NAK.L Regulatory News (NAK)

14 Jun 2007 07:00

Highams Systems Services Group PLC13 June 2007 For release 7.00am 14 June 2007 Highams Systems Services Group plc ("Highams" or "the Group") The AIM-quoted IT recruitment consultancy and a leading niche provider of technology talent in the financial services industry Preliminary Results for the year ended 31 March 2007 "A Year of Change and Excitement" Highlights •A year of significant change with agreed ambitious plans for the year ahead •Revamped board including appointment of Dave Pye as new CEO •New City of London office and enlarged sales team have already delivered additional business •Good progress made in moving to higher-margin recruitment •Higher margin permanent business increased by 90% - strong demand for permanent staff traditionally a sign of a confident market •Continued investment in current year •Overseas expansion - future roll-out of innovative low cost, high touch model as a formula for further international development •Gross profit up by 2.5% to £2.2m (2006: £2.1m), representing 13.29% of turnover (2006: 11.73%); Group turnover fell to £16.3m (2006: £18.0m), reflecting reduced volume of low-margin contract business; Group operating loss before goodwill amortisation of £120k (2006: profit of £192k before goodwill amortisation), in the main reflecting increased investment in the second half of the year Commenting, Alan Howarth, Non-Executive Chairman of Highams, said: "These are exciting times at Highams. We have a revamped Board. We have a newChief Executive, Dave Pye. We have opened a new Highams office in the heart ofour client base in the City of London. We have considerably enlarged our salesteam. We have agreed ambitious plans for the year ahead. Our goal is to make a step change in the Group's performance. We recognised as aBoard that such a step change was not likely without new personnel at all levelsof the organisation, starting at the top! With the continuing strength of our marketplace and our determined approach todelivering high-quality, high-value recruitment consultancy services, I lookforward to the Group's continued progress in the months ahead with confidence". Enquiries:Dave Pye, Chief Executive Tel: 01883 341 144Highams Systems Services Group plcwww.highams.com Richard Thompson Tel: 020 7149 6482Charles Stanley Securities (Nomad) Tarquin Edwards / Chris Steele Tel: 020 7034 4758 / 59Adventis Financial PR Preliminary Results for the for the year ended 31 March 2007 Chairman's Statement Introduction These are exciting times at Highams. We have a revamped Board. We have a newChief Executive, Dave Pye. We have opened a new Highams office in the heart ofour client base in the City of London. We have considerably enlarged our salesteam. We have agreed ambitious plans for the year ahead. Our goal is to make a step change in the Group's performance. We recognised as aBoard that such a step change was not likely without new personnel at all levelsof the organisation, starting at the top! I strongly encourage you to read our new Chief Executive's Report to learn moreof the year ended 31 March 2007 and, importantly, what is in store for thiscurrent financial year and the future. The results for the last financial year, given below, reveal the progress we aremaking in our move to higher margin business, albeit the bottom line wasinevitably impacted by the investment at the start of the new change programme.The current financial year will be one of continued investment as we implementour plans, which we expect to see bear fruit in this and subsequent years. Financial Results The Group made an operating loss of £120,000 before goodwill amortisation of£128,000 (2006: profit of £192,000 before goodwill amortisation of £128,000), inthe main reflecting our increased investment in the second half of the year. Group loss before taxation was £313,000 (2006: loss of £13,000). Reflecting the Group's move towards higher margin business and a greaterpercentage of permanent business, Group turnover fell by 10 per cent. to £16.3m(2006: £18.0m) as we undertook a reduced volume of low-margin contract business,but gross profit still grew by 2.5% to £2.2m (2006: £2.1m) representing 13.29%of turnover, a significant improvement compared to 11.73% in 2006. The Directors are not recommending the payment of a final dividend for the yearto 31 March 2007 (2006: nil). Trading Review Our emphasis has been, and remains, on finding higher value business throughfurther enhancing our capabilities to provide a specialised range of services tosmaller and medium sized organisations. We have continued to seek and win newclients that meet these criteria in our niche market sectors of insurance,investment management and financial services. We have achieved this refocusing of our strategy whilst managing to modestlyimprove our levels of net fee income. Compared to the previous year, our volumeof low-margin business has reduced substantially, while higher-margin contract business has increased by around 5% and permanent business has increased by 90%. Trading in our specialist areas has remained positive, with a continuingemphasis on demand for permanent staff. This stronger demand for permanent staffcompared to contract personnel is traditionally a sign of a confident market. Demand is particularly strong, across the board, for individuals with projectand programme management skills, business analysis experience related tobusiness intelligence and regulatory reporting, and those with web developmentskills in our niche markets. Investment In 2007/08, we are making substantial investments in new initiatives, additionalstaff, targeted training, our London premises and overseas expansion. We expectthat our niche markets will remain strong for the next two or three years atleast, making this an opportune time to be investing in our ambitious plans.Inevitably there are normal risks associated with such an investment programme,and the delivery of the benefits from the investments will lag behind the costs.I therefore expect our half year results to reflect the costs and few of thebenefits, whilst the second half of the year should be more balanced. Suchinvestments will initially also require greater use of our finance facilitiesand hence higher interest charges will likely be incurred. Board Changes On 3 January 2007 we welcomed Dave Pye as our new CEO, following an intensiveselection process. Dave brings substantial sales and senior-level managementexperience, a wealth of contacts and extensive influence within the ITrecruitment industry to his new role at Highams and has used all of this todetermine and drive the exciting change programme on which we have embarked. On Dave's appointment, Ted Andrews stepped aside as Managing Director to assumethe position of Chief Operating Officer. We announced the resignations of Glen Burbidge and Tony Eve, effective from 31March 2007 and 11 May 2007 respectively. Glen Burbidge's Board responsibilitieshave been assumed by Dave Pye whilst his operational duties have been taken overby Mark de Lacy, who runs our Caterham sales team, and Paul Byrne who is incharge of our London sales office. Tony Eve's Board and operationalresponsibilities have been absorbed into Ted Andrews' role. Executives and Staff We remain unusual amongst recruitment companies in having a high number of veryknowledgeable and long-serving staff. I am extremely grateful to them for theirloyalty and their eagerness to support the significant changes we are effectingin the Company. I extend a warm welcome to our newer staff and hope that many ofthem will develop along similar lines as their experienced colleagues. Outlook As I stated in my introduction, these are exciting times at Highams with a greatnumber of very positive changes in progress. Dave Pye's CEO's Report explainsmany of these changes, demonstrating the thought leadership, practical approachand infectious energy and enthusiasm he has brought to Highams. With the continuing strength of our marketplace and our determined approach todelivering high-quality, high-value recruitment consultancy services, I lookforward to the Group's continued progress in the months ahead with confidence. Alan Howarth Chairman 14 June 2007 Chief Executive's Report Introduction: The rising importance of recruitment companies The search for talent has remained one of the top priorities for ChiefExecutives during the past year. Its importance will continue in the next fiveyears as organisations realise that what McKinsey once called the 'War forTalent' is having a major impact on recruitment companies in Europe andglobally. Two significant reports on Talent and Recruitment in The Economist(Oct 06) and by Demos* and the Recruitment and Employment Confederation (April07) have shown how recruitment is changing and how increasingly importantintermediaries such as Highams are in the provision of talent to organisations. We fully expect that changing demographics, new attitudes to career expectationsand more dependence from employers on a good personality fit (compared to simplya good skills fit) will place greater emphasis on high-quality, networkorientated recruitment methods. Highams operates in this arena and is creating a niche for itself in theprovision of senior appointments in technology in the financial services sector.Highams' role as an intermediary between contingent and permanent talent and ourcustomers continues to be recognised by our long standing customers and thosenew clients who started benefiting from Highams' services in the past year. Challenging Highams in a Changing World Since my arrival in January 07, there has been much change at Highams to ensurewe make the most of the rising importance of recruitment companies toorganisations. The market in the UK and Europe continues to grow. This yearHighams has hired 15 new people to tap into this growth. Our focus has remainedin financial services and I am delighted to report Highams has secured a numberof new customers in the last quarter of 2006/07. Whilst the focus away from someof the historic, lower margin, preferred supplier business has had an effect onthe revenue line, proportionally the net fee income as a percentage of sales isrising. Our approach has been to refine our offering to our customers - both to ourconsultants and candidates and to organisations which hire them. Highams offerstwo distinct services; a private client approach in the provision of seniorconsultants who have worked with Highams in the past and a retail approach forgeneral business with a wider range of customers. This has resulted in Highamsdeveloping deeper relationships with significant customers and allowing us tooffer them a wider range of value-creating services whilst, at the same time,maintaining our existing business with customers where Highams places peoplewith organisations on an occasional basis. Our major focus for 07/08 is to ensure Highams is at the forefront in our sectorin maximizing the efficiency provided by Web 2.0. In the words of the Demosreport, "Web 2.0 sees the internet as a collaborative tool, where we each have arole in creating value for one another." as is happening, for instance, withYouTube, ecademy and Tribe.net. This will result in attracting talent for ourcustomer base and ensuring that talent can communicate with one another and withHighams. The relationship that Highams builds with its candidates andconsultants will be increasingly vital to its success in a world where those whomanage and deliver top talent will become ever more important and successful. *Recruitment 2020 How recruitment is changing and why it matters Available from www.demos.co.uk The International Dimension As our customer base grows so will our presence internationally. Our business inBrussels has grown in 2006/07 and our innovative model of using localhome-workers in Belgium is a formula that Highams will use internationallyduring the coming 12 months. This model primarily involves ex-patriates,typically parents returning to full or part-time work having had families. Theyare excellent recruiters and their intelligence combined with our workforceflexibility will help develop and cement stronger relationships with ourcustomers. It is a low cost, high touch model that will see Highams become aninternational organisation in a world where talent is sourced and deliveredglobally. As talented people continue to move around, Highams will featureprominently in its sector. This approach is being executed initially by workingwith our international customers who are demanding Highams provides itsexcellent UK services into other geographic locations. Expansion in the UK In April 2007, we opened our first office in the UK outside our Caterhamheadquarters. Taking an office on 28th floor of the iconic 'Gherkin' building inthe City of London has brought Highams closer to its financial servicescustomers and is a base for our Platinum Club, an invitation only community forour private client technology talent. Highams continues to work alongside its customers as they seek to become moreimaginative, utilise their brand in the most effective way and ensure that, inthe 'digital age', the technology that drives organisations is provided by thevery best people. Highams will continue to provide the very best talent as itcontinues to grow with its customers in the coming years. Our wider responsibility Highams has recently selected The Rainbow Trust, Trees for Cities and Action Aidto partner. Working with The Rainbow Trust, Highams' staff will, through variousfund-raising events, raise money to provide support for the families of sickchildren. We will also be raising awareness for our environment and for projects overseasby making donations to Trees for Cities (for every interview) and Action Aid(for every contract or permanent placement made). These partnerships are a great example of how we can work alongside a charity,both motivating our staff in their work and demonstrating to clients our socialresponsibility. People making the difference One of the key success factors for Highams to build on is the length of serviceof our people. Of our people who have been with us for more than a year, over50% have been at Highams for more than 10 years and a further 30% for more than5 years. In a market where traditionally recruiters move many times, ourheritage of keeping our top people is much appreciated by our customers,resulting in continued and strong business renewals. Adding another 40% ofpeople to this team this year has already generated additional business and willauger well for the coming years. Today Highams employs 40 proud people. In this rising market they all need to beat the top of their game. Those that were not, exited the business in the finalquarter of 2006/07. For both our new colleagues and our existing people, newtraining programmes have been developed. Highams has taken an active role in therecruitment industry with its involvement in the Recruitment and EmploymentConfederation. The Highams brand, often quoted in the past 24 years butcertainly relatively quiet in the recent past, has been invigorated with anumber of press articles, customer events and charitable involvement in thefirst six months of 2007. My role as CEO is to ensure our people are confident and happy in the key rolethey play in our organisation and with their customers. It is to drive thisbusiness back to sustainable, profitable growth and to provide the platform todo so. Finally, it is to establish Highams as one of the key organisations uponwhose services its customers rely to drive their businesses forward. I am proud of our people and their dedication in this year of change andexcitement. I trust that you will share in our enthusiasm to make a differencein the recruitment sector and to see how our influence matters as we devoteourselves to being the leading niche provider of technology talent in thefinancial services industry. Dave Pye Chief Executive Officer 14 June 2007 Consolidated Profit & Loss Accountfor the year ended 31 March 2007 2007 2006 Unaudited Notes £'000 £'000 Turnover 16,286 17,997Cost of sales (14,121) (15,885) Gross profit 2,165 2,112Administrative expenses- before goodwill amortisation (2,285) (1,920)- goodwill amortisation (128) (128) (2,413) (2,048) Operating (loss)/profit before goodwill (120) 192amortisation Operating (loss)/profit (248) 64Interest receivable - 2Interest payable (65) (79) Loss on ordinary activities before taxation (313) (13)Tax on loss on ordinary activities - (2) Loss for the year 2 (313) (15) Loss per share - basic and diluted 1 (0.98) p (0.05) p Consolidated Statement of Total Recognised Gainsand Lossesfor the year ended 31 March 2007 2007 2006 Unaudited £'000 £'000Loss for the financial year (313) (15)Loss on foreign currency translation - (1)Total recognised gains and losses, relating to the (313) (16)year Consolidated Balance Sheet31 March 2007 2007 2006 Unaudited Notes £'000 £'000Fixed assetsGoodwill 943 1,071Tangible assets 37 55 980 1,126 Current assetsDebtors 2,936 3,170Cash at bank and in hand 228 73 3,164 3,243 Creditors: amounts falling due within one (2,483) (2,395)year Net current assets 681 848Net assets 1,661 1,974 Capital and reservesCalled up share capital 1,594 1,594Share premium 2 679 679Merger reserve 2 90 90Employee share benefit trust reserve 2 (61) (61)Profit and loss account 2 (641) (328)Shareholders' funds 2 1,661 1,974 Consolidated Cash Flow Statementfor the year ended 31 March 2007 2007 2006 Unaudited Notes £'000 £'000 Net cash (outflow)/inflow from operating 3 (61) 458activities Returns on investments and servicing offinanceInterest received - 2Interest paid (65) (79) (65) (77) TaxationUK corporation tax - (46) Capital expenditure and financial investmentPurchase of tangible fixed assets (10) (38)Sale of tangible fixed assets - 9 (10) (29) Cash (outflow)/inflow before financing in the (136) 306year FinancingPurchase of own shares by Employee Share - (2)Benefit TrustIncrease/(decrease) in invoice discounting 291 (478)facility 291 (480) Increase/(decrease) in cash in the year 4 155 (174) 1. Loss per share Loss Weighted Loss per Profit/ Weighted Profit/ average share (loss) average (loss) per number of number of share shares shares 2007 2007 2007 2006 2006 2006 Unaudited Unaudited Unaudited £'000 '000 p £'000 '000 p (Loss)/profit for the (185) 31,692 (0.58) 113 31,700 0.35financial year beforegoodwill amortisationGoodwill amortisation (128) - (0.40) (128) - (0.40)Loss for the financial year (313) 31,692 (0.98) (15) 31,700 (0.05)Dilutive effect of options - 5 - - - - (313) 31,697 (0.98) (15) 31,700 (0.05) The weighted average number of shares excludes shares held by the Employee Share BenefitTrust. Loss per share before goodwill amortisation is presented as the directors consider that thisgives a useful indication of underlying performance. 2. Reconciliation of movements in shareholders' funds Group Share Share Merger Employee Profit Total capital premium reserve share and loss benefit account reserve £'000 £'000 £'000 £'000 £'000 £'000 Opening shareholders' funds 1,594 679 90 (61) (328) 1,974Loss for the year - - - - (313) (313)Closing shareholders' funds 1,594 679 90 (61) (641) 1,661 3. Net cash flow from operating activities 2007 2006 Unaudited £'000 £'000 Operating (loss)/profit (248) 64Depreciation of tangible fixed assets 28 17Goodwill amortisation 128 128Decrease/(increase) in debtors 234 (261)(Decrease)/increase in creditors (203) 508Loss on disposal of fixed assets - 3Exchange difference - (1)Net cash (outflow)/inflow from operating (61) 458activities 4. Analysis and reconciliation of net debtAnalysis of changes in net debt 1 April Cash 31 March 2006 flow 2007 Unaudited Unaudited £'000 £'000 £'000 Cash at bank and in hand 73 155 228Invoice discounting facility (300) (291) (591)Net debt (227) (136) (363) Reconciliation of net cash flow to movement in 2007 2006net debt Unaudited £'000 £'000 Cash inflow/(outflow) 155 (174)(Increase)/decrease in invoice discounting (291) 478facility (136) 304Net debt at beginning of year (227) (531)Net debt at end of year (363) (227) 5. The financial information above does not constitute statutory accounts withinthe meaning of section 240 Companies Act 1985 as amended ("the Act"). Statutoryaccounts in respect of the year ended 31 March 2006, on which the auditorsreport was unqualified, did not include references to any matters to which theauditors drew attention by way of emphasis without qualifying their report andcontained no statement under section 237(2) or (3) of the Act, have beendelivered to the Registrar of Companies. 6. The auditors have not reported on the accounts for the year ended 31 March2007, nor have any such accounts been delivered to the Registrar of Companies. 7. Copies of the statutory accounts for the year ended 31 March 2007 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