NAK.L Regulatory News (NAK)

20 Dec 2007 07:01

Highams Systems Services Group PLC20 December 2007 For release 7.00am 20 December 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 is today pleased to announce interim results for the six months ended 30 September 2007 INTERIM RESULTS For the six months ended 30 September 2007 Highlights •Turnover of £7.06m (2006: £8.13m) reflecting the Group's increasing emphasis on growing its higher value, higher margin revenue streams •Move towards higher value business has seen gross margin increase to 14.5% from 13.1% in 2006, an improvement of 10.7% •Loss before tax of £495,000 (2006: profit £25,000) reflecting Highams' significant investment in new sales staff, London premises and overseas expansion as part of the Group's previously announced new change programme •Substantial investment programme being delivered - the Group has seen a doubling in the number of sales staff and 14 new clients this financial year. •Interim Management Practice launched to capitalise on Highams' specialist offering •Expanded client base has substantially reduced Group's exposure to the loss of any lower margin larger clients •Highams continues to roll out its expansive new change programme with current trading in line with management's expectations Alan Howarth, Chairman, commented: "As I advised at the time of our Preliminary Results, we have significantlyinvested in re-energising the Highams brand and business operation through asubstantial change programme. A major part of this programme has seen ustransition from a process-oriented business model to a higher-value, nichespecialist, service oriented business model. Our investment has included a doubling of our UK sales staff, targeted trainingthroughout the Group, the opening of our first London sales office and thelaunch of our Interim Management Practice. Our Interim Results reflect not onlythe costs of this investment but also our determined move towards higher marginand higher value business. This change programme has now been effected and monthly operating performancewill return to profitability in 2008 when we will begin to reap the rewards ofour investments." 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 CHAIRMAN'S STATEMENT Interim results for the six months ended 30 September 2007 Introduction As I advised at the time of our Preliminary Results, we have significantlyinvested in re-energising the Highams brand and business operation through asubstantial change programme. A major part of this programme has seen us transition from a process-orientedbusiness model to a higher-value, niche specialist, service oriented businessmodel. This has had the benefit of helping us win higher-margin business with asignificant number of new clients, whilst enabling us to substantially reduceour risk and dependence on a major, but low-margin client which, at September2006, accounted for almost 20% of our gross margin and now accounts for lessthan 11% of our gross margin. Our investment has included a doubling of our UK sales staff, targeted trainingthroughout the Group, the opening of our first London sales office and thelaunch of our Interim Management Practice. Our Interim Results reflect not onlythe costs of this investment but also our determined move towards higher marginand higher value business. This change programme has now been effected and monthly operating performancewill return to profitability in 2008 when we will begin to reap the rewards ofour investments. Financials Group turnover was £7.06 million (2006: £8.13 million) reflecting the Group'smove away from high-volume, low margin business towards higher margin business.Gross profit, although slightly down at £1.025 million (2006: £1.068 million)represents a much improved 14.51% of turnover (2006: 13.14%). The operating lossbefore interest and tax was £455,000 (2006: profit £57,000) and as outlinedabove, it represents exciting investment in new initiatives and in the Group'sfuture success. The Company will not be declaring an interim dividend. Current Trading We are experiencing a continuing heavy demand for interim, contract andpermanent staff from our insurance and financial services sector clients and thesoftware houses that supply systems to that sector. Demand is particularlystrong for experienced business analysts and individuals with ecommerce and webservices skills. Outlook We expect to see the major investments of the first half of the year start tomake an impact in the last few months of the year, though their benefit will bemore clearly evident in the coming financial year. The changes we have effected to our management team, the significant increase inour sales force together with our drive for high quality business gives mereason to view the future with confidence. Alan Howarth Non-executive Chairman 20 December 2007 Consolidated Balance SheetAs at 30 September 2007 30 Sept 2007 30 Sept 2006 31 Mar 2007 Unaudited Unaudited Unaudited £'000 £'000 £'000 Assets NotesNon-current assetsIntangible asset - Goodwill 2 1,071 1,071 1,071Intangible asset - Computer software 13 16 10Property, plant and equipment 24 32 27 1,108 1,119 1,108 Current assetsTrade and other receivables 2,818 3,303 2,936Cash and cash equivalents 68 124 228 2,886 3,427 3,164LiabilitiesCurrent liabilitiesTrade and other payables (1,564) (1,816) (1,892)Other financial liabilities (1,136) (732) (591) Net current assets 186 879 681Net assets 1,294 1,998 1,789 EquityOrdinary shares 1,594 1,594 1,594Share premium 679 679 679Merger reserve 90 90 90Employee share benefit trust reserve (61) (61) (61)Currency reserve 0 (1) 0Retained earnings (1,008) (303) (513)Total equity 1,294 1,998 1,789 Consolidated Income Statementfor the six months ended 30 September 6 months to 6 months to 12 months to2007 30 Sept 2007 30 Sept 2006 31 Mar 2007 Unaudited Unaudited Unaudited Notes £'000 £'000 £'000Continuing operationsRevenue 7,063 8,130 16,286Cost of sales (6,038) (7,062) (14,121) Gross profit 1,025 1,068 2,165Administrative expenses (1,480) (1,011) (2,285)Operating (loss)/profit (455) 57 (120) Finance costs (40) (32) (65)(Loss)/profit on ordinary activities (495) 25 (185)before taxation Tax expense - - -(Loss)/profit for the period attributable to (495) 25 (185)equity shareholders (Loss)/profit per share - basic 3 (1.56) p 0.08 p (0.58) p Consolidated Statement of Recognised Income and Expensefor the six months ended 30 September2007 6 months to 6 months to 12 months to 30 Sept 2007 30 Sept 2006 31 Mar 2007 Unaudited Unaudited Unaudited £'000 £'000 £'000(Loss)/profit for the period (495) 25 (185)Loss on foreign currency translation - (1) -Total recognised income and expense for the (495) 24 (185)period attributable to equity shareholders Consolidated Cash Flow Statementfor the six months ended 30 September 2007 6 months to 6 months to 12 months to 30 Sept 2007 30 Sept 2006 31 Mar 2007 Unaudited Unaudited Unaudited £'000 £'000 £'000 Cash flows from operating activities(Loss)/profit before taxation (495) 25 (185)Adjustments for Depreciation of tangible fixed assets 9 8 17 Depreciation of intangible assets - 7 5 11 software Interest expense 40 32 65 Increase/(decrease) in trade and 118 (133) 234 other receivables (Decrease) in trade and other (328) (279) (203) payables Exchange difference - (1) -Cash used in operations (649) (343) (61)Interest paid (40) (32) (65)Income taxes paid - - -Net cash used in operating activities (689) (375) (126) Cash flows from investing activitiesPurchase of property plant and equipment (7) - (4)Purchase of intangible asset - software (9) (6) (6)Net cash used in investing activities (16) (6) (10) Cash flows from financing activitiesIncrease in other financial liabilities 545 432 291Net cash from financing activities 545 432 291 Net (decrease)/increase in cash and cash (160) 51 155equivalents for the period Cash and cash equivalents at beginning of 228 73 73period Cash and cash equivalents at end of period 68 124 228 Notes to the Interimreport1. Accounting policiesBasis of preparation The interim financial information for the six months ended 30 September 2007has been prepared in accordance with the accounting policies that will applyfor the year ended 31 March 2008 which will follow the International FinancialReporting Standards (IFRS) and interpretations as endorsed by the EuropeanUnion.The interim financial information for the six months ended 30 September 2007does not constitute statutory accounts within the meaning of section 240 of theCompanies Act 1985. The comparatives for the full year ended 31 March 2007 arenot the company's full statutory accounts for that year. A copy of thestatutory accounts for that year has been delivered to the Registrar ofCompanies. The auditors' report on those accounts was unqualified, did notinclude references to any matters to which the auditors drew attention by wayof emphasis without qualifying their report and did not contain a statementunder section 237(2)-(3) of the Companies Act 1985.First time adoption In preparing these financial statements, the group has elected to apply thefollowing transitional arrangements permitted by IFRS 1 "First time adoption ofInternational Financial Reporting Standards": • Business combinations: the Group has decided not to apply retrospectively theprovisions of IFRS 3, Business combinations, to business combinations thatoccurred prior to 1 April 2006. The carrying amount of capitalised goodwill at31 March 2006 that arose on business combinations accounted for using theacquisition method under UK GAAP was frozen at this amount and tested forimpairment at 1 April 2006. • Cumulative translation differences: the Group has taken advantage of thepermitted exemption under IFRS 1 to treat cumulative translation differencesfor all foreign operations as zero at the date of transition, 1 April 2006.Except as noted above, the following principal accounting policies have beenapplied consistently in the preparation of these accounts:Basis of consolidation The Group financial statements consolidate the financial statements of theCompany and its subsidiary undertakings, and exclude all intra-Grouptransactions and balances. The results of subsidiary undertakings acquired are included from the date ofacquisition using the purchase method of accounting. The results of subsidiaryundertakings disposed of are included up to the date of disposal, and the netprofit or loss on disposal is calculated based on the net proceeds receivableand the net assets at the date of disposal, including any goodwill.Revenue recognition Revenue represents amounts receivable for services provided during theaccounting period net of trade discounts and value added tax. Revenue inrespect of contract placements is recognised in the period in which thecontractor undertakes the work. Revenue in respect of permanent placements isrecognised in the period in which a placement commences work.Intangible asset - Goodwill Goodwill represents any excess of the cost of acquisition over the fair valueof the identifiable assets and liabilities acquired for acquisitions after 31March 2006, together with goodwill recognised on transition to IFRS on 1 April2006. Goodwill is tested annually for impairment and is carried at cost lessaccumulated impairment losses.Property, plant and equipment depreciation Property, plant and equipment are stated at cost net of accumulateddepreciation and any provision for impairment. Depreciation is provided atrates calculated to write off the cost, less estimated residual value, ofproperty, plant and equipment over their estimated useful lives at thefollowing rates:Leasehold improvements - over remaining period of lease on a straight-line basisComputer equipment - 50% per annum on a straight-line basisFurniture, fittings andoffice equipment - 25% per annum on a straight-line basis Motor vehicles - 25% per annum on a reducing balance basisImpairment of non-financial assets Impairment tests on intangible assets with indefinite useful economic lives areundertaken annually on 31 March. Other non-financial assets are subject toimpairment tests whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. Where the carrying value of an assetexceeds its recoverable amount the asset is written down immediately. Impairments are charged as an expense in the period they are recognised.Leased assets Rentals under operating leases are charged to the income statement on astraight-line basis over the lease term. All of the Group's current leases areoperating leases.Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount ofan asset or liability in the balance sheet differs to its tax base, except fordifferences arising on: • the initial recognition of goodwill; • goodwill for which amortisation is not tax deductible; • the initial recognition of an asset or liability in a transaction which isnot a business combination and at the time of the transaction affects neitheraccounting nor taxable profit; and • investments in subsidiaries and jointly controlled entities where the groupis able to control the timing of the reversal of the difference and it isprobable that the difference will not reverse in the foreseeable future. Deferred tax assets are recognised in the balance sheet only where it isprobable that taxable profit will be available against which the difference canbe utilised. Deferred taxation is measured at the tax rates that are expected to apply inthe periods in which the asset is realised or the liability isForeign currency Transactions entered into by Group entities in a currency other than thecurrency of the primary economic environment in which it operates (the"functional currency") are recorded at the rate of exchange at the time of thetransaction. Monetary assets and liabilities denominated in foreign currenciesat the balance sheet date are reported at the rates of exchange prevailing atthat date. Exchange differences arising on the retranslation of unsettledmonetary assets and liabilities are recognised immediately in the incomestatement. On consolidation the results of overseas operations are translated intosterling at rates approximating to those ruling when the transactions tookplace. All assets and liabilities of overseas operations are translated atrates of exchange ruling on the balance sheet date. Exchange differencesarising from this policy are recognised directly in equity.Pension costs The Group operates a defined contribution pension scheme. The pension costexpensed to the income statement represents contributions payable by the Groupto the pension scheme in the period.Financial assets The Group's financial assets comprise trade debtors, other debtors, and cashand cash equivalents. Trade and other receivables are measured initially atfair value and subsequently at amortised cost. Appropriate allowances forestimated irrecoverable amounts are recognised in profit and loss when there isobjective evidence that the asset is impaired.Financial Liabilities The Group's financial liabilities comprise trade creditors, other creditors,and a confidential interest bearing invoice discounting facility. All financialliabilities are measured at amortised cost.Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand. Bank overdraftsare included within current liabilities unless there is a right of offset withcash balances.Employee share benefit trust The cost of the company's shares held by the employee share benefit trust isdeducted from shareholders' funds in the company and consolidated balancesheet. Any cash received by the employee share benefit trust on disposal of theshares it holds is also recognised directly in shareholders' funds. Otherassets and liabilities of the employee share benefit trust, (includingborrowings) are recognised as assets and liabilities of the company. Any sharesheld by the employee share benefit trust are treated as cancelled for thepurposes of calculating earnings per share.Share-based payments Where share options are awarded to employees, the fair value of the options atthe date of grant is charged to the income statement over the vesting period.Non-market vesting conditions are taken into account by adjusting the number ofequity instruments expected to vest at each balance sheet date so that,ultimately, the cumulative amount recognised over the vesting period is basedon the number of options that eventually vest. Market vesting conditions arefactored into the fair value of the options granted. As long as all othervesting conditions are satisfied, a charge is made irrespective of whether themarket vesting conditions are satisfied. The cumulative expense is not adjustedfor failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, theincrease in the fair value of the options, measured immediately before andafter the modification, is also charged to the income statement over theremaining vesting period.Exceptional items Material and non-recurring items of income and expense are disclosed in theincome statement as "Exceptional items". Examples of items which may give riseto disclosure as "Exceptional items" include inter alia gains or losses on thedisposal of businesses, investments and property, plant and equipment, costs ofrestructuring and reorganisation of existing businesses, integration of newlyacquired businesses, litigation settlements, and asset impairments.2. First time adoptionThe Group reported under UK GAAP in its previously published financialstatements for the year ended 31 March 2007. The tables below reconcile betweennet assets and loss as reported previously under UK GAAP and those reportedunder IFRS for the periods ended 31 March 2007 and 30 September 2006. Areconciliation of net assets is also provided at 1 April 2006, being thetransition date to IFRS. Reconciliation of loss under UK GAAP and IFRS 6 months to 12 months to 30 Sept 2006 31 Mar 2007 Note £'000 £'000 Loss reported under UK GAAP (39) (313) Adjustment to IFRS:Amortisation of goodwill (a) 64 128 Profit/(Loss) reported under 25 (185)IFRS Reconciliation of equity under UK GAAP and IFRS As at As at As at 1 Apr 2006 30 Sept 2006 31 Mar 2007 £'000 £'000 £'000 Equity reported under UK 1,974 1,934 1,661GAAP Adjustment to IFRS:Amortisation of goodwill (a) 64 128 Equity reported under IFRS 1,974 1,998 1,789 Explanation of reconciling item between UK GAAP andIFRS (a) From 1 April 2006, the date of transition to IFRS, goodwill is no longeramortised and the annual goodwill expense has been removed from the incomestatement for the year ended 31 March 2007 and six months ended 30 September2006. Goodwill amortisation incurred prior to the date of transition to IFRS hasnot been adjusted as advantage has been taken of the permitted exemption underIFRS 1 not to apply IFRS 3 to business combinations occurring before thetransition date. 3. Loss per share 6 months to 6 months to 12 months to 30 Sep 2007 30 Sep 2006 31 Mar 2007 Unaudited Unaudited Unaudited Loss Weighted Per Profit Weighted Per Loss Weighted Per average share average share average share number of number of number of shares shares shares £'000 000's p £'000 000's p £'000 000's p (Loss)/profit for (495) 31,692 (1.56) 25 31,708 0.08 (185) 31,692 (0.58)the financialperiod This information is provided by RNS The company news service from the London Stock Exchange