Last checked at 31 Mar 2008 08:00
FOR IMMEDIATE RELEASE
31 MARCH 2008 GARNER PLC ("Garner" or the "Company") FINAL RESULTS TO 31 DECEMBER 2007
CHAIRMAN'S STATEMENT
At last year's AGM we set out our strategy of continuing to secure the team, broaden our client base and maintain profitability. All of this we achieved. Whilst the first half of 2007 proved strong and saw us winning a lot of assignments including from new clients, the second half had to be focused on delivery. The credit crunch affected all markets. Although we did not encounter poor trading, certainly client decision making took longer.
Whilst turnover for the year shows an increase of 19 per cent to ‚£3,122,000 (2006: ‚£2,612,000), the turnover for the second half was down on the same period last year. Profits decreased slightly (4.6 per cent) as a consequence of higher staff costs resulting in pre-tax profits of ‚£494,000 (2006: ‚£518,000). However, a lower tax charge means that post tax profits were up 10 per cent at ‚£402,000 (2006: ‚£365,000). Earnings per share are: 1.06p (2006: 0.97p).
Net debt at the year end has reduced to ‚£1,183,000 (2006:‚£1,287,000) with the Group generating net cash flow of ‚£104,000. This cash flow represented a reduction in borrowing of ‚£25,000 and an increase in cash balances of ‚£79,000. Net liabilities at the year end were ‚£1,301,000 (2006:‚£1,703,000 as restated), an improvement of ‚£402,000. We have now put in place a more advantageous banking arrangement designed to give us more operating headroom for growth.
The increase in our cost base was almost entirely a result of improving our reward strategy for our consultants in achieving key targets of both improved billing levels and broadening our client base. We were delighted to win another FTSE 10 client with whom there is the potential for a significant relationship. Of equal importance was the work of one of our colleagues who was very successful in winning volume business from clients' digital business assignments.
Adding to our client base is essential in protecting our commercial performance, and this remains a priority not only for 2008 but in the long term. It is worth noting that we increased our client list by five companies in different sectors in the first two months of 2008. Our expertise now stretches across technology, media, packaging, professional services, public sector and, of course, banking and real estate.
With reference to growing the team, we are being very selective. We will be announcing some additions during 2008 as we plan to launch a new specialist HR practice in April and a Digital Media practice in May.
Predictions for the future are not easy, not least because our clients are finding forecasting difficult too. Strategically, however, there are some good signs for Garner Plc. Our consultants have well established client relationships and more of our assignments are for work to be done overseas, e.g. Ireland, Germany and the Middle East.
Finally, we have been working on a new trading relationship with a leading US search firm about which I hope to make an announcement soon. This will enable us to leverage globally many of our UK client relationships. Overall, we think that we are in as strong a position as we could be with a good and committed team and costs under tight control. I look forward to sharing with you our progress at the half year.
J BARTLEChairman
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Andrew Garner Chief Executive Officer, Garner Plc 020 7629 8822 Ross Andrews City Financial Associates Limited 020 7492 4777 Ruari McGirr St Helen's Capital Plc 020 7628 5582 CONSOLIDATED INCOME STATEMENT Note 31 December 2007 31 December 2006 ‚£000 as restated ‚£000 REVENUE 3,122 2,612 COST OF OPERATIONS (2,513) (1,978) GROUP OPERATING PROFIT 609 634 Net finance costs (115) (116) PROFIT ON ORDINARY ACTIVITIES 494 518BEFORE TAXATION Tax expense (92) (153) PROFIT FOR THE FINANCIAL YEAR 402 365 Earnings per share - Basic 2 1.06p 0.97p Earnings per share - Diluted 2 1.01p 0.97p
All activity arose from continuing operations.
There are no recognised gains and losses other than as stated above. Accordingly, no Statement of Total Recognised Gains and Losses is given.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Year ended Year ended 31 December 31 December 2007 2006 as restated ‚£000 ‚£000 Profit for the 402 365period Prior Year Adjustment due to IFRS conversion 67 - Total recognised income and expense for the period since last Annual Report 469 365
All other changes to equity are shown in note 3 - Reconciliation of movements in total equity.
DETAILED RECONCILIATION OF RESTATED 2006 INCOME STATEMENT Note Previous Effect of Restated UK GAAP transition results as to IFRS Per IFRS ‚£000 ‚£000 ‚£000 Revenue 2,612 2,612 Cost of Operations (i) (2,045) 67 (1,978) Group Operating Profit 567 67 634 Net finance costs (116) - (116) Profit on ordinary activities 451 67 518before taxation Tax expenses (153) - (153) Profit for the financial year 298 67 365
(i) Goodwill has been adjusted by ‚£67,000, being the amortisation charge for the year. In line with IFRS, goodwill has not been amortised from the transition date, but has instead been subject to an impairment review. The review has indicated that goodwill is not impaired.
CONSOLIDATED BALANCE SHEETAs at 31 December 2007 2007 2006 ‚£000 ‚£000 ‚£000 as restated ‚£000 Goodwill 959 959 Property, plant and equipment 14 16 TOTAL NON-CURRENT ASSETS 973 975 Trade and other receivables 812 671 Cash and cash equivalents 56 - TOTAL CURRENT ASSETS 868 671 TOTAL ASSETS 1,841 1,646 Current Liabilities Redeemable Preference Shares 1,213 1,213 Trade and other payables 561 700 Bank overdraft and interest bearing 850 688 loans Current tax liability 195 244 TOTAL CURRENT LIABILITIES 2,819 2,845 Non-Current Liabilities Interest bearing loans 323 504 TOTAL LIABILITIES 3,142 3,349 TOTAL ASSETS LESS TOTAL LIABILITIES (1,301) (1,703) Issued share capital 4,942 4,942 Share premium account 3,845 3,845 Retained earnings (10,088) (10,490) TOTAL EQUITY (1,301) (1,703) RECONCILIATION OF GROUP EQUITY AT 1 JANUARY 2007 Note Previous Effect of Restated transition results UK GAAP to IFRS per IFRS ‚£000 ‚£000 ‚£000 Goodwill 16 - 16 Property, plant and (i) 892 67 959equipment TOTAL NON-CURRENT ASSETS 908 67 975 Trade and other receivables 671 - 671 TOTAL CURRENT ASSETS 671 - 671 TOTAL ASSETS 1,579 67 1,646 Current Liabilities Redeemable Preference 1,213 - 1,213Shares Trade and other payables 700 - 700 Bank overdraft and interest 688 - 688bearing loans Current tax liability 244 - 244 TOTAL CURRENT LIABILITIES 2,845 - 2,845 Non-Current Liabilities Interest bearing loans 504 - 504 TOTAL LIABILITIES 3,349 - 3,349 TOTAL ASSETS LESS TOTAL LIABILITIES (1,770) 67 (1,703) Issued share capital 4,942 - 4,942 Share premium account 3,845 - 3,845 Retained earnings (10,557) 67 (10,490) TOTAL EQUITY (1,770) 67 (1,703) CONSOLIDATED CASH FLOW STATEMENT AND NOTES 2007 2006 Note As restated ‚£000 ‚£000 Net cash from operating activities (i) 223 90 Cash flows from investing activities and servicing of finance Interest paid (115) (116) Payments to acquire tangible assets (2) (20) Net cash used in investing activities (117) (136) Cash flows from financing activities Net cash inflow from equity placings - 445 Repayment of secured loans (181) (174) Repayment of advances from Directors (31) (300) Increase in invoice discounting 187 96 Net cash from financing activities (25) 67 Net increase in cash and cash equivalents 81 21 Net cash and cash equivalents at beginning of (25) (46)period Net cash and cash equivalents at end of period 54 (25) Analysis of net funds Cash and cash equivalents 56 - Bank overdraft (2) (25) 54 (25) Borrowings due within one year (848) (663) Borrowings due after one year (323) (504) Directors loan account (66) (97) Net funds (1,183) (1,289) Note (i) Reconciliation of operating profit to net cash from operating activities 2007 2006 as restated ‚£000 ‚£000 Operating profit 609 634 Depreciation of property, plant and equipment 4 4 Amortisation of loan arrangement fees 3 2 (Increase) in trade and other receivables (144) (368) (Decrease) in trade and other payables (108) (182) Taxation paid (141) - Net cash from operating activities (ii) 223 90 Note (ii) Material adjustments to operating cash flows under IFRS for the year ended 31 December 2006 Previous Effect of Restated UK GAAP transition results to IFRSs per IFRS ‚£000 ‚£000 ‚£000 Operating profit 567 67 634 Depreciation 4 - 4 Amortisation 69 (67) 2 (Increase) in trade and other (368) - (368)receivables (Decrease) in trade and other payables (182) - (182) Net cash from operating activities 90 - 90 NOTES1. ACCOUNTING POLICIES
The financial statements have been prepared for the first time in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The adoption of International Financial Reporting Standards has resulted in the restatement of 2006 results to provide a like for like comparison. The financial impact of this change in reporting is detailed after each of the above financial reports.
A summary of the more important accounting policies, which have been applied consistently, is set out below.
Basis of accounting
The financial statements are prepared under the historical cost convention.
Although the accounts disclose a net liabilities position as at 31 December 2007 the accounts have been prepared on a going concern basis due to current trading levels and cash generation being in excess of required payments to creditors. The Group remains dependant on the continuing support of its bankers who have confirmed their intention to extend the existing facilities through to 30 July 2008.
Basis of consolidation
The consolidated income statement and balance sheet include the financial statements of the Company and its subsidiary undertaking made up to 31 December 2007. The results of subsidiaries sold and acquired are included in the consolidated income statement up to, or from, the date control passes. Intra-Group sales and profits are eliminated fully on consolidation.
On acquisition of a subsidiary, all of the subsidiary assets and liabilities that exist at the date of acquisition are recorded at their provisional fair values reflecting their condition at that date.
Basis of preparation of the financial statements
Goodwill
Goodwill arising on acquisition of subsidiaries is included in the balance sheet of the consolidated accounts as an asset at cost less impairment. In previous years goodwill has been amortised over the economic life of the asset, subject to an impairment review in line with UK GAAP. However for 2007 in line with International Financial Reporting Standards, goodwill has not been amortised from the transition date, but has instead been subject to an impairment review.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently where there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
The recoverable amount is calculated as a multiple of Earnings Before Interest and Taxation based on immediate past results using a multiple at the lower end of the range that would normally be applied to businesses within the same sector.
In further accordance with International Financial Reporting Standards, the 2006 comparative income statement and balance sheet results have had that year's goodwill amortisation added back to provide a like for like comparison. A reconciliation between the 2006 published results and the 2006 comparative results in these accounts appears on page 13.
Tangible fixed assets
The cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition.
Depreciation is calculated so as to write off the cost of tangible fixed assets, less their estimated residual values, over the expected useful economic lives of the assets concerned:
Fixtures and Fittings - 25% - 33% per annum on cost Land & Buildings - over 5, years straight line Foreign exchange
Transactions denominated in foreign currency are translated into the functional currency at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated at the rates ruling at that date. These translation differences are dealt with in the income statement account.
Leases
Costs in respect of operating leases are charged on a straight-line basis over the lease term.
Deferred taxation
UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current rates and laws. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different to those in which they are included in the financial statements. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no binding contract to dispose of those assets. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
Investments
Fixed asset investments are stated at cost less provision for any impairment in value.
Revenue Recognition
Revenue comprises the fair value of the sale of services, net of value-added tax, rebates and discounts. Revenue is recognised on the percentage completion basis, using pre-specified milestones to trigger invoices.
Pensions
The Group operates a number of defined contribution funded pension schemes for the benefit of certain employees. The costs of the pension schemes are charged to the income statement account as incurred.
Enterprise Management Incentive Share Option Scheme
During the year Garner plc granted options on 1,758,437 new Ordinary Shares of 1.0p each to certain employees of Garner International Ltd. These options may be exercised over one third of the Shares under Option on each of the first, second and third anniversaries of the date of the grant in equal instalments. The options will expire on the tenth anniversary of the date of grant. These options are included in the calculation of the Group's fully diluted earnings per share.
For equity-settled share-based payment transactions the group, in accordance with IFRS2 (effective from 1 January 2006) measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. The fair value of those equity instruments is measured at grant date, using the trinomial method. The expense is apportioned over the vesting period of the financial instrument and is based on the numbers which are expected to vest and the fair value of those financial instruments at the date of grant. If the equity instruments granted vest immediately, the expense is recognised in full.
2. BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
In accordance with IAS 33, earnings per ordinary share of 1.06p (2006: 0.97p) have been calculated by dividing the profit on ordinary activities after taxation and non-equity dividends of ‚£402,000 (2006: ‚£365,000) by 37,968,937 (2006: 30,594,733), being the weighted average number of ordinary shares in issue and ranking for dividend during the period. There were no preference shares at 31 December 2007 (2006: nil) available for conversion. The share options granted through the EMI scheme have been used to calculate the diluted earnings per ordinary share of 1.01p (2006: 0.97p).
3. RECONCILIATION OF MOVEMENTS IN TOTAL EQUITY
2007 2006 As restated ‚£000 ‚£000 Profit for the financial period 402 365 402 365 Issue of share capital - 147 Premium on issue of new shares - 358 Costs of share issues - (56) Net addition to shareholders' funds 402 814 Opening shareholders' deficit (1,703) (2,517) Closing shareholders' deficit (1,301) (1,703)
The impact of IFRS at the transition date has had no effect on the Group's equity.
4. STATUTORY ACCOUNTS
The financial information in this statement does not constitute the Company's statutory accounts for the year ended 31 December 2007 or 2006 (but is derived from those accounts).
5. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at The Institute of Directors, 116 Pall Mall, London, SW1Y 5ED at 2.30pm on 21st May.
6. REPORT AND ACCOUNTS
Copies of the Report and Accounts for the year ended 31 December 2007 are being sent to shareholders in due course. Further copies will be available from the Company's registered office at 6 Derby Street, London, W1J 7AD and on the Company's web site www.garnerinternational.com.
GARNER PLC