PRP.L Regulatory News (PRP)

3 June 2011

Prime People Plc

Results for the year ended 31 March 2011

Prime People Plc ("Prime People" or the "Group"), the real estate, infrastructure and customer insights recruitment specialist, today announces its results for the year ended 31 March 2011.

Highlights:

Peter Moore Managing Director of Prime People, said:

"These results show a significant year on year improvement and are a testament to the continued hard work of our staff. I am pleased that the robustness and cash generative nature of our business has allowed us to pay both an interim and increased final dividend.Our core business continued to perform solidly in the UK where we have also succeeded in generating revenue from new business areas. Our overseas businesses offer exposure to regions with substantial GDP and growth potential. Subject to the economies in which we operate not changing materially, we believe that the Company is well placed to have another successful year."

-Ends-

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Chairman's Statement

Introduction

We saw a continuation of the improvement in overall market conditions and both our net fee income and profitability in the year to 31 March 2011.

The recovery has been in permanent placements, where net fee income grew by 35% in the year. Our temporary business suffered a decline in sales and net fee income as a direct result of Public Sector spending cuts. The ratio of net fee income from permanent placements to temporary placements has increased from 78:22 in 2010 to 88:12 in the year being reported.

We have increased our permanent consultant headcount within our established areas of activity and broadened our business into new end markets.

The Group generated 29% of its net fee income outside the UK, which is broadly similar to the 30% achieved in 2010.

Results

Operating profit for the year was £1.01m (2010: £0.46m), a significant improvement on the prior year. Basic earnings per share increased to 5.86p (2010: 2.79p).

The conversion rate of operating profit from net fee income increased from 6.9% in 2010 to 12.5% in 2011.

Gross revenue was marginally down at £13.95m reflecting the lower level of temporary business (2010: £14.18m). However, net fee income increased by 20.5% to £8.04m (2010: £6.67m).

The Group maintained a strong net cash position with £3.03m as at 31 March 2011 (2010: £2.3m). During the year the Group repaid the final tranche of the bank loan entered into with Barclays Bank Plc in January 2006 to part fund the acquisition of Macdonald & Company Group Limited.

Dividends

The Board will be recommending an increase in the final dividend to 2.25p (2010: 1.50p) per share which combined with the interim dividend of 1.75p per share, will result in a total dividend of 4.00p (2010: 3.50p).

Share Buy Back

During the year 55,000 shares at a cost of £30,375 (2010: 25,000 shares at a cost of £8,750) were purchased through the Group's buy back programme and the Board will be seeking shareholder approval for the renewal of the authority to repurchase up to 10% of the Group's issued share capital at the Annual General Meeting on 28 June 2011.

Strategy

With recruitment being driven to a very large extent by the economic cycle it is our strategy to broaden, whether by organic growth or acquisition, the recruitment service that the Group provides when the time is right and the opportunity arises, both by geography and sector. We continue to invest in our established businesses and we are looking to extend our reach in South East Asia. We expect to add to our established presence in that region (Hong Kong since 2006) by opening an office in China.

Outlook

Whilst there continues to be uncertainty surrounding recovery in the UK, there is evidence of confidence returning to our markets. Our overseas revenues provide diversity to our business and, subject to there being no systemic shocks, we look forward with some confidence to 2012.

Our people

Finally, I should like to thank our staff for their hard work and commitment over the last twelve months.These results are a testament to their efforts.

Robert Macdonald

Executive Chairman

2 June 2011

Operating Review

The Business

The Group's principal activity is the delivery of permanent and temporary recruitment services. Historically, the Group's focus has been to provide these services into the built environment sector. More recently the Group has successfully broadened its sector focus to include provision of recruitment services for customer insight staff in the market research and data analysis sectors.

The Group has delivered strong net fee income growth of 20.5% increasing net fee income from £6.67m to £8.04m producing an operating profit of £1.01m (2010: £0.46m).

In the UK business a number of our teams have had a strong year. It is very encouraging to report that Prime Insight, the customer insight recruitment business closed with net fee income up by 147%. Against this net fee income from our temporary business reduced by 33% from £1.47m to £0.98m, as referred to in the Chairman's Statement this area has been affected by the government spending cuts.

On the international front, net fee income grew by 15.8% from £2.02m to £2.34m, reflecting a partial return of confidence to the Middle East market and the strength of the South East Asia market. With respect to the latter we have doubled the consultant headcount in our Hong Kong office during the course of the year, which we expect to provide strong net fee income growth in 2012.

During the year we continued to invest in new market sectors. We have established teams in both the UK and Internationally serving the environment and energy sectors and, in the UK, serving the pharmaceutical research sector. These teams have now been in place since June 2010 and we expect them to generate net fee income growth in 2012.

Our Staff

The success of our business is reliant on the quality of our staff and we have adopted an improved recruitment and training process during the year. Whilst overall headcount has remained similar to 2010, productivity per head has increased by 16% and we are looking for this to further improve in 2012.

A testament to the above approach is that our largest brand, Macdonald & Company, was placed in the top 100 companies to work for by the Sunday Times and achieved 2 Star Status in "The Sunday Times 100 Best Small Companies To Work For 2011".

Current Trading

The outlook for the year remains positive. We believe that the strong market position of our UK business combined with the continued investment in new sectors and our overseas businesses will enable us to further increase the net fee income generated by the Group.

Peter Moore

Managing Director

2 June 2011

Financial Review

Trading results

Gross fee income for the year from continuing operations decreased by 1.6% to £13.95m (2010: £14.18m).

Net fee income increased by 20.5% to £8.04m (2010: £6.67m).

The group considers net fee income to be the key indicator of the performance of the business. This is defined as the income generated from permanent placements together with the contribution earned from contract and temporary staff.

Administrative costs totalled £7.03m which represents 87% of net fee income (2010: £6.21m: 93%). A significant contributor to the reduction as a percentage of net fee income was the improvement in fee productivity across the group. Profit before tax increased by 120 per cent to £1.01m (2010: £0.46m).

The taxation charge is £0.33m on a profit on ordinary activities before taxation of £1.02m which gives an overall tax rate of 31.8% (2010: 27.9 %). The reasons for the difference from the standard UK corporation tax rate of 28% are detailed in note 8 of the accounts.

Earnings per share

Basic earnings per share increased by 110% to 5.86pence (2010: 2.79 pence).The diluted earnings per share increased by 108% to 5.65pence (2010: 2.71pence).

Dividend

As outlined in the Chairman's statement, the Directors propose a final dividend of 2.25 pence which will, subject to shareholder approval at the Annual General Meeting, be paid on 1 July 2011 to shareholders who are on the register on 17 June 2011, making a total dividend paid to shareholders for the year of 4.00 pence per ordinary share.

Balance sheet

The Group's net assets position at 31 March 2011 is similar to last year at £13.79m (2010:13.53m)

Trade receivables are slightly down on last year at £1.72m (2010:£1.78m) as is the average credit period taken by customers at 45 days (2010: 46 days).

Cash flow and cash position

Net cash inflow of £1.58m (2010: inflow of £0.89m) was generated from operating activities during the year, which after net taxation payments of £0.23m (2010: net taxation payment of £0.03m), resulted in a net cash inflow from operating activities of £1.35m (2010: inflow of £0.86m).

The group operates a centralised treasury function with a net cash position at 31 March 2011 of £3.03m, compared to a net cash position of £2.3m at 31 March 2010.

Chris Heayberd

Finance Director

2 June 2011

The above results relate to continuing operations

Condensed consolidated statement of financial position

Condensed consolidated statement of changes in equity

For the year ended 31 March 2011

1 Basis of preparation

Basis of preparation

The consolidated financial statements of the Prime People plc have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union and also comply with IFRIC interpretations and Company Law applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through the statement of comprehensive income.

The financial information in this preliminary announcement which comprises the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Changes In Equity, Consolidated Cash Flow Statement and related notes is derived from the full Group financial statements for the year ended 31 March 2011 and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. Group statutory accounts for 31 March 2010 have been delivered to the Registrar of Companies and those for 31 March 2011 will be delivered following the Company's annual general meeting. The auditors have reported on each set of Group statutory accounts and their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

2 Segmental analysis 

a) Gross fee revenue, net fee income and operating profit by geographic region

All revenues disclosed are derived from external customers.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment operating profit represents the profit earned by each segment after allocation of central administration costs.

2 Segmental analysis (continued)

b) Gross fee income and net fee income generated from permanent and temporary placements

3 Taxation on profits on ordinary activities

4 Dividends

The Directors propose to pay a final dividend in respect of the year ended 31 March 2011 of 2.25 pence per share (2010: 1.50 pence per share) which, subject to shareholder approval, will be paid on 1 July 2011 to shareholders who are on the register on 17 June 2011.

5 Earnings per share

Earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

Fully diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by existing share options assuming dilution through conversion of all existing options.

Earnings and weighted average number of shares from continuing operations used in the calculations are shown below.

6 Reconciliation of profit before tax to net cash inflow from operating activities

7 Analysis of net cash

8 Availability of Annual Report

A copy of the company's Annual report will be available on the Company's website www.prime-people.co.uk and will be posted to those shareholders who have requested a copy on or around 6 June 2011.