Parity Regulatory News (PTY)

RNS Number : 9869I

Parity Group PLC

23 March 2010

 

 

 

 

23 March 2010

 

 

PARITY GROUP PLC

 

UNAUDITED PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 2009

 

Parity Group plc, the UK IT Services Company, announces its unaudited preliminary results for the year ended 31 December 2009.

 

Key points - financial

 

·; Group revenues from continuing operations of £119.0M (2008: £132.3M)

·;

·; Resilient performance from Resources with revenues of £100.5m (2008: £110.2M) and operating profit before exceptional items of £3.0M (2008: £3.7M)

·;

·; Solutions experienced difficult trading conditions, with revenues of £18.5M (2008: £22.1M) and operating profit before exceptional items of £0.03M (2008: £1.4M)

·;

·; Group profit from continuing operations before tax and exceptional items of £0.25M (2008: £1.7M)

·;

·; Net debt of £9.8M (2008: £3.8M), due to lower profitability, legacy cash outflows, restructuring costs, and a short-term H2 increase in debtor days. Now improved with a consequent reduction in net debt as at the end of February to £7.5M

 

Key points - operational

 

·; Training business divested in February 2009

 

·; Decisive action taken on costs, with closure of Hemel Hempstead and Leeds sites and staff reductions across the business

 

·; Client service levels maintained

 

·; Successfully widened Public Sector client base to reduce dependency on a few large organisations

 

·; Sales effort more focussed on Private Sector to take advantage of any upturn

 

·; Implementation of new IT systems with clear benefits showing through in the current year

 

Alwyn Welch, Chief Executive, commented:

 

"As the recession deepened during 2009, Parity continued to experience difficult trading conditions. Against this background, Resources delivered a very resilient performance, especially compared to most of its competitors, whilst Solutions struggled for much of the year although showed improvement in the second half. By acting quickly on both costs and operating systems, we have weathered the economic storm far better than the Group has done in the past.

 

"We do not expect our markets to strengthen or grow significantly overall during the current year. IT spending in the public sector will continue to be under strong pressure, but we can see more signs for optimism in the private sector. However, revenue visibility remains low and volatility high.

 

"Prudence and caution will remain our operational watchwords, as we navigate Parity through the current year and as the market slowly emerges from recession. In the meantime, our reputation for high quality service delivery will help us to continue to differentiate well."

 

 

Enquiries:

 

Parity Group plc Alwyn Welch, Chief Executive Officer Ian Ketchin, Finance Director	0845 873 6942
Hogarth John Olsen / Ian Payne	020 7357 9477

 

 

About Parity Group plc:

 

Parity Group PLC is a UK-focused IT services company, operating via two core business units - Parity Resources and Parity Solutions.

 

Parity Resources is a leading IT recruitment specialist, with over 30 years experience in providing permanent and contract technology staff, temporary staff and managed recruitment services across all markets.

 

Parity Solutions specialises in providing IT, Projects and Consulting, using leading edge technologies and drawing upon the depth of experience of its consultants in Programme and Project Management.

 

Parity is listed on the London Stock Exchange, with a ticker of PTY.LN.

 

 

PARITY GROUP PLC

 

PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 2009

 

 

 

CHAIRMAN'S STATEMENT

 

The past year has again been very difficult for the IT Services Industry. I express the Board's thanks to our management and staff for their efforts in responding to the challenges we have faced.

Public expenditure pressures over the coming years will certainly affect our industry but we are better placed than most given our reputation for excellent service in the public sector. The disposal of our Training business is leading to greater focus on improving profitability in our Resources and Solutions businesses.

We are fully focussed on creating greater scale in our businesses and on reducing cost, in what is a highly competitive market. We are determined to resolve these challenges in the best interests of our shareholders and staff and the continued support of both is much appreciated.

Lord Freeman

Chairman

 

 

CHIEF EXECUTIVE'S REVIEW

 

 

INTRODUCTION

 

During 2009, as the recession deepened, the Group continued to experience difficult trading conditions, with client spending reductions, downwards price pressures, and lengthened procurement cycles. Against this background, Resources delivered a very resilient performance, especially compared to most of its competitors, whilst Solutions struggled for much of the year although showed improvement in the second half.

 

We disposed of the Training business in February 2009. As part of the transaction we continued to provide certain back office support for most of the year.

 

Driven both by this significant change to our business and by a need to continually improve our cost effectiveness, we closed two locations and consolidated most of our back office team into Wimbledon whilst reducing headcount in the process. We also implemented new integrated IT systems to replace dated, inefficient software, and to enable us to take further cost of out the Group and so operate more effectively.

 

By acting quickly we weathered the economic storm far better than the Group has done in the past.

 

Market

 

Parity operates from five offices in the UK and Ireland. We operate in the IT Services (Solutions) and IT Recruitment (Resources) sectors. Activity in both sectors tends to follow changes in GDP and often in an exaggerated manner as a significant proportion of IT spending is considered discretionary by clients.

 

In 2009 discretionary spending, even in the Public Sector, was subject to significant reductions and to lengthened procurement cycles. Recruitment of permanent IT staff declined and whilst the decline in temporary staff recruitment was less severe, pricing pressures were consistently downwards.

 

Much of Parity's work is short term in nature, although in Solutions we have some multi-year contracts and in Resources certain temporary staff who are critical to our clients' on-going operations are on long-term assignments. As project procurements slowed, and project and assignment durations shortened, our visibility of the business became very short and we experienced considerable market volatility.

 

Competition, not surprisingly, has increased and we also saw larger competitors fighting in our tier of the market as larger opportunities in both the private and public sector markets became scarce.

 

In 2009 the majority of our business was delivered to Public Sector clients, where we were successful in widening our client base. More recently we have also started to re-orient our sales effort towards Private Sector clients, to take advantage of an expected upturn in that market as the recession lifts and to reduce our exposure to the spending-constrained Public Sector.

 

 

OPERATIONAL REVIEW

Group revenue was £119.0M, 10% lower than in 2008 (£132.3M). Operating profit before exceptional items was lower at £1.5M (2008: £3.0M), due to lower revenue and price pressures, combined with stranded costs after the Training disposal, offset by cost reductions through the year. Profit before tax and exceptional items for continuing operations was £251k (2008: £1,693k).

 

Exceptional charges of £271k relate to the closure of the Hemel Hempstead office. Within operating profit before exceptional items we incurred aborted transaction costs of £63k and restructuring charges of £200k.

 

Net debt increased to £9.8M (2008: £3.8M; H1 2009: £6.3M). Lower profitability combined with legacy cash outflows, together with the cost of closing Hemel Hempstead and investment in new IT systems contributed to this position. Increasing debtor levels, caused by invoicing issues both internally and at a number of our larger clients, were the major factor in the second half of the year.

 

Since the year end the position has improved significantly. At the end of February 2010 net debt had fallen to £7.5M and trade debtors had reduced by over £2M. Our internal systems and process issues have now been resolved and our debtor days have already reduced to our normal 30.

 

Resources

 

In a weak recruitment market, Resources delivered a strong result, better than many competitors. This was due to a combination of strong positioning in the market where we are in the top 10 IT recruiters in the UK, and the top 3 in the Public Sector, and a clear focus on delivering operating profit.

 

Revenue of £100.5M was 9% lower than 2008 (£110.2M), due to lower contractor volumes and average daily rates decreasing due to pricing pressures. Contractor margins reduced to 8.5% (2008 9.5%) and permanent revenue (and margin) declined by £0.5M. These factors combined with lower contractor revenue reduced gross margin by 21% to £8.7M (2008: £11.1M).

 

Strong cost controls in the business, including a reduction in headcount of 28% from a peak in March to the year end, delivered a reduction of 23% in SG&A… costs to £5.7M (2008: £7.4M).

 

The resulting operating profit before exceptional items of £3.0M (2008: £3.7M) represented a margin of 3.0% compared to 3.4% in 2008. Of the £0.7M decrease in operating profit before exceptional items, some £500k was due to lower permanent revenue.

 

Average contractor numbers declined by 7% from H2 2008 to H1 2009, and by 8% from H1 to H2 2009. Most of this decline was in the commercial sector, although we did see a worse seasonal impact than we have recently experienced in the public sector in Q2. Orders, measured by gross margin on new and extension contracts signed, improved by 38% in H2 compared to H1.

 

We won key new frameworks at the NHS (PASA) and our focus on diversifying in the public sector was demonstrated by growth over the year of 51% in the numbers of contractors in Health, which helped offset a reduction of 19% in Central Government where spending pressures were applied early in the year. In the private sector, we renewed and grew revenue over the year at clients such as Shell and Unilever.

 

Since entering 2010 contractor numbers in public and commercial clients sectors have grown above the mid December level and overall by 5%. We have seen strengthening demand from our commercial clients and so far good resilience in the public sector market, although we expect weakness here in our second quarter due to the pressures on UK public spending.

 

…Sales, general and administration costs (SG&A) is defined as total operating costs less cost of sales before exceptional items.

 

Solutions

 

Solutions experienced very difficult trading conditions throughout the year, with customers' buying decisions being delayed and some project cancellations. Price pressures resulted in an average daily fee rate decrease of approx 10% over the year, and as our utilisation has generally remained high this created the need for continued cost reductions and also a mix change in the skills of the delivery people we employ.

 

Revenue for 2009 at £18.5M was 16% lower than in 2008 (£22.1M) and fee revenue…… reduced by 18% in part due to price decreases as noted above. Operating profit before exceptional items was impacted and reduced to £29k (2008: £1.4M). The 2009 numbers include over £300k of non-exceptional restructuring costs and internal costs on our new IT systems.

 

In what was otherwise a very difficult year for Solutions, we made good progress in the market and in improving our underlying competitiveness. We won and started to deliver to two new significant clients at CAA and Ofsted, both using Microsoft technology and beating Tier 1 incumbent suppliers. We began working with Adobe, and have won our first project and also a framework agreement at the Met Office. In Northern Ireland we won an unsolicited bid for a new Talent Management BPO project with DEL, and shortly after the end of the year we announced the creation of a Microsoft skills centre of excellence in Belfast with strong support from Invest NI and Microsoft themselves.

 

We have been building a relationship with our offshore delivery partner Sonata Software. Initially this involved using their staff in the UK to supplement our own, but recently they have started to deliver significant sized work packages from Bangalore. We are now taking some of their offerings to market in the UK, so gradually strengthening and widening our relationship. Sonata bring us very strong technical and project capability, and allow us to be more competitive with our larger competitors who have their own offshore capability.

 

Solutions ended the year with an improving pipeline, competitive position, and orders. Nonetheless the outlook remains volatile as much of the work we undertake is seen as discretionary by our clients. Broadening our client base, and working more with partners including some larger systems integrators, will be the focus for us in 2010.

 

…… Fee revenue is defined as project revenue delivered by our own staff or associates

 

Training (Discontinued)

 

As previously noted we disposed of the Training business to ECS Limited at the end of February 2009. Training lost £245k in the first two months of the year.

 

Since the disposal we have continued to deliver certain services to Parity Training, as agreed under a transitional services agreement. We have also focussed on reducing the stranded costs.

 

STRATEGY

 

Parity's overarching strategy continues to be to build a strong mid-sized business to deliver high quality IT and recruitment services into the UK and Ireland market. We differentiate through the quality of the work we do, the people we work with (internally and externally), and through the experience enjoyed by our clients when we work for them. We will manage the business prudently to ensure we balance quality with affordability, so building value for all stakeholders in our business.

 

 

 

 

In Resources, where we have an estimated overall market share that places us in the Top 10 IT recruiters in the UK, and the Top 3 in the Public Sector, our priority is to build a business based on higher value, scarcer skill sets. This strategy has enabled us to protect operating margin even as prices and volumes come under pressure, and it will allow us to continue to differentiate on service rather than risk becoming commoditised. We wish to have a modest level of permanent recruitment income, to improve operating margin and to allow us to offer a wider range of services to our clients, but we do not wish to become a generalist supplier.

 

In Solutions our most important strategic objective is to grow our business to gain critical mass. Our technology focus will remain heavily towards Microsoft, but also complementing our existing Oracle capability with a growing presence in Adobe solutions. Whilst we have a good track record in mid-tier organisations in the Public Sector, and in Utility companies, increasingly our application strength is in delivering business information (BI) and knowledge sharing systems. This requires strong integration skills, understanding of the business issues in those domains, and the ability to bring together the skills required to deliver to clients. We will continue to focus our growth in this area, complementing our talent management BPO services.

 

PEOPLE

 

2009 was a second tough year for our staff, and as the essence of our business is the service delivered by people this created challenges for management and our staff alike.

 

We had significant losses of people, with the disposal of Training; the closure of our Hemel Hempstead and Leeds offices; and some other staff reductions across the business. In common with much of our industry we awarded very limited pay rises, and little profit-related variable compensation was paid. We also offered our staff the opportunity to take unpaid leave as part of our focus on reducing costs without causing long-term damage to our ability to service our clients.

 

It is a credit to all our colleagues that they managed to retain their focus and commitment during this difficult year. Importantly, we did not experience what is a common symptom of low morale: poor service delivery. Indeed the very culture that attracts and retains clients, has provided a source of stability in our company.

 

On behalf of the Board, and particularly of the Executive Committee, I would like to thank all Parity people for fighting so hard and effectively during such a tough year. Whilst the financial results were not as we would have wished, our people contributed strongly to the resilience we have shown.

 

 

OUTLOOK

 

We do not expect the markets in which we operate to grow significantly during the current year. Whilst the economy overall may grow slowly, we expect IT spending in the public sector to continue to come under strong pressure. Conversely we see signs for optimism in the private sector.

 

Revenue visibility remains low and volatility high. However there are clearly areas of the market which are already growing, and we are focusing our selling efforts on those. Our reputation for high quality service delivery across our business will help us to continue to differentiate well. Clients investing at this stage of the cycle insist upon low risk, high quality delivery as well as competitive prices.

 

Prudence and caution will remain our operational watchwords, as we navigate Parity through the current year and as the market slowly emerges from recession.

 

 

 

 

 

Alwyn Welch

Chief Executive Officer FINANCIAL REVIEW

 

REVENUE

 

Continuing operations	2009 £'000	2008 £'000
Resources	100,517	110,161
Solutions	18,507	22,117
	119,024	132,278

 

Group revenues from continuing operations fell by £13.3M (10%) to £119.0M, reflecting the tough trading conditions experienced by the Group during the year.

 

Resources proved to be more resilient to the effects of recession than many of its competitors. Permanent recruitment, which declined most significantly in 2009, forms only a small part of the Resources business. Contract recruitment, which is where Parity specialises, has been more robust. The Solutions business continued to experience customer delays in signing contracts to start work, reductions in scope after contracts had been awarded, and price pressures.

 

 

OPERATING PROFIT

 

Continuing operations	2009 £'000	2008 £'000
Resources	2,993	3,691
Solutions	29	1,351
Operating profit before central costs and exceptional items	3,022	5,042
Central costs	(1,572)	(2,034)
Operating profit before exceptional items	1,450	3,008

 

Operating profit before exceptional items decreased by 52% reflecting the economic conditions prevailing during 2009. Resources saw a decline in operating profit before exceptional items from £3.7M to £3.0M which is nevertheless 13% more than reported in 2007. Operating profit before exceptional items in Solutions was at breakeven. Despite further cost reductions the market conditions and the competition for business meant that Solutions was unable to generate sufficient revenue to make a good return.

 

DISPOSAL AND DISCONTINUED OPERATIONS

 

On 27 February 2009 we completed the sale of the Training business to ECS Ltd (a Dubai-based company) for consideration of up to £3.0M. This included £1.5M dependent on revenue performance in the twelve months following the sale. We do not expect performance levels to have been adequate to trigger payment of any of this conditional consideration. This disposal simplified the business and improved focus. The results for discontinued operations include a loss on disposal of £208,000 and a trading loss for Training in the first two months of the year of £245,000.

 

As a result of the disposal the Group addressed its cost base, as certain costs previously charged across three business units are now shared across two. We closed our major back office facility in Hemel Hempstead and moved the roles to our head office in Wimbledon, whilst also reducing the number of staff engaged in support functions. We continue to work to reduce our IT infrastructure costs.

 

EXCEPTIONAL ITEM

 

As a result of the closure of our Hemel Hempstead office we incurred an exceptional charge of £271,000. This included redundancy costs for certain staff and retention bonuses for those moving to our Wimbledon office in addition to recruitment costs to complete the new team. It is a credit to our people that despite the upheaval of this move, the change in staff and the implementation of a new finance system during the year, the finance team delivered an uninterrupted service to the business.

 

In 2008 there was an exceptional restructuring charge of £371,000 relating to redundancies in the Solutions business and moderate central cost changes.

 

FINANCE SYSTEM

 

During 2009 we implemented our new Microsoft Dynamic AX ERP system across the business. This replaced a number of old systems, some of which were no longer supported. AX is also integrated with our front office recruitment system to create processing efficiencies.

 

FINANCE COSTS

 

Interest charges include notional interest on the Group's pension liabilities of £862,000 (2008: £827,000) in accordance with IAS 19. Interest costs on borrowings fell by £147,000 to £341,000 owing to falling interest rates.

 

TAXATION

 

There was a tax credit of £245,000 on continuing operations (2008: charge of £129,000). This included the write back of a surplus provision of £360,000 and a reduction of £300,000 in the deferred tax asset in the Solutions business owing to reduced visibility of future profits. The tax on discontinued operations was a charge of £189,000 (2008: £784,000).

 

PENSIONS

 

The Group's defined benefit pension scheme had an increased accounting deficit at the year end. The accounting deficit was £3.3M (2008: £1.9M) at 31 December 2009. The increase reflects the projected changes in the financial markets, and an increase in longevity of members. The Group contributes £900,000 a year to reduce the deficit.

 

NET ASSETS

 

Net assets totalled £7.3M at the period end, a decrease of £1.3M on last year. The largest single item leading to this reduction was the £1.4M increase in the pension liability.

 

CASH FLOW AND NET DEBT

 

Net debt at 31 December 2009 was £9.8M (2008: £3.8M). This result was disappointing and reflected a number of factors. The challenge of transitioning to our new financial systems was compounded by the growing trend in the Public Sector to outsource payment processes or use shared service centres. The changes in those processes gave rise to further challenges in our payment cycle. With a similar ageing profile of trade debtors to 31 December 2008 we would have expected £2M-£3M less net debt at 31 December 2009. At the end of February 2010 net debt had been reduced by £2.3M.

 

The other major factors affecting the year end net debt were a reduction in trade and other creditors of £4.2M which was in line with the fall in turnover and the capital expenditure of £1.7M.

 

Debtor days closed the year at 33 days (2008: 30 days) and have subsequently been reduced again to 30 days.

 

EARNINGS PER SHARE AND DIVIDEND

 

The weighted average number of shares used in the calculation of basic earnings per share was 37.9 million (2008: 37.9 million). The basic loss per share was 0.19 pence (2008: loss of 9.08 pence. The basic earnings per share from continuing operations was 0.59 pence (2008: earnings of 3.14 pence).

 

The Board does not propose a dividend for 2009 (2008: nil).

RISKS AND UNCERTAINTIES

There are a number of potential risks and uncertainties that could have an adverse impact on the Group's long-term performance. Risk management is seen as an important element of internal control and is used to mitigate the Group's exposure to such risks. The key risks facing the business and how we address them are outlined below.

Market and client riskRisk from losing out to our competitors is minimised by ensuring we maintain a competitive edge through strong relationship management and quality of service delivery.

Our exposure to market risks is further limited by the fact that we serve a diverse range of clients with the largest accounting for less than six per cent of turnover of the Continuing Group in 2009. Seventy-three per cent of turnover came from the public sector.

The Company constantly reviews levels of fixed cost in order to reduce the impact of a downturn in revenue.

ResourcesThe continuing consolidation in the market combined with the economic downturn brings pricing pressure. Parity's response is to focus on higher margin, higher level skill areas that are not so vulnerable to low margin, high volume competitors. Resources delivers 45% of its revenue under the Catalist public sector framework. This framework is presently subject to retender. Should Parity not retain its position on this framework, we may be able to offer services to our public sector clients though other public sector frameworks. In addition if we were to lose our Catalist accreditation, the current contractor book would take some time to erode, giving the Company time to find new business and adjust the cost base.

SolutionsThe increasing trend to offshore IT development could restrict Parity's ability to win new work. The Company's approach is to focus on smaller contracts where the additional cost of managing the outsourced service would offset the lower delivery cost. In addition we have partnered with an Indian company, Sonata Software, who will deliver modules of projects for Parity where remote delivery is considered effective. Our core competence is in project management and we believe this will always require on-site presence.

 

Contract risk

Parity's contracts can be complex and each one is different. The operation and management of those contracts is key to successful performance.

The Company has established detailed and formal controls to manage the risks associated with taking on new clients and the continued supply of services to ensure that contractual obligations are met over the life of a contract.

Human Resources

Our people are an important element of our service and having appropriately trained staff helps us mitigate the risk of poor service delivery. Our performance management system ensures that staff have clear objectives and are appropriately rewarded for the outcome, while also identifying training and development needs.

Technology risk

As an IT services provider we rely on our IT, telecommunications and infrastructure systems to perform and manage the services we provide to clients. The Company engages with its service providers and reviews its own disaster recovery systems regularly in order to minimise the risk of prolonged disruption to systems.

Regulatory and legal

The Board also recognises that non-compliance with relevant laws and regulations can result in substantial fines or penalties. Suitable controls are built into our service delivery processes.

 

Ian Ketchin

Group Finance Director

 

 

DIRECTORS' RESPONSIBILITY STATEMENT

 

The responsibility statement set out below has been extracted from the annual financial report, which will be published in due course, and relates to that report and not this announcement:

 

The annual report and accounts are the responsibility of, and have been approved by, the directors. The directors confirm to the best of their knowledge that: (a) The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as endorsed by the European Union and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and (b) the annual report and accounts include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

 

By Order of the Board

 

 

Ian Ketchin

Group Finance Director

 

 

 

Parity Group plc

Consolidated income statement

For the year ended 31 December 2009

_______________________________________________________________________

 

	Notes	Before exceptional items 2009 £'000 unaudited		Exceptional items 2009 £'000 unaudited	After exceptional items 2009 £'000 unaudited	Before exceptional items 2008 £'000 audited (see note 1)	Exceptional Items 2008 £'000 audited (see note 1)	After exceptional items 2008 £'000 audited (see note 1)
Continuing operations Revenue		2	119,024	-	119,024	132,278	-	132,278
Employee benefit costs			(12,214)	(271)	(12,485)	(14,479)	(371)	(14,850)
Depreciation & amortisation			(488)	-	(488)	(327)	-	(327)
All other operating expenses			(104,872)	-	(104,872)	(114,464)		(114,464)
Total operating expenses			(117,574)	(271)	(117,845)	(129,270)	(371)	(129,641)
Operating profit		2	1,450	(271)	1,179	3,008	(371)	2,637
Finance income Finance costs		4  5	4 (1,203)	-	4 (1,203)	1 (1,316)	- -	1 (1,316)
Profit/(loss) before tax			251	(271)	(20)	1,693	(371)	1,322
Taxation
Write down of deferred tax asset			(300)	-	(300)	-	-	-
Other taxation			469	76	545	(236)	107	(129)
		6	169	76	245	(236)	107	(129)
Profit/(loss) for the year from continuing operations		2	420	(195)	225	1,457	(264)	1,193
Discontinued operationsLoss for the year from discontinued operations		2	(496)	-	(496)	(4,641)	-	(4,641)
Profit/(loss) for the year attributable to equity shareholders			(76)	(195)	(271)	(3,184)	(264)	(3,448)
Basic (loss) per share on loss for the year		8			(0.71p)			(9.08p)
Basic earnings per share from continuing operations		8			0.59p			3.14p
Diluted (loss) per share on loss for the year		8			(0.71p)			(9.08p)
Diluted earnings per share from continuing operations		8			0.59p			3.14p

 

Parity Group plc

Consolidated statement of comprehensive income

for the year ended 31 December 2009_________________________________________

 

	2009 £'000 unaudited	2008 £'000 audited (see note 1)
Loss for the year	(271)	(3,448)
Other comprehensive income:
Exchange differences on translation of foreign operations	781	(612)
Actuarial (loss)/gain on defined benefit pension scheme	(2,088)	116
Deferred taxation on actuarial gains on pension scheme taken directly to equity	-	(32)
Other comprehensive income for the year net of tax	(1,307)	(528)
Total comprehensive income for the year	(1,578)	(3,976)

 

 

 

 

Consolidated statement of changes in equity

for the year ended 31 December 2009_________________________________________

	Share capital £'000	Deferred  shares £'000	Share premium reserve £'000	Other reserves £'000	Retained earnings £'000	Total £'000
At 1 January 2009	760	14,319	20,134	44,160	(70,714)	8,659
Loss for the year	-	-	-	-	(271)	(271)
Other comprehensive expense for the year net of tax	-	-	-	-	(1,307)	(1,307)
Share options - value of employee services	-	-	-	-	53	53
At 31 December 2009	760	14,319	20,134	44,160	(72,239)	7,134

 

 

	Share capital £'000	Deferred  shares £'000	Share premium reserve £'000	Other reserves £'000	Retained earnings £'000	Total £'000
At 1 January 2008	760	14,319	20,134	44,160	(66,614)	12,759
Loss for the year	-	-	-	-	(3,448)	(3,448)
Other comprehensive expense for the year net of tax	-	-	-	-	(528)	(528)
Share options - value of employee services	-	-	-	-	(124)	(124)
At 31 December 2008	760	14,319	20,134	44,160	(70,714)	8,659

 

 

Parity Group plc

Consolidated balance sheet

As at 31 December 2009_____________________________________________

 

	As at 31.12.09 £'000 unaudited	As at 31.12.08 £'000 audited (see note 1)
Non-current assets
Goodwill	4,594	4,594
Intangible assets - software	1,530	67
Property, plant and equipment	1,159	1,343
Available for sale financial assets	117	130
Deferred tax assets	1,535	1,813
	8,935	7,947
Current assets
Work in progress	451	638
Trade and other receivables	25,382	24,719
Cash and cash equivalents	128	369
	25,961	25,726
Assets classified as held for sale and included in disposal groups	-	4,055
Total assets	34,896	37,728
Current liabilities
Financial liabilities	(9,913)	(4,310)
Trade and other payables	(13,476)	(16,410)
Current tax liabilities	-	(944)
Provisions	(401)	(444)
	(23,790)	(22,108)
Non-current liabilities
Provisions	(646)	(864)
Retirement benefit liability	(3,326)	(1,946)
	(3,972)	(2,810)
Liabilities classified as held for sale and included in disposal groups	-	(4,151)
Total liabilities	(27,762)	(29,069)
Net assets	7,134	8,659
Shareholders' equity
Called up share capital	15,079	15,079
Share premium account	20,134	20,134
Other reserves	44,160	44,160
Retained earnings	(72,239)	(70,714)
Total shareholders' equity	7,134	8,659

Parity Group plc

Consolidated cash flow statement

for the year ended 31 December 2009_________________________________________

	Notes	2009 £'000 unaudited	2008 £'000 audited  (see note 1)
Cash flows (used in) / generated from operating activities
Cash (used in) / generated from operations	4	(3,521)	3,897
Interest received		4	-
Interest paid		(341)	(488)
Taxation received		1	100
Net cash (used in) / from operations		(3,857)	3,509
Cash flows from investing activities
Purchase of intangible assets - software		(1,654)	(65)
Purchase of property, plant and equipment		(199)	(426)
Net cash movement from sale of subsidiary undertaking
Cash disposed of with subsidiary undertaking		(776)	-
Net proceeds from sale of subsidiary undertaking		511	-
		(265)	-
Net cash used in investing activities		(2,118)	(491)
Cash flows from financing activities
Net movement on invoice financing		5,603	(3,085)
Payment of capital element of finance leases		-	(2)
Net cash from / (used in) financing activities		5,603	(3,087)
Net decrease in cash and cash equivalents		(372)	(69)
Cash and cash equivalents at beginning of the year		500	770
Net foreign exchange difference		-	(201)
Cash and cash equivalents at end of the year		128	500

 

Analysed as:
Cash and cash equivalents of continuing business		128	369
Cash & cash equivalents held in assets classified as held for sale and in disposal groups		-	131
		128	500

 

 

Parity Group plc

 

Unaudited Notes to the Results Announcement

 

1 Accounting Policies

 

Basis of preparation

The financial information set out in these unaudited preliminary results do not constitute the company's statutory accounts for 2008 or 2009.

Statutory accounts for the year ended 31 December 2008 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2008 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 237(2) or 237(3) of the Companies Act 1985. The results for 2009 are unaudited. Statutory accounts for the year ended 31 December 2009 will be finalised based on the information presented in this results announcement.

Statutory accounts for the year ended 31 December 2008 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2009 will be delivered to the Registrar in due course.

The financial information set out in these unaudited preliminary results have been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRS). The accounting policies adopted in this results announcement have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2009. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2008 except that the application of IAS1 (revised) has resulted in a change in the format and presentation of the primary statements and IFRS 8 has been applied for segmental analysis.

 

 

2 Segmental analysis

 

The continuing Group is organised into two business segments: Resources and Solutions.

	2009 £'000 unaudited	2008 £'000 audited (see note 1)
Revenue - continuing operations
Resources	100,517	110,161
Solutions	18,507	22,117
	119,024	132,278

 

	2009 £'000 unaudited	2008 £'000 audited (see note 1)
Revenue - discontinued operations
Training	2,197	16,380

 

The Group operates solely in the United Kingdom and Republic of Ireland.

 

 

Before exceptional items

Exceptional items

Total

 

Continuing operations	2009 £'000 unaudited	2008 £'000 audited (see note 1)	2009 £'000 unaudited	2008 £'000 audited (see note 1)	2009 £'000 unaudited	2008 £'000 audited (see note 1)
Segment results Resources	2,993	3,691	(245)	-	2,748	3,691
Solutions	29	1,351	-	(331)	29	1,020
	3,022	5,042	(245)	(331)	2,777	4,711
Central costs	(1,572)	(2,034)	(26)	(40)	(1,598)	(2,074)
Operating profit	1,450	3,008	(271)	(371)	1,179	2,637
Finance income	4	1	-	-	4	1
Finance costs	(1,203)	(1,316)	-	-	(1,203)	(1,316)
Profit/(loss) before tax	251	1,693	(271)	(371)	(20)	1,322
Taxation	169	(236)	76	107	245	(129)
Profit/(loss) for the year from continuing operations	420	1,457	(195)	(264)	225	1,193

 

 

 

Discontinued operations	2009 £'000 unaudited	2008 £'000 audited (see note 1)
Segment results
Resources	146	(5)
Training	(453)	(3,851)
	(307)	(3,856)
Finance income	-	-
Finance costs	-	(1)
Loss before tax	(307)	(3,857)
Taxation	(189)	(784)
Loss for the year from discontinued operations	(496)	(4,641)

 

The 2009 operating result for Training includes the loss on disposal and the trading loss of £245k for the two months of the year prior to disposal. The 2008 operating result for Training included a goodwill impairment of £2,522,000 and costs of disposal of £745,000.

The 2009 result for Resources discontinued operations primarily represents the release of provisions no longer required.

 

3 Exceptional items

 

 

Continuing operations		2009 £'000 unaudited	2008 £'000 audited (see note 1)
Restructuring		271	371

 

The exceptional charge of £271,000 for 2009 for continuing operations related to reorganisation costs following the closure of an office and the associated relocation of roles. These roles related to finance staff supporting the Resources business. The tax credit relating to the exceptional item was £76,000.

 

The exceptional charge of £371,000 for 2008 for continuing operations related to restructuring costs. There were a number of redundancies across the Group in order to adjust the business to the current market. The tax credit relating to the 2008 exceptional item was £107,000.

 

 

4 Finance income

 

			2009 £'000 unaudited	2008 £'000 audited (see note 1)
Bank interest receivable			4	1

 

5 Finance costs

 

			2009 £'000 unaudited	2008 £'000 audited (see note 1)
Bank interest payable			341	489
Post retirement benefits			862	827
Total finance costs			1,203	1,316

 

The bank interest payable is in respect of the Group's invoice financing facilities.

 

 

6 Taxation

			2009 £'000 unaudited	2008 £'000 audited (see note 1)
Current tax
Continuing operations			(523)	141
Discontinued operations			189	(18)
			(334)	123
Deferred tax
Continuing operations			278	(12)
Discontinued operations			-	802
			278	790
Taxation (credit) / charge			(56)	913

 

The 2009 tax credit includes a credit of £76,000 (2008: £107,000) in respect of exceptional items. In addition, the tax credit above includes a charge of £300,000 (2008: £802,000) arising as a result of the derecognition of deferred tax assets where recovery is not expected in the foreseeable future.

 

The total tax credit relating to continuing operations is £245,000 (2008: charge of £129,000).

 

Continuing operations			2009 £'000 unaudited	2008 £'000 audited (see note 1)
Analysis of tax (credit) / charge for the year
Current tax
Tax on (loss)/profit for the current year			(163)	141
Adjustments in respect of prior periods			(360)	-
			(523)	141
Deferred tax
Origination and reversal of temporary differences			(22)	240
Write down of deferred tax asset			300	-
Adjustments in respect of prior periods			-	(252)
			(278)	(12)
Total tax (credit) / charge on continuing operations			(245)	129

 

Tax on items charged to equity			2009 £'000	2008 £'000
Deferred tax charge relating to defined benefit pension scheme			-	32

 

Reconciliation of the total tax charge

The tax charge in the income statement for the year differs from the standard rate of Corporation tax in the UK of 28% (2008: 28.5%). The differences are reconciled below.

 

			2009 £'000 unaudited	2008 £'000 audited (see note 1)
Loss on ordinary activities before tax			(327)	(2,535)
Loss on ordinary activities multiplied by rate of corporation tax in the UK of 28% (2008: 28.5%)			(92)	(722)
Effects of:
Tax losses not recognised			176	-
Adjustments in respect of prior periods - deferred tax			-	(252)
Adjustments in respect of prior periods - current tax			(334)	123
Deferred tax not provided			(168)	-
Goodwill write off not allowable			-	719
Other disallowable expense			94	282
Write down of deferred tax asset			300	802
Other			(32)	(39)
Total tax (credit)/charge for year			(56)	913

 

 

Analysed as:

Tax (credit)/charge on continuing operations			(245)	129
Tax charge on discontinued operations			189	784
Total tax (credit)/charge for the year			(56)	913

 

 

 

7 Discontinued operations

 

	2009 £'000 unaudited	2008 £'000 audited (see note 1)
Pre tax loss from discontinued operations	(307)	(3,857)
Taxation	(189)	(784)
Total	(496)	(4,641)

 

 

Cash flows from discontinued operations

 

	2009 £'000 unaudited	2008 £'000 audited (see note 1)
Net cash flows used in operating activities	(234)	668
Net cash flows used in investing activities	(265)	(297)
Total	(499)	371

 

Discontinued operations contributed £2,197,000 (2008: £16,380,000) to revenue, £2,090,000 (2008: £20,237,000) to expenses and the taxation relating to discontinued operations was £189,000 (2008: £784,000).

 

8 Earnings per ordinary share

 

Basic earnings per share is calculated by dividing the basic earnings for the year by the weighted average number of fully paid ordinary shares in issue during the year, less those shares held by the ESOP Trust, which are treated as cancelled. The ESOP Trust held 43,143 shares at 31 December 2009 (2008: 43,143).

 

Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares. The Group has one class of potential dilutive ordinary shares being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. These options, held under the Executive Share Option Scheme, are not dilutive. 

 

In March 2009 the Company granted 3,802,177 options under the Senior Executive Share Option Plan. In April 2009 the Company granted 975,000 options under the Executive Share Option Scheme.

 

 

	Earnings 2009 £'000 unaudited	Weighted average number of shares 2009 000's unaudited	Earnings per share 2009 Pence unaudited	Earnings 2008 £'000audited (see note 1)	Weighted average number of shares 2008 000'saudited (see note 1)	Earnings per share 2008 Penceaudited (see note 1)
Basic (loss) /earnings per share	(271)	37,979	(0.71)	(3,448)	37,979	(9.08)
Effect of dilutive options		-			-
Diluted (loss)/earnings per share	(271)	37,979	(0.71)	(3,448)	37,979	(9.08)
Basic earnings per share from continuing operations	225	37,979	0.59	1,193	37,979	3.14
Effect of dilutive options		-			-
Diluted earnings per share from continuing operations	225	37,979	0.59	1,193	37,979	3.14

 

 

The denominator used in the earnings per share calculations is the adjusted weighted average number of ordinary shares in issue.

 

As at 31 December 2009 the number of ordinary shares in issue was 38,021,784 (2008: 38,021,784). 

 

Basic and diluted loss per share from discontinued operations was 0.78p (2008: 12.22p). 

 

 

 

9 Assets and liabilities classified as held for sale and in disposal groups

 

The major classes of assets and liabilities comprising the operations classified as held for sale at 31 December 2008 are set out below. An impairment loss of £2,522,000 was recognised against the goodwill of the Training division on the classification of these operations as held for sale.

 

		31 December 2008
		£000 audited
Intangibles - software		274
Property, plant and equipment		488
Trade and other receivables		3,162
Cash and cash equivalents		131
Total assets classified as held for sale		4,055
Trade and other payables		4,038
Provisions		113
Total liabilities associated with assets classified as held for sale		4,151
Net liabilities of disposal group		(96)

 

On 27 February 2009 the Group completed the sale of Parity Training Limited to ECS Limited, a Dubai-based company, for up to £3.0M in cash, half of which is contingent on certain revenue targets being met. Under the Sale & Purchase Agreement, Parity was required to deliver Parity Training to the buyer with minimum net assets of £1,155,000.

 

 

10 Reconciliation of operating profit to net cash flow

 

			Consolidated
		2009 £'000 unaudited	2008 £'000 audited (see note 1)
Continuing operations Profit for the year		225	1,193
Adjustments for:
Tax		(245)	129
Depreciation and amortisation		488	400
Equity settled share based payments		54	(159)
Finance income		(4)	(1)
Finance costs		1,203	1,316
Changes in working capital
Decrease in work in progress		187	68
Decrease/(increase) in trade and other receivables		717	6,005
Decrease in trade and other payables		(4,046)	(3,503)
Decrease in provisions		(296)	(607)
Change in retirement benefit liability		(1,570)	(1,612)
Cash (used in)/from continuing operations		(3,287)	3,229
Discontinued operations
Loss for the year		(496)	(4,641)
Adjustments for:
Tax		189	784
Depreciation and amortisation		40	237
Equity settled share based payments		-	35
Loss on disposal of subsidiary		208	-
Loss on disposal of property, plant and equipment		-	123
Change in fair value of available for sale assets		13	(6)
Impairment of goodwill		-	2,522
Finance costs		1	1
Changes in working capital
(Increase)/decrease in trade and other receivables		(122)	1,742
Decrease in trade and other payables		(90)	(123)
Increase/(decrease) in provisions		23	(6)
Cash (used in)/from discontinued operations		(234)	668
Total net cash flow from operating activities		(3,521)	3,897

 

Cash generated from operations includes cash outflows relating to exceptional items recorded in prior years of £272,000 (2008: £784,000).

 

11 Consolidated reconciliation of net cash flow to movement in net debt

 

	Consolidated
	2009 £'000 unaudited	2008 £'000 audited (see note 1)
(Decrease)/increase in cash in the year	(372)	(69)
Decrease/(increase) in invoice financing facility	(5,603)	3,085
Repayment of obligations under finance leases	-	2
Exchange movements	-	(201)
Movement in net debt in the year	(5,975)	2,817
Net debt at 1 January	(3,810)	(6,627)
Net debt at 31 December	(9,785)	(3,810)
Net debt at 31 December comprises:
Cash and cash equivalents	128	500
Financial liabilities - current	(9,913)	(4,310)
	(9,785)	(3,810)

 

 

12 Post retirement benefits

 

The Group provides employee benefits under various arrangements, including through defined benefit and defined contribution plans, the details of which are disclosed in the Annual Report and Accounts.

 

13 Commitments and contingencies

 

The Group leases various buildings which operate within all segments. The leases are non-cancellable operating agreements with varying terms and renewal rights. The Group also has various other non-cancellable operating leases.

 

14 Related party transactions

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are therefore not disclosed in this note. There were no material related party transactions requiring disclosure either in 2009 or 2008.

 

 

 

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