Rtc Grp. Regulatory News (RTC)

15 Apr 2005 07:00

ATA Group PLC15 April 2005 ATA Group plc Preliminary results for the year ended 31 December 2004 ATA Group plc ("ATA") is a human resource support services group, which providesemployment solutions and training services to client companies in the UnitedKingdom and the Republic of Ireland. Highlights Group pre-tax profits at £1.36m (2003, before exceptional credits of £53,000 :£1.17m). Underlying, fully diluted, earnings per share at 11.13p (2003: 9.66p). Dividends for the year have been raised to 6.4p (2003: 6.0p). Recruitment and labour supply had a better year and achieved pre tax profits of£233,000 (2003: loss (£71,000)), even after post acquisition restructuring costsat Gem-Weld of £168,000. Training and consultancy has dealt well with turmoil in the Railway Industry butpre tax profits have eased to £1.13m (2003: £1.29m). A challenging year is anticipated in 2005. Commenting on the results Bill Douie, Chairman, said: "In ATA Selection Ltd, demand for candidates for permanent positions remainedstrong and on an improving trend during the year but a paucity of qualitycandidates distorted the balance of supply and demand. Nonetheless by increasingeffectiveness at the "sharp end", key performance ratios held up well.Additionally the pace quickened in contract recruitment and by the year end themajority of our locations had teams of contract consultants. GanymedeTracklayers Ltd enjoyed a most satisfactory move from trading losses in 2003 tomaterial profits in 2004. In August a further move was made into the provision of services to the NationalRail Network with the acquisition of Gem-Weld (UK) Ltd, a company providingspecialist track welding services. Catalis Rail Training Ltd continued to enjoy another reasonably positive yearbut the anticipated fall off in business following the transfer of maintenancework from the private sector to Network Rail began to appear towards the yearend. Rail Training Audit Services Ltd continued to perform creditably and gaineda short extension to it's contract to the end of 2005, with prospects of afurther contract for three years. Following major changes in the provision of maintenance services to the NationalRail infrastructure, Catalis Rail Training and Rail Training Audit Services arefacing the need to re-position their businesses and there is bound to be aperiod of uncertainty and change. This will inevitably result in both majorchallenges and short term non-recurring costs, particularly in 2005 butextending into 2006. It is not possible at this stage to evaluate the impact ofthese changes on either underlying trading in our Railway interests nor thecosts of moving to the new structure. Whereas improved trading in recruitmentwill help to offset these factors, it is unlikely that the Group will escapewholly without some financial pain over the medium term. The Group's businessmodel remains fundamentally sound and the Directors believe that this period ofadjustment will be successfully navigated." 15th April 2005 ENQUIRIES: ATA Group plc Tel: 01454 310069 Bill Douie, Chairman Clive Chapman, Chief ExecutiveChairman's StatementYear ended 31 December 2004 I am pleased to present the thirteenth preliminary results of the company. FINANCIAL Recruitment and labour supply Recruitment division turnover increased to £9.38m (2003: £6.33m) including£98,000 from Gem-Weld (UK) Ltd, acquired in August 2004. The main areas ofadvance were in on-track labour supply through Ganymede Tracklayers Ltd and incontract recruitment in Engineering and Rail. These advances were partly offsetby losses and re-organisation costs at Gem-Weld of £168,000. Nonetheless,divisional profits rose to £233,000 (2003: loss (£71,000)). Training and consultancy Following the decision by Network Rail to bring back all InfrastructureMaintenance "in house" and thus to replace the work previously done by privatesector contractors a period of uncertainty emerged which adversely affected bothturnover and profits at Catalis Rail Training Ltd and Rail Training AuditServices Ltd. There was a consequential reduction of divisional turnover to£7.77m (2003: £8.57m) and profits to £1.13m (2003: £1.29m). Group Group Pre-tax profits at £1.36m (2003, before exceptional credits : £1.17m) haveimproved by 16.2%, and underlying fully diluted earnings per share at 11.13p(2003: 9.66p) have improved by 15.2%. Emphasis continues to be placed on cashconservation and at the year end the position had improved to £597,000 net cash(2003: £225,000 net cash). TRADING Recruitment and labour supply Demand for candidates for permanent positions remained strong and on animproving trend during the year but a paucity of quality candidates distortedthe balance of supply and demand. Nonetheless by increasing effectiveness at the"sharp end", key performance ratios held up well and a satisfactory improvementin profitability was achieved. ATA Selection Ltd was, however, still operatingat well short of optimum levels and key management changes took place in thesecond half of the year resulting in a pleasing enhancement of trading resultsin the final quarter. Additionally the pace quickened in contract recruitmentand by the year end the majority of our locations had teams of contractconsultants. By the beginning of 2004, full re-organisation at Ganymede Tracklayers Ltd wascomplete and the success in gaining a contract with Network Rail was built onwith other business being gained from National Rail Renewals Companies as wellas, most notably, an early entry into London Underground work through TubeLines. These developments allowed a most satisfactory move from trading lossesin 2003 to material profits in 2004. In August a further move was made into the provision of services to the NationalRail Network with the acquisition of Gem-Weld (UK) Ltd, a company providingspecialist track welding services. Although small, Gem-Weld had, and still has,an excellent reputation for quality but had suffered badly in terms of theuncertainties and lack of orders resulting from the changes in infrastructuremaintenance. These difficulties, which were common to all suppliers of thisservice, continued up to the year end and, coupled with the re-organisationneeded, resulted in the negative performance outlined above. Training and consultancy Catalis Rail Training Ltd continued to enjoy another reasonably positive yearbut the anticipated fall off in business following the transfer of maintenancework from the private sector to Network Rail began to appear towards the yearend. In particular Catalis Rail Training as the only serious supplier ofexternal training for signal engineers, is especially vulnerable and the processof planning for re-orientation commenced in the second half. The contract gainedto supply such training to London Underground initially through Tube Lines, hasbeen built on with a similar but smaller arrangement with Metronet.Rail Training Audit Services Ltd continued to perform creditably and gained ashort extension to it's contract to the end of 2005, with prospects of a furthercontract for three years. Nonetheless a continuing drive for cost reductions byNetwork Rail and, again, collateral effects from the changes in infrastructuremaintenance have reduced the amount of training mandated in the key area ofemployee safety, resulting in reduced numbers of trainers and less demand forthe services. Capital Investment Following the completion of our investment program in IT and rail trainingequipment capital investment fell further to a figure significantly less thandepreciation, permitting a further strengthening of the Group balance sheet. Atthe year end the opportunity was taken to repay early the final instalments ofour medium term loan from Barclays Bank. Pension Funds The Group operates both defined contribution and defined benefit pensionschemes. Although asset valuations in 2002 reduced the surplus value of ourdefined benefit scheme, funds available to cover all the future requirements ofpensioners, deferred pensioners and current employee members of the schemeremained in excess of the minimum. The remaining surplus has been used to fundboth employee and employer contributions resulting in a "contribution holiday"to the end of 2004. As a matter of prudence, although some surplus remains,contributions, albeit at a reduced rate, re-commenced from the first of January2005. This position will be reviewed again following the publication of theresults of the scheme triennial valuation, due later in 2005. DIVIDENDS In view of the improving trading outlook at the half year the interim dividendwas increased to 2.5p. Given the need for caution concerning the short termchanges needed at Catalis Rail Training your directors are recommending amaintained final dividend of 3.9p. OUTLOOK The pendulum swings. After three lean years recruitment is in much better shapeand is expected to continue to improve and expand, with much of the turnoverincrease arising from expansion in contract recruitment. Ganymede is coping wellwith the maintenance and renewals changes and is expected to hold its position.Following post acquisition restructuring, business at Gem-Weld has now startedto pick up leading to a much improved trading picture. Following major changes in the provision of maintenance services to the NationalRail infrastructure, Catalis Rail Training and Rail Training Audit Services arefacing the need to re-position their businesses and there is bound to be aperiod of uncertainty and change. This will inevitably result in both majorchallenges and short term non-recurring costs, particularly in 2005 butextending into 2006. It is not possible at this stage to evaluate the impact ofthese changes on either underlying trading in our Railway interests nor thecosts of moving to the new structure. Whereas improved trading in recruitmentwill help to offset these factors, it is unlikely that the Group will escapewholly without some financial pain over the medium term. The Group's businessmodel remains fundamentally sound and the Directors believe that this period ofadjustment will be successfully navigated.As the position becomes more clear, the Company will make further announcements. BOARD DEVELOPMENT It remains the Group's intention to add a further non-executive director to theboard. In view of the need to conserve resources and maintain tight control ofcosts, this is unlikely to happen in the immediate future. STAFF These are likely to prove uncertain and difficult times for our Railwayinterests and I would particularly like to thank all Group staff for theirunderstanding, co-operation and loyalty. W.J.C. Douie, Chairman 15 April 2005 Chief Executive's ReportYear ended 31 December 2004 GROUP VISION AND AIMS The vision of the Group is to achieve sustainable and attractive earningsthrough the provision of business services in recruitment, training andconsultancy. This model is based on the logic that the competencies encapsulatedin these services are predominantly transferable across market sectors. Themarket focus to date has been in mainstream engineering, manufacturing and railrelated fields but the Group is not restricted to these sectors. Hence the Groupbenefits from the diversity of the client base, by market definition, whilstenjoying the advantages gained through the application of core, competencybased, services. The aim is to capitalise on the level of competence that the Group possesses inthe provision of recruitment services in permanent, contract and more specificlabour supply areas, supported by the capacity to supply quality training,assessment, audit and verification services to the same clients and acrossmarkets. During 2004 the Group sustained a mix of organic growth activity,particularly in contract recruitment, with an acquisition in rail labour supplyto further this aim. The segmental split of these outcomes is identified in thesummary below. GROUP TRADING SUMMARY 2004 Turnover Operating Profit/(Loss) -------------- ------ ------------------ 2004 2003 2004 2003 2004 2003 2004 2003 £'000 £'000 % % £'000 £'000 % %Recruitmentand LabourSupply 9,380 6,334 54.69 42.49 270 (61) 19.04 (5.01) Training andConsultancy 7,772 8,572 45.31 57.51 1,148 1,278 80.96 105.01-------------- ------ ------ ------ ------ ------ ------ ------ ------ Group Total 17,152 14,906 100.00 100.00 1,418 1,217 100.00 100.00-------------- ------ ------ ------ ------ ------ ------ ------ ------ Consequently, the recruitment related revenues increased by 48% compared to 2003and represented 55% of the Group's total revenue, moving from a loss to anoperating profit of £270,000, after the initial trading losses (£140,000) of thelabour supply acquisition in 2004 have been written off, or £410,000 before. The reduction in training revenues by 9%, compared to 2003, reflects thedecision by Network Rail to recall all rail maintenance contracts from theprivate sector and the resultant reduction in training related expenditure.Operating profits reduced accordingly in line with the revenue diminution. In total Group revenues grew by 15% to £17.2 million whilst operating profitsincreased by 16.5% to £1.4 million. Despite a significant change in the mix ofthe underlying revenues between recruitment and training related activity, yearon year, the Group gross margin held up at 39% with net pre-tax profit beforeexceptionals of 8%. RECRUITMENT AND LABOUR SUPPLY The permanent recruitment services remain focused on the provision of staff incommercial and technical sales roles, technical engineering, manufacturing andrail. Demand for services and candidate shortages produced a commensurateincrease in the number of staff engaged in these activities in 2004 and growthin the subsequent volumes of activity. The nationwide network of officescontinue to provide advantages in the assessment and selection of suitablecandidates for clients providing all parties with an efficient service as thebackbone of a sustainable barrier to entry. The utilisation of the spare capacity, in these same offices, to organicallybuild the contract recruitment business in the core Group market of technicalmanufacturing and engineering produced positive outcomes in 2004. Underlyingrevenues increased by 143% to £2 million with excellent quarter on quartergrowth. The marginal cost gain of expansion in this area remains a key aim ofthe Group with further opportunities to extrapolate the concept acrossadditional markets and geographical locations. The acquisition in 2004 of a further labour supply business, approved by NetworkRail in rail specific welding duties, complements the existing rail maintenancelabour supply business Ganymede Tracklayers acquired in 2002. Consolidatedrevenues in 2004 contributed £2.5 million to Group with opportunities in 2005 tobid for national tenders and preferred supplier contracts. These three distinct recruitment services, of permanent, contract and laboursupply, utilise the Group's operational offices, back office systems, frontoffice software and managerial staff to great effect. TRAINING AND CONSULTANCY Since acquiring Catalis Rail Training in 2000 the Group has enjoyed a dominantposition in certain aspects of the technical rail training market. This positionaltered in 2004 as the impact of a not for profit Network Rail re-nationalisingthe maintenance of the railways affected the demand for such training. Thesecond half of 2004 witnessed a slow down in the demand for open programmemaintenance training as Network Rail came to terms with the training needsanalysis of 18,000 transferred staff from the Infrastructure Maintenancecompanies. Revenues in maintenance and safety training reduced accordingly whilst the grossmargin percentage was maintained through the use of a mix of permanent trainersand associates. Diversification into alternative revenue streams resulted inpositive contract wins with Tube Lines and Metronet, the key providers to LondonUnderground for infrastructure works. The implication of Network Rail providing its own in-house training will requirea re-organisation of Catalis in 2005 to ensure that the business is best shapedto fit the external market provided by the Train and Freight operatingcompanies, the construction based renewals market of rail, international raildemand, rail manufacturers and London Underground. Group consultancy services provide specialists to support the core elements ofrecruitment and training in rail related audit and verification work, withquality, health and safety, occupational assessment, development and generalmanagement courses. The combined revenue of these services are not material inGroup terms but offer attractive margins based on the unique expertise on offer. INFORMATION TECHNOLOGY Whilst it would be premature to see the internet as a mature market the supplyof candidates through an on-line capability has now settled down to the pointthat electronic means account for 90% of all candidate applications. This factoralone has provided a return on the investment in IT over the last 3 years tobuild a robust, real time, wide area network to support all Group activities. The web based capability within the recruitment businesses during 2004 reducedthe expenditure on paper press as a means to attract candidates and provides aplatform for significant savings looking forward into 2005. Front office and back office systems to meet the growth in contract activitywere also deemed essential and this investment took place during the year.Capital expenditure reduced during 2004 compared to 2003 in respect of theoperating recruitment systems. SHARE OPTIONS The Government EMI scheme was adopted in 2001. Further options have been grantedin 2004 in this scheme. The management team and key staff will continue to bethe focus of such incentives PROSPECTS The strategic mix of recruitment and training across a range of markets, basedon the flexibility embodied in the capability of the management team to pursuegrowth areas, is the essence of the Group's business prospects. The expertise,experience and brands of the trading entities support this future. The balance of revenues shifted during 2004 in favour of the recruitmentservices and this trend will continue in 2005, excluding any acquisitions, basedlargely on organic developments in contract recruitment. Whilst the grossmargins in contract are generally lower than in training the opportunity forgrowth is significant utilising the physical capacity of the national officenetwork and IT infrastructure of the Group. The training elements will encounter a year of change due to the revised NetworkRail framework and it is envisaged that certain activities currently performedby the Group will be subsumed into Network Rail. Revenues will be affected andcosts will need to be realigned as this transition unfolds during 2005. Acquisitions remain an important part of the overall strategy to bolt new marketareas into the strategic mix of recruitment and training. The Group hasestablished a track record in the selection, assessment and integration of suchbusinesses and remains an active player in this field. Clive Chapman, Chief Executive 15 April 2005 Consolidated Profit and Loss Account 2004 2003 Notes £'000 £'000 £'000 £'000 TurnoverContinuing operations 17,054 14,789Acquisitions 98 - ------- ------- 17,152 14,789Discontinued operations - 117 ------- ------- 17,152 14,906Cost of sales (10,464) (8,677) ------- ------- ------- -------Gross Profit 6,688 6,229Administrative expenses (5,382) (5,183)Other operating income 112 171 ------- ------- ------- -------Operating ProfitContinuing operations 1,558 1,276Acquisitions (140) - ------- ------- 1,418 1,276Discontinued operations - (59) ------- ------- 1,418 1,217Profit on disposal of fixed assets - 53Interest receivable and similar 6 11incomeInterest payable and similar (63) (58)charges ------- ------- (57) 6 ------- ------- ------- -------Profit on ordinary activitiesbefore taxation 1,361 1,223 Tax on profit on ordinary (436) (393)activities ------- ------- ------- -------Profit on ordinary activities aftertaxation 925 830Dividends 1 (523) (488) ------- ------- ------- -------Retained profit for the financial 402 342year ------- ------- ------- -------Earnings per share 2 11.34p 10.21pFully diluted earnings per share 2 11.13p 10.11pUnderlying earnings per share 2 11.34p 9.75pUnderlying fully diluted earningsper share 2 11.13p 9.66p There were no recognised gains or losses other than those reported in the Profitand Loss Account. Consolidated Balance Sheet 2004 2003 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 1,154 1,116Tangible assets 1,588 1,843 -------- -------- -------- -------- 2,742 2,959Current assetsStock 29 12DebtorsAmounts falling due after more than one year 809 826Amounts falling due within one year 3,483 3,819Cash at bank and in hand 715 839 -------- -------- -------- -------- 5,036 5,496CreditorsAmounts falling due within one year (3,528) (4,372) -------- -------- -------- -------- 1,508 1,124 -------- -------- -------- --------Total assets less current liabilities 4,250 4,083CreditorsAmounts falling due after more than one year (50) (257)Provisions for liabilities and charges (101) (150) -------- -------- -------- --------Net assets 4,099 3,676 -------- -------- -------- -------- Capital and reservesCalled up share capital 82 81Share premium account 1,796 1,776Capital redemption reserve 50 50Profit and loss account 2,171 1,769 -------- -------- -------- --------Equity shareholders' funds 4,099 3,676 -------- -------- -------- -------- Approved by the Board of Directors on 15 April 2005 C CHAPMAN Chief Executive A BAILEY Director Consolidated Cash Flow Statement 2004 2003 £'000 £'000 £'000 £'000Net cash inflow from operating activities 1,857 2,109Return on investments and servicing offinanceInterest received 6 11Interest paid (63) (58) -------- -------- -------- --------Net cash (outflow) from return oninvestments (57) (47)and servicing of financeTaxationUK corporation tax paid (506) (518)Capital expenditureSale of tangible fixed assets 35 473Purchase of tangible fixed assets (321) (459) -------- -------- -------- --------Net cash (outflow)/inflow from capitalexpenditure (286) 14Acquisitions and disposalsPurchase of subsidiary undertaking (15) (6)Net debt acquired with subsidiary (19) - -------- -------- -------- --------Net cash (outflow) from acquisitions anddisposals (34) (6)Equity dividends paid (522) (479) -------- -------- -------- --------Net cash inflow before use of financing 452 1,073FinancingIssue of ordinary share capital 21 13Decrease in loans (500) (262)Capital element of finance lease rentalpayments (97) (116) -------- -------- -------- --------Net cash (outflow) from financing (576) (365) -------- -------- -------- --------(Decrease)/Increase in cash (124) 708 -------- -------- -------- -------- NOTES 1. Dividends On 1 September 2004 an interim dividend of 2.5p net per share was resolved bythe Board to be paid to shareholders on the register on 19 November 2004. Theinterim dividend was paid on 13 December 2004. A final dividend for the year of 3.9p net per share will be proposed at theforthcoming Annual General Meeting (to be held at the offices of LawrenceGraham, 190 Strand, London, WC2 1JN on 17 May 2005 at 12.00 noon) and ifapproved, will be paid on 29 July 2005 to shareholders on the register on 24June 2005. 2. Earnings per Share The calculation of earnings per share is based on a profit after taxation of£925,000 (2003: £830,000) and a weighted average of 8,155,492 (2003: 8,130,104)shares in issue.The underlying earnings per share figure is based upon earnings excluding theexceptional credits and attributable tax charge. Report & Accounts The above results do not represent the statutory accounts. The statutoryaccounts for 2003 have been filed with the Registrar of Companies, received anunqualified audit report and did not contain a statement under Section 237 (2)or (3) of the Companies Act 1985. The audited accounts will be mailed toshareholders shortly and will be available from the Company's registered office:- Kingston House, Oaklands Business Park, Armstrong Way, Yate, BS37 5NA. This information is provided by RNS The company news service from the London Stock Exchange