Rtc Grp. Regulatory News (RTC)

13 Apr 2006 07:00

ATA Group PLC13 April 2006 ATA Group plc Preliminary results for the year ended 31 December 2005 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 £512,000 (2004: £1.38m). Fully diluted earnings per share at 5.25p (2004:11.34p - restated). Dividends for the year have reduced to 3.0 pence (2004: 6.4p). Recruitment and labour supply had a difficult year but achieved pre-tax profitsat £217,000 (2004 : £233,000). Training and consultancy has suffered the full impact of infrastructuremaintenance being taken over by Network Rail reducing profits to £295,000 (2004: £1.15m). MANAGEMENT Since the year end we have been deprived of the services of our Chief Executiveand founder director, Clive Chapman, who tragically died suddenly on January27th whilst on holiday. Whilst our deepest sympathies are extended to hisfamily at this time of loss, it is the duty of the Directors to deal with theconsequences of this event to ensure that no material and lasting damage issuffered by any of the stakeholders in ATA Group Plc. This subject is coveredin more detail in the full Chairman's statement. Another challenging year is anticipated in 2006. Commenting on the results Bill Douie, Chairman, said: "In spite of fundamental change, over the last few years, in the culture andprocesses in permanent recruitment which have assisted direct access tocandidates by employers, there are many talents, areas of experience andpersonal aspirations and ambitions which can only be covered by expertinterviewing. As a consequence there remains strong demand for qualityRecruitment Consultancies to handle the otherwise time consuming process to thepoint of short-listing. Advances in IT have further increased efficiency inprocessing contract recruitment and in this area strong expansion continues. From a mothballed condition at the start of 2005, Gem-Weld has regained asignificant market position and early losses of £168,000 for the three and ahalf months of ownership in 2004 have reduced to £101,000 for the whole of 2005.Ganymede Tracklayers continued to build on its contracts with Network Rail andTube Lines. Catalis Rail Training has suffered from the transfer of Signal Engineer trainingfor the National Rail Network to Network Rail. Although reasonable levels ofsuch business continued from Tube Lines, Metronet and private sector NationalRail Renewals companies, overall turnover in this area of our business wasapproximately halved from two years previously. Steady progress continues inother areas of Rail and Non Rail Training." 13 April 2006 ENQUIRIES: ATA Group plc Tel: 01454 310069 Bill Douie, Executive Chairman. Andrew Bailey, Group Managing Director. CHAIRMAN'S STATEMENTYear ended 31 December 2005 I am pleased to present the fourteenth preliminary results of the company. MANAGEMENT Since the year end we have been deprived of the services of our Chief Executiveand founder director, Clive Chapman, who tragically died suddenly on January27th whilst on holiday. Whilst our deepest sympathies are extended to hisfamily at this time of loss, it is the duty of the Directors to deal with theconsequences of this event to ensure that no material and lasting damage issuffered by any of the stakeholders in ATA Group Plc. This subject is coveredin more detail below. FINANCIAL Recruitment and labour supply Recruitment division turnover increased to £12.22m (2004 : £9.38m) reflectingsolid performances in recruitment and on-track labour supply. The main areas ofadvance were in Gem-Weld where losses were reduced from £168,000 to £101,000 andin contract recruitment where turnover advanced from £2.0m to £3.9m. Divisionalprofits fell to £217,000 (2004 : £233,000). Training and consultancy Following the decision by Network Rail in 2003 to bring back all InfrastructureMaintenance "in-house" and thus to replace the work previously done by privatesector contractors the period of uncertainty which has adversely affected bothturnover and profits at Catalis Rail Training and Rail Training Audit Servicesworsened and there was a consequential further reduction of divisional turnoverto £6.10m (2004 : £7.77m) and profits to £295,000 (2004 : £1.15m). Group Group pre-tax profits at £512,000 (2004 : £1.38m) have fallen by 63%, and fullydiluted earnings per share at 5.25p (2004 : 11.34p - restated) have reduced by54%. Emphasis continues to be placed on cash conservation but at the year endGroup net debt was £688,000 (2004 : £597,000 net cash). TRADING Recruitment and labour supply Over the last few years the culture and processes in permanent recruitment haveundergone fundamental change following rapid and extensive changes inInformation Technology. Essentially the system of press advertisement ofvacancies attracting applicants for specific jobs has largely been replaced bymassive candidate databases with applicant seekers paying to search for suitablecandidates for their positions. In theory this should make possible staffsearch by employers "from the desk" a practical reality. However, in practice,employers are faced with substantial numbers of possible candidates who may ormay not be actively seeking to change jobs. Although keyword search techniqueshave matured and improved and specific qualifications and skill sets can filterto a degree, there are many talents, areas of experience and personalaspirations and ambitions which cannot be covered. Consequently there remains aneed for skilled interviewing and, in order to reduce the time required toprocess a search, expert short-listing and the demand for expert recruitmentconsultancies remains strong. Although volumes have been largely maintained inpermanent recruitment at ATA Selection, the time taken to seek and processcandidates and vacancies has extended and employment costs for consultants haveincreased. As a result net margins have been under pressure and steps are beingtaken to address this issue by making more efficient use of our extensiveinvestment in up to the minute IT systems. However, in contract recruitment,Information Technology advances have materially cut the costs of processing evenshort term weekly paid contracts and, in this area of our business, the pacequickened and by the year end the majority of our locations had teams ofcontract consultants. Turnover in this important and growing section of ourbusiness grew by 95% compared with 2004. At the beginning of 2005, Gem-Weld had been reduced to only two employees andwas effectively mothballed pending an improvement in demand. A major salesinitiative was commenced in late January with pleasing results, including thesecuring of a Network Rail contract in the Thames Valley area. Turnoverincreased from £30,000 in January to £1.10m for the year as a whole. GanymedeTracklayers performed well in its contracts with Network Rail and Tube Lines andmade a satisfactory contribution to the Group. Training and consultancy Catalis Rail Training has suffered from the transfer of Signal Engineer trainingfor the National Rail Network to Network Rail. Although reasonable levels ofsuch business continued from Tube Lines, Metronet and private sector NationalRail Renewals companies, turnover in this area of our business, wasapproximately halved from two years previously. Steady progress continues inother areas of Rail and Non Rail Training. Rail Training Audit Services continued to perform creditably in the final yearof its contract with Network Rail but was unsuccessful in gaining a newcontract. Capital investment Following the completion of our investment programme in IT and rail trainingequipment in 2004, capital investment continued at a figure significantly lessthan depreciation, permitting a further strengthening of the Group balancesheet. Pension funds On adoption of the full provisions of FRS 17 and following a formal actuarialvaluation of the Group's interest in this pension scheme the prepayment of£826,000 at 1 January 2004 has been written off as a prior year adjustment. Thepension scheme meets the criteria of a multi-employer scheme and is accountedfor as a defined contribution scheme in the accounts for the year ended 31December 2005 and for the restated comparatives for the year ended 31 December2004. DIVIDENDS In view of the reduction in Group profitability at the half year the interimdividend was reduced to 1.0p. Given the need for caution concerning the shortterm changes needed at Catalis Rail Training your Directors are recommending afinal dividend of 2.0p. MANAGEMENT CHANGES AND RE-ORGANISATION Following the unexpected death of Group Chief Executive, Clive Chapman, inJanuary immediate steps were taken to stabilise the organisation and a fullreview was commenced. As a first phase, Andrew Bailey, Group CommercialDirector, was promoted to the position of Group Managing Director and BillDouie, Group Chairman, reversed his decision to become part time, reverting tothe full time role of Group Executive Chairman. These two moves, supported bythe appointment of a Financial Controller, whilst securing the necessarycontinuity of management and leadership in the Group, nevertheless left theGroup without any non-executive directors. It is the intention to seek andappoint at least one non-executive with relevant industry and City experience atthe earliest opportunity. My review of Group strategy is now well underway and will be concluded by theend of April but early moves have been made to establish contacts within presentand past advisors both to seek advice and to make contacts which may serve tofacilitate a new Group strategy. At operational level certain minor adjustments have been made to ensure that allresponsibilities for delivery below Group Board level, previously held by theChief Executive, have been covered. The second line management team reportsdirectly to the Group Managing Director. It is most pleasing to report thatwithout exception all members of that team have risen to the challenge withenthusiasm and I remain confident that they will perform with credit. There isalso gratifying evidence that all members of staff have responded well to thenew situation and are determined to succeed. As phase two, the structure of the Group has been changed to reflect reality inthat the three subsidiaries serving the Railway Industry, Catalis, Ganymede andGem-Weld, have been combined to form the "Railway Division" and Paul McLoughlin,already Managing Director of Ganymede and Gem-Weld, has been appointed to a newpost of Managing Director, Railway Division. Paul will continue in hisresponsibility for delivery at Ganymede and Gem-Weld but will oversee thedevelopment and delivery of all three subsidiaries, with particular emphasis onsales and market development and divisional and company expansion both withinand beyond the Railway Industry. ATA Selection, covering both permanent andcontract recruitment, will form the Recruitment Division. Medium and long term Group Strategy Although it is possible to cover for the loss of a key management figure in mostrespects and the moves outlined above substantially complete that process,overall Group Strategy must reflect and play to the strengths available at GroupBoard level. It is clear that the quiver of talents available at that level haschanged and a new view must be taken. There can be no doubt that Clive showedparticular strengths in transforming underperforming enterprises from withinwith important concentration on spotting and developing latent managementtalent. As a consequence past strategy has been focused on acquisitions withina narrow range of activities compatible with present Group Companies but withinadequate or departing key management. It is no longer possible, for the timebeing, for ATA Group to provide such talents and to inject additional managementfrom other parts of the Group and, until that position changes with the fullflowering of present management resources, ATA Group Plc will be seekingacquisitions of, and mergers with, organisations capable of demonstrating aboveaverage self contained management resources at operating and Chief Executivelevel. Above all there is a renewed, urgent and keen focus on enhancement ofshareholder value. OUTLOOK This is a year when it is more difficult than usual to comment on outlook. Thataccepted, the new picture within the Railway Industry is becoming cleareralthough further fundamental shifts in the balance between the public andprivate sectors cannot be ruled out. The bulk of readjustment at Catalis hasnow been concluded and events over the last few months give me optimism that afinal changeover with Network Rail will complete the picture to our mutualadvantage. The newly formed Railway Division is performing to expectations andwill make a lower but satisfactory contribution to Group fortunes than was thecase two years ago. This Division will now address the challenge ofdiversification into other products and industries. Notwithstanding the comments made above, the Recruitment Division is makingfurther progress with permanent recruitment maintaining its position and growthcontinuing in contract recruitment and National and Local Preferred SupplierAgreements. Cost control and cash conservation remain high on the agenda to underpin thebeginnings of recovery from the setback of 2005. As the position becomes more clear, the Company will make further announcements. STAFF There can be no more appropriate time for me to thank all our staff for theirefforts and successes in 2005 and to acknowledge the universal strength andloyalty displayed by all under the difficult times at the start of 2006. We arefortunate indeed in having the team we have. W.J.C. Douie, Chairman 13 April 2006 OPERATIONAL REPORT Year ended 31 December 2005 GROUP TRADING SUMMARY 2005 Group revenue for the year has increased by 7% compared with 2004. Reductions intraining and consultancy were offset by increased revenues in recruitment andlabour supply. The change in sales mix, reflecting the growth in lower margincontract recruitment and labour supply against reductions in higher margintechnical and rail safety training revenues, has resulted in an overall decreasein group operating profit of 62% compared with 2004. Turnover Operating Profit 2005 2004 2005 2004 2005 2004 2005 2004 £'000 £'000 % % £'000 £'000 % % Recruitment and Labour Supply 12,224 9,380 66.72 54.69 239 270 43.77 18.82 Training and Consultancy 6,097 7,772 33.28 45.31 307 1,165 56.23 81.18 Group Total 18,321 17,152 100.00 100.00 546 1,435 100.00 100.00 Operating profits are stated before net interest payable of £34,000 (2004 :£57,000) and after deduction of goodwill of £76,000 (2004 : £68,000). RECRUITMENT AND LABOUR SUPPLY The permanent recruitment services remain focused on the provision of staff incommercial and technical sales roles, technical engineering, manufacturing andrail. Whilst top line turnover fell the gross margin percentage increased as thedivision demonstrated its strength and adaptability in times of variable marketconditions. Contract recruitment activity in the Group's core market of technicalmanufacturing and engineering continued to grow on the solid base established inthe previous two years. Underlying revenues increased by 95% to £3.9m withexcellent quarter on quarter growth. The continued expansion and diversificationof this area of activity remains a key aim of the Group. The labour supply business benefited from success in winning further supplycontracts. Whilst revenues in the traditional maintenance market have fallenshort of expectation, the development of opportunities in other market areas hascontributed to the growth in revenues of 40% to £3.5m compared with 2004. The Group is well placed, through its investment in front and back officesystems and structure, to benefit from continued growth and development of thesevolume service revenues. TRAINING AND CONSULTANCY The majority of these services are focused on the rail industry, ranging fromthe development of training materials, training and development delivery,competence assessment, audit services and verification. Training revenues in 2005 suffered a continuation of the slow down in demandfrom Network Rail for technical and rail safety training, first witnessed in thesecond half of 2004, as a result of the re-nationalisation of the maintenance ofthe railways. Revenues fell as a result by 23% to £5.4m. The impact on grossmargin was mitigated to some extent by the use of a mix of permanent trainersand associates. The implications of Network Rail providing its own in-house training have beenaddressed by a restructure of the business to ensure that it is best shaped tofit the alternative external rail market provided by the Train and Freightoperating companies, the construction based renewals market of rail,international rail demand, rail manufacturers, consultancies and LondonUnderground and to accelerate the diversification into opportunities outside ofthe rail market. 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. Whilst revenues from these activities are not material inGroup terms, the attractive margin contribution was maintained. STAFF DEVELOPMENT The Group continues to believe that the key to future success is strongly linkedto people development. During the year the establishment of a Group widecompetence framework was largely completed and is expected to be rolled out in2006, alongside our continuing leadership and staff development initiatives. INFORMATION TECHNOLOGY The Group's investment, in Information Technology to support businessactivities, through both a real time wide area network and front and back officesystems to support the growth in contract activity, was substantially completedin 2004. Expenditure during the year was therefore restricted to maintenance andupgrades to those systems. Future investment will be aimed at leveragingbusiness benefits through increased profile and presence on the internet. The internet continues to account for a substantial proportion of candidateapplications to the recruitment businesses. The web based capability built up totake advantage of this market change has resulted in further reductions inexpenditure to attract candidates during 2005. SHARE OPTIONS The Government EMI scheme was adopted in 2001. Further options have been grantedin 2005 in this scheme (details may be found in note 19 of the accounts). Themanagement team and key staff will continue to be the focus of such incentives. Andrew Bailey, Group Managing Director 13 April 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT 2005 2004 Notes £'000 £'000 £'000 £'000 (Restated) (Restated) Turnover 18,321 17,152Cost of sales (12,617) (10,464)Gross Profit 5,704 6,688Administrative expenses (5,326) (5,365)Other operating income 168 112Operating Profit 546 1,435Interest receivable and similar income 6 6Interest payable and similar charges (40) (63) (34) (57)Profit on ordinary activities before taxation 512 1,378Tax on profit on ordinary activities (78) (436)Profit on ordinary activities after taxation 434 942 Earnings per share 2 5.29p 11.55pFully diluted earnings per share 2 5.25p 11.34p All amounts relate to continuing operations. RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDSYEAR ENDED 31 DECEMBER 2005 2005 2004 Notes £'000 £'000 (Restated) Equity shareholders' funds at 1 January 2005 as previously 4,099 3,676reportedPrior year adjustment 3 (490) (508)As restated 3,609 3,168Profit for the year 434 942Dividends (402) (522)Additional share capital issued - 1Premium on share issue 21 20Equity shareholders' funds at 31 December 2005 3,662 3,609 CONSOLIDATED STATEMENT OF TOTALRECOGNISED GAINS AND LOSSES 2005 2004 Notes £'000 £'000 (Restated) Profit on ordinary activities after taxation 434 942 Total recognised gains and losses relating to the year 434 Prior year adjustment 3 (490) Total gains and losses recognised since the last annual report (56) CONSOLIDATED BALANCE SHEET31 DECEMBER 2005 2005 2004 £'000 £'000 £'000 £'000 (Restated) (Restated)Fixed assets Intangible assets 1,117 1,154 Tangible assets 1,175 1,588 2,292 2,742Current assetsStock 45 29 Debtors 4,817 3,483 Cash at bank and in hand 178 715 5,040 4,227 CreditorsAmounts falling due within one year (3,583) (3,209) 1,457 1,018Total assets less current liabilities 3,749 3,760CreditorsAmounts falling due after more than one (44) (50)yearProvisions for liabilities and charges (43) (101)Net assets 3,662 3,609 Capital and reservesCalled up share capital 82 82Share premium account 1,817 1,796Capital redemption reserve 50 50Profit and loss account 1,713 1,681Equity shareholders' funds 3,662 3,609 CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 DECEMBER 2005 2005 2004 £'000 £'000 £'000 £'000 Net cash (outflow) / inflow from operating (308) 1,857activities Return on investments and servicing of financeInterest received 6 6 Interest paid (40) (63) Net cash outflow from return on investments and (34) (57)servicing of finance TaxationUK corporation tax paid (335) (506) Capital expenditure Sale of tangible fixed assets 37 35 Purchase of tangible fixed assets (219) (321)Net cash outflow from capital expenditure (182) (286)Acquisitions and disposalsPurchase of subsidiary undertaking - (15) Net debt acquired with subsidiary - (19) Net cash outflow from acquisitions and disposals - (34) Equity dividends paid (402) (522) Net cash (outflow) / inflow before use of (1,261) 452financingFinancingIssue of ordinary share capital 21 21 Decrease in loans (10) (500) Capital element of finance lease rental payments (51) (97) Net cash outflow from financing (40) (576) Decrease in cash (1,301) (124) NOTES 1. Dividends On 7 September 2005 an interim dividend of 1.0p net per share wasresolved by the Board to be paid to shareholders on the register on 18 November2005. The interim dividend was paid on 12 December 2005. A final dividend for the year of 2.0p net per share will be proposed atthe forthcoming Annual General Meeting (to be held at the offices of LawrenceGraham, 190 Strand, London, WC2R 1JN on 19 May 2006 at 12.00 noon) and ifapproved, will be paid on 28 July 2006 to shareholders on the register on 23June 2006. 2. Earnings per Share The calculation of earnings per share is based on a profit after taxationof £434,000 (2004: £942,000 - restated) and a weighted average of 8,199,290(2004: 8,155,492) shares in issue. All outstanding share options are considered to be dilutive. 3. Basis of Preparation The preliminary announcement of results for the year ended 31 December 2005 hasbeen prepared on the basis of the same historical cost accounting polices as setout in the group's financial statements for the year ended 31 December 2004 withthe following exceptions: FRS 17 : Retirement benefits In previous years the Group has accounted for the defined benefit pension schemein respect of certain employees of Catalis Rail Training Limited under theprovisions of SSAP 24. At 31 December 2004 a prepayment of pension contributionsof £809,000 was being carried forward and this amount was being written off overthe future working lifetime of the members. On adoption of the full provisions of FRS 17 and following a formal actuarialvaluation of the Groups interest in this pension scheme the prepayment of£826,000 at 1 January 2004 has been written off as a prior year adjustment. Thepension scheme meets the criteria of a multi employer scheme and is accountedfor as a defined contribution scheme in the accounts for the year ended 31December 2005 and for the restated comparatives for the year ended 31 December2004. FRS 21 : Events after the balance sheet date Under the terms of FRS 21 dividends which have been declared after the balancesheet date are not recognised as a liability at that date. As a result the accounts have been amended to reflect only dividends that weredeclared during the year. The effect of these changes in accounting policies on the comparative financialinformation is as follows : Group 2004 £'000 Dividends Dividend previously charged to profit and loss 523 Dividend charged to profit and loss under FRS 21 (522) Net reduction on dividend charged to profit and loss 1 Retained profit for the year As previously reported 402 FRS 17 17 FRS 21 1 As restated 420 Debtors - amounts falling due after one year As previously reported 809 FRS 17 (809) As restated - Creditors As previously reported 3,528 FRS 21 (319) As restated 3,209 Profit and loss reserve As previously reported 2,171 FRS 17 (809) FRS 21 319 Net effect of FRS17 and FRS 21 (490) As restated 1,681 Report & Accounts The above results do not represent the statutory accounts. The statutoryaccounts for 2004 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. ENDS This information is provided by RNS The company news service from the London Stock Exchange