Robert Walters Regulatory News (RWA)

25 Feb 2008 07:01

Robert Walters PLC25 February 2008 25 FEBRUARY 2008 ROBERT WALTERS PLC ("Robert Walters" or "the Group") Preliminary Results for the year ended 31 December 2007 ANOTHER YEAR OF RECORD RESULTS FINANCIAL HIGHLIGHTS • Net fee income (gross profit) up 19% to £128.9m (2006: £108.6m)• Operating profit up 34% to £26.1m (2006: £19.5m)• Profit before taxation up 26% to £24.9m (2006: £19.8m)• Earnings per share up 23% to 23.2p (2006: 18.9p)• Full-year dividend increased 17.5% to 4.70p per ordinary share (2006: 4.00p)• Share buy-back programme continued, with £12.8 million returned to shareholders Robert Walters, Chief Executive, commented: "The business has never been in better shape and I am very pleased to announce arecord set of results for 2007. "The management team has led the business through a number of economic cycles.Although we have limited visibility, the Group is more internationally diverseand multi-disciplined than ever before and, as such, despite the economicuncertainty we are well placed to face the challenges of the current year." OPERATING HIGHLIGHTS • Staff numbers increased to 1,474 (2006: 1,230) with 62% of the Group's net fee income now generated outside of the UK. • Asia Pacific is now the Group's largest region in terms of both net fee income and operating profit, with new offices opened in Osaka and Kowloon. • Significant investment in our contract business in Europe and Asia Pacific, with contract now representing 32% of the Group's recruitment net fee income. • Strong operating cash flow with £24.0m cash balance at year end. • Entry into mainland China through acquisition of Talent Spotter. ENQUIRIES: Robert Walters plc +44 (0) 20 7379 3333Robert Walters, Chief ExecutiveAlan Bannatyne, Finance Director Pelham PRJames Henderson +44 (0) 20 7743 6673 james.henderson@pelhampr.com Archie Berens +44 (0) 20 7743 6679 archie.berens@pelhampr.com ABOUT ROBERT WALTERS Robert Walters is a leading specialist professional recruitment consultancy,which focuses on placing high calibre professionals into permanent, contract andtemporary positions at all management levels. The Group specialises in theaccounting, finance, banking, IT, management consultancy, legal, sales andmarketing, human resources, supply chain, secretarial and support fields.Robert Walters' blue-chip client base ranges across multi-national corporationscovering all market sectors. Established in 1985, Robert Walters has built a global presence, with 35 officesnow spanning 15 countries across five continents. Chairman's Statement I am pleased to report a record set of results for the Group for the year ended31 December 2007. Revenue increased by 17% to £319.8m (2006: £274.5m) producinga 19% increase in gross profit ("net fee income") to £128.9m (2006: £108.6m).Operating profit increased by 34% to £26.1m (2006: £19.5m) and it wasencouraging to see the conversion rate of operating profit from net fee incomeimprove to 20.3% (2006: 17.9%). Profit before tax rose by 26% to £24.9m (2006:£19.8m). The Group continued to experience candidate shortages across all our markets andgenerally activity levels remained strong. We maintained a healthy balancebetween permanent and contract recruitment, with significant investment in ourcontract businesses delivering impressive rates of growth in net fee incomeacross the globe. Contract now represents 32% (2006: 30%) of the Group'srecruitment net fee income. During the year staff numbers increased to 1,474 (2006: 1,230) and we opened newoffices in Madrid and Osaka. In early 2008 we opened an office in Kowloon, oursecond in Hong Kong, and today we announce that we have acquired a majorityinterest in a specialist recruitment consultancy business with offices inShanghai and Suzhou, the first Robert Walters offices in mainland China. This isa significant development for Robert Walters and opens up a key territory forthe Group. Following the Group's record trading performance, the Board is recommending anincrease in the final dividend to 3.35p per share (2006: 2.85p). Together withthe interim dividend of 1.35p (2006: 1.15p) this represents a 17.5% increase inthe total dividend per share to 4.70p (2006: 4.00p). Additionally, the companydelivered value to shareholders through its share buy-back programme, acquiring3.9m shares for £12.8m. We will be seeking shareholder consent for the renewalof the authority to repurchase up to 10% of the issued shared capital at theAnnual General Meeting on 8 May 2008. I would like to take this opportunity to formally welcome to the Board our newNon-executive Directors, Lady Judge and Andy Kemp and express our thanks to mypredecessor, Tim Barker, for his valuable contribution to the Group over thelast seven years. In this my first year as Chairman, it has been a pleasure towitness first hand the energy and commitment of our staff across the world. The global strength of the Robert Walters brand is a testament to the depth ofour senior management team and our consultants' ability to deliver value addedand innovative recruitment solutions to clients and candidates. Notwithstanding the current uncertainties in global financial markets, webelieve that the Group is well positioned to take advantage of opportunities forlong term growth in both existing and new markets, particularly withinContinental Europe and Asia Pacific. Philip Aiken Chairman Chief Executive's Statement 2007 was another strong year for the Group. Operating profit increased 34% to arecord £26.1m (2006: £19.5m) with net fee income growth during the second halfof the year accelerating on a like-for-like basis. This increase in operatingprofit is particularly pleasing given headcount growth of 20% and the fact thata significant number of new hires are still well below their ultimateproductivity levels. We have also expanded our office network from 28 to 35. Europe and Asia Pacific achieved the highest rates of net fee income growth withAsia Pacific now our largest region in terms of both net fee income andprofitability. The significant investment in our contract business in theseregions provides a greater platform for long term growth in these excitingmarkets. Candidates remained in short supply with the Robert Walters global footprint, akey source of competitive advantage, continuing to provide clients withincreased opportunity to source the highest calibre professionals. United Kingdom Revenue in the UK was £148.7m (2006: £138.4m) and net fee income increased by10% to £48.6m (2006: £44.1m). Operating profit increased by 56% to £5.0m (2006:£3.2m). All disciplines grew net fee income, with our core Finance and Accountingbusiness delivering a sharp increase in contractor numbers and an improvement inthe underlying margin. Our HR, Legal, Sales & Marketing and IT divisions continued to evolve, with ourIT business showing particularly strong operating profit growth during thesecond half of the year. There appears to be the beginnings of a polarisation in the professionalrecruitment sector between the larger international players and boutiques. Wehave seen a steady move, driven by clients, towards the use of recruitment firmsas a one-stop-shop for a variety of professional roles. This has left thelandscape unusually bereft of medium sized competitors - a very different storyfrom twenty or even ten years ago. Candidates also appear to be focussing on registering with those firms offeringa wide breadth of career opportunities rather than registration with a largenumber of smaller recruitment firms. It is our responsibility to capitalise on these trends and continue to capturemarket share whilst preserving our quality of service. This trend is further accentuated by the requirement from certain largercorporates and financial institutions for a managed service solution to theirrecruitment needs. Our outsourcing business, Resource Solutions, is ideallyplaced to benefit from this development in the market. As pioneers of thisservice offering, Resource Solutions has an enviable client list, many of whomare requesting more and more auxiliary services, including payrolling and agencymanagement. Resource Solutions continued to win client engagements and broaden its sectorcoverage during the year and whilst operating profit decreased marginally, thiswas as a consequence of implementation costs for a number of significant longterm client projects on which we expect to see a return on investment during2008. Europe Revenue was £44.4m (2006: £33.0m) and net fee income increased by 33% to £25.8m(2006: £19.4m). Operating profit increased by 34% to £5.1m (2006: £3.8m). Thisis our fastest growing region and represents 20% of the Group's net fee income. All of our European operations produced strong growth in permanent net feeincome, whilst our contract business in France delivered an exceptionalperformance. The offices we opened in Eindhoven and Lyon during 2006 made a positivecontribution during the current year. In 2007 we opened an office in Madrid andlook forward to its continued expansion in the forthcoming year. One of our major initiatives in France and Belgium over the past two years hasbeen the expansion of Walters Interim, our junior professional recruitmentbusiness. We now have three offices in France servicing this market and areplanning further offices in Belgium over the next few years. We believe thatthis business still has a great deal of potential and as in other areas of theworld, we see the security and resilience of contract net fee income as a strongcomplement to the more cyclical permanent recruitment sector. Asia Pacific Revenue was £124.1m (2006: £99.0m) and net fee income increased by 27% to £52.1m(2006: £41.2m). Operating profit increased by 33% to £15.9m (2006: £12.0m). Thisregion is now our largest, representing 40% of the Group's net fee income. All offices significantly increased both net fee income and operating profitwith exceptional performances delivered by Japan and Australia. The demographic landscape of Japan, market deregulation and the continuingdecline of the "salaryman" lifetime employment mentality have presented theGroup with an exceptional opportunity in this market. During the year, we openeda new office in Osaka and secured additional office space in Tokyo for ourrapidly growing contract business which we anticipate will lead to amulti-office network throughout Japan in due course. In February this year we entered the mainland China market, acquiring two newoffices in Shanghai and Suzhou. This acquisition demonstrates commitment to ourstrategy for growth and opens up another exciting market for the Group. During the year we took additional office space in Adelaide, Kuala Lumpur andSingapore, whilst a new office opened in Kowloon in early January 2008. Wecontinue to explore additional opportunities across the region. Other International Other International comprises South Africa and the USA, with Ireland nowreported under Europe following a re-alignment of the Group's internal reportingstructure. This region now represents less than 2% of the Group's net feeincome. Revenue was £2.5m (2006: £4.1m) with net fee income decreasing by 38% to £2.4m(2006: £3.9m) resulting in an operating profit of £0.1m (2006: £0.5m). SouthAfrica is a profitable and growing operation whilst our New York officeunderperformed. General overview The Group is now more internationally diverse and multi-disciplined than everbefore. As such, despite the economic uncertainty we are well placed to face thechallenges of the current year. Robert Walters Chief Executive Consolidated Income Statement FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £'000 £'000RevenueContinuing operations 319,795 274,462Cost of sales (190,865) (165,857)Gross profit 128,930 108,605Administrative expenses (102,815) (89,115)Operating profit 26,115 19,490Interest received 332 58Interest paid (831) (506)(Loss) gain on foreign exchange (675) 805Profit before taxation 24,941 19,847Taxation (7,518) (5,754)Profit after taxation 17,423 14,093Dividends (3,139) (2,585)Retained profit for the year 14,284 11,508 Earnings per share (pence):Basic 23.2 18.9Diluted 21.8 17.1 Consolidated Statement of Recognised Income and Expense FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £'000 £'000Profit for the year 17,423 14,093Foreign currency translation differences 1,916 (1,761)Total recognised income and expense for the year 19,339 12,332 Consolidated Balance Sheet AS AT 31 DECEMBER 2007 2007 2006 £'000 £'000Non-current assetsIntangible assets 7,822 7,747Property, plant and equipment 4,745 4,210Deferred tax asset 3,749 5,555 16,316 17,512Current assetsTrade and other trade receivables 69,742 61,219Corporation tax receivables 1,429 189Cash and cash equivalents 23,953 19,584 95,124 80,992Total assets 111,440 98,504 Current liabilitiesTrade and other trade payables (47,763) (39,325)Corporation tax liabilities (4,937) (3,431)Bank loans (4,640) (4,617) (57,340) (47,373)Net current assets 37,784 33,619 Non-current liabilitiesBank loans (3,718) (8,011)Deferred tax liabilities (683) (1,143) (4,401) (9,154)Total liabilities (61,741) (56,527)Net assets 49,699 41,977 EquityCalled-up share capital 17,086 17,019Share premium account 40,553 57,968Other reserves (73,470) (74,034)Own shares held (1,073) (2,686)Treasury shares held (18,865) (14,773)Foreign exchange reserves 438 (1,478)Retained earnings 85,030 59,961Total equity 49,699 41,977 Consolidated Cash Flow Statement FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £'000 £'000Cash generated from operating activities 30,372 18,190 Income taxes paid (6,616) (4,137)Net cash from operating activities 23,756 14,053 Investing activitiesInterest paid (net) (499) (444)Purchases of computer software (697) (526)Purchases of property, plant and equipment (net) (1,803) (1,522)Net cash used in investing activities (2,999) (2,492) Financing activitiesEquity dividends paid (3,139) (2,585)Proceeds from issue of equity 3,216 195Proceeds from bank loan - 10,000Repayment of bank loan (4,671) (1,921)Treasury shares purchased (4,092) (9,987)Shares purchased for cancellation (8,742) -Net cash used in financing activities (17,428) (4,298)Net increase in cash and cash equivalents 3,329 7,263 Cash and cash equivalents at beginning of year 19,584 13,612Effect of foreign exchange rate changes 1,040 (1,291)Cash and cash equivalents at end of year 23,953 19,584 Statement of Accounting Policies FOR THE YEAR ENDED 31 DECEMBER 2007 Basis of preparation The financial report for the year ended 31 December 2007 has been prepared inaccordance with the historical cost convention and with International FinancialReporting Standards, including International Accounting Standards andInterpretations (IFRSs) as adopted for use by the European Union, though thisannouncement does not itself contain sufficient information to comply withIFRSs. The financial information in this announcement, which was approved by the Boardof Directors on 22 February 2008, does not constitute the Company's statutoryaccounts for the years ended 31 December 2006 or 2007 but is derived from theseaccounts. Statutory accounts for 2006 have been delivered to the Registrar ofCompanies and those for 2007 will be delivered following the Company's AnnualGeneral Meeting. The auditors have reported on these accounts; their reportswere unqualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. The 2007 Annual Report and Accounts will be posted to shareholders by 1 April2008. Copies may be obtained after this date from the Company Secretary, 55Strand, London WC2N 5WR. The Annual General Meeting of Robert Walters plc will be held on 8 May 2008 at55 Strand, London WC2N 5WR. 1. Segmental information 2007 2006 £'000 £'000 i) Revenue: UK 148,746 138,374 Europe* 44,439 32,999 Asia Pacific 124,132 98,997 Other* 2,478 4,092 319,795 274,462 ii) Gross profit: UK 48,594 44,144 Europe* 25,790 19,361 Asia Pacific 52,114 41,197 Other* 2,432 3,903 128,930 108,605 1. Segmental information (continued) 2007 2006 £'000 £'000 iii) Profit before interest and taxation: UK 4,997 3,203 Europe* 5,096 3,798 Asia Pacific 15,926 11,963 Other* 96 526 Operating profit 26,115 19,490 Net finance credit (cost) (1,174) 357 Profit before taxation 24,941 19,847 iv) Net Assets: UK 1,702 15,007 Europe* 7,262 3,791 Asia Pacific 25,902 16,815 Other* (322) (1,762) Unallocated corporate assets and liabilities 15,155 8,126 49,699 41,977 The analysis of revenue by destination is not materially different to theanalysis by origin. The Group is divided into geographical areas for managementpurposes, and it is on this basis that the primary segmental information hasbeen prepared. 1. Segmental information (continued) v) Other information - 2007: Property, Plant & Depreciation and Assets Liabilities Equipment Amortisation £'000 £'000 £'000 £'000 UK 1,313 1,253 39,839 (38,137) Europe* 443 194 17,941 (10,679) Asia Pacific 927 512 39,402 (13,500) Other 38 23 300 (622) Unallocated corporate assets - - 29,131 (13,976) and liabilities 2,721 1,982 126,613 (76,914) Other information - 2006: Property, Plant & Depreciation and Assets Liabilities Equipment Amortisation £'000 £'000 £'000 £'000 UK 875 1,069 37,946 (22,939) Europe* 587 149 10,997 (7,206) Asia Pacific 588 374 25,786 (8,971) Other* 21 30 471 (2,233) Unallocated corporate assets - - 25,328 (17,202) and liabilities 2,071 1,622 100,528 (58,551) * In 2007, following a re-alignment of the Group's internal reporting structure,Ireland is now presented in "Europe". As a result, the comparative figures forboth "Europe" and "Other" have been restated to reflect this change. For the purposes of other information, unallocated corporate assets andliabilities include cash, bank loans and corporate and deferred tax balances. 1. Segmental information (continued) 2007 2006 £'000 £'000vi) Revenue by business grouping: Robert Walters 303,431 265,342 Resource Solutions (recruitment process outsourcing) 16,364 9,120 319,795 274,462 vii) Carrying value of assets: Robert Walters 77,985 58,247 Resource Solutions 19,498 16,953 97,483 75,200 viii) Additions to fixed assets: Robert Walters 2,548 1,504 Resource Solutions 173 36 2,721 1,540 2. Interest paid 2007 2006 £'000 £'000 Interest on bank overdrafts 195 365 Interest on long term loans 560 141 Other 76 - Total borrowing costs 831 506 3. Taxation 2007 2006 £'000 £'000 Current tax charge Corporation tax - UK 1,236 1,134 Corporation tax - Overseas 6,904 5,151 Double tax relief - (50) Adjustments in respect of prior periods Corporation tax - UK (6) 58 Corporation tax - Overseas 71 148 8,205 6,441 Deferred tax Deferred tax - UK 251 (385) Deferred tax - Overseas (938) 122 Adjustments in respect of prior periods Deferred tax - UK - (99) Deferred tax - Overseas - (325) (687) (687) Total tax charge for the year 7,518 5,754 UK corporation tax has been charged at 30% (2006: 30%). Profit before taxation 24,941 19,847 Tax at standard UK corporation tax rate of 30% 7,482 5,954 Effects of: Reduction in withholding tax on foreign earnings (521) (329) Other expenses not deductible for tax purposes 590 394 Overseas earnings taxed at different rates (98) (47) Adjustments to tax charges in previous periods 65 (218) Total tax charge for year 7,518 5,754 4. Equity dividends 2007 2006 £'000 £'000 Amounts recognised as distributions to equity holders in the period: Interim dividend paid of 1.35p per share (2006 1.15p) 1,025 871 Final dividend for 2006 of 2.85p (2005: 2.35p) 2,114 1,714 3,139 2,585 Proposed final dividend for 2007 of 3.35p (2006: 2.85p) 2,518 2,114 The proposed final dividend of £2,518,000 is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 5. Earnings per share The calculation of earnings per ordinary share is based on the profit on ordinary activities after taxation and the weighted average number of ordinary shares of Robert Walters plc. 2007 2006 £'000 £'000 Profit after taxation 17,423 14,093 2007 2006 Number Number of Shares of Shares Weighted average number of shares: Shares in issue throughout the year 85,096,683 84,731,927 Share issued in the year 1,541,259 243,739 Shares cancelled in the year (964,983) - Treasury and own shares held (10,724,113) (10,245,689) For basic earnings per share 74,948,846 74,729,977 Outstanding share options 4,904,365 7,714,057 For diluted earnings per share 79,853,211 82,444,034 6. Intangible assets Goodwill Computer Software Total £'000 £'000 £'000 Cost At 1 January 2006 6,847 2,176 9,023 Additions - 531 531 Disposals - (3) (3) Foreign currency translation differences - (14) (14) At 31 December 2006 6,847 2,690 9,537 Additions - 697 697 Disposals - (1) (1) Foreign currency translation differences - 4 4 At 31 December 2007 6,847 3,390 10,237 Accumulated depreciation and impairment At 1 January 2006 - 1,326 1,326 Charge for the year - 476 476 Disposals - (2) (2) Foreign currency translation differences - (10) (10) At 31 December 2006 - 1,790 1,790 Charge for the year - 621 621 Disposals - (1) (1) Foreign currency translation differences - 5 5 At 31 December 2007 - 2,415 2,415 Carrying value At 31 December 2006 6,847 900 7,747 At 31 December 2007 6,847 975 7,822 The carrying value of goodwill, denominated in £ Sterling, relates to thehistoric acquisition of Dunhill Pty in Australia and is tested annually forimpairment, or more frequently if there are indications that goodwill might beimpaired. The recoverable amount of the goodwill is based on value in use,calculated by preparing cash flow forecasts derived from the most recentfinancial budgets and an assumed growth rate of 3%, which does not exceed theanticipated long term average potential growth rate of the Australian market.The value of the cash flows is then discounted at a post tax rate of 8%, basedon the Group's weighted average cost of capital. 7. Movement in equity 2007 2006 £'000 £'000 Profit for the year 17,423 14,093 Foreign currency translation differences 1,916 (1,761) 19,339 12,332 Dividends paid (3,139) (2,585) Treasury shares purchased (4,092) (9,987) Shares purchased for cancellation (9,351) - Credit in respect of share schemes 1,749 6,326 New shares issued 3,216 195 Net increase in equity 7,722 6,281 Opening equity 41,977 35,696 Closing equity 49,699 41,977 8. Notes to the cash flow statement 2007 2006 £'000 £'000 Operating profit 26,115 19,490 Adjustments for: Depreciation and amortisation charges 1,982 1,607 Loss on disposal of computer software - 1 Loss on disposal of property, plant and equipment 63 95 Movement in share scheme balance 2,287 1,571 Operating cash flows before movements in working capital 30,447 22,764 Increase in receivables (6,302) (18,428) Increase in payables 6,227 13,854 Cash generated by operations 30,372 18,190 9. Reconciliation of net cash flow to movement in net funds 2007 2006 £'000 £'000 Increase in cash and cash equivalents in the year 3,329 7,263 Cash (outflow) inflow from decrease (increase) in bank loans 4,671 (8,079) Foreign currency translation differences 639 (1,291) Movement in net funds in the year 8,639 (2,107) Net funds at beginning of year 6,956 9,063 Net funds at end of year 15,595 6,956 10. Subsequent events Since the balance sheet date, the Group has acquired a majority interest in aspecialist recruitment business in China for a maximum consideration of Renminbi20 million (£1.4m) payable over two years. 11. Dividend The dividend will be paid on 6 June 2008 to those shareholders on the registeras at 16 May 2008. This information is provided by RNS The company news service from the London Stock Exchange