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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Greatfleet | LSE:GFG | London | Ordinary Share | GB00B2QBB969 | ORD 20P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 8.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 0289V
Greatfleet PLC
22 May 2008
Click on, or paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/0289V_-2008-5-21.pdf
Greatfleet plc
("Greatfleet", "the Group" or the "Company")
Unaudited preliminary results for the Year Ended 31 December 2007
Greatfleet, the specialist recruitment firm, today announces its unaudited preliminary results for the year ended 31 December 2007.
Financial Highlights:
* Turnover in the year ended 31 December 2007 of £10.3 million ( 2006: £11.4million)
* Loss before tax in the year ended 31 December 2007 of £1.66 million (2006: profit before tax £0.99 million)
* Restructuring costs in the year ended 31 December 2007 of £0.91 million (2006: one off credits of £0.3 million)
* Adjusted operating loss in the year ended 31 December 2007 of £0.62 million*
* adjusted operating loss represents operating loss of £1.53 million less restructuring costs of £0.91 million incurred in the year
ended 31 December 2007
Operational Highlights:
Within financial year 2007
* Placing of shares in March 2007 which raised £2.35 million (net of expenses)
* Qualitas People Solutions ("Qualitas") acquired in September 2007 for a total consideration of £4.1m
* Colin Gerstein, co-founder of Qualitas, announced as Chief Executive Officer in October 2007
* Strategic and operational review of the Group completed in November 2007
* Rationalisation and restructuring of the Group - now operates under two trading brands, Longbridge Search & Selection and Qualitas
People Solutions.
Post financial year end
* £1.32 million (net of expenses), raised in March 2008 through a placing of new ordinary shares in the Company with existing and
new shareholders (including management and staff)
* Repayment of all amounts owed to General Capital - less than the total amount of £0.66 million owed originally
* Repayment in full of an outstanding £0.28 million convertible loan note owed to Baronsmead, managed by ISIS
* Appointment of Greg McManus as Group Managing Director on 25 March 2008.
Chief Executive, Colin Gerstein commented:
"Through the restructuring and supported by a strong new management team, we have created a solid platform on which we can now build the
business organically and through acquisition. The Company is now well placed to expand and with continued hard work it can look ahead with
some confidence."
Enquiries:
Greatfleet plc Tel: 0845 881 0700
Colin Gerstein, Chief Executive Officer
Noble & Company Limited Tel: 0207 763 2200
Nick Naylor
Nick Athanas
Parkgreen Communications Limited Tel: 020 7851 7480
Ben Knowles Mob: 07900 346 978
ben.knowles@parkgreenmedia.com
Lucy Lake Mob: 07894 263 046
lucy.lake@parkgreenmedia.com
Chairman's statement
I am sorry to report that 2007 was a difficult and unsatisfactory year for the Company, as indicated in the circular sent to
shareholders in March this year. Trading for the year was well below our original expectations, resulting in an operating loss for the
underlying business of £0.61 million and a net overall loss of £1.66 million after meeting, or providing for, significant unexpected and
exceptional restructuring costs.
A number of changes to the Board have also taken place during the year. In August 2007, Nigel Grant, the previous Finance Director,
resigned and Wayne Bailey, the Group's financial controller, took over Nigel Grant's responsibilities for the finance function. In October
2007 Stuart Blake, the previous Chief Executive, stepped down from the Board due to ill health. The previous Chairman, Jonathan Hill, also
resigned in October 2007 at which time I assumed the role of Non-Executive Chairman. In the light of Stuart Blake's departure, Colin
Gerstein and Tony Cox, who had become part of the Group following the acquisition of Qualitas in September, joined the Board as executive
directors with Colin Gerstein assuming the role of the Company's Chief Executive Officer and Tony Cox as Executive Director. Following these
Board changes the new Board requested that a thorough review of the Company's strategic and operational performance be undertaken by the new
executive management team led by Colin Gerstein.
During the course of this review several matters came to light revealing an unsatisfactory state of affairs in the business including
the overstatement of revenues and exclusion of costs in the Company's management accounts, vacant leasehold properties, payments to staff
which were not performance related and serious staff underperformance. As announced in November 2007 these factors, along with poor trading,
have had a detrimental impact on the outcome for 2007. The new Board was shocked by these findings and share the dismay of shareholders.
On the positive side, I can report that the Board has confidence in its new Chief Executive, Colin Gerstein. He has resolutely dealt
with the various legacy issues outlined above that he inherited and has brought about a number of important changes in management, a
complete rationalisation of the brands under which we trade into two brands (Longbridge Search & Selection and Qualitas People Solutions), a
major reduction in operating costs and improvements in consultant productivity and staff morale. As a result of these changes the Board
considers that the Company is now much better placed to develop organically and to undertake selective acquisitions to enable the group to
return to profitability and secure future growth.
One key to the Company's recovery was the support received from its shareholders enabling the Company to raise £1.32 million (net of
expenses) in March 2008 which will be used to provide support to the balance sheet and allow for organic development. The funds have enabled
the full repayment of certain legacy creditors including General Capital and Baronsmead. The Board is grateful for this vital support and
will do all it can to ensure Colin Gerstein and his new team are successful in driving the business forward and rebuilding value in the
Company. It was with reluctance that the Board accepted the resignation of Tony Cox with effect from the conclusion of the fund raising.
Tony is returning to live in Ireland and we wish him well and thank him for his efforts in shaping the business for the future.
Finally, on behalf of the Board I would like to thank all the employees of Greatfleet for their perseverance during the last number of
difficult months and our shareholders for your continuing support of the Company.
Sir John Baker
Chairman
21 May 2008
Chief Executive Officer's report
The results for 2007 reflect both the Company's poor trading performance and the full impact of a top to bottom restructuring of the
business following the strategic and operational review which was completed in November 2007.
Our focus over the past six months has, by necessity, largely been inward dealing with significant legacy issues, many of which were
highlighted in our announcements in November last year and the circular which was sent to shareholders in March 2008 in connection with our
recently completed placing which raised £1.32 million (net of expenses).
Since November the Group has been rationalised and restructured and as a result now operates under two trading brands - Longbridge
Search & Selection and Qualitas People Solutions. Both now operate in the professional services sector with Longbridge covering senior
appointments and Qualitas providing mid-market services.
Longbridge, the Group's established London-based legal brand has been the focus of our most significant restructuring, its growth having
been hampered by unsustainable remuneration arrangements, insufficient management controls and poor culture. It is a testament to the brand
that it has survived with its reputation intact in spite of the poor stewardship it has been subjected to in the past. This provides the
Board with considerable confidence that we can return it to profitability in the near future. As a means to growing revenue and net fee
income, Longbridge's activities now include high level placements in the banking, finance and technology sectors. Longbridge continues to
build on its reputation in the legal recruitment market adding consistently to its already enviable international blue chip client base.
Qualitas continues to provide contingent recruitment services, building on its excellent regional reputation in the technology and
banking sectors and adding legal support to capitalise on the Group's client relationships held within Longbridge. Qualitas maintains the
Group's IT contract book and further growth in this area forms a key part of the Group's future strategy, both organically and through
acquisition. In the course of our restructuring a leasehold property in Leeds, unoccupied since 2005, has been refitted as a Qualitas office
and is beginning to make a contribution to the brand. Qualitas now operates from London, Edinburgh, Dublin, Leeds and Norwich. By July of
this year an additional office is planned to open in Birmingham underlining our determination to provide a full nationwide offering to our
current and prospective clients.
Through the restructuring, and supported by a strong new management team, we have created a solid platform on which we can now build the
business organically and through acquisition. In order to maximise the performance of our existing resources and in preparation for the
proposed substantial increase in activity planned for the future we continue to add to our senior management team. In particular the
appointment of Greg McManus on 25 March 2008 as Group Managing Director has provided a vital foundation in support of our plans.
Much time has been expended by the Company on rationalising our consultant base due to poor past performance and excessive costs. Today
our consultants, many of whom are experienced in the industry but new to the business, are keen to flourish in our performance-related
culture and of a calibre to meet the demands of our future plans. Their sector knowledge and contact base are being constantly developed
providing a good opportunity for winning new business.
More importantly there is today a determination and confidence among our people to achieve our shared goals and a pride in our business
that has been sadly lacking in the past. Our task now is to build on our improved productivity as we have done progressively since the start
of the year.
We continue to build relationships with organisations looking for service providers who understand their business and the issues
affecting them. Similarly, we are continuingly updating our information gathering processes allowing us to introduce candidates with the
best experience to provide lasting benefits for our clients.
In spite of a softening within the wider economy we believe that the prospects in the UK for the professional services sector remain
good. Across the Group we have seen no downturn in the level of assignments won and our net fee income per consultant, the most accurate
benchmark of economic impact, continues to rise. To support our plans we have invested heavily in research and training and our flexible
platform now allows us to react quickly to changes in the economic environment.
The business has been substantially underperforming against its peers for a considerable period of time and has yet to return to
profitability month-on-month but the restructuring is showing sufficient positive signs to give us belief that we are on the right path.
Though much remains to be accomplished I feel confident that the Group can look to the future with confidence. We are now well
positioned to tackle the challenges and take advantage of the opportunities that lie ahead.
Finally, in the short time I have been associated with the Group, I have been hugely impressed by the commitment and dedication of our
people. In thanking them for their continuing efforts I would also like to stress our unwavering commitment both to our clients, to provide
an excellent service in a timely fashion, and to our shareholders to build a growing, profitable and sustainable business.
Colin Gerstein
Chief Executive Officer
21 May 2008
Financial Review
Overview
As noted in the Chairman's and Chief Executive's reports 2007 was a difficult year for Greatfleet culminating in the complete
reorganisation of the business in the latter part of the year.
Revenue and operating profit
Revenue for the year ended 31 December 2007 decreased to £10.3 million (2006: £11.4 million) despite the acquisition of Qualitas in
September 2007. This reduction was primarily due to poor sales performance resulting from reduced net fee income per sales consultant and
despite increased number of consultants before and during the reorganisation of the business.
Net fee income
Net fee income for the year ended 31 December 2007 increased slightly to £7.2 million (2006: £6.9 million) due to a larger share of
revenue arising from permanent placements than contracting in 2007.
Operating loss
An operating loss of £1.53 million was recorded in the year ended 31 December 2007 (2006: operating profit of £0.89 million). During
the year administration expenses increased to £7.8 million (2006: £5.9 million). The increase was principally a result of a substantial
uplift in the number of staff during the year, some of which were on commission rates significantly in excess of industry norms and
significant one-off loyalty bonuses without targets. These arrangements have now ceased or been renegotiated to enable the Company to move
forward on a basis in line with current industry standards.
Restructuring costs
Also in the year ended 31 December 2007 restructuring costs of £0.91 million were incurred in order to reshape the business for the
future. The operating loss, before taking account of the restructuring costs, was therefore £0.62 million.
Taxation
As a result of the losses incurred in the year ended 31 December 2007 the Group did not incur any material corporation tax and still has
losses carried forward in the amount of £4,4 million.
Earnings per share
The loss per share on a fully diluted basis for the year ended 31 December 2007 was 2.19p (2006: earnings per share of 1.75p). The
adjusted loss per share on a fully diluted basis, after adding back the costs of the reorganisation incurred in the year ended 31 December
2007, was 0.98p per share (2006: adjusted earnings per share, after adding back one-off credits and the profit on disposal of a subsidiary,
of 0.95p).
Dividend
The Company is not proposing the payment of a final dividend for the year ended 31 December 2007.
Balance sheet
Net assets increased to £6.8 million as at 31 December 2007 (31 December 2006: £3.2 million). The increase principally reflects the
£2.5 million fund raising in March 2007, and the shares issued as part consideration for the acquisition of Qualitas in September 2007.
Cash flow and net debt
The Groups cash flow was improved during the year with the placing of shares that raised £2.35 million (net of expenses). This allowed
the Group to repay a loan from General Capital in the amount of £0.87 million, provided the funds for the cash payment plus expenses of
£0.66 million for the acquisition of Qualitas and provided funds for the recruitment of additional staff. In addition the Group increased
its invoice discounting facility during the year to £2 million. At 31 December 2007, net debt was £1.2 million.
Key performance indicators
The Group uses the following financial and non-financial key performance indicators to measure the performance of the business: revenue
per consultant, net fee income per consultant, contractor numbers, consultant numbers and debtor days. Due to the reorganisation of the
business in the later part of the year we are not able to give any meaningful calculations for our key performance indicators as these were
affected by the fluctuation in staff numbers during the year.
Wayne Bailey
Financial controller
21 May 2008
Unaudited consolidated income statement for the year ended 31 December 2007
Year ended Year ended
Notes 31 31
December December
Restated*
2007 2006
Total Total
£'000 £'000
Revenue
- Existing operations 9,788 11,359
- Acquisitions 532 -
________ ________
4 10,320 11,359
Cost of sales (3,118) (4,490)
________ ________
Gross profit 7,202 6,869
Administrative expenses (7,817) (5,948)
Share of operating loss in joint venture 0 (31)
Restructuring costs 5 (914)
________ ________
Operating (Loss)/profit
- Existing operations (1,153) 890
- Acquisitions (376)
(1,529) 890
Investment revenue 21 3
Finance costs (149) (96)
Profit on disposal of subsidiary - 191
________ ________
(Loss) /profit before taxation (1, 657) 988
Taxation 6 and 7 (6) -
________ ________
(Loss)/profit for the period attributable to (1,663) 988
equity shareholders
Earnings per share (pence)
From continuing operations
Basic 8 (2.19) 1.76
Diluted 8 (2.19) 1.75
Adjusted
Basic 8 (0.98) 0.95
Diluted 8 (0.98) 0.95
* Comparative information for the year ended 31 December 2006 was previously reported under UK GAAP and has been restated under IFRS as
adopted by the EU. The reconciliations from UK GAAP to IFRS are shown in note 2 in the financial statements.
Unaudited consolidated statement of changes in equity
Issued capital Share premium Merger reserve Profit and loss ESOT Convertible
debt Total
account account account Share option
reserve
reserv
e
£'000 £'000 £'000 £'000 £'000
£'000 £'000
At 1 January 2006 1,120 2,699 1,994 (3,607) (75)
53 2,184
Conversion to IFRS (121)
(121)
At 1 January 2006 - as 1,120 2,699 1,994 (3,728) (75)
53 2,063
restated
Profit for the period 988
988
Adjustment to share premium 122
122
Shares issued in the period 6 21
27
Share based payment charge 30
30
At 31 December 2006 1,126 2,821 2,015 (2,710) (75)
53 3,230
Shares issued in the period 710 4,610
5,320
Costs in connection with (165)
(165)
placement of ordinary shares
Proceeds from sale of shares (70) 75
5
and closure of ESOT
Share based payment charge 17
17
Exchange differences 17
17
Loss for the period (1,663)
(1,663)
At 31 December 2007 1,836 7,266 2,015 (4,409) -
53 6,761
Unaudited consolidated balance sheet at 31 December 2007
Note 2007 2006
£'000 £'000
Non-current assets
Goodwill 9 9,253 4,881
Property, plant and equipment 143 199
Trade and other receivables 227 227
9,623 5,307
Current assets
Trade and other receivables 10 2,915 2,699
Cash and cash equivalents 10 50 4
2,965 2,703
Total assets 12,588 8,010
Non-current liabilities
Bank loans 338 43
Convertible loan notes - 250
Other loans 25 25
Obligations under finance leases - 21
Long term provisions - 129
363 468
Current liabilities
Trade and other payables 11 4,262 2,915
Convertible loan notes 278 -
Current tax liabilities 6 -
Obligations under finance leases - 15
Bank overdrafts and loans 872 1,347
Provisions 46 35
5,464 4,312
Total liabilities 5,827 4,780
Net current liabilities 2,499 1,382
Net assets 6,761 3,230
Equity
Share capital 1,836 1,126
Share premium account 7,266 2,821
Merger reserve 2,015 2,015
Retained deficit (4,409) (2,710)
ESOP share reserve - (75)
Convertible debt option reserve 53 53
Total equity 6,761 3,230
Unaudited consolidated cash flow statement for the year ended 31 December 2007
Year ended Year ended
31 December 31 December
Note 2007 2006
£'000 £'000
Net cash (outflow)/inflow from operating 13 (1,453) 223
activities
Investing activities
Interest received 21 3
Purchase of property, plant and equipment (16) (22)
Acquisition of subsidiary (including 12 (666) (18)
associated costs)
Net cash used in investing activities (661) (37)
Financing activities
Proceeds on issue of shares (net of issue 2,353 -
costs)
Repayment of bank loans (802) (81)
Repayments of obligations under finance (35) (11)
leases
Repayment of other loans (94) (23)
New bank loans raised 650 -
Loans cancelled - -
Proceeds on sale of ESOP shares 5 0
Increase in bank overdrafts and factoring 66 209
facilities
Net cash from/ (used in) from financing 2,143 (196)
activities
Net increase/(decrease) in cash and cash 29 (10)
equivalents
Cash and cash equivalents at the beginning of 4 14
the year
Effect of foreign exchange rate changes 17 -
Cash and cash equivalents at the end of the 50 4
year
Notes to the preliminary statement
1 General information
Greatfleet plc is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office is 85
Gracechurch Street, London EC3V 0AA. The nature of the Group's operations and its principal activities are set out in the Chairman's and
Chief Executives reports.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which
the group operates.
While the financial information included in this unaudited preliminary announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient
information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS in June 2008.
The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31
December 2007 or 2006. The financial information for the year ended 31 December 2006 has been delivered to the Registrar of Companies
following the Company's Annual General Meeting. BDO Stoy Hayward auditors to Greatfleet at that time,reported on those accounts; their
report was unqualified, did not draw attention to any matters by way of emphasis of matter without qualifying their reports and did not
contain a statement under s237 (2) or (3) of the Companies Act 1985. The transition from UK GAAP to IFRS which impacts on the numbers
reported in the statutory accounts for the year ended 31 December 2006 have been previously announced in the unaudited interim statements.
The audit of the statutory accounts for the year ended 31 December 2007 is not yet complete. These accounts will be finalised on the basis
of the financial information presented by the directors in the preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting.
2 Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS's). The financial
statements have also been prepared in accordance with IFRS's adopted by the European Union and therefore the Group financial statements
comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.
Transitional arrangements
The Group has adopted IFRS from 1 January 2006, the date of transition. Transitional arrangements were disclosed in the June 2007
unaudited interim financial information.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets,
liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the
acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non
Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business
combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.
If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent
liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the
assets, liabilities and contingent liabilities recognised.
Goodwill
Goodwill arising on an acquisition of a subsidiary undertaking is the difference between the fair value of the consideration paid and
the fair value of the identifiable assets and liabilities acquired. Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least
annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the
carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP amounts subject to
being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not
included in determining any subsequent profit or loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services
provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Income from permanent search and selection
assignments is recognised when a contractual obligation on the client to pay arises being the earlier of when an invoice is payable or an
offer is accepted by a candidate and a start date is known. Non-refundable retainers are recognised as the services are provided. Income in
respect of contract staff is recognised when the service has been provided.
Operating loss
Operating loss is stated after charging restructuring costs but before investment income and finance costs.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that
are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint
ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
Trade receivables
Trade receivables are recognised at nominal value. Appropriate allowances for estimated irrecoverable amounts are recognised in profit
or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the
asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial
recognition.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including
premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in profit or loss using the
effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period
in which they arise.
Share based payments
The Group has applied the requirements of IFRS 2 Share-based Payment. In accordance with the transitional provisions, IFRS 2 has been
applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair
value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares
that will eventually vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of the Binomial Lattice model. The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in note 2, the directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical judgements in applying the group's accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the
directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts
recognised in financial statements.
Revenue recognition
The Group's revenue recognition policy is, to recognise revenue on non-retained assignments at the time an offer is accepted by a
candidate and a start date is known, rather than on the actual start date. This presents a more meaningful reflection of activity in any
period. In the opinion of the Board, the Group has fulfilled its contractual obligations by the date of acceptance, which can be reliably
determined by the Group's accounting systems, and has earned the right to consideration. Suitable provision is made for potential drop-outs
and associated commission costs.
For retained assignments the Group's revenue recognition policy is to recognise revenue as the service is provided.
Revenue in respect of contract staff is recognised when the service has been provided.
In making its judgement, the Board considered the detailed criteria for the recognition of revenue from the sale of goods set out in IAS
18 Revenue and, in particular, whether the Group had transferred to the buyer the significant risks and rewards of ownership of the goods.
Following the detailed quantification of the Group's liability in respect of candidates who do not actually join a client after the start
date is known the directors are satisfied that the significant risks and rewards have been transferred and that recognition of the revenue
in the current year is appropriate, in conjunction with recognition of an appropriate provision for revenue for non-candidates who do not
ultimately take up their position.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below.
Fair value of acquired intangible assets and impairment of goodwill
The carrying amount of the fair value of acquired intangible assets at the balance sheet date was £nil.
Determining whether goodwill is impaired and the fair value of acquired intangible assets requires an estimation of the value in use of
the cash-generating units to which goodwill and the fair value of acquired intangible assets has been allocated. The value in use
calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount
rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £9.3 million.
4 Revenue
Business and geographical segments
The consolidated entity operates in one business segment, being that of recruitment services, and this is the Group's primary segment.
As a result, no additional business segment information is required to be provided. The Group's secondary segment is geography. The segment
results by geography are shown below.
Sales revenue by
geographical
market
2007 2006
£'000 £'000
United Kingdom and Ireland 8,873 8,762
Rest of the World 1,447 2,597
10,320 11,359
5 Restructuring costs
In October 2007, the Group commenced a reorganisation and rationalisation of its activities. This led to a number of redundancies and
one-off restructuring costs which were recognised in the income statement for the year ended 31 December 2007. A summary of these costs is
as follows:
2007 2006
£' £'
000 000
Accelerated depreciation on leasehold assets 50 -
Payroll, termination and redundancy costs 582 -
Relocation costs 48 -
Other costs 52 -
Onerous lease provision 46 -
Professional fees 136 -
914 -
6 Taxation
2007 2006
£' £'
000 000
Current tax 6 -
Deferred tax - -
7 Deferred tax
There is no unprovided deferred tax other than losses available for future offset against taxable profits. There are tax losses carried
forward at 31 December 2007 of £4,400,000 (2006: £2,600,000) for the Group.
8 (Loss)/earnings per share
A The calculation of the basic and diluted earnings per share is based on the following data:
(Loss)/earnings
2007
£'000 2006
£'000
(Loss)/earnings for the purposes of basic (1,663) 988
loss/earnings per share being net (loss)/earnings
attributable to equity holders of the parent
(Loss)/earnings for the purposes of diluted (1,663) 988
earnings per share
2007 2006
Number of shares
Weighted average number of ordinary shares for the 76,077,324 56,154,721
purposes of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options - 426,154
Weighted average number of ordinary shares for the 76,077,324 56,580,875
purposes of diluted earnings per share
(Loss)/earnings per share (pre share consolidation)*
- basic (pence) (2.19) 1.76
- diluted (pence) (2.19) 1.75
(Loss)/earnings per share (post consolidation)*
- basic (pence) (21.9) 17.6
- diluted (pence) (21.9) 17.5
B The calculation of adjusted basic and diluted earnings per share is based on the following data:
(Loss)/Earnings
2007
£'000 2006
£'000
restate
d
(Loss)/earnings for the purposes of basic loss/earnings (1,663) 988
per share being net (loss)/profit attributable to equity
holders of the parent
Restructuring costs 914
Special items (259)
Profit on disposal of subsidiary - (191)
(Loss)/earnings for the purposes of the adjusted basic (749) 538
loss/earnings per share being net (loss)/profit
attributable to equity holders of the parent
(Loss)/earnings per share (continued)
Adjusted (Loss)/earnings per share (pre share consolidation)*
- basic (pence) (0.98) 0.95
- diluted (pence) (0.98) 0.95
Adjusted (Loss)/earnings per share (post share consolidation)*
- basic (pence) (9.8) 9.5
- diluted (pence) (9.8) 9.5
The adjusted (Loss)/earnings per share has been calculated on the basis of continuing operations before restructuring costs in the year
ended 31 December 2007 and special items in the year ended 31 December 2006. The directors consider that the adjusted (Loss)/earnings per
share calculation gives a better understanding of the Groups (Loss)/earnings per share.
*On 7 April 2008 the Company's ordinary shares were consolidated on the basis of 1 new ordinary share for every 10 shares in issue. Had
this been the case at the year end the earning per share as outlined above would have increased by a factor of 10 times.
9 Goodwill
£'000
At 1 January 2006 5,059
Recognised on acquisition of a subsidiary 189
Derecognised on disposal of a subsidiary (367)
At 1 January 2007 4,881
-
Recognised on acquisition of a subsidiary 4,372
At 31 December 2007 9,253
Carrying amount
At 31 December 2007 9,253
At 31 December 2006 4,881
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to
benefit from that business combination. The carrying amount of goodwill had been allocated as follows:
2007 2006
£'000 £'000
Qualitas 4,562 -
Longbridge 4,691 4,881
9,253 4,881
Subsequent to the acquisition of Qualitas, a number of Greatfleet's small brands and the associated goodwill were transferred to
Qualitas.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations
are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management
estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to
the CGUs. The growth rates are based on the Directors best estimate of growth achievable. Changes in selling prices and direct costs are
based on past practices and expectations of future changes in the market.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management.
The rate used to discount the forecast cash flows is 10 per cent.
10 Other financial assets
Trade and other receivables
2007 2006
£' £'
000 000
Non current assets 227 227
227 227
2007 2006
£'000 £'000
Current assets
Amounts recoverable for the provision of services 1,485 1,217
Other debtors 161 71
Prepayments and accrued income 1,269 1,411
2,915 2,699
Non current assets consist of a rent deposit of £227,000 (2006: £227,000).
The average credit period taken on sales is 54 days (2006: 39 days).
Cash and cash equivalents
2007 2006
£' £'
000 000
Cash and cash equivalents 50 4
Cash and cash equivalent comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less.
The carrying amount of these assets approximates their fair value.
11 Other financial liabilities
Trade and other payables
2007 2006
£'000 £'000
Trade creditors 916 881
Other creditors 917 75
Accruals 1,153 1,145
PAYE and VAT 1,276 814
4,262 2,915
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
taken for trade purchases is 62 days (2006: 48 days).
The Directors consider that the carrying amount of trade payables approximates to their fair value.
12 Acquisition and disposal of Subsidiaries
On 18 September 2007 the Group acquired the issued share capital of Qualitas People Solutions Limited, Qualitas People Solutions
(UK) Limited and Alliance Recruitment Limited for £3.4 million plus deferred consideration. The summary balance sheet acquired comprised:
2007
£'000
Book and fair value
Fixed assets 60
Debtors and prepayments 557
Overdrafts (32)
Creditors and accruals (686)
Loans (130)
Net assets/(liabilities) acquired (231)
Goodwill arising on acquisition 4,372
Satisfied by:
Cash 600
Shares 2,800
Deferred consideration 675
Associated costs 66
4,141
Net cash outflow arising on acquisition
Cash consideration 600
Cash and cash equivalents acquired 0
600
The goodwill arising on the acquisition of the Qualitas group is attributable to the anticipated profitability of the distribution of
the Group's products in the new markets and the anticipated future operating synergies from the combination.
Qualitas contributed £0.53 million revenue and £0.33 million to the Group's loss for the period between the date of acquisition and
the balance sheet date.
If the acquisition of Qualitas had been completed on the first day of the financial year, Group revenues for the period would have been
£2.4 million and Group loss attributable to equity holders of the parent would have been £0.26 million.
Disposal of subsidiaries
On 17 January 2006 the Company disposed of its 75% shareholding in Parallax Consultancy Solutions Limited for £1. The investment had
previously been written down to £1. The profit on disposal was calculated as:
2006
£'
000
Net assets disposed of:
Creditors falling due within one year 4
Profit on disposal 4
During 2006 the Group deconsolidated PS Publications Limited. The profit on disposal was calculated as:
2006
£'
000
Net assets disposed of:
Creditors falling due within one year 187
Profit on disposal 187
13 Notes to the Cash Flow Statement
Reconciliation of operating loss to net cash inflow / (outflow) from operations:
2007 2006
£'000 £'000
(Loss)/profit for the year (1,529) 890
Adjustments for:
Depreciation of property, plant and equipment 136 87
Operating loss in Joint venture - 31
Share-based payment expense 17 31
Decrease in provisions (118) (95)
Operating cash flows before movements in working capital (1,494) 944
Decrease in receivables 381 310
Decrease in creditors (164) (889)
Cash (used) / generated by operations (1,277) 365
Interest paid (176) (142)
Net cash (used in)/generated from operating (1,453) 223
activities
14 Events after the balance sheet date
1) On 8 April 2008 the Company:
i) consolidated its share capital on the basis of 1 new ordinary share of 20 pence each for every 10 ordinary shares of 2 pence
each;
ii) issued 5,913,020 consolidated shares at 25 pence per share to raise a total of £1.48 million gross (£1.32 million after
expenses);
iii) issued 861,302 warrants which gives the holders the right to subscribe for new shares at 40 pence per share until 8 April
2009; and
iv) issued 2,700,000 shares to the vendors of Qualitas (Colin Gerstein and Antony Cox) pursuant to the settlement of the deferred
consideration arrangements in relation to Greatfleet*s acquisition of Qualitas in September 2007.
The net proceeds of the issue will be used by the Company to repay certain creditors of the Company, provide additional working capital
and allow the organic development of the Group.
2) The loan from General Capital Venture Finance Limited and associated exit fee, early repayment fee and interest totalling £0.61
million was repaid in full on 22 April 2008.
3) The convertible loan from Baronsmead together with accrued interest totalling £0.29 million was repaid in full on 28 April 2008.
15 Note to shareholders
This announcement has been extracted without material adjustment from the unaudited consolidated financial statements of Greatfleet for
the year ended 31 December 2007. The audited results will be posted to shareholders by mid June 2008 and will also be available from the
Company's head office at 85 Gracechurch Street, London EC3V 0AA and will be available to download from its website at: www.greatfleet.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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