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Share Name | Share Symbol | Market | Type |
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Corporacion Financiera Alba | TG:CSV | Tradegate | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.10 | 0.19% | 51.60 | 51.50 | 51.60 | 51.70 | 51.10 | 51.70 | 14 | 22:50:06 |
RNS Number:2025J Corporate Services Group PLC 26 March 2003 FOR IMMEDIATE RELEASE 26 MARCH 2003 THE CORPORATE SERVICES GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002 Highlights * Turnover from continuing operations down 20.9% to #591.5 million * Loss, from continuing operations, before goodwill amortisation and operating exceptional items: #16.7 million (2001: #3.5 million) * Loss per share, adjusted for goodwill amortisation and exceptional items: 5.7p (2001: 1.4p) * Revenue from Healthcare up 7.0%. This division now represents almost 25% of UK turnover * Acquisition of BRS Taskforce, specialists in driving recruitment, from Exel * Cost savings target of #6.5 million for 2003 achieved * UK and US operating costs reduced by 11% and 23% respectively * Year end net debt of #43.2 million (2001: #49.0 million) subsequently reduced via Placing and Open Offer * New management team installed under Julian Treger, Executive Chairman, Mark Adams, Chief Operating Officer and Desmond Doyle, Group Finance Director * Business plan designed to deliver revenue and margin growth despite adverse macroeconomic markets. Long term goal: net operating profit margins of 5% Commenting on current trading and prospects, Julian Treger, Executive Chairman, said: "Although trading in the first eleven weeks of 2003 has continued to be difficult with sales 10.0% lower in the UK and 16.7% down in the US compared to the same period last year, the rates of decrease represent a significant improvement over those experienced at this time last year. "The Board anticipates that trading in 2003 will continue to be below the levels of 2002. Against this backdrop the Board continues to take action to reduce its cost base and position the business to ensure that it becomes cash generative and profitable irrespective of trading conditions. We believe that the new Board, management team and unitary structure will provide the necessary focus to tackle the challenges ahead." For further information, please contact: Mark Adams, Chief Operating Officer: 01582 692658 Desmond Doyle, Group Finance Director: 01582 692658 Melvyn Marckus, CardewChancery & Co: 020 7930 0777 Results 2002 proved to be a difficult year for the Group with sales, on a continuing basis, down 20.9% to #591.5 million (2001: #747.6 million) and losses from continuing operations, before goodwill amortisation and operating exceptional items of #16.7 million (2001: #3.5 million). Operating exceptional items were #89.2 million (2001: #1.7 million). The loss per share, adjusted for goodwill amortisation and exceptional items, was 5.7p (2001: 1.4p). Net cash inflow from operating activities was #8.3 million. After deduction of interest and capital expenditure and tax receipts, these funds have been used to reduce net debt by #5.8 million to #43.2 million. These results are clearly unacceptable and must be significantly improved during the current year. Strategic Review Following my appointment as Executive Chairman in September 2002, the Group undertook a detailed review and assessment of its operations. This has led to a restructuring of our activities and a repositioning of individual businesses designed to ensure better responses to market developments. As a result, we have developed a new business plan to deliver revenue and margin growth in our recruitment businesses, despite the current adverse macroeconomic conditions and difficult staffing markets. We have accomplished a great deal in a short time but much remains to be done and investors should expect our restructuring process to continue throughout 2003. In order to deliver the new business plan successfully, the Board has decided to consolidate corporate and business functions into a unitary management structure with one operating management team under the direction of the Chief Operating Officer, Mark Adams. As part of this process, we are closing the head office in London and merging its functions with those of Blue Arrow in Luton. This is designed to eliminate a level of cost duplication and secure important cost savings. The immediate priority for management will be to deliver the newly defined strategy and business plan. In November 2002, we announced a major cost savings programme following the review of the Group's operations. We are pleased to announce that we have achieved our cost savings target of #6.5 million for 2003. This programme should result in annualised savings of more than #9.0 million. Action has been focused on central overheads and not the interface between clients and the business, at either central or branch level. Given the difficult state of the market we need to cut costs further and we are today initiating an exercise to deliver savings opportunities via a re-engineering of our business processes and policies to improve efficiency further. We will update shareholders on the results of this exercise at the time of our half-year results announcement. Our long-term goal is to earn net operating profit margins of 5%. Despite some success in growing Comensura, we have decided to restructure this business. While the Workforce Solutions businesses in the UK and US will be amalgamated with our staffing businesses in these markets, the Service Centre Solutions business in the UK will be reorganised to deliver value in the relationships which have been established to date with the minimum of additional investment. As a consequence of the review of operations, operating exceptional items of #89.2 million have been charged in the year. Of this charge, #2.9 million relates to the restructuring and reorganisation of the Group, #4.4 million to the restructuring and reorganisation of Blue Arrow, #0.7 million to the impairment of an investment, and the balance, #81.2 million, to the restructuring and reorganisation of Corestaff including goodwill impairment. The goodwill impairment relates to a write down, which was made at the half-year, of the goodwill attributable to the US business reflecting the continued weakness in the US market. Acquisition of BRS Taskforce Business from Exel We are undertaking a review of the longer term strategic positioning of the Group in order to maximise our potential as an industry leader in our chosen sectors. Part of our strategy will include the purchase of attractive add-on businesses and we are pleased to announce today the acquisition of the business and certain assets of BRS Taskforce from Exel. Simultaneously, we have entered into an agreement with Exel whereby we become a preferred supplier for the provision of driving, office and industrial staff. The acquisition expands our national coverage in a number of key locations and increases the revenues of our driving division, before taking into account any increased sales to Exel as a result of the new supply agreement. The Group will continue to explore acquisition opportunities that are earnings enhancing and serve to strengthen our business, either in a specific sector or in a geographical area. Financing In January 2003 we successfully raised #24.8 million though a Placing and Open Offer to finance the Company's working capital requirements and strengthen the Group's balance sheet. In February 2003, agreement was reached for the waiver of the right to bring non-tax warranty claims arising from the sale in December 2001 of Euristt S.A. to Groupe CRIT S.A. leading to a release of security against possible claims of #4.1 million. These funds were received in March 2003. Despite the difficult trading conditions we continue to operate comfortably within the headroom provided by our current bank facilities and in line with our plan. We are reviewing the Group's banking arrangements and facilities in order to better utilise the asset security offered by our balance sheet. Additionally, as our liability to workers' compensation claims decreases, the collateralisation requirements of our insurers will also decrease. Indeed there is a reasonable prospect of the release of funds from this process later in the year. Business Review The year 2002 proved extremely challenging for the recruitment industry as a whole with the continuation of the difficult trading conditions experienced in 2001 affecting almost every sector and geographic area in which we operate. Economies in both the UK and the US have remained weak, as has the demand for temporary staff. In developing our new business plan and strategy we have assumed that the current economic environment for the general staffing businesses will remain broadly unchanged for the remainder of the financial year ending 31 December 2003. We have continued to exit unprofitable business and sought to identify less cyclical aspects of the economy, such as healthcare, to protect our future business from external economic influences. We have directed our focus and activity into those business sectors or regions where we can become one of the top three players, utilising our influence and/or scale to deliver increased returns. To support this aim we have further developed the infrastructure of the organisation with better communication, teamwork and involvement to create a culture where everyone recognises, and is rewarded for, their contribution to the success of the business. New compensation and commission plans have been implemented in both staffing businesses which specifically address the achievement of the business plan. The investment that we continue to make in our people, processes and systems has created a competitive and customer orientated business. While we continue to address cost efficiency in a difficult market, we are intent on focusing on those sectors where we can become a market leader. This will leave us well placed to benefit from an upturn in the economy. United Kingdom Staffing Services During 2002 we saw a progressive improvement in trading performance in comparison to the prior year and we finished the year trading at levels only marginally below those for the corresponding period last year. In the event, turnover from our UK business fell 11.0% from #444.4 million to #395.4 million. Despite weakness in our market, gross margins were largely maintained at the levels achieved in 2001. Operating profit, before operating exceptional items, reduced to #2.1 million from #6.9 million, reflecting the lower levels of revenue. We controlled operating costs, reducing these by 11% year-on-year. In preparing our business plan, greater emphasis is being given to the development of specialist operations such as healthcare, driving and catering to balance the Group's general staffing businesses and reduce exposure to economic cycles. In the UK, our plan is aimed at both increasing sales and improving margins. This strategy is to be achieved through a number of initiatives. The tender response and sales teams have been reorganised to give more focus to profitable volume accounts. The remuneration arrangements for our consultants have been re-balanced and re-aligned to reward productivity and profitability. Through these measures we anticipate a reduction in staff turnover and a consequent improvement in productivity. The High Street operations experienced a 15% reduction in revenue in the year. This division has been restructured and strengthened with the appointment of Office and Industrial sector Directors and Regional Managers to provide more focus at branch level. We combined this with a revised training programme and increased focus on permanent recruitment in the Office sector. We integrated Austin Benn (our permanent management level recruitment division) into the High Street structure to simplify the management structure and reduce overhead. Finally, we have undertaken a detailed location analysis to facilitate our assessment of market potential in respect of branch development. Sales in our healthcare business grew by 7.0% in the year and this now represents almost 25% of our UK business. We aim to strengthen our market leading position in the locum doctor market via our Medacs and PRN businesses during the next 12 months. We continue to develop selected healthcare staffing sectors, including homecare and nursing, where we envisage potential for strong returns. We initiated market-leading research to quantify the impact of the Agency Worker Directive on UK businesses and temporary workers. We have established important relationships at senior levels of government and have increased the resource to build on this platform, positioning Blue Arrow as an innovative thought leader within the industry. US Staffing Services Turnover decreased from #301.7 million to #193.6 million, a reduction of 33.3% in local currency terms. This reduction reflects the termination of unprofitable and/or high-risk accounts as well as difficult ongoing conditions in the US employment market. Operating losses, before goodwill amortisation and operating exceptional items, totalled #11.1 million compared with a loss of #0.2 million in 2001. This loss includes a provision of #4.6 million in respect of workers' compensation claims, #3.0 million of which was provided at the half year. We continue to target lower risk business. Industrial business now represents approximately 25% of US revenues (a reduction of more than 50%) as we progressively shift to clerical and professional service lines. At the half-year we formed our Speciality Services Business ("SSB") which brought together our technology, accounting and finance skill offerings under central management. In August, the SSB launched a new service line to address increased client demand for high-end engineering skills. Through these strategies, we have been successful in securing a significant number of attractive new accounts, although the growth in new business has not been sufficient to replace reductions in demand from existing customers or accounts that we have deliberately terminated. During 2002 we reorganised our US business and reduced operating costs by 23% in local currency terms against 2001 levels. Cumulatively over the last two years, operating costs have reduced by 38% in local currency terms. Even while cutting costs we have built a stronger, more capable company. The management team has been strengthened, processes have been streamlined and the sales force has doubled in size. To support the increased sales force we have implemented a number of processes, tools and measurements to promote the team's success. All sales personnel have been trained on a new, comprehensive selling process designed to enhance relationships with new and existing clients. Further, we have introduced a proprietary sales system to support the new sales process and provide key performance metrics. We believe that the US business is now well positioned to take advantage of an upturn once the US employment market begins to recover. Our programme of proactively managing the risk associated with workers' compensation has continued to drive down the claims incidence rate on current payroll and the year end actuarial valuation indicated no further deterioration in the cost of settling outstanding 2002 claims. However, as indicated at the half-year, the actuarial valuation in respect of the cost of settling claims from prior periods has shown a continued deterioration. Accordingly, we recorded a further provision of #4.6 million during the year, #3.0 million of which was provided at the half-year, to prudently raise our contingency to the middle of the range of expected outcomes. Additional measures have been introduced during the year to audit and manage the settlement of prior year claims currently resulting in a 67% reduction in the number of outstanding workers' compensation claims compared to early 2001. Comensura - Human Capital Solutions Following a detailed review of the Comensura operations, the Board has taken the decision to rationalise and restructure the business to align activities more closely with the core recruitment businesses while retaining key members of the operational management team. The Workforce Solutions businesses within the UK and the US will now come under the management of Blue Arrow and Corestaff respectively. This will allow these businesses to focus on the development of sales pipelines and the technology platform which was developed and implemented during the year. The Workforce Solutions business secured a number of major contract wins in both the UK and the US during the year and is currently profitable in the US on a stand-alone basis. The Service Centre Solutions division has been unable to secure revenues on acceptable terms. In order to preserve resources and focus on the core businesses, the Group has decided to restructure activity in this division. We are currently looking at the options available to deliver value in the relationships that we have developed. Board A number of changes have been made to the Corporate Services Group Board including my appointment as Executive Chairman. This followed the departure of Michael Davies and Peter Owen as Chairman and Chief Executive respectively. These changes were followed by further changes at the start of 2003 with the appointment of Mark Adams as Chief Operating Officer, Desmond Doyle as Group Finance Director in succession to Tony Collyer whose resignation from the Board becomes effective today, and David Young as a non-executive Director. Today, we are announcing that Gilles Avenel has decided not to offer himself for re-election and will stand down at the AGM. I would like to thank Michael, Peter, Tony and Gilles personally for their respective contributions to the Group and wish them every success in the future. Current Trading and Prospects Although trading in the first eleven weeks of 2003 has continued to be difficult with sales 10.0% lower in the UK and 16.7% down in the US compared to the same period last year, the rates of decrease represent a significant improvement over those experienced at this time last year. The Board anticipates that trading in 2003 will continue to be below the levels of 2002. Against this backdrop the Board continues to take action to reduce its cost base and position the business to ensure that it becomes cash generative and profitable irrespective of trading conditions. We believe that the new Board, management team and unitary structure will provide the necessary focus to tackle the challenges ahead. Group Profit and Loss for the year ended 31 December 2002 2001 Notes # 000 # 000 Turnover Continuing operations 1 591,548 747,643 Discontinued operations - 410,585 --------- --------- 591,548 1,158,228 _________ _________ Cost of sales (487,972) (965,890) _________ _________ Gross profit 103,576 192,338 Administrative expenses (including goodwill (215,723) (194,368) amortisation & exceptional items) ________________________________________________________________________________ Operating (loss)/profit from operations before (16,722) 10,372 goodwill amortisation and exceptional items Goodwill amortisation (6,265) (10,691) Operating exceptional items 2 (89,160) (1,711) ________________________________________________________________________________ Operating loss: --------- --------- Continuing operations (112,147) (14,170) Discontinued operations - 12,140 --------- --------- _________ _________ Total operating loss (112,147) (2,030) Non-operating exceptional items: Continuing operations Loss on disposal of tangible fixed assets - (170) Profit on deemed disposal of interest in - 415 subsidiary Discontinued operations Loss on sale of discontinued operations - (7,452) _________ _________ Loss on ordinary activities before interest (112,147) (9,237) Net interest payable (4,839) (12,615) _________ _________ Loss on ordinary activities before taxation (116,986) (21,852) Tax on loss on ordinary activities 3 - (3,088) _________ _________ Loss on ordinary activities after taxation (116,986) (24,940) Equity minority interest 715 152 _________ _________ Loss for the financial year attributable to 5 (116,271) (24,788) members of the parent company _________ _________ Loss per share 4 (5.7)p (1.4)p - before goodwill amortisation and exceptional items 4 (31.9)p (6.8)p - basic and diluted _________ _________ The accompanying notes are an integral part of this Group profit and loss account. Group Statement of Total Recognised Gains and Losses for the year ended 31 December 2002 2001 # 000 # 000 Loss for the financial year attributable to members of (116,271) (24,788) the parent company Exchange differences net of tax of #nil (note 3) (9,938) 4,183 ________ ________ Total recognised gains and losses relating to the (126,209) (20,605) year ________ ________ The accompanying notes are an integral part of this Group statement of total recognised gains and losses Group Balance Sheet as at 31 December Notes 2002 2001 # 000 # 000 Fixed assets Intangible assets 57,323 149,250 Tangible assets 11,176 21,418 Investments 4,357 6,537 _________ _________ 72,856 177,205 _________ _________ Current assets Debtors 76,829 88,722 Investments 8,420 7,651 Cash at bank and in hand 12,556 21,265 _________ _________ 97,805 117,638 Creditors: amounts falling due within one (79,762) (76,372) year _________ _________ Net current assets 18,043 41,266 _________ _________ Total assets less current liabilities 90,899 218,471 Creditors: amounts falling due after more than one year Convertible debt (59,073) (58,705) Other creditors - (143) _________ _________ (59,073) (58,848) Provisions for liabilities and charges (15,106) (15,979) _________ _________ 16,720 143,644 Equity minority interest 1,132 417 _________ _________ Net assets 17,852 144,061 _________ _________ Capital and reserves Called up share capital 27,413 27,413 Share premium account 5 236,037 236,037 Profit and loss account 5 (245,598) (119,389) _________ _________ Equity shareholders' funds 6 17,852 144,061 _________ _________ Group Cash Flow Statement for the year ended 31 December 2002 2001 Notes # 000 # 000 Net cash inflow from operating activities 7 8,322 63,588 Returns on investments and servicing of (4,515) (12,099) finance Taxation 2,582 (4,462) Capital expenditure and financial investment (1,238) (5,111) Acquisitions and disposals - 47,980 _________ _________ Cash inflow before management of liquid 5,151 89,896 resources and financing Financing (13,351) (68,901) _________ _________ (Decrease)/increase in cash 8 (8,200) 20,995 _________ _________ The accompanying notes are an integral part of this Group cash flow statement. Notes to the Accounts for the year ended 31 December 1 Segmental information By origin, destination and business United United Total United Continental United Total Kingdom States 2002 Kingdom Europe States 2001 # 000 # 000 # 000 # 000 # 000 # 000 # 000 Turnover Staffing 395,404 193,589 588,993 444,369 - 301,680 746,049 services Human 141 2,414 2,555 - - 1,594 1,594 capital _______ _______ ________ _______ _______ _______ ________ Continuing 395,545 196,003 591,548 444,369 - 303,274 747,643 Discontinued - - - - 410,585 - 410,585 _______ _______ ________ _______ _______ _______ ________ 395,545 196,003 591,548 444,369 410,585 303,274 1,158,228 _______ _______ ________ _______ _______ _______ ________ Loss on ordinary activities before taxation Staffing 2,148 (11,089) (8,941) 6,909 - (205) 6,704 services Human (2,793) (1,288) (4,081) (3,789) - (1,110) (4,899) capital _______ _______ ________ _______ _______ _______ ________ Continuing (645) (12,377) (13,022) 3,120 - (1,315) 1,805 Discontinued - - - - 13,849 - 13,849 _______ _______ ________ _______ _______ _______ ________ (645) (12,377) (13,022) 3,120 13,849 (1,315) 15,654 Goodwill (59) (6,206) (6,265) (59) (1,709) (8,923) (10,691) amortisation Operating (5,869) (81,136) (87,005) (313) - (616) (929) exceptional items _______ _______ ________ _______ _______ _______ ________ (6,573) (99,719) (106,292) 2,748 12,140 (10,854) 4,034 _______ _______ _______ _______ _______ Corporate costs - UK (3,700) (5,282) Corporate operating (2,155) (782) exceptional items ________ ________ (112,147) (2,030) Non-operating - (7,207) exceptional items Net interest (4,839) (12,615) payable ________ ________ Loss on ordinary (116,986) (21,852) activities before taxation ________ ________ Net assets Staffing (3,453) 63,102 59,649 20,506 - 160,589 181,095 services Human 3,694 (859) 2,835 4,156 - 7,391 11,547 capital _______ _______ _______ _______ _______ _______ ________ Continuing 241 62,243 62,484 24,662 - 167,980 192,642 _______ _______ _______ _______ _______ Unallocated (45,764) (48,998) net liabilities _______ ________ Net assets before 16,720 143,644 minority interest _______ ________ 1 Segmental information (continued) Operations in New Zealand and Australia have been included under the UK as the results are not material. Goodwill amortisation of #6,265,000 (2001: #10,691,000) and operating exceptional items of #87,689,000 (2001: #929,000) relate to staffing services, further operating exceptional items amounting to #1,471,000 (2001: #nil) relate to human capital solutions. Unallocated net liabilities comprise net debt, including loan notes, and taxation. 2 Exceptional items 2002 2001 Recognised in arriving at operating loss #000 #000 Group restructuring and reorganisation 2,930 1,711 Blue Arrow restructuring and reorganisation 4,398 - Corestaff restructuring and reorganisation (including 81,136 - goodwill impairment) Investment in own shares - impairment 696 - ________ ________ 89,160 1,711 ________ ________ 2002 2001 #000 #000 Recognised below operating loss Loss on disposal of land and buildings - 64 Loss on disposal of motor cars and office equipment - 106 ________ ________ - 170 Profit on deemed disposal of interest in subsidiary - (415) Loss on sale of discontinued operations - 7,452 ________ ________ - 7,207 ________ ________ The effect on the taxation charge for the year of the exceptional items recognised below operating loss is disclosed in note 3. The costs shown under Group restructuring and reorganisations in both 2002 and 2001 relate to the compensation and associated costs incurred under the termination settlements of main Board Director's and senior management plus, in 2002, the costs associated with the closure of the corporate offices and relocation to Luton and the impairment of licences and investments held by the human capital business. Costs shown under both Blue Arrow and Corestaff restructuring and reorganisations include compensation and associated costs from branch and head office rationalisation programs, including the write off of assets made obsolete by the reorganisation. Also included, in the case of Corestaff, is the impairment to goodwill made in June 2002. The impairment to the investment in own shares results from the post balance sheet event where a placing and open offer at 5 pence per share has crystallised an existing temporary impairment in the market price of the Company's shares. Cash flows relating to operating exceptional items Net cash inflow from operating activities includes cash outflows of #1,019,000 (2001: #1,711,000) relating to the operating exceptional items. 3 Taxation a) Tax on loss on ordinary activities 2002 2001 # 000 # 000 Current tax UK Corporation tax on profits of the period - 1,778 Adjustments in respect of previous years - - Double taxation relief - (2,319) ________ ________ - (541) Foreign tax - 2,900 ________ ________ - 2,359 Deferred tax - origination and reversal of timing - 729 differences ________ ________ - 3,088 ________ ________ The tax effect in the profit and loss account relating to exceptional items recognised below operating loss is #nil (2001: #nil). UK current tax amounting to #nil (2001: #272,000) has been deducted in arriving at the exchange differences shown in the Group statement of total recognised gains and losses. b) Factors affecting current and future tax charges The estimated effective current tax rate of 0.0% (2001:(10.8%)) can be reconciled to the standard UK rate of 30.0% as follows: 2002 2001 % % Tax credit at UK standard rate 30.0 30.0 Differences in tax rates in other countries 7.0 3.6 Loss on disposal of Euristt S.A. 0.0 (10.2) Other permanent differences (0.8) (2.4) Timing differences: Depreciation, amortisation and impairment charges in (24.6) 37.0 excess of capital allowances Short term timing differences (0.6) (11.2) Losses arising in the year but not utilised (11.0) (57.6) _____ _____ Effective current tax rate 0.0 (10.8) _____ _____ The current and total effective tax rates in 2002 are lower than standard (i.e. the tax credit on the loss has been reduced) primarily because of the timing differences arising from the impairment of US goodwill. Also, the Group is unable to utilise the losses arising in the year other than by way of offset against future profits. Given the uncertainty over future utilisation of these timing differences and losses (e.g. profits may arise in entities that cannot offset the losses), no deferred tax assets have been recognised in respect of them. As and when these timing differences and losses are utilised, this will affect the current and total tax charges. The effective tax rate for 2001 was negative primarily as a result of the inability either to set losses in one country against profits in another or to recognise those losses as an asset. 4 Loss per share The calculations of earnings per share are based on the following loss and numbers of shares. Loss for the year Loss per share 2002 2001 2002 2001 # 000 # 000 Pence Pence Basic and diluted Unadjusted loss (116,271) (24,788) (31.9) (6.8) Non-operating exceptional items (net - 7,207 - 2.0 of tax) Operating exceptional items (net of 89,160 1,711 24.5 0.5 tax) Goodwill amortisation 6,265 10,691 1.7 2.9 ________ ________ _______ ________ Adjusted loss (20,846) (5,179) (5.7) (1.4) ________ ________ _______ ________ Basic loss per share is calculated using a weighted average number of shares of 364,173,921 (2001: 364,173,921) calculated after adjusting for the effects of the Placing and Open Offer (note 11) but excluding the shares owned by The Corporate Services Group Employee Share Trust. Additional earnings per share calculations have been presented in order to provide information on the underlying performance of the Group. There were no dilutive potential Ordinary Shares in 2002 (2001: nil). 5 Reserves Share Profit premium and loss account # 000 # 000 1 January 2002 236,037 (119,389) Foreign exchange movements - (9,938) Retained loss for the year - (116,271) ________ ________ 31 December 2002 236,037 (245,598) ________ ________ The cumulative amount of goodwill written off directly to reserves is #123,628,000 (2001: #123,628,000). 6 Reconciliation of movements in Group shareholders' funds 2002 2001 # 000 # 000 Loss for the financial year (116,271) (24,788) Goodwill on disposal previously written off - 33,957 Exchange difference (9,938) 4,183 ________ ________ Net (reduction in)/additions to shareholders' funds (126,209) 13,352 Opening shareholders' funds 144,061 130,709 ________ ________ Closing shareholders' funds 17,852 144,061 ________ ________ 7 Reconciliation of Operating Loss to Net Cash Inflow From Operating Activities 2002 2001 # 000 # 000 Operating loss (112,147) (2,030) Depreciation 5,020 8,201 Goodwill amortisation 6,265 10,691 Licence amortisation 417 25 Impairment of fixed asset investments 1,755 - Impairment of goodwill 75,000 - Impairment of licences 1,097 - Loss on sale of fixed assets and loss on assets made 6,179 - obsolete on reorganisation Decrease in debtors 8,332 62,926 Increase/(decrease) in creditors 16,451 (14,687) Decrease in provisions (47) (1,538) ________ ________ Net cash inflow from operating activities 8,322 63,588 ________ ________ 2002 2001 # 000 # 000 Net cash inflow from operating activities comprises: Continuing operating activities 8,322 36,199 Discontinued operating activities - 27,389 ________ ________ 8,322 63,588 ________ ________ 8 Reconciliation of Net Cash Flow to Movement in Net Debt 2002 2001 # 000 # 000 (Decrease)/increase in cash in the period (8,200) 20,995 Cash outflow from decrease in debt, lease financing and 13,351 68,901 revolving credit ________ ________ Change in net debt resulting from cash flows 5,151 89,896 Loans and revolving credit disposed of with subsidiary - 28,370 Other non-cash movements (92) 7,283 Foreign exchange movement 715 (1,122) ________ ________ Movement in net debt in the period 5,774 124,427 Net debt at 1 January (48,994) (173,421) ________ ________ Net debt at 31 December (43,220) (48,994) ________ ________ 9 Analysis of Net Debt 1 January Cash Foreign Other 31 December flow exchange non-cash 2002 2002 Changes # 000 # 000 # 000 # 000 # 000 Cash at bank and in 21,265 (8,406) (303) - 12,556 hand Overdrafts (1,853) 206 150 - (1,497) ________ ________ _______ ________ ________ 19,412 (8,200) (153) - 11,059 ________ ________ _______ ________ ________ Debt due after one (58,705) - - (368) (59,073) year Term Loan (4,000) 4,000 - - - Finance leases (979) 828 - - (151) Revolving credit (12,373) 8,523 375 - (3,475) ________ ________ _______ ________ ________ (76,057) 13,351 375 (368) (62,699) ________ ________ _______ ________ ________ Current asset 7,651 - 493 276 8,420 investments ________ ________ _______ ________ ________ (48,994) 5,151 715 (92) (43,220) ________ ________ _______ ________ ________ Major non-cash transactions Non-cash movements include the accrual of Convertible Note issue costs of #368,000 (2001: #368,000), and interest credited, but not remitted, of #276,000 (2001: #nil) on the Euro denominated money market deposits included in current asset investments. In 2001, the non cash item relates to #7,651,000 Euristt disposal proceeds received directly into a restricted investment account disclosed under current asset investments. 10 Contingent liabilities a) Serious Fraud Office Three former directors of the Company have been charged with fraudulent trading. This follows a Serious Fraud Office investigation into accounting irregularities during the accounting years 1997 and 1998. No current Director was a member of the Board at that time. The Board is of the opinion that there should be no material adverse impact on the Company's financial or trading position as a result of these investigations. b) Prior Year Accounting In the preparation of the 1998 results, as disclosed in the accounts for that year, the Group's accounting policies were found to have been applied aggressively and in some cases there had been material errors. Accordingly, in the 1998 accounts the prior year comparative figures shown for 1997 were restated. The events leading up to the restatement of the Company's 1997 results, and the restatement itself, may give rise to the potential for claims against the Company. Due to the inherent uncertainty involved with any such claim, it is not considered appropriate to put a monetary figure to this potential liability. c) Property guarantees The Group has provided guarantees to the landlords of two properties transferred to Training for Tomorrow (Holdings) Limited. The property guarantees have leases expiring between one and eleven years with a total annual lease expense of #188,000 (2001: #266,000). d) Warranties Pursuant to a share purchase agreement dated 16 November 2001 made between (1) the Company and Laybridge Limited (a wholly owned subsidiary of the Company) and (2) Groupe CRIT S.A., the Company gave a number of warranties to Groupe CRIT S.A. in respect of Euristt S.A.. Claims under the warranties must be notified prior to 30 January 2005 in respect of matters relating to taxation and social security and prior to 30 April 2003 in respect of all other claims and the Company's maximum aggregate liability under warranties is limited to 25% of the total consideration (such total being Euro125.0 million (#81.2 million), subject to certain adjustments). The Company is not liable in respect of any claim under the warranties relating to taxation and social security unless the aggregate of all such claims exceeds Euro3.0 million (#1.9 million) and in respect of such claims the total liability shall be limited to the amount in excess of Euro3.0 million. The Company is not liable in respect of any claim under the warranties relating to matters other than taxation and social security unless the aggregate amount of all such claims for which the Company would otherwise be liable exceeds Euro1.5 million (#1.0 million). As at 31 December 2002, the Company had received quantified claims under the warranties relating to taxation and social security and to matters other than taxation and social security totalling Euro1.0 million and Euro1.1 million (of which it disputes Euro0.6 million and Euro1.0 million) respectively. An amount of Euro12.5 million has been placed in an interest bearing investment trust as a guarantee against liability under warranty claims. Subsequent to the year end agreement was reached with Groupe CRIT S.A. regarding the non-tax warranties. The Euro6.25 million plus accrued interest less an agreed claim of Euro261,000 has been transferred to the Company's UK bank account. 11 Post Balance Sheet Event On 7 January 2003, the Company announced a Placing and Open Offer to shareholders in respect of 548,260,882 New Ordinary Shares of 1 pence each at 5 pence per share. At the same time, the Company announced the sub-division of Existing Ordinary Shares into one New Ordinary Share and one Deferred Share. Upon conversion of the Existing Ordinary Shares into New Ordinary Shares, the Deferred Shares were acquired by the Company for a nil consideration and cancelled. The proposals underlying the Placing and Open Offer were approved by Shareholders at an Extraordinary General Meeting on 30 January 2003 and the New Ordinary Shares were listed on the London Stock Exchange on 3 February 2003. The proceeds of the issue, net of expenses, amounted to #24.8 million. 12 Nature of Preliminary Statement of Results The financial information in the preliminary statement of results does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 (the "Act"). The statutory accounts for the year ended 31 December 2002 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The preliminary announcement was approved by the Board on 25 March 2003 and has been prepared on a basis consistent with the annual accounts for the year ended 31 December 2001, except in respect of deferred tax as detailed below. Financial Reporting Standard (FRS) 19 'Deferred Tax' has been adopted for the first time this year. The standard requires full provision, subject to certain exceptions, for deferred tax assets and liabilities arising from the timing differences between the recognition of gains and losses in the accounts and for tax purposes. Previously, SSAP 15 required recognition of deferred tax assets and liabilities to the extent that it was probable that timing differences would reverse in the foreseeable future. This change in accounting policy has not resulted in a requirement to restate previously reported figures due to there having been insufficient evidence at the time the 2001 accounts were prepared that suitable profits would arise in appropriate entities against which the future reversal of timing differences could be deducted. It has also not affected the amount of deferred tax recognised at 31 December 2002. FRS 19 has no impact on cash flows. The statutory accounts have been delivered to the Registrar of Companies in respect of the year ended 31 December 2001 and the Auditors of the Company made a report thereon under Section 235 of the Act. That report was an unqualified report and did not contain a statement under Section 237 (2) or (3) of the Act. 13 AGM Arrangements The Company will hold its Annual General Meeting on 21 May 2003. The business to be conducted at the meeting will include the re-appointment of Directors retiring by rotation, the renewal of authorisation to issue Ordinary Shares and disapply statutory pre-emption rights and the receipt of the accounts for the year ended 31 December 2002 and the reports of the Directors and Auditors. This information is provided by RNS The company news service from the London Stock Exchange END FR UVURRONROUUR
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