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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Harvey Nash Grp | LSE:HVN | London | Ordinary Share | GB0006573546 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 128.50 | 125.50 | 131.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMHVN
RNS Number : 3141M
Harvey Nash Group PLC
27 April 2018
27 April 2018
HARVEY NASH GROUP PLC
("Harvey Nash" or the "Group")
PRELIMINARY RESULTS
24% uplift in core profit before tax
Harvey Nash, the global technology recruitment and outsourcing group, announces its preliminary results for the year ended 31 January 2018, delivering a record performance.
Hot Features
Premium
Financial Results Constant
Currency
-------------------------- --------------------------------- ----------
2018 2017 Variance Variance
-------------------------- ---------- ---------- --------- ----------
Revenue GBP889.3m GBP784.3m 13.4% 9.2%
Gross profit GBP100.1m GBP97.9m 2.2% (0.6%)
Core(1) operating profit GBP11.4m GBP9.3m 22.6% 16.8%
Operating profit GBP6.0m GBP9.2m (34.4%) (40.5%)
Core(1) PBT GBP10.8m GBP8.6m 24.4% 18.2%
Profit before tax GBP5.4m GBP8.5m (37.1%) (43.7%)
Core(1) EPS 11.46p 8.86p 29.3%
EPS 4.74p 8.70p (45.5%)
Final dividend 2.652p 2.525p 5.0%
Net cash from operating
activities GBP0.6m GBP15.1m (96.3%)
Net cash at 31 January (GBP6.8m) GBP5.6m (221.4%)
--------------------------- ---------- ---------- --------- ----------
Albert Ellis, Chief Executive Officer of Harvey Nash, commented:
"The Group delivered an excellent performance in the year to January 2018, driven by our transformation programme which saw us sharpen our focus on the buoyant demand for technology skills, streamline our operations and complete two earnings enhancing acquisitions. This combination of organic and acquisitive growth, our renewed strategy and transformed cost base resulted in a 24% uplift in Core profit before tax and an increased core conversion margin from 9.5% to 11.7%.
I am particularly delighted by the outstanding performance of the UK business against a backdrop of Brexit related uncertainty and an overall decline in demand reported by many others in our sector. A successful acquisition in IT solutions, increased demand in the regions and strong growth in Financial Services in London has contributed to this excellent result.
We are encouraged by the strong trading momentum in the second half of the year to January 2018 which has continued into the current year. As a result, the Board is confident the Group will continue to make significant progress in the year ahead."
Financial Highlights
-- Revenue increased by 13.4% to a record level of GBP889.3m -- Core(1) operating profit increased by 22.6% to GBP11.4m -- Operating profit decreased 34.4% to GBP6.0m -- Core(1) PBT increased by 24.4% to GBP10.8m -- Core(1) EPS increased by 29.3% to 11.46p -- Final dividend increased by 5.0% to 2.652p
Operational Highlights
-- Transformation programme on track with expected annualised savings of GBP2.0m. The cost of this programme impacted statutory results
-- Listing successfully moved to AIM to support growth strategy -- Two acquisitions successfully integrated and already delivering synergies:
o PAT (July 2017), a Swedish leadership consulting business
o Crimson (September 2017), a UK IT solutions and recruitment business
-- In the UK & Ireland, robust growth and market share gains achieved despite the sector being materially affected by Brexit uncertainty
o Gross profit increased by 7.2% and operating profit by 7.6%
o Robust organic growth across Ireland, Scotland and offices outside London
o In London Financial Services division achieved revenue growth of 28%
o Multiple managed service contracts won by Recruitment Solutions division
o Contractor numbers up 23% year on year at 31 January 2018
-- In Europe strong organic growth was reported in Benelux and Nordics with benefits flowing from streamlining actions taken during the year in Central Europe
o Excellent organic growth from the Benelux with 16.9% increase in gross profit and 20.7% increase in operating profit
o Nordics gross profit up 5.3% with 47.2% increase in operating profit
o Strong year on year growth in contractor numbers (up 20% at 31 January 2018) underpinning profit growth and momentum at the start of the current year
o Outstanding organic growth in Finland, with gross profit up 35.4%
o Turnaround in Germany achieved in second half of the year
-- In Rest of the World, although gross profit fell 11.9% the benefits from the transformation programme resulted in operating profit of GBP0.9m (2017: GBP0.2m)
o Record revenues for Executive Search in the USA
o Operating profit in Vietnam increased by 60.3%
Enquiries:
Harvey Nash Albert Ellis (CEO) Tel: 020
and Mark Garratt 7333 2635
(CFO)
Hudson Sandler Michael Sandler Tel: 020
and Hattie O'Reilly 7796 4133
Panmure Gordon (Nominated Ben Thorne, Erik Tel: 020
Adviser & Broker) Anderson, Andrew 7886 2500
Potts
Key:
(1) Core results exclude non-recurring items and the impact of offices closed during the current financial year. The impact of these closed offices is described as 'non-core'. There were no office closures in the year ended 31 January 2017. For further details see notes 8 to the financial information.
Note: Alternative Performance Measures
The Group uses Alternative Performance Measures (APMs) as key performance indicators to assess underlying performance of the Group. All references to non-recurring items, core operations, or net debt throughout this report meet the definition of an APM. Descriptions of these APMs and a reconciliation to their equivalent statutory measures will be detailed on pages 89 to 90 in our Annual Report and Accounts.
CEO Review
I am delighted to report excellent results showing strong organic growth and an encouraging contribution from the two acquisitions made during the year. It is particularly pleasing that these results are ahead of expectations, which were raised four times over the course of the year.
Transformation Programme
During the year, management implemented a Transformation Programme taking action in the following key areas:
-- to focus on our key strength in the Technology and Digital Transformation markets -- to invest in our market-leading businesses in the UK, Europe and Vietnam
-- to streamline operations by closing underperforming offices, reviewing overheads and driving efficiencies
-- to move the Company's listing to AIM, a more appropriate environment for the Group's acquisition strategy
The early results of this transformation are very positive, with accelerated profit growth in the second half. This can be clearly seen in the proportion of Group operating profit in the second half of the year, which represented 60.7% of the total. The success of the transformation is also reflected in the conversion ratio (operating profit as a proportion of gross profit) improving, on a core basis to 12.6% for the second half of the year. Full year conversion was 10.7% on a statutory basis (2017: 9.5%).
Financial Performance
The year saw record revenue of GBP889.3m, up 13.4%, and gross profit of GBP100.1m, up by 2.2%. Core profit before tax and non-recurring items increased by 24.4% to GBP10.8m (2017: GBP8.6m). On a total basis, taking account of the impact of closed offices, profit before tax and non-recurring items was GBP10.1m. Removing these closed offices reduced the Group's core revenue and gross profit but lifted core operating profit.
Results from the UK & Ireland were excellent, with gross profit increasing by 7.2% and operating profit before non-recurring items and Group costs up 7.6%. The strategy to increase market share by growing the scale of the business through prudent headcount increases, an acquisition and broad geographic coverage has resulted in a strong set of results.
With the UK market materially affected by the uncertainty surrounding Brexit, the business focused on buoyant demand for technology skills in areas such as the Financial Services sector where a combination of compliance challenges and Brexit preparations are creating demand for technology skills and offices outside of London where demand was stronger.
Changes to the tax treatment of freelancers working in the Public Sector (IR35 legislation) resulted in some disruption in the first half of the year but demand and profits rebounded in the second half. While Executive Search reflected the cautious stance adopted by business with gross profit down by 10.5%, permanent placements in IT recruitment was up 13.8%. Multiple contract wins in the Recruitment Solutions division during the year lifted organic growth and the total number of contractors at the year-end was up 23.0% on the prior year. Gross profit for outsourced IT solutions and software development increased by 10.4%.
In Europe, our market leading businesses in Belgium, Netherlands, Sweden and Finland delivered strong organic growth. Contractor growth of 20% increased gross profit in the Benelux by 16.9%. Growth in Executive Search including the acquisition of PAT in Sweden increased gross profit in the Nordics by 5.3%.
Actions were taken to restructure our businesses in Norway, Switzerland and Germany, by reducing headcount and property costs. Whilst this was reflected in the 15.8% decline in Central Europe gross profit, operating profit for the second half of the year was GBP0.4m, more than double that of the first half.
In the Rest of the World, an operating profit of GBP0.9m was achieved compared to GBP0.2m in the prior year thanks to record results in US Executive Search and strong profit growth in Vietnam. A key part of the Transformation Programme included a number of office closures, particularly in Asia. Excluding the results of these locations, core operating profit in the Rest of the World was GBP1.4m.
Dividend
The Board is recommending a 5.0% increase in the final dividend to 2.652 pence per share (2017: 2.525p) in line with the Group's progressive and sustainable dividend policy. This gives a total dividend for the year of 4.30 pence per share (2017: 4.09p). Subject to approval at the Annual General Meeting on 28 June 2018, the final dividend will be paid on 6 July 2018 to shareholders on the register on 15 June 2018.
Technology
The Group generates approximately eighty percent of its gross profit in the technology and digital markets.
The Group's own 2017 global survey of IT leaders identified that four out of ten companies are increasing their investment in digital strategies and two thirds of CIOs are experiencing skills shortages, driving up demand. Latest research suggests that many jobs in administration, production, retail, logistics and sales will be replaced in the future by robotics or intelligent software automation.
Our global reach of Technology Recruitment and Outsourcing specialisation differentiates Harvey Nash. We are well placed to benefit from the increasing investment in digital and the automation and artificial intelligence and big data analytics trends identified in recent studies.
Strategy
We have a clear strategic vision. We aim to continue to be one of the market leading technology recruitment, executive search and outsourcing brands in the UK, Northern Europe and Vietnam with support from challenger brands in Australia and the USA. Investment is primarily focused in locations where we have scale, a well-recognised brand and opportunities for growth.
We offer a one-stop-shop approach to technology and digital recruitment. Our unique portfolio of services leverages the needs of our clients, from the very top of an organisation down to the operational level, from CIO to developer and offshore project manager. This model is resilient, supporting the Group throughout the business cycle.
Our growth model is founded on two core activities, acquisitions and organic growth.
In July 2017 the Group moved its stock market quotation from the Main Market to the AIM market of the London Stock Exchange. One of the purposes of this was to facilitate future acquisitions to complement organic growth in our existing businesses. Critically, owners of businesses which would fit with the Group have been attracted to our strategic platform and management culture. We have been successful over the years in attracting, integrating and retaining entrepreneurs to continue working within the Group long after their earnout is finished.
Attracting the very best employees is critical to driving growth. We invest in our people, fostering an inclusive and collegiate culture. We were the first recruitment business to be awarded the Ernst and Young National Equalities Standard, the accepted standard for inclusiveness in business across the UK and increasingly the world. Another attraction for our employees is our corporate purpose.
Board changes
Mark Garratt joined the Board in April 2017. In the course of year, he has assumed additional responsibilities to those for which he was recruited particularly to include much of the Group's IT infrastructure, including cyber security. The Board has decided formally to broaden the scope of Mark's responsibilities, effective 1 May 2018 and to change his title to Chief Financial Officer.
Outlook and Current Trading
We are encouraged by the strong trading momentum in the second half of the year to January 2018 which has continued into the current year. As a result, the Board is confident the Group will continue to make significant progress in the year ahead.
Albert Ellis
Chief Executive Officer
Group Finance Director's Review
Overview
I am delighted that in my first year as Group Finance Director the Group has performed so strongly whilst going through significant changes, including acquisitions and the transformation programme.
Record revenue increased by 13.4% to GBP889.3m (2017: GBP784.3m) and gross profit increased by 2.2% to GBP100.1m (2017: GBP97.9m). On a constant currency basis, revenue grew by 9.2% while gross profit decreased by 0.6%.
Closing fee earner headcount increased by 1.0% on the previous year to 619. Investment in UK and Benelux and acquisitions was offset by reductions in Germany and USA. Acquisitions accounted for 25 additional fee earners in the UK and Sweden.
The net finance charge of GBP0.7m was unchanged on the prior year as average net borrowings remained similar. The cost of acquisitions and the transformation programme were offset by strong trading cashflows.
Profit before tax and non-recurring items and closed offices increased by 24.4% to GBP10.8m (2017: GBP8.6m) whereas the statutory profit after tax fell by 41.6% to GBP3.5m (2017: GBP6.0m) once account is taken of the transformation programme and other non-recurring items.
The Group had a net borrowings position at 31 January 2018 of GBP6.8m (2017: net cash of GBP5.6m) which relates to the working capital required to fund higher levels of trading, and has no long-term debt. The Group is managed by geography in the main and in the cases of the UK & Ireland and the Benelux, the overall results are very similar to core performance whereas Nordics, Central Europe and the Rest of the World was impacted more by the transformation programme.
United Kingdom and Ireland
The UK and Irish businesses performed well, growing revenue and gross profit while the market declined.
2018 2018 2017 Variance
Core Total Restated* Core Total
GBPm GBPm GBPm % %
Gross profit 39.4 39.7 37.0 6.5% 7.2%
Operating profit 6.8 6.7 6.2 9.0% 7.6%
Group and central
service costs (5.7) (4.8) 18.1%
Total Operating
Profit 1.0 1.4 (28.2%)
* In the current year, Group and central service costs are presented separately to show underlying trading performance in each segment. The 2017 results have been restated on the same basis.
The UK & Ireland represented 39.7% of the Group's gross profit in 2018 (2017: 37.8%). The business employs 280 fee earners in ten offices and is recognised as a leading market specialist in executive and specialist technology talent provision. On a core basis, the UK & Ireland represented 40.1% (2017: 38.7%). Executive Search and interim revenue accounted for 10% of gross profit, Technology Recruitment 75% and Outsourcing 15% (2017: 12%, 74% and 14% respectively).
Gross profit of GBP39.7m was up 7.2% year-on-year, up 6.6% on a constant currency basis. Core operating profit was GBP6.8m, up 9.0% on the prior year (8.2% on a constant currency basis). Taking account of the closed office in Cork, total operating profit grew 7.6% to GBP6.7m.
Demand was more robust for IT recruitment outside London, with Scotland, Ireland, the Midlands and Northern England reporting strong growth. Total gross profit from the UK businesses outside London grew by 18.2% albeit GBP1.7m related to the Crimson acquisition. London was mixed with strong growth with financial services clients held back by reduced demand for executive and interim roles.
Group and central service costs include the Group marketing, IT and finance functions as well as listing and Board costs. The Group transformation yielded cost savings of GBP0.3m in the second half of the year, offset by GBP1.1m of variable pay accrued on the improved results (2017: GBPnil).
Mainland Europe
Mainland Europe accounts for 41.2% of the Group's total gross profit (2017: 39.9%). The Group employs 230 fee earners in 17 offices in nine countries and benefits from leading market positions.
2018 2018 2017 Variance
Core Total Restated* Core Total
GBPm GBPm GBPm % %
Benelux 19.1 19.1 16.3 16.9% 16.9%
Central
Europe 7.2 7.4 8.8 (17.9%) (15.8%)
Nordics 14.7 14.7 14.0 5.3% 5.3%
Gross profit 41.0 41.2 39.1 4.9% 5.4%
Benelux 7.2 7.2 6.0 20.7% 20.7%
Central
Europe 0.6 0.5 0.9 (33.4%) (42.0%)
Nordics 1.2 1.2 0.8 47.2% 47.2%
Operating
profit 9.0 8.9 7.7 16.8% 15.7%
* In the current year, central costs have been separated out to show underlying trading performance in each segment. The 2017 results have been restated on the same basis.
Revenue in Mainland Europe increased by 14.0% to GBP529.3m (2017: GBP464.4m) and gross profit increased by 5.4% to GBP41.2m (2017: GBP39.1m). On a constant currency basis, growth was 7.8% and 0.3% respectively. Operating profit increased by 15.7% to GBP8.9m (2017: GBP7.7m), up 9.8% on a constant currency basis. Across the region, Technology Recruitment placements accounted for 64.2% of gross profit and leadership services placements accounted for 35.8%.
Benelux
Results from the Netherlands and Belgium were excellent, with gross profit increasing by 16.9% to GBP19.1m (10.5% on a constant currency basis). Operating profit increased to GBP7.2m (2017: GBP6.0m) up 20.7% (14.1% on a constant currency basis). This was supported by investment in fee earner headcount, which rose from 82 to 88 over the year.
The Netherlands performed very well year on year, growing gross profit by 16.7% (10.3% on a constant currency basis) and operating profit by 15.4% (up 9.3% on a constant currency basis) driven by growing contractor numbers. In addition, an accounting estimate for aged accrued liabilities in the Netherlands was re-assessed following a detailed review resulting in a non-recurring credit to the income statement. In Belgium, the Group continued to make very good progress, with gross profit increasing by 17.0% (10.5% on a constant currency basis) with both the Harvey Nash and Talent IT brands showing double digit growth in both gross profit and operating profit.
Nordics
The Nordics region comprising Sweden, Norway, Finland and Denmark also reported encouraging growth. Revenue and gross profit increased by 4.5% and 5.3% respectively (0.2% and 1.1% on a constant currency basis). Operating profit grew by 47.2% to GBP1.2m (41.6% at constant currency) mainly as a result of transformation actions taken during the year to reduce the cost base in Oslo and Copenhagen. Sweden accounts for 84.7% of gross profit, reported strong financial results, supported by the acquisition of PAT in July 2017. Operating profit grew by 65.7% (62.0% constant currency) and 26.0% excluding the impact of PAT. Norway gross profit was 11.5% lower (16.1% constant currency). Over the year, the management team was strengthened, the office was relocated and performance is improving. Record gross profit was achieved in Finland with an increase of 35.4% (28.8% constant currency) due to growth in Executive Search and Board Services. This resulted in an operating profit compared to a small loss in the prior year.
Central Europe
The Group's Central Europe region comprises Germany, Switzerland and Poland. Both our German and Swiss operations have been through a period of restructure and transformation including reductions in management, fee earners and property overheads. As a result of this restructure, fee earners were reduced by 28% in Germany and 29% in Switzerland. As a result, overall revenue fell in this region by 13.6% (17.9% on a constant currency basis), while gross profit fell by 15.8% (20.0% on a constant currency basis) to GBP7.4m. Although operating profit fell for the year by 42.0% (43.7% on a constant currency basis) the second half reflected the progress made from the actions taken. In Germany gross profit was 12.8% lower (17.6% on a constant currency basis). In Switzerland, gross profit was 26.1% lower (28.4% on a constant currency basis). Poland saw strong growth, with gross profit increasing by 23.6% (14.0% on a constant currency basis). The in-country Technology Recruitment business has achieved strong growth and provides nearshore recruiting support for other European IT recruitment businesses.
Rest of World
Results from the rest of the world were mixed, with strong performances from the remaining offices in Asia Pacific following the effects of the transformation programme.
2018 2018 2017 Variance
Core Total Restated* Core Total
GBPm GBPm GBPm % %
USA 13.8 13.9 16.6 (16.7%) (16.4%)
Asia Pacific 3.8 5.3 5.2 (26.9%) 2.7%
Gross profit 17.6 19.2 21.8 (19.1%) (11.9%)
USA 0.4 0.1 0.7 (51.1%) (80.8%)
Asia Pacific 1.0 0.7 (0.5) (295.4%) (239.5%)
Operating
profit 1.4 0.8 0.2 487.0% 268.9%
* In the current year, central costs have been separated out to show underlying trading performance in each segment. The 2017 results have been restated on the same basis.
USA
The USA represented 13.9% of the Group's gross profit in 2018 (2017: 17.0%). The USA is the largest market for technology recruitment in the world, and though fragmented, it offers strong growth potential. The Group has five offices in the USA, with 65 fee earners and 45 offshore recruiters based in Vietnam supporting well-known multinational clients. During the year the loss-making office in Denver was closed. The US Technology Recruitment business has faced acute skills shortages particularly on the West Coast, which reduced conversion rates from vacancies into placements reducing contractor numbers and the level of permanent placements compared to the prior year. Gross profit declined by 16.4% to GBP13.9m, (down 18.9% on a constant currency basis). In the current year, 24% of gross profit related to Executive Search, with 54% Technology Recruitment and 22% Outsourcing (2017: 17%, 59% and 24% respectively). Excluding the impact of the Denver office closure, core operating profit fell to GBP0.4m, down 51.1% (59.6% constant currency). On a total basis, operating profit was GBP0.1m (2017: GBP0.7m).
Asia Pacific
Management have taken a number of actions in Asia to improve performance in FY19, including the closure of the Hong Kong office and the Executive Search businesses in Japan and Singapore. The focus in the region is on IT outsourcing from Vietnam and the Australian recruitment and offshore business. Led by a strong performance from Vietnam, Asia Pacific gross profit increased by 2.7% to GBP5.3m (2017: GBP5.2m), with an operating profit of GBP0.7m compared to a loss of GBP0.5m in the prior year. On a core basis, stripping out these closed offices operating profit increased to GBP1.0m (2017: loss of GBP0.5m).
Service Line
2018 2018 2017 Variance
Core Total Restated* Core Total
GBPm GBPm GBPm % %
Executive
Search 21.9 23.5 23.7 (7.4%) (1.0%)
Technology
Recruitment 64.1 64.5 63.1 1.5% 2.3%
Outsourcing 12.1 12.1 11.1 8.8% 8.8%
Total Gross
Profit 98.1 100.1 97.9 0.2% 2.2%
Executive
Search 2.3 2.0 0.8 177.0% 143.0%
Technology
Recruitment 12.9 12.5 11.4 12.7% 9.3%
Outsourcing 1.9 1.9 1.9 2.3% 2.3%
Total Operating
Profit 17.1 16.4 14.1 21.1% 16.3%
Central Costs (5.7) (5.7) (4.8) 18.1% 18.1%
Total Operating
Profit 11.4 10.8 9.3 22.6% 15.4%
* In the current year, central costs have been separated out to show underlying trading performance in each segment. The 2017 results have been restated on the same basis.
Operating profit in all service lines grew, with IT Solutions and Outsourcing showing the strongest growth in gross profit with operating profit improved in the UK and Asia offset weaker lower results from the USA. On a total basis, growth was similar in both the Technology Recruitment and Outsourcing service lines. Executive Search's growth was strong in the USA, stable in the UK & Europe and reduced in Asia due to headcount reductions in offices subject to closure. Excluding the impact of closed offices, Group operating profit before non-recurring items increased by 22.6% to GBP11.4m (2017: GBP9.3m). On a statutory basis, Group operating profit before non-recurring items was GBP10.8m, an increase of 15.4% (9.9% on a constant currency basis). Central costs are discussed above in the UK & Ireland segment.
Taxation
The overall effective rate of tax is a function of the mix of profits between the various countries in which the Group operates, with higher rates in the USA, Belgium and Germany, offset by lower rates elsewhere.
The tax charge for core operations for the year before non-recurring items was GBP2.4m (2017: GBP2.2m) giving an effective rate of tax on core operations of 22.6% (2017: 25.5%). The full charge for the year was GBP1.9m (2017: GBP2.2m) yielding an effective rate of tax of 34.9% (2017: 25.9%) this is higher due to the impact of office closures and the accrual release in the Netherlands which have a higher tax rate than the Group average.
The deferred tax asset of GBP3.8m (2017: GBP2.8m) relates primarily to accrued Group interest charges payable by the USA business and tax losses.
Earnings per Share
Basic earnings per share decreased to 4.80p (2017: 8.70p). EPS for core operations, before non-recurring items increased to GBP11.46p (2017: 8.86p).
Balance Sheet
Total net assets at the year-end were GBP60.8m (2017: GBP62.0m). Property, plant and equipment decreased by GBP0.6m to GBP2.6m (2017: GBP3.2m) with depreciation exceeding new capital spending. Intangible assets increased by GBP7.3m to GBP62.4m due to the two acquisitions. Offsetting this was the GBP0.8m impairment in Japan. An increase in net trade receivables to GBP120.9m (2017: GBP102.9m) was due to higher levels of trading in the quarter preceding the year end. Debtor days were 39.5 days at 31 January 2018 compared to (2017: 38.0 days. Accrued income increased by GBP6.0m, a result of timing of the weekly invoicing cycle. Trade payables increased by GBP10.1m to GBP78.5m in line with higher trading and timings of contractor payrolls. Accruals increased to GBP56.2m (2017: GBP52.5m) due mainly to the timing of contractor payments in Benelux. Deferred consideration increased to GBP4.1m (2017: GBP0.2m), as a result of the two acquisitions during the year.
Cash Flow
Net cash generated from operating activities was GBP0.5m (2016: GBP15.1m). The decrease is due to increased working capital as a result of the higher levels of trading, the costs of transformation (GBP4.5m) and acquisitions (GBP8.0m). The overall net debt position at 31 January 2018 was GBP6.8m (2017: net cash of GBP5.6m). Other significant cash outflows in the year included dividend payments of GBP3.0m (2017: GBP2.8m) and tax payments of GBP3.3m (2017: GBP2.9m). Capital expenditure was lower at GBP0.8m (2017: GBP1.0m).
Banking Facilities
The Group maintains adequate headroom in its banking facilities. During the year its invoice discounting facilities were increased from GBP60.0m to GBP70.0m. The facilities are available in the UK & Ireland, Benelux and the USA. A facility of GBP2.75m with Close Finance was added to the Group's existing facilities through the UK acquisition of Crimson.
Mark Garratt
Group Finance Director
Consolidated Income Statement
for the year ended 31 January 2018
2018 2018 2018 2017
Notes Core(*) Non-core(*) Total GBP'000
GBP'000 GBP'000 GBP'000
============================= ======== ========== ============= ========== ==========
Continuing operations
Revenue 885,651 3,608 889,259 784,328
Cost of sales (787,585) (1,600) (789,185) (686,449)
----------------------------- -------- ---------- ------------- ---------- ----------
Gross profit 4 98,066 2,008 100,074 97,879
Administrative expenses (86,637) (2,685) (89,322) (88,559)
============================= ======== ========== ============= ========== ==========
Operating profit before
non-recurring items 11,429 (677) 10,752 9,320
Non-recurring items 8 (2,958) (1,762) (4,720) (119)
============================= ======== ========== ============= ========== ==========
Operating profit 4 8,471 (2,439) 6,032 9,201
Finance costs (671) - (671) (676)
============================= ======== ========== ============= ========== ==========
Profit before tax 7,800 (2,439) 5,361 8,525
Income tax expense 5 (1,992) 123 (1,869) (2,206)
============================= ======== ========== ============= ========== ==========
Profit for the year
from continuing operations 5,808 (2,316) 3,492 6,319
============================= ======== ========== ============= ========== ==========
Discontinued operations
Loss from discontinued
operations - - - (340)
Profit for the year attributable
to owners of the Company 5,808 (2,316) 3,492 5,979
======================================= ========== ============= ========== ==========
Earnings per share
from continuing operations
- Basic 7 7.99p 4.80p 8.70p
- Diluted 7 7.81p 4.70p 8.70p
(*) Core results exclude the impact of offices closed during the current financial year. These excluded items are described as 'non-core'. There were no office closures in the year ended 31 January 2017. See note 8 for further details on Alternative Performance Measures.
Consolidated Statement of Comprehensive Income
for the year ended 31 January 2018
2018 2017
GBP'000 GBP'000
------------------------------------------ --------- ---------
Profit for the year 3,492 5,979
------------------------------------------- --------- ---------
Foreign currency translation differences
(1) (2,095) 4,669
Disposal of net investment (1) (5) -
------------------------------------------ --------- ---------
Other comprehensive (loss) / income
for the year (2,100) 4,669
------------------------------------------- --------- ---------
Total comprehensive income for the
year attributable to owners of Company 1,392 10,648
------------------------------------------- --------- ---------
(1) These differences may be recycled into the Consolidated Income Statement if specific conditions are met.
Consolidated Balance Sheet
as at 31 January 2018
Notes 2018 2017
GBP'000 GBP'000
-------------------------------- ------ ---------- ----------
ASSETS
Non-current assets
Intangible assets 62,381 55,074
Property, plant and equipment 2,623 3,201
Investments 234 264
Deferred tax assets 5 1,483 2,167
Loans receivable 2,015 1,976
-------------------------------- ------ ---------- ----------
68,736 62,682
Current assets
Trade and other receivables 152,664 128,926
Deferred tax assets 5 2,270 794
Cash and cash equivalents 10,487 20,250
165,421 149,970
Total assets 234,157 212,652
-------------------------------- ------ ---------- ----------
LIABILITIES
Current liabilities
Trade and other payables (148,294) (133,186)
Current income tax liabilities (1,575) (2,307)
Borrowings (17,261) (14,694)
Deferred consideration (1,000) (171)
Provisions (1,991) (96)
-------------------------------- ------ ---------- ----------
(170,121) (150,454)
-------------------------------- ------ ---------- ----------
Net current liabilities (4,700) (484)
-------------------------------- ------ ---------- ----------
Non-current liabilities
Deferred consideration (3,060) -
Long-term provisions (321) -
Deferred tax liabilities 5 - (159)
(3,381) (159)
Total liabilities (173,502) (150,613)
-------------------------------- ------ ---------- ----------
Net assets 60,655 62,039
-------------------------------- ------ ---------- ----------
EQUITY
Ordinary shares 3,673 3,673
Share premium 8,425 8,425
Fair value and other reserves 15,079 15,079
Own shares held (811) (910)
Cumulative translation reserve 4,540 6,640
Retained earnings 29,749 29,132
-------------------------------- ------ ---------- ----------
Total equity 60,655 62,039
-------------------------------- ------ ---------- ----------
Consolidated Statement of Changes in Equity
for the year ended 31 January 2018
Share Share Fair Own Cumulative Retained Total
capital premium value shares translation earnings
and held reserve
other
reserves
--------------------- -------- -------- --------- ------- ------------ --------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- --------- ------- ------------ --------- -------
1 February 2016 3,673 8,425 15,079 (1,032) 1,971 26,002 54,118
Profit for the
year - - - - - 5,979 5,979
Currency translation
adjustments - - - - 4,669 - 4,669
--------------------- -------- -------- --------- ------- ------------ --------- -------
Total comprehensive
income for the
year - - - - 4,669 5,979 10,648
Movement in own
shares - - - 122 - - 122
Dividends paid - - - - - (2,849) (2,849)
--------------------- -------- -------- --------- ------- ------------ --------- -------
31 January 2017 3,673 8,425 15,079 (910) 6,640 29,132 62,039
--------------------- -------- -------- --------- ------- ------------ --------- -------
1 February 2017 3,673 8,425 15,079 (910) 6,640 29,132 62,039
--------------------- ----- ----- ------ ----- ------- ------- -------
Profit for the
year - - - - - 3,492 3,492
Currency translation
adjustments - - - - (2,100) - (2,100)
--------------------- ----- ----- ------ ----- ------- ------- -------
Total comprehensive
income for the
year - - - - (2,100) 3,492 1,392
Employee share
option and bonus
plan - - - - - 187 187
Movement in own
shares - - - 99 - (33) 66
Dividends paid
(note 6) - - - - - (3,029) (3,029)
--------------------- ----- ----- ------ ----- ------- ------- ------- 31 January 2018 3,673 8,425 15,079 (811) 4,540 29,749 60,655 --------------------- ----- ----- ------ ----- ------- ------- -------
Consolidated Cash Flow Statement
for the year ended 31 January 2018
Notes 2018 2017
GBP'000 GBP'000
------------------------------------------------------------- ------ --------- ---------
Profit before tax 5,361 8,525
Non-recurring items 4,720 119
------------------------------------------------------------- ------ --------- ---------
Profit before tax and non-recurring
items 10,081 8,644
Adjustments for:
* depreciation 1,341 1,284
* amortisation 69 70
* loss on disposal of property, plant and equipment 7 101
* finance costs 671 676
253 -
* share based employee settlement and share option
charge
Operating cash flows before
changes in working capital 12,422 10,775
Changes in working capital:
* decrease / (increase) in trade and other receivables (22,516) 9,633
* increase / (decrease) in trade and other payables 15,994 (2,239)
* increase / (decrease) in provisions 2,191 (35)
Cash flows from operating activities 8,091 18,134
Non-recurring items (4,453) (119)
Income tax paid (3,098) (2,935)
------------------------------------------------------------- ------ --------- ---------
Net cash generated from operating
activities 540 15,080
------------------------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Purchases of property, plant
and equipment (834) (1,049)
Capitalised software development (71) -
costs
Disposal of subsidiary - (6,166)
Cash acquired with acquisitions 75 -
Purchase of subsidiary undertakings (7,757) -
Settlement of deferred consideration (250) (439)
Net cash used in investing
activities (8,837) (7,654)
------------------------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Proceeds from employee share
option exercise - 60
Dividends paid to group shareholders 6 (3,029) (2,849)
Interest paid (671) (676)
Increase / (decrease) in borrowings 2,260 (4,104)
------------------------------------------------------------- ------ --------- ---------
Net cash used in financing
activities (1,440) (7,569)
------------------------------------------------------------- ------ --------- ---------
Decrease in cash and cash equivalents (9,737) (143)
Cash and cash equivalents at
the beginning of the year 20,250 18,506
Exchange movements on cash
and cash equivalents (26) 1,887
------------------------------------------------------------- ------ --------- ---------
Cash and cash equivalents at
the end of the year 10,487 20,250
------------------------------------------------------------- ------ --------- ---------
Notes to the Preliminary Results
1. Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not constitute statutory accounts for the years ended 31 January 2018 or 2017, for the purpose of the Companies Act 2006, but is derived from those accounts.
The statutory accounts for 2017 have been filed with the Registrar of Companies. The statutory accounts for 2018 will be filed with the Registrar of Companies following the Group's next Annual General Meeting. The Group's auditors have reported on the 2018 and 2017 statutory accounts; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.
2. Basis of preparation
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended January 2017 with the exception of the following new accounting standards and amendments which were mandatory for accounting periods beginning on or after 1 February 2017, none of which had any material impact on the Group's results or financial position:
In the current year, the following new and revised Standards and Interpretations have been adopted:
-- Amendments to IAS 7 'Statement of Cash Flows' -- Amendments to IAS 12 'Income Taxes' -- Amendments to IFRS 2 'Share-Based Payments' -- Annual Improvements to IFRSs 2014-2016 Cycle
The main factors that could affect the business and the financial results are described in the Principal Risks section of the 31 January 2017 Annual Report.
3. Going concern
The Group's business activities for the year are described in the CEO Review and FD Review and the financial statements within this preliminary announcement. The Directors have reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. As a result they continue to adopt the going concern basis of accounting in the preparation of the financial statements.
The Directors have assessed the Group's viability over a longer period than the twelve months required by the 'Going Concern' statement in accordance with the 2014 UK Corporate Governance Code. The Directors have assessed the Group's viability over the three year period ending 31 January 2021 which aligns with the Group's planning process. This period is considered an appropriate balance between the need to provide a longer term outlook, and the need for a reasonable degree of confidence in that outlook in a fast-moving industry.
4. Segment information
IFRS 8 "Operating Segments" requires disclosure of information about the Group's operating segments. It requires a management approach under which segment information is presented on a similar basis to that used for internal reporting purposes. The chief operating decision maker in the business has been identified as the Group Board. Services provided by each reportable segment are Executive Search, Technology Recruitment and Outsourcing.
The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 2.
The Group Board analyses segmental information as follows:
Gross profit
2018 2018 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Geographical Core Non-core Total Restated*
United Kingdom
& Ireland 39,442 252 39,694 37,024
Mainland
Europe 41,019 179 41,198 39,086
Benelux 19,062 - 19,062 16,306
Nordics 14,743 - 14,743 13,996
Central Europe 7,214 179 7,393 8,784
---------------------------- -------- -------- -------- ---------
Rest of
World 17,605 1,577 19,182 21,769
United States 13,829 52 13,881 16,607
Asia Pacific 3,776 1,525 5,301 5,162
---------------------------- -------- -------- -------- ---------
Total Gross
profit 98,066 2,008 100,074 97,879
Service Line
Executive Search 21,947 1,525 23,472 23,700
Technology Recruitment 64,066 483 64,549 63,096
Outsourcing 12,053 - 12,053 11,083
----------------------------- -------- -------- -------- ---------
Total Gross
profit 98,066 2,008 100,074 97,879
Operating profit
2018 2018 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Geographical Core Non-core Total Restated*
United Kingdom &
Ireland 6,787 (88) 6,699 6,227
Mainland
Europe 8,958 (81) 8,877 7,670
Benelux 7,162 - 7,162 5,935
Nordics 1,169 - 1,169 794
Central Europe 627 (81) 546 941
----------------------------------- -------- -------- -------- ---------
Rest of
World 1,365 (508) 857 233
United States 364 (221) 143 745
Asia Pacific 1,001 (287) 714 (512)
----------------------------------- -------- -------- -------- ---------
Total 17,110 (677) 16,433 14,130
Service Line
Executive Search 2,332 (287) 2,045 842
Technology Recruitment 12,865 (390) 12,475 11,417
Outsourcing 1,913 - 1,913 1,871
------------------------------------- -------- -------- -------- ---------
Total 17,110 (677) 16,433 14,130
Group and central
service costs (5,680) - (5,680) (4,810)
Total Operating Profit before
non-recurring items 11,429 (677) 10,752 9,320
Non-recurring items
(see note 9) (4,720) (119)
---------------------------------------- -------- -------- -------- ---------
Total Operating Profit 6,032 9,201
Finance costs (671) (676)
---------------------------------------- -------- -------- -------- ---------
Profit before tax 5,361 8,524
---------------------------------------- -------- -------- -------- ---------
*In the current year, Group and central service costs are separately disclosed to reflect the management information provided to the chief operating decision maker. The 2017 results have been restated on the same basis.
There were no discontinued operations during the year.
5. Tax
2018 2018 2018 2017
Core Non-core Total GBP'000
GBP'000 GBP'000 GBP'000
---------------------------- --------- ---------- --------- ---------
Corporation tax on profits - - - -
in the year - UK
Corporation tax on profits
in the year - overseas 2,868 (41) 2,827 2,742
Adjustments in respect
of prior years (4) - (4) 82
Total current tax 2,864 (41) 2,823 2,824
---------------------------- --------- ---------- --------- ---------
Deferred tax (872) (82) (954) (618)
---------------------------- --------- ---------- --------- ---------
Total tax charge from
continuing operations 1,992 (123) 1,869 2,206
---------------------------- --------- ---------- --------- ---------
Discontinued operations
---------------------------- --------- ---------- --------- ---------
Adjustments in respect
of prior years - - - 340
---------------------------- --------- ---------- --------- ---------
Total tax charge from
discontinuing operations - - - 340
---------------------------- --------- ---------- --------- ---------
Total tax charge 1,992 (123) 1,869 2,546
------------------- ------ ------ --------- ------
The tax for the year is higher (2017: higher) than the standard UK corporation tax rate applied to pre-tax profit. The standard rate of corporation tax in the UK changed from 20% to 19% with effect from 1 April 2017. The Group's profits for this accounting period are therefore taxed at an effective standard rate of 19.17% (2017: 20.17%).
The differences are explained below for 2018 and 2017 using the UK standard rate of corporation tax:
2018 2018 2018 2017
Core Non-core Total GBP'000
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ---------- --------- ---------
Profit before tax from continuing
operations 7,800 (2,439) 5,361 8,525
--------------------------------------- --------- ---------- --------- ---------
Tax at standard UK corporation
tax rate of 19.13% (2017: 20.00%) 1,495 (467) 1,028 1,705
Effects of:
Expenses not deductible for tax
purposes 465 - 465 487
Income not taxable (125) - (125) (441)
Utilisation of brought forward
tax losses not previously recognised (185) - (185) (31)
Tax losses for which no deferred
tax asset is recognised 42 315 357 121
Tax losses now recognised for
deferred tax (64) - (64) (201)
Adjustments to tax in respect
of prior year (4) - (4) 82
Effect of changes in tax rates
on deferred tax balances (16) 44 28 61
Profits taxed at overseas rates 370 (15) 355 411
Other 14 - 14 12
Total taxation 1,992 (123) 1,869 2,206
--------------------------------------- --------- ---------- --------- ---------
Current tax:
Tax on profit in the year 2,868 (41) 2,827 2,742
Adjustments in respect of prior
years (4) - (4) 82
--------------------------------------- --------- ---------- --------- ---------
Total current tax 2,864 (41) 2,823 2,824
--------------------------------------- --------- ---------- --------- ---------
Deferred tax:
Origination and reversal of timing
differences (1,320) (82) (1,402) (679)
Effect of changes in tax rates
on deferred tax balances 448 - 448 61
Total deferred tax credit (872) (82) (954) (618)
--------------------------------------- --------- ---------- --------- ---------
Total tax charge 1,992 (123) 1,869 2,206
--------------------------------------- --------- ---------- --------- ---------
Deferred tax 2018 2017
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Deferred tax assets:
Deferred tax asset to be settled after
more than 12 months 1,483 2,167
Deferred tax asset to be settled within
12 months 2,270 794
--------------------------------------------- --------- ---------
3,753 2,961
Deferred tax liabilities:
Deferred tax liability to be settled after
more than 12 months - (159)
Deferred tax liability to be settled within - -
12 months
--------------------------------------------- --------- ---------
- (159)
Net deferred tax asset 3,753 2,802
--------------------------------------------- --------- ---------
The deferred tax position is analysed below:
Asset Share-based Accelerated Accrued
payments capital Tax interest Loan
allowances losses charges waiver Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------ ------------ -------- ---------- -------- --------
1 February 2017 10 - 1,521 1,006 424 2,961
Movement 34 (29) 1,212 - (424) 793
----------------- ------------ ------------ -------- ---------- -------- --------
31 January 2018 44 (29) 2,733 1,006 - 3,754
----------------- ------------ ------------ -------- ---------- -------- --------
The deferred tax asset recognised for accrued interest charges relates to Group interest charges payable by the US business.
Deferred tax assets arising from deductible temporary differences are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences, and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the periods in which they are realised. The rates enacted or substantively enacted by the UK government for the relevant periods of reversal are 19% from 1 April 2017 and then 17% from 1 April 2020. The rates enacted by the US government for the relevant periods of reversal was 26% from 22 December 2017.
Due to the uncertainty of recoverability, deferred tax assets in respect of tax losses, depreciation in excess of accelerated capital allowance and deductible temporary differences of GBP3.6m (2017: GBP4.6m) have not been recognised. Future tax charges may be reduced as a result of tax losses for which a deferred tax asset is currently not recognised.
Unremitted Total
Liability earnings
GBP'000 GBP'000
1 February 2017 (159) (159)
Reversed 159 159
------------------ ----------- --------
31 January 2018 - -
------------------ ----------- --------
The deferred tax liability relates to unremitted earnings in Switzerland.
6. Dividends
The dividends paid in the year were GBP3.0m (2017: GBP2.8m).
The proposed final dividend of GBP1.9m (2.652p per share) is subject to approval by shareholders at the AGM on 28 June 2018 (2017: 2.525p per share amounting to GBP1.8m) and has not been included as a liability at 31 January 2018.
2018
GBP'000
-------------------------------------- ---------
Final dividend for year ended 31
January 2017 of 2.525p per share 1,834
--------------------------------------- ---------
Interim dividend for year ended
31 January 2018 of 1.643p per share 1,195
--------------------------------------- ---------
Total 3,029
--------------------------------------- ---------
Proposed final dividend for year
ended 31 January 2018 of 2.652p
per share 1,929
--------------------------------------- ---------
2017
GBP'000
-------------------------------------- ---------
Final dividend for year ended 31
January 2016 of 2.360p per share 1,712
--------------------------------------- ---------
Interim dividend for year ended
31 January 2017 of 1.565p per share 1,137
--------------------------------------- ---------
Total 2,849
--------------------------------------- ---------
Proposed final dividend for year
ended 31 January 2017 of 2.525p
per share 1,835
--------------------------------------- ---------
7. Earnings per share
2018 2018 2018 2017
Core Non-core Total GBP'000
GBP'000 GBP'000 GBP'000
------------------------------------ --------- ---------- ----------- -----------
Earnings
Profit before non-recurring
items 10,758 (677) 10,081 8,644
Non-recurring items (2,958) (1,762) (4,720) (119)
Profit before tax 7,800 (2,439) 5,361 8,525
Tax on profit before non-recurring
items (2,427) 34 (2,393) (2,206)
Tax on non-recurring items 435 89 524 -
Total tax (1,992) 123 (1,869) (2,206)
Profit after tax 5,808 (2,316) 3,492 6,319
------------------------------------ --------- ---------- ----------- -----------
Number of shares
Weighted average number
of shares 72,683,400 72,621,076
Dilutive effect of share 1,635,660 -
plans
------------------------------------ --------- ---------- ----------- -----------
Diluted weighted average
number of shares 74,319,060 72,621,076
------------------------------------ --------- ---------- ----------- -----------
Earnings per share
Basic EPS 7.99p 4.80p 8.70p
Basic EPS before non-recurring
items 11.46p 10.58p 8.86p
Diluted EPS 7.81p 4.70p 8.70p
Diluted EPS before non-recurring
items 11.21p 10.34p 8.86p
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the employee benefit trust, which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.
8. Alternative performance measures and non-recurring items
Alternative performance measures
In the reporting of financial information, the Group uses certain measures that are not required under IFRS. We consider that these additional measures (commonly referred to as 'alternative performance measures' or 'APMs') provide shareholders with valuable additional information on the performance of the business. These measures are consistent with those used internally, and are considered critical to understanding the financial performance of the Group. APMs are also used to enhance the comparability of information between reporting periods, by adjusting for non-recurring or items considered to be distortive to trading performance which may affect IFRS measures, to aid shareholders in understanding the Group's performance. These APMs are not intended to be a substitute for, or superior to, IFRS measures.
In the current year, a decision was taken to close a number of underperforming offices. Trading results from offices closed in the current year are disclosed as an APM on the face of the income statement. Results from the underlying business are referred to as 'core results' and the impact of closed offices referred to as 'non-core results'.
For this reason, the Group presents a number alternative performance measures including:
Core operating profit
Core profit before tax
Core earnings per share
The Consolidated Income Statement shows the reconciliation of these APMs to the most directly comparable IFRS equivalents.
The Group also presents two further APMs:
Net debt - defined as cash and cash equivalents less borrowings, disclosed in note 19
Non-recurring items - defined in accounting policy note (v)
The non-core operating loss before non-recurring items of GBP0.7k arose from the following offices closures during the current year: Denver (USA) GBP0.2m, Japan GBP0.2m, Singapore GBP0.1m, Cork GBP0.1m and Geneva GBP0.1m.
Office closure costs of GBP1.8m are included in the table of non-recurring items below and arose as follows: Hong Kong GBP0.7m, Japan GBP0.5m, Singapore GBP0.2m, Denver (USA) GBP0.2m, Cork GBP0.1m and Geneva GBP0.1m.
There were no office closures in the prior year.
Non-recurring items
2018 2018 2018 2017
Core Non-core Total GBP'000
GBP'000 GBP'000 GBP'000
------------------------------- --------- ---------- --------- ---------
Group transformation 4,189 1,762 5,951 -
Release of aged accruals (2,871) - (2,871) (539)
Impairment of goodwill 798 - 798 99
Acquisition costs 377 - 377 -
Re-listing on AIM 245 - 245 -
Excess deferred consideration
payable 220 - 220 -
Bad debt write-off - - - 559
Total non-recurring items 2,958 1,762 4,720 119
------------------------------- --------- ---------- --------- ---------
In the year, the Executive Directors commenced a review of the Group's operations and cost base, implementing a transformation programme to review underperforming offices, streamline the business and reduce central overheads.
Office closure costs totalling GBP1.8m are discussed in the APM section above. The remaining GBP4.2m comprises:
- Recruitment of a new Group Finance Director and consequent overlapping costs totalling GBP0.4m, considered the first step of this transformation and are accordingly treated as a non-recurring item.
- Streamlining businesses in the UK, Nordics and Central Europe at a cost of GBP0.8m, GBP0.7m and GBP1.3m respectively.
- Restructure and simplification of Group and central services totalling GBP1.0m.
The accounting estimate for aged accrued liabilities in Netherlands was re-assessed following a detailed review. This estimate is now in line with the rest of the business and resulted in a release of aged accrued liabilities totalling GBP3.0m.
As a result of the decision to close the Group's executive search business in Japan, the goodwill recognised on the acquisition of Beaumont KK was fully impaired, leading to a non-recurring cost of GBP798k.
The Group's policy is to recognise acquisition-related costs as non-recurring items in profit or loss as incurred.
On 28 July 2017, the Group's shares were admitted to AIM and its listing on the London Stock Exchange's Main Market was cancelled. The cost of this re-listing was GBP0.2m.
The final deferred consideration payable for the Beaumont KK acquisition in Japan exceeded initial estimates and the
GBP0.2m shortfall was booked as a non-recurring item.
In the prior year, a review of the USA trade receivable ledger led to the discovery of uncollected historical invoices totalling $0.7m which were no longer contractually enforceable.
9. Business combinations
PAT Management AB
On 3 July 2017, the Group acquired 100% of the share capital of PAT Management AB, a recruitment business in Lund, Sweden, for an initial cash consideration of SEK 17.6m (GBP1.6m) and contingent consideration of SEK 11.8m (GBP1.1m). The contingent consideration arrangements require the Group to pay the selling company, PAT Invest AB, based on a multiple of earnings before interest and tax ('EBIT'), over threshold performance, for the three years ending January 2020.
The provisional fair value of the net assets acquired is approximately equal to the acquiree's carrying amount. The excess of consideration above net asset values has been attributed in full to goodwill as no other intangible assets have been identified.
Details of the net assets acquired and the goodwill recognised were as follows:
GBP'000
-------------------------------------------- --------
Cash consideration 1,602
Deferred consideration 1,077
Fair value of net identifiable assets
acquired (227)
Goodwill recognised at date of acquisition 2,452
Foreign exchange movements (70)
--------------------------------------------- --------
Goodwill at 31 January 2018 2,382
--------------------------------------------- --------
Acquisition-related costs amounted to GBP0.1m.
The assets and liabilities arising at the date of acquisition were as follows:
GBP'000
---------------------------------- --------
Tangible fixed assets 11
Cash 148
Receivables 289
Payables (221)
Net identifiable assets acquired 227
----------------------------------- --------
The outflow of cash to acquire the business, net of cash acquired, was:
GBP'000
----------------------------------------- --------
Cash consideration 1,602
Cash and cash equivalents in subsidiary
acquired (148)
Acquisition costs 75
Cash outflow on acquisition 1,529
------------------------------------------ --------
The company recorded revenue of GBP1.3m and gross profit of GBP1.3m for the 12 months ending 31 January 2018.
Crimson Limited
On 11 September 2018, the Group acquired 100% of the share capital of Crimson Limited, a UK IT solutions and recruitment company based in Birmingham, from its management for an initial cash and cash equivalent consideration of GBP6.1m and deferred cash consideration of up to GBP9m. The contingent consideration arrangements require the Group to pay a guaranteed GBP2m over two years and then on a multiple of earnings before interest and tax ('EBIT'), over threshold performance, for the three years ending September 2020.
The provisional fair value of the net assets acquired is approximately equal to the acquiree's carrying amount. The excess of consideration above net asset values has been attributed in full to goodwill as no other intangible assets have been identified.
Details of the net assets acquired and the goodwill recognised were as follows:
GBP'000
-------------------------------------------- --------
Cash and cash equivalent consideration 6,124
Deferred consideration 3,000
Fair value of net identifiable assets
acquired (1,666)
Goodwill recognised at date of acquisition 7,458
Movement in deferred consideration -
-------------------------------------------- --------
Goodwill at 31 January 2018 7,458
--------------------------------------------- --------
Acquisition-related costs amounted to GBP0.3m.
The assets and liabilities arising at the date of acquisition were as follows:
GBP'000
---------------------------------- --------
Tangible fixed assets 133
Receivables 3,659
Overdraft (73)
Payables (2,053)
Net identifiable assets acquired 1,666
----------------------------------- --------
The outflow of cash to acquire the business, net of cash acquired, was:
GBP'000
----------------------------------------- --------
Cash consideration 5,851
Cash and cash equivalents in subsidiary
acquired 73
Acquisition costs 302
Cash outflow on acquisition 6,226
------------------------------------------ --------
The company recorded revenue of GBP21.8m and gross profit of GBP4.6m for the 12 months ending 31 January 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BRGDSLSDBGIL
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April 27, 2018 02:00 ET (06:00 GMT)
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