6th Mar 2009 12:31
SERVOCA Plc
Preliminary announcement of the results for the year ended 30 September 2008
Highlights
For the year ended 30 September 2008
Enquiries:
Servoca 020 7747 3030
Andrew Church
FinnCap 020 7600 1658
Geoff Nash
Ed Frisby
Introduction
The year ended 30 September 2008 is the first full reporting period of Servoca Plc ("the Group") following the change of the accounting period.
During the year the Group has made strategic acquisitions in the Security and Education markets.
There were several start up initiatives during the year. Some of these have not lived up to expectations and we have terminated all loss making businesses as part of the Group's restructuring programme. This included the revision of the Group's management structure and streamlining of the operational management, simplification of the Group's corporate structure, the continued rationalisation of the front and back office systems and a reduction of operational and administrative staff and general overheads. The restructuring also necessitated the placing of two of its subsidiaries into administration post year end.
The Group is raising £5 million via a placing to finance working capital and deferred consideration.
Financial review
During the year ended 30 September 2008, Group revenue was £42.1 million, which produced a gross profit of £12.7 million. Comparison with previous periods is not considered meaningful given the reverse acquisition that took place in 2007 and the various acquisitions that have taken place in the business during this year.
In April 2008, the Company raised £1.9 million, before expenses, through a placing of 6,333,340 ordinary shares of 10p each at a price of 30p per share. The Balance sheet as at 30 September 2008 includes £2.65 million of share based deferred consideration under current liabilities.
On 7 November 2007 the Company obtained Court approval for a capital reduction by way of cancellation of the balance of £8.81 million on the share premium account and £6.04 million on the capital redemption reserve.
The operating loss, prior to the goodwill impairment charge of £3.1 million, was £3.6 million for the year after charging exceptional restructuring costs of £1.6 million.
Acquisitions
As detailed below, the Company has made a number of acquisitions in the year.
Operational highlights
Strategy and delivery
Following a number of acquisitions made by the Group, our strategy is to concentrate on organic growth in our existing three principal markets of Education, Healthcare, and Secure Solutions.
Resourcing
Healthcare :
Within Healthcare we have combined three brands ( Windsor, Berry and Dream Medical ) under a new banner - Servoca Nursing and Care. This Company together with our existing brands TLP, Firstpoint and Triple West supplies a broad spectrum of skills providing allied health professionals, doctors, nurses, domiciliary care, social workers and other associated specialisations. We are now able to offer a complete service by having the ability to cover all major staffing disciplines within this sector. Servoca is one of only a handful of organisations who offer a one stop shop, and one of even fewer such organisations able to offer a national branch network attracting highly skilled healthcare professionals throughout the country. Servoca Healthcare is now in a position to bid for lucrative, long term, regional and national contracts which will help the Group to underpin plans to increase our visibility of earnings and recurring revenue streams within Healthcare. During the year this division secured major contracts in South Yorkshire and the West Midlands.
The Healthcare sector demands an up-to-date and complex skill set and we therefore invest heavily in providing training for new and existing staff. Servoca Healthcare now provides large scale training courses for the NHS, private care homes, local authorities and many other business types involved in the health arena.
Education :
We have three brands within our Education division and our strategy will be to continue to grow our market presence both in the UK and abroad.
Dream Education provides long term qualified teachers mostly within secondary schools.
Academics was acquired in March 2008 for an initial consideration of £3.1 million and an earn out of up to £5.8 million. Academics operates as an Education recruitment and training provider which supplies qualified teachers on a contract or permanent basis to clients in London and the Home Counties.
In May 2008, the Company acquired the business trade and assets of a business trading as Day to Day Teachers Limited from the administrators .The Company paid a cash consideration of £0.38 million. Day to Day Teachers operates from two branches and supplies qualified teachers and classroom assistants on a supply or temporary basis.
These acquisitions will enhance the Education resourcing division by enabling us to provide a wider service offering to our expanding client base. Opportunities exist for us to develop the Home Counties market and roll out the proven Academics model nationally. Academics also has a resourcing office in Melbourne which will allow international expansion from the existing infrastructure.
Servoca Secure Solutions
Our Security Division - Servoca Secure Solutions ("SSS"), - includes our acquisitions within security and our Criminal Justice Operation where both now enjoy significant cross-selling opportunities.
We have enjoyed particular success in the areas of criminal justice training, crime training, the outsourcing of cold case reviews, business process outsourcing and the provision of highly experienced teams into sensitive areas.
To strengthen our Security offering, in December 2007 we acquired both International Security & Surveillance Limited ("ISS") and ISS Special Projects Limited ("ISS (SP)") for an aggregate consideration of approximately £2.85 million which was paid in a combination of cash and ordinary shares. These two businesses have been combined under the Servoca Secure Solutions brand. This division continues to provide manned guarding, systems services, corporate investigations including close protection, risk management and surveillance.
The newly enlarged division is now able to offer a wide breadth of important and highly valued services to a variety of clients whose needs are often of a sensitive and high-profile nature. SSS provides confidential services to the majority of Police Constabularies throughout the UK . SSS is the only organisation of its type to have gained the "Skills for Justice Accreditation" for all of our policing training products. Over the past year SSS has run a number of specialist policing conferences and special interest days, further cementing our strategic relationship with the UK Police Service.
It is our intention to develop SSS into a unique specialist brand able to offer the full spectrum of security services. We are building this division to become a significant provider of high end specialist Security services.
Board changes
Glenn Swaby became the new Chief Financial Officer on 28 March 2008 when Andrew Brundle stepped down.
Tony Rogers resigned as a Director with effect from 3 October 2008.
Darren Browne resigned as Chief Executive Officer on 3 November 2008.
Andrew Church was appointed as Chief Executive Officer on 24 November 2008.
Emma Sugarman , founder and Managing Director of Academics Limited, was appointed to the Board on 16 December 2008.
Summary and prospects
The 2008 results showed good underlying growth marred by several one off costs and loss making businesses which have now been closed. The cost base has been realigned and the restructuring completed. This has transformed the performance of the Group and each division of the Group is now delivering profits.
The Group will continue to serve many areas of public sector recruitment that suffer from manpower supply shortages. The underlying growth in public sector recruitment remains strong and there will be a greater focus on profit delivery by the new management team.
We have new additions to the Board and Servoca has a strong platform on which to build and deliver shareholder value and realise its full potential.
Preliminary announcement of the results for the year ended 30 September 2008
Consolidated income statement
For the year ended 30 September 2008
|
Year ended 30 September 2008 |
Eight months ended 30 September 2007 |
||||
|
Note |
£'000 |
£'000 |
|||
|
Revenue |
2 |
42,050 |
8,738 |
||
|
Cost of sales |
(29,320) |
(6,456) |
|||
|
Gross profit |
12,730 |
2,282 |
|||
|
Administrative expenses |
(19,473) |
(9,411) |
|||
|
Other operating income |
- |
- |
|||
|
Operating loss before goodwill impairment and exceptional costs |
(604) |
(1,858) |
|||
|
Goodwill impairment |
(3,131) |
(5,271) |
|||
|
Exceptional costs |
(3,008) |
- |
|||
|
Operating loss |
(6,743) |
(7,129) |
|||
|
Finance income |
4 |
308 |
|||
|
Finance costs |
(429) |
(81) |
|||
|
Loss before taxation |
2 |
(7,168) |
(6,902) |
||
|
Tax expense |
- |
- |
|||
|
Loss for the year/period attributable to equity holders of the parent |
(7,168) |
(6,902) |
|||
|
Loss per share: |
Pence |
Pence |
|||
|
- Basic and diluted |
3 |
(16.13) |
(23.96) |
||
|
Adjusted loss per share: |
|||||
|
- Basic and diluted |
3 |
(2.32) |
(5.66) |
Consolidated balance sheet
At 30 September 2008
|
30 September 2008 |
30 September 2007 |
|||||
|
Note |
£'000 |
£'000 |
||||
|
Assets |
||||||
|
Non-current assets |
||||||
|
Intangible assets |
7,237 |
1,683 |
||||
|
Property, plant and equipment |
697 |
358 |
||||
|
Total non-current assets |
7,934 |
2,041 |
||||
|
Current assets |
||||||
|
Trade and other receivables |
4 |
9,908 |
4,742 |
|||
|
Cash and cash equivalents |
204 |
99 |
||||
|
Total current assets |
10,112 |
4,841 |
||||
|
Total assets |
18,046 |
6,882 |
||||
|
Liabilities |
||||||
|
Current liabilities |
||||||
|
Trade and other payables |
(7,642) |
(3,377) |
||||
|
Other financial liabilities |
(7,637) |
(2,335) |
||||
|
Contingent consideration |
(4,628) |
(150) |
||||
|
Corporation tax liability |
(367) |
(285) |
||||
|
Provisions |
(1,040) |
(285) |
||||
|
Total current liabilities |
(21,314) |
(6,432) |
||||
|
Non-current liabilities |
||||||
|
Other financial liabilities |
(68) |
(7) |
||||
|
Contingent consideration |
(460) |
(150) |
||||
|
Provisions |
(352) |
(208) |
||||
|
Total non-current liabilities |
(880) |
(365) |
||||
|
Total liabilities |
(22,194) |
(6,797) |
||||
|
Total net (liabilities)/assets |
(4,148) |
85 |
|
£'000 |
£'000 |
|||||
|
Capital and reserves attributable to equity holders of the company |
||||||
|
Called up share capital |
4,812 |
3,931 |
||||
|
Share premium account |
2,054 |
8,812 |
||||
|
Capital redemption reserve |
- |
6,036 |
||||
|
Merger reserve |
2,772 |
2,772 |
||||
|
Reverse acquisition reserve |
(12,268) |
(12,268) |
||||
|
Retained earnings |
(1,518) |
(9,198) |
||||
|
Total Equity |
(4,148) |
85 |
Consolidated statement of changes in equity
For the year ended 30 September 2008
|
Ordinary share capital |
Share premium |
Capital redemption reserve |
Merger reserve |
Reverse acquisition reserve |
Retained earnings |
Total equity |
||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Balance as at 31 January 2007 |
- |
- |
- |
- |
- |
(2,296) |
(2,296) |
|
|
Changes in equity for the period ended 30 September 2007 |
||||||||
|
Loss for the period |
- |
- |
- |
- |
- |
(6,902) |
(6,902) |
|
|
Total recognised income and expense for the period |
- |
- |
- |
- |
- |
(6,902) |
(6,902) |
|
|
Acquisition of subsidiary |
545 |
6,512 |
6,036 |
96 |
- |
13,189 |
||
|
Reverse acquisition |
- |
(2,249) |
- |
- |
(12,268) |
- |
(14,517) |
|
|
Issue of share capital - Dream Group Limited |
- |
2,249 |
- |
- |
- |
- |
2,249 |
|
|
Issue of share capital - Servoca Plc |
3,386 |
2,300 |
- |
2,676 |
- |
- |
8,362 |
|
|
3,931 |
8,812 |
6,036 |
2,772 |
(12,268) |
- |
9,283 |
||
|
Balance as at 30 September 2007 |
3,931 |
8,812 |
6,036 |
2,772 |
(12,268) |
(9,198) |
85 |
|
|
Changes in equity for the year ended 30 September 2008 |
||||||||
|
Loss for the year |
- |
- |
- |
- |
- |
(7,168) |
(7,168) |
|
|
Total recognised income and expense for the year |
(7,168) |
(7,168) |
||||||
|
Reduction in capital |
- |
(8,812) |
(6,036) |
- |
- |
14,848 |
- |
|
|
Shares issued for acquisition of subsidiaries |
248 |
856 |
- |
- |
- |
- |
1,104 |
|
|
Issue of share capital |
633 |
1,198 |
- |
- |
- |
- |
1,831 |
|
|
881 |
(6,758) |
(6,036) |
- |
- |
14,848 |
2,935 |
||
|
Balance as at 30 September 2008 |
4,812 |
2,054 |
- |
2,772 |
(12,268) |
(1,518) |
(4,148) |
Consolidated cash flow statement
For the year ended 30 September 2008
|
Year ended 30 September 2008 |
Year ended 30 September 2008 |
Eight months ended 30 September 2007 |
Eight months ended 30 September 2007 |
|||
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Operating activities |
||||||
|
Loss before tax |
(7,168) |
(6,902) |
||||
|
Adjustments for: |
||||||
|
Depreciation and amortisation charges |
394 |
71 |
||||
|
Finance costs |
429 |
81 |
||||
|
Finance income |
(4) |
(308) |
||||
|
Loss on disposal of fixed assets |
- |
13 |
||||
|
Goodwill impairment |
3,131 |
5,271 |
||||
|
Increase in trade and other receivables |
(2,371) |
(388) |
||||
|
Increase in trade and other payables |
4,370 |
842 |
||||
|
Movement in provisions |
899 |
493 |
||||
|
Cash generated from operations |
(320) |
(827) |
||||
|
Interest paid |
(429) |
(81) |
||||
|
Corporation tax paid |
(326) |
- |
||||
|
Cash flows from operating activities |
(1,075) |
(908) |
||||
|
Investing activities |
||||||
|
Acquisitions, net of cash acquired |
(3,544) |
(3,247) |
||||
|
Purchase of property, plant and equipment |
(595) |
(156) |
||||
|
Interest received |
4 |
11 |
||||
|
(4,135) |
(3,392) |
|||||
|
Financing activities |
||||||
|
Issue of ordinary shares |
1,900 |
3,605 |
||||
|
Share issue costs |
(68) |
(103) |
||||
|
Repayment of finance lease creditor |
42 |
(2) |
||||
|
1,874 |
3,500 |
|||||
|
Decrease in cash and cash equivalents |
5 |
(3,336) |
(800) |
|||
|
Cash and cash equivalents at beginning of the year |
5 |
(2,229) |
(1,429) |
|||
|
Cash and cash equivalents at end of the year |
5 |
(5,565) |
(2,229) |
Notes forming part of the preliminary announcement
For the year ended 30 September 2008
1. Accounting policies
Basis of preparation
The principal accounting policies are set out in the Group's financial statements for the year ended 30 September 2008.
This preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), and applied in accordance with the provisions of the Companies Act 1985.
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.
The Board of Directors regularly monitors the ability of the Group to meet its liabilities as they fall due for the foreseeable future against the facilities and funding options open to it.
Having conducted a review in relation to the financial position at 30 September 2008, the Directors have prepared cash flow forecasts and identified a shortfall of funding. In order to meet this shortfall, the Directors are in the process of raising £5.0 million before expenses by way of a share placing and, at the date of this annual report, have received placing commitments from placees to subscribe for the whole of this amount. The Directors propose to apply the proceeds of the placing to finance the contingent consideration payment of £2.35 million due to the vendor of Academics Limited and for the remainder to provide additional working capital for the Group.
The placing is subject to shareholder approval scheduled for 30 March 2009. If, for whatever reason, the placing is not implemented and alternative sources of finance cannot be obtained, the Group will not be able to meet its contingent consideration and other obligations as they fall due.
Having taken this uncertainty into account, these financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its liabilities as they fall due for the foreseeable future.
The auditors report in the statutory accounts of the group for the year ended 30 September 2008, which is not qualified, contains an emphasis of matter drawing attention to the material uncertainty referred to above relating to the Group's ability to continue as a going concern. The statutory accounts will be delivered to the Registrar following the Company's forthcoming Annual General Meeting.
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated.
2. Segmental analysis
The Group's primary format for reporting segment information is by business segment, being by type of service supplied. The operating divisions are organised and managed by reporting segment where applicable and by divisions within a reporting entity where necessary.
The Medical and Care segment provides recruitment services to the Healthcare sector.
The Education Recruitment segment provides recruitment services to the Education sector.
The Secure Solutions segment provides outsourced services to the Security sector.
|
Medical and Care Recruitment segment |
Education Recruitment segment |
Secure Solutions segment |
Unallocated |
Total |
||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
For the year ended 30 September 2008: |
||||||
|
Turnover |
22,967 |
9,819 |
9,264 |
- |
42,050 |
|
|
Segment expense |
(23,721) |
(8,654) |
(9,538) |
(741) |
(42,654) |
|
|
Goodwill impairment |
(670) |
- |
(2,461) |
- |
(3,131) |
|
|
Exceptional costs |
(2,218) |
(15) |
(296) |
(479) |
(3,008) |
|
|
Operating (loss)/profit |
(3,642) |
1,150 |
(3,031) |
(1,220) |
(6,743) |
|
|
Interest expense |
(178) |
(69) |
(50) |
(132) |
(429) |
|
|
Finance income |
- |
- |
3 |
1 |
4 |
|
|
(Loss)/profit |
(3,820) |
1,081 |
(3,078) |
(1,351) |
(7,168) |
|
|
Balance sheet |
||||||
|
Assets |
5,253 |
9,342 |
2,705 |
746 |
18,046 |
|
|
Liabilities |
(9,169) |
(10,437) |
(2,522) |
(66) |
(22,194) |
|
|
Net assets/(liabilities) |
(3,916) |
(1,095) |
183 |
680 |
(4,148) |
|
|
Other |
||||||
|
Capital expenditure |
201 |
6,981 |
2,532 |
285 |
9,999 |
|
|
Depreciation, amortisation and impairment |
|
861 |
65 |
2,535 |
64 |
3,525 |
|
Medical and Care Recruitment segment |
Education Recruitment segment |
Secure Solutions segment |
Unallocated |
Total |
||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
For the eight months ended 30 September 2007: |
||||||
|
Turnover |
4,107 |
2,888 |
1,743 |
- |
8,738 |
|
|
Segment expense |
(4,531) |
(2,406) |
(2,272) |
(1,387) |
(10,596) |
|
|
Goodwill impairment |
(5,271) |
- |
- |
- |
(5,271) |
|
|
Operating (loss)/profit |
(5,695) |
482 |
(529) |
(1,387) |
(7,129) |
|
|
Interest expense |
- |
- |
- |
(81) |
(81) |
|
|
Finance income |
- |
- |
- |
308 |
308 |
|
|
(Loss)/profit |
(5,695) |
482 |
(529) |
(1,160) |
(6,902) |
|
|
Balance sheet |
||||||
|
Assets |
4,330 |
1,037 |
626 |
889 |
6,882 |
|
|
Liabilities |
(4,424) |
(655) |
(445) |
(1,273) |
(6,797) |
|
|
Net assets/(liabilities) |
(94) |
382 |
181 |
(384) |
85 |
|
|
Other |
||||||
|
Capital expenditure |
6,486 |
44 |
27 |
- |
6,557 |
|
|
Depreciation, amortisation and impairment |
5,303 |
24 |
13 |
2 |
5,342 |
3. Loss per share
The calculation of loss per share for the year ended 30 September 2008 is based on a weighted average number of shares in issue during the period of:
|
Basic |
Dilutive effect of share options and shares to be issued |
Diluted |
||
|
30 September 2008 |
44,430,904 |
- |
44,430,904 |
|
|
30 September 2007 |
28,801,555 |
- |
28,801,555 |
The above same number of shares are used in all of the loss per share calculations below.
Additional disclosure is also given in respect of loss per share before goodwill impairment and exceptional costs as the directors believe this gives a more accurate presentation of maintainable earnings.
|
Year ended 30 September 2008 |
Total |
|
|
£'000 |
||
|
Loss used for basic and diluted calculation |
(7,168) |
|
|
Goodwill impairment and exceptional costs |
6,139 |
|
|
Loss before goodwill impairment and exceptional costs |
(1,029) |
|
|
Pence |
||
|
Basic and diluted loss per share |
(16.13) |
|
|
Goodwill impairment and exceptional costs |
13.81 |
|
|
Adjusted basic and diluted loss per share before goodwill impairment and exceptional costs |
(2.32) |
|
Eight months ended 30 September 2007 |
Total |
|
|
£'000 |
||
|
Loss used for basic and diluted calculation |
(6,902) |
|
|
Goodwill impairment |
5,271 |
|
|
Loss before goodwill impairment |
(1,631) |
|
|
Pence |
||
|
Basic and diluted loss per share |
(23.96) |
|
|
Goodwill impairment |
18.30 |
|
|
Adjusted basic and diluted loss per share before goodwill impairment |
(5.66) |
4. Trade and other receivables
|
30 September 2008 |
30 September 2007 |
||
|
£'000 |
£'000 |
||
|
Due in less than one year: |
|||
|
Trade debtors |
7,967 |
4,578 |
|
|
Less: Provision for impairment of trade receivables |
(412) |
(782) |
|
|
Trade debtors net |
7,555 |
3,796 |
|
|
Other debtors |
1,440 |
426 |
|
|
Prepayments and accrued income |
913 |
520 |
|
|
9,908 |
4,742 |
|
30 September 2008 |
30 September 2007 |
||
|
£'000 |
£'000 |
||
|
Total financial assets other than cash and cash equivalents classified as loans and receivables |
8,995 |
4,222 |
|
|
Cash and cash equivalents |
204 |
99 |
|
|
Total financial assets classified as loans and receivables |
9,199 |
4,321 |
The fair values of financial assets classified as loan and receivables approximate to their carrying value.
At 30 September 2008 the analysis of trade receivables is:
|
Neither past due nor |
Past due or impaired |
|||||||||
|
Total |
impaired |
31-60 |
60-90 |
90-120 |
120+ |
|||||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
Trade receivables |
7,967 |
4,568 |
1,042 |
884 |
222 |
1,251 |
||||
|
Provision |
(412) |
- |
- |
- |
- |
(412) |
||||
|
7,555 |
4,568 |
1,042 |
884 |
222 |
839 |
|||||
At 30 September 2007 the analysis of trade receivables is:
|
Neither past due nor |
Past due or impaired |
||||||||
|
Total |
impaired |
31-60 |
60-90 |
90+ |
|||||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
Trade receivables |
4,578 |
2,414 |
1,500 |
365 |
299 |
||||
|
Provision |
(782) |
- |
(118) |
(365) |
(299) |
||||
|
3,796 |
2,414 |
1,382 |
- |
- |
|||||
Movements on the Group provision for impairment of trade receivables are as follows:
|
30 September 2008 |
30 September 2007 |
||
|
£'000 |
£'000 |
||
|
At beginning of the period |
782 |
45 |
|
|
Acquired on acquisitions |
52 |
677 |
|
|
(Utilised)/provided during the year |
(422) |
60 |
|
|
At end of period |
412 |
782 |
5 Notes to the consolidated cash flow
a) Cash and cash equivalents comprise
|
Year ended 30 September 2008 |
Eight months ended 30 September 2007 |
||
|
£'000 |
£'000 |
||
|
Cash available on demand |
204 |
99 |
|
|
Overdrafts |
(235) |
(80) |
|
|
Invoice discounting facilities |
(5,534) |
(2,248) |
|
|
(5,565) |
(2,229) |
||
|
Cash and cash equivalents at beginning of period |
(2,229) |
(1,429) |
|
|
Net cash decrease in cash and cash equivalents |
(3,336) |
(800) |
Preliminary announcement of the results for the year ended 30 September 2008
b) Analysis of net debt
|
As at 1 October 2007 |
Cash flow |
Arising on acquisitions |
Non cash movement |
As at 30 September 2008 |
||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Cash and cash equivalents |
(2,229) |
(3,336) |
- |
- |
(5,565) |
|
|
Finance lease obligations |
(14) |
11 |
(48) |
(52) |
(103) |
|
|
Loans |
- |
(1,833) |
- |
- |
(1,833) |
|
|
(2,243) |
(5,158) |
(48) |
(52) |
(7,501) |
6. Copies of the annual accounts and financial statements for the year ended 30 September 2008 are not being posted to shareholders but will be available to view and download from the company's website, www.servoca.com
Related Shares:
Servoca