30th Mar 2007 07:01
InterQuest Group PLC30 March 2007 InterQuest Group PLC 30 March 2007 Preliminary results for the year ended 31 December 2006 The Board of InterQuest Group plc, (LSE:ITG) the specialist IT recruitmentgroup, announces its unaudited preliminary results for the year ended 31December 2006. Financial highlights • Year on year turnover up 107% to £57.22m • Gross profit up 84% to £9.01m • EBITA (excluding FRS 20) up 76% to £3.05m • Profit on ordinary activities before taxation up 61% to £2.10m • Basic earnings per share of 5.2 pence (2005: 6.8 pence) • Basic adjusted earnings per share of 7.5 pence (2005: 5.7 pence) Operational highlights • Strong organic growth of 15% in operating profits after accounting for 84% increase in public company and other central costs • Contractor numbers more than doubled during the year (organic and acquisitions) • Acquisition of PeopleCo Worldwide Limited in March 2006 • Acquisition of Sand Resources Limited in June 2006 • Catalist (central Government supplier accreditation) for Interim Management and IT specialist contractors • New clients won during the year including Cisco, Accenture and the FSA • Two office moves into larger premises to match increase in demand Commenting on the results, Gary Ashworth, Executive Chairman, said: "This has been a year of considerable growth and progress for the Group. Acombination of strong organic growth and two successful acquisitions made duringthe year have resulted in a doubling of revenue, an 84% increase in gross profitand a 61% increase in profit before tax. The outlook for 2007 is very positiveand the Board remains confident in the future prospects of the Group." Chairman's and Chief Executive's statement: Introduction We are pleased to announce that 2006 has been a year of great progress for theGroup. Our stated strategy of growing the business by acquisition as well asorganically and by specialising in niche markets within the technology sector,all around a central administrative and financial core, has delivered stronggrowth. We would like to thank our dedicated sales and administrative team fortheir hard work, thorough knowledge of their individual markets and dedicationto growing the business. We are proud of them all. Results During the year the Group's existing business grew organically by 15%. This wasunderpinned by a growing requirement for contract staff, with demand forspecialist skills out-stripping supply and leading to candidate shortages insome areas. Total revenues, including part year figures for the twoacquisitions, grew by 107% to £57.22m, which enabled the business to increaseits EBITA to £3.05m after adding back the charge for FRS20 share-based payments.Profit before tax increased by 61% to £2.10m and basic adjusted earnings pershare (see note 3) increased to 7.5 pence (2005: 5.7 pence). Operations Our seven operating businesses performed exceptionally well during 2006 in thesupply of both contract and permanent staff. We are pleased that we havecontinued to grow our client base by adding a number of new wins includingCisco, Accenture and the FSA. In addition, we were awarded two Catalistaccreditations by the Office of Government Commerce to supply specialist ITcontractors and interim managers to public sector organisations. The "Academy" development programme for new recruits into the industry hascontinued to deliver new fee earners into the different business units and formsan essential part of our future growth. During the second half of the year two of our operating businesses, Insight andPeopleCo, moved into new larger offices in Bexleyheath and Harrogate in order tofulfil the increase in demand from our clients and to allow space for continuedfuture expansion. In April we are relocating our London head office andoperating divisions into a new office, which is twice the size of itspredecessor. This will provide space for continued organic growth. Our focus has been on building the business of contract staffing whilst at thesame time further developing and increasing permanent placements. This hasproduced excellent results with our number of contractors working for clientsgrowing by over 100% during the year, of which organic growth accounted for a35% increase. We have maintained our margins and have benefited from the impactof some wage inflation. We believe that the strategy that we have adopted from the outset of focusing onspecialist sectors by acquiring and growing independently branded specialists isworking and providing the right impetus for present and future success. We will continue to follow our growth strategy by: 1. Identifying complementary and specialist acquisitions2. Growing their earnings3. Developing and incentivising staff at all levels4. Imposing centralised financial control5. Offering specialist divisions the benefits of a strong group structure. Acquisitions On 1 March 2006, the Group purchased PeopleCo Worldwide Limited for a totalconsideration of £5.4m. The business operates three divisions, which are focusedon ERP, software development and software testing. The business has performed very well in 2006and we are very pleased with the acquisition, which extends the Group'sgeographical reach into the North of England and provides PeopleCo's clients andcandidates with a London office. On 8 June 2006, the Group acquired Sand Resources Limited for a consideration ofup to £5.2m in cash and shares. The initial consideration paid at completioncomprised £1.39m in cash and £0.36m in new InterQuest shares. There is a maximumfurther consideration of £2.95m, payable as to 73.75% in cash and 26.25% inInterQuest shares provided that certain financial targets are achieved in theyear to 31 May 2007. In addition, further amounts of £0.3m and £0.2m are payableas to 50% in cash and 50% in InterQuest shares provided that increased financialtargets are achieved in the years ending 31 May 2008 and 2009. Full provisionhas been made at 31 December 2006 for amounts that the Directors believe will bepayable under these arrangements. Sand Resources Limited is a specialist provider of IT recruitment services tothe public sector and in February this year was one of only thirteen companiesawarded Catalist accreditation by the Office of Government Commerce (OGC) tosupply IT contractors to public sector organisations. The business has grownsignificantly since joining the Group and we are pleased with that performanceand excited about the prospects for future growth. We continue to cultivate a healthy pipeline of future acquisitions that meet ourcriteria as niche-focused, specialist IT recruitment businesses. Cashflow and financing Cash based earnings before interest costs, depreciation, amortisation, tax andFRS 20 share based payment charge were £3.16m in 2006. Very strong organicgrowth in the number of contractors working absorbed £1.93m of operatingcashflow therefore the net cash inflow from operating activities was £1.23mduring the year. The Group invested £6.05m of cash in the acquisitions of PeopleCo WorldwideLimited and Sand Resources Limited partly funded by a £4.42m increase in tradedebtor financing and £0.05m of new shares and acquired £0.27m of debt as part ofthese acquisitions. In addition, the Group paid net £0.10m for tangible fixedassets, £0.85m of corporation tax and £0.31m of interest. The Group ended the year with net debt of £5.04m, which is funded via invoicediscounting and bank overdraft and comfortably within our existing facilities. Outlook A full year contribution from PeopleCo Worldwide Limited and Sand ResourcesLimited in 2007, combined with increased demand for contract and permanentstaff, underpin our confidence in the future prospects of the Group. We areexcited about the future of the investments that we made in 2006 and the organicgrowth achieved by the Group to date. With current trading levels, this gives us confidence that we are wellpositioned to achieve our future goals and deliver another successful outcomefor the current financial year. About the InterQuest Group InterQuest is a specialist IT recruitment Group with seven different businessesfocusing on supplying staff on a contact or permanent basis with specific skillareas across the information technology spectrum. It seeks to combine organicgrowth and an acquisition policy to enhance an offering of niche IT recruitmentservices to clients and candidates. Interquest UK - Established in 1996, focuses on supplying IT professionals tothe Retail, FMCG and E-tailing sectors. Insight Computer Recruitment - Established in 1991, supplies the PC support andvoice and data communications market. SBS - Established in 1969, supplies local and central government with CRM, business intelligence and security staff. Genesis - Established in 1993, specialises in servicing City Institutions and Investment Banks. FJB - Established in 1998, supplies staff to the financial services sector as well as the NHS. PeopleCo - Established in 1997, has a business specialisation of SAP, softwaredevelopment and software testing. Sand Resources - Established in 1999, is 100% focused on public sectororganisations. For further information please contact InterQuest Group plcGary Ashworth, Executive ChairmanRoss Eades, Chief Executive OfficerMichael Joyce, Finance Director020 7025 0100 Tim BlackstoneBritton Financial PR020 7251 2544 INTERQUEST GROUP PLC SUMMARISED CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2006 Note 2006 2005 Restated £ £ TurnoverContinuing operations 34,605,800 27,598,849Acquisitions 22,615,581 - 57,221,381 27,598,849 Cost of sales (48,214,251) (22,704,979) Gross profit 9,007,130 4,893,870 Goodwill amortisation (556,858) (284,131)FRS20 share based payment charge (88,473) (67,947)Other administrative expenses (5,956,398) (3,160,094)Total administrative expenses (6,601,729) (3,512,172) Operating profitContinuing operations 1,499,638 1,381,698Acquisitions 905,763 - 2,405,401 1,381,698 Interest payable (311,708) (87,324)Interest receivable 1,715 8,206 Profit on ordinary activities before taxation 2,095,408 1,302,580 Tax on profit on ordinary activities 2 (637,806) 301,829 Profit retained and transferred to reserves 1,457,602 1,604,409 Earnings per shareBasic 3 5.2 pence 6.8 pence Diluted 3 4.8 pence 6.4 pence All transactions arise from continuing operations. There were no recognised gains or losses other than the profit for the financialyear. INTERQUEST GROUP PLC SUMMARISED CONSOLIDATED BALANCE SHEET At 31 December 2006 Note 2006 2005 Restated £ £Fixed assetsIntangible assets 11,662,610 5,053,895Tangible assets 238,272 158,837 11,900,882 5,212,732 Current assetsDebtors 4 13,351,435 5,586,808Cash at bank and in hand - 1,316,873 13,351,435 6,903,681 Creditors: amounts falling due within one year 5 (12,814,028) (3,196,660) Net current assets 537,407 3,707,021 Total assets less current liabilities 12,438,289 8,919,753 Creditors: amounts falling due greater than one year 6 (515,258) - 11,923,031 8,919,753 Capital and reservesCalled up share capital 286,906 257,568Share premium account 7,383,026 5,955,161Profit and loss account 4,063,338 2,605,736Share based payment reserve 189,761 101,288ShareholdersO funds 11,923,031 8,919,753 INTERQUEST GROUP PLC SUMMARISED CONSOLIDATED cASH FLOW STATEMENT For the year ended 31 December 2006 Note 2006 2005 £ £ Net cash inflow from operating activities 7 1,229,143 1,329,049 Returns on investments and servicing of financeInterest paid (311,708) (87,324)Interest received 1,715 8,206 (309,993) (79,118) Taxation (851,671) (407,303) Capital expenditurePayments to acquire tangible fixed assets (95,591) (26,797)Receipts from sales of tangible fixed assets 1,384 - (94,207) (26,797) Acquisitions and disposalsPurchase of subsidiary undertaking in the period 10 (6,054,379) (496,854)Consideration paid in respect of the purchase of a subsidiary - (1,228,868) undertaking in a previous periodNet cash / (trade debtor finance) acquired with subsidiary 10 (270,377) (299,369)undertakings (6,324,756) (2,025,091) Net cash outflow before financing (6,351,484) (1,209,260) FinancingIssue of ordinary share capital net of expenses 45,300 2,603,436Net increase/(decrease) in trade debtor finance 4,424,071 (688,542) 4,469,371 1,914,894 (Decrease)/increase in cash 8 (1,882,113) 705,634 INTERQUEST GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2006 1 BASIS OF PREPARATION Principal accounting policies The principal accounting policies of the Group are set out in the Group's 2006Financial Statements. These policies have remained unchanged other than for theadoption of FRS 20 "Share Based Payments" and the presentational requirements ofFRS 25 "Financial Instruments: Disclosure and Presentation". Financial information The financial information set out in this preliminary announcement does notconstitute Statutory Accounts as defined in Section 240 of the Companies Act1985. The summarised consolidated balance sheet at 31 December 2006 and the summarisedconsolidated profit and loss account, summarised consolidated cash flowstatement and associated notes for the year then ended have been extracted fromthe Group's financial statements. Those financial statements have not yet beendelivered to the Registrar, nor have the auditors reported on them. Thefinancial information relating to the year ended 31 December 2005 is extractedfrom the statutory accounts, which incorporated an unqualified audit report andwhich has been filed with the Register of Companies. 2 TAX ON PROFIT ON ORDINARY ACTIVITIES The tax charge/(credit) is based on the profit for the year and represents: 2006 2005 Restated £ £ United Kingdom corporation tax at 30% (2005: 30%) 317,135 325,625Adjustments in respect of prior years (28,596) 17,840Total current tax 288,539 343,465 Deferred taxation Accelerated capital allowances (22,793) (156,778) Tax losses carried forward 400,891 (464,882)Other timing differences (28,831) (23,634) 637,806 (301,829) Profit on ordinary activities before taxation 2,095,408 1,302,580 Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 30% (2005: 30%) 628,622 390,774 Effect of: Expenses not deductible for tax purposes (including amortisation) 202,729 73,123Capital allowances for the period in excess of depreciation 17,172 (56,417)Other tax adjustments (160,220) 20,384Marginal relief - (4,115)Tax losses utilised in year (364,568) (98,124)Under/(over) provision in prior years (28,596) 17,840Profits charged at lower rate of tax (6,600) -Current tax charge for year 288,539 343,465 INTERQUEST GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2006 3 EARNINGS PER SHARE 2006 2005 Restated £ £ For basic earnings per share Profit for the financial year 1,457,602 1,604,409 For adjusted earnings per share Profit for the financial year 1,457,602 1,604,409 Add back amortisation of goodwill 556,858 284,131 Add back FRS 20 share based payment charge 88,473 67,947 Less tax credit for recognition of losses and accelerated capital allowances - (621,660) Adjusted profit for the financial year 2,102,933 1,334,827 Weighted average number of shares Number Number of shares of shares For basic earnings per share 27,966,694 23,466,432 For diluted earnings per share 30,518,167 25,026,381 Earnings per share Basic 5.2 pence 6.8 pence Diluted 4.8 pence 6.4 pence Adjusted earnings per share Basic 7.5 pence 5.7 pence Diluted 6.9 pence 5.3 pence INTERQUEST GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2006 4 DEBTORS 2006 2005 Restated £ £ Trade debtors 10,719,785 4,207,733Prepayments and accrued income 2,307,897 614,000Other debtors 26,617 113,029Deferred tax asset 297,136 652,046 13,351,435 5,586,808 5 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2006 2005 £ £ Trade creditors 3,643,401 1,604,951Corporation tax 132,507 338,189Other taxation and social security 1,169,809 478,458Trade debtor finance facilities 4,424,071 -Bank overdraft 565,240 -Accruals and deferred income 1,966,143 549,819Other creditors 242,514 225,243Hire purchase 9,152 -Deferred consideration 661,191 - 12,814,028 3,196,660 The trade debtor finance facilities are secured by fixed and floating chargesover the Group's assets and had a maximum facility of £8,000,000 at theyear-end. Interest is charged at 1.0% over the prevailing bank base rate. 6 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 2006 2005 £ £ Hire purchase 39,232 -Deferred consideration 476,026 - 515,258 - INTERQUEST GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2006 7 NET CASH INFLOW FROM OPERATING ACTIVITIES 2006 2005 £ £ Operating profit 2,405,401 1,381,698Depreciation 105,029 70,394Amortisation of intangible assets 556,858 284,131FRS 20 share based payment charge 88,473 67,947Increase in debtors (3,550,260) (138,948)Increase/(decrease) in creditors 1,623,642 (336,173)Net cash inflow from operating activities 1,229,143 1,329,049 8 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) 2006 2005 £ £ (Decrease)/increase in cash in the year (1,882,113) 705,634Increase in hire purchase in the year (48,384) -(Increase)/decrease in trade debtor finance facilities (4,424,071) 688,542Movement in net funds in the year (6,354,568) 1,394,176Net funds/(debt) at 31 December 2005 1,316,873 (77,303)Net (debt)/funds at 31 December 2006 (5,037,695) 1,316,873 9 ANALYSIS OF CHANGES IN NET FUNDS/(DEBT) At 1 Cash flow Non cash At 31 January movement December 2006 2006 £ £ £ £ Cash at bank and in hand 1,316,873 (1,316,873) - -Overdraft - (565,240) - (565,240) 1,316,873 (1,882,113) - (565,240)Hire purchase - - (48,384) (48,384)Trade debtor finance facilities - (4,424,071) - (4,424,071)Net (debt)/funds 1,316,873 (6,306,184) (48,384) (5,037,695) INTERQUEST GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2006 10 ACQUISITIONS PeopleCo Worldwide Ltd On 1 March 2006 the Group acquired PeopleCo Worldwide Limited for a totalconsideration of £4,368,812 in cash and £1,056,191 in new InterQuest Groupshares issued at 50 pence each. Sand Resources Ltd On 8 June 2006 the Group acquired Sand Resources Limited for an initialconsideration of £1,394,311 in cash and £355,712 in new InterQuest group sharesissued at 50 pence each. Analysis of the acquisition of PeopleCo Worldwide Limited and Sand ResourcesLimited Net assets at date of acquisition: Book value Adjustments Provisional fair value £ £ £PEOPLECo Worldwide Limited Tangible fixed assets 27,908 - 27,908Debtors 2,269,919 - 2,269,919Cash in hand and at bank 211,638 - 211,638Creditors due within one year (1,382,698) (25,000) (1,407,698) Net assets 1,126,767 (25,000) 1,101,767 Sand Resources Limited Tangible fixed assets 76,200 (17,780) 58,420Debtors 2,299,358 - 2,299,358Trade debtor finance facility (482,015) - (482,015)Creditors due within one year (1,495,149) - (1,495,149)Creditors due in more than one year (44,455) - (44,455) Net assets 353,939 (17,780) 336,159 Total net assets 1,437,926Goodwill arising on acquisition 7,165,573 8,603,499 Discharged by:Initial consideration in cash 5,763,123Initial consideration in shares 1,411,903Deferred contingent consideration 1,137,217Costs associated with the acquisition 291,256 8,603,499 The fair value adjustments are provisional as the directors intend to reservetheir right to re-appraise fair values up until the first full financial yearpost acquisition. Fair value adjustments relate to timing differences andadjustments to the carrying value of the fixed assets on completion. INTERQUEST GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2006 11 POST BALANCE SHEET EVENTS On 16 February 2007 the Group entered into a ten-year lease agreement (with afive-year break clause) in respect of new offices in central London. The officeis currently being fitted out for occupation in April 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
InterQuest Group