28th Feb 2005 07:01
Robert Walters PLC28 February 2005 Robert Walters plc("Robert Walters" or the "Group") Preliminary Results for the year ended 31 December 2004 Robert Walters, the global recruitment specialist, announces strong growth innet fee income and operating profit in all the Group's divisions. Operatingprofit up 255% to £7.1m. Financial Highlights • Gross profit ("net fee income") up 29% to £67.0m (2003: £52.0m)• Operating profit up 255% to £7.1m (2003: £2.0m)• Profit before taxation up 112% to £7.2m (2003: £3.4m)*• Earnings per share up 112% to 5.5p (2003: 2.6p)• Cash at 31 December 2004 of £9.7m (2003: £15.9m)• Total dividend maintained at 3.15p per ordinary share *After £0.1m foreign exchange translation loss (2003: £1.2m gain) Robert Walters, Chief Executive, commented: "A shortage in supply of qualified professionals and a growing demand from ourclients is combining to drive growth. Investment continues in training and in driving new services and systems acrossour offices world-wide. We are increasingly flexing the power of our global network to the advantage ofa growing number of multinationals for whom we are a key supplier of choice." 28 February 2005 Enquiries: Robert Walters plc Tel: 020 7379 3333Robert Walters, Chief ExecutiveIan Nash, Finance Director College Hill Tel: 020 7457 2020Matthew Gregorowski [email protected] CHAIRMAN'S STATEMENT I am pleased to report a strong result for the Group in the year to 31 December2004. Turnover for the year was £188.2m (2003: £156.8m) producing a 29% increase ingross profit ("net fee income") to £67.0m (2003: £52.0m). Operating profitbefore the amortisation of goodwill was £7.5m (2003: £2.4m). Profit before taxrose to £7.2m (2003: £3.4m), which includes a foreign exchange translation lossof £0.1m (2003: gain of £1.2m). The improved trading conditions experienced in the first half of 2004 continuedas anticipated throughout the year. In the UK and Asia Pacific, the Groupcontinued to trade strongly. Continental Europe, which was the last of ourmarkets to be hit by the economic downturn, has now seen a return of businessconfidence and all of our operations there have returned to growth. Within our permanent recruitment business, the growth in net fee income has beendriven by increases in both recruitment volumes and rates. Rate increases haveresulted from the shortage of suitably qualified professionals; partly arisingfrom the cutbacks in training programmes over the last three years. We are alsobeginning to see evidence of salary increases above inflation for professionallyqualified candidates. Our contract business, which showed no revenue growth in the first half of theyear, achieved significant growth in the second half and we now feel that thepressure on margins in this area has abated. The Board recommends maintaining the full year dividend at 3.15p per share. The current year has started well and we believe that net fee income for thefirst quarter of 2005 will exceed that achieved in the same period of 2004. Weremain optimistic that the improved economic conditions we have seen in all ofthe Group's markets will be sustained throughout 2005. Our investment inincreased headcount (from 736 to 915 during 2004) ensures that the Group is wellplaced to take advantage of future growth opportunities. In summary, the Group is in a good position to grow its market share,productivity and profitability in 2005. Timothy BarkerChairman CHIEF EXECUTIVE'S STATEMENT 2004 was the first year of strong profit growth for the Group since the businessexperienced a downturn in 2001. This was due to the favourable economicconditions across the Group's markets, combined with the dedication, hard workand loyalty of the employees of Robert Walters. The considerable investment made by the Group over the last three years to addstrength and depth to our existing international operations and develop ourstaff, structures and systems is now starting to deliver value as the marketimproves. UNITED KINGDOM Turnover in the UK was £102.3m (2003: £87.2m) and net fee income increased by34% to £31.5m (2003: £23.6m). This produced an operating profit of £1.8m (2003:£0.0m). The shortage in supply of recently qualified professionals coupled with anincrease in demand in the market underpinned the growth in permanent recruitmentacross all of our UK operations. The use of our global network to provideinnovative solutions to attract professionally qualified candidates to meet thisshortfall has allowed the Group to be a key supplier to many of our clients. TheGroup's global network has also assisted us to meet the increased demand forcontractors that was evident in the second half of the year and resulted insignificant year-on-year growth in this area of business. All of our UK disciplines increased both their net fee income and operatingprofit. Our core discipline, Finance and Accounting, grew significantly in bothpermanent and contract net fee income. At the end of 2004 we opened an Edinburghoffice, in line with our objective of establishing a greater regional presence. The resurgence in the IT sector continued and our IT operation grew both net feeincome and operating profit. Our newer UK businesses, operating in the HR andLegal disciplines, have grown rapidly in 2004 and are both profitable. Theyoffer excellent growth prospects for the future. CONTINENTAL EUROPE Turnover was £11.9m (2003: £8.4m) and net fee income increased by 40% to £6.6m(2003: £4.7m), resulting in an operating profit of £0.4m (2003: operating loss£0.4m). The improved market conditions experienced in the second half of 2004 were keyto the turnaround in this region. In all of our significant operations bothpermanent and contract net fee income grew year-on-year and these businesses arenow profitable. We have increased our headcount in all these operations inanticipation of their continued development. The key driver of net fee income in our Dutch and Belgian operations was growthin permanent recruitment levels. In France, we are particularly pleased toreport an 80% increase in net fee income, driven by an excellent performance inboth our permanent recruitment business and Walters Interim, our newlyestablished contract business. We believe 2004 has provided a solid foundation for further success in ourContinental European markets. ASIA PACIFIC In Asia Pacific, we have continued to deliver growth in turnover, net fee incomeand operating profit in what is the Group's second largest regional market.Turnover increased to £70.0m (2003: £57.5m), net fee income by 24% to £25.5m(2003: £20.7m) and operating profit doubled to £4.8m (2003: £2.4m). All of our operations in this region increased both net fee income and operatingprofits. Consistent with our business in the UK, there was strong growth inpermanent net fee income coupled with strong growth in contract net fee incomein the second half of the year. Our six offices in Australia and New Zealand continued to develop their strongregional presence and delivered growth in operating profit. Our Singapore officehad another excellent year with strong growth in net fee income and operatingprofit. Our Hong Kong office has shaken off the difficulties of 2003, doublingnet fee income and turning a loss into a healthy profit. Our Japanese operationcontinued to make good progress, almost doubling operating profit in a market webelieve offers a great deal of potential, and we have increased consultantnumbers by over 50%. We continue to focus on strengthening our position within these markets, whilstalso reviewing the potential of entering new markets in this region. OTHER INTERNATIONAL Other international comprises the USA, Ireland and South Africa. Turnover was£4.1m (2003: £3.8m), net fee income £3.4m (2003: £3.0m) and operating profit£82,000 (2003: £28,000). Our operation in New York has increased its operating profit in improved marketconditions. In Dublin, in line with our intention to build our presence in thismarket, we have doubled the number of consultants and are close to achievingmonth-on-month profitability. Johannesburg, although loss making in 2004,remains a key market for candidate sourcing. RESOURCE SOLUTIONS Resource Solutions is the Group's outsourcing business and manages therecruitment process for a number of major clients across the world. The improvedmarket conditions also benefited this operation with clients requiring more ofour personnel to handle their recruitment needs as well as an increased numberof client contractors. This resulted in a 21% increase in net fee income. Webelieve that, with recruitment becoming more sophisticated and the buyers ofrecruitment services more demanding, Resource Solutions combined with the RobertWalters brand provides a formidable service offering to attract and retainclients. As such, we continue to invest in the infrastructure of ResourceSolutions to provide our clients with a market leading offering. GENERAL OVERVIEW Both the Group and the markets in which we operate are in good shape. Thecontinued development of our employees and brand, under our experiencedmanagement team, provides an excellent platform to maintain the Group's profitgrowth in the future. Robert WaltersChief Executive FINANCIAL REVIEWTURNOVER Turnover for the Group is the total income from the placement of permanent andcontract staff and therefore includes the remuneration costs of contractcandidates and the total cost of advertising recharged to clients. It alsoincludes outsourcing fees, consultancy fees and the net income from payrollingcontracts charged by Resource Solutions to its clients. Turnover increased 20.0% to £188.2m (2003: £156.8m) with 56.3% of the annualtotal being generated in the second half of the year. The increase in turnover was primarily due to the upturn in the Robert Walterscontract business and its associated candidate remuneration costs, as well as ageneral improvement in all areas of the business. GROSS PROFIT (NET FEE INCOME) Net fee income is the total placement fees of permanent candidates, the marginearned on the placement of contract candidates and income from advertising. Italso includes the outsourcing, consultancy and payrolling margins earned byResource Solutions. Net fee income for the year increased by 29.0% to £67.0m (2003: £52.0m). Net feeincome was £36.3m in the second half of 2004 compared with £30.8m in the firsthalf (2003: 1H £25.3m, 2H £26.7m). Net fee income has shown a quarter-on-quarterincrease over the last two years. Net fee income gross margin has increased to 35.6% (2003: 33.1%) partly due to agreater proportion of permanent recruitment fees, but also due to improvedmargins in both the Robert Walters contract business and Resource Solutionspayroll contracts. OPERATING PROFIT Administrative expenses were £59.9m (2003: £49.9m) including a goodwill chargeof £0.4m (2003: £0.4m). The principal reason for this increase was the growth inthe Group average headcount from 730 in 2003 to 846 in 2004, coupled with higherbonus payments as a result of the improved profitability of the Group. The Group has focused heavily on consultant productivity during the year andsucceeded in improving the average level of net fee income per consultantdespite the high number of new hires. The increase in net fee income outweighedthe increase in the cost base resulting in growth in the Group's operatingprofit to £7.1m (2003: £2.0m). INTEREST AND FINANCING COSTS The Group incurred a foreign exchange loss of £0.1m (2003: gain of £1.2m). Thegain in 2003 was due primarily to the translation of the Group's Australiandollar inter-company account. The foreign exchange exposure to future movementsin the Australian dollar was greatly reduced in the latter half of 2003, as aresult of a significant reduction in the inter-company trading balance. Interest received in 2004 was £0.3m (2003: £0.2m). TAXATION The tax charge in 2004 was £3.0m (2003: £1.3m) which gives an effective rate of41.2% (2003: 38.4%). As in 2003, the tax rate is higher than the standard UKrate of taxation, mainly due to disallowable items and profits generated in hightax jurisdictions. EARNINGS PER SHARE AND DIVIDENDS Basic earnings per share were 5.5p (2003: 2.6p). The weighted average number ofshares for the year was 78.0m (2003: 81.1m). A final dividend of 2.1p (2003:2.1p) per ordinary share is being proposed by the Board. Together with theinterim dividend of 1.05p (2003: 1.05p) per ordinary share paid in October 2004,the total dividend would amount to 3.15p (2003: 3.15p) per ordinary share. Thefinal dividend, which amounts to £1.6m, will be paid on 27 May 2005 to thoseshareholders on the register at 6 May 2005. BALANCE SHEET The Group had net assets of £31.1m at 31 December 2004 (2003: £31.6m) includinggoodwill of £6.5m (2003: £6.8m). The reduction in the Group net assets is mostlyaccounted for by the retained profits for the year, offset by the acquisition inthe market of £1.9m of the Group's own shares for various incentive schemeswhich are shown in the balance sheet as a reduction in shareholders' funds.There was also an adverse foreign exchange reserves movement of £0.4m. In 2005, the Company will seek to renew the powers which were granted at the AGMin 2004 to enable it to make market purchases of its shares. CASH FLOW AND NET CASH POSITION At 31 December 2004, the Group had cash balances of £9.7m (2003: £15.9m). Cashflow from operating activities was £1.1m (2003: £3.4m). The significant payments made from operational cash flow were £1.7m of taxation,£2.5m of dividends, £1.2m of capital expenditure and £1.9m for the acquisitionof the Group's own shares. Surplus cash balances are generally invested with financial institutions withfavourable credit ratings that offer competitive rates of return. The Group alsohas an agreed £10.0m overdraft facility available which is due for renewal inNovember 2005. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) The 2004 financial year end will be the last reporting period prior to theintroduction of IFRS. The Group will report its interim results in 2005 inaccordance with IFRS, together with the restatement of 2004 on a comparablebasis. Ian NashGroup Finance Director Consolidated profit and loss accountFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £'000 £'000TurnoverContinuing operations 188,235 156,835Cost of sales (121,212) (104,885)Gross profit 67,023 51,950Goodwill (396) (396)Other administrative expenses (59,519) (49,546)Administrative expenses (59,915) (49,942) Operating profit 7,108 2,008Net finance income 135 1,398Profit on ordinary activities before 7,243 3,406taxationTax on profit on ordinary activities (2,987) (1,308)Profit on ordinary activities after 4,256 2,098taxationDividends (2,433) (2,453)Retained profit (loss) for the year 1,823 (355) Earnings per share (pence):Basic 5.5 2.6Diluted 5.2 2.5 Consolidated statement of total recognised gains and lossesFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £'000 £'000Profit for the year 4,256 2,098Foreign currency translation differences (407) 593Total recognised gains for the year 3,849 2,691 Consolidated balance sheetAS AT 31 DECEMBER 2004 2004 2003 £'000 £'000Fixed assetsGoodwill 6,451 6,847Tangible assets 3,460 3,474 9,911 10,321Current assetsDebtors 38,381 23,389Cash at bank and in hand 9,712 15,915 48,093 39,304Creditors: Amounts falling due within one year (26,862) (17,832)Net current assets 21,231 21,472 Total assets less current liabilities 31,142 31,793Provision for liabilities and charges - (183)Net assets 31,142 31,610 Capital and reservesCalled-up share capital 16,935 16,935Share premium account 77,816 77,816Other reserves (74,034) (74,034)Own shares held (8,232) (6,348)Foreign exchange reserves (481) (74)Profit and loss account 19,138 17,315Equity shareholders' funds 31,142 31,610 Consolidated cash flow statementFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £'000 £'000Net cash inflow from operations 1,067 3,423Returns on investments and servicing of finance 281 227Taxation (1,707) (786)Capital expenditure and financial investment (1,162) (865)Financing (1,884) (3,500)Equity dividends paid (2,467) (2,453)Decrease in cash in year (5,872) (3,954) Notes to the accounts: The 2004 Annual Report and Accounts will be posted to shareholders by 31 March2005. Copies may be obtained after this date from the Company Secretary, 55Strand, London WC2N 5WR. The 2004 Annual General Meeting of Robert Walters plc will be held on 4 May 2005at 55 Strand, London WC2N 5WR. 1. Basis of accounting The principal accounting policies of the Group have been applied consistently inall aspects throughout the current year and are also consistent with the 2003audited annual financial statements. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2004 or 2003, but is derivedfrom those accounts. Statutory accounts for 2003 have been delivered to theRegistrar of Companies and those for 2004 will be delivered following theCompany's Annual General Meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under s237 (2) ors237 (3) of the Companies Act 1985. The preliminary announcement was approved by the Directors on 25 February 2005. 2. Segmental information 2004 2003 £'000 £'000 i) Turnover: UK 102,262 87,231 Continental Europe 11,942 8,387 Asia Pacific 69,975 57,457 Other 4,056 3,760 188,235 156,835 ii) Gross profit: UK 31,457 23,556 Continental Europe 6,643 4,748 Asia Pacific 25,541 20,654 Other 3,382 2,992 67,023 51,950 iii) Profit (loss) on ordinary activities before interest and tax: UK 1,816 (6) Continental Europe 397 (367) Asia Pacific 4,813 2,353 Other 82 28 Operating profit 7,108 2,008 Net finance income 135 1,398 Profit on ordinary activities before tax 7,243 3,406 iv) Net assets: UK 12,220 15,913 Continental Europe 2,192 2,120 Asia Pacific 17,047 13,694 Other (317) (117) 31,142 31,610 The analysis of turnover by destination is not materially different to theanalysis by origin. The Directors believe there to be only one class of business throughout 2004 and2003. 3. Tax on profit on ordinary activities 2004 2003 £'000 £'000 Current tax charge: Corporation tax - UK 948 333 Corporation tax - Overseas 2,262 1,549 Double tax relief - (150) Adjustments in respect of prior periods: Corporation tax - UK (167) (171) Corporation tax - Overseas 384 (233) 3, 427 1, 328 Deferred Tax: Deferred tax - UK (189) (27) Deferred tax - Overseas (142) (493) Adjustments in respect of prior periods: Deferred tax - UK (109) 202 Deferred tax - Overseas - 298 (440) (20) 2, 987 1, 308 4. Equity dividends 2004 2003 £'000 £'000 Interim dividend paid of 1.05p per share (2003:1.05p) 811 889 Final dividend proposed of 2.1p (2003 : 2.1p) 1,622 1,684 Adjustment in respect of prior year - (120) 2,433 2,453 5. Earnings per share The calculation of earnings per ordinary share is based on the profit onordinary activities after taxation and the weighted average number of ordinaryshares of Robert Walters plc. 2004 2003 £'000 £'000 Profit on ordinary activities after taxation 4,256 2,098 2004 2003 NUMBER NUMBER OF SHARES OF SHARES Weighted average number of shares: Shares in issue 84,676,927 84,659,941 Own shares held (6,701,724) (3,516,692) For basic earnings per share 77,975,203 81,143,249 Outstanding share options 4,643,560 3,051,985 For diluted earnings per share 82,618,763 84,195,234 6. Goodwill £'000 Cost: At 1 January 2004 and 31 December 2004 8,617 Amortisation: At 1 January 2004 1,770 Charge for the year 396 At 31 December 2004 2,166 Net book value: At 1 January 2004 6,847 At 31 December 2004 6,451 7. Reconciliation of movements in shareholders' funds 2004 2003 £'000 £'000 Profit for the year 4,256 2,098 Foreign currency translation differences (407) 593 3,849 2,691 Dividend (2,433) (2,453) Own shares purchased (1,884) (3,516) New shares issued - 16 Net decrease in shareholders' funds (468) (3,262) Opening shareholders' funds 31,610 34,872 Closing shareholders' funds 31,142 31,610 8. Analysis of cash flow 2004 2003 £'000 £'000 Reconciliation of operating profit to net cash inflow: Operating profit 7,108 2,008 Depreciation charges 1,128 1,495 Goodwill amortisation 396 396 Loss on disposal of tangible fixed assets 42 418 Increase in debtors (14,465) (784) Increase (decrease) in creditors 7,041 (293) (Decrease) increase in provision (183) 183 Net cash inflow from operating activities 1,067 3,423 Interest received 281 227 Net cash inflow 281 227 Taxation UK Corporation tax paid (899) (105) Foreign tax paid (808) (681) Net cash outflow (1,707) (786) Capital expenditure Payments to acquire tangible fixed assets (1,162) (865) Net cash outflow (1,162) (865) Financing Issues of ordinary share capital - 16 Own shares purchased (1,884) (3,516) Net cash outflow (1,884) (3,500) 9. Analysis and reconciliation At 1 Exchange At 31 January movement December 2004 Cash flows on cash 2004 £'000 £'000 £'000 £'000 Analysis of change in netfunds:Cash at bank and in hand 15,915 (5,872) (331) 9,712Net funds 15,915 (5,872) (331) 9,712 2004 2003 £'000 £'000Decrease in cash in the year (5,872) (3,954)Foreign currency translationdifferences (331) 659Movement in net funds (6,203) (3,295)Net funds at 1 January 15,915 19,210Net funds at 31 December 9,712 15,915 10. Dividend The dividend will be paid on 27 May 2005 to those shareholders on the registerat 6 May 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Robert Walters