5th Mar 2007 07:00
Berkeley Scott Group Plc05 March 2007 BERKELEY SCOTT GROUP PLC Results for the 12 months ended 30th September 2006 5 March 2007 Financial and Operational Highlights Since the year end • Tony Reeves and John Bowmer invested £2.5million in the business through a subscription of shares and are now the two largest shareholders in the Group • As a result Tony Reeves and John Bowmer were appointed as Co-Chairmen • Michael Jackson was appointed as a non Executive Director • Today announced the appointment of John Rose as Chief Executive Officer During the year • Turnover increased by 5.2 % to £18m (2005: £17.1m)• Net Fee Income up 3% to £9.5m (2005: £9.3m) • Permanent NFI fell by 5.5 % to £5.3m (2005: £5.6m ) • Temporary NFI increased by 9.5 % to £2.7m (2005: £2.5) • Executive Search NFI increased by 71% to £0.6m (2005: £0.4m)• EBITDA (operating profit before interest, tax, depreciation and amortisation): £0.4m (2005: £Nil)• Loss on ordinary activities before taxation £0.4m (2005: £0.9m) Co-Chairmen Tony Reeves and John Bowmer said: "We have been looking for a recruitment company with a good name and significantpotential for some time now, and Berkeley Scott is such a company. We aredelighted to have secured John Rose, who has extensive sector experience, forour Chief Executive Officer, and we believe that the company is in a goodposition to grow organically and through acquisition. We look forward to rapidlydeveloping the business." Enquiries: Berkeley Scott Group PlcTony Reeves, Co-Chairman 020 7603 6837Will Coker, Chief Financial Officer 01483 414 141 Cardew GroupTim Robertson 020 7930 0777Catherine Maitland Co-Chairmen's statement for the year ended 30 September 2006 We are pleased to present Berkeley Scott's second full set of results sincejoining AIM in December 2004 and the first since we took over as Co-Chairmen atthe end of January 2007. During the period under review, one of significantconsolidation, the Group generated a 5.2% increase in total revenues to £18m(2005: £17.1m) which led to operating profit before interest, tax, depreciationand amortisation (EBITDA) of £400k (2005: £3k). On 30th January 2007, we invested £2.5 million in Berkeley Scott by way of anoffer for subscription and as a result we are now the Group's largest twoshareholders. We identified Berkeley Scott, from a number of possibleopportunities, as a company with the potential to grow rapidly both organicallyand through acquisition. Our first impressions of the Company, in the short timewe have been involved, have confirmed this view. Both of us have extensive experience in the recruitment sector and in growingcompanies by way of enhancements in operational efficiency and through strategicacquisitions. As a first step in expanding the Group, we are delighted to announce theappointment of John Rose as the Company's new Chief Executive Officer. Johncomes with a wealth of industry experience, most recently he was CEO of HudsonUK. The commencement date of his appointment will be confirmed shortly. Berkeley Scott has an excellent market position as a leading provider ofresourcing solutions to the hospitality and leisure sectors and we are activelyseeking to add to the Company's presence within this and complementary sectors.Currently we are reviewing all aspects of the business as the basis fordeveloping the company's growth strategy. As part of this process, we are reviewing the current network of offices acrossthe UK, including the relocation of the head office to London where many of theCompany's existing and potential clients are based. The planning and timing ofthis move is at very early stages but in any event, we intend to retain asignificant office in the Godalming area. In addition, we are looking atconsolidating the current operating structure so as to improve our focus onclient service, and ability to maximise cross-referrals, generate furtheroperating efficiencies and ensure that the business is focused on our corerecruitment strengths. We believe the Company provides a solid platform onto which future acquisitionscan be added and which we will actively pursue. In particular we are seekingtargets that have strong brands, serve attractive niche recruitment sectors andhave sustainable revenues and quality candidate databases. We have beenencouraged by the number of opportunities that exist and this has considerablyreinforced our confidence in the ultimate goal of delivering long termenhancement of shareholder value through improved operating performance. There have been a number of Board changes within the year; Roger Taylor, RodLeefe and Jeremy Hamer all stepped down as a Non Executive Directors and inJanuary 2007, Michael Jackson joined as a Non Executive Director; on 30thJanuary 2007 Roddy Watt, joint founder and Chief Executive, stepped down fromthe Board. We would like to thank the whole Berkeley Scott team for their hard work andcommitment during this period of transition and we look forward to workingtogether as the Company enters a new and exciting period of its development. Anthony H Reeves John P BowmerCo-Chairman and Interim Chief Executive Officer Co-Chairman OPERATING REVIEW Principal activities and Business Review Berkeley Scott Group Plc ("the Group" or "the Company" or "Berkeley Scott"), isa market-leading provider of resourcing solutions to the hospitality and leisuresectors. The Company joined the AIM Market in December 2004. The year was one of considerable consolidation, and one in which the tradingeffectiveness of the business was addressed directly, and enhanced as a resultof a number of measures taken to increase the productivity of the organisation.Whilst there is still some way to go in this regard, considerable progress wasmade. The overall trading performance of the business improved substantially as theyear progressed. The company benefited in particular from organisational changesundertaken in 2005, and a cost reduction programme which was implemented inFebruary and March 2006. The performance of the business was also underpinned bya market which continued to be reasonably buoyant. The hotel sector of ourPermanent recruitment division in particular had a very strong year. Trading Results The total revenue of the business increased by 5.2 % to £18m (2005: £17.1m), andNet Fee Income (revenue less direct costs which are, in the main, the wages paidto Temporary workers) by 3% to £9.5m (2005: £9.3m). Permanent Net Fee Incomefell by 5.5% to £5.3m (2005: £5.6m). Growth in this area had been anticipated;however it was impacted by an unexpected change in the management of thisdivision in January 2006. Temporary Net Fee Income, driven both by high demandand by increasing productivity, made a strong contribution increasing by 9.5% to£2.7m (2005: £2.5m). The Executive Search business, ISIS, achieved a substantiallevel of growth, Net Fee Income increasing by 71% to £0.6m (2005: £0.4m).Finally the Solutions business remained static with Net Fee Income of £0.8m. A significant cost cutting exercise towards the end of the first half ensuredthat increases in the cost base in the first half were arrested and reversed inthe second half. The company recorded an operating profit before interest, tax, depreciation andamortisation ("EBITDA") of £400K (2005: £3k), which, after adding back £73k ofrestructuring related expenditure resulted in an adjusted EBITDA of £473k (2005:£325k). Whilst the business does experience a significant level of seasonality,the second half always being stronger than the first half, the swing in theprofitability of the business was marked, a first half EBITDA loss of £244K,being turned into a second half profit of £644K. The Company recorded a loss before taxation of £388k (2005: £897k loss). Netborrowing including working capital facilities at the end of September was £2.8m(2005: £2.7m) being gearing of 141% (2005: 107%). Operations Review In June 2005, the decision was taken to simplify the organisation structure inorder to create a stronger platform for growth. This reorganisation bedded inthroughout the year and accordingly, the business is in a much stronger positionto progress. However, the view was taken that the central support functions werestill disproportionately large for the company as it stood, and as a result, aprogramme of cost cutting measures was implemented. This has had the effect ofremoving approximately £400k of cost on an annualised basis. The overallheadcount of the organisation reduced over the course of the year by 18% from200 to 164. Partly as a result of these measures, and partly due to the new structure, thestrengthened senior management team, and continuing favourable marketconditions, the company moved from an EBITDA loss of £244k in the first half, toan EBITDA profit of £644k in the second half. Permanent Recruitment Demand continued at a very good level for permanent recruitment services frommost sectors in which the company operates. The hotel sector in particular hashad a very strong year, and restaurants, pubs, bars and catering all fairedwell. Unfortunately, the company continued to experience higher than anticipatedturnover of consultants in this division which was disruptive. Whilst it isanticipated this will now start to slow as a result of the initiatives taken;including the introduction of a structured management appraisal and developmenttool called Destiny, and the establishment of the company's virtual trainingAcademy, the market for high quality recruiters has continued to be verycompetitive. This means that our consultants are being targeted regularly byother recruitment organisations, and attracting the volume and calibre of newrecruits has proved difficult. Accordingly, further steps were taken to addressthis. These included the development of a dedicated internal recruitmentresource, overhaul of our recruitment processes, the introduction of newsoftware to help manage our own recruitment, and the introduction of anincentive scheme to reward our own team members for introducing new employees. During the year, we also directly addressed the skills of the permanentconsulting management team, and the consultant workforce. Our Diploma programmewas run three times during the year with the aim of developing the skills of ourmanagers. More recently, we have appointed a new, highly experienced TrainingManager who overhauled our induction programmes, and much of our skills-basedtraining. Over the course of the year, further work was undertaken to strengthen our ITplatform, and to simplify certain of our operating procedures to enable fasterresponse to client needs, and to maximise the productivity of our consultants,something that has been a challenge over the recent past. We are now starting tosee the results of this evidenced by improving Net Fee Income per capita. Thatsaid, the productivity of our permanent business is yet to be fully realised. Temporary Recruitment Under a new Director of Temporary Recruitment appointed towards the end of theprevious financial year, the temporary recruitment business had a strong year.Revenues and Net Fee Income grew substantially, and the cost base was alsoreduced, thus enhancing productivity per capita. Stability at regional management and team management levels also contributed,and turnover of consultants dropped steadily in this area of the business. Thereducing staff turnover enabled greater emphasis to be placed on businessdevelopment activities, and productivity enhancement. This was further supportedby the implementation of a new front office IT system which has been developedin conjunction with external software providers. This new system, Red Book hadbeen several years in development, and is now being rolled out across thecompany. The process should be finished in this financial year, and shouldenable the company to enjoy further improvements in productivity in due course. Generally, it was a positive and constructive year for Temporary recruitment,much good work being done to strengthen and consolidate existing operations.With continuing positive conditions in most areas of our market, the outlook forfurther revenue and contribution growth from this division is encouraging. Executive Search Our executive search business, ISIS, has had a very good year delivering asignificant profit contribution. Whilst a relatively small part of the companyin terms of headcount and overall revenues, under consistent management thebusiness has moved from strength to strength, and supported and made anincreasing contribution to the business as a whole, introducing business toother divisions wherever possible. It is also fair to say that the reputation of ISIS was greatly enhanced in thelast year. It enjoyed increasing stability amongst the team, with staff turnoverdropping to zero on an annualised basis, by the end of the financial year. Once again, ISIS's markets have remained buoyant, and under continuing strongmanagement, the prospects for growth within this division in the future areencouraging. Resourcing Solutions Our resourcing solutions business performed in line with expectation over theyear. The new management team settled in well and some progress was made. Ouron-line recruitment system, Sourcerer received acclaim, albeit the lead-time onsales is longer than we would like. Our advertising and communications business,BSA&C had some notable wins, and we also secured some significant projectrecruitment wins over the course of the year. Berkeley Scott Group Plc Consolidated profit and loss account for the year ended 30 September 2006 Note 2006 2005 £ £ Turnover 17,976,941 17,063,791 Cost of sales (13,818,049) (12,982,587) ----------- -----------Gross profit 4,158,892 4,081,204 Administrative expenses (4,238,834) (4,686,622) ----------- -----------Operating loss---------------------------- ------ ----------- ----------- EBITDA* 2 399,960 3,366 Depreciation, amortisation and similar (479,902) (608,784)charges ---------------------------- ------ ----------- ----------- (79,942) (605,418)Interest receivable 2,822 513Interest payable and similar charges (310,892) (291,825) ----------- ----------- Loss on ordinary activities before taxation (388,012) (896,730) Tax credit on loss on ordinary activities 3 592 64,494 ----------- -----------Loss on ordinary activities after taxation (387,420) (832,236) Dividends payable (non equity) - (7,551) ----------- -----------Loss on ordinary activities transferred to (387,420) (839,787)reserves =========== =========== Loss per share in pence 4 (4.5) (10.8)(Basic and diluted)Loss per share in pence (continuing 4 (4.5) (9.3)operations)(Basic and diluted) *EBITDA is operating profit before interest, taxation, depreciation andamortisation All recognised gains and losses in the current and prior year are included inthe profit and loss account Berkeley Scott Group Plc Consolidated balance sheet at 30 September 2006 Note 2006 2005 £ £ £ £Fixed assets Intangible assets 2,332,301 2,517,781Tangible assets 807,667 749,749 --------- --------- 3,139,968 3,267,530Current assetsDebtors 3,342,936 3,624,019Cash at bank and in 3,161 3,161hand --------- --------- 3,346,097 3,627,180Creditors: amountsfalling due within (4,299,551) (4,194,952)one year --------- --------- Net current (953,454) (567,772)liabilities --------- ---------Total assets less 2,186,514 2,699,758current liabilitiesCreditors: amountsfalling due after (217,522) (343,346)more than one year --------- --------- 1,968,992 2,356,412 ========= =========Capital and reserves Called up share 5 170,372 170,372capitalShare premium account 6 3,571,738 3,571,738Capital redemption 6 1,834 1,834reserveProfit and loss 6 (1,774,952) (1,387,532)account --------- ---------Shareholders' funds 7 1,968,992 2,356,412 ========= ========= Berkeley Scott Group Plc Consolidated cash flow statement for the year ended 30 September 2006 Note 2006 2005 £ £ £ £Net cash inflow from 8 330,238 129,996operating activities Returns on investmentsand servicing of financeInterest received 2,822 513Interest paid (305,865) (280,992)Interest element offinance lease rental (5,027) (10,833)paymentsSpecial dividend - non - (109,451)equity -------- --------Net cash outflow fromreturns on investment (308,070) (400,763)and servicing of financeTaxationUK corporation tax 592 (41,702) -------- --------Tax paid 592 (41,702) Capital expenditure andfinancial investmentPurchase of tangible (356,731) (300,322)fixed assetsReceipts from sale of 1,069 13,964fixed assets -------- -------- Net cash outflow fromcapital expenditure (355,662) (286,358)and financial investment -------- -------- Cash outflow beforemanagement of liquid (332,902) (598,827)resources and financing Financing Capital element offinance lease rental (47,751) (55,571)paymentsRepayment of loans (100,000) (1,908,333)Share capital issued - 3,071,500Expenses paid inconnection with share - (894,421)issue New loans - 500,000 -------- -------- Cash (outflow) / inflow (147,751) 713,175from financing -------- -------- (Decrease) / Increase in 9 (480,653) 114,348cash in the year ======== ======== Notes forming part of the financial statements for the year ended 30 September2006 1. Accounting policies The financial statements have been prepared under the historical costconvention, and are in accordance with applicable accounting standards. In preparing these financial statements the Group has adopted for the first timeFRS21 'Events after the balance sheet date', FRS22 'Earnings per share' and FRS25 'Financial Instruments: Disclosure and Presentation. The following principal accounting policies have been applied: Basis of preparation This summary financial information comprises that of Berkeley Scott Group Plcand its subsidiaries for the year ended 30th September 2006. The results havebeen prepared using accounting policies consistent with those presented in the2005 financial statements. The preliminary announcement, which does notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985, is an extract from the Group statutory accounts for the year ended30th September 2006, which will be delivered to the Registrar of Companies indue course. The auditors have not yet reported on those accounts. The resultsfor the year ended 30th September 2005 have been extracted from the statutoryaccounts for that period, which have been delivered to the Registrar ofCompanies and on which the auditors gave an unqualified report. Goodwill Goodwill arising on an acquisition of a trade or a subsidiary undertaking is thedifference between the fair value of the consideration paid and the fair valueof the assets and liabilities acquired. It is capitalised and amortised throughthe profit and loss account over the directors' estimate of its useful economiclife of 20 years. Impairment tests on the carrying value of goodwill areundertaken: - at the end of the first full financial year following acquisition; and - in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. Deferred taxation Deferred tax balances are recognised in respect of all timing differences thathave originated but not reversed by the balance sheet date except that therecognition of deferred tax assets is limited to the extent that the Companyanticipates making sufficient taxable profits in the future to absorb thereversal of the underlying timing differences. Deferred tax balances are not discounted. 2. Operating loss Reconciliation of EBITDA to Adjusted EBITDA 2006 2005 £ £EBITDA per consolidated profit and loss 399,960 3,366 Non-recurring costsRestructuring and redundancy costs 39,425 273,766Settlement to Chairman and associated legal fees 33,250 - Exceptional itemCosts relating to the closure of Number One Bureau - 47,386Limited ------------ ----------Adjusted EBITDA 472,635 324,518 ============ ========== 3. Taxation on loss from ordinary activities 2006 2005 £ £Current taxUK corporation tax on results of the year - (41,110)Adjustment in respect of previous periods (592) (23,384) ------------ -----------Total current tax (592) (64,494) ============ =========== The tax assessed for the period is higher than the standard rate of corporationtax in the UK. The differences are explained below. 2006 2005 £ £ Loss on ordinary activities before tax (388,012) (896,730) ============ =========== Loss on ordinary activities at the standard rate ofcorporation tax in the UK of 30% (2005 - 30%) (116,404) (269,019)Effect of:Expenses not deductible for tax purposes 94,641 73,410Capital allowances in advance of depreciation 56,571 51,763Other short term timing differences 4,360 -Adjustment to tax charge of previous period (592) (23,384)Losses utilised (39,168) -Losses carried forward - 91,203Losses carried back - 10,891Charges on income - 642 ------------ -----------Current tax charge for period (592) (64,494) ============ =========== Deferred tax On 30 September 2006, there was an unprovided deferred tax asset as set outbelow. This asset has not been included in the balance sheet as itsrecoverability is uncertain. As at As at 30 September 30 September 2006 2005 £ £Depreciation in excess of Capital Allowances 70,582 13,090Provisions 12,933 10,071Losses carried forward 42,421 85,325 ------------ ----------- 125,936 108,486 ============ =========== 4. Basic Loss per share Loss per ordinary share has been calculated using the weighted average number ofshares in issue during the relevant financial periods. The weighted averagenumber of equity shares in issue was 8,518,615 (2005 - 7,770,968) and the loss,being loss after tax and non equity dividends, was £387,420 (2005 - £839,787).The loss after tax and non equity dividends, on continuing operations was£387,420 (2005: £718,882) Diluted Loss per share Options held in respect of the ordinary shares of the Company do not have adilutive effect on the loss per share calculation in any of the periods coveredby these accounts. 5. Share capital 2006 2005 2006 2005 Number Number £ £Authorised Ordinary shares of 2p each 50,000,000 50,000,000 1,000,000 1,000,000 ---------- --------- -------- -------- 50,000,000 50,000,000 1,000,000 1,000,000 ========== ========= ======== ======== 2006 2005 2006 2005 Number Number £ £Allotted, called up andfully paid Ordinary shares of 2p each 8,518,615 8,518,615 170,372 170,372 ========== ========= ======== ======== Post Balance Sheet Event An EGM was held on 29th January 2007 to approve resolutions authorising theCompany to raise £2.5 million (before expenses) through the issue of 14,285,714new ordinary shares of 2p each to AH Reeves and JP Bowmer. The subscription was recommended by the Board after consultation with a numberof key shareholders. Following admittance of these shares to AIM on 30th January 2007 AH Reeves andJP Bowmer joined the Board as Co-Chairmen, M Jackson joined the Board as a nonexecutive director and DRB Watt stepped down. Funds raised will be used to strengthen the Group's balance sheet. 6. Reserves Share Capital Profit premium redemption & loss account reserve account £ £ £Group At 1 October 2005 3,571,738 1,834 (1,387,532)Loss for the year - - (387,420) ---------- ---------- ----------At 30 September 2006 3,571,738 1,834 (1,774,952) ========== ========== ==========Company At 1 October 2005 3,571,738 1,834 (268,067)Loss for the year - - (175,309) ---------- ---------- ----------At 30 September 2006 3,571,738 1,834 (443,376) ========== ========== ========== 7. Reconciliation of movements in shareholders' funds 2006 2005 £ £Loss for the year (387,420) (832,236)Dividends - (7,551)New share capital subscribed - 2,177,079 ------------ ---------- Net addition to / (deduction from) shareholders' (387,420) 1,337,292funds Opening shareholders' funds 2,356,412 1,019,120 ------------ ----------Closing shareholders' funds 1,968,992 2,356,412 ============ ========== 8. Reconciliation of operating profit to net cash inflow from operatingactivities 2006 2005 £ £Operating loss on ordinary activities (79,942) (605,418)Depreciation 294,422 324,514Amortisation of goodwill 185,480 284,270 Decrease / (Increase) in debtors 281,082 (232,262)(Decrease) / Increase in creditors (354,127) 364,686Loss / (Profit) on disposal of fixed assets 3,323 (5,794) ------------ ----------Net cash inflow from operating activities 330,238 129,996 ============ ========== 9. Reconciliation of net cash flow to movement in net debt 2006 2005 £ £(Decrease) / increase in cash in the year (480,653) 114,348Cash inflow from movement in debt and lease 147,751 1,465,054financing ------------ ----------Change in net debt resulting from cash flows (332,902) 1,579,402 New finance lease - (7,000) ------------ ----------Movement in net debt in the year (332,902) 1,572,402 Net debt at start of year (598,765) (2,171,167) ------------ ----------Net debt at end of year (931,667) (598,765) ============ ========== CONTACT DETAILS Directors AH Reeves JP Bowmer M Jackson WJ Coker Secretary and registered office IMCO Secretary Limited Berkeley House 11-13 Ockford Road Godalming Surrey GU7 1QU Company number 2228050 Auditors BDO Stoy Hayward LLP Connaught House Alexandra Terrace Guildford Surrey GU1 3DA Nominated advisor and broker Daniel Stewart & Company plc Becket House 36 Old Jewry London EC2R 8DD Bankers Royal Bank of Scotland 280 Bishopsgate London EC2 4RB Registrars Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield, HD8 0LA The Annual General Meeting for Berkeley Scott Group plc will be held on 28 March2007. The statutory accounts will be issued prior to this meeting and filed indue course with the Registrar of Companies. Copies will be available forinspection at the Company's Registered Office. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Kellan Group