5th Mar 2009 07:00
InterQuest Group plc
Preliminary results for the year ended 31 December 2008
The Board of InterQuest Group plc ("InterQuest" or "the Group") is pleased to announce its audited preliminary results for the year ended 31 December 2008.
Highlights
Revenue up 22% to £105.5m (2007: £86.8m)
Gross profit up 19% to £15.3m (2007: £12.9m)
EBITA (before IFRS 2 and amortisation charges) up 20% to £5.4m (2007: £4.5m)
Profit before taxation up 19% to £3.7m (2007: £3.1m)
Basic adjusted earnings per share up 15% to 12.7 pence (2007: 11.0 pence)
Basic earnings per share up 10% to 9.0 pence (2007: 8.2 pence)
Net cash from operating activities £4.9m (2007: £2.7m)
Net debt reduced from £9.3m at start of 2008 to £5.5m at 31 December 2008
Maiden dividend of 1 pence per share
Gary Ashworth, Executive Chairman, commented:
"In 2008 the Group has delivered continuing growth in revenue, gross profit, EBITA, profit before taxation and earnings per share. We have reported the best set of figures in our seven year history. Very importantly in these difficult times we have reduced our net debt quite substantially from £9.3m to £5.5m and strengthened our balance sheet for the future. We believe that this is a testament to our niche-focused specialist business model and the commitment of our people.
The current economic environment is uncertain, however, we believe that our specialist business model, strong bias towards contract recruitment and healthy balance sheet will stand us in good stead during 2009 and gives us a robust platform for future growth when the economy improves."
Enquiries
For further information please contact:
|
InterQuest Group plc |
020 7025 0100 |
|
Gary Ashworth, Executive Chairman |
|
|
Ross Eades, Chief Executive |
|
|
Michael Joyce, Finance Director |
|
|
Cenkos Securities Limited |
020 7397 8900 |
|
Ivonne Cantu |
Chairman's and Chief Executive's Review
We are pleased to present a solid set of results for 2008. It has been another year of growth and progress and we are reporting our highest revenue and profit to date.
Our model of championing separately branded, specialist IT recruitment companies, providing our clients with key people in mission critical areas, has proved robust and resilient to a general downturn in the overall recruitment market.
However, we are not immune from the effects of the economy and in the second half of 2008 our revenue from permanent recruitment activities decreased by approximately one-third from that achieved in the first half. Demand for contract staff remains buoyant and this now comprises almost 80% of our gross profit.
The 2007 acquisitions of ecrm People Limited and Intelect Recruitment plc have been fully integrated into the Group and their business leaders have become valued contributors to our Board of Management.
Sand Resources, which is primarily focussed upon the public sector, had a particularly good year reporting 25% growth in gross profit. The public sector now accounts for approximately one-third of our overall revenue.
During the year, six different strategic action groups (SAG's) were formed to address and solve specific challenges facing the group. The outcomes from these groups have resulted in several new initiatives including increased cross over of business between Group companies, entry into new specialist areas in the growing compliance and risk markets and more sophisticated training, marketing and PR across the Group.
A new division, specialising in the recruitment of pharmaceutical IT staff was established in July and has started to make inroads into mainland European clients.
The training academy, which is the development bedrock for many of our "home grown" fee earners has continued to be a huge success, producing many of our successful sales staff. In addition, we have developed a series of 15 training modules to help experienced recruiters' hone their skills in an increasingly competitive market.
During the first quarter of 2008 we successfully undertook a Group rebranding exercise to strengthen our corporate image and unify the Group by bridging all our individual brands with a common link. We revamped all our corporate communications including our websites. This has helped to underpin sustainable long-term growth for the Group.
In the final quarter of 2008 we launched IQ Equity which aims to back teams of recruiters wanting a stake in their own IT recruitment business. We are in discussions with parties which may result in InterQuest using its training, finance and infrastructure to start new businesses with shared ownership in line with the group's niche brand strategy.
During the course of the year we relocated one of our specialist brands into our Tunbridge Wells office which now houses three operating divisions. As a result, we were able to close our office in Bexleyheath and benefit from efficient use of shared services and reduced office costs.
Group net debt has reduced over the year from £9.3m to £5.5m and debtor days were reduced to 45 days in December. Our strong relationship with our bankers has continued and we look forward to their support and keen pricing, in the years to come.
We are delighted to announce the Group's maiden dividend of 1 pence per share.
Current trading and prospects
In the first two months of trading since the year end we have increased the number of contractors working on site at our clients by 3% however permanent recruitment remains difficult and is running at a similar level to the last quarter of 2008.
Clients are still recruiting in all of our business areas, some aggressively in the public sector and compliance categories. Furthermore, vacancies are starting to be released from customers who have been prevented from hiring due to headcount freezes over the last few months. We are keeping a watchful eye on costs, have negotiated keener prices with suppliers for many central services and have re-aligned our cost base to reflect the drop in demand for permanent placement numbers.
Although the financial results for 2009 are likely to be materially lower than 2008 we remain committed to build on our strong foundations so that the Group is positioned for strong growth when the economy improves.
Finance Director's Review
Profit and loss account
Revenue (all from continuing operations) grew by 22% during 2008 to £105.5m (2007: £86.8m). The two acquisitions made in 2007, Intelect Recruitment Plc (July) and ecrm People Limited (September) contributed a full year of revenues and profits in 2008.
Gross profit increased by £2.4m or 19% to £15.3m (2007: £12.9m). Our gross margin percentage decreased slightly from 14.9% to 14.5% as a result of an increased bias towards contract recruitment which accounted for 68% of our gross profit in 2007 and 71% in 2008.
Cash based EBITA (earnings before interest, tax, amortisation of goodwill and IFRS 2 share based payment charge) increased by 20% to £5.4m (2007: £4.5m).
The intangible amortisation charge increased to £1.0m (2007: £0.7m) reflecting the full year impact of the amortisation on the two 2007 acquisitions.
The net interest charge was steady at £0.5m (2007: £0.5m) however this should decrease in 2009 as the Group has reduced net debt as noted below.
Profit before tax increased by 19% to £3.7m (2007: £3.1m).
Tax on profits was £1.0m representing an effective tax rate of 27% as the Group benefitted from a deferred tax credit arising from the amortisation of intangible assets.
Earnings per share and dividend
Basic earnings per share increased by 10% to 9.0 pence in 2008 (2007: 8.2 pence). When the effect of non-cash and non-trading items, being amortisation and the IFRS 2 share based payment charge, are removed the basic adjusted earnings per share was 12.7 pence in 2008 representing an increase of 15% from 11.0 pence in 2007. See note for details of the calculation.
A maiden dividend of 1 pence has been proposed.
Balance sheet, cash flow and financing
The Group's net assets increased by £2.8m to £18.6m at 31 December 2008 (2007: £15.8m), the majority of this was due to the retained profit of £2.7m for the year.
Improved profitability and tight control of working capital delivered £6.3m of operating cash flow (before tax and interest payments). The Group paid £0.6m of deferred consideration in cash in respect of the acquisitions of Sand Resources, ecrm People and Intelect Recruitment; £1.4m of corporation tax and £0.5m of interest during the year. Net capital expenditure was £0.1m and a small number of new shares were issued during the year to staff exercising share options, which raised £0.1m of cash.
As a result of these cash flows, net debt decreased from £9.3m at the start of the year to £5.5m at the end of 2008.
Group background
The InterQuest Group is a specialist IT recruitment business providing contract and permanent recruitment services within niche disciplines in the UK and Europe. The Group currently comprises seven separately branded specialist divisions covering a broad range of skill sets and industries including Public Sector, SAP, Oracle, CRM Testing, Banking, Insurance, Retailing, Pharmaceuticals, Media, Analytics, Infrastructure and Communications with over 1,000 IT contractors working on assignment and 160+ permanent staff in 5 offices in the UK.
Audited condensed consolidated income statement
|
2008 |
2007 |
|
|
Note |
£'000 |
£'000 |
|
Revenue |
105,525 |
86,772 |
|
Cost of sales |
(90,201) |
(73,864) |
|
------------ |
------------ |
|
|
Gross profit |
15,324 |
12,908 |
|
Amortisation |
(1,011) |
(741) |
|
Other administrative expenses |
(10,036) |
(8,491) |
|
------------ |
------------ |
|
|
Total administrative expenses |
(11,047) |
(9,232) |
|
------------ |
------------ |
|
|
Operating profit |
4,277 |
3,676 |
|
Finance costs |
(551) |
(535) |
|
------------ |
------------ |
|
|
Profit before taxation |
3,726 |
3,141 |
|
Income tax expense 4 |
(990) |
(741) |
|
------------ |
------------ |
|
|
Profit for the year |
2,736 |
2,400 |
|
============ |
============ |
|
|
Earnings per share from both total and continuing operations: |
||
|
Pence |
Pence |
|
|
Basic earnings per share 5 |
9.0 |
8.2 |
|
============ |
============ |
|
|
Diluted earnings per share 5 |
8.5 |
7.4 |
|
============ |
============ |
|
All results for the Group are derived from continuing operations in both the current and preceding periods.
The accompanying notes form an integral part of this condensed consolidated report.
Audited condensed consolidated balance sheet
|
31 December 2008 |
31 December 2007 |
||
|
Note |
£'000 |
£'000 |
|
|
ASSETS |
|||
|
Non-current assets |
|||
|
Property, plant and equipment |
393 |
488 |
|
|
Goodwill 6 |
14,607 |
15,183 |
|
|
Intangible assets 6 |
2,881 |
3,892 |
|
|
------------ |
------------ |
||
|
Total non-current assets |
17,881 |
19,563 |
|
|
------------ |
------------ |
||
|
Current assets |
|||
|
Trade and other receivables |
17,018 |
18,661 |
|
|
Cash and cash equivalents 7 |
11 |
135 |
|
|
------------ |
------------ |
||
|
Total current assets |
17,029 |
18,796 |
|
|
------------ |
------------ |
||
|
Total assets |
34,910 |
38,359 |
|
|
------------ |
------------ |
||
|
LIABILITIES |
|||
|
Current liabilities |
|||
|
Trade and other payables |
(8,412) |
(9,363) |
|
|
Financial liabilities - borrowings 7 |
(5,544) |
(9,398) |
|
|
Current tax payable |
(730) |
(833) |
|
|
Deferred consideration |
(717) |
(664) |
|
|
------------ |
------------ |
||
|
Total current liabilities |
(15,403) |
(20,258) |
|
|
------------ |
------------ |
||
|
Non-current liabilities |
|||
|
Deferred consideration |
(200) |
(1,495) |
|
|
Deferred income tax liabilities |
(674) |
(768) |
|
|
------------ |
------------ |
||
|
Total non-current liabilities |
(874) |
(2,263) |
|
|
------------ |
------------ |
||
|
Total liabilities |
(16,277) |
(22,521) |
|
|
------------ |
------------ |
||
|
Net assets |
18,633 |
15,838 |
|
|
============ |
============ |
||
|
EQUITY |
|||
|
Share capital |
306 |
301 |
|
|
Share premium account |
8,479 |
8,344 |
|
|
Retained earnings |
9,461 |
6,916 |
|
|
Share based payment reserve |
387 |
277 |
|
|
------------ |
------------ |
||
|
Total equity |
18,633 |
15,838 |
|
|
============ |
============ |
||
The accompanying notes form an integral part of this condensed consolidated report.
Audited condensed consolidated statement of changes in equity
|
Share capital |
Share premium account |
Retained earnings |
Share based payment reserve |
Total equity |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 1 January 2007 |
287 |
7,383 |
4,526 |
189 |
12,385 |
|
Profit for the year |
- |
- |
2,400 |
- |
2,400 |
|
------------ |
------------ |
------------ |
------------ |
------------ |
|
|
Total recognised income and expense |
- |
- |
2,400 |
- |
2,400 |
|
Deferred tax on employee share options |
- |
- |
(10) |
- |
(10) |
|
Movement in share based payment reserve |
- |
- |
- |
88 |
88 |
|
Issue of share capital |
14 |
961 |
- |
- |
975 |
|
------------ |
------------ |
------------ |
------------ |
------------ |
|
|
Balance at 31 December 2007 |
301 |
8,344 |
6,916 |
277 |
15,838 |
|
============ |
============ |
============ |
============ |
============ |
|
|
Balance at 1 January 2008 |
301 |
8,344 |
6,916 |
277 |
15,838 |
|
Profit for the year |
- |
- |
2,736 |
- |
2,736 |
|
------------ |
------------ |
------------ |
------------ |
------------ |
|
|
Total recognised income and expense |
- |
- |
2,736 |
- |
2,736 |
|
Deferred tax on employee share options |
- |
- |
(191) |
- |
(191) |
|
Movement in share based payment reserve |
- |
- |
- |
110 |
110 |
|
Issue of share capital |
5 |
135 |
- |
- |
140 |
|
------------ |
------------ |
------------ |
------------ |
------------ |
|
|
Balance at 31 December 2008 |
306 |
8,479 |
9,461 |
387 |
18,633 |
|
============ |
============ |
============ |
============ |
============ |
The accompanying notes form an integral part of this condensed consolidated report.
Audited condensed consolidated cash flow statement
|
2008 |
2007 |
|
|
Note |
£'000 |
£'000 |
|
Cash flows from operating activities |
||
|
Profit after taxation |
2,736 |
2,400 |
|
Adjustments for: |
||
|
Depreciation |
239 |
160 |
|
Profit on sale of assets |
(1) |
- |
|
Share based payment charge |
110 |
88 |
|
Finance costs |
551 |
535 |
|
Amortisation |
1,011 |
741 |
|
Income tax expense |
990 |
741 |
|
Decrease/(increase) in trade and other receivables |
1,643 |
(2,186) |
|
(Decrease)/increase in trade and other payables |
(977) |
856 |
|
------------ |
------------ |
|
|
Cash generated from operations |
6,302 |
3,335 |
|
Income taxes paid |
(1,436) |
(586) |
|
------------ |
------------ |
|
|
Net cash from operating activities |
4,866 |
2,749 |
|
------------ |
------------ |
|
|
Cash flows from investing activities |
||
|
Purchase of property, plant and equipment |
(171) |
(356) |
|
Acquisition of subsidiaries net of cash acquired |
(2) |
(5,773) |
|
Payment of deferred consideration |
(610) |
(622) |
|
Proceeds from sale of equipment |
31 |
- |
|
------------ |
------------ |
|
|
Net cash used in investing activities |
(752) |
(6,751) |
|
------------ |
------------ |
|
|
Cash flows from financing activities |
||
|
Proceeds from issue of share capital |
140 |
312 |
|
Net (decrease) / increase in discounting facility |
(2,999) |
3,952 |
|
Repayment of hire purchase liabilities |
- |
(22) |
|
Interest paid |
(551) |
(535) |
|
------------ |
------------ |
|
|
Net cash from financing activities |
(3,410) |
3,707 |
|
------------ |
------------ |
|
|
Net increase / (decrease) in cash and cash equivalents |
704 |
(295) |
|
Cash and cash equivalents at beginning of year |
(860) |
(565) |
|
------------ |
------------ |
|
|
Cash and cash equivalents at end of year 7 |
(156) |
(860) |
|
============ |
============ |
Notes to the condensed unaudited consolidated report
1 Nature of operations and general information
InterQuest Group plc and its subsidiaries' ("the Group") principal activity is the provision of IT recruitment solutions in the United Kingdom. The Group is one of the UK's leading staffing businesses in the information and communications technology sector. The Group comprises seven specialist niche businesses operating from five UK locations, combined with a centralised finance and administration function.
InterQuest Group plc is the Group's ultimate parent company. It is incorporated and domiciled in England and Wales. The address of InterQuest Group plc's registered office, which is also its principle place of business, is 16-18 Kirby Street, London, EC1N 8TS. InterQuest Group plc's shares are listed on the Alternative Investment Market (AIM).
2 Basis of preparation
The financial information in this report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2008 were authorised for issue by the Board of Directors on 4 March 2009 and signed on the Board's behalf by Michael Joyce and will be filed with the Registrar of Companies in due course. The auditor's report on those accounts was unqualified and did not contain a statement made under Section 237(2) or Section 237(3) of the Companies Act 1985.
The Group's consolidated financial statements are presented in thousands of Pounds Sterling (£'000). The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union (EU) and company law applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention, except for financial instruments.
3 Summary of significant accounting policies
The same accounting policies, presentation and methods of computation are followed in this condensed consolidated report as were applied in the preparation of the Group's annual financial statements for the year ended 31 December 2008.
|
4 Income tax expense |
2008 |
2007 |
|
£'000 |
£'000 |
|
|
Current tax |
||
|
Corporation tax on profits for the period |
1,323 |
847 |
|
Adjustment in respect of prior periods |
(48) |
27 |
|
------------ |
------------ |
|
|
Total current tax |
1,275 |
874 |
|
Deferred tax |
||
|
Utilisation of tax losses |
- |
64 |
|
Accelerated capital allowance |
5 |
43 |
|
Charge on share based payments |
80 |
(21) |
|
Other temporary differences |
(9) |
3 |
|
Intangible asset temporary differences |
(283) |
(222) |
|
Effect of change in tax rates |
(78) |
- |
|
------------ |
------------ |
|
|
Total deferred tax |
(285) |
(133) |
|
------------ |
------------ |
|
|
Total tax charge |
990 |
741 |
|
============ |
============ |
|
5 Earnings per share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Profit for the period |
||
|
Basic earnings |
2,736 |
2,400 |
|
Adjustments to basic earnings |
||
|
Intangible assets amortisation |
1,011 |
741 |
|
Share based payment charge |
110 |
88 |
|
Adjusted earnings |
3,857 |
3,229 |
|
============ |
============ |
|
|
Number of shares |
||
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
30,438,663 |
29,299,010 |
|
Weighted average number of share options in issue |
1,864,483 |
3,060,076 |
|
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
32,303,146 |
32,359,086 |
|
Earnings per share |
Pence |
Pence |
|
Basic earnings per share |
9.0 |
8.2 |
|
Diluted earnings per share |
8.5 |
7.4 |
|
Adjusted earnings per share |
||
|
Basic earnings per share |
12.7 |
11.0 |
|
Diluted earnings per share |
12.0 |
10.0 |
6 Goodwill and intangible assets
The following table shows the significant movements in intangible assets.
|
Goodwill |
Customer relationships |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
Cost at 1 January 2007 |
10,193 |
2,894 |
13,087 |
|
Additions from business combinations |
4,795 |
2,161 |
6,956 |
|
Revision to deferred consideration |
195 |
- |
195 |
|
Accumulated amortisation |
- |
(1,163) |
(1,163) |
|
Net book amount at 31 December 2007 |
15,183 |
3,892 |
19,075 |
|
============ |
============ |
============ |
|
|
Net book amount at 1 January 2008 |
15,183 |
3,892 |
19,075 |
|
Revision to deferred consideration |
(632) |
- |
(632) |
|
Fair value adjustment |
56 |
- |
56 |
|
Amortisation |
- |
(1,011) |
(1,011) |
|
Net book amount at 31 December 2008 |
14,607 |
2,881 |
17,488 |
|
============ |
============ |
============ |
|
|
Cost at 31 December 2008 |
14,607 |
5,055 |
19,662 |
|
Accumulated amortisation |
- |
(2,174) |
(2,174) |
|
Net book amount at 30 June 2008 |
14,607 |
2,881 |
17,488 |
|
============ |
============ |
============ |
7 Cash, cash equivalents and net debt
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Cash and cash equivalents include the following for the purposes of the cash flow statement: |
||
|
Cash at bank and in hand |
11 |
135 |
|
Bank overdrafts |
(167) |
(995) |
|
------------ |
------------ |
|
|
Total |
(156) |
(860) |
|
============ |
============ |
Net debt is calculated as total debt as shown in the balance sheet less cash and cash equivalents.
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Total debt |
5,544 |
9,398 |
|
Less: Cash and cash equivalents |
(11) |
(135) |
|
Net debt |
5,533 |
9,263 |
Related Shares:
InterQuest Group