Interim results

18 September 2012

Work Group plc

("the Group" or "Work Group")

Interim results for the 6 month period ended 30 June 2012

Work Group plc (LSE - AIM: "WORK") announces its financial results for the six months ended 30 June 2012 ("the Period").

Headlines

·; Net fee income down 4% to £6.2m (2011: £6.4m)

·; Group broke-even at an operating level before exceptional items and taxation (2011: £0m)

·; UK business broke-even at an operating level before exceptional items (2011: £0.2m)

·; Profit for the current financial year expected to be below current market expectations

·; Net cash at period end of £0.5m (2011: £0.6m)

·; Balance sheet remains strong with no debt

Further enquiries

About Work Group plc

Work Group plc is a talent engagement company with two principal businesses: Armstrong Craven and Work Communications.

The company enables employers to develop more effective and efficient relationships with talent. It helps strengthen staff retention rates through better communication and cut the cost of hiring by reducing the organisation's reliance on traditional 3rd party recruiters.

The Group creates solutions that span all business functions, all industry sectors and all levels of hiring - from high volume school-leaver and graduate recruitment, through to niche roles and the boardroom. The company has offices in the UK, US and Asia and clients range from pharmaceutical companies and global banks through to retailers and the entertainment industry.

Chairman's review

Despite the challenges of a difficult market, Work Group has made progress during the first six months of 2012. We have seen improvements in our international businesses; improvements in our UK communications business and (despite a decline in search revenues) improvements in our Armstrong Craven intelligence offerings.

These reflect the fact that we are providing services which represent the future and which reflect our clients' increasing commitment to invest in talent management.

Outlook

Prospects for the wider economy and the recruitment market remain uncertain which makes forecasting a challenge and we are finding that the conversion of our pipeline is taking longer and is more uncertain than has been the case previously. Accordingly, whilst the Board expects the Group to be profitable this year, it anticipates that the Group results will be below market expectations.

Simon Howard

Chairman

Operating review

The wider macro-economic conditions continued to make trading very uncertain during this period with the Group achieving a break-even position before exceptional items and taxation, and net cash was £0.5m at the period end.

Group net fee income declined 4% to £6.2m (2011: £6.4m). Clients across the board have remained cautious about committing to large project spend. The Work Communications division achieved a near flat performance, with net fee income of £4.2m (2011: £4.2m), whilst Armstrong Craven (Search & Intelligence services) net fee income declined by 11%. The decline was all within Search services, as the Intelligence offerings remained strong.

Our Optimal consultancy services again proved strong (reported within Work Communications) with net fee income increasing by 30%; but the current climate continued to have a significant effect on advertising income which fell 15% during the period. Across the Group income from fee based services remained at 88% of total income (2011: 88%) but gross margin further improved to 65.7% (2011: 62.2%).

Total net operating expenses in the period of £6.2m (excluding exceptional costs) were 5% lower than 2011. This was due to the follow through effect of the strong programme of cost and headcount reductions and the closure of the Scottish office that took place in the second half of 2011. This programme resulted in a decrease in headcount of 27, to 168 people at the period end. Exceptional costs, principally relating to redundancy and office closure costs, were £26k (2011: £33k).

Our overseas offices continued their growth, with net fee income increasing in the US operation by 141% to £0.4m and in Hong Kong by 28% to £0.2m. The combined overseas businesses broke even at an operating level compared to a £0.2m loss in 2011. Modest investment in these businesses has continued, in order to reach a sustainable size and profitability. The UK business achieved break even at the operating profit level before exceptional items (2011: £0.2m).

With net cash at the period end of £0.5m and no debt, the balance sheet remains strong. 

Julian Maslen

Finance Director

Consolidated income statement

for the 6 month period ended 30 June 2012

 The results above are all in respect of continuing operations.

Consolidated statement of comprehensive income

for the 6 month period ended 30 June 2012

Consolidated balance sheet

as at 30 June 2012

Consolidated cash flow statement

 for the 6 month period ended 30 June 2012

Notes to the interim financial information

1 Financial information and presentation

The Company is a limited liability company incorporated and domiciled in the United Kingdom. The address of its registered office is Saffron House, 6-10 Kirby Street, London, EC1N 8EQ.

The Company has its primary listing on the AIM Market of the London Stock Exchange.

This condensed consolidated Interim Report does not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2011 were approved by the Board of Directors on 14 March 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. 

2 Principal accounting policies

Basis of preparation

This condensed consolidated financial information is for the half-year ended 30 June 2012 and has been prepared in accordance with AIM Rules and accounting policies set out in the Group's 2011 annual report as amended for new standards effective during the period where relevant. These accounting policies are based on the EU-adopted IFRS and IFRIC interpretations that are applicable at the balance sheet date. IFRS and IFRIC interpretations that will be applicable at 31 December 2012, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing this interim financial information. It is therefore possible that further changes to the accounting policies and the comparative financial information may be required before their publication in the 2012 annual report and financial statements.

Exceptional items

Exceptional items are those income or costs recognised as one-off or non-recurring in nature, and substantive in size. The separate reporting of exceptional items helps provide a better indication of the Group's underlying business performance.

Seasonality of operations

Due to the seasonal nature of the recruitment segment, higher revenues and operating profits are usually expected in the second half of the year than in the first six months.

3 Exceptional items

The exceptional costs of £26,000 (2011: £32,000) principally relate to redundancy costs incurred during the period.

4 Taxation

The deferred tax asset for the six month period ended 30 June 2012 is based on the estimated expected effective tax rate of 20% (2011 actual rate: 27%). No deferred tax asset has been recognised for the trading losses of the foreign subsidiaries.

5 Earnings per share

As there are basic losses per share the effect of share options is anti-dilutive, consequently diluted losses per share equates to the basic losses per share.

6 Reconciliation of operating loss to cash (used in)/ generated from operations

Statement of directors' responsibilities

The directors confirm that this Interim Report has been prepared in accordance with AIM rules and accounting policies set out in the Group's 2011 annual report as amended for new standards effective during the period.

The directors are also responsible for the maintenance and integrity of the Company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors of Work Group plc are listed in the Work Group plc Annual Report for 31 December 2011. A list of current directors is maintained on the Work Group plc website: www.workgroup.plc.uk.

Principal risks and uncertainties

The Board consider the principal risks and uncertainties relating to the Group for the next six months to be the same as detailed in our last Annual Report and Accounts to 31 December 2011. Full details of the risks and uncertainties are detailed in the Directors' report section of those accounts. The principal risks to the business are:

·; Economic uncertainty

·; Loss of clients

·; Loss of key employees

·; Financial risk

Copies of the interim report are available from Work Group plc's registered office: Saffron House, 6 - 10 Kirby Street, London EC1N 8EQ or from its website at www.workgroup.plc.uk