Interim Results - Replacement

Work Group plc

CORRECTION: Interim results for the 6 month period ended 30 June 2013

This is a correction of the announcement from 7.00 a.m. on 30 August 2013 with RNS number 8080M. Reason for the correction: The registered office address where copies of the interim report can be located was incorrect. Please note that the correct registered office address for Work Group plc is Marble Arch Tower, 55 Bryanston Street, London, W1H 7AA.

30 August 2013

Work Group plc

("the Group" or "Work Group")

Interim results for the 6 month period ended 30 June 2013

Work Group plc (LSE - AIM: "WORK") announces its financial results for the six months ended 30 June 2013 ("the Period").

Headlines

- Group Profit of £1.9m at an operating level before exceptional items and taxation (2012: break-even)

- Disposed of Armstrong Craven assets for total consideration of £2.8m

- Net fee income down 17% to £5.1m (2012: £6.2m)

- Operating expenses before exceptional items reduced by 15% on like for like basis, with further savings expected

- Net cash at period end of £1.3m (2012: £0.5m)

- Group remains debt free

Further enquiries:

About Work Group plc

The Company offers a range of solutions that enable organisations to win "the war for talent". It focuses on providing services in talent acquisition and talent management that help employers to more effectively attract, engage, develop and retain key staff.

Work Group plc's approach is to help employers reduce their reliance on traditional third-party recruiters, such as head-hunters and recruitment firms, by helping them establish and maintain a direct relationship with prospective employees thereby reducing the cost of hiring. The Group also assists employers in reducing their staff attrition costs through better employee engagement and improved internal communications.

Chairman's review

Against a background of continuing challenges in the recruitment market, the Group reviewed all its activities and decided that a change in strategy was required. In particular, we witnessed increasing divergence between the Armstrong Craven and Work Communications client bases, and concluded there was little synergy to be exploited between the two businesses.

In addition, the general trends of clients insourcing more activities, committing to smaller project spends and consequently a higher client churn coupled with lower margins meant that the investment needs of the two businesses were only going to increase.

Following the Armstrong Craven disposal, the Group is now in a position to bring greater focus to its activities. Much is changing within the Group and with a reduced cost base we are committed to eliminating operating losses and returning to profitability.

Simon Howard

Chairman

Operating review

Trading conditions remained challenging during the period, with caution in the recruitment market still very much in evidence. As previously disclosed the Group continued to review all strategic options and on 26 June 2013 announced that the Group had concluded a transaction to sell the assets of the Armstrong Craven division to Isis Equity Partners for £2.8m. An initial cash consideration of £1.8m was received with a further £300,000 payable on 31 December 2013, in addition to certain trading assets being retained by the Group.

An operating loss of £0.1m (2012: break-even) was incurred on Group operations before accounting for the profit on the transaction, exceptional items and taxation. Net cash was £1.3m at the period end. Clients in all business streams remain cautious about committing to large project expenditure and consequently Group net fee income declined 17% to £5.1m (2012: £6.2m). Net fee income in the Work Communications businesses declined to £3.0m (2012: £4.2m), while Armstrong Craven (Search & Intelligence services) increased net fee income by 6% despite the tough trading conditions.

The current climate continued to have a significant effect on advertising income, which fell 21% during the period. Across the Group income from fee based services increased to 90% of total income (2012: 88%) and gross margin improved slightly to 65.8% (2012: 65.7%).

The table below analyses the trading performance of the Group for the six months including the discontinued operations of Armstrong Craven.

* Includes £1,957k profit on disposal of assets

** Includes £2,200k goodwill impairment

Total net operating expenses in the period of £5.2m (excluding profit on sale of assets and exceptional costs) were 15% lower than the same period in 2012 which was due to a continued programme of headcount and overhead cost reductions.

Headcount was 85 at the period end. This is a reduction of 32 in the Work Communications businesses, when compared with the first half of 2012, and 51 having transferred under TUPE in connection with the Armstrong Craven disposal. During the period, the Group achieved a full assignment of the lease on its London property and moved to smaller premises in late July 2013. This action will cut a further £0.3m per annum from the overall overhead costs, while further overhead cost savings will be achieved during the second half of 2013 as a result of the Armstrong Craven disposal and reductions in central costs.

Exceptional costs were £2,229k (2012: £26k) of which £2,200k related to the goodwill impairment of Armstrong Craven.

The discontinued operations contributed £0.4m to the operating profit in the period to 30 June 2013. This excludes the £1,957k gain on the disposal of the Armstrong Craven assets.

Net cash at the period end was £1.3m and the Group remains debt free. A further £0.3m in cash will be payable to the Group in the second half of 2013 in respect of the Armstrong Craven disposal, which is non-performance based.

Julian Maslen

Finance Director

Consolidated income statement

for the 6 month period ended 30 June 2013

 *Restated to reflect comparatives for discontinued operations.

Consolidated statement of comprehensive income

for the 6 month period ended 30 June 2013

Consolidated balance sheet

as at 30 June 2013

Consolidated cash flow statement

for the 6 month period ended 30 June 2013

*Proceeds from disposal of property, plant and equipment relate to the disposal of business unit.

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 Marble Arch Tower, 55 Bryanston Street, London, W1H 7AA.

The Company has its primary listing on AIM, a market operated by 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 2012 were approved by the Board of Directors on 11April 2013 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 2013 and has been prepared in accordance with AIM Rules and accounting policies set out in the Group's 2012 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 2013, 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 2013 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. The exceptional costs of £2,229k (2012: £26k) principally related to goodwill impairment losses of £2,200,000 and redundancies and ex-gratia payments incurred during the period.

4 Taxation

The deferred tax asset and liability for the six month period ended 30 June 2013 is based on the estimated expected effective tax rate of 23.5% (2012 actual rate: 20%). 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

7 Discontinued operations

On 25 June 2013 the Group disposed of the Armstrong Craven segment. The total consideration for the sale was £2,138k, with an immediate cash payment of £1,838k, in addition to certain trading assets being retained by the Group. The deferred consideration of £300k is payable in December 2013.

Financial information relating to the Armstrong Craven operations for the period to the date of disposal is set out below, comparative figures have been restated.

8 Availability of interim report and accounts

The directors confirm that this interim report has been prepared in accordance with AIM rules and accounting policies set out in the Group's 2012 annual report as amended for new standards effective during the period.

Copies of the interim report are available from Work Group plc's registered office: Marble Arch Tower, 55 Bryanston Street, London, W1H 7AA or from its website at www.workgroup.plc.uk