Final Results
Parity Group PLC
05 March 2008
5th March 2008
PARITY GROUP PLC
Preliminary results for the year ended 31 December 2007
Parity Group plc, the UK IT services company, announces preliminary results for
the year ended 31 December 2007.
Financial highlights
• Revenue from continuing operations up 2% to £160M (2006: £157M)
following exit of low margin contracts.
• Adjusted operating profit from continuing operations up 216% to £4.6M
(2006: £1.4M)*
• Profit from continuing operations before tax and exceptional item £2.6M
(2006: loss of £0.2M).
• Profit before tax from continuing operations of £2.3M (2006: loss of
£0.8M).
• Adjusted basic earnings per share from continuing operations of 3.79p
(2006: loss per share of 1.98p).**
• Basic earnings per share of 1.08p (2006: 2.99p).
• Net debt of £6.6M (2006: £5.7M).
* Adjusted operating profit excludes share-based compensation of £551,000
(2006:£68,000) and exceptional item of £347,000 (2006: £600,000).
** Adjusted basic earnings per share from continuing operations is stated
before exceptional item after tax of £243,000 (2006: £420,000) and
deferred tax write downs of £1.039M (2006: nil)
Operational highlights
• Business now clearly focused on higher margin revenue opportunities,
resulting in stronger and better quality pipeline.
• Solutions: strong margins driven by good project delivery and revenue
growth.
• Resources: exit from low margin contracts resulting in margin
improvement through the year; strong start to 2008.
• Training: accelerated shift in mix to strategic, higher margin products;
investment to improve efficiency.
• Good progress made on property rationalisation and disposal.
• Strengthened management teams and significantly leaner operating
structure.
Alwyn Welch, Chief Executive of Parity, said:
'2007 was a year during which we successfully continued the performance recovery
whilst making a number of changes and investments to position the Group for
further success.
'We achieved good margin progression in all three of our business streams,
through a combination of top line growth, a better mix of services and greater
control of costs. In addition, we have significantly improved our cash flow.
We have seen an encouraging start to 2008, although the current economic
backdrop is uncertain. With our continued focus on higher margin activities in
growth segments of the market, the Board remains confident of the Group's
prospects.'
Enquiries:
Parity Group PLC 0845 873 0790
Alwyn Welch, Chief Executive Officer
Ian Ketchin, Group Finance Director
Hogarth Partnership Limited 020 7357 9477
John Olsen/Sarah Richardson
Notes to editors:
About Parity Group plc
Parity Group PLC is a UK-focused IT services company, operating via three core
business units - Parity Resources, Parity Solutions and Parity Training.
Parity Resources is a leading IT recruitment specialist, with over 30 years
experience in providing permanent and contract technology staff, temporary staff
and managed recruitment services across all markets.
Parity Solutions specialises in providing IT, Projects and Consulting, using
leading edge technologies and drawing upon the depth of experience of its
consultants in Programme and Project Management.
Parity Training is one of the UK's leading Management and IT training providers.
In addition to a comprehensive schedule of public courses, Parity delivers
tailored learning solutions and customised programmes for major clients.
Parity is listed on the London Stock Exchange, with a ticker of PTY.LN.
Chairman's Statement
I have been much impressed, since joining the Board as Chairman in July 2007, by
the quality of Parity's management and staff. In particular I single out our
Chief Executive, Alwyn Welch, and our new Group Finance Director, Ian Ketchin.
Supported by the impressive depth of experience and qualifications of the
executive management team and staff, your company has achieved a consistent and
significant improvement in profitability. I am convinced that this will be
maintained.
Your Board has been ably led in the recent past by John Hughes to whom we owe a
particular debt of gratitude for his perseverance in restoring the Company to
financial health. He remains Deputy Chairman.
Philip Swinstead has recently retired from the Board after giving much wise and
experienced support on his return to the Company when it was needed most of all.
On behalf of shareholders may I thank both John and Philip most sincerely.
My continuing duty to shareholders is clear: to lead a united Board in guiding
our executive team and all our staff to deliver consistently improving financial
returns. I know that together we shall succeed.
Lord Freeman
Chairman
Chief Executive's Review
Introduction
2007 saw a further period of business improvement throughout the Group. Having
delivered a profit in the second half of 2006, we continued with our performance
recovery programme in 2007 whilst making a number of changes and investments
necessary to position the Group for continued growth. Trading was generally in
line with both management and market expectations, driven by our strong focus on
recurring revenues and higher quality work to add predictability to the
business. Morale across the Group improved immensely, and our reputation in the
marketplace has further improved.
The increasing robustness and momentum within the business allowed us to cope
with the many challenges we faced throughout the year, whilst keeping our focus
clear and making good progress. By the year end we successfully reduced the
increased level of borrowings relating to working capital built up during the
first half. Despite continued investment especially in facilities and IT,
reduction in debtors and work in progress led to total net debt reducing to
£6.6M at 31 December 2007. At the same time we have made excellent progress
during 2007 and since the end of the year in closing down most of the remaining
legacy issues.
Group revenue from continuing operations grew 2% to £159.9M (2006: £156.8M),
with a strong performance from Solutions being offset by a reduction in
Resources where our priority is quality of revenue rather than volume and where
we exited certain low margin contracts. Operating profit (before exceptional
items) has continued to show an excellent improvement to £4.0M (2006: £1.4M).
Training and Solutions delivered good year on year margin improvement, and
Resources, whilst flat compared to 2006, made excellent progress during the
year.
Resources
Resources, after three years of strong revenue growth, saw a modest revenue
decline of 4% to £110.3M (2006 £114.5M). Two significant low margin contracts
ended during the first half of the year and this contributed to lower second
half revenue. We chose not to seek higher volume, low margin, replacement
business but instead to concentrate on growing higher quality business in niches
where we can establish good differentiation and where demand is strong.
Operating profit (before exceptionals) therefore reduced slightly to £2.66M
(2006 £2.71M), and the margin for the year held at 2.4%. However this masks an
improvement from 2.0% in the first half of 2007 to 2.8% in the second half.
Gross Margin (net fee income) was flat at £5.2M in both halves of the year, and
sales costs were held at 44% of gross margin reflecting continued investment in
new higher margin revenue streams. Good cost control delivered an operating
profit of 25% of gross margin for the year and 28% in the second half.
The real strength of this operation is our Public Sector business, where we
remain the largest supplier under the specialist contractor sections of the UK
Government's Catalist buying framework, with many large departments being
clients. We experienced some margin pressure in the public sector during the
early part of 2007 but through strong selling and high quality delivery we saw
margins increase as the year progressed.
Our Commercial Sector business shrank due to the end of the two large lower
margin contracts and we are investing in new business sales teams to replace
this with higher margin business. We saw good traction in our new SAP practice,
and we have recently strengthened the management team.
We remain focused on higher value skills, where we can attract better day rates
and margins. This means concentrating on those skills in strong demand,
typically those where the continuing shift in technology is creating demand and
where offshoring is not deflating salaries. Our primary skills focus is in
project, programme and service management, and in skills such as SAP and .net.
We continue to believe that a focus on these skills, combined with a strong
reputation for delivery quality, is appropriate for continued business
improvement during 2008 and beyond.
Solutions
Solutions continued the turnaround which commenced during the second half of
2006. Revenue for the year grew 30% to £31.0M (2006 £23.9M) and, despite the
successful completion of the large Northern Ireland Electricity ('NIE') contract
during the second half of the year, still grew 7% in the second half compared to
the same period in 2006. Operating profit increased 311% to £3.2M (2006: £0.78M)
and margin showed an impressive increase from 3.3% to 10.3%.
Revenue excluding hardware, software and third party subcontractors, increased
by 31% from £17.9M in 2006 to £23.4M in 2007 with the growth in the second half
of 2007 34% higher than the same period in 2006. This removed the 'lumpy' nature
of large system integration contracts, and demonstrates the improvement in the
underlying 'own delivered' revenue. We also grew our managed services revenue,
derived from longer term 'annuity' contracts, from £2.2M to £4.7M, further
contributing to an increased visibility and stability in the business.
This fast growth and return to profit has necessitated an investment in our
sales capability and also a strengthening of our delivery management, whilst
continuing to attack G&A costs. So whilst gross margin increased from £6.65M in
2006 to £8.20M in 2007, SG&A costs also decreased from £5.87M to £5.00M.
Our delivery quality remains good. In particular we received excellent feedback
on the large NIE systems integration project, which we completed in good time
for the client to be ready for the newly deregulated market in Ireland. The
demands of this project, and also the growth in our Microsoft technology
projects activity, led to us running at very high levels of utilisation during
much of 2007 despite hiring efforts and a much reduced rate of staff attrition.
This also had a knock-on impact on sales during the middle of the year, but we
ended 2007 with a very strong pipeline and continued high overall utilisation.
Our market focus is on mid-sized organisations in the Public Sector, where
demand for small scale projects remains high, as well as selected clients in the
commercial arena and specifically in the Utility market, where NIE has given us
excellent credentials. With a good capability in Oracle and Microsoft
(especially Sharepoint) technology, combined with strong project management and
a co-operative delivery culture, we aim to continue to strengthen this business
to remain a strong player in the mid market. We will avoid opportunities that
require offshore delivery and will continue to partner flexibly to broaden our
reach as we grow to achieve long term sustainable mass in our chosen market.
Training
Training has been the business unit that required the most radical changes over
the last two years to be both competitive and to target attractive areas of the
market. During 2007 we continued to address the cost base, incurring one-off
costs of approximately £150,000 in the year to reduce on-going costs in sales
and delivery, where we exited delivery of technical training courses.
We are pleased to report that revenue showed a modest improvement at £18.6M
(2006 £18.4M) after three years of decline. We have significantly changed the
mix of business in Training. First, our more commoditised technical training
declined by 25% to £3.5M, whilst our areas of focus (project and programme
management, service management, business systems design, and other soft skills
related to IT) grew by 14% to £11.1M. Second, we saw a continuation in the shift
of business from public courses (inherently higher margin but with little
visibility) to training programmes and contracts for typically larger
organisations, which give us far better revenue visibility at the expense of
some margin. We also sold more e-learning material as part of these programmes.
As a result we saw gross margins decline from 39% to 36%, but managed to offset
this with lower SG&A costs, and therefore increased operating profit to £570,000
(2006 £308,000). We invested in a new IT system to run this operation during
2006 and the first part of 2007. Initial teething issues caused some additional
costs and working capital during the third quarter of the year, but by year end
the system was well bedded in and the business operating as usual.
We invested in three main areas in this business during the year. We expanded
our product portfolio to include e-learning, which we are continuing in 2008
with our 'Learning Plus' platform. We invested in people, both to provide
consultancy in training and learning and to deliver more training courses. We
had lost a number of our own trainers during 2005 and 2006, which was impacting
the quality and the margin delivered by courses so we grew our headcount of
employed trainers by 9 during the year whilst increasing utilisation from 72% to
78%, and decreasing use of contractors. Overall this was a year of significant
challenge and change for this business, which the team met well.
SG&A Costs
(Sales, general and administrative costs (SG&A) are defined as total operating
costs less cost of sales and before exceptional items.)
We continued to reduce SG&A costs during the year, particularly in the area of
facilities and other centrally managed shared services. Most of the cost
reduction has been in G&A as we have maintained and in places increased
investment in sales.
We reduced SG&A across the business from £27.0M in 2005, to £23.4M in 2006 and
again to £21.1M in 2007. (2005 and 2006 restated to exclude employed
consultants).
We needed to continue the investment in re-furbishing and consolidating offices
during 2007, and combined our Northern Ireland presence into a new facility in
Belfast; closed the old company HQ in London and moved this function into
Wimbledon; exited most of the Birmingham training facility; and invested in a
single training facility in Moorgate in London which opened on 1st Jan 2008. We
exited the previous two facilities in London in early 2008.
This significant capital investment has been made both to reduce overall running
costs but also to ensure we have the working environment to attract both staff
and clients.
Restructuring & Discontinued Operations
We have continued to make good progress in completing the closure of all items
outstanding from the disposals of overseas operations made in 2005 and 2006. At
our interim results we declared a modest profit on the recovery of a fully
provided bad debt in Switzerland, and in the second half we have a further gain
due to consideration received from a similarly provided bad debt in the USA. We
have also realised a small gain in the USA and Europe as liabilities have been
closed off. The total impact of these items during 2007 was a profit after tax
of £257,000.
At the end of 2007 we also made good progress, finally, on surplus empty
property, primarily the office in Fleet. This has stood empty since 2005 on a
long lease in an area with low demand and excess capacity, where market rents
have as a result declined. This has made it difficult to sub-let, but we have
now agreed terms to sub-let for the remaining term of the lease albeit below our
original head lease rent. This combined with a sub let of an empty floor in
Leeds has required the charging of an exceptional cost of £347,000 before tax.
However this will mean all our surplus property is sub-let, and the cash outflow
associated with this legacy will decline significantly over the next 18 months.
Market
Parity operates wholly from locations within the UK and Ireland, and the vast
majority of our services are sold and delivered to clients in this geography.
This specific geographic focus has allowed us to concentrate our efforts on one
of the largest IT services and recruitment markets in Europe without the
distraction and cost of expanding further afield.
During the last year we have experienced generally favourable market conditions
overall, and our market focus has been to concentrate on those areas where
demand is stronger and Parity has good differentiation other than price. This
has helped us improve margins despite the micro and macro economic pressures on
our clients. We have experienced little impact so far from the pressure
affecting the financial services market, nor the expected tightening of public
sector spending. We will continue to seek niches of strong demand to counter any
potential general market squeeze.
Focus
Our overall business objective remains to achieve margin improvement through
concentration on higher margin services combined with cost control. We will
invest prudently to help realise our objectives and to narrow our focus and
improve long term sustainability of our business.
Training has exited delivery of technical courses to concentrate on higher
value, IT-related areas such as project, programme and service management as
well as business systems design. We continue to manage delivery of technical
courses and have added more value around our base courses with e-learning
components. Our client base increasingly comprises large organisations in the
public and private sector, with a shift towards training programmes and away
from 'public' courses. This brings the benefit of size of contract and stability
of revenue, but at a cost of lower margins and as a consequence we have made
changes to our organisation and cost base to reflect this evolution.
Resources remains focused on the supply of temporary and permanent skilled staff
into typically larger organisations within the Public and Private sectors. Our
target market for recruitment is therefore similar to that of Training, where
not only is the daily rate higher, but the excess of demand over supply allows
us to create real value for clients by finding and attracting the people that
their operations require. We will continue, within these broad skill areas, to
focus on further sub-niches in areas such as applications (eg SAP), business
issues (e.g. security) and narrow vertical segments (e.g. criminal justice).
Solutions focuses on the delivery of high quality, mainly fixed-price, projects
and application-centric services to mid-tier clients. Our main targets are
mid-sized contracts where the size and nature of the work, or where the type of
activity or client sensitivity, generally precludes offshore delivery. Our main
areas of technology are Microsoft (especially Sharepoint) and Oracle. We combine
this with rigorous project management skills, and a delivery culture that
encourages working together with clients. This culture also enables us to
partner effectively to extend our reach and scope, and act as a true integrator
of services. We can make use of our well-established Belfast operation to
provide a modestly lower cost capability compared to south-east England, and
this also gives us a strong presence in the Irish market.
People
As with any service company, the people who work for Parity are our main asset,
and therefore critical to our success. We have therefore invested in improving
our working environment and the rewards and benefits available to our employees,
so that we can attract and retain the people we need. This, combined with our
improved business performance, has helped us reduce unwanted staff attrition
from over 30% in 2006 to 20% in 2007, which is closer to industry average. We
recruited to grow our headcount during the first half of 2007, particularly in
the areas of Microsoft technology, recruiting sales and trainers.
We have had in place a new performance management system since 2006, and link
the outcome of this to rewards including variable compensation. An element of
the latter, principally related to profit, is in place for all staff in 2008. We
have also started to update our benefits through the introduction of flexible
benefits.
On behalf of the whole Board I would like to thank all the people who have
worked for Parity over the last year for their support and strong delivery,
which has driven the recovery of the Group.
Outlook
We have seen an encouraging start to 2008 although the current economic backdrop
is uncertain. With our continued focus on higher margin activities in growth
segments of the market, the Board remains confident of the Group's prospects.
Alwyn Welch
Chief Executive Officer
Financial review
2007 was a year of continued recovery for Parity. Following the disposal of
overseas operations in 2006, the focus in 2007 was on generating improved
margins in the UK and Ireland market. This, together with continuing cost
action, has generated results that are again significantly improved on the
previous year.
Revenue and operating margin from business units
2007 2006 2007 2006 2007 2006
Business Revenue Revenue Operating Operating Operating Operating
unit £000 £000 profit profit margin margin
£000 £000 % %
Resources 110,279 114,517 2,656 2,710 2.41 2.37
Solutions 31,034 23,922 3,195 778 10.30 3.25
Training 18,625 18,406 570 308 3.06 1.67
-------- -------- --------- --------- --------- ---------
Total 159,938 156,845 6,421 3,796 4.01 2.42
-------- -------- --------- --------- --------- ---------
The Resources business exited two large, low margin contracts during the year
and this was a major factor in both the revenue fall and the modest improvement
in operating margin. Margin pressure was experienced in the public sector in the
first half of 2007 but eased in the second half.
Solutions continued to drive operational efficiencies and successfully completed
a large contract with Northern Ireland Electricity during 2007. This provided
the step up in performance from the 2006 results.
Training has concentrated on delivering higher margin courses in softer skills
and now subcontracts the delivery of technical training, which has become
commoditised. There has also been a greater focus on in-house delivery rather
than public courses. Whilst in-house courses attract lower gross margins the
economies of scale more than compensate in S,G&A savings. Together with
increased use of our own trainers this has resulted in a significant improvement
in operating margin.
Across the business units, operational efficiencies yielded savings of close to
£2.3M in S,G&A costs. This is the second consecutive year of substantial profit
improvements.
Group trading summary
2007 2006
£000 £000
Operating profit from business units 6,421 3,796
Central costs (2,409) (2,419)
------- -------
Operating profit before exceptional items 4,012 1,377
Net finance expense (1,377) (1,551)
------- -------
Profit/(loss) before tax and exceptional item 2,635 (174)
Exceptional item (347) (600)
------- -------
Profit/(loss) before tax 2,288 (774)
------- -------
Group profit before tax and exceptional items from continuing operations was
£2,635,000 (2006: loss of £174,000). Central costs were held at £2.4M after
absorbing the cost of Board changes. Share option charges for 2007 were £551,000
(2006: £68,000). The exceptional item relates to provisions for unoccupied and
sublet property in the UK (2006: £600,000). Net borrowing costs were £577,000
(2006: £865,000), while notional interest on the pension deficit was £800,000
(2006: £686,000).
Cashflow
Cash of £1.7M was generated from operations (2006: £4.5M outflow). There were
significant non-trading outflows in the year, including £0.9M to the pension
fund, £2.2M on capital items, principally on fit out of office buildings, and
£0.9M on vacant property.
Days sales outstanding opened 2007 at a particularly low figure of 32. During
the first half this deteriorated to 41 days at half year having peaked at 47 in
May. This increase was caused by a number of specific client issues and also
staff turnover. By the year end, after concerted effort, days sales outstanding
stood at 35. Net borrowings opened the year at £5.7M and reached £9.3M at half
year before being reduced down to £6.6M at the end of 2007.
Property
Property consolidation and moves in 2007 reduced the portfolio by two properties
and included opening a new training centre on the edge of the City of London in
Moorgate and a new Belfast office. Terms have been agreed to sublet two vacant
properties, in Fleet and Leeds, to the end of the respective leases. A further
provision for vacant and sublet property of £347,000 was made for all known
shortfalls between rental outgoings and income on sublets.
Discontinued activities
In line with the strategy of focus on the UK and Ireland, the group disposed of
the last of its overseas activities in 2006. No revenue was generated in 2007 as
the overseas businesses no longer trade. However provisions have been adjusted
to reflect the anticipated costs of wind-up and we have also received cash or
other consideration totalling £290,000 for two large debts, previously provided.
The net result is a £257,000 profit after tax for discontinued activities.
Write down of deferred tax asset and impact of rate change
The Group carries a significant deferred tax asset arising from historic losses.
In addition to the normal tax charge for 2007 there is a reduction of £1.039M in
the value of this asset. The deferred tax asset in respect of the Training
business was written down by £0.85M after an assessment of the visibility of
future profits likely to be available to utilise this asset. The asset has also
been reduced by £189,000 to reflect the change in the corporation tax rate at
which relief for past losses will be received from 30% to 28%.
Other taxation
The tax charge on current year continuing activities was £1.096M (2006:
£197,000) and is made up as follows:
£'000
Profit for the year @ 30% 686
Disallowable expenses 260
Prior period adjustments 126
Timing and other differences 24
-------
1,096
-------
Pensions
The Group operates a number of defined contribution pension schemes as well as a
closed defined benefit scheme. Assets for the defined contribution schemes are
held in separate, independently administered funds. Company contributions to the
defined benefit scheme were £0.9M (2006: £0.8M). The defined benefit scheme is
closed to both future members and to future service accrual, although actuaries
continue to advise the Trustees on the required funding rate. During 2006 the
Group agreed a payment plan of £0.9M per annum to reduce the pension deficit. At
31 December 2007, the accounting deficit was £2.8M (2006: £4.7M). The reduction
in accounting deficit reflects the 2007 cash payment and the impact of a higher
discount rate on the scheme liabilities.
Earnings per share and dividend
The weighted average number of shares used in the calculation of basic earnings
per share was 37.9M (2006: 27.9M). The basic earnings per share was 1.08p (2006:
2.99p). The basic earnings per share from continuing activities before
exceptional item and deferred tax write-downs was 3.79p (2006: loss of 1.98p).
The Board does not propose a dividend for the year (2006: nil).
Ian Ketchin
Group Finance Director
Parity Group plc
Consolidated Income Statement
For the year ended 31 December 2007
_________________________________________________________________________________________________________
2007 before 2007 2007 after 2006 before 2006 2006 after
exceptional exceptional exceptional exceptional exceptional exceptional
Items items Items Items items Items
(unaudited) (unaudited) (unaudited) (audited) (audited) (audited)
Notes £'000 £'000 £'000 £'000 £'000 £'000
------------- ----- -------- -------- -------- ------- ---------- --------
Continuing
operations
Revenue 2 159,938 - 159,938 156,845 - 156,845
------------- ----- -------- -------- -------- ------- ---------- --------
Employee
benefit costs (20,606) - (20,606) (20,672) - (20,672)
Depreciation (466) - (466) (569) - (569)
All other
operating
expenses (134,854) (347) (135,201) (134,227) (600) (134,827)
------------- ----- -------- -------- -------- ------- ---------- --------
Total operating
expenses (155,926) (347) (156,273) (155,468) (600) (156,068)
------------- ----- -------- -------- -------- ------- ---------- --------
Operating
profit (loss) 2 4,012 (347) 3,665 1,377 (600) 777
------------- ----- -------- -------- -------- ------- ---------- --------
Finance income 15 - 15 7 - 7
Finance costs (1,392) - (1,392) (1,558) - (1,558)
------------- ----- -------- -------- -------- ------- ---------- --------
Profit/(loss)
before tax 2,635 (347) 2,288 (174) (600) (774)
------------- ----- -------- -------- -------- ------- ---------- --------
Write down of
deferred
tax asset and
impact of
rate change (1,039) - (1,039) - - -
Other taxation (1,200) 104 (1,096) (377) 180 (197)
------------- ----- -------- -------- -------- ------- ---------- --------
Taxation (2,239) 104 (2,135) (377) 180 (197)
------------- ----- -------- -------- -------- ------- ---------- --------
Profit (loss)
for the year from
continuing
operations 396 (243) 153 (551) (420) (971)
------------- ----- -------- -------- -------- ------- ---------- --------
Discontinued
operations 2 - (366) 2,170
Profit for the
year from
discontinued
operations 257 257 1,804
------------- ----- -------- -------- -------- ------- ---------- --------
Profit (loss)
for the year
attributable
to equity
shareholders 653 (243) 410 (917) 1,750 833
------------- ----- -------- -------- -------- ------- ---------- --------
Basic earnings
per share on
profit for the
year 5 1.08p 2.99p
Basic
earnings/(loss)
per share from
continuing
operations 5 0.40p (3.49p)
Diluted
earnings per
share on
profit for the
year 5 1.07p 2.99p
Diluted
earnings/(loss)
per share from
continuing
operations 5 0.40p (3.49p)
Parity Group plc
Balance Sheet
As at 31 December 2007
________________________________________________________________________________
Consolidated
------------------------ ---------- ----------
As at As at
31.12.07 31.12.06
£'000 £'000
unaudited audited
------------------------ ---------- ----------
Non-current assets
Goodwill 7,116 7,116
Intangible assets - software 370 -
Property, plant and equipment 2,071 615
Available for sale financial assets 124 -
Deferred tax assets 2,635 5,102
------------------------ ---------- ----------
12,316 12,833
Current assets
Work in progress 706 998
Trade and other receivables 35,680 39,494
Cash and cash equivalents 770 736
------------------------ ---------- ----------
37,156 41,228
------------------------ ---------- ----------
Total assets 49,472 54,061
------------------------ ---------- ----------
Current liabilities
Financial liabilities (7,397) (6,394)
Trade and other payables (24,168) (28,687)
Current tax liabilities (268) (201)
Provisions (967) (677)
------------------------ ---------- ----------
(32,800) (35,959)
Non-current liabilities
Financial liabilities - (1)
Provisions (1,067) (2,369)
Retirement benefit liability (2,846) (4,703)
------------------------ ---------- ----------
(3,913) (7,073)
------------------------ ---------- ----------
Total liabilities (36,713) (43,032)
------------------------ ---------- ----------
Net assets 12,759 11,029
------------------------ ---------- ----------
Shareholders' equity
Called up share capital 15,079 15,075
Share premium account 20,134 20,020
Other reserves 44,160 44,160
Retained earnings (66,614) (68,226)
------------------------ ---------- ----------
Total shareholders' equity 12,759 11,029
------------------------ ---------- ----------
Parity Group plc
Statement of Recognised Income and Expense
For the year ended 31 December 2007
________________________________________________________________________________
Consolidated
------------------------------- --------- ----------
Year Year
ended ended
31.12.07 31.12.06
£'000 £'000
unaudited audited
------------------------------- --------- ----------
Exchange differences on translation of foreign
operations (111) 152
Actuarial gains/(losses) on defined benefit pension
schemes 1,090 (762)
Deferred taxation on items taken directly to equity (328) 229
------------------------------- --------- ----------
Net profit/(loss) recognised directly in equity 651 (381)
Profit for the year 410 833
------------------------------- --------- ----------
Total recognised income for the year
attributable to equity shareholders 1,061 452
------------------------------- --------- ----------
Parity Group plc
Cash Flow Statement
For the year ended 31 December 2007
________________________________________________________________________________
Consolidated
------------------------------- ----- -------- -------
Note Year Year
ended ended
31.12.07 31.12.06
£'000 £'000
unaudited audited
------------------------------- ----- -------- -------
Cash flows from operating activities
Cash generated from operations 6 1,711 (4,508)
Interest received 15 11
Interest paid (592) (872)
Tax received - -
------------------------------- ----- -------- -------
Net cash from operations 1,134 (5,369)
------------------------------- ----- -------- -------
Cash flows from investing activities
Purchase of intangible assets - software (295) -
Purchase of property, plant and equipment (1,913) (272)
Net proceeds from disposal of subsidiary - 4,649
undertakings
Proceeds from disposal of available for sale assets - 71
Proceeds from disposal of property, plant and
equipment - -
------------------------------- ----- -------- -------
Net cash (used in)/from investing activities (2,208) 4,448
------------------------------- ----- -------- -------
Cash flows from financing activities
Issue of ordinary shares 118 14,599
Cash (outflow) in respect of repayment of bank
borrowing - (20,176)
Net movement on invoice financing 2,017 4,804
Payment of capital element of finance leases (19) (19)
------------------------------- ----- -------- -------
Net cash from/(used in) financing activities 2,116 (792)
------------------------------- ----- -------- -------
Net increase/(decrease) in cash and cash
equivalents 1,042 (1,713)
Cash and cash equivalents at beginning of the year (260) 1,738
Net foreign exchange difference (12) (285)
------------------------------- ----- -------- -------
Cash and cash equivalents at end of the year 770 (260)
------------------------------- ----- -------- -------
Parity Group plc
Unaudited Notes to the Preliminary Results
1 Accounting Policies
Basis of preparation
These preliminary results do not constitute full Financial Statements within the
meaning of section 240 of the Companies Act 1985. The financial information for
the year ended 31 December 2007 has been extracted from the unaudited financial
statements of Parity Group plc for the year ended 31 December 2007 which will be
delivered to the Registrar of Companies in due course. The results for the year
ended 31 December 2006 have been extracted from the audited accounts for the
year ended 31 December 2006. The auditors have issued an unqualified opinion on
the Group's statutory financial statements for the year ended 31 December 2006,
which have been filed with the Registrar of Companies and did not contain
statements under Section 237 (2)-(3) of the Companies Act 1985, or include
reference to any matters to which the auditors wished to draw attention by way
of emphasis without qualifying their report.
2 Segmental Analysis
The Group is organised into three primary business segments: Solutions, Training
and Resources.
Consolidated
------------------------------- --------- ----------
2007 2006
£'000 £'000
unaudited audited
------------------------------- --------- ----------
Revenue - continuing operations
Solutions 31,034 23,922
Training 18,625 18,406
Resources 110,279 114,517
------------------------------- --------- ----------
159,938 156,845
------------------------------- --------- ----------
Geographical analysis
United Kingdom and Ireland 159,938 156,845
------------------------------- --------- ----------
159,938 156,845
------------------------------- --------- ----------
Revenue - discontinued operations
------------------------------- --------- ----------
Resources - Mainland Europe - 3,380
------------------------------- --------- ----------
2 Segmental Analysis continued
Operating
result before
exceptional Exceptional Operating
items items profit
-------------- ------- ------- ------- ------- ------- -------
2007 2006 2007 2006 2007 2006
£'000 £'000 £'000 £'000 £'000 £'000
unaudited audited unaudited audited unaudited audited
-------------- ------- ------- ------- ------- ------- -------
Continuing operations
Resources 2,656 2,710 - - 2,656 2,710
Solutions 3,195 778 - - 3,195 778
Training 570 308 - - 570 308
-------------- ------- ------- ------- ------- ------- -------
6,421 3,796 - - 6,421 3,796
Central costs (2,409) (2,419) (347) (600) (2,756) (3,019)
-------------- ------- ------- ------- ------- ------- -------
Segment results 4,012 1,377 (347) (600) 3,665 777
Interest
expense (1,392) (1,558) - - (1,392) (1,558)
Interest income 15 7 - - 15 7
-------------- ------- ------- ------- ------- ------- -------
Profit/(loss)
before tax 2,635 (174) (347) (600) 2,288 (774)
Tax (2,239) (377) 104 180 (2,135) (197)
-------------- ------- ------- ------- ------- ------- -------
Profit/(loss)
for the year
from continuing
operations 396 (551) (243) (420) 153 (971)
-------------- ------- ------- ------- ------- ------- -------
Operating
result before
exceptional Exceptional Operating
items items profit
-------------- ------- ------- ------- ------- ------- -------
2007 2006 2007 2006 2007 2006
£'000 £'000 £'000 £'000 £'000 £'000
unaudited audited unaudited audited unaudited audited
-------------- ------- ------- ------- ------- ------- -------
Discontinued operations
Resources 314 (462) - 2,170 314 1,708
-------------- ------- ------- ------- ------- ------- -------
Segment results 314 (462) - 2,170 314 1,708
Interest income 13 4 - - 13 4
-------------- ------- ------- ------- ------- ------- -------
Profit (loss)
before tax 327 (458) - 2,170 327 1,712
Tax (70) 92 - - (70) 92
-------------- ------- ------- ------- ------- ------- -------
Profit (loss)
for the year
from discontinued
operations 257 (366) - 2,170 257 1,804
-------------- ------- ------- ------- ------- ------- -------
3 Exceptional Items
Consolidated
------------------------- ------- -------
Continuing operations 2007 2006
£'000 £'000
unaudited audited
------------------------- ------- -------
Property restructuring 347 600
------------------------- ------- -------
Total exceptional items from continuing operations 347 600
------------------------- ------- -------
The exceptional charge of £347,000 for 2007 (2006: £600,000) for continuing
operations relates to unoccupied property in the UK. The tax credit relating to
the exceptional item is £104,000 (2006: £180,000).
Consolidated
------------------------- ------------ ------- -------
Discontinued operations 2007 2006
£'000 £'000
unaudited audited
----------------------------------- ------- -------
Gain on disposal of subsidiaries - 2,170
----------------------------------- ------- -------
Total exceptional items from discontinued operations - 2,170
----------------------------------- ------- -------
The exceptional item in 2006, from discontinued operations, relates to the gain
on disposal of subsidiaries in Mainland Europe. Exceptional items from
discontinued operations are shown gross of tax. The tax credit relating to
exceptional items from discontinued operations is £nil (2006: £nil).
4 Discontinued Operations
2007 2006
£'000 £'000
unaudited audited
----------------------------------- ------- --------
Pre tax profit (loss) from discontinued operations 327 (458)
----------------------------------- ------- --------
Gain on disposal of subsidiary net tangible assets - 2,170
Profit before tax 327 1,712
----------------------------------- ------- --------
Taxation (70) 92
----------------------------------- ------- --------
Total 257 1,804
----------------------------------- ------- --------
In May 2006 the Group completed the disposals of the major elements of its
Continental European businesses. These disposals were in line with the strategy
of streamlining the business to focus on the UK and Ireland.
The 2006 tax credit of £92,000 relates to trading operations.
Cash flows from discontinued operations
2007 2006
£'000 £'000
unaudited audited
----------------------------------- ------- --------
Net cash flows used in operating activities (45) (23)
Net cash flows from investing activities - -
Net cash flows used in financing activities - (3,249)
----------------------------------- ------- --------
Total (45) (3,272)
----------------------------------- ------- --------
Discontinued operations contributed nil (2006: £3,380,000) to revenue, other
income of £314,000 (2006: nil), £nil (2006: £3,838,000) to expenses, a gain on
disposal in 2006 of £2,170,000 and the taxation relating to discontinued
operations was £70,000 (2006: £92,000 credit).
5 Earnings Per Ordinary Share
Basic earnings per share is calculated by dividing the basic earnings for the
year by the weighted average number of fully paid ordinary shares in issue
during the year, less those shares held by the ESOP Trust, which are treated as
cancelled. The ESOP Trust held 43,143 shares at 31 December 2007 (2006:46,950).
Diluted earnings per share is calculated on the same basis as the basic earnings
per share with a further adjustment to the weighted average number of fully paid
ordinary shares to reflect the effect of all dilutive potential ordinary shares.
The Group has one class of potential dilutive ordinary shares being those share
options granted to employees where the exercise price is less than the average
market price of the Company's ordinary shares during the year. These options,
where held under the Executive Share Option Scheme, are not dilutive as the
performance criteria had not been met. 551,578 of these options are under the
Share Save Scheme, have no performance criteria and are dilutive.
In March 2007, June 2007, September 2007 and November 2007 respectively the
Company granted 411,555, 174,698, 393,063 and 440,000 options under the
Executive Share Option Scheme and in June 2007 551,578 awards under the Share
Save Scheme. In September 2006 and October 2006, the Company granted 2,023,805
options under the Executive Share Option Scheme and 2,560,000 awards under the
Long-Term Incentive Plan respectively.
Earnings 2007 Pence Earnings 2006 Weighted Pence
£'000 Weighted per share £'000 ave. no. of per share
ave. no. of Shares
shares 000's
000's
-------------------- ------- ------- ------- ------- ------- -------
Basic earnings
per share 410 37,896 1.08 833 27,857 2.99
Effect of dilutive
options 468
Diluted earnings per
share 410 38,364 1.07 833 27,857 2.99
-------------------- ------- ------- ------- ------- ------- -------
Basic earnings/(loss)
per share from
continuing operations 153 37,896 0.40 (971) 27,857 (3.49)
Effect of dilutive
options 468
Diluted earnings/(loss)
per share from
continuing operations 153 38,364 0.40 (971) 27,857 (3.49)
-------------------- ------- ------- ------- ------- ------- -------
Basic earnings
per share 410 37,896 1.08 833 27,857 2.99
Effect of
adjusting
items 1,025 (1,384)
Adjusted basic
earnings per
share from
continuing
operations * 1,435 37,896 3.79 (551) 27,857 (1.98)
-------------------- ------- ------- ------- ------- ------- -------
Diluted earnings per
share 410 38,364 1.07 833 27,857 2.99
Effect of adjusting
items 1,025 (1,384)
Adjusted diluted
earnings/(loss)
per share from
continuing operations* 1,435 38,364 3.74 (551) 27,857 (1.98)
-------------------- ------- ------- ------- ------- ------- -------
* Adjusted earnings per share from continuing operations is stated before
discontinued operations, the exceptional item after tax and deferred tax write
down and rate change.
6 Reconciliation of Profit /(Loss) to Net Cash Flow
Consolidated
------------------------ --------- ---------
Continuing operations 2007 2006
£'000 £'000
unaudited audited
------------------------ --------- ---------
Profit/(loss) for the year 153 (971)
Adjustments for:
Tax 2,135 197
Depreciation and amortisation 466 569
Equity settled share based payments 551 68
Profit on disposal of available for sale assets - (41)
Loss on disposal of tangible fixed assets 21 76
Interest income (2) (7)
Interest expense 1,392 1,558
Changes in working capital
Decrease in work in progress 292 325
Decrease/(increase) in trade and other receivables 3,301 (3,836)
Decrease in trade and other payables (3,961) (437)
Decrease in provisions (1,012) (580)
Change in retirement benefit liability (1,567) (1,402)
------------------------ --------- ---------
Cash from /(used in) continuing operations 1,769 (4,481)
------------------------ --------- ---------
Discontinued operations
------------------------ --------- ---------
Profit (loss) for the year 257 1,804
Adjustments for:
Tax 70 (92)
Impairment of available for sale assets 26 -
Interest income (13) (4)
Profit on disposal of discontinued operations - (2,170)
Interest expense - -
Changes in working capital
Decrease in trade and other receivables 258 2,111
Decrease in trade and other payables (656) (1,455)
Increase/(Decrease) in provisions - (221)
------------------------ --------- ---------
Cash used in discontinued operations (58) (27)
------------------------ --------- ---------
Total net cash flow from/(used in) operating activities 1,711 (4,508)
------------------------ --------- ---------
Cash generated from operations includes cash outflows relating to exceptional
items recorded in prior years of £880,000 (2006: outflow of £3,535,000).
7 Consolidated Reconciliation of Net Cash Flow to Movement in Net Borrowings
2007 2006
£'000 £'000
unaudited audited
-------------------------------- ---------- --------
Increase/(decrease) in cash in the year 46 (717)
Decrease/(increase) in overdrafts 996 (996)
Decrease (increase) in bank loans - 17,500
Decrease in other bank borrowings - 2,676
Increase in invoice financing facility (2,017) (4,804)
Repayment of obligations under finance leases 19 19
Exchange movements (12) (285)
-------------------------------- ---------- --------
Movement in net debt in the year (968) 13,393
Net debt at 1 January (5,659) (19,052)
-------------------------------- ---------- --------
Net debt at 31 December (6,627) (5,659)
-------------------------------- ---------- --------
8 Statement of Changes in Shareholders' Equity
Share
Consolidated Share Deferred premium Other Retained
capital shares reserve reserves earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
---------------- ------- ------- ------- ------- ------- ------
At 1 January 2007 756 14,319 20,020 44,160 (68,226) 11,029
Net profit for the year - - - - 410 410
Net gain recognised - - - - 651 651
directly in equity
Issue of new shares 4 - 114 - - 118
Share options - value
of employee services - - - - 551 551
---------------- ------- ------- ------- ------- ------- ------
At 31 December 2007 760 14,319 20,134 44,160 (66,614) 12,759
---------------- ------- ------- ------- ------- ------- ------
Share
Consolidated Share Deferred premium Other Retained
capital shares reserve reserves earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
---------------- ------- ------- ------- ------- ------- ------
At 1 January 2006 14,434 - 6,062 44,160 (68,746) (4,090)
Net profit for the
year - - - - 833 833
Net gain recognised (381) (381)
directly in equity
Capital restructure (14,319) 14,319 - - - -
Issue of new shares 641 - 13,958 - - 14,599
Share options - value
of employee services - - - - 68 68
---------------- ------- ------- ------- ------- ------- ------
At 31 December 2006 756 14,319 20,020 44,160 (68,226) 11,029
---------------- ------- ------- ------- ------- ------- ------
The Board is not proposing a dividend for the year (2006: nil per share)
9 Issue of New Shares
During the year 209,524 shares were issued on the exercise of share options.
On 30 March 2006 the Company published a prospectus in respect of the fully
underwritten issue of a Firm Placing of 16,000,000 New Ordinary Shares and a
Placing and Open Offer of 16,038,427 New Ordinary Shares to qualifying
shareholders holding ordinary shares at the close of business on 29 March 2006.
A capital reorganisation was also proposed to subdivide and re-designate each
ordinary share of 5p into one new ordinary share of 2p and 124 deferred shares.
Shareholder approval for the issue and capital reorganisation was sought and
received at an extraordinary general meeting held on 24 April 2006.
In order to issue shares at below the pre-existing nominal price of 5p the
Company completed a capital reorganisation on 28 April 2006 such that:
• Each issued ordinary share of 5p was re-designated into one ordinary
share of 2p
• Every 50 shares were consolidated into one New ordinary share and 124
deferred shares
• Every 2 unissued ordinary shares of 5p were re-designated into 5 New
ordinary shares
The deferred shares are not listed on the London Stock Exchange, having no
voting rights, no rights to dividends and the right only to a very limited
return on capital in the event of liquidation.
Net proceeds from this firm placing and placing and open offer amounted to
£14,599,000.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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