Final Results
Robert Walters PLC
04 March 2003
4 March 2003
ROBERT WALTERS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2002
Robert Walters plc, the recruitment and HR outsourcing business, today announced
its preliminary results for the twelve months ended 31 December 2002.
Financial Highlights
• Turnover (gross fee income) £260.3m (2001: £253.6m)
• Gross profit (net fee income) £55.6m (2001: £65.2m)
• Operating profit, pre-exceptional items, £1.2m (2001: £7.7m)*
• Operating profit, post-exceptional items, £0.6m (2001: £6.3m)**
• Profit before tax £0.9m (2001: £6.5m)
• Loss per share 0.4p (2001: earnings per share 4.9p)
• Operating cash flow £16.4m (2001: £15.0m)
• Cash at year end £19.2m (2001: £9.0m)
• Final dividend 2.1p (2001: 2.1p)
* After goodwill charge of £1.0m (2001: £0.3m)
** Total exceptional charge £654k for office closures and write off of minority
investment (2001 : £1.5m in termination of technology project).
Commenting on the results, Chief Executive, Robert Walters, said:
'The last year has seen the worst market for recruitment services for a decade.
Against this backdrop our business has suffered. The Group operated at
break-even over the second half of 2002 due to particularly difficult trading
conditions encountered from September onwards.
'We remain extremely cautious in our outlook. Markets are highly volatile and
difficult to predict. We continue to manage our business with daily attention
to costs, risks and opportunities. The strength of our balance sheet, with
£19.2m cash and no borrowings, allows us to balance short term requirements
against the long term objective to ensure the business can capitalise on any
future upturn in business confidence.'
For further information please contact:
Robert Walters plc +44 20 7379 3333
Robert Walters Chief Executive
Ian Nash Group Finance Director
Brunswick +44 20 7404 5959
Patrick Handley
Fiona Fong
Or visit our website at www.robertwalters.com
Notes to Editors:
Robert Walters plc
Robert Walters is a leading global recruitment consultancy, specialising in
placing high calibre professionals into permanent, contract and temporary
positions at all management levels. The Group specialises in the accounting,
finance, banking, IT, management consultancy, general management, legal, sales
and marketing, human resources, call centre and support fields. Robert Walters'
blue-chip client base ranges across multi-national corporations covering all
market sectors.
Established in 1985, Robert Walters has built a global presence with 19 offices
spanning five continents. It employs over 760 staff worldwide.
In 1997, Robert Walters established its outsourcing division, Resource
Solutions, to provide HR outsourcing and consultancy services. At the forefront
of recruitment outsourcing, Resource Solutions currently operates contracts
throughout Europe, Australasia, Asia and the US.
CHAIRMANS' STATEMENT
I am pleased to report on the Group's results for the year to 31 December 2002.
Turnover for the year was £260.3m (2001: £253.6m) producing a gross profit ('
net fee income') of £55.6m (2001: £65.2m) resulting in operating profit (before
exceptional items) of £1.2m (2001: £7.7m). Profit before tax for the year was
£0.9m (2001: £6.5m).
Last year was exceptionally hard for the recruitment industry: difficult
conditions in all market sectors affected permanent recruitment and increased
pressure on both hiring levels and margins in the contract business. For Robert
Walters, net fee income was volatile and deteriorated in the fourth quarter.
The Board has responded to this environment by making sure that costs are
tightly controlled and measures taken to enhance productivity. Costs have been
reduced, particularly by the reduction of staff levels. We have, however,
invested in additional training of our consultants to equip them with the skills
they need to be successful in these difficult markets.
During the fourth quarter we closed five of the Group's smallest offices which
consistently struggled to produce satisfactory levels of fee income and
management is focusing on those of our operations with the greatest potential.
These closures resulted in an exceptional charge of £551k. In addition, an
exceptional charge of £103k was incurred on the write-off of a minority
investment in a small mentoring business and the Group has written off the £523k
goodwill relating to the acquisition of Interim Leaders, our specialist interim
management business.
Despite the difficult trading conditions, the Board recommends maintaining the
full year dividend at 3.15p per share. This reflects the strength of the Group's
balance sheet.
The outlook for the first quarter of 2003 remains uncertain. At this point we
believe that net fee income for the first three months will fall somewhat below
the level achieved in 2002.
In summary, we will continue to maintain a sharp focus on our efficiency and
cost control in order to strike the right balance between the short term
requirements of the business and the resources needed to respond effectively to
improvements in market conditions.
On behalf of the Board I would like to thank all our staff for their continuing
commitment to the Group during these difficult times.
CHIEF EXECUTIVE'S STATEMENT
The last year has seen the worst market for recruitment services for a decade.
Against this backdrop our business has suffered. The Group operated at
break-even over the second half of 2002 due to particularly difficult trading
conditions encountered from September onwards.
United Kingdom
In the UK turnover rose by 4.0% to £190.9m (2001: £183.6m) and net fee income
declined by 25.1% to £27.1m (2001: £36.2m). Operating profit declined from
£5.1m to £0.5m.
Permanent recruitment was the worst hit with a 38.7% fall in net fee income
across our UK specialist divisions. The continued decline in the investment
banking sector, and overall uncertainty among major corporates, has particularly
affected permanent recruitment. The proportion of contract business in the UK
increased from 52.9% to 58.3%. This reflects the slower decline of our contract
markets.
The IT recruitment market continued to be extremely difficult throughout 2002.
We downsized our IT business and broadened our customer base to adapt to these
conditions and succeeded in increasing our profits over 2001.
Interim Leaders, our specialist interim management business, underperformed in
2002. Given the current conditions for this business, the Board decided that it
was appropriate to write off the remaining goodwill associated with this
acquisition which resulted in a charge of £0.5m.
Continental Europe
In Benelux, France and Germany turnover remained static at £10.1m while net fee
income fell by 12.9% to £5.3m (2001: £6.1m). Operating profit of £1.2m in 2001
has turned into an operating loss of £0.5m in 2002. This includes an
exceptional charge of £0.4m that arose on the closure of our German office.
Situated in Frankfurt it had been opened four years previously but had
constantly struggled to reach a profitable level of operation and following the
decline in the financial services sector we decided to concentrate on our
profitable Continental European operations. During the year these experienced
falling levels of permanent recruitment, whilst the interim business grew.
In spite of the overall decline in the net fee income of Continental Europe our
Paris office increased its net fee income by 5.5%. We believe the scale of the
French recruitment market offers excellent long term potential to the Group. The
remainder of our established European operations found trading more difficult
but succeeded in remaining profitable in a challenging year.
Asia Pacific
In Asia Pacific turnover fell by 1.2% to £54.8m (2001: £55.5m) and net fee
income rose by 0.8% to £19.8m (2001: £19.6m). Operating profit fell from £1.1m
to £0.4m. This figure includes an exceptional charge of £0.2m following the
decision to close our four smallest Australasian offices in Wellington,
Canberra, Gold Coast and Darwin.
Our fully integrated and re-branded Dunhill acquisition has given us growth in
market share and a significant presence in the retained advertised market. Our
remaining Australasian offices will continue to provide an excellent platform
for future growth.
Net fee income in Japan increased by 36.3% in 2002. Although this was an
excellent overall performance, the fourth quarter fee income levels were the
lowest of the year and we enter 2003 cautiously. In spite of this we feel that
this market offers us substantial long term opportunities.
Our Singapore office performed well throughout 2002, despite facing the worst
recession for over 35 years. However, our Hong Kong office struggled with its
heavy exposure to the financial services market. Following internal
restructuring, it is now better placed to take advantage of the opportunities
that exist as well as providing an excellent springboard for exploiting the
longer term opportunities in China.
Other International
Turnover in the USA, Ireland and South Africa increased by 3.8% to £4.5m (2001:
£4.3m). Net fee income rose by 3.0% to £3.4m (2001: £3.3m) and operating profit
grew marginally from £248,000 to £260,000.
The South African and Irish operations remain a continuing source of candidates
for several of our other offices.
Resource Solutions
Clients continue to see the benefit of outsourcing their recruitment processes
and Resource Solutions has increased the number of its clients. However, the
volume of recruitment by these companies has declined, and with it, the volume
of Resource Solutions business. Together with pricing pressures this resulted in
a fall in fee income in 2002.
General Overview
We continue to manage our cost base across the world in line with the prevailing
economic environment. Total staff numbers have been reduced by 16.7% to
approximately 760 in the year to 31 December 2002, with most of that reduction
happening in the last quarter. We continue to invest in our brand and in
various initiatives to assist our employees to deal with this difficult economic
climate.
We remain extremely cautious in our outlook. Markets are highly volatile and
difficult to predict. We continue to manage our business with daily attention
to costs, risks and opportunities. The strength of our balance sheet, with
£19.2m cash and no borrowings, allows us to balance short term requirements
against the long term objective to ensure the business can capitalise on any
future upturn in business confidence.
FINANCIAL REVIEW
Turnover
Turnover for the Group is the total income from the placement of permanent and
contract staff and therefore includes the remuneration costs of contract
candidates and the value of advertising invoiced to clients. It also includes
the outsourcing fees, consultancy fees and total income from payrolling
contracts charged by Resource Solutions to its clients.
Turnover increased by 2.7% to £260.3m (2001: £253.6m) with 49.9% of the annual
total being generated in the second half (2001: 52.9%).
The turnover increase is essentially due to the growth in outsourced payroll
contracts operated by Resource Solutions. Turnover from permanent recruitment
and the contract business in Robert Walters declined, as did the fees in
Resource Solutions.
Gross Profit (Net Fee Income)
Net fee income is the total placement fees of permanent candidates, the margin
earned on the placement of contract candidates and advertising income. It also
includes the outsourcing and consultancy margin earned by Resource Solutions.
Net fee income for the year decreased by 14.7% to £55.6m (2001: £65.2m). Net fee
income was virtually identical for both the first half of the year and the
second half. Net fee income for the second quarter showed a healthy increase on
the first quarter but deteriorated through the second half.
The increased volume of low margin outsourced payroll contracts explains why the
growth in turnover is not reflected in net fee income.
Operating Profit
Administrative expenses before exceptional items were £54.4m (2001: £57.5m). The
principal reason for this decline is the fall in Group headcount from 917 at the
start of 2002 to 764 at the year end, most of which took effect in the last
quarter.
The reduction in the cost base was not enough to offset the fall in net fee
income resulting in a decline in the Group's operating profit, before
exceptional items, to £1.2m (2001: £7.7m).
Following a review of the Group's goodwill, the Board has decided to write off
in full the goodwill of £523k associated with the acquisition of Interim
Leaders.
Exceptional Items
In the last quarter of 2002 the Group closed five of its smallest offices at a
cost of £551k. This amount consists of lease terminations, redundancy costs, and
the disposal of assets at below book value which are considered to be
exceptional items.
The decision was also taken to make a provision against the carrying value of
the minority investment in a small mentoring business. This has resulted in an
additional exceptional charge to the profit and loss account of £103k.
The total exceptional charge is £654k (2001: £1,457k).
Taxation
The tax charge in 2002 was £1.2m (2001: £2.4m) which was disproportionately
large in relation to the Group profit. This was due to the relative proportion
to profit of the goodwill write off and disallowable items, unrelieved losses in
Germany and profits generated in high tax jurisdictions.
Loss per share and dividends
Basic loss per share was 0.4p (2001: earnings per share 4.9p) and adjusted
earnings per share before exceptional items were 0.3p (2001: 6.1p). The weighted
average number of shares for the year was 83.2m (2001: 82.6m).
A final dividend of 2.1p (2001: 2.1p) is being proposed by the Board. Together
with the interim dividend of 1.05p (2001: 1.05p) per ordinary share paid in
November 2002 the total dividend would amount to 3.15p (2001: 3.15p) per
ordinary share. The final dividend, which amounts to £1.8m will be paid on 11
April 2003 to those shareholders on the register at 12 March 2003. Although
the dividend is not covered by earnings per share, it is covered 6.2 times by
cash earnings per share of 19.9p.
Balance Sheet
The Group had net assets of £37.7m at 31 December 2002 (2001: £40.9m) including
goodwill of £7.2m (2001: £9.4m).
The majority of the movement is accounted for by the retained loss for the year
of £3.0m (2001: profit of £1.6m).
During the course of 2003, the Company will be taking measures to enable it to
make market purchases of its own shares, in common with most listed companies.
Completion of these powers will require shareholder approval and the standard
legal process of a reduction in capital.
Cash Flow and Net Cash Position
At 31 December 2002 the Group had cash balances of £19.2m (2001: £9.0m). Cash
flow from operating activities was £16.4m (2001: £15.0m) reflecting the focus on
improving the working capital position of the Group during the year.
The significant payments made from the operational cash flow were £2.6m of
taxation, dividends of £2.7m and capital expenditure of £1.3m.
Surplus cash balances are generally invested in short term deposits at floating
rates. The Group also has a committed £5.0m overdraft facility available, which
is due for renewal in October 2003.
Consolidated profit and loss account
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
Before Exceptional Before Exceptional
Exceptional Items Exceptional Items
Items Total Items Total
£'000 £'000 £'000 £'000 £'000 £'000
Turnover
Continuing operations 260,321 - 260,321 253,552 - 253,552
Cost of sales (204,699) - (204,699) (188,321) - (188,321)
Gross profit 55,622 - 55,622 65,231 - 65,231
Goodwill (1,026) - (1,026) (348) (348)
Other administrative (53,349) (654) (54,003) (57,154) (1,457) (58,611)
expenses
Administrative (54,375) (654) (55,029) (57,502) (1,457) (58,959)
expenses
Operating profit 1,247 (654) 593 7,729 (1,457) 6,272
Interest (net) 264 - 264 223 - 223
Profit on ordinary 1,511 (654) 857 7,952 (1,457) 6,495
activities before
taxation
Tax on profit on (1,232) 63 (1,169) (2,850) 437 (2,413)
ordinary activities
Profit (loss) on 279 (591) (312) 5,102 (1,020) 4,082
ordinary activities
after taxation
Dividends (2,667) - (2,667) (2,496) - (2,496)
Retained (loss) profit (2,388) (591) (2,979) 2,606 (1,020) 1,586
for the year
Earnings (Loss) per
share (pence)
Basic 0.3 (0.7) (0.4) 6.1 (1.2) 4.9
Diluted 0.3 (0.7) (0.4) 6.1 (1.2) 4.9
Consolidated statement of total recognised gains and losses
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
£'000 £'000
(Loss) profit on ordinary (312) 4,082
activities after taxation
Foreign currency (202) (42)
translation differences
Total recognised (losses) (514) 4,040
gains for the year
Consolidated balance sheet
AS AT 31 DECEMBER 2002
2002 2001
£'000 £'000
Fixed assets
Goodwill 7,243 9,355
Tangible assets 4,394 5,605
Investments - 103
Own shares held 2,832 2,425
14,469 17,488
Current assets
Debtors 22,551 34,248
Cash at bank and in hand 19,210 9,035
41,761 43,283
Creditors: amounts falling due within one year (18,526) (19,741)
Net current assets 23,235 23,542
Total assets less current liabilities 37,704 41,030
Provisions for liabilities and charges - (145)
Net assets 37,704 40,885
Capital and reserves
Called-up share capital 16,931 16,931
Share premium account 82,804 82,804
Other reserves (74,034) (74,034)
Foreign exchange reserves (667) (465)
Profit and loss account 12,670 15,649
Equity shareholders' funds 37,704 40,885
Consolidated cash flow statement
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
£'000 £'000
Net cash inflow from operating activities 16,416 15,024
Returns on investments and servicing of finance 264 223
Taxation (2,552) (5,543)
Capital expenditure and financial investment (1,327) (3,788)
Acquisitions and disposals - (4,896)
Equity dividends paid (2,680) (2,132)
Increase (decrease) in cash in the year 10,121 (1,112)
Notes to the accounts:
1. Basis of accounting
The accounting policies are the same as those set out in the financial
statements of the Group for the year ended 31 December 2001, with the exception
of the adoption of FRS19 on Deferred Taxation. These policies have been applied
consistently throughout the current year and preceding year and the adoption of
FRS19 has not had a material effect.
The preliminary results for the year ended 31 December 2002 are unaudited. The
financial information set out above does not constitute the Group's audited
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The financial information for the year ended 31 December 2001 has been extracted
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualified and did not contain a statement under section 237 (2) or 237 (3) of
the Companies Act 1985. The Group accounts for the year ended 31 December 2002
will be finalised on the basis of the financial information presented by the
Directors in the preliminary announcement. The Group accounts for the year
ended 31 December 2002 have not yet been delivered to the Registrar of
Companies.
The preliminary announcement was approved by the Directors on 3 March 2003.
2. Segmental information
2002 2001
£'000 £'000
i) Turnover:
UK 190,854 183,551
Continental Europe 10,124 10,139
Asia Pacific 54,834 55,516
Other 4,509 4,346
260,321 253,552
ii) Gross profit:
UK 27,138 36,219
Continental Europe 5,289 6,071
Asia Pacific 19,777 19,624
Other 3,418 3,317
55,622 65,231
iii) Profit on ordinary activities before interest and tax:
UK 528 5,131
Continental Europe (111) 1,225
Asia Pacific 570 1,125
Other 260 248
1,247 7,729
Exceptional items (654) (1,457)
Operating profit 593 6,272
Interest (net) 264 223
Profit on ordinary activities before tax 857 6,495
iv) Net assets:
UK 25,757 28,676
Continental Europe 1,507 4,833
Asia Pacific 10,270 7,254
Other 170 122
37,704 40,885
The analysis of turnover by destination is not materially different to the
analysis by origin.
The Directors believe there to be only one class of business throughout 2002 and
2001.
3. Exceptional items
2002 2001
£'000 £'000
Office closure costs 551 -
Provision for impairment of investment 103 -
IT strategy costs - 1,457
Net exceptional items 654 1,457
The exceptional costs incurred in the current year were in respect of the
closure of a number of unprofitable offices and provision for impairment of
investment.
The IT strategy costs in 2001 related to consultancy fees incurred in developing
a global technology process.
There is an overseas tax credit of £63,000 associated with the closure of
offices and a UK tax credit of £437,000 in respect of the IT strategy costs in
the prior year.
4. Tax on profit on ordinary activities
2002 2001
£'000 £'000
Current year tax charge:
Corporation tax - UK 776 2,109
Corporation tax - Overseas 713 1,352
Double tax relief (99) (633)
Deferred tax - UK (10) (356)
Deferred tax - Overseas (147) -
1,233 2,472
Adjustments in respect of prior periods:
Corporation tax - UK 42 (369)
Corporation tax - Overseas 150 -
Double tax relief - 64
Deferred tax (256) 246
(64) (59)
1,169 2,413
5. Equity dividends
2002 2001
£'000 £'000
Interim dividend paid of 1.05p per share (2001:1.05p) 889 889
Final dividend proposed of 2.1p per share (2001:2.1p) 1,778 1,778
Adjustment in respect of prior period - (171)
2,667 2,496
6. (Loss) earnings per share
The calculation of earnings per ordinary share is based on the (loss) profit on
ordinary activities after taxation and the weighted average number of ordinary
shares of Robert Walters plc.
2002 2001
£'000 £'000
(Loss) profit on ordinary activities after taxation (312) 4,082
2002 2001
Number Number
of Shares of Shares
Weighted average number of shares:
Shares in issue 84,656,927 83,907,876
Own shares held (1,488,292) (1,299,016)
For basic earnings per share 83,168,635 82,608,860
Outstanding share options 1,819,950 365,053
For diluted earnings per share 84,988,585 82,973,913
7. Goodwill
£'000
Cost:
At 1 January 2002 9,703
Reduction in deferred consideration (1,086)
At 31 December 2002 8,617
Amortisation:
At 1 January 2002 348
Charge for the year 503
Impairment loss on Interim Leaders 523
At 31 December 2002 1,374
Net book value:
At 1 January 2002 9,355
At 31 December 2002 7,243
8. Reconciliation of movements in shareholders' funds
2002 2001
£'000 £'000
(Loss) profit for the year (312) 4,082
Foreign currency translation differences (202) (42)
(514) 4,040
Dividend (2,667) (2,496)
New shares issued - 3,518
Net (deduction) addition to shareholders' funds (3,181) 5,062
Opening shareholders' funds 40,885 35,823
Closing shareholders' funds 37,704 40,885
9. Analysis of cash flow
2002 2001
£'000 £'000
Reconciliation of operating profit to net cash flow from
operating activities:
Operating profit 593 6,272
Depreciation charges 1,806 1,628
Goodwill amortisation 1,026 348
Loss on disposal of tangible fixed assets 362 322
Provision for impairment of investment 103 -
Decrease in debtors 11,697 10,923
Increase (decrease) in creditors 974 (4,159)
Decrease in provision (145) (310)
Net cash flow from operating activities 16,416 15,024
Returns on investments and servicing of finance
Interest received 264 234
Interest paid - (11)
Net cash inflow 264 223
Taxation
UK Corporation paid tax (788) (4,202)
Foreign tax paid (1,764) (1,794)
ACT received (net) - 453
Net cash outflow (2,552) (5,543)
Capital expenditure
Payments to acquire tangible fixed assets (920) (3,788)
Payment to acquire own shares (407) -
Net cash outflow (1,327) (3,788)
Acquisitions and disposals
Purchase of subsidiary undertaking - (5,085)
Net cash acquired with subsidiary undertaking - 189
Net cash outflow - (4,896)
10. Analysis and reconciliation of net funds
At 1 Exchange At 31
January Cash Movement December
2002 Flows On cash 2002
£'000 £'000 £'000 £'000
Analysis of change in net funds:
Cash at bank and in hand 9,035 10,121 54 19,210
Net funds 9,035 10,121 54 19,210
2002 2001
£'000 £'000
Increase (decrease) in cash in the year 10,121 (1,112)
Foreign currency translation difference 54 334
Movement in net funds 10,175 (778)
Net funds at 1 January 9,035 9,813
Net funds at 31 December 19,210 9,035
11. Dividend
The record date for the final dividend is 12 March 2003 and payment date is 11
April 2003.
12. Issue of the Annual Report and Accounts
The 2002 Annual Report and Accounts will be posted to shareholders by 31 March
2003. Copies may be obtained after this date from the Company Secretary, 55
Strand, London WC2N 5WR.
13. Annual General Meeting
The 2002 Annual General Meeting of Robert Walters plc will be held at 55 Strand,
London WC2N 5WR on 8 May 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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