Final Results
Robert Walters PLC
02 March 2004
2 March 2004
ROBERT WALTERS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2003
Robert Walters plc, the professional recruitment company, today announced its
preliminary results for the twelve months ended 31 December 2003.
Financial Highlights
• Turnover £156.8m (2002: £181.8m)
• Gross profit (net fee income) £52.0m (2002: £55.6m)
• Operating profit before amortisation of goodwill and exceptional items
£2.4m(1) (2002: £2.3m(2))
• Profit before tax £3.4m(3) (2002: £0.9m)
• Earnings per share 2.6p (2002: loss per share 0.4p)
• Cash at year end £15.9m (2002: £19.2m)
• Final dividend 2.1p (2002: 2.1p)
(1) goodwill amortisation charge of £0.4m and no exceptional items.
(2) goodwill amortisation charge of £1.0m and exceptional items of £0.7m.
(3) includes a foreign exchange translation gain of £1.2m.
Commenting on the results, Chief Executive, Robert Walters, said:
'2003 has been a year of continued focus on cost control, a substantial
investment in training and development and a determination across the Group to
win new business in a challenging economic environment.
'We enter 2004 with more optimism about the professional recruitment market than
we have had for several years. We believe that the initiatives taken in the
recent difficult times, combined with our strong brand presence in key markets,
will allow us to emerge a stronger and more profitable business.'
For further information please contact:
Robert Walters plc +44 20 7379 3333
Robert Walters Chief Executive
Ian Nash Group Finance Director
Brunswick
Patrick Handley +44 20 7404 5959
Mark Antelme
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, 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 20 offices
spanning five continents. It employs over 735 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 in
Europe, Asia and the US.
CHAIRMAN'S STATEMENT
I am pleased to report on the Group's results for the year to 31 December 2003.
Turnover for the year was £156.8m (2002: £181.8m) producing a gross profit ('net
fee income') of £52.0m (2002: £55.6m) resulting in an increased operating profit
of £2.4m (2002: £2.3m), before £0.4m amortisation of goodwill (2002: £1.0m) and
in the absence of exceptional items (2002: £0.7m).
Profit before tax rose to £3.4m (2002: £0.9m), including £1.2m of foreign
exchange gains arising primarily on the translation of the Group's Australian
dollar intercompany account following the strengthening of the Australian dollar
against the pound during the year.
The year saw continuing pressure on the professional recruitment market. Volumes
of placements fell and fee margins were subject to continual pressure. However,
the cost control initiatives implemented over the last two years have produced
the anticipated benefits.
The quarter on quarter decline in net fee income that had been experienced in
the previous two years has now reversed and there were marginal increases from
the first quarter onwards. Consequently, we have taken the view that further
headcount reduction is unnecessary and in many of our businesses we are now
seeking to increase our headcount.
The Board recommends maintaining the full year dividend at 3.15p per share.
Although this dividend is not fully covered by earnings in 2003, it is the
Board's view that it is justified by the strength of the Group's balance sheet.
We believe that net fee income for the first quarter of the current year will be
in excess of that achieved in the first quarter of 2003 and we are cautiously
optimistic about the majority of our markets.
In summary, we will maintain our focus on productivity and judicious cost
control combined with continued investment in the training of our consultants
and business development so that, as one of the leading global providers of
professional staff, we can benefit from the anticipated improvement in worldwide
economic conditions in 2004.
On behalf of the Board, I would like to thank all our staff for their excellent
work in another hard year for the recruitment industry.
TIMOTHY BARKER
Chairman
CHIEF EXECUTIVE'S STATEMENT
2003 was a mixed year. Trading conditions remained difficult but there were
signs towards the end of the year that we were entering a more favourable
economic environment. The Group improved profitability through the second half
of the year and we believe our brand and market share have strengthened
throughout this difficult period.
United Kingdom
In the UK turnover fell by 22% to £87.2m (2002: £112.3m) and net fee income
declined by 13% to £23.6m (2002: £27.1m). Operating profit declined from £0.5m
to £0.0m.
The market was still characterised by the reluctance of employers to authorise
the hiring of additional staff and much of our activity has been in relation to
replacement of staff.
Permanent recruitment levels were marginally higher than in 2002 whereas our
contract business declined across all our markets.
For much of the year uncertainty prevailed, resulting in a reluctance to hire
which affected our core businesses. In our smaller IT and HR businesses we
succeeded in increasing our profits over 2002.
It remains our intention to grow our geographical presence in the UK and we
opened a Guildford office in the second half of the year.
Continental Europe
Our business in Continental Europe continued to suffer from difficult market
conditions. Turnover was £8.4m (2002: £10.1m) while net fee income fell 11% to
£4.7m (2002: £5.3m). Our operating loss increased to £0.4m (2002: £0.1m).
In this region we now have operations based in Benelux and France following the
closure of our German operation in 2002. In Benelux the levels of net fee income
from permanent recruitment remained constant while those of our interim business
declined. Cost savings offset this decline, producing a very similar result to
that of 2002. The French recruitment market proved extremely tough and our net
fee income declined 14% moving the business from a profit to a small loss.
We remain confident that our operations in Benelux and France have retained the
critical mass and the resolution to perform strongly once their economies
recover.
Asia Pacific
In Asia Pacific we have managed to achieve growth in turnover, net fee income
and operating profit. Turnover increased to £57.5m (2002: £54.8m), net fee
income to £20.7m (2002: £19.8m) and operating profit to £2.4m (2002: £0.6m).
Our six offices across Australia and New Zealand give us a strong presence and
continue to grow more profitable year by year. The results we have achieved bear
testimony to the optimism in this region and give credence to our strategy of
building a global recruitment presence.
Our Singapore office once again turned in an exceptional performance with
increases in both net fee income and operating profit. Our Hong Kong office has
now begun to shake off the economic effects of SARS and by the last quarter of
2003 was operating profitably again. In Japan, we achieved similar levels of net
fee income and operating profit to those achieved in 2002 and we believe we are
well positioned to benefit from the market potential that exists in the medium
term.
Other International
Turnover in USA, Ireland and South Africa fell by 17% to £3.8m (2002: £4.5m).
Net fee income fell by 12% to £3.0m (2002: £3.4m) and operating profit was
£28,000 (2002: £260,000).
South Africa and Ireland both disappointed in 2003 and we have restructured both
management teams. We are confident that these businesses are now better able to
contribute to both Group profitability and our global candidate sourcing
requirements.
Our small operation in New York continued to trade profitably in a very
uncertain market.
Resource Solutions
Resource Solutions is our outsourcing business which manages the recruitment
processes for a number of our major clients. This division has seen only limited
new business gains but in difficult times has retained its position and is an
important element of the Group's strategy. We view 2004 with renewed optimism
for new business opportunities.
General Overview
2003 has been a year of continued focus on cost control, a substantial
investment in training and development and a determination across the Group to
win new business in a challenging economic environment.
We enter 2004 with more optimism about the professional recruitment market than
we have had for several years. We believe that the initiatives taken in the
recent difficult times, combined with our strong brand presence in key markets,
will allow us to emerge a stronger and more profitable business.
ROBERT WALTERS
Chief Executive
FINANCIAL REVIEW
Turnover
Turnover for the Group is the total income from the placement of permanent and
contract staff and therefore includes the remuneration of contract staff and the
cost of advertising to clients. It also includes outsourcing fees, consultancy
fees and the net income from payrolling contracts charged by Resource Solutions
to its clients.
Turnover fell 13.8% to £156.8m (2002: £181.8m) with 50.5% of the annual total
being generated in the second half (2002: 50.4%). Turnover in 2002 was restated
by £78.5m in accordance with the amendment to FRS 5, also resulting in a
reduction in turnover of £58.8m in the current year.
The fall in turnover was primarily due to the decline in the Robert Walters
contract business and the outsourcing contracts operated by Resource Solutions.
Gross Profit (Net Fee Income)
Net Fee Income is the total income from the placement fees of permanent
candidates, the margin earned on the placement of contract candidates and
advertising income. It also includes the outsourcing and consultancy margins
earned by Resource Solutions.
Net Fee Income for the year decreased by 6.5% to £52.0m (2002: £55.6m). Net fee
income was £26.7m in the second half of 2003 compared with £25.3m in the first
half (2002: 2H £28.0m, 1H £27.6m). Net fee income has shown a steady increase
quarter on quarter from the first quarter of 2003.
Increases in margin in both Robert Walters contract business and Resource
Solutions payroll contracts are the reasons why the fall in turnover is
mitigated at the net fee income level.
Operating Profit
Administrative expenses were £49.9m (2002: £55.0m) including a goodwill charge
of £0.4m (2002: £1.0m) and no exceptional items (2002: £0.7m). The principal
reason for this decline was the fall in the Group average headcount from 870 in
2002 to 730 in 2003. The necessary decline in headcount for the Group since 2000
has now been reversed with headcount rising modestly from 715 at 30 June 2003 to
736 at 31 December 2003.
The reduction in the cost base, the reduced goodwill amortisation charge and the
absence of any exceptional items in 2003 outweighed the decline in the net fee
income resulting in an increase in the Group's operating profit to £2.0m (2002:
£0.6m).
Interest and Financing Income
As stated in the Group's Interim Statement, there was a £1.0m foreign exchange
gain due primarily to the translation of the Group's Australian dollar
intercompany account following the strengthening of the dollar against the pound
in the first half of 2003. The total foreign exchange gain for the year was
£1.2m (2002: £0.0m). Interest received in 2003 was £227k (2002: £264k).
Taxation
The tax charge in 2003 was £1.3m (2002: £1.2m) which gives an effective rate of
38.4%.
This rate is above the UK standard rate of 30% due to the amortisation of
goodwill, disallowable items, unrelieved losses and profits being generated in
high tax jurisdictions and also reflects a one-off reduction of £0.6m in the tax
charge for the year as a result of corporation tax deductions available in
respect of the vesting of share options during the year.
Earnings per Share and Dividends
Basic earnings per share were 2.6p (2002 loss per share 0.4p). The weighted
average number of shares for the year was 81.1m (2002: 83.2m).
A final dividend of 2.1p (2002: 2.1p) per ordinary share is being proposed by
the Board. Together with the interim dividend of 1.05p (2002: 1.05p) per
ordinary share paid in October 2003, the total dividend would amount to 3.15p
(2002: 3.15p) per ordinary share. The final dividend, which amounts to £1.7m,
will be paid on 28 May 2004 to those shareholders on the register at 7 May 2004.
Although this dividend is not fully covered by earnings in 2003, it is the
Board's view that it is justified by the strength of the Group's balance sheet.
Balance Sheet
The Group had net assets of £31.6m at 31 December 2003 (2002: £34.9m) including
goodwill of £6.8m (2002: £7.2m).
The movement in the balance sheet is accounted for by the retained loss for the
year of £0.4m (2002: £3.0m), a translation gain of £0.6m (2002: loss of £0.2m)
and the purchase of a further £3.5m (2002: £0.4m) of the Group's own shares to
meet the potential future obligations under employee incentive arrangements,
which are now categorised within capital and reserves, in accordance with UITF
38.
In 2004 the Company intends to renew the powers, which were granted at the AGM
in 2003, to enable it to make market purchases of its shares.
Cash Flow and Net Cash Position
At 31 December 2003, the Group had cash balances of £15.9m (2002: £19.2m). Cash
flow from operating activities was £3.4m (2002: £16.4m).
The significant payments made from operational cash flow were £0.8m of taxation,
dividends of £2.5m, £0.9m of capital expenditure and £3.5m for the acquisition
of the Group's own shares.
Surplus cash balances are generally invested in financial institutions with
favourable credit ratings that offer competitive rates of return, whilst still
providing the Group with flexibility in its cash management. The Group also has
a committed £5.0m overdraft facility available which is due for renewal in
October 2004.
IAN NASH
Group Finance Director
Consolidated profit and loss account - unaudited
FOR THE YEAR ENDED 31 DECEMBER 2003
2003 2002
£'000 £'000
Turnover
Continuing operations (2002 restated - see note 2) 156,835 181,781
Cost of sales (2002 restated - see note 2) (104,885) (126,159)
Gross profit 51,950 55,622
Goodwill (396) (1,026)
Exceptional administrative expenses - (654)
Other administrative expenses (49,546) (53,349)
Administrative expenses (49,942) (55,029)
Operating profit 2,008 593
Interest and financing income 1,398 264
Profit on ordinary activities before taxation 3,406 857
Tax on profit on ordinary activities (1,308) (1,169)
Profit (loss) on ordinary activities after taxation 2,098 (312)
Dividends (2,453) (2,667)
Retained loss for the year (355) (2,979)
Earnings (loss) per share (pence):
Basic 2.6 (0.4)
Diluted 2.5 (0.4)
Consolidated statement of total recognised gains and losses - unaudited
FOR THE YEAR ENDED 31 DECEMBER 2003
2003 2002
£'000 £'000
Retained profit (loss) for the year 2,098 (312)
Foreign currency translation differences 593 (202)
Total recognised gains (losses) for the year 2,691 (514)
Consolidated balance sheet - unaudited
AS AT 31 DECEMBER 2003
2002
2003 (RESTATED)
£'000 £'000
Fixed assets
Goodwill 6,847 7,243
Tangible assets 3,474 4,394
10,321 11,637
Current assets
Debtors 23,389 22,551
Cash at bank and in hand 15,915 19,210
39,304 41,761
Creditors: Amounts falling due within one year (17,832) (18,526)
Net current assets 21,472 23,235
Total assets less current liabilities 31,793 34,872
Provision for liabilities and charges (183) -
Net assets 31,610 34,872
Capital and reserves
Called-up share capital 16,935 16,931
Share premium account 77,816 82,804
Other reserves (74,034) (74,034)
Own shares held (6,348) (2,832)
Foreign exchange reserves (74) (667)
Profit and loss account 17,315 12,670
Equity shareholders' funds 31,610 34,872
Consolidated cash flow statement - unaudited
FOR THE YEAR ENDED 31 DECEMBER 2003
2003 2002
£'000 £'000
Net cash inflow from operations 3,423 16,416
Returns on investments and servicing of finance 227 264
Taxation (786) (2,552)
Capital expenditure and financial investment (865) (920)
Financing (3,500) (407)
Equity dividends paid (2,453) (2,680)
(Decrease) increase in cash in year (3,954) 10,121
Notes to the accounts:
1. Basis of accounting
The principal accounting policies of the Group are the same as those set out in
the financial statements of the Group for the year ended 31 December 2002, with
the exception of the adoption of UITF abstract 38 ('UITF 38') and the guidance
issued in 2003 in the amendment to FRS 5, application note (g).
In accordance with recommended practice, early adoption of the amendment to UITF
38 has been implemented and accordingly the profit and loss expense for the
executive share scheme introduced during the year has been based on the
difference between the fair value of the shares on the date of the grant and the
exercise price. An additional consequence is that the ESOP shares previously
shown as assets in the balance sheet have now been deducted from shareholders'
funds, and the prior year comparatives have been restated. There would have been
an additional charge to the Group's profit and loss account of £0.2m (2002:
£nil) if UITF 38 had not been adopted.
The requirements of the amendment to FRS 5, application note (g) were adopted
during the current year and the prior year comparative turnover figures have
been restated as there was a material effect. This restatement had no impact on
the Group's operating profit.
With the exceptions of UITF 38 and the amendment to FRS 5, application note (g),
all other accounting policies were applied consistently during the current and
the prior year.
The preliminary results for the year ended 31 December 2003 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 2002 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 2003
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 2003 have not yet been delivered to the Registrar of Companies.
The preliminary announcement was approved by the Directors on 1 March 2004.
2. Segmental information
2003 2002
£'000 £'000
i) Turnover:
UK (2002 restated) 87,231 112,315
Continental Europe 8,387 10,124
Asia Pacific 57,457 54,834
Other 3,760 4,508
156,835 181,781
ii) Gross Profit:
UK 23,556 27,138
Continental Europe 4,748 5,289
Asia Pacific 20,654 19,777
Other 2,992 3,418
51,950 55,622
iii) (Loss) profit on ordinary activities before interest
and tax:
UK (6) 528
Continental Europe (367) (111)
Asia Pacific 2,353 570
Other 28 260
2,008 1,247
Exceptional items - (654)
Operating Profit 2,008 593
Interest and financing income 1,398 264
Profit on ordinary activities before tax 3,406 857
iv) Net Assets:
UK (2002 restated) 15,913 22,925
Continental Europe 2,120 1,507
Asia Pacific 13,694 10,270
Other (117) 170
31,610 34,872
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 2003 and 2002.
Both turnover and cost of sales in the United Kingdom have been adjusted by
£78.5m from the previously reported figures of £260.3m and (£204.7m)
respectively. This restatement follows a review of the guidance issued in 2003
in the amendment to FRS 5, application note (g), relating to Revenue Recognition
and the identification that in certain transactions the Group is primarily
involved in an intermediary role. In accordance with the published guidance, the
Group's policy is now only to recognise as turnover the net income arising from
such transactions.
The 2002 net assets of the Group have also been reduced by £2.8m, following the
restatement of own shares held that are now categorised within capital and
reserves, in accordance with the early adoption of UITF 38. This restatement has
no impact on the Group's profit and loss account.
3. Exceptional items
2003 2002
£'000 £'000
Office closure costs - 551
Provision for impairment of investment - 103
Net exceptional items - 654
The exceptional costs incurred in the prior year were in respect of the closure
of a number of unprofitable offices and there was an associated tax credit of
£63,000.
4. Tax on profit on ordinary activities
2003 2002
£'000 £'000
Current year tax charge:
Corporation tax - UK 333 776
Corporation tax - Overseas 1,549 713
Double tax relief (150) (99)
Deferred tax - UK (27) (10)
Deferred tax - Overseas (493) (147)
1,212 1,233
Adjustments in respect of prior periods:
Corporation tax - UK (171) 42
Corporation tax - Overseas (233) 150
Deferred tax - UK 202 (256)
Deferred tax - Overseas 298 -
96 (64)
1,308 1,169
The Group's overseas tax rates are generally higher than those in the UK and
therefore the future effective tax rate is partially dependent on the
geographical balance of the Group profit.
5. Equity dividends
2003 2002
£'000 £'000
Interim dividend paid of 1.05p per share (2002 : 1.05p) 889 889
Final dividend proposed of 2.1p (2002 : 2.1p) 1,684 1,778
Adjustment in respect of prior year (120) -
2,453 2,667
6. Earnings (loss) per share
The calculation of earnings per ordinary share is based on the profit (loss) on
ordinary activities after taxation and the weighted average number of ordinary
shares of Robert Walters plc.
2003 2002
£'000 £'000
Profit (loss) on ordinary activities after
taxation 2,098 (312)
2003 2002
Number Number
of shares of shares
Weighted average number of shares:
Shares in issue 84,659,941 84,656,927
Own shares held (3,516,692) (1,488,292)
For basic earnings per share 81,143,249 83,168,635
Outstanding share options and awards 3,051,985 1,819,950
For diluted earnings per share 84,195,234 84,988,585
7. Goodwill
£'000
Cost:
At 1 January 2003 and 31 December 2003 8,617
Amortisation:
At 1 January 2003 1,374
Charge for the year 396
At 31 December 2003 1,770
Net book value:
At 1 January 2003 7,243
At 31 December 2003 6,847
8. Reconciliation of movements in shareholders' funds
2003 2002
£'000 £'000
Profit (loss) for the year 2,098 (312)
Foreign currency translation differences 593 (202)
2,691 (514)
Dividend (2,453) (2,667)
Own shares purchased (3,516) (407)
New shares issued 16 -
Net reduction to shareholders' funds (3,262) (3,588)
Opening shareholders' funds 34,872 38,460
Closing shareholders' funds 31,610 34,872
9. Analysis of cash flow
2003 2002
£'000 £'000
Reconciliation of operating profit to net cash flow from
operating activities:
Operating profit 2,008 593
Depreciation charges 1,495 1,806
Goodwill amortisation 396 1,026
Loss on disposal of tangible fixed assets 418 362
Provision for impairment of investment - 103
(Increase) decrease in debtors (784) 11,697
(Decrease) increase in creditors (293) 974
Increase (decrease) in provision 183 (145)
Net cash flow from operating activities 3,423 16,416
Returns on investments and servicing of
finance
Interest received 227 264
Net cash inflow 227 264
Taxation
UK Corporation tax paid (105) (788)
Foreign tax paid (681) (1,764)
Net cash outflow (786) (2,552)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (865) (920)
Net cash outflow (865) (920)
Financing
Issue of ordinary share capital 16 -
Own shares purchased (3,516) (407)
Net cash outflow (3,500) (407)
10. Analysis and reconciliation of net funds
At 1 Exchange At 31
January Cash movement December
2003 flows on cash 2003
£'000 £'000 £'000 £'000
Analysis of change in net funds: 19,210 (3,954) 659 15,915
Cash at bank and in hand
Net funds 19,210 (3,954) 659 15,915
2003 2002
£'000 £'000
(Decrease) increase in cash in the year (3,954) 10,121
Foreign currency translation
differences 659 54
Movement in net funds (3,295) 10,175
Net funds at 1 January 19,210 9,035
Net funds at 31 December 15,915 19,210
11. Dividend
The dividend will be paid on 28 May 2004 to those shareholders on the register
at 7 May 2004.
12. Issue of the Annual Report and Accounts
The 2003 Annual Report and Accounts will be posted to shareholders by 31 March
2004. Copies may be obtained after this date from the Company Secretary, 55
Strand, London WC2N 5WR.
13. Annual General Meeting
The 2003 Annual General Meeting of Robert Walters plc will be held on 13 May
2004 at 55 Strand, London WC2N 5WR.
This information is provided by RNS
The company news service from the London Stock Exchange
Tuesday, 14th May 2024
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