Interim Results

Robert Walters PLC 07 September 2004 7 September, 2004 ROBERT WALTERS PLC Interim Results for the six months ended 30 June 2004 Robert Walters plc, the professional recruitment company, today announced its interim results for the six months ended 30 June 2004. Financial Highlights â€¢ Gross profit ('net fee income') up 21% to Â£30.8m (H1 2003: Â£25.3m) â€¢ Operating profit up 257% to Â£3.2m* (H1 2003: Â£0.9m*) â€¢ Profit before tax up 52% to Â£2.8m** (H1 2003: Â£1.9m**) â€¢ Cash at 30 June 2004 of Â£13.6m (31 December 2003: Â£15.9m) â€¢ Earnings per share up 58% to 1.9p (H1 2003: 1.2p) â€¢ Interim dividend maintained at 1.05p per ordinary share * Before Â£0.2m goodwill amortisation ** After Â£0.3m exchange loss (exchange gain H1 2003: Â£1.0m) Commenting on the results, Chief Executive, Robert Walters, said: 'The encouraging growth achieved in the first half reflects the significant efforts made over the last few years to put Robert Walters in the best possible position to take advantage of the current return in business confidence. Our permanent recruitment business has returned to growth and the contract business is showing signs of improvement. 'Whilst we are optimistic with regard to the continuation of improved trading conditions, we have adopted a policy of cautious growth to capitalise on the increased opportunities in the market. We intend to steadily increase our market share, productivity and overall profitability.' For further information, please contact: Robert Walters plc Robert Walters Chief Executive +44 20 7379 3333 Ian Nash Finance Director Stephen Edwards Marketing Director Brunswick +44 20 7404 5959 Patrick Handley Nigel Prideaux Mark Antelme Notes to editors 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 850 staff worldwide. In 1997, Robert Walters established its recruitment process outsourcing division, Resource Solutions, to provide recruitment 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 trading for the six months ended 30 June 2004. In the first half, turnover was Â£82.2m (2003: Â£77.7m) producing a gross profit ('net fee income') of Â£30.8m (2003: Â£25.3m) and a substantial improvement in operating profit to Â£3.0m (2003: Â£0.7m). Profit before tax was Â£2.8m (2003: Â£1.9m) which included Â£0.3m of foreign exchange translation losses (foreign exchange translation gains 2003: Â£1.0m). Business confidence returned and trading conditions improved in most of the Group's markets and in particular in the sectors hardest hit over the last three years such as financial services. Net fee income for the Group increased 21% over the same period in 2003 with most of this increase coming from permanent recruitment. Net fee income in the second quarter of 2004 improved for the fifth consecutive quarter and was almost back to a level last achieved in the third quarter of 2001. Following the improvement in business confidence, and as anticipated at the time of the preliminary statement, we have increased headcount from 736 at 31 December 2003 to 863 at the half year. We expect to continue to increase headcount in the second half of 2004 to take advantage of greater opportunities. United Kingdom Turnover in the UK was Â£44.6m (2003: Â£44.1m), net fee income Â£14.4m (2003: Â£11.2m) and operating profit Â£0.8m (2003 operating loss: Â£0.3m). The growth in net fee income was driven by permanent recruitment with contract recruitment at similar levels to 2003, although the second quarter of 2004 showed signs of improvement in this market. All of our UK recruitment disciplines increased their net fee income year on year. We saw good growth across our finance operations and permanent recruitment in the financial services sector produced exceptional growth. Within an improved market for IT services, our IT business continued to increase profit, and we are also delighted that our newest UK business, HR recruitment, continued to perform well with net fee income almost doubling and operating profit tripling. Continental Europe Turnover in Continental Europe was Â£5.1m (2003: Â£4.4m), net fee income Â£2.9m (2003: Â£2.5m) and operating profit Â£0.1m (2003: Â£0.1m). Trading conditions have continued to be difficult although we are starting to see signs of improvement. Permanent recruitment increased across all of our European operations whereas interim business was comparable to 2003. We are encouraged by the general improvement in our European markets and have extended our operations by establishing Walters Interim in Paris to focus on the contract market. Asia Pacific Turnover in the Asia Pacific region was Â£30.8m (2003: Â£27.1m), net fee income Â£11.8m (2003: Â£9.9m) and operating profit doubled to Â£2.2m (2003: Â£0.9m). In the first half of 2004, all our Asia Pacific operations produced increased net fee income resulting in a further increase in their operating profit. Consistent with our business elsewhere, this growth in net fee income came predominantly from permanent recruitment. Our operations in Australia, Singapore and Japan delivered excellent profit growth. We are also pleased to report that our Hong Kong operation which was drastically hit by the SARS epidemic in the first half of 2003 has operated profitably in the first six months of 2004. We continue to maintain a watching brief across this region to ascertain the appropriate time to establish a presence in other Asian markets, in particular China. Other International Other international comprises our New York, Dublin and Johannesburg offices. Turnover for these businesses was Â£1.8m (2003: Â£2.1m), net fee income Â£1.6m (2003: Â£1.7m) and operating loss Â£0.1m (2003 operating profit: Â£0.1m). Our US operation has increased its operating profit in the improved market conditions. We have increased our investment in our Dublin office and we are starting to achieve increased momentum in that market. Within our small Johannesburg office, the management changes made last year have yet to have a positive impact and consequently the business made a small loss to date in 2004. Resource Solutions Resource Solutions, our outsourcing business, which manages the recruitment process for a number of major clients, also benefited from improved market conditions. Net fee income increased by 23% due to additional numbers of staff at client sites and an increase in the number of client contractors payrolled by Resource Solutions. Resource Solutions remains an important element in the Group's strategy and we look forward to continued growth from this business. Cash Flow The Group ended the period with Â£13.6m net cash (31 December 2003 Â£15.9m). Operating activities generated Â£1.2m (30 June 2003: Â£1.9m) despite an increase in debtors of Â£6.8m, reflecting increased activity levels. The significant cash outflows were the final dividend of Â£1.7m and corporate taxation of Â£1.0m. Dividend The Board has decided to maintain the interim dividend at 1.05p per share. The interim dividend will be paid on 29 October 2004 to those shareholders on the Company's register at 17 September 2004. Current Trading and Prospects Whilst the economic backdrop contains a degree of uncertainty, we have started the third quarter of 2004 well and we remain optimistic that the improving market conditions that we experienced in the first half of 2004 will continue throughout this year. Consequently, we will maintain our policy of cautious growth, in order to increase our market share, productivity and overall profitability. Timothy Barker Chairman ROBERT WALTERS plc INTERIM RESULTS 2004 consolidated profit and loss account 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Notes Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ---------------------- ----- --------- ------- --------- Turnover (2003 restated - see note 1) 3 82,247 77,697 156,835 Cost of sales (2003 restated - see note 1) (51,496) (52,382) (104,885) ---------------------- ----- --------- ------- --------- Gross profit 3 30,751 25,315 51,950 ---------------------- ----- --------- ------- --------- Goodwill amortisation (198) (200) (396) Other administrative expenses (27,575) (24,425) (49,546) ---------------------- ----- --------- ------- --------- Administrative expenses (27,773) (24,625) (49,942) ---------------------- ----- --------- ------- --------- Operating profit 3 2,978 690 2,008 Net finance (expenditure) income 4 (137) 1,181 1,398 ---------------------- ----- --------- ------- --------- Profit on ordinary activities before taxation 2,841 1,871 3,406 Tax on profit on ordinary activities 5 (1,317) (869) (1,308) ---------------------- ----- --------- ------- --------- Profit on ordinary activities after taxation 1,524 1,002 2,098 Dividends 6 (811) (889) (2,453) ---------------------- ----- --------- ------- --------- Retained profit (loss) for the period 713 113 (355) ---------------------- ----- --------- ------- --------- Earnings per share (pence): 7 Basic 1.9 1.2 2.6 Diluted 1.8 1.2 2.5 ---------------------- ----- --------- ------- --------- consolidated statement of total recognised gains and losses 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ---------------------- ----- --------- ------- --------- Profit for the period 1,524 1,002 2,098 Foreign currency translation differences (557) 110 593 ---------------------- ----- --------- ------- --------- Total recognised gains for the period 967 1,112 2,691 ---------------------- ----- --------- ------- --------- ROBERT WALTERS plc INTERIM RESULTS 2004 consolidated balance sheet 2004 2003 2003 30 June 30 June 31 December (Restated - see note 1) Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ------------------------- --------- ------- -------- Fixed assets Goodwill 6,649 7,045 6,847 Tangible assets 3,196 4,114 3,474 ------------------------- --------- ------- -------- 9,845 11,159 10,321 ------------------------- --------- ------- -------- Current assets Debtors 30,123 22,570 23,389 Cash at bank and in hand 13,642 18,390 15,915 ------------------------- --------- ------- -------- 43,765 40,960 39,304 Creditors: amounts falling due within one year (23,540) (18,448) (17,832) ------------------------- --------- ------- -------- Net current assets 20,225 22,512 21,472 ------------------------- --------- ------- -------- Total assets less current liabilities 30,070 33,671 31,793 Provision for liabilities and charges (188) - (183) ------------------------- --------- ------- -------- Net assets 29,882 33,671 31,610 ------------------------- --------- ------- -------- Capital and reserves Share capital 16,935 16,931 16,935 Share premium 77,816 82,804 77,816 Other reserves (74,034) (74,034) (74,034) Own shares held (8,232) (4,256) (6,348) Foreign exchange reserves (631) (557) (74) Profit and loss account 18,028 12,783 17,315 ------------------------- --------- ------- -------- Equity shareholders' funds 29,882 33,671 31,610 ------------------------- --------- ------- -------- ROBERT WALTERS plc INTERIM RESULTS 2004 consolidated cashflow statement 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Note Â£'000 Â£'000 Â£'000 ------------------------ ----- --------- ------- --------- Net cash inflow from operations 8 1,177 1,944 3,423 Returns on investments and servicing of finance 137 157 227 Taxation (1,046) 223 (786) Capital expenditure and financial investment (386) (538) (865) Equity dividends paid (1,654) (1,729) (2,453) ------------------------ ----- --------- ------- --------- Cash flow before financing (1,772) 57 (454) Financing - (1,415) (3,500) ------------------------ ----- --------- ------- --------- Decrease in cash in period 8 (1,772) (1,358) (3,954) ------------------------ ----- --------- ------- --------- reconciliation of movement in shareholders funds 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ------------------------ ----- --------- ------- --------- Profit for the period 1,524 1,002 2,098 Foreign currency translation differences (557) 110 593 ------------------------ ----- --------- ------- --------- 967 1,112 2,691 Dividend (811) (889) (2,453) Own shares purchased (1,884) (1,415) (3,516) New shares issued - - 16 ------------------------ ----- --------- ------- --------- Net reduction to shareholders' funds (1,728) (1,192) (3,262) Opening shareholders' funds 31,610 34,863 34,872 ------------------------ ----- --------- ------- --------- Closing shareholders' funds 29,882 33,671 31,610 ------------------------ ----- --------- ------- --------- The previously reported 30 June 2003 equity shareholders' funds balance has been reduced by Â£4,256,000 as a result of the adoption of the UITF abstract 38 in respect of own shares held. This restatement had no impact on the Group's profit and loss account. ROBERT WALTERS plc INTERIM RESULTS 2004 notes to the financial information 1 Accounting Policies Since 30 June 2003, there have been the following changes to accounting policies: Both turnover and cost of sales in the United Kingdom have been adjusted by Â£26.9m from the previously reported figures as at 30 June 2003 of Â£104.6m and Â£79.3m 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 to only recognise the net income arising from such transactions. The 30 June 2003 net assets of the Group have also been reduced by Â£4.3m, 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 had no impact on the Group's profit and loss account. These changes were reflected in the annual 2003 report and accounts of Robert Walters plc. 2 Financial information The financial information on pages 5 to 11 was formally approved by the Board of Directors on 6 September 2004. The financial information set out in this document does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2003 for Robert Walters plc on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. The financial information in respect of the period ended 30 June 2004 is unaudited but has been reviewed by the Company's auditors. Their report is attached on page 12. The financial information in respect of the period ended 30 June 2003 is unaudited. 3 Segmental Information 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ----------------------- ---------- -------- --------- i) Turnover: UK (30 June 2003 restated) 44,595 44,107 87,231 Continental Europe 5,059 4,387 8,387 Asia Pacific 30,791 27,055 57,457 Other 1,802 2,148 3,760 ----------------------- ---------- -------- --------- 82,247 77,697 156,835 ----------------------- ---------- -------- --------- ii) Gross profit: UK 14,446 11,232 23,556 Continental Europe 2,887 2,485 4,748 Asia Pacific 11,848 9,858 20,654 Other 1,570 1,740 2,992 ----------------------- ---------- -------- --------- 30,751 25,315 51,950 ----------------------- ---------- -------- --------- iii) UK 765 (334) (6) Continental Europe 91 74 (367) Asia Pacific 2,202 884 2,353 Other (80) 66 28 ----------------------- ---------- -------- --------- Operating profit 2,978 690 2,008 Net finance (expenditure) income (137) 1,181 1,398 ----------------------- ---------- -------- --------- Profit on ordinary activities before tax 2,841 1,871 3,406 ----------------------- ---------- -------- --------- 4 Net finance (expenditure) income 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ----------------------- ---------- -------- --------- Interest received 200 157 227 Foreign exchange (loss) gain (337) 1,024 1,171 ----------------------- ---------- -------- --------- (137) 1,181 1,398 ----------------------- ---------- -------- --------- 5 Corporation tax 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ----------------------- ---------- -------- --------- UK 538 133 337 Overseas 779 736 971 ----------------------- ---------- -------- --------- Total taxation 1,317 869 1,308 ----------------------- ---------- -------- --------- The charge for taxation is based on the expected annual tax rate of 46% (2003: 46%) on profit before taxation and amortisation of goodwill. The effective rate of tax is high due to a number of factors, including: overseas profits subject to higher taxation; goodwill amortisation; disallowables and, unrelieved foreign losses. 6 Dividends 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Â£'000 Â£'000 Â£'000 ------------------------- -------- -------- ---------- Interim dividend of 1.05p per share 811 889 889 (2003 : 1.05p) Final dividend (2003 : 2.1p) - - 1,684 Adjustment in respect of prior year - - (120) ------------------------- -------- -------- ---------- 811 889 2,453 ------------------------- -------- -------- ---------- The total amount of the interim dividend is lower than in June 2003 due to the purchase of own shares during the period. 7 Earnings per share The calculation of earnings per share is based on the profit on ordinary activities after taxation and the weighted average number of ordinary shares of the Company. 2004 2003 2003 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Weighted average number of shares: Unaudited Unaudited Audited -------------------------- -------- --------- --------- Shares in issue 84,676,927 84,656,927 84,659,941 Own shares held (5,945,560) (2,149,018) (3,516,692) -------------------------- -------- --------- --------- For basic earnings per share 78,731,367 82,507,909 81,143,249 Outstanding share options 4,694,164 200,002 3,051,985 -------------------------- -------- --------- --------- For diluted earnings per share 83,425,531 82,707,911 84,195,234 -------------------------- -------- --------- --------- 8 Analysis of cash flow 2004 2003 2003 6 mths to 6 mths to 12 mths to Reconciliation of operating profit 30 June 30 June 31 December to net cash flow from operating Unaudited Unaudited Audited activities: Â£'000 Â£'000 Â£'000 -------------------------- -------- --------- --------- Operating profit 2,978 690 2,008 Depreciation charges 587 684 1,495 Goodwill amortisation 198 200 396 Loss on disposal of tangible fixed 22 222 418 assets Increase in debtors (6,788) (286) (784) Increase (decrease) in creditors 4,175 434 (293) Increase in provision 5 - 183 -------------------------- -------- --------- --------- Net cash flow from operating activities 1,177 1,944 3,423 -------------------------- -------- --------- --------- Analysis of change in net funds: -------------------------- -------- --------- --------- Decrease in cash in the period (1,772) (1,358) (3,954) Foreign currency translation (501) 538 659 differences -------- --------- --------- -------------------------- Movement in net funds in the period (2,273) (820) (3,295) Opening net funds 15,915 19,210 19,210 -------------------------- -------- --------- --------- Closing net funds 13,642 18,390 15,915 -------------------------- -------- --------- --------- 9 Registered office The Company's registered office is located at 55 Strand, London, WC2N 5WR. ROBERT WALTERS plc INTERIM RESULTS 2004 Independent review report to robert walters plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2004 which comprises the consolidated profit and loss account, the consolidated statement of total recognised gains and losses, the consolidated balance sheet, the consolidated cash flow statement, the reconciliation of movement in shareholders' funds, and the related notes, 1 to 9. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review, we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2004. Deloitte & Touche LLP Chartered Accountants London 6 September 2004 This information is provided by RNS The company news service from the London Stock Exchange

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