Interim Results
ATA Group PLC
08 September 2006
ATA Group Plc
CHAIRMAN'S STATEMENT
I am pleased to present the interim report of the Company for the six months to
30 June 2006.
Structure and Management
Following the loss of our Chief Executive in January certain changes have been
instituted both in the reporting structure and the top management of our Group.
The previous split of our activities into 'Recruitment & Labour Supply' and
'Training & Consultancy' has been replaced by 'Recruitment' and 'Railway'.
The Recruitment division, trading under the name of ATA Selection, now comprises
all of our permanent and contract recruitment activities serving the White
Collar markets in Engineering, Sales, Rail and, recently initiated,
Construction.
The Railway division comprises all Training activities in the Group, presently
substantially to the Railway Industry, trading as Catalis, and Blue Collar
labour supply, presently solely to the Overground and Underground railway
systems, trading as Ganymede Tracklayers.
In order to ensure continuity and quality of top management I have reverted to
full-time Group Executive Chairman, Andrew Bailey has been appointed Group
Managing Director and we have recruited a full-time Group Financial Controller.
Although a number of possible names for non-executive director have been
suggested we have yet to locate a candidate who meets all the requirements and
the search continues. Accordingly, for the time being, the Group Board consists
of the above two named executives.
The operational responsibility has been placed in the hands of the team of four
Regional Directors in the Recruitment division and in the hands of Paul
McLoughlin, recently promoted Managing Director of the Railway division.
Disposal
There follows the text of an announcement made on 28 July 2006.
The Directors of ATA are pleased to announce the following disposal:-
Completion took place today of the sale of the assets and goodwill of Gem-Weld
(UK) Limited for a cash consideration of £264,000 payable in five instalments
over fifteen months.
Mr Bill Douie, Chairman of ATA Group Plc, commented
'The provision by the private sector of rail Track Welding Services was thrown
into turmoil following the return of maintenance of the infrastructure of the
National Rail Network to Network Rail. Since that time there have been periods
of feast and famine in demand for such services and during a period of low
demand in 2004 ATA Group purchased Gem-Weld (UK) Limited. During late 2004 and
2005 costly re-organisation of the Company took place and satisfactory business
flows and trading results were enjoyed for approximately twelve months to 31
March 2006.
At the beginning of the Network Rail budget year on 1 April 2006 demand again
reduced to wholly un-commercial levels, a situation which continues, and ATA
Group reluctantly concluded that it was not possible to provide this service
through a stand-alone company.
Accordingly the opportunity has been taken to dispose of this activity and
terminate what has not been a successful investment for the Group. The
consideration will be used to further strengthen the Group's cash reserves.
This disposal allows further simplification of the Group's range of core
business activities which are strongly focussed on the provision of recruitment
and training services to the manufacturing, construction and transport
industries, predominantly in the UK.'
Gem-Weld (UK) Limited has been treated in the accounts as a discontinued
activity. Losses to 30 June 2006 of £340,000 on turnover of £549,000 include a
goodwill write-off of £129,000. Proceeds of sale will be accounted for in the
second half.
Trading
General
Economic conditions remain stable although threatening as the Global Economy
faces the possibility of recession and events in the Middle East and elsewhere
serve to de-stabilise the world environment. General stability continues in the
trading environment in recruitment, although the Railway Industry is still
undergoing a process of fundamental change which continues to create significant
uncertainty and challenging trading conditions much as expected. Group turnover
in the six months to 30 June 2006 increased 6% to £9.145m, (2005 £8.626m),
profit before tax including non-recurring and exceptional items rose to £1.188m,
(2005 £4,000). Earnings per share rose to 7.24p (2005 0.34p). All figures are
adjusted to exclude the discontinued activity.
Recruitment
Recruitment turnover in the period was £5.55m (2005 £4.39m). Operating profit
rose to £300,000 (2005 £89,000). The performance of ATA Selection improved
during the period in permanent recruitment and further material progress was
made in contract recruitment. In common with most of our peer group, we continue
to experience difficulties in attracting and retaining consultants of
satisfactory quality and consultant numbers in both permanent and contract
recruitment are broadly similar to those at the last year end. Greater attention
is being paid to the need for effective training and development of staff and
early signs, reflected in more efficient performance and better retention, are
encouraging. This is, and will remain, a significant challenge and other
initiatives to improve this important area will be introduced in the second
half.
Railway
Training turnover in the period continues to be seriously impacted by reduced
demand for Signal Engineer Training following the transfer of all Infrastructure
Maintenance to Network Rail in the second half of 2004 and the termination of
the contract enjoyed by Rail Training Audit Services, but increased by the
inclusion of Ganymede Tracklayers (previously reported under Recruitment and
labour supply) and shows a reduction to £3.60m (2005 £4.24m). An operating loss
of £161,000 (2005 loss £79,000) was incurred, entirely due to continuing
difficulties at Catalis. These figures exclude the discontinued activity.
During the period agreement has been concluded with Network Rail for a smooth
transition from provision of Signal Engineer Training to the maintenance market
by the private sector to provision, in the great majority, internally by Network
Rail. Under the terms of an agreement dated 21 June 2006, certain plant,
equipment and other assets, used by Catalis to provide Signal Engineer Training
courses, were sold to Network Rail with proceeds being receivable over the
second half of 2006. The assets will be decommissioned and delivered to Network
Rail over the remainder of 2006. As a result the lease on our premises at Crewe
has been extended to 31 December 2006 but from 1 January 2007 the remaining
Signal Engineer Training, supplied to the private sector renewals market, will
be provided from our premises in Derby and Clapham, London, and on Tube Lines
own premises at Stratford, London.
Although this agreement provides welcome clarity and will permit the
re-organisation of our training interests from a new and smaller base, there can
be no doubt that the short term outlook for this activity is significantly
reduced from that of two and more years ago.
Ganymede Tracklayers continues to provide a quality service to the Railway
Industry but the immediate prospects for growth in that market are limited.
As mentioned above, Gem-Weld has been sold and is treated as discontinued.
Non-recurring item
Fortunately the Group had taken the prudent step of securing keyman insurance on
the life of the Chief Executive and the net payment received of £974,000 has
been shown as a non-recurring item.
Dividends
Your Directors consider that, although many problems have been experienced in
the business in the first six months of 2006, they are pleased that steady
progress is being made in all areas and that results for the period are improved
over 2005. In view of this they have resolved to pay a maintained interim
dividend of 1.0p (2005: 1.0p).
Strategy
The massive changes wrought by a re-structured Railway Industry and by changes
in the quantity of top management available to our Group have prompted a
strategic review which is now substantially complete. No longer can we set out
to find growth through acquisition of poorly managed compatible companies where
integration and overhaul led by our erstwhile Chief Executive could be expected
to lead to enhanced shareholder value. Nonetheless I am pleased with the level
of quality management at senior level in the divisions and there has been no
abatement in the thrust towards organic start-ups to extend the range and volume
of our support service activities.
We have, therefore, decided upon an alternative route which can briefly be
summed up as; Simplify the Group with enhanced focus, optimise the present
businesses with re-orientation where required, pursue organic start-up
opportunities with vigour and seek acquisitions of support service companies
with proven track records and management in current and compatible niche
markets.
I have no doubt that continued maturity and experience in our senior managers
will eventually provide the top level succession we now need. This process may
be accelerated through the continued acquisition strategy which we are pursuing
with energy and diligence.
Outlook
As in 2005 we are in the midst of a challenging year. Also, as in 2005, the bulk
of this year's re-positioning has taken place in the first half and the second
should demonstrate a more stable picture. Further development of contract
recruitment is anticipated enabling more intensive use to be made of our
nationwide network of branches, where permanent recruitment is expected to
continue the trend to more effective working. Additionally we have taken our
first steps to enter the white collar Construction market in both contract and
permanent recruitment, with this activity initially located in Derby. This is
expected to generate continuing increases in turnover and, through enhancement
of contract consultant maturity and skill, to generate improvements in profits
from this section of our business. Ganymede Tracklayers is continuing steady
performance and intends immediately to enter the Blue Collar contract market in
Construction, particularly within the 2012 footprint, and expects to extend
further its client base, outside the Railway Industry. The second half is
expected to produce a steadier performance from Catalis as the agreement with
Network Rail plays out to the year end and where repositioning to take full
advantage of a much altered Railway Industry will be substantially complete by
early 2007. I remain confident that the Group will continue to make solid
progress in dealing with a fast changing trading environment.
W.J.C.Douie, Chairman. 8th September 2006.
ATA Group Plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
6 Months 6 Months 12 Months
to 30 Jun 2006 to 30 Jun 2005 to 31 Dec
2005
(unaudited) (unaudited)
As restated As restated
Notes £'000 £'000 £'000 £'000 £'000 £'000
Turnover
Continuing operations 9,145 8,626 17,277
Discontinued operations 549 304 1,044
____________________________________________
2 9,694 8,930 18,321
____________________________________________
Operating Profit
Continuing operations 139 10 515
- Non-recurring item 3 974 - -
Discontinued operations (340) 38 19
____________________________________________
2 773 48 534
Net interest payable (13) (6) (34)
____________________________________________
760 42 500
Profit on disposal of 4 88 - -
Fixed Assets
____________________________________________
Profit on ordinary 848 42 500
activities
before taxation
Tax on profit on ordinary
activities 5 (254) (14) (78)
____________________________________________
Profit on ordinary
activities
after taxation 594 28 422
____________________________________________
Earnings per share (pence) 7 7.24 0.34 5.15
ATA Group Plc
CONSOLIDATED BALANCE SHEET
As at As at As at
30 Jun 2006 30 Jun 2005 31 Dec 2005
(unaudited) (unaudited)
As restated As restated
Notes £'000 £'000 £'000
FIXED ASSETS
Intangible assets 952 1,118 1,117
Tangible assets 881 1,323 1,175
_________________________________
1,833 2,441 2,292
_________________________________
CURRENT ASSETS
Stock 27 29 45
Debtors 5,411 3,222 4,817
Cash at bank and in hand 676 803 178
_________________________________
6,114 4,054 5,040
_________________________________
CREDITORS: Due within one year (3,597) (2,992) (3,583)
_________________________________
NET CURRENT ASSETS 2,517 1,062 1,457
_________________________________
4,350 3,503 3,749
TOTAL ASSETS LESS CURRENT LIABILITIES
(46) (50) (44)
CREDITORS: Due after more than one year
PROVISIONS FOR LIABILITIES AND CHARGES (43) (101) (43)
_________________________________
NET ASSETS 4,261 3,352 3,662
_________________________________
CAPITAL AND RESERVES
Called up share capital 82 82 82
Share premium account 1,817 1,817 1,817
Capital redemption reserve 50 50 50
Share based payment reserve 33 22 28
Profit and loss account 10 2,279 1,381 1,685
_________________________________
9
SHAREHOLDERS' FUNDS 4,261 3,352 3,662
_________________________________
ATA Group Plc
CONSOLIDATED CASH FLOW STATEMENT
6 Months to 6 Months to 12 Months to
30 Jun 2006 30 Jun 2005 31 Dec
(unaudited) (unaudited) 2005
Notes £'000 £'000 £'000
CASH INFLOW / (OUTFLOW) FROM
OPERATING ACTIVITIES 8 1,323 312 (308)
Returns on investments and servicing of
finance (13) (6) (34)
Taxation - (135) (335)
Payments to acquire tangible fixed (39) (97) (219)
assets
Receipts on disposal of tangible fixed 21 31 37
assets
Equity dividends paid - - (402)
_________________________________
Net cash inflow/(outflow) before use of 1,292 105 (1,261)
liquid resources and financing
Issue of ordinary share capital - 21 21
Decrease in medium term loans (1) (8) (10)
Capital element of finance lease rental (29) (30) (51)
payments
_________________________________
INCREASE / (DECREASE) IN CASH BALANCES 1,262 88 (1,301)
_________________________________
ATA Group Plc
NOTES TO THE INTERIM STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2006
1. ACCOUNTING POLICIES
The accounting policies used in the preparation of the interim accounts are
consistent with those used in the preparation of the audited annual accounts for
the year ended 31 December 2005 with the exception of the introduction of FRS 20
'Share based payments', which requires a charge to be made to the profit and
loss account in respect of transactions that can be settled by the issuing of
equity instruments.
The Group has applied the requirements of FRS 20 Share based payments. In
accordance with the transitional provisions, FRS 20 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
January 2005.
The Group issues equity settled share based payments to certain employees.
Equity settled share based payments are measured at fair value (excluding the
effect of non market based vesting conditions) at the date of grant. The fair
value determined at the date of grant of the equity settled share based payments
is expensed on a straight line basis over the vesting period, based on the
Group's estimate of shares that will eventually vest and adjusted for the effect
of non market based vesting conditions.
Fair value is measured by use of a Black-Scholes model.
The Group financial information consolidates the accounts of ATA Group Plc and
all its material subsidiary undertakings using the acquisition method.
The comparative figures for the year ended 31 December 2005 do not constitute
statutory accounts within the meaning of S.240 of the Companies Act 1995, but
they have been derived from the audited financial statements for that year,
which have been filed with the Registrar of Companies. The report of the
auditors was unqualified and did not contain a statement under section 237 (2)
or (3) of the Companies Act 1985.
2. SEGMENTAL ANALYSIS
6 Months to 6 Months to 12 Months to
30 Jun 2006 30 Jun 2005 31 Dec 2005
(unaudited) (unaudited)
As restated As restated
£'000 £'000 £'000
TURNOVER
Recruitment Division 5,546 4,386 8,758
Railway Division 4,148 4,544 9,563
_________________________________
9,694 8,930 18,321
_________________________________
OPERATING (LOSS)/PROFIT - Excluding
non-recurring item
Recruitment Division 300 89 16
Railway Division (501) (41) 518
_________________________________
(201) 48 534
_________________________________
Operating (loss)/profit is stated after amortisation of goodwill of £165,000 in
the period (2005 £36,000), £129,000 of which relates to the full write off of
goodwill relating to Gem-Weld (UK) Limited following an impairment review.
3. NON-RECURRING ITEM - Operating Profit
Net payment received in respect of keyman insurance in relation to the former
Chief Executive.
4. PROFIT ON DISPOSAL OF FIXED ASSETS
Profit on maintenance assets sold to Network Rail under the terms of an
agreement dated 21 June 2006.
5. TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax on profit on ordinary activities for the period to 30 June 2006 has been
provided at the estimated rate applicable to the group for the period.
6. DIVIDENDS
The Board has approved an interim dividend of 1p per ordinary share net to be
paid on 11 December 2006 to shareholders on the register of members at 17
November 2006.
7. EARNINGS PER SHARE
The earnings per share have been calculated on the profit on ordinary activities
after taxation, based on the number of shares in issue (8,202,331) during the
period. The fully diluted earnings per share is not materially different from
the basic earnings per share and has not been disclosed.
8. CASH FLOW STATEMENT
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
2006
£'000
Operating profit 773
Amortisation 165
Depreciation 242
Share-based payment depreciation 5
Profit on sale of fixed assets (10)
Decrease in stocks 18
Increase in debtors (345)
Increase in creditors 475
------
Net cash inflow from operating activities 1,323
======
ANALYSIS OF CHANGES IN NET (DEBT)/ FUNDS
At Other At 30
1 Jan 2006 Cash Flows Movements Jun 2006
£'000 £'000 £'000 £'000
Cash at bank and in hand 178 498 - 676
Bank overdraft (764) 764 - -
Debt due within 1 year (1) 1 - -
HP and finance leases (101) 29 - (72)
____________________________________________
Net (Debt)/Funds (688) 1,292 - 604
____________________________________________
9. MOVEMENT IN SHAREHOLDERS' FUNDS
STATEMENT OF MOVEMENT IN GROUP SHAREHOLDERS' FUNDS
As at As at As at
30 Jun 2006 30 Jun 2005 31 Dec 2005
£'000 £'000 £'000
As previously reported 3,662 4,418 3,609
FRS 17 - (802) -
_____________________________________
Opening shareholders' funds as restated 3,662 3,616 3,609
Profit for the period 594 28 422
Dividends - (319) (402)
Issue of shares - 21 21
Share based payment reserve 5 6 12
_____________________________________
Closing shareholders' funds 4,261 3,352 3,662
_____________________________________
10. PRIOR PERIOD ADJUSTMENTS
FRS 17 : Retirement benefits
In previous years the Group has accounted for the defined benefit pension scheme
in respect of certain employees of Catalis Rail Training Limited under the
provisions of SSAP24. At 31 December 2004 a prepayment of pension contributions
of £809,000 was being carried forward and this amount was being written off over
the future working lifetime of the members.
On adoption of the full provisions of FRS 17 and following a formal actuarial
valuation of the Group's interest in this pension scheme the prepayment of
£826,000 at 1 January 2004 was written off as a prior year adjustment in the
financial statements for the year ended 31 December 2005. The pension scheme
meets the criteria of a multi employer scheme and was accounted for as a defined
contribution scheme in the accounts for the year ended 31 December 2005 and for
the restated comparatives for the period ended 30 June 2005.
FRS 20 : Share Based Payments
Equity settled share option scheme
The Company operates an EMI based share option scheme for certain employees of
the Group. Options are exercisable at a price equal to the average quoted market
price of the Company's shares on the date of grant. The vesting period is three
years. If the options remain unexercised after a period of seven years from the
date of grant the options expire. Options are forfeited if the employee leaves
the Group before the options vest.
The effect of these changes in accounting policies on the comparative financial
information is as follows:-
As at As at
30 Jun 2005 31 Dec 2005
£'000 £'000
Profit and loss reserve
As previously reported 2,205 1,713
FRS 17 (802) -
FRS 20 (22) (28)
________________________
As restated 1,381 1,685
________________________
Debtors - amounts falling due after one year
As previously reported 802 -
FRS 17 (802) -
________________________
As restated - -
________________________
Share based payment reserve
As previously reported - -
FRS 20 22 28
________________________
As restated 22 28
________________________
ATA GROUP PLC
Registered Office
Kingston House,
Oaklands Business Park,
Armstrong Way,
Yate,
South Gloucestershire BS37 5NA
Approved and authorised for release
for and on behalf of ATA Group Plc
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