Preliminary Results
ATA Group PLC
17 April 2007
ATA Group plc
Preliminary results for the year ended 31 December 2006
ATA Group plc ('ATA') is a human resource support services group, which provides
employment solutions and training services to client companies in the United
Kingdom and the Republic of Ireland.
HIGHLIGHTS
Group pre-tax profits at £618,000 (2005: £500,000).
Earnings per share at 4.60p (2005:5.15p after a lower tax charge).
Dividends for the year have been maintained at 3.0p (2005: 3.0p).
Recruitment made steady progress and achieved operating profits at £414,000.
Railway activities continued to suffer the full impact of reorganisation and
closure costs following infrastructure maintenance being taken over by Network
Rail resulting in operating and non-recurring losses of £592,000.
Discontinued operations attendant upon the sale of the assets and business of
Gem-Weld (UK) Limited accounted for losses of £291,000.
Exceptional credits amount to £1,090,000.
Taxation charges in 2006 are higher than normal following non-allowable write
offs.
A more promising trading year is anticipated in 2007.
Commenting on the results Bill Douie, Chairman, said:
'There can be no doubt that, as expected, 2006 was a trying year. Opportunities
to resolve outstanding problems were taken and a clean out of underperforming
operations has now all but concluded. The Group now comprises a strong and
growing Recruitment business, tightly focused on attractive market areas, with a
fresh approach to people development and retention and further enhancement of
management strengths and experience. The Railway division has stabilised and
concentrated in markets with promise and growth potential, albeit at a lower
level of turnover (and costs). Additionally there is a new drive to create fast
expanding revenues from our Derby premises and, to that end, we are presently
engaging in a major refurbishment and re-branding exercise. There remains,
however, one activity which is in a declining market, that of labour supply, and
it is unlikely that we will continue this in the longer term. This is a year
when our strong feelings of achievement must be tempered by caution as the
strength of both our own markets and the Global Economy as a whole cannot be
taken for granted.
That accepted, your directors are quietly confident that the Group is on a
recovery trend and that sufficient stability has been achieved for us to renew
our search for suitable acquisitions in similar activity sectors.'
17th April 2007
ENQUIRIES:
ATA Group plc Tel: 01454 310069
Bill Douie, Executive Chairman. Andrew Bailey, Group Managing Director.
CHAIRMAN'S STATEMENT
Year ended 31 December 2006
FINANCIAL
For 2006, the Group has been re-organised into two divisions, Recruitment and
Railway. In 2005 the Recruitment Division also embraced Gem-Weld (business sold
in 2006) and Ganymede, now part of the Railway Division. Comparatives for 2005
have been restated accordingly.
Recruitment Division (ATA Selection)
Recruitment Division turnover increased to £11.58m (2005: £8.76m, excluding
Gem-Weld and Ganymede) reflecting solid performance in Permanent recruitment and
continuing growth in Contract recruitment. Divisional operating profits rose to
£414,000 (2005: £177,000, excluding Gem-Weld and Ganymede).
Railway Division (Catalis Rail Training and Ganymede)
The changing commercial shape of the overground railway has necessitated an
extensive reorganisation at Catalis including condensation of Signal Engineer
training into two locations, Derby and Clapham. This has involved the closure of
our Crewe training school and material costs have been absorbed during 2006. It
has also been necessary to re-position Catalis to offer an altered suite of
courses in line with market demand, now concentrated on renewals work streams
and train operations. As a consequence, trading in 2006 has been difficult and
costs have been unusually high. Accordingly, turnover in the division, now
including Ganymede, has fallen to £6.55m (2005: £8.51m) and losses have been
incurred of £592,000 (2005: £348,000 operating profit).
Discontinued operation
During the year the business and assets of Gem-Weld (UK) Limited were sold and
the Company is now dormant. The combination of trading losses and closure costs
have resulted in an operating loss of £291,000.
Exceptional credits
These items comprise the Keyman Insurance payout consequent upon the death of
our Chief Executive, the net profit on the sale of the business and assets of
Gem-Weld (UK) Limited and the net proceeds of the sale of training assets to
Network Rail.
Group
Group pre-tax profits at £618,000, including exceptional credits of £1,090,000,
(2005: £500,000) have risen by 24%, and earnings per share at 4.60p (2005: 5.15p
on a lower tax charge) have remained steady. Emphasis continues to be placed on
cash conservation and at the year end Group net cash was £924,000 (2005:
£688,000 net debt).
Taxation
The taxation charge for 2006 has been provided at an exceptionally high 39%. An
explanation of this figure can be found in the accounts, but the high level of
tax due in large part results from write-offs of items not allowable for tax,
mainly goodwill. These serve to reduce after tax earnings but not cash.
TRADING
Recruitment
During 2006 the opportunity was taken to engage in a root and branch review of
our recruitment activities to refresh all our operating attitudes and best
practices and to ensure that we were correctly positioned in our focus on key
markets. As mentioned in my last annual statement there have been many and
fundamental changes in the attractiveness of niche markets and in the operating
methods to ensure optimum service quality to our clients. In particular, the
changes, some negative and some positive, following the development and coming
of age of internet based Human Resource services have been fully understood and
operating methods have been varied to take advantage of that facility. In our
review of markets strong attention was paid to gross and net margins as well as
competitive advantages and it became clear that the changes in business to
business and commercial selling practices had seriously reduced the size and
attractiveness of that particular market place. Accordingly, we have largely
withdrawn from sales recruitment, condensing into one branch to cover the whole
country in technical sales only.
At the same time we have identified and moved into a new high demand market area
in white collar construction and early progress is gratifying.
It has also become clear that the future growth of ATA recruitment activities is
best concentrated in Contract Recruitment, with Permanent Recruitment
maintaining its existing important position in Technical Engineering, Rail and
now Construction.
The ATA brand image and key competitive advantages have historically been
strongest in local branch activities mainly serving the SME market sector. Over
the last few years we have availed ourselves of advances in Information
Technology techniques and products and have added Large Companies to our
portfolio of clients mainly by means of Preferred Supplier appointments serviced
from our new central branch located in the Derby premises, The Derby Conference
Centre, also occupied by Catalis.
Railway
Catalis has continued to suffer from the transfer of Signal Engineer training
for the maintenance of the National Rail Network to Network Rail. Although
reasonable levels of such business continued from Tube Lines, Metronet and
private sector National Rail Renewals companies, overall turnover was
approximately halved from three years previously. Nonetheless this important
sector of our Railway Training activities has now completed a move to
installation and test training to service those involved in renewals rather than
maintenance and capacity has now been matched to the projected demand pattern on
a five year view. Steady progress continues in other areas of Rail and Non Rail
Training.
A full review has taken place of our extensive premises in Derby with a view to
achieving significant improvements in our usage of the available space. With
this in mind the non training activities have been concentrated in the
leaseholding company now renamed The Derby Conference Centre Limited.
Discontinued activity
During the year it became clear that it was not possible for the Group to
operate successfully in the specialist area of Rail Welding and consequently the
business and assets of Gem-Weld (UK) Limited were sold.
Capital Investment
Following the completion of our investment programme in IT and rail training
equipment in 2003 capital investment continued at a figure significantly less
than depreciation.
DIVIDENDS
In view of the setback in the short term of Group trading performance and an
exceptionally high tax charge but taking account of the exceptional revenues
garnered from Keyman Insurance and asset disposals your directors are
recommending a final dividend of 2.0p making an unchanged total dividend of 3.0p
for the year.
PERSONNEL
During the operational reviews mentioned above it became clear that too much
emphasis was being placed on higher level personal development and management
training at the expense of early stage consultant and sharp end operational
coaching. As the year progressed the balance was restored and high levels of
attention to personal development at all levels has returned to being the norm.
This is a service provider and we are only as good as our people.
MANAGEMENT
In 2006 the challenge was to stabilise our management structure and team to form
a strong base from which to build. It is most gratifying to report that in
general we have experienced above expectation skills, talents and achievement
and that the new top teams are in highly motivated, fighting form.
Above all there is a renewed, urgent and keen focus on enhancement of
shareholder value.
STAFF
There can be no more appropriate time for me to thank all our staff for their
efforts and successes in 2006 and to acknowledge the universal strength and
loyalty displayed in recent trying times.
W.J.C. Douie, Chairman 17 April 2007
OPERATIONAL REPORT
Year ended 31 December 2006
GROUP TRADING SUMMARY 2006
Revenue from continuing operations for the year has increased by 5% compared to
2005. Reductions in Railway were offset by increased revenues in Recruitment.
The change in sales mix, reflecting the continued growth in lower margin
contract recruitment against reductions in higher margin technical and rail
safety training revenues, combined with the impact of the restructure in
Catalis, has resulted in an operating loss from continuing operations of
£178,000 compared to a profit of £525,000 in 2005. Group profit before interest
and tax increased by 16% compared with 2005.
Turnover Operating Profit/(Loss)
-------------------- ----------------------
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Recruitment Division 11,584 8,764 414 177
Railway Division 6,550 8,513 (592) 348
------------------- --------- --------- --------- ---------
Continuing Operations 18,134 17,277 (178) 525
------------------- --------- --------- --------- ---------
Discontinued Operations 580 1,044 (291) 9
Exceptional - - 974 -
------------------- --------- --------- --------- ---------
Group Total 18,714 18,321 505 534
------------------- --------- --------- --------- ---------
Operating profits on continuing operations include a deduction for goodwill of
£122,000 (2005: £76,000), including £54,000 in relation to Ganymede following an
impairment review. Group total operating profits are stated before net interest
payable of £3,000 (2005: £34,000).
RECRUITMENT
The permanent recruitment services, for the majority of the year, focused on the
provision of staff in our traditional commercial and technical sales roles,
technical engineering, manufacturing and rail. A new market area of
construction, serving both commercial and local government organisations, was
established in the latter part of 2006 and whilst it made a modest contribution
to trading in the year, it is seen as a significant opportunity for future
growth. The sales operation was also restructured and refocused towards the end
of 2006 and is now chiefly targeted at the technical sales market, on a national
basis, from a single location. Permanent turnover fell compared to 2005,
reflecting the disappointing performance in sales, which culminated in the
decision to realign the approach to this market. The number of permanent
placements made is a key measure of performance of the business and is measured
on the basis of vacancies filled per individual consultant. We believe that the
addition of a new market area and the restructuring of the sales operation will
reposition the permanent business to contribute to growth moving forward.
Contract recruitment activity in the Group's core market of technical
manufacturing and engineering continued to grow on the solid base established in
previous years. Contractor heads out per contract consultant, as a key measure
of performance, delivered excellent quarter on quarter growth. Underlying
revenues increased by 92% to £7.5m. Construction contract was established as a
new market area in the latter part of 2006 and again, whilst a modest
contribution was made to the year, this market area is expected to deliver
future growth. The continued expansion and diversification of contract
recruitment activity remains a key aim of the Group.
RAILWAY
The majority of these services are focused on the rail industry, ranging from
the development of training materials, training and development delivery,
competence assessment and labour supply.
Training revenues in 2006 suffered a continuation of the slow down in demand
from Network Rail for technical and rail safety training, first witnessed in the
second half of 2004, as a result of the re-nationalisation of the maintenance of
the railways. Revenues fell as a result by 18% to £4.5m and impacted negatively
on trainer utilisation and course take up which are key indicators applied to
measure the performance of the business.
The implications of Network Rail providing its own in-house training have been
addressed by a restructure of the training business. This resulted in the
closure of our premises at Crewe at the end of December, the sale of certain
plant and equipment to Network Rail and the relocation of further plant from
Crewe to our premises at Derby and Clapham. The outcome of the restructure, we
believe, ensures that the training operation is now best shaped to fit the
alternative external rail market provided by the Train and Freight operating
companies, the construction based renewals market of rail, international rail
demand, rail manufacturers, consultancies and London Underground and will
accelerate the diversification into opportunities outside of the rail market.
The labour supply business, operated by Ganymede, continued to focus on the
development of revenues outside of Network Rail. However, a reduction in demand
from Network Rail during the second half of the year led to a fall off in the
key performance measure of man hours worked, which resulted in a decrease in
total revenues of 14% compared to 2005.
The variance in divisional performance also reflects the revenue contribution of
£810,000 in 2005 from Rail Training Audit Services, which ceased to trade on 31
December 2005 following the conclusion of its contract with Network Rail.
DISCONTINUED ACTIVITIES
The discontinued activity represents the trading results in the year of
Gem-Weld. The company ceased to trade, following the decision of ATA Group to
dispose of the assets and trade of the business at a point where demand for its
services reduced to wholly un-commercial levels.
EXCEPTIONAL ITEMS
Non-recurring profits include £73,000 in relation to the profit on sale of
certain Catalis plant, equipment and other assets to Network Rail; £974,000 net
payment received from the Keyman Insurance policy secured on the life of the
Chief Executive and £43,000 net profit from the sale of the business and assets
of Gem-Weld (UK) Limited, after goodwill impairment.
GROUP PERFORMANCE INDICATORS
Earnings Per Share is a key measure as it indicates the underlying profit of the
business attributable to shareholders. It measures not only trading performance,
but also the impact of exceptional items, cash management and interest charges.
Compared to 2005, earnings per share fell by 10% as a result of an exceptionally
high tax charge arising from the accelerated write off of goodwill in relation
to Gem-Weld and Ganymede.
STAFF DEVELOPMENT
The Group continues to believe that the key to future success is strongly linked
to people development. We therefore operate a number of initiatives,
incorporating our Group wide competency framework, designed to develop
individuals in operational, management and leadership skills.
INFORMATION TECHNOLOGY AND THE INTERNET
The Group's investment, in Information Technology to support business
activities, through both a real time wide area network and front and back office
systems to support the growth in volume activities, is complete. Expenditure
during the year was therefore restricted to maintenance and upgrades to those
systems. Future investment will be aimed at gaining operational efficiency
through evolution into the latest technologies and leveraging business benefits
through increased profile and presence on the internet.
The internet accounts for the majority of candidate applications to the
recruitment businesses. The web based capability built to take advantage of this
market change has resulted in further reductions in expenditure to attract
candidates during 2006. We believe however, that we have now reached the stage
at which year on year cost reductions have been maximised. To mitigate the
future impact of increased cost of candidate recruitment, the recruitment
business re-launched its web presence at the end of December 2006, with the view
to establishing its site as a vertical market job board in its target market
sectors. Marketing activity will focus on raising the profile and the activity
conducted through the new site. Third party job boards will, however, continue
to play an integral role in candidate recruitment and we will therefore continue
to seek to maximise the return on this spend, through the measurement of the
response per advertisement and cost of recruitment of individual candidates.
SHARE OPTIONS
The Government EMI scheme was adopted in 2001. Further options have been granted
in 2006 in this scheme. The management team and key staff will continue to be
the focus of such incentives.
Andrew Bailey, Group Managing Director 17 April 2007
Consolidated Profit and Loss Account
Year ended 31 December 2006
2006 2005
Notes £'000 £'000 £'000 £'000
(Restated) (Restated)
Turnover
Continuing operations 18,134 17,277
Discontinued operations 580 1,044
------- -------
18,714 18,321
Cost of sales (14,301) (12,617)
------- ------- ------- -------
Gross Profit 4,413 5,704
Administrative expenses - normal (4,918) (5,338)
Administrative expenses - 974 -
exceptional ------- -------
(3,944) (5,338)
Other operating income 36 168
------- ------- ------- -------
Operating Profit
Continuing operations - normal (178) 525
Continuing operations - exceptional 974 -
Discontinued operations (291) 9
------- -------
505 534
Exceptional Items
Profit on disposal of fixed assets 73 -
Profit on disposal of operation 43 -
------- -------
116 -
Interest receivable and similar 13 6
income
Interest payable and similar (16) (40)
charges ------- -------
(3) (34)
------- ------- ------- -------
Profit on ordinary activities
before taxation 618 500
Tax on profit on ordinary (241) (78)
activities ------- ------- ------- -------
Profit for the year 377 422
------- ------- ------- -------
Earnings per share
- continuing
(including exceptional credits) 7.60p 5.12p
- discontinued (3.00)p 0.03p
------- ------- ------- -------
2 4.60p 5.15p
------- ------- ------- -------
Fully diluted earnings per share
- continuing
(including exceptional credits) 7.60p 5.08p
- discontinued (3.00)p 0.02p
------- ------- ------- -------
2 4.60p 5.10p
------- ------- ------- -------
Reconciliation of Movements in Equity Shareholders' Funds
Year ended 31 December 2006
2006 2005
--------- ---------
£'000 £'000
(Restated)
Equity shareholders' funds at 1 January 2006 3,662 3,609
Profit for the year 377 422
Dividends (247) (402)
Premium on share issue - 21
Share based payment reserve 3 12
--------- ---------
Equity shareholders' funds at 31 December 2006 3,795 3,662
--------- ---------
Consolidated statement of total recognised gains and losses
2006 2005
--------- ---------
Notes £'000 £'000
(Restated)
Profit for the financial year 377 422
--------- ---------
Total recognised gains and losses relating to the 377 422
year
Prior year adjustment 3 (12) -
--------- ---------
Total gains and losses recognised since the last
annual report 365 422
--------- ---------
Consolidated Balance Sheet
31 December 2006
2006 2005
£'000 £'000 £'000 £'000
(Restated) (Restated)
Fixed assets
Intangible assets 862 1,117
Tangible assets 654 1,175
-------- -------- -------- --------
1,516 2,292
Current assets
Stock 3 45
Debtors 3,564 4,817
Cash at bank and in hand 939 178
-------- -------- -------- --------
4,506 5,040
Creditors
Amounts falling due within one year (2,225) (3,583)
-------- -------- -------- --------
2,281 1,457
-------- -------- -------- --------
Total assets less current 3,797 3,749
liabilities
Creditors
Amounts falling due after more than (2) (44)
one year
Provisions for liabilities and - (43)
charges -------- -------- -------- --------
Net assets 3,795 3,662
-------- -------- -------- --------
Capital and reserves
Called up share capital 82 82
Share premium account 1,817 1,817
Capital redemption reserve 50 50
Share based payment reserve 31 28
Profit and loss account 1,815 1,685
-------- -------- -------- --------
Equity shareholders' funds 3,795 3,662
-------- -------- -------- --------
The financial statements were approved and authorised for issue by the Board and
were signed on its behalf on 17 April 2007 by
W J C DOUIE Chairman
A BAILEY Director
Consolidated Cash Flow Statement
Year ended 31 December 2006
2006 2005
£'000 £'000 £'000 £'000
Net cash inflow/(outflow) from operating
activities 1,912 (308)
Return on investments and servicing of
finance
Interest received 13 6
Interest paid (16) (40)
-------- -------- -------- --------
Net cash outflow from return on
investments (3) (34)
and servicing of finance
Taxation
UK corporation tax paid (251) (335)
Capital expenditure
Sale of tangible fixed assets 77 37
Purchase of tangible fixed assets (134) (219)
-------- -------- -------- --------
Net cash outflow from capital (57) (182)
expenditure
Acquisitions and disposals
Sale of business 97 -
Sale of assets 161 -
-------- -------- -------- --------
Net cash inflow from acquisitions and
disposals 258 -
Equity dividends paid (247) (402)
-------- -------- -------- --------
Net cash inflow/(outflow) before use of
financing 1,612 (1,261)
Financing
Issue of ordinary share capital - 21
Decrease in loans (1) (10)
Capital element of finance lease rental
payments (86) (51)
-------- -------- -------- --------
Net cash outflow from financing (87) (40)
-------- -------- -------- --------
Increase/(decrease) in cash 1,525 (1,301)
-------- -------- -------- --------
Notes
1. DIVIDENDS
On 8 September 2006 an interim dividend of 1.0p net per share was resolved by
the Board to be paid to shareholders on the register on 17 November 2006. The
interim dividend was paid on 11 December 2006.
A final dividend for the year of 2.0p net per share will be proposed at the
forthcoming Annual General Meeting (to be held at the offices of Lawrence Graham
LLP, 4 More London Riverside, London, SE1 2AU on 24 May 2007 at 12.00 noon) and
if approved, will be paid on 27 July 2007 to shareholders on the register on 22
June 2007.
2. EARNINGS PER SHARE
The calculation of earnings per share is based on a profit after taxation of
£377,000 (2005: £422,000 as restated) and a weighted average of 8,203,331 (2005:
8,199,290) shares in issue.
The outstanding share options were considered to be dilutive in 2005, however
they are not considered to be dilutive in 2006.
3. BASIS OF PREPARATION
The preliminary announcement of results for the year ended 31 December 2006 has
been prepared on the basis of the same historical cost accounting policies as
set out in the group's financial statements for the year ended 31 December 2005
with the following exception:
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 the grant. The vesting period is 3
years. If the options remain unexercised after a period of 10 years from the
date of grant the options expire. Options are forfeited if the employee leaves
the Group before the options are exercised.
The effect of this change in accounting policy on the comparative financial
information is as follows:-
Group
2005
£'000
Profit for the year
As previously reported 434
FRS 20 (12)
--------
As restated 422
--------
Profit and loss reserve
As previously reported 1,713
FRS20 (28)
--------
As restated 1,685
--------
Share based payment reserve
As previously reported -
FRS 20 28
--------
As restated 28
--------
Report & Accounts
The above results do not represent the statutory accounts. The statutory
accounts for 2005 have been filed with the Registrar of Companies, received an
unqualified audit report and did not contain a statement under Section 237 (2)
or (3) of the Companies Act 1985. The audited accounts will be mailed to
shareholders shortly and will be available from the Company's registered office:
- Kingston House, Oaklands Business Park, Armstrong Way, Yate, BS37 5NA.
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