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Networkers Intnl PLC (NWKI)

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Monday 14 April, 2014

Networkers Intnl PLC

Final Results

RNS Number : 7037E
Networkers International PLC
14 April 2014
 



 

14 April 2014

NETWORKERS INTERNATIONAL PLC

(AIM: NWKI)

 

Final Results

for the YEAR ENDED 31 DECEMBER 2013 

 

The Board of Networkers International Plc ('Networkers' or 'the Group'), the AIM-listed international recruitment company, is pleased to announce final results for the year ended 31 December 2013.

 

Financial Highlights

 

 

·      Adjusted* pre-tax profits for the year of £7.1m (2012: £7.0m);

 

·      Pre-tax profits of £6.3m (2012: £5.7m);

 

·      Adjusted* EPS (basic earnings per share) increased by 11% to  5.21p (2012: 4.70p);

 

·      Conversion ratio improved to 24.9% (2012: 23.7%);

 

·      Net fee income (gross profit or NFI) reduced by 5% to £29.1m (2012: £30.8m);

 

·      Permanent net fee income has grown by 18% for the year with contract net fee income reducing by 10%. Permanent placements represent 26% (2012: 21%) of net fee income;

 

·      Operating cash inflow of £6.7m (2012: £6.0m) for the year;

 

·      Net debt relating entirely to drawdown on invoice discounting for working capital purposes has been reduced to £3.0m (2012: £6.9m), after making payments for own share purchases and dividend payments totalling £1.6m;

 

·      Strong balance sheet and good liquidity with net assets of £20.2m and net current assets of  £13.7m; and

 

·      A recommended final dividend of 1.00p per share, being 54% up on last year's final dividend. Full year total dividend of 1.70p (2012: 1.25p) per share being a 36% increase on prior year and with over 3 times adjusted earnings cover.

 

* Refer to Reconciliation of adjusted pre tax profit in the CEO Review.  For the adjusted EPS calculation, the year end number of shares of 83,291,765 (2012:83,535,269) have been used.

 

 

 

Operational Highlights

 

·      Share of net fee income derived from markets outside of the UK remained at 71%;

 

·      Stand out performance in Energy & Engineering division growing NFI by 82% year on year;

 

·      An agreement was reached during the year to settle the Group's class action litigation in the US, resulting in an exceptional one off, pre tax charge of £0.55m during the year.  This charge includes legal fees as well as an increase in the provision to cover payments to class members; and

 

·      Offices operational in UK, South Africa, UAE, China, Malaysia, Singapore, Mexico, Brazil, USA and Canada;

 

 

Commenting on today's results, Spencer Manuel, CEO, said "The Group has made good progress during the year.  Whilst our NFI was slightly down (5%) on last years record levels, I am pleased we maintained positive growth in underlying pre-tax profits and EPS for the full year to December 2013

The balance of the business has continued to improve with the stand out performance being the Energy & Engineering division which grew by 82% during the year and now represents 12% of Group NFI replacing the reduced share of the Telecoms division (51% of NFI) where market conditions in certain geographies continue to be a barrier to short term growth.  Our IT division (37% of NFI) resumed growth during H2 and is enjoying improved market conditions. 

Whilst current trading is in line with 2013, market conditions do appear to be improving in all our markets and we see significant opportunities for growth as the year progresses."

 

 

 

Enquiries:

Networkers International        

Spencer Manuel, CEO                            020 8315 9000

Jon Plassard, CFO, COO                      

                                             

Numis Securities Limited        

David Poutney, Corporate Broking           020 7260 1000

Richard Thomas, Nominated Adviser

                                             

 

 



 

Networkers International Plc

 

Chairman's Statement

 

 

I am pleased to report on our results for the year ended 31 December 2013. 

 

2013 Review

 

I would like to extend the appreciation of the Board to all of our staff across the world for their continued hard work, enthusiasm and loyalty which has contributed so much in making 2013 another positive year for the Group and laying further foundations for future growth.

 

* Refer to Reconciliation of adjusted pre tax profit in the CEO Review. 



 

N R Goodman

Chairman 

 

11 April 2014

 



Networkers International Plc

CEO's Review

 

 

 

Business model

 

Networkers International Plc is a specialist recruitment group providing contract and permanent recruitment services to the Telecoms, IT and Energy & Engineering sectors.

 

Our model is to operate in specialist technical areas within our chosen sectors where demand from clients is greatest and where there are skill shortages. 

 

We have a significant weighting towards international placements within both cross border recruitment and local recruitment in overseas markets with a particular emphasis on emerging markets.  Over 70% of the Group's net fee income is derived from markets outside of the UK.

 

Our international offices are all linked via our Customer Relationship Management database and sales reporting systems making it an effective and efficient way to service our global clients and candidates.

 

 

Strategy

 

Our strategy remains unchanged.  In particular, to develop our existing divisions in our three sectors globally, obtaining scale in each of our offices and to focus on specialist markets within our sectors.  Our domestic and international profile is growing and we will continue to invest in expanding each of our business streams though recruiting and developing talented people with long term objectives and through growth from bolt on acquisitions in specific markets. 

 

Our strategic aim is for Networkers International to be seen as innovators and experts in our chosen fields and to be recognised as the leading recruitment consultancy in our sectors by clients and candidates.

 

 

Review of the business

 

As reported last year, the Group started 2013 with a lower contractor position than the previous year.  This, together with the fact that the international telecoms market has yet to return to normalised conditions, meant that it was going to be a challenge to grow net fee income during 2013.  However, as a result of improvements in our sales mix to more profitable permanent placements, strong growth in our Energy and Engineering division and efficiency improvements within the business as borne out by an improvement in our conversion ratio, I am pleased to report that we have maintained our underlying profitability with the Group's adjusted* pre-tax profit increasing to £7.1m (2012: £7.0m). 

 

After charges for amortisation on intangible assets arising on business combinations and provision for litigation costs (see below), the Group's reported pre tax profit totalled £6.3m (2012: £5.7m).

 

This resilient performance is testament to our strategy of diversification and focus within specialist, niche recruitment areas.

 

 

 

* Refer to Reconciliation of adjusted pre tax profit below. 



 

Energy & Engineering

 

Our fast growing Energy & Engineering business stream has performed very well during the year with net fee income having increased by 82% year-on-year, following 33% growth in 2012.  This now represents over 12% of the Group's total net fee income and we fully expect that this division will continue to increase its proportion of Group net fee income during the current year. 

 

We remain focussed on specialist areas within the energy sector including renewable energy and specific verticals within oil and gas.  Market conditions are good and the dynamics for this sector remain very positive with good growth prospects.  It is an exciting global industry with an extremely fluid and transient workforce in a labour market where there is a global skills shortage. Our existing international office network is well positioned to support the Group's investment into this sector, particularly within the emerging markets where we already have a long history of providing cross border recruitment.

 

 

Telecoms

 

Following on from very strong growth in 2011 and the first half of 2012, we reported last year that trading conditions in the international telecoms market became more challenging towards the end of 2012 and into 2013.  Whilst there was some pick up in demand in some regions, the soft market conditions remained throughout 2013 caused by the hiatus in investment from the mobile telecoms operators. 

 

The division has performed well to offset the market weakness by growing its high level permanent placements, broadening its client base geographically and by focussing on more specialist areas within the sector.  This has led to growth in Telecoms permanent fee income increasing by 22%, partly offsetting the 18% fall in contract fee income. 

 

Notwithstanding the softer market conditions, we do consider this sector to have solid long term growth prospects for the Group and we believe we are well placed to benefit from the continued convergence of technologies within mobile telecoms and IT and the rollout of 4G networks across the world in the future.  We are starting to see a tentative increase in demand from our clients in the more developed markets of Europe and North America and we are confident that demand will then follow in the emerging markets of Africa, Asia and Latin America which has traditionally been our main market focus in this sector.

 

 

IT

 

We continue to successfully transition the IT division towards more specialist technologies where skill shortages are greatest and demand from clients therefore stronger.  We have seen strong growth in our UK Specialist Markets division which includes our offerings in Digital Media, ERP, Public Sector and .NET amongst others.  The Specialist Market division has increased its net fee income by 15%.

 

Overall, our IT division did see a reduction in net fee income during the year of 6% although it did experience sequential growth as market conditions improved in the UK as the year progressed which bodes well for the current year.  This reduction was due, in the main, to our IT Banking division which found market conditions tough.

 

Our international offices continued to increase net fee income within the IT division with the Mexico office and the newly launched Singapore office performing particularly well. 

 

 

 

 



Group revenues

 

Due to the shift in sales mix towards more permanent placements and the reduced revenue from contract placements, Group revenues have reduced by 5.5% to £161.4m (2012: £170.7m).  Net fee income saw a similar reduction to £29.1m (2012: £30.8m).

 

Gross profit margins have improved to 18.1% (2012: 18.0%) as a result of a greater share of net fee income being attributed to permanent placements which has more than made up for the lower contractor margins being achieved due to a greater mix of contract revenue being derived from the Energy & Engineering division.

 

The table below sets out the split of net fee income:

 


% of NFI


Divisions

2013


2012


2011


Telecommunications

51%


56%


59%


IT

37%


38%


36%


Energy & Engineering

   12%


    6%


    5%



100%


100%


100%


 

Profit from operations

 

The Group's adjusted** profit from operations totalled £7.3m (2012: £7.3m).  The Group's profit from operations totalled £6.5m (2012: £6.0m).

 

The Group's conversion ratio has improved to 24.9% (2012: 23.7%). This is a positive performance achieved through tight control of overhead expenditure and an improved mix of business towards higher margin permanent placements.

 

 

Litigation

 

As previously announced, during 2006, three individuals filed a class action complaint for unspecified damages, alleging that they were improperly classified as independent contractors rather than employees and are due additional payments for violations of wage and hour laws including those governing overtime pay, rest breaks, and meal breaks principally during the period 2005 and 2006.

During 2012, the California court of appeal overturned its original favourable decision and ruled that certain aspects of the claim could be certified as a class action.  This resulted in an exceptional provision of £1.0 million in the full year accounts for the year ending 31 December 2012, bringing the total provision to £1.6m.

 

The increase in the provision and the cost of legal fees which combined, totalled £0.55m, has been treated as an exceptional item in the income statement together with the associated deferred tax write off of £0.54m (see below).

 

Profit before taxation

 

Net finance costs for the year totalled £0.20m (2012: £0.27m).  This reduction is due to a lower level of indebtedness throughout the year.

 

After finance expenses and litigation provisions, profit before taxation for the year totalled £6.29m (2012: £5.68m).

 

** adjusted for the add back of amortisation of intangible assets on business combinations, litigation provision and share based payments.



Taxation

 

 

The effective tax rate of the Group, excluding the exceptional item, has improved to 36.6% (2012: 41.9%).  Due to the international nature of our business, the Group works within a variety of different tax regimes, some of its overseas subsidiaries, particularly in the United States of America, incur corporate tax at rates higher than that of the UK. In addition, a number of countries where we operate impose a withholding tax on services performed by the Group.  This withholding tax is not always fully recoverable which has an impact on the effective tax rate.

 

The reduction in the effective tax rate experienced in 2013 is reflective of the reduced revenue that has been subject to irrecoverable withholding taxes, together with reduced tax rates in the UK.

 

In prior years, the Group had taken a deferred tax asset relating to the litigation provision referred to above.  Whilst the Board believes that a tax benefit will derive to the Group as a result of the payments, there are some uncertainties surrounding the timing of this.  Consequently, the Board considers it appropriate to write off the deferred tax asset and to only recognise a tax benefit should it become realised in future years.

 

 

Profit after taxation

 

Profit after exceptional costs and taxation totalled £3.24m (2012: £3.22m).

 

 

Earnings per share

 

Basic earnings per share totalled 3.67p (2012: 3.35p) and diluted earnings per share totalled 3.59p (2012: 3.28p).  Adjusted earnings per share (see note 3) has shown an increase of 11% to 5.21p (2012: 4.70p).

 

 

Dividends

 

An interim dividend of 0.70p (2012: 0.60p) per share totalling £0.58m (2012: £0.53m) was paid during the year. 

 

The directors recommend the payment of a final dividend of 1.00p (2012: 0.65p) per share totalling £0.85m (2012: £0.54m). 

 

This will mark the third successive year we have increased our dividend payout to shareholders.

 

 

Events after the balance sheet date

 

On 31 January 2014, as previously announced, the Group acquired the remaining shares in one of its trading subsidiaries.  The consideration was satisfied by a cash payment of £0.43m and the issue of 981,400 ordinary 1p shares.  Following a review of the purchase agreement, it was concluded that the original agreement terms from 2010 indicated that the agreement was, in essence, a share based payment transaction.  As a result, the 2012 comparative balance sheet has been restated to reflect the post balance sheet liability of the share purchase.  There is no income statement effect.

 

 

Balance sheet and cash flow

 

The financial position of the Group remains strong. As a result of the lower working capital requirements of the business together with steps undertaken by management to improve cash flow the Group has generated £6.7m of net operating cash flows. 

 

The balance sheet indicates a reduction in total assets to £40.8m (2012: £44.1m).  This is due primarily to the reduction in trade receivables brought about by improved collections, a reduction in Group revenue and an improvement in the Group's sales mix to more cash positive permanent placements.  Trade and other receivables have reduced by £3.1m to £31.4m.  Debtors Days for 2013 averaged 49 days (2012: 53 days). 

 

Total liabilities have shown a corresponding reduction to £20.6m (2012: £25.0m).  This reduction is attributable to the reduced level of trade and other payables of £1.7m and a reduction in draw down on invoice discounting of £3.4m. 

 

During the year the company used its strong cash flows to reduce borrowings by £3.4m, increase its dividend to a total of £1.1m and made own share purchases of £0.5m.

 

Net assets at 31 December 2013 total £20.2m (2012: £19.1m).

 

 

 

Current trading and outlook

 

 

Spencer Manuel

CEO

 

 

11 April 2014

 

 

 

Reconciliation of adjusted pre tax profit

 

 







2013


2012



£ 000's


£ 000's







Reported pre tax profit

6,287


5,681


Add:





Amortisation of intangible assets arising





on business combinations

222


340


Share based payments

-


5


Litigation provision and related costs  (note 4)

549


1,000


*Adjusted pre tax profit

7,058


7,026























Networkers International Plc

 

Consolidated income statement for the year ended 31 December 2013

 



Before exceptional items

Exceptional items

(Note 4)



Before exceptional item

Exceptional item

(Note 4)



Note

2013

2013

2013


2012

2012

2012



£'000

£'000

£'000


£'000

£'000

£'000



















Revenue

2

161,352

-

161,352


170,673

-

170,673

Cost of sales


132,208

-

132,208


139,885

-

139,885

Gross profit


29,144

-

29,144


30,788

-

30,788










Administrative expenses









Amortisation of intangible assets arising on business combinations


 

222

 

-

 

222


 

340

 

-

 

340

Other administrative expenses


21,887

549

22,436


23,498

1,000

24,498

Total administrative expenses


22,109

549

22,658


23,838

1,000

24,838










Profit from operations


7,035

(549)

6,486


6,950

(1,000)

5,950

Finance income


1

-

1


-


-

Finance expense


(200)

-

(200)


(269)

-

(269)

Profit before taxation


6,836

(549)

6,287


6,681

(1,000)

5,681

Tax expense


2,500

544

3,044


2,801

(340)

2,461

Profit for the year


4,336

(1,093)

3,243


3,880

(660)

3,220










Attributable to:









- Equity holders of the parent


4,141

(1,093)

3,048


3,612

(660)

2,952

- Non-controlling interests


195

-

195


268

-

268



4,336

(1,093)

3,243


3,880

(660)

3,220

Earnings per share









Basic

3



 3.67p




3.35p

Diluted

3



 3.59p




3.28p

Adjusted

3



5.21p




4.70p





_____ _




_______

 

 

 

 


Networkers International Plc

 

Consolidated statement of comprehensive income for the year ended 31 December 2013

 

 

 

 



2013

2012



£'000

£'000









Profit for the year


3,243

3,220

Other comprehensive income:




Exchange losses on retranslation of foreign operations


(676)

(497)



_______

_______





Total comprehensive income for the year


2,567

2,723



_______

_______





Total comprehensive income attributable to:




- Equity holders of the parent


2,372

2,455

- Non-controlling interests


 195

268



_______

_______







2,567

2,723



_______

_______



Networkers International Plc

 

Consolidated balance sheet as at 31 December 2013

 

 

 



 

2013

 

2012

 

2011



£'000

£'000

£'000




As restated

As restated

Assets





Non-current assets





Intangible assets


5,728

5,761

6,115

Property, plant and equipment


479

487

405

Deferred tax asset


505

1,166

796



_______

_______

_______






Total non-current assets


6,712

7,414

7,316



_______

_______

_______

Current assets





Trade and other receivables


31,388

34,470

40,140

Cash and cash equivalents


2,662

2,197

2,124



_______

_______

_______






Total current assets


34,050

36,667

42,264



_______

_______

_______






Total assets


40,762

44,081

49,580



_______

_______

_______






Liabilities





Current liabilities





Trade and other payables


(11,940)

(13,612)

(17,805)

Loans and borrowings


(5,658)

(9,092)

(11,175)

Provisions


(2,057)

(289)

(381)

Current tax liability


(714)

(130)

(534)



_______

_______

_______






Total current liabilities


(20,369)

(23,123)

(29,895)



_______

_______

_______






Non-current liabilities





Provisions


(217)

(1,817)

(217)

Deferred tax liability


(24)

(50)

(76)



_______

_______

_______






Total non-current liabilities


(241)

(1,867)

(293)



_______

_______

_______






Total liabilities


(20,610)

(24,990)

(30,188)



_______

_______

_______






Total net assets


20,152

19,091

19,392



_______

_______

_______

 

 

 

 

Networkers International Plc

 

Consolidated balance sheet at 31 December 2013 (continued)

 

 

 

 



2013

2012

2011



£'000

£'000

£'000

Equity



As restated

As restated

Share capital


905

895

890

Share premium


285

167

96

Retained earnings


18,519

16,971

17,029

Foreign exchange reserve


(876)

(200)

297

Capital redemption reserve


53

53

53

Reverse acquisition reserve


676

676

676



_______

_______

_______






Attributable to equity holders of the parent


19,562

18,562

19,041






Non-controlling interest


590

529

351



_______

_______

_______






Total equity


20,152

19,091

19,392



_______

_______

_______



Networkers International Plc

 

Consolidated cash flow statement for the year ended 31 December 2013

 

 

 


2013

2012

Cash flow from operating activities

£'000

£'000




Profit before taxation

6,287

5,681

Adjustments for:



Depreciation

227

212

Amortisation of intangibles

259

367

Equity settled share based payment expense

-

5

Finance income

(1)

-

Finance expense

200

269


______

______




Cash flows from operating activities before changes in working capital and provisions

6,972

6,534




Decrease in trade and other receivables

2,620

5,277

Decrease in trade and other payables

(1,050)

(2,516)


______

______




Cash generated from operations

8,542

9,295




Income taxes paid

(1,840)

(3,311)


______

______




Net cash flows from operating activities

6,702

5,984




Investing activities



Purchase of property, plant and equipment

(252)

(268)

Purchase of intangibles

(62)

(13)

Purchase of shares of non-controlling interest

(313)

(22)

Acquisition of subsidiary, net of cash acquired

(131)

-


______

______




Net cash used in investing activities

(758)

(303)




Net cash before financing activities

5,944

5,681




Financing activities



Interest paid

(200)

(269)

Interest received

1

-

Dividends paid to shareholders

(1,119)

(1,025)

Dividends paid to minority interests

-

(49)

(Repayment) / drawdown of invoice discounting

(3,434)

(2,083)

Purchase of shares held in treasury

(515)

(1,965)

Issue of share capital

128

76


______

______




Net cash used in financing activities

(5,139)

(5,315)




Effects of exchange rate changes

(340)

(293)


______

______




Net increase in cash and cash equivalents

465

73




Cash and cash equivalents at the start of the year

2,197

2,124


______

______




Cash and cash equivalents at the end of the year

2,662

2,197


______

______


Networkers International Plc

 

Consolidated statement of changes in equity for the year ended 31 December 2013

 

 

 








Total










attributable





Share

Reverse

Capital


Foreign

to equity

Non-



Share

premium

acquisition

redemption

Retained

exchange

holders of

controlling

Total


capital

account

reserve

reserve

earnings

reserve

parent

interests

Equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











At 31 December 2012

895

167

676

53

16,971

(200)

18,562

529

19,091











Comprehensive Income for the year










Profit

-

-

-

-

3,048

-

3,048

195

3,243

Other comprehensive income

-

-

-

-

-

(676)

(676)

-

(676)











Total comprehensive income for the year

 

-

 

-

 

-

 

-

 

3,048

 

(676)

 

2,372

 

195

 

2,567











Contributions by and distributions to owners










Dividends paid to equity holders of parent

 

-

 

-

 

-

 

-

 

(1,119)

 

-

 

(1,119)

 

-

 

(1,119)

Shares issued in the year

10

118

-

-

-

-

128

-

128

Purchase of shares held in treasury

 

-

 

-

 

-

 

-

 

(515)

 

-

 

(515)

 

-

 

(515)

Purchase of shares of non-controlling interest

 

-

 

-

 

-

 

-

 

134

 

-

 

134

 

(134)

 

-











Total Contributions by and distributions to owners

 

10

 

118

 

-

 

-

 

(1,500)

 

-

 

(1,372)

 

(134)

 

(1,506)


_______

_______

_______

_______

_______

_______

_______

_______

_______











As at 31 December 2013

905

285

676

53

18,519

(876)

19,562

590

20,152


_______

_______

_______

_______

_______

_______

_______

_______

_______



Networkers International Plc

 

Consolidated statement of changes in equity for the year ended 31 December 2013 (continued)

 

 

 








Total










attributable





Share

Reverse

Capital


Foreign

to equity

Non-



Share

premium

acquisition

redemption

Retained

exchange

holders of

controlling

Total


capital

account

reserve

reserve

earnings

reserve

parent

interests

Equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











At 31 December 2011

890

96

676

53

17,029

297

19,041

351

19,392











Comprehensive Income for the year










Profit

-

-

-

-

2,952

-

2,952

268

3,220

Other comprehensive income

-

-

-

-

-

(497)

(497)

-

(497)











Total comprehensive income for the year

 

-

 

-

 

-

 

-

 

2,952

 

(497)

 

2,455

 

268

 

2,723











Contributions by and distributions to owners










Share based payments

-

-

-

-

5

-

5

-

5

Deferred tax on share based payments

 

-

 

-

 

-

 

-

 

(44)

 

-

 

(44)

 

-

 

(44)

Dividends paid to equity holders of parent

 

-

 

-

 

-

 

-

 

(1,025)

 

-

 

(1,025)

 

-

 

(1,025)

Dividends paid to minority interest

-

-

-

-

-

-

-

(49)

(49)

Shares issued in the year

5

71

-

-

-

-

76

-

76

Purchase of shares held in treasury

 

-

 

-

 

-

 

-

 

(1,965)

 

-

 

(1,965)

 

-

 

(1,965)

Purchase of shares of non-controlling interest

 

-

 

-

 

-

 

-

 

19

 

-

 

19

 

(41)

 

(22)











Total Contributions by and distributions to owners

 

5

 

71

 

-

 

-

 

(3,010)

 

-

 

(2,934)

 

(90)

 

(3,024)


_______

_______

_______

_______

_______

_______

_______

_______

_______











As at 31 December 2012

895

167

676

53

16,971

(200)

18,562

529

19,091


_______

_______

_______

_______

_______

_______

_______

_______

_______


Networkers International Plc

 

Notes to the accounts

 

 

1      Basis of preparation

 

The financial information set out in this document does not constitute the Company's statutory accounts for year to 31 December 2012 and 2013.  Statutory accounts for the years ended 31 December 2012 and 31 December 2013 have been reported on by the Independent Auditors.  The Independent Auditors' Reports on the Annual Report and Financial Statements for 2012 and 2013 was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under sections 498(2) or 498(3) of the Companies Act 2006. 

 

Statutory accounts for the year ended 31 December 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2013 will be delivered to the Registrar in due course, and will be available from the Company's registered office at Hanover Place, 8 Ravenbourne Road, Bromley, BR1 1HP and from the Company's website www.networkersplc.com/investors.

 

The financial information set out in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2013.  The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2012. New standards, amendments and interpretations to existing standards, which have been adopted by the Group have not been listed, since they have no material impact on the financial statements

 

The Board of Directors approved this preliminary announcement on 11th April 2014

 

 

2      Segment information

 

 

The Group has 3 main reportable segments:

 

 

·     Information Technology division - This division is involved in the sourcing, recruitment and supply of IT personnel across a range of industries both in the UK and globally. This division of the business generates 53% (2012: 52%) of the Group's revenue. 

 

·     Telecommunications division - This division is involved in the sourcing, recruitment and supply of highly skilled telecom engineers to global telecommunication enterprises. This division of the business generates 40% (2012: 44%) of the Group's revenue.

 

·     Energy and Engineering Division - This division is involved in the sourcing, recruitment and supply of Energy and Engineering personnel to a range of global industries. This division of the business generates 7% of the Group's revenue (2012: 4%).

 

All segments are monitored by the board of directors as well as senior management.

 

Factors that management used to identify the Group's reportable segments

 

The Group's reportable segments are strategic business units that although supplying the same product offerings, operate in distinct markets and are therefore managed and reported on separately.

 

Measurement of operating segment profit or loss, assets and liabilities

 

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

 

The Group evaluates performance on the basis of profit or loss from operations before tax not including overhead costs such as those incurred by the support centres, goodwill impairment, and also excluding the effects of share based payments.

 

The Board does not review assets and liabilities by segment.

 

 

 



 

IT

 

Telecoms

Energy & Engineering

 

Total



2013

2013

2013

2013



£'000

£'000

£'000

£'000








Revenue from external customers

86,024

63,773

11,555

161,352



_______

_______

_______

_______








Segment Net Fee Income

10,801

14,730

3,613

29,144



_______

_______

_______

_______








Segment profit before income tax

2,721

4,176

624

7,521



_______

_______

_______

_______









 

IT

 

Telecoms

Energy & Engineering

 

Total



2012

2012

2012

2012



£'000

£'000

£'000

£'000








Revenue from external customers

88,061

76,395

6,217

170,673



_______

_______

_______

_______








Segment Net Fee Income

11,549

17,255

1,984

30,788



_______

_______

_______

_______








Segment profit before income tax

2,631

4,596

307

7,534



_______

_______

_______

_______

 

 

 

 



2013

2012


Profit or loss after income tax expense

£'000

£'000






Total profit or loss for reportable segments

7,521

7,534


Exceptional item

(549)

(1,000)


Depreciation

(227)

(212)


Amortisation of intangibles

(259)

(367)


Share based payments

-

(5)


Interest expense

(200)

(269)


Interest income

1

-



_______

_______






Profit before income tax expense

6,287

5,681



_______

_______






Corporation taxes

(3,044)

(2,461)



_______

_______






Profit after income tax expense

3,243

3,220



_______

_______

 



 

Geographical information:

 

Revenue is recognised based upon where the actual service is provided.

 


Revenue

2013

2012



£'000

£'000






Europe

130,196

141,028


Middle East and Africa

8,414

10,217


Americas

18,585

15,797


Asia Pacific

4,157

3,631



_______

_______






Group

161,352

170,673



_______

_______

 

Revenues from one customer in the IT segment represents approximately £17.3m (2012 - £20.2m)

 

 

3      Earnings per share

 



2013

2012



£'000

£'000






Numerator




Earnings used for calculation of basic and diluted EPS

3,048

2,952


Add back:




Amortisation of intangible assets acquired through business combinations net of tax

195

314


Share based payments net of tax

-

3


Litigation provision net of tax

1,093

660



_________

_________






Earnings used in calculation of adjusted EPS

4,336

3,929



_________

_________







2013

2012



Number

Number






Denominator




Weighted average number of shares used in basic EPS

82,948,187

88,113,684


Effects of employee share options

1,854,450

1,966,019



_________

_________






Weighted average number of shares used in diluted EPS

84,802,637

90,079,703



_________

_________










Year end number of shares (excluding shares held in treasury)

used in adjusted EPS

83,291,765

83,535,269



_________

_________






Basic

3.67p

3.35p



_________

_________






Diluted

3.59p

3.28p



_________

_________






Adjusted

5.21p

4.70p



_________

_________

 

 



 

 

4      Exceptional items

 

 

 

 

The increase in the provision and the cost of legal fees which combined, totalled £0.55m (2012: £1.0m), have been treated as an exceptional item in the income statement.

 

In prior years, the Group had taken a deferred tax asset relating to the litigation provision referred to above.  Whilst the Board believes that a tax benefit will derive to the Group as a result of the payments, there are some uncertainties surrounding the timing of this.  Consequently, the Board considers it appropriate to write off the deferred tax asset of £0.54m and to only recognise a tax benefit should it become realised in future years.

 

 

 

5      Reserves

 

The following describes the nature and purpose of each reserve within owners' equity

 

Share capital:Amount subscribed for share capital at nominal value.

Share premium: Amount subscribed for share capital in excess of nominal value.

Foreign exchange:Gains/losses arising on retranslating the net assets of overseas operations in to sterling.

Capital redemption reserve: The capital redemption reserve of £53,000 exists as a result of the Group cancelling its shares held in Treasury.                                                           

Reverse acquisition reserve:The reverse acquisition reserve of £676,000 exists as a result of the acquisition by Networkers International Plc of Networkers International (UK) Plc. In accordance with International Accounting Standards the acquisition has been accounted for as a reverse acquisition

Retained earnings:Cumulative net gains and losses recognisedin the consolidated income statement less cost of own shares held in treasury amounting to £515,000 (2012: £1,965,000).

 

 

 

6          Payment of Dividend

 

An interim dividend of 0.70p per share totalling £0.58m (2012: £0.53m) was paid during the year.  The directors recommend the payment of a final dividend of 1.00p per share totalling £0.85m (2012:  £0.54m). 

 

 

 

 

These results are available from the Group's website www.networkersplc.com

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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