TIDMNGH
RNS Number : 1186N
Network Group Holdings PLC
26 August 2011
NETWORK GROUP HOLDINGS PLC
("NGH" or "the Company" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2011
Network Group Holdings plc (AIM: NGH), the specialist
recruitment and business process outsourcing group, today announces
interim results for the six months ended 31 May 2011.
Financial Highlights
-- Revenue of GBP27.5m, an increase of GBP2.4m (9.5%)
-- Operating profit of GBP1.2m, an increase of GBP0.5m
(59.7%)
-- Profit before tax * of GBP1.2m, an increase of GBP0.5m
(86.2%)
-- Earnings per share * of 0.9 pence, compared to earnings per
share of 0.5 pence for the corresponding period in 2010
* Comparative profit before tax and earnings per share are
stated before "other items", being the movement in the value of the
liabilities associated with the equity conversion mechanism, and
the movement in the mark to market value of the Group's interest
rate collar. There are no "other items" in 2011.
For further information please contact:
Network Group Holdings plc
David Waller, Chairman
www.networkgroupholdings.co.uk 01676 525300
Nominated Adviser
Arden Partners plc
Steve Douglas 0121 423 8943
CHAIRMAN'S STATEMENT
Introduction
The Group has experienced increased revenue and profitability in
the first six months of the year significantly exceeding
performance for the corresponding period last year. The recruitment
division, particularly those businesses operating in the IT, health
and social care, and construction sectors, has shown good revenue
growth and margins have been maintained.
Financial Results
A summary of the financial performance for the half year ended
31 May 2011, compared to the corresponding period in 2010 is set
out as follows:
6 months 6 months Year ended
ended 31 ended 31 30 November
May 2011 May 2010 2010
GBP000 GBP000 GBP000
Revenue 27,534 25,149 52,233
Gross profit 9,937 9,265 19,149
Operating profit 1,244 779 2,196
Profit before tax ^ 1,162 624 1,919
Adjusted earnings per share
^ 0.9p 0.5p 1.5p
Net debt 4,205 4,712 3,137
^ The profit before tax and earnings per share comparatives are
stated before other Items. There are no other items in 2011.
The reported profit for the period is GBP829,000 (6 months ended
31 May 2010: GBP2,880,000; year ended 30 November 2010:
GBP3,805,000). In the comparative periods ended 31 May 2010 and 30
November 2010 the Statement of Comprehensive Income includes a
credit of GBP2,363,000 and GBP2,434,000 respectively for other
items that have not recurred in 2011. Both of these figures include
GBP2,301,000 in respect of the movement in the value of the
liabilities associated with the Group's equity conversion
mechanism.
Revenue for the Group was 9.5% higher than revenue for the
corresponding period in 2010 whilst the gross profit for the Group
was 7.3% higher than the corresponding period in 2010.
Operating profit for the Group was 59.7% higher than the
corresponding period in 2010. Profit before tax and other items was
GBP1,162,000 compared to GBP624,000 in the corresponding period in
2010. The profit before other items attributable to the
shareholders of NGH has more than doubled compared to the
corresponding period in 2010.
Corporate update
During the first half of the year the Group increased its
portfolio of specialist recruitment agencies with the acquisition
of four companies.
In April, the Group acquired Sheridan Maine Recruitment Limited,
specialising in accountancy and finance recruitment. Following the
half year end date the Group's shareholding has been diluted to
75.1% following the issue of equity to the management. Also in
April the Group acquired Options Network Limited, specialising in
construction and engineering recruitment. The Group is currently
diluting its shareholding to 25.1% through an issue of equity to
the management.
In May the Group acquired 75.1% of Network Professional
Recruitment Limited, specialising in recruitment in the financial
services and insurance sectors. Also in May the Group acquired a
majority stake in Procurement People Recruitment Limited, a
recruitment company specialising in procurement professionals.
The Group also increased its shareholding in existing subsidiary
Network Catering Limited during the period.
Following the half year end date in August the Group acquired
51% of SSR Contract & Technical Limited and 51% of SSR General
& Management Limited, recruitment companies specialising in the
security and allied sectors.
Equity conversion mechanism
In the report and accounts for the year ended 30 November 2010,
it was explained that the Directors had renegotiated the agreements
in respect of the equity conversion mechanism and consequently the
accounting treatment had changed as a result of the revised
contractual position such that the Group no longer recognises the
liability on the Statement of Financial Position. A credit of
GBP2,301,000 was recognised in the Statement of Comprehensive
Income in the period to 31 May 2010 and the year to 30 November
2010, within other items, resulting from the extinguishment of the
liability.
Outlook
The second half of the year has started well, significantly
ahead of the corresponding period last year. The Board is
optimistic that the results for the full year will meet their
expectations.
The Group is continually seeking acquisitions to increase the
Group's offering in the recruitment and business process
outsourcing sectors.
Finally, I would like to thank my fellow directors and the
employees of the Group for their support and continued
contributions.
D Waller
Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
Financial and Operational Review
The revenue and operating profit for our two divisions, is
provided below:
6 months ended 31 6 months ended 31
May 2011 May 2010
Gross Operating Gross Operating
Revenue profit profit Revenue profit profit
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Recruitment 24,255 6,817 774 22,087 6,352 382
Business
process
outsourcing 3,279 3,120 806 3,062 2,913 698
Central
group
costs - - (229) - - (208)
Total --------- --------- --------- --------- --------- ---------
27,534 9,937 1,351 25,149 9,265 872
The total operating profit shown above excludes amortisation and
impairment of goodwill and intangible assets of GBP13,000 (2010:
GBP50,000), share-based payment charges of GBP94,000 (2010:
GBP58,000) and profit on disposal of subsidiary undertakings of
GBPnil (2010: GBP15,000). Operating profit is shown in the
Statement of Comprehensive Income as GBP1,244,000 (2010:
GBP779,000).
Recruitment
Revenue for the recruitment division represented 88.1% of total
Group revenue for the half year ended 31 May 2011 compared to 87.8%
for the corresponding period in 2010. Revenue for the recruitment
division for the half year ended 31 May 2011 increased by
GBP2,168,000 (9.8%) from the same period last year. This is
predominantly due to an increase in revenue from the businesses
operating in IT, health and social care, and construction
sectors.
The gross profit for the recruitment sector for the half year
ended 31 May 2011 increased by GBP465,000 (7.3%) from the same
period last year and represented 68.6% of total Group gross profit
for the half year ended 31 May 2011 compared to 68.6% for the
corresponding period in 2010. The increase in gross profit compared
to 2010 is reflective of the increase in revenue and margins have
been maintained.
The operating profit in the recruitment division increased by
GBP392,000 in the half year ended 31 May 2011 compared to the same
period in 2010, an increase of 103%.
Business Process Outsourcing ("BPO")
Revenue for the BPO division represented 11.9% of total Group
revenue for the half year ended 31 May 2011 compared to 12.2% for
the corresponding period in 2010. Revenue for the BPO division for
the half year increased by 7.1% compared to the same period in 2010
predominantly due to increased revenue from its major customer,
Pertemps. The increase in revenue resulted in an increase in gross
profit and operating profit.
The increase in the operating profit for the BPO division for
the half year ended 31 May 2011 was GBP108,000, an increase of
15.5%, compared to the corresponding period in 2010.
Statement of Financial Position
The Statement of Financial Position at 31 May 2011 shows equity
attributable to the company's equity holders of GBP4,262,000
compared to GBP2,730,000 at 31 May 2010 and GBP3,550,000 at 30
November 2010.
Ongoing Strategy
The Group remains focussed on growth through acquisition and
organic means. The Group made four acquisitions during the period
and has made a further two since. The Group's principles of sharing
ownership with management and allowing management to convert the
shareholdings in their businesses into NGH shares remain core and
it is the Board's strong belief that these principles will continue
to attract quality people to the Group.
Finally, I would like to thank my business partners and all of
our employees for their continuing effort during the period and for
the remainder of the financial year.
T Watts
Chief Executive Officer
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 May 2011
Unaudited 6 months Unaudited 6 months
ended ended Audited year ended
31 May 2011 31 May 2010 30 November 2010
Before Other After Before Other After
other items other other items other
items * items items * items
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
CONTINUING OPERATIONS
Revenue 27,534 25,149 - 25,149 52,233 - 52,233
Cost of sales (17,597) (15,884) - (15,884) (33,084) - (33,084)
----- ----- ----- ----- ----- ----- -----
GROSS PROFIT 9,937 9,265 - 9,265 19,149 - 19,149
Administrative
expenses (8,586) (8,393) - (8,393) (16,923) - (16,923)
Profit on disposal of
subsidiary undertakings - 15 - 15 154 - 154
Amortisation and impairment
of goodwill and intangible
assets (13) (50) - (50) (85) - (85)
Share-based payment
costs (94) (58) - (58) (99) - (99)
----- ----- ----- ----- ----- ----- -----
Total administrative
expenses (8,693) (8,486) - (8,486) (16,953) - (16,953)
----- ----- ----- ----- ----- ----- -----
OPERATING PROFIT 1,244 779 - 779 2,196 - 2,196
Finance income 5 3 2,363 2,366 6 2,434 2,440
Finance costs (87) (158) - (158) (283) - (283)
----- ----- ----- ----- ----- ----- -----
PROFIT BEFORE
TAX 1,162 624 2,363 2,987 1,919 2,434 4,353
Income tax expense
(note 4) (333) (107) - (107) (548) - (548)
----- ----- ----- ----- ----- ----- -----
PROFIT FOR THE
PERIOD 829 517 2,363 2,880 1,371 2,434 3,805
Other comprehensive
income - - - - - - -
----- ----- ----- ----- ----- ----- -----
TOTAL COMPREHENSIVE
INCOME 829 517 2,363 2,880 1,371 2,434 3,805
----- ----- ----- ----- ----- ----- -----
Profit and total comprehensive
income for the period
attributable to:
Equity holders 627 302 2,363 2,665 987 2,434 3,421
Non-controlling
interests 202 215 - 215 384 - 384
----- ----- ----- ----- ----- ----- -----
829 517 2,363 2,880 1,371 2,434 3,805
----- ----- ----- ----- ----- ----- -----
Earnings per share from
continuing operations
(pence) (note 5)
Basic 0.9p 4.2p 5.3p
Diluted 0.9p 4.2p 5.3p
* Other items includes the movement in the value of the
liabilities associated with the equity conversion mechanism (note
3) and the movement in the mark to market valuation of the Group's
interest rate collar. There are no other items in 2011.
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 May 2011
Audited
Unaudited Unaudited as at 30
as at 31 as at 31 November
May 2011 May 2010 2010
GBP000 GBP000 GBP000
ASSETS
Non-current assets
Goodwill 5,230 4,804 4,737
Other intangible assets 74 64 28
Investments - 5 -
Property, plant and equipment 361 398 347
Deferred tax asset 153 145 153
---------- ---------- ----------
5,818 5,416 5,265
---------- ---------- ----------
Current assets
Trade and other receivables 10,329 8,549 8,496
Cash and cash equivalents 301 38 1,266
---------- ---------- ----------
10,630 8,587 9,762
---------- ---------- ----------
TOTAL ASSETS 16,448 14,003 15,027
---------- ---------- ----------
LIABILITIES
Current liabilities
Trade and other payables (6,680) (6,103) (6,233)
Current tax liabilities (491) (140) (474)
Bank overdrafts and loans (1,506) (4,750) (1,403)
---------- ---------- ----------
(8,677) (10,993) (8,110)
Non-current liabilities
Bank loans (3,000) - (3,000)
---------- ---------- ----------
TOTAL LIABILITIES (11,677) (10,993) (11,110)
---------- ---------- ----------
NET ASSETS 4,771 3,010 3,917
---------- ---------- ----------
EQUITY
Share capital 73 72 73
Share capital redemption reserve 40 40 40
Share premium 1,040 964 1,020
Investment in own shares (2,427) (2,427) (2,427)
Share-based payment reserve 354 263 268
Merger reserve 1,167 1,167 1,167
Special reserve 300 300 300
Retained earnings 3,715 2,351 3,109
---------- ---------- ----------
Equity attributable to the
company's equity holders 4,262 2,730 3,550
Non-controlling interests 509 280 367
---------- ---------- ----------
TOTAL EQUITY 4,771 3,010 3,917
---------- ---------- ----------
GROUP STATEMENT OF CASH FLOWS
For the six months ended 31 May 2011
Unaudited Unaudited Audited
6 months 6 months year ended
ended 31 ended 31 30 November
May 2011 May 2010 2010
GBP000 GBP000 GBP000
NET CASH USED IN OPERATING
ACTIVITIES (note 7) (665) (2,030) (201)
---------- ---------- ----------
INVESTING ACTIVITIES
Interest received 3 5 6
Proceeds on disposal of businesses - 15 15
Proceeds on disposal of subsidiary
undertakings - - 75
Purchases of property, plant
and equipment (131) (72) (180)
Acquisition of subsidiary
undertakings (108) (3) -
Acquisition of businesses (146) - (90)
Costs of transactions with
non-controlling interests (11) - -
---------- ---------- ----------
NET CASH USED IN INVESTING
ACTIVITIES (393) (55) (174)
---------- ---------- ----------
FINANCING ACTIVITIES
Dividends paid to non-controlling
interests (10) (301) (436)
Repayment of borrowings - - (1,300)
New bank loans raised 103 450 1,403
---------- ---------- ----------
NET CASH FROM / (USED IN)
FINANCING ACTIVITIES 93 149 (333)
---------- ---------- ----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (965) (1,936) (708)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,266 1,974 1,974
---------- ---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD 301 38 1,266
---------- ---------- ----------
NOTES TO THE INTERIM RESULTS
For the six months ended 31 May 2011
1. GENERAL INFORMATION
These interim results were approved by the Board of Directors on
25 August 2011.
A copy of the interim results is available for download from the
Company's website. Copies will also be sent to all shareholders and
copies are available for collection indefinitely from the Company's
Registered Office at the address below:
Network Group Holdings plc Meriden Hall Main Road Meriden
Warwickshire CV7 7PT Telephone: +44 (0) 1676 525300
www.networkgroupholdings.co.uk
2. BASIS OF PREPARATION
The Group's interim results for the six month period ended 31
May 2011 are prepared in accordance with the Group's accounting
policies which are based on the recognition and measurement
principles of International Financial Reporting Standards (IFRSs)
as adopted by the EU and effective, or expected to be adopted and
effective, at 30 November 2011. The principal accounting policies
of the Group have remained unchanged from those set out in the
Group's 2010 annual report and financial statements. As permitted,
these interim results have been prepared in accordance with the AIM
rules and not in accordance with IAS34 "Interim financial
reporting".
These interim results do not constitute full statutory accounts
as defined by the Companies Act 2006 and are unaudited. The
statutory accounts for the year ended 30 November 2010, which were
prepared under IFRS, have been filed with the Registrar of
Companies. These statutory accounts carried an unqualified
auditor's report and did not contain a statement under Section 498
of the Companies Act 2006.
3. EQUITY CONVERSION MECHANISM
The Group operates an equity conversion mechanism whereby the
non-controlling interests of subsidiary undertakings may be able to
transfer their shareholdings to NGH in exchange for NGH equity
shares or cash. The choice of consideration is at the discretion of
the Directors of NGH. Where NGH has an unavoidable obligation to
settle these instruments, they are recognised as a liability in
accordance with IAS 32 'Financial Instruments: Presentation'. No
liability is recognised where the Group does not have an
unavoidable obligation in respect of the equity conversion
mechanism and due to a change in the contractual position during
the period ended 31 May 2010 this applied to all outstanding equity
conversion mechanisms at 31 May 2011, 30 November 2010 and 31 May
2010 and no liability has therefore been recognised at these
dates.
A credit of GBP2,301,000 was recognised in the Statement of
Comprehensive Income in the period ended 31 May 2010 and in the
year ended 30 November 2010, within other items, resulting from the
extinguishment of the liability.
4. TAX
Income tax for the six months ended 31 May 2011 is charged at
26.7% (six months ended 31 May 2010: 28%, year ended 30 November
2010: 28%), representing the average annual income tax rate
expected for the full period, applied to the taxable income of the
six month period.
By parliamentary resolution on 20 March 2011 the corporation tax
rate effective from 1 April 2011 is 26%. Further reductions in the
corporation tax rate for future years, as announced in the budget
on 23 March 2011, had not been enacted by 31 May 2011.
5. EARNINGS PER ORDINARY SHARE
From continuing operations
Unaudited 6 Unaudited 6 months Audited year ended
months ended ended 30 November 2010
31 May 2011 31 May 2010
Before Other After Before Other After
other items other other items other
items items items items
Basic 0.9p 0.5p 3.7p 4.2p 1.5p 3.8p 5.3p
Diluted 0.9p 0.5p 3.7p 4.2p 1.5p 3.8p 5.3p
The calculation of the basic and diluted earnings per share is
based on the following data:
Unaudited
6 months Unaudited 6 months
ended 31 ended Audited year ended
Earnings May 2011 31 May 2010 30 November 2010
Before After Before After
other Other other other Other other
items items items items items items
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Earnings for
the purposes
of basic and
diluted
earnings per
share being
net profit
attributable
to the
company's
equity
holders 627 302 2,363 2,665 987 2,434 3,421
----- ----- ----- ----- ----- ----- -----
Unaudited Unaudited Audited
6 months 6 months year ended
ended ended 31 30 November
Number of shares 31 May 2011 May 2010 2010
000 000 000
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 66,035 64,161 64,973
Effect of dilutive potential
ordinary shares - share options - - -
---------- ---------- ----------
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share 66,035 64,161 64,973
---------- ---------- ----------
The weighted average number of ordinary shares for the purposes
of basic earnings per share and diluted earnings per share excludes
6,500,000 shares held by the Group's Employee Benefit Trust.
The diluted earnings per share calculation does not consider the
shares that may be issued in respect of the equity conversion
mechanism (note 3).
All results of the Group relate to continuing operations and
consequently no earnings per share is presented in respect of
discontinued operations.
6. DIVIDENDS
The directors have not recommended the payment of a dividend in
any period.
7. NOTES TO THE GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months year ended
ended ended 31 30 November
31 May 2011 May 2010 2010
GBP000 GBP000 GBP000
Operating activities
Operating profit from continuing
operations 1,244 779 2,196
Adjusted for:
Depreciation of property, plant
and equipment 127 148 294
Impairment of goodwill - 5 4
Amortisation of intangible assets 13 45 81
Impairment of other investments - - 5
Profit on disposal of businesses - (15) (15)
Profit on disposal of subsidiary
undertakings - - (139)
Share-based payment costs 94 58 99
---------- ---------- ----------
Operating cash flows before
movements in working capital 1,478 1,020 2,525
Increase in receivables (1,817) (2,044) (2,283)
Increase / (decrease) in payables 78 (676) 135
---------- ---------- ----------
Cash (used in) / from operations (261) (1,700) 377
Corporation tax paid (316) (178) (278)
Interest paid (88) (152) (300)
---------- ---------- ----------
Net cash used in operating
activities (665) (2,030) (201)
---------- ---------- ----------
8. EVENTS SUBSEQUENT TO THE REPORTING DATE
In August 2011 the Group acquired, through a purchase of shares
and a subscription for new shares, 51% of SSR Contract &
Technical Limited and 51% of SSR General & Management
Limited.
Also in August 2011 the Group's shareholding in Sheridan Maine
Recruitment Limited was reduced to 75.1% following the issue of
shares to the management of that company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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