Interim Results

10 September 2002 ROBERT WALTERS PLC INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2002 Robert Walters plc, the recruitment and HR outsourcing business, today announced its interim results for the six months ended 30 June 2002. Financial Summary * Net fee income £27.6m (2001: £34.8m) * Operating profit £1.2m† (2001: £6.1m)* * Profit before taxation £1.3m† (2001: £6.2m)* * Operating cashflow £7.9m (2001: £8.6m) * Cash at 30 June 2002 of £13.4m (2001: £6.5m) * Earnings per share 0.9p (2001: 5.1p) * Interim dividend maintained at 1.05p (net) † After £0.2m goodwill amortisation *After £0.1m goodwill amortisation Commenting on the results, Robert Walters, Chief Executive, said: 'We have responded to difficult business conditions with a management focus on cost control and achieved growth in specific business segments, despite the decline in demand in our permanent business, and pressure on margins in contract. Operating cash flow was good and we conclude the half year with a strengthened cash position. 'The business environment remains difficult and we will therefore continue to manage our business on the basis of unchanged market conditions. We remain focused on controlling our cost base whilst continuing to look for opportunities to develop our business. We believe we are well placed to return to earnings growth when business conditions improve in our principal markets.' - ends For further information please contact: Robert Walters plc +44 20 7379 3333 Robert Walters Chief Executive Philippa Brook Director of Marketing Brunswick Patrick Handley +44 20 7404 5959 Fiona Fong Or visit our website at www.robertwalters.com Notes to Editors: Robert Walters plc Robert Walters is a leading global recruitment consultancy, specialising in placing high calibre professionals into permanent, contract and temporary positions at all management levels. The group specialises in the accounting, finance, banking, IT, general management, legal, sales and marketing, human resources, call centre and support fields. Robert Walters' blue-chip client base ranges across leading investment banks and multi-national corporations covering all market sectors. Established in 1985, Robert Walters has built a global presence with 24 offices spanning five continents. It employs over 850 staff world-wide. In 1997, Robert Walters established its outsourcing division, Resource Solutions, to provide HR consultancy and services. At the forefront of recruitment outsourcing, Resource Solutions currently operates contracts throughout Europe, Australasia, Asia and the US. Chairman's Statement Commenting on the results, Chairman, Timothy Barker said: I am pleased to report on the Group's trading for the six months ended 30 June 2002. In the first half of 2002 turnover was £130.5m (2001: £119.5m) producing a gross profit ('net fee income') of £27.6m (2001: £34.8m), operating profit of £ 1.2m (2001: £6.1m) and profit before taxation of £1.3m (2001: £6.2m). The operating profit is after a deduction of £0.2m in relation to goodwill amortisation associated with the acquisition of Dunhill (2001: £0.1m). Trading conditions continued to be difficult through the first half of 2002. Our net fee income in the first quarter was broadly in line with the fourth quarter of 2001 and improved in the second quarter of 2002. This was the first increase in quarter on quarter net fee income for six quarters. Despite this, the overall level of net fee income in the second quarter remained below that achieved in the third quarter of 2001. Worldwide economic conditions have adversely affected all of the Group's business areas. The depressed state of the financial services, telecoms and IT sectors continues to have an impact on our net fee income across both the permanent and contract businesses globally. We have continued to control our costs tightly and our headcount has fallen from 1050 as at 30 June 2001 to 890 as at 30 June 2002. Staff levels throughout the Group are managed with a view to protecting our market position and to sustain the necessary resources in order to benefit us as and when business conditions improve. United Kingdom Turnover in the UK was £96.2m (2001: £85.1m), net fee income £13.4m (2001: £ 19.8m) and operating profit £0.3m (2001: £3.8m), with net fee income in the UK remaining flat across the last three quarters. Outsourced payroll contracts managed through our outsourcing business, Resource Solutions, helped to increase turnover but had less of an impact on net fee income due to the naturally lower margins in payrolling activity. The permanent recruitment business declined substantially compared to the first half of 2001 reflecting weakness in financial services and the technology, media and telecommunications sectors. We have also seen margin pressure in our contract business in the same sectors. Continental Europe Turnover in Continental Europe was £5.0m (2001: £5.2m), net fee income £2.6m (2001: £3.2m) and operating profit was £0.2m (2001: £0.7m). We have had to face difficult trading conditions in Continental Europe and our permanent recruitment businesses have declined in all markets with Belgium and France being the worst hit. However, our interim management businesses in Holland and Belgium have continued to grow despite the difficult market and we continue to invest in this area. We believe the Continental Europe market offers the Group great potential and we will continue to invest cautiously as opportunities present themselves. Asia Pacific Turnover in the Asia Pacific region was £26.8m (2001: £26.7m), net fee income £ 9.8m (2001: £9.9m) and operating profit £0.5m (2001: £1.4m). The first half of 2001 included two months' trading of our Australian acquisition, Dunhill. This acquisition is now fully integrated into the Robert Walters business. Our net fee income in the Asia Pacific region continued to decline markedly through the first quarter of 2002, following the trend of the second half of 2001. The second quarter of 2002 has shown improvement in net fee income in all our operations across this region. We are particularly pleased with our Japanese operation, which has performed exceptionally well throughout the first half of the year. Other International Turnover in the USA, Ireland and South Africa was £2.5m (2001: £2.5m), net fee income £1.8m (2001: £1.9m) and operating profit £0.2m (2001: £0.2m). The New York office increased net fee income quarter on quarter following the extremely difficult business conditions in the fourth quarter of 2001. Operations in Ireland and South Africa, although small, continue to show year on year net fee income growth despite facing difficult market conditions. Resource Solutions Resource Solutions, our HR outsourcing business which manages the on-site recruitment function for a number of clients around the world, continued to grow as an increasing number of large companies look to third party specialists to manage the HR function within their businesses. Cash flow The Group ended the period with £13.4m net cash having commenced the year with £9.0m. Operating activities generated £7.9m with the significant outflows being tax of £1.2m, capital expenditure of £0.7m and dividends of £1.7m. Dividend The Board has decided to maintain the interim dividend of 1.05p per share (first half 2001: 1.05p) as the cash position of the Group remains strong. The interim dividend will be paid on 7 November 2002 to those shareholders on the Company's register on 20 September 2002. Current trading and prospects The business environment remains difficult and we therefore continue to manage our business on the basis of unchanged market conditions. We remain focused on controlling our cost base whilst continuing to look for opportunities to develop our business. We have instigated a worldwide training and development programme, which will further enhance the quality of our staff. We believe we are well placed to grow our profits significantly when business confidence returns to our principal markets. - ends - Consolidated profit & loss account 2001 - 12 mths to 31 December 2002 2001 Before Exceptional 6 mths to 6 mths to Exceptional Item 30 June 30 June Item (note 4) Total Note Unaudited Unaudited Audited Audited Audited £ 000 £ 000 £ 000 £ 000 £ 000 ___________________________________________________________________________________________________ Turnover 3 130,495 119,525 253,552 - 253,552 Cost of sales (102,867) (84,711) (188,321) - (188,321) ___________________________________________________________________________________________________ Gross profit 3 27,628 34,814 65,231 - 65,231 ___________________________________________________________________________________________________ Goodwill amortisation (233) (81) (348) - (348) Other administrative expenses (26,217) (28,645) (57,154) (1,457) (58,611) ___________________________________________________________________________________________________ Administrative expenses (26,450) (28,726) (57,502) (1,457) (58,959) ___________________________________________________________________________________________________ Operating profit 3 1,178 6,088 7,729 (1,457) 6,272 Interest (net) 116 140 223 - 223 ___________________________________________________________________________________________________ Profit on ordinary activities before 1,294 6,228 7,952 (1,457) 6,495 taxation Tax on profit on ordinary 5 (542) (2,054) (2,850) 437 (2,413) activities ___________________________________________________________________________________________________ Profit on ordinary activities after 752 4,174 5,102 (1,020) 4,082 taxation Dividends 6 (889) (889) (2,496) - (2,496) ___________________________________________________________________________________________________ Retained (loss)/profit for the (137) 3,285 2,606 (1,020) 1,586 period ___________________________________________________________________________________________________ Earnings per share (pence): 7 Basic 0.9 5.1 6.1 (1.2) 4.9 Diluted 0.9 5.1 6.1 (1.2) 4.9 ___________________________________________________________________________________________________ Consolidated statement of total recognised gains and losses 2002 2001 2001 __________ __________ __________ 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited £ 000 £ 000 £ 000 ___________________________________________________________________________________________________ Retained profit for the 752 4,174 4,082 period Foreign currency translation 31 (106) (42) differences ___________________________________________________________________________________________________ Total recognised gains for the 783 4,068 4,040 period ___________________________________________________________________________________________________ Consolidated balance sheet 2002 2001 2001 30 June 30 June 31 December Unaudited Unaudited Audited £ 000 £ 000 £ 000 ___________________________________________________________________________________________________ Fixed assets Goodwill 8,037 9,414 9,355 Tangible assets 5,271 7,147 5,605 Investments 103 103 103 Own shares held 2,425 2,565 2,425 ___________________________________________________________________________________________________ 15,836 19,229 17,488 ___________________________________________________________________________________________________ Current assets Debtors 29,165 41,849 34,248 Cash at bank and in hand 13,406 6,502 9,035 ___________________________________________________________________________________________________ 42,571 48,351 43,283 Creditors: Amounts falling due within one year (17,483) (24,758) (19,741) ___________________________________________________________________________________________________ Net current assets 25,088 23,593 23,542 ___________________________________________________________________________________________________ Total assets less current liabilities 40,924 42,822 41,030 Provision for liabilities and charges (145) (302) (145) ___________________________________________________________________________________________________ Net assets 40,779 42,520 40,885 ___________________________________________________________________________________________________ Capital and reserves Called up share capital 16,931 16,931 16,931 Share premium 82,804 82,804 82,804 Other reserves (74,034) (74,034) (74,034) Foreign exchange reserves (434) (529) (465) Profit and loss account 15,512 17,348 15,649 ___________________________________________________________________________________________________ Equity shareholders' funds 40,779 42,520 40,885 ___________________________________________________________________________________________________ Consolidated cashflow statement 2002 2001 2001 ____________ ____________ ______________ 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited Note £ 000 £ 000 £ 000 ___________________________________________________________________________________________________ Net cash inflow from operating activities 8 7,933 8,584 15,024 Returns on investments and servicing of finance 116 140 223 Taxation (1,230) (3,047) (5,543) Capital expenditure and financial investment (657) (3,573) (3,788) Acquisitions and disposals - (4,205) (4,896) Equity dividends paid (1,731) (1,243) (2,132) ___________________________________________________________________________________________________ Cash inflow (outflow) before financing and 4,431 (3,344) (1,112) management of liquid resources Funds on short term deposit (8,000) - - Financing - - - ___________________________________________________________________________________________________ Decrease in cash for the period 8 (3,569) (3,344) (1,112) ___________________________________________________________________________________________________ Notes to the financial information: 1. Accounting Policies There have been no changes to the accounting policies as set out in the 2001 annual report and accounts of Robert Walters plc other than the adoption of the requirements of FRS 19, Deferred Tax, however this has not had a material impact on the results for the current and prior periods. 2. Financial Information The financial information in this document was formally approved by the Board of Directors on 10 September 2002. The financial information set out in this document does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2001 for Robert Walters plc on which the auditors gave an unqualified report, have been delivered to the Registar of Companies. The financial information in respect of the period ended 30 June 2002 is unaudited but has been reviewed by the Company's auditors. Their report is attached on page 12. The financial information in respect of the period 30 June 2001 is unaudited. 3. Segmental Information 2002 2001 2001 _______________ ___________ _____________ 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited £ 000 £ 000 £ 000 ______________________________________________________________________________________ i) Turnover: UK 96,179 85,112 183,551 Continental Europe 5,025 5,209 10,139 Asia Pacific 26,825 26,740 55,516 Other 2,466 2,464 4,346 ______________________________________________________________________________________ 130,495 119,525 253,552 ______________________________________________________________________________________ ii) Gross Profit: UK 13,424 19,762 36,219 Continental Europe 2,604 3,214 6,071 Asia Pacific 9,775 9,918 19,624 Other 1,825 1,920 3,317 ______________________________________________________________________________________ 27,628 34,814 65,231 ______________________________________________________________________________________ iii) Profit on ordinary activities before tax: UK 330 3,779 5,131 Continental Europe 207 749 1,225 Asia Pacific 465 1,358 1,125 Other 176 202 248 ______________________________________________________________________________________ Operating profit before 1,178 6,088 7,729 exceptional items Exceptional item - - (1,457) ______________________________________________________________________________________ Operating Profit 1,178 6,088 6,272 Interest (net) 116 140 223 ______________________________________________________________________________________ Profit on ordinary activities 1,294 6,228 6,495 before tax ______________________________________________________________________________________ 4. Exceptional Item In the year ended 31 December 2001 IT development costs of £1,457,000 were written off relating to consultancy fees incurred in developing a global technology process. 5. Taxation The charge for taxation is based on the expected annual tax rate of 35% (2001: 33%) on profit before taxation and amortisation of goodwill. £351,000 (2001: £683,000) relates to overseas taxation. 6. Dividends 2002 2001 2001 ___________ ___________ _____________ 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited £ 000 £ 000 £ 000 ______________________________________________________________________________________ Interim dividend of 1.05p per share (2001: 889 889 889 1.05p) Final dividend (2001 : 2.1p) - - 1,778 Adjustment in respect of prior periods - - (171) ______________________________________________________________________________________ 889 889 2,496 ______________________________________________________________________________________ 7. Earnings Per Share The calculation of earnings per share is based on the profit on ordinary activities after taxation and the weighted average number of ordinary shares of the Company. 2002 2001 2001 ___________ ___________ _____________ 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Unaudited Unaudited Audited £'000 £'000 £'000 ______________________________________________________________________________________ Profit on ordinary activities after 752 4,174 4,082 taxation ______________________________________________________________________________________ 2002 2001 2001 ___________ ___________ _____________ 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Weighted average number of shares: Unaudited Unaudited Audited ______________________________________________________________________________________ Shares in issue 84,656,927 83,146,410 83,907,876 Own shares held (1,299,016) (1,299,016) (1,299,016) ______________________________________________________________________________________ For basic earnings per share 83,357,911 81,847,394 82,608,860 Outstanding share options 1,097,471 - 365,053 ______________________________________________________________________________________ For diluted earnings per share 84,455,382 81,847,394 82,973,913 ______________________________________________________________________________________ 8. Analysis of cash flow 2002 2001 2001 __________ ___________ ____________ 6 mths to 6 mths to 12 mths to 30 June 30 June 31 December Reconciliation of operating profit to net Unaudited Unaudited Audited cash flow from operating activities: £ 000 £ 000 £ 000 ________________________________________________________________________________________ Operating profit 1,178 6,088 6,272 Depreciation charge 883 710 1,628 Goodwill amortisation 233 81 348 Loss on disposal of tangible fixed assets 197 - 322 Decrease in debtors 5,083 1,111 10,923 Increase (decrease) in creditors 359 594 (4,159) Decrease in provision - - (310) Net cash flow from operating activities 7,933 8,584 15,024 ________________________________________________________________________________________ Analysis of change in net funds: ________________________________________________________________________________________ Decrease in cash in the period (3,569) (3,344) (1,112) Funds on short term deposit 8,000 - - Foreign currency translation differences (60) 33 334 ________________________________________________________________________________________ Movement in net funds in the period 4,371 (3,311) (778) Opening net funds 9,035 9,813 9,813 ________________________________________________________________________________________ Closing net funds 13,406 6,502 9,035 ________________________________________________________________________________________ 9. Registered Office The Company's registered office is at 55 Strand, London, WC2N 5WR. Independent Review Report to Robert Walters plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2002 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of total recognised gains and losses, and the related notes, 1 to 9. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/ 4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review, we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2002. Deloitte & Touche Chartered Accountants London 10 September 2002

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