Final Results

RNS Number : 3910A

Empresaria Group PLC

20 March 2013

EMPRESARIA GROUP PLC

Results for the year ended 31 December 2012

Empresaria Group plc ("Empresaria" or the "Group"), the international, multi branded specialist staffing services group, has delivered an improved profit over the prior year with particularly strong growth from the Rest of the World region.

Financial Highlights	2012	2011	% change	% change (constant currency)
Revenue	£194.3m	£208.9m	-7%	-4%
Net fee income	£43.9m	£46.9m	-6%	-3.5%
Operating profit	£4.4m	£2.8m	+57%
Adjusted operating profit*	£5.4m	£5.3m	+2%
Profit before tax	£3.6m	£1.9m	+89%
Adjusted profit before tax*	£4.6m	£4.5m	+2%
Earnings/(loss) per share	3.0p	(0.4)p	n/a
Adjusted earnings per share*	5.0p	4.0p	+25%

· 12% growth in permanent revenue

· Temporary revenue declined 8% on prior year

· Net fee income diversified by geography (Continental Europe 36%, UK 36%, Rest of the World 28%)

· Conversion ratio increases to 12% (2011: 11%)

· Exceptional charge of £0.7m, with £1.1m for restructuring costs in Germany and a £0.4m release of the provision for claims for retrospective pay and social security

· Net debt of £8.1m at year end (2011: £5.6m), after purchases of minority shares and investment in working capital

* adjusted to exclude amortisation of intangible assets, exceptional items and movements in the fair values of options

Chief Executive Joost Kreulen said:

"In 2012 we delivered an improved profit performance over the prior year against the backdrop of challenging worldwide staffing markets and ongoing economic uncertainties. During the year we had to resolve some specific operational issues, in particular in Chile and Germany, but strong foundations now exist across the Group which can provide the basis for sustainable growth despite continued volatility in some of our markets.

Group revenue and net fee income were marginally lower than in 2011, but a tight control of costs offset this and allowed us to deliver an increased operating profit of £4.4m (2011: £2.8m) and profit before tax of £3.6m (2011: £1.9m). On an adjusted basis, profit before tax was £4.6m (2011: £4.5m).

We remain focused on delivering profitable growth, optimising our delivery models and tightly managing costs to improve conversion ratios. We closely monitor the productivity and efficiency of the whole organisation and this will continue to be a key area of focus in 2013, as the global economic conditions remain difficult and changeable. We are also looking at where we can make further investments in our brands to help them expand internationally and whilst we remain focused on bringing down our overall debt we will have a selective approach to external investments if the right opportunity comes up."

- Ends -

Enquiries:

Empresaria Group plc Joost Kreulen, Chief Executive Spencer Wreford, Group Finance Director	01342 711 430

Altium (Nominated Adviser) Tim Richardson	0207 484 4040

Allenby Capital Limited (Broker) Nick Naylor	0203 328 5656

A presentation of these results will be made to analysts and investors on 20 March 2013 and an edited copy of this will be made available late that morning on the Empresaria Group plc website: www.empresaria.com

Notes for editors:

· Empresaria Group plc (AIM: EMR; Sector: Support Services, Staffing) operates in 18 countries with over 800 internal staff.

· Empresaria Group plc applies a management equity philosophy and business model, with group company management teams holding significant equity in their own business.

Chairman's statement

Overview of performance in 2012

Overall Group revenue was £194.3m (2011: £208.9m), a reduction of 7%, with Group net fee income reducing 6% to £43.9m (2011: £46.9m). However, good control over costs meant that both adjusted operating profit of £5.4m and adjusted profit before tax of £4.6m were up 2% on 2011. Adjusted earnings per share increased 25% to 5.0p (2011: 4.0p), benefitting from the purchases of minority shares made in the year.

At the regional level, the Rest of the World continued to grow strongly with net fee income increasing by 9% on the prior year. There was another particularly strong performance from the Asian region which grew by 15% year on year. Our recent investments in Singapore and Hong Kong are developing well and we expect them to deliver positive contributions in 2013.

Our UK business has solid foundations and maintained net fee income in 2012 at prior year levels, despite the double-dip recession. Tight cost control helped in delivering an increase in adjusted operating profit.

In Continental Europe, net fee income declined 20% over the year, predominantly as a result of the required realignment of our business in Germany. This restructuring exercise has removed a significant level of costs and right-sized the business for the current market conditions, but resulted in lower profits in 2012. We have recognised £1.1m of exceptional restructuring costs for Germany in these accounts. This has been partially offset by a reduction in the provision against claims for retrospective pay and social security in Germany. We have settled a large proportion of the historic claims and only had a small number of additional claims arise in the year.

Our reported net debt has increased to £8.1m (2011: £5.6m) due to our investment in working capital, a reduction in credit insured invoice financing and the purchase of minority shares, in particular the acquisition of the remaining minority shares in Headway for a total cash outlay in the year of Euro 2.95m (approximately £2.4m). By accelerating this purchase fully into 2012, the Company benefitted from a saving of approximately £0.6m in total consideration.

Board

Joost Kreulen took over as Chief Executive Officer on 1 January 2012, having been responsible for the Group's Asian operations since 2009 and, more recently, also for a number of the Group's UK based businesses. Joost has extensive experience of operational and business development roles within specialist staffing operations, having worked for over 25 years in the staffing industry.

Miles Hunt resigned from the Board, ceasing to be a Non-executive Director on 31 March 2012.

People

In absolute terms, staff numbers increased from 803 at the end of 2011 to 834 at the end of 2012, although the average number of staff fell from 848 last year to 834 this year, with the movements across the regions mirroring their financial performance.

The success of the Group is dependent on having the right people in the right place and the Board would like to thank all of the Group's staff for their hard work, commitment and contribution over the last year, in what have been challenging conditions for a number of our brands.

The Group strategy and success is underpinned by a philosophy of management equity. Operating company management teams invest directly in their own businesses, thereby aligning management and shareholder interests. Where we have acquired first generation management equity we are actively pursuing a strategy of second generation equity, to incentivise senior managers to drive the next stage of development of their companies. This will typically involve setting a threshold profit limit and allowing minority shareholders to benefit from increases in profit over this limit.

Dividend

We continue to adopt a sustainable dividend policy, whilst prioritising free cash flow for developing the Group and strengthening the balance sheet. For the year ended 31 December 2012, the Board is proposing to maintain the final dividend at 0.35p per share (2011: 0.35p per share) which, if approved by Shareholders at the Annual General Meeting, will be paid on 24 June 2013 to shareholders on the register at 24 May 2013.

Governance

The principle of sound corporate governance practices is core to our success as a Group. The diversified nature of the Group, operating through 20 brands across 18 countries, means it is vital that a strong control culture and clear policies on corporate conduct and governance exist and are communicated and monitored effectively. The Board develop the Group's corporate governance arrangements in line with the UK Corporate Governance Code, making sure that the entrepreneurial freedom enjoyed by the operating companies is within a framework of clearly understood principles and controls.

Current trading and outlook

We are cautiously optimistic about the current year. Global economic conditions remain uncertain and there are many risks to the fragile recovery seen in some of our key markets. However, due to the actions taken during 2012, we expect a better Group performance in 2013. In particular, the operational improvements made in Germany and Chile mean both are better placed for the current year and the investments made in Singapore should contribute more positively from the solid platform now in place.

We continue to see opportunities for growth within our existing Group and will take a selective approach to external investments.

Chief Executive Officer's business review

Overview

In 2012 we delivered an improved profit performance over the prior year against the backdrop of challenging worldwide staffing markets and ongoing economic uncertainties. During the year we had to resolve some specific operational issues, in particular in Chile and Germany, but strong foundations now exist across the Group which can provide the basis for sustainable growth despite continued volatility in some of our markets.

Performance across the regions was mixed. Adjusted operating profit grew 33% in the Rest of the World and 12% in the UK, but it declined 23% in Continental Europe. The growth in the Rest of the World was driven by Asia-Pacific, with adjusted operating profit up more than 50%. The region was the fastest growing in the Group again this year. In Chile the exit costs of an onerous loss-making contract resulted in a loss for the year. However there was a much better performance in the second half of the year and we are confident that the business is much stronger and has a better mix of clients going into 2013. The UK has performed consistently, despite the double-dip recession and particularly weak market conditions across the financial services sector. In Continental Europe we have seen improvements in the Czech Republic and Slovakia, but these have been overshadowed by the reduced profit from Germany. Profit in Finland and Estonia was lower in the year as the business transitioned to a new management team.

Claims for retrospective pay and social security in Germany have been lower than originally anticipated, allowing a write back of the provision of £0.4m in the year. As at the end of 2012 we hold a provision of £1.0m which we believe is sufficient to cover all current and potential liabilities for these claims. During the year, in light of the impacts of changing pay rate tariffs and a declining German economy, we have taken action to reduce costs and right-size our German temporary recruitment business, closing or merging 13 branch offices across Germany and Austria and reducing staff numbers by 13% on average. Whilst we anticipate another challenging year in Germany, principally due to the introduction of equal pay legislation across many industries from November 2012, we believe the action taken during 2012 has helped put our business back on a profitable growth trend and are confident of increased demand over the medium-term.

We remain focused on delivering profitable growth, optimising our delivery models and tightly managing costs to improve conversion ratios. We closely monitor the productivity and efficiency of the whole organisation and this will continue to be a key area of focus in 2013, as the global economic conditions remain difficult and changeable. We are also looking at where we can make further investments in our brands to help them expand internationally and, whilst we remain focused on bringing down our overall debt, we will have a selective approach to external investments if the right opportunity comes up.

Regional Performance

£m	2012	2011
Revenue	66.5	67.0
Net fee income	16.0	16.0
Adjusted operating profit	2.2	2.0
% of Group net fee income	36%	34%
Average number of employees	201	201

Revenue decreased by 1% to £66.5m (2011: £67.0m) with an increase in permanent fees of 3%, offset by a decline in temporary fees of 1%. The temporary margin was also slightly down by 0.4% on 2011 but overall net fee income was level at £16.0m. The higher level of permanent fees helped the gross margin improve marginally to 24.0%. The biggest challenge in the year was in the banking and finance sector, where lower global demand hit confidence in the London market and impacted both clients and candidates.

The proportion of net fee income from temporary sales was 59% (2011: 60%), reflecting the stronger permanent sales performance. Adjusted operating profit was up 12% to £2.2m (2011: £2.0m) as a result of tight cost control. This increase helped the UK region increase its share of the Group's net fee income by 2% to 36%. Employee numbers remained the same, averaging 201 in the year.

Market conditions during the year in the UK were poor, with uncertainty and poor visibility due to the double-dip recession. In addition, whilst we had anticipated a slowdown in demand across the London region during the Olympic Games, the expectation had been for a catch up in the second half of the year to make up for lost productivity. This did not materialise and second half revenue was down on the first half, although net fee income and adjusted operating profit were just ahead.

Within the Infrastructure and Construction sector business, there was a small decline in permanent sales, but an increase in temporary sales as our Building services brand, Reflex HR, opened a new office in London to target this market in more depth. However, profits were lower as costs were increased due to this new office investment. FastTrack's Heathrow Airport office, opened in 2011, continued to perform well and generated a significantly better return in its second year of operation. The outlook for new infrastructure projects appears more positive at the beginning of 2013 than it did a year ago and we hope this will feed into higher demand for our services during the course of the year.

Our two Financial Services brands had a mixed year. There was a 33% increase in insurance staffing revenue along with a five-fold increase in adjusted operating profit. However, market conditions within the core banking and finance sector were very difficult and we saw a reduction in both permanent and temporary sales. Costs were managed down and whilst the business reported a trading profit it was significantly down on the prior year. The business has diversified its sector coverage and now offers a wider range of staffing services for back-office and compliance functions.

Results within our Other brands group have been largely positive, especially from the Creative and Retail (real estate) brands, which generated increased profits over 2011. The Recruitment-to-Recruitment brand had another challenged year, with only technical, oil & gas and IT sectors consistently increasing staff this year. Further investments in the Domestic Services brand to enhance their web presence and marketing effectiveness meant profit was slightly down on prior year.

Continental Europe

£m	2012	2011
Revenue	83.2	102.7
Net fee income	15.7	19.7
Adjusted operating profit	1.7	2.2
% of Group net fee income	36%	42%
Average number of employees	198	221

Revenue decreased by 19% to £83.2m (2011: £102.7m) and this fed through to a 20% decline in net fee income to £15.7m (2011: £19.7m). There was an increase in permanent sales of 92%, albeit from a low base, but this was offset by a reduced temporary margin of 0.7%. The proportion of net fee income from temporary sales remained high at 96% (2011: 98%). There were significant cost savings made during the year, with average staff numbers falling 10%, but this was not enough to offset the lower net fee income, resulting in adjusted operating profit of £1.7m, down £0.5m on 2011.

The market conditions across Europe have been challenging. Even Germany has not been immune, with a negative GDP in the last quarter of 2012, preceded by worsening economic conditions. Germany also introduced equal pay directives for temporary workers in the last quarter of 2012, which is currently being adopted by the majority of industries. This leads to pay rate surcharges over current pay levels of up to 50%, phased in over a nine month period. Whilst this is not expected to have a long-term negative impact on the temporary recruitment industry, we anticipate a fall in demand of up to 20% in the short-term and a reduced gross margin as clients react to the increased costs by reducing the levels of temporary labour.

These issues in Germany have necessitated a reduction of the cost base across the branch network and at head office. A restructuring programme was implemented in the second quarter and is now largely completed. This has resulted in 13 branch offices being closed down or merged and a material reduction in staff. Average staff numbers in Germany over 2012 were 13% lower than 2011 and were 16% down at the year end. The cost base going into 2013 is 15% lower than at the beginning of 2012 and, whilst we expect a further fall in revenue, this should ensure that the profits improve in 2013.

Profits continued to improve within the outsourced business which is looking at ways of broadening its client base. The cost base was restructured in 2011, in reaction to the increased pay rates after changing tariffs, as a result of which the business was better placed for 2012.

There has also been a release of £0.4m of the provision held against claims for retrospective pay and social security contributions in Germany and the provision stood at £1.0m at year end. Only a small number of new claims were submitted in the year and the social security audit was successfully finalised for all years to 2009. Nearly half of all claims submitted to date have been settled for an average of 15% of the original claim value. We are confident that the current provision level is sufficient to cover all known and potential claims in this matter.

In March 2012, we reached agreement with the former minority shareholder in Headway to purchase 6.7% of his minority holding for €1.3m and to restructure the timings of the put and call options over the remaining 13.33%. During the summer of 2012, following an approach by the vendor, we agreed an early settlement for the remaining shares. Whilst this resulted in a further cash outflow in the year, increasing the Group's net debt, we negotiated a reduced price for the purchase, saving in the region of £0.6m in total consideration. Of the €2.2m consideration, €1.1m was payable on completion with two tranches of €550,000 payable before the end of December 2012 and March 2013. This purchase was funded by a new €2.2m revolving credit facility, repayable in full by the end of December 2013.

The results at our Healthcare business in the Baltic region were down on the prior year. Overall, demand for its services is stable, but it has become more competitive to attract qualified staff. The business has invested further in its recruitment team and is looking to broaden its candidate base within the Baltic region.

Our specialist businesses in the Czech Republic and Slovakia performed much stronger than in the prior year, with both businesses delivering a small profit, against losses in 2011.

Rest of the World

£m	2012	2011
Revenue	44.6	39.2
Net fee income	12.2	11.2
Adjusted operating profit	1.5	1.1
% of Group net fee income	28%	24%
Average number of employees	435	426

Revenue grew by 14% to £44.6m (2011: £39.2m) and net fee income grew by 9% to £12.2m (2011: £11.2m). This remains the Group's fastest growing region and now represents 28% of Group net fee income. The temporary margin declined by nearly 2%, mainly due to a specific operational issue in Chile arising in the first half and which has now been addressed. Permanent revenue (including revenue from the training and Recruitment Process Outsourcing businesses) grew by 16% and now accounts for 64% of regional net fee income. Overall temporary revenue (from Japan, Australia and the outsourcing business in Chile) grew 13% but a lower overall gross margin restricted net fee income growth. Costs increased with the greater activity, and average staff numbers increased by 2%, driven by the training business in Indonesia. Adjusted operating profit was £1.5m (2011: £1.1m) up 33%.

In Japan, profits from both Group brands grew by over 40% as trading conditions in Tokyo returned to normal following the earthquake and tsunami in early 2011. The Japanese economy remains constrained and is not forecasting high growth, but we expect to see a continued strong performance for our businesses in 2013.

The South East Asia region saw strong growth in revenue, although profit growth was held back by the costs of investments in Singapore and Hong Kong. Our executive search brand, Monroe Consulting, grew revenues by just under 40% across its established offices in Indonesia, Thailand and Philippines, although losses in Singapore held back overall growth. The Group's investments in Singapore delivered a second year of losses, but we are confident that they have reached sufficient scale to make a positive contribution in 2013. There was a small loss in Hong Kong in line with expectations for a first year launch. Our training business in Indonesia achieved higher sales in 2012 but, as a result of investments in staff, the profit remained on the same level as prior year.

Revenue in India was flat year-on-year but, following the restructuring in 2011, improved efficiency and cost control resulted in better net fee income and a strong improvement in profit for the year, against a loss in 2011. Demand for Recruitment Process Outsourcing services is strongest from the US market and we expect this to be a positive trend into 2013.

In China, we saw steady revenue and profit growth, despite a slowdown in the local economy in the second half of the year. The forecast is for China to return to sustainable levels of economic growth and this should help our business to deliver steady growth. The two businesses in Shanghai were merged during the year.

Revenue from Australia grew by 20% and this fed through to a strong improvement in profit. The Melbourne office, opened in 2011, has contributed profitably this year. The Australian market weakened in the last quarter of 2012 but the early signs for 2013 are more promising.

Our Chilean business was loss making in the year, despite a significantly improved second half performance. The business took the decision to exit from an unprofitable major contract, accounting for approximately 30% of sales, which resulted in transitional losses. New clients have already been found to help the sales volume recover. Some transitional costs will continue into 2013 but, due to the actions taken during 2012, the business is able to deliver more reliable and less risky income streams and we are confident of returning it to profitability in 2013.

Finance review

Revenue and net fee income

Revenue for the year was £194.3m (2011: £208.9m), a 7% decrease with net fee income decreasing by 6% to £43.9m (2011: £46.9m). Gross margin was 22.6% (2011: 22.5%) with an increase in permanent revenue offset by a lower temporary margin. Permanent sales (including training and RPO services) grew by 12% and accounted for 35% of net fee income (2011: 29%). Temporary revenue (including outsourced services) was down 8% on 2011, with the margin also reducing to 16.2% (2011: 17.3%).

The proportion of net fee income from non-UK operations reduced slightly to 64% (2011: 66%). On a constant currency basis, net fee income would have been 3.5% below 2011.

Trading summary

From continuing operations	2012	2011	% change
	£m	£m
Revenue	194.3	208.9	(7%)
Net fee income	43.9	46.9	(6%)
Administrative costs	(38.5)	(41.6)	(7%)
Operating profit	4.4	2.8	57%
Adjusted operating profit*	5.4	5.3	2%
Net finance income and costs	(0.8)	(0.9)	(11%)
Profit before tax	3.6	1.9	89%
Adjusted profit before tax*	4.6	4.5	2%

* The adjusted operating profit and adjusted profit before tax figures exclude exceptional items, intangible amortisation and movements in the values of put and call options (see note 6 for details).

Operating profit

Operating profit was £4.4m, up 57% on 2011. On an adjusted basis, it was up 2% at £5.4m. The conversion ratio of 12.0% was an improvement on 11.3% in 2011.

This was due to a reduction in administrative costs, which at £38.5m were down 7% on 2011, with about two thirds of the saving coming from staff salaries and commissions. The Group reacted quickly to changes in market conditions to manage costs down during the year. In the UK, costs were slightly down on the prior year, in Continental Europe were 20% down year-on-year, but were 6% higher in the Rest of the World. About one third of this increase in the Rest of the World related to the new investment in Hong Kong.

Finance income and costs

Finance income was £0.1m (2011: £0.6m), all being bank interest income (2011: £0.1m). Finance costs were £0.9m (2011: £1.5m), which all related to interest payable on invoice discounting, bank loans and overdrafts (2011: £0.9m).

An agreement was reached to purchase the minority shares of Headway during the year, so there are no longer any put or call options. In 2011, there was a net loss of £0.1m from the movement in the fair value of these options.

Exceptional charges

International Financial Reporting Standards (IFRS) require that items of income and expenditure that are material in terms of their nature or amount should be disclosed separately. Such items have been disclosed as exceptional charges in these accounts. The total net charge is £0.7m (2011: £2.2m) and is made up of two items in Germany: the charge of £1.1m for restructuring costs which relate to the closure or merger of branch offices and divisions and the termination of staff, reduced by the release of £0.4m of the provision for potential claims for retrospective pay and social security.

Taxation

The total tax charge in the year is £1.7m (2011: £1.1m) representing an effective tax rate of 47% (2011: 58%). Against the adjusted profit before tax and after excluding the tax on the exceptional provisions the effective tax rate reduces to 39% (2011: 36%). This remains high because of a combination of prior year tax charges, no tax benefit on certain losses and non-deductible costs in the year. The prior year tax mostly arises in the UK, however we have been able to close three years of tax enquiries over the last year. The profits earned by the Group are subject to different tax rates in the countries in which the Group operates with the majority of profits being taxed at higher rates than in the UK.

Earnings per share

Basic earnings per share in the year ended 31 December 2012 was 3.0p (2011: loss of 0.4p).

The Group achieved adjusted earnings per share of 5.0p (2011: 4.0p). This measure excludes exceptional items, intangible amortisation and fair value movements on put and call options, so provides a better understanding of the underlying trading performance.

There were no movements in the number of shares in issue during the year. The dilution effect of the 1.2m share options issued in 2011 was insignificant in the year.

Dividend

During the year, the Group paid a dividend of £0.2m in respect of the year ended 31 December 2011, amounting to 0.35p per share. For the year ended 31 December 2012, the Board is proposing a similar dividend of 0.35p per share, which if approved by shareholders at the Annual General Meeting, will be paid on 24 June 2013 to shareholders on the register on 24 May 2013.

Treasury

The Group's treasury function is centrally managed with responsibility for ensuring compliance with treasury policy and managing the daily treasury operations resting with the Group Finance Director. The treasury philosophy of the Group is that speculative transactions are not permitted and where possible debt should match the location and currency of the related assets. There are certain matters reserved for Board approval, including the following:

- Changes to the Group's capital structure;

- Approval of Group financing arrangements or significant changes to existing arrangements;

- Approval of treasury policies and any activity involving forward contracts, derivatives, hedging activity and significant foreign currency exposures; and

- Approving the appointment of any of the Group's principal bankers.

Treasury is managed to deal with the following risk areas.

Liquidity & Funding risk

The objectives are:

- To ensure that at all times the Group has access to sufficient cash resources as part of committed bank facilities to meet its financial obligations as they fall due, including taxes and dividends and to provide funds for capital expenditure and investment opportunities as they arise.

- Bank facilities must have a maturity profile that matches the funding requirement of the Group.

- The Group must have sufficient liquidity to meet non-discretionary financial obligations in the event of unexpected business disruption.

- To ensure compliance with borrowing facility covenants and undertakings.

- To ensure the capital structure of the Group is appropriate for the Group's profile.

The Group maintains a range of facilities appropriate to manage its working capital and medium-term financing requirements. At the year-end the Group had banking facilities totalling £29.0m (2011: £29.8m).

Bank facilities at 31 December	2012	2011
	£m	£m
Overdrafts, loans and other bank debt	18.0	17.0
Invoice financing facilities	11.0	12.8
	29.0	29.8

Amount of facility undrawn at year-end	4.8	6.3

The amount of facility undrawn of £4.8m (2011: £6.3m) excludes the headroom on the invoice financing facility. The invoice financing facility is available to the UK companies only. The reduction in the facility was based on the disposal of the supply chain business in 2011 and reduced trading within the construction sector. There is bank approval to increase the facility back to the 2011 level with no additional fees.

The other debt includes amortising term loans of £2.0m (2011: £2.9m), one of which expires in 2013 and the other in 2016 and a £0.3m long-term loan in Japan. There are overdraft facilities of £5.8m (2011: £7.6m). In the UK the overdraft is phased over the calendar year, with £4.0m from renewal in February to the end of June, £3.0m to the end of September and then £2.0m until the end of December, increasing back to the £4.0m in January 2014. This is designed to match the Group's funding requirements which are typically greater in the first half of the year. The overdrafts are renewable annually and were last renewed in February 2013. There are also two revolving credit facilities. The first was renewed in March 2011 for a five year term. During the year this facility was increased from £6.25m to €10.0m (approximately £8.2m) and is now allocated to fund the German working capital with a limit on the drawn amount of 66% of the Headway group trade receivables. A second revolving credit facility of €2.2m (approximately £1.8m) has been provided as a short term loan with an expiry of 31 December 2013. This facility is to fund the acquisition of the final 13.33% of minority shares in Headway, which was originally planned to be completed before 31 January 2014.

Group net debt increased from £5.6m at 31 December 2011 to £8.1m at 31 December 2012, as detailed below:

	2012	2011
	£m	£m
Cash at bank and in hand	6.2	6.0
Overdraft facilities	(3.2)	(1.3)
Invoice financing (with recourse)	(1.1)	(0.2)
Bank loans	(10.0)	(9.6)
Non-bank loans	-	(0.5)
Reported net debt	(8.1)	(5.6)

Non-recourse invoice financing	(6.4)	(10.1)

Total net debt	(14.5)	(15.7)

The reported net debt excludes non-recourse invoice financing of £6.4m (2011: £10.1m) which is offset against trade receivables. The total debt, including the non-recourse invoice financing, is £14.5m (2011: £15.7m). In 2012, two businesses in the UK decided to stop using non-recourse invoice financing, which had the result of increasing the reported net debt at the end of 2012. On a like-for-like basis, if the invoice financing in 2011 had been with recourse, the reported net debt in 2011 would have been £6.8m. The increase in total debt includes the impact of the short-term revolving credit facility of €2.2m (amount of drawn facility at 31 December 2012: £1.4m), taken out to fund the accelerated purchase of shares in Headway. This expenditure was expected to be incurred in 2013 and so represents a cash flow timing issue.

The Group has to meet certain bank covenant tests on a quarterly basis. These tests were all met during the year. The figures at year end were:

Covenant	Target	Actual
Net debt:EBITDA	< 2.5 times	1.3
Interest cover	> 3.0 times	8.4
Debt service cover	> 1.25 times	2.0

Interest rate risk

The objectives are to:

- Ensure compliance with interest cover covenants.

- Manage the Group's net interest rate exposure to ensure the Group can meet its profit targets.

- Manage the impact of adverse interest rate movements.

- Any surplus cash invested can never put the capital amount at risk.

The Group currently uses floating interest rates. This is expected to match the interest costs with the economic cycle (eg when interest rates are higher there is typically better economic growth and so for a cyclical industry such as recruitment, profits should be greater when the economy is performing positively).

Within the UK Group the majority of bank accounts are included in a cash pooling arrangement. An interest optimisation model allows currency balances (including overdrafts) to be included within the cash pooling arrangement. With interest income not generally paid on current accounts, the Group aims to minimise the external interest cost paid to banks by repatriating surplus funds from around the Group to minimise the use of the overdraft facilities.

Foreign exchange risk

The objectives are to:

- Manage the adverse impact of exchange rate movements to ensure budgeted profit is achieved, protect the financial outcome of large transactions or capital expenditure and protect the cash flows of the business.

- Minimise variances in the value of the Group's net foreign currency denominated assets by seeking to borrow in the same currency as the asset (natural hedges).

- Manage the foreign exchange impact of long-term investments through net investment hedges.

The overall purpose of hedging is to mitigate risks and achieve a known outcome.

Credit risk

The objective is to ensure treasury transactions are undertaken with creditworthy counterparties and in accordance with approved limits.

The main credit risks arise through the use of different banks across the Group and on the Group's trade receivables. The credit ratings of the banks used within the Group are monitored with a target that no more than 10% of Group cash is held in banks with a rating below BBB (Fitch rating) or equivalent.

Debtor days are reviewed monthly with high balances investigated with management. Average debtor days for the Group at the end of 2012 were 51 (2011: 52).

Cashflow

Reported net debt increased by £2.5m in the year to £8.1m (2011: £5.6m). There were cash inflows from increased bank borrowings of £2.7m and disposal proceeds of £0.2m. Against these were cash outflows on the purchase of minority shares of £3.2m, tax payments of £1.6m, £0.8m on net interest costs and dividends of £0.6m, of which £0.2m was paid to Group shareholders. There was also an investment in working capital and cash spend on restructuring costs.

Acquisitions and disposals

During the year, the Group made a number of acquisitions of shares in subsidiaries held by minority shareholders, as summarised below:

- In January 2012, 14.5% of the shares in Bar 2 Limited for cash consideration of £0.3m taking the Group ownership to 85.5%.

- In March 2012, 6.7% of the shares in Empresaria Holding Deutschland GmbH (the holding company for the Headway operating companies) were acquired for cash consideration of €1.3m and the terms of the existing call options were extended to be exercisable in the period to 31 January 2014. Subsequently the Group agreed to a final settlement for the remaining 13.33% of shares for cash consideration of €2.2m, with €1.1m payable on completion and two tranches of €550,000 payable before 31 December 2012 and 31 March 2013 respectively. This represents full consideration for the shares and is not subject to adjustment for any changes in the CGZP liability. The consideration amount also includes the loss of dividend rights by the minority shareholder.

- In July 2012, the final 5.7% of the minority shares in FastTrack Management Services (London) Limited for a total cash consideration of up to £282,000, with an initial consideration of £254,000 and a deferred consideration of up to £28,000, payable in 2013 and contingent on certain performance criteria being met.

- In August 2012, the Group announced the purchase of 26.7% of shares in the MediradiX companies for cash consideration of €0.1m. The Group now holds 86.7% of the shares of both these companies.

The Group received £0.2m in deferred consideration from the disposals made in 2011 of the supply chain business in the UK and Advanced Career Indonesia in Indonesia.

Balance sheet

The Group's net assets as at 31 December 2012 were £24.0m (2011: £27.6m). A summarised balance sheet is provided below:

	2012	2011 Restated	Movement
	£m	£m	£m
Goodwill & intangibles	26.6	27.3	(0.7)
Property, plant & equipment	1.3	1.7	(0.4)
Other fixed assets	1.2	1.8	(0.6)
Trade and other receivables	27.4	30.3	(2.9)
Net borrowings	(8.1)	(5.6)	(2.5)
Trade payables and other current liabilities	(23.5)	(27.1)	3.6
Deferred tax liability	(0.9)	(0.8)	(0.1)
Net assets	24.0	27.6	(3.6)

Share capital and premium	21.6	21.6	0.0
Equity reserve	(6.1)	(2.4)	(3.7)
Other reserves & retained earnings	5.1	4.9	0.2
Equity attributable to the owners of the company	20.6	24.1	(3.5)
Minority interests	3.4	3.5	(0.1)
Total equity	24.0	27.6	(3.6)

Post balance sheet events

On 28 January 2013, the Group announced the acquisition of 10% of the shares in Skill House Staffing Solutions KK, a Japanese company specialising in placing IT professionals, for cash consideration of £0.45m. This takes the Group's ownership to 100%.

Prior year adjustment

The Group is presenting restated prior year balance sheets. As part of our periodic balance sheet review the Group has identified some erroneous debit balances against certain accruals which have now been corrected. The amount of the restatement is £0.6m which is applied against the equity at the year ended 31 December 2008.

Going concern

The Board has undertaken a recent and thorough review of the Group's budget, forecasts and associated risks and sensitivities. Despite the uncertainty in the economy and its inherent risk and impact on the business, the Board has concluded, given the level of borrowings and bank facilities, that the Group is expected to be able to continue in operational existence for the foreseeable future, being a period of at least twelve months from the date of approval of the accounts. As a result, the going concern basis continues to be appropriate in preparing the financial statements.

Consolidated income statement

		2012	2011
	Note	£m	£m
Continuing operations
Revenue	2	194.3	208.9
Cost of sales		(150.4)	(162.0)

Gross profit	2	43.9	46.9
Administrative costs		(38.5)	(41.6)
Operating profit before exceptional items and intangible amortisation		5.4	5.3

Exceptional items	3	(0.7)	(2.2)
Intangible amortisation		(0.3)	(0.3)
Operating profit	2	4.4	2.8
Finance income	4	0.1	0.6
Finance costs	4	(0.9)	(1.5)
Profit before tax		3.6	1.9
Income tax	5	(1.7)	(1.1)
Profit for the period from continuing operations		1.9	0.8

Discontinued operations
Loss for the period from discontinued operations		-	(0.4)

Profit for the year		1.9	0.4

Attributable to:
Equity holders of the parent		1.4	(0.1)
Non-controlling interest		0.5	0.5
		1.9	0.4

Earnings/(loss) per share :

From continuing operations
Basic and diluted (pence)	7	3.0	0.6
Adjusted (pence)	7	5.0	4.1

From continuing and discontinued operations
Basic and diluted (pence)	7	3.0	(0.4)
Adjusted (pence)	7	5.0	4.0

Consolidated statement of comprehensive income

	2012	2011
	£m	£m

Exchange differences on translation of foreign operations	(1.0)	(1.0)
Net expense recognised directly in equity	(1.0)	(1.0)
Profit for the year	1.9	0.4
Total comprehensive income / (expense) for the year	0.9	(0.6)

Attributable to:
Equity holders of the parent	0.4	(0.9)
Non-controlling interest	0.5	0.3
	0.9	(0.6)

Consolidated balance sheet

		2012	2011	2010
	Note	£m	£m	£m
ASSETS			Restated	Restated
Non-current assets
Property, plant and equipment		1.3	1.7	1.9
Goodwill	8	24.8	25.1	26.4
Other intangible assets		1.8	2.2	2.5
Deferred tax assets		1.2	1.5	1.0
Call option asset		-	0.3	0.9
		29.1	30.8	32.7

Current assets
Trade and other receivables		27.4	30.3	31.0
Cash and cash equivalents		6.2	6.0	7.1
		33.6	36.3	38.1
Total assets		62.7	67.1	70.8

LIABILITIES
Current liabilities
Trade and other payables		21.8	25.1	25.6
Current tax liabilities		1.7	2.0	1.8
Borrowings	9	6.4	3.0	12.7
Put option liability		-	-	1.0
		29.9	30.1	41.1

Non-current liabilities
Borrowings	9	7.9	8.6	0.5
Deferred tax liabilities		0.9	0.8	0.6
Total non-current liabilities		8.8	9.4	1.1
Total liabilities		38.7	39.5	42.2
Net assets		24.0	27.6	28.6

EQUITY
Share capital		2.2	2.2	2.2
Share premium account		19.4	19.4	19.4
Merger reserve		1.5	1.5	1.5
Retranslation reserve		3.3	4.0	4.1
Option reserve		-	0.8	(0.6)
Equity reserve		(6.1)	(2.4)	(1.9)
Other reserves		(1.3)	(1.1)	(0.6)
Retained earnings		1.6	(0.3)	0.9
Equity attributable to owners of the Company		20.6	24.1	25.0
Non-controlling interest		3.4	3.5	3.6
Total equity		24.0	27.6	28.6

Consolidated statement of changes in equity

	Share capital	Share premium account	Merger reserve	Retranslation reserve	Option reserve	Equity reserve	Other reserves	Retained earnings Restated	Non-controlling interest	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Balance at 31 December 2009	2.2	19.4	1.5	3.9	(0.6)	-	(0.7)	(2.1)	2.7	26.3

Profit for the year	-	-	-	-	-	-	-	3.1	1.5	4.6
Dividend	-	-	-	-	-	-	-	(0.2)	-	(0.2)
Currency translation differences	-	-	-	0.2	-	-	0.1	-	0.3	0.6
Disposal of subsidiary	-	-	-	-	-	-	-	-	0.1	0.1
Non-controlling interest acquired during the year	-	-	-	-	-	(1.9)	-	-	(0.1)	(2.0)
Dividend paid to non-controlling interest	-	-	-	-	-	-	-	-	(0.9)	(0.9)

Balance at 31 December 2010	2.2	19.4	1.5	4.1	(0.6)	(1.9)	(0.6)	0.9	3.6	28.6

(Loss)/profit for the year	-	-	-	-	-	-	-	(0.1)	0.5	0.4
Dividend	-	-	-	-	-	-	-	(0.2)	-	(0.2)
Currency translation differences	-	-	-	(0.8)	-	-	-	-	(0.2)	(1.0)
Disposal of subsidiary	-	-	-	0.7	-	-	(0.5)	-	0.1	0.3
Non-controlling interest acquired during the year	-	-	-	-	-	(0.5)	-	-	(0.4)	(0.9)
Movement in put options	-	-	-	-	1.4	-	-	(0.9)	-	0.5
Dividend paid to non-controlling interest	-	-	-	-	-	-	-	-	(0.1)	(0.1)

Balance at 31 December 2011	2.2	19.4	1.5	4.0	0.8	(2.4)	(1.1)	(0.3)	3.5	27.6

Profit for the year	-	-	-	-	-	-	-	1.4	0.5	1.9
Dividend	-	-	-	-	-	-	-	(0.2)	-	(0.2)
Currency translation differences	-	-	-	(0.7)	-	-	(0.3)	-	-	(1.0)
Share based payment	-	-	-	-	-	-	0.1	-	-	0.1
Non-controlling interest acquired during the year	-	-	-	-	-	(3.7)	-	-	(0.2)	(3.9)
Movement in put options	-	-	-	-	(0.8)	-	-	0.7	-	(0.1)
Dividend paid to non-controlling interest	-	-	-	-	-	-	-	-	(0.4)	(0.4)

Balance at 31 December 2012	2.2	19.4	1.5	3.3	-	(6.1)	(1.3)	1.6	3.4	24.0

Equity comprises the following:

· "Share capital" represents the nominal value of equity shares.

· "Share premium account" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

· "Merger reserve" relates to premiums arising on shares issued subject to the provisions of section 612 "Merger relief" of the Companies Act 2006.

· "Retranslation reserve" represents the exchange differences arising from the translation of the financial statements of foreign subsidiaries.

· "Option reserve" relates to the initial recorded value of the liability relating to the put options held by non-controlling interests over the shares in the subsidiary companies net of the initial recorded value of the call options held by the Group over shares held by non-controlling interests.

· "Equity reserve" represents movement in equity due to acquisition of non-controlling interests under IFRS 3 (2008).

· "Other reserves" mainly represents exchange differences on intercompany long-term receivables which are treated as a net investment in foreign operations and the share based payment reserve of £0.1m.

· "Retained earnings" represents accumulated profits less distributions and income/expense recognised in equity from incorporation.

Consolidated cash flow statement

	2012	2011
	£m	£m

Profit for the year	1.9	0.4
Adjustments for:
Depreciation	0.9	0.8
Intangible amortisation	0.3	0.3
Taxation expense recognised in income statement	1.7	1.1
Exceptional items	0.7	2.2
Loss on business disposal	-	0.4
Cash paid for exceptional items	(1.0)	-
Share based payments	0.1	-
Net finance charge	0.8	0.8
	5.4	6.0

(Decrease) / increase in invoice discounting	(2.9)	1.4
Decrease/(increase) in trade receivables	6.0	(1.9)
Decrease in trade payables	(3.3)	(1.6)

Cash generated from operations	5.2	3.9
Interest paid	(0.9)	(0.9)
Income taxes paid	(1.6)	(1.8)

Net cash from operating activities	2.7	1.2

Cash flows from investing activities
Business disposals	0.2	1.0
Purchase of property, plant and equipment and intangibles	(0.5)	(0.7)
Finance income	0.1	0.1

Net cash used in investing activities	(0.2)	0.4


Cash flows from financing activities
Further shares acquired in existing subsidiaries	(3.2)	(1.3)
Increase / (decrease) in borrowings	1.9	(2.4)
Proceeds from bank loan	1.5	2.4
Repayment of bank and other loan	(1.6)	(1.0)
Dividends paid to shareholders	(0.2)	(0.2)
Dividends paid to non-controlling interest in subsidiaries	(0.4)	(0.1)

Net cash from financing activities	(2.0)	(2.6)


Net increase / (decrease) in cash and cash equivalents	0.5	(1.0)
Effect of foreign exchange rate changes and disposal	(0.3)	(0.1)
Cash and cash equivalents at beginning of the year	6.0	7.1

Cash and cash equivalents at end of the year	6.2	6.0

1 Basis of preparation and general information

The financial information has been abridged from the audited financial information for the year ended 31 December 2012.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011, but is derived from those accounts. Statutory accounts for 2011 have beendelivered to the Registrar of Companies and those for 2012 will be delivered following the Company's Annual General Meeting. The Auditors have reported on those accounts; their reportswere unqualified, did notdraw attention to any matters by way of emphasis without qualifying their reports and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation.

Accounting policies have been consistently applied throughout 2011 and 2012.

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS'), this announcement does not itself contain sufficient financial information to comply with IFRS. The Group will be publishing full financial statements that comply with IFRS in May 2013.

2 Segment analysis

The revenue and profit before taxation are attributable to the Group's one principal activity, the provision of staffing and recruitment services, and is analysed by geographic segment as follows. The Group's reportable segments are business units based in different geographic regions. Each unit is managed separately with local management responsible for determining local strategy.

Information reported to the Group's Chief Executive Officer for the purpose of resource allocation and assessment of segment performance is based on profit or loss from operations before amortisation of intangible assets and exceptional items.

The analysis of the Group's business by geographical origin is set out below:

Year ended 31st December 2012	UK	Continental Europe	Rest of the World	Total
	£m	£m	£m	£m

Revenue	66.5	83.2	44.6	194.3
Gross profit	16.0	15.7	12.2	43.9
Adjusted operating profit*	2.2	1.7	1.5	5.4
Operating profit	2.2	0.8	1.4	4.4

* Adjusted operating profit represents operating profit before exceptional items and intangible amortisation.

Year ended 31st December 2011	UK	Continental Europe	Rest of the World	Total
	£m	£m	£m	£m

Revenue	67.0	102.7	39.2	208.9
Gross profit	16.0	19.7	11.2	46.9
Adjusted operating profit*	2.0	2.2	1.1	5.3
Operating profit	2.0	0.1	0.7	2.8

3 Exceptional items

Exceptional items are those which, in management's judgement, need to be disclosed separately by virtue of their size or incidence in order for the reader to obtain a proper understanding of the financial information.

	2012	2011
	£m	£m

Continental Europe
(Release)/charge against potential retrospective pay claim claims and social security liability in Germany	0.4	(1.7)
Germany restructuring charges	(1.1)	-
Charge for social security in Finland	-	(0.3)
	(0.7)	(2.0)

Rest of the World
Provision for contract dispute in India	-	(0.2)
	-	(0.2)

Total	(0.7)	(2.2)

In Germany the provision for potential claims from temporary workers and social security has reduced from £1.7m to £1.0m with a release of £0.4m and £0.3m utilisation against claims received in the year.

In Germany restructuring costs of £1.1m have been incurred following the decision in the year to close or merge branch offices and terminate staff.

	£m
Losses in respect of office cost and assets	0.5
Staff termination costs	0.6
	1.1

4 Finance income and cost

	2012	2011
	£m	£m
Finance income
Bank interest receivable	0.1	0.1
Movement in put option liability	-	0.5
	0.1	0.6

Finance cost
On amounts payable to invoice discounters	(0.2)	(0.2)
Bank loans and overdrafts	(0.7)	(0.7)
Movement in call option assets	-	(0.6)
	(0.9)	(1.5)

Net finance cost	(0.8)	(0.9)

5 Taxation

	2012	2011
	£m	£m
Current taxation

Current tax	(1.1)	(1.5)
Adjustment to tax charge in respect of previous periods	(0.2)	(0.1)
	(1.3)	(1.6)
Deferred tax	(0.4)	0.5
Total income tax expense in the income statement	(1.7)	(1.1)

6 Reconciliation of Adjusted profit before tax to Profit before tax

	2012	2011
	£m	£m

Profit before tax	3.6	1.9
Amortisation of intangibles	0.3	0.3
Exceptional items	0.7	2.2
Movement in put option liability	-	(0.5)
Movement in call option assets	-	0.6
Adjusted profit before tax	4.6	4.5

7 Earnings per share

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the average number of shares in issue during the year. A reconciliation of the earnings and weighted average number of shares used in the calculations are set out below.

The calculation of the basic and diluted earnings per share is based on the following data:

a) From continuing and discontinued operations	2012	2011
	£m	£m
Earnings
Earnings / (loss) attributable to equity holders of the parent	1.4	(0.1)
Adjustments :
Exceptional items	0.7	2.2
Loss on business disposal	-	0.4
Movement in put option liability	-	(0.5)
Movement in call option asset	-	0.6
Amortisation of intangible assets	0.3	0.3
Tax on exceptional items and intangible amortisation	(0.1)	(0.6)
Non-controlling interest in intangible amortisation and exceptional items	-	(0.5)
Earnings for the purpose of adjusted earnings per share	2.3	1.8

Number of shares	Millions	Millions
Weighted average number of shares - basic	44.6	44.6
Weighted average number of shares - diluted	44.9	44.6

Earnings/(loss) per share	Pence	Pence
Basic	3.0	(0.4)
Adjusted earnings per share	5.0	4.0

b) From continuing operations	2012	2011
	£m	£m
Earnings
Earnings/(loss) attributable to equity holders of the parent	1.4	(0.1)
Adjustments to exclude loss from discontinued operations	-	0.4
Earnings from continuing operations for the purpose of basic and diluted earnings per share	1.4	0.3
Adjustments :
Exceptional items	0.7	2.2
Movement in put option liability	-	(0.5)
Movement in call option asset	-	0.6
Amortisation of intangible assets	0.3	0.3
Tax on exceptional items and intangible amortisation	(0.1)	(0.6)
Non-controlling interest in intangible amortisation and exceptional items	-	(0.5)
Earnings for the purpose of adjusted earnings per share	2.3	1.8

Number of shares	Millions	Millions
Weighted average number of shares - basic	44.6	44.6
Weighted average number of shares - diluted	44.9	44.6

Earnings per share	Pence	Pence
Basic	3.0	0.6
Adjusted earnings per share	5.0	4.1

c) Fully diluted earnings per share

There are 1.2m share options (2011: 1.2m shares options) in issue. The dilution effect of these options was insignificant for the year ended 31 December 2012 and for year ended 31 December 2011.

8 Goodwill

	2012	2011	2010
	£m	£m	£m
At 1 January	25.1	26.4	26.5
Addition / (disposal)	0.2	(0.7)	-
Foreign exchange	(0.5)	(0.6)	(0.1)
At 31 December	24.8	25.1	26.4

Goodwill has been tested for impairment by comparing the carrying amount of each cash-generating unit (CGU) at lowest level of cashflow, including goodwill, with the recoverable amount of that income-generating unit.

The recoverable amount of each cash-generating unit is determined based on the higher of value in use calculations and its fair value less costs to sell. The value in use calculations are based on cash flow projections derived from the Group budget for the year ended 31 December 2013 and growth forecasts extrapolated into perpetuity. The key assumptions for this calculation are in growth rates and discount rates. The growth rates applied are the average five year GDP growth forecast for the relevant country, which ranged from 1.1% to 8.5%. Any growth rate in excess of 5.0% was capped for the purpose of this calculation. A discount rate of 12.5% (2011: 7.2%) has been applied in discounting the projected cash flows, being the estimated industry weighted average cost of capital. The Group's weighted average cost of capital is approximately 6.5%, lower than the industry rate due to the Group's higher gearing.

As part of the impairment review, management has considered the sensitivity of the recoverable amount for each unit to changes in the growth rate and discount rate. This sensitivity analysis showed that the long-term growth rate could reduce to nil without giving rise to an impairment of goodwill and that the discount rate could increase to 18% without giving rise to an impairment of goodwill. Given the restructuring of the German operations in the year, management also ran a sensitivity for Germany, using the 2012 adjusted profit before tax with no future growth. No impairment was indicated. None of these changes in the key assumptions are reasonably expected to occur.

The carrying amount of goodwill has been allocated as follows:

	2012	2011	2010
	£m	£m	£m
Goodwill by region
UK	7.7	7.7	8.1
Continental Europe	13.5	13.6	14.0
Rest of the World	3.6	3.8	4.3
	24.8	25.1	26.4

9 Borrowings

	2012	2011	2010
	£m	£m	£m
Current
Bank overdrafts	3.2	1.3	3.8
Amounts related to invoice financing	1.1	0.2	0.8
Current portion of bank loans	2.1	1.0	8.1
Other loan creditors	-	0.5	-
	6.4	3.0	12.7

Non-current
Bank loans	7.9	8.6	0.5
	7.9	8.6	0.5
Total financial liabilities	14.3	11.6	13.2

The bank loans include a revolving credit facility which expires in 2016, a term loan of £2.2m which expires in 2016 and a term loan of £0.1m which expires in 2013. The bank loans are secured by a first fixed charge over all book and other debts given by the Company and certain of its subsidiaries. Interest rates vary over the term of the loan. In 2012, interest was payable at 2.375% over base rate on the term loans, and 2.0% over LIBOR on the revolving credit facilities.

The interest rate on the UK bank overdrafts (balance at 31 December 2012: £1.2m) was fixed during the year at rates of 2.5% above LIBOR and 2.5% above base rate. Other overdrafts (balance at 31 December 2012: £2.0m) had interest rates of 4.5% and 7.8% during the year.

The amounts above for invoice financing represent with-recourse facilities. The Group also has non-recourse invoice financing which is offset against trade receivables. The total amount at 31 December was £6.4m (2011: £10.1m, 2010: £8.5m).

Movement in net borrowings	2012	2011	2010
	£m	£m	£m
As at 1 January	(5.6)	(6.1)	(8.0)
Net increase / (decrease) in cash and cash equivalents	0.5	(1.1)	2.0
(Increase)/decrease in loans	(1.7)	1.0	(1.0)
(Increase)/decrease in invoice financing	(1.1)	0.2	0.5
On disposal of business	-	0.4	0.3
Currency translation differences	(0.2)	-	0.1
As at 31 December	(8.1)	(5.6)	(6.1)

Analysis of net borrowings	2012	2011	2010
	£m	£m	£m
Financial liabilities - borrowings	(14.3)	(11.6)	(13.2)
Cash and cash equivalents	6.2	6.0	7.1
As at 31 December	(8.1)	(5.6)	(6.1)

10 Dividends

	2012	2011
	£000	£000
Amount recognised as distribution to equity holders in the year:
Final dividend for the year ended 31 December 2011 of 0.35 pence (2010: 0.35 pence) per share	156	156

Proposed final dividend for the year ended 31 December 2012 is 0.35 pence (2011: 0.35 pence) per share	156	156

The proposed dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

11 Prior year restatement

The impact of the restatement on prior year balance sheets is disclosed below:

	Trade and other payables	Retained earnings
	£m	£m
31 December 2009
As previously disclosed	(22.3)	1.5
Adjustment	(0.6)	0.6
Restated	(22.9)	2.1


31 December 2010
As previously disclosed	(25.0)	(1.5)
Adjustment	(0.6)	0.6
Restated	(25.6)	(0.9)


31 December 2011
As previously disclosed	(24.5)	(0.3)
Adjustment	(0.6)	0.6
Restated	(25.1)	0.3