Final Results

Robert Walters PLC 14 February 2001 ROBERT WALTERS plc PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31st December 2000 Robert Walters plc, the specialist recruitment and HR outsourcing business, today announced its preliminary results for the year ended 31st December 2000. FINANCIAL HIGHLIGHTS * Turnover (gross fee income) up 21.5% to £216.8m (1999: £178.5m) * Gross profit (net fee income) up 33.0% to £63.5m (1999: £47.8m) * Operating profit pre-exceptionals up 23.5% to £15.5m (1999: £12.6m) * Profit before tax pre-exceptionals up 27.1% to £15.7m (1999: £12.3m) * Profit before tax up 62.7% to £18.3m (1999: £11.2m) * Earnings per share pre-exceptionals up 31.4% to 12.7p (1999: 9.7p) * Earnings per share up 71.1% to 15.0p (1999: 8.7p) * Dividend of 1.56 pence per share (reflecting six months trading since flotation) CORPORATE HIGHLIGHTS * Successful return to the London Stock Market * Continued delivery of strong organic growth * Increased product offerings across the Group * Resource Solutions, the HR outsourcing business, achieved breakeven in line with plan * Sale of holding in Stepstone ASA for pre-tax profit of £4.1m * Acquisition of The Dunhill Group, a leading Australian recruitment group (see RNS statement) Commenting on the results, Chief Executive Robert Walters said: 'Robert Walters plc has had an exceptionally busy and productive year. In addition to bringing our company back to the London Stock Market we have delivered strong profit growth and have achieved a significant increase in pre-exceptional earnings per share. We have continued to develop our range of product offerings in all key market places and our global footprint now extends across thirteen countries in five continents. 'We have also announced today an agreement for the purchase of The Dunhill Group in Australia. This deal makes us a market leader in Australia, provides a platform for development in the Asia Pacific region and significantly enhances our potential to benefit from cross border candidate flows. I am particularly impressed by the calibre of the Dunhill management team who will be joining the Group.' Daniel Affolter, Chairman, said: 'The key drivers of profitability for the recruitment sector are strong and the major professional labour markets in Europe and the Far East have undergone deregulation. Key service industries are experiencing significant skills shortages, and companies across a range of sectors face competitive pressures to outsource their human resource functions. Robert Walters management has strategically positioned the company by geography, by market segment and product offering to capitalise on these trends. 'At this early stage in the financial year, the Group is trading in line with management expectations. The company possesses dual strength in both contract and permanent recruitment and can accommodate any corresponding shifts in clients' recruiting strategies. Furthermore, the company has a global spread of operations and strength across a broad range of sectors.' For further information please contact: Robert Walters plc +44 20 7379 3333 Robert Walters, Chief Executive / Philippa Brook, Director of Marketing Brunswick +44 20 7404 5959 Patrick Handley / Deborah Done Or visit our website at www.robertwalters.com Chief Executive's Review Robert Walters plc made a successful return to the London Stock Market in July 2000. The business has enjoyed strong growth over the past year, particularly the UK contract business and our Asian operation. In 2000 turnover (gross fee income) increased by 21.5% to £216.8m, gross profit (net fee income) increased by 33% to £63.5m and operating profit (before operating exceptional items) 23.5% to £15.5m. Pre exceptional earnings per share increased by 31.4% to 12.7p. Demand for appropriately qualified and skilled candidates continues to be strong and therefore our ability to source professionals globally gives the Group a major competitive advantage. The demands clients are making are more challenging than ever before but for those companies with the ability and global infrastructure to deliver, significant opportunities are emerging. An example is the increasing number of global partnerships with clients allowing for an efficient and highly integrated client/customer relationship to develop. We have announced that we have reached an agreement to acquire the Dunhill Group in Australia. The acquisition gives us a strong national presence in the key Australian markets and provides enhanced opportunities for cross- border candidate placement. The highly experienced Dunhill management team will remain with the Group following the acquisition. Our increasing international reach, balance of permanent and contract recruitment and a rapidly growing outsourcing division, places us in an enviable position to capitalise on the continuing skills shortages in the global professional recruitment market. Operating Review During 2000 we have continued our strategy of growing the Robert Walters' business globally. Our activities are split into 2 areas - specialist recruitment and human resources outsourcing and consultancy. UK Permanent Recruitment Our permanent recruitment business activities continue to expand and we believe our market share is increasing. The recent mergers and reorganisation in the financial sector has created opportunities for us in the London banking markets. The shortage of quality candidates in some areas has also seen salary packages increase substantially. Contract Our contract business continues to grow. In a market short of skills our global network of offices allows us to effectively source and place top quality candidates. The demand for quality professionals to fulfil project based roles remains very strong and we continue to strive to be the employer of first choice for candidates. Earlier in the year we started an Interim Management business focusing on the top end of the market and this division is experiencing strong demand from our established client base. Information Technology This business area increased its net fee income substantially. During this period the market shifted from a demand for contract staff to a demand for permanent staff. Our business was able to react quickly to this market shift which led to a strong performance from our specialist clients as well as the more traditional corporates and investment banks. Towards the end of the year, we established an IT business in our Reading office which has commenced trading strongly. Australia and New Zealand This region continues to play a very significant role in the sourcing of candidates into Europe and Asia and placing the returning candidates back into Australia and New Zealand. We had a strong year in the finance and accountancy business but our IT business underperformed. Following restructuring we strongly believe the business is in an excellent position for future growth. Other International This year has seen the continued growth and development of our international network. We have successfully developed our recently opened offices in Tokyo and Paris, and continued to expand our service offerings to clients in many of our other offices. In The Netherlands, Belgium and New York, we have established Interim Management and contract businesses. Resource Solutions During 2000, Resource Solutions broke even in line with plan and continued to grow on a global basis, covering new industry sectors and establishing more consultancy service products. The brand is now firmly established in the UK, USA, Japan, Australia, New Zealand and Hong Kong delivering a broad range of HR solutions. We have also carried out consultancy work on behalf of clients in Belgium, Germany, Ireland, Korea, Singapore and Taiwan. Technology Update Towards the end of 2000, Robert Walters completed the full specification and design phases of an entire redevelopment of its recruitment operations and back office systems. The outcome of this project will be to roll out a global database, linking our front to back office processes across our network of offices. The system build phase is now well underway and we expect to begin implementation in Q4 of 2001. Traffic to www.robertwalters.com has grown significantly throughout the year, from 14,800 visits in December 1999 to 45,700 visits in December 2000. The launch of client microsites in 2000 enabled Robert Walters to offer a complete online solution to clients, providing high profile branding and an online database, tailored to each clients requirements. Financial Review Turnover Turnover for the Group is the total income from the placement of permanent and contract staff and therefore includes the employment costs of contract candidates and the value of advertising as invoiced to clients. It also includes the outsourcing and consultancy fees charged by Resource Solutions to its clients. Turnover for the year increased 21.5% in 2000 to £216.8m from £178.5 in 1999. Turnover grew steadily through the year - 57.7% of turnover in 2000 was in the six months ended 31 December 2000 (51.9% of turnover in 1999 was in the six months ended 31 December 1999). The turnover for the Group's offices outside of the UK grew by 43.5% to £58.1m (1999: £40.5m). Turnover benefited from a full year of trading in the Tokyo and Paris offices and from the Singapore and New York offices which had strong year on year growth. Gross Profit Gross profit is the total placement fees of permanent candidates, the margin earned on the placement of contract candidates and advertising income. It also reflects the outsourcing and consultancy margin earned in Resource Solutions. Gross profit for the year increased by 33% to £63.5m (1999: £47.8m). All areas of the business experienced growth in gross profit (net fee income) with the Asian operation showing a particularly strong increase combined with the opening of the Tokyo office. The gross margin improved from 26.8% in 1999 to 29.3% in 2000, reflecting the faster growth in the permanent recruitment businesses together with the impact of new offices in Tokyo and Paris in 2000 whose businesses are 100% permanent recruitment. Operating Profit Administration expenses (before operating exceptional items) in the year of £48m were 75.6% of gross margin compared to 73.7% in 1999. This increase was created by a hiring initiative in the middle of the year to take advantage of the higher profile of the Group post flotation and to increase fee earning potential in the later half of 2000 and 2001. Operating profit before operating exceptional items increased by 23.5% to £15.5m (1999 : £12.6m). Operating profit after operating exceptional items for the year increased by 22.6% to £14.0m (1999 : £11.5m). Operating exceptional items in 2000 were £1.5m and related to charges for a comprehensive IT strategy review that took place across the Group during the year. This review concluded that our systems required a major upgrade both to accommodate the global nature of the business and to provide the benefits of latest technology. To this end a new system and global database will be rolled out from late 2001 through to early 2002. The total cost over the two year period for implementation is expected to be £6m most of which will be capital expenditure. In the later part of the year, the company entered into a new property lease in order to consolidate its UK operations and expand capacity in London by nearly a third. Disposals The Group made a gain of £4.1m on the disposal of a 0.99% investment in Stepstone ASA. Proceeds from the sale amounted to £5.2m. Taxation The effective rate of tax on profits on ordinary activities for the year fell from 35.9% in 1999 to 33.5%. This reduction was due to: * a decrease in the average rate of UK tax from 30.25% to 30% during the year. * the gain on the sale of the holding in Stepstone ASA which was taxed at 30%. * a Groupwide reduction in non-allowable entertaining costs. Earnings and Returns to Shareholders Earnings per share have increased by 71.1% to 15.0 pence per ordinary share (1999 pro forma equivalent : 8.7 pence). The weighted average number of shares in issue was 81,137,816. Fully diluted earnings per share were 13.2 pence in 2000 based on 91,781,676 shares which include all exercisable options. A net dividend of 1.56p per ordinary share has been proposed by the Directors and is in line with the dividend policy outlined in the prospectus dated 20 June 2000. It represents 50% of the total dividend that would have been paid had the shares been listed throughout the year 2000. The dividend will be paid on 31 May 2001 to those shareholders on the companies' register on 19 April 2001. Balance Sheet The Group had net assets of £35.8m at 31 December 2000 (1999: £12.1m). The following accounted for this increase: * the reduction in borrowings and amounts owing related to the previous parent company which were forgiven as part of the flotation in July 2000. This reduction increased net assets by £9.1m and represented borrowings of the parent company which were held in the books of Robert Walters plc * the issue of 2.3m ordinary shares issued by the company raised £3.8m and * the £10.7m of retained earnings for the year. Cashflow and Net Cash Position At 31 December 2000 the Group had cash balances of £9.8m (1999: £4.0m). Cashflow from operating activities in 2000 was £7.3m (1999: £10.3m). During the year the Group raised: * £3.8m as a result of the IPO in July * £5.2m from the sale of its 0.99% holding in Stepstone ASA The funds raised are for financing continued investment in the development of the Group's IT strategy and further possible acquisitions. The Group acquired 1,301,328 shares in Robert Walters plc at a cost of £2,565k. These were purchased to hedge against future employers national insurance liabilities arising on the exercise of options. The proposed ordinary dividend of 1.56p per share , will if approved, result in a cash outflow of £1,284k (£1,427k including tax). Surplus cash balances are invested in sterling at short-term fixed rates to give the Group flexibility in its cash management . As a result of the increased volume of international business the importance of foreign currency management has increased. The Group treasury function has hedged against future exchange movements in cash payments and remittances using forward options and other financial instruments. Acquisitions On 14th February 2001 the Group entered into an agreement to acquire 100% of the Dunhill Group ('Dunhill'). Dunhill is a leading provider of recruitment services in Australia to a diverse range of industry sectors and clients including large financial institutions and blue chip commercial companies. Dunhill operates from eight offices throughout Australia with the largest operations based in Sydney, Melbourne and Brisbane. For the financial year ended 31 December 2000, Dunhill reported consolidated pre- tax profits of A$4.3 million (£1.6 million). Net assets acquired on completion are expected to have a book value of A$1.7 million (£0.6 million). The Group has agreed to acquire Dunhill for an initial consideration of A$21.9 million (£8.2 million), payable on completion and satisfied 52.5% by existing cash resources and 47.5% by the issue of new Robert Walters plc ordinary shares. Deferred consideration of up to A$13.2m (£5.0m) is payable in March 2002 dependent upon the performance of the Dunhill Group in 2001. 52.5% of the deferred consideration will be satisfied by a cash payment and 47.5% by an issue of new Robert Walters plc ordinary shares. The acquisition is expected to be completed by the end of March 2001. Acquisition costs are expected to be £0.4m. Consultants and Employees The number of employees of the Group (including Executive Directors) as at 31 December 2000 was 823 (1999: 620). This 32.7% increase in the headcount during the year has come from our continued expansion in UK IT and Commerce staff, our Asian offices and the growth of Resource Solutions, our human resources outsourcing and consultancy services division. Consolidated Profit and Loss Account For the year ended 31 December 2000 Notes Year ended Year ended 31 December 31 December 2000 1999 £'000 £'000 Turnover 2 216,786 178,490 Direct costs (153,267) (130,728) __________ ____________ Gross profit 63,519 47,762 Administrative expenses (49,475) (36,310) __________ __________ Operating profit Before operating exceptional items 15,506 12,552 Operating exceptional items (1,462) (1,100) 14,044 11,452 Profit on disposal of investment 4,056 - __________ __________ Profit on ordinary activities before 18,100 11,452 finance charges Finance charges (net) 152 (233) __________ __________ Profit on ordinary activities before 18,252 11,219 taxation Taxation (6,120) (4,026) __________ __________ Profit on ordinary activities after 12,132 7,193 taxation Dividends paid and proposed 3 (1,427) 0 __________ __________ Retained profit for the year 10,705 7,193 ========= ========== Basic earnings per share (pence) 4 15.0 8.7 ========= ========== Diluted earnings per share (pence) 4 13.2 8.7 ========= ========== Consolidated Statement of Total Recognised Gains and Losses For the year ended 31 December 2000 Year ended Year ended 31 December 31 December 2000 1999 £'000 £'000 Profit for the year 10,705 7,193 Gain (loss) on foreign currency translation 157 (129) _________ __________ Total recognised gains for the year 10,862 7,064 ========= ========== Consolidated Balance Sheets 31 December 2000 Year ended Year ended 31 December 31 December 2000 1999 £'000 £'000 Fixed assets Tangible assets 3,618 2,311 Investments 103 731 Own shares held 2,565 - __________ __________ 6,286 3,042 __________ __________ Current assets Debtors 43,304 32,455 Cash at bank and in hand 9,813 3,987 __________ __________ 53,117 36,442 Creditors: Amounts falling due within one (23,125) (27,121) year __________ __________ Net current assets 29,992 9,321 __________ __________ Total assets less current liabilities 36,278 12,363 Creditors: Amounts falling due after more - (7) than one year Provisions for liabilities and charges (455) (252) __________ __________ Net assets 35,823 12,104 ========= ========== Capital and reserves Called-up share capital 16,460 16,000 Share premium 79,757 67,391 Merger reserve (83,379) (83,379) Capital contribution 44 13 Capital reserves 9,301 9,301 Other reserves (423) (580) Profit and loss account 14,063 3,358 __________ __________ Equity shareholders' funds 35,823 12,104 ========= ========== Consolidated Cashflow Statements For the year ended 31 December 2000 Notes Year ended Year ended 31 December 31 December 2000 1999 £'000 £'000 Net cash inflow from operating 5 7,273 10,253 activities Returns on investments and servicing 5 151 (233) of finance Taxation (5,159) (5,229) Capital expenditure and financial 5 (5,087) (777) investment Acquisitions and disposals 5 4,917 (1,650) Equity dividends paid - (8,009) _________ __________ Cash inflow (outflow) before 5 2,095 (5,645) financing Financing 3,743 3,916 _________ __________ Increase (decrease) in cash in the 5,838 (1,729) year ========= ========== Notes to the accounts: The financial information included within the preliminary announcement does not comprise the company's statutory accounts for the year ended 31 December 2000, which have not yet been filed with the registrar of companies and in relation to which the auditors' report has not yet been signed. The comparatives have been compiled as described in the Basis of compilation note. Statutory accounts for the year ended 31 December 1999 for Robert Walters Operations Limited on which the auditors gave an unqualified report, have been delivered to the registrar of companies. The preliminary announcement was approved by the Board of Directors on 13 February 2001. 1. Basis of compilation The Company was incorporated on 24 March 2000 and subsequently acquired SAI Holdings BV and Robert Walters Operations Limited by way of share for share exchange. This reorganisation qualifies as a group reconstruction under Financial Reporting Standard 6 'Acquisitions and Mergers'. Accordingly for the purposes of this financial information the principles of merger accounting have been applied and SAI Holdings BV and Robert Walters Operations Limited have been accounted for as if they had been in this group relationship throughout the period covered by this financial information. There have been no changes to the accounting policies as set out in the 1999 accounts of Robert Walters Operations Limited. 2. Segmental information Turnover for the Group is derived from the continuing principal activity of the placing of permanent and contract professional staff and is exclusive of VAT. The directors believe there to be only one class of business throughout the years. Geographical analysis by origin is as follows: 2000 Turnover Profit Before Net operating Tax assets £'000 £'000 £'000 United Kingdom 158,639 12,620 26,778 Australia and New Zealand 39,237 1,843 2,746 Other International 18,910 3,789 6,299 _______ _______ _______ 216,786 18,252 35,823 ====== ====== ====== 1999 Turnover Profit Before Net operating Tax assets £'000 £'000 £'000 United Kingdom 137,961 7,141 10,586 Australia and New Zealand 31,478 1,878 3,422 Other International 9,051 2,200 3,864 _______ _______ _______ 178,490 11,219 17,872 ====== ====== ====== The 1999 net operating assets reconciles to the balance sheet when the short term loan of £5,768,000 is included. The analysis by turnover by destination is not materially different to the analysis by origin. 3. Equity dividends 2000 1999 £'000 £'000 Proposed dividend of 1.73p gross (1999 - 0p) 1,427 0 per ordinary share ======== ========= 4. Earnings per share The calculation of earnings per ordinary share is based on the profit on ordinary activities after taxation for the financial year and the weighted average number of ordinary shares of Robert Walters plc. Basic Diluted 2000 1999 2000 1999 £'000 £'000 £'000 £'000 Profit for the financial year 12,132 7,193 12,132 7,193 2000 1999 Number of Number of Shares Shares Weighted average number of shares: Shares in issue 82,300,000 82,300,000 Own shares held (1,162,184) - ___________ ___________ For basic earnings per share 81,137,816 82,300,000 Outstanding share options 10,643,860 - ___________ ___________ For diluted earnings per share 91,781,676 82,300,000 ========== ========== 5. Cash Flow 2000 1999 £'000 £'000 Reconciliation of operating profit to net cash flow from operating activities Operating profit 14,046 11,452 Depreciation charges 1,217 968 (Gain) loss on disposal of tangible fixed (14) 168 assets Increase in debtors (10,811) (1,006) Increase (decrease) in creditors 2,835 (1,329) __________ _________ Net cash inflow from operating activities 7,273 10,253 ========= ========= Returns on investments and servicing of finance Interest received 267 123 Interest paid (116) (353) Interest element of hire purchase contracts - (3) repayment __________ _________ Net cash inflow 151 (233) __________ _________ Capital expenditure Payments to acquire tangible fixed assets (2,555) (777) Receipts from sales of tangible fixed assets 33 - Payment to acquire own shares (2,565) __________ _________ Net cash outflow (5,087) (777) __________ _________ Acquisitions and disposals Investment in fixed asset investment (243) (711) Purchase of subsidiary undertaking - (939) Sale of fixed asset investment 5,160 __________ _________ Net cash inflow 4,917 (1,650) __________ _________ Financing Issue of ordinary share capital 3,753 229 Increase in short term borrowings - 3,729 Capital element of finance lease payments (10) (42) __________ _________ Net cash inflow 3,743 3,916 ========= ========= Analysis and reconciliation of net debt At 1 Cash Non cash Exchange At 31 January flows flow movement December 2000 on cash 2000 £'000 £'000 £'000 £'000 £'000 Cash at bank and 3,987 5,838 - (12) 9,813 in hand Hire purchase (10) 10 - - - contracts Short term (5,768) 5,768 - - borrowings Loan from (4,017) 666 3,351 - - Staffmark ________ ________ ________ ________ ________ Closing net debt (5,808) 6,514 9,119 (12) 9,813 (restated)* ======== ======== ======== ======== ======== 2000 1999 £'000 £'000 Increase (decrease) in cash 5,838 (1,729) Hire purchase contracts repaid 10 Cash flow from decrease (increase) in debt 666 (5,524) _________ __________ Change in net debt resulting from cash flows 6,514 (7,253) Non cash flows resulting from decrease in debt 9,119 Translation differences (12) (31) _________ __________ Movement in net debt in year 15,621 (7,284) Net (debt) funds at 1 January (5,808) 5,493 _________ __________ Net funds (debt) at 31 December 9,813 (1,791) ========= ========== *The opening net debt has been restated to reflect the £4,017,000 loan with StaffMark becoming a third party loan following the IPO in July 2000. The decrease in net debt includes £9,119,393 of non cash reduction of the StaffMark debt, as part of the group refinancing on the IPO in July 2000. £9,119,393 was assumed by the StaffMark group of companies following the subscription on the 19th June 2000 for 1,521,572 ordinary shares in Robert Walters Operation Ltd at a fair market value.

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