Final Results

RNS Number : 4239O

Robert Walters PLC

06 March 2009

6 MARCH 2009

ROBERT WALTERS PLC

Preliminary Results for the year ended 31 December 2008

ROBERT WALTERS DELIVERS RESULTS IN LINE WITH EXPECTATIONS

FINANCIAL HIGHLIGHTS

Net fee income (gross profit) up 7% to £138.6m (2007: £128.9m).
Profit before taxation down 27% to £18.2m (2007: £24.9m).
Basic earnings per share down 26% to 17.2p (2007: 23.2p).
Final dividend maintained at 3.35p per share, giving a total dividend for the year of 4.75p per share (2007: 4.70p).
Balance sheet remains strong, with £22.2m of net cash as at 31 December 2008 (31 December 2007: £15.6m).
£10.1m of the Company's own shares purchased through share buy-back programme.

OPERATIONAL HIGHLIGHTS

67% of the Group's net fee income now generated from outside of the UK (2007: 62%).
Banking recruitment activity severely impacted by the global financial crisis. Headcount in permanent banking recruitment divisions across the Group reduced by 22% during the year.
Total headcount reduced 7% from 1,687 at the half year to 1,571 at the year end (2007: 1,474).
Continued investment in contract business in Europe and Asia Pacific. Contract represents 35% (2007: 32%) of the Group's recruitment net fee income and provides some hedge against the more cyclical permanent market.

Robert Walters, Chief Executive, commented:

'During the year, we successfully completed a programme of investment in our contract businesses particularly in Europe and Asia Pacific, whilst accelerating headcount reductions in the business areas most affected by the economic downturn.

'The prevailing economic conditions show little sign of improving and in some markets are becoming noticeably more difficult, with net fee income down 21% in the first two months of this year. The Group will continue to react quickly to market conditions by adjusting our cost base as necessary and maintaining tight controls over cash management.

'Our strategy is clear: to manage the current downturn as effectively as possible, whilst maintaining the breadth of disciplines and geographic coverage, to ensure we are able to take advantage of the inevitable market recovery. The best placed recruitment businesses will be the ones whose brands and balance sheets are strong. The Group entered this downturn as a diverse and global operation with a strong cash position and a highly experienced management team. We believe this leaves us well equipped to meet the challenges ahead.'

ENQUIRIES:

Robert Walters plc	+44 (0) 20 7379 3333
Robert Walters, Chief Executive
Alan Bannatyne, Group Finance Director

Pelham PR
James Henderson	+44 (0) 20 7337 1501
	james.henderson@pelhampr.com

Archie Berens	+44 (0) 20 7337 1509
	archie.berens@pelhampr.com

Robert Walters plc

Preliminary results for the year ended 31 December 2008

Chairman's Statement

Against a backdrop of extremely challenging economic conditions across the globe, I am pleased to report the Group's results for the year ended 31 December 2008. Revenue increased by 5% to £337.3m (2007: £319.8m), generating a 7% increase in gross profit (net fee income) to £138.6m (2007: £128.9m). Operating profit decreased by 29% to £18.6m (2007: £26.1m) whilst profit before taxation fell by 27% to £18.2m (2007: £24.9m). The Group continued to be strongly cash generative, resulting in a net cash position of £22.2m as at 31 December 2008 (2007: £15.6m).

Despite tough market conditions, we have continued to invest in Europe and Asia Pacific. Net fee income from these regions increased by 17%, and 67% of the Group's net fee income is now generated outside of the UK (2007: 62%), which is a testament to the success of our strategy of international growth and diversification. During the first half of the year, we opened new offices in Bangkok and Kowloon and acquired a majority interest in Talent Spotter, a specialist recruitment business in mainland China with offices in Shanghai and Suzhou. The Group now has 37 offices in 16 countries.

The Board is recommending maintaining the final dividend at 3.35p per share (2007: 3.35p), which together with the interim dividend of 1.40p per share represents a total dividend of 4.75p per share (2007: 4.70p). During the year, the Company continued its policy of buying back shares, acquiring 6.3m shares for £10.1m. We will be seeking shareholder consent for the renewal of the authority to repurchase shares of up to 10% of the Group's issued share capital at the Annual General Meeting on 8 May 2009.

Whilst the Group is mindful of the challenges faced during 2009, we remain confident in the strength and resilience of our business across the globe and believe we are well positioned for a return to growth as markets recover.

On behalf of the Board, I would like to thank all of the Group's employees for their continued hard work and dedication.

Philip Aiken

Chairman

5 March 2009

Chief Executive Officer's Statement

Whilst the effects of the financial crisis were largely confined to the world's major financial centres during the first half of 2008, the economic downturn spread rapidly during the second half and impacted on our business more widely.

Both candidate and client confidence has been significantly eroded, resulting in reduced recruitment activity levels and trading across most markets. However, our contract businesses across the globe have remained relatively resilient. Given that the impact of the slowdown has been felt most keenly in the permanent recruitment market, the investment we have made in our contract business has provided some hedge against the cyclical permanent market. Contract now represents 35% of the Group's recruitment net fee income (2007: 32%).

We have reduced headcount significantly in the business areas most severely impacted by the economic downturn, in particular within our permanent banking divisions where headcount has been cut by 22% across the globe. As conditions deteriorated more widely in the second half of the year, total headcount was reduced 7% from 1,687 at the half year to 1,571 at the year end (2007: 1,474).

Asia Pacific (42% of net fee income)

Revenue was £137.1m (2007: £124.1m) and net fee income increased by 11% to £58.1m (2007: £52.1m). Operating profit declined by 22% to £12.3m (2007: £15.9m).

Australia, the largest operation in the Asia Pacific region, was impacted in the second half as a result of both the financial crisis and the reduced demand for mineral resources, whilst New Zealand delivered a moderate increase in net fee income in a tightening market.

We continued to invest in Asia during the first half of the year. In February, we entered mainland China through the acquisition of Talent Spotter, a specialist professional recruitment business with offices in Shanghai and Suzhou. This business is now fully rebranded and integrated. We also grew organically with the opening of new offices in Bangkok and Kowloon at the beginning of the year.

Hong Kong was hit hard by the turmoil in the financial services sector, whilst both Japan and Singapore were resilient until experiencing a marked slowdown in permanent activity in the final quarter. By contrast, the contract businesses in both locations continue to perform well and we see opportunities for future growth. The Kuala Lumpur office performed strongly.

United Kingdom (33% of net fee income)

Revenue was £133.2m (2007: £148.7m) and net fee income decreased by 6% to £45.4m (2007: £48.6m). Operating profit declined by 62% to £1.9m (2007: £5.0m).

The downturn in permanent banking recruitment reported in the first half spread to other permanent recruitment disciplines in the second half of the year, resulting in further headcount reductions to align with activity. However, the streamlining of the management structure in the first half of the year has resulted in improved operational efficiencies and significant cost savings. Our London contract business remained more resilient, whilst the UK's regional offices delivered strong net fee income and operating profit growth.

Resource Solutions, our recruitment process outsourcing business built on a strong first half and continued to win new business and deliver additional services to existing clients.

Europe (24% of net fee income)

Revenue was £64.9m (2007: £44.4m) and net fee income increased by 28% to £33.0m (2007: £25.8m). Operating profit declined by 12% to £4.5m (2007: £5.1m).

Europe, our fastest growing region, continued to deliver strong net fee income growth in the first half of the year, particularly in France and The Netherlands. We opened a new office in Strasbourg whilst our Eindhoven and Rotterdam offices carried their strong first half performances through to the second half of the year.

Walters Interim, our junior contract business, delivered impressive returns across both France and Belgium and was launched into The Netherlands during the second half of the year.

Our business in Ireland, which derives a large proportion of its business from the financial services sector, was hit hard by the financial crisis and underperformed. Spain continues to experience extremely difficult trading conditions.

USA and South Africa (1% of net fee income)

Revenue was £2.1m (2007: £2.5m) and net fee income decreased by 13% to £2.1m (2007: £2.4m) delivering an operating loss of £0.1m (2007: profit of £0.1m).

Our small New York office experienced extremely difficult trading conditions. South Africa continues to grow from a low base.

General overview

The prevailing economic conditions show little sign of improving and in some markets are becoming noticeably more difficult, with net fee income down 21% in the first two months of this year. The Group will continue to react quickly to market conditions by adjusting our cost base as necessary and maintaining tight controls over cash management.

Our strategy is clear: to manage the current downturn as effectively as possible, whilst maintaining the breadth of disciplines and geographic coverage, to ensure we are able to take advantage of the inevitable market recovery. The best placed recruitment businesses will be the ones whose brands and balance sheets are strong. The Group entered this downturn as a diverse and global operation with a strong cash position and a highly experienced management team. We believe this leaves us well equipped to meet the challenges ahead.

Robert Walters
Chief Executive

5 March 2009

Consolidated Income Statement

FOR THE YEAR ENDED 31 DECEMBER 2008

	2008	2007
	£'000	£'000
Revenue
Continuing operations	337,311	319,795
Cost of sales	(198,726)	(190,865)
Gross profit	138,585	128,930
Administrative expenses	(119,943)	(102,815)
Operating profit	18,642	26,115
Finance income	530	332
Finance costs	(821)	(831)
Loss on foreign exchange	(169)	(675)
Profit before taxation	18,182	24,941
Taxation	(5,967)	(7,518)
Profit for the year	12,215	17,423

Attributable to:
Equity holders of the parent	12,242	17,423
Minority interest	(27)	-
	12,215	17,423

Earnings per share (pence):
Basic	17.2	23.2
Diluted	16.6	21.8

Consolidated Statement of Recognised Income and Expense

FOR THE YEAR ENDED 31 DECEMBER 2008

	2008	2007
	£'000	£'000
Profit for the year	12,215	17,423
Exchange differences on translation of overseas operations	8,480	1,916
Total recognised income and expense for the year	20,695	19,339

Attributable to:
Equity holders of the parent	20,722	19,339
Minority interest	(27)	-
	20,695	19,399

Consolidated Balance Sheet

AS AT 31 DECEMBER 2008


	2008	2007
	£'000	£'000
Non-current assets
Intangible assets	9,638	7,822
Property, plant and equipment	6,228	4,745
Deferred tax assets	2,771	3,749
	18,637	16,316
Current assets
Trade and other receivables	68,419	69,742
Corporation tax receivables	579	1,429
Cash and cash equivalents	28,525	23,953
	97,523	95,124
Total assets	116,160	111,440

Current liabilities
Trade and other payables	(47,618)	(47,763)
Corporation tax liabilities	(2,031)	(4,937)
Bank loans	(4,822)	(4,640)
	(54,471)	(57,340)
Net current assets	43,052	37,784

Non-current liabilities
Bank loans	(1,532)	(3,718)
Deferred tax liabilities	(502)	(683)
	(2,034)	(4,401)
Total liabilities	(56,505)	(61,741)
Net assets	59,655	49,699

Equity
Called-up share capital	17,034	17,086
Share premium account	20,586	40,553
Other reserves	(73,410)	(73,470)
Own shares held	(9,834)	(1,073)
Treasury shares held	(18,865)	(18,865)
Foreign exchange reserves	8,918	438
Retained earnings	115,226	85,030
Equity attributable to equity holders of the parent	59,655	49,699
Minority interest	-	-
Total equity	59,655	49,699

Consolidated Cash Flow Statement

FOR THE YEAR ENDED 31 DECEMBER 2008

	2008	2007
	£'000	£'000
Cash generated from operating activities	29,549	30,372

Income taxes paid	(9,102)	(6,616)
Net cash from operating activities	20,447	23,756

Investing activities
Acquisition of subsidiary (net of cash acquired)	(237)	-
Interest paid	(348)	(499)
Purchases of computer software	(1,677)	(697)
Purchases of property, plant and equipment	(2,438)	(2,087)
Proceeds on disposal of property, plant and equipment	132	284
Net cash used in investing activities	(4,568)	(2,999)

Financing activities
Equity dividends paid	(3,303)	(3,139)
Proceeds from issue of equity	41	3,216
Proceeds from bank loans	3,028	-
Repayment of bank loans	(6,814)	(4,671)
Purchase of treasury and own shares	(9,658)	(4,092)
Shares purchased for cancellation	(401)	(8,742)
Net cash used in financing activities	(17,107)	(17,428)
Net (decrease) increase in cash and cash equivalents	(1,228)	3,329

Cash and cash equivalents at beginning of year	23,953	19,584
Effect of foreign exchange rate changes	5,800	1,040
Cash and cash equivalents at end of year	28,525	23,953

Statement of Accounting Policies

FOR THE YEAR ENDED 31 DECEMBER 2008

Basis of preparation

The financial report for the year ended 31 December 2008 has been prepared in accordance with the historical cost convention and with International Financial Reporting Standards, including International Accounting Standards and Interpretations (IFRSs) as adopted for use by the European Union, though this announcement does not itself contain sufficient information to comply with IFRSs.

The current economic conditions are expected to impact on demand for our services in the short term. In addition, liquidity pressure on both our clients and suppliers could also have an adverse impact on the business. However, the Group has considerable financial resources including £22.2m of net cash at 31 December 2008 together with a diverse range of clients and suppliers across different geographic locations and sectors. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the Directors have formed a judgement, at the time of approving the accounts, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the accounts.

The financial information in this announcement, which was approved by the Board of Directors on 5 March 2009, does not constitute the Company's statutory accounts for the year ended 31 December 2008 but is derived from these accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

The Annual General Meeting of Robert Walters plc will be held on 8 May 2009 at 55 Strand, London WC2N 5WR.

1.	Segmental information
		2008	2007
		£'000	£'000
i)	Revenue:
	Asia Pacific	137,092	124,132
	UK	133,213	148,746
	Europe	64,884	44,439
	USA and South Africa	2,122	2,478
		337,311	319,795

ii)	Gross profit:
	Asia Pacific	58,053	52,114
	UK	45,448	48,594
	Europe	32,969	25,790
	USA and South Africa	2,115	2,432
		138,585	128,930

1.	Segmental information (continued)
		2008	2007
		£'000	£'000
iii)	Profit before taxation:
	Asia Pacific	12,345	15,926
	UK	1,894	4,997
	Europe	4,508	5,096
	USA and South Africa	(105)	96
	Operating profit	18,642	26,115
	Net finance costs	(460)	(1,174)
	Profit before taxation	18,182	24,941

iv)	Net Assets:
	Asia Pacific	14,983	25,902
	UK	11,324	1,702
	Europe	10,781	7,262
	USA and South Africa	(421)	(322)
	Unallocated corporate assets and liabilities	22,988	15,155
		59,655	49,699

The analysis of revenue by destination is not materially different to the analysis by origin. The Group is divided into geographical areas for management purposes, and it is on this basis that the primary segmental information has been prepared.

1.	Segmental information (continued)

v)	Other information - 2008:	Fixed asset additions	Depreciation and amortisation	Assets	Liabilities
		£'000	£'000	£'000	£'000
	Asia Pacific	1,537	967	30,374	(15,391)
	UK	2,352	1,655	35,255	(23,930)
	Europe	248	266	24,369	(13,588)
	USA and South Africa	24	27	394	(815)
	Unallocated corporate assets and liabilities	-	-	31,875	(8,888)
		4,161	2,915	122,267	(62,612)

	Other information - 2007:	Fixed asset additions	Depreciation and amortisation	Assets	Liabilities
		£'000	£'000	£'000	£'000
	Asia Pacific	927	512	39,402	(13,500)
	UK	1,313	1,253	39,839	(38,137)
	Europe	443	194	17,941	(10,679)
	USA and South Africa	38	23	300	(622)
	Unallocated corporate assets and liabilities	-	-	29,131	(13,976)
		2,721	1,982	126,613	(76,914)

For the purposes of segmental information, unallocated corporate assets and liabilities include cash, bank loans and corporate and deferred tax balances.

1.	Segmental information (continued)
		2008		2007
		£'000		£'000
vi)	Revenue by business grouping:
	Robert Walters	312,758		303,431
	Resource Solutions (recruitment process outsourcing)	24,553		16,364
		337,311		319,795

vii)	Carrying value of assets:
	Robert Walters		68,800	77,984
	Resource Solutions		20,092	19,498
	Unallocated corporate assets		31,875	29,131
			120,767	126,613

viii)	Additions to fixed assets:
	Robert Walters		4,040	2,548
	Resource Solutions		121	173
			4,161	2,721

For the purposes of segmental information, unallocated corporate assets and liabilities include cash, bank loans and corporate deferred tax balances

2.	Finance costs
		2008	2007
		£'000	£'000
	Interest on bank overdraft	162	195
	Interest on long-term loans	360	560
	Other	299	76
		821	831

3.	Taxation
		2008	2007
		£'000	£'000
	Current tax charge
	Corporation tax - UK	19	1,236
	Corporation tax - Overseas	6,225	6,904

	Adjustments in respect of prior years
	Corporation tax - UK	(310)	(6)
	Corporation tax - Overseas	283	71
		6,217	8,205
	Deferred tax
	Deferred tax - UK	(390)	251
	Deferred tax - Overseas	347	(938)

	Adjustments in respect of prior years
	Deferred tax - Overseas	(207)	-
		(250)	(687)
	Total tax charge for the year	5,967	7,518

	UK corporation tax has been charged at 28.5% (2007: 30%)

	Profit before taxation	18,182	24,941

	Tax at standard UK corporation tax rate of 28.5% (2007: 30%)	5,182	7,482
	Effects of:
	(Relieved) unrelieved losses	(151)	-
	Reduction in withholding tax on foreign earnings	-	(521)
	Other expenses not deductible for tax purposes	759	590
	Overseas earnings taxed at different rates	411	(98)
	Adjustments to tax charges in previous years	(234)	65
	Total tax charge for the year	5,967	7,518

4.	Dividends
		2008	2007
		£'000	£'000
	Amounts recognised as distributions to equity holders in the year:
	Interim dividend paid of 1.40p per share (2007 1.35p)	974	1,025
	Final dividend for 2007 of 3.35p (2006: 2.85p)	2,329	2,114
		3,303	3,139
	Proposed final dividend for 2008 of 3.35p (2007: 3.35p)	2,359	2,329

	The proposed final dividend of £2,359,000 is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

5.	Earnings per share
	The calculation of earnings per ordinary share is based on the profit for the year attributable to equity holders of the parent and the weighted average number of shares of the Company.


		2008	2007
		£'000	£'000
	Profit for the year attributable to equity holders of the parent	12,242	17,423

		2008	2007
		Number of shares	Number of shares
	Weighted average number of shares:
	Shares in issue throughout the year	85,428,703	85,096,683
	Share issued in the year	19,397	1,541,259
	Shares buy-backs and cancellations	(279,644)	(964,983)
	Treasury and own shares held	(14,279,043)	(10,724,113)
	For basic earnings per share	70,889,413	74,948,846
	Outstanding share options	2,548,118	4,904,365
	For diluted earnings per share	73,437,531	79,853,211

6.	Intangible assets
		Goodwill	Computer software	Total
		£'000	£'000	£'000
	Cost:
	At 1 January 2007	6,847	2,690	9,537
	Additions	-	697	697
	Disposals	-	(1)	(1)
	Foreign currency translation differences	-	4	4
	At 31 December 2007	6,847	3,390	10,237
	Additions	768	1,677	2,445
	Disposals	-	(34)	(34)
	Foreign currency translation differences	293	120	413
	At 31 December 2008	7,908	5,153	13,061
	Accumulated depreciation and impairment:
	At 1 January 2007	-	1,790	1,790
	Charge for the year	-	621	621
	Disposals	-	(1)	(1)
	Foreign currency translation differences	-	5	5
	At 31 December 2007	-	2,415	2,415
	Charge for the year	-	992	992
	Disposals	-	(33)	(33)
	Foreign currency translation differences	-	49	49
	At 31 December 2008	-	3,423	3,423
	Carrying value:
	At 1 January 2007	6,847	900	7,747
	At 31 December 2007	6,847	975	7,822
	At 31 December 2008	7,908	1,730	9,638

The carrying value of goodwill relates to the acquisition of Talent Spotter (£1,061,000), which is fully disclosed in note 10 and the historic acquisition of the Dunhill Group in Australia (£6,847,000). Goodwill is tested annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of the goodwill is based on value in use over the next five years, calculated by preparing cash flow forecasts derived from the most recent financial budgets and an assumed growth rate of 3%, which does not exceed the long-term average potential growth rate of the respective operations. The value of the cash flows is then discounted at a post tax rate of 8% (pre-tax rate of 11.9%), based on the Group's weighted average cost of capital.

7.	Movement in equity shareholders’ funds
		2008		2007
		£'000		£'000
	Profit for the year attributable to equity holders of the parent	12,242		17,423
	Exchange differences on translation of overseas operations	8,480		1,916
	Total recognised income and expense for the year	20,722		19,339
	Dividends paid	(3,303)		(3,139)
	Treasury and own shares purchased	(9,658)		(4,092)
	Shares purchased for cancellation	151		(9,351)
	Adjustment in respect of share schemes	2,003		1,749
	New shares issued	41		3,216
	Net increase in equity	9,956		7,722
	Opening equity	49,699		41,977
	Closing equity	59,655		49,699
8.	Notes to the cash flow statement
		2008	2007
		£'000	£'000
	Operating profit	18,642	26,115
	Adjustments for:
	Depreciation and amortisation charges	2,915	1,982
	Loss on disposal of property, plant and equipment	42	63
	Movement in share scheme balance	3,566	2,287
	Operating cash flows before movements in working capital	25,165	30,447
	Decrease (increase) in receivables	10,368	(6,302)
	(Decrease) increase in payables	(5,984)	6,227
	Cash generated from operating activities	29,549	30,372

9.	Reconciliation of net cash flow to movement in net cash	2008	2007
		£'000	£'000
	(Decrease) increase in cash and cash equivalents in the year	(1,229)	3,329
	Cash outflow from decrease in bank loans	3,786	4,671
	Foreign currency translation differences	4,020	639
	Movement in net cash in the year	6,577	8,639
	Net cash at beginning of year	15,595	6,956
	Net cash at end of year	22,172	15,595

10.		Acquisition of subsidiary
	On 25 February 2008, the Group acquired 70 per cent of Talent Spotter, a specialist professional recruitment business based in mainland China, for cash consideration of £814,000. This transaction has been accounted for by the purchase method of accounting.


			Book value and fair value
			£'000
		Net assets acquired
		Tangible fixed assets	46
		Goodwill	768
		Total consideration	814

		Satisfied by:
		Cash consideration paid	259
		Deferred cash consideration payable	555
			814

	The goodwill arising on the acquisition of Talent Spotter, which has been fully rebranded as Robert Walters China, is attributable to the value of the management team in the business. The contribution to revenue and profit before taxation of Robert Walters China in the year was not material.