Final Results
Robert Walters PLC
28 February 2005
Robert Walters plc
('Robert Walters' or the 'Group')
Preliminary Results for the year ended 31 December 2004
Robert Walters, the global recruitment specialist, announces strong growth in
net fee income and operating profit in all the Group's divisions. Operating
profit up 255% to £7.1m.
Financial Highlights
• Gross profit ('net fee income') up 29% to £67.0m (2003: £52.0m)
• Operating profit up 255% to £7.1m (2003: £2.0m)
• Profit before taxation up 112% to £7.2m (2003: £3.4m)*
• Earnings per share up 112% to 5.5p (2003: 2.6p)
• Cash at 31 December 2004 of £9.7m (2003: £15.9m)
• Total dividend maintained at 3.15p per ordinary share
*After £0.1m foreign exchange translation loss (2003: £1.2m gain)
Robert Walters, Chief Executive, commented:
'A shortage in supply of qualified professionals and a growing demand from our
clients is combining to drive growth.
Investment continues in training and in driving new services and systems across
our offices world-wide.
We are increasingly flexing the power of our global network to the advantage of
a growing number of multinationals for whom we are a key supplier of choice.'
28 February 2005
Enquiries:
Robert Walters plc Tel: 020 7379 3333
Robert Walters, Chief Executive
Ian Nash, Finance Director
College Hill Tel: 020 7457 2020
Matthew Gregorowski matthew.gregorowski@collegehill.com
CHAIRMAN'S STATEMENT
I am pleased to report a strong result for the Group in the year to 31 December
2004.
Turnover for the year was £188.2m (2003: £156.8m) producing a 29% increase in
gross profit ('net fee income') to £67.0m (2003: £52.0m). Operating profit
before the amortisation of goodwill was £7.5m (2003: £2.4m). Profit before tax
rose to £7.2m (2003: £3.4m), which includes a foreign exchange translation loss
of £0.1m (2003: gain of £1.2m).
The improved trading conditions experienced in the first half of 2004 continued
as anticipated throughout the year. In the UK and Asia Pacific, the Group
continued to trade strongly. Continental Europe, which was the last of our
markets to be hit by the economic downturn, has now seen a return of business
confidence and all of our operations there have returned to growth.
Within our permanent recruitment business, the growth in net fee income has been
driven by increases in both recruitment volumes and rates. Rate increases have
resulted from the shortage of suitably qualified professionals; partly arising
from the cutbacks in training programmes over the last three years. We are also
beginning to see evidence of salary increases above inflation for professionally
qualified candidates.
Our contract business, which showed no revenue growth in the first half of the
year, achieved significant growth in the second half and we now feel that the
pressure on margins in this area has abated.
The Board recommends maintaining the full year dividend at 3.15p per share.
The current year has started well and we believe that net fee income for the
first quarter of 2005 will exceed that achieved in the same period of 2004. We
remain optimistic that the improved economic conditions we have seen in all of
the Group's markets will be sustained throughout 2005. Our investment in
increased headcount (from 736 to 915 during 2004) ensures that the Group is well
placed to take advantage of future growth opportunities.
In summary, the Group is in a good position to grow its market share,
productivity and profitability in 2005.
Timothy Barker
Chairman
CHIEF EXECUTIVE'S STATEMENT
2004 was the first year of strong profit growth for the Group since the business
experienced a downturn in 2001. This was due to the favourable economic
conditions across the Group's markets, combined with the dedication, hard work
and loyalty of the employees of Robert Walters.
The considerable investment made by the Group over the last three years to add
strength and depth to our existing international operations and develop our
staff, structures and systems is now starting to deliver value as the market
improves.
UNITED KINGDOM
Turnover in the UK was £102.3m (2003: £87.2m) and net fee income increased by
34% to £31.5m (2003: £23.6m). This produced an operating profit of £1.8m (2003:
£0.0m).
The shortage in supply of recently qualified professionals coupled with an
increase in demand in the market underpinned the growth in permanent recruitment
across all of our UK operations. The use of our global network to provide
innovative solutions to attract professionally qualified candidates to meet this
shortfall has allowed the Group to be a key supplier to many of our clients. The
Group's global network has also assisted us to meet the increased demand for
contractors that was evident in the second half of the year and resulted in
significant year-on-year growth in this area of business.
All of our UK disciplines increased both their net fee income and operating
profit. Our core discipline, Finance and Accounting, grew significantly in both
permanent and contract net fee income. At the end of 2004 we opened an Edinburgh
office, in line with our objective of establishing a greater regional presence.
The resurgence in the IT sector continued and our IT operation grew both net fee
income and operating profit. Our newer UK businesses, operating in the HR and
Legal disciplines, have grown rapidly in 2004 and are both profitable. They
offer excellent growth prospects for the future.
CONTINENTAL EUROPE
Turnover was £11.9m (2003: £8.4m) and net fee income increased by 40% to £6.6m
(2003: £4.7m), resulting in an operating profit of £0.4m (2003: operating loss
£0.4m).
The improved market conditions experienced in the second half of 2004 were key
to the turnaround in this region. In all of our significant operations both
permanent and contract net fee income grew year-on-year and these businesses are
now profitable. We have increased our headcount in all these operations in
anticipation of their continued development.
The key driver of net fee income in our Dutch and Belgian operations was growth
in permanent recruitment levels. In France, we are particularly pleased to
report an 80% increase in net fee income, driven by an excellent performance in
both our permanent recruitment business and Walters Interim, our newly
established contract business.
We believe 2004 has provided a solid foundation for further success in our
Continental European markets.
ASIA PACIFIC
In Asia Pacific, we have continued to deliver growth in turnover, net fee income
and operating profit in what is the Group's second largest regional market.
Turnover increased to £70.0m (2003: £57.5m), net fee income by 24% to £25.5m
(2003: £20.7m) and operating profit doubled to £4.8m (2003: £2.4m).
All of our operations in this region increased both net fee income and operating
profits. Consistent with our business in the UK, there was strong growth in
permanent net fee income coupled with strong growth in contract net fee income
in the second half of the year.
Our six offices in Australia and New Zealand continued to develop their strong
regional presence and delivered growth in operating profit. Our Singapore office
had another excellent year with strong growth in net fee income and operating
profit. Our Hong Kong office has shaken off the difficulties of 2003, doubling
net fee income and turning a loss into a healthy profit. Our Japanese operation
continued to make good progress, almost doubling operating profit in a market we
believe offers a great deal of potential, and we have increased consultant
numbers by over 50%.
We continue to focus on strengthening our position within these markets, whilst
also reviewing the potential of entering new markets in this region.
OTHER INTERNATIONAL
Other international comprises the USA, Ireland and South Africa. Turnover was
£4.1m (2003: £3.8m), net fee income £3.4m (2003: £3.0m) and operating profit
£82,000 (2003: £28,000).
Our operation in New York has increased its operating profit in improved market
conditions. In Dublin, in line with our intention to build our presence in this
market, we have doubled the number of consultants and are close to achieving
month-on-month profitability. Johannesburg, although loss making in 2004,
remains a key market for candidate sourcing.
RESOURCE SOLUTIONS
Resource Solutions is the Group's outsourcing business and manages the
recruitment process for a number of major clients across the world. The improved
market conditions also benefited this operation with clients requiring more of
our personnel to handle their recruitment needs as well as an increased number
of client contractors. This resulted in a 21% increase in net fee income. We
believe that, with recruitment becoming more sophisticated and the buyers of
recruitment services more demanding, Resource Solutions combined with the Robert
Walters brand provides a formidable service offering to attract and retain
clients. As such, we continue to invest in the infrastructure of Resource
Solutions to provide our clients with a market leading offering.
GENERAL OVERVIEW
Both the Group and the markets in which we operate are in good shape. The
continued development of our employees and brand, under our experienced
management team, provides an excellent platform to maintain the Group's profit
growth in the future.
Robert Walters
Chief Executive
FINANCIAL REVIEW
TURNOVER
Turnover for the Group is the total income from the placement of permanent and
contract staff and therefore includes the remuneration costs of contract
candidates and the total cost of advertising recharged to clients. It also
includes outsourcing fees, consultancy fees and the net income from payrolling
contracts charged by Resource Solutions to its clients.
Turnover increased 20.0% to £188.2m (2003: £156.8m) with 56.3% of the annual
total being generated in the second half of the year.
The increase in turnover was primarily due to the upturn in the Robert Walters
contract business and its associated candidate remuneration costs, as well as a
general improvement in all areas of the business.
GROSS PROFIT (NET FEE INCOME)
Net fee income is the total placement fees of permanent candidates, the margin
earned on the placement of contract candidates and income from advertising. It
also includes the outsourcing, consultancy and payrolling margins earned by
Resource Solutions.
Net fee income for the year increased by 29.0% to £67.0m (2003: £52.0m). Net fee
income was £36.3m in the second half of 2004 compared with £30.8m in the first
half (2003: 1H £25.3m, 2H £26.7m). Net fee income has shown a quarter-on-quarter
increase over the last two years.
Net fee income gross margin has increased to 35.6% (2003: 33.1%) partly due to a
greater proportion of permanent recruitment fees, but also due to improved
margins in both the Robert Walters contract business and Resource Solutions
payroll contracts.
OPERATING PROFIT
Administrative expenses were £59.9m (2003: £49.9m) including a goodwill charge
of £0.4m (2003: £0.4m). The principal reason for this increase was the growth in
the Group average headcount from 730 in 2003 to 846 in 2004, coupled with higher
bonus payments as a result of the improved profitability of the Group.
The Group has focused heavily on consultant productivity during the year and
succeeded in improving the average level of net fee income per consultant
despite the high number of new hires. The increase in net fee income outweighed
the increase in the cost base resulting in growth in the Group's operating
profit to £7.1m (2003: £2.0m).
INTEREST AND FINANCING COSTS
The Group incurred a foreign exchange loss of £0.1m (2003: gain of £1.2m). The
gain in 2003 was due primarily to the translation of the Group's Australian
dollar inter-company account. The foreign exchange exposure to future movements
in the Australian dollar was greatly reduced in the latter half of 2003, as a
result of a significant reduction in the inter-company trading balance.
Interest received in 2004 was £0.3m (2003: £0.2m).
TAXATION
The tax charge in 2004 was £3.0m (2003: £1.3m) which gives an effective rate of
41.2% (2003: 38.4%). As in 2003, the tax rate is higher than the standard UK
rate of taxation, mainly due to disallowable items and profits generated in high
tax jurisdictions.
EARNINGS PER SHARE AND DIVIDENDS
Basic earnings per share were 5.5p (2003: 2.6p). The weighted average number of
shares for the year was 78.0m (2003: 81.1m). A final dividend of 2.1p (2003:
2.1p) per ordinary share is being proposed by the Board. Together with the
interim dividend of 1.05p (2003: 1.05p) per ordinary share paid in October 2004,
the total dividend would amount to 3.15p (2003: 3.15p) per ordinary share. The
final dividend, which amounts to £1.6m, will be paid on 27 May 2005 to those
shareholders on the register at 6 May 2005.
BALANCE SHEET
The Group had net assets of £31.1m at 31 December 2004 (2003: £31.6m) including
goodwill of £6.5m (2003: £6.8m). The reduction in the Group net assets is mostly
accounted for by the retained profits for the year, offset by the acquisition in
the market of £1.9m of the Group's own shares for various incentive schemes
which are shown in the balance sheet as a reduction in shareholders' funds.
There was also an adverse foreign exchange reserves movement of £0.4m.
In 2005, the Company will seek to renew the powers which were granted at the AGM
in 2004 to enable it to make market purchases of its shares.
CASH FLOW AND NET CASH POSITION
At 31 December 2004, the Group had cash balances of £9.7m (2003: £15.9m). Cash
flow from operating activities was £1.1m (2003: £3.4m).
The significant payments made from operational cash flow were £1.7m of taxation,
£2.5m of dividends, £1.2m of capital expenditure and £1.9m for the acquisition
of the Group's own shares.
Surplus cash balances are generally invested with financial institutions with
favourable credit ratings that offer competitive rates of return. The Group also
has an agreed £10.0m overdraft facility available which is due for renewal in
November 2005.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The 2004 financial year end will be the last reporting period prior to the
introduction of IFRS. The Group will report its interim results in 2005 in
accordance with IFRS, together with the restatement of 2004 on a comparable
basis.
Ian Nash
Group Finance Director
Consolidated profit and loss account
FOR THE YEAR ENDED 31 DECEMBER 2004
2004 2003
£'000 £'000
Turnover
Continuing operations 188,235 156,835
Cost of sales (121,212) (104,885)
Gross profit 67,023 51,950
Goodwill (396) (396)
Other administrative expenses (59,519) (49,546)
Administrative expenses (59,915) (49,942)
Operating profit 7,108 2,008
Net finance income 135 1,398
Profit on ordinary activities before 7,243 3,406
taxation
Tax on profit on ordinary activities (2,987) (1,308)
Profit on ordinary activities after 4,256 2,098
taxation
Dividends (2,433) (2,453)
Retained profit (loss) for the year 1,823 (355)
Earnings per share (pence):
Basic 5.5 2.6
Diluted 5.2 2.5
Consolidated statement of total recognised gains and losses
FOR THE YEAR ENDED 31 DECEMBER 2004
2004 2003
£'000 £'000
Profit for the year 4,256 2,098
Foreign currency translation differences (407) 593
Total recognised gains for the year 3,849 2,691
Consolidated balance sheet
AS AT 31 DECEMBER 2004
2004 2003
£'000 £'000
Fixed assets
Goodwill 6,451 6,847
Tangible assets 3,460 3,474
9,911 10,321
Current assets
Debtors 38,381 23,389
Cash at bank and in hand 9,712 15,915
48,093 39,304
Creditors: Amounts falling due within one year (26,862) (17,832)
Net current assets 21,231 21,472
Total assets less current liabilities 31,142 31,793
Provision for liabilities and charges - (183)
Net assets 31,142 31,610
Capital and reserves
Called-up share capital 16,935 16,935
Share premium account 77,816 77,816
Other reserves (74,034) (74,034)
Own shares held (8,232) (6,348)
Foreign exchange reserves (481) (74)
Profit and loss account 19,138 17,315
Equity shareholders' funds 31,142 31,610
Consolidated cash flow statement
FOR THE YEAR ENDED 31 DECEMBER 2004
2004 2003
£'000 £'000
Net cash inflow from operations 1,067 3,423
Returns on investments and servicing of finance 281 227
Taxation (1,707) (786)
Capital expenditure and financial investment (1,162) (865)
Financing (1,884) (3,500)
Equity dividends paid (2,467) (2,453)
Decrease in cash in year (5,872) (3,954)
Notes to the accounts:
The 2004 Annual Report and Accounts will be posted to shareholders by 31 March
2005. Copies may be obtained after this date from the Company Secretary, 55
Strand, London WC2N 5WR.
The 2004 Annual General Meeting of Robert Walters plc will be held on 4 May 2005
at 55 Strand, London WC2N 5WR.
1. Basis of accounting
The principal accounting policies of the Group have been applied consistently in
all aspects throughout the current year and are also consistent with the 2003
audited annual financial statements.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2004 or 2003, but is derived
from those accounts. Statutory accounts for 2003 have been delivered to the
Registrar of Companies and those for 2004 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under s237 (2) or
s237 (3) of the Companies Act 1985.
The preliminary announcement was approved by the Directors on 25 February 2005.
2. Segmental information
2004 2003
£'000 £'000
i) Turnover:
UK 102,262 87,231
Continental Europe 11,942 8,387
Asia Pacific 69,975 57,457
Other 4,056 3,760
188,235 156,835
ii) Gross profit:
UK 31,457 23,556
Continental Europe 6,643 4,748
Asia Pacific 25,541 20,654
Other 3,382 2,992
67,023 51,950
iii)
Profit (loss) on ordinary activities before interest and tax:
UK 1,816 (6)
Continental Europe 397 (367)
Asia Pacific 4,813 2,353
Other 82 28
Operating profit 7,108 2,008
Net finance income 135 1,398
Profit on ordinary activities before tax 7,243 3,406
iv) Net assets:
UK 12,220 15,913
Continental Europe 2,192 2,120
Asia Pacific 17,047 13,694
Other (317) (117)
31,142 31,610
The analysis of turnover by destination is not materially different to the
analysis by origin.
The Directors believe there to be only one class of business throughout 2004 and
2003.
3. Tax on profit on ordinary activities
2004 2003
£'000 £'000
Current tax charge:
Corporation tax - UK 948 333
Corporation tax - Overseas 2,262 1,549
Double tax relief - (150)
Adjustments in respect of prior periods:
Corporation tax - UK (167) (171)
Corporation tax - Overseas 384 (233)
3, 427 1, 328
Deferred Tax:
Deferred tax - UK (189) (27)
Deferred tax - Overseas (142) (493)
Adjustments in respect of prior periods:
Deferred tax - UK (109) 202
Deferred tax - Overseas - 298
(440) (20)
2, 987 1, 308
4. Equity dividends
2004 2003
£'000 £'000
Interim dividend paid of 1.05p per share (2003:1.05p) 811 889
Final dividend proposed of 2.1p (2003 : 2.1p) 1,622 1,684
Adjustment in respect of prior year - (120)
2,433 2,453
5. Earnings per share
The calculation of earnings per ordinary share is based on the profit on
ordinary activities after taxation and the weighted average number of ordinary
shares of Robert Walters plc.
2004 2003
£'000 £'000
Profit on ordinary activities after taxation 4,256 2,098
2004 2003
NUMBER NUMBER
OF SHARES OF SHARES
Weighted average number of shares:
Shares in issue 84,676,927 84,659,941
Own shares held (6,701,724) (3,516,692)
For basic earnings per share 77,975,203 81,143,249
Outstanding share options 4,643,560 3,051,985
For diluted earnings per share 82,618,763 84,195,234
6. Goodwill
£'000
Cost:
At 1 January 2004 and 31 December 2004 8,617
Amortisation:
At 1 January 2004 1,770
Charge for the year 396
At 31 December 2004 2,166
Net book value:
At 1 January 2004 6,847
At 31 December 2004 6,451
7. Reconciliation of movements in shareholders' funds
2004 2003
£'000 £'000
Profit for the year 4,256 2,098
Foreign currency translation differences (407) 593
3,849 2,691
Dividend (2,433) (2,453)
Own shares purchased (1,884) (3,516)
New shares issued - 16
Net decrease in shareholders' funds (468)
(3,262)
Opening shareholders' funds 31,610 34,872
Closing shareholders' funds 31,142 31,610
8. Analysis of cash flow
2004 2003
£'000 £'000
Reconciliation of operating profit
to net cash inflow:
Operating profit 7,108 2,008
Depreciation charges 1,128 1,495
Goodwill amortisation 396 396
Loss on disposal of tangible fixed assets 42 418
Increase in debtors (14,465) (784)
Increase (decrease) in creditors 7,041 (293)
(Decrease) increase in provision (183) 183
Net cash inflow from operating activities 1,067 3,423
Interest received 281 227
Net cash inflow 281 227
Taxation
UK Corporation tax paid (899) (105)
Foreign tax paid (808) (681)
Net cash outflow (1,707) (786)
Capital expenditure
Payments to acquire tangible fixed assets (1,162) (865)
Net cash outflow (1,162) (865)
Financing
Issues of ordinary share capital - 16
Own shares purchased (1,884) (3,516)
Net cash outflow (1,884) (3,500)
9. Analysis and reconciliation
At 1 Exchange At 31
January movement December
2004 Cash flows on cash 2004
£'000 £'000 £'000 £'000
Analysis of change in net
funds:
Cash at bank and in hand 15,915 (5,872) (331) 9,712
Net funds 15,915 (5,872) (331) 9,712
2004 2003
£'000 £'000
Decrease in cash in the year (5,872) (3,954)
Foreign currency translation
differences (331) 659
Movement in net funds (6,203) (3,295)
Net funds at 1 January 15,915 19,210
Net funds at 31 December 9,712 15,915
10. Dividend
The dividend will be paid on 27 May 2005 to those shareholders on the register
at 6 May 2005.
This information is provided by RNS
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