Interim Results

RNS Number : 2664C

Robert Walters PLC

29 August 2008

 



29 AUGUST 2008

ROBERT WALTERS PLC

Half-Yearly Financial Results for the 6 months ended 30 June 2008

FINANCIAL HIGHLIGHTS

• Net fee income (gross profit) up 17% to £71.7m (2007: £61.5m):

• • 68% (2007: 61%) of the Group's net fee income generated outside of the UK.

• Continued investment in overseas development in the first half of 2008:
• • Headcount investment focused largely in Europe and Asia Pacific. The Group now employs 1,687 people worldwide (2007: 1,382).
  • New offices opened in Bangkok, Kowloon, Paris and Strasbourg.
  • Two new offices acquired in China, in Shanghai and Suzhou.
• Operating profit down 8% to £10.6m (2007: £11.5m).
• Profit before taxation down 15% to £9.8m (2007: £11.4m).
• Basic earnings per share down 12% to 9.2p (2007: 10.4p).
• Interim dividend increased 4% to 1.40p per ordinary share (2007: 1.35p).
• Strong balance sheet with £18.3m cash as at 30 June 2008 (30 June 2007: £13.4m).
• £9.5m of the Company's own shares purchased through share buy-back programme. The Group intends to continue with this policy.

Robert Walters, Chief Executive, commented:

'The international diversity and multi-disciplined nature of the Group has enabled us to deliver a solid performance. The results also reflect the investment made in the business, which was weighted towards the first half of the year. Our businesses in Europe and Asia Pacific continue to grow and perform strongly, whilst in the UK we have implemented management and structural changes to improve future performance.' 

OUTLOOK

• Extended geographic reach, with 37 offices in 16 countries.
• China acquisition now fully integrated.
• Our growing contract businesses in Europe and Asia Pacific continue to contribute strongly to growth. Contract now represents 32% (2007: 30%) of the Group's recruitment net fee income.
• The Group is well positioned, with a strong international footprint and a diversity of disciplines.
• The prevailing economic climate shows little sign of improving and we therefore remain cautious with regard to the short term outlook.

  ENQUIRIES:

Robert Walters plc	[phone]
Robert Walters, Chief Executive
Alan Bannatyne, Group Finance Director
Pelham PR
James Henderson	[phone]
	[e-mail]
Archie Berens	[phone]
	[e-mail]
James Moore	[phone] [e-mail]

ROBERT WALTERS - A SNAPSHOT

Robert Walters is a leading specialist professional recruitment consultancy, which focuses on placing high calibre professionals into permanent, contract and temporary positions at all levels of seniority.  The Group specialises in the accounting, finance, banking, IT, management consultancy, legal, sales and marketing, human resources, secretarial and support fields.  Robert Walters' blue-chip client base ranges across multi-national corporations covering all market sectors.

Established in 1985, Robert Walters has built a global presence, with 37 offices now spanning 16 countries across 5 continents.

  Robert Walters plc

Half-Yearly Financial Results for the six months ended 30 June 2008

Interim Management Report

We are pleased to report the results for the Group for the six months ended 30 June 2008. Revenue increased by 13% to £169.8m (2007: £150.8m) generating a 17% increase in gross profit ('net fee income') to £71.7m (2007: £61.5m). Operating profit decreased by 8% to £10.6m (2007: £11.5m) whilst profit before taxation fell by 15% to £9.8m (2007: £11.4m).

We have delivered strong growth in Europe and Asia Pacific with net fee income increasing by 31%. These regions accounted for 66% (2007: 59%) of the Group's net fee income. In the UK, which has been impacted by adverse economic conditions, we have implemented corrective measures, leaving it better positioned for the second half of the year.

We continue to invest in our contract businesses which now represent 32% (2007: 30%) of the Group's recruitment net fee income.

Over the last 12 months, headcount has increased to 1,687 (2007: 1,382), focusing on Europe and Asia Pacific where the Group continues to see opportunities for profitable growth. The Group now has 57 employees in mainland China, which we entered by way of acquisition earlier this year. 

Asia Pacific (42% of net fee income)

Revenue was £68.7m (2007: £56.2m) and net fee income increased by 26% to £30.2m (2007: £23.9m). Operating profit increased by 6% to £7.4m (2007: £6.9m).

We continue to invest in Asia, with two new offices in mainland China, one in Hong Kong and one in Thailand further strengthening our presence in this region. The Osaka office which opened in the second half of 2007, shows great promise and our contract business in Tokyo is beginning to deliver a return on investment.

Both Australia and New Zealand have shown double digit growth in net fee income. Singapore and Malaysia produced good results, whereas Hong Kong has been impacted by the uncertainties surrounding the financial services sector.

United Kingdom (32% of net fee income)

Revenue in the UK was £68.4m (2007: £73.2m) and net fee income decreased by 3% to £23.4m (2007: £24.1m). Operating profit decreased by 77% to £0.6m (2007: £2.4m). 

The decrease in operating profit was due to a downturn in city-related permanent business. Despite our exposure to the banking sector being more limited than in previous years, there was still a material impact on our UK business. As a consequence, we have made some significant changes to our permanent business units, streamlining the management structure and resulting in cost savings going forward. All costs relating to this initiative have been taken in the first half.

The contract and regional businesses proved to be solid performers in the first half of the year and Resource Solutions, our recruitment process outsourcing business, continued to win new client engagements particularly in the commercial sector.

Europe (24% of net fee income)

Revenue was £31.5m (2007: £19.9m) and net fee income increased by 40% to £16.9m (2007: £12.0m). Operating profit increased by 26% to £2.6m (2007: £2.1m).

Europe continued to perform ahead of our expectations with particularly strong trading in the Netherlands and France.

Our investment in contract recruitment in the region, particularly in France, has contributed significantly to overall growth. We now have three Walters Interim offices in France and have opened a new office in Strasbourg to further strengthen our network across the country.

In the Netherlands, our Eindhoven and Rotterdam offices exceeded expectations and complemented growth in our well established Amsterdam office. Walters Interim in Belgium is growing strongly and our Madrid office continues to make progress with an encouraging performance towards the end of the first half.

Other International (2% of net fee income)

Other International comprises South Africa and the USA. Revenue and net fee income were £1.2m (2007: £1.5m) and operating profit was £nil (2007: £0.1m).

Growth in our South Africa operation was more than offset by a weak performance from our New York office.

Cash flow

The Group ended the period with £18.3m of cash (30 June 2007: £13.4m, 31 December 2007: £24.0m).

Operating activities generated £10.9m (2007: £9.2m) reflecting strong control over working capital during the period, with 103% of operating profit converted into cash. £9.5m was used to purchase 5,725,000 of the Company's own shares, £4.9m tax; £2.3m dividend; and £2.0m capital expenditure.

Dividend

The Board has decided to increase the interim dividend to 1.40p per share (2007: 1.35p) reflecting our long term confidence in the business. The interim dividend will be paid on 24 October 2008 to those shareholders on the Company's register on 12 September 2008.

Treasury Management, Currency Risk and Other Principal Risks and Uncertainties affecting the Business

The Group does not have material transactional currency exposures although is exposed to translation differences on the profits and cash flows generated by its overseas operations, the main functional currencies of the Group being Sterling, the Euro, the Australian dollar and the Japanese Yen.

The £0.7m loss on foreign exchange in the period was a non cash item arising primarily on the retranslation of a £5m intercompany Japanese loan, which has now been repaid. The net assets of the Group were not impacted as there was a corresponding increase in the overseas assets of the Group, evidenced by the foreign exchange translation gain of £2.2m reflected in the consolidated balance sheet.

The other principal risks and uncertainties affecting the business activities of the Group remain those detailed within the Operating and Financial Review section of the Annual Report for the year ended 31 December 2007, namely the employment market, employment law and staff retention across the Group. The Board does not foresee a material change in respect of these factors for the remainder of the year.

Outlook

The Group is well positioned, with a strong international footprint and a diversity of disciplines. The prevailing economic climate shows little sign of improving and we therefore remain cautious with regard to the short term outlook.

Philip Aiken                                Robert Walters

Chairman                                Chief Executive

28 August 2008

ROBERT WALTERS PLC

Half-yearly Financial Results

Condensed consolidated income statement

		2008		2007		2007
		6 mths to		6 mths to		12 mths to
		30 June		30 June		31 December
		Unaudited		Unaudited		Audited
		£'000		£'000		£'000
Revenue - continuing operations		169,827		150,799		319,795
Cost of sales		(98,134)		(89,312)		(190,865)
Gross profit		71,693		61,487		128,930
Administrative expenses		(61,137)		(49,972)		(102,815)
Operating profit		10,556		11,515		26,115
Finance income		225		118		332
Finance costs		(264)		(311)		(831)
(Loss) gain on foreign exchange		(749)		111		(675)
Profit before taxation		9,768		11,433		24,941
Taxation		(3,106)		(3,659)		(7,518)
Profit for the period		6,662		7,774		17,423
Attributable to:
Equity holders of the parent		6,665		7,774		17,423
Minority interest		(3)		-		-
		6,662		7,774		17,423
Earnings per share (pence):
Basic		9.2		10.4		23.2
Diluted		8.9		9.6		21.8

Condensed consolidated statement of recognised income and expense

			2008		2007		2007
			6 mths to		6 mths to		12 mths to
			30 June		30 June		31 December
			Unaudited		Unaudited		Audited
			£'000		£'000		£'000
Profit for the period			6,662		7,774		17,423
Foreign currency translation differences			2,167		152		1,916
Total recognised income and expense for the period			8,829		7,926		19,339
Attributable to:
Equity holders of the parent			8,832		7,926		19,339
Minority interest			(3)		-		-
			8,829		7,926		19,339

ROBERT WALTERS PLC

Half-yearly Financial Results

Condensed consolidated balance sheet

		2008		2007		2007
		30 June		30 June		31 December
		Unaudited		Unaudited		Audited
		£'000		£'000		£'000
Non-current assets
Intangible assets		9,511		7,581		7,822
Property, plant and equipment		5,360		4,060		4,745
Deferred tax asset		3,782		3,264		3,749
		18,653		14,905		16,316
Current assets
Trade and other receivables		73,200		70,716		69,742
Corporation tax receivables		660		298		1,429
Cash and cash equivalents		20,484		13,435		23,953
		94,344		84,449		95,124
Total assets		112,997		99,354		111,440
Current liabilities
Trade and other payables		(48,799)		(44,377)		(47,763)
Corporation tax liabilities		(2,496)		(3,568)		(4,937)
Bank overdrafts and loans		(9,505)		(4,605)		(4,640)
		(60,800)		(52,550)		(57,340)
Net current assets		33,544		31,899		37,784
Non-current liabilities
Bank loan		(2,688)		(5,571)		(3,718)
Deferred tax liabilities		(614)		(1,251)		(683)
		(3,302)		(6,822)		(4,401)
Total liabilities		(64,102)		(59,372)		(61,741)
Net assets		48,895		39,982		49,699
Equity
Share capital		17,030		17,210		17,086
Share premium		20,570		58,624		40,553
Other reserves		(73,407)		(73,854)		(73,470)
Own shares held		(10,065)		(1,073)		(1,073)
Treasury shares held		(18,865)		(19,065)		(18,865)
Foreign exchange reserves		2,605		(1,326)		438
Retained earnings		111,008		59,466		85,030
Equity attributable to equity holders of the parent		48,876		39,982		49,699
Minority interest		19		-		-
Total equity		48,895		39,982		49,699

Following an application to the Court, the share premium of the Company was reduced by

£20,000,000 on 11 June 2008. Accordingly, the distributable reserves of the Company increased by a

corresponding amount.

ROBERT WALTERS PLC

Half-yearly Financial Results

Condensed consolidated cash flow statement

			2008		2007		2007
			6 mths to		6 mths to		12 mths to
			30 June		30 June		31 December
			Unaudited		Unaudited		Audited
			£'000		£'000		£'000
Cash generated from operating activities			10,925		9,208		30,372
Income taxes paid			(4,904)		(3,522)		(6,616)
Net cash from operating activities			6,021		5,686		23,756
Investing activities
Acquisition of subsidiary (net of cash acquired)			(238)		-		-
Interest paid			(95)		(193)		(499)
Purchases of computer software			(525)		(144)		(697)
Purchases of property, plant and equipment			(1,523)		(732)		(2,087)
Proceeds on disposal of property, plant and equipment			47		241		284
Net cash used in investing activities			(2,334)		(828)		(2,999)
Financing activities
Equity dividends paid			(2,329)		(2,114)		(3,139)
Proceeds on issue of shares			20		955		3,216
Proceeds from bank loan			3,894		-		-
Repayment of bank loan			(2,582)		(2,361)		(4,671)
Purchase of treasury and own shares			(9,060)		(4,092)		(4,092)
Shares purchased for cancellation			(401)		(3,451)		(8,742)
Net cash used in financing activities			(10,458)		(11,063)		(17,428)
Net (decrease) increase in cash and cash equivalents			(6,771)		(6,205)		3,329
Cash and cash equivalents at beginning of the period			23,953		19,584		19,584
Effect of foreign exchange rate changes			1,099		56		1,040
			18,281		13,435		23,953
Cash and cash equivalents at end of the period
Bank balances and cash			20,484		13,435		23,953
Bank overdrafts			(2,203)		-		-
			18,281		13,435		23,953

ROBERT WALTERS PLC

Half-yearly Financial Results

Condensed consolidated statement of changes in equity

			2008		2007		2007
			6 mths to		6 mths to		12 mths to
			30 June		30 June		31 December
			Unaudited		Unaudited		Audited
			£'000		£'000		£'000
Profit for the period			6,665		7,774		17,423
Foreign currency translation differences			2,167		152		1,916
Total recognised income and expense for the period			8,832		7,926		19,339
Dividends paid			(2,329)		(2,114)		(3,139)
Own shares purchased			(9,060)		-		-
Shares purchased for cancellation*			151		(3,451)		(9,351)
Treasury shares purchased			-		(4,092)		(4,092)
Adjustment in respect of share schemes			1,563		(1,291)		1,749
New shares issued			20		1,027		3,216
Net (decrease) increase in equity			(823)		(1,995)		7,722
Opening equity			49,699		41,977		41,977
Closing equity			48,876		39,982		49,699

* At 31 December 2007, the Company entered into an agreement with its brokers to purchase shares during the close period. The arrangement resulted in a non-cash financial liability of £609,000 being recorded in accordance with IAS 32 and a corresponding debit being recognised in equity. In the event only 75% of these shares were purchased and the excess liability of £151,000 has been written back to equity in 2008. 

Notes to the condensed set of financial statements

1.    Accounting policies

The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in the half-yearly financial results has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. 

The same accounting policies are followed in this condensed set of financial statements as applied in the Group's latest annual report for the year ended 31 December 2007.

2.    Financial information

The financial information on pages 5 to 12 was formally approved by the Board of Directors on 28 August 2008.  The financial information set out in this document does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.  Statutory accounts prepared under IFRS for the year ended 31 December 2007 for Robert Walters plc have been delivered to the Registrar of Companies.  The auditors' report on these accounts was not qualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985.

The financial information in respect of the period ended 30 June 2008 is unaudited but has been reviewed by the Company's auditors.  Their report is attached on page 13.  The financial information in respect of the period ended 30 June 2007 is also unaudited.

ROBERT WALTERS PLC

Half-yearly Financial Results

3.	Segmental information
		2008		2007		2007
		6 mths to		6 mths to		12 mths to
		30 June		30 June		31 December
		Unaudited		Unaudited		Audited
		£'000		£'000		£'000
i)	Revenue:
	Asia Pacific	68,662		56,188		124,132
	UK	68,438		73,220		148,746
	Europe	31,499		19,884		44,439
	Other	1,228		1,507		2,478
		169,827		150,799		319,795
ii)	Gross profit:
	Asia Pacific	30,193		23,878		52,114
	UK	23,402		24,081		48,594
	Europe	16,876		12,035		25,790
	Other	1,222		1,493		2,432
		71,693		61,487		128,930
iii)	Profit before taxation:
	Asia Pacific	7,355		6,917		15,926
	UK	561		2,423		4,997
	Europe	2,628		2,085		5,096
	Other	12		90		96
	Operating profit	10,556		11,515		26,115
	Net finance costs	(788)		(82)		(1,174)
	Profit before taxation	9,768		11,433		24,941
iv)	Revenue by business grouping:
	Robert Walters	159,453		143,942		303,431
	Resource Solutions	10,374		6,857		16,364
		169,827		150,799		319,795

The Group is divided into geographical areas for management purposes, and it is on this basis that the primary segmental information has been prepared.

.

ROBERT WALTERS PLC

Half-yearly Financial Results

4.	Corporation tax
		2008		2007		2007
		6 mths to		6 mths to		12 mths to
		30 June		30 June		31 December
		Unaudited		Unaudited		Audited
		£'000		£'000		£'000
	UK	(42)		790		1,230
	Overseas	3,204		2,767		6,975
		3,162		3,557		8,205
	Deferred tax	(56)		102		(687)
	Total taxation	3,106		3,659		7,518

The tax charge is based on the expected annual tax rate of 31.8% (2007: 32.0%) on profit before taxation. The overall tax rate is higher than the UK standard rate of 28.5% due to a proportion of expenditure being disallowable for tax purposes.

5.	Dividends
		2008		2007		2007
		6 mths to		6 mths to		12 mths to
		30 June		30 June		31 December
		Unaudited		Unaudited		Audited
		£'000		£'000		£'000
	Amounts recognised as distributions to equity holders in the period:
	Final dividend for 2007 of 3.35p (2006: 2.85p)	2,329		2,114		2,114
	Interim dividend for 2007 of 1.35p (2006: 1.15p)	-		-		1,025
		2,329		2,114		3,139
	Proposed interim dividend for 2008 of 1.40p (2007: 1.35p)	944		1,025		1,025

The proposed interim dividend was approved by the Board on 28 August 2008 and has not been included as a liability at 30 June 2008.

6.	Earnings per share
	The calculation of earnings per share is based on the profit for the period and the weighted average number of shares of the Company.
		2008		2007		2007
		6 mths to		6 mths to		12 mths to
		30 June		30 June		31 December
		Unaudited		Unaudited		Audited
	Weighted average number of shares:
	Shares in issue throughout the period	85,428,703		85,096,683		85,096,683
	Shares issued in the period	5,414		372,647		1,541,259
	Shares cancelled in the period	(258,950)		(79,590)		(964,983)
	Treasury and own shares held	(12,822,649)		(10,931,054)		(10,724,113)
	For basic earnings per share	72,352,518		74,458,686		74,948,846
	Outstanding share options	2,697,255		6,901,526		4,904,365
	For diluted earnings per share	75,049,773		81,360,212		79,853,211

ROBERT WALTERS PLC

Half-yearly Financial Results

7.		Notes to the cash flow statement
			2008		2007			2007
			6 mths to		6 mths to			12 mths to
			30 June		30 June			31 December
			Unaudited		Unaudited			Audited
			£'000		£'000			£'000
		Operating profit for the period	10,556		11,515			26,115
		Adjustments for:
		Depreciation and amortisation charges	1,256		947			1,982
		Loss on disposal of property, plant and equipment	44		-			63
		Movement in share scheme balance	1,585		1,000			2,287
		Operating cash flows before movements in working capital	13,441		13,462			30,447
		Increase in receivables	(1,233)		(9,069)			(6,302)
		(Decrease) increase in payables	(1,283)		4,815			6,227
		Cash generated from operations	10,925		9,208			30,372
8.		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 tax of Robert Walters China in the period was not material.

  ROBERT WALTERS PLC

Half-yearly Financial Results

9.    Bank loans                    

In March 2008, the Group borrowed RMB 20m (£1.5m) at a rate of the People Bank Of China base rate plus 10% to finance the acquisition of Talent Spotter and provide working capital. RMB 10m (£0.7m) is repayable over 4 years and the remainder is a short term facility.

In April 2008, the Group borrowed JPY 330m (£1.6m) at a rate of 1.62%. The loan is repayable in October 2008.

In May 2008, the Group entered into a trade loan facility of £12.5m at a rate of LIBOR plus 0.75%, due for renewal in April 2009.

10.    Related party transactions

There have been no related party transactions or changes in the related party transactions described in the latest annual report that have had a material effect on the financial position or performance of the Group in the first six months of the financial year.

11.    Registered office

    The Company's registered office is located at 55 Strand, London, WC2N 5WR.

RESPONSIBILITY STATEMENT 

We confirm to the best of our knowledge:

a)      the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

b)      the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and 

c)      the interim management report and note 10 includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board,

Alan Bannatyne

Group Finance Director

28 August 2008

ROBERT WALTERS PLC

Half-yearly Financial Results

INDEPENDENT REVIEW REPORT TO ROBERT WALTERS PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial results for the six months ended 30 June 2008 which comprises the condensed consolidated income statement, the condensed consolidated statement of recognised income and expense, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity, and related notes 1 to 11. We have read the other information contained in the half-yearly financial results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial results are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the half-yearly financial results in accordance with the Disclosure and Transparency Rules of the United Kingdoms' Financial Services Authority. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in the half-yearly financial results has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial results based on our review.

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial results for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte & Touche LLP

Chartered Accountants

London

28 August 2008

 

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