Final Results
ATA Group PLC
15 April 2005
ATA Group plc
Preliminary results for the year ended 31 December 2004
ATA Group plc ('ATA') is a human resource support services group, which provides
employment solutions and training services to client companies in the United
Kingdom and the Republic of Ireland.
Highlights
Group pre-tax profits at £1.36m (2003, before exceptional credits of £53,000 :
£1.17m).
Underlying, fully diluted, earnings per share at 11.13p (2003: 9.66p).
Dividends for the year have been raised to 6.4p (2003: 6.0p).
Recruitment and labour supply had a better year and achieved pre tax profits of
£233,000 (2003: loss (£71,000)), even after post acquisition restructuring costs
at Gem-Weld of £168,000.
Training and consultancy has dealt well with turmoil in the Railway Industry but
pre tax profits have eased to £1.13m (2003: £1.29m).
A challenging year is anticipated in 2005.
Commenting on the results Bill Douie, Chairman, said:
'In ATA Selection Ltd, demand for candidates for permanent positions remained
strong and on an improving trend during the year but a paucity of quality
candidates distorted the balance of supply and demand. Nonetheless by increasing
effectiveness at the 'sharp end', key performance ratios held up well.
Additionally the pace quickened in contract recruitment and by the year end the
majority of our locations had teams of contract consultants. Ganymede
Tracklayers Ltd enjoyed a most satisfactory move from trading losses in 2003 to
material profits in 2004.
In August a further move was made into the provision of services to the National
Rail Network with the acquisition of Gem-Weld (UK) Ltd, a company providing
specialist track welding services.
Catalis Rail Training Ltd continued to enjoy another reasonably positive year
but the anticipated fall off in business following the transfer of maintenance
work from the private sector to Network Rail began to appear towards the year
end. Rail Training Audit Services Ltd continued to perform creditably and gained
a short extension to it's contract to the end of 2005, with prospects of a
further contract for three years.
Following major changes in the provision of maintenance services to the National
Rail infrastructure, Catalis Rail Training and Rail Training Audit Services are
facing the need to re-position their businesses and there is bound to be a
period of uncertainty and change. This will inevitably result in both major
challenges and short term non-recurring costs, particularly in 2005 but
extending into 2006. It is not possible at this stage to evaluate the impact of
these changes on either underlying trading in our Railway interests nor the
costs of moving to the new structure. Whereas improved trading in recruitment
will help to offset these factors, it is unlikely that the Group will escape
wholly without some financial pain over the medium term. The Group's business
model remains fundamentally sound and the Directors believe that this period of
adjustment will be successfully navigated.'
15th April 2005
ENQUIRIES:
ATA Group plc Tel: 01454 310069
Bill Douie, Chairman Clive Chapman, Chief Executive
Chairman's Statement
Year ended 31 December 2004
I am pleased to present the thirteenth preliminary results of the company.
FINANCIAL
Recruitment and labour supply
Recruitment division turnover increased to £9.38m (2003: £6.33m) including
£98,000 from Gem-Weld (UK) Ltd, acquired in August 2004. The main areas of
advance were in on-track labour supply through Ganymede Tracklayers Ltd and in
contract recruitment in Engineering and Rail. These advances were partly offset
by losses and re-organisation costs at Gem-Weld of £168,000. Nonetheless,
divisional profits rose to £233,000 (2003: loss (£71,000)).
Training and consultancy
Following the decision by Network Rail to bring back all Infrastructure
Maintenance 'in house' and thus to replace the work previously done by private
sector contractors a period of uncertainty emerged which adversely affected both
turnover and profits at Catalis Rail Training Ltd and Rail Training Audit
Services Ltd. There was a consequential reduction of divisional turnover to
£7.77m (2003: £8.57m) and profits to £1.13m (2003: £1.29m).
Group
Group Pre-tax profits at £1.36m (2003, before exceptional credits : £1.17m) have
improved by 16.2%, and underlying fully diluted earnings per share at 11.13p
(2003: 9.66p) have improved by 15.2%. Emphasis continues to be placed on cash
conservation and at the year end the position had improved to £597,000 net cash
(2003: £225,000 net cash).
TRADING
Recruitment and labour supply
Demand for candidates for permanent positions remained strong and on an
improving trend during the year but a paucity of quality candidates distorted
the balance of supply and demand. Nonetheless by increasing effectiveness at the
'sharp end', key performance ratios held up well and a satisfactory improvement
in profitability was achieved. ATA Selection Ltd was, however, still operating
at well short of optimum levels and key management changes took place in the
second half of the year resulting in a pleasing enhancement of trading results
in the final quarter. Additionally the pace quickened in contract recruitment
and by the year end the majority of our locations had teams of contract
consultants.
By the beginning of 2004, full re-organisation at Ganymede Tracklayers Ltd was
complete and the success in gaining a contract with Network Rail was built on
with other business being gained from National Rail Renewals Companies as well
as, most notably, an early entry into London Underground work through Tube
Lines. These developments allowed a most satisfactory move from trading losses
in 2003 to material profits in 2004.
In August a further move was made into the provision of services to the National
Rail Network with the acquisition of Gem-Weld (UK) Ltd, a company providing
specialist track welding services. Although small, Gem-Weld had, and still has,
an excellent reputation for quality but had suffered badly in terms of the
uncertainties and lack of orders resulting from the changes in infrastructure
maintenance. These difficulties, which were common to all suppliers of this
service, continued up to the year end and, coupled with the re-organisation
needed, resulted in the negative performance outlined above.
Training and consultancy
Catalis Rail Training Ltd continued to enjoy another reasonably positive year
but the anticipated fall off in business following the transfer of maintenance
work from the private sector to Network Rail began to appear towards the year
end. In particular Catalis Rail Training as the only serious supplier of
external training for signal engineers, is especially vulnerable and the process
of planning for re-orientation commenced in the second half. The contract gained
to supply such training to London Underground initially through Tube Lines, has
been built on with a similar but smaller arrangement with Metronet.
Rail Training Audit Services Ltd continued to perform creditably and gained a
short extension to it's contract to the end of 2005, with prospects of a further
contract for three years. Nonetheless a continuing drive for cost reductions by
Network Rail and, again, collateral effects from the changes in infrastructure
maintenance have reduced the amount of training mandated in the key area of
employee safety, resulting in reduced numbers of trainers and less demand for
the services.
Capital Investment
Following the completion of our investment program in IT and rail training
equipment capital investment fell further to a figure significantly less than
depreciation, permitting a further strengthening of the Group balance sheet. At
the year end the opportunity was taken to repay early the final instalments of
our medium term loan from Barclays Bank.
Pension Funds
The Group operates both defined contribution and defined benefit pension
schemes. Although asset valuations in 2002 reduced the surplus value of our
defined benefit scheme, funds available to cover all the future requirements of
pensioners, deferred pensioners and current employee members of the scheme
remained in excess of the minimum. The remaining surplus has been used to fund
both employee and employer contributions resulting in a 'contribution holiday'
to the end of 2004. As a matter of prudence, although some surplus remains,
contributions, albeit at a reduced rate, re-commenced from the first of January
2005. This position will be reviewed again following the publication of the
results of the scheme triennial valuation, due later in 2005.
DIVIDENDS
In view of the improving trading outlook at the half year the interim dividend
was increased to 2.5p. Given the need for caution concerning the short term
changes needed at Catalis Rail Training your directors are recommending a
maintained final dividend of 3.9p.
OUTLOOK
The pendulum swings. After three lean years recruitment is in much better shape
and is expected to continue to improve and expand, with much of the turnover
increase arising from expansion in contract recruitment. Ganymede is coping well
with the maintenance and renewals changes and is expected to hold its position.
Following post acquisition restructuring, business at Gem-Weld has now started
to pick up leading to a much improved trading picture.
Following major changes in the provision of maintenance services to the National
Rail infrastructure, Catalis Rail Training and Rail Training Audit Services are
facing the need to re-position their businesses and there is bound to be a
period of uncertainty and change. This will inevitably result in both major
challenges and short term non-recurring costs, particularly in 2005 but
extending into 2006. It is not possible at this stage to evaluate the impact of
these changes on either underlying trading in our Railway interests nor the
costs of moving to the new structure. Whereas improved trading in recruitment
will help to offset these factors, it is unlikely that the Group will escape
wholly without some financial pain over the medium term. The Group's business
model remains fundamentally sound and the Directors believe that this period of
adjustment will be successfully navigated.
As the position becomes more clear, the Company will make further announcements.
BOARD DEVELOPMENT
It remains the Group's intention to add a further non-executive director to the
board. In view of the need to conserve resources and maintain tight control of
costs, this is unlikely to happen in the immediate future.
STAFF
These are likely to prove uncertain and difficult times for our Railway
interests and I would particularly like to thank all Group staff for their
understanding, co-operation and loyalty.
W.J.C. Douie, Chairman 15 April 2005
Chief Executive's Report
Year ended 31 December 2004
GROUP VISION AND AIMS
The vision of the Group is to achieve sustainable and attractive earnings
through the provision of business services in recruitment, training and
consultancy. This model is based on the logic that the competencies encapsulated
in these services are predominantly transferable across market sectors. The
market focus to date has been in mainstream engineering, manufacturing and rail
related fields but the Group is not restricted to these sectors. Hence the Group
benefits from the diversity of the client base, by market definition, whilst
enjoying the advantages gained through the application of core, competency
based, services.
The aim is to capitalise on the level of competence that the Group possesses in
the provision of recruitment services in permanent, contract and more specific
labour supply areas, supported by the capacity to supply quality training,
assessment, audit and verification services to the same clients and across
markets. During 2004 the Group sustained a mix of organic growth activity,
particularly in contract recruitment, with an acquisition in rail labour supply
to further this aim. The segmental split of these outcomes is identified in the
summary below.
GROUP TRADING SUMMARY 2004
Turnover Operating Profit/(Loss)
-------------- ------ ------------------
2004 2003 2004 2003 2004 2003 2004 2003
£'000 £'000 % % £'000 £'000 % %
Recruitment
and Labour
Supply 9,380 6,334 54.69 42.49 270 (61) 19.04 (5.01)
Training and
Consultancy 7,772 8,572 45.31 57.51 1,148 1,278 80.96 105.01
-------------- ------ ------ ------ ------ ------ ------ ------ ------
Group Total 17,152 14,906 100.00 100.00 1,418 1,217 100.00 100.00
-------------- ------ ------ ------ ------ ------ ------ ------ ------
Consequently, the recruitment related revenues increased by 48% compared to 2003
and represented 55% of the Group's total revenue, moving from a loss to an
operating profit of £270,000, after the initial trading losses (£140,000) of the
labour supply acquisition in 2004 have been written off, or £410,000 before.
The reduction in training revenues by 9%, compared to 2003, reflects the
decision by Network Rail to recall all rail maintenance contracts from the
private sector and the resultant reduction in training related expenditure.
Operating profits reduced accordingly in line with the revenue diminution.
In total Group revenues grew by 15% to £17.2 million whilst operating profits
increased by 16.5% to £1.4 million. Despite a significant change in the mix of
the underlying revenues between recruitment and training related activity, year
on year, the Group gross margin held up at 39% with net pre-tax profit before
exceptionals of 8%.
RECRUITMENT AND LABOUR SUPPLY
The permanent recruitment services remain focused on the provision of staff in
commercial and technical sales roles, technical engineering, manufacturing and
rail. Demand for services and candidate shortages produced a commensurate
increase in the number of staff engaged in these activities in 2004 and growth
in the subsequent volumes of activity. The nationwide network of offices
continue to provide advantages in the assessment and selection of suitable
candidates for clients providing all parties with an efficient service as the
backbone of a sustainable barrier to entry.
The utilisation of the spare capacity, in these same offices, to organically
build the contract recruitment business in the core Group market of technical
manufacturing and engineering produced positive outcomes in 2004. Underlying
revenues increased by 143% to £2 million with excellent quarter on quarter
growth. The marginal cost gain of expansion in this area remains a key aim of
the Group with further opportunities to extrapolate the concept across
additional markets and geographical locations.
The acquisition in 2004 of a further labour supply business, approved by Network
Rail in rail specific welding duties, complements the existing rail maintenance
labour supply business Ganymede Tracklayers acquired in 2002. Consolidated
revenues in 2004 contributed £2.5 million to Group with opportunities in 2005 to
bid for national tenders and preferred supplier contracts.
These three distinct recruitment services, of permanent, contract and labour
supply, utilise the Group's operational offices, back office systems, front
office software and managerial staff to great effect.
TRAINING AND CONSULTANCY
Since acquiring Catalis Rail Training in 2000 the Group has enjoyed a dominant
position in certain aspects of the technical rail training market. This position
altered in 2004 as the impact of a not for profit Network Rail re-nationalising
the maintenance of the railways affected the demand for such training. The
second half of 2004 witnessed a slow down in the demand for open programme
maintenance training as Network Rail came to terms with the training needs
analysis of 18,000 transferred staff from the Infrastructure Maintenance
companies.
Revenues in maintenance and safety training reduced accordingly whilst the gross
margin percentage was maintained through the use of a mix of permanent trainers
and associates. Diversification into alternative revenue streams resulted in
positive contract wins with Tube Lines and Metronet, the key providers to London
Underground for infrastructure works.
The implication of Network Rail providing its own in-house training will require
a re-organisation of Catalis in 2005 to ensure that the business is best shaped
to fit the external market provided by the Train and Freight operating
companies, the construction based renewals market of rail, international rail
demand, rail manufacturers and London Underground.
Group consultancy services provide specialists to support the core elements of
recruitment and training in rail related audit and verification work, with
quality, health and safety, occupational assessment, development and general
management courses. The combined revenue of these services are not material in
Group terms but offer attractive margins based on the unique expertise on offer.
INFORMATION TECHNOLOGY
Whilst it would be premature to see the internet as a mature market the supply
of candidates through an on-line capability has now settled down to the point
that electronic means account for 90% of all candidate applications. This factor
alone has provided a return on the investment in IT over the last 3 years to
build a robust, real time, wide area network to support all Group activities.
The web based capability within the recruitment businesses during 2004 reduced
the expenditure on paper press as a means to attract candidates and provides a
platform for significant savings looking forward into 2005.
Front office and back office systems to meet the growth in contract activity
were also deemed essential and this investment took place during the year.
Capital expenditure reduced during 2004 compared to 2003 in respect of the
operating recruitment systems.
SHARE OPTIONS
The Government EMI scheme was adopted in 2001. Further options have been granted
in 2004 in this scheme. The management team and key staff will continue to be
the focus of such incentives
PROSPECTS
The strategic mix of recruitment and training across a range of markets, based
on the flexibility embodied in the capability of the management team to pursue
growth areas, is the essence of the Group's business prospects. The expertise,
experience and brands of the trading entities support this future.
The balance of revenues shifted during 2004 in favour of the recruitment
services and this trend will continue in 2005, excluding any acquisitions, based
largely on organic developments in contract recruitment. Whilst the gross
margins in contract are generally lower than in training the opportunity for
growth is significant utilising the physical capacity of the national office
network and IT infrastructure of the Group.
The training elements will encounter a year of change due to the revised Network
Rail framework and it is envisaged that certain activities currently performed
by the Group will be subsumed into Network Rail. Revenues will be affected and
costs will need to be realigned as this transition unfolds during 2005.
Acquisitions remain an important part of the overall strategy to bolt new market
areas into the strategic mix of recruitment and training. The Group has
established a track record in the selection, assessment and integration of such
businesses and remains an active player in this field.
Clive Chapman, Chief Executive 15 April 2005
Consolidated Profit and Loss Account
2004 2003
Notes £'000 £'000 £'000 £'000
Turnover
Continuing operations 17,054 14,789
Acquisitions 98 -
------- -------
17,152 14,789
Discontinued operations - 117
------- -------
17,152 14,906
Cost of sales (10,464) (8,677)
------- ------- ------- -------
Gross Profit 6,688 6,229
Administrative expenses (5,382) (5,183)
Other operating income 112 171
------- ------- ------- -------
Operating Profit
Continuing operations 1,558 1,276
Acquisitions (140) -
------- -------
1,418 1,276
Discontinued operations - (59)
------- -------
1,418 1,217
Profit on disposal of fixed assets - 53
Interest receivable and similar 6 11
income
Interest payable and similar (63) (58)
charges ------- -------
(57) 6
------- ------- ------- -------
Profit on ordinary activities
before taxation 1,361 1,223
Tax on profit on ordinary (436) (393)
activities ------- ------- ------- -------
Profit on ordinary activities after
taxation 925 830
Dividends 1 (523) (488)
------- ------- ------- -------
Retained profit for the financial 402 342
year ------- ------- ------- -------
Earnings per share 2 11.34p 10.21p
Fully diluted earnings per share 2 11.13p 10.11p
Underlying earnings per share 2 11.34p 9.75p
Underlying fully diluted earnings
per share 2 11.13p 9.66p
There were no recognised gains or losses other than those reported in the Profit
and Loss Account.
Consolidated Balance Sheet
2004 2003
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 1,154 1,116
Tangible assets 1,588 1,843
-------- -------- -------- --------
2,742 2,959
Current assets
Stock 29 12
Debtors
Amounts falling due after more than one year 809 826
Amounts falling due within one year 3,483 3,819
Cash at bank and in hand 715 839
-------- -------- -------- --------
5,036 5,496
Creditors
Amounts falling due within one year (3,528) (4,372)
-------- -------- -------- --------
1,508 1,124
-------- -------- -------- --------
Total assets less current liabilities 4,250 4,083
Creditors
Amounts falling due after more than one year (50) (257)
Provisions for liabilities and charges (101) (150)
-------- -------- -------- --------
Net assets 4,099 3,676
-------- -------- -------- --------
Capital and reserves
Called up share capital 82 81
Share premium account 1,796 1,776
Capital redemption reserve 50 50
Profit and loss account 2,171 1,769
-------- -------- -------- --------
Equity shareholders' funds 4,099 3,676
-------- -------- -------- --------
Approved by the Board of Directors on 15 April 2005
C CHAPMAN Chief Executive
A BAILEY Director
Consolidated Cash Flow Statement
2004 2003
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 1,857 2,109
Return on investments and servicing of
finance
Interest received 6 11
Interest paid (63) (58)
-------- -------- -------- --------
Net cash (outflow) from return on
investments (57) (47)
and servicing of finance
Taxation
UK corporation tax paid (506) (518)
Capital expenditure
Sale of tangible fixed assets 35 473
Purchase of tangible fixed assets (321) (459)
-------- -------- -------- --------
Net cash (outflow)/inflow from capital
expenditure (286) 14
Acquisitions and disposals
Purchase of subsidiary undertaking (15) (6)
Net debt acquired with subsidiary (19) -
-------- -------- -------- --------
Net cash (outflow) from acquisitions and
disposals (34) (6)
Equity dividends paid (522) (479)
-------- -------- -------- --------
Net cash inflow before use of financing 452 1,073
Financing
Issue of ordinary share capital 21 13
Decrease in loans (500) (262)
Capital element of finance lease rental
payments (97) (116)
-------- -------- -------- --------
Net cash (outflow) from financing (576) (365)
-------- -------- -------- --------
(Decrease)/Increase in cash (124) 708
-------- -------- -------- --------
NOTES
1. Dividends
On 1 September 2004 an interim dividend of 2.5p net per share was resolved by
the Board to be paid to shareholders on the register on 19 November 2004. The
interim dividend was paid on 13 December 2004.
A final dividend for the year of 3.9p net per share will be proposed at the
forthcoming Annual General Meeting (to be held at the offices of Lawrence
Graham, 190 Strand, London, WC2 1JN on 17 May 2005 at 12.00 noon) and if
approved, will be paid on 29 July 2005 to shareholders on the register on 24
June 2005.
2. Earnings per Share
The calculation of earnings per share is based on a profit after taxation of
£925,000 (2003: £830,000) and a weighted average of 8,155,492 (2003: 8,130,104)
shares in issue.
The underlying earnings per share figure is based upon earnings excluding the
exceptional credits and attributable tax charge.
Report & Accounts
The above results do not represent the statutory accounts. The statutory
accounts for 2003 have been filed with the Registrar of Companies, received an
unqualified audit report and did not contain a statement under Section 237 (2)
or (3) of the Companies Act 1985. The audited accounts will be mailed to
shareholders shortly and will be available from the Company's registered office:
- Kingston House, Oaklands Business Park, Armstrong Way, Yate, BS37 5NA.
This information is provided by RNS
The company news service from the London Stock Exchange
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