Preliminary Results

RNS Number : 9304B

Staffline Group PLC

28 February 2011

 



Embargoed until 0700                                                                          Monday, 28 February 2011

 

STAFFLINE GROUP PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

Staffline Group plc ("Staffline" or "the Group"), a leading provider of recruitment, training and outsourced human resources services to industry, today announces its preliminary results for the year ended 31 December 2010.

Financial highlights:

·      Revenues up 79% to £206.2million (2009: £115.0million)

·      Group operating profit (pre-amortisation) up 110% to £7.8million (2009: £3.7million)

·      Group operating margin (pre-amortisation) 3.8% (2009: 3.2%)

·      Profit before tax up 100% to £7.0million (2009: £3.5million)

·      Basic earnings per share up 106% to 23.7p (2009: 11.5p)

·      Diluted earnings per share before amortisation up 111% to 24.9p (2009: 11.8p)

·      Final dividend of 3.8p; total dividend of 6.2p (2009: 3.1p); increase of 100%

Operational highlights:

·      Continued growth of the OnSite platform

−      Increased by 16 sites during the reporting period to 135 (2009: 119)

−      Represents 89% of Group sales (2009: 86%) 

·      Three acquisitions completed and integrated successfully during 2010 , with Kelburn Industrial acquired in January 2011

·      Investment in new acquisitions, Peter Rowley and House of Logistics, opening up opportunities in new industries and increasing Group operating margins

·      Market for outsourcing continues to offer opportunities for expansion and growth

·      Current trading in line with management's expectations

Commenting on the results and prospects for 2011, Andy Hogarth, Chairman and Chief Executive, said:

"Staffline continues to perform strongly against a backdrop of challenging market conditions. Our revenue and profit have both increased significantly, a testament to the skill and dedication of our people. I would like to thank them all for their continued hard work throughout the past year.

Changing attitudes towards outsourcing staff have benefitted us, with many companies reluctant to hire permanent staff in the current economic climate. OnSite is continuing to grow, with the opening of 16 more sites.

We continue to strive to create value for shareholders, underpinned by our successful strategy of organic growth coupled with selective acquisitions.  The Board's confidence in our business model continues to strengthen as is indicated by the doubling of the total dividend.  The Group has made a good start to the new financial year and we look forward to reporting another year of progress."

For further information, please contact:
Staffline Group plc	0115 950 0885
Andy Hogarth, Chairman and Chief Executive	07931 175775
Tim Jackson, Finance Director	07720 458626
www.staffline.co.uk
Liberum Capital Limited
NOMAD & Broker
Chris Bowman / Richard Bootle	020 3100 2222
Buchanan Communications
Jeremy Garcia/ James Strong / Gabriella Clinkard	020 7466 5000

About Staffline

Staffline Group plc is a recruitment organisation specialising in the provision of fully flexible blue collar workers to the food processing, manufacturing, e-retail and logistics industries.  Staffline provides and manages industrial workforces and uses training and business improvement techniques to ensure increased levels of efficiency to give their clients a significant commercial advantage.  Operating from over 150 locations in the UK, Staffline supplies up to 22,500 fully flexible workers each day.  Brands include OnSite, based on clients' premises, Peter Rowley a national training and consultancy organisation; OSP a specialist volume recruitment call centre; and House of Logistics, an outsourcing business operating on a "pay for performance" basis.

A presentation for analysts will be held at 10.30am on February 28^th 2010 at the offices of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE

Chairman and Chief Executive's Statement

Introduction

2010 Financial Results

It is very pleasing to be able to report a significant increase in the Group's revenue and profits given the continuing demanding trading environment in which we operate.   Sales have increased by 79% to £206.2million (2009: £115.0million) whilst profit before tax increased by 100% to £7.0million (2009: £3.5million).  Operating profit before amortisation increased by 110% to £7.8million (2009: £3.7m).  The increased profitability, and a continued focus on debtor collections led to a further significant decline in the net bank debt of the Group, which stood at £2.3million at the year end (2009: £5.0million).

Dividends

The Group has already paid an interim dividend of 2.4p per share (2009: 1.4p) and the Directors propose a final dividend for the year of 3.8p (2009: 1.7p) giving a total dividend for the year of 6.2p (2009: 3.1p).  This represents an increase of 100% and is within the Board's stated desired level of cover of earnings of 3.75 times. 

Subject to shareholder approval at the AGM, the final dividend will be paid on 6 July 2011 to shareholders on the register on 3 June 2011.

2010 Trading and Operational Review

Trading in 2010 started strongly in comparison to the first half of 2009 and this trend continued throughout the year.  The growth we experienced was due to three major factors:

1.     increase in demand from existing customers

2.     new OnSite openings during the year

3.     acquisitions made both in 2009 and in 2010

Existing customers

2010 saw the majority of the Group's clients experience an increase in demand for their products and services from the lows of 2008 and 2009.  Many maintained their reluctance to commit to hiring workers permanently but rather chose to increase their temporary and flexible headcount through Staffline.  The Board believes this trend is set to continue with both outsourcing and the bias towards part-time workers remaining strong.

New OnSite locations

From the end of 2009 and throughout 2010 we opened a significant number of new locations, completing the year operating from 135 OnSite locations (2009: 119). Our aim is to continue to expand our OnSite footprint and improve our geographical coverage across the UK.

Acquisitions

We acquired two businesses during May 2010, A La Carte Recruitment Limited and DKM Labour Solutions and a further one in November, Qubic Recruitment Solutions Limited.  All three businesses have performed ahead of budget, are fully integrated in to Staffline and are expected to add approximately £37m to revenues on an annual basis.

Of the four acquisitions made in 2009 three have again traded ahead of our expectations.  The one exception is our training organisation, Peter Rowley which, whilst still making a profit for the full year, suffered from the significant changes in Government funding for the sector in the second half.  The remaining businesses, Techsearch, OSP and Staffline Express performed at or ahead of expectations.

We have also made a rapid start to 2011 completing the asset acquisition of Kelburn Industrial, a Newcastle-based provider of recruitment solutions.  Kelburn Industrial is a specialist in supplying temporary industrial labour whose business model and customer base is highly complementary to Staffline.

Group Strategy

Our Group strategy remains unchanged - a strong focus on organic growth although more recently we have accelerated our appetite for small add-on acquisitions.

We intend to continue to pursue both of these strategies in 2011.  The third leg of our strategy is to look to enhance revenues through offering other complementary services to our existing client base, including training.  We remain fully committed to this element despite the slowdown in the training sector mentioned above, due to the Government spending cutbacks.  

Employees

The number of employees has continued to rise as we have won more clients and made more acquisitions.  We have been very fortunate to have had some exceptionally talented people join us this year.  The number of employees at the year end was 319 (2009:243).  Average sales per employee during the year were £708,000 compared to £553,000 in 2009.  We fund a great deal of training for employees in a very wide range of subjects and had 24 employees pass their REC Certificate in Recruitment Practice, 2 obtaining accountancy qualifications as well as 11 achieving success in a wide range of other subjects.

Travel and Subsistence Schemes

The Group has campaigned for some years against the use of travel and subsistence schemes by recruitment businesses with workers who earn at or near the minimum wage.  In October 2010, the Coalition Government announced its intention to change Minimum Wage legislation to ensure that these schemes could not be used to reduce workers' pay below the statutory minimum.  A judicial review of the results of that were announced on 30 December 2010 upheld the Government's decision.  Since that date there are still a number of umbrella companies who offer other types of tax reduction scheme which include; the payment of temporary workers offshore (in Hong Kong or the Isle of Man); making every worker a director of a limited company (claiming that minimum wage legislation is then non-applicable); 'adjust' the number of hours worked or 'adjust' holiday pay.  The Department for Business Innovation and Skills has issued guidance stating that in its opinion such schemes are not compliant with National Minimum Wage legislation for workers paid at or close to Minimum Wage.  However the continued use of such schemes continues to increase the competitive pressures on the Group.

Industry Appointments

Staffline's Operations Director, Marshall Evans, continues to be a Corporate Director of the Recruitment and Employment Confederation ("REC") and in addition was appointed to the role of Chairman of the REC's Policy Committee during the year.  This role involves representing the recruitment industry at the highest levels of Government.  In addition, Marshall is a member of the Board of the Gangmaster Licensing Authority and I am an executive member of the Association of Labour Providers.  Staffline is proud to be the only organisation with representation on the three organisations that shape the future of our industry.

Health & Safety

We take the provisions of a safe working environment for all our contractors and staff seriously and have invested in processes and systems which are intended to alert us to areas of possible concern. In an Onsite location the Group is often responsible for carrying out induction and other training, keeping accurate records and ensuring that a worker is suitably qualified for a role. We have direct access to the client and concerns identified can often be readily addressed. We continue to maintain effective communication with our clients to clearly understand their needs, to ascertain the role to be performed and to ensure our workers are specifically trained to undertake their duties.

During 2010 we introduced Health & Safety audits, which are intended to help us maintain and develop a continuously improving health & safety culture. Our commitment to safety has been shown by our consistent improvement in performance, recording an accident frequency rate (AFR) for the whole year of 0.32, a significant improvement on the previous year's AFR of 0.77. This equates to a 58% reduction in reportable accidents. This accident rate compares against an average of 6.1 for the industries in which Staffline works.  The AFR is calculated using the number of reportable accidents and total hours worked.

Environmental Policy

Staffline is introducing an Environmental Management System to help reduce its impact on the environment as detailed in our revised Environmental Policy.  This is a proactive step taken to ensure our targets for reduction in emissions are realistic and achievable.

As part of our continuing drive to reduce our Environmental impact, Staffline actively promotes the use of alternatives to motorised transport. By being registered with the Government initiative Cycle Scheme, we have enabled all our workers to purchase a bicycle tax free, which reinforces our aim to reducing our carbon footprint.

ISO 9001 and Investors in People (IIP)

At the beginning of 2010 we committed to both attain ISO 9001 for the first time and retain our IIP status both of which we successfully achieved.

Information Technology

During the year we have continued to invest significantly in our IT infrastructure, bringing our total spend in recent years to in excess of £3million.  The latest investment, an extensive upgrade to our main information capture systems will be launched internally in February 2011 and to our clients in the following months.  Trials have proved it to be extremely effective in reducing our operating costs whilst allowing us to significantly increase the level of service to clients.

Current Trading and Prospects

We believe the Group can continue to grow market share and that our OnSite model offers customers a reliable and cost effective outsourced solution.  Trading for the first 8 weeks of 2011 has been positive, and we remain confident that trading will continue in line with market expectations.  

The acquisition of Kelburn Industrial in January 2011 is an indication that there are still a number of acquisition targets which could give us the potential to accelerate revenue growth and expand both our customer base and geographical footprint.

Andy Hogarth

Chairman and Chief Executive

Date:

Finance Director's statement

Financial Highlights

The total revenues for the year increased by 79% to £206.2million (2009: £115.0million) reflecting the impact of strong demand for our services from existing customers, new business wins in 2009 and 2010 and also the impact of the acquisitions made during last year and this year.  The successful growth of our OnSite business, which achieves lower gross margins on higher volumes, has continued. The change in business mix has resulted in a reduction in gross margin to 11.2% (2009: 12.9%).  However, profit from operations has increased by 98% to £7.1million (2009: £3.6m), and the net operating margin, including amortisation of intangibles, has increased to 3.5% from 3.1% in 2009. The charge for amortisation has increased by £579,000 to £721,000 during the year.

The investment in acquisitions, offset by continued tight management of our debtor book and strong cash flow generation, has led to finance charges being flat at £0.1million (2009: £0.1million) and this has meant that we have continued to improve interest cover, which has now reached 56 times (2009: 33 times).  The interest rates on our overdraft facility changed slightly during the year, at 2.5% (2009: 2.0%) over bank base rate, while the rate for term borrowings remained at 1.0% (2009: 1.0%) over bank base rate.

Profit before tax for the reporting year increased to £7.0million (2009: £3.5million) and profit after tax was increased to £5.0million (2009: £2.4million).

Earnings per Share

The basic earnings per share more than doubled to 23.7p (2009: 11.5p). The diluted earnings per share also increased significantly to 22.6p (2009: 11.2p) and the diluted earnings per share before amortisation increased by 111% to 24.9p (2009: 11.8p).

Dividends

The directors propose a final dividend of 3.8p per share against 1.7p per share last year. This gives a total dividend for the year of 6.2p per share which is 100% ahead of the 3.1p per share paid last year.

Acquisitions

During the year we completed three acquisitions for a total consideration of £4.8million, net of cash balances acquired. This amount is comprised of £3.7million cash paid during the year, and further potential consideration of £1.1million which is dependent on future profitability. These acquisitions will add around £37million to turnover in a full year. The acquisitions have resulted in the recognition in the Group balance sheet of additions to goodwill of £1.2million and additions to intangible assets of £1.3million. The intangible assets will be amortised over a period of 2 years. The acquisitions have been funded from existing bank facilities.

Balance Sheet

The Group balance sheet has strengthened during the year, with net current assets rising by £0.9million to £3.9million (2009: £3.0million) and a broadly unchanged ratio of current assets to current liabilities of 1.14 (2009: 1.18).  It is also pleasing to report a significant fall in gearing to 7% (2009: 19%). The Group continues to be focused on cash generation and ensuring a robust balance sheet.

Financing

The Group's current bank facilities include a term loan of £2.7million, repayable in quarterly instalments up to 2013, and an overdraft of up to £10.0million.  At 31 December 2010 the Group was in a net cash position (excluding term loans).  The overdraft facility is renewable annually and is due to be renewed in March 2011.  Substantive discussions have already been held with the bank, which have resulted in an indicative offer of similar facilities for the period to March 2012 at a similar cost of funding as currently in place. The Board believes that these facilities, once finalised, will ensure that the Group has sufficient headroom to manage the current operations as well as providing further headroom to support the continued growth of the business. 

Post tax cash generation during the year has been strong and the relentless focus on debtor management has succeeded in reducing our working capital requirement by £0.3million despite the 79% increase in sales. In addition, we have invested £3.7million in acquisitions during the year covering A La Carte Recruitment Limited, DKM Labour Solutions and Qubic Recruitment Solutions Limited, and also invested £0.4million on our systems to assist the growth and development of the business.  Despite these investments we still ended the year with a £2.7million reduction in net debt to £2.3million (2009: £5.0million). During the year staff exercised share options raising £0.2million for the Company.

Tim Jackson
Finance Director
Date:

Consolidated summarised statement of comprehensive income

For the year ended 31 December 2010

	Note		2010	2009
			£'000	£'000
Continuing operations
Sales revenue			206,158	115,025
Cost of sales			(183,017)	(100,189)
Gross profit			23,141	14,836
Administrative expenses			(16,032)	(11,253)
Operating profit before amortisation of intangibles			7,830	3,725
Amortisation of intangibles			(721)	(142)
Profit from operations			7,109	3,583
Finance costs			(126)	(108)
Profit for the year before taxation			6,983	3,475
Tax expense	3		(1,935)	(1,030)
Net profit and total comprehensive income for the year			5,048	2,445
Total comprehensive income attributable to:
Non-controlling interest			(18)	-
Owners of the parent			5,066	2,445
Earnings per ordinary share	4
Basic			23.7p	11.5p
Diluted			22.6p	11.2p

Consolidated summarised statement of changes in equity

For the year ended 31 December 2010

	Share capital	Own shares JSOP	Share premium	Share based payment reserve	Profit and loss account	Total attributable to owners of parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2010	2,123	-	14,525	170	9,318	26,136	-	26,136
Dividends	-	-	-	-	(872)	(872)	-	(872)
Share options issued in equity settled share based payments	-	-	-	28	-	28	-	28
Share options exercised	15	-	179	-	-	194	-	194
Issue of new shares to Joint Share Ownership Plan	126	(1,157)	1,031	-	-	-	-	-
Transactions with owners	2,264	(1,157)	15,735	198	8,446	25,486	-	25,486
Profit for the period	-	-	-	-	5,066	5,066	(18)	5,048
Total comprehensive income for the period	-	-	-	-	5,066	5,066	(18)	5,048
Balance at 31 December 2010	2,264	(1,157)	15,735	198	13,512	30,552	(18)	30,534

	Share capital	Own shares JSOP	Share premium	Share based payment reserve	Profit and loss account	Total attributable to owners of parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2009	2,123	-	14,525	149	7,489	24,286	-	24,286
Dividends	-	-	-	-	(616)	(616)	-	(616)
Share options issued in equity settled share based payments	-	-	-	21	-	21	-	21
Transactions with owners	2,123	-	14,525	170	6,873	23,691	-	23,691
Profit for the period	-	-	-	-	2,445	2,445	-	2,445
Total comprehensive income for the period	-	-	-	-	2,445	2,445	-	2,445
Balance at 31 December 2009	2,123	-	14,525	170	9,318	26,136	-	26,136

Consolidated summarised statement of financial position

For the year ended 31 December 2010

		2010	2009
		£'000	£'000
Assets
Non current
Goodwill		26,162	25,422
Other intangible assets		1,296	726
Property, plant and equipment		1,116	725
		28,574	26,873
Current
Trade and other receivables		30,633	18,609
Cash and cash equivalents		1,871	859
		32,504	19,468
Total assets		61,078	46,341
Liabilities
Current
Trade and other payables		(23,328)	(12,030)
Borrowings		(2,395)	(3,177)
Other current liabilities		(1,544)	(608)
Current tax liabilities		(1,330)	(627)
		(28,597)	(16,442)
Non current
Borrowings		(1,740)	(2,639)
Other non current liabilities		(207)	(1,124)
Total liabilities		(30,544)	(20,205)
Equity
Share capital		(2,264)	(2,123)
Own shares		1,157	-
Share premium		(15,735)	(14,525)
Share based payment reserve		(198)	(170)
Profit and loss account		(13,512)	(9,318)
		(30,552)	(26,136)
Non-controlling interest		18	-
Total equity		(30,534)	(26,136)
Total equity and liabilities		(61,078)	(46,341)

The financial statements were approved by the Board of Directors on 28 February 2011.

A J Hogarth                                                                                          T D Jackson

Director                                                                                                  Director

Consolidated summarised statement of cash flows

For the year ended 31 December 2010

					2010	2009
					£'000	£'000
Cash flows from operating activities
Profit before taxation					6,983	3,475
Adjustments for:
Finance costs					126	108
Depreciation, loss on disposal and amortisation					871	413
Operating profit before changes in working capital and provisions					7,980	3,996
Change in trade and other receivables					(7,820)	(2,804)
Change in trade and other payables					9,203	2,306
Cash generated from operations					9,363	3,498
Employee equity settled share options					28	21
Employee cash settled share options					15	-
Taxes paid					(1,222)	(774)
Net cash inflow from operating activities					8,184	2,745
Cash flows from investing activities
Purchases of property, plant and equipment					(471)	(48)
Sale of property, plant and equipment					68	-
Acquisition of businesses - deferred consideration for prior acquisitions					(592)	-
Acquisition of businesses net of cash acquired					(3,000)	(1,000)
Acquisition of businesses - deferred consideration paid					(693)	-
Net cash used in investing activities					(4,688)	(1,048)
Cash flows from financing activities
Repayment of bank and other loans					(899)	(906)
Interest paid					(126)	(108)
Dividends paid					(872)	(616)
Proceeds from the issue of share capital					194	-
Net cash flows from financing activities					(1,703)	(1,630)
Net change in cash and cash equivalents					1,793	67
Cash and cash equivalents at beginning of period					(1,396)	(1,463)
Cash and cash equivalents at end of period					397	(1,396)

Notes to the Accounts

For the year ended 31 December 2010

1              accounting policies

The principal accounting policies adopted by the Group which have been applied consistently are set out in the statutory financial statements for the year ended 31 December 2010.

Basis of preparation

The consolidated financial statements of Staffline Group plc and its subsidiary undertakings ('the Group') have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the EU and the International Financial Reporting Standards as issued by the International Accounting Standards Board. 

2              segmental reporting

(a)           By business segment (primary segment):

As defined under IFRS 8,  the only material business segment the Group has is that of providing temporary staff to customers. The placement of permanent staff to customers and the Group's training business both contribute less than 10% of Group total revenue, profit and assets.  The sales revenue is from the rendering of services. The financial information reviewed by the board is materially the same as that reported under IFRS.

 (b)          By geographical segment (secondary segment):

Under the definitions contained in IFRS 8, the only material geographic segment that the Group operates in is the United Kingdom.

The Group has reviewed the requirement for segmental reporting and does not believe that any of its business segments require separate disclosure. An initial review was done last year end and it was believed that segmental reporting might be required for Peter Rowley Limited, the Group's training business, however the integration of this business and the growth in the remaining balance of the business has negated the requirement for this reporting as Peter Rowley constitutes an immaterial proportion of the total business.

During 2010, one customer contributed greater than 10% of the group's revenues being £21,659,000 (10.5% of total revenues) (2009: no customers greater than 10%).

 

3              tax expense

The relationship between the expected tax expense at 28% and the tax expense actually recognised in the statement of comprehensive income can be reconciled as follows:

	2010		2009
	£'000	%	£'000	%
Result for the year before tax	6,983		3,475
Tax rate	28.0%		28.0%
Expected tax expense	1,955	28.0	973	28.0
Adjustment for non-deductible expenses relating to short term temporary differences	26		30
Other non-deductible expenses	44		27
Adjustment in respect of previous year	(90)		-
Actual tax expense	1,935	27.7	1,030	29.4
Tax expense comprises:
Current tax expense	1,935		1,030

There is no tax expense or credit in relation to the share based payment reserve credited to equity.

4              earnings per share

The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year, after deducting any own shares (JSOP). The calculation of the diluted earnings per share is based on the basic earnings per share adjusted to allow for all dilutive potential ordinary shares.

Details of the earnings and weighted average number of shares used in the calculations are set out below:

	Basic		Diluted
	2010	2009	2010	2009
Earnings (£'000)	5,048	2,445	5,048	2,445
Weighted average number of shares	21,254,988	21,229,081	22,369,807	21,854,101
Earnings per share (pence)	23.7p	11.5p	22.6p	11.2p

The weighted average number of shares has been increased by 1,114,819 (2009: 625,020) shares to take account of all dilutive potential ordinary shares that could be issued under the share option scheme and all shares issued during the year excluding own shares.

Dividends

During the year, Staffline Group plc paid interim dividends of £508,808 (2009: £297,207) to its equity shareholders.  This represents a payment of 2.4p (2009: 1.4p) per share.  A final dividend of £812,612 has been proposed (2009: £360,894) but has not been accrued within these financial statements.  This represents a payment of 3.8p (2009: 1.7) per share.  The final dividend for 2009 was declared and paid in 2010.

5              ACQUISITIONS

The Group purchased 100% of the share capital of A La Carte Recruitment Limited and Qubic Recruitment Solutions Limited and the trade and assets of DKM Labour Solutions during the year for a total estimated consideration (before costs) of £6,121,000. An adjustment was required to the book values of the assets and liabilities of the businesses acquired in order to present the net assets at fair values in accordance with group accounting policies. The purchases were accounted for as acquisitions. Post-acquisition contribution to the group's profit was a profit of £564,000. Post-acquisition contribution to the group's revenue was £21,676,000. If the acquisitions had been made on 1 January 2010, profit after tax of the group would have been £5,499,000 and revenue would have been £221,315,000.

The aggregated fair values of the assets and liabilities acquired, together with the fair value of the consideration paid, can be summarised as follows:

	Book value at acquisition	Fair value adjustment	Provisional fair value to group
	£'000	£'000	£'000
Intangible assets - customer contracts	-	1,262	1,262
Intangible assets - favourable service agreements	-	29	29
Fixtures and fittings	138	-	138
Trade and other receivables	4,204	-	4,204
Cash at bank	1,340	-	1,340
Trade and other payables	(1,989)	(91)	(2,080)
Deferred tax	11	-	11
Net assets	3,704	1,200	4,904
Goodwill			1,217
			6,121
Satisfied by:
Cash			4,340
Guaranteed deferred consideration			445
Contingent deferred consideration			1,336
			6,121

Identifiable net assets
The fair value of the trade and other receivables acquired as part of the business combinations amounted to £4,204,000, with a gross contractual amount of £4,354,000. As of the acquisition date, the Group's best estimate of the contractual cash flow not expected to be collected amounted to £150,000.

Goodwill
Goodwill of £1,217,000 is primarily related to growth expectations, expected future profitability, the skill and expertise of the acquired workforce, and expected cost synergies. The goodwill that arose from these business combinations is not expected to be deductible for tax purposes.

Contingent deferred consideration
For two of the businesses acquired, an element of the consideration is dependent on future profits of the acquired businesses. The amount of contingent deferred consideration has been estimated using forecast income statements for the coming period, taking into account management estimates of future performance. The total consideration for the three businesses acquired is capped at £7.64 million, therefore the possible (undiscounted) range of the contingent consideration is from nil to £2.855m. Contingent deferred consideration is classified as a financial liability, measured at amortised cost with any changes in estimated value recognised in profit and loss.

All of the guaranteed deferred consideration and £248k of the contingent deferred consideration was paid during the year to 31 December 2010.

6              publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The consolidated summarised income statement, the consolidated summarised statement of changes in equity, the consolidated summarised balance sheet and the consolidated summarised cash flow statement and associated notes have been extracted from the Group's 2010 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006.

Those financial statements have not yet been delivered to the registrar of companies.

 

END

 

 

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