Interim Results

ATA Group PLC 08 September 2006 ATA Group Plc CHAIRMAN'S STATEMENT I am pleased to present the interim report of the Company for the six months to 30 June 2006. Structure and Management Following the loss of our Chief Executive in January certain changes have been instituted both in the reporting structure and the top management of our Group. The previous split of our activities into 'Recruitment & Labour Supply' and 'Training & Consultancy' has been replaced by 'Recruitment' and 'Railway'. The Recruitment division, trading under the name of ATA Selection, now comprises all of our permanent and contract recruitment activities serving the White Collar markets in Engineering, Sales, Rail and, recently initiated, Construction. The Railway division comprises all Training activities in the Group, presently substantially to the Railway Industry, trading as Catalis, and Blue Collar labour supply, presently solely to the Overground and Underground railway systems, trading as Ganymede Tracklayers. In order to ensure continuity and quality of top management I have reverted to full-time Group Executive Chairman, Andrew Bailey has been appointed Group Managing Director and we have recruited a full-time Group Financial Controller. Although a number of possible names for non-executive director have been suggested we have yet to locate a candidate who meets all the requirements and the search continues. Accordingly, for the time being, the Group Board consists of the above two named executives. The operational responsibility has been placed in the hands of the team of four Regional Directors in the Recruitment division and in the hands of Paul McLoughlin, recently promoted Managing Director of the Railway division. Disposal There follows the text of an announcement made on 28 July 2006. The Directors of ATA are pleased to announce the following disposal:- Completion took place today of the sale of the assets and goodwill of Gem-Weld (UK) Limited for a cash consideration of £264,000 payable in five instalments over fifteen months. Mr Bill Douie, Chairman of ATA Group Plc, commented 'The provision by the private sector of rail Track Welding Services was thrown into turmoil following the return of maintenance of the infrastructure of the National Rail Network to Network Rail. Since that time there have been periods of feast and famine in demand for such services and during a period of low demand in 2004 ATA Group purchased Gem-Weld (UK) Limited. During late 2004 and 2005 costly re-organisation of the Company took place and satisfactory business flows and trading results were enjoyed for approximately twelve months to 31 March 2006. At the beginning of the Network Rail budget year on 1 April 2006 demand again reduced to wholly un-commercial levels, a situation which continues, and ATA Group reluctantly concluded that it was not possible to provide this service through a stand-alone company. Accordingly the opportunity has been taken to dispose of this activity and terminate what has not been a successful investment for the Group. The consideration will be used to further strengthen the Group's cash reserves. This disposal allows further simplification of the Group's range of core business activities which are strongly focussed on the provision of recruitment and training services to the manufacturing, construction and transport industries, predominantly in the UK.' Gem-Weld (UK) Limited has been treated in the accounts as a discontinued activity. Losses to 30 June 2006 of £340,000 on turnover of £549,000 include a goodwill write-off of £129,000. Proceeds of sale will be accounted for in the second half. Trading General Economic conditions remain stable although threatening as the Global Economy faces the possibility of recession and events in the Middle East and elsewhere serve to de-stabilise the world environment. General stability continues in the trading environment in recruitment, although the Railway Industry is still undergoing a process of fundamental change which continues to create significant uncertainty and challenging trading conditions much as expected. Group turnover in the six months to 30 June 2006 increased 6% to £9.145m, (2005 £8.626m), profit before tax including non-recurring and exceptional items rose to £1.188m, (2005 £4,000). Earnings per share rose to 7.24p (2005 0.34p). All figures are adjusted to exclude the discontinued activity. Recruitment Recruitment turnover in the period was £5.55m (2005 £4.39m). Operating profit rose to £300,000 (2005 £89,000). The performance of ATA Selection improved during the period in permanent recruitment and further material progress was made in contract recruitment. In common with most of our peer group, we continue to experience difficulties in attracting and retaining consultants of satisfactory quality and consultant numbers in both permanent and contract recruitment are broadly similar to those at the last year end. Greater attention is being paid to the need for effective training and development of staff and early signs, reflected in more efficient performance and better retention, are encouraging. This is, and will remain, a significant challenge and other initiatives to improve this important area will be introduced in the second half. Railway Training turnover in the period continues to be seriously impacted by reduced demand for Signal Engineer Training following the transfer of all Infrastructure Maintenance to Network Rail in the second half of 2004 and the termination of the contract enjoyed by Rail Training Audit Services, but increased by the inclusion of Ganymede Tracklayers (previously reported under Recruitment and labour supply) and shows a reduction to £3.60m (2005 £4.24m). An operating loss of £161,000 (2005 loss £79,000) was incurred, entirely due to continuing difficulties at Catalis. These figures exclude the discontinued activity. During the period agreement has been concluded with Network Rail for a smooth transition from provision of Signal Engineer Training to the maintenance market by the private sector to provision, in the great majority, internally by Network Rail. Under the terms of an agreement dated 21 June 2006, certain plant, equipment and other assets, used by Catalis to provide Signal Engineer Training courses, were sold to Network Rail with proceeds being receivable over the second half of 2006. The assets will be decommissioned and delivered to Network Rail over the remainder of 2006. As a result the lease on our premises at Crewe has been extended to 31 December 2006 but from 1 January 2007 the remaining Signal Engineer Training, supplied to the private sector renewals market, will be provided from our premises in Derby and Clapham, London, and on Tube Lines own premises at Stratford, London. Although this agreement provides welcome clarity and will permit the re-organisation of our training interests from a new and smaller base, there can be no doubt that the short term outlook for this activity is significantly reduced from that of two and more years ago. Ganymede Tracklayers continues to provide a quality service to the Railway Industry but the immediate prospects for growth in that market are limited. As mentioned above, Gem-Weld has been sold and is treated as discontinued. Non-recurring item Fortunately the Group had taken the prudent step of securing keyman insurance on the life of the Chief Executive and the net payment received of £974,000 has been shown as a non-recurring item. Dividends Your Directors consider that, although many problems have been experienced in the business in the first six months of 2006, they are pleased that steady progress is being made in all areas and that results for the period are improved over 2005. In view of this they have resolved to pay a maintained interim dividend of 1.0p (2005: 1.0p). Strategy The massive changes wrought by a re-structured Railway Industry and by changes in the quantity of top management available to our Group have prompted a strategic review which is now substantially complete. No longer can we set out to find growth through acquisition of poorly managed compatible companies where integration and overhaul led by our erstwhile Chief Executive could be expected to lead to enhanced shareholder value. Nonetheless I am pleased with the level of quality management at senior level in the divisions and there has been no abatement in the thrust towards organic start-ups to extend the range and volume of our support service activities. We have, therefore, decided upon an alternative route which can briefly be summed up as; Simplify the Group with enhanced focus, optimise the present businesses with re-orientation where required, pursue organic start-up opportunities with vigour and seek acquisitions of support service companies with proven track records and management in current and compatible niche markets. I have no doubt that continued maturity and experience in our senior managers will eventually provide the top level succession we now need. This process may be accelerated through the continued acquisition strategy which we are pursuing with energy and diligence. Outlook As in 2005 we are in the midst of a challenging year. Also, as in 2005, the bulk of this year's re-positioning has taken place in the first half and the second should demonstrate a more stable picture. Further development of contract recruitment is anticipated enabling more intensive use to be made of our nationwide network of branches, where permanent recruitment is expected to continue the trend to more effective working. Additionally we have taken our first steps to enter the white collar Construction market in both contract and permanent recruitment, with this activity initially located in Derby. This is expected to generate continuing increases in turnover and, through enhancement of contract consultant maturity and skill, to generate improvements in profits from this section of our business. Ganymede Tracklayers is continuing steady performance and intends immediately to enter the Blue Collar contract market in Construction, particularly within the 2012 footprint, and expects to extend further its client base, outside the Railway Industry. The second half is expected to produce a steadier performance from Catalis as the agreement with Network Rail plays out to the year end and where repositioning to take full advantage of a much altered Railway Industry will be substantially complete by early 2007. I remain confident that the Group will continue to make solid progress in dealing with a fast changing trading environment. W.J.C.Douie, Chairman. 8th September 2006. ATA Group Plc CONSOLIDATED PROFIT AND LOSS ACCOUNT 6 Months 6 Months 12 Months to 30 Jun 2006 to 30 Jun 2005 to 31 Dec 2005 (unaudited) (unaudited) As restated As restated Notes £'000 £'000 £'000 £'000 £'000 £'000 Turnover Continuing operations 9,145 8,626 17,277 Discontinued operations 549 304 1,044 ____________________________________________ 2 9,694 8,930 18,321 ____________________________________________ Operating Profit Continuing operations 139 10 515 - Non-recurring item 3 974 - - Discontinued operations (340) 38 19 ____________________________________________ 2 773 48 534 Net interest payable (13) (6) (34) ____________________________________________ 760 42 500 Profit on disposal of 4 88 - - Fixed Assets ____________________________________________ Profit on ordinary 848 42 500 activities before taxation Tax on profit on ordinary activities 5 (254) (14) (78) ____________________________________________ Profit on ordinary activities after taxation 594 28 422 ____________________________________________ Earnings per share (pence) 7 7.24 0.34 5.15 ATA Group Plc CONSOLIDATED BALANCE SHEET As at As at As at 30 Jun 2006 30 Jun 2005 31 Dec 2005 (unaudited) (unaudited) As restated As restated Notes £'000 £'000 £'000 FIXED ASSETS Intangible assets 952 1,118 1,117 Tangible assets 881 1,323 1,175 _________________________________ 1,833 2,441 2,292 _________________________________ CURRENT ASSETS Stock 27 29 45 Debtors 5,411 3,222 4,817 Cash at bank and in hand 676 803 178 _________________________________ 6,114 4,054 5,040 _________________________________ CREDITORS: Due within one year (3,597) (2,992) (3,583) _________________________________ NET CURRENT ASSETS 2,517 1,062 1,457 _________________________________ 4,350 3,503 3,749 TOTAL ASSETS LESS CURRENT LIABILITIES (46) (50) (44) CREDITORS: Due after more than one year PROVISIONS FOR LIABILITIES AND CHARGES (43) (101) (43) _________________________________ NET ASSETS 4,261 3,352 3,662 _________________________________ CAPITAL AND RESERVES Called up share capital 82 82 82 Share premium account 1,817 1,817 1,817 Capital redemption reserve 50 50 50 Share based payment reserve 33 22 28 Profit and loss account 10 2,279 1,381 1,685 _________________________________ 9 SHAREHOLDERS' FUNDS 4,261 3,352 3,662 _________________________________ ATA Group Plc CONSOLIDATED CASH FLOW STATEMENT 6 Months to 6 Months to 12 Months to 30 Jun 2006 30 Jun 2005 31 Dec (unaudited) (unaudited) 2005 Notes £'000 £'000 £'000 CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES 8 1,323 312 (308) Returns on investments and servicing of finance (13) (6) (34) Taxation - (135) (335) Payments to acquire tangible fixed (39) (97) (219) assets Receipts on disposal of tangible fixed 21 31 37 assets Equity dividends paid - - (402) _________________________________ Net cash inflow/(outflow) before use of 1,292 105 (1,261) liquid resources and financing Issue of ordinary share capital - 21 21 Decrease in medium term loans (1) (8) (10) Capital element of finance lease rental (29) (30) (51) payments _________________________________ INCREASE / (DECREASE) IN CASH BALANCES 1,262 88 (1,301) _________________________________ ATA Group Plc NOTES TO THE INTERIM STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2006 1. ACCOUNTING POLICIES The accounting policies used in the preparation of the interim accounts are consistent with those used in the preparation of the audited annual accounts for the year ended 31 December 2005 with the exception of the introduction of FRS 20 'Share based payments', which requires a charge to be made to the profit and loss account in respect of transactions that can be settled by the issuing of equity instruments. The Group has applied the requirements of FRS 20 Share based payments. In accordance with the transitional provisions, FRS 20 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005. The Group issues equity settled share based payments to certain employees. Equity settled share based payments are measured at fair value (excluding the effect of non market based vesting conditions) at the date of grant. The fair value determined at the date of grant of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market based vesting conditions. Fair value is measured by use of a Black-Scholes model. The Group financial information consolidates the accounts of ATA Group Plc and all its material subsidiary undertakings using the acquisition method. The comparative figures for the year ended 31 December 2005 do not constitute statutory accounts within the meaning of S.240 of the Companies Act 1995, but they have been derived from the audited financial statements for that year, which have been filed with the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2. SEGMENTAL ANALYSIS 6 Months to 6 Months to 12 Months to 30 Jun 2006 30 Jun 2005 31 Dec 2005 (unaudited) (unaudited) As restated As restated £'000 £'000 £'000 TURNOVER Recruitment Division 5,546 4,386 8,758 Railway Division 4,148 4,544 9,563 _________________________________ 9,694 8,930 18,321 _________________________________ OPERATING (LOSS)/PROFIT - Excluding non-recurring item Recruitment Division 300 89 16 Railway Division (501) (41) 518 _________________________________ (201) 48 534 _________________________________ Operating (loss)/profit is stated after amortisation of goodwill of £165,000 in the period (2005 £36,000), £129,000 of which relates to the full write off of goodwill relating to Gem-Weld (UK) Limited following an impairment review. 3. NON-RECURRING ITEM - Operating Profit Net payment received in respect of keyman insurance in relation to the former Chief Executive. 4. PROFIT ON DISPOSAL OF FIXED ASSETS Profit on maintenance assets sold to Network Rail under the terms of an agreement dated 21 June 2006. 5. TAX ON PROFIT ON ORDINARY ACTIVITIES The tax on profit on ordinary activities for the period to 30 June 2006 has been provided at the estimated rate applicable to the group for the period. 6. DIVIDENDS The Board has approved an interim dividend of 1p per ordinary share net to be paid on 11 December 2006 to shareholders on the register of members at 17 November 2006. 7. EARNINGS PER SHARE The earnings per share have been calculated on the profit on ordinary activities after taxation, based on the number of shares in issue (8,202,331) during the period. The fully diluted earnings per share is not materially different from the basic earnings per share and has not been disclosed. 8. CASH FLOW STATEMENT RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 2006 £'000 Operating profit 773 Amortisation 165 Depreciation 242 Share-based payment depreciation 5 Profit on sale of fixed assets (10) Decrease in stocks 18 Increase in debtors (345) Increase in creditors 475 ------ Net cash inflow from operating activities 1,323 ====== ANALYSIS OF CHANGES IN NET (DEBT)/ FUNDS At Other At 30 1 Jan 2006 Cash Flows Movements Jun 2006 £'000 £'000 £'000 £'000 Cash at bank and in hand 178 498 - 676 Bank overdraft (764) 764 - - Debt due within 1 year (1) 1 - - HP and finance leases (101) 29 - (72) ____________________________________________ Net (Debt)/Funds (688) 1,292 - 604 ____________________________________________ 9. MOVEMENT IN SHAREHOLDERS' FUNDS STATEMENT OF MOVEMENT IN GROUP SHAREHOLDERS' FUNDS As at As at As at 30 Jun 2006 30 Jun 2005 31 Dec 2005 £'000 £'000 £'000 As previously reported 3,662 4,418 3,609 FRS 17 - (802) - _____________________________________ Opening shareholders' funds as restated 3,662 3,616 3,609 Profit for the period 594 28 422 Dividends - (319) (402) Issue of shares - 21 21 Share based payment reserve 5 6 12 _____________________________________ Closing shareholders' funds 4,261 3,352 3,662 _____________________________________ 10. PRIOR PERIOD ADJUSTMENTS FRS 17 : Retirement benefits In previous years the Group has accounted for the defined benefit pension scheme in respect of certain employees of Catalis Rail Training Limited under the provisions of SSAP24. At 31 December 2004 a prepayment of pension contributions of £809,000 was being carried forward and this amount was being written off over the future working lifetime of the members. On adoption of the full provisions of FRS 17 and following a formal actuarial valuation of the Group's interest in this pension scheme the prepayment of £826,000 at 1 January 2004 was written off as a prior year adjustment in the financial statements for the year ended 31 December 2005. The pension scheme meets the criteria of a multi employer scheme and was accounted for as a defined contribution scheme in the accounts for the year ended 31 December 2005 and for the restated comparatives for the period ended 30 June 2005. FRS 20 : Share Based Payments Equity settled share option scheme The Company operates an EMI based share option scheme for certain employees of the Group. Options are exercisable at a price equal to the average quoted market price of the Company's shares on the date of grant. The vesting period is three years. If the options remain unexercised after a period of seven years from the date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest. The effect of these changes in accounting policies on the comparative financial information is as follows:- As at As at 30 Jun 2005 31 Dec 2005 £'000 £'000 Profit and loss reserve As previously reported 2,205 1,713 FRS 17 (802) - FRS 20 (22) (28) ________________________ As restated 1,381 1,685 ________________________ Debtors - amounts falling due after one year As previously reported 802 - FRS 17 (802) - ________________________ As restated - - ________________________ Share based payment reserve As previously reported - - FRS 20 22 28 ________________________ As restated 22 28 ________________________ ATA GROUP PLC Registered Office Kingston House, Oaklands Business Park, Armstrong Way, Yate, South Gloucestershire BS37 5NA Approved and authorised for release for and on behalf of ATA Group Plc This information is provided by RNS The company news service from the London Stock Exchange

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