Rtc Grp. Regulatory News (RTC)

17 Apr 2007 07:01

ATA Group PLC17 April 2007 ATA Group plc Preliminary results for the year ended 31 December 2006 ATA Group plc ("ATA") is a human resource support services group, which providesemployment solutions and training services to client companies in the UnitedKingdom and the Republic of Ireland. HIGHLIGHTS Group pre-tax profits at £618,000 (2005: £500,000). Earnings per share at 4.60p (2005:5.15p after a lower tax charge). Dividends for the year have been maintained at 3.0p (2005: 3.0p). Recruitment made steady progress and achieved operating profits at £414,000. Railway activities continued to suffer the full impact of reorganisation andclosure costs following infrastructure maintenance being taken over by NetworkRail resulting in operating and non-recurring losses of £592,000. Discontinued operations attendant upon the sale of the assets and business ofGem-Weld (UK) Limited accounted for losses of £291,000. Exceptional credits amount to £1,090,000. Taxation charges in 2006 are higher than normal following non-allowable writeoffs. A more promising trading year is anticipated in 2007. Commenting on the results Bill Douie, Chairman, said: "There can be no doubt that, as expected, 2006 was a trying year. Opportunitiesto resolve outstanding problems were taken and a clean out of underperformingoperations has now all but concluded. The Group now comprises a strong andgrowing Recruitment business, tightly focused on attractive market areas, with afresh approach to people development and retention and further enhancement ofmanagement strengths and experience. The Railway division has stabilised andconcentrated in markets with promise and growth potential, albeit at a lowerlevel of turnover (and costs). Additionally there is a new drive to create fastexpanding revenues from our Derby premises and, to that end, we are presentlyengaging in a major refurbishment and re-branding exercise. There remains,however, one activity which is in a declining market, that of labour supply, andit is unlikely that we will continue this in the longer term. This is a yearwhen our strong feelings of achievement must be tempered by caution as thestrength of both our own markets and the Global Economy as a whole cannot betaken for granted. That accepted, your directors are quietly confident that the Group is on arecovery trend and that sufficient stability has been achieved for us to renewour search for suitable acquisitions in similar activity sectors." 17th April 2007 ENQUIRIES: ATA Group plc Tel: 01454 310069 Bill Douie, Executive Chairman. Andrew Bailey, Group Managing Director. CHAIRMAN'S STATEMENTYear ended 31 December 2006 FINANCIAL For 2006, the Group has been re-organised into two divisions, Recruitment andRailway. In 2005 the Recruitment Division also embraced Gem-Weld (business soldin 2006) and Ganymede, now part of the Railway Division. Comparatives for 2005have been restated accordingly. Recruitment Division (ATA Selection) Recruitment Division turnover increased to £11.58m (2005: £8.76m, excludingGem-Weld and Ganymede) reflecting solid performance in Permanent recruitment andcontinuing growth in Contract recruitment. Divisional operating profits rose to£414,000 (2005: £177,000, excluding Gem-Weld and Ganymede). Railway Division (Catalis Rail Training and Ganymede) The changing commercial shape of the overground railway has necessitated anextensive reorganisation at Catalis including condensation of Signal Engineertraining into two locations, Derby and Clapham. This has involved the closure ofour Crewe training school and material costs have been absorbed during 2006. Ithas also been necessary to re-position Catalis to offer an altered suite ofcourses in line with market demand, now concentrated on renewals work streamsand train operations. As a consequence, trading in 2006 has been difficult andcosts have been unusually high. Accordingly, turnover in the division, now including Ganymede, has fallen to £6.55m (2005: £8.51m) and losses have been incurred of £592,000 (2005: £348,000 operating profit). Discontinued operation During the year the business and assets of Gem-Weld (UK) Limited were sold andthe Company is now dormant. The combination of trading losses and closure costshave resulted in an operating loss of £291,000. Exceptional credits These items comprise the Keyman Insurance payout consequent upon the death ofour Chief Executive, the net profit on the sale of the business and assets ofGem-Weld (UK) Limited and the net proceeds of the sale of training assets toNetwork Rail. Group Group pre-tax profits at £618,000, including exceptional credits of £1,090,000,(2005: £500,000) have risen by 24%, and earnings per share at 4.60p (2005: 5.15pon a lower tax charge) have remained steady. Emphasis continues to be placed oncash conservation and at the year end Group net cash was £924,000 (2005:£688,000 net debt). Taxation The taxation charge for 2006 has been provided at an exceptionally high 39%. Anexplanation of this figure can be found in the accounts, but the high level oftax due in large part results from write-offs of items not allowable for tax,mainly goodwill. These serve to reduce after tax earnings but not cash. TRADING Recruitment During 2006 the opportunity was taken to engage in a root and branch review ofour recruitment activities to refresh all our operating attitudes and bestpractices and to ensure that we were correctly positioned in our focus on keymarkets. As mentioned in my last annual statement there have been many andfundamental changes in the attractiveness of niche markets and in the operatingmethods to ensure optimum service quality to our clients. In particular, thechanges, some negative and some positive, following the development and comingof age of internet based Human Resource services have been fully understood andoperating methods have been varied to take advantage of that facility. In ourreview of markets strong attention was paid to gross and net margins as well ascompetitive advantages and it became clear that the changes in business tobusiness and commercial selling practices had seriously reduced the size andattractiveness of that particular market place. Accordingly, we have largelywithdrawn from sales recruitment, condensing into one branch to cover the wholecountry in technical sales only. At the same time we have identified and moved into a new high demand market areain white collar construction and early progress is gratifying. It has also become clear that the future growth of ATA recruitment activities isbest concentrated in Contract Recruitment, with Permanent Recruitmentmaintaining its existing important position in Technical Engineering, Rail andnow Construction. The ATA brand image and key competitive advantages have historically beenstrongest in local branch activities mainly serving the SME market sector. Overthe last few years we have availed ourselves of advances in InformationTechnology techniques and products and have added Large Companies to ourportfolio of clients mainly by means of Preferred Supplier appointments servicedfrom our new central branch located in the Derby premises, The Derby ConferenceCentre, also occupied by Catalis. Railway Catalis has continued to suffer from the transfer of Signal Engineer trainingfor the maintenance of the National Rail Network to Network Rail. Althoughreasonable levels of such business continued from Tube Lines, Metronet andprivate sector National Rail Renewals companies, overall turnover wasapproximately halved from three years previously. Nonetheless this importantsector of our Railway Training activities has now completed a move toinstallation and test training to service those involved in renewals rather thanmaintenance and capacity has now been matched to the projected demand pattern ona five year view. Steady progress continues in other areas of Rail and Non RailTraining. A full review has taken place of our extensive premises in Derby with a view toachieving significant improvements in our usage of the available space. Withthis in mind the non training activities have been concentrated in theleaseholding company now renamed The Derby Conference Centre Limited. Discontinued activity During the year it became clear that it was not possible for the Group tooperate successfully in the specialist area of Rail Welding and consequently thebusiness and assets of Gem-Weld (UK) Limited were sold. Capital Investment Following the completion of our investment programme in IT and rail trainingequipment in 2003 capital investment continued at a figure significantly lessthan depreciation. DIVIDENDS In view of the setback in the short term of Group trading performance and anexceptionally high tax charge but taking account of the exceptional revenuesgarnered from Keyman Insurance and asset disposals your directors arerecommending a final dividend of 2.0p making an unchanged total dividend of 3.0pfor the year. PERSONNEL During the operational reviews mentioned above it became clear that too muchemphasis was being placed on higher level personal development and managementtraining at the expense of early stage consultant and sharp end operationalcoaching. As the year progressed the balance was restored and high levels ofattention to personal development at all levels has returned to being the norm.This is a service provider and we are only as good as our people. MANAGEMENT In 2006 the challenge was to stabilise our management structure and team to forma strong base from which to build. It is most gratifying to report that ingeneral we have experienced above expectation skills, talents and achievementand that the new top teams are in highly motivated, fighting form. Above all there is a renewed, urgent and keen focus on enhancement ofshareholder value. STAFF There can be no more appropriate time for me to thank all our staff for theirefforts and successes in 2006 and to acknowledge the universal strength andloyalty displayed in recent trying times. W.J.C. Douie, Chairman 17 April 2007 OPERATIONAL REPORTYear ended 31 December 2006 GROUP TRADING SUMMARY 2006 Revenue from continuing operations for the year has increased by 5% compared to2005. Reductions in Railway were offset by increased revenues in Recruitment.The change in sales mix, reflecting the continued growth in lower margincontract recruitment against reductions in higher margin technical and railsafety training revenues, combined with the impact of the restructure inCatalis, has resulted in an operating loss from continuing operations of£178,000 compared to a profit of £525,000 in 2005. Group profit before interestand tax increased by 16% compared with 2005. Turnover Operating Profit/(Loss) -------------------- ---------------------- 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Recruitment Division 11,584 8,764 414 177 Railway Division 6,550 8,513 (592) 348------------------- --------- --------- --------- --------- Continuing Operations 18,134 17,277 (178) 525------------------- --------- --------- --------- --------- Discontinued Operations 580 1,044 (291) 9 Exceptional - - 974 -------------------- --------- --------- --------- --------- Group Total 18,714 18,321 505 534------------------- --------- --------- --------- --------- Operating profits on continuing operations include a deduction for goodwill of£122,000 (2005: £76,000), including £54,000 in relation to Ganymede following animpairment review. Group total operating profits are stated before net interestpayable of £3,000 (2005: £34,000). RECRUITMENT The permanent recruitment services, for the majority of the year, focused on theprovision of staff in our traditional commercial and technical sales roles,technical engineering, manufacturing and rail. A new market area ofconstruction, serving both commercial and local government organisations, wasestablished in the latter part of 2006 and whilst it made a modest contributionto trading in the year, it is seen as a significant opportunity for futuregrowth. The sales operation was also restructured and refocused towards the endof 2006 and is now chiefly targeted at the technical sales market, on a nationalbasis, from a single location. Permanent turnover fell compared to 2005,reflecting the disappointing performance in sales, which culminated in thedecision to realign the approach to this market. The number of permanentplacements made is a key measure of performance of the business and is measuredon the basis of vacancies filled per individual consultant. We believe that theaddition of a new market area and the restructuring of the sales operation willreposition the permanent business to contribute to growth moving forward. Contract recruitment activity in the Group's core market of technicalmanufacturing and engineering continued to grow on the solid base established inprevious years. Contractor heads out per contract consultant, as a key measureof performance, delivered excellent quarter on quarter growth. Underlyingrevenues increased by 92% to £7.5m. Construction contract was established as anew market area in the latter part of 2006 and again, whilst a modestcontribution was made to the year, this market area is expected to deliverfuture growth. The continued expansion and diversification of contractrecruitment activity remains a key aim of the Group. RAILWAY The majority of these services are focused on the rail industry, ranging fromthe development of training materials, training and development delivery,competence assessment and labour supply. Training revenues in 2006 suffered a continuation of the slow down in demandfrom Network Rail for technical and rail safety training, first witnessed in thesecond half of 2004, as a result of the re-nationalisation of the maintenance ofthe railways. Revenues fell as a result by 18% to £4.5m and impacted negativelyon trainer utilisation and course take up which are key indicators applied tomeasure the performance of the business. The implications of Network Rail providing its own in-house training have beenaddressed by a restructure of the training business. This resulted in theclosure of our premises at Crewe at the end of December, the sale of certainplant and equipment to Network Rail and the relocation of further plant fromCrewe to our premises at Derby and Clapham. The outcome of the restructure, webelieve, ensures that the training operation is now best shaped to fit thealternative external rail market provided by the Train and Freight operatingcompanies, the construction based renewals market of rail, international raildemand, rail manufacturers, consultancies and London Underground and willaccelerate the diversification into opportunities outside of the rail market. The labour supply business, operated by Ganymede, continued to focus on thedevelopment of revenues outside of Network Rail. However, a reduction in demandfrom Network Rail during the second half of the year led to a fall off in thekey performance measure of man hours worked, which resulted in a decrease intotal revenues of 14% compared to 2005. The variance in divisional performance also reflects the revenue contribution of£810,000 in 2005 from Rail Training Audit Services, which ceased to trade on 31December 2005 following the conclusion of its contract with Network Rail. DISCONTINUED ACTIVITIES The discontinued activity represents the trading results in the year ofGem-Weld. The company ceased to trade, following the decision of ATA Group todispose of the assets and trade of the business at a point where demand for itsservices reduced to wholly un-commercial levels. EXCEPTIONAL ITEMS Non-recurring profits include £73,000 in relation to the profit on sale ofcertain Catalis plant, equipment and other assets to Network Rail; £974,000 netpayment received from the Keyman Insurance policy secured on the life of theChief Executive and £43,000 net profit from the sale of the business and assetsof Gem-Weld (UK) Limited, after goodwill impairment. GROUP PERFORMANCE INDICATORS Earnings Per Share is a key measure as it indicates the underlying profit of thebusiness attributable to shareholders. It measures not only trading performance,but also the impact of exceptional items, cash management and interest charges.Compared to 2005, earnings per share fell by 10% as a result of an exceptionallyhigh tax charge arising from the accelerated write off of goodwill in relationto Gem-Weld and Ganymede. STAFF DEVELOPMENT The Group continues to believe that the key to future success is strongly linkedto people development. We therefore operate a number of initiatives,incorporating our Group wide competency framework, designed to developindividuals in operational, management and leadership skills. INFORMATION TECHNOLOGY AND THE INTERNET The Group's investment, in Information Technology to support businessactivities, through both a real time wide area network and front and back officesystems to support the growth in volume activities, is complete. Expenditureduring the year was therefore restricted to maintenance and upgrades to thosesystems. Future investment will be aimed at gaining operational efficiencythrough evolution into the latest technologies and leveraging business benefitsthrough increased profile and presence on the internet. The internet accounts for the majority of candidate applications to therecruitment businesses. The web based capability built to take advantage of thismarket change has resulted in further reductions in expenditure to attractcandidates during 2006. We believe however, that we have now reached the stageat which year on year cost reductions have been maximised. To mitigate thefuture impact of increased cost of candidate recruitment, the recruitmentbusiness re-launched its web presence at the end of December 2006, with the viewto establishing its site as a vertical market job board in its target marketsectors. Marketing activity will focus on raising the profile and the activityconducted through the new site. Third party job boards will, however, continueto play an integral role in candidate recruitment and we will therefore continueto seek to maximise the return on this spend, through the measurement of theresponse per advertisement and cost of recruitment of individual candidates. SHARE OPTIONS The Government EMI scheme was adopted in 2001. Further options have been grantedin 2006 in this scheme. The management team and key staff will continue to bethe focus of such incentives. Andrew Bailey, Group Managing Director 17 April 2007 Consolidated Profit and Loss AccountYear ended 31 December 2006 2006 2005 Notes £'000 £'000 £'000 £'000 (Restated) (Restated) TurnoverContinuing operations 18,134 17,277Discontinued operations 580 1,044 ------- ------- 18,714 18,321Cost of sales (14,301) (12,617) ------- ------- ------- -------Gross Profit 4,413 5,704Administrative expenses - normal (4,918) (5,338)Administrative expenses - 974 -exceptional ------- ------- (3,944) (5,338)Other operating income 36 168 ------- ------- ------- -------Operating ProfitContinuing operations - normal (178) 525Continuing operations - exceptional 974 -Discontinued operations (291) 9 ------- ------- 505 534Exceptional ItemsProfit on disposal of fixed assets 73 -Profit on disposal of operation 43 - ------- ------- 116 -Interest receivable and similar 13 6incomeInterest payable and similar (16) (40)charges ------- ------- (3) (34) ------- ------- ------- -------Profit on ordinary activitiesbefore taxation 618 500Tax on profit on ordinary (241) (78)activities ------- ------- ------- -------Profit for the year 377 422 ------- ------- ------- ------- Earnings per share- continuing (including exceptional credits) 7.60p 5.12p- discontinued (3.00)p 0.03p ------- ------- ------- ------- 2 4.60p 5.15p ------- ------- ------- ------- Fully diluted earnings per share- continuing (including exceptional credits) 7.60p 5.08p- discontinued (3.00)p 0.02p ------- ------- ------- ------- 2 4.60p 5.10p ------- ------- ------- ------- Reconciliation of Movements in Equity Shareholders' FundsYear ended 31 December 2006 2006 2005 --------- --------- £'000 £'000 (Restated) Equity shareholders' funds at 1 January 2006 3,662 3,609Profit for the year 377 422Dividends (247) (402)Premium on share issue - 21Share based payment reserve 3 12 --------- ---------Equity shareholders' funds at 31 December 2006 3,795 3,662 --------- --------- Consolidated statement of total recognised gains and losses 2006 2005 --------- --------- Notes £'000 £'000 (Restated) Profit for the financial year 377 422 --------- ---------Total recognised gains and losses relating to the 377 422yearPrior year adjustment 3 (12) - --------- ---------Total gains and losses recognised since the lastannual report 365 422 --------- --------- Consolidated Balance Sheet31 December 2006 2006 2005 £'000 £'000 £'000 £'000 (Restated) (Restated)Fixed assetsIntangible assets 862 1,117Tangible assets 654 1,175 -------- -------- -------- -------- 1,516 2,292Current assetsStock 3 45Debtors 3,564 4,817Cash at bank and in hand 939 178 -------- -------- -------- -------- 4,506 5,040CreditorsAmounts falling due within one year (2,225) (3,583) -------- -------- -------- -------- 2,281 1,457 -------- -------- -------- --------Total assets less current 3,797 3,749liabilitiesCreditorsAmounts falling due after more than (2) (44)one yearProvisions for liabilities and - (43)charges -------- -------- -------- --------Net assets 3,795 3,662 -------- -------- -------- -------- Capital and reservesCalled up share capital 82 82Share premium account 1,817 1,817Capital redemption reserve 50 50Share based payment reserve 31 28Profit and loss account 1,815 1,685 -------- -------- -------- --------Equity shareholders' funds 3,795 3,662 -------- -------- -------- -------- The financial statements were approved and authorised for issue by the Board andwere signed on its behalf on 17 April 2007 by W J C DOUIE Chairman A BAILEY Director Consolidated Cash Flow StatementYear ended 31 December 2006 2006 2005 £'000 £'000 £'000 £'000Net cash inflow/(outflow) from operatingactivities 1,912 (308)Return on investments and servicing offinanceInterest received 13 6Interest paid (16) (40) -------- -------- -------- --------Net cash outflow from return oninvestments (3) (34)and servicing of financeTaxationUK corporation tax paid (251) (335)Capital expenditureSale of tangible fixed assets 77 37Purchase of tangible fixed assets (134) (219) -------- -------- -------- --------Net cash outflow from capital (57) (182)expenditureAcquisitions and disposalsSale of business 97 -Sale of assets 161 - -------- -------- -------- --------Net cash inflow from acquisitions anddisposals 258 -Equity dividends paid (247) (402) -------- -------- -------- --------Net cash inflow/(outflow) before use offinancing 1,612 (1,261)FinancingIssue of ordinary share capital - 21Decrease in loans (1) (10)Capital element of finance lease rentalpayments (86) (51) -------- -------- -------- --------Net cash outflow from financing (87) (40) -------- -------- -------- --------Increase/(decrease) in cash 1,525 (1,301) -------- -------- -------- -------- Notes 1. DIVIDENDS On 8 September 2006 an interim dividend of 1.0p net per share was resolved bythe Board to be paid to shareholders on the register on 17 November 2006. Theinterim dividend was paid on 11 December 2006. A final dividend for the year of 2.0p net per share will be proposed at theforthcoming Annual General Meeting (to be held at the offices of Lawrence GrahamLLP, 4 More London Riverside, London, SE1 2AU on 24 May 2007 at 12.00 noon) andif approved, will be paid on 27 July 2007 to shareholders on the register on 22June 2007. 2. EARNINGS PER SHARE The calculation of earnings per share is based on a profit after taxation of£377,000 (2005: £422,000 as restated) and a weighted average of 8,203,331 (2005:8,199,290) shares in issue. The outstanding share options were considered to be dilutive in 2005, howeverthey are not considered to be dilutive in 2006. 3. BASIS OF PREPARATION The preliminary announcement of results for the year ended 31 December 2006 hasbeen prepared on the basis of the same historical cost accounting policies asset out in the group's financial statements for the year ended 31 December 2005with the following exception: FRS 20 : Share Based Payments Equity settled share option scheme The Company operates an EMI based share option scheme for certain employees ofthe Group. Options are exercisable at a price equal to the average quoted marketprice of the Company's shares on the date of the grant. The vesting period is 3years. If the options remain unexercised after a period of 10 years from thedate of grant the options expire. Options are forfeited if the employee leavesthe Group before the options are exercised. The effect of this change in accounting policy on the comparative financialinformation is as follows:- Group 2005 £'000Profit for the yearAs previously reported 434FRS 20 (12) --------As restated 422 -------- Profit and loss reserveAs previously reported 1,713FRS20 (28) --------As restated 1,685 -------- Share based payment reserveAs previously reported -FRS 20 28 --------As restated 28 -------- Report & Accounts The above results do not represent the statutory accounts. The statutoryaccounts for 2005 have been filed with the Registrar of Companies, received anunqualified 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 toshareholders 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