Northern Recruitment Group PLC
16 February 2007
16 February 2007
NORTHERN RECRUITMENT GROUP PLC
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
'Underlying business performance in the first half was in line with our budgets
and targets.'
• Turnover up 20% to £11.2m (2005: £9.3m)
o Temporary recruitment revenues up 28%
o Core permanent recruitment fees up 5%
o NRG Connect revenues down 15%
• Gross profit up 5% to £3.94m (2005: £3.75m)
• Profit before tax £1.0m (2005: £1.14m), after £0.14m bad debt provision
• Diluted earnings per share 4.0p (2005: 4.4p)
• Balance sheet remains strong: net cash £4.7m (2005: £4.8m)
• Interim dividend maintained at 2.5p
'Our core permanent and temporary recruitment businesses have both continued to
make progress in the first month of the second half. The new business pipeline
is exceptionally strong, and we are awaiting the outcome of a number of bids and
tenders which have the potential to deliver significantly improved levels of
utilisation at NRG Connect. However, the achievement of an improved performance
over the year as a whole is contingent on our success in this key area, and we
will update the market once this becomes clearer.'
ENQUIRIES:
Northern Recruitment Group Hudson Sandler
Lorna Moran, Chief Executive Nick Lyon
Tel: 0191 260 4412 Tel: 020 7796 4133
NOTE TO EDITORS
Northern Recruitment Group (NRG) is a total solutions recruitment business
focusing on recruitment and HR consultancy services. It aims to be the leading
provider of these services in all the regions where it operates.
Based in Newcastle upon Tyne, where the business was founded by Chief Executive
Lorna Moran in 1977, NRG services its clients through a network of offices
across the North East, Yorkshire and Scotland. Its NRG Connect business designs
and manages high volume national recruitment projects. Clients have the
opportunity to select full or part process: from applicant attraction and
assessment through to final job offers.
NRG services both the public and private sectors, with each accounting for
around half its business. Its dedicated NRG Public Sector division handles a
wide range of assignments from national volume contracts to both executive and
non-executive appointments for national, regional and local government bodies,
and for not-for-profit organisations in areas such as higher education and the
arts.
NRG Professional Services provides recruitment solutions in the specialist areas
of finance, IT and human resources, covering executive, interim, permanent and
temporary appointments across those skill ranges. NRG Technical specialises in
middle management recruitment for manufacturing clients and has broadened its
specialism to support a growing demand for skilled contractors, while NRG City
is a high street brand dedicated to meeting the demand for quality support staff
including PAs, receptionists, office managers and administrators both permanent
and temporary.
NRG has significant capability to handle high volume contracts for both
permanent and temporary staff. Its specialist NRG Call Centre Solutions
business works with leading contact centres to meet their requirements for staff
both temporary and permanent, while the NRG Works flexible resourcing division
provides temporary employees for a wide range of manufacturing, engineering,
warehouse and distribution businesses.
NRG has a distinctive culture that focuses on excellent client service and on
assuring value for money through high efficiency and tight financial control.
It has been a public company since obtaining a full stock market listing in
November 1997. Its aim is to achieve continued growth for the benefit of its
shareholders and staff by building on its strong regional brand and reputation,
combined with national delivery capabilities, and by devising and implementing
innovative people solutions in partnership with its clients.
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
Underlying business performance in the first half was in line with our budgets
and targets. Our flexible resourcing division delivered strong growth in
temporary recruitment revenues, following its strategic repositioning and
re-branding, and the strengthening of its management team. The Company's core
permanent recruitment operations also made solid progress, offset by an expected
reduction in high volume project work at NRG Connect, our national response
handling unit. The pre-tax outturn was impacted by our first significant bad
debt provision in 25 years.
Results
Turnover in the six months to 31 December 2006 grew by 20% to £11.2 million
(2005: £9.3 million). Revenues from temporary placements increased by 28%,
while fees from permanent recruitment declined by 1% overall, with growth of 5%
in our other core operations masked by a 15% decline in turnover at NRG Connect.
Gross profit increased by 5% to £3.94 million (2005: £3.75 million). The gross
contribution from temporary placements grew by 21%, representing an average
margin of 16.2% (2005: 17.2%). In permanent recruitment, profitability exactly
mirrored turnover, with a 15% reduction at NRG Connect offsetting a 5%
improvement in our other operations.
Administrative expenses grew by 10% to £3.06 million (2005: £2.77 million). The
principal factors here were a bad debt provision of £144,000, and a 7% or
£135,000 rise in payroll costs. The provision follows the appointment of
administrators last month at a former client in the food processing industry, to
which we had supplied high volumes of temporary staff for its pre-Christmas
production peak. The payroll increase reflects our recruitment of increased
numbers of experienced fee-earners as part of our continued investment in the
business for future growth.
As a result of these cost increases, operating profit was 10% lower than in the
first half last year at £0.88 million (2005: £0.98 million). A 26% reduction in
finance income to £0.12 million (2005: £0.16 million) reflected lower average
cash balances following the re-basing of our ordinary dividend and the payment
of a £2 million special dividend last year. In consequence, profit before tax
of £1.0 million (2005: £1.14 million) was 12% lower than in the comparable
period last year.
Diluted earnings per share were 4.0 pence (2005: 4.4 pence), a reduction of 10%.
Finances
The Company retains a strong balance sheet, with net cash at the end of the
first half of £4.7 million, compared with £4.8 million in December 2005 and £4.9
million at our financial year-end in June 2006. The modest reduction during the
first half reflects payment of the final dividend at a cost of £0.9 million.
Trade receivables rose by £0.5m in the half year as a result of the growth in
sales.
Dividend
The Board has declared a maintained interim dividend of 2.5 pence per share, and
intends to review the final dividend in the light of both performance for the
year and the Company's strong cash position. The interim dividend will be paid
on 30 March 2007 to those shareholders on the register at the close of business
on 16 March 2007. The ex dividend date will be 14 March 2007.
Trading highlights
The market place remained robust across all sectors of our business. The
strongest underlying progress was made by our flexible resourcing division, NRG
Works, which demonstrated substantial benefits from the development of its new
brand identity and the strengthening of its management last year. Particularly
strong progress was made in the engineering and packaging sectors, with
highlights including the operation of assessment centres and the provision of
temporary staff for Cummins, building on our already strong relationship in
permanent recruitment.
The bad debt arising in the food processing sector is our first such experience
in 25 years of supplying high volume temporary staff, and reflects the sudden
collapse of a client immediately after its Christmas peak. Whilst we are
confident that our procedures for controlling credit and collecting payments are
robust, we are conducting a thorough review to identify any opportunities for
improvement.
NRG Professional Services continued to perform strongly, particularly in senior
executive recruitment for public sector clients. Major assignments completed
during the first half included the recruitment of a Chair, Chief Executive and
14-strong Board for the new Business Link for North East England, and senior
appointments for the University of Edinburgh. We have further strengthened this
division through the recruitment of additional staff, and expect these new teams
to deliver benefits during the second half.
NRG Call Centre Solutions, specialising in the supply of contact centre staff
for many well-known businesses, made further solid progress. NRG City,
dedicated to the provision of high quality support staff, made a slightly
reduced contribution despite a very strong performance by our office in Tees
Valley.
NRG Public Sector continued to deliver both senior and support staff to a wide
range of central and local government bodies, public-private partnerships and
not-for-profit organisations, though high volume project work was at a lower
level than in the first half last year.
NRG Connect continues to operate successfully and profitably, and remains a key
source of competitive advantage for NRG. During the first half it successfully
handled our first major assignment for the Home Office and maintained its
excellent relationships with a number of other public sector bodies, including
HM Revenue & Customs. Overall, however, there was a reduction in the number of
major projects handled compared with the previous first half.
Tees Valley produced the strongest performance among our regional offices in the
first half, though our headquarters in Newcastle upon Tyne remained the
principal fee generator. Although their financial performance improved only
modestly during the half, our operations in Scotland have benefited from new
management appointments and are successfully developing a stronger and more
diversified client base.
Across NRG's business as a whole, the growth in temporary recruitment volumes
has increased the proportion of our revenues derived from the private sector.
People
We have continued to strengthen the business through the recruitment of
experienced fee-earners. Our underlying results have already begun to reflect
the measures we took last year to address areas of underperformance, notably in
the temporary staff area, by reinforcing our management team through both
internal promotion and external recruitment. This significantly enhanced
management and service capability puts us in a strong position to win new
business, deliver client satisfaction and so achieve profitable growth.
Outlook
Our core permanent and temporary recruitment businesses have both continued to
make progress in the first month of the second half. The new business pipeline
is exceptionally strong, and we are awaiting the outcome of a number of bids and
tenders which have the potential to deliver significantly improved levels of
utilisation at NRG Connect. However, the achievement of an improved performance
over the year as a whole is contingent on our success in this key area, and we
will update the market once this becomes clearer.
Leo Finn, Chairman
Lorna Moran, Chief Executive
Consolidated income statement
6 months ended 6 months ended Year ended
31 December 2006 31 December 30 June
Unaudited 2005 2006
£'000 Unaudited Audited
£'000 £'000
Revenue 11,207 9,321 18,313
Cost of Sales (7,267) (5,570) (11,256)
Gross profit 3,940 3,751 7,057
Administrative expenses (3,056) (2,771) (5,362)
Operating profit 884 980 1,695
Finance income 118 159 259
Profit before tax 1,002 1,139 1,954
Income tax (311) (353) (623)
Profit for the period attributable to the
equity holders of the parent
691 786 1,331
Basic earnings per share (pence) 4.0 4.5 7.6
Diluted earnings per share (pence) 4.0 4.4 7.6
There were no gains or losses for the current or comparative period other than
those reported in the consolidated income statement.
Consolidated Balance Sheet as at
31 December 31 December 30 June
2006 2005 2006
Unaudited Unaudited Audited
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 364 498 452
Deferred tax assets 79 99 73
443 597 525
Current assets
Trade and other receivables 4,080 3,156 3,524
Cash & cash equivalents 4,731 4,848 4,888
8,811 8,004 8,412
Total assets 9,254 8,601 8,937
LIABILITIES
Current liabilities
Trade & other payables (2,362) (1,733) (2,039)
Income tax payable (268) (360) (144)
Total current liabilities (2,630) (2,093) (2,183)
Net assets 6,624 6,508 6,754
EQUITY
Capital & reserves
Issued capital 874 873 872
Share premium account 719 697 697
Capital redemption reserve 43 43 43
Retained earnings 4,988 4,895 5,142
Total equity attributable to equity
holders of the parent 6,624 6,508 6,754
Consolidated statement of cash flows
6 months ended 31 6 months ended 31 Year ended 30
December 2006 December 2005 June 2006
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period 691 786 1,331
Adjusted for:
Depreciation 107 129 249
Financial income (118) (159) (259)
Equity settled share-based payments 29 23 47
(Gain)/Loss on sale of property, plant & equipment - - (1)
Income tax 311 353 623
Operating Profit before changes in working capital 1,020 1,132 1,990
(Increase)/Decrease in trade and other receivables (556) 194 (127)
Increase/(Decrease) in trade and other payables 323 (718) (453)
Cash generated from the operations 787 608 1,410
Income tax paid (193) (592) (937)
Net cash from operating activities 594 16 473
Cash flows from investing activities
Proceeds from sale of property, plant & equipment - - 17
Acquisition of property, plant & equipment (19) (17) (108)
Interest received 118 159 259
Net cash inflow from investing activities 99 142 168
Cash flows from financing activities
Proceeds from the issue of share capital 24 115 114
Own shares - - -
Dividends paid (874) (3,136) (3,578)
Net cash outflow from financing activities (850) (3,021) (3,464)
Net decrease in cash & cash equivalents (157) (2,863) (2,823)
Cash & cash equivalents at the start of the period 4,888 7,711 7,711
Cash & cash equivalents at the end of the period 4,731 4,848 4.888
Notes
1. Basis of preparation
The interim financial information has been prepared on the basis of the
accounting policies adopted in the Company's financial statements for the year
ended 30 June 2006.
2. Status of financial information
The interim information for the 6 months ended 31 December 2006 and 31 December
2005 has not been audited or reviewed by the auditors.
The comparative figures for the year ended 30 June 2006 are not the Company's
financial statements for that financial year. Those accounts have been reported
on by the Company's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under section 237(2) or
(3) of the Companies Act 1985.
3. Dividends
The following dividends were declared and paid by the Company:
6 months ended 6 months ended Year ended
31.12.2006 31.12.2005 30.06.2006
Dividend paid per ordinary share (pence per share) 5.0p 18.0p 20.5p
Total dividend paid (£'000s) 874 3,136 3,578
For the 6 months ended 31 December 2006 a dividend of 2.5p (6 months ended 31
December 2005 2.5p, 12 months ended 30 June 2006 7.5p) per ordinary share is
proposed amounting to £437,000 (6 months ended 31 December 2005, £436,000, 12
months ended 30 June 2006 £1,308,000).
4. Share capital and reserves
Reconciliation of movement in capital and reserves attributable to equity
shareholders
Share Share Capital Retained Total
capital premium redemption earnings
reserve
£'000 £'000 £'000 £'000 £'000
At 1 July 2006 872 697 43 5,142 6,754
Shares issued in the period 2 22 - - 24
Total recognised income and expense - - - 691 691
Purchase of own shares - - - - -
Sale of own shares - - - - -
Share based payments - - - 29 29
Equity dividends - - - (874) (874)
At 31 December 2006 874 719 43 4,988 6,624
The number of ordinary shares in issue at 31 December 2006 was 17,487,080 (31
December 2005: 17,454,080, 30 June 2006: 17,454,080). The weighted average
number of ordinary shares outstanding during the period was 17,463,341 (31
December 2005: 17,387,880, 30 June 2006: 17,416,059).
5. Interim report
The interim report is being posted to all shareholders and copies are available
on the company's website www.nrgplc.com and on application to the Company
Secretary, Northern Recruitment Group plc, 56 Grey Street, Newcastle upon Tyne,
NE1 6AH.
This information is provided by RNS
The company news service from the London Stock Exchange