Highams Systems Services Group PLC
13 June 2007
For release 7.00am 14 June 2007
Highams Systems Services Group plc ('Highams' or 'the Group')
The AIM-quoted IT recruitment consultancy and a leading niche provider of
technology
talent in the financial services industry
Preliminary Results
for the year ended 31 March 2007
'A Year of Change and Excitement'
Highlights
•A year of significant change with agreed ambitious plans for the year
ahead
•Revamped board including appointment of Dave Pye as new CEO
•New City of London office and enlarged sales team have already delivered
additional business
•Good progress made in moving to higher-margin recruitment
•Higher margin permanent business increased by 90% - strong demand for
permanent staff traditionally a sign of a confident market
•Continued investment in current year
•Overseas expansion - future roll-out of innovative low cost, high touch
model as a formula for further international development
•Gross profit up by 2.5% to £2.2m (2006: £2.1m), representing 13.29% of
turnover (2006: 11.73%); Group turnover fell to £16.3m (2006: £18.0m),
reflecting reduced volume of low-margin contract business; Group operating
loss before goodwill amortisation of £120k (2006: profit of £192k before
goodwill amortisation), in the main reflecting increased investment in the
second half of the year
Commenting, Alan Howarth, Non-Executive Chairman of Highams, said:
'These are exciting times at Highams. We have a revamped Board. We have a new
Chief Executive, Dave Pye. We have opened a new Highams office in the heart of
our client base in the City of London. We have considerably enlarged our sales
team. We have agreed ambitious plans for the year ahead.
Our goal is to make a step change in the Group's performance. We recognised as a
Board that such a step change was not likely without new personnel at all levels
of the organisation, starting at the top!
With the continuing strength of our marketplace and our determined approach to
delivering high-quality, high-value recruitment consultancy services, I look
forward to the Group's continued progress in the months ahead with confidence'.
Enquiries:
Dave Pye, Chief Executive Tel: 01883 341 144
Highams Systems Services Group plc
www.highams.com
Richard Thompson Tel: 020 7149 6482
Charles Stanley Securities (Nomad)
Tarquin Edwards / Chris Steele Tel: 020 7034 4758 / 59
Adventis Financial PR
Preliminary Results for the for the year ended 31 March 2007
Chairman's Statement
Introduction
These are exciting times at Highams. We have a revamped Board. We have a new
Chief Executive, Dave Pye. We have opened a new Highams office in the heart of
our client base in the City of London. We have considerably enlarged our sales
team. We have agreed ambitious plans for the year ahead.
Our goal is to make a step change in the Group's performance. We recognised as a
Board that such a step change was not likely without new personnel at all levels
of the organisation, starting at the top!
I strongly encourage you to read our new Chief Executive's Report to learn more
of the year ended 31 March 2007 and, importantly, what is in store for this
current financial year and the future.
The results for the last financial year, given below, reveal the progress we are
making in our move to higher margin business, albeit the bottom line was
inevitably impacted by the investment at the start of the new change programme.
The current financial year will be one of continued investment as we implement
our plans, which we expect to see bear fruit in this and subsequent years.
Financial Results
The Group made an operating loss of £120,000 before goodwill amortisation of
£128,000 (2006: profit of £192,000 before goodwill amortisation of £128,000), in
the main reflecting our increased investment in the second half of the year.
Group loss before taxation was £313,000 (2006: loss of £13,000).
Reflecting the Group's move towards higher margin business and a greater
percentage of permanent business, Group turnover fell by 10 per cent. to £16.3m
(2006: £18.0m) as we undertook a reduced volume of low-margin contract business,
but gross profit still grew by 2.5% to £2.2m (2006: £2.1m) representing 13.29%
of turnover, a significant improvement compared to 11.73% in 2006.
The Directors are not recommending the payment of a final dividend for the year
to 31 March 2007 (2006: nil).
Trading Review
Our emphasis has been, and remains, on finding higher value business through
further enhancing our capabilities to provide a specialised range of services to
smaller and medium sized organisations. We have continued to seek and win new
clients that meet these criteria in our niche market sectors of insurance,
investment management and financial services.
We have achieved this refocusing of our strategy whilst managing to modestly
improve our levels of net fee income. Compared to the previous year, our volume
of low-margin business has reduced substantially, while higher-margin contract b
usiness has increased by around 5% and permanent business has increased by 90%.
Trading in our specialist areas has remained positive, with a continuing
emphasis on demand for permanent staff. This stronger demand for permanent staff
compared to contract personnel is traditionally a sign of a confident market.
Demand is particularly strong, across the board, for individuals with project
and programme management skills, business analysis experience related to
business intelligence and regulatory reporting, and those with web development
skills in our niche markets.
Investment
In 2007/08, we are making substantial investments in new initiatives, additional
staff, targeted training, our London premises and overseas expansion. We expect
that our niche markets will remain strong for the next two or three years at
least, making this an opportune time to be investing in our ambitious plans.
Inevitably there are normal risks associated with such an investment programme,
and the delivery of the benefits from the investments will lag behind the costs.
I therefore expect our half year results to reflect the costs and few of the
benefits, whilst the second half of the year should be more balanced. Such
investments will initially also require greater use of our finance facilities
and hence higher interest charges will likely be incurred.
Board Changes
On 3 January 2007 we welcomed Dave Pye as our new CEO, following an intensive
selection process. Dave brings substantial sales and senior-level management
experience, a wealth of contacts and extensive influence within the IT
recruitment industry to his new role at Highams and has used all of this to
determine and drive the exciting change programme on which we have embarked.
On Dave's appointment, Ted Andrews stepped aside as Managing Director to assume
the position of Chief Operating Officer.
We announced the resignations of Glen Burbidge and Tony Eve, effective from 31
March 2007 and 11 May 2007 respectively. Glen Burbidge's Board responsibilities
have been assumed by Dave Pye whilst his operational duties have been taken over
by Mark de Lacy, who runs our Caterham sales team, and Paul Byrne who is in
charge of our London sales office. Tony Eve's Board and operational
responsibilities have been absorbed into Ted Andrews' role.
Executives and Staff
We remain unusual amongst recruitment companies in having a high number of very
knowledgeable and long-serving staff. I am extremely grateful to them for their
loyalty and their eagerness to support the significant changes we are effecting
in the Company. I extend a warm welcome to our newer staff and hope that many of
them will develop along similar lines as their experienced colleagues.
Outlook
As I stated in my introduction, these are exciting times at Highams with a great
number of very positive changes in progress. Dave Pye's CEO's Report explains
many of these changes, demonstrating the thought leadership, practical approach
and infectious energy and enthusiasm he has brought to Highams.
With the continuing strength of our marketplace and our determined approach to
delivering high-quality, high-value recruitment consultancy services, I look
forward to the Group's continued progress in the months ahead with confidence.
Alan Howarth
Chairman
14 June 2007
Chief Executive's Report
Introduction: The rising importance of recruitment companies
The search for talent has remained one of the top priorities for Chief
Executives during the past year. Its importance will continue in the next five
years as organisations realise that what McKinsey once called the 'War for
Talent' is having a major impact on recruitment companies in Europe and
globally. Two significant reports on Talent and Recruitment in The Economist
(Oct 06) and by Demos* and the Recruitment and Employment Confederation (April
07) have shown how recruitment is changing and how increasingly important
intermediaries such as Highams are in the provision of talent to organisations.
We fully expect that changing demographics, new attitudes to career expectations
and more dependence from employers on a good personality fit (compared to simply
a good skills fit) will place greater emphasis on high-quality, network
orientated recruitment methods.
Highams operates in this arena and is creating a niche for itself in the
provision of senior appointments in technology in the financial services sector.
Highams' role as an intermediary between contingent and permanent talent and our
customers continues to be recognised by our long standing customers and those
new clients who started benefiting from Highams' services in the past year.
Challenging Highams in a Changing World
Since my arrival in January 07, there has been much change at Highams to ensure
we make the most of the rising importance of recruitment companies to
organisations. The market in the UK and Europe continues to grow. This year
Highams has hired 15 new people to tap into this growth. Our focus has remained
in financial services and I am delighted to report Highams has secured a number
of new customers in the last quarter of 2006/07. Whilst the focus away from some
of the historic, lower margin, preferred supplier business has had an effect on
the revenue line, proportionally the net fee income as a percentage of sales is
rising.
Our approach has been to refine our offering to our customers - both to our
consultants and candidates and to organisations which hire them. Highams offers
two distinct services; a private client approach in the provision of senior
consultants who have worked with Highams in the past and a retail approach for
general business with a wider range of customers. This has resulted in Highams
developing deeper relationships with significant customers and allowing us to
offer them a wider range of value-creating services whilst, at the same time,
maintaining our existing business with customers where Highams places people
with organisations on an occasional basis.
Our major focus for 07/08 is to ensure Highams is at the forefront in our sector
in maximizing the efficiency provided by Web 2.0. In the words of the Demos
report, 'Web 2.0 sees the internet as a collaborative tool, where we each have a
role in creating value for one another.' as is happening, for instance, with
YouTube, ecademy and Tribe.net. This will result in attracting talent for our
customer base and ensuring that talent can communicate with one another and with
Highams. The relationship that Highams builds with its candidates and
consultants will be increasingly vital to its success in a world where those who
manage and deliver top talent will become ever more important and successful.
*Recruitment 2020 How recruitment is changing and why it matters
Available from www.demos.co.uk
The International Dimension
As our customer base grows so will our presence internationally. Our business in
Brussels has grown in 2006/07 and our innovative model of using local
home-workers in Belgium is a formula that Highams will use internationally
during the coming 12 months. This model primarily involves ex-patriates,
typically parents returning to full or part-time work having had families. They
are excellent recruiters and their intelligence combined with our workforce
flexibility will help develop and cement stronger relationships with our
customers. It is a low cost, high touch model that will see Highams become an
international organisation in a world where talent is sourced and delivered
globally. As talented people continue to move around, Highams will feature
prominently in its sector. This approach is being executed initially by working
with our international customers who are demanding Highams provides its
excellent UK services into other geographic locations.
Expansion in the UK
In April 2007, we opened our first office in the UK outside our Caterham
headquarters. Taking an office on 28th floor of the iconic 'Gherkin' building in
the City of London has brought Highams closer to its financial services
customers and is a base for our Platinum Club, an invitation only community for
our private client technology talent.
Highams continues to work alongside its customers as they seek to become more
imaginative, utilise their brand in the most effective way and ensure that, in
the 'digital age', the technology that drives organisations is provided by the
very best people. Highams will continue to provide the very best talent as it
continues to grow with its customers in the coming years.
Our wider responsibility
Highams has recently selected The Rainbow Trust, Trees for Cities and Action Aid
to partner. Working with The Rainbow Trust, Highams' staff will, through various
fund-raising events, raise money to provide support for the families of sick
children.
We will also be raising awareness for our environment and for projects overseas
by making donations to Trees for Cities (for every interview) and Action Aid
(for every contract or permanent placement made).
These partnerships are a great example of how we can work alongside a charity,
both motivating our staff in their work and demonstrating to clients our social
responsibility.
People making the difference
One of the key success factors for Highams to build on is the length of service
of our people. Of our people who have been with us for more than a year, over
50% have been at Highams for more than 10 years and a further 30% for more than
5 years. In a market where traditionally recruiters move many times, our
heritage of keeping our top people is much appreciated by our customers,
resulting in continued and strong business renewals. Adding another 40% of
people to this team this year has already generated additional business and will
auger well for the coming years.
Today Highams employs 40 proud people. In this rising market they all need to be
at the top of their game. Those that were not, exited the business in the final
quarter of 2006/07. For both our new colleagues and our existing people, new
training programmes have been developed. Highams has taken an active role in the
recruitment industry with its involvement in the Recruitment and Employment
Confederation. The Highams brand, often quoted in the past 24 years but
certainly relatively quiet in the recent past, has been invigorated with a
number of press articles, customer events and charitable involvement in the
first six months of 2007.
My role as CEO is to ensure our people are confident and happy in the key role
they play in our organisation and with their customers. It is to drive this
business back to sustainable, profitable growth and to provide the platform to
do so. Finally, it is to establish Highams as one of the key organisations upon
whose services its customers rely to drive their businesses forward.
I am proud of our people and their dedication in this year of change and
excitement. I trust that you will share in our enthusiasm to make a difference
in the recruitment sector and to see how our influence matters as we devote
ourselves to being the leading niche provider of technology talent in the
financial services industry.
Dave Pye
Chief Executive Officer
14 June 2007
Consolidated Profit & Loss Account
for the year ended 31 March 2007
2007 2006
Unaudited
Notes £'000 £'000
Turnover 16,286 17,997
Cost of sales (14,121) (15,885)
Gross profit 2,165 2,112
Administrative expenses
- before goodwill amortisation (2,285) (1,920)
- goodwill amortisation (128) (128)
(2,413) (2,048)
Operating (loss)/profit before goodwill (120) 192
amortisation
Operating (loss)/profit (248) 64
Interest receivable - 2
Interest payable (65) (79)
Loss on ordinary activities before taxation (313) (13)
Tax on loss on ordinary activities - (2)
Loss for the year 2 (313) (15)
Loss per share - basic and diluted 1 (0.98) p (0.05) p
Consolidated Statement of Total Recognised Gains
and Losses
for the year ended 31 March 2007
2007 2006
Unaudited
£'000 £'000
Loss for the financial year (313) (15)
Loss on foreign currency translation - (1)
Total recognised gains and losses, relating to the (313) (16)
year
Consolidated Balance Sheet
31 March 2007
2007 2006
Unaudited
Notes £'000 £'000
Fixed assets
Goodwill 943 1,071
Tangible assets 37 55
980 1,126
Current assets
Debtors 2,936 3,170
Cash at bank and in hand 228 73
3,164 3,243
Creditors: amounts falling due within one (2,483) (2,395)
year
Net current assets 681 848
Net assets 1,661 1,974
Capital and reserves
Called up share capital 1,594 1,594
Share premium 2 679 679
Merger reserve 2 90 90
Employee share benefit trust reserve 2 (61) (61)
Profit and loss account 2 (641) (328)
Shareholders' funds 2 1,661 1,974
Consolidated Cash Flow Statement
for the year ended 31 March 2007
2007 2006
Unaudited
Notes £'000 £'000
Net cash (outflow)/inflow from operating 3 (61) 458
activities
Returns on investments and servicing of
finance
Interest received - 2
Interest paid (65) (79)
(65) (77)
Taxation
UK corporation tax - (46)
Capital expenditure and financial investment
Purchase of tangible fixed assets (10) (38)
Sale of tangible fixed assets - 9
(10) (29)
Cash (outflow)/inflow before financing in the (136) 306
year
Financing
Purchase of own shares by Employee Share - (2)
Benefit Trust
Increase/(decrease) in invoice discounting 291 (478)
facility
291 (480)
Increase/(decrease) in cash in the year 4 155 (174)
1. Loss per share Loss Weighted Loss per Profit/ Weighted Profit/
average share (loss) average (loss) per
number of number of share
shares shares
2007 2007 2007 2006 2006 2006
Unaudited Unaudited Unaudited
£'000 '000 p £'000 '000 p
(Loss)/profit for the (185) 31,692 (0.58) 113 31,700 0.35
financial year before
goodwill amortisation
Goodwill amortisation (128) - (0.40) (128) - (0.40)
Loss for the financial year (313) 31,692 (0.98) (15) 31,700 (0.05)
Dilutive effect of options - 5 - - - -
(313) 31,697 (0.98) (15) 31,700 (0.05)
The weighted average number of shares excludes shares held by the Employee Share Benefit
Trust.
Loss per share before goodwill amortisation is presented as the directors consider that this
gives a useful indication of underlying performance.
2. Reconciliation of movements in shareholders' funds
Group
Share Share Merger Employee Profit Total
capital premium reserve share and loss
benefit account
reserve
£'000 £'000 £'000 £'000 £'000 £'000
Opening shareholders' funds 1,594 679 90 (61) (328) 1,974
Loss for the year - - - - (313) (313)
Closing shareholders' funds 1,594 679 90 (61) (641) 1,661
3. Net cash flow from operating activities
2007 2006
Unaudited
£'000 £'000
Operating (loss)/profit (248) 64
Depreciation of tangible fixed assets 28 17
Goodwill amortisation 128 128
Decrease/(increase) in debtors 234 (261)
(Decrease)/increase in creditors (203) 508
Loss on disposal of fixed assets - 3
Exchange difference - (1)
Net cash (outflow)/inflow from operating (61) 458
activities
4. Analysis and reconciliation of net debt
Analysis of changes in net debt 1 April Cash 31 March
2006 flow 2007
Unaudited Unaudited
£'000 £'000 £'000
Cash at bank and in hand 73 155 228
Invoice discounting facility (300) (291) (591)
Net debt (227) (136) (363)
Reconciliation of net cash flow to movement in 2007 2006
net debt
Unaudited
£'000 £'000
Cash inflow/(outflow) 155 (174)
(Increase)/decrease in invoice discounting (291) 478
facility
(136) 304
Net debt at beginning of year (227) (531)
Net debt at end of year (363) (227)
5. The financial information above does not constitute statutory accounts within
the meaning of section 240 Companies Act 1985 as amended ('the Act'). Statutory
accounts in respect of the year ended 31 March 2006, on which the auditors
report was unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and
contained no statement under section 237(2) or (3) of the Act, have been
delivered to the Registrar of Companies.
6. The auditors have not reported on the accounts for the year ended 31 March
2007, nor have any such accounts been delivered to the Registrar of Companies.
7. Copies of the statutory accounts for the year ended 31 March 2007 will be
sent to all shareholders. Additional copies will be available from the Company
Secretary, Highams Systems Services Group plc, Quadrant House, 33/45 Croydon
Road, Caterham, Surrey, CR3 6PB.
This information is provided by RNS
The company news service from the London Stock Exchange