Northern Recruitment Group PLC
08 February 2008
8 February 2008
NORTHERN RECRUITMENT GROUP PLC
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
'Profitability in the first half of the current financial year was in line with
our budgets'
• Turnover £9.9m (2006: £11.2m)
• Gross profit £3.32m (2006: £3.94m), a reduction of £0.62m
o Core permanent recruitment up 12%
o Temporary recruitment down 6%
o NRG Connect down £0.76m
• Profit before tax £0.54m (2006: £1.0m)
• Diluted earnings per share 2.1p (2006: 4.0p)
• Balance sheet remains strong: net cash £4.71m (2006: £4.73m)
• Interim dividend maintained at 2.5p
• Successful start for new TotalNRG consortium
• NRG Connect re-branded and refocused as NRGRPO
'Despite growing uncertainty about prospects for the UK economy as a whole in
2008, our own pipeline of new business bids and tenders remains encouraging. We
are therefore budgeting for continued progress in our core permanent recruitment
operations during the second half, and targeting a renewal of growth in the
temporary employment arena. The revenue stream from the TotalNRG consortium is
growing steadily, but the repositioning of NRG Connect as NRGRPO will take time
to produce results, and we do not anticipate any uplift in activity in this area
during the current financial year. In consequence, while we anticipate that
Company profits in the second half will show progress compared with those of the
first half, it is possible that they will not match those achieved in the second
half of our previous financial year.'
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.
NRG addresses 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 Executive provides specialist search and selection services for board
level and other senior appointments in both the public and private sectors.
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.
TotalNRG is a consortium of five leading regional recruitment specialists, led
by NRG, which combines specialised local knowledge with truly national delivery
capabilities.
NRGRPO (Recruitment Process Outsourcing) develops and implements tailor-made
recruitment solutions for clients from both the private and public sectors, with
the capability to handle a wide range of briefs including graduate recruitment,
diversity improvement, skills assessment, attrition reduction and high volume
candidate attraction through our central response handling and project
management centre. Our highly flexible approach allows clients to choose NRGRPO
for special projects, specific parts of their recruitment process, or full
implementation from developing the initial plan through to final job offers.
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.
HALF-YEARLY FINANCIAL REPORT
Business Review
Profitability in the first half of the current financial year was in line with
our budgets, and principally reflected the extremely low levels of activity at
our NRG Connect national response handling unit, compared with a period in 2006
when it handled a significant amount of major project work. The resulting
profit shortfall in this unit more than accounted for the overall reduction in
the Company's profit compared to last year.
Our core permanent recruitment businesses continued to make pleasing progress,
benefiting from our investment in additional fee-earning staff. Many of our
temporary recruitment operations also did well, and we are taking action to
address the areas of underperformance in this part of the Group.
The market place in which we operate remained generally robust in the six months
under review. The primary exception to this was the absence of major public
sector contracts, principally affecting NRG Connect.
NRG Executive, filling board level and other senior positions in both the public
and private sectors, continued to perform particularly well. We have further
extended our higher education portfolio, winning a number of valuable new
commissions and filling several senior positions for University College London.
We have also made good progress in the healthcare sector. During the first half
we doubled the number of staff in our Executive team and made two senior
appointments focusing exclusively on the development of our business in the
private sector. This is now beginning to bear fruit.
NRG Call Centre Solutions, specialising in the provision of both permanent and
temporary contact centre staff, built further on its very successful performance
last year. Following the completion of a high volume contract for British
Airways' Newcastle contact centre, we have expanded our involvement in the
provision of recruitment services for this client both here and in Manchester.
Our work for Newcastle Building Society, Barclays and Freedom Direct has
continued to expand, and recently we have been selected as a national supplier
to a blue chip company following their rationalisation of temporary staff
providers.
NRG Works, our flexible resourcing division, continued to make good progress in
the automotive, food and pharmaceutical sectors. A large temporary contract was
converted to permanent positions which resulted in reduced overall revenues in
comparison to last year.
NRG City, dedicated to the provision of high quality support staff, had a
challenging first half across all its operating centres. Management action is
now being taken to address this underperformance. Following successful
re-tenders, we retained our contract with Durham University for the provision of
temporary staff, and extended our contract with the East Riding of Yorkshire and
North Lincolnshire Councils for the provision of temporary clerical workers
to include additionally industrial, catering, accountancy and audit staff.
TotalNRG is a consortium of regional recruitment specialists, led by NRG,
established in 2007. It secured a place on the pan-Government framework
contract for the provision of recruitment services, and has now begun to supply
high quality temporary staff to a wide range of Government organisations
including HM Prison Service, the Crown Prosecution Service, Border & Immigration
Agency, the Home Office, Security Industry Authority and HM Revenue & Customs.
The innovative consortium model is proving robust and effective in delivering
staff in all parts of the UK, capitalising on the local knowledge of our
partners, and in ensuring tight management control throughout the process.
NRG Connect, our national response handling unit, experienced a fall in its
gross profit contribution of almost £0.8m as a result of the absence of the high
volume public sector contracts which have been its mainstay. We have responded
to this change in the business environment by widening our range of recruitment
services. To reflect the change this unit is to be rebranded as NRGRPO
(Recruitment Process Outsourcing) and will be targeting private as well as
public sector clients.
NRG Scotland continues to offer scope for improvement in profitability. However
following a successful re-tender after three years as a strategic recruitment
partner with Scottish Water, we were pleased to secure preferred supplier status
for the provision of technical and operations staff and we have also won a new
contract to supply temporary staff to the National Health Service in Scotland.
Our Newcastle and Tees Valley offices have been the principal beneficiaries of
the expansion of NRG Professional Services Group with a strengthened team in NRG
Finance, continued good growth in NRG Scientific and a successful first half for
NRG Engineering. A number of key strategic preferred supplier agreements were
gained in the first half including Sabic and eaga plc. We have relocated our
Tees Valley office to enlarged and improved premises in Middlesbrough to enable
us to improve our exploitation of the many opportunities in this city-region.
Financial Review
Company sales in the period were £9.9m compared to £11.2m in the same period
last year.
Gross profit, a key performance indicator (KPI), was £3.32m compared to £3.94m
last year. Analysis of this change shows that fees from our core permanent
business rose by 12 per cent compared to the same period last year, whilst gross
profit from temporary placements fell by 6 per cent; in addition NRG Connect was
down from £0.78m to £0.02m due to the lack of large project work in the first
six months of this year.
A further KPI is the percentage margin on sales revenues from the supply of
temporary workers. This improved from 16.2 in the six months to December 2006
to 16.7 in the period under review, mainly because of the changed mix of
business.
Payroll costs are the largest component of the Company's administrative costs.
They rose to £2.07m from £2.02m in the same period last year.
Whilst gross profit fell by £0.62m as explained above, the reduction in
operating profit was confined to £0.48m - £0.40m this year, £0.88m last year -
due to savings in operating costs.
Cash balances at the end of the period were £4.71m, close to their level in
December 2006 (£4.73m). There was a cash outflow £0.60m in the first six months
of the year after capital expenditure of £0.13m and dividends of £0.87m.
Income tax for the period shown in the income statement is £0.17m as detailed in
note 3. This compares with £0.31m for the first six months of last year.
Basic and diluted earnings per share were 2.1p compared to 4.0p for the
corresponding period in the previous year.
Risks and uncertainties
As required under IAS 34 'Interim Financial Reporting' and the new UKLA
Disclosure and Transparency Rules (DTR), the Board is providing a description of
the principal risks and uncertainties for the remainder of the financial year
ending 30 June 2008.
The UK economy
• The performance of employment businesses in the UK has traditionally been
linked to national economic growth.
Legislative changes
• Restricting the flexibility of movement of workers could adversely affect
the recruitment sector.
Competition
• The market for the supply of temporary and permanent recruitment services
is highly fragmented and competitive.
Commercial relationships
• The company has key clients in the public and private sectors.
Technology
• The recruitment sector is increasingly reliant upon technology platforms.
The Board conducts a review of business risks and has implemented procedures to
allow the Directors to monitor these risks on a regular basis. These are more
fully described in the Company's Annual Reports.
Dividend
In the light of the Company's strong financial position, the Board has declared
an unchanged interim dividend of 2.5p. It will be paid on 28 March 2008 to
those shareholders on the register at the close of business on 14 March 2008.
The ex-dividend date will be 12 March 2008.
People
We have continued to strengthen the business through training, development,
promotion and external recruitment. The addition of experienced fee-earners to
our team has made a major contribution to the progress we have been able to
achieve in our core permanent recruitment operations. The Board is grateful for
the continuing efforts of every single member of the NRG team in all parts of
the Group.
Outlook
Despite growing uncertainty about prospects for the UK economy as a whole in
2008, our own pipeline of new business bids and tenders remains encouraging. We
are therefore budgeting for continued progress in our core permanent recruitment
operations during the second half, and targeting a renewal of growth in the
temporary employment arena. The revenue stream from the TotalNRG consortium is
growing steadily, but the repositioning of NRG Connect as NRGRPO will take time
to produce results, and we do not anticipate any uplift in activity in this area
before the end of our current financial year. In consequence, while we
anticipate that Company profits in the second half will show progress compared
with those of the first half, it is possible that they will not match those
achieved in the second half of our previous financial year.
BY ORDER OF THE BOARD
Leo Finn Lorna Moran
Chairman Chief Executive
8 February 2008 8 February 2008
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with International Accounting Standard 34 'Interim Financial Reporting' (IAS
34) as adopted by the EU; and
• the interim management report includes a fair review of the information
required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year.
BY ORDER OF THE BOARD
Leo Finn Lorna Moran
Chairman Chief Executive
8 February 2008 8 February 2008
Condensed income statement Notes 6 months ended 6 months ended Year ended
31 December 2007 31 December 2006 30 June 2007
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 9,908 11,207 22,336
Cost of Sales (6,588) (7,267) (14,751)
Gross profit 3,320 3,940 7,585
Administrative expenses (2,915) (3,056) (5,787)
Operating profit 405 884 1,798
Financial income 138 118 238
Profit before tax 543 1,002 2,036
Tax 3 (168) (311) (621)
Profit for the period attributable to the 375 691 1,415
equity holders of the parent
Basic earnings per share (pence) 4 2.1 4.0 8.1
Diluted earnings per share (pence) 4 2.1 4.0 8.1
There were no items of income or expense for the current or comparative period
other than those reported in the condensed income statement.
Condensed balance sheet Notes 6 months ended 6 months ended Year ended
31 December 2007 31 December 2006 30 June 2007
Unaudited Unaudited Audited
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 377 364 348
Investment in subsidiaries - - -
Deferred tax assets 52 79 69
429 443 417
Current assets
Trade and other receivables 3,287 4,080 3,717
Cash & cash equivalents 4,710 4,731 5,308
7,997 8,811 9,025
Total assets 8,426 9,254 9,442
LIABILITIES
Current liabilities
Trade & other payables (1,854) (2,362) (2,310)
Income tax payable (164) (268) (241)
(2,018) (2,630) (2,551)
Total liabilities (2,018) (2,630) (2,551)
Net assets 6,408 6,624 6,891
EQUITY
Share capital and reserves
Share capital 6 875 874 874
Share premium account 6 726 719 719
Capital redemption reserve 6 43 43 43
Retained earnings 6 4,764 4,988 5,255
Total equity attributable to equity 6 6,408 6,624 6,891
holders of the parent
Condensed cash flow statement Notes 6 months ended 6 months ended Year ended
31 December 2007 31 December 2006 30 June 2007
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period 375 691 1,415
Adjusted for:
Depreciation 97 107 199
Financial income (138) (118) (238)
Profit on sale of property, plant and (10) - (3)
equipment
Share-based payment expenses 15 29 18
Taxation 168 311 621
Cash flows from operating activities 507 1,020 2,012
before working capital movements
Decrease/(Increase) in trade and other 430 (556) (193)
receivables
(Decrease)/Increase in trade and other (456) 323 271
payables
Cash inflow from the operating activities 481 787 2,090
Income tax paid (235) (193) (529)
Net cash inflow from operating activities 246 594 1,561
Cash flows from investing activities
Proceeds from sale of property, plant and 10 - 3
equipment
Interest received 138 118 238
Acquisition of property, plant and (126) (19) (95)
equipment
Net cash inflow from investing activities 22 99 146
Cash flows from financing activities
Proceeds from the issue of share capital 6 8 24 24
Dividends paid 6 (874) (874) (1,311)
Net cash outflow from financing activities (866) (850) (1,287)
Net (decrease)/ increase in cash and cash (598) (157) 420
equivalents
Cash and cash equivalents at the start of 5,308 4,888 4,888
the period
Cash and cash equivalents at the end of 4,710 4,731 5,308
the period
Unaudited Notes
1. Basis of preparation and accounting policies
The interim financial information for the six months ended 31 December 2007,
including comparative financial information, has been prepared on the basis of
the accounting policies set out in the last annual report and accounts and in
accordance with International Financial Reporting Standards ('IFRS'), including
IAS 34, as issued by the International Accounting Standards Board and adopted by
the European Union. They do not include all of the information required for
the full annual financial statements, and should be read in conjunction with the
statutory accounts for the Company as at and for the year ended 30 June 2007.
The condensed financial statements are unaudited and were approved by the Board
of Directors on 8 February 2008.
The comparative figures for the financial year ended 30 June 2007 are not the
company's statutory accounts 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 (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
2 Segmental reporting
Business is the basis of the Company's primary segmentation. The Company
operates in one business segment being the provision of recruitment services.
As a result no additional business segment information is required to be
provided. It operates in one geographical segment, the United Kingdom, and
therefore no additional segment information is required to be provided.
3. Taxation
6 months ended 6 months ended 12 months ended
31 December 2007 31 December 2006 30 June 2007
£'000 £'000 £'000
Current tax expense
Current year 158 311 613
Adjustment for prior years - - 12
158 311 625
Deferred tax expense
Origination and reversal of temporary differences 10 - 4
Adjustments for prior years - - (12)
Effect of tax rate change on opening balance - - 4
10 - (4)
Total tax in income statement 168 311 621
4. Earnings per share
Earnings per share and diluted earnings per share are calculated by reference to
a weighted average number of ordinary shares calculated as follows:
6 months ended 6 months ended 12 months ended
31 December 2007 31 December 2006 30 June 2007
Basic weighted average number of shares in issue 17,478,738 17,463,341 17,470,448
Employee share options 31,242 112,825 79,915
Weighted average number of diluted shares outstanding 17,509,980 17,576,166 17,550,363
5. Dividends
The following dividends were declared and paid by the Company:
6 months ended 6 months ended 12 months ended
31 December 2007 31 December 2006 30 June 2007
Dividend paid per ordinary share
(pence per share) 5.0 5.0 7.5
Total dividend paid (£'000) 874 874 1,311
For the 6 months ended 31 December 2007 a dividend of 2.5p (6 months ended 31
December 2006 2.5p, 12 months ended 30 June 2007 7.5p) per ordinary share
amounting to £438,000 (6 months ended 31 December 2006 £437,000, 12 months ended
30 June 2007 £1,311,000) was approved by the directors on 8 February 2008. It
has not been included as a liability as at 31 December 2007.
6. Share capital and reserves
Share Share Capital Retained Total
capital premium redemption earnings
reserve
£'000 £'000 £'000 £'000 £'000
Balance at 1 July 2007 874 719 43 5,255 6,891
Total recognised income and expense - - - 375 375
Shares issued in the period 1 7 - - 8
Share based payment transactions net of tax - - - 8 8
Dividends - - - (874) (874)
Balance at 31 December 2007 875 726 43 4,764 6,408
£'000 £'000 £'000 £'000 £'000
Balance at 1 July 2006 872 697 43 5,142 6,754
Total recognised income and expense - - - 691 691
Shares issued in the period 2 22 - - 24
Share based payment transactions net of tax - - - 29 29
Dividends - - - (874) (874)
Balance at 31 December 2006 874 719 43 4,988 6,624
£'000 £'000 £'000 £'000 £'000
Balance at 1 July 2006 872 697 43 5,142 6,754
Total recognised income and expense - - - 1,415 1,415
Shares issued in the period 2 22 - - 24
Share based payment transactions net of tax - - - 9 9
Dividends - - - (1,311) (1,311)
Balance at 30 June 2007 874 719 43 5,255 6,891
The number of ordinary shares in issue at 31 December 2007 was 17,506,080 (31
December 2006: 17,487,080, 30 June 2007: 17,487,080).
7. 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