Print   

 

7 September 2009

 

 

NETWORKERS INTERNATIONAL PLC

(AIM: NWKI)

 

Unaudited Interim Results

for the 6 month period to 30 June 2009 

 

The Board of Networkers International Plc ('Networkers' or 'the Group'), the AIM-listed international recruitment company, is pleased to announce interim results for the six months ended 30 June 2009.

 

Highlights

• Pre-tax profits for the period down by 25.4% to £2.20m (2008: £2.95m);

• Total net borrowings (including drawdown on invoice discounting facilities) have been reduced to £2.9m (June 2008: £17.0m);

• Basic earnings per share down by 26.7% to 1.56p (2008: 2.13p);

• Improvement in gross profit margins to 16.6% (2008: 15.3%);

• Net fee income (gross profit) down by 9.7% to £11.48m (2008: £12.7m);

• Good cash management together with the proceeds from the disposal of the Middle East joint venture has resulted in operating cash flows before financing of £8.55m (2008: £1.95m);

• Strong balance sheet and good liquidity with net tangible assets of £11.0m and net current assets of £11.5m;

• Strategic focus on overseas expansion has seen the mix of international net fee income increase from 46% to 55% in 6 months; and

• Continued growth within the international markets, with additional office openings planned for second half of the year.

 

Commenting on today's results, Spencer Manuel, CEO, said 'As expected, the first half of the year has proved to have been a challenging period; however, I am pleased to report that our geographical diversification and our higher mix of contract sales has provided us with some resilience to these difficult market conditions.  

'With net borrowings now reduced to below £3m from £17m a year ago, together with our profitable trading, solid balance sheet and strong cash generation, the Group has a sound platform to continue to operate successfully throughout the current climate.'

 

Enquiries:

Networkers International                                 020 8315 9000
Spencer Manuel, CEO
Jon Plassard, CFO
www.networkersint.com

 

Seymour Pierce Limited                                  020 7107 8000

Richard Feigen

Catherine Leftley

 

Bishopsgate Communications Ltd                    020 7562 3350 
Maxine Barnes

Gemma O'Hara

  

 

 

 

Networkers International Plc

Chief Executive Officer's Report

 

 

I am pleased to report on our Interim Results for the six month period to 30 June 2009.  As expected, and as with a number of our peers in the staffing sector, the first half of 2009 has proved to be a challenging trading period for the Group. However, despite the difficult global market conditions, the Group has achieved a profit before tax of £2.20m (2008: £2.95m).  

 

I am also pleased to report that during the period we have successfully generated over £8.5m in cash from operating and investing activities. This has been achieved through improved cash management, a lower working capital requirement and the proceeds from the disposal of our joint venture. This has reduced the Group's net borrowings to £2.9m (June 2008: £17m).  

 

Net fee income (gross margin) 

 

We continue to increase our focus on higher margin recruitment activities and to increase our presence in international markets. As a result of this strategy, our overall gross margin percentage has increased to 16.6% (2008: 15.3%) and our International business now accounts for 55% of our net fee income compared to 41% a year ago.  Due to overall weaker market conditions, we have seen a 9.7% reduction in total net fee income.

 

As a result of our geographical diversification, the Group's contracting division (representing 87% of net fee income) continues to show some resilience to market conditions with a 3% decline compared to the first six months of 2008. We are maintaining gross margin percentages in all our key business streams and as a result of improvements to our sales mix, overall contracting margins have increased to 14.7% (2008: 12.7%).  

 

Our permanent division (13% of net fee income), has fared less well with a 36% reduction.  With approximately 70% of our permanent division servicing clients within the UK, the overall weakness in the UK jobs market has had a negative impact on placements. Our International permanent recruitment division continues to perform well and, whilst a relatively recent addition to our offerings, has doubled its revenue compared to the corresponding period.

 

Profit from operations

 

Our conversion ratio (the ratio of operating profits before amortisation of intangible assets and profit on disposal of joint venture to net fee income) remains healthy at 19.1%, although this has reduced from 26.2% last year, it clearly demonstrates that our cost base has been prudently managed in order to align the cost structure of the business to the reduced trading levels we are currently experiencing. Staff numbers have been reduced by 12% since the start of 2009.

 

After accounting for the profit on disposal of joint venture (see below) the Group's profit from operations for the period totalled £2.50m (2008: £3.27m), down by 23.6% from the corresponding period last year.

 

Joint Venture (JV)

 

During the period the Group disposed of its Middle East JV for a total cash consideration of £2.2m net of foreign taxes. The JV was set up in 2001 as a resource and project service provider within the telecommunications and IT sector, originally operating in Saudi Arabia but successfully establishing itself in Iran, UAE, Pakistan and Algeria. The Group has recognised a profit on disposal of £0.4m. In the corresponding period in 2008 the Group's share of profits from the joint venture amounted to £0.24m.

 

We maintain a 50:50 partnership with our joint venture partners located in Dubai, to provide recruitment services in the Middle East (excluding Saudi Arabia, Iran and Algeria).

 

Profit before Taxation

 

The Group's strong cash generation in the period has resulted in a much reduced net borrowings position. This reduction in borrowings, together with lower interest rates has resulted in net finance costs being reduced by 54% to £0.25m (2008: £0.56m).

 

After finance expenses and the profit on disposal of the JV, profit before taxation for the period has been reduced by 25.4% to £2.20m (2008: £2.95m).

  

 

Networkers International Plc

Chief Executive Officer's Report (continued)

 

 

 

Balance Sheet 

 

The Group's balance sheet continues to strengthen with net assets increasing to £15.8m (June 2008: £12.4m). The Group's total assets have been reduced to £33.9m (June 2008: £44.6m) as a consequence of reduced trading activities resulting in a lower trade receivables figure. The Group's total liabilities have been reduced to £18.1m (June 2008: £32.2m) primarily as a result of the £14.1m reduction in net borrowings.

 

During the six month period, the Group has repaid £4.8m of its term loan including an early repayment of £3m. It is anticipated that the remaining term loan balance of £4.5m will be repaid in full within the next 12 months, a year earlier than its scheduled repayment date. The original term loan of £16m was taken out in December 2006 to acquire MSB International.

 

In addition to the repayment of the term loan, the Group has reduced its invoice discounting balance by £2.6m to £0.68m.

 

The Group has also embarked upon a share buy back program. Consequently, the Group has acquired treasury shares  totalling £0.2m.

 

Strategy

 

We continue with our strategy to develop the NetworkersMSB trading brand and to raise awareness of the values of the Group. We remain committed to building and developing strong relationships with our key global clients and to provide them with local multi sector recruitment services from our overseas offices.  

 

Our commitment to further increase our presence in emerging markets is demonstrated by the opening of an additional office during the period in China. Furthermore, we plan to open an additional three international offices during the second half of the year. With these new openings we will have 16 offices in 11 countries by the financial year end.

 

Whilst the UK staffing sector remains challenging, we are optimistic that opportunities exist for medium term growth in the UK and therefore we retain our UK strategy of focusing on higher value and higher margin business as well as maintaining our investment in our public sector division. 

 

We continue to prudently manage our cost base but are also mindful of ensuring that we remain well placed to exploit opportunities when market conditions do improve.

 

Current trading and outlook

 

Overall, the first half year has proved to have been a challenging period and the trading environment remains difficult. However, our international business continues to show some resilience, with trading conditions reasonably stable. The pace of decline in the UK also appears to have slowed in recent weeks with some stability now being seen in many business streams.  

 

With net borrowings now reduced to below £3m, together with our profitable trading, solid balance sheet and strong cash generation, the Group has a sound platform to continue to operate successfully throughout the current climate.  

 

 

 

Spencer Manuel
CEO

4 September 2009

 

 

 

 

Networkers International Plc

 

Consolidated income statement for the six month period to 30 June 2009

 

	Note	6 months to 30 June 2009 Unaudited		6 months to 30 June 2008 Unaudited		12 months to  31 December  2008 Audited
		£000		£000		£000
Revenue		69,188		83,094		163,425
Cost of Sales		(57,711)		(70,383)		(137,364)
		_______		_______		_______
Gross profit		11,477		12,711		26,061
Administrative expenses		(9,382)		(9,441)		(19,309)
Profit on disposal of joint venture		402		-		-
		_______		_______		_______
Profit from operations		2,497		3,270		6,752
Finance income		5		100		43
Finance expense		(254)		(664)		(1,465)
Share of post tax (loss) / profit of joint venture		(53)		240		240
		_______		_______		_______
Profit before taxation		2,195		2,946		5,570
Tax expense		(751)		(986)		(2,114)
		_______		_______		_______
Profit for the period		1,444		1,960		3,456
		_______		_______		_______
Attributable to:
- Equity holders of the parent		1,444		1,960		3,462
- Minority Interest		-		-		(6)
		_______		_______		_______
		1,444		1,960		3,456
		_______		_______		_______
Earnings per share
Basic	2	1.56 p		2.13 p		3.75 p
Diluted	2	1.54 p		2.04 p		3.59 p

 

 

 

 

  Networkers International Plc

 

Consolidated statement of comprehensive income for the six month period ended 30 June 2009

 

  

	6 months  Unaudited to 30 June 2009		6 months  Unaudited to 30 June 2008		12 month Audited to 31 Dec  2008
	£000		£000		£000
Profit for the period	1,444		1,960		3,456
Other comprehensive income:
Exchange difference on retranslation of foreign operations	(267)		(238)		777
	_______		_______		_______
Total comprehensive income for the period	1,177		1,722		4,233
	_______		_______		_______
Total comprehensive income attributable to:
- Equity holders of the parent	1,177		1,722		4,239
- Minority Interest	-		-		(6)
	_______		_______		_______
	1,177		1,722		4,233
	_______		_______		_______

 

  

Networkers International Plc

 

Consolidated balance sheet as at 30 June 2009

 

	At 30 June 2009  Unaudited		At 30 June 2008  Unaudited		At 31 Dec 2008 Audited
	£000		£000		£000
Assets
Non Current Assets
Intangible assets	4,866		4,979		4,933
Property, plant and equipment	311		355		419
Deferred tax asset	555		614		533
Investment in equity accounted joint ventures	-		1,791		58
	_______		_______		_______
Total non current assets	5,732		7,739		5,943
	_______		_______		_______
Current Assets
Trade and other receivables	25,236		35,144		32,284
Current tax assets	602		121		-
Other financial assets	68		55		-
Cash and cash equivalents	2,246		1,555		1,732
	_______		_______		_______
Total current assets	28,152		36,875		34,016
Non-current assets classified as held for sale	-		-		1,745
	_______		_______		_______
Total assets	33,884		44,614		41,704
	_______		_______		_______
Liabilities
Current Liabilities
Trade and other payables	(12,261)		(13,231)		(13,112)
Current tax liabilities	-		-		(462)
Loans and borrowings	(4,069)		(11,118)		(6,996)
Other financial liabilities	(214)		-		(127)
Provisions	(112)		(141)		(111)
	_______		_______		_______
Total current liabilities	(16,656)		(24,490)		(20,808)
	_______		_______		_______
Non current liabilities
Loans and borrowings	(1,096)		(7,481)		(5,639)
Provisions	(299)		(269)		(299)
Other financial liabilities	-		-		(136)
	_______		_______		_______
Total non current liabilities	(1,395)		(7,750)		(6,074)
	_______		_______		_______
Total liabilities	(18,051)		(32,240)		(26,882)
	_______		_______		_______
Total Net Assets	15,833		12,374		14,822
	_______		_______		________

 

 

Networkers International Plc

 

Consolidated balance sheet as at 30 June 2009 (continued)

  

	At 30 June 2009  Unaudited		At 30 June 2008 Unaudited		At 31 Dec 2008 Audited
	£000		£000		£000
Equity
Share capital	933		921		922
Share premium	18		-		5
Retained earnings	13,943		11,197		12,667
Foreign exchange reserve	263		(420)		530
Reverse acquisition reserve	676		676		676
	_______		_______		_______
Attributable to equity holders of the parent	15,833		12,374		14,800
Minority Interest	-		-		22
	_______		_______		_______
Total equity	15,833		12,374		14,822
	_______		_______		________

  

 

Networkers International Plc

 

Consolidated cash flow statement for the period ended 30 June 2009

  

	Note	6 months  to 30 June  2009  Unaudited		6 months  to 30 June 2008  Unaudited		12 months to 31 December 2008 Audited
		£000		£000		£000
Cash flow from operating activities
Profit before taxation		2,195		2,946		5,570
Adjustments for:
Share of loss/ (profit) in joint venture		53		(240)		(240)
Profit on disposal of joint venture		(402)		-		-
Depreciation		88		142		199
Amortisation of intangibles		93		62		197
Equity settled share based payments		14		41		136
Movement on fair value of derivatives		(49)		(90)		228
Finance income		(5)		(10)		(43)
Finance expense		303		664		1,237
		______		______		______
Cash flows from operating activities before changes in working capital and provisions		2,290		3,515		7,284
Decrease / (increase) in debtors		6,688		(2,216)		1,480
(Decrease) / increase in creditors		(691)		1,695		1,342
Decrease in provisions		-		-		(10)
		______		______		______
Cash flows generated from operations		8,287		2,994		10,096
Income taxes paid		(1,857)		(887)		(945)
		______		______		______
Net cash flows from operating activities		6,430		2,107		9,151
Cash flow from investing activities:
Interest received		5		10		43
Purchase of property, plant and equipment & Intangibles		(31)		(164)		(370)
Payments to acquire investment in joint venture		(56)		-		-
Net proceeds from disposal in joint venture		2,202		-		-
		______		______		______
Net cash used in investing activities		2,120		(154)		(327)
Cash flow from financing activities:
Interest paid		(303)		(664)		(1,237)
(Repayment) / drawdown of invoice discounting		(2,627)		139		(3,983)
Repayment of bank borrowings		(4,843)		(1,843)		(3,686)
Issue of share capital		25		-		6
Purchase of treasury shares		(214)		-		-
		______		______		______
Net cash used in financing activities		(7,962)		(2,368)		(8,900)
Exchange gains/(losses) on cash and cash equivalents		(74)		(30)		(192)
		______		______		______
Net increase / (decrease) in cash & cash equivalents		514		(445)		(268)
Cash and cash equivalents at beginning of period		1,732		2,000		2,000
		______		______		______
Cash and cash equivalents at end of period	3	2,246		1,555		1,732
		______		______		______

 

  

 

Networkers International Plc

 

Consolidated Statement of Changes in Equity

 

 

	Share Capital £000	Share Premium Account £000	Reverse Acquisition Reserve £000	Retained  Earnings £000	Foreign Exchange Reserve £000	Minority Interest £000	Total Equity £000
Balance at 1 January 2008	921	-	676	9,149	(103)	-	10,643
Total comprehensive income for the period	-	-	-	1,960	(238)	-	1,722
Share based payment charge	-	-	-	41	-	-	41
Deferred tax on share based payment charge	-	-	-	(32)	-	-	(32)
Transfer between reserves	-	-	-	79	(79)	-	-
	________	________	________	_______	________	_______	_______
Balance at 30 June 2008	921	-	676	11,197	(420)	-	12,374
Total comprehensive income for the period	-	-	-	1,502	1,015	(6)	2,511
Share based payment charge	-	-	-	57	-	-	57
Deferred tax on share based payment charge	-	-	-	(154)	-	-	(154)
Issue of shares	1	5	-	-	-	-	6
Transfer between reserves	-	-	-	65	(65)	-	-
Minority Interest acquisition	-	-	-	-	-	28	28
	________	________	________	_______	________	_______	_______
Balance at 31 December 2008	922	5	676	12,667	530	22	14,822
Total comprehensive income for the period	-	-	-	1,444	(267)	-	1,177
Share based payment charge	-	-	-	14	-	-	14
Deferred tax on share based payment charge	-	-	-	32	-	-	32
Issue of shares	11	13	-	-	-	-	24
Reclassification of minority interest	-	-	-	-	-	(22)	(22)
Purchase of treasury shares	-	-	-	(214)	-	-	(214)
	________	________	________	_______	________	_______	_______
Balance at 30 June 2009	933	18	676	13,943	263	-	15,833
	________	________	________	_______	________	_______	_______

  

Networkers International Plc

 

Notes to the accounts

 

 

1    Basis of preparation

 

This financial information has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively EU Adopted IFRSs).  

 

The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statement for the year ended 31 December 2009 and are unchanged from those disclosed in the Group's Report and Financial Statements for the year ended 31 December 2008, except for the adoption of IAS 1 'Presentation of Financial Statements' (Revised).

 

IAS 1 Presentation of Financial Statements (Revised) includes the requirement to present a Statement of Changes in Equity as a primary statement and introduces the possibility of either a single Statement of Comprehensive (combining the Income Statement and a Statement of Comprehensive Income) or to retain the Income Statement with a supplementary Statement of Comprehensive Income. The second option has been adopted by the Group in the preparation of the interim financial statements. As this standard is concerned with presentation only it does not have any impact on the results or net assets of the Group. 

 

The financial information for the six months ended 30 June 2009 and the six months ended 30 June 2008 is unaudited and does not constitute the group's statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2008 has, however, been derived from the audited statutory financial statement for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references 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)-(3) of the Companies Act 1985.

 

The Board of Directors approved this interim report on 4 September 2009.

 

 

 

Networkers International Plc

 

Notes to the accounts (Continued)

 

 

2    Earnings per share

 

The calculation of basic earnings per share is based on the profit after taxation and minority interests.

 

	6 months ended 30 June  2009 £000	6 months ended 30 June  2008 £000	12 months  ended 31 December  2008 £000
Numerator
Earnings used for calculations of basic and diluted EPS	1,444	1,960	3,456
	________	________	________

 

 

	30 June  2009 Number	30 June  2008 Number	31 December  2008 Number
Denominator
Weighted average number of shares used in basic EPS	92,594,410	92,115,377	92,161,952
Exercise of options	1,474,140	4,202,325	4,044,726
	________	________	________
Weighted average number of shares used in diluted EPS	94,068,550	96,317,702	96,206,678
	________	________	________
Basic (pence)	1.56p	2.13p	3.75p
	________	________	________
Diluted (pence)	1.54p	2.04p	3.59p
	________	________	________

 

    The number of anti dilutive share options excluded from the calculations is 1,920,000 (2008 - 50,000)

 

 

  

Networkers International Plc

 

Notes to the accounts (Continued)

 

 

3    Reconciliation of Cash and cash equivalents

 

	30 June  2009 £000	30 June  2008 £000	31 Dec  2008 £000
Cash available upon demand	2,246	1,573	1,732
Bank overdrafts	-	(18)	-
	______	______	______
Cash and cash equivalents	2,246	1,555	1,732
	______	______	______

 

 

4    Payment of Dividend

 

The Directors do not recommend the payment of an interim dividend for the six months ended 30 June 2009.

 

 

 

 

These interim results are available from the Group's website www.networkersint.com

 

ENDIR FLLFBKKBEBBX