RNS Number:9038H
Reed Health Group PLC
25 February 2003
25 February 2003
Reed Health Group plc
("Reed Health Group" or the "Company")
Interim Results for the six months ended 31 December 2002
Reed Health Group plc, a provider of healthcare staffing services
in the Health, Social Care and Education sectors in the UK,
announces interim results for the six months ended 31 December
2002.
Interim Interim Change
2002 2001
Turnover #58.3m #37.9m +54%
Operating profit #3.3m #2.2m +50%
Profit before tax #3.1m #2.2m +41%
Earnings per share 3.22p 3.37p -4%
Earnings per share pre
exceptional items and
goodwill amortisation 5.08p 3.72p +37%
Interim dividend 0.73p 0.66p +11%
- Group turnover increased by 54% to #58.3 million (2001:
#37.9 million)
- Health Professionals, Nursing and Medical
- Turnover of #38.5 million
- Reed Nurse awarded four contracts in the period
- Two regional contracts awarded since the period end
- In January 2003, appointed supplier under the second phase
of the London Agency Project
- Locum Medical selected for National Framework contract for
medical locums
- Social Care
- Turnover increased by 20% to #17.6 million
- Contract won with Leeds City Council, adding 2,000 hours per
week
- Education
- Turnover of #2.2 million
- Difficult first half due to intense competition and pressure
on margins
- Appointment of David Fennell as Chief Executive and Mark
Garratt as Group Finance Director in January 2003. Departure of
previous Chief Executive and Group Finance Director in November
2002 having minimal effect on business to date
- Appointment of Thomas Fraser and Barry Hartop as Non-
Executive Directors and Susan Dael as Director of Human Resources
and resignation of Alan Dexter and Daphne Statham as Non-
Executive Directors with immediate effect
- Continued integration of The Locum Group
- Interim dividend of 0.73p per share (2001: 0.66p)
Lord Tom Sawyer, Chairman of Reed Health Group, commented:
"The Board believes that Reed Health Group has successfully
managed the initial impact of NHS Professionals on its nursing
division and believes it continues to be sensible for the NHS to
enter into competitively priced contracts with experienced
private sector healthcare staffing providers. In addition, we
have been awarded a place in the second phase of the London
Agency Project for nurses, as well as in the National Framework
Agreement for medical locums. During the first six months of the
current financial year, the Group has improved its presence in
its key markets of health professions and social care.
"We are confident that, as demand for staff in the health and
social services professions increases, the markets in which we
operate will remain positive. Reed Health Group will continue to
be a leading player in its markets and the Board views the
prospects of the Group with confidence."
For further information, please contact:
Reed Health Group plc 020 7834 3181
David Fennell, Chief Executive
Mark Garratt, Group Finance Director
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Graham Herring
25 February 2003
Reed Health Group plc
("Reed Health Group", the "Company" or the "Group")
Interim Results for the six months ended 31 December 2002
The Board of Reed Health Group is pleased to announce interim
results for the six months ended 31 December 2002.
The events at the Annual General Meeting on 26 November 2002,
where the Reed family and associated trusts voted against the re-
election of Christa Echtle and Desmond Doyle as Chief Executive
and Group Finance Director respectively, gave rise to an
unsettled period for the Company. However, the Company has
maintained its position within its markets and looks forward to
the future with confidence.
At a time of increasing competitor pressure, both from the NHS
and the private sector, Reed Health Group has continued to make
encouraging progress in all areas of its business. The
contribution from The Locum Group, which was acquired in May
2002, has enabled the Group to increase turnover significantly
and has strengthened the Group's position in its key markets of
healthcare, social care and education.
Financial Review
Total Group turnover for the six months to 31 December 2002,
which includes a full six month contribution from The Locum
Group, increased by 54% to #58.3 million, compared with #37.9
million for the same period last year. Operating profit was up
50% to #3.3 million (2001: #2.2 million), with pre-tax profit
increasing by 41% to #3.1 million (2001: #2.2 million). Basic
earnings per share were 3.22p (2001: 3.37p). This is due to the
"Compensation for loss of office" and connected costs associated
with the AGM in 2002 and the acquisition of The Locum Group which
have both increased the number of shares in issue and created
goodwill, thus generating an amortisation charge of #786,000.
This amortisation is not tax deductible so has increased the
effective tax charge compared to last year. However, adjusted
earnings per share increased by 37% to 5.08p (2001: 3.72p).
The Board is recommending an interim dividend of 0.73p (2001:
0.66p) payable on 10 April 2003 to shareholders on the register
on 7 March 2003.
REVIEW OF OPERATIONS
Health
Reed Health Group operates separate divisions serving the
medical, nursing and allied health professions on a nationwide
basis. We are market leaders in the provision of allied health
professions to NHS Trust hospitals, clinics and GP surgeries.
Total turnover in these divisions, which is now the largest
sector in the Group, was #38.5 million (2001: #23.2 million),
with a divisional contribution of #3.9 million (2001: #1.5
million).
Allied Health Professions. Turnover in this business area was
#21.0 million (2001: #6.6 million). We have maintained both the
Reed Health and Locum Group brands as candidates' terms of
engagement and the services offered by our consultants differ
somewhat. As competitors in our field have demonstrated, brand
equity may be worth more than any efficiencies to be gained by
merging the two brands. However, we are reviewing this position
to see whether one brand may be more appropriate going forward.
Medical. Turnover in this business area was #6.5 million. The
Locum Group Medical division retained its place in the new
National Framework Agreement for Medical Locums, the successor to
the "national contract". Despite fierce competition we have
confirmed our position as one of the leading players in the
hospital doctors market. We have special priority agreements
with 28 NHS Trusts, but are approved for every Trust in England
and Wales. We are pursuing opportunities for bespoke contracts
in Scotland through our new Glasgow branch.
Nursing. Reed Nurse entered this financial year with
uncertainties as to the impact NHS Professionals would have and
the need to re-tender for the London Agency Project.
Consequently, sales of #11.3 million were achieved, compared with
#16.6 million for the same period last year.
In the first six months of the year, we are pleased to have been
awarded the following contracts with NHS Trusts: Central and
North West London, where we are sole provider, commenced in
August 2002; Barnet and Chase Farm, again where we are sole
provider, which started in November 2002; Royal Berks and Battle,
which started in December 2002, where we are master vendor; and
Heatherwood and Wexham Park, as one of two providers, which
started in January 2003. As the bookings from these contracts
come through, in the second half of the year we expect to show
volume growth in this division.
We have been approved as suppliers under the second phase of the
London Agency Project ("LAP 2"). This project, which comes into
effect in the Spring of 2003, allows us to operate with better
rates in the London market. We have been asked by three large
NHS Trusts to negotiate special Service Level Agreements, which
promise further turnover growth. Additionally, Reed Health
successfully bid for a place on the North West Agency Project and
as a result from April 2003 will open branches in Liverpool and
Manchester. Finally, bookings have already started in Surrey
where we are among the agencies approved to supply all the Trusts
there through NHS Professionals.
Social Care
This division supplies qualified social workers and residential
social workers on a temporary and contract basis, primarily to
Local Authorities and social care organisations in the
independent sector, across specialist services ranging from child
to elderly care.
Turnover in this division increased by 20% to #17.6 million
(2001: #14.7 million), while the divisional contribution was #3.2
million (2001: #2.0 million). This includes a full six month
contribution from the Locum Group Care division, which operates
solely in London. During the period, the Group has raised the
average hourly rate in line with the competition with the result
that some volume was lost to competitors. This is being remedied
by carefully applying more competitive charge rates to particular
clients. Reed Social Care is also starting to make good use of
Locum Group's Australian source of qualified candidates both for
permanent and temporary positions.
We have won a new contract with Leeds City Council for 2,000
hours per week and Reed Health is now one of their two largest
suppliers.
By 2005 at least 50% of residential care workers will need to
have NVQ2 or 3 level qualifications and managers will have to
have NVQ4 qualifications. Therefore, in order to enable us to be
the first to provide what our customers will demand we are
commencing a programme of NVQ training for our candidates.
Education
The Education division, which was part of The Locum Group,
concentrates on the supply of temporary and permanent teachers to
primary and secondary schools. The division achieved first half
sales of #2.2m, with a divisional contribution of #0.05 million.
The sector is currently experiencing intense competition and
pressure on margins, which is consequently having an effect on
our Education division. Education, however, is the smallest
division in the Group, representing only 4% of turnover, and
occupies all but one of its five branches jointly with other
divisions. We continue to believe that this is a market which
fits the overall strategy of the Group, to supply professionally
qualified personnel to the public sector and that it brings
seasonal complementarity to our markets.
International
Our recruitment offices in Australia and New Zealand continue to
play an important part in attracting suitable staff to work in
each of our markets and the office in Canada, which we
established in the latter part of 2002 initially to supply
teachers to the UK, is already a significant advantage to the
Group.
A key task for the current financial year is to improve our
conversion rates of candidates from Australia, New Zealand,
Canada, Germany and via our websites. We have appointed an
International Manager to co-ordinate more closely with our
overseas offices and candidates to ensure that we take advantage
of opportunities offered by our international offices.
Board Changes
Following the Annual General Meeting on 26 November 2002, Christa
Echtle and Desmond Doyle were not re-elected as Chief Executive
and Group Finance Director respectively and consequently left the
Company. A compensation package has been agreed with Desmond
Doyle and we are currently finalising the severance package for
Christa Echtle. All costs expected regarding these terminations
have been provided for and are shown as exceptional items in
these interim accounts.
On 29 January 2003, the appointments of David Fennell, acting
Chief Executive, as Chief Executive to the Board and Mark Garratt
as Group Finance Director were announced. David joined Reed
Health Group following the acquisition of The Locum Group, where
he was Chief Executive. He has spent his career within
specialist personnel recruitment and for the last decade has been
specifically involved in the health care sector. He joined The
Locum Group as Chief Executive in November 1997, a position he
held until its acquisition by Reed Health Group.
Mark Garratt joined Reed Health Group from Cater Barnard plc, a
company listed on AIM, where he was Group Finance Director. Mark
has spent his commercial career in financial management in
Business to Business service organisations including, for the
past eight years, as a Finance Director. Previously, he has been
Finance Director of AIM listed Envesta plc, Glendinning
Management Consultants, which is now part of WPP, and Interior
plc, now part of Interior Services Group plc. Mark has extensive
plc experience and will bring added expertise to the Board.
At a Board Meeting held yesterday, Alan Dexter and Daphne Statham
announced their resignations as Non-Executive Directors of the
Company with immediate effect.
The Board would like to thank Alan and Daphne for their
contributions to the Board, both since their appointments and, in
particular, since the Annual General Meeting.
The Board also announces the appointment of Barry Hartop and
Thomas Fraser as Non-Executive Directors and Susan Dael as
Director of Human Resources to the Board with immediate effect.
Thomas Fraser, aged 43, a qualified accountant, has spent his
career in the financial services sector. He was Managing
Director of AMP UK Financial Services until 2002 and prior to
that was Managing Director Europe of CGNU and a director of
Norwich Union plc. Whilst at Norwich Union he played a key role
in setting up their private medical insurance and private health
insurance businesses and his knowledge of this industry will be
important for Reed Health Group in years to come. Thomas has been
appointed the Senior Independent Non-Executive Director.
Barry Hartop, aged 60, is currently Chief Executive Officer of
Telenor Business Solutions Limited. He was Non-Executive
Chairman of The Locum Group for five years prior to its
acquisition by Reed Health Group in May 2002 and consequently has
considerable knowledge of the markets in which Reed Health Group
operates. In addition, Barry has held a number of senior
management appointments in both the public and private sector.
Susan Dael, IPD, aged 35, joined Reed Health Group as Associate
Director of Human Resources in May 2002 following the acquisition
of The Locum Group and we are pleased to appoint her to the
Board. She joined Locum Group in September 1997 and was
appointed HR Director in January 2000. Prior to this she has
worked as recruitment manager with Burger King.
The Board can confirm that neither Mr Fraser nor Mr Hartop have
not been at any time in the previous five years, a Director of
any publicly quoted company not listed above and there is no
relevant information to disclose under paragraphs 6.F.2 (b) to
(g) of the Listing Rules in relation to the above appointments.
The Board believes that all three new directors are highly
qualified and experienced individuals. Their appointments will
enhance the composition of the board, and their contribution will
be invaluable to the future performance of the Group.
Relationship Agreement
Following the events at the Annual General Meeting, the Board has
taken leading Counsel's opinion regarding the relationship
agreement between Alec Reed and his related interests, Reed
Executive plc and the Group. Counsel has confirmed, in writing,
that the action taken by Alec Reed and his related interests at
the Annual General Meeting does not breach, either in the letter
or the spirit, the relationship agreement entered into by Reed
Health Group at the time of its demerger from Reed Executive PLC.
Employees
In the past six months we have seen considerable change within
Reed Health Group and the Board would like to thank all our
colleagues for their hard work and determination in contributing
to the success of the Group during this period.
Group Strategy
Reed Health Group continues to focus on the supply of the most
highly qualified personnel to the health and care markets and to
develop in these markets without altering its current business
model. In addition, it will continue to seek premium business in
all its key markets. The Board believes that the Group is
extremely well placed to pursue the considerable opportunities
available in its markets.
We are in detailed discussions with parties bidding for the
Department of Health's proposed NHS Diagnostic and Treatment
Centres. We are uniquely placed to provide medical, nursing and
allied health professionals for these centres. Success in this
project will help us increase our market share in the years
ahead. Additionally, the parties with which we are in discussion
are developing further opportunities within the NHS and we hope
to take advantage of these.
Outlook
The Board believes that Reed Health Group has successfully
managed the initial impact of NHS Professionals on its nursing
division and believes it continues to be sensible for the NHS to
enter into competitively priced contracts with experienced
private sector healthcare staffing providers. In addition, we
have been awarded a place in the second phase of the London
Agency Project for nurses, as well as in the National Framework
Agreement for medical locums. During the first six months of the
current financial year, the Group has improved its presence in
its key markets of health professions and social care.
The Group will continue to focus on business development, both
with the NHS Trusts and private suppliers of health services, who
the Board believes will play an increasing role in the provision
of healthcare services in the UK.
We are confident that, as demand for staff in the health and
social services professions increases, the markets in which we
operate will remain buoyant. Reed Health Group will continue to
be a leading player in its markets. The Board views the prospects
of the Group with confidence.
- ends -
For further information, please contact:
Reed Health Group plc 020 7834 3181
David Fennell, Chief Executive
Mark Garratt, Group Finance Director
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Graham Herring
Summarised Consolidated Profit and Loss Account
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Dec 02 31 Dec 01 30 Jun 02
Notes #'000 #'000 #'000
Turnover: continuing 58,272 37,884 78,345
operations
Cost of sales (45,033) (31,100) (63,180)
__________________________________________________________________________________________
Gross profit 13,239 6,784 15,165
Administrative expenses (9,930) (4,625) (10,274)
Operating profit before
goodwill amortisation and 4,555 2,315 5,179
exceptional items
Goodwill amortisation (786) - (132)
Exceptional items 3 (460) (156) (156)
__________________________________________________________________________________________
Operating profit 3,309 2,159 4,891
__________________________________________________________________________________________
Net interest (payable)/receivable (172) 22 48
__________________________________________________________________________________________
Profit on ordinary activities 3,137 2,181 4,939
before taxation
Taxation 4 (1,216) (672) (1,588)
__________________________________________________________________________________________
Profit for the period 1,921 1,509 3,351
Dividends paid and proposed 5 (435) (295) (1,094)
__________________________________________________________________________________________
Retained profit for the period 1,486 1,214 2,257
__________________________________________________________________________________________
Earnings per share
- basic pre exceptional item 6 5.08p 3.72p 7.89p
and goodwill amortisation
- basic 6 3.22p 3.37p 7.27p
- diluted 6 3.22p 3.35p 7.22p
Dividend per share
- interim 0.73p 0.66p 0.66p
- final - - 1.34p
Statement of Total Recognised Gains and Losses
There were no recognised gains and losses in the period, or in
the prior periods shown, other than the results shown above.
Summarised Consolidated Balance Sheet
Unaudited Unaudited Audited
as at as at as at
31 Dec 02 31 Dec 01 30 Jun 02
Notes #'000 #'000 #'000
Intangible fixed assets 30,647 - 31,437
Tangible fixed assets 1,220 770 1,075
__________________________________________________________________________________________
31,867 770 32,512
Current assets
Debtors 16,527 11,924 19,702
Cash at bank and in hand 141 4,411 1,139
__________________________________________________________________________________________
16,668 16,335 20,841
Creditors: amounts falling
due within one year (15,526) (8,458) (19,692)
__________________________________________________________________________________________
Net current assets 1,142 7,877 1,149
__________________________________________________________________________________________
Total assets less current
liabilities 33,009 8,647 33,661
Creditors due in more than
one year - - (2,131)
Provision for liabilities and
charges (12) (6) (12)
__________________________________________________________________________________________
Net assets 32,997 8,641 31,518
__________________________________________________________________________________________
Equity shareholders' funds 7 32,997 8,641 31,518
__________________________________________________________________________________________
Summarised Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
Net cash inflow from operating activities 4,550 4,876 7,212
Returns on investment and servicing (177) 22 48
of finance
Tax (595) (369) (926)
__________________________________________________________________________________________
3,778 4,529 6,334
Capital expenditure (354) (414) (476)
Purchase of subsidiary undertakings - - (34,462)
__________________________________________________________________________________________
3,424 4,115 (28,604)
Equity dividend (799) - (295)
Financing (3,623) - 29,742
__________________________________________________________________________________________
(Decrease)/increase in cash during the period (998) 4,115 843
__________________________________________________________________________________________
Reconciliation of operating profit to net cash inflow from
operating activities
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
Operating profit 3,309 2,159 4,891
Depreciation of tangible fixed 209 82 237
assets
Amortisation 786 - 132
Loss on disposal of tangible fixed assets - - 7
Decrease/(increase) in debtors 3,175 (990) (1,068)
(Decrease)/increase in creditors (2,929) 3,625 3,013
__________________________________________________________________________________________
Net cash inflow from operating activities 4,550 4,876 7,212
__________________________________________________________________________________________
Reconciliation of net cash flow to movement in net (debt)/ funds
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
(Decrease)/increase in cash in the period (998) 4,115 843
New loan - - (9,000)
Repayment of loans 8,000 - 1,000
_____________________________________________________________________________________________
Amounts owed under invoice discounting facility (4,377) - -
Reduction/(increase) in net (debt)/funds 2,625 4,115 (7,157)
_____________________________________________________________________________________________
Net (debt)/funds at the start of period (6,861) 296 296
Net (debt)/funds at end of period (4,236) 4,411 (6,861)
_____________________________________________________________________________________________
Analysis of Net (Debt)/Funds
Unaudited Unaudited Audited
6 months 6 months 12 months
as at as at as at
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
Cash at bank and in hand 141 4,411 1,139
Bank overdraft - - -
_____________________________________________________________________________________________
Cash 141 4,411 1,139
_____________________________________________________________________________________________
Loans - - (8,000)
Finance leases - - -
Amounts owed under invoice (4,377) - -
discounting facility
_____________________________________________________________________________________________
Borrowings (4,377) - (8,000)
_____________________________________________________________________________________________
Net (debt)/funds (4,236) 4,411 (6,861)
_____________________________________________________________________________________________
Notes to the interim accounts
1. Accounting Policies
There have been no changes to the accounting policies as set out in the
Annual Report and Financial Statements 2002 for Reed Health Group plc.
2. Turnover
The turnover for the Group is derived in the UK.
3. Exceptional Items
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
The profit on ordinary activities
before taxation is stated after charging
the following exceptional items:
Costs in connection with the AGM 2002 460 - -
Costs in connection with the demerger of the Group - 156 156
______________________________________________________________________________________
4. Taxation
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
UK corporation tax
Current tax on income for the year 1,216 669 1,591
Deferred taxation net (reversal)/origination
of timing differences - 3 (3)
______________________________________________________________________________________
Tax on profit on ordinary activities 1,216 672 1,588
______________________________________________________________________________________
Profit on ordinary activities before taxation 3,137 2,181 4,939
______________________________________________________________________________________
Theoretical UK corporation tax rate of 30% 941 654 1,482
Goodwill amortisation not tax deductible 236 - 40
Other expenditure not tax deductible 39 18 66
Accelerated capital allowances - (3) 3
______________________________________________________________________________________
1,216 669 1,591
______________________________________________________________________________________
5. Dividends
The interim dividend of 0.73p per share will be paid on 10 April 2003
to ordinary shareholders on the register at the 7 March 2003.
6. Earnings per Share
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
These have been calculated on earnings of:
- earnings per the accounts 1,921 1,509 3,351
- exceptional items 460 156 156
- tax relief (138) - -
- goodwill amortisation 786 - 132
_____________________________________________________________________________________
- earnings pre-exceptional items and
goodwill amortisation 3,029 1,665 3,639
_____________________________________________________________________________________
Number of Number of Number of
shares shares shares
The weighted average number of shares
used was:
Basic 59,644,772 44,733,579 46,126,000
Diluted - 255,754 281,000
______________________________________________________________________________________
For diluted earnings per share 59,644,772 44,989,333 46,407,000
______________________________________________________________________________________
7. Reconciliation of Movements in Shareholders' Funds
Unaudited Unaudited Audited
As at As at as at
31 Dec 02 31 Dec 01 30 Jun 02
#'000 #'000 #'000
Total recognised gains relating to the period 1,921 1,509 3,351
Dividend (435) (295) (1,094)
______________________________________________________________________________________
Additional net (expenses)/proceeds of share
issue (7) - 21,783
______________________________________________________________________________________
Net addition to shareholders' funds 1,479 1,214 24,040
Opening shareholders' funds 31,518 7,427 7,478
______________________________________________________________________________________
Closing shareholders' funds 32,997 8,641 31,518
______________________________________________________________________________________
8. Interim Report
The interim report was approved by the Board on 24 February 2003.
The figures for the year to 30 June 2002 were derived from the
statutory accounts for that year. The statutory accounts for
the year ended 30 June 2002 have been delivered to the
Registrar of Companies and received an audit report which was
unqualified and did not contain statements under s237 (2) or
(3) of the Companies Act 1985.
The interim report will be posted to shareholders and copies
will be available in due course from the Company's Registered
Office: 7-9 St George's Square, Pimlico, London, SW1V 2HX.
This information is provided by RNS
The company news service from the London Stock Exchange
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