TIDMRTG
RNS Number : 9211S
ReThink Group (The) PLC
30 September 2014
30 September 2014
The Rethink Group plc
("Rethink" or the "Group")
Interim Results
The Rethink Group plc (AIM: RTG), a leading Talent Management
and Recruitment Services company, is pleased to announce its
interim results for the six month period ended 30 June 2014.
H1 2014 Financial Highlights
-- Group revenue from continuing operations increased 4.5% to
GBP56.5m (H1 2013: GBP54.0m)
-- Net Fee Income* ("NFI") from continuing operations increased
4.5% to GBP10.0m (H1 2013: GBP9.6m) with Talent Management NFI
increasing 32.7% to GBP2.4m (H1 2013: GBP1.8m).
-- Operating profit from continuing operations increased 18.4%
to GBP0.81m (H1 2013: GBP0.68m)
-- Net borrowings** decreased to GBP9.3m (2013 year end:
GBP11.7m).
-- Cash generated by operations GBP2.8m (H1 2013: cash absorbed
GBP1.1m)
-- Basic earnings per share 0.479 pence (H1 2013: 0.374
pence)
* Net Fee Income (NFI) represents gross revenue less direct cost
of sales
** Net borrowings consist of cash at bank less bank borrowings
under the Group's revolving invoice discounting facility.
Operational Highlights
-- Won a new three year Talent Management contract with a UK
listed multichannel marketing and communications business.
-- Secured a Talent Management contract renewal for a further
three years with M&S plc.
-- Increased investment in experienced business development
executives within the Talent Management division.
-- Restructured PLC Board and a new Executive Board created.
Steve Wright, Chief Executive Officer of Rethink, commented:
"I am satisfied with the performance of the Group in the first
half of the year as we continue to implement our strategy. Our
Talent Management division is growing in line with our
expectations, winning new clients and repeat business from existing
clients. We will continue to invest in this division building long
term sustainable revenues for the Group.
For further information please contact:
The Rethink Group plc
Steve Wright, CEO / Ben Felton, CFO 0207 367 4444
Shore Capital (Nominated Adviser and
Broker)
Bidhi Bhoma/Edward Mansfield 0207 408 4090
Newgate Threadneedle
John Coles/Fiona Conroy 020 7653 9850
About The Rethink Group plc
Rethink Group (AIM: RTG) provides business transformation
services through Talent Management and Recruitment Services. These
mutually supported activities work in synergy and support our
growing customer base.
The Group supports clients across the UK, Europe, US, Middle
East and Asia Pacific.
For more information please visit our website:
www.rethinkgroupplc.com
Chairman and CEO's Statement
In the six month period to 30 June 2014, the Group steadily grew
revenues and net fee income ("NFI") from continuing operations by
4.5% and generated a profit from operations of GBP0.81m, 18.4%
ahead of the same period in 2013. The growth in NFI continues to be
driven by our Talent Management division which reported a 32.7%
increase in NFI to GBP2.4m in the period (2013: GBP1.8m).
The Group continues to build strong, long term relationships
with major UK and overseas corporates across both the Talent
Management and Recruitment divisions. During the period Rethink
secured a Talent Management contract renewal with M&S plc for a
further three years and also signed a new three year agreement with
a large UK listed multi-channel marketing and communications
business.
Not only do these new contracts provide the Group with
sustainable future revenues, they also highlight the excellent work
of all our staff and the continued trust our clients have in
Rethink.
Financial Review
The Group grew both permanent and contract revenues in the six
month period to 30 June 2014, to a total of GBP56.5m (2013:
GBP54.0m). NFI from permanent recruitment increased 11.5% to
GBP4.3m (2013: GBP3.9m), reflecting growing business confidence in
the UK and Irish markets as clients invest in their permanent
workforce.
Group EBITDA (before separately identifiable items) decreased by
18.4% to GBP0.91m (H1 2013: GBP1.11m) as a result of investment in
the Talent Management Division and the cost of the recent move to a
new head office in London; a combined investment of GBP0.4m in the
period. Operating profit from continuing operations (after
separately identifiable items) increased 18.4% to GBP0.81m (H1
2013: GBP0.68m) and profit before tax increased by 15.8% to
GBP0.61m (2013: GBP0.53m).
The Group reported basic earnings per share for the period of
0.479 pence (H1 2013: 0.374 pence).
Working Capital and Invoice Discounting
The Group continued to focus on its working capital management
resulting in net cash generated from operation of GBP2.8m in the
period (H1 2013: outflow of GBP1.1m).
Net borrowings, which represents cash and cash equivalents less
the Group's revolving invoice discounting facility, reduced to
GBP9.3m from GBP11.7m at 31 December 2013 as the Group took
advantage of surplus cash generated from operations to pay down its
borrowings.
Operational Review
Rethink's ongoing structure is aligned to two interconnected
business units of Talent Management, where our involvement with a
client is deeper and is typically underpinned by longer term
managed service agreements, and Open-Market Recruitment,
characterised by transactional client relationships. The Group
provides its services to clients in two primary vertical markets -
Business and Technology and Pharmaceuticals and Life Sciences, and
operates through offices in the UK and overseas.
Talent Management Division
NFI for our Talent Management Division increased 32.7% to
GBP2.4m (H1 2013: GBP1.8m) and contribution from operations of the
division, after accounting for direct investment costs of GBP0.3m,
grew slightly to GBP1.3m (H1 2013: GBP1.2m).
In line with our stated strategy the Group has focused
significant investment in the Talent Management division during the
period, through engaging more experienced business development
executives, building a new dedicated website and increased
marketing. This investment has started to bear fruit with the
recent contract win, announced in July 2014, and contract renewal
with M&S plc after the period end. We will continue to invest
significantly in this area of the business as we develop a
portfolio of products that will deepen and broaden our service
offerings to clients.
Recruitment Division
Our Open-Market Recruitment business experienced a modest
decline in NFI of 2.2% to GBP7.6m (H1 2013 GBP7.7m), impacting the
contribution from this division which reduced slightly to GBP1.2m
from GBP1.3m in the same period of 2013. The division continues to
deliver excellent repeat business across its blue chip client base
and importantly also provides a steady flow of introductions to the
Talent Management division.
Board Changes
As disclosed in April 2014, the Group restructured its board of
directors ("PLC Board") and established a new operational board
("Executive Board"). The Executive Board continues to focus on
executing the Group's three year growth strategy, through the
development and delivery of Talent Management and Recruitment
services. Its central responsibility is on business development
across all Group brands.
The PLC Board, which has been streamlined to five members,
concentrates on supporting the Executive Board in the formulation
and review and execution of Group strategy, investor relations and
maintaining strong standards of corporate governance.
Outlook
The Group is steadily building momentum in its Talent Management
division with new contract wins and repeat business from major blue
chip clients. Encouragingly, the majority of our Talent Management
income originates from long term client relationships which were
nurtured and developed in the core Open-Market Recruitment
division. The investment in new Talent Management business
development executives and marketing collateral in the period is
expected to augment this revenue stream by generating incremental
business from both new and existing clients.
Despite the cost of investment in the period, the Group still
expects to report an increase in EBITDA for the full year to 31
December 2014, however, this is expected to be marginally below
current market expectations.
While we expect revenues and NFI to grow in the long term, it is
in the very nature of long term client relationships built on trust
that investment costs will take longer than traditional recruitment
investment to yield returns. However, it is our firm belief that
the returns will not only be greater but also more sustainable over
time, and hence expected to create greater shareholder value due to
the improved quality of earnings.
John O'Sullivan Stephen Wright
Chairman Chief Executive Officer
30 September 2014
INTERIM CONSOLIDATED INCOME STATEMENT
2014
Unaudited Unaudited Audited
=======================================
Six months Six months Year ended
ended ended
=======================================
30-Jun-14 30-Jun-13 31-Dec-13
Note GBP'000 GBP'000 GBP'000
======================================= ===== =========== =========== ===========
REVENUE 56,464 54,027 111,693
Cost of sales (46,444) (44,437) (92,133)
GROSS PROFIT 10,020 9,590 19,560
Administrative expenses (9,211) (8,907) (18,153)
OPERATING PROFIT FROM CONTINUING
OPERATIONS 5 809 683 1,407
Analysed as:
Earnings before interest, tax,
depreciation, amortisation and
non-recurring items 910 1,113 2,225
Amortisation and depreciation (101) (130) (176)
OPERATING PROFIT FROM CONTINUING
OPERATIONS BEFORE NON-RECURRING
ITEMS 809 983 2,049
Separately identifiable items 3 - (300) (642)
OPERATING PROFIT FROM CONTINUING
OPERATIONS 809 683 1,407
--------------------------------------- ----- ----------- ----------- -----------
Finance costs (199) (158) (579)
Finance income - - 2
PROFIT BEFORE TAXATION 610 525 830
Tax expense (52) (95) (172)
PROFIT FOR THE PERIOD FROM CONTINUING
OPERATIONS 558 430 658
Profit on discontinued operations - 2 198
PROFIT FOR THE PERIOD 558 432 856
======================================= ===== =========== =========== ===========
Other comprehensive income
Foreign currency exchange differences
on translation of foreign operations (204) 131 112
TOTAL COMPREHENSIVE INCOME FOR
THE PERIOD 354 563 968
======================================= ===== =========== =========== ===========
Earnings per share:
----------- ----------- -----------
- Basic 2 0.479p 0.374p 0.742p
----------- ----------- -----------
- Diluted 2 0.479p 0.374p 0.738p
----------- ----------- -----------
INTERIM CONSOLIDATD BALANCE SHEET 2014
Unaudited Unaudited Audited
============================ ==============
30-Jun-14 30-Jun-13 31-Dec-13
============================
Note GBP'000 GBP'000 GBP'000
============================ ============== ---------- ---------- ----------
ASSETS
NON-CURRENT ASSETS
Goodwill 4 3,919 4,121 4,050
Investment 12 5 12
Property, plant and equipment 619 515 381
Intangible assets 77 74 54
Deferred tax asset 63 56 62
---------- ----------
TOTAL NON-CURRENT ASSETS 4,690 4,771 4,559
---------- ---------- ----------
CURRENT ASSETS
Trade and other receivables 25,328 29,017 22,270
Cash and cash equivalents 1,473 449 1,600
Corporation tax asset - 11 -
---------- ----------
TOTAL CURRENT ASSETS 26,801 29,477 26,870
---------- ---------- ----------
TOTAL ASSETS 31,491 34,248 31,429
---------- ---------- ----------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (13,861) (14,561) (11,860)
Advances on invoice discounting facility (10,667) (13,756) (13,304)
Finance leases (107) - (35)
Corporation tax liability (250) - (105)
---------- ---------- ----------
TOTAL CURRENT LIABILITIES (24,885) (28,317) (25,304)
---------- ---------- ----------
NET CURRENT ASSETS 1,916 1,160 1,566
---------- ---------- ----------
NON-CURRENT LIABILITIES
Finance leases (134) - (7)
Deferred tax liability (50) (43) (50)
---------- ---------- ----------
TOTAL NON-CURRENT LIABILITIES (184) (43) (57)
---------- ---------- ----------
NET ASSETS 6,422 5,888 6,068
---------- ---------- ----------
EQUITY
Share capital 117 117 117
Share premium account 3,238 3,238 3,238
Merger reserve 218 218 218
Translation reserve (448) (225) (244)
Retained earnings 3,297 2,540 2,739
---------- ---------- ----------
TOTAL EQUITY ATTRIBUTABLE TO THE EQUITY
HOLDERS OF THE PARENT 6,422 5,888 6,068
========== ========== ==========
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2014
Share Retained Share Merger Translation Total
capital earnings premium reserve reserve equity
-------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------- --------- --------- ------------ --------
At 1 January 2013 114 2,108 3,145 218 (356) 5,229
Changes in equity
for the six months
ended 30 June 2013
Profit for the year - 432 - - - 432
Other comprehensive
income - - - - 131 131
--------- ---------- --------- --------- ------------ --------
Total comprehensive
income in the year - 432 - - 131 563
Share options exercised 3 - 93 - - 96
--------- ---------- --------- --------- ------------ --------
At 30 June 2013 117 2,540 3,238 218 (225) 5,888
Changes in equity
for the six months
ended 31 December
2013
Profit for the period - 424 - - - 424
Other comprehensive
income - - - - (19) (19)
--------- ---------- --------- --------- ------------ --------
Total comprehensive
income in the year - 424 - - (19) 405
Recognition of share
based payment expense - 5 - - - 5
Own shares held - (230) - - - (230)
--------- ---------- --------- --------- ------------ --------
At 31 December 2013 117 2,739 3,238 218 (244) 6,068
Changes in equity
for the six months
ended 30 June 2014
Profit for the period - 558 558
Other comprehensive
income - - - - (204) (204)
--------- ---------- --------- --------- ------------ --------
Total comprehensive
income in the year - 558 - - (204) 354
--------- ---------- --------- --------- ------------ --------
At 30 June 2014 117 3,297 3,238 218 (448) 6,422
========= ========== ========= ========= ============ ========
INTERIM CASHFLOW STATEMENT 2014
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30-Jun-14 30-Jun-13 31-Dec-13
GBP'000 GBP'000 GBP'000
Profit before tax 610 525 830
Adjustments for:
Share based payment charge - - 5
Depreciation charges 85 95 153
Amortisation 16 35 22
Disposal of property, plant and equipment - - 150
Disposal of intangible assets - - 35
Finance costs 199 158 579
Finance income - - (2)
------------ ------------ ------------
910 813 1,772
Increase in trade and other receivables (58) (6,158) (2,411)
Increase in trade and other payables 1,927 4,241 1,417
------------ ------------ ------------
Cash generated/(absorbed) by operations 2,779 (1,104) 776
Corporation tax refunded/(paid) 92 - (46)
------------ ------------ ------------
Net cash generated from/(absorbed
by)
operating activities 2,871 (1,104) 732
------------ ------------ ------------
Cash flows from investing activities
Purchase of property, plant & equipment (322) (80) (153)
Purchase of intangible assets (40) (29) (32)
Disposal of subsidiary undertaking
net of cash disposed - 2 220
Finance income - - 2
------------ ------------ ------------
Net cash (absorbed by)/generated from
investing
activities (362) (107) 37
------------ ------------ ------------
Cash flows from financing activities
Finance costs paid (199) (158) (579)
Net change in advances on invoice
discounting facility (2,637) 1,319 868
Payment for redemption of preference
shares - (628) (628)
Purchase/(repayment) of finance leases 199 (89) (47)
Proceeds from issue of share capital - 95 96
------------ ------------ ------------
Net cash (absorbed by)/ generated
from financing activities (2,637) 539 (290)
------------ ------------ ------------
Net (decrease)/increase in cash and
cash equivalents (127) (672) 479
Cash and cash equivalents at the beginning
of the period 1,600 1,121 1,121
------------ ------------ ------------
Cash and cash equivalents at the end
of the period 1,473 449 1,600
============ ============ ============
Notes to the unaudited financial information
For the six months ended 30 June 2013
1. Basis of Preparation
The financial information presented in this document has been
prepared in accordance with the recognition and measurement
principles of International Financial Reporting Standards (IFRS)
and International Financial Reporting Interpretations Committee
(IFRIC) interpretations that are expected to be applicable for the
year ending 31 December 2014. The principle accounting policies
used in preparing these Interim Results are unchanged from those
adopted and disclosed in the audited financial statements for the
year ended 31 December 2013
The financial information in this statement relating to the six
months ended 30 June 2014 and the six months ended 30 June 2013 has
neither been audited nor reviewed pursuant to guidance issued by
the Auditing Practices Board. The financial information for the
period ended 31 December 2013 does not constitute the full
statutory accounts for that period. The Annual Report and Financial
Statements for 2013 have been filed with the Registrar of
Companies. The Independent Auditor's Report on the Annual Report
and Financial Statements for 2013 was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
2. Earnings per share
Basic earnings per share of 0.479 pence (2013 H1: 0.374 pence)
are calculated by dividing the profit attributable to equity
holders of the Group by the weighted average number of ordinary
shares in issue.
Fully diluted earnings per share of 0.479 pence (2013 H1: 0.374
pence) is calculated by adjusting the weighted average number of
ordinary shares by existing share options, share incentive plans
and the contingent share consideration on business combinations,
assuming dilution through conversion of all existing options and
shares held in share plans that are not underwater.
Unaudited Unaudited Audited
30-Jun 30-Jun 31-Dec
2014 2013 2013
GBP'000 GBP'000 GBP'000
------------------------------------------ ---------- ---------- --------
Numerator
Profit for the period - used in basic
and diluted EPS 558 432 856
Denominator
Weighted average number of shares used
in basic EPS 116,518 115,385 115,385
Effects of:
Employee share options 5 - 571
---------- ---------- --------
Weighted average number of shares used
in diluted EPS 116,523 115,385 115,956
========== ========== ========
3. Separately identifiable items
Included within separately identifiable Unaudited Unaudited Audited
items are:-
30-Jun 30-Jun 31-Dec
2014 2013 2013
GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- ---------- --------
Banking exit fee - 40 40
Company reorganisation costs - 260 602
----------- ---------- --------
Total - 300 642
=========== ========== ========
During 2013 the Group incurred certain restructuring and
reorganisation costs. These costs include compromise agreements
associated with a Board restructure, bank exit fees, office closure
costs and termination costs relating to a software project.
4. Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill is tested for impairment in each financial period and
carried at cost less accumulated impairment losses. The movement in
the carrying value of goodwill in each of the reporting periods
covered in this interim statement solely reflects the impact of
revaluation of goodwill on overseas subsidiaries due to movements
in foreign exchange.
5. Segment Information
Reportable Segments
Factors that management use to identify the Group's reportable
segments
The Group's three reportable segments during the reported
periods, being Recruitment, Talent Management and Technology
Services (discontinued in 2013), are sectors that offer different
products and services. They are managed separately having a
dedicated Director, and separate reporting within the internal
information provided to the management team including the
Directors.
Measurement of operating segment profit
Talent Management, Recruitment and Technology Services are
evaluated for performance on the basis of contribution.
Recruitment is represented by the subsidiaries, Rethink
Recruitment Solutions Limited, ReBuild Recruitment Services
Limited, Integritas Recruitment Limited, Rethink Recruitment
(Southend) Limited, Rethink MEA FZCO, Berkley Recruitment (Group)
Limited and Berkley Recruitment Group (Asia) Pte. Limited with all
subsidiaries involved in both Permanent and Contract
Recruitment.
Permanent recruitment involves the placing of candidates in
permanent employment roles. Contract recruitment involves the
placing of candidates in fixed term roles.
Talent Management is currently represented by Rethink
Professional Services Limited and involves certain elements of
recruitment as set out above.
Technology Services was represented by Aiimi Limited and
TrustTech Limited. The segment was involved in providing technical
advice, support and project management. This business service was
discontinued in 2013.
Segmental view 2014 H1
-------------------------------- --------------------------------------------------------------
Talent Management Recruitment Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ---- ------------------ ------------ ------------ --------
Revenue
Contract revenue 22,355 29,791 - 52,146
Permanent revenue 493 3,825 - 4,318
------------------ ------------ ------------ --------
Total revenue 22,848 33,616 - 56,464
================== ============ ============ ========
Gross profit 2,445 7,575 - 10,020
Administrative expenses (1,162) (6,359) - (7,521)
------------------ ------------ ------------ --------
Contribution from operations 1,283 1,216 - 2,499
Central administrative
expenses - - (1,690) (1,690)
------------------ ------------ ------------ --------
Operating profit from
continuing operations 1,283 1,216 (1,690) 809
-------------------------------------- ------------------ ------------ ------------ --------
Analysed as:
EBITDA 910
Amortisation and depreciation (101)
Operating profit from
continuing operations 809
-------------------------------- ---- ------------------ ------------ ------------ --------
Segmental view 2013 H1
-------------------------------- ---------------------------------------------------------------------
Technology
Services Talent Management Recruitment Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ------------------ ------------ ------------ --------
Revenue
Contract revenue - 17,086 33,068 - 50,154
Permanent revenue - 362 3,511 - 3,873
Business Transformation
and Technology Services 2,156 - - - 2,156
----------- ------------------ ------------ ------------ --------
Total revenue 2,156 17,448 36,579 - 56,183
----------- ------------------ ------------ ------------ --------
Discontinued operations (2,156) - - - (2,156)
Revenue per consolidated
statement of comprehensive
income - 17,448 36,579 - 54,027
=========== ================== ============ ============ ========
Gross profit from continuing
operations - 1,843 7,747 - 9,590
Gross profit from discontinued
operations 879 - - - 879
----------- ------------------ ------------ ------------ --------
Total gross profit 879 1,843 7,747 - 10,469
Administrative expenses (877) (604) (6,491) - (7,973)
----------- ------------------ ------------ ------------ --------
Contribution from continuing
operations - 1,239 1,256 - 2,495
Contribution from discontinued
operations 2 - - - 2
Central administrative
expenses - - - (1,812) (1,812)
----------- ------------------ ------------ ------------ --------
Operating profit from
continuing operations - 1,239 1,256 (1,812) 683
-------------------------------- ----------- ------------------ ------------ ------------ --------
Analysed as:
EBITDA before non-recurring
items
Amortisation and depreciation 1,113
Non-recurring items (130)
(300)
Operating profit from
continuing operations 683
-------------------------------- ----------- ------------------ ------------ ------------ --------
Segmental view 2013 FY
-------------------------------- ----------------------------------------------------------------------
Technology
Services Talent Management Recruitment Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ------------------ ------------ ------------ ---------
Revenue
Contract revenue - 44,768 58,872 - 103,640
Permanent revenue - 1,208 6,845 - 8,053
Business Transformation
and Technology Services 3,113 - - - 3,113
----------- ------------------ ------------ ------------ ---------
Total revenue 45,976 65,717 - 114,806
----------- ------------------ ------------ ------------ ---------
Discontinued operations (3,113) - - - (3,113)
Revenue per consolidated
statement of comprehensive
income - 45,976 65,717 - 111,693
=========== ================== ============ ============ =========
Gross profit from continuing
operations - 5,256 14,304 - 19,560
Gross profit from discontinued
operations 1.442 - - - 1,442
----------- ------------------ ------------ ------------ ---------
Total gross profit 1,442 5,256 14,304 - 21,002
Administrative expenses (1,574) (1,365) (12,262) - (15,201)
----------- ------------------ ------------ ------------ ---------
Contribution from ongoing
operations - 3,891 2,042 - 5,933
Discontinued operations (132) - - - (132)
Central administrative
expenses - - - (4,526) (4,526)
----------- ------------------ ------------ ------------ ---------
Operating profit from
continuing operations - 3,891 2,042 (4,526) 1,407
-------------------------------- ----------- ------------------ ------------ ------------ ---------
Analysed as:
EBITDA before non-recurring
items 2,225
Amortisation and depreciation (176)
Non-recurring items (642)
Operating profit from
continuing operations 1,407
-------------------------------- ----------- ------------------ ------------ ------------ ---------
Segment reportable administrative expenses consist primarily of
staff, office, general expenses and depreciation.
Geographical information
The Group's operations are located in the UK, Ireland, Singapore
and the Middle East.
5. Distribution of the Interim Report
Copies of this announcement may be obtained from the Company
Secretary at the registered office: The Crane Building, 22
Lavington Street, London SE1 0NZ. In addition, an electronic
version will be available on the Group's website -
www.rethinkgroupplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QKCDNABKDNCB
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