TIDMNWKI
RNS Number : 0074O
Networkers International PLC
12 September 2011
12 September 2011
NETWORKERS INTERNATIONAL PLC
(AIM: NWKI)
Unaudited Interim Results
for the 6 month period to 30 June 2011
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 2011.
Financial Highlights
-- Adjusted* pre-tax profits for the period up by 29.3% to
GBP3.00m (2010: GBP2.32m);
-- Pre-tax profits up by 37.2% to GBP2.87m (2010: GBP2.10m);
-- Adjusted* earnings per share of 2.01p (2010: 1.61p);
-- Net fee income (gross profit) up by 12.7% to GBP13.61m (2010:
GBP12.08m);
-- Contract net fee income has shown growth of 15.2% in the
period, with permanent placements showing growth of 1.7%. Permanent
placements represents 16.8% of net fee income;
-- Strong balance sheet with net assets of GBP17.9m and net
current assets of GBP11.0m; and
-- Increase of 39% in the interim dividend resulting in a
recommended interim dividend of 0.450p per share totalling GBP0.4m
(2010: 0.324p per share totalling GBP0.3m).
Operational Highlights
-- Share of net fee income derived from markets outside of the
UK increased to 66% (2010: 62%) and we expect the share of overseas
earnings to continue to increase during the second half of the
year;
-- Good progress made within the Group's technology division in
achieving growth through investing in specialist vertical
markets;
-- Acquisition during May 2011 of the remaining 50% of the UAE
joint venture shares, resulting in this becoming a 100% owned
subsidiary; and
-- Group headcount increased organically by 11% in the six month
period;
Commenting on today's results, Spencer Manuel, CEO, said "I am
pleased to report another strong performance for the first half of
2011 with pre tax profits up by 37% on the same period last year.
The impressive growth in profits can be attributed to the Group's
continued strategy of international expansion within our core
telecoms, energy and specialist IT markets. We now derive
two-thirds of our net fee income from international
placements."
"Whilst we remain mindful of the economic uncertainties in some
regions of the world, overall, conditions in the highly skilled
sectors we operate in remain positive with strong demand from our
international clients. Our markets within the UK (one-third of net
fee income) remain somewhat subdued and this area of our business
has shown only modest growth during the period. Looking ahead, we
anticipate increasing headcount both within our existing office
network as well as establishing new offices in high growth,
international markets. We continue to look for earnings enhancing
acquisitions within our core sectors that will increase our scale
and geographical reach"
*adjusted for the add back of amortisation of intangible assets
arising on business combinations.
Enquiries:
Networkers International 020 8315 9000
Spencer Manuel, CEO
Jon Plassard, CFO
www.networkersint.com
Seymour Pierce Limited 020 7107 8000
John Cowie / Stewart Dickson (Nominated adviser)
Leti McManus / Jacqui Briscoe (Corporate broking)
Networkers International Plc
Chief Executive Officer's Report
We are pleased to report on our Interim Results for the six
month period to 30 June 2011.
During last year (2010), we reported that the Group saw a
recovery in all its key markets, and the good momentum gained
during last year has continued into 2011. This has enabled us to
deliver an impressive 37% increase in our pre tax profits to
GBP2.87m (2010: GBP2.10m).
Group revenues
As a result of the overall improvement in market conditions,
increased headcount and the continued internationalisation of the
business, the Group has increased its revenues in the period by
20.7% to GBP86.87m (2010: GBP71.99m). In terms of net fee income
(gross profit), the Group has achieved growth of 12.7% to GBP13.61m
(2010: GBP12.08m). This is made up of growth of 19% in our
international markets with our UK business showing modest growth of
1%. Our international telecoms division has once again been the key
driver for this growth, with a 21% increase in net fee income,
following on from similar growth levels in 2010. The majority of
this growth is attributable to the strong demand experienced in the
emerging markets of Sub-Saharan Africa and Asia where our clients
are, in the main, subsidiaries of major blue-chip telecoms,
technology and engineering companies.
As a result of the accelerating expansion of our international
business, net fee income generated from outside of the UK now
represents two-thirds of the Group's total.
The Group's average gross margin totalled 15.7%. Whilst this is
below the 16.8% achieved in the comparative period in 2010, it is a
significant improvement on the 15.1% achieved in the last six
months of 2010. The encouraging aspect of this is that the
sequential increase in gross margins has been achieved through an
improvement in contractor gross margins, as opposed to any effect
of changes in the sales mix between contract and permanent
revenue.
Total contractor net fee income grew by 15.2% compared to the
same period last year with permanent fee income showing only a
modest increase. This was due to two factors; firstly the Group's
permanent revenue in H1 2010 was particularly strong and acted as a
tough comparator and secondly, demand for permanent staff was slow
in the first quarter of 2011 which then improved in the second
quarter. The share of net fee income relating to permanent
placements has reduced to 16.8% compared to 18.5% in the
corresponding period last year.
During the second half of 2010, the Group re-focussed its
technology business with the objective to achieve growth through
investing in specialist vertical markets and to roll out these
specialisms into our international offices. The Group is now
starting to see the benefits of this strategy with specialist
markets within IT and Energy now working alongside our telecoms
division in a number of our international offices.
The mix of net fee income in our key markets is shown in the
table below:
Share of net
fee income
2011 2010
Telecommunications 56% 52%
IT (Specialist
Markets) 30% 33%
IT (Strategic accounts) 6% 9%
Energy &engineering 5% 3%
Other 3% 3%
------- ------
100% 100%
------------------------- ------- ------
Profit from operations
Our conversion ratio (the ratio of profit from operations before
amortisation of intangible assets to net fee income) has shown a
healthy increase to 22.5% (2010: 20.3%). This demonstrates the
positive operational gearing and efficiency of the Group with its
costs base aligned to trading activity.
Since the start of 2011, staff numbers have increased
organically by 11% as the Group responded to the increase in demand
within our international markets.
The Group's profit from operations for the period totalled
GBP2.94m (2010: GBP2.23m), up 31.8%.
Acquisitions
During May 2011, the Group acquired the remaining 50% of the
shares of its joint venture based in the UAE for a consideration of
GBP0.54m and, as it is now a 100% subsidiary of the Group, it has
been rebranded under the Networkers International name. Due to the
timing of the acquisition, the UAE company did not materially
contribute to the profits of the group in this period, although we
are optimistic for its future value to the group.
We continue to look for additional earnings enhancing
acquisitions that will strengthen our market position and
geographical presence in our core markets.
Profit before Taxation
After net interest of GBP0.16m (2010: GBP0.16m) paid on our
working capital facility, and our share of the profits of our UAE
based joint venture of GBP92,000 (2010: GBP24,000), profit before
taxation totalled GBP2.87m (2010: GBP2.10m).
Taxation
Due to the International nature of our business, the Group works
within a variety of different tax regimes. Some of our overseas
subsidiaries, particularly in the United States of America incur
corporate tax rates significantly higher than that of the UK. In
addition, a number of countries impose a withholding tax on
services performed by the Group which is not always fully
recoverable. As such, the effective tax rate for the period is
38.0% (2010: 38.6%). The Group anticipate that in the medium term
the effective tax rate should reduce as a result of an improved mix
of contribution to Group profits from our overseas
subsidiaries.
Cash flows and Balance Sheet
As a result of the Groups high mix of contract placements we
expect to experience a higher level of working capital requirement
during periods of high contractor growth. As such, during the
period there has been a cash outflow from operations of GBP1.43m.
This outflow is consistent with the growth experienced in the
period and the Group's debtor days (days sales outstanding)
remained broadly consistent throughout the period at 53 days.
The Group's balance sheet continues to strengthen with net
assets increasing to GBP17.9m (June 2010: GBP16.4m). The Group's
total assets have increased to GBP48.3m (June 2010: GBP40.9m) as a
consequence of increased trading activities and the inclusion of
the UAE subsidiary which was acquired during the period resulting
in a higher trade receivables figure. The Group's total liabilities
have increased to GBP30.3m (June 2010: GBP24.5m). The increase in
total liabilities is primarily as a result of associated working
capital to finance the increase in trading activities as well as
the liabilities taken on with the UAE acquisition.
Strategy
There have been no changes to our strategy during the period. We
remain committed to building up our specialist vertical markets
within our Telecoms, IT, and Energy division and to bolster our
international office network through increased headcount and new
office openings in regions that offer high growth potential. We
currently have 16 offices in 11 countries and over 320 staff, of
which over 100 are located outside of the UK.
Current trading and outlook
The first half year has proved to have been a very successful
period for the Group. Whilst there remain economic uncertainties in
some regions of the world, the overall trading outlook remains
positive particularly in our international markets. The UK market
remains relatively stable but is still some way off being fully
recovered.
I would like to extend the appreciation on behalf of the Board
to all our staff around the world for their hard work and efforts
in making this another successful period for the Group.
Spencer Manuel
CEO
12 September 2011
Networkers International Plc
Consolidated income statement for the six month period to 30
June 2011
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
Revenue 2 86,867 71,988 153,045
Cost of sales 73,258 59,909 128,733
________ ________ ______
Gross profit 13,609 12,079 24,312
Administrative expenses
Amortisation of intangible assets arising on
business combinations 121 224 290
Other administrative expenses 10,548 9,627 19,406
Total administrative expenses 10,669 9,851 19,696
_______ _______ _______
Profit from operations 2,940 2,228 4,616
Finance income 20 65 118
Finance expense (178) (222) (512)
Share of post tax profits of joint ventures 92 24 60
______ ______ ______
Profit before taxation 2,874 2,095 4,282
Tax expense 1,093 809 1,622
_______ _______ _______
Profit for the year 1,781 1,286 2,660
_______ _______ _______
Attributable to:
- Equity holders of the parent 1,620 1,286 2,593
- Non-controlling interests 161 - 67
_______ _______ _______
1,781 1,286 2,660
_______ _______ _______
Earnings per share
Basic 3 1.82p 1.38p 2.82p
Diluted 3 1.77p 1.35p 2.76p
_______ _______ _______
Networkers International Plc
Consolidated statement of comprehensive income for the six month
period ended 30 June 2011
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit for the year 1,781 1,286 2,660
Other comprehensive income:
Exchange (losses) / gains on retranslation of foreign operations
(140) 361 167
_______ _______ _______
Total comprehensive income for the year 1,641 1,647 2,827
_______ _______ _______
Total comprehensive income attributable to:
- Equity holders of the parent 1,480 1,647 2,760
- Non-controlling interests 161 - 67
_______ _______ _______
1,641 1,647 2,827
_______ _______ _______
Networkers International Plc
Consolidated balance sheet as at 30 June 2011
At 30 June At 30 June At 31 Dec
2011 2010 2010
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Assets
Non current assets
Intangible assets 5,921 5,650 5,563
Property, plant and equipment 464 308 252
Deferred tax asset 885 709 818
Investments in equity accounted joint ventures 19 53 60
_______ _______ _______
Total non current assets 7,289 6,720 6,693
_______ _______ _______
Current assets
Trade and other receivables 39,918 31,776 31,684
Current tax assets - 150 -
Cash and cash equivalents 1,043 2,284 1,652
_______ _______ _______
Total current assets 40,961 34,210 33,336
_______ _______ _______
Total assets 48,250 40,930 40,029
_______ _______ _______
Liabilities
Current liabilities
Trade and other payables (18,480) (14,430) (15,116)
Loans and borrowings (10,719) (9,570) (7,595)
Other financial liabilities (21) (97) (41)
Provisions (103) (108) (83)
Current tax liability (667) - (213)
_______ _______ _______
Total current liabilities (29,990) (24,205) (23,048)
_______ _______ _______
Non-current liabilities
Provisions (217) (299) (299)
Deferred tax liability (102) - (102)
_______ _______ _______
Total non-current liabilities (319) (299) (401)
_______ _______ _______
Total liabilities (30,309) (24,504) (23,449)
_______ _______ _______
Total net assets 17,941 16,426 16,580
_______ _______ _______
Networkers International Plc
Consolidated balance sheet as at 30 June 2011 (continued)
At 30 June At 30 June At 31 Dec
2011 2010 2010
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Equity
Share capital 941 939 940
Share Premium 62 44 49
Retained earnings 15,864 14,081 14,538
Foreign exchange reserve 352 686 492
Reverse acquisition reserve 676 676 676
_______ _______ _______
Attributable to equity holders of the parent 17,895 16,426
16,695
Non-controlling interest 46 - (115)
_______ _______ _______
Total equity 17,941 16,426 16,580
_______ _______ _______
Networkers International Plc
Consolidated cash flow statement for the period to 30 June
2011
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
Note Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Profit before taxation 2,874 2,095 4,282
Adjustments for:
Share of profit / (loss) in joint venture (92) (24) (60)
Depreciation 89 83 169
Amortisation of intangibles 129 224 333
Equity settled share based payment expense 58 6 41
Movement on fair value of derivatives (20) (62) (118)
Finance income - (10) -
Finance expense 178 305 512
______ ______ ______
Cash flows from operating activities before changes in
working capital and provisions 3,216 2,617 5,159
Increase in trade and other receivables (7,991) (5,945)
(5,540)
Increase in trade and other payables 3,342 2,371 2,962
Decrease in provisions - - (10)
______ ______ ______
Cash flows generated from operations (1,433) (957) 2,571
Income taxes paid (706) (478) (1,128)
______ ______ ______
Net cash flows from operating activities (2,139) (1,435)
1,443
Investing activities
Interest received - 10 -
Purchase of property, plant and equipment & intangibles
(311) (205) (256)
Payment to acquire investment in joint venture (541) - -
Purchase of shares of non-controlling interest - - (11)
Acquisition of subsidiary, net of cash acquired - 365 -
Disposal of shares of subsidiary undertakings - - 36
Transferred from assets previously classified as held for resale
- - 365
______ ______ ______
Net cash used in investing activities (852) 170 134
Net cash before financing activities (2,991) (1,265) 1,577
Financing activities
Interest paid (178) (305) (512)
Dividends paid (300) - (300)
Drawdown of invoice discounting 3,126 3,953 3,174
Repayment of bank borrowings - (1,575) (2,763)
Issue of share capital 14 7 13
Purchase of shares held in treasury (63) (350) (1,117)
______ ______ ______
Net cash used in financing activities 2,599 1,730 (1,505)
Effects of exchange rate changes (217) 132 (107)
______ ______ ______
Net (decrease) / increase in cash and cash equivalents (609) 597
(35)
Cash and cash equivalents at the start of the year 1,652 1,687
1,687
______ ______ ______
Cash and cash equivalents at the end of the year 4 1,043 2,284
1,652
______ ______ ______
Networkers International Plc
Consolidated statement of changes in equity
Share Reverse Foreign Non-
Share Premium acquisition Retained exchange controlling
Capital Account reserve earnings reserve interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2010 938 38 676 13,137 325 - 15,114
Total
comprehensive
income for the
period - - - 1,286 361 - 1,647
Share based
payments - - - 6 - - 6
Deferred tax
credit on share
based payments - - - 2 - - 2
Shares issued in
the period 1 6 - - - - 7
Purchase of
shares held in
treasury - - - (350) - - (350)
______ ______ ______ ______ ______ ______ ______
As at 30 June
2010 939 44 676 14,081 686 - 16,426
Total
comprehensive
income for the
period - - - 1,307 (194) 67 1,180
Share based
payments - - - 35 - - 35
Deferred tax
credit on share
based payments - - - (35) - - (35)
Dividends paid - - - (300) - - (300)
Shares issued in
the period 1 5 - - - - 6
Non-controlling
interest -
disposal - - - 217 - (182) 35
Purchase of
shares held in
treasury - - - (767) - - (767)
______ ______ ______ ______ ______ ______ ______
As at 31
December 2010 940 49 676 14,538 492 (115) 16,580
Total
comprehensive
income for the
period - - - 1,620 (140) 161 1,641
Share based
payments - - - 58 - - 58
Deferred tax
credit on share
based payments - - - 11 - - 11
Shares issued in
the period 1 13 - - - - 14
Dividends paid - - - (300) - - (300)
Purchase of
shares held in
treasury - - - (63) - - (63)
______ ______ ______ ______ ______ ______ ______
As at 30 June
2011 941 62 676 15,864 352 46 17,941
______ ______ ______ ______ ______ ______ ______
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
statements for the year ended 31 December 2011 and are unchanged
from those disclosed in the Group's Report and Financial Statements
for the year ended 31 December 2010.
The financial information for the six months ended 30 June 2011
and the six months ended 30 June 2010 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 2010 has, however, been derived from the audited
statutory financial statements 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 498(2)-(3) of
the Companies Act 2006.
The Board of Directors approved this interim report on 12
September 2011.
2 Segment information
The Group has 3 main reportable segments:
-- Information Technology division - This division is involved
in the sourcing, recruitment and supply of IT personnel across a
range of industries both in the UK and globally. This division
generates 40% (June 2010: 48%) of the Group's revenue.
-- Telecommunications division - This division is involved in
the sourcing, recruitment and supply of highly skilled telecom
engineers to global telecommunication enterprises. This division of
the business generates 41% (June 2010: 39%) of the Group's
revenue.
-- All other segments: These areas, detailed below, contribute
19% to the Group's revenue (June 2010: 13%).
Other segments include recruitment and supply of resources in
the following areas - Finance, Human Resources, Supply Chain and
procurement, Energy and payroll services solutions. All, except
payroll service, individually contributed a relatively small amount
of revenue to the Group (2% each (2010: 1%)), with payroll services
contributing 16% (June 2010: 9%) and are monitored by the Board of
directors and senior management as well.
Factors that management used to identify the Group's reportable
segments
The Group's reportable segments are strategic business units
that although supplying the same product offerings, operate in
distinct markets and are therefore managed and reported on
separately.
Measurement of operating segment profit or loss, assets and
liabilities
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies.
The Group evaluates performance on the basis of profit or loss
from operations before tax not including overhead costs such as
those incurred by the support centres, goodwill impairment, and
also excluding the effects of share based payments.
Networkers International Plc
Notes to the accounts (Continued)
2 Segment information
Six months ending 30 June 2011
IT Telco Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue from external
customers 34,905 35,381 16,581 86,867
_______ _______ _______ _______
Segment profit before
income tax 1,225 1,920 163 3,308
_______ _______ _______ _______
Six months ending 30 June 2010
IT Telco Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue from external
customers 34,553 27,819 9,616 71,988
_______ _______ _______ _______
Segment profit before
income tax 1,055 1,359 151 2,565
_______ _______ _______ _______
Year ending 31 December 2010
IT Telco Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue from external
customers 70,329 58,429 24,287 153,045
_______ _______ _______ _______
Segment profit before
income tax 2,223 2,657 339 5,219
_______ _______ _______ _______
Networkers International Plc
Notes to the accounts (Continued)
2 Segment information (Continued)
Reconciliation of reportable segment profit to the Group's
corresponding amounts:
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Profit after income tax expense
Total profit or loss for reportable segments 3,308 2,565
5,219
Depreciation (89) (83) (169)
Amortisation of intangibles (129) (224) (333)
Share based payments (58) (6) (41)
Interest expense (178) (222) (512)
Interest income 20 65 118
Profit before income tax expense 2,874 2,095 4,282
Corporation taxes (1,093) (809) (1,622)
_______ _______ _______
Profit after income tax expense (continuing activities) 1,781
1,286 2,660
_______ _______ _______
Geographical information:
Revenue is recognised based upon where the actual service is
provided.
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Revenue
Europe 74,774 63,965 116,042
Middle East and Africa 2,548 1,489 2,252
Americas 7,735 4,435 7,600
Asia Pacific 1,810 2,099 3,585
_______ _______ _______
Group 86,867 71,988 129,479
_______ _______ _______
Networkers International Plc
Notes to the accounts (Continued)
3 Earnings per share
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Numerator
Earnings used for calculation of basic and diluted EPS 1,620
1,286 2,593
_______ _______ _______
Numerator
Earnings used for calculation of adjusted EPS
Profit on ordinary activities after taxation 1,620 1,286
2,593
Add back:
Amortisation of intangibles arising on business combinations 121
195 290
Share based payment charge (net of tax) 43 6 30
________ ________ ________
Adjusted earnings 1,784 1,487 2,913
_______ _______ _______
Number Number Number
Denominator
Weighted average number of shares
used in basic and adjusted EPS 88,871,971 93,314,270
92,090,311
Effects of employee share options 2,463,018 1,661,229
1,787,459
__________ __________ ________
Weighted average number of shares
used in diluted EPS 91,334,989 94,975,499 93,877,770
__________ __________ _________
Period end number of shares (excluding shares
held in treasury) used in adjusted EPS 88,859,145 92,618,302
88,922,914
__________ __________ _________
Basic 1.82p 1.38p 2.82p
Diluted 1.77p 1.35p 2.76p
Adjusted 2.01p 1.61p 3.28p
_______ _______ _______
The number of options excluded from the diluted EPS calculation
is 50,000 (June 2010: 50,000; Dec 2010 : 50,000)
Networkers International Plc
Notes to the accounts (Continued)
4 Reconciliation of Cash and cash equivalents
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Cash available upon demand 1,043 2,284 1,652
________ ________ ________
Cash and cash equivalents 1,043 2,284 1,652
_______ _______ _______
5 Payment of Dividend
The Directors recommend the payment of an interim dividend for
the six months ended 30 June 2011 of 0.450p per share totalling
GBP0.4m (2010 Interim: 0.324p per share totalling GBP0.3m)
These interim results are available from the Group's website
www.networkersplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UGUMPBUPGGQB
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