RNS Number:8474P
Corporate Services Group PLC
17 September 2003
FOR IMMEDIATE RELEASE 17 SEPTEMBER 2003
THE CORPORATE SERVICES GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
Highlights
Financial
* Turnover from continuing operations - #258.1 million (2002: #296.6
million), a decrease of 13.0% (2002: 23.8% decrease compared with 2001)
* Significant reduction in operating loss in respect of continuing
operations to #6.5 million (2002: loss of #11.9 million) before goodwill
amortisation and operating exceptional items
* Pre tax loss of #11.2 million (2002: loss of #94.4 million including
operating exceptional items)
* Loss of 1.2p per share, adjusted to exclude amortisation of goodwill,
discontinued activities, operating exceptional items and minority interest
(2002: loss of 4.0p)
* Basic loss of 1.7p per share (2002: loss of 25.8p)
* Placing and Open Offer completed raising #24.8 million, net of expenses
* Net debt #44.5 million at 30 June 2003 (31 December 2002: net debt of
#43.2 million; 30 June 2002: net debt of #62.8 million)
Operational
* Year-on-year reduction in operating costs of #9.2 million achieved
during the period
* Business reengineering process initiated with #10.0 million of
annualised savings by 2005 identified
* Gross margins maintained in difficult market conditions for recruitment
businesses
* Losses substantially reduced within the continuing Comensura business.
Commenting of the results, Julian Treger, Executive Chairman, said:
"We have made significant progress in reducing our costs during the period and
anticipate further substantial reductions as a result of our business
reengineering process. This restructuring of the UK business, which commenced
last month, will continue through 2004 and is designed to ensure that our
business becomes cash generative and profitable on a run rate basis by the end
of 2004 without relying on an improvement in the market.
"Trading during the first 10 weeks of the second half has remained below the
levels experienced for the same period last year, with UK and US sales down 8.8%
and 13.3% respectively. The rates of decrease represent an improvement over
those experienced at the year end. Importantly, our US business has experienced a
marginal rise in daily revenues during the third quarter compared with the
second quarter of the year, thus continuing the trend identified in the second
quarter.
"In line with our statement in the annual report, the Board anticipates that
trading in 2003 will continue to be below the level of 2002 for the remainder of
the year. We expect, however, that the rate of decrease year-on-year will
continue to improve through the remaining months of 2003. Although our
businesses continue to show mixed signs, we are hopeful that in 2004 we will
begin to see year-on-year increases in trading, starting with our US business."
For further information please contact:
Mark Adams, Chief Operating Officer, CSG: 01582 692658
Desmond Doyle, Group Finance Director, CSG: 01582 692658
Melvyn Marckus, CardewChancery: 020 7930 0777
Executive Chairman's Report
Business overview
We anticipated that 2003 would be another difficult year for the recruitment
industry in both the UK and the US and that trading would continue to be below
the levels of 2002. This has proved to be the case in the first half of the
current year with revenues down compared to the prior year.
We have responded to this challenge and taken action to further reduce our cost
base. As indicated at the end of 2002, we initiated and completed a thorough
review of our UK business processes and policies during the period under review.
The detailed planning and implementation phase of the findings is now under way.
Certain aspects of the learning from our US experience in respect of cost
reduction and efficiency improvement were fed into the reengineering process
undertaken in the UK. This restructuring of the business, which commenced last
month, will continue through 2004 and is designed to ensure that our business
becomes cash generative and profitable on a run rate basis by the end of 2004
without relying on an improvement in the market. Through this reengineering
exercise, we have identified process efficiency savings that will lead to an
annualised reduction of #10.0 million in our cost base by 2005. This is in
addition to the major cost reduction exercise completed in 2002 which has
yielded a reduction in current year costs of #9.2 million, well ahead of the
initial target of #6.5 million that we set ourselves at this time last year.
The reengineering process has also identified a number of new growth prospects
and opportunities to differentiate the business as we move into 2004. Business
plans are being developed to evaluate these options further and we will update
shareholders in due course.
Results for the period
Turnover from continuing operations during the first six months of 2003 declined
by 13.0% from #296.6 million to #258.1 million compared with the same period
last year. This comprised a fall of 7.5% in sales from the UK operations and a
fall of 15.0%, measured in local currency, in sales derived from US general
staffing operations. These results are by no means acceptable but they do
represent a significant improvement on 2002 versus 2001 where we experienced
declines of 23.8%, 13.9% and 37.2% respectively in the same period.
Our gross margin in the first half of 2003 was 18.0%. A like-for-like comparison
is affected by a one-off #3.1 million charge in 2002 which related to workers'
compensation claims growth arising from prior periods, particularly in 1999/
2000. After adjusting for this one-off item, we have maintained our gross
margins year-on-year. This is a notable achievement in difficult trading
conditions.
The cost savings programme initiated at the end of 2002 resulted in a reduction
in operating costs, excluding goodwill amortisation, of #9.2 million, or 14.7%,
when compared to the corresponding period of the previous year. In the UK, the
majority of this reduction occurred at the centre, where we have benefited from
the new unitary management structure and the exit from the Victoria headquarters
in London, which we are in the process of sub-leasing. In particular, corporate
costs were reduced from #2.2 million to #1.0 million in the period. In the US,
overheads have been reduced across the business where a culture of strong cost
control has been rigorously enforced by local management.
The resulting loss for the period, before goodwill amortisation and operating
exceptional items was #7.0 million (2002: loss of #12.4 million). This reduces
to a loss of #6.5 million (2002: loss of #11.9 million) on a continuing basis,
after excluding the loss resulting from the termination of part of the Comensura
business, the restructuring of which, as we indicated at the last year end,
would be completed by June 2003.
The adjusted loss per share (adding back goodwill amortisation, operating
exceptional items, discontinued activities and minority interest) was 1.2p
(2002: loss of 4.0p).
As at 30 June 2003, the net indebtedness of the Group amounted to #44.5 million
(including a restricted cash deposit of #4.5 million related to warranties given
in connection with the sale of the Euristt business in 2001). This compares with
net indebtedness of #43.2 million at 31 December 2002 (including a restricted
cash deposit of #8.4 million). The December 2002 balance was flattered by the
agreed deferral of a tax payment of #10.5 million into 2003; had this payment
been made in December, net debt would have been #53.7 million.
During the period, we successfully completed a fundraising via a Placing and
Open Offer which raised #24.8 million net of expenses. These proceeds were used
to finance the working capital requirements of the business. We continue to
monitor working capital very closely and are continually evaluating how to best
utilise the security offered by our balance sheet including a potential
restructuring of the #60 million convertible bond which is due for repayment in
July 2005.
General staffing services - UK
In line with other businesses in the staffing sector, Blue Arrow has continued
to experience difficult trading conditions and a resultant reduction in sales.
In the period to 30 June 2003, sales fell 8.3% to #130.8 million compared with
the corresponding period in 2002. Part of this decline is attributable to the
loss of a number of relatively large accounts last year where Blue Arrow
declined to take on new contracts on unacceptable terms or margins. Blue Arrow
has also continued to rationalise its branch network and has closed a number of
under-performing branches.
Certain sectors within Blue Arrow have performed ahead of last year. In
particular, the market leading catering and driving businesses have increased
revenues year-on-year. The driving business has benefited from the acquisition
of the BRS Taskforce business from Exel, announced in March 2003. We are pleased
to report that this business has been successfully integrated with processes
fully transitioned to the Blue Arrow way of working and is performing in line
with expectations.
During the period Blue Arrow fundamentally redeveloped its online capability and
re-launched its primary website with a new "Jobs Online" functionality. This has
led to a substantial month-on-month increase in traffic. In June, the site
attracted more than 3.0 million "hits" and in excess of 100,000 visits from job
seekers making bluearrow.co.uk one of the most popular sites for those seeking
employment in the UK. Blue Arrow has also strengthened its national sales team
and tender processes and is better able to respond to the requirements of its
clients and potential customers.
Despite pressure on revenues, Blue Arrow has increased its gross margin
percentage by 0.3% when compared with the same period in 2002.
Operating costs have reduced by 2.7% compared with the corresponding period last
year. The reduction in operating costs has been targeted at back office staff
thus leaving the field teams largely unaffected. Given the reduced level of
sales and the improvements in efficiency that will be driven through the
reengineering process, Blue Arrow will significantly reduce operating costs
further over the coming year with the aim of returning to profitability on a run
rate basis by the end of 2004.
Healthcare staffing services - UK
The healthcare staffing business, trading under the brands of Medacs, PRN and
Blue Arrow Nursing Care, represents an increasingly important segment of our UK
business and, with revenues of #46.9 million during the period under review,
accounts for 26% of UK revenues. The business is run independently of our high
street general staffing business and faces many different challenges in the
markets in which it operates. During the period, we have appointed a new
managing director of the business who has developed a strategy to integrate the
various healthcare businesses in order to drive improved productivity and
efficiency within the organisation.
During the half year, revenues have declined by 5.4% against a background of
increased competition, particularly in the supply of locum doctors to the NHS
which has witnessed the introduction of NHS Professionals and an increase in the
number of agencies approved to supply under the National Framework Agreement.
Despite this competition, we have increased gross margin percentages and have
thus succeeded
in maintaining the absolute gross margin, period-on-period. Through tight
control of costs we have been able to increase the bottom line profitability of
the business by 21.9%.
General staffing services - US
After a number of months of substantial sales declines, reflecting both the
weakness in the US economy and the decision to exit from low margin or low
quality business that carried a high exposure to workers' compensation claims,
Corestaff has finally seen a levelling off in month-on-month sales performance.
Revenues for the last quarter to 30 June 2003 were marginally ahead of those for
the first quarter of the year, the first quarter on quarter growth that we have
seen for a number of periods, while sales were only 5.1% below revenues for the
final quarter of 2002.
In addition, the new sales management system, which was implemented in 2002, has
recorded an increase in both sales calls and formal tender activity in the first
half relative to the second half of 2002 and Corestaff is currently proposing
for a number of major client assignments. While it is still too early to be
definitive that a recovery is underway in the staffing sector, there are a
number of positive signs that we continue to monitor.
The gross profit percentage, excluding the one-off workers' compensation
adjustment in the period to 30 June 2002, declined by 1.1% in the first half
compared with the same period last year. While Corestaff has moved out of the
higher risk industrial market, which now represents less than a quarter of the
business, it has continued to witness margin pressure in the clerical and
technical sectors where Corestaff now focuses its activities within a highly
competitive US landscape.
Operating costs were 16% below those for the corresponding period, as measured
in local currency. The operating loss for the period was #3.1 million (2002:
loss of #6.2 million).
We have recently seen a significant increase in corporate activity in the US
staffing services market and continue to track developments. We have examined,
and will continue to look for, opportunities to participate in a consolidation
of general staffing businesses in the US market place.
Workers' compensation
During the period, we have seen the number and incidence of workers'
compensation claims continue to fall. We continue to aggressively settle claims
and have been doing so at amounts below actuarial assessed liabilities. The most
recent actuarial assessment has not shown the levels of claims growth in respect
of prior years that we have previously experienced and we see no need to make
further provision at the half year. Our insurers require us to continue to
collateralise future claims which we do through a combination of restricted cash
deposits and letters of credit drawn against our invoice discounting facilities.
At 30 June 2003, the level of collateral was some #16.7 million against an
actuarial liability in the range of #6.6 million to #10.4 million. Since the
period end, our insurers have released collateral of #1.9 million on the back of
our improved claims record. We expect further reductions in collateral in the
coming months which should provide sufficient cash resources for the settlement
of prior year claims without the need to draw on current cash resources.
Human capital solutions - Comensura
At the year end we announced the restructuring of the Comensura business. This
has been completed in the period with the termination of the Service Centre
Solutions segment and the transfer of the WorkForce Solutions businesses into
the core general staffing operations in the UK and US. The termination of this
business resulted in a loss for the period of #0.6 million (2002: #0.5 million).
The sales pipeline has been handed over to Clear Technology Inc., on a
commission earned basis.
The WorkForce Solutions business is now marginally profitable in the US on
revenues of #1.5 million during the period. Although the UK business lost #0.6
million in the period (2002: loss of #1.3 million), recent sales wins encourage
us to believe that the business will be close to break even on a run rate basis
by the year end.
Current trading and Outlook
Trading during the first 10 weeks of the second half has remained below the
levels experienced for the same period last year, with UK and US sales down 8.8%
and 13.3% respectively. The rates of decrease represent an improvement over
those experienced at the year end. Importantly, our US business has experienced
a marginal rise in daily revenues during the third quarter compared with the
second quarter of the year, thus continuing the trend identified in the second
quarter.
In line with our statement in the annual report, the Board anticipates that
trading in 2003 will continue to be below the level of 2002 for the remainder of
the year. We expect, however, that the rate of decrease year-on-year will
continue to improve through the remaining months of 2003. Although our
businesses continue to show mixed signs, we are hopeful that in 2004 we will
begin to see year-on-year increases in trading, starting with our US business.
Julian Treger
Chairman
Group Profit & Loss Account
For the six months ended 30 June 2003
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
Notes # 000 # 000 # 000
Turnover 2
Continuing operations 258,072 296,556 591,533
Discontinued operations - - 15
__________ __________ __________
258,072 296,556 591,548
Cost of sales 3 (211,664) (246,377) (487,972)
__________ __________ __________
Gross profit 3 46,408 50,179 103,576
Administrative expenses
(including goodwill
amortisation and
exceptional items) 3 (55,291) (142,062) (215,723)
-------------------------------------------------------------------------------
Operating loss from
operations before goodwill
amortisation and
exceptional items (7,043) (12,400) (16,722)
Goodwill amortisation (1,840) (4,483) (6,265)
Operating exceptional 4 - (75,000) (89,160)
items
-------------------------------------------------------------------------------
Operating loss 2
Continuing operations (8,318) (91,343) (110,350)
Discontinued operations (565) (540) (1,797)
__________ __________ __________
Total operating loss (8,883) (91,883) (112,147)
Net interest payable (2,362) (2,521) (4,839)
__________ __________ __________
Loss on ordinary
activities (11,245) (94,404) (116,986)
before taxation
Tax on loss on ordinary
activities 5 - - -
__________ __________ __________
Loss on ordinary
activities (11,245) (94,404) (116,986)
after taxation
Equity minority interest 6 (1,132) 295 715
__________ __________ __________
Loss for the financial
period attributable to
members of the parent
company 9 (12,377) (94,109) (116,271)
__________ __________ __________
Loss per share 1
- before goodwill
amortisation, exceptional
items, discontinued
operations and minority
interest (1.2)p (4.0)p (5.6)p
- basic and diluted (1.7)p (25.8)p (31.9)p
Group statement of total recognised gains and losses
For the six months ended 30 June 2003
Six months Six months Twelve months
ended ended ended
30 June 2003 30 June 2002 31 December
2002
# 000 # 000 # 000
Loss for the financial period (12,377) (94,109) (116,271)
Exchange differences net of
tax (note 5) (1,839) (6,341) (9,938)
________ ________ ________
Total recognised gains and
losses relating to the period (14,216) (100,450) (126,209)
========== ========== ==========
Group balance sheet
30 June 2003
30 June 2003 30 June 2002 31 December 2002
Notes
#000 #000 #000
Fixed assets
Intangible assets 54,223 62,764 57,323
Tangible fixed assets 10,375 18,147 11,176
Investments 4,322 7,835 4,357
_________ _________ _________
68,920 88,746 72,856
_________ _________ _________
Current assets
Debtors 76,510 88,990 76,829
Investments 7 4,544 8,254 8,420
Cash at bank and in 13,719 2,453 12,556
hand
_________ _________ _________
94,773 99,697 97,805
Creditors: amounts
falling (63,472) (71,078) (79,762)
due within one year
_________ _________ _________
Net current assets 31,301 28,619 18,043
_________ _________ __________
Total assets less
current 100,221 117,365 90,899
liabilities
Creditors: amounts
falling due after more
than one year
Convertible debt (59,257) (58,889) (59,073)
Other creditors - (109) -
_________ _________ __________
(59,257) (58,998) (59,073)
Provisions for
liabilities (12,534) (15,468) (15,106)
and charges
_________ _________ __________
28,430 42,899 16,720
Equity minority 6 - 712 1,132
interest
_________ _________ __________
Net assets 28,430 43,611 17,852
=========== =========== ============
Capital and reserves
Called up share capital 8 & 9 8,224 27,413 27,413
Share premium account 9 255,348 236,037 236,037
Other reserve 9 24,672 - -
Profit and loss account 9 (259,814) (219,839) (245,598)
_________ _________ __________
Total shareholders' 13 28,430 43,611 17,852
funds
=========== =========== ============
The interim report was approved by the Board on 17 September 2003
Desmond Doyle
Group Finance Director
Group cash flow statement
For the six months ended 30 June 2003
Six months Six months Twelve months
ended ended ended
30 June 2003 30 June 2002 31 December
2002
Notes #000 #000 #000
Net cash (outflow)/inflow
from operating activities 10 (23,576) (10,415) 8,322
Returns on investments and
servicing of finance (2,192) (2,267) (4,515)
Taxation 1,038 1 2,582
Capital expenditure and
financial investment (866) (1,888) (1,238)
Acquisitions and disposals (364) - -
________ ________ ________
Cash (outflow)/inflow
before financing (25,960) (14,569) 5,151
Management of liquid
resources
Disposal of current asset
investment 4,447 - -
________ ________ ________
Financing
Issue of ordinary share
capital 9 27,413 - -
Share issue expenses 9 (2,619) - -
Revolving credit (685) (7,379) (8,523)
Repayment of secured loans - (4,000) (4,000)
Capital element of finance
lease payments (94) (517) (828)
________ ________ ________
24,015 (11,896) (13,351)
________ ________ ________
Increase/(decrease) in
cash 11 2,502 (26,465) (8,200)
========== ========== ==========
Notes to the interim report
For the six months ended 30 June 2003
1 Basis of preparation
I. The financial information on the preceding pages, which is unaudited, for the
six months to 30 June 2003 does not constitute the statutory accounts of the
Group for the relevant period. The financial information for the year ended
31 December 2002 has been extracted from the statutory accounts of the Group
for that year, which were reported on by the auditors without qualification
or statement under section 237(2) or (3) of the Companies Act 1985 and have
been delivered to the Registrar of Companies.
II. The financial information has been produced on the same accounting policies
as those used in the 2002 financial statements.
III. The calculations of loss per share are based on the following loss and
numbers of shares.
Loss for the period Loss per share
30 June 30 June 31 December 30 June 30 June 31 December
2003 2002 2002 2003 2002 2002
#000 #000 #000 Pence Pence Pence
Basic & diluted
Unadjusted
loss (12,377) (94,109) (116,271) (1.7) (25.8) (31.9)
Minority
interest 1,132 (295) (715) 0.2 (0.1) (0.2)
Discontinued
operations 565 540 1,050 0.1 0.1 0.3
Operating
exceptional
items (net
of - 75,000 89,160 - 20.6 24.5
tax)
Goodwill
amortisation 1,840 4,483 6,265 0.2 1.2 1.7
______ ______ ______ ____ ____ ____
Adjusted (8,840) (14,381) (20,511) (1.2) (4.0) (5.6)
loss
======== ========= ======== ====== ====== ======
Basic loss per share for the six months ended 30 June 2003 is calculated using a
weighted average number of shares of 738,031,244 (June 2002 and December 2002:
364,173,921 calculated after adjusting for the effects of the Placing and Open
Offer - note 8) excluding the shares owned by The Corporate Services Group
Employee Share Trust.
Additional earnings per share calculations have been presented in order to
provide information on the continuing, underlying performance of the Group.
There are no dilutive potential ordinary shares at June 2003 (June 2002 and
December 2002: nil).
IV. A copy of the interim statement will be posted to shareholders and made
available to the public at the Company's registered office,
800 The Boulevard, Capability Green, Luton, LU1 3BA.
2 Segmental information
By origin and business
The healthcare staffing sector has become an increasingly important segment of
our business. It is run by a separate management team from that of the general
staffing sector and faces many different challenges unique to the sector. The
Directors, therefore, consider it appropriate to identify the healthcare results
as a separate business segment.
Six months ended 30 June 2003
Turnover United Kingdom United States Total
#000 #000 #000
General staffing services 130,815 78,760 209,575
Healthcare staffing services 46,901 - 46,901
Human capital solutions 108 1,488 1,596
_______ _______ _______
Continuing 177,824 80,248 258,072
Discontinued - - -
_______ _______ _______
177,824 80,248 258,072
========= ========= =========
Loss on ordinary activities before
taxation
General staffing services (3,764) (3,065) (6,829)
Healthcare staffing services 1,918 - 1,918
Human capital solutions (611) 69 (542)
_______ _______ _______
Continuing (2,457) (2,996) (5,453)
Discontinued (565) - (565)
_______ _______ _______
(3,022) (2,996) (6,018)
Goodwill amortisation (34) (1,806) (1,840)
Operating exceptional items - - -
_______ _______ _______
(3,056) (4,802) (7,858)
========= =========
Corporate costs - UK (1,025)
Corporate operating exceptional -
items
_______
Operating loss (8,883)
Net interest payable (2,362)
______
Loss on ordinary activities before
taxation (11,245)
=========
Six months ended 30 June 2002
Turnover United Kingdom United States Total
#000 #000 #000
General staffing services 142,582 103,412 245,994
Healthcare staffing services 49,594 - 49,594
Human capital solutions 36 932 968
_______ _______ _______
Continuing 192,212 104,344 296,556
Discontinued - - -
_______ _______ _______
192,212 104,344 296,556
========= ========= =========
Loss on ordinary activities before
taxation
General staffing services (2,688) (6,219) (8,907)
Healthcare staffing services 1,573 - 1,573
Human capital solutions (1,280) (1,003) (2,283)
_______ _______ _______
Continuing (2,395) (7,222) (9,617)
Discontinued (540) - (540)
_______ _______ _______
(2,935) (7,222) (10,157)
Goodwill amortisation (29) (4,454) (4,483)
Operating exceptional items - (75,000) (75,000)
_______ _______ _______
(2,964) (86,676) (89,640)
========= =========
Corporate costs - UK (2,243)
Corporate operating exceptional -
items
_______
Operating loss (91,883)
Net interest payable (2,521)
______
Loss on ordinary activities before
taxation (94,404)
=========
Twelve months ended 31 December
2002
Turnover United Kingdom United States Total
#000 #000 #000
General staffing services 297,645 193,589 491,234
Healthcare staffing services 97,759 - 97,759
Human capital solutions 126 2,414 2,540
_______ _______ _______
Continuing 395,530 196,003 591,533
Discontinued 15 - 15
_______ _______ _______
395,545 196,003 591,548
========= ========= =========
Loss on ordinary activities
before taxation
General staffing services (158) (11,089) (11,247)
Healthcare staffing services 2,306 - 2,306
Human capital solutions (1,743) (1,288) (3,031)
_______ _______ _______
Continuing 405 (12,377) (11,972)
Discontinued (1,050) - (1,050)
_______ _______ _______
(645) (12,377) (13,022)
Goodwill amortisation (59) (6,206) (6,265)
Operating exceptional items (5,869) (81,136) (87,005)
_______ _______ _______
(6,573) (99,719) (106,292)
========= =========
Corporate costs - UK (3,700)
Corporate operating exceptional
items (2,155)
_______
Operating loss (112,147)
Net interest payable (4,839)
_______
Loss on ordinary activities before
taxation (116,986)
=========
3 Cost of sales, gross profit and administrative expenses
Six months Six months Twelve months
ended ended ended
30 June 2003 30 June 2002 31 December
2002
#000 #000 #000
Cost of sales
Continuing
operations 211,664 246,377 487,599
Discontinued
operations - - 373
__________ __________ __________
211,664 246,377 487,972
============ ============ ============
Gross profit
Continuing
operations 46,408 50,179 103,934
Discontinued
operations - - (358)
__________ __________ __________
46,408 50,179 103,576
============ ============ ============
Administrative expenses
Continuing
operations 54,726 66,522 125,871
Discontinued
operations 565 540 692
Operating
exceptional items
- continuing
operations - 75,000 88,413
Operating
exceptional items
- discontinued
operations - - 747
__________ __________ __________
55,291 142,062 215,723
============ ============ ============
4 Exceptional items
Six months Six months Twelve months
ended ended ended
30 June 2003 30 June 2002 31 December
2002
#000 #000 #000
Recognised in arriving at
operating loss
Group
restructuring and
reorganisation - - 2,930
Blue Arrow
restructuring and
reorganisation - - 4,398
Corestaff
restructuring and
reorganisation
(including
goodwill
impairment) - 75,000 81,136
Investment in own
shares -
impairment - - 696
__________ __________ __________
- 75,000 89,160
============ ============ ============
In the previous periods, the costs shown under Group restructuring and
reorganisation relate to the compensation and associated costs incurred under
the termination settlements of main Board Directors and senior management plus
the costs associated with the closure of the corporate offices and relocation to
Luton and the impairment of licences and investments held by the human capital
solutions business.
In these periods the costs shown under both Blue Arrow and Corestaff
restructuring and reorganisation include compensation and associated costs from
branch and head office rationalisation programmes, including the write off of
assets made obsolete by the reorganisation. Also included in the case of
Corestaff is the impairment to goodwill made in June 2002.
5 Taxation
a) Tax on loss on ordinary activities
The Group has not suffered any taxation in the UK or overseas in the current or
comparative periods.
UK corporation tax at 30%, amounting to #nil for the 6 months to 30 June 2003
(June 2002 #nil and December 2002 #nil) has been deducted in arriving at the
exchange differences in the Group statement of total recognised gains and
losses. No tax has been attributed to the exchange losses in the current period.
b) Factors affecting current and future tax charges
The principal factors affecting the tax charge for all three periods shown are
the non-recognition of deferred tax assets in respect of trading losses and the
workers compensation provision
The deferred tax assets at each period end have not been recognised as there is
insufficient evidence that they will be recoverable. They will be recoverable if
suitable taxable profits arise in the relevant jurisdictions in the future.
6 Equity minority interest
During the period to 30 June 2003 the decision was made to restructure the
operations of the Comensura business, to transfer the workforce solutions
businesses into the core staffing operations in the UK and US and to terminate
the service centre solutions segment. As a result of this decision it is not
considered appropriate to maintain the asset balance due from the minority
interest in the business, consequently this has been fully provided for in these
accounts.
7 Current asset investment
Investments represent Euro6.25 million deposited in an interest bearing investment
trust which invests in risk-free money market instruments following the disposal
of Euristt at the end of 2001. These funds are held as a guarantee against
future warranty claims relating to tax and social security issues that must be
claimed by 30 January 2005.
During the period to 30 June, agreement was reached with Groupe CRIT S.A.
regarding the non-tax warranties arising from the sale of Euristt. As a result
one half of the original Euro12.5 million investment plus accrued interest less an
agreed claim of Euro261,000 has been transferred to the Company's UK bank account
during the period.
8 Share capital
Group and Company 30 June and 30 June and
30 June 30 June 31 December 31 December
2003 2003 2002 2002
Authorised Number # 000 Number # 000
Ordinary
Shares of 1p
(30 June and
31 December
2002 - 10p
each) 1,132,826,031 11,328 360,000,000 36,000
Deferred
shares of 9 p 274,130,441 24,672 - -
_______ ________
36,000 36,000
========= ==========
Allotted, issued and
fully paid
Ordinary
Shares of 1p
(30 June and
31 December
2002 - 10p
each) 822,391,323 8,224 274,130,441 27,413
============ ========= ============ ==========
At an extraordinary general meeting held on 30 January 2003 the shareholders
approved a Placing and Open Offer for 548,260,882 New Ordinary shares of 1 pence
each at 5 pence per share and the sub-division of the existing Ordinary shares
into 1 New Ordinary share of 1 pence and 1 Deferred share of 9 pence. All of the
Deferred shares were immediately acquired by the Company for nil consideration
and cancelled.
9 Called up share capital and reserves
Profit
Group Called up Share Other and loss
share capital premium reserve account
# 000 # 000 # 000 # 000
1 January 2003 27,413 236,037 - (245,598)
New shares issued 5,483 21,930 - -
Creation and
cancellation (24,672) - 24,672 -
of deferred shares
Share issue costs - (2,619) - -
Foreign exchange - - - (1,839)
movements
Retained loss for the
period - - - (12,377)
________ ________ ________ ________
30 June 2003 8,224 255,348 24,672 (259,814)
========== ========== ========== ==========
The Other reserve represents a non-distributable profit arising upon the
purchase for nil consideration, and cancellation, of deferred shares created as
part of the Placing and Open offer in January 2003.
10 Reconciliation of operating loss to net cash inflow from operating activities
Six months Six months Twelve months
ended ended ended
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Operating loss (8,883) (91,883) (112,147)
Depreciation 1,556 3,639 5,020
Goodwill amortisation 1,840 4,483 6,265
Licence amortisation 36 559 417
Impairment of fixed asset
investments - - 1,755
Impairment of goodwill - 75,000 75,000
Impairment of licences - - 1,097
(Profit)/loss on sale of fixed
assets and loss on assets made
obsolete on reorganisation (25) - 6,179
(Increase)/decrease in debtors (634) (2,398) 8,332
(Decrease)/increase in
creditors (15,170) 160 16,451
(Decrease)/increase in
provisions (2,296) 25 (47)
__________ __________ __________
Net cash (outflow)/inflow from
operating activities (23,576) (10,415) 8,322
============ ============ ============
Net cash (outflow)/inflow from operating activities comprises:
Six months Six months Twelve months
ended ended ended
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Continuing operating
activities (23,011) (10,062) 8,999
Discontinued operating
activities (565) (353) (677)
__________ __________ __________
(23,576) (10,415) 8,322
============ ============ ============
11 Reconciliation of net cash flow to movement in net debt
Six months Six months Twelve months
ended ended ended
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
Increase/(decrease) in cash in
the period 2,502 (26,465) (8,200)
Cash outflow from decrease in
debt, lease financing and
revolving credit 779 11,896 13,351
Cash (inflow)/outflow from
(decrease)/increase in liquid
resources (4,447) - -
__________ __________ __________
Change in net debt resulting
from cash flows (1,166) (14,569) 5,151
Other non-cash movements (104) (48) (92)
Foreign exchange movement (49) 846 715
__________ __________ __________
Movement in net debt in the
period (1,319) (13,771) 5,774
Opening net debt (43,220) (48,994) (48,994)
__________ __________ __________
Closing net debt (44,539) (62,765) (43,220)
============ ============ ============
12 Analysis of net debt
Other
Foreign non-cash
1 January 2003 Cash flow exchange changes 30 June 2003
# 000 # 000 # 000 # 000 # 000
Cash at bank
and in hand 12,556 1,732 (569) - 13,719
Overdrafts (1,497) 770 23 - (704)
__________ __________ _________ __________ __________
11,059 2,502 (546) - 13,015
__________ __________ _________ __________ __________
Debt due
after (59,073) - - (184) (59,257)
one year
Finance (151) 94 - - (57)
leases
Revolving
credit (3,475) 685 6 - (2,784)
__________ __________ _________ __________ __________
(62,699) 779 6 (184) (62,098)
__________ __________ _________ __________ __________
Current
asset 8,420 (4,447) 491 80 4,544
investments
__________ __________ _________ __________ __________
(43,220) (1,166) (49) (104) (44,539)
============ ============ =========== ============ ============
13 Reconciliation of movement in Group shareholders' funds
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
# 000 # 000 #000
Loss for the financial period (12,377) (94,109) (116,271)
New share capital subscribed 24,794 - -
(net of issue costs)
Exchange difference (1,839) (6,341) (9,938)
__________ __________ __________
Net additions to/(reduction)
in shareholders' funds 10,578 (100,450) (126,209)
Opening shareholders' funds 17,852 144,061 144,061
__________ __________ __________
Closing shareholders' funds 28,430 43,611 17,852
============ ============ ============
14 Contingent liabilities
a) Serious Fraud Office Three former directors of the Company have been
charged with fraudulent trading. This follows a Serious Fraud Office
investigation into accounting irregularities during the accounting years 1997
and 1998. This is prior to the change in the membership of the Board which
occurred in May 1999. The Board is of the opinion that there should be no
material adverse impact on the Company's financial or trading position as a
result of these investigations.
b) Prior year accounting In the preparation of the 1998 results, as disclosed
in the accounts for that year, the Group's accounting policies were found to
have been applied aggressively and in some cases there had been material errors.
Accordingly, in the 1998 accounts the prior year comparative figures shown for
1997 were restated. The events leading up to the restatement of the Company's
1997 results, and the restatement itself, may give rise to the potential for
claims against the Company. Due to the inherent uncertainty involved with any
such claim it is not considered appropriate to put a monetary figure to this
potential liability.
c) Property guarantees The Group has provided guarantees to the landlords of
four properties transferred to Training for Tomorrow (Holdings) Limited. The
property guarantees have leases expiring between one and ten years with a total
annual lease expense of #266,000 (June 2002 and December 2002: #266,000).
d) Warranties Pursuant to a share purchase agreement dated 16 November 2001
made between (1) the Company and Laybridge Limited (a wholly owned subsidiary of
the Company) and (2) Groupe CRIT S.A., the Company gave a number of warranties
to Groupe CRIT S.A. in respect of Euristt S.A.. During the period to 30 June
2003 settlement was reached with Group CRIT S.A. regarding all non-tax
warranties. Claims under the warranties in respect of matters relating to
taxation and social security must be notified prior to 30 January 2005. The
Company is not liable in respect of any claim under the warranties relating to
taxation and social security unless the aggregate of all such claims exceeds
Euro3.0 million (#1.9 million) and in respect of such claims the total liability
shall be limited to the amount in excess of Euro3.0 million. As at 30 June 2003,
the Company had received quantified claims under the warranties relating to
taxation and social security totalling Euro1.0 million (of which it disputes Euro0.6
million). An amount is retained in an interest bearing investment trust as a
guarantee against liability under the tax and social security warranty claims
(see note 7).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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