TIDMRTC
RNS Number : 8249D
RTC Group PLC
24 February 2020
24 February 2020
RTC Group Plc
("RTC", "the Company" or "the Group")
Final results for the year ended 31 December 2019
RTC Group Plc (AIM: RTC.L) is pleased to announce its audited
results for the year ended 31 December 2019.
Highlights
-- Group revenue GBP94.9m (2018: GBP87.8m), 8% increase.
-- Profit from operations maintained at GBP2.0m (2018: GBP2.0m).
-- Earnings per share (basic) 9.60p (2018: 10.20p).
-- A final dividend is proposed of 2.76p per share making total
dividends in respect of the year to 31 December 2019 of 4.16 p
(2018: 3.85p), 8% increase.
-- Net working capital debt reduced to GBP2.8m (2018: GBP4.5m). The Group has no term debt.
-- 75% of gross profit generated by our more resilient contract business.
Commenting on the results Andy Pendlebury, CEO said:
" 2019 was another extremely positive year for the Group,
revenue, gross profit, cash generation and shareholder dividends
all increased in line with market expectations.
I am extremely excited about our prospects as the work we have
done to position ourselves as a lead player in the infrastructure,
rail, energy and international sectors has yet to be fully
exploited by the Group.
Finally, we are proud that we have consistently delivered on our
dividend commitment to our shareholders and our dividend yield is
one of the best in the sector ."
Enquiries:
RTC Group Plc Tel: 0133 286 1835
Bill Douie, Chairman
Andy Pendlebury, Chief Executive
SPARK Advisory Partners Limited (Nominated Tel: 0203 368 3550
Adviser)
Matt Davis / Mark Brady
www.Sparkadvisorypartners.com
Whitman Howard Limited (Broker) Tel: 020 7659 1234
Nick Lovering
www.Whitman-howard.com
About RTC
RTC Group Plc is an AIM listed recruitment business that focuses
on white and blue-collar recruitment, providing temporary and
permanent labour to a broad range of industries and customers in
both domestic and international markets through its geographically
defined operating divisions.
UK division
Through its Ganymede and ATA Recruitment brands the Group
provides a wide range of recruitment services in the UK.
Ganymede specialise in recruiting the best technical and
engineering talent and providing complete workforce solutions to
help build and maintain infrastructure and transportation for a
wide range of UK and international clients. Ganymede is a market
leader in providing a diverse range of people solutions to the
rail, energy, construction, highways and transportation sectors.
With offices strategically located across the country, Ganymede
provides its clients with the benefit of a national network of
skilled personnel combined with local expertise.
ATA Recruitment provide high-quality technical recruitment
solutions to the manufacturing, engineering and technology sectors.
Working as an engineering recruitment partner supporting businesses
across the UK. ATA Recruitment has a strong track record of
attracting and recruiting the best engineering talent for our
clients. ATA's regional offices which are strategically located in
Leicester and Leeds each have dedicated market-experts to ensure
ATA delivers excellence to both our clients and candidates.
The Group headquarters are located at the Derby Conference
Centre which also provides office accommodation for its operating
divisions in addition to generating rental and conferencing income
from space not utilised by the Group.
International division
Through its GSS brand the Group works with customers across the
globe that are focused on delivering projects in a variety of
engineering sectors. GSS has a track record of delivery in some of
the world's most hostile locations. Working closely with its
customers GSS provides contract and permanent staffing solutions on
an international basis, providing key personnel into new projects
and supporting ongoing large-scale project staffing needs. GSS
typically recruit across a range of disciplines and skills from
operators and supervisors, through to senior management level.
www.rtcgroupplc.co.uk
Chairman's statement
For the year ended 31 December 2019
I am pleased to present the final report for the year.
Group
The performance across both our UK and International divisions
has been extremely pleasing. Overall, 2019 has seen further growth
in Group revenues to GBP94.9m (2018: GBP87.8m).
UK division
Within the UK, our ATA brand navigated fragile market conditions
to produce a very creditable trading result. Ganymede continued to
prosper with further increases in demand in both the Rail industry
and the Energy division despite the slower than expected growth of
our contract to train and supply operatives to serve the roll out
of the government smart meter policy. Within Central Services
revenues from the Derby Conference Centre increased and the
facility continued to provide a first-class headquarters and value
add for our clients as explained in the Chief Executive's
statement.
International division
Internationally our GSS brand had an exceptional year's
performance beating its highest ever contribution to the Group.
Dividends
In pursuance of our policy, an interim dividend of 1.4p (2018:
1.3p) has been paid. Your directors are now proposing a final
dividend for the 2019 year of 2.76p (2018: 2.55p) per share,
subject to approval at the Annual General Meeting on 22 April
2020.
Outlook
Although there remain uncertainties for the UK economy in 2020
which are likely to remain until our future trading arrangements
with the European Community are resolved, we enter 2020 following a
healthy performance in 2019 with optimism. ATA Recruitment is
continuing to perform at satisfactory levels, and Ganymede is
substantially insulated from any volatility in the general UK
markets by the contracts it has within both the Rail and Energy
industries. The Derby Conference Centre is experiencing improving
demand for its services.
Internationally, GSS has continuing flows of demand from its
longstanding client in Afghanistan and continues to develop
business in the Middle East.
The establishment of strong and stable Government and the
passing at long last of our exit from the European Union give us
cause to anticipate more predictable and promising trading
conditions although the progress to a final trade agreement with
the EU may cause 2020 to be a bumpy year. Recent clear indications
of strong increases in infrastructure spending and investment
culminating in the announcement of an urgent drive to construct and
complete our major expansion in High Speed Rail transport are
expected to offer many opportunities for the Group.
We view the future with confidence.
Staff
I should like to thank our staff at all levels for their
loyalty, hard work and enthusiasm.
W J C Douie 23 February 2020
Chairman
Chief Executive's operational and strategic review
For the year ended 31 December 2019
Overview
2019 was another extremely positive year for the Group. Our
business continued to grow despite severe economic and
geo-political uncertainty which impacted the wider global and UK
economies. Group revenue, gross profit, cash generation and
shareholder dividends all increased in line with market
expectations. The Group's long-term investment programme in
apprentice training and workforce upskilling remained at a
constant, and in certain cases enhanced level. These costs have to
be recognised fully in the year incurred and cannot be spread over
the expected revenue recovery timeline. Therefore, whilst we could,
like many organisations have in the current climate, deferred this
investment to achieve both higher profit and associated earnings
per share, the Board did not see this as a necessary nor sensible
strategy to deploy. Furthermore, whilst the Board is cognisant of
the importance of meeting, and wherever possible exceeding annual
profit targets, this will not be done at any cost as creating
long-term sustainable profit and cash flow growth is our key
priority to support our goal of growing dividends every year - not
an easy commitment to make or deliver - as being essential in
attracting and retaining a supportive shareholder community. We are
proud that we have consistently delivered on our dividend
commitment to our shareholders and our dividend yield is one of the
best in the sector.
I am delighted that our results, when compared alongside the
performance of many of our publicly traded peers, especially the
small cap contingent, fair extremely well, and across a broad range
of measures vindicate the strategic direction being followed by the
Board. They provide confidence that the range of strategic
imperatives outlined for shareholders in both our 2014 and 2017
business reviews are being implemented by strong management teams
deployed across each of our businesses and within the corporate
centre of the Group. Given that many of the current macro-economic
challenges were neither present, nor indeed envisaged when we
redefined the vision and strategic direction of the Group we
believe our business model remains robust and once the economy
regains accelerated momentum, capable of generating additional
organic led growth opportunities for us to further grow shareholder
value. I appreciate that there is no guarantee that 2020 will
deliver a vastly different landscape than 2019 but by growing and
using our balance sheet wisely, as we continue to do, we will be
well prepared for any eventuality encountered by the Group.
With regards to our financial prudence and treasury management I
would like to provide some clarity around our debt position as this
has been a source of difficulty facing a number of companies in our
sector over the past 12-18 months. I believe it is worth outlining
for our shareholders, our relative position and attitude to the use
of debt and its potential impact on shareholder wealth. Typically,
debt in our sector is raised for two predominant reasons. Firstly,
to finance business expansion through acquisition activity. Our
sector has seen profit multiples of target companies (the multiple
of net earnings before interest, tax, depreciation and
amortisation) rise to significantly high, and in our opinion
unrealistic valuations, and whilst this may provide short-term
gains for shareholders, overly ambitious synergy savings are rarely
achieved with the consequences of overpaying for targets providing
unmanageable debt burdens. The impact on shareholder wealth through
overburdened balance sheets is extremely damaging and in certain
circumstances can be terminal. We will not do this to our
shareholders and will concentrate on investing in and building on
organic growth opportunities with existing and new clients. Funding
this aspect of growth is where our industry derives its second key
source of debt from in the form CID (Confidential Invoice
Discounting). Through its banking facility, the Group acts as a
secondary source lender to clients through recruiting and
payrolling workers for them thereby bolstering their working
capital capabilities. For doing this the Group charges clients a
fee (our margin) to recover both its direct and indirect costs and
a contribution to profit for reinvestment and dividends to
shareholders. The primary risk to our shareholders is clients
defaulting on their "working capital loans" or as it is referred to
bad debts, and this is mitigated for our shareholders by the
quality of due diligence in client selection and through our credit
control and treasury management. Over the past 5 years the Group
has cumulatively provided around GBP300m of these "working capital
loans" to clients with a less than 0.02% default rate. We therefore
believe that our debt position is extremely solid, and I hope this
provides clarity and context to the debt position held on the
Group's balance sheet.
Divisional business review
UK division
Operational integration of ATA and Ganymede
For many years Ganymede and ATA have successfully competed in
their respective UK markets. Both businesses have enjoyed
significant growth and have established reputations for delivering
first class recruitment solutions to a range of clients in the
rail, infrastructure, built environment and manufacturing sectors.
As CEO of the Group I am extremely proud of everybody across both
businesses for all the hard work that has gone into achieving this
success.
However, as eluded to in my 2017 SWOT analysis both the
competitive landscape and dynamics of the markets we serve are
changing and our clients are demanding a broader solution from a
streamlined supply chain. In order to compete and stay ahead of our
competition we needed to change and adapt our business model and
structure to fit the new paradigm. In our current format we have to
approach clients multiple times through both businesses, set up
individual trading arrangements under both companies and submit two
sets of invoices for payments. This, when clients are looking to
streamline supplier relationships, reduce administration and
transaction costs and award bigger contracts with fewer suppliers,
is both counter intuitive and potentially damaging to the
Group.
With this in mind, we integrated the ATA projects business with
Ganymede creating a highly focused white-and-blue collar business.
Our ATA branch network will continue to operate and grow in their
current locations and compete in their indigenous manufacturing,
engineering and industrial markets under the ATA Recruitment brand.
Our commitment to grow all our branches remains a key priority for
the Group.
I believe having done this we will create a very focused and
enlarged people solutions business capable of competing with and
beating much larger competitors who currently dominate the
infrastructure and transportation marketplace . I also believe it
will create opportunities for individuals across both businesses to
accelerate their career and personal growth plans and help us
become a more effective and efficient business by redefining our
cost structure to focus on sales and account management to harness
growth . Clearly there will be a number of challenges to overcome
in ensuring a smooth integration but I believe the collective
capability of the two businesses will achieve better growth and
market positioning and I believe all concerned will see this as a
new beginning and launch pad for everybody in the business and I
have full confidence that the team led by Managing Director Paul
Crompton have an exciting and prosperous future ahead of them.
Ganymede
Ganymede had another outstanding year with both its Rail and
Energy divisions delivering record levels of growth. The Rail
business has continued to build on its reputation, presence and
positioning in the Rail sector. Its solid performance as a lead
supplier to Network Rail culminated in Network Rail exercising its
option to extend its framework agreement until 31 March 2021 a
significant and stellar performance by the whole team. Ganymede is
now widely recognised as a leading exponent of safety critical
working in the UK Rail sector. The Businesses reputation was
significantly enhanced following the collapse of Carillion where
Ganymede worked tirelessly alongside Network Rail to ensure minimal
disruption on a range of unfinished and vitally important rail
projects. In addition to strengthening its position with Network
Rail, Ganymede has been selected as a preferred supplier to a
number of Tier 1 rail suppliers broadening its footprint and
involvement in other key rail infrastructure projects. By merging
Ganymede with ATA who are also heavily involved in supplying white
collar personnel to a broad range of rail focused suppliers the
business can now offer full 'cradle to grave' and through life
solutions to the sector which clients are increasingly
demanding.
Ganymede's Energy business is now beginning to show the shoots
of growth in its smart meter roll out programme following a number
of years of slower than expected activity due to industry wide
technology and compatibility issues. Our strategic contract with
SSE has seen a significant increase in demand during the last
quarter of 2019, which is extremely encouraging, and we believe the
next 3-5 years will see a steady and consistent increase in
headcount deployed on this type of activity. The Energy division is
also involved in discussions with a number of energy companies
engaged in medium to long-term roll out programmes for charging
technology for smart cars. Like domestic smart meter forecasts,
growth in this sector is set to rise significantly over the next
5-10 years and we believe given our experience and existing
relationships with key OEM's we are favourably placed to establish
a number of strategic partnerships. This is because this
large-scale national rollout programme would have similarities to
the safety critical work we currently perform for both Network Rail
and SSE.
Ganymede has continued with its long-term investment in training
across both the sectors through its apprentice and operative
upskilling programme. The investment commitment is not
insignificant and as previously alluded to, is costed as incurred
with revenue lagging investment in training. Whilst this has a
short impact on profits, the business is committed to generating
revenue over longer term as this provides a more consistent and
steadier stream of revenues.
During 2019 Ganymede invested in a number of safety initiatives
and campaigns which have improved communications and engagement
with its workforce, and this has driven significant improvements in
safety performance which is a key priority for both the Rail and
Energy sectors. These initiatives are seen by the Board as
long-term investment priorities and are further examples of the
Group's attitude to business investment even during this difficult
economic climate as we believe it will benefit the shareholder in
the long-term.
Finally, Ganymede invested in two new sub-divisions during 2019
again incurring upfront investment costs and both are showing early
signs of promise. Firstly the newly formed trades and labour
division was formed to compliment the supply of rail engineering
personnel with various non-rail tradesmen as many projects now
demand a complete end-to-end workforce capability and secondly a
small works business has been established to perform small packages
of work where Ganymede take wider control and responsibility for
both Network Rail and other Tier 1 suppliers. We believe by having
a holistic capability, including the ATA white collar project
business, it places Ganymede in a more favourable position to
secure a new and enhanced long-term relationship with Network Rail
and its key Tier 1 partners.
ATA
The challenging headwinds experienced by ATA in the first half
of 2019 did not abate and like much of its competition ATA had to
weather further and, in some cases, worsening conditions. The
impact was felt equally by both the projects business where a
number of new civil engineering projects were either held or in
certain cases shelved pending the outcome of Brexit and the
turbulent domestic political landscape. The ATA branch network
which supports the UK manufacturing, engineering and industrial
sectors was impacted as falling confidence dampened enthusiasm for
capital investment initiatives and headcount led growth.
We believe the decision to combine ATA projects with Ganymede
will have a positive impact during 2020 as it broadens its exposure
to bigger and more established projects as part of the Ganymede
offering. In terms of the branch network, ATA has always been
firmly aligned to the direction of the wider economy and this has
never been more evident than during the uncertainties created by
Brexit. It has been a couple of extremely frustrating years for ATA
branches and the generalist recruitment sector per se. However, ATA
and its senior executive team, along with members of the Board,
have endured many cycles of muted business confidence in the UK and
history shows that these periods of stagnant or declining growth
are normally followed by longer periods of growth as operational
headcount cuts, usually deeper than needed, are reversed and
depleted stock levels are replenished.
Furthermore, it is likely that a post-Brexit UK will be
challenging for many companies as the war for talent will intensify
as businesses find it harder to recruit from overseas. In this
regard we believe that the ATA branch network will be able to
source candidates through its sister company GSS who has access to
a broad range of international recruitment partners. This could
provide a valuable source of competitive advantage as many
companies try to navigate through the EU settlement scheme, updated
visa requirements and the evolving immigration reform
landscape.
Central Services
Our Conference centre (the DCC), a part of Central Services,
continues to provide first class headquarters for our Group
financial directorate, human resources and technology departments.
It is also headquarters to our Ganymede and ATA businesses and the
Board. At the same time the DCC provides conferencing, events and
commercial office facilities and is widely recognised as one of the
most unique and respected venues across the East Midlands. In
addition to the direct value add it generates for the Group, the
DCC has played a significant role in helping our prime revenue
generators through offering a range of bolt on services to clients
not offered by many of our competitors. Additionally, the DCC has
generated various and in certain circumstances significant leads to
our recruitment businesses and this attitude of cooperation and
inter-divisional business development is encouraged across all
Group operations.
International division
Our International business GSS is a clear market leader in the
deployment and management of large volume multi-nationality workers
with a broad range of skills into hostile environments for NATO
partner suppliers. It is unrivalled in the UK and has a range of
unique skills and differentiators built up over the ten years since
it was established by the Group.
I am delighted to report that the business had another hugely
successful year culminating in its highest ever contribution to the
Group. This achievement is even more remarkable as during 2018 the
business had over GBP0.7m of non-recurring permanent fees from one
client in the USA for a specific recruitment project in
Afghanistan. To fill this gap the business recruited additional
personnel for deployment in Afghanistan and other international
locations for existing clients. The business now has around 1,000
workers deployed on blue chip international Government/NATO
projects across a range of locations including Afghanistan, Iraq,
Bahrain, Oman and UAE. The business is also currently in
discussions with a range of USA and other international contractors
to expand both its service offering.
Outlook and future growth strategy
Any attempt at forecasting the outlook in the present economic
climate is not without difficulty and anybody purporting to do so
accurately without clearly identifying the accompanying and
imminent risks runs the risk themselves of misleading shareholders.
That is not our style and I would like to outline the key risks and
uncertainties I see in delivering growth for our shareholders.
Firstly, we cannot avoid the continuing macro-economic and
geo-political fallout and continued threat from both the US/China
trade war and the risk of a disorderly exit from the European
Union. Both have the potential to further dampen the appetite for
business investment, especially in the UK, and under these
circumstances it is not uncommon for candidates to defer career
moves thereby reducing supply capability. However, this is not
untypical of recruitment supply/demand cycles and once confidence
returns sentiment tends to reverse. To mitigate the potential of
this threat and to counter the ebbs and flows of traditional
recruitment activity, we embarked on a strategic change of
direction when I joined the Group as CEO. Through building a
diversified portfolio of businesses supporting long-term indigenous
infrastructure programmes and projects with high value order book
revenue. This, complimented by long-term international defence
related contracts, has enabled the Board to build a solid
foundation to mitigate the impact of exposure the UK economy which
historically represented 100% of Group revenue.
The second predominant risk causing sleepless nights for CEO's
is IR35. The IR35 cloud has been firmly on the horizon for twenty
years as the initial legislation was first passed in the 2000
Finance Bill. Whilst the implementation date has been postponed on
many occasions, HMRC is adamant it is not going to kick the can
down the road anymore and the government is firmly committed to
implementing its policy in April 2020. It is worth outlining that
the legislation designed to combat tax avoidance by workers
supplying services to clients through intermediaries is highly
complex and with employment law relying on caselaw to determine the
legal status of individuals, the complexity of the issue will be
challenging for all concerned for the foreseeable future. Presently
a significant contingent of workers deployed by the Group across
its client base have been determined as residing outside the scope
of the legislation as they are employed by the Government through
Network Rail and the Government is responsible for determining the
status of all workers engaged under their auspices. The status of
workers engaged by Group within the private sector are subject to
review by our various clients and we are working closely with all
our clients to establish the most appropriate route to keeping the
individuals engaged on their work programmes from April 2020.
Whilst I am acutely aware that the concerns highlighted above
could be received negatively, that is not my intention. Far from it
as I am extremely excited about our prospects as the work we have
done to position ourselves as a lead player in the Infrastructure,
Rail, Energy and International sectors has yet to be fully
exploited by the Group. Rather I believe it is my responsibility to
outline for our shareholders an honest and frank assessment of the
challenges we face along with a clear message as to what we are
doing to protect their interests. I believe this candour is what
our shareholders want from us.
A M Pendlebury 23 February 2020
CEO
Finance Director's report
For the year ended 31 December 2019
Financial highlights
The Group delivered profit from operations of GBP2.0m (2018:
GBP2.0m).
UK
The Group saw a mixed performance across its UK businesses,
Ganymede and ATA Recruitment, with areas such as technical
engineering recruitment, both permanent and contract, impacted by
clients showing caution pending a conclusion to Brexit
negotiations. Whilst in areas such as contract recruitment for rail
clients and permanent recruitment for energy clients demand was
strong. As a result, revenue from permanent placements in the UK
was maintained at GBP2.8m (2018: GBP2.8m) and contract revenue was
up GBP7.8m to GBP90.3m (2018: GBP82.5m). Overall, the UK
recruitment activities delivered profit from operations of GBP3.7m
(2018: GBP3.6m) an increase of 3% on the previous year. Within
Central Services, the Derby Conference Centre contributed GBP0.9m
(2018: GBP0.9m) gross profit.
International
The Group's international division delivered its most profitable
year since inception with revenues up GBP1.8m to GBP16.6m (2018:
14.8m) and profit from operations breaking the GBP1m barrier at
GBP1.1m (2018: GBP0.9m) despite the absence of GBP0.7m of permanent
fees delivered in 2018 as that contract ended early in 2019.
Taxation
The tax charge for the year was GBP0.4m (2018: GBP0.4m). The
variance between this and the expected charge if a 19% corporation
tax rate was applied to the profit for the year is explained in
note 3.
Dividends
During the year, the Company paid a final dividend in respect of
the previous year's results of GBP363,418 (2018: GBP326,984) which
represents a payment of 2.55p (2018: 2.3p) per share and an interim
dividend of GBP199,734 (2018: GBP184,817) to its equity
shareholders. This represents a payment of 1.4p (2018: 1.3p) per
share. Total dividend payments of GBP563,152 (2018: GBP511,801)
which equate to 3.95p per share (2018: 3.6p) were made during the
year refer to note 5.
A final dividend for the year ended 31 December 2019 of
GBP393,760 (2018: GBP362,780) has been proposed but has not been
accrued within these financial statements. This represents a
payment of 2.76p (2018: 2.55p) per share.
Operational integration of ATA and Ganymede
To provide a simplified company structure and streamlined back
office procedures to underpin the operational integration of
Ganymede and ATA Recruitment (as set out in the Chief Executive's
strategic report), the trade and assets of ATA Recruitment Limited
were hived-up into Ganymede Solutions Limited on 31 December 2019.
The assets were transferred at book value and there was no impact
on the Group financial statements.
Adoption of new accounting standards
During the year IFRS 16 Leases (effective 1 January 2019) was
adopted which has resulted in the Group recognising right of use
assets and lease liabilities for all qualifying contracts that are,
or contain, a lease in the statement of financial position. The
Group has applied the modified retrospective transition method and
as such comparatives have not been restated. The impact on profit
before tax for the Group for the year was not material and there
was no impact on opening equity at 1 January 2019. The Group also
adopted IFRIC 23 which provides guidance on the accounting for
current and deferred tax liabilities and assets in circumstances in
which there is uncertainty over income tax treatments; this had no
material impact on the financial statements.
Own shares held
The cost of the Group's own shares purchased through the
Employee Benefit Trust is shown as a deduction from equity. 40,000
options were exercised during the year and own shares held in the
EBT were used to satisfy this demand. The balance of GBP263,919 on
the own shares held reserve within equity reflects 377,027 shares
remaining in the EBT that will be used to satisfy future
exercises.
Statement of financial position
The Group's statement of financial position has further
strengthened compared to the same point last year with net working
capital increasing to GBP4.0m (2018: GBP3.1m). The ratio of current
assets to current liabilities was improved at 1.3 (2018: 1.2). The
Group's gearing ratio, which is calculated as total borrowings over
net assets was significantly improved at 0.6 (2018: 1.2) largely as
a result of change in mix of sales in favour of clients with
shorter payment terms. The Group has no term debt and is financed
using its invoice discounting and overdraft facilities with HSBC.
Interest cover decreased to 9.7 (2018: 16.4) as during the year
there were higher interest charges due to IFRS 16.
Cash flows
The Group generated a net cash inflow from operating activities
of GBP2.9m (2018: GBP1.0m) largely due to strict control over the
level of trade debtors year on year. Whilst revenues have increased
during the year, the mix of those sales has been more towards
clients with shorter payment terms which is also reflected in the
movement in invoice discounting facility which shows a GBP1.8m
reduction in funds in use. Cash generated from operations was
applied to dividends GBP0.6m (2018: GBP0.5m) and the purchase of
property plant and equipment GBP0.3m (2018: GBP0.5m). Payments of
GBP0.2m (2018: GBPNil) in respect of lease liabilities are also
being shown within the cash flows from financing activities
following the adoption of IFRS 16. These were previously within the
profit from operations.
Prior period restatements
As explained in note 6, the 2018 consolidated statement of
financial position has been restated to present overdrafts of
GBP1,454,000, which were previously included in cash and cash
equivalents, within liabilities due within 1 year. This restatement
has not impacted the previously reported profits, net current
assets or net assets. In addition, the consolidated cash flow
statement has been restated to present certain overdrafts,
amounting to GBP827,000 within financing activities rather than
cash and cash equivalents.
Financing
The Group's current bank facilities include a net overdraft
facility across the Group of GBP50,000 and an invoice discounting
facility of up to GBP9.0m with HSBC at a margin of 1.5% above base.
An increase in the facility up to GBP11m has also been approved by
HSBC but not yet invoked as the Group is operating within its
current facility. The Board closely monitors the level of facility
utilisation and availability to ensure there is enough headroom to
manage current operations and support the growth of the business.
The Group continues to be focused on cash generation and building a
robust statement of financial position to support the growth of the
business.
S L Dye 23 February 2020
Group Finance Director
Consolidated statement of comprehensive income
For the year ended 31 December 2019
2019 2018
Notes GBP'000 GBP'000
--------------------------------------- ------- ---------- ----------
Revenue 2 94,949 87,806
Cost of sales (80,475) (73,908)
--------------------------------------- ------- ---------- ----------
Gross profit 2 14,474 13,898
Administrative expenses (12,513) (11,918)
--------------------------------------- ------- ---------- ----------
Profit from operations 1,961 1,980
Finance expense (203) (121)
--------------------------------------- ------- ---------- ----------
Profit before tax 1,758 1,859
Tax expense 3 (390) (419)
--------------------------------------- ------- ---------- ----------
Total profit and other comprehensive
income for the period attributable
to owners of the Parent 1,368 1,440
--------------------------------------- ------- ---------- ----------
Earnings per ordinary share
Basic 4 9.60p 10.20p
--------------------------------------- ------- ---------- ----------
Fully diluted 4 8.59p 9.36p
--------------------------------------- ------- ---------- ----------
Consolidated statement of changes in equity
For the year ended 31 December 2019
Share Share Own Capital Share Retained Total
capital premium shares redemption based earnings equity
held reserve payment
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- ------------- ---------- ----------- ---------
Balance at
1 January
2019 146 120 (292) 50 379 4,833 5,236
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Total comprehensive
income for
the year - - - - - 1,368 1,368
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Transactions
with owners:
Dividends - - - - - (563) (563)
Share options
exercised - - 28 - (15) (11) 2
Share based
payment charge - - - - 193 - 193
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Total transactions
with owners - - 28 - 178 (574) (368)
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
At 31 December
2019 146 120 (264) 50 557 5,627 6,236
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
The information for the prior reporting period is as
follows:
Share Share Own Capital Share Retained Total
capital premium shares redemption based earnings equity
held reserve payment
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Balance at
1 January
2018 146 120 (473) 50 215 3,993 4,051
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Total comprehensive
income for
the year - - - - - 1,440 1,440
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Transactions
with owners:
Dividends - - - - - (512) (512)
Share options
exercised - - 181 - (76) (88) 17
Share based
payment charge - - - - 240 - 240
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Total transactions
with owners - - 181 - 164 (600) (255)
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
At 31 December
2018 146 120 (292) 50 379 4,833 5,236
---------------------- ---------- ---------- --------- ------------- ---------- ----------- ---------
Consolidated statement of financial position
As at 31 December 2019
2018
Restated
(refer
to note
2019 6)
GBP'000 GBP'000
-------------------------------- ---------- -----------
Assets
Non-current
Goodwill 132 132
Other intangible assets 234 306
Property, plant and equipment 1,680 1,648
Right of use assets 3,044 -
Deferred tax asset 95 66
--------------------------------- ---------- -----------
5,185 2,152
Current
Inventories 10 8
Trade and other receivables 15,809 15,811
Cash and cash equivalents 798 1,546
--------------------------------- ---------- -----------
16,617 17,365
Total assets 21,802 19,517
--------------------------------- ---------- -----------
Liabilities
Current
Trade and other payables (8,493) (7,863)
Lease liabilities (282) -
Corporation tax (296) (261)
Current borrowings (3,570) (6,093)
(12,641) (14,217)
Non-current liabilities
Lease liabilities (2,855) -
Deferred tax liabilities (70) (64)
--------------------------------- ---------- -----------
Net assets 6,236 5,236
--------------------------------- ---------- -----------
Equity
Share capital 146 146
Share premium 120 120
Own shares held (264) (292)
Capital redemption reserve 50 50
Share based payment reserve 557 379
Retained earnings 5,627 4,833
Total equity 6,236 5,236
--------------------------------- ---------- -----------
Consolidated statement of cash flows
For the year ended 31 December 2019
2018
(restated
refer to
2019 note 6)
GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 1,758 1,859
Adjustments for:
Depreciation, loss on disposal and amortisation 693 412
Finance expense 203 121
Employee equity settled share options
charge 194 240
Change in inventories (2) (2)
Change in trade and other receivables (18) (2,739)
Change in trade and other payables 629 1,553
-------------------------------------------------------- --------- ------------
Cash inflow from operations 3,457 1,444
Income tax paid (378) (320)
Interest paid (203) (121)
Net cash inflow from operating activities 2,876 1,003
-------------------------------------------------------- --------- ------------
Cash flows from investing activities
Purchase of property, plant and equipment
and intangibles (314) (504)
Proceeds from asset disposals 20 -
Net cash used in investing activities (294) (504)
Cash flows from financing activities
Movement on invoice discounting facility (1,821) (73)
Movement on perpetual bank overdrafts (75) 195
Dividends paid (563) (512)
Payment of lease liabilities (246) -
Proceeds from exercise of share options 2 17
Net cash (outflow)/inflow from financing
activities (2,703) (373)
-------------------------------------------------------- --------- ------------
Net (decrease)/increase in cash and
cash equivalents (121) 126
-------------------------------------------------------- --------- ------------
Cash and cash equivalents at beginning
of period 919 793
-------------------------------------------------------- --------- ------------
Cash and cash equivalents at end of
period 798 919
-------------------------------------------------------- --------- ------------
1. Corporate information and basis of preparation
RTC Group Plc is a public limited company incorporated and
domiciled in England whose shares are publicly traded.
The announcement of results of the Group for the year ended 31
December 2019 was authorised for issue in accordance with a
resolution of the directors on 23 February 2020.
The financial information included in this announcement has been
compiled in accordance with the recognition and measurement
criteria of International Financial Reporting Standards ("IFRS"),
including International Accounting Standards ("IAS") and
interpretations issued by the International Accounting Standards
Board ("IASB") and its committees, and as adopted by the EU. This
announcement does not itself however contain sufficient information
to comply with IFRS.
Other than the adoption of IFRS 16 which sets out the principles
for recognition, measurement and presentation of leases , and IFRIC
23 which provides guidance on the accounting for current and
deferred tax liabilities and assets in circumstances in which there
is uncertainty over income tax treatments, which are both effective
for accounting periods starting on or after 1 January 2019, the
accounting policies adopted are consistent with those described in
the annual financial statements for the year ended 31 December
2018.
There have been no significant changes in the basis upon which
estimates have been determined, compared to those applied at 31
December 2018 and no change in estimate has had a material effect
on the current period.
2. Segment analysis
Factors that management used to identify the Group's reportable
segments
As a result of the operational integration of ATA and Ganymede
during 2019, as explained in the CEO's report, the Group has
reviewed the determination of its operating segments. This has
resulted in the business being split into three operating segments,
with recruitment being split by geographical area rather than by
statutory entity. This reflects the integrated approach to the
Group's recruitment business in the UK and independent delivery of
overseas business. Three operating segments have therefore been
agreed, based on the geography of the business unit; United Kingdom
and International and central services.
This is consistent with the reporting for management purposes,
with the Group organised into two reportable segments, Recruitment
and Central Services, which are strategic business units that offer
different products and services. They are managed separately
because each segment has a different purpose within the Group and
requires different technologies and marketing strategies.
The comparative segmental information has been restated to
reflect the changes made in 2019.
Operating segments
Segment operating profit is the profit earned by each operating
segment defined above and is the measure reported to the Group's
Board, the Group's Chief Operating Decision Maker (CODM), for
performance management and resource allocation purposes. The Group
manages the trading performance of each segment by monitoring
operating contribution and centrally manages working capital,
financing and equity.
Revenues within the recruitment operating segment have similar
economic characteristics and share a majority of the aggregation
criteria set out in IFRS 8:12 in particular the nature of the
products and services, the type or class of customers, the country
in which the service is delivered and the processes utilised to
deliver the services and the regulatory environment for the
services.
The purpose of the Central Services segment is to provide all
central services for the Group including the Group's head office
facilities in Derby. It also generates income from excess space at
the Derby site including rental and conferencing facilities.
Revenue, gross profit and operating profit delivery by
geography:
Year ended 31 December 2019 Year ended 31 December 2018
UK UK Inter-national Total UK UK Inter-national Total
Recruitment Central Recruitment Group Recruitment Central Recruitment Group
Services Services
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------- ---------- ---------------- ---------- ------------- ---------- ---------------- ----------
Revenue 76,526 1,864 16,559 94,949 71,305 1,696 14,805 87,806
Cost of
sales (64,680) (1,010) (14,785) (80,475) (60,108) (824) (12,976) (73,908)
----------------- ------------- ---------- ---------------- ---------- ------------- ---------- ---------------- ----------
Gross profit 11,846 854 1,774 14,474 11,197 872 1,829 13,898
Administrative
expenses (7,852) (3,269) (701) (11,822) (7,368) (3,222) (917) (11,507)
Amortisation
of intangibles (85) - - (85) (182) - - (182)
Depreciation
of right
of use assets (125) (214) - (339) - - - -
Depreciation (93) (170) (4) (267) (79) (146) (4) (229)
----------------- ------------- ---------- ---------------- ---------- ------------- ---------- ---------------- ----------
Total
administrative
expenses (8,155) (3,653) (705) (12,513) (7,629) (3,368) (921) 11,918
----------------- ------------- ---------- ---------------- ---------- ------------- ---------- ---------------- ----------
Profit from
operations 3,691 (2,799) 1,069 1,961 3,568 (2,496) 908 1,980
----------------- ------------- ---------- ---------------- ---------- ------------- ---------- ---------------- ----------
The revenue reported above is generated from continuing
operations with external customers. There were no sales between
segments in the year (2018: Nil).
For segment reporting purposes revenue is analysed by the
geographical location in which the services are delivered.
The accounting policies of the operating segments are the same
as the Group's accounting policies. Segment profit represents the
profit earned by each segment without allocation of Group
administration costs or finance costs.
During 2019, one customer in the UK segment contributed 10% or
more of total revenue being GBP31.3m (2018: GBP21.4m) and one
customer in the International segment also contributed 10% or more
of total revenue being GBP16.5m (2018: GBP14.0m).
Recruitment revenues are generated from permanent and temporary
recruitment and long-term contracts for labour supply. Within
Central Services revenues are generated from the rental of excess
space and facilities at the Derby site, described as Other
below.
Revenue and gross profit by service classification for
management purposes:
Revenue Gross profit
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------- ---------
Permanent placements 2,819 3,588 2,819 3,588
Contract 90,266 82,522 10,801 9,438
Other 1,864 1,696 854 872
----------------------- --------- --------- --------- ---------
94,949 87,806 14,474 13,898
----------------------- --------- --------- --------- ---------
All operations are continuing. All assets and liabilities are in
the UK.
3. Tax expense
2019 2018
Continuing operations GBP'000 GBP'000
---------------------------------------------------- --------- ---------
Current tax
UK corporation tax 402 367
Adjustments in respect of previous periods 11 38
---------------------------------------------------- --------- ---------
413 405
Deferred tax
Origination and reversal of temporary differences (23) 14
Tax 390 419
---------------------------------------------------- --------- ---------
Factors affecting the tax expense
The tax assessed for the year is higher than (2018: higher than)
would be expected by multiplying the profit by the standard rate of
corporation tax in the UK of 19% (2018: 19%). The differences are
explained below:
Factors affecting tax expense 2019 2018
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Result for the year before tax 1,758 1,859
----------------------------------------------- --------- ---------
Profit multiplied by standard rate of tax of
19% (2018: 19%) 334 353
Non-deductible expenses 86 87
Tax credit on exercise of options (5) (25)
Other differences (36) (34)
Adjustment in respect of previous periods 11 38
----------------------------------------------- --------- ---------
390 419
----------------------------------------------- --------- ---------
4. Basic and diluted earnings per share
The calculation of basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
The calculation of the fully diluted earnings per share is based
on the basic earnings per share adjusted to allow for dilutive
potential ordinary shares.
Basic Fully diluted
2019 2018 2019 2018
Earnings GBP'000 1,368 1,440 1,368 1,440
------------------------- ------------ ------------ ------------ -------------
Basic weighted average
number of shares 14,254,557 14,114,625 14,254,557 14,114,625
------------------------- ------------ ------------ ------------ -------------
Dilutive effect of
share options - - 1,676,094 1,263,737
Fully diluted weighted
average number of
shares - - 15,930,651 15,378,362
------------------------- ------------ ------------ ------------ -------------
Earnings per share
(pence) 9.60p 10.20p 8.59p 9.36p
------------------------- ------------ ------------ ------------ -------------
5. Dividends
2019 2018
GBP'000 GBP'000
----------------------------------------- ---------- ----------
Final dividend of 2.55p per share
(2018: 2.3p) proposed and paid during
the year relating to the previous
year's results. 363 327
Interim dividend of 1.4p per share
(2018: 1.3p). 200 185
----------------------------------------- ---------- ----------
563 512
----------------------------------------- ---------- ----------
A final dividend of GBP393,760 (2018: GBP362,780) has been
proposed but has not been accrued within these financial
statements. This represents a payment of 2.76p (2018: 2.55p) per
share.
6. Prior period restatements
At 31 December 2018 cash and cash equivalents in the
consolidated statement of financial position, as originally
presented, included bank overdrafts of GBP1,454,000. Detailed
consideration of the evidence supporting this treatment has
concluded that the conditions for this net presentation were not
met and the error has been corrected within the comparatives,
reclassifying the overdrafts to current liabilities. The restated
cash and cash equivalents, after this reclassification is
GBP1,546,000.
At 1 January 2018 the restated cash and cash equivalents and
overdrafts should have been GBP1,733,000 and GBP1,572,000
respectively in the consolidated statement of financial
position.
In the consolidated statement of cash flows certain overdrafts
at 31 December 2018, which represents a core element of the
financing structure of the relevant subsidiary, amounting to
GBP827,000 (2017 GBP632,000) have been adjusted to include the
movement within financing activities and correct the previous
offset against the cash balances.
The correction of these errors has not had any impact on
previously reported profits, net current assets or net assets.
7. Report and accounts
The above financial information does not constitute the
Company's statutory accounts for the years ended 31 December 2019
or 2018 but is derived from those accounts. The auditor has
reported on these accounts; their report was unqualified, did not
draw any matters by way of emphasis without qualifying their report
and did not contain statements under s498 (2) or (3) Companies Act
2006 or equivalent preceding legislation. The statutory accounts
for 2018 have been filed with the Registrar of Companies.
Full audited accounts of RTC Group Plc for the year ended 31
December 2019 will be made available on the Company's website at
www.rtcgroupplc.co.uk later today and will be dispatched to
shareholders on 23 March 2020 and then be available from the
Company's registered office - The Derby Conference Centre, London
Road, Derby, DE24 8UX.
The Company's Annual General meeting will be held at 12 noon on
22 April 2020 at the offices of Gowling WLG (UK) LLP , 4 More
London Riverside, London, SE1 2AU .
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKNBNDBKBPBB
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February 24, 2020 02:00 ET (07:00 GMT)
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