TIDMRTG
RNS Number : 2726E
ReThink Group (The) PLC
08 April 2014
8 April 2014
The Rethink Group plc
("Rethink" or the "Group")
Final Results
Rethink Group (AIM:RTG), one of the UK's leading talent
management and recruitment services companies, is pleased to today
announce its final results for the year ended 31 December 2013.
Financial highlights
-- Record Group revenue achieved, increasing 28.0% to GBP111.7m
(2012: GBP87.3m) from continuing operations
-- Net Fee Income* ("NFI") from continuing operations increased
7.6% to GBP19.6m (2012: GBP18.2m) with Talent Management NFI
increasing 28.1% to GBP5.3m (2012 restated: GBP4.1m)
-- Group EBITDA before separately identifiable items increased
to GBP2.2m (2012: GBP0.07m)
-- Profit from operations increased to GBP1.4m** (2012: loss of
GBP0.5m)
-- Cash at the year-end was GBP1.6m (2012: GBP1.1m)
-- Net borrowings increased to GBP11.7m*** (2012: GBP11.3m) due
to working capital requirements
-- Cash generated by operations GBP0.8m (2012: absorbed
GBP3.1m)
-- Adjusted basic earnings per share before separately
identifiable items 0.742p (2012: loss of 0.678p)
* Net Fee Income (NFI) represents gross revenue less direct cost
of sales
** After deducting separable items which include restructuring
costs of GBP0.6m (2012: goodwill impairment of GBP0.4m and
reduction of acquisition consideration of GBP0.2m)
*** Net borrowings are cash at bank less bank borrowings under
the Group's Invoice Discounting arrangements
Operational highlights
-- Talent Management
- Won three year Talent Management agreement with Admin Re
- Signed a three year extension for a Talent Management
agreement with a leading UK high street retailer
-- Recruitment
- Growth in contractor numbers to a record 987 (2012: 894)
-- Revised Group strategy developed and implementation
progressing well
- Talent Management strategic focus instigated
- Successful divestment of non-core technology services division to management
Steve Wright, Rethink CEO, commented: "Rethink has made strong
progress in 2013, both financially and operationally. During the
year the Group added several prestigious clients to its already
impressive roster and achieved record levels of contractor numbers
and permanent recruitment placements. These achievements led to an
increase in revenues, profits and cash for the Group. The refreshed
Group strategy, although still in its early stage of
implementation, is being executed successfully and delivering
results. We look forward to 2014 with increasing confidence."
For further information please contact:
Rethink Group plc
Steve Wright, CEO 07836 226902
Shore Capital (Nominated Adviser and
Broker)
Bidhi Bhoma/Edward Mansfield 0207 408 4090
Newgate Threadneedle
John Coles/Fiona Conroy 020 7653 9850
About Rethink Group plc
Rethink Group (AIM: RTG) provides business transformation
services through talent management and recruitment services. These
mutually supported activities work in synergy and support our
growing customer base.
The Group supports clients across the UK, Europe, US, Middle
East and Asia Pacific.
For more information please visit our website:
www.rethinkgroupplc.com
Chairman's Statement
The results for the year to 31 December 2013 reflect the
progress we have made in refocusing the Group towards the Talent
Management division supported by the Recruitment division, whilst
restoring profitability. We are encouraged by the 7.6% improvement
in group Net Fee Income ("NFI")driven by a 28.1% improvement in NFI
within the Talent Management division. The overall financial
improvement has allowed the Group to recommence investment in
continuing operations.
This growth demonstrates the rationale and initial success of
the Group's re-focussed strategy. As we continue to implement and
execute against the new strategy we are confident of achieving a
more sustainable earnings stream that will build over time and
enhance the quality and predictability of future earnings.
Financial performance
Revenue for the year grew by 28.0% to GBP111.7m (2012:
GBP87.3m), driven by growth in contractor numbers. NFI, which is a
more meaningful measure of growth, increased to GBP19.6m (2012:
GBP18.2m), and EBITDA increased to GBP1.6m (2012: GBP0.07m) after
accounting for one off separately identifiable restructuring costs
of GBP0.6m (2012: separable items of GBP0.4 related to a one-off
impairment to goodwill for Berkley Singapore in the period) .
Profits from operations were GBP1.4m (2012: losses GBP0.5m).
People
Our staff numbers increased to 196 by the year end (2012: 182).
Rethink has a high quality base of talented and enthusiastic people
who are central to the success of Group and I would like to thank
them for their continued efforts.
Board Changes
During the year the Group has significantly strengthened the
executive team.
Jon Butterfield, the Group's CEO, and John Sadiq, the Group's
Non-Executive Chairman, left the Group during 2013. They were
replaced by Stephen Wright and John O'Sullivan respectively.
Stephen, who had joined the Board as our Chief Financial Officer
in March 2012, was appointed to the role of interim CEO in January
2013. The appointment was made permanent with effect from 25 June
2013. John O'Sullivan, a non-executive director with significant
experience in the Talent Management and Recruitment sectors was
appointed interim Non-Executive Chairman on the departure of John
Sadiq. His appointment was made permanent with effect from 7 April
2014.
In addition, Andrew Lord, Managing Director of the Recruitment
Division, was appointed Chief Operating Officer in January
2013.
On 11 November 2013, the Group successfully divested of Aiimi
Limited ("Aiimi"), a non-core technology services division, to
management. Accordingly, Stephen Salvin, Executive Director of
Rethink and Managing Director of Aiimi resigned from the Board on
the same day.
Post period, on 7 April 2014, Rethink was delighted to welcome
Ben Felton to the Board as Chief Financial Officer. Ben is a
Chartered Accountant and prior to joining Rethink was CFO of Norman
Broadbent plc, an AIM listed human capital consulting group.
Dividend
The Board is not recommending a dividend until the Group's cash
resources are further strengthened.
Outlook
2013 was a year of change which we successfully navigated.
Though there is much work to do to deliver our revised strategy,
the progress made so far is promising. NFI for both contract and
permanent recruitment, together with profitability, is in line with
management expectations following the investment in both the Talent
Management and Recruitment divisions. With a firmer financial
footing, Rethink is now building momentum towards realising its
growth objectives.
The impact of technology on all markets is well understood and
highly skilled and motivated people are a vital ingredient in our
client's ability to execute against their own business plans.
Rethink will continue to work closely with clients by not only
sourcing the best qualified candidates in a timely and flexible
manner, but also by providing added value services that maximise
their investments in talent. This approach will enable the
achievement of our strategic goals.
In addition, the improved economic backdrop in the territories
in which Rethink operates is encouraging and it is expected that
the 'war for talent' will now start to accelerate as client
organisations resume investment to compete in their markets.
John O'Sullivan
Non-executive Chairman
Chief Executive's Statement
Introduction
The year to 31 December 2013 has brought a number of significant
changes to Rethink. We have embarked on a journey to redefine the
Group's strategy and develop opportunities to build deeper client
relationships in the provision of talent solutions to our key
vertical markets of Business and Technology, and Life Sciences and
Pharmaceuticals.
In line with the new focused strategy, in November 2013 the
Group divested of Aiimi, a technology consulting operation, which
was concluded to be non-core. The sale recognised a net gain on
disposal of GBP0.2m.
Overall Group revenues from continuing operations increased to
GBP111.7m in 2013 (2012: GBP87.3m), representing growth of 28.0%
and NFI also grew from GBP18.2m to GBP19.6m. With a clear focus now
in place and momentum building, we have a platform on which to
develop a more sustainable business that should reward all
stakeholders in the future.
The Group's two reportable divisions are Talent Management and
Recruitment.
Talent Management
Our Talent Management business is driven by clients with whom
Rethink has strong, long term relationships, underpinned by fixed
term agreements to provide either contract and/or permanent
recruitment services. Often these agreements are augmented by a
range of consulting and managed services. Rethinkoffers a range of
talent management services, ranging from employer branding,
employee attraction and development, through to managed recruitment
services and delivery methods, including a full Recruitment Process
Outsourcing service.
With long-term relationships in place with prestigious
organisations, across a range of sectors, we are building a track
record that is opening up further opportunities for the Group. The
highlight for this division was the renewal of a significant Talent
Management agreement with a major UK retailer for a further three
years.
A client's adoption of Rethink's Talent Management solutions
provides measurable on-going benefits such as improved quality,
efficiency and better value for money. These are key qualities in
today's demanding business environment and are crucial to the
Group's on-going success.
Revenues for our Talent Management division increased 60.9% to
GBP46.0m and now represent 41.2% of the Group's total revenue in
2013. NFI increased 28.1% to GBP5.3m (2012: GBP4.1m), and
contribution from on-going operations increased significantly to
GBP3.9m (2012: GBP2.5m). The further development of this division
is a key part of our strategy moving forward.
Recruitment
The Recruitment division provides contract, interim, permanent
and executive search solutions to a wide range of clients
predominantly in the UK and Ireland, as well as an international
client base through our operations in Dubai and Singapore. The
division has 150 consultants across eight offices.
Revenues for the recruitment business were GBP65.7m (2012:
GBP58.7m), representing 58.8% of the Group's total revenue in 2013.
NFI increased marginally to GBP14.3m in the year (2012: GBP14.1m)
and contribution from on-going operations was GBP2.0m (2012:
GBP0.7m).
The strong turnaround in contribution from the recruitment
business is a first step in positioning this division to help drive
new Talent Management opportunities moving forward.
Clients
Our client base continues to grow. In 2013 we were pleased to
announce that we had secured a three year Talent Management
contract with Admin Re, a major organisation in the financial
services sector.
Our organisation is now clearly focussed on identifying
opportunities to extend and develop our recruitment client
relationships into longer term contractual commitments. We believe
that the growth in our Talent Management business demonstrates the
power of a partnership approach to client engagement.
We have embarked on building a strong portfolio of offerings
that will enable us to deliver a wider range of value added
services to our clients. Consequently, by deepening our
relationships through our Talent Management services, we will
become increasingly valuable partners to our clients in the years
to come.
Group Strategy
Rethink's strategic objective is to further develop its Talent
Management services and client relationships.
There is considerable opportunity in this core market and we
will focus on our strengths and experience in the Business and
Technology, Retail and Pharma and Life Sciences sectors.
Our view is that the most attractive growth opportunities for
the Group lie in Talent Management services where we can build
deeper strategic relationships with clients, by providing a
complete service including talent identification, assessment,
deployment and on-going development and engagement strategies.
Increasingly, we will seek out projects and managed service
opportunities in order to become more embedded within our clients.
While this in itself is not a change of strategy, it is an
important change of emphasis which we believe will manifest itself
in improved financial performance, as we are able to demonstrate
the benefits to clients.
In 2013 we launched a three year strategic plan. Under our plan
a key objective is to ensure that over 60% of the Group's
performance is derived from Talent Management services generated
through long term client relationships, with Recruitment services
providing the balancing 40%.
Expansion will come through a combination of organic growth and,
where appropriate, selective acquisitions that support the Group's
strategic growth objectives.
Our intention is to drive organic growth in both our Talent
Management and Recruitment divisions with Talent Management taking
the lead.
A key part of this strategy is the continued focus on our
Recruitment division, from where many of the future Talent
Management opportunities will be developed.
We will continue to work closely with clients and partners to
develop three key talent management capabilities:
1. Workforce Planning - which will embrace organisational
design, career transition and redeployment, and software enabled
planning.
2. Attraction - which covers many of the activities and
capabilities that are deployed across our client base, and includes
employer branding, website design and management, talent pooling,
screening and assessment, face to face hiring and on-boarding.
3. Performance Management and Retention - which covers a range
of services to ensure that talent, once hired, is effectively
deployed. This includes performance management, team profiling,
talent programmes, engagement strategies and leadership
development.
The purpose of this strategy is to deliver sustainable and
recurring revenue streams, which in turn will support a premium
valuation for our equity stakeholders and greater career
opportunities for our employees.
Stephen Wright
Chief Executive Officer
Financial Review
Income Statement:
Earnings before Interest, Tax, Depreciation and Amortisation
(EBITDA)
The Group's preferred measure of profitability is EBITDA, since
this is the measure which most appropriately provides a guide to
the underlying cash generative capability of the Group. In the year
to 31 December 2013 EBITDA, after separable items, increased to
GBP1.6m (2012: GBP0.07m).
Profit/ (Loss) before Tax
Profit before tax amounted to GBP0.8m (2012: loss of GBP0.8m).
This was after separately identifiable items of GBP0.6m (2012:
GBP0.3m). The separately identifiable items are restructuring and
reorganisations costs which are unlikely to recur in the future.
These costs include compromise agreements associated with a board
restructure, bank exit fees, office closure costs and termination
of a software project.
Earnings per share
In the current year, the basic earnings per share after
separable items were 0.742p (2012: losses of 0.678p).
Cash Flow:
During the year, cash generated by operations was GBP0.8m (2012:
cash absorbed GBP3.1m) which, after net corporation tax paid of
GBP0.1m (2012: payment of GBP0.4m), led to net cash generated from
operating activities of GBP0.7m (2012: cash absorbed GBP3.5m).
Net cash generated by investment activities amounted to GBP0.04m
(2012: cash absorbed GBP0.3m). This included GBP0.2m of cash
received as part consideration for the sale of Aiimi Limited in
November 2013.
Incremental financing through invoice discounting amounted to
GBP0.9m (2012: GBP4.4m), together with GBP0.1m (2012: GBP0.3m) of
share proceeds relating to the exercise of options. The Group also
redeemed in full all outstanding preference shares, resulting in a
cash outflow of GBP0.7m. Finance costs of GBP0.6m (2012: GBP0.4m)
and repayments associated with finance leases of GBP0.04m (2012:
GBP0.1m) were made during the year.
In the year to 31 December 2013 cash and cash equivalents
increased by GBP0.5m to GBP1.6m (2012: GBP0.2m increase to
GBP1.1m).
Balance Sheet:
Net Assets
Consolidated net assets increased to GBP6.1m (2012: GBP5.2m) of
which GBP4.6m (2012: GBP4.6m) related to non-current assets, the
largest single item being goodwill of GBP4.1m (2012: GBP4.0m).
Net current assets increased to GBP1.6m (2012: GBP0.7m).
Working Capital
Trade and other receivables at the year end amounted to GBP25.3m
(2012: GBP22.9m).
The Group's average day sales outstanding reduced to 33 days
(2012: 40 days).
Cash and invoice discounting facilities
Cash at the year-end was GBP1.6m (2012: GBP1.1m) and bank
borrowings, consisting solely of Group invoice discounting
facilities, were GBP13.3m (2012: GBP13.1m). At 31 December 2013 the
total invoice discounting facility available to the Group was
GBP20.0m.
Goodwill
Goodwill at the year end was assessed for impairment and the
Directors have concluded, following a review of future cash flow
projections, that no impairment charge was required (2012:
impairment of GBP0.4m). Translation of goodwill led to a foreign
exchange gain of GBP0.1m (2012: loss of GBP0.3m), with a carrying
value of goodwill on the Consolidated Statement of Financial
Position at the financial year end of GBP4.1m (2012: GBP4.0m).
Ben Felton
Chief Financial Officer
Consolidated statement of comprehensive income
For the year ended 31 December 2013
Separately Separately
Before identifiable Before identifiable
separately items separately items
identifiable (note Total identifiable (note Total
items 8) 2013 items 8) 2012
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
==================================== ===== ============ ============ ======== ============= ============= ========
Revenue 111,693 - 111,693 87,259 - 87,259
Cost of sales (92,133) - (92,133) (69,073) - (69,073)
==================================== ===== ============ ============ ======== ============= ============= ========
Gross profit 19,560 - 19,560 18,186 - 18,186
Administrative expenses (17,511) (642) (18,153) (18,291) (422) (18,713)
==================================== ===== ============ ============ ======== ============= ============= ========
Earnings before interest, tax,
depreciation and amortisation 2,225 (642) 1,583 67 - 67
Amortisation, depreciation and
impairment (176) - (176) (172) (422) (594)
==================================== ===== ============ ============ ======== ============= ============= ========
Profit/(loss) from operations 5 2,049 (642) 1,407 (105) (422) (527)
Finance expense 4 (579) - (579) (386) - (386)
Finance income 4 2 - 2 1 155 156
==================================== ===== ============ ============ ======== ============= ============= ========
Profit/(loss) before taxation 1,472 (642) 830 (490) (267) (757)
Tax expense 7 (172) - (172) (21) - (21)
==================================== ===== ============ ============ ======== ============= ============= ========
Profit/(loss) from continuing
operations 1,300 (642) 658 (511) (267) (778)
Profit on discontinued operations,
net of tax 198 - 198 30 - 30
Profit/(loss) 1,498 (642) 856 (481) (267) (748)
Other comprehensive expense
Foreign currency exchange
differences
on translation of foreign
operations 112 - 112 (307) - (307)
==================================== ===== ============ ============ ======== ============= ============= ========
Total comprehensive income/(expense)
for the year 1,610 (642) 968 (788) (267) (1,055)
==================================== ===== ============ ============ ======== ============= ============= ========
All of the profit and comprehensive income for the year is
attributable to equity holders of the parent.
In accordance with the International Financial Reporting
Standards the prior year figures have been restated to show the
prior period effect of the current year discontinued operation (see
note 26).
Earnings/(loss) per share Pence Pence Pence Pence
========================== ===== ===== ======= =======
Basic 91.298 0.742 (0.436) (0.678)
Diluted 91.292 0.738 (0.436) (0.678)
========================== ===== ===== ======= =======
Earnings/(loss) per share for continuing
operations Pence Pence Pence Pence
========================================= ===== ===== ======= =======
Basic 91.127 0.570 (0.527) (0.802)
Diluted 91.121 0.567 (0.527) (0.802)
========================================= ===== ===== ======= =======
Consolidated statement of changes in equity
For the year ended 31 December 2013
Shares
Share Retained Share to be Merger Translation
Capital Earnings Premium Issued Reserve Reserve Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ======== ========= ======== ======== ======== =========== ========
At 1 January 2012 104 3,105 2,528 33 218 (49) 5,939
Changes in equity for
the year ended 31 December
2012
Loss for the year - (748) - - - - (748)
Other comprehensive expense
for the year - - - - - (307) (307)
---------------------------- -------- --------- -------- -------- -------- ----------- --------
Total comprehensive expense
for the year - (748) - - - (307) (1055)
Contributions by and
distributions to owners
Recognition of share-based
payment expense - 5 - - - - 5
Issue of shares 4 - 317 (33) - - 288
Share options exercised 6 - 300 - - - 306
Dividends paid - (254) - - - - (254)
---------------------------- -------- --------- -------- -------- -------- ----------- --------
Total contributions by
and distributions to
owners 10 (249) 617 (33) - - 345
At 31 December 2012 114 2,108 3,145 - 218 (356) 5,229
Changes in equity for
the year ended 31 December
2013
Profit for the year - 856 - - - - 856
Other comprehensive income
for the year - - - - - 112 112
============================ ======== ========= ======== ======== ======== =========== ========
Total comprehensive income
for the year - 856 - - - 112 968
Contributions by and
distributions to owners
Own shares held (note
26) - (230) - - - - (230)
Recognition of share-based
payment expense - 5 - - - - 5
Share options exercised 3 - 93 - - - 96
---------------------------- -------- --------- -------- -------- -------- ----------- --------
Total contributions by
and distributions to
owners 3 (225) 93 - - - (129)
At 31 December 2013 117 2,739 3,238 - 218 (244) 6,068
============================ ======== ========= ======== ======== ======== =========== ========
Consolidated statement of financial position
As at 31 December 2013
2013 2012
Notes GBP'000 GBP'000
============================================ ===== ======== =========
Assets
Non-current assets
Goodwill 11 4,050 3,966
Investment 14 12 5
Property, plant and equipment 12 381 530
Intangible assets 13 54 80
Deferred tax asset 22 62 24
============================================ ===== ======== =========
Total non-current assets 4,559 4,605
============================================ ===== ======== =========
Current assets
Trade and other receivables 15 25,270 22,859
Cash and cash equivalents 2 1,600 1,121
Corporation tax asset - 4
============================================ ===== ======== =========
Total current assets 26,870 23,984
============================================ ===== ======== =========
Total assets 31,429 28,589
============================================ ===== ======== =========
Liabilities
Current liabilities
Trade and other payables 16 (11,860) (10,195)
Loans and borrowings 17 (13,339) (13,114)
Corporation tax liability (105) -
============================================ ===== ======== =========
Total current liabilities (25,304) (23,309)
============================================ ===== ======== =========
Net current assets 1,566 675
============================================ ===== ======== =========
Non-current liabilities
Loans and borrowings 17 (7) (40)
Deferred tax liability 22 (50) (11)
============================================ ===== ======== =========
Total non-current liabilities (57) (51)
============================================ ===== ======== =========
Net assets 6,068 5,229
============================================ ===== ======== =========
Equity
Share capital 23 117 114
Share premium account 3,238 3,145
Merger reserve 218 218
Translation reserve (244) (356)
Retained earnings 2,739 2,108
============================================ ===== ======== =========
Total equity attributable to equity holders
of the parent company 6,068 5,229
============================================ ===== ======== =========
The financial statements were approved by the Board of Directors
and authorised for issue on 7 April 2014.
Stephen Wright
Chief Executive Officer
Consolidated statement of cash flows
For the year ended 31 December 2013
2013 2012
Notes GBP'000 GBP'000
==================================================== ===== ======== ========
Cash flows from operating activities
Profit/(loss) before tax from continuing operations 830 (757)
Adjustments for:
Share-based payment expense 5 5
Depreciation charges 12 153 199
Amortisation 13 22 84
Impairment of goodwill - 422
Disposal of property, plant and equipment 150 -
Disposal of intangible assets 35 -
Finance expense 4 579 399
Finance income 4 (2) (156)
==================================================== ===== ======== ========
1,772 196
Increase in trade and other receivables (2,411) (2,705)
Increase/(decrease) in trade and other payables 1,417 (578)
==================================================== ===== ======== ========
Cash generated from/(absorbed by) operations 778 (3,087)
Corporation tax paid (46) (363)
==================================================== ===== ======== ========
Net cash generated from/(absorbed by) operating
activities 732 (3,450)
==================================================== ===== ======== ========
Cash flows from investing activities
Purchase of property, plant and equipment (153) (242)
Purchase of intangible assets 13 (32) (84)
Purchase of investment - (5)
Disposal of subsidiary undertaking net of cash
disposed 220 -
Finance income 4 2 1
==================================================== ===== ======== ========
Net cash generated from/(absorbed by) investing
activities 37 (330)
==================================================== ===== ======== ========
Cash flows from financing activities
Finance costs paid 4 (579) (399)
Net change in advances on invoice discounting
facility 868 4,435
Repayment of finance leases (47) (80)
Payment for redemption of preference shares (628) -
Proceeds from issue of share capital net of
issue costs 96 305
Payment of dividend - (254)
==================================================== ===== ======== ========
Net cash generated from financing activities (290) 4,007
==================================================== ===== ======== ========
Net change in cash and cash equivalents 479 227
Cash and cash equivalents at start of year 2 1,121 892
==================================================== ===== ======== ========
Cash and cash equivalents at end of year 2 1,600 1,119
==================================================== ===== ======== ========
In accordance with the International Financial Reporting
Standards the prior year figures have been restated to show the
prior period effect of the current year discontinued operation (see
note 26).
Notes to the financial statements
For the year ended 31 December 2013
1. Basis of preparation
The Group's full financial statements, on which this financial
information is based, have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as issued by
the International Accounting Standards Board ('IASB'),
International Financial Reporting Interpretations Committee
('IFRIC') interpretations and Standing Interpretations Committee
('SIC') interpretations as adopted and endorsed by the European
Union ('EU') and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
2. Notes to the cash flow statements
Cash and Cash Equivalents
The amounts disclosed in the cash flow statement in respect of
cash and cash equivalents are in respect of these statements of
financial position amounts:
2013 2012
Group GBP'000 GBP'000
========================= ======== ========
Cash available on demand 1,600 1,121
========================= ======== ========
3. Employees and Directors
2013 2012
Group GBP'000 GBP'000
================================================ ======== ========
Wages and salaries 11,902 12,113
Social security contributions and similar taxes 1,390 1,427
Pension costs 390 547
Share-based payment expense 5 5
================================================ ======== ========
13,687 14,092
================================================ ======== ========
The average number of employees during the year was as
follows:
2013 2012
Group Number Number
=============== ======= =======
Sales 171 209
Administrative 23 19
Directors 12 13
=============== ======= =======
206 241
=============== ======= =======
Key management personnel compensation
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. These are considered to be the directors
of subsidiary undertakings and Company directors.
2013 2012
All Key Management Personnel GBP'000 GBP'000
================================================ ======== ========
Wages and salaries 1,505 1,709
Social security contributions and similar taxes 154 167
Compensation for loss of office 311 -
Pension costs 103 88
================================================ ======== ========
2,073 1,964
================================================ ======== ========
Remuneration in respect of the highest paid Director:
2013 2013
GBP'000 GBP'000
=================== ======== ========
Salary and bonuses 229 232
=================== ======== ========
During 2013 there was one Director in the Group's defined
contribution pension scheme (2012: one). This scheme is
administered by an independent pension provider and the assets of
the scheme are held separately to those of the Group.
During 2013 1,500,000 (2012: 1,750,000) share options were
exercised by the Directors. Disclosure of the total gains arising
from the exercise of the share options is included within note
25.
4. Finance income and expense
2013 2012
GBP'000 GBP'000
=================================================== ======== ========
Finance income:
Bank interest received 2 1
Reduction in deferred consideration on acquisition - 155
=================================================== ======== ========
2 156
=================================================== ======== ========
2013 2012
GBP'000 GBP'000
========================================= ======== ========
Finance expense:
Bank charges and interest 30 31
Invoice discounting charges and interest 525 341
Preference share interest 24 14
========================================= ======== ========
579 386
========================================= ======== ========
5. Profit/ (loss) from operations
2013 2012
This is stated after charging: GBP'000 GBP'000
================================================= ======== ========
Staff costs (note 3) 12,891 14,092
Other operating leases - property 497 533
Depreciation of property, plant and equipment 153 161
Amortisation of intangible assets 22 11
Auditor's remuneration - audit services - parent 14 16
- UK and Ireland subsidiaries 43 32
Auditor's remuneration - non-audit services - -
Foreign exchange gains and losses 50 98
================================================= ======== ========
6. Segment information
Reportable Segments
Factors that management use to identify the Group's reportable
segments
The Group's three reportable segments, being Recruitment, Talent
Management and Technology Services are sectors that offer different
products and services. They are managed separately having a
dedicated Director, and separate reporting within the internal
information provided to the management team including the
Directors.
Measurement of operating segment profit and assets
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies.
Recruitment, Talent Management and Technology Services are
evaluated for performance on the basis of contribution.
Recruitment is represented by the subsidiaries, Rethink
Recruitment Solutions Limited, Otravida Search Limited (formerly
known as Integritas Recruitment Limited), Rethink Group Inc,
Rethink MEA FZCO, Berkley Recruitment (Group) Limited and Berkley
Recruitment Group (Asia) Pte. Limited with all subsidiaries
involved in both permanent and contract recruitment. Permanent
recruitment involves the placing of candidates in permanent
employment roles. Contract recruitment involves the placing of
candidates in fixed term roles.
Talent Management is currently represented by Rethink
Professional Services Limited and parts of Rethink Recruitment
Solutions Limited and is also involved in both permanent and
contract recruitment. As highlighted in 2012, this division
continues to increase in importance. In the current and previous
financial year we have more accurately reflected the allocation
between Talent Management and Recruitment to ensure the Talent
Management segment more fully reflects its associated income and
costs.
Technology Services is represented by Aiimi Limited. The segment
is involved in providing technical consulting, software, SaaS,
support and project management. During the year Aiimi was sold (see
note 26) therefore this segment is deemed a discontinued
operation.
Continuing operations Discontinued
================================== =============================== ============ =========== ========
Technology
Recruitment Talent Management Services Unallocated Total
2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================== ============ ================= ============ =========== ========
Contract revenue 58,872 44,768 - - 103,640
Permanent revenue 6,845 1,208 - - 8,053
Technology Services - - 3,113 - 3,113
=================================== =========== ================= ============ =========== ========
Total revenue from external
customers 65,717 45,976 3,113 114,806
=================================== =========== ================= ============ =========== ========
Discontinued operations - - (3,113) - (3,113)
=================================== =========== ================= ============ =========== ========
Group's revenue per consolidated
statement of comprehensive
income 65,717 45,976 - - 111,693
=========== ================= ============ =========== ========
Gross profit from continuing
operations 14,304 5,256 - - 19,560
Gross profit from Discontinued
operations - - 1,442 - 1,442
=================================== =========== ================= ============ =========== ========
Total Gross profit 14,304 5,256 1,442 - 21,002
Administrative expenses (12,262) (1,365) (1,574) - (15,201)
=================================== =========== ================= ============ =========== ========
Contribution from continuing
operations 2,042 3,891 - - 5,933
=================================== =========== ================= ============ =========== ========
Discontinued operations - - (132) - (132)
Central administrative expenses - - - (3,884) (3,884)
=========== ================= ============ =========== ========
Earnings before interest,
tax, depreciation, amortisation
and separately identifiable
items 2,042 3,891 - (3,708) 2,225
Amortisation, depreciation
and impairment - - - (176) (176)
=================================== =========== ================= ============ =========== ========
Profit from continuing operations
before separately identifiable
items 2,042 3,891 - (3,884) 2,049
Finance costs (579) (579)
Finance income - - - 2 2
Profit from continuing operations
before tax and separately
identifiable items 2,042 3,891 - (4,461) 1,472
Separately identifiable items (642)
Profit from continuing operations
before tax 830
=================================== =========== ================= ============ =========== ========
Statement of financial position
Reportable segment assets 20,778 10,451 - 200 31,429
Reportable segment liabilities (14,535) (10,826) - - (25,361)
=================================== =========== ================= ============ =========== ========
Continuing operations Discontinued
=============================== ============================================= ============ =========== ========
Technology
Recruitment Talent Management Services Unallocated Total
2012 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ==================== ======================= ============ =========== ========
Contract revenue 51,540 26,948 - - 78,488
Permanent revenue 7,153 1,618 - - 8,771
Technology Services - - 3,942 - 3,942
================================ ======= =========== ======================= ============ =========== ========
Total revenue from external
customers 58,693 28,566 3,942 - 91,201
================================ ======= =========== ======================= ============ =========== ========
Discontinued Operations (3,942) (3,942)
Group's revenue per consolidated
statements of comprehensive
income 58,693 28,566 - - 87,259
=========== ======================= ============ =========== ========
Gross profit 14,084 4,102 1,932 - 20,118
Administrative expenses (13,386) (1,634) (1,917) - (16,937)
======================================== =========== ======================= ============ =========== ========
Contribution from ongoing
operations 698 2,468 15 - 3,181
======================================== =========== ======================= ============ =========== ========
Central administrative expenses (3,693) (3,693)
======================================== =========== ======================= ============ =========== ========
Earnings before interest,
tax, depreciation, amortisation
and separately identifiable
items 67
Amortisation and depreciation (172)
================================ ======= =========== ======================= ============ =========== ========
Loss from continuing operations
before separately identifiable
items (105)
Finance costs (386) (386)
Finance income 1 1
Loss from continuing operations
before tax and separately
identifiable items (490)
Separately identifiable items (267)
Loss from continuing operations
before tax (757)
================================ ======= =========== ======================= ============ =========== ========
Statement of financial position
Reportable segment assets 21,487 5,195 1,907 - 28,589
Reportable segment liabilities (16,819) (5,176) (1,365) - (23,360)
================================ ======= =========== ======================= ============ =========== ========
Segment reportable administrative expenses consist primarily of
staff, office and general expenses.
Segment reportable assets consist primarily of property, plant
and equipment, intangible assets, inventories, trade and other
receivables and cash.
Segment reportable liabilities consist primarily of trade and
other payables, bank loans and finance leases and tax payable.
The 2012 comparative numbers have been restated to show the
effect of the discontinued operations in 2013.
Non-current
External revenue assets
by location by location
of customers of assets
------------------ ------------------
2013 2012 2013 2012
Geographical information GBP'000 GBP'000 GBP'000 GBP'000
========================= ======== ======== ======== ========
United Kingdom 91,700 70,581 4,429 4,555
Other 19,993 16,678 69 50
========================= ======== ======== ======== ========
111,693 87,259 4,498 4,605
========================= ======== ======== ======== ========
Revenues from single customers that exceed 10% or more of total
Group revenues in 2013 are GBP19,839k (2012: GBPnil).
7. Taxation
2013 2012
restated
GBP'000 GBP'000
================================================= ======== =========
Current tax expense
UK corporation tax on profit/(loss) for the year 181 1
Adjustments in respect of prior years (10) 27
================================================= ======== =========
171 28
================================================= ======== =========
Deferred tax (note 22)
Origination and reversal of timing differences 1 8
Adjustment in respect of prior year - (15)
1 (7)
================================================= ======== =========
Total tax expense 172 21
================================================= ======== =========
Factors affecting the tax charge
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the UK applied
to profits for the year are as follows:
2013 2012
GBP'000 GBP'000
=================================================== ======== ========
Profit/(loss) from continuing operations 658 (778)
Total tax expense 172 21
=================================================== ======== ========
Profit/(loss) before taxation 830 (757)
=================================================== ======== ========
Expected tax charge based on the standard rate of
corporation tax in the UK of 23.25% (2012: 24.5%) 193 (185)
Lower rates of tax on overseas earnings (68) 24
Items disallowed/(non-taxable) for tax 71 131
Other permanent differences (14) (54)
Losses carried back - 88
Deferred tax - adjustment in respect of prior year - (15)
Corporation tax - adjustments in respect of prior
years (10) 32
=================================================== ======== ========
Total tax expense 172 21
=================================================== ======== ========
8. Separately identifiable items
2013 2012
GBP'000 GBP'000
=================================================== ======== ========
Debit included within administrative expenses:
Impairment of goodwill (note 11) - 422
Restructuring and reorganisation costs 642 -
--------------------------------------------------- -------- --------
642 422
Credit included within finance income:
Reduction in deferred consideration on acquisition - 155
=================================================== ======== ========
During the year the Group incurred certain restructuring and
reorganisations costs which are unlikely to recur in the future.
These costs include compromise agreements associated with a board
restructure, bank exit fees, office closure costs and termination
of a software project.
9. Earnings/ (Loss) per share
2013 2012
GBP'000 GBP'000
======================================================= ======== ========
Numerator
Profit/(loss) for the year - used in basic and diluted
EPS 856 (748)
Denominator
Weighted average number of shares used in basic EPS 115,385 110,383
Effects of:
Employee share options 571 -
Contingent on business combinations - -
======================================================= ======== ========
Weighted average number of shares used in diluted
EPS 115,956 110,383
======================================================= ======== ========
Earnings per share of 0.742p (2012: loss per share of 0.678p) is
calculated by dividing the profit (2012: loss) attributable to
equity holders of the Group by the weighted average number of
Ordinary shares in issue.
Earnings per share for continuing operations of 0.570p (2012:
loss per share of 0.802p) is calculated by dividing the profit from
continuing operations of GBP658k (2012: loss of GBP778k)
attributable to equity holders of the Group by the weighted average
number of Ordinary shares in issue.
IAS 33 earnings per share defines dilution as a reduction in
earnings per share or an increase in loss per share resulting from
the assumption that convertible instruments are converted, that
options or warrants are exercised, or that ordinary shares are
issued upon the satisfaction of specified conditions. In the
current year, the fully diluted earnings of 0.738p per share has
been calculated by adjusting the weighted average number of
ordinary shares that existed during the year by existing share
options, share incentive plans and the contingent share
consideration on business combinations, assuming dilution through
conversion of all existing options and shares held in share plans.
As the conditions were not been met in the prior year, the number
of shares used in the calculation of the diluted EPS calculation is
identical to the number of shares used in the basic EPS
calculation.
An adjusted EPS figure has been provided to show the level of
earnings/ (loss) per share before the impact of separately
identifiable items.
2013 2012
GBP'000 GBP'000
========================================================== ======== ========
Numerator
Profit/(loss) for the year - used in basic and diluted
EPS 856 (748)
Adjusted:
Separately identifiable items 642 -
Impairment of investment - 422
Reduction in deferred consideration on acquisition - (155)
========================================================== ======== ========
Earnings/(loss) used for the adjusted EPS calculation
before separable items 1,498 (481)
========================================================== ======== ========
Adjusted:
Profit on discontinued operations (198) (30)
========================================================== ======== ========
Earnings/(loss) used for the adjusted EPS calculation
before separable item
for continuing operations 1,300 (511)
========================================================== ======== ========
Weighted average number of shares used in basic EPS 115,385 110,383
========================================================== ======== ========
Earnings/(loss) per share before the impact of separately
identifiable items 1.298p (0.436)p
========================================================== ======== ========
Earnings/(loss) per share before the impact of separately
identifiable items
for continuing operations 1.127p (0.527)p
========================================================== ======== ========
10. Dividends
2013 2012
GBP'000 GBP'000
======================================================== ======== ========
Prior year final dividend paid of GBPnil (2012: 0.233p)
per Ordinary share - 254
======================================================== ======== ========
The Directors have not recommended a final dividend.
11. Goodwill and impairment
2013 2012
Group GBP'000 GBP'000
------------------------------------------------- -------- --------
Net book value and cost at start of year 3,966 4,703
Impairments:
Berkley Recruitment Group (Asia) Pte. Limited - (422)
Foreign exchange rate movements 84 (315)
Net book value and cost at end of year 4,050 3,966
================================================= ======== ========
Details of goodwill allocated to cash-generating units (CGUs)
are as follows:
Goodwill carrying
amount
--------------------------
At At
31 December 31 December
2013 2012
GBP'000 GBP'000
=============================================== ============ ============
ReThink Recruitment (Southend) Limited - 679
ReThink MEA FZCO 250 250
Trusttech Limited - 32
Berkley Recruitment (Group) Limited 3,089 3,005
ReThink Recruitment Solutions Limited 711 -
4,050 3,966
=============================================== ============ ============
Goodwill has been allocated to internal CGUs which have been
deemed to be the applicable legal entities acquired. Goodwill has
been tested for impairment at 31 December 2013 by reference to the
recoverable amount of the CGU. No impairment is deemed necessary in
the current year. Following this test in the prior year, the
goodwill relating to Berkley Recruitment Group (Asia) Pte. Limited
was fully impaired.
The recoverable amount of each CGU has been determined from
value in use calculations based on cash flow projections from
formally approved budgets covering a one year period to 31 December
2013 and then extrapolated to 2017 and in perpetuity (with zero
growth rate) thereafter.
Following a group restructure, striking off applications were
filed for ReThink Recruitment (Southend) Limited and Trusttech
Limited within the year. The related goodwill has been reallocated
to the ReThink Recruitment Solutions Limited were the trade now
resides. This is now deemed to be appropriate level for review. Key
assumptions included in the extrapolated projections are as
follows:
2013 2012
All investments All investments
% %
========================== ================ ================
Discount rate 13.0% 13.0%
Growth rate and inflation 5.0% 5.0%
========================== ================ ================
The value in use calculations uses a pre-tax discount rate which
has been derived from a post tax discount rate of 13% based on the
Group's weighted average cost of capital. The growth rate and
inflation have been based on independent economic data and reflect
management's assessment of specific risks related to the CGUs,
specifically in the geographic regions and market sectors of the
acquisitions made in the current year.
Sensitivity to changes in assumptions
The actual total recoverable amounts for the appropriate CGUs
exceed their carrying values by GBP11.4m (2012: GBP12.0m), with
positive cash flows projected in all years.
There are no reasonably possible factors that would cause the
carrying value to exceed the recoverable amount for all cash
generating units except Berkley Recruitment (Group) Limited.
Sensitivity analysis has been provided below for Berkley
Recruitment (Group) Limited.
If any of the following changes were made to the key
assumptions, the carrying amount and recoverable amount would be
equal.
Berkley Recruitment (Group)
Limited
============= ===========================
Increase from 13% to
Discount rate 15.8%
Reduction from 5% to
Growth rate minus2%
============= ===========================
12. Property, plant and equipment
Improvements Fixtures Computer Under Motor
to property and fittings equipment construction vehicles Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
==================== ============= ============= ========== ============= ========= ========
Cost
At 1 January 2013 146 348 762 65 12 1,333
Additions 9 44 27 73 - 153
Disposals (5) (133) (205) (104) - (447)
===================== ============ ============= ========== ============= ========= ========
At 31 December 2013 150 259 584 34 12 1,039
===================== ============ ============= ========== ============= ========= ========
Depreciation
At 1 January 2013 123 158 510 - 12 803
Charge for year 19 41 93 - - 153
Disposals (5) (131) (162) - - (298)
===================== ============ ============= ========== ============= ========= ========
At 31 December 2013 137 68 441 - 12 658
===================== ============ ============= ========== ============= ========= ========
Net book value
At 31 December 2013 13 191 143 34 - 381
===================== ============ ============= ========== ============= ========= ========
At 31 December 2012 23 190 252 65 - 530
===================== ============ ============= ========== ============= ========= ========
The net book value of tangible fixed assets for the Group
includes an amount of GBP103k (2012: GBP145k) in respect of assets
held under finance leases and hire purchase contracts. All these
assets are classified as computer equipment.
Improvements Fixtures Computer Under Motor
to property and fittings equipment construction vehicles Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
==================== ============= ============= ========== ============= ========= ========
Cost
At 1 January 2012 142 261 530 - 12 945
Additions 4 97 241 65 - 407
Disposals - (10) (9) - - (19)
===================== ============ ============= ========== ============= ========= ========
At 31 December 2012 146 348 762 65 12 1,333
Depreciation
At 1 January 2012 92 139 387 - 5 623
Charge for year 31 29 132 - 7 199
Disposals - (10) (9) - - (19)
===================== ============ ============= ========== ============= ========= ========
At 31 December 2012 123 158 510 - 12 803
===================== ============ ============= ========== ============= ========= ========
Net book value
At 31 December 2012 23 190 252 65 - 530
===================== ============ ============= ========== ============= ========= ========
At 31 December 2011 50 122 143 - 7 322
===================== ============ ============= ========== ============= ========= ========
13. Intangible assets
Development Software
costs licences Total
Group GBP'000 GBP'000 GBP'000
================================= ============ ========= ========
Cost
At 1 January 2013 215 76 291
Additions - internally developed 32 - 32
Disposals (165) (40) (205)
At 31 December 2013 82 36 118
================================== =========== ========= ========
Amortisation
At 1 January 2013 139 72 212
Charge for year 20 3 22
Disposals (129) (41) (170)
================================== =========== ========= ========
At 31 December 2013 30 34 64
================================== =========== ========= ========
Net book value
At 31 December 2013 52 2 54
================================== =========== ========= ========
At 31 December 2012 77 3 80
================================== =========== ========= ========
Software licences are acquired separately and are leased to
clients. Development costs are all internally generated and in
relation to new software products.
Development Software
costs licences Total
Group GBP'000 GBP'000 GBP'000
====================================== ============ ========= ========
Cost
At 1 January 2012 131 76 207
Reclassification from property, plant
and equipment - - -
Additions - internally developed 84 - 84
======================================= =========== ========= ========
215 76 291
At 31 December 2012
====================================== =========== ========= ========
Amortisation
At 1 January 2012 66 61 127
Charge for year 72 12 84
======================================= =========== ========= ========
138 73 211
At 31 December 2012
====================================== =========== ========= ========
Net book value
At 31 December 2012 77 3 80
======================================= =========== ========= ========
At 31 December 2011 65 15 80
======================================= =========== ========= ========
14. Investments
Other investments
Group GBP'000
==================== =================
Cost
At 1 January 2013 5
Revaluation 7
==================== =================
At 31 December 2013 12
==================== =================
Net book value
At 31 December 2013 12
==================== =================
At 31 December 2012 5
The principal subsidiaries of the Rethink Group plc, all of
which have been included in the consolidated financial statements
are as follows:
Proportion
of
ownership
interest
and Ordinary
Country of share capital
Name Nature of business incorporation held
================================= ===================== =============== ==============
ReThink Professional Services
Limited Talent Management England 100%
ReThink Recruitment Solutions
Limited Recruitment Services England 100%
ReBuild Recruitment Services
Limited** Recruitment Services England 100%
ReThink Recruitment (Southend)
Limited** Recruitment Services England 100%
Aiimi Limited Technology Services England 100%
Otravida Search Limited Recruitment Services England 100%
Trusttech Limited** Technology Services England 100%
ReThink MEA FZCO* Recruitment Services UAE 100%
Berkley Recruitment (Group)
Limited* Recruitment Services Ireland 100%
Berkley Recruitment Group (Asia)
Pte. Limited* Recruitment Services Singapore 100%
Rethink Acquisitions Limited Holding Company England 100%
Rethink Group Inc. Recruitment Services USA 100%
================================= ===================== =============== ==============
* The shareholding in these companies are indirect via a
subsidiary undertaking.
** Application to strike off has been filed within the year.
During 2012 an investment was made in Port Erin Biopharma
Investments Limited. The percentage holding is negligible.
15. Trade and other receivables
Group Group
2013 2012
GBP'000 GBP'000
=================================== ======== ========
Trade receivables 22,539 21,652
Amounts owed by Group undertakings - -
Other receivables 396 203
Prepayments and accrued income 2,335 1,004
25,270 22,859
=================================== ======== ========
The fair value of trade and other receivables is not materially
different to the carrying amount.
Included within Group trade receivables is an amount of
GBP21,843k (2012: GBP21,308k) subject to invoice discounting.
Trade receivables subject to invoice discounting are recognised
as the Group retains the significant risks and benefits. Payments
received from invoice discounting providers are shown as advances
on invoice discounting facility (note 17).
16. Trade and other payables
Group Group
2013 2012
GBP'000 GBP'000
=================================== ======== ========
Trade payables 8,209 6,524
Amounts owed to Group undertakings - -
Social security and other taxes 2,434 2,349
Other payables 182 126
Accruals 1,035 1,196
=================================== ======== ========
11,860 10,195
=================================== ======== ========
Book values of trade and other payables approximate to fair
value.
17. Financial liabilities - loans and borrowings
Group Group
2013 2012
GBP'000 GBP'000
========================================= ======== =========
Current:
Finance lease 35 49
Advances on invoice discounting facility 13,304 12,437
Redeemable Preference shares - 628
========================================= ======== =========
13,339 13,114
========================================= ======== =========
Group Group
2013 2012
GBP'000 GBP'000
============== ======== ========
Non-current:
Finance lease 7 40
============== ======== ========
7 40
============== ======== ========
The total minimum amount of future finance lease payments due
are as follows:
2013 2012
GBP'000 GBP'000
================================================== ======== ========
Not later than one year 35 49
Later than one year and not later than five years 7 40
================================================== ======== ========
42 89
================================================== ======== ========
The difference between the total minimum amount of future
finance lease payments and total liability are future interest
payments. An analysis of the interest rate payable on financial
liabilities and information about fair values is given in note
20.
The present value of future lease payments approximates to the
book value.
Redeemable Preference shares
In the prior year Rethink Acquisitions Limited issued 496,128
(3.6%) non-voting redeemable preference shares with a par value of
EUR1 per share in part settlement of the deferred consideration
following the acquisition of Berkley Recruitment (Group) Limited
and Berkley Recruitment Group (Asia) Pte. Limited. These shares
were redeemed on 30 June 2013.
18. Operating leasing agreements
The Group leases its properties. The terms of property leases
vary from location to location, although they all tend to be tenant
repairing with rent reviews every two to five years, and typically
have break clauses.
The total future minimum lease payments are due as follows:
Non-cancellable
operating
leases
--------------------
2013 2012
Group GBP'000 GBP'000
================================================== ========= =========
Not later than one year 257 494
Later than one year and not later than five years 247 505
================================================== ========= =========
504 999
================================================== ========= =========
19. Share-based payment
The Group operates a share option scheme for employees, being an
Enterprise Management Incentive scheme (EMI). The EMI options are
subject to the employee being employed at the vesting qualification
point. Share options were also issued outside of the EMI.
The total options vest as set out below:
31 December 2013 31 December 2012
---------------------- ----------------------
Weighted Weighted
average average
exercise exercise
price price
GBP Number GBP Number
================================= ========= =========== ========= ===========
Outstanding at beginning of year 0.093 23,125,614 0.082 30,676,500
Granted during the year 0.065 6,422,423 0.031 6,532,864
Exercised during the year 0.040 (2,375,000) 0.047 (5,446,250)
Lapsed during the year 0.098 (9,211,173) 0.097 (8,637,500)
--------------------------------- --------- ----------- --------- -----------
Outstanding at end of year 0.062 17,961,864 0.093 23,125,614
================================= ========= =========== ========= ===========
Of the total number of options outstanding at the end of the
year 1,545,000 (2012: 3,575,000) had vested and were exercisable at
the end of the year.
The exercise price of options outstanding at the end of the year
ranged between 6 pence and 6.12 pence (2012: ranged between 4 pence
and 11 pence).
Options granted during 2009 vest as follows:
50% of options 36 months after grant, with any options not
exercised within 10 years, to lapse.
50% of options 60 months after grant, with any options not
exercised within 10 years from the original grant, to lapse.
Options granted during 2010 vest as follows:
For 7,370,000 options granted during 2010:
50% of options 36 months after grant, with any options not
exercised within 10 years, to lapse.
50% of options 60 months after grant, with any options not
exercised within 10 years from the original grant, to lapse.
At the year end 2,652,500 options were still outstanding.
Options granted during 2011 vest as follows:
For 7,375,000 options granted during 2011:
50% of options 36 months after grant, with any options not
exercised within 10 years, to lapse.
50% of options 60 months after grant, with any options not
exercised within 10 years from the original grant, to lapse.
At the year end 2,495,000 options were still outstanding.
For 4,809,000 options granted during 2011:
100% of options 36 months after grant, with any options not
exercised within 10 years, to lapse.
At the year end 4,809,000 options were still outstanding.
Options granted during 2012 vest as follows:
For 4,552,864 options granted during 2012:
50% of options 36 months after grant, with any options not
exercised within 10 years, to lapse.
50% of options 48 months after grant, with any options not
exercised within 10 years from the original grant, to lapse.
At the year end 1,790,441 options were still outstanding.
Options granted during 2013 vest as follows:
For 2,182,423 options granted during 2013:
50% of options 36 months after grant, with any options not
exercised within 10 years, to lapse.
50% of options 60 months after grant, with any options not
exercised within 10 years from the original grant, to lapse.
For 300,000 options granted during 2013:
100% of options 36 months after grant, with any options not
exercised within 10 years, to lapse subject to performance
criteria.
For 3,250,000 options granted during 2013:
33% of options 12 months after grant, with any options not
exercised within 10 years, to lapse.
33% of options 24 months after grant, with any options not
exercised within 10 years, to lapse.
33% of options 36 months after grant, with any options not
exercised within 10 years, to lapse.
During the year any options outstanding considered to be
underwater, priced at less than 6.75pence were modified and
re-priced at 6.12pence
The weighted average fair value of each option granted during
the year was GBP0.119 (2012: GBP0.029).
The following information is relevant in determination of the
fair value of the options granted and modified during the year.
2013 2012
Option pricing model used Black-Scholes Black-Scholes
================================================= ============== ==============
Weighted average share price at grant date (GBP) 0.164 0.085
Weighted average exercise price (GBP) 0.06 0.09
Weighted average volatility 15% 15%
Dividend growth 1.8% 1.8%
Weighted risk free interest rate 0.5% 0.5%
================================================= ============== ==============
Volatility is based on management's best estimate having
reviewed the average weekly share price of quoted comparable
companies.
The Group did not enter into any share-based payment
transactions with parties other than employees during 2013 or
2012.
A share-based payment has been charged to the statement of
comprehensive income of GBP5k (2012: GBP5k). The weighted average
contractual life of options is 8.4 years (2012: 6.3 years).
20. Financial instruments - risk exposure and management
All financial assets are held as loans and receivables. All
financial liabilities are held at amortised cost.
The Group is exposed through its operations to one or more of
the following financial risks that arise from its use of financial
instruments.
-- Market risk
-- Foreign currency risk
-- Credit risk
-- Liquidity risk
-- Interest rate risk
Policy for managing these risks is set by the Board following
recommendations from the Chief Financial Officer. Certain risks are
managed centrally, while others are managed locally following
guidelines communicated from the Board. The policy for each risk is
described in more detail below.
Market risk
Market risk is the risk that the fair value of future cash flows
of a financial instrument will fluctuate because of changes in
interest rate (interest rate risk).
Foreign currency risk
Foreign currency risk arises due to contractors and/or clients
being based in countries whose functional currency is not the same
as the Group's primary functional currency (sterling). Transactions
involving overseas contractors and clients are exposed to currency
risk giving rise to gains or losses on translation into sterling.
Currencies the Group transacts in are US dollars, Singapore
dollars, Euros and Arab Emirate dirhams. Risk is mitigated by
ensuring wherever possible sales transactions are in the same
currency as the relevant costs of sale transactions.
As the Group mitigates foreign currency risk by offsetting gains
and losses on sales and cost of sales transactions, the impact on
the financial statements of a 1% change in the exchange rates
during the year would have been negligible (2012: negligible).
Credit risk
The Group is mainly exposed to credit risk from invoiced sales
where cash is not received at the statement of financial position
date. However, the Group reduces its risk through appropriate use
of credit insurance, when available, with a maximum insured balance
per individual claim of GBP750k, but extended to GBP2m for the
Group's largest customer (2012: GBP2m).
The Group also maintains invoice discounting facilities which
enable its receivables to be financed. At the statement of
financial position date GBP2,886k (2012: GBP5,050k) of trade
receivables was considered overdue and not impaired. Aging of the
trade receivables considered overdue is as follows:
2013 2012
Days from date of invoice GBP'000 GBP'000
============================= ======== ========
16-30 40 73
30-60 1,826 2,355
60-90 514 1,419
90-120 242 715
>120 264 488
Individually impaired amounts - -
============================= ======== ========
2,886 5,050
============================= ======== ========
Of the trade receivables considered overdue GBP2,569k (2012:
GBP3,437k) is subject to credit insurance.
Regular management review is made to assess the recoverability
of gross receivables and provision is made accordingly. No
provision has been made against trade receivables in the current
and prior year.
The Group has a wide range of customers and seeks to constantly
develop and broaden its relationships. Current active customer
numbers exceed 700. The top 10 customers of the Group account for
49% of revenue in 2013 (2012: 42%).
Trade receivables at the statement of financial position date
relating to the top 10 customers are as follows:
2013 2012
GBP'000 GBP'000
======================= ======== ========
Balance at 31 December 7,545 6,885
======================= ======== ========
Having considered concentrations of credit risk, the Group
believes risk across trade receivables to be low (and hence the
quality of debtors as high) for the following reasons:
-- The customer portfolio, whilst including a number of
individually significant accounts, largely comprises of substantial
'blue chip' companies operating in a variety of sectors where the
historic incidence of bad debt has been negligible.
-- Year end bad debt provisioning, after detailed review is negligible.
Additional analysis of our year end trade receivables is:
2013 2012
GBP'000 GBP'000
===================== ======== ========
Commercial 22,185 21,473
Public sector bodies 354 179
===================== ======== ========
22,539 21,652
===================== ======== ========
The Board do not consider there to be significant concentrations
of commercial customers with shared characteristics, other than
predominantly operating in the UK, with the only other
concentration of risk potentially being the public sector where the
Board believes credit risk to be low. The Group's total exposure to
debt risk is trade debtors of GBP22,539k (2012: GBP21,652k).
During the course of the year, the Group has continued to
develop its business in the Middle East and with it, its exposure
to a market with less rigorous payment processes. The Directors
ensure that these credit risk challenges are minimised by
maintaining careful monitoring of these clients.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and finance charges. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they
fall due.
The liquidity risk is managed centrally by the finance function.
Budgets are set locally and centrally, and are agreed by the Board
annually in advance, enabling the Group's cash flow requirements to
be anticipated. Where facilities of Group entities need to be
increased, approval of the Chief Financial Officer must be sought.
When the amount of the facility is above a certain level the
agreement of the Board is needed.
Interest rate risk
The Group's external borrowings at the statement of financial
position date comprise a short-term overdraft and an invoice
discounting facility. The Group does not seek to fix interest on
this borrowing, as the Board considers the exposure to interest
rate risk acceptable, due to the low levels of debt.
The interest profile of the Group's financial assets and
liabilities are as follows:
Invoice discounting liabilities are payable at 2.3% (2012: 1.8%)
above base rate.
There was no overdraft facility during 2013. Overdraft
facilities during 2012 were payable at 2012: 2.0% above base
rate.
If during the year base rates had been 0.5% higher, interest
charges would have been GBP69k higher (2012: GBP55k), with a
corresponding decrease in net assets.
Capital Disclosures
The Group's objectives when maintaining capital are:
-- to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
-- to provide an adequate return to shareholders commensurate with the level of risk.
The Group sets the amount of capital it requires in proportion
to risk. The Group manages its capital structure and makes
adjustments to it in the light of economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders,
issue new shares, or sell assets to reduce debt.
Total capital is categorised as follows:
2013 2012
GBP'000 GBP'000
====================== ======== ========
Share capital 117 114
Share premium account 3,238 3,145
Retained earnings 2,739 2,108
====================== ======== ========
6,094 ,5,367
====================== ======== ========
To the extent financial assets and liabilities are not carried
at fair value in the statements of financial position, book value
approximates to fair value at 31 December 2013 and 2012.
21. Financial assets and liabilities - other disclosures
Maturity of financial liabilities
The following table illustrates the contractual maturity of the
Group's financial liabilities, excluding bank borrowing and finance
leases that must be settled gross, based where relevant, on
interest rates and exchange rates prevailing at the statement of
financial position date.
At At
31 December 31 December
2013 2012
GBP'000 GBP'000
====================== ============ ============
In less than one year 11,860 10,823
====================== ============ ============
The maturity of trade and other payables is as follows:
At At
31 December 31 December
2013 2012
GBP'000 GBP'000
========================= ============ ============
Days from date of invoice
0-30 7,918 5,882
30-60 37 300
60-90 139 278
90-120 52 8
>120 63 56
========================= ============ ============
8,209 6,524
========================= ============ ============
Maturity of bank balances is shown below.
Finance facilities
In May 2013 the Group entered into a three year arrangement to
provide a new facility of GBP20m with Bank Leumi. This replaced the
existing arrangements that the Group had in place with Lloyds
Banking Group and Bank of Ireland Invoice Finance.
The Group's principal bankers are Bank Leumi, through whom there
is a main invoice discounting facility of GBP20m (2012: GBP16.85m).
The principal terms of this invoice discounting facility are that
it is an umbrella Group facility with 90% availability against
sales invoices
In 2012 the Group also has an invoice discounting facility
through Bank of Ireland Invoice Finance. This facility was EUR3m
with 85% availability against sales invoices.
Borrowing facilities
The Group had undrawn committed borrowing facilities available
at 31 December 2013. The borrowings are secured by fixed and
floating charges in favour of the Group's bankers. All bank
borrowings are on a floating rate fixed above base rate. The
carrying value of assets pledged as security at 31 December 2013 is
GBP31,429k (2012: GBP28,589k).
Subject to the above, the invoice discounting facility takes
first security over the trade receivables. Facilities available but
not utilised at statement of financial position date are as
follows:
At At
31 December 31 December
2013 2012
GBP'000 GBP'000
============================================= ============ ============
Overdraft - expiry within one year - 100
Invoice discounting - expiry within one year 6,696 6,855
============================================= ============ ============
6,696 6,955
============================================= ============ ============
Invoice discounting is available within the overall limits as
set out above but is further restricted by conditions including
total value of sales invoices raised, percentage entitlement and
specific debt exclusion.
22. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 20% (2012: 23%).
Deferred tax assets have been recognised in respect of all tax
losses and other temporary differences giving rise to deferred tax
assets because the Directors believe that it is probable that these
assets will be recovered.
Deferred tax liabilities have been recognised in respect of
temporary differences with regard to capital allowances in advance
of depreciation giving rise to deferred tax liabilities because it
is probable that these amounts will become payable.
The movements in deferred tax assets and liabilities during the
year are shown below.
Details of the deferred tax asset, amounts charged to the
consolidated statement of comprehensive income and amounts charged
to reserves are as follows:
31 December 31 December
2013 2012
Group GBP'000 GBP'000
================================================== =========== ===========
At start of year 13 11
Previously recognised deferred tax assets written
off in the year 2 2
Charge for the year (3) -
-------------------------------------------------- ----------- -----------
At end of year 12 13
================================================== =========== ===========
Deferred tax asset 62 24
Deferred tax liability (50) (11)
================================================== =========== ===========
12 13
================================================== =========== ===========
23. Share capital
At 31 December At 31 December
2013 2012
-------------------- --------------------
Authorised Number GBP'000 Number GBP'000
================================ =========== ======= =========== =======
Ordinary shares of 0.1p 145,000,000 145 145,000,000 145
================================ =========== ======= =========== =======
At 31 December At 31 December
2013 2012
-------------------- ---------------------
Issued Ordinary shares of 0.1p
each Number GBP'000 Number GBP'000
================================ ========== ======== =========== ========
At the beginning of the year 114,142,786 114 104,231,887 104
Issued during the year - - 4,464,649 5
Share options exercised 2,375,000 3 5,446,250 5
-------------------------------- ----------- ------- ----------- --------
At the end of the year 116,517,786 117 114,142,786 114
================================ =========== ======= =========== ========
At 31 December At 31 December
2013 2012
-------------------- --------------------
Allotted, issued and fully paid Number GBP'000 Number GBP'000
-------------------------------- ----------- ------- ----------- -------
Ordinary shares of 0.1p 116,517,786 117 114,142,786 114
================================ =========== ======= =========== =======
24. Reserves
Reserves consist of the following:
Share capital - Share capital records the nominal value of
shares in issue.
Share premium account - Amounts subscribed for share capital in
excess of nominal value.
Merger reserve - Amounts subscribed for share capital in excess
of nominal value on acquisition of another company.
Translation reserve - Represents the gain or loss arising on the
translation of the foreign subsidiary.
Shares to be issued - Shares for which consideration has been
received but which are not yet issued.
Retained earnings - Represents total comprehensive income less
any amounts dealt with in other reserves.
25. Related party disclosures
Details of key management's emoluments are given in note 3.
Directors are considered to be the only key management
personnel.
Options over shares in the Company held or granted to the
Directors serving at the year end were as follows:
Gain on
Options Options options
at exercised exercised
31 December in the in the
Option 2013 year year
Grant date price GBP'000
======================== ================= ======= ============= =========== ==========
R O'Callaghan 6 February 2007 4.00p - 750,000 22
and 16 December
2010 6.12p 250,000 - -
and 15 November
2011 6.12p 250,000 - -
I P Blair 30 April 2007 4.00p - 250,000 8
J Butterfield (resigned
17 January 2013) 30 April 2007 4.00p - 250,000 6
M J Bennett 30 April 2007 4.00p - 250,000 8
F Brosnan 21 June 2011 11.00p 2,404,500 - -
S Greenwood 21 June 2011 11.00p 2,404,500 - -
S Wright 17 April 2012 6.12p 2,590,364 - -
======================== ================= ======= ============= =========== ==========
7,899,364 1,500,000 44
========================================== ======= ============= =========== ==========
There are no trading transactions between the parent and
subsidiaries other than recharges of costs incurred. Amounts
outstanding at 31 December 2013 and 2012 are disclosed within notes
15 and 16.
During the year the Group incurred property lease costs of
GBP68k (2012: GBP59k) from Capel Property. This business is a
partnership between directors S Greenwood and F Brosnan, and is in
reference to two separate office property leases in Dublin and
Cork. There was no outstanding balance at 31 December 2013.
26. Discontinued operations
In November 2013, the Group sold its 100% interest in Aiimi
Limited. This is the only operation presented within the Technology
services segment. The post-tax gain on disposal of discontinued
operations was determined as follows:
31 December
2013
GBP'000
============================================== ===========
Consideration received (and net cash inflow):
Cash 220
Other* 410
---------------------------------------------- -----------
Total consideration received 630
============================================== ===========
Net assets disposed of:
Property plant and equipment 12
Intangibles 35
Trade and other receivables 894
Trade and other payables (641)
---------------------------------------------- -----------
At end of year 300
============================================== ===========
Gain on disposal of discontinued operations 330
============================================== ===========
* Included in Other Consideration are 3,600,000 ordinary shares
in the Company previously owned by the managing director of Aiimi
Limited (and previously a director of the Company) that have been
placed with a third party for the benefit of the Company. As the
Company has all the risks and rewards of the shares they have been
recognised as part consideration for the sale of Aiimi at fair
value at date of sale, being the mid-market share price of 6.38
pence. The shares have been correspondingly debited to equity
reflecting the fact they are in substance 'own shares held', but
not legally 'treasury shares'.
The post-tax gain on disposal of discontinued operations was
determined as follows:
31 December 31 December
2013 2012
Result of discontinued operation GBP'000 GBP'000
=============================================== =========== ===========
Revenue 3,113 3,942
Expenses other than finance costs (3,232) (3,927)
Finance costs (13) (13)
Tax expense - 28
Gain from selling discontinued operation after
tax 330 -
----------------------------------------------- ----------- -----------
At end of year 198 30
=============================================== =========== ===========
31 December 31 December
2013 2012
Earnings per share from discontinued operation Pence GBP'000
=============================================== =========== ===========
Basic earnings per share 0.171 0.027
Diluted earnings per share 0.171 0.027
----------------------------------------------- ----------- -----------
Statement of cash flows
The statement of cash flows includes the following amounts
relating to discontinued operations:
31 December 31 December
2013 2012
GBP'000 GBP'000
====================================== =========== ===========
Operating activities 241 102
Investing activities 283 (69)
Financing activities 13 -
-------------------------------------- ----------- -----------
Net cash from discontinued operations 537 33
====================================== =========== ===========
27. Ultimate controlling party
The Directors do not consider any one party to exercise ultimate
control over the Group.
28. Status of Financial Information
The financial information set out above does not comprise the
Company's statutory accounts for the periods ended 31 December 2013
or 31 December 2012. Statutory accounts for 31 December 2012 have
been delivered to the Registrar of Companies and those for 31
December 2013 will be delivered following the Company's Annual
General Meeting. The auditors have reported on those accounts;
their report was unqualified, did not include references to any
matters to which the auditors drew attention by way of emphasis of
matter without qualifying their report and did not contain
statements under section 498(2) and (3) of the Companies Act 2006
in respect of the accounts for 2013 or 2012.
29. Publication of announcement and report and accounts
A copy of this announcement will be available at the Company's
registered office (The Crane Building, 22 Lavington Street, London,
SE1 0NZ) 14 days from the date of this announcement and on its
website, www.therethinkgroupplc.com
This announcement is not being sent to shareholders. The Annual
Report will be posted to shareholders shortly and will be made
available on the Group's website.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR IRMRTMBAMBAI
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