TIDMNGH
Network Group Holdings plc
(the "Group", "Company")
Full year results
The Board of Network Group Holdings plc announces that it has today posted the
Annual Report and Accounts for the year ended 30 November 2008 to shareholders,
and it is also available on the Company's website. Copies of the Annual Report
and Accounts will be available for collection from the Company's Registered
Office at the address below:
Network Group Holdings plc
Meriden Hall
Main Road
Meriden
Warwickshire CV7 7PT
Telephone: +44 (0) 1676 525300
www.networkgroupholdings.co.uk
For further information please contact:
Network Group Holdings plc 01676 525 000
David J Waller, Chairman
www.networkgroupholdings.co.uk
Nominated Adviser 020 7492 4777
Dowgate Capital Advisers Limited
Tony Rawlinson, Chairman
CHAIRMAN'S REPORT
Introduction
It gives me great pleasure to deliver this statement following my appointment
as Chairman of the Group. I would like to thank my predecessor, Christopher
Ross, for his contribution to the Group.
The Group has made steady progress since flotation in September 2007, with the
broadening of its specialist recruitment portfolio. Two specialist recruitment
acquisitions were made during the year, R&L Executive Network Limited,
specialising in the placement of sales and marketing personnel into the fast
moving consumer goods market, and Cactus Search Limited, which places
individuals into senior positions in the call centre market.
In the case of both of these acquisitions a 51% equity stake has been acquired
in line with the Group's partnering principles. In common with the rest of our
recruitment portfolio, the business leaders who hold the minority equity stake
are, at various stages in the future, able to convert their minority
shareholding into shares in Network Group Holdings Plc ("NGH") based on a
predetermined formula.
During the year, four of our business leaders converted an element of their
minority shareholdings into shares in NGH. This resulted in the issue of 0.65m
new shares in NGH at a total value of GBP0.3m.
During the year, the Group made a significant acquisition and subsequent
disposal of Pertemps People Development Group Limited ("PPDG"). The financial
benefit to the Group of the sale of PPDG was as follows:
* The original acquisition contained an anti-embarrassment clause providing
that in the event of a sale of PPDG within a two year period the proceeds
of sale would be passed through to the original vendors and the shares
issued as part consideration bought back by NGH. In consideration for NGH
consenting to a sale within the two year period, NGH has received a sum of
GBP5.1m in cash. Set against this amount should be considered the sum of GBP
1.6m that was payable by NGH as part of the original consideration on the
acquisition, repaid prior to the year end, and the costs of disposal.
* The accounting profit for the disposal of PPDG is GBP3.2m before the costs
associated with the sale.
* At the year end, the proceeds received by the Group, which are required to
be passed through to the original vendors under the anti-embarrassment
clause, are held in the balance sheet, together with a corresponding
liability. Following the balance sheet date in December 2008 the proceeds
were distributed to the original vendors by way of a buy-back of 39.9m
shares in NGH and the creation of an Employee Benefit Trust, which also
acquired 6.5m shares in NGH.
Financial results
My predecessor's comments in the 2008 half yearly report commented on the
difficulties with accounting comparatives for a group that was re-structured in
order to facilitate its admission to AIM in September 2007. The full year
results ended 30 November 2008 represent the first period of reported trading
where there has been no reorganisation. However, we need to move away from
reporting pro-forma numbers and the comparatives that are included in the
financial statements are those required by the regulations. The comparatives
have not, however, been referred to in this statement or that of the Chief
Executive in the context of a comparison as the Board believes it provides no
benefit to do so.
The comparatives included within these financial statements have been re-stated
to reflect the impact of the subsidiary shareholder incentive schemes. The
shareholder incentive schemes are fundamental to the partnering principles upon
which NGH was founded and the view of the Board is that any equity conversions
will benefit NGH, with it being highly probable that such conversions will be
discharged for NGH equity shares (with the exception of GBP316,000).
The presentation of the Income Statement has been amended to present the
results before the deduction of "other items". Other items represent the charge
to the income statement in respect of the movement in the liability associated
with the equity conversion mechanism described above, and the charge to the
income statement in respect of the movement in the mark-to-market value of the
Group's interest collar. The Board views these charges to the income statement
as non-operational accounting entries and therefore has chosen to present the
income statement both before and after the deduction of these figures.
Since the comparatives represent the figures for the eleven months to 30
November 2007, and includes earnings per share it is worth re-iterating the
comments made by the previous chairman in his statement for the 2007 annual
review concerning earnings per share. The earnings per share for the eleven
months to 30 November 2007, as re-stated, are 5.5p, basic and 5.4p, diluted, in
relation to continuing activities. However, the results for that period include
exceptional profits from the disposal of subsidiary and associated undertakings
totalling GBP6.3m. Those exceptional profits were not shown as discontinued
activities since they relate to the disposal of recruitment businesses
(principally related to the pre-float re-construction), and recruitment
continues as one of our two core activities.
The financial statements show the results for the year ended 30 November 2008
split by continuing and discontinued operations. The discontinued operations
represent the profits generated by PPDG during the period of ownership and the
profit generated by the disposal of PPDG. Whilst we will continue to make
acquisitions of specialist recruitment businesses on the shared equity
principles referred to above, I believe that the results for the year ended 30
November 2008 provide a base period for which meaningful like for like
comparisons in underlying earnings can be made in the future.
A summary of the financial performance for the year ended 30 November 2008 is
set out as follows:
Revenue* GBP61.6m
Operating Profit* GBP1.1m
Profit Before Tax* ^ GBP0.5m
Profit from Discontinued Operations GBP2.1m
* The above amounts relate to the continuing operations of NGH.
^ Profit before tax is stated before other items, being the movement in value
of the equity conversion mechanism liabilities, as described above, and the
movement in value of the Group's interest rate collar.
Outlook
We must remain cautious in our outlook in these challenging economic conditions
which make it very difficult to predict the current year.
NGH has addressed its overhead structure, significantly reducing its cost base
and continues to continually monitor the costs of the Group.
We believe that the Group's strategy of a bias towards government funded
revenues, which the Board expects to be more resilient in these challenging
economic times, together with a diverse portfolio of business sectors, leaves
the Group in a stronger position than many of our competitors.
Board changes
During the year, the Board was strengthened by the appointment of Tim Watts, as
Chief Executive Officer, with Jon Smith moving into the role of Chief Operating
Officer. Paul Davis, our Financial Controller, Nigel Dudley, our Company
Secretary, and Spencer Jones, Head of Tax and Transactions were appointed to
the Board during the year. Paul Doona left the role of Finance Director during
the year.
John James joined the Board as non-executive director during the year and since
the balance sheet date I have been appointed as non-executive chairman,
replacing Christopher Ross. Barrie Clark, one of the previous non-executive
directors, also left the Board in September.
Colin Birchall, the CEO of PPDG, joined the Board following the acquisition of
PPDG and subsequently left the Board following the sale of PPDG.
I would like to thank all Board members for their contributions during what was
a very busy year.
The Group moves forward with a Board of directors that possess a significant
number of years of recruitment and public company experience.
Finally, I would like to thank all of our business leaders and staff for their
contributions over the last year and I look forward to working with them in the
future.
D J Waller
Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
This is my first annual report since my appointment as Chief Executive Officer
of the Group and it gives me great pleasure to deliver my statement.
I have known many of our business leaders for a considerable period of time and
I am privileged to once again be working alongside them in the development of
the Group.
Financial and Operational Review
The financial year ended 30 November 2008 finished slightly below our
expectations as the difficult economic conditions hit towards the end of the
year. I set out below the revenue and operating profit for our two divisions.
Further detail is provided for the individual sectors of our recruitment
division.
Revenue Operating
profit
GBP000s % GBP000s
Professional recruitment* 8,522 13.8 948
Technical recruitment* 29,170 47.3 393
Public sector recruitment* 17,104 27.8 180
Central recruitment function* 359 0.6 (319)
--- -- ---
Recruitment total* 55,155 89.5 1,202
--- -- ---
Business outsourcing* 6,482 10.5 1,114
Central group costs* - - (845)
--- -- ---
Total* 61,637 100.0 1,471
--- -- ---
* The above amounts relate to the continuing operations of NGH.
Note that the operating profit of GBP1,471,000 shown above excludes amortisation
of goodwill and intangible assets of GBP99,000, share based payments of GBP49,000
and loss on partial disposal of subsidiaries of GBP220,000. Operating profit
shown in the income statement is GBP1,103,000.
Professional Recruitment Sector
Revenue for the year ended 30 November 2008 was GBP8.5m representing 15.5% of the
recruitment division revenue and 13.8% of the total revenue. The operating
profit for the year was GBP0.9m representing 40.9% of total operating profit,
before central group costs.
The sales and marketing and health and safety market sectors performed well
during the year. Another strong performer was Cactus, referred to in the
Chairman's statement as one of the acquisitions made during the year. Both
acquisitions made during the year have integrated well into the Group.
The slow down in the property market affected demand for property lawyers and
towards the end of the year, the economic conditions affected demand for
corporate and commercial lawyers. This caused a below expectation performance
from our legal recruitment business.
Technical Recruitment Sector
Revenue for the year ended 30 November 2008 was GBP29.2m representing 52.9% of
the recruitment division revenue and 47.3% of the total revenue. The operating
profit for the year was GBP0.4m representing 17.0% of total operating profit,
before central group costs.
The businesses within the technical recruitment sector operate in diverse
markets, with a strong bias towards temporary and contract recruitment. The
businesses within the rail and IT sectors performed well during 2008. However,
the professional construction market was more challenging with reduced demand
in the housing industry and major infrastructure projects put on hold as a
result of the economic conditions.
Public Sector Recruitment
Revenue for the year ended 30 November 2008 was GBP17.1m representing 31.0% of
the recruitment division revenue and 27.8% of the total revenue. The operating
profit for the year was GBP0.2m representing 7.8% of total operating profit,
before central group costs.
Profitability was lower than expected in this sector. This was due in part to
the continued reinvestment into the Healthcare operation which has seen
significant growth in revenue levels. In addition, the profits of the Education
business were reduced as a result of the start up costs associated with a new
branch opening. The market proved highly competitive and a decision was made
later in the year to close the new branch.
This sector benefits from some longer term government funded contracts which
has been the focus of the Group.
Business Process Outsourcing
Revenue for the year ended 30 November 2008 was GBP6.5m representing 10.5% of the
total revenue. The operating profit for the year was GBP1.1m representing 48.1%
of total operating profit, before central group costs.
The return on the business process outsourcing division was good, largely due
to the temporary recruitment revenues of its major customer. The number of new
external customers increased with a good number of contract wins during the
year.
Pertemps People Development Group ("PPDG")
As described in the Chairman's statement, the Group acquired and disposed of
PPDG during the year. Whilst the benefits to the Group of those transactions
have also been described in the Chairman's statement, I would like to emphasise
the partnering principles that underpin the strategy of the Group.
The business that became PPDG was founded in 1999 by Colin Birchall and his
management team. Upon the disposal last year, some 50 employees and management
benefited as shareholders of PPDG, rolling over their interests into the
acquirer. It is these principles, under which the Group operates, which we
believe will continue to attract businesses to join the Group.
Balance Sheet
The consolidated balance sheet shows shareholders' funds of GBP0.7m, an increase
of GBP0.8m from the prior balance sheet date.
The balance sheet includes liabilities within current and non-current
liabilities totalling GBP4.9m in respect of the equity conversion mechanism for
the subsidiary minority shareholders. The view of the Board is that these
equity conversion mechanisms will benefit NGH, with it being highly probable
that these liabilities will be settled in equity shares and not in cash (with
the exception of GBP316,000).
Cashflow & Funding
The consolidated cash flow statement shows a marginal increase in cash and cash
equivalents from GBP1.60m to GBP1.61m during the year. The position was helped by
the net cash gain of GBP2.8m during the year from the disposal of PPDG. A further
GBP0.5m of costs and GBP0.6m of corporation tax is payable in connection with the
disposal following the year end.
Following the disposal of PPDG, the Group revised its rolling-credit facility
to a GBP12.5m limit which expires in September 2010. At the balance sheet date,
the Group had net debt of GBP8.4m.
The Group meets its day to day working capital requirements through a rolling
credit facility which is due for renewal in September 2010. There are financial
covenants attached to the rolling credit facility linked to the profitability
of the Group.
The current economic conditions create uncertainty over the level of demand for
certain services provided by the Group. Consequently, during the current
economic conditions, there is uncertainty over the level of profitability of
the Group.
The Group's forecasts and projections, taking account of reasonably possible
changes in trading performance, and the measures reasonably available to the
Group, indicate that the Group should be able to operate within the current
facility, net debt to EBITDA and interest cover covenants.
After making enquiries, the directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the annual report and accounts.
Ongoing strategy
The Group remains focussed on the growth of its specialist recruitment
businesses, organically, by acquisition, and to a lesser extent by start up. We
anticipate that the current economic conditions will provide further
opportunities from growing businesses that are attracted by our equity sharing
principles.
We also expect there to be opportunities within the outsourcing markets as
companies seek to reduce costs in the current economic conditions.
Finally, I would like to extend my thanks to all the employees and partners of
NGH for their continued efforts in what will undoubtedly be a challenging year.
T Watts
Chief Executive Officer
Consolidated Income Statement for the year ended 30 November 2008
Year ended 30 November 2008 11m ended 30 November 2007
Before Other items Total Before Other Total
other items * other items items *
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
CONTINUING
OPERATIONS
Revenue 61,637 - 61,637 51,660 - 51,660
Cost of sales (37,683) - (37,683) (29,559) - (29,559)
----------- ----------- --------- ----------- ---------- ----------
GROSS PROFIT 23,954 - 23,954 22,101 - 22,101
Administrative (22,483) - (22,483) (23,592) - (23,592)
expenses
Impairment of - - - (39) - (39)
goodwill arising on
associates
(Loss) / profit on (220) - (220) 252 - 252
partial disposal of
subsidiaries
Profit on disposal - - - 4,980 - 4,980
of subsidiary
undertakings
Profit on disposal - - - 1,046 - 1,046
of associate
undertakings
Amortisation of (99) - (99) (167) - (167)
goodwill and
intangible assets
Share based payment (49) - (49) (80) - (80)
costs
----------- ----------- --------- ----------- ---------- ----------
Total (22,851) - (22,851) (17,600) - (17,600)
administrative
expenses
Share of results of - - - 72 - 72
associates
OPERATING PROFIT 1,103 - 1,103 4,573 - 4,573
Investment revenues 73 - 73 46 - 46
Finance expenses (696) (359) (1,055) (993) - (993)
----------- ----------- --------- ----------- ---------- ----------
PROFIT BEFORE TAX 480 (359) 121 3,626 - 3,626
Tax on profit on (385) - (385) (288) - (288)
ordinary activities
----------- ----------- --------- ----------- ---------- ----------
PROFIT / (LOSS) FOR 95 (359) (264) 3,338 - 3,338
THE YEAR / PERIOD
FROM CONTINUING
OPERATIONS
DISCONTINUED
OPERATIONS
Profit for the year 2,143 - 2,143 3,360 - 3,360
/ period from
discontinued
operations
----------- ----------- --------- ----------- ---------- ----------
PROFIT FOR THE YEAR 2,238 (359) 1,879 6,698 - 6,698
/ PERIOD
----- ----- ----- ----- ----- -----
Attributable to:
Equity holders of 1,339 (359) 980 6,321 - 6,321
the parent
Minority interest 899 - 899 377 - 377
----------- ----------- --------- ----------- ---------- ----------
2,238 (359) 1,879 6,698 - 6,698
----- ----- ----- ----- ----- -----
* Other items includes the movement in the value of the equity conversion
mechanism and the movement in the mark to market valuation of the Group's
interest rate collar.
(Loss)/Earnings per share
Year ended 30 November 11m ended 30 November 2007
2008
Before Other Total Before Other Total
other items other items
items items
p p p p p p
From continuing
operations
Basic (0.4) (0.4) (0.8) 5.5 - 5.5
Diluted (0.4) (0.4) (0.8) 5.4 - 5.4
From continuing and
discontinued
operations
Basic 1.5 (0.4) 1.1 11.6 - 11.6
Diluted 1.5 (0.4) 1.1 11.5 - 11.5
Consolidated statements of changes in equity
Share Share Share based Merger Retained Anti-embarrassment Total
capital premium payment reserve earnings clause reserve
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2007 54 - - 502 (7,171) - (6,615)
New shares issued 3 912 - - - - 915
Expenses of issue - (784) - - - - (784)
of shares
Share based - - 80 - - - 80
payment costs
Profit for period - - - - 6,321 - 6,321
Disposal of - - - 241 (241) - -
subsidiary
----------- ----------- --------- ----------- ---------- ---------- ----------
At 30 November 57 128 80 743 (1,091) - (83)
2007
New shares issued 48 16,820 - - - - 16,868
Share based - - * 299 - - - 299
payment costs
Lapsed share - - * (292) - 292 - -
options
Profit for year - - - - 980 - 980
Disposal of - - - 258 (258) - -
associate
Revaluation of - - - - 233 - 233
equity conversion
mechanism
Anti-embarrassment - - - - - (17,607) (17,607)
clause
----------- ----------- --------- ----------- ---------- ---------- ----------
At 30 November 105 16,948 87 1,001 156 (17,607) 690
2008
----- ----- ----- ----- ----- ----- -----
* Share based payment costs above includes GBP250,000 relating to discontinued
activities.
Consolidated Balance Sheet at 30 November 2008
(restated)
2008 2007
GBP000 GBP000
ASSETS
NON-CURRENT ASSETS
Goodwill 3,556 2,305
Other intangible assets 157 148
Property, plant and equipment 569 656
Interests in associates - -
Deferred tax asset - 70
------ ------
4,282 3,179
CURRENT ASSETS
Short term investments 6,852 -
Trade and other receivables 13,986 12,758
Cash held in Escrow 10,512 -
Cash and cash equivalents 1,610 1,603
------ ------
32,960 14,361
------ ------
TOTAL ASSETS 37,242 17,540
------ ------
LIABILITIES & EQUITY
CURRENT LIABILITIES
Trade and other payables 7,952 7,379
Current tax liabilities 727 405
Bank overdrafts and loans 14 30
Financial liabilities 2,293 2,115
Anti-embarrassment clause liability 17,364 -
------ ------
28,350 9,929
NON-CURRENT LIABILITIES
Bank loans 10,025 9,539
Financial liabilities 2,577 1,884
Deferred tax 87 -
------ ------
12,689 11,423
EQUITY
Share capital 105 57
Share premium account 16,948 128
Share based payment reserve 87 80
Merger reserve 1,001 743
Retained earnings / (deficit) 156 (1,091)
Anti-embarrassment clause reserve (17,607) -
------ ------
690 (83)
Minority interest 383 270
Other reserve (4,870) (3,999)
------ ------
Total minority interest (4,487) (3,729)
------ ------
TOTAL LIABILITIES & EQUITY 37,242 17,540
------ ------
Consolidated statement of cash flows for the year ended 30 November 2008
Year ended 30 11 months ended
November 30 November
2008 2007
Notes GBP000 GBP000
NET CASH (USED IN) / FROM OPERATING 3 (824) 6,817
ACTIVITIES
INVESTING ACTIVITIES
Interest received 50 61
Dividends received from assets held 674 61
for resale / associates
Proceeds on disposal of assets held 3,677 112
for resale
Proceeds on disposal of investment in - 1,000
associate undertakings
Proceeds from disposal of subsidiary - 1,864
undertakings
Proceeds on disposal of property, 6 16
plant and equipment
Purchases of property, plant and (279) (439)
equipment
Acquisition of subsidiary (1,790) (378)
undertakings
Investment in associate undertaking - (50)
------ ------
NET CASH FROM INVESTING ACTIVITIES 2,338 2,247
------ ------
FINANCING ACTIVITIES
Dividends paid to minority interests (377) (240)
Repayment of obligations under - (16)
finance leases
Repayments of borrowings (1,614) (3,063)
Proceeds on issue of shares - 915
New bank loans raised 500 9,930
Decrease in bank overdrafts (16) (15,541)
------ ------
NET CASH USED IN FINANCING ACTIVITIES (1,507) (8,015)
------ ------
NET INCREASE IN CASH AND CASH 7 1,049
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 1,603 554
BEGINNING OF YEAR
------ ------
CASH AND CASH EQUIVALENTS AT END OF 1,610 1,603
YEAR
------ ------
Notes
1. Significant Accounting Policies
Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs). The financial statements have also been
prepared in accordance with IFRSs adopted by the European Union and therefore
the Group financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost basis.
The Group meets its day to day working capital requirements through a rolling
credit facility which is due for renewal in September 2010. There are financial
covenants attached to the rolling credit facility linked to the profitability
of the Group.
The current economic conditions create uncertainty over the level of demand for
certain services provided by the Group. Consequently, during the current
economic conditions, there is uncertainty over the level of profitability of
the Group.
The Group's forecasts and projections, taking account of reasonably possible
changes in trading performance, and the measures reasonably available to the
Group, indicate that the Group should be able to operate within the current
facility, net debt to EBITDA and interest cover covenants.
After making enquiries, the directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the annual report and accounts.
The presentation of the Income Statement has been amended to present the
results before the deduction of "other items". Other items represent the charge
to the income statement in respect of the movement in the liability associated
with the equity conversion mechanism described below, and the charge to the
income statement in respect of the movement in the mark-to-market value of the
Group's interest collar.
The presentation of the balance sheet has been changed, to present liabilities
and equity in total, as the directors believe this presentation is more
appropriate to the business.
Basis of Consolidation
The consolidated financial information includes the results, cash flows and
assets and liabilities of Network Group Holdings Plc and the entities under its
control (its subsidiaries). Control is achieved where Network Group Holdings
Plc has the power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities.
Minority interests in the net assets of consolidated subsidiaries are
identified separately from the Network Group Holdings Plc equity therein.
Minority interests consist of the amount of those interests at the date of the
original business combination and the minority's share of changes in equity
since the date of the combination. Losses applicable to the minority in excess
of the minority's interest in the subsidiary's equity are allocated against the
interests of Network Group Holdings Plc.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal. Adjustments are made,
where necessary, to the financial statements of subsidiaries to bring their
accounting policies into line with those of Network Group Holdings Plc. All
Intra-Group transactions, balances, income and expenses are eliminated on
consolidation.
Anti-embarrassment clause
As part of the acquisition of Pertemps People Development Group Limited
("PPDG") in the year, an anti-embarrassment clause existed which enabled the
original vendor shareholders of PPDG to receive a significant element of the
consideration from the disposal in exchange for the buy-back of the 46,428,585
Network Group Holdings Plc shares issued on the acquisition. Following the
disposal of PPDG, a liability was recognised in the balance sheet with a
corresponding debit to the anti-embarrassment clause reserve, within
shareholders' funds. When the anti-embarrassment clause liability is
discharged, the anti-embarrassment clause reserve is transferred to the
relevant reserves within shareholders' funds.
Equity Conversion Mechanism
The Group operates an equity conversion mechanism whereby the minority
shareholders of subsidiary undertakings are able to transfer their minority
shareholdings to Network Group Holdings Plc ("NGH") in exchange for equity NGH
shares or cash. The choice of consideration is at the discretion of the
directors of NGH. It is the current intention of the directors to discharge the
liability in equity shares and not by way of payment in cash, with the
exception of GBP316,000.
The accounting treatment follows the application of IAS 39: Financial
Instruments: Recognition and Measurement. Upon the creation of a new equity
conversion mechanism, liabilities are recognised within current and non-current
liabilities, with a corresponding debit to the other reserve within minority
interests. The financial liability arising from the Group's equity conversion
mechanism is calculated based on the latest actual profit figures representing
the directors' best estimate of the liability available for each relevant
subsidiary undertaking discounted back to present value for those options which
cannot be exercised within the next 12 months. At each balance sheet date the
fair value is recalculated based on the latest actual figures available, with
any movement in the liability being recognised within finance expenses in the
income statement. The movement in the income statement is then transferred from
retained earnings to the other reserve within minority interests.
Upon exercise of the equity conversion mechanism, an element of the liability
is discharged, and an element of the other reserve is transferred as part of
the acquisition.
2. (Loss) / earnings per share
From continuing and discontinued operations
The calculation of the basic and diluted (loss) / earnings per share is based
on the following data:
Earnings
Year 11m ended
ended 30 30
November November
2008 2007
Before Other Total Before
other items other
items items &
total
GBP000 GBP000 GBP000 GBP000
Earnings for the purposes of basic 1,339 (359) 980 6,321
(loss) / earnings per share being net
profit attributable to equity holders
of the parent and Earnings for the
purposes of diluted (loss) / earnings
per share
------ ------ ------ ------
Number of shares
Year ended 30 11m ended 30
November 2008 November
2007
000 000
Weighted average number of ordinary shares for the 89,048 54,376
purposes of basic (loss) / earnings per share
Effect of dilutive potential ordinary shares:
Share options 405 464
------ ------
Weighted average number of ordinary shares for the 89,453 54,840
purposes of diluted (loss) / earnings per share
------ ------
From continuing operations
Year 11m ended
ended 30 30
November November
2008 2007
Before Other Total Before
other items other
items items &
total
GBP000 GBP000 GBP000 GBP000
Net profit attributable to equity 1,339 (359) 980 6,321
holders of the parent
Adjustments to exclude profit for year (1,697) - (1,697) (3,349)
/ period from discontinued operations
------ ------ ------ ------
(Loss) / earnings from continuing (358) (359) (717) 2,972
operations for the purpose of basic
(loss) / earnings per share excluding
discontinued operations and (Loss) /
earnings from continuing operations
for the purpose of dilutive (loss) /
earnings per share excluding
discontinued operations
------ ------ ------ ------
The profit for the year / period from discontinued operations of GBP2,143,000
(2007: GBP3,360,000) has been adjusted for minority interests of GBP446,000 (2007:
GBP11,000) resulting in the amounts above.
The denominators used are the same as those detailed above for both basic and
diluted earnings per share from continuing and discontinued operations.
From discontinued operations
Year ended 30 November 2008 11 months ended 30 November
2007
Before Other Total Before Other Total
other items other items
items items
Basic 1.9p - 1.9p 6.1p - 6.1p
----- ----- ----- ----- ----- -----
Diluted 1.9p - 1.9p 6.1p - 6.1p
----- ----- ----- ----- ----- -----
3. Notes to the consolidated cash flow statement
Year ended 30 11m ended 30
November 2008 November 2007
GBP000 GBP000
Operating activities
Operating profit from continuing operations 1,103 4,573
Operating profit from discontinued operations - 3,345
----------- -----------
Total operating profit 1,103 7,918
Adjusted for:
Share of profit in associates including - (33)
goodwill impairment
Depreciation of property, plant and equipment 388 378
Impairment of goodwill 18 -
Amortisation of intangible assets 81 217
Loss / (profit) on partial disposal of 220 (252)
subsidiary undertakings
Profit on disposal of subsidiary undertakings - (4,980)
Profit on disposal of associate undertakings - (1,046)
Profit on disposal of discontinued operations - (3,487)
Share based payment costs 49 80
----------- -----------
Operating cash flows before movements in 1,859 (1,205)
working capital
(Increase) / decrease in receivables (1,341) 5,334
Increase in payables 17 3,832
----------- -----------
Cash from operations 535 7,961
Corporation tax paid (625) (118)
Interest paid (734) (1,026)
----------- -----------
Net cash (used in) / from operating activities (824) 6,817
----------- -----------
4. Net assets / (liabilities)
At the balance sheet date, the net liabilities of the Group were GBP3,797,000
(2007 restated: GBP3,812,000).
The net liabilities at the balance sheet date are impacted by a total liability
of GBP4,870,000 (2007 restated: GBP3,999,000) in respect of the equity conversion
mechanism. The directors currently expect this liability to be discharged by
way of equity share capital, and not through the payment of cash, with the
exception of GBP316,000. Therefore, the directors believe it is appropriate to
also present the net assets / (liabilities) excluding the liability for the
equity conversion mechanism. The net assets / (liabilities) at the balance
sheet date, excluding the liability for the equity conversion mechanism were GBP
1,073,000 (2007 restated: GBP187,000).
If full conversion of all minority subsidiary shareholdings subject to the
arrangements into equity shares of Network Group Holdings Plc had taken place
at the balance sheet date, net assets of the Group would have increased by a
minimum of GBP4,870,000 (2007 restated: GBP3,999,000).
5. Post balance sheet events
At the balance sheet date, the Company was in the process of discharging the
anti-embarrassment liability, created by the disposal of Pertemps People
Development Group Limited ("PPDG"). The following steps were being taken.
On 31 October 2008, the Group published a circular to its shareholders seeking
permission to reduce its share premium account by GBP16,948,000. At an EGM on 17
November 2008 the resolution was passed by the shareholders. The reduction in
share premium became effective on 11 December 2008 following a court hearing on
10 December 2008.
On 28 November 2008, the Group published another circular to its shareholders
seeking permission to buy-back and cancel 39,928,585 of its shares and to
purchase 6,500,000 of its shares from the original shareholders of PPDG. The
purchase of the 6,500,000 shares would be made by a newly formed Employee
Benefit Trust ("EBT"), which is a subsidiary of the Group. At an EGM on 15
December 2008 the resolutions were passed and on 16 December 2008 the
transactions were completed, discharging the obligations of the
anti-embarrassment clause. The consideration for the buy-back of shares was GBP
9,521,000 of cash plus shares in the acquirer with a deemed value of GBP
5,659,000, a total value of GBP15,180,000. A loan of GBP921,000 in cash plus shares
in the acquirer with a deemed value of GBP1,506,000, a total value of GBP2,427,000,
was provided to the EBT for the purchase of 6,500,000 shares. The shares
purchased by the EBT have had their dividend rights waived.
The transactions described above involved certain of the directors of the
Company.
Following the transactions described above the issued share capital of Network
Group Holdings Plc was 65,537,284 ordinary shares of 0.1p each.
If the transactions described above had been completed at the balance sheet
date, the balance sheet would have looked as follows:
GBP000
Non-current assets 4,282
Current assets 15,596
------
TOTAL ASSETS 19,878
------
Current liabilities 10,986
Non-current liabilities 12,689
------
23,675
EQUITY
Share capital 65
Share capital redemption reserve 40
Share premium -
Share based payment reserve 87
Merger reserve 1,001
Special reserve 363
Investment in own shares (2,427)
Retained earnings 1,561
Anti-embarrassment clause reserve -
------
690
Minority interest 383
Other reserve (4,870)
------
TOTAL LIABILITIES AND EQUITY 19,878
------
Following the transactions described above the issued share capital of Network
Group Holdings Plc was 65,537,284 ordinary shares of 0.1p each, however, the
6,500,000 shares held by the EBT are not considered in the earnings per share
calculation. If the number of shares to be used for the earnings per share
calculation had been 59,037,284, for the entire year, the Group's loss per
share for continuing operations before other items would have been 0.6 pence
per share and the loss per share for continuing operations after other items
would have been 1.2 pence per share.
END
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