RNS Number:6421J
Reed Executive PLC
04 April 2003
4th April 2003
Reed Executive PLC
("Reed Executive" or "the Group")
Preliminary results for the 52 weeks ended
27th December 2002
2002 2001 % Change
Turnover from continuing operations #349.4m #373.7m (6.5%)
Operating profit from continuing operations #7.6m #14.0m (45.7%)
Group profit before tax* #8.1m #14.2m (43.0%)
Earnings per share 11.4p 22.7p (49.8%)
Dividend per share** 2.0p 6.0p -
* Profit before tax of #8.1m, in spite of challenging trading
conditions
* Earnings per share 11.4p
* Successfully implemented electronic "end to end" recruitment
solutions
* Launched innovative new partnership with Cheshire and Lancashire
Education Authorities
* Increased applications to reed.co.uk by 103% to 3.3 million and job
numbers up to 120,000
James Reed, Chief Executive, Reed Executive PLC, commented:
"The year 2002 was a difficult trading year for the group as I indicated at the
time of the interims, and this is reflected in the full year results. We
experienced difficult market conditions during the 52 weeks to 27th December
2002, and the current trading environment shows no indication of short term
recovery. In the circumstances, the Board is managing the business carefully
with attention to costs, risks and opportunities to deal with these difficult
market conditions. We continue to invest in services and introduce new
developments and innovations in anticipation of an eventual upturn in the
recruitment business."
- ends -
For further information, please contact:
Reed Executive PLC
James Reed, Chief Executive 020 7313 7450
Derek Beal, Finance Director www.reed.co.uk
*2001 figures are prior to demerger of the Reed Health Group and include
contributions from that business.
**It was announced today that the boards of James Reed & Partners plc and the
Company had reached agreement on the terms of recommended offers to be made on
behalf of James Reed & Partners plc for the whole of the issued and to be issued
share capital of the Company. If the offers do not become or are not declared
wholly unconditional, it is the Board's current intention to declare a dividend
of 2p per share for the 52 weeks ended 27th December 2002.
Chief Executive's Report
The year 2002 was a difficult trading year for the group as I indicated at the
time of the interims, and this is reflected in the full year results. We
experienced difficult market conditions during the 52 weeks to 27th December
2002, and the current trading environment shows no indication of short term
recovery. In the circumstances, the Board is managing the business carefully
with attention to costs, risks and opportunities to deal with these difficult
market conditions. We continue to invest in services and introduce new
developments and innovations in anticipation of an eventual upturn in the
recruitment business.
Financial Results
For the 52 weeks to 27th December 2002, turnover from continuing activities was
#349.4 million compared with #373.7 million in the previous year. Profit before
tax was #8.1 million, down 43% (2001: #14.2m) and earnings per share were 11.4p
(2001: 22.7p).
Despite this disappointing trading performance we have managed the business
carefully and have further strengthened the balance sheet. Our on-going
financial management has resulted in a continued improvement in our debtor
position. We ended the year with a healthy cash balance.
Overall, the year 2002 was characterised by increased pressure on margins in all
of our markets and by a change in our business mix. Our permanent recruitment
business has been particularly affected by the economic slowdown and permanent
revenues declined by 18% during the year. Obviously, this has had a direct
impact on profitability.
Dividends
An interim dividend of 2p per share was paid during the period (2001: 3p). It
was announced today that the boards of James Reed & Partners plc and the Company
had reached agreement on the terms of recommended offers to be made on behalf of
James Reed & Partners plc for the whole of the issued and to be issued share
capital of the Company. If the offers do not become or are not declared wholly
unconditional, it is the Board's current intention to declare a dividend of 2p
per share for the 52 weeks ended 27th December 2002.
Operational Review
Difficult trading conditions offer the more innovative recruitment specialists
an opportunity to develop and emphasise their unique points of difference. This
was certainly the case for Reed Executive in 2002. Our group achieved a number
of significant advances during the year and these will certainly enhance our
service offering and as a result strengthen our competitive position.
Reed Solutions, the largest of our operating companies, which provides temporary
and permanent recruitment services through the Reed Employment network, launched
its managed agency service successfully during the year. This is now delivered
through Reed Managed Services to a growing number of large clients who are
benefiting from our streamlined model of service delivery. In addition, we are
now successfully delivering 'end-to-end' electronic recruitment services and
this is achieving significant savings in administrative time for those 'early
adopter' clients that are ready to make use of it. This combination of our
managed agency and electronic solutions should be compelling for clients in both
the private and public sectors that have large and complex recruitment needs and
I am hopeful that this will result in our further increasing our market share.
Reed Personnel Services, which provides professional recruitment services in the
areas of accountancy, insurance and IT through Reed Accountancy, Reed Insurance
and Reed Technology is also now successfully delivering a full managed agency
service and is expanding into new recruitment niches. Of the three core areas,
it will come as no surprise that Technology is the one that has been hardest hit
by the economic slowdown. Insurance has continued to perform reasonably well,
and in Accountancy a modest growth in temporary volumes went some way towards
offsetting business lost on the permanent side. Three new areas were
established during the year and these are now being developed. The new areas
are in engineering, legal and scientific recruitment and each of these
specialist recruitment businesses will be seeking to capitalise on the database
of candidates that is now available through reed.co.uk.
Reed in Partnership, which provides welfare to work services for the government,
placed 13,888 people who had been long-term unemployed into work during 2002.
This is the company's best performance to date. We also successfully
implemented nine new Action Team contracts during the year and our innovative
programmes to find jobs for ex-offenders and prostitutes in Doncaster featured
prominently in the national press. On the downside, we were not successful in
our bid to secure the contract to deliver the New Deal in Hackney for a second
term. This was a great disappointment to everyone concerned, but I would like
to record that in the five years since we were appointed to run the New Deal in
Hackney, we have placed 8,464 people into work and youth unemployment in the
area has fallen by 75%.
Reed Learning, which provides professional development, education and training
enjoyed continued growth during the year. In particular, there has been strong
demand for our training services and the number of training days sold rose by
19% year on year. The most notable achievement of the year, however, was the
establishment of two managed Local Education Authority (LEA) services. These
are the Lancashire Teaching Agency and the Cheshire Supply Service. These
ethical partnerships will not only be responsible for the cost effective
deployment and development of the respective counties' supply teacher workforce
but they will also contribute to their overall teacher recruitment, retention
and morale strategies.
Finally, Reed Connections, which provides our group with accounting and IT
services made an important contribution during the year. The team led the
development and implementation of our new managed agency platform and
successfully upgraded our payroll systems. They also delivered the improvement
in our cash position and a reduction in our debtor days.
Online Recruitment
Our website, reed.co.uk, continued to grow in popularity during the year. It
continued to break previous records for both visitors and applications. The
number of visits to the site rose to 20.2 million, an increase of 150% over
prior year and jobseekers made 3.3 million applications to jobs - an increase of
103% over 2001. Over 30,000 recruiters are now making use of our '
freecruitment' service and more than 120,000 jobs are consistently posted on
the site. This increase in usage is partly driven by significant improvements
that we have made to the site and partly by changes in the wider labour market.
It is no coincidence that our traffic has risen so markedly at a time when the
International Labour Organisation's statistics show that unemployment has
started to rise in the UK. Our challenge is to convert as many registrations as
possible into successful placements both for ourselves and for our 'freecruiter'
partners. This will ensure the ongoing success and development of reed.co.uk.
Litigation
In December 2002, in our High Court Action against subsidiaries of Reed Elsevier
plc concerning certain websites, the Court granted us a declaration that the
Defendants have infringed our REED trade mark (registered for employment agency
services) and passed off their business and services as ours by use of the word
"Reed". It also ordered that we are entitled to proceed with an inquiry as to
damages (a detailed procedure by which the quantum of damages to be awarded is
assessed). Various cost orders were made including an order that the Defendants
pay a substantial proportion of our costs up to the judgement last May (to be
assessed). In January the Defendants lodged an Appeal which is to be heard
later this year. The inquiry is stayed pending the appeal. The Board remains
of the opinion that the robust protection of our reputation and the REED trade
mark, good name and brand heritage is fundamental to our future success.
Regulations
The threat of further potentially damaging labour market regulation particularly
from the European Union remains very real and at the top of the list is the
proposed Temporary Workers Directive. It contains a number of proposals that
would materially harm our business and would also lead to reduced flexibility in
the UK's labour market. Rightly, the directive is being resisted by the UK
recruitment industry and by the UK's wider business community that accounts for
half of Europe's temporary workforce. The UK Government's own draft proposals
for the regulation of the private recruitment industry are yet to be introduced
but it would make sense for the Department of Trade and Industry to await
confirmation of the European rules before introducing further domestic
regulations.
Co-Members
I would like to thank all of our Co-Members for their contribution in what
turned out to be an eventful and challenging year. Success in any activity is
founded on commitment and I am grateful to my colleagues for the considerable
commitment that they have shown since the current slowdown began.
We have sought to avoid making unnecessary job cuts that are motivated more by
short-term gain than long-term growth and this will continue to be the case. In
fact we will be actively seeking to create new opportunities for our Co-Members.
Outlook
Overall trading has continued to be difficult. Early last autumn there were some
hopeful signs that things might start to improve but trading at the end of the
year was particularly weak and this weakness has continued into 2003. Given the
current level of global uncertainty and the very limited visibility of the
recruitment business, it is not possible to predict with any certainty when this
might change. In the circumstances, we are more committed than ever to
delivering a first class service to our clients and to building upon what we
believe is already a leading market position.
James Reed,
Chief Executive
4th April
2003
Summarised Consolidated Profit & Loss Account
For the 52 weeks ended 27th December 2002
52 Weeks 52 Weeks
Ended 27th Ended 28th
December December
Note 2002 2001 Movement
(Restated)
#'000 #'000 %
Turnover
Continuing activities 349,449 373,664 (6.5%)
Discontinued activities - 33,331 -
Total Turnover 349,449 406,995 (14.1%)
Operating profit
Continuing activities 7,566 14,035 (46.1%)
Discontinued activities - 2,025 -
Total operating profit 7,566 16,060 (52.9%)
Exceptional Item 2 - (1,799) -
Interest receivable less interest payable 534 (28) -
Profit on ordinary activities before 8,100 14,233 (43.1%)
taxation
Tax on profit on ordinary activities 3 (3,254) (4,555) (28.6%)
Profit on ordinary activities after 4,846 9,678 (49.9%)
taxation
Minority Interest 4 22 (80.1%)
Profit on ordinary activities after 4,850 9,700 (50.0%)
taxation
Equity Dividends 4 (847) (2,566) (67.0%)
Dividend In Specie 4 - (8,207) -
Retained Profit/(Loss) for the period 4,003 (1,073) -
Earnings per share 5
Basic 11.4p 22.7p (49.8%)
Diluted 11.3p 22.2p (49.1%)
Dividends per share 4 2.0p 6.0p (66.7%)
Summarised Consolidated Balance Sheet
As at 27th December 2002
As at 27th As at 28th
December December
2002 2001 Movement
(Restated)
#'000 #'000 %
Fixed assets
Tangible assets 20,443 23,490 (13.0%)
Investments 6,140 2,818 117.9%
26,583 26,308 1.0%
Current assets
Debtors 51,555 59,988 (14.1%)
Cash at bank and in hand 19,905 10,188 95.4%
71,460 70,176 1.8%
Creditors: Amounts falling due within one year (41,893) (44,712) (6.3%)
Net current assets 29,567 25,464 16.1%
Total assets less current liabilities 56,150 51,772 8.5%
Provisions for liabilities and charges (5,096) (4,668) 9.2%
Net assets 51,054 47,104 8.4%
Capital & Reserves 51,198 47,244 8.4%
Equity minority interests (144) (140) 2.9%
Shareholders' funds 51,054 47,104 8.4%
Summarised Consolidated Cashflow Statement
For the 52 weeks ended 27th December 2002
52 Weeks 52 Weeks
Ended 27th Ended 28th
December December
2002 2001
#'000 #'000
Net cash inflow from operating activities 23,131 24,169
Returns on investment and servicing of finance 711 335
Taxation paid (2,940) (5,548)
Capital expenditure and financial investment (9,055) (11,175)
Dividends paid (2,130) (2,566)
Capital element of finance lease rentals - (698)
Increase in cash 9,717 4,517
Notes to the Accounts
For the 52 weeks ended 27th December 2002
1. Adoption of new Financial Reporting Standards
FRS 19 "Deferred Tax" has been adopted for the first time in these accounts.
Comparative figures have been restated to be consistent with the new accounting
policy. Previously under SSAP 15, provision was only made for deferred taxation
if it was probable that the tax would be payable in the foreseeable future.
FRS 17 "Retirements Benefits" need not be applied in full until the 2005
accounts, so as in previous years, expenses have been charged under SSAP 24.
2. Non-operating exceptional items
52 Weeks 52 Weeks
Ended 27th Ended 28th
December December
2002 2001
#'000 #'000
The profit on ordinary activities before taxation is stated
after charging the following exceptional items:
Fundamental reorganisation costs (costs of de-merger) - 1,799
3. Taxation
52 Weeks 52 Weeks
Ended 27th Ended 28th
December December
2002 2001
(Restated)
#'000 #'000
UK Corporation tax 3,113 4,840
Net under-provision in previous years 479 -
3,592 4,840
Deferred tax (338) (285)
3,254 4,555
4. Dividends
52 Weeks 52 Weeks
Ended 27th Ended 28th
December December
2002 2001
#'000 #'000
Interim Dividend @ 2p per share 895 1,342
Final Dividend - 1,342
Less : amounts payable to Employee Benefit Trust (48) (118)
847 2,566
Dividend in specie - Reed Health Ltd - 8,207
847 10,773
5. Earnings per share
52 Weeks 52 Weeks
Ended 27th Ended 28th
December December
2002 2001
(Restated)
The weighted average number of shares used was:-
Total number of shares in issue 44,733,579 44,733,579
Less: Ave number of shares held by EBT (2,362,521) (1,965,000)
Basic weighted average number of shares 42,371,058 42,768,579
Adjustment for share options under SAYE schemes 731,323 894,030
Diluted weighted average number of shares 43,102,382 43,662,609
These have been calculated on earnings of: #4,850,000 #9,700,000
Basic earnings per share 11.4p 22.7p
Diluted earnings per share 11.3p 22.2p
The basic weighted average number of shares excludes those held by the
Employee Benefit Trust in accordance with Financial Reporting Standard 14.
6. Preliminary statement
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 4th April 2003. It has been prepared using accounting
policies that are consistent with those adopted in the statutory accounts for
the 52 weeks ended 27th December 2002. However this statement is not the
company's statutory accounts.
The statutory accounts for the 52 weeks ended 28th December 2001 have been
delivered to the Registrar of Companies and received an audit report which was
unqualified and did not contain any statements under s.237(2) or (3) of the
Companies Act 1985.
The statutory accounts for the 52 weeks ended 27th December 2002 received an
audit report which was unqualified and did not contain any statements under
s.237(2) or (3) of the Companies Act 1985, and will be delivered to the
Registrar of Companies in due course.
A copy of the preliminary statement, together with the full Annual Report has
been sent to shareholders today. Further copies are available from the
registered office: California, 120 Coombe Lane, London, SW20 0BA.
This information is provided by RNS
The company news service from the London Stock Exchange
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