RNS Number:2025J
Corporate Services Group PLC
26 March 2003
FOR IMMEDIATE RELEASE 26 MARCH 2003
THE CORPORATE SERVICES GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Highlights
* Turnover from continuing operations down 20.9% to #591.5 million
* Loss, from continuing operations, before goodwill amortisation and
operating exceptional items: #16.7 million (2001: #3.5 million)
* Loss per share, adjusted for goodwill amortisation and exceptional
items: 5.7p (2001: 1.4p)
* Revenue from Healthcare up 7.0%. This division now represents almost
25% of UK turnover
* Acquisition of BRS Taskforce, specialists in driving recruitment, from
Exel
* Cost savings target of #6.5 million for 2003 achieved
* UK and US operating costs reduced by 11% and 23% respectively
* Year end net debt of #43.2 million (2001: #49.0 million) subsequently
reduced via Placing and Open Offer
* New management team installed under Julian Treger, Executive Chairman,
Mark Adams, Chief Operating Officer and Desmond Doyle, Group Finance Director
* Business plan designed to deliver revenue and margin growth despite
adverse macroeconomic markets. Long term goal: net operating profit margins
of 5%
Commenting on current trading and prospects, Julian Treger, Executive Chairman,
said:
"Although trading in the first eleven weeks of 2003 has continued to be
difficult with sales 10.0% lower in the UK and 16.7% down in the US compared to
the same period last year, the rates of decrease represent a significant
improvement over those experienced at this time last year.
"The Board anticipates that trading in 2003 will continue to be below the levels
of 2002. Against this backdrop the Board continues to take action to reduce its
cost base and position the business to ensure that it becomes cash generative
and profitable irrespective of trading conditions. We believe that the new
Board, management team and unitary structure will provide the necessary focus to
tackle the challenges ahead."
For further information, please contact:
Mark Adams, Chief Operating Officer: 01582 692658
Desmond Doyle, Group Finance Director: 01582 692658
Melvyn Marckus, CardewChancery & Co: 020 7930 0777
Results
2002 proved to be a difficult year for the Group with sales, on a continuing
basis, down 20.9% to #591.5 million (2001: #747.6 million) and losses from
continuing operations, before goodwill amortisation and operating exceptional
items of #16.7 million (2001: #3.5 million). Operating exceptional items were
#89.2 million (2001: #1.7 million). The loss per share, adjusted for goodwill
amortisation and exceptional items, was 5.7p (2001: 1.4p). Net cash inflow from
operating activities was #8.3 million. After deduction of interest and capital
expenditure and tax receipts, these funds have been used to reduce net debt by
#5.8 million to #43.2 million. These results are clearly unacceptable and must
be significantly improved during the current year.
Strategic Review
Following my appointment as Executive Chairman in September 2002, the Group
undertook a detailed review and assessment of its operations. This has led to a
restructuring of our activities and a repositioning of individual businesses
designed to ensure better responses to market developments. As a result, we have
developed a new business plan to deliver revenue and margin growth in our
recruitment businesses, despite the current adverse macroeconomic conditions and
difficult staffing markets. We have accomplished a great deal in a short time
but much remains to be done and investors should expect our restructuring
process to continue throughout 2003.
In order to deliver the new business plan successfully, the Board has decided to
consolidate corporate and business functions into a unitary management structure
with one operating management team under the direction of the Chief Operating
Officer, Mark Adams. As part of this process, we are closing the head office in
London and merging its functions with those of Blue Arrow in Luton. This is
designed to eliminate a level of cost duplication and secure important cost
savings. The immediate priority for management will be to deliver the newly
defined strategy and business plan.
In November 2002, we announced a major cost savings programme following the
review of the Group's operations. We are pleased to announce that we have
achieved our cost savings target of #6.5 million for 2003. This programme should
result in annualised savings of more than #9.0 million. Action has been focused
on central overheads and not the interface between clients and the business, at
either central or branch level.
Given the difficult state of the market we need to cut costs further and we are
today initiating an exercise to deliver savings opportunities via a
re-engineering of our business processes and policies to improve efficiency
further. We will update shareholders on the results of this exercise at the time
of our half-year results announcement. Our long-term goal is to earn net
operating profit margins of 5%.
Despite some success in growing Comensura, we have decided to restructure this
business. While the Workforce Solutions businesses in the UK and US will be
amalgamated with our staffing businesses in these markets, the Service Centre
Solutions business in the UK will be reorganised to deliver value in the
relationships which have been established to date with the minimum of additional
investment.
As a consequence of the review of operations, operating exceptional items of
#89.2 million have been charged in the year. Of this charge, #2.9 million
relates to the restructuring and reorganisation of the Group, #4.4 million to
the restructuring and reorganisation of Blue Arrow, #0.7 million to the
impairment of an investment, and the balance, #81.2 million, to the
restructuring and reorganisation of Corestaff including goodwill impairment. The
goodwill impairment relates to a write down, which was made at the half-year, of
the goodwill attributable to the US business reflecting the continued weakness
in the US market.
Acquisition of BRS Taskforce Business from Exel
We are undertaking a review of the longer term strategic positioning of the
Group in order to maximise our potential as an industry leader in our chosen
sectors. Part of our strategy will include the purchase of attractive add-on
businesses and we are pleased to announce today the acquisition of the business
and certain assets of BRS Taskforce from Exel. Simultaneously, we have entered
into an agreement with Exel whereby we become a preferred supplier for the
provision of driving, office and industrial staff. The acquisition expands our
national coverage in a number of key locations and increases the revenues of our
driving division, before taking into account any increased sales to Exel as a
result of the new supply agreement. The Group will continue to explore
acquisition opportunities that are earnings enhancing and serve to strengthen
our business, either in a specific sector or in a geographical area.
Financing
In January 2003 we successfully raised #24.8 million though a Placing and Open
Offer to finance the Company's working capital requirements and strengthen the
Group's balance sheet. In February 2003, agreement was reached for the waiver of
the right to bring non-tax warranty claims arising from the sale in December
2001 of Euristt S.A. to Groupe CRIT S.A. leading to a release of security
against possible claims of #4.1 million. These funds were received in March
2003. Despite the difficult trading conditions we continue to operate
comfortably within the headroom provided by our current bank facilities and in
line with our plan.
We are reviewing the Group's banking arrangements and facilities in order to
better utilise the asset security offered by our balance sheet. Additionally, as
our liability to workers' compensation claims decreases, the collateralisation
requirements of our insurers will also decrease. Indeed there is a reasonable
prospect of the release of funds from this process later in the year.
Business Review
The year 2002 proved extremely challenging for the recruitment industry as a
whole with the continuation of the difficult trading conditions experienced in
2001 affecting almost every sector and geographic area in which we operate.
Economies in both the UK and the US have remained weak, as has the demand for
temporary staff.
In developing our new business plan and strategy we have assumed that the
current economic environment for the general staffing businesses will remain
broadly unchanged for the remainder of the financial year ending 31 December
2003.
We have continued to exit unprofitable business and sought to identify less
cyclical aspects of the economy, such as healthcare, to protect our future
business from external economic influences. We have directed our focus and
activity into those business sectors or regions where we can become one of the
top three players, utilising our influence and/or scale to deliver increased
returns.
To support this aim we have further developed the infrastructure of the
organisation with better communication, teamwork and involvement to create a
culture where everyone recognises, and is rewarded for, their contribution to
the success of the business. New compensation and commission plans have been
implemented in both staffing businesses which specifically address the
achievement of the business plan.
The investment that we continue to make in our people, processes and systems has
created a competitive and customer orientated business. While we continue to
address cost efficiency in a difficult market, we are intent on focusing on
those sectors where we can become a market leader. This will leave us well
placed to benefit from an upturn in the economy.
United Kingdom Staffing Services
During 2002 we saw a progressive improvement in trading performance in
comparison to the prior year and we finished the year trading at levels only
marginally below those for the corresponding period last year. In the event,
turnover from our UK business fell 11.0% from #444.4 million to #395.4 million.
Despite weakness in our market, gross margins were largely maintained at the
levels achieved in 2001. Operating profit, before operating exceptional items,
reduced to #2.1 million from #6.9 million, reflecting the lower levels of
revenue. We controlled operating costs, reducing these by 11% year-on-year.
In preparing our business plan, greater emphasis is being given to the
development of specialist operations such as healthcare, driving and catering to
balance the Group's general staffing businesses and reduce exposure to economic
cycles.
In the UK, our plan is aimed at both increasing sales and improving margins.
This strategy is to be achieved through a number of initiatives. The tender
response and sales teams have been reorganised to give more focus to profitable
volume accounts. The remuneration arrangements for our consultants have been
re-balanced and re-aligned to reward productivity and profitability. Through
these measures we anticipate a reduction in staff turnover and a consequent
improvement in productivity.
The High Street operations experienced a 15% reduction in revenue in the year.
This division has been restructured and strengthened with the appointment of
Office and Industrial sector Directors and Regional Managers to provide more
focus at branch level. We combined this with a revised training programme and
increased focus on permanent recruitment in the Office sector. We integrated
Austin Benn (our permanent management level recruitment division) into the High
Street structure to simplify the management structure and reduce overhead.
Finally, we have undertaken a detailed location analysis to facilitate our
assessment of market potential in respect of branch development.
Sales in our healthcare business grew by 7.0% in the year and this now
represents almost 25% of our UK business. We aim to strengthen our market
leading position in the locum doctor market via our Medacs and PRN businesses
during the next 12 months. We continue to develop selected healthcare staffing
sectors, including homecare and nursing, where we envisage potential for strong
returns.
We initiated market-leading research to quantify the impact of the Agency Worker
Directive on UK businesses and temporary workers. We have established important
relationships at senior levels of government and have increased the resource to
build on this platform, positioning Blue Arrow as an innovative thought leader
within the industry.
US Staffing Services
Turnover decreased from #301.7 million to #193.6 million, a reduction of 33.3%
in local currency terms. This reduction reflects the termination of unprofitable
and/or high-risk accounts as well as difficult ongoing conditions in the US
employment market. Operating losses, before goodwill amortisation and operating
exceptional items, totalled #11.1 million compared with a loss of #0.2 million
in 2001. This loss includes a provision of #4.6 million in respect of workers'
compensation claims, #3.0 million of which was provided at the half year.
We continue to target lower risk business. Industrial business now represents
approximately 25% of US revenues (a reduction of more than 50%) as we
progressively shift to clerical and professional service lines. At the half-year
we formed our Speciality Services Business ("SSB") which brought together our
technology, accounting and finance skill offerings under central management. In
August, the SSB launched a new service line to address increased client demand
for high-end engineering skills. Through these strategies, we have been
successful in securing a significant number of attractive new accounts, although
the growth in new business has not been sufficient to replace reductions in
demand from existing customers or accounts that we have deliberately terminated.
During 2002 we reorganised our US business and reduced operating costs by 23% in
local currency terms against 2001 levels. Cumulatively over the last two years,
operating costs have reduced by 38% in local currency terms. Even while cutting
costs we have built a stronger, more capable company. The management team has
been strengthened, processes have been streamlined and the sales force has
doubled in size. To support the increased sales force we have implemented a
number of processes, tools and measurements to promote the team's success. All
sales personnel have been trained on a new, comprehensive selling process
designed to enhance relationships with new and existing clients. Further, we
have introduced a proprietary sales system to support the new sales process and
provide key performance metrics. We believe that the US business is now well
positioned to take advantage of an upturn once the US employment market begins
to recover.
Our programme of proactively managing the risk associated with workers'
compensation has continued to drive down the claims incidence rate on current
payroll and the year end actuarial valuation indicated no further deterioration
in the cost of settling outstanding 2002 claims. However, as indicated at the
half-year, the actuarial valuation in respect of the cost of settling claims
from prior periods has shown a continued deterioration. Accordingly, we recorded
a further provision of #4.6 million during the year, #3.0 million of which was
provided at the half-year, to prudently raise our contingency to the middle of
the range of expected outcomes. Additional measures have been introduced during
the year to audit and manage the settlement of prior year claims currently
resulting in a 67% reduction in the number of outstanding workers' compensation
claims compared to early 2001.
Comensura - Human Capital Solutions
Following a detailed review of the Comensura operations, the Board has taken the
decision to rationalise and restructure the business to align
activities more closely with the core recruitment businesses while retaining key
members of the operational management team.
The Workforce Solutions businesses within the UK and the US will now come under
the management of Blue Arrow and Corestaff respectively. This will allow these
businesses to focus on the development of sales pipelines and the technology
platform which was developed and implemented during the year. The Workforce
Solutions business secured a number of major contract wins in both the UK and
the US during the year and is currently profitable in the US on a stand-alone
basis.
The Service Centre Solutions division has been unable to secure revenues on
acceptable terms. In order to preserve resources and focus on the core
businesses, the Group has decided to restructure activity in this division. We
are currently looking at the options available to deliver value in the
relationships that we have developed.
Board
A number of changes have been made to the Corporate Services Group Board
including my appointment as Executive Chairman. This followed the departure of
Michael Davies and Peter Owen as Chairman and Chief Executive respectively.
These changes were followed by further changes at the start of 2003 with the
appointment of Mark Adams as Chief Operating Officer, Desmond Doyle as Group
Finance Director in succession to Tony Collyer whose resignation from the Board
becomes effective today, and David Young as a non-executive Director. Today, we
are announcing that Gilles Avenel has decided not to offer himself for
re-election and will stand down at the AGM. I would like to thank Michael,
Peter, Tony and Gilles personally for their respective contributions to the
Group and wish them every success in the future.
Current Trading and Prospects
Although trading in the first eleven weeks of 2003 has continued to be difficult
with sales 10.0% lower in the UK and 16.7% down in the US compared to the same
period last year, the rates of decrease represent a significant improvement
over those experienced at this time last year.
The Board anticipates that trading in 2003 will continue to be below the levels
of 2002. Against this backdrop the Board continues to take action to reduce its
cost base and position the business to ensure that it becomes cash generative
and profitable irrespective of trading conditions. We believe that the new
Board, management team and unitary structure will provide the necessary focus to
tackle the challenges ahead.
Group Profit and Loss
for the year ended 31 December
2002 2001
Notes # 000 # 000
Turnover
Continuing operations 1 591,548 747,643
Discontinued operations - 410,585
--------- ---------
591,548 1,158,228
_________ _________
Cost of sales (487,972) (965,890)
_________ _________
Gross profit 103,576 192,338
Administrative expenses (including goodwill (215,723) (194,368)
amortisation & exceptional items)
________________________________________________________________________________
Operating (loss)/profit from operations before (16,722) 10,372
goodwill amortisation and exceptional items
Goodwill amortisation (6,265) (10,691)
Operating exceptional items 2 (89,160) (1,711)
________________________________________________________________________________
Operating loss:
--------- ---------
Continuing operations (112,147) (14,170)
Discontinued operations - 12,140
--------- ---------
_________ _________
Total operating loss (112,147) (2,030)
Non-operating exceptional items:
Continuing operations
Loss on disposal of tangible fixed assets - (170)
Profit on deemed disposal of interest in - 415
subsidiary
Discontinued operations
Loss on sale of discontinued operations - (7,452)
_________ _________
Loss on ordinary activities before interest (112,147) (9,237)
Net interest payable (4,839) (12,615)
_________ _________
Loss on ordinary activities before taxation (116,986) (21,852)
Tax on loss on ordinary activities 3 - (3,088)
_________ _________
Loss on ordinary activities after taxation (116,986) (24,940)
Equity minority interest 715 152
_________ _________
Loss for the financial year attributable to 5 (116,271) (24,788)
members of the parent company
_________ _________
Loss per share 4 (5.7)p (1.4)p
- before goodwill amortisation and exceptional
items
4 (31.9)p (6.8)p
- basic and diluted
_________ _________
The accompanying notes are an integral part of this Group profit and loss
account.
Group Statement of Total Recognised Gains and Losses
for the year ended 31 December
2002 2001
# 000 # 000
Loss for the financial year attributable to members of (116,271) (24,788)
the parent company
Exchange differences net of tax of #nil (note 3) (9,938) 4,183
________ ________
Total recognised gains and losses relating to the (126,209) (20,605)
year
________ ________
The accompanying notes are an integral part of this Group statement of total
recognised gains and losses
Group Balance Sheet
as at 31 December
Notes 2002 2001
# 000 # 000
Fixed assets
Intangible assets 57,323 149,250
Tangible assets 11,176 21,418
Investments 4,357 6,537
_________ _________
72,856 177,205
_________ _________
Current assets
Debtors 76,829 88,722
Investments 8,420 7,651
Cash at bank and in hand 12,556 21,265
_________ _________
97,805 117,638
Creditors: amounts falling due within one (79,762) (76,372)
year
_________ _________
Net current assets 18,043 41,266
_________ _________
Total assets less current liabilities 90,899 218,471
Creditors: amounts falling due after more than
one year
Convertible debt (59,073) (58,705)
Other creditors - (143)
_________ _________
(59,073) (58,848)
Provisions for liabilities and charges (15,106) (15,979)
_________ _________
16,720 143,644
Equity minority interest 1,132 417
_________ _________
Net assets 17,852 144,061
_________ _________
Capital and reserves
Called up share capital 27,413 27,413
Share premium account 5 236,037 236,037
Profit and loss account 5 (245,598) (119,389)
_________ _________
Equity shareholders' funds 6 17,852 144,061
_________ _________
Group Cash Flow Statement
for the year ended 31 December
2002 2001
Notes # 000 # 000
Net cash inflow from operating activities 7 8,322 63,588
Returns on investments and servicing of (4,515) (12,099)
finance
Taxation 2,582 (4,462)
Capital expenditure and financial investment (1,238) (5,111)
Acquisitions and disposals - 47,980
_________ _________
Cash inflow before management of liquid 5,151 89,896
resources and financing
Financing (13,351) (68,901)
_________ _________
(Decrease)/increase in cash 8 (8,200) 20,995
_________ _________
The accompanying notes are an integral part of this Group cash flow statement.
Notes to the Accounts for the year ended 31 December
1 Segmental information
By origin, destination and business
United United Total United Continental United Total
Kingdom States 2002 Kingdom Europe States 2001
# 000 # 000 # 000 # 000 # 000 # 000 # 000
Turnover
Staffing 395,404 193,589 588,993 444,369 - 301,680 746,049
services
Human 141 2,414 2,555 - - 1,594 1,594
capital
_______ _______ ________ _______ _______ _______ ________
Continuing 395,545 196,003 591,548 444,369 - 303,274 747,643
Discontinued - - - - 410,585 - 410,585
_______ _______ ________ _______ _______ _______ ________
395,545 196,003 591,548 444,369 410,585 303,274 1,158,228
_______ _______ ________ _______ _______ _______ ________
Loss on ordinary activities
before taxation
Staffing 2,148 (11,089) (8,941) 6,909 - (205) 6,704
services
Human (2,793) (1,288) (4,081) (3,789) - (1,110) (4,899)
capital
_______ _______ ________ _______ _______ _______ ________
Continuing (645) (12,377) (13,022) 3,120 - (1,315) 1,805
Discontinued - - - - 13,849 - 13,849
_______ _______ ________ _______ _______ _______ ________
(645) (12,377) (13,022) 3,120 13,849 (1,315) 15,654
Goodwill (59) (6,206) (6,265) (59) (1,709) (8,923) (10,691)
amortisation
Operating (5,869) (81,136) (87,005) (313) - (616) (929)
exceptional
items
_______ _______ ________ _______ _______ _______ ________
(6,573) (99,719) (106,292) 2,748 12,140 (10,854) 4,034
_______ _______ _______ _______ _______
Corporate costs - UK (3,700) (5,282)
Corporate operating (2,155) (782)
exceptional items
________ ________
(112,147) (2,030)
Non-operating - (7,207)
exceptional
items
Net interest (4,839) (12,615)
payable
________ ________
Loss on ordinary (116,986) (21,852)
activities before
taxation
________ ________
Net assets
Staffing (3,453) 63,102 59,649 20,506 - 160,589 181,095
services
Human 3,694 (859) 2,835 4,156 - 7,391 11,547
capital
_______ _______ _______ _______ _______ _______ ________
Continuing 241 62,243 62,484 24,662 - 167,980 192,642
_______ _______ _______ _______ _______
Unallocated (45,764) (48,998)
net
liabilities
_______ ________
Net assets before 16,720 143,644
minority interest
_______ ________
1 Segmental information (continued)
Operations in New Zealand and Australia have been included under the UK as the results are
not material.
Goodwill amortisation of #6,265,000 (2001: #10,691,000) and operating exceptional items of
#87,689,000 (2001: #929,000) relate to staffing services, further operating exceptional
items amounting to #1,471,000 (2001: #nil) relate to human capital solutions.
Unallocated net liabilities comprise net debt, including loan notes, and taxation.
2 Exceptional items
2002 2001
Recognised in arriving at operating loss #000 #000
Group restructuring and reorganisation 2,930 1,711
Blue Arrow restructuring and reorganisation 4,398 -
Corestaff restructuring and reorganisation (including 81,136 -
goodwill impairment)
Investment in own shares - impairment 696 -
________ ________
89,160 1,711
________ ________
2002 2001
#000 #000
Recognised below operating loss
Loss on disposal of land and buildings - 64
Loss on disposal of motor cars and office equipment - 106
________ ________
- 170
Profit on deemed disposal of interest in subsidiary - (415)
Loss on sale of discontinued operations - 7,452
________ ________
- 7,207
________ ________
The effect on the taxation charge for the year of the exceptional items
recognised below operating loss is disclosed in note 3.
The costs shown under Group restructuring and reorganisations in both 2002 and
2001 relate to the compensation and associated costs incurred under the
termination settlements of main Board Director's and senior management plus, in
2002, the costs associated with the closure of the corporate offices and
relocation to Luton and the impairment of licences and investments held by the
human capital business.
Costs shown under both Blue Arrow and Corestaff restructuring and
reorganisations include compensation and associated costs from branch and head
office rationalisation programs, including the write off of assets made obsolete
by the reorganisation. Also included, in the case of Corestaff, is the
impairment to goodwill made in June 2002.
The impairment to the investment in own shares results from the post balance
sheet event where a placing and open offer at 5 pence per share has crystallised
an existing temporary impairment in the market price of the Company's shares.
Cash flows relating to operating exceptional items
Net cash inflow from operating activities includes cash outflows of #1,019,000
(2001: #1,711,000) relating to the operating exceptional items.
3 Taxation
a) Tax on loss on ordinary activities
2002 2001
# 000 # 000
Current tax
UK Corporation tax on profits of the period - 1,778
Adjustments in respect of previous years - -
Double taxation relief - (2,319)
________ ________
- (541)
Foreign tax - 2,900
________ ________
- 2,359
Deferred tax - origination and reversal of timing - 729
differences
________ ________
- 3,088
________ ________
The tax effect in the profit and loss account relating to exceptional items
recognised below operating loss is #nil (2001: #nil).
UK current tax amounting to #nil (2001: #272,000) has been deducted in arriving
at the exchange differences shown in the Group statement of total recognised
gains and losses.
b) Factors affecting current and future tax charges
The estimated effective current tax rate of 0.0% (2001:(10.8%)) can be reconciled
to the standard UK rate of 30.0% as follows:
2002 2001
% %
Tax credit at UK standard rate 30.0 30.0
Differences in tax rates in other countries 7.0 3.6
Loss on disposal of Euristt S.A. 0.0 (10.2)
Other permanent differences (0.8) (2.4)
Timing differences:
Depreciation, amortisation and impairment charges in (24.6) 37.0
excess of capital allowances
Short term timing differences (0.6) (11.2)
Losses arising in the year but not utilised (11.0) (57.6)
_____ _____
Effective current tax rate 0.0 (10.8)
_____ _____
The current and total effective tax rates in 2002 are lower than standard (i.e.
the tax credit on the loss has been reduced) primarily because of the timing
differences arising from the impairment of US goodwill. Also, the Group is unable
to utilise the losses arising in the year other than by way of offset against
future profits. Given the uncertainty over future utilisation of these timing
differences and losses (e.g. profits may arise in entities that cannot offset the
losses), no deferred tax assets have been recognised in respect of them. As and
when these timing differences and losses are utilised, this will affect the
current and total tax charges.
The effective tax rate for 2001 was negative primarily as a result of the
inability either to set losses in one country against profits in another or to
recognise those losses as an asset.
4 Loss per share
The calculations of earnings per share are based on the following loss and
numbers of shares.
Loss for the year Loss per share
2002 2001 2002 2001
# 000 # 000 Pence Pence
Basic and diluted
Unadjusted loss (116,271) (24,788) (31.9) (6.8)
Non-operating exceptional items (net - 7,207 - 2.0
of tax)
Operating exceptional items (net of 89,160 1,711 24.5 0.5
tax)
Goodwill amortisation 6,265 10,691 1.7 2.9
________ ________ _______ ________
Adjusted loss (20,846) (5,179) (5.7) (1.4)
________ ________ _______ ________
Basic loss per share is calculated using a weighted average number of shares of
364,173,921 (2001: 364,173,921) calculated after adjusting for the effects of
the Placing and Open Offer (note 11) but excluding the shares owned by The
Corporate Services Group Employee Share Trust. Additional earnings per share
calculations have been presented in order to provide information on the
underlying performance of the Group. There were no dilutive potential Ordinary
Shares in 2002 (2001: nil).
5 Reserves
Share Profit
premium and loss
account
# 000 # 000
1 January 2002 236,037 (119,389)
Foreign exchange movements - (9,938)
Retained loss for the year - (116,271)
________ ________
31 December 2002 236,037 (245,598)
________ ________
The cumulative amount of goodwill written off directly to reserves is
#123,628,000 (2001: #123,628,000).
6 Reconciliation of movements in Group shareholders' funds
2002 2001
# 000 # 000
Loss for the financial year (116,271) (24,788)
Goodwill on disposal previously written off - 33,957
Exchange difference (9,938) 4,183
________ ________
Net (reduction in)/additions to shareholders' funds (126,209) 13,352
Opening shareholders' funds 144,061 130,709
________ ________
Closing shareholders' funds 17,852 144,061
________ ________
7 Reconciliation of Operating Loss to Net Cash Inflow From Operating
Activities
2002 2001
# 000 # 000
Operating loss (112,147) (2,030)
Depreciation 5,020 8,201
Goodwill amortisation 6,265 10,691
Licence amortisation 417 25
Impairment of fixed asset investments 1,755 -
Impairment of goodwill 75,000 -
Impairment of licences 1,097 -
Loss on sale of fixed assets and loss on assets made 6,179 -
obsolete on reorganisation
Decrease in debtors 8,332 62,926
Increase/(decrease) in creditors 16,451 (14,687)
Decrease in provisions (47) (1,538)
________ ________
Net cash inflow from operating activities 8,322 63,588
________ ________
2002 2001
# 000 # 000
Net cash inflow from operating activities comprises:
Continuing operating activities 8,322 36,199
Discontinued operating activities - 27,389
________ ________
8,322 63,588
________ ________
8 Reconciliation of Net Cash Flow to Movement in Net Debt
2002 2001
# 000 # 000
(Decrease)/increase in cash in the period (8,200) 20,995
Cash outflow from decrease in debt, lease financing and 13,351 68,901
revolving credit
________ ________
Change in net debt resulting from cash flows 5,151 89,896
Loans and revolving credit disposed of with subsidiary - 28,370
Other non-cash movements (92) 7,283
Foreign exchange movement 715 (1,122)
________ ________
Movement in net debt in the period 5,774 124,427
Net debt at 1 January (48,994) (173,421)
________ ________
Net debt at 31 December (43,220) (48,994)
________ ________
9 Analysis of Net Debt
1 January Cash Foreign Other 31 December
flow exchange non-cash 2002
2002 Changes
# 000 # 000 # 000 # 000 # 000
Cash at bank and in 21,265 (8,406) (303) - 12,556
hand
Overdrafts (1,853) 206 150 - (1,497)
________ ________ _______ ________ ________
19,412 (8,200) (153) - 11,059
________ ________ _______ ________ ________
Debt due after one (58,705) - - (368) (59,073)
year
Term Loan (4,000) 4,000 - - -
Finance leases (979) 828 - - (151)
Revolving credit (12,373) 8,523 375 - (3,475)
________ ________ _______ ________ ________
(76,057) 13,351 375 (368) (62,699)
________ ________ _______ ________ ________
Current asset 7,651 - 493 276 8,420
investments
________ ________ _______ ________ ________
(48,994) 5,151 715 (92) (43,220)
________ ________ _______ ________ ________
Major non-cash transactions
Non-cash movements include the accrual of Convertible Note issue costs of
#368,000 (2001: #368,000), and interest credited, but not remitted, of #276,000
(2001: #nil) on the Euro denominated money market deposits included in current
asset investments. In 2001, the non cash item relates to #7,651,000 Euristt
disposal proceeds received directly into a restricted investment account
disclosed under current asset investments.
10 Contingent liabilities
a) Serious Fraud Office
Three former directors of the Company have been charged with fraudulent trading.
This follows a Serious Fraud Office investigation into accounting irregularities
during the accounting years 1997 and 1998. No current Director was a member of
the Board at that time. The Board is of the opinion that there should be no
material adverse impact on the Company's financial or trading position as a
result of these investigations.
b) Prior Year Accounting
In the preparation of the 1998 results, as disclosed in the accounts for that
year, the Group's accounting policies were found to have been applied
aggressively and in some cases there had been material errors. Accordingly, in
the 1998 accounts the prior year comparative figures shown for 1997 were
restated. The events leading up to the restatement of the Company's 1997
results, and the restatement itself, may give rise to the potential for claims
against the Company. Due to the inherent uncertainty involved with any such
claim, it is not considered appropriate to put a monetary figure to this
potential liability.
c) Property guarantees
The Group has provided guarantees to the landlords of two properties transferred
to Training for Tomorrow (Holdings) Limited. The property guarantees have leases
expiring between one and eleven years with a total annual lease expense of
#188,000 (2001: #266,000).
d) Warranties
Pursuant to a share purchase agreement dated 16 November 2001 made between (1)
the Company and Laybridge Limited (a wholly owned subsidiary of the Company) and
(2) Groupe CRIT S.A., the Company gave a number of warranties to Groupe CRIT
S.A. in respect of Euristt S.A.. Claims under the warranties must be notified
prior to 30 January 2005 in respect of matters relating to taxation and social
security and prior to 30 April 2003 in respect of all other claims and the
Company's maximum aggregate liability under warranties is limited to 25% of the
total consideration (such total being Euro125.0 million (#81.2 million), subject to
certain adjustments). The Company is not liable in respect of any claim under
the warranties relating to taxation and social security unless the aggregate of
all such claims exceeds Euro3.0 million (#1.9 million) and in respect of such
claims the total liability shall be limited to the amount in excess of Euro3.0
million. The Company is not liable in respect of any claim under the warranties
relating to matters other than taxation and social security unless the aggregate
amount of all such claims for which the Company would otherwise be liable
exceeds Euro1.5 million (#1.0 million). As at 31 December 2002, the Company had
received quantified claims under the warranties relating to taxation and social
security and to matters other than taxation and social security totalling Euro1.0
million and Euro1.1 million (of which it disputes Euro0.6 million and Euro1.0 million)
respectively. An amount of Euro12.5 million has been placed in an interest bearing
investment trust as a guarantee against liability under warranty claims.
Subsequent to the year end agreement was reached with Groupe CRIT S.A. regarding
the non-tax warranties. The Euro6.25 million plus accrued interest less an agreed
claim of Euro261,000 has been transferred to the Company's UK bank account.
11 Post Balance Sheet Event
On 7 January 2003, the Company announced a Placing and Open Offer to
shareholders in respect of 548,260,882 New Ordinary Shares of 1 pence each at 5
pence per share. At the same time, the Company announced the sub-division of
Existing Ordinary Shares into one New Ordinary Share and one Deferred Share.
Upon conversion of the Existing Ordinary Shares into New Ordinary Shares, the
Deferred Shares were acquired by the Company for a nil consideration and
cancelled.
The proposals underlying the Placing and Open Offer were approved by
Shareholders at an Extraordinary General Meeting on 30 January 2003 and the New
Ordinary Shares were listed on the London Stock Exchange on 3 February 2003. The
proceeds of the issue, net of expenses, amounted to #24.8 million.
12 Nature of Preliminary Statement of Results
The financial information in the preliminary statement of results does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985 (the "Act"). The statutory accounts for the year ended 31 December 2002
will be finalised on the basis of the financial information presented by the
Directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
The preliminary announcement was approved by the Board on 25 March 2003 and has
been prepared on a basis consistent with the annual accounts for the year ended
31 December 2001, except in respect of deferred tax as detailed below.
Financial Reporting Standard (FRS) 19 'Deferred Tax' has been adopted for the
first time this year. The standard requires full provision, subject to certain
exceptions, for deferred tax assets and liabilities arising from the timing
differences between the recognition of gains and losses in the accounts and for
tax purposes. Previously, SSAP 15 required recognition of deferred tax assets
and liabilities to the extent that it was probable that timing differences would
reverse in the foreseeable future. This change in accounting policy has not
resulted in a requirement to restate previously reported figures due to there
having been insufficient evidence at the time the 2001 accounts were prepared
that suitable profits would arise in appropriate entities against which the
future reversal of timing differences could be deducted. It has also not
affected the amount of deferred tax recognised at 31 December 2002. FRS 19 has
no impact on cash flows.
The statutory accounts have been delivered to the Registrar of Companies in
respect of the year ended 31 December 2001 and the Auditors of the Company made
a report thereon under Section 235 of the Act. That report was an unqualified
report and did not contain a statement under Section 237 (2) or (3) of the Act.
13 AGM Arrangements
The Company will hold its Annual General Meeting on 21 May 2003. The business to
be conducted at the meeting will include the re-appointment of Directors
retiring by rotation, the renewal of authorisation to issue Ordinary Shares and
disapply statutory pre-emption rights and the receipt of the accounts for the
year ended 31 December 2002 and the reports of the Directors and Auditors.
This information is provided by RNS
The company news service from the London Stock Exchange
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FR UVURRONROUUR