Embargoed for 07.01 Tuesday 18 March 2003
PARITY GROUP PLC
PRELIMINARY RESULTS
Parity Group plc ('Parity'), the international IT services group, announces its
preliminary results for the year ended 31 December 2002. Parity also announces
that it is in exclusive negotiations to acquire Technical Training Limited, a
Scottish training company which will extend Parity's training coverage in the
UK and that it has signed a Letter of Intent to become the sole European
alliance partner of Chimes Inc. Under the Chimes agreement, separately
announced today, Chimes will assign to Parity existing contracts which
generated revenues of �15m in 2002.
Group Financials
� Group turnover �183.3m (2001: �246.9m)
� Group pre tax loss before exceptional items and goodwill amortisation
�2.1m (2001: �3.3m profit)
� Basic loss per share 16.01p (2001: 2.05p)
� Loss per share before exceptional items and goodwill l.62p (2001:
earnings l.71p)
� Further restructuring resulting in annualised savings of �4.6m and an
exceptional restructuring charge of �3.6m
� Exceptional goodwill write-off �12.8m
� Exceptional provision against carrying value of Parity shares held by
Employee Benefit Trust �4.7m
� Final dividend of 0.06p; total dividend for the year of 0.26p
Divisional Highlights
Business Solutions
� Profitability improved as revenues declined under policy of not
pursuing poor margin business
� Mainland Europe performance significantly improved
� Commercial sector business increased by 80% and the government sector
now accounts for 40% of revenues
� Overheads reduced by 19%
� Market remains highly competitive but late stage pipeline much
stronger than in 2002
Training
� Revenues up by 2% in very tough market, clearly winning market share
� Improving pipeline of large, multi-year contracts
� Won four large training outsourcing contracts in the period including
Halifax Bank of Scotland, the Department of Work and Pensions, Galileo and a
large European hi-tech manufacturing and services group
� Initial agreement to acquire Technical Training Limited, a Scottish
training company which will extend Parity's training coverage in the UK
� Awarded Training Company of the Year and IT Trainer of the Year in
February 2003
Resourcing Solutions
� Profitability sustained in the UK although at lower levels
� Improving pipeline
� Continued focus on cost reduction
� �5m-7m BT Ignite contract announced in December 2002
� Letter of Intent signed to become the sole European alliance partner
of Chimes Inc. (see separate announcement)
� Markets remain challenging but new value propositions with other Group
divisions generating increased interest and sales
Parity Americas
� Results impacted by exposure to Finance, IT and Airline sectors
� Restructuring actions bring annualised cost savings of �0.4m
� Selected vendor for CitiGroup consulting work, bringing new
opportunity
� Major systems integration contract won with Renal Solutions Inc. in
December 2002 off-setting market pressure in staffing
Commenting on the results, Parity Group Chairman Bill Cockburn said:
"In the last year we took strong and appropriate action to reduce our cost base
and have seen the benefits of the cost reductions implemented in 2001.
Benefits will also accrue from last year's new large contract wins, adding to
our existing high quality blue chip customer base, and the revenue benefits of
these contracts are anticipated to be significantly larger in 2003 than in
2002. The Group now has 41% of its budgeted 2003 revenues sold forward or
expected under framework agreements.
"While the markets in which we operate are still uncertain and we are
disappointed to report a loss for the year, the Group's increasing security of
revenues, promising pipelines and lower cost base give us the confidence that
we will make good progress in 2003."
Enquiries:
Parity Group plc Telephone:
020 7776 0800
Ian Miller, Group Chief Executive
Alison Leyshon, Group Finance Director
Financial Dynamics Telephone:
020 7831 3113
Giles Sanderson
Harriet Keen
Notes to Editors
About Parity Group plc
Parity Group is a leading provider of IT services, technology staff, training
and human capital management solutions operating from over 30 offices across
the UK, mainland Europe and the USA. It comprises three key areas:-
Business Solutions designs, builds and operates complete systems covering a
variety of business functions. Focusing on maximising investment returns, its
consultants specialise in interactive commerce, customer relationship
management, content management, Web-enablement, security and applications
management, providing services across a range of vertical sectors.
Resourcing Solutions is a professional services supplier providing permanent
and interim technology staff. It advises companies on how to optimise the
deployment and utilisation of staff and skills. It also supplies technology and
consultancy to maximise the effectiveness with which its customers use external
suppliers and internal resources. The division was selected as a finalist in
the 'Best International Recruitment Firm' Professional Recruiter Awards 2002.
Training delivers bespoke and public scheduled courses in technology,
management and business skills at eleven training centres nationwide and at
customer sites. Blending traditional training with e-learning to achieve
effective learning outcomes, it additionally provides a range of learning
services spanning the design and delivery of integrated learning solutions to
fully outsourced training and development.
Customers across the group include AT&T, CSFB, HP, IBM, JP Morgan Chase, Shell,
and in the UK, Barclaycard, British Aerospace, BT, Royal Mail, Food Standards
Agency, Lloyds TSB, National Health Service and ScottishPower. For more
information on Parity, visit www.parity.net
Group Overview and Results
Turnover and Profits
The Group has continued to adjust its business mix in response to the ongoing
recession in the IT Services sector. This resulted in reduced Group revenues
of �183.3m (2001: �246.9m), down 26% on the prior year. The Group's loss
before goodwill amortisation, exceptional items and taxation was �2.1m (2001: �
3.3m profit), including a loss of �0.6m generated in mainland Europe. After
exceptional costs, goodwill amortisation and taxation the Group reported a loss
of �24.2m (2001: �3.1m loss).
Exceptional Costs
As announced at the time of the interim results, in response to continued
uncertainty in the sector the Board carried out a further restructuring
exercise during the year in order to reduce the Group's cost base. The aim was
to improve profitability, optimise the use of UK property across the Group,
improve staff utilisation rates and streamline support functions.
This exercise was largely completed by the financial year end at a total cost
of �3.6m which is being treated as an exceptional charge. The restructuring
programme is expected to result in savings of over �4.6m on an annualised
basis. The savings from this exercise attributable to 2002 are �1.6m. In
total, more than �11.0m has been removed from the Group's cost base since 2001.
As announced in the trading statement issued on 17 January 2003, in view of the
current economic climate the Board has conducted an impairment review of the
carrying value of goodwill held on the balance sheet arising on previous
acquisitions and the value of Parity shares held by the Employee Benefit Trust.
This has resulted in exceptional provisions for impairment of �12.8m and �4.7m
respectively. At 31 December 2002 the remaining carrying value of goodwill
held on the balance sheet was �10.2m whilst shares held by the EBT were valued
at �0.4m, based on the market price of Parity's shares at 31 December 2002 of
16.25p.
Taxation
The effective tax rate for the Group for 2002 was 6.2% (2001: 9.0%) based on
the loss before goodwill and amounts written off investments. The low
effective rate was due mainly to the inability to utilise tax losses in
jurisdictions where only limited tax relief was available. The exceptional
costs gave rise to a tax credit of �0.7m.
At 31 December 2002 the Group had unrelieved tax losses of �1.8m which will be
carried forward to be offset against future profits.
Dividend
As stated in our Interim results announcement, in the light of the ongoing
recession in the IT industry, and the impact that this has had on share prices
in the sector, the Board decided to amend its dividend policy to bring the
dividend yield back in line with the sector. The Board is recommending that
the final dividend should be set at 0.06p, giving a total dividend for the year
of 0.26p. The final dividend will be payable on 1 July 2003 to all
shareholders on the register at the close of business on 30 May 2003.
Cash Flow and Net Debt
Trading activities before exceptional items generated a cash inflow of �3.9m
(2001: �10.1m) including a cash inflow of �2.8m (2001: �3.0m) from working
capital.
The net cash outflow from exceptional items was �3.1m of which �1.6m related to
exceptional items accrued in 2001. Further cash costs relating to the
restructuring programme will be incurred in 2003 but these have been fully
provided for in 2002.
At year end the Group had net debt of �15.0m (2001: �12.7m) an increase of �
1.7m compared to the position at the half year despite the payment of �2.7m of
final 2001 and interim 2002 dividends in the second half. We continue to
maintain tight control over our cash with capital and discretionary expenditure
being approved only on the basis of a clear business need.
Banking facilities
The Group has successfully renegotiated an extension of its �18.0m committed
revolver loan facility with Lloyds TSB until 31 March 2006. However, as this
facility was not formally approved until 2003, the borrowings against the
previous facility are shown as being repayable within one year in the Group
balance sheet as the original facility was due to expire on 31 October 2003,
less than twelve months after the balance sheet date.
This facility is secured over the trade debtors of our main UK operating
companies.
The Group now has total facilities, including overdrafts, of �24.0m and the
Board remains confident of our ability to operate within these facilities for
the foreseeable future.
Divisional Performance
Year to 31 December Turnover (� Profit/(loss) before RoS%
m) tax (�m)
2002 2001 2002 2001 2002 2001
Business Solutions
UK 26.6 32.8 1.18 1.81 4.5 5.5
Mainland Europe 5.7 5.8 (0.13) (0.85) (2.2) (14.7)
32.3 38.6 1.05 0.96 3.3 2.5
Training 27.1 26.6 0.07 1.68 0.2 6.3
Resourcing Solutions 69.1 97.5 0.24 3.44 0.3 3.5
UK 31.8 47.4 (0.47) (0.63) (1.5) (1.3)
Mainland Europe
100.9 144.9 (0.23) 2.81 (0.2) 1.9
Parity Americas 23.0 36.8 0.62 2.57 2.7 7.0
Operating total 183.3 246.9 1.51 8.02 0.8 3.2
Central costs (2.92) (3.88)
Net interest (0.70) (0.88)
Before goodwill (2.11) 3.26
amortisation and
exceptional items
Goodwill amortisation (1.39) (1.37)
Exceptional items (16.38) (5.16)
Amounts written off (4.69) -
investments
Group total 183.3 246.9 (24.57) (3.27)
Operational Review
Business Solutions
Business Solutions has continued to focus on larger contracts which improve
utilisation and therefore margins. While revenues declined by 16% compared
with 2001 to �32.3m (2001: �38.6m) profit for the year before exceptional costs
was �1.0m, an increase of 10% compared to 2001. The general market for
Business Solutions remains highly competitive, and the Group's policy of not
pursuing business on which it cannot make a reasonable profit resulted in
revenues for the second half being lower than the first half. That position
has now stabilised and revenues have flattened out. The mainland Europe
business has benefited significantly from this focus, and has seen a
commendable improvement in performance to show flat revenues year on year, and
a loss of �0.8m in 2001 being reduced to a loss of �0.1m in 2002.
In the UK, revenues decreased by 19% to �26.6m (2001: �32.8m). Operating
profit decreased by 35% to �1.2m (2001: �1.8m). Market sectors in decline were
those most affected by the economy. The Communications Sector was down 93%,
Energy by 65% and Finance by 76%, as sales effort was moved to those sectors
with better prospects. Those sectors showing most growth were Government,
which increased by 6% and Commercial, which recorded an increase of 80%. The
Technical Authoring and Translation unit based in the UK, which relied to a
large extent on work from declining sectors, was closed and the residual
capability merged into mainstream units.
Margins continued the improvement made in the first half year as a result of
increased utilisation of permanent staff following a combination of headcount
reductions at the end of 2001 and in 2002. In addition, overheads have fallen
by 19% year on year as a result of the restructuring actions taken in the
second half of the year and tight control over discretionary expenditure.
Training
Our Training business unit grew revenues by 2% in an extremely tough market
which saw a number of its competitors shrink considerably or exit the market
altogether. This impressive performance was achieved through a change in the
sales mix, with a decline in the proportion of revenues generated from public
courses from 55% in 2001 to 49%, offset by an increase in in-house programmes
and bought in courses, both driven by the large training outsourcing contracts
won during the year, all of which came on-stream in quarters two and three.
These included Halifax Bank of Scotland, the Department of Work and Pensions,
Galileo and a large European hi-tech manufacturing and services group which
took total Training outsourcing revenues to �10m per annum under framework
agreements for the next two and a half years.
This has had an adverse impact on profitability in the short term as selling
costs and transition costs have been taken as incurred, and the transfer of
business from the previous suppliers to Parity needs to be phased over several
quarters. During this transfer process, Parity oversees the provision of
services by third party training and facility providers with whom the
outsourcing client has existing commitments. We have been working with these
outsourcing clients to accelerate the migration of their third party
commitments to Parity and by the fourth quarter we had already seen
considerable progress. This reduction in the proportion of revenues generated
from third party courses will result in a further increase in profitability
from these contracts in 2003.
One-off bid and infrastructure costs incurred in 2002 in winning these larger
outsourcing contracts were estimated to be in the region of �0.5m compared to �
nil in 2001. Despite these upfront costs outsourcing contracts provide a
strong foundation for future sales growth. We have already been asked to
increase the scope of the service that we provide to three of these clients and
expect revenues to continue to grow over the remainder of the contract period.
The outsourcing contracts also bring us greater visibility of future revenues.
Our own response to the reduced demand for public training was to improve
efficiency and reduce our overheads by consolidating our training space whilst
retaining our geographic footprint and realigning our headcount. In addition,
we have been reducing bought in costs by driving harder deals on direct costs
such as hotels and catering.
At the end of the year we carried out a fundamental restructuring of our sales
force to address the change in sales mix and improve selling efficiency. The
Division moved away from regional sales teams towards a single customer service
centre based in Leeds responsible for targeting the public course market and a
national sales team focused on relationship management.
Public training remains an important part of our market and we regularly review
the range of public courses we offer to ensure that they continue to satisfy
market needs. In spite of difficult trading conditions we have continued to
invest in our public courses, developing 124 new courses in the year and
refreshing and updating 50 existing courses.
We were delighted that our successes in 2002 were recognised when we won both
top prizes, Trainer of the Year and Training Company of the Year, awarded by
the Institute of IT Training in February 2003.
Also announced today is the signing by Parity Training of an initial agreement
to acquire Technical Training Limited, an Edinburgh based training company.
The consideration will be performance related, subject to a maximum of �0.7m in
cash and will be payable, based on business revenues, over thirty six months
from the date of acquisition. The acquisition will bring with it significant
new blue chip clients which will add to Parity's UK coverage.
Resourcing Solutions
Conditions in the staffing market remain very challenging. Revenues for the
business unit as a whole have declined by 30% year on year although second half
performance was only down by 17% compared to the same period in 2001.
Intense pressure on selling price and margins has resulted in a loss for the
year of �0.2m with losses in mainland Europe of �0.4m outweighing a profit of �
0.2m in the UK. The UK result includes a loss of �0.2m in respect of a sales
unit established at the end of 2001. A decision was taken to close down this
unit at the end of the year and the associated redundancy costs have been
included in the restructuring charge.
Further costs were removed from both the UK and mainland Europe operations
during the year in order to reduce the breakeven position in the face of
declining margins.
Under the partnership agreement with Chimes, details of which were separately
announced today, Chimes will assign existing contracts to Parity which
generated revenues of �15m in 2002.
Parity Americas
Our US business has been severely impacted by the downturn in the American
economy particularly given its reliance on the finance, IT and travel sectors.
In 2001 these sectors contributed 67% of total revenues. In 2002 this
increased to 71% but the absolute revenues earned decreased by 38% as clients
in these sectors cut their spending. Revenues from our largest client fell by
49%. We were particularly affected by the trend amongst banking and financial
institutions of converting contractors to permanent employees. We not only
lost the future revenue stream associated with these contractors but, in common
with market practice in the US, did not receive a conversion fee.
As in the UK there has also been severe pressure on margins which we have
countered as far as possible by reducing overheads. Annualised cost savings
arising as a result of this restructuring are estimated to be �0.5m.
In September 2002 we appointed a new Managing Director for this business unit
in order to drive an increase in Solutions sales thereby protecting the
deterioration in margins in our contractor business. We are pleased to
announce the award of a �1.0m applications design and development contract with
Renal Solutions Inc., a US supplier of dialysis products and services, building
on our experience in the Healthcare sector. We have also been selected as a
"Tier 1" vendor for consulting work at CitiGroup. This client has reduced from
an unlimited number of suppliers down to 19. The contract will not be fully
implemented until May 2003 but we expect to see a significant benefit in 2003
based on details of projected spend provided by the client.
Group Strategy
We announced at the time of our Strategy Review in May 2001 that the Group
would continue to develop its existing lines of business, each of which has a
clear strategy for its own market. In addition, we would seek to capitalise on
the combined strengths of the Group in two target markets - our Key Accounts,
and those segments open to value propositions that linked the capabilities of
two or more of the lines of business. That strategy appears to be working
well, despite the recession across the IT Services industry. 39% of Group
revenue in 2002 came from our top 20 accounts compared to 19% in 2000.
While the cooperation between lines of business has worked from an early stage,
the successes were in relatively small contracts. That changed in November
2002 when we were delighted to announce an �8.0m five year contract with the
Cabinet Office to redevelop, manage and operate candidate handling and
management for Fast Stream, the Civil Service's premiere graduate selection and
recruitment programme. This contract will involve all three of Parity's
service offerings, using the skills of Business Solutions to computerise the
application and candidate tracking procedure, the recruitment knowledge of
Resourcing Solutions to advise on the process, and the regional centres of
Training to run the assessment tests. We believe that a market is opening for
business process management in those aspects of HR that can benefit from better
technology. Parity is very well positioned to manage this type of opportunity
and will be actively pursuing this market space in 2003.
Current Trading and Outlook
In the last year we took strong and appropriate action to reduce our cost base
and have seen the benefits of the cost reductions implemented in 2001.
Benefits will also accrue from last year's new large contract wins, adding to
our existing blue chip customer base, and the revenue benefits of these
contracts are anticipated to be significantly larger in 2003 than in 2002. The
Group now has 41% of its budgeted 2003 revenues sold forward or expected under
framework agreements.
While the markets in which we operate are still uncertain and we are
disappointed to report a loss for the year, the Group's increasing security of
revenues, promising pipelines and lower cost base give us the confidence that
we will make good progress in 2003.
Group Profit and Loss Account
Before Before
exceptional Exceptional Total exceptional Exceptional Total
items items 2002 items items 2001
Notes �'000 �'000 �'000 �'000 �'000 �'000
Turnover 2 183,273 - 183,273 246,930 - 246,930
Operating (184,685) (3,603) (188,288) (242,789) (5,157) (247,946)
costs before
goodwill
Goodwill (1,385) - (1,385) (1,369) - (1,369)
amortisation
Impairment - (12,772) (12,772) - - -
of goodwill
Operating (186,070) (16,375) (202,445) (244,158) (5,157) (249,315)
costs
Operating (2,797) (16,375) (19,172) 2,772 (5,157) (2,385)
(loss)
profit
Amounts - (4,690) (4,690) - - -
written off
investment
Net interest (705) - (705) (880) - (880)
payable
(Loss) 2 (2,117) (8,293) (10,410) 3,261 (5,157) (1,896)
profit on
ordinary
activities
before
goodwill and
taxation
Goodwill (1,385) (12,772) (14,157) (1,369) - (1,369)
amortisation
and
impairment
(Loss) (3,502) (21,065) (24,567) 1,892 (5,157) (3,265)
profit on
ordinary
activities
before
taxation
Taxation (334) 691 357 (687) 858 171
credit
(charge) on
(loss)
profit on
ordinary
activities
(Loss) (3,836) (20,374) (24,210) 1,205 (4,299) (3,094)
profit on
ordinary
activities
after
taxation
Dividends 4 (393) - (393) (3,778) - (3,778)
Retained (4,229) (20,374) (24,603) (2,573) (4,299) (6,872)
loss for the
financial
year
All amounts are related to
continuing operations
Loss per 3
ordinary
share
- Basic (16.01p) (2.05p)
- (16.01p) (2.03p)
Diluted
(Loss) 3
earnings per
ordinary
share before
goodwill
amortisation
and
exceptional
items
- Basic (1.62p) 1.71p
- (1.62p) 1.68p
Diluted
Group Balance Sheet
2002 2001
Notes �'000 �'000
FIXED ASSETS
Intangible assets 10,245 24,380
Tangible assets 4,380 6,589
Investments 1,177 5,867
15,802 36,836
CURRENT ASSETS
Debtors 39,028 45,733
Cash at bank and in hand 3,608 5,948
42,636 51,681
CREDITORS: amounts falling due within one year (28) (4,014)
Variable rate loan notes payable (44,438) (33,307)
Other creditors
(44,466) (37,321)
NET CURRENT (LIABILITIES) ASSETS (1,830) 14,360
TOTAL ASSETS LESS CURRENT LIABILITIES 13,972 51,196
CREDITORS: amounts falling due after more than one - (12,000)
year
PROVISIONS FOR LIABILITIES AND CHARGES (2,364) (2,620)
NET ASSETS 11,608 36,576
CAPITAL AND RESERVES
Called up share capital 7,698 7,694
Capital redemption reserve 7 50 50
Share premium account 7 3,729 3,701
Other reserves 7 35,320 35,320
Profit and loss account 7 (35,189) (10,189)
EQUITY SHAREHOLDERS' FUNDS 11,608 36,576
Group Cash Flow Statement
2002 2001
�'000 �'000
NET CASH FLOW FROM OPERATING ACTIVITIES 3,874 10,067
BEFORE EXCEPTIONAL ITEMS
Exceptional items (3,075) (1,182)
NET CASH INFLOW FROM OPERATING ACTIVITIES 799 8,885
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 126 54
Interest paid (867) (833)
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING (741) (779)
OF FINANCE
TAXATION RECEIVED/(PAID) 508 (4,607)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (649) (3,230)
Sale of tangible fixed assets 531 92
Purchase of other investments - (729)
NET CASH OUTFLOW FROM CAPITAL (118) (3,867)
EXPENDITURE AND FINANCIAL INVESTMENT
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings - (1,921)
Net overdraft acquired with subsidiary undertaking - (575)
NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS - (2,496)
EQUITY DIVIDENDS PAID (2,676) (3,760)
NET CASH OUTFLOW BEFORE FINANCING (2,228) (6,624)
FINANCING
Issue of ordinary shares 29 199
Repayment of loan notes (3,986) (750)
Increase in borrowings 3,000 8,492
NET CASH (OUTFLOW) INFLOW FROM FINANCING (957) 7,941
(DECREASE) INCREASE IN CASH IN THE PERIOD (3,185) 1,317
Reconciliation of net cash flow to movement in net debt
2002 2001
�'000 �'000
(Decrease) increase in cash in the period (3,185) 1,317
Variable rate loan notes 2004 repaid 3,986 750
Increase in bank loans (3,000) (8,492)
Loan notes issued on acquisition of Prime Selection - (3,986)
Limited
Change in net debt resulting from cash flows in the (2,199) (10,411)
period
Exchange movements (122) (13)
Movement in net debt in the period (2,321) (10,424)
Net debt at 1 January 2002 (12,674) (2,250)
Net debt at 31 December 2002 (14,995) (12,674)
Reconciliation of Movements in Shareholders' Funds
2002 2001
�'000 �'000
Loss for the year attributable to shareholders (24,210) (3,094)
Dividends (393) (3,778)
Retained losses (24,603) (6,872)
Other recognised losses (394) (46)
Share options exercised - 63
Shares issued to QUEST 29 137
Shares issued to vendors - (9)
Net decrease in shareholders' funds (24,968) (6,727)
Equity shareholders' funds at start of year 36,576 43,303
Equity shareholders' funds at end of year 11,608 36,576
Statement of Total Recognised Gains and Losses
2002 2001
�'000 �'000
Loss for the year attributable to shareholders (24,210) (3,094)
Currency translation differences on foreign currency net (394) (46)
investments
Total recognised losses for the year (24,604) (3,140)
Notes to the Accounts
1. BASIS OF PREPARATION
The financial information for the year ended 31 December 2002 does not
constitute the full statutory accounts for the year. The results for the year
ended 31 December 2002 are an extract from the Company's statutory accounts.
These accounts have been reported on by the Company's auditors and will be
delivered to the Registrar of Companies in due course. The report of the
auditors was unqualified and did not contain a statement under section 237(2)
or (3) of the Companies Act 1985.
The results for the year ended 31 December 2001 are an extract from the
Company's statutory accounts for that year. Those statutory accounts have been
reported on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditors was unqualified and did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985.
Basis of Consolidation
The consolidated financial statements incorporate the results of Parity Group
plc and its subsidiary undertakings drawn up to 31 December each year.
2. SEGMENTAL ANALYSIS
The Group provides information technology services through its Business
Solutions, Training, Resourcing Solutions and Parity Americas business
segments.
2002 2001
Turnover Profit Net Turnover Profit Net
(loss) assets (loss) assets
�'000 �'000
before �'000 before �'000
taxation taxation
�'000 �'000
Business Solutions
United Kingdom 26,529 1,184 1,307 32,850 1,809 1,264
Mainland Europe 5,732 (128) 2,166 5,763 (850) 703
32,261 1,056 3,473 38,613 959 1,967
Training - United 27,138 65 616 26,563 1,681 2,915
Kingdom
Resourcing Solutions
United Kingdom 69,100 241 6,667 97,463 3,439 8,898
Mainland Europe 31,739 (468) 2,001 47,418 (628) 3,947
100,839 (227) 8,668 144,881 2,811 12,845
Parity Americas 23,035 618 1,409 36,873 2,573 2,993
Operating total 183,273 1,512 14,166 246,930 8,024 20,720
before central costs
Central costs (2,924) (3,883)
Net interest payable (705) (880)
Non-operating assets and (12,803) (8,524)
liabilities including
net debt
Before goodwill (2,117) 1,363 3,261 12,196
and exceptional items
Goodwill amortisation (1,385) (1,369)
Goodwill 10,245 24,380
Exceptional items (16,375) (5,157) -
Amounts written off (4,690) -
investments
183,273 (24,567) 11,608 246,930 (3,265) 36,576
Turnover and profit are stated on the basis of origin. There is no material
difference between turnover and profit by origin and by destination.
Turnover for Resourcing Solutions in the UK as shown above excludes �1,264,000
(2001: �1,016,000) of inter-segmental turnover. Turnover for Business
Solutions in the UK excludes �59,000 (2001: �nil) of inter-segmental turnover.
Turnover for Business Solutions in mainland Europe as shown above excludes �
97,000 (2001: �14,000) of inter-segmental turnover. Turnover for Training as
shown above excludes �107,000 of inter-segmental turnover (2001: �185,000).
Of the goodwill amortisation charge for the year �1,078,000 (2001: �1,078,000)
relates to Business Solutions (UK) and �307,000 (2001: �291,000) relates to
Resourcing Solutions (UK).
The Training business has not previously been reported separately from Business
Solutions. In recognition of the importance of the division within the Group,
Training has been shown as a separate segment and comparative amounts have been
restated accordingly.
3. EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue during the year, excluding those held in the Employee Benefit Trust which
are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has one class of dilutive potential ordinary shares: those
share options granted to employees where the exercise price is less than the
average market price of the Company's ordinary shares during the year; however
during the year the exercise price was greater than the average market price of
the companies ordinary shares and consequently the share options granted to
employees are excluded from the diluted EPS calculations.
2002 2001
(Loss) earnings per share (Loss) earnings per share
(Loss) (Loss)
earnings Basic Diluted earnings Basic Diluted
�'000 pence pence �'000 pence pence
Loss per ordinary (24,210) (16.01) (16.01) (3,094) (2.05) (2.03)
share
Exceptional items 20,374 13.47 13.47 4,299 2.85 2.81
Goodwill amortisation 1,385 0.92 0.92 1,369 0.91 0.90
(Loss) earnings per (2,451) (1.62) (1.62) 2,574 1.71 1.68
ordinary share before
goodwill amortisation
and exceptional items
Supplementary basic and diluted EPS have been calculated to exclude the effect
of goodwill amortisation and exceptional items. The adjusted numbers have been
provided in order that the effects of goodwill amortisation and exceptional
items on reported earnings can be fully appreciated.
The weighted average number of ordinary shares used in the calculation of basic
and diluted earnings per share is as follows:
2002 2001
Average Average
number number
i) Basic weighted average number of shares in issue 153,928,731 153,691,485
Adjustment for shares held by EBT (2,756,238) (2,756,238)
151,172,493 150,935,247
ii) Dilutive weighted average number of 153,928,731 153,691,485
shares in issue
Adjustment for share options - 1,785,392
Adjustment for shares held by EBT (2,756,238) (2,756,238)
151,172,493 152,720,639
The number of ordinary shares in issue at 31 December 2002 was 153,969,570
(2001: 153,882,905)
4. DIVIDENDS
The Directors have proposed a final dividend of 0.06p (2001: 1.57p) per
ordinary share, payable on 1 July 2003 to shareholders on the register at the
close of business on 30 May 2003.
5. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
2002 2001
�'000 �'000
Operating (loss) profit before exceptional items (2,797) 2,772
Depreciation of tangible assets 2,366 2,908
Amortisation of intangible assets 1,385 1,369
Loss on disposal of tangible assets 108 37
Decrease in debtors 6,748 12,349
Decrease in creditors (4,253) (11,638)
Increase in provisions 317 2,270
Net cash flow from operating activities before exceptional 3,874 10,067
items
The net cash outflow from exceptional items during the year was �3,075,000.
The cash outflow from exceptional costs incurred in 2002 was �1,466,000. Cash
outflows in 2002 relating to exceptional costs incurred in 2001 were �
1,609,000.
6. ANALYSIS OF NET DEBT
At Cash Exchange At
1 January Flow Movements 31 December
2002 �'000 �'000 2002
�'000 �'000
Cash at bank and in hand 5,948 (2,285) (55) 3,608
Overdrafts (2,608) (900) (67) (3,575)
3,340 (3,185) (122) 33
(12,000) (3,000) - (15,000)
Bank loans
(4,014) 3,986 - (28)
Variable rate loan notes 2004
(12,674) (2,199) (122) (14,995)
7. RESERVES
Capital Profit &
redemption Share Other loss
reserve Premium reserves account Total
�'000 �'000 �'000 �'000 �'000
At 1 January 2002 50 3,701 35,320 (10,189) 28,882
Shares issued to - 28 - (3) 25
QUEST
Retained loss for the - - - (24,603) (24,603)
year
Exchange adjustments - - - (394) (394)
At 31 December 2002 50 3,729 35,320 (35,189) 3,910
The cumulative amount of unamortised goodwill which has been taken to reserves
is �69,291,000 (2001:�69,291,000).
END
