RNS Number:6044I
Spring Group PLC
12 March 2003
SPRING GROUP PLC
SPRING RETURNS TO PROFIT IN H2 2002
Spring Group plc ("Spring"), the recruitment, workforce management and training
company, announces its preliminary results for the year ended 31 December 2002.
HIGHLIGHTS
* Return to profit in the second half of 2002
o Operating profit on continuing operations (before exceptional items and
goodwill) of #0.2 million in H2, 2002
o Profit on ordinary activities before taxation of #0.7 million in H2,
2002
* Generated cash of #5.4 million from trading activities in 2002 (2001:
#5.2 million use of cash)
* Further progress at new high-margin Triage and hy-phen businesses
* Spring IT Training achieved breakeven in Q4 2002
* Revenue growth of 13% in second half at Spring Personnel
* Central, IT and infrastructure costs (before exceptional items) of
#1.8 million in H2 2002 (H1: #2.8 million)
* Net cash at year end of #51.7 million, representing 34.3p per share
(31 December 2001: #53.0 million)
Eight months
Six months to Year ended 31 ended 31
31 December December December
2002 2002 2001*
#m #m #m
Turnover from continuing operations 144.9 293.3 220.9
Operating profit/(loss) from continuing
operations before goodwill amortisation and
exceptional items 0.2 (3.1) (6.2)
Profit/(loss) on ordinary activities before
taxation 0.7 (8.8) (15.0)
Profit/(loss) per share 0.46p (5.93p) (9.15p)
* 2001 comparatives are for the eight months ended 31 December 2001, following
the change in year end announced in May 2001.
Richard Barfield, Spring's Chief Executive Officer, commented:
"Spring has made significant progress in 2002, trading cash positively for the
year as a whole and returning to profit in the second half of the year.
Although market conditions remain challenging, Spring's financial resources and
broad range of staffing and training offerings position Spring to continue its
turnaround and to deliver improved shareholder value."
For further information please contact:
Richard Barfield, CEO, Spring Group plc 0207 452 7644
Ben Atwell, Financial Dynamics 0207 831 3113
Further information on Spring can be found at www.spring.com
CHAIRMAN'S STATEMENT
The results for the second half of 2002 marked a return to profit after several
periods of losses. Spring's financial and operating results continued to
improve, building on the turnaround which we began in the first half.
In the first half of 2002, the focus was on the restructuring and refocusing of
the Group. This included the appointment of new management with a focus on
Spring's core businesses; the closure of our loss-making start-ups in web-based
recruitment and in the USA; the halving of our central, IT, and infrastructure
costs; and the improvement of our overall portfolio mix through the acquisition
of Triage Limited. We also achieved further success with the hy-phen workforce
management service, announcing a number of major new contracts.
In the second half of 2002 we continued to build on this and, after several
periods of losses with significant levels of exceptional items, we are reporting
a profit on continuing operations, no net exceptional items and an overall
profit before tax. Although market conditions remained challenging, the positive
trends were continued with further improvements to the revenue mix through the
growth of our permanent, vertical markets and spot businesses in IT staffing,
revenue growth in general staffing and the achievement of breakeven in the final
quarter in our IT training business.
Spring's improved results during the second half of 2002 have been achieved
through the hard work and dedication of our staff, who have demonstrated
exceptional commitment in a period of global economic uncertainty, competitive
challenge in our sector and significant change within Spring. I would like to
take this opportunity to place on record the appreciation of the Board and
shareholders for all their efforts.
Steven Fink
Chairman
12 March 2003
CHIEF EXECUTIVE OFFICER'S REVIEW
INTRODUCTION
During the first half of 2002 Spring took actions to position itself to return
to profit and to become the UK's leading IT staffing company. In the second half
of 2002 there was further progress on each of these objectives.
Firstly, the Group achieved profitability in the second half of 2002, as set out
below:
# million 6 months to 6 months to Year ended
31 December 2002 30 June 2002 31 December 2002
Turnover 144.9 148.4 293.3
Operating profit/(loss) * 0.2 (3.3) (3.1)
Profit /(loss) before tax 0.7 (9.5) (8.8)
* Before exceptional items and goodwill amortisation.
During the second half of 2002, Spring also reported no net exceptional items.
Secondly, the relative resilience of our IT staffing contractor numbers, the
successful integration of the Triage specialist skills business acquired in May
2002 and further contract wins for the hy-phen workforce management service
represent significant further steps towards our goal of becoming the UK's
leading IT staffing company.
At the same time, Spring Personnel, our general staffing business, reported
increased revenues in the second half of 2002 whilst Spring IT Training achieved
a breakeven in the final quarter of 2002.
GROUP RESULTS
IT STAFFING
The operating results, before exceptional items and goodwill amortisation, for
IT Staffing for the period comprise the following:
# million Year ended 31 December Eight months ended 31 December
2002 2001
Operating Operating
Revenue profit / (loss) Revenue profit / (loss)
______ ______ ______ ______
Spring IT Personnel 198.8 2.2 154.6 2.0
Triage 16.2 (1.0) 9.0 (0.5)
Spring IT Solutions 8.4 0.6 6.3 0.3
______ ______ ______ ______
#223.4m #1.8m #169.9m #1.8m
______ ______ ______ ______
Spring IT Personnel
Key operating metrics remained stable in Spring IT Personnel in the second half
of 2002 and Spring IT Personnel consolidated its position as one of the UK's
largest suppliers of contract and permanent IT staff to the corporate sector.
Whilst market conditions continued to be challenging, with continued downward
pressure on contractor numbers, permanent placements and billing rates, Spring
IT Personnel maintained its contractor numbers over 2,500 and in a declining
market enhanced its overall market share. Combined with further action to align
the cost base, this yielded an overall improvement in profitability with an
increase from #1.0 million in the first half of 2002 to #1.2 million in the
second half of 2002.
Triage
Following the acquisition of Triage Limited in May 2002 and its integration with
SpringConnect, the merged business trading as Triage is leading Spring's
strategic thrust into high-margin specialist technology recruitment. Triage's
specialised market knowledge provides fast and cost-effective resourcing of IT
specialists in scarce leading-edge technologies which are in high demand. In
the second half of 2002 the business grew to over 250 contractors on placement
generating annualised revenues of around #22 million, and the merged business
traded at close to break-even in the second half of the year.
Spring IT Solutions
During the second half of the year, actions were taken to focus Spring IT
Solutions on the provision of employed consultants for application management
services and IT outsourcing to large corporate users of IT. These services are
now being offered to Spring's IT staffing customer base. As a result, operating
profits (before exceptional items and goodwill amortisation) increased to #0.5
million in the second half (H1 2002: #0.1 million).
HY-PHEN
hy-phen reported turnover in 2002 of #0.3 million (eight months ended 31
December 2001: #nil) and operating losses (before exceptional items and goodwill
amortisation) of #1.3 million (eight months ended 31 December 2001: #0.9
million).
hy-phen, which combines Spring's unique proprietary technology and staffing
industry expertise into a managed service, has rapidly established a strong
position in this emerging market in the UK. hy-phen now has over #4.5 million
of contracted revenues and manages over #230 million of contract spend with blue
chip clients including Barclays Bank, Royal Mail and National Grid, and recently
announced a further contract with Cogent Defence and Security Networks Limited.
SPRING IT TRAINING
Spring IT Training, a leading provider of applications and professional IT
training and services, reported turnover of #16.5m in the year (eight months
ended 31 December 2001: #12.1 million) and operating losses (before exceptional
items and goodwill amortisation) of #1.5 million (2001: #2.1 million).
Spring IT Training continued to improve its financial performance despite
difficult market conditions. Revenue declined by 5% compared to the 12 months
ended 31 December 2001, in a market which fell by around 20%. Trading in Q3 was
difficult but a strong Q4 saw revenues up by 4% on Q4 2001 with a breakeven
result.
Throughout the year there was a strong focus on cost control with overhead costs
reduced by more than 25% on 2001 and operating losses reduced to #1.5 million
compared with a loss of #5.4 million for the 12 months ended 31 December 2001.
During the first part of 2003 we have continued to win important new contracts,
including the UK's largest-ever e-learning contract with the National Health
Service; this will be formally launched on 21 March, with a significant take-up
expected. Discussions are under way with other Government departments to use
this solution. In a recent initiative Hewlett Packard has appointed Spring as
one of two training partners in the UK. The investment made in 2002 to develop
the course portfolio is expected to generate growth in our public courses
business.
SPRING PERSONNEL
Spring Personnel, the group's general staffing business, reported turnover of
#53.1 million in the period (eight months ended 31 December 2001: #38.9 million)
and operating profits (before exceptional items and goodwill amortisation) of
#2.6 million (2001: #2.0 million).
Although conditions in the general staffing market continued to be challenging,
particularly for permanent placements, Spring Personnel improved its revenues in
the second half by 13% over the first half, and finished the year with over
4,400 temporary staff on placement, over 10% higher than any previous period.
In addition, all branches were trading profitably. The company has signed its
first contract for a web-based recruitment outsourcing service, and won several
major new contracts for the supply of temporary staff.
Discontinued operations
The loss on discontinued operations of #1.0 million (eight months ended 31
December 2001: #2.0 million) relates to the Group's US IT staffing start-up
operation, which was closed in the first half of the year. All costs associated
with the closure were accounted for within the six months ended 30 June 2002.
Central costs
Spring has taken firm action to reduce central costs in 2002, with a reduction
from #7.0 million in the eight months ended 31 December 2001 to #4.6 million in
the year to 31 December 2002, and from #2.8 million in the first half of 2002
to #1.8 million in the second half.
Exceptional items
Operating exceptional items of #4.6 million (eight months ended 31 December
2001: #4.3 million) include property reorganisation costs (#2.7 million) and
reorganisation and redundancy and other costs (#1.9 million).
Earnings/(loss) per share
During the second half of 2002, earnings per share was 0.46p. For 2002 as a
whole, the loss per share was 5.93p (eight months ended 31 December 2001:
9.15p).
Balance sheet and cash flow
In the year to 31 December 2002, the Group became cash generative, with positive
cash from trading activities of #5.4 million (eight months ended 31 December
2001: #5.2 million use of cash). At 31 December 2002 Spring had net funds of
#51.7 million representing 34.3p per share (31 December 2001: #53.0 million,
35.2p per share). The net assets of the Group were #76.0 million (31 December
2001: #84.9 million).
Capital and reserves in the parent company balance sheet and those of Group
subsidiaries have been restructured during the year, to enable subsidiary
companies' accounts to reflect properly capitalised balance sheets and to
eliminate profit and loss account deficits.
Proposed dividend
A final proposed dividend of 0.1p (2001: 0.1p) will be payable to shareholders
on the register on 21 March 2003 and will be paid on 31 May 2003.
CURRENT TRADING AND PROSPECTS
Spring has made significant progress in 2002, trading cash positively for the
year as a whole and returning to profit in the second half of the year.
Although market conditions remain challenging, Spring's financial resources and
broad range of staffing and training offerings position Spring to continue its
turnaround and to deliver improved shareholder value.
Richard Barfield
Chief Executive Officer
12 March 2003
Spring Group plc
Group profit and loss account
For the year ended 31 december 2002
Before Exceptional Goodwill
exceptional items amortisation
items and
goodwill
amortisation
Notes #000 #000 #000
______ ______ ______
Turnover
Continuing operations -
ongoing 286,426 - -
Continuing operations -
acquisitions 6,904 - -
______ ______ ______
Total turnover 1 293,330 - -
______ ______ ______
Cost of sales (251,218) - -
______ ______ ______
Gross profit 42,112 - -
Net operating expenses (46,193) (4,616) (1,457)
______ ______ ______
Operating loss 1 (4,081) (4,616) (1,457)
______ ______ ______
Operating loss
Continuing operations -
ongoing (3,194) (3,828) (1,123)
Continuing operations -
acquisitions 77 (245) (334)
______ ______ ______
Total continuing (3,117) (4,073) (1,457)
operations
Discontinued (964) (543) -
operations
Operating loss 1 (4,081) (4,616) (1,457)
______ ______ ______
Additional profit on
disposal of subsidiary
in prior years
Loss on disposal of
fixed assets -
continuing operations
Loss on disposal of
fixed assets -
discontinued
operations
Loss on ordinary
activities before
interest and taxation
Interest receivable
Amounts written off
fixed asset
investments
Interest payable
Loss on ordinary
activities before
taxation
Taxation
Loss for the financial
period
Dividends
Transfer from reserves 5
Basic and diluted loss 3
per share
Dividends per share 8
Group profit and loss account
For the year ended 31 december 2002 (continued)
Year Period
Ended Ended
31 December 31 December
2002 2001
(note 7)
#000 #000
______ ______
Turnover
Continuing operations - ongoing 286,426 220,916
Continuing operations - acquisitions 6,904 -
______ ______
Total turnover 293,330 220,916
______ ______
Cost of sales (251,218) (189,405)
______ ______
Gross profit 42,112 31,511
Net operating expenses (52,266) (45,799)
______ ______
Operating loss (10,154) (14,288)
Operating loss
Continuing operations - ongoing (8,145) (10,968)
Continuing operations - acquisitions (502) -
______ ______
Total continuing operations (8,647) (10,968)
Discontinued operations (1,507) (3,320)
Operating loss (10,154) (14,288)
______ ______
Additional profit on disposal of subsidiary in prior years 367 -
Loss on disposal of fixed assets - continuing operations (558) -
Loss on disposal of fixed assets - discontinued operations (132) -
______ ______
Loss on ordinary activities before interest and taxation (10,477) (14,288)
Interest receivable 1,812 1,575
Amounts written off fixed asset investments - (2,257)
Interest payable (175) (51)
______ ______
Loss on ordinary activities before taxation (8,840) (15,021)
Taxation 192 1,675
______ ______
Loss for the financial period (8,648) (13,346)
Dividends (292) (292)
Transfer from reserves (8,940) (13,638)
______ ______
Basic and diluted loss per share (5.93p) (9.15p)
Dividends per share 0.2p 0.2p
Spring Group plc
BALANCE SHEETS
AS AT 31 DECEMBER 2002
Group Company
31 31 31 31
December December December December
2002 2001 2002 2001
Notes #000 #000 #000 #000
______ ______ ______ ______
Fixed assets
Intangible assets 2,567 1,123 - -
Tangible assets 4,925 7,044 259 1,381
Investments 3,656 3,656 70,624 100,349
______ ______ ______ ______
11,148 11,823 70,883 101,730
Current assets
Stock 182 180 - -
Debtors 49,644 57,804 5,045 27,491
Investments 972 41,043 968 41,036
Cash at bank and in hand 51,672 13,495 33,452 21,689
______ ______ ______ ______
102,470 112,522 39,465 90,216
Creditors-amounts falling due within
one year (34,443) (37,216) (4,470) (5,869)
______ ______ ______ ______
Net current assets 68,027 75,306 34,995 84,347
______ ______ ______ ______
Total assets less current liabilities 79,175 87,129 105,878 186,077
Provisions for liabilities and charges (3,185) (2,231) (580) (1,400)
______ ______ ______ ______
75,990 84,898 105,298 184,677
______ ______ ______ ______
Capital and reserves
Called up share capital 15,077 15,077 15,077 15,077
Share premium 9,539 9,539 9.539 9,539
Merger reserve 11,406 16,440 - 15,516
Special reserve - 38,984 - 121,948
Profit and loss account 39,968 4,858 80,682 22,597
______ ______ ______ ______
Equity shareholders' funds 5 75,990 84,898 105,298 184,677
______ ______ ______ ______
Spring Group plc
GROUP CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2002
Year ended Period ended
31 December 31 December
2002 2001 (note 7)
Notes #000 #000
______ ______
Net cashflow from trading activities 5,418 (5,203)
Outflow relating to exceptional items (5,487) (2,824)
______ ______
Net cashflow from operating activities 4 (69) (8,027)
Returns on investments and servicing of finance 1,764 1,579
Taxation 1,553 664
Capital expenditure and financial investment (1,416) (1,950)
______ ______
1,832 (7,734)
Acquisitions and disposals (2,740) (6)
Equity dividends paid (454) (291)
______ ______
Net cashflow before management of liquid resources
and financing (1,362) (8,031)
Management of liquid resources 40,068 17,174
Financing (101) (42)
______ ______
Increase in cash for the period 38,605 9,101
______ ______
Spring Group plc
Group cashflow STATEMENT - continued
Reconciliation of net cashflow to movements in net funds
Year ended Period ended
31 December 31 December
2002 2001 (note 7)
#000 #000
______ ______
Increase in cash 38,605 9,101
Cashflow from management of liquid resources (40,068) (17,174)
Cash outflow from change in other debt 101 42
______ ______
Change in net funds resulting from cashflows (1,362) (8,031)
Loans and finance leases acquired with subsidiaries (32) -
New finance leases - (6)
Exchange differences 32 (31)
______ ______
Change in net funds in the period (1,362) (8,068)
Net funds brought forward 53,029 61,097
______ ______
Net funds carried forward 51,667 53,029
______ ______
Analysis of net funds
31 December Other 31 December
2001 Cashflow movements 2002
#000 #000 #000 #000
______ ______ ______ ______
Short term cash deposits 41,036 (40,068) - 968
Cash at bank and in hand 13,495 38,145 32 51,672
Overdrafts (460) 460 - -
Debt due within one year (1,036) 63 - (973)
Finance leases (6) 6 - -
______ ______ ______ ______
53,029 (1,394) 32 51,667
______ ______ ______ ______
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 2002
Year ended Period ended
31 December 31 December
2002 2001 (note 7)
#000 #000
______ ______
Loss for the period (8,648) (13,346)
Exchange differences on retranslation of net assets of
subsidiary undertakings 32 (31)
______ ______
(8,616) (13,377)
______ ______
Spring Group plc
Notes to the PRELIMINARY Results
1. Segmental information
TURNOVER
Year ended Period ended
31 December 31 December
2002 2001
#000 #000
______ ______
IT Staffing 223,391 169 918
hy-phen 277 -
IT Training 16,515 12,112
Spring Personnel 53,147 38,886
Total continuing operations 293,330 220,916
______ ______
OPERATING PROFIT (LOSS)
Year ended 31 December 2002
Before
exceptional
items and Exceptional
goodwill items Goodwill
amortisation (Note 2) amortisation Total
#000 #000 #000 #000
______ ______ ______ ______
IT Staffing 1,753 (3,089) (1,068) (2,404)
hy-phen (1,310) - (371) (1,681)
IT Training (1,536) (35) (18) (1,589)
Spring Personnel 2,575 - - 2,575
Central costs (4,599) (949) - (5,548)
______ ______ ______ ______
Continuing operations (3,117) (4,073) (1,457) (8,647)
Discontinued
operations (964) (543) - (1,507)
Total (4,081) (4,616) (1,457) (10,154)
______ ______ ______ ______
OPERATING PROFIT (LOSS) - CONTINUED
Period ended 31 December 2001
Before
exceptional
items and Exceptional
goodwill items Goodwill
amortisation (Note 2) amortisation Total
#000 #000 #000 #000
______ ______ ______ ______
IT Staffing 1,769 (2,233) (1,508) (1,972)
hy-phen (900) - (212) (1,112)
IT Training (2,094) (150) - (2,244)
Spring Personnel 1,987 (85) - 1,902
Central costs (7,007) (535) - (7,542)
______ ______ ______ ______
Continuing operations (6,245) (3,003) (1,720) (10,968)
Discontinued operations
(2,021) (1,299) - (3,320)
______ ______ ______ ______
Total (8,266) (4,302) (1,720) (14,288)
______ ______ ______ ______
The prior year segmental information has been restated in respect of US IT
Staffing, which has been discontinued in the current year and hy-phen, which is
analysed as a separate business line.
NET ASSETS
31 December 31 December
2002 2001
Analysis by class of business #000 #000
Trading net assets (liabilities)
IT Staffing 17,371 24,871
hy-phen 61 84
IT Training 103 441
Spring Personnel 4,229 5,944
Head office (519) (2,553)
Discontinued operations - (1,203)
______ ______
Total trading net assets 21,245 27,584
Non-trading net assets (liabilities)
Net funds 51,667 53,029
ESOP investment 3,656 3,656
Dividends (146) (308)
Taxation (432) 937
______ ______
Total 75,990 84,898
______ ______
2. Exceptional items
Year ended Period ended
31 December 31 December
2002 2001
#000 #000
______ ______
Property reorganisation costs 2,744 2,009
Reorganisation and redundancy costs 1,845 2,293
Other costs 27 -
______ ______
4,616 4,302
______ ______
3. Loss per share
The calculation of basic loss per share is based on the weighted average number
of shares in issue during the period of 145,927,191 (31 December 2001:
145,927,032).
Year ended Period ended
31 December 31 December
2002 2001
#000 p per share #000 p per share
______ ______ ______ ______
Basic and diluted loss per share (8,648) (5.93) (13,346) (9.15)
______ ______ ______ ______
The weighted average number of shares for the calculation of the diluted loss
per share is the same as that for the basic loss per share as the exercise of
share options would have the effect of reducing the loss per ordinary share and
is therefore not dilutive under the terms of FRS14.
4. Reconciliation of operating loss to operating cashflows
Year ended Period ended
31 December 31 December
2002 2001
#000 #000
______ ______
Operating loss (10,154) (14,288)
Profit on sale of fixed assets (18) (76)
Depreciation and amortisation 4,192 3,678
Provision for employee share option entitlement - 90
Increase in stocks (2) (29)
Decrease in debtors 9,158 8,911
Decrease in creditors (4,199) (7,014)
Increase in provisions for liabilities and charges 954 701
______ ______
Net cashflow from operating activities (69) (8,027)
______ ______
5. Reconciliation of movements in shareholders' funds
Year ended Period ended
31 December 31 December
2002 2001
#000 #000
______ ______
Loss for the period (8,648) (13,346)
Dividends (292) (292)
______ ______
(8,940) (13,638)
Other movement on reserves - exchange differences 32 (31)
______ ______
Net change to shareholders' funds (8,908) (13,669)
Opening shareholders' funds 84,898 98,567
______ ______
Closing shareholders' funds 75,990 84,898
______ ______
6. Basis of preparation
The preliminary announcement has been prepared on the basis of the accounting
policies set out in the most recently published financial statements of the
Group for the period ended 31 December 2001, with the exception of the
implementation of FRS 19 "Deferred Tax". During the year ended 31 December 2002
the Group implemented FRS 19 "Deferred Tax", which requires full provision for
deferred tax. The results of the Group are unchanged as a result of
implementing this standard.
The financial information set out in this announcement with regard to Spring
Group plc and its subsidiaries does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act. Statutory accounts for the Group
for the period ended 31 December 2001, upon which the auditors have reported
without qualification, have been delivered to the Registrar of Companies.
7. Change of year end
On 17 May 2001 the Company changed its statutory year end to 31 December. The
prior period comparative balances are the balances for the eight month period to
31 December 2001.
8. Dividend
The proposed final dividend will be payable to shareholders on the register on
21 March 2003 and will be paid on 31 May 2003.
9. Date of approval of Preliminary Announcement
The preliminary announcement covers the period 1 January 2002 to 31 December
2002 and was approved by the Board on 12 March 2003.
The report and accounts will be sent to shareholders in due course. Further
copies will be available from the Company's registered office, Burlington House,
20 Barrington Road, Altrincham, Cheshire WA14 1HH, and can be accessed on the
Spring Website, www.spring.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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