Turbulent Year For Pinnacle
Pinnacle Staffing has announced its final results for 2008 and in the words of Chairman, Tom Charlton The Group has had a turbulent year.
Tom Charlton, Chairman's Statement:
The Group has had a turbulent year with a new Board being appointed in September 2008 to address the challenges faced by the Group. Despite a broadly favourable market background, the Group had not been well-placed to serve its markets due to a legacy of underinvestment in its branch structure, excessive central overheads and a lack of focus on the core elements necessary for a modern healthcare recruitment business. Pinnacle owns one of the best brand names in the healthcare industry, BNA, with 60 years of proud service to the NHS, but the brand had become neglected and treated as just another trading name within the business. The initial focus of the new Board has therefore been to promote the BNA brand with a new logo, resources made available for advertising and the commitment to develop the branch structure with new branches to be established and existing ones expanded. Pinnacle also owns other nursing brands, and although individually they are not as renowned as BNA, they will have their part to play in driving Pinnacle's return to growth. Likewise in medical services, we have valuable brand-names which have not been developed and where there is scope for establishing successful trading businesses.
The results presented are for the 52 weeks ended 4th January 2009, and the comparative figures for the 53 weeks ending 6th January 2008. Group revenue for the period amounted to 38.1m (2007: 43.5m) a decrease of approximately 12%. Gross margins increased slightly to 19% (2007: 18.8%) mainly due to the revision of the Group's non-NHS charge rates, despite the lower margins available on the London and Regional Nursing Frameworks and generally lower margins within the Medical Services Division. Total gross profit achieved was 7.3m (2007:8.2m).
EBITDA was a loss of 362k (2007: Profit 186k).The operating loss was 6,974k (2007: 461k), finance charges were 244k (2007: 172k) the taxation credit was 132k (2007: Charge 71k),total depreciation and amortisation of intangible assets was 683k (2007: 647k), total impairment of goodwill and intangible assets was 5,929k (2007: nil) and retained loss after tax was 7.1m (2007: 704k).
There has been significant expenditure on the implementation of a new IT network infrastructure and a new billing and payroll system to replace those previously provided by Nestor. The costs of these systems have been a heavy drain on the Group's cash resources and the full cost of installation which amounted to approximately 401k has been expensed in the financial year just ended. There was a cash outflow of 281k during the year (2007: 684k). Closing net borrowings were 2.2m (2007: 1.9m).
The Group's core Nursing Division which includes its key brand, the British Nursing Association, (BNA) broadly maintained its revenue with sales for the year of 31.5m (2007: 30.4m). Medical Services has seen a substantial fall in revenue to 6.6m (2007: 13.0m) caused principally by the withdrawal from the NHS North Central London Master Vendor Agreement for the supply of allied health professionals. The Transitional Services Agreement under which the Group purchased IT, billing and payroll services from Nestor ended during the year.
The Group continues to trade within its existing bank facilities and remains in compliance with its banking covenants. I gave a personal guarantee during the year at the request of our bankers to support the Group's invoice discounting facility. This guarantee was to provide additional security to our bankers as a condition of temporarily relaxing the minimum headroom requirements under the facility. Due to the forecast growth in revenue, it is anticipated that this guarantee will no longer be required by the end of May 2009. The Group's current invoice discounting facility expires in September 2009 and discussions regarding renewal with our bankers have already commenced with neither party being aware of any reason why, at the current time, these facilities will not be renewed.
During the year, there have been a number of Board changes. In January 2008 Julie Greenwood took the decision to relinquish her role as Chief Executive. She was replaced by Jacqui Skinner who later stepped down in September 2008. The Non-Executive Chairman, Richard Aitken-Davies and Non-Executive Directors Trevor Jones and Ewan Gowrie also resigned in September 2008. Having been appointed as a Non-Executive Director, I was appointed to the role of Executive Chairman in September 2008 to oversee the day-to-day operational management of the business and to ensure that the Company's strategy was effectively delivered. David Hope was appointed Chief Operating Officer in September 2008 and also to the position of Finance Director in December 2008 when David Laing resigned his position. John Hodges was appointed a Non-Executive Director in September 2008 and in January 2009 Lynn Young was also appointed as a Non-Executive Director.
The Board currently consists of a two man executive team with two non-executive directors. In view of the demands of the business and the need to provide continued stability and clear leadership, it has been agreed that I will now remain as Executive Chairman for the foreseeable future. However the Board is delighted to announce that John Hodges has been appointed to the position of Deputy Chairman. It is essential for the growth of the business that day-to-day decisions are taken swiftly in an entrepreneurial environment while at the same time the executives have access to the commercial and nursing expertise of the non-executives. The current Board structure works well and provides leadership to the business.
There are tremendous opportunities for the Group to take advantage of its portfolio of brand-names in the healthcare recruitment industry. BNA is undoubtedly still held in affection by many nurses although the decline in its revenue over the last few years has led many to believe that it has disappeared from the industry. Our success in being appointed as the primary supplier of agency nurses for Acute Trusts within the Bristol, Bath, Gloucester and Weston Collaborative shows that it is still a powerful brand which can be reinvigorated with the right investment and hard work to re-establish its brand credentials. Our other brands have also faded from their past glories. However with the right market positioning and investment in people and processes, they too can recover and become valuable profit contributors. Already a new management team has breathed new life into our doctors recruitment business and we are constantly looking for new opportunities to develop our medical services offering.
I am confident that 2009 will see both a significant increase in revenue and a return to profitability for the Group. The Board shares my belief that the potential of the Group is such that we should be looking at a time scale of the next four years to restore Pinnacle to being a successful and leading healthcare recruitment business which we can all be proud of. I would like to thank our staff, my fellow Directors, our healthcare workers and our clients, bankers and shareholders for their support over the last year as we look forward to an exciting 2009 as we start to grow the business again.