Servoca Turns Around 7.2 Million Loss
SERVOCA Plc Has Announced Its Financial Results For the year ended 30 September 2009
Group revenues up by 37.1% to 57.6 million (2008: 42.0 million)
Gross profit up by 32.3% to 16.8 million with margins of 29.2% (2008: 12.7 million with margins of 30.3%)
Profit before tax of 2.2 million before share based payment expense of 0.3 million (2008: loss before tax of 1.0 million before exceptional charges of 6.1 million)
Profit after tax of 2.0 million (2008: loss 7.2 million)
Basic earnings per share 2.50p (2008: loss per share 16.13p)
Net debt reduced from 7.5 million in 2008 to 3.4 million in 2009
Cash generated from operations 3.3 million (2008: cash utilised 2.2 million)
Loss making businesses terminated and major restructure programme completed
5 million placing undertaken in March 2009
For the year ended 30 September 2009, Servoca Plc is pleased to report its maiden set of full year profits.
As reported in our Interim Statement for the six months ended 31 March 2009 the business implemented a major restructuring and cost reduction exercise in the first half of the year. This involved the appointment of a new Group Chief Executive, the exit from poorly performing businesses and a reduction in overhead expenditure.
The focus on improved operational management and profit maximisation from existing businesses has delivered strong organic growth and is reflected across all areas of the Group's financial performance, with the results for the year ended 30 September 2009 being comfortably ahead of expectations.
For the year ended 30 September 2009, Group revenue was 57.6 million compared with 42.0 million in the previous year, an increase of 37.1%. Gross profit for the year was 16.8 million against 12.7 million for the year ended 30 September 2008, an increase of 32.3%.
Operating profit for the year was 2.6 million (before share based payment expense of 0.3 million) compared with an operating loss in the prior year of 6.7 million (after goodwill impairment of 3.1 million, exceptional costs of 3.0 million and share based payment expense of nil).
The Group's profit (after interest, before tax and share scheme charges) was 2.2 million compared to a prior year loss (after interest, before tax and exceptional charges) of 1.0 million.
In March 2009, the share capital of the Company was restructured by the sub division of each 10p share in the company into one new 1p ordinary share and one new 9p deferred share. The Company also raised 5.0 million, before expenses, through a placing of 62.5 million ordinary 1p shares at a price of 8p each. Full details of the movement in share capital are disclosed in note 6 to this preliminary announcement.
In July 2009, the Company settled the deferred consideration on the acquisition of Academics Holdings Limited. Additional cash of 2.35 million was paid and 7.6 million new ordinary shares of 1p each were issued to the vendors.
The basic earnings per share for the year were 2.50p compared with a loss per share of 16.13p for the year ended 30 September 2008.
Net debt reduced from 7.5 million at September 2008 to 3.4 million at September 2009.
Cash generated from operations in the year was 3.3 million (September 2008: cash utilised 2.2 million).
Acquisitions / Closed Businesses
On 28 January 2009 Windsor Recruitment & Training Limited was put into administration due to poor trading conditions and losses suffered in the Company's training division and on 9 February 2009, Salus Recruitment Limited was also put into administration.
An arm's length transaction was entered into with the administrators of Windsor Recruitment & Training Limited to acquire the business and certain assets of the healthcare division of that company.
Strategy and delivery
Our strategy remains unchanged and is to focus on growth in our existing three principal markets of Education Recruitment, Healthcare Recruitment, and Secure Solutions. The management team remains focused on profit delivery and realising the Group's potential, the Board will consider acquisition opportunities where it believes shareholder value can be enhanced.
Our Healthcare recruitment business operates through five distinct brands, Firstpoint, Servoca Nursing and Care, Triple West Medical, Pure Medical and The Locum Partnership. These businesses supply a broad spectrum of skills including Allied Health Professionals, Doctors, Nurses, Care Workers and other associated specialisations. This allows us to offer a complete service by having the ability to cover all major staffing disciplines within this sector.
Our businesses in this area experienced strong trading conditions and performance. We reported in our Interim Statement for the six months ended 31 March 2009 that we had taken action to substantially reduce the cost base with a belief that such a reduction would not impact on gross margin. We are pleased to report that this has proved the case and that performance across all financial metrics was improved in the second half despite the rationalisation of certain offices/businesses. Because of the reduced overhead, an increase in gross margin in the second half translated into a significant improvement to net profitability.
Healthcare recruitment (continued):
In July 2009, Servoca Nursing and Care and Firstpoint were awarded a place on the NHS framework agreement for the supply of nurses to all NHS bodies in England and selected parts of the UK. This agreement started after the year end and runs for three years, it means that these businesses are authorised and approved to supply all grades of nursing personnel to the NHS. This contract win will initially impact margins but is expected to yield a substantial uplift in the volume of opportunities available to these businesses over the medium to longer term.
The healthcare sector remained resilient in the second half and trading conditions remain robust.
Our Education recruitment business operates through three brands, Academics, Day to Day Teachers and Dream Education.
Academics was acquired in 2008 and the business has performed strongly since being incorporated into the Group and made a significant contribution to the Groups performance over the year. Academics operates as an education recruitment and training provider which supplies education professionals on a contract or permanent basis to clients in London and the Home Counties.
Dream Education provides long term teaching professionals to schools across the UK, mostly within secondary schools. Historically this business has focused exclusively on the supply of overseas candidates but is now focusing on the supply of UK trained professionals. Changes to work permit regulations have affected our ability to supply overseas teachers on a temporary basis and hence the prioritisation of attracting an increased UK based candidate flow.
Day to Day Teachers is our education recruitment business that provides supply teachers and classroom assistants to cover short-term periods of absence within schools.
In our Interim Statement we confirmed that the sector was proving resilient to the economic climate and relative to other sectors this remains the case. Performance over the second half was robust and made a significant contribution to the Group's overall profitability.
Our Security Division - Secure Solutions - incorporates two main business areas corporate security services and criminal justice operations. Our corporate security offering comprises manned guarding, systems services and a corporate investigations unit that engages in a variety of sensitive and highly specialist activities. Our criminal justice operation provides resourcing, training and outsourcing services to a majority of police constabularies throughout the UK. This area also provides investigative skills and services to a range of local and central government authorities.
Our Criminal Justice business performed creditably over the year but our corporate security business faced greater challenges given its exposure to the private sector economy. Given these challenges we implemented a number of cost saving initiatives in the first half that were intended to sustain an efficient business capable of delivering improved profitability going forward. We are pleased to report that we have seen the benefit of our actions in the second half and this ensured a profitable contribution over the period. We are further pleased to report that because of a substantial contract win in our Manned Guarding business, we enter our new financial year with increased visibility on a substantially improved level of profitability.
The focus of our activities in these areas will continue to be ensuring that they continue to make a profitable contribution to the Group's performance.
Tony Rogers resigned as a Director with effect from 3 October 2008.
Darren Browne resigned as Chief Executive Officer on 3 November 2008.
Andrew Church was appointed as Chief Executive Officer on 24 November 2008.
Emma Sugarman , founder and Managing Director of Academics Limited, was appointed to the Board on 17 December 2008.
Summary and prospects
Servoca holds attractive market positions in resilient sectors and the focus will be on further developing the potential within the Group.
Servoca continues to serve many areas of public sector recruitment that suffer from manpower supply shortages. The Group operates a range of services and positions within its markets and we will continue to expand both existing and new service offerings where we believe strong demand exists.
In the short-term, we are currently experiencing less fluidity in the education recruitment market with fewer teaching professionals moving schools or posts as candidates appear to prioritise job security against the backdrop of the wider economic climate. Whilst this is expected to create a more challenging trading environment as we enter 2010, the sector remains resilient to the economic climate relative to other sectors. Our diversified range of services also means we operate a balanced exposure to a number of markets and for this reason we remain confident of the year ahead.