SERVOCA Shares up 10% On Interims
SERVOCA Shares up 10% On Interims
Interim report For the six months ended 31 March 2010
Revenue down 14.8% to 25.64m (March 2009 30.10m, including 2.28m from closed businesses)
Profit before taxation (excluding share based payments and amortisation) up 10.5% to 0.95m (March 2009 0.86m). Profit before taxation of 0.71m (March 2009 0.86m)
Administrative expenses down 20.2% (excluding share based payments and amortisation) to 5.92m (March 2009 7.42m)
Net Debt reduced to 1.90m (March 2009 2.50m)
The Board is pleased to report a 10.5% increase in profit before tax (before share based payments) over the same period last year on a reduced level of turnover and gross profit.
As cautioned in our preliminary announcement of the results for the year ended 30 September 2009 we have seen pressure on our businesses operating in the education recruitment market and this is reflected in the reduced turnover. On a like for like basis (excluding businesses closed during the period to March 2009) turnover in our education businesses is down by 2.9m over the same period last year as compared to an increase of 1.4m from our healthcare recruitment businesses.
We have continued to drive down the Group's overheads and are pleased to report a significant reduction in our costs of 1.5m when compared to March 2009. Profitability and improved cash collection have helped to reduce net debt to 1.9m.
During the six months to 31 March 2010, revenues decreased by 14.8% to 25.64m (March 2009 - 30.10m), which resulted in a reduction in gross profit from 8.46m in the six months to 31 March 2009 to 6.92m in the current period.
The profit before tax, share based payment and amortisation, increased by 10.5% to 0.95m (March 2009 - 0.86m).
Basic earnings per share for the period to 31 March 2010 were 0.60p (March 2009 - 1.77p).
Net debt at 31 March 2010 was 1.90m (March 2009 - 2.50m).
Strategy and delivery
During the period the Group retained its focus on developing our existing three principal markets of Education Recruitment, Healthcare Recruitment and Secure Solutions. The management team has remained focused on profit delivery. The Board will consider acquisition opportunities where it believes shareholder value can be enhanced.
Our Healthcare Recruitment business operates through a number of discrete brands and supply is focused on Doctors, Nurses, Care Workers and Allied Health Professionals. 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 have performed creditably over the period with turnover and gross profit both up on the same period last year (on a like for like basis, excluding businesses closed in 2009) and their contribution towards central costs ahead of internal expectations at the half year.
As communicated in our year end statement, our nursing supply businesses were awarded a place on the NHS framework for the supply of nurses to all NHS bodies in England and selected parts of the UK for three years last July. These businesses have seen encouraging initial progress over the period with reduced margin but improved volume, increasing the weekly gross profit run rate. However, towards the end of the period trading conditions became more challenging with some Trusts reporting budget restraints, these conditions are moderating growth rates though we remain hopeful of further progress.
Across the NHS we are seeing the pressures associated with the much publicised need to reduce public sector spending start to impact and for that reason we anticipate a more challenging trading environment in the second half. This is being evidenced in our Doctors supply business which delivered 26% more Gross Profit in the period compared to the same period last year but has started to see downward pressure on its run rate margin as we enter the current half year.
Our Education Recruitment business operates through three brands, Academics, Dream Education and Day to Day Teachers.
Academics operate 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. Academics were a major contributor to the Group's profitability last year and were expected to deliver a similar level of Contribution this year. However, performance in the first half is such that the performance of the business in the second half is expected to fall well short of expectations. Historically the business has enjoyed high levels of Permanent recruitment fees with the vast majority of this revenue falling in September for the start of the academic year. The demand for Permanent recruitment services from schools has been lower so far this year, we expect this trend to continue into the key month of September and have a material impact on second half expectation and full year result.
Dream Education provides long-term teaching professionals to schools across the UK, mostly within secondary schools. As reported in our results for the year ended 30 September 2009 this business has historically focussed exclusively on the supply of overseas candidates. This model was no longer viable as we entered the new financial year as changes to work permit regulations had removed the ability to continue supply on the same basis. New management was appointed in the early part of the period and we are now making progress in positioning this business as a quality supplier of UK trained teaching professionals.
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.
As cautioned in our year end statement we have experienced a more challenging trading environment in the period. Greater candidate availability and reduced demand has placed particular pressure on permanent recruitment fees.
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 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.
The performance of our Security business has been transformed in the period in comparison to the prior year. Marginally loss making in the first half of 2009, the impact of numerous cost saving initiatives last year and a substantial contract win as we entered our current financial year, have substantially improved profitability. The business struggled in the first half of 2009 amidst a difficult trading climate in the private sector but conditions in the first half of this year have improved. Whilst competition is fierce and therefore margin pressure is significant, we remain positive on the business delivering against internal expectations for the full year.
The Criminal Justice operation is under new management and is evolving into an improved, sales led operation. The business has delivered in line with internal expectations for the period though the pressure on public sector finances is starting to impact this area.
Miles Davis resigned as a Director with effect from 11 February 2010 and we thank him for his valuable contribution to the Group.
Despite a positive first half performance, it is increasingly clear that uncertainty regarding public sector spending and in particular a reduction on historically high levels of permanent recruitment fees in education, will mean that it is unlikely the Group will deliver against its full year expectation.
The current operation still offers considerable scope for internal improvement, with several new management appointments already starting to make a positive impact on the development of the Group. These improvements will not make an immediate impact on profitability but will lead to a more sustainable business capable of substantial levels of growth in the longer term. Further strengthening of the management team and the internal operation is on-going.
The Group is cash generative and has made substantial strides in improving the levels of net debt in the business. This positions the Group positively for the future and we look forward to developing the capabilities of the Group. Despite the uncertainty surrounding public sector spending the Board believes the key markets of Healthcare and Education still hold relatively resilient long term prospects and we also continue to pursue our activities in the private sector.