The Rethink Group announce group revenue increase of 4.5%
§ Won a new three year Talent Management contract with a UK listed multichannel marketing and communications business.
§ Secured a Talent Management contract renewal for a further three years with M&S plc.
§ Increased investment in experienced business development executives within the Talent Management division.
§ Restructured PLC Board and a new Executive Board created.
Steve Wright, Chief Executive Officer of Rethink, commented:
"I am satisfied with the performance of the Group in the first half of the year as we continue to implement our strategy. Our Talent Management division is growing in line with our expectations, winning new clients and repeat business from existing clients. We will continue to invest in this division building long term sustainable revenues for the Group.
For further information please contact:
The Rethink Group plc
Steve Wright, CEO / Ben Felton, CFO
0207 367 4444
Shore Capital (Nominated Adviser and Broker)
Bidhi Bhoma/Edward Mansfield
0207 408 4090
John Coles/Fiona Conroy
020 7653 9850
About The Rethink Group plc
Rethink Group (AIM: RTG) provides business transformation services through Talent Management and Recruitment Services. These mutually supported activities work in synergy and support our growing customer base.
The Group supports clients across the UK, Europe, US, Middle East and Asia Pacific.
For more information please visit our website: www.rethinkgroupplc.com
Chairman and CEO's Statement
In the six month period to 30 June 2014, the Group steadily grew revenues and net fee income ("NFI") from continuing operations by 4.5% and generated a profit from operations of £0.81m, 18.4% ahead of the same period in 2013. The growth in NFI continues to be driven by our Talent Management division which reported a 32.7% increase in NFI to £2.4m in the period (2013: £1.8m).
The Group continues to build strong, long term relationships with major UK and overseas corporates across both the Talent Management and Recruitment divisions. During the period Rethink secured a Talent Management contract renewal with M&S plc for a further three years and also signed a new three year agreement with a large UK listed multi-channel marketing and communications business.
Not only do these new contracts provide the Group with sustainable future revenues, they also highlight the excellent work of all our staff and the continued trust our clients have in Rethink.
The Group grew both permanent and contract revenues in the six month period to 30 June 2014, to a total of £56.5m (2013: £54.0m). NFI from permanent recruitment increased 11.5% to £4.3m (2013: £3.9m), reflecting growing business confidence in the UK and Irish markets as clients invest in their permanent workforce.
Group EBITDA (before separately identifiable items) decreased by 18.4% to £0.91m (H1 2013: £1.11m) as a result of investment in the Talent Management Division and the cost of the recent move to a new head office in London a combined investment of £0.4m in the period. Operating profit from continuing operations (after separately identifiable items) increased 18.4% to £0.81m (H1 2013: £0.68m) and profit before tax increased by 15.8% to £0.61m (2013: £0.53m).
The Group reported basic earnings per share for the period of 0.479 pence (H1 2013: 0.374 pence).
Working Capital and Invoice Discounting
The Group continued to focus on its working capital management resulting in net cash generated from operation of £2.8m in the period (H1 2013: outflow of £1.1m).
Net borrowings, which represents cash and cash equivalents less the Group's revolving invoice discounting facility, reduced to £9.3m from £11.7m at 31 December 2013 as the Group took advantage of surplus cash generated from operations to pay down its borrowings.
Rethink's ongoing structure is aligned to two interconnected business units of Talent Management, where our involvement with a client is deeper and is typically underpinned by longer term managed service agreements, and Open-Market Recruitment, characterised by transactional client relationships. The Group provides its services to clients in two primary vertical markets - Business and Technology and Pharmaceuticals and Life Sciences, and operates through offices in the UK and overseas.
Talent Management Division
NFI for our Talent Management Division increased 32.7% to £2.4m (H1 2013: £1.8m) and contribution from operations of the division, after accounting for direct investment costs of £0.3m, grew slightly to £1.3m (H1 2013: £1.2m).
In line with our stated strategy the Group has focused significant investment in the Talent Management division during the period, through engaging more experienced business development executives, building a new dedicated website and increased marketing. This investment has started to bear fruit with the recent contract win, announced in July 2014, and contract renewal with M&S plc after the period end. We will continue to invest significantly in this area of the business as we develop a portfolio of products that will deepen and broaden our service offerings to clients.
Our Open-Market Recruitment business experienced a modest decline in NFI of 2.2% to £7.6m (H1 2013 £7.7m), impacting the contribution from this division which reduced slightly to £1.2m from £1.3m in the same period of 2013. The division continues to deliver excellent repeat business across its blue chip client base and importantly also provides a steady flow of introductions to the Talent Management division.
As disclosed in April 2014, the Group restructured its board of directors ("PLC Board") and established a new operational board ("Executive Board"). The Executive Board continues to focus onexecuting the Group's three year growth strategy, through the development and delivery of Talent Management and Recruitment services. Its central responsibility is on business development across all Group brands.
The PLC Board, which has been streamlined to five members, concentrates on supporting the Executive Board in the formulation and review and execution of Group strategy, investor relations and maintaining strong standards of corporate governance.
The Group is steadily building momentum in its Talent Management division with new contract wins and repeat business from major blue chip clients. Encouragingly, the majority of our Talent Management income originates from long term client relationships which were nurtured and developed in the core Open-Market Recruitment division. The investment in new Talent Management business development executives and marketing collateral in the period is expected to augment this revenue stream by generating incremental business from both new and existing clients.
Despite the cost of investment in the period, the Group still expects to report an increase in EBITDA for the full year to 31 December 2014, however, this is expected to be marginally below current market expectations.
While we expect revenues and NFI to grow in the long term, it is in the very nature of long term client relationships built on trust that investment costs will take longer than traditional recruitment investment to yield returns. However, it is our firm belief that the returns will not only be greater but also more sustainable over time, and hence expected to create greater shareholder value due to the improved quality of earnings.