RNS Number:2047E
High-Point Rendel Group PLC
25 November 2002
High-Point Rendel Group plc
25 November 2002
Preliminary results
High-Point Rendel Group plc ("High-Point" or the "Company" or the "Group"), the
international business management and consulting business, today announces its
preliminary results for the year ended 31 July 2002.
Results
2002 has been a disappointing year, in which the combination of the economic
slow down, a complete restructuring of the non fee earning cost base and the
delay in the agreement of certain fee entitlements have put the Company under
strain, resulting in a significant loss for the year of #2.5 million. In the
second half of the year to 31 July 2002 the Board decided that it could no
longer support certain long term activities purely on the back of the
performance of the core consultancy business. Accordingly, all such activities
were suspended and resources focused on core activities. In July 2002 a
programme of restructuring was announced which involved the closure of the
Group's Stamford office in the USA, the termination of Vantagepoint's executive
recruitment business in the United Kingdom and a planned reduction in the
overheads associated with the Vantagepoint management consultancy business and
the Group's Hong Kong office. The result of these actions will significantly
reduce the annual cost base. The benefits of this action are showing through in
the trading results for the first quarter of the current year with the level of
net fees being maintained despite the streamlining of the Group's business and
the lower cost base. The costs associated with the restructuring amount to #1.6
million and include an accrual of #0.7 million for costs incurred after the year
end and have been disclosed within exceptional items in the notes to the
financial statements.
The results for the year have also been recently impacted by the delay in
agreeing significant additional fee entitlements on certain long term contracts.
The Board has therefore adopted a prudent approach in recognising such amounts
and this has resulted in a write down in the value of certain contracts and as a
consequence a deduction from anticipated operating profits of #1.8 million in
this year. However, the Board has confidence that in time these contracts will
yield their expected contributions.
The delay in agreeing these additional fee entitlements and the accrual for
restructuring costs has resulted in a loss before taxation of the Group, after
exceptional items, of #2.5 million.
Dividend
The Group paid an interim dividend of 0.8p per share for the six months ended 31
January 2002 (2001: 0.8p per share) amounting to #0.2 million. The directors
do not recommend paying a final dividend in light of the exceptional costs
incurred in relation to the restructuring.
Board and Employees
Bob Stubbs resigned as an executive director of the Group during the year, and
Pat Desmond and Ian Reeves both resigned as directors of the Group after the end
of the financial year.
The Board would like to thank all the Group's employees for their hard work and
contribution. The Board believes that the quality of work and commitment shown
by the Group's employees will ensure its ongoing success in the future.
Developments and Prospects
Over the past year the Group has continued with its policy of enhancing the
High-Point Rendel brand, and has refocused efforts on its core activities of
project risk management, troubleshooting services and capital project delivery.
The Group has also made strong progress in ensuring repeat business and in
winning new assignments with blue chip clients, in particular this has resulted
in order book levels in the Capital Project Delivery division being 225% of the
level of two years ago.
The Board has taken steps during the year to ensure that the Group is structured
in a way that it is able to trade successfully despite the high level of global
economic instability. The Group has focused all its management and resources on
the core competencies where it has the skills, knowledge and reputation to
prosper. The Board remains convinced that the Group has the quality and depth of
personnel resources to trade profitably in this challenging environment.
The Company is presently operating with a level of indebtedness which is
unacceptable. The Board therefore continues to concentrate on all aspects of
cash generation in order to reduce borrowings.
Going Concern
The financial statements are prepared on the going concern basis, the validity
of which depends on the Group's ability to operate within its agreed overdraft
facilities and with the continued support of its bank, including the
continuation of these overdraft facilities beyond their expiry on 28th February
2003. Your attention is drawn to note 1 below. The Company enjoys good
relations with its bankers, and the Board is grateful for their support. The
Directors remain confident about the Company's future; they and certain senior
employees have this month agreed to make loans of cash and salary sacrifices to
support the Company.
Corporate Activity
On 4th October 2002 the Board announced that it had agreed indicative terms of
an offer which may be made by a third party financial institution which would
back executive management to continue to run the business. There is nothing
further to report on this initiative at this stage.
The Future
The Board is determined to continue to drive through the benefits of focussing
on its core activities and the actions that it has already taken, and will
explore all avenues open to deliver shareholder value.
HIGH-POINT RENDEL GROUP plc
GROUP PROFIT & LOSS ACCOUNT
Restated *
Audited Audited
31 July 31 July
Continuing Discontinued 2002 Continuing Discontinued 2001
Operations Operations Total Operations Operations Total
Note #000 #000 #000 #000 #000 #000
Turnover:
Turnover: 25,078 162 25,240 26,500 251 26,751
Group and
share of joint
ventures'
turnover
Less: share of (65) - (65) - - -
joint
ventures'
turnover
Group Turnover 2 25,013 162 25,175 26,500 251 26,751
Operating 3 (26,389) (839) (27,228) (26,612) (1,162) (27,774)
costs
Group (1,376) (677) (2,053) (112) (911) (1,023)
operating
loss:
Share of (160) (38)
operating loss
in joint
ventures
Share of - (14)
operating loss
of associate
undertakings
Total
operating
loss:
Group and share of (2,213) (1,075)
joint ventures and
associate undertakings
Interest (288) (209)
Loss on ordinary activities (2,501) (1,284)
before taxation
Taxation 4 (236) 40
Loss on ordinary activities after (2,737) (1,244)
taxation
Minority - (19)
interests -
equity
Loss for the (2,737) (1,263)
year
Dividends (219) (219)
Retained loss (2,956) (1,482)
for the year
Loss per share (10.0p) (4.7p)
- basic
Loss per share n/a n/a
- diluted
Dividends per 0.8p 0.8p
ordinary share
Operating costs are stated after charging exceptional items of #1,287,000 (2001: #1,496,000) as disclosed in note 3 of
this statement.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Restated*
Audited Audited
Year to Year to
31 July 31 July
2002 2001
#000 #000
Loss attributable to shareholders (2,737) (1,263)
Exchange difference on retranslation of net assets (306) 30
of subsidiary undertakings
Total recognised gains and losses for the year (3,043) (1,233)
RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' Audited Restated *
FUNDS Audited
Year to Year to
31 July 31 July
2002 2001
#000 #000
Opening
shareholders'
funds
As originally 8,215 8,502
stated
Prior period 312 272
adjustment
8,527 8,774
Total (3,043) (1,233)
recognised
gains and
losses
Dividends (219) (219)
New shares 4 1,205
issued
Closing shareholders' 5,269 8,527
funds
* The Group Profit and Loss Account, Statement of Total Recognised Gains and Losses and Reconciliation of Movements
in Group Shareholders' Funds for the year ended 31 July 2001 have been restated for the adoption of FRS 19.
HIGH-POINT RENDEL GROUP plc
GROUP BALANCE SHEET
Restated *
Audited Audited
31 July 31 July
2002 2001
#000 #000
Fixed assets
Intangible assets 1,534 1,620
Tangible assets 947 911
Investments 654 749
3,135 3,280
Current assets
Debtors 11,841 14,985
Cash at bank and in hand 1,740 988
13,581 15,973
Creditors
Amounts falling due within one year (10,825) (10,170)
Net current assets 2,756 5,803
Total assets less current liabilities 5,891 9,083
Creditors
Amounts falling due after more than one year (183) (77)
Provision for liabilities and charges (439) (479)
5,269 8,527
Capital and reserves
Called up share capital 274 274
Share premium account 2,998 2,994
Other reserve 25 25
Profit and loss account 1,972 5,234
Equity shareholders' funds 5,269 8,527
* The Group Balance Sheet as at 31 July 2001 has been restated for the adoption of FRS 19.
HIGH-POINT RENDEL GROUP plc
GROUP STATEMENT OF CASH FLOWS
Audited Audited
Year to Year to
31 July 31 July
2002 2001
Note #000 #000
Net cash inflow/(outflow) from operating activities 5 438 (1,549)
Returns on investment and servicing of finance (288) (209)
Taxation (91) (237)
Capital expenditure and financial investment (301) (969)
Dividends paid (219) (602)
Net cash flow before financing (461) (3,566)
Financing (215) 1,008
Decrease in cash (676) (2,558)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Audited Audited
Year to Year to
31 July 31 July
2002 2001
#000 #000
Decrease in cash (676) (2,558)
Repayment of capital element of finance lease rentals 215 197
Changes in net debt resulting from cash flows (461) (2,361)
Inception of new finance lease obligations (331) (207)
Movement in net debt (792) (2,568)
Opening net debt (3,697) (1,129)
Closing net debt (4,489) (3,697)
HIGH-POINT RENDEL GROUP plc
NOTES TO THE AUDITED PRELIMINARY FINANCIAL INFORMATION
at 31 July 2002
1 Basis of preparation of preliminary financial information
The preliminary financial information has been prepared on the basis of the accounting policies set out in the
Group's statutory accounts for the year ended 31 July 2001 except as stated below.
Restatement in financial statements - Financial Reporting Standard 19 - Deferred Tax
Financial Reporting Standard 19 - Deferred Tax (FRS 19) has been adopted by the Group in this preliminary financial
information.
In previous years the Group had complied with Statement Accounting Practice 15 - Deferred Taxation (SSAP 15) which
has been superseded by the introduction of FRS 19. SSAP 15 required provision for deferred tax to be made using the
liability method to the extent that net deferred tax assets or liabilities were likely to crystallise in the
foreseeable future. This method was commonly referred to as the partial provision method. FRS 19, by contrast,
requires a form of full provisioning.
The effect of the implementation of FRS 19 on the reported results is as
follows:
31 July 31 July
2002 2001
#000 #000
Tax on loss (236) 40
(Increase) /reduction in loss for the year (236) 40
Deferred tax assets 76 312
Net assets 76 312
The implementation of FRS19 does not affect the Group's cash or borrowings position.
Fundamental accounting concept - Going Concern
The preliminary financial information is prepared on the going concern basis because the directors consider there
will be sufficient funds available to enable it to continue operating and to meet its liabilities as they fall due.
The Group is dependent on its overdraft facilities and loan facilities totalling #4.2m and #1.5m respectively,
which are repayable on demand, in order to meet its day-to-day working capital requirements. At the date of
approval of this preliminary financial information, it has an overdraft of #3.8m and has drawn down #1.5m of its
loan facility. Receipt of the debtor relating to a contract in the Middle East, referred to below will be applied
to repayment of the loan, which is secured on this. The overdraft facility expires on 28 February 2003.
The nature of the Group's business is such that there can be considerable unpredictable variation in the timing of
cash inflows. In particular, there is uncertainty over the timing and final amount of the cash receipts from
contracts in the UK, Middle East and Far East. The directors have prepared projected cash flow information for the
period ending 31 December 2003. On the basis of these cash flow forecasts, the directors consider that the Group
will continue to operate within the facilities currently agreed, assuming continuation of the overdraft facilities
at a similar level beyond the current expiry date of 28 February 2003.
However, even if these facilities are renewed at a similar level, the margin of current and expected future
facilities over requirements is not large, and inherently, there can be no certainty as to whether the Group will
be able to continue within these facilities, or that the bank will continue to support the Group, including renewal
of the overdraft facilities on similar terms.
Should the Group not be able to secure sufficient funds to enable it to continue operating and to meet its
liabilities as they fall due, then adjustments would be necessary to provide for any impairments of fixed assets,
to reclassify fixed assets and long term liabilities as current assets and current liabilities, and to provide for
any further liabilities that might arise.
2 Segmental analysis
Turnover Operating loss
Year to Year to
31 July 31 July 31 July 31 July
2002 2001 2002 2001
#000 #000 #000 #000
By class of business
Capital project delivery 14,090 13,597 (543) (1,173)
Business and management services 11,085 13,154 (1,510) 150
25,175 26,751 (2,053) (1,023)
By geographic origin
Continuing operations:
Europe, Africa and 17,667 16,235 (1,118) (361)
Middle East
Asia and Pacific Rim 7,346 10,265 (258) 249
25,013 26,500 (1,376) (112)
Discontinued operations:
Americas 162 251 (677) (911)
25,175 26,751 (2,053) (1,023)
By geographic market
Europe, Africa and Middle East 16,977 16,423
Indian Sub-Continent 690 922
Asia and Pacific Rim 7,346 9,154
Americas 162 252
25,175 26,751
3 Exceptional items
Recognised before operating loss: Audited Audited
Year to Year to
31 July 31 July
2002 2001
#000 #000
Restructuring costs 1,595 -
Specific bad debt provision (308) 400
Set-up costs of Sure Power alliance - 922
Abortive acquisition costs - 174
1,287 1,496
4 Taxation
Restated*
Audited Audited
Year to Year to
31 July 31 July
2002 2001
#000 #000
The charge for the year comprises:
Current year charge
Overseas taxation 81 261
Prior year adjustments
UK corporation - (191)
taxation
Overseas taxation (81) (70)
Deferred taxation (236) 40
(236) 40
* The tax charge for the year ended 31 July 2001 has been restated for the adoption of FRS 19.
5 Reconciliation of operating loss to net cash inflow/(outflow) from operating activities
Audited Audited
Year to Year to
31 July 31 July
2002 2001
#000 #000
Operating loss (2,053) (1,023)
Depreciation 419 458
Amortisation of goodwill 86 86
Loss/(profit) on sale of tangible fixed assets 7 (20)
Decrease/(increase) in debtors 2,600 (884)
Decrease in creditors and provisions (621) (166)
Net cash flow from operating activities 438 (1,549)
6 Publication of non-statutory accounts
The financial information contained in this preliminary statement does not constitute statutory accounts as defined
in S240 of the Companies Act 1985. The financial information for the preceding year is based on the statutory
accounts for the financial year ended 31 July 2001. Those accounts, upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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