RNS Number:5876P
Spring Group PLC
10 September 2003
10 September 2003
SPRING GROUP PLC REPORTS INTERIM RESULTS
Revenue returns to growth
Record market share and pipeline
Integration of Best International trading subsidiaries substantially completed
with cost savings and revenue synergies on target
Richard Barfield, Spring's Chief Executive Officer, said: "Spring Group made
further good progress in the first half of 2003. By continuing to invest in the
business and acquiring the Best International trading subsidiaries, we have
doubled our market share to become the UK's leading IT staffing company. With
the Best businesses now substantially integrated, I expect our unrivalled
portfolio of services and our record pipeline of new opportunities to deliver
improved financial results in the second half of 2003 and in 2004."
STRATEGIC HIGHLIGHTS
* Revenue exceeded prior year run rate from April 2003 onwards, despite
difficult trading conditions
* IT contractor numbers over 4,500 at 30 June 2003, up 58% since 1
January through organic growth and acquisition
* Pipeline of new business opportunities at record level
* Recently-acquired Best International trading subsidiaries substantially
integrated ahead of schedule, achieving cost saving and revenue synergy
targets
* Spring IT Training secures major 3 year outsourcing contract
FINANCIAL HIGHLIGHTS
* Turnover from continuing operations #145.7 million (2002: #148.4 million)
* Operating loss from continuing operations before goodwill amortisation
and exceptional items #2.7 million (2002: #3.3 million)
* Operating exceptional items of #1.6 million (2002: #4.2 million)
* Operating loss reduced to #4.5 million (2002: #9.8 million)
* Loss on ordinary activities before taxation reduced to #3.9 million
(2002: #9.5 million)
* Loss per share reduced to 2.67p (2002: 6.39p)
* Interim dividend maintained at 0.1p (2002: 0.1p)
* Group cash balances of #46.7 million following #6.3 million initial
outflow on acquisition of Best
For further information:
Richard Barfield, CEO, Spring Group plc 0207 655 8605
Ben Atwell, Financial Dynamics 0207 831 3113
Information on Spring can be found on www.spring.com
SPRING GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
INTRODUCTION
Spring enters the second half of 2003 positioned strongly for the balance of
this year and into 2004:
* IT contractor numbers, totalling over 4,500, are at record levels in each of
the businesses in the IT Staffing division, including IT Personnel, Best and
Triage, and we have doubled our market share since the beginning of the year;
* The new business pipeline in IT Staffing is at a record high level for the
Group;
* The Best businesses have been successfully integrated ahead of schedule,
achieving our cost saving and revenue synergy targets;
* Spring now offers its IT staffing clients an unrivalled portfolio of
recruitment, staffing and workforce management products and services;
* In Spring Personnel, a new Managing Director has been recruited with a
brief to develop plans for the growth of this business;
* Spring IT Training has secured a 3 year training outsourcing contract,
one of the largest ever awarded in the UK, which is expected to deliver
multi-million pound incremental revenue for the next 3 years;
* Spring's balance sheet is strong, with #71.9 million of net assets and
#46.7 million of cash to support the Group's further growth.
Given our continued investment for growth and the difficult trading conditions
of the first six months of 2003, the Group as a whole reported an operating loss
as expected. From the position of strength described above, the Group is
expected to return to an operating profit before exceptional items and goodwill
in the second half and to be positioned strongly for continuing improved
financial performance in 2004.
GROUP RESULTS
Spring IT Staffing
In June 2003, Spring acquired the trading subsidiaries of Best International,
one of the largest IT recruitment and staffing solutions businesses in the UK.
With over #85 million in revenues in 2002 and market-leading strengths in
executive search and selection, campaign, permanent and regional contract IT
staffing, the acquisition enabled Spring to continue to build its service
portfolio and improve operating margins.
The acquisition was completed on 23 June, hence the first half numbers include
no contribution from Best. Thereafter, we moved swiftly and the integration is
now substantially complete, with the regional offices, IT staffing organisation,
product and service branding and cost base rationalised in line with the
demanding targets we set when the transaction completed. The benefits of the
merger are coming through as planned:
* Our unrivalled range of IT staffing products and services now includes
additional capability in search and selection, campaign, permanent and
regional contract;
* The targeted cost savings achieved through the integration will significantly
improve Spring IT Staffing's cost run rate into 2004;
* Customers of Best recognise the financial strength of the larger group to
which Best now belongs, and are placing new business and renewing existing
business with us;
* Cross-selling activities are yielding material results across all
divisions of the Group.
Spring IT Staffing's operating results for the period were as follows:
6 months to 30 June 2003 2003 2002 2002
______ ______ ______ ______
Operating Operating
# million Profit Profit
Revenue /(Loss)* Revenue /(Loss)*
Spring IT Personnel 97.3 0.1 105.0 1.0
Triage 10.4 (0.3) 5.3 (1.0)
Spring IT Solutions 3.8 0.3 4.5 0.1
______ ______ ______ ______
111.5 0.1 114.8 0.1
====== ====== ====== ======
* before exceptional items and goodwill amortisation
Spring IT Personnel
In Spring IT Personnel, we adhered to our plans to invest in our permanent and
regional contract businesses and our contractor numbers increased through
organic growth during the period by 24% from 2,500 on 1 January to 3,100 on 30
June. Whilst the first half results were impacted by the uncertainties affecting
the global economy and the technology sector in particular, the second half
starting position for contractor numbers and our significantly enhanced
capabilities in permanent recruitment support our forecast of a return to
revenue growth in the second half.
Triage
Triage, Spring's specialist technology recruitment business, has continued to
grow during the period, doubling its revenues to #10.4 million. Losses arose as
we invested in additional resource to service our clients in Europe, the Far
East and the USA. From a starting position of 220 contractors, the business grew
to 350 contractors at 30 June, an increase of 60%. Today, Triage has 390
specialist technology consultants in place with clients around the world and is
well positioned to deliver further improved results in the second half and in
2004. Average billing rates increased overall and the business won a major
contract with the UK operation of a substantial international telecoms company,
which has already enabled us to place over 75 additional contractors.
Spring IT Solutions
During the first half of 2003, Spring IT Solutions developed new and innovative
offerings in applications support, helpdesk and applications management, and
Spring began to actively promote these to our clients utilising our Employed
Consultants Model. This has recently proved highly successful at a number of
major blue chip clients, significantly increasing our employed consultant
numbers.
hy-phen
hy-phen, Spring's workforce management technology and service offering, reported
turnover of #0.2 million in the period (2002: #0.1 million). Operating losses
for the period were #1.0 million (2002: #0.8 million).
The number of programmes has increased, with customer spend under management
increasing to over #300 million, reinforcing hy-phen's leadership position in
the workforce management market. hy-phen has also grown its revenue generated
from consulting and management fees, and with a strong pipeline has an improved
outlook for the second half of the year.
Spring IT Training
Spring IT Training reported turnover of #6.2 million in the period (2002: #8.5
million). Operating losses before exceptional items and goodwill amortisation
for the period were #0.9 million (2002: #0.8 million).
In addition to the widespread general weakness in the IT training market in the
UK, Spring IT Training experienced a major downturn in one of its core markets,
that for Hewlett Packard (HP) partner certification training, as a result of
strategic and operational changes within HP. Spring IT Training's management
team therefore undertook a further reorganisation and property rationalisation
in June, reducing annualised operating costs by #1.4 million. Exceptional costs
of #1.6m were incurred as a result of these changes.
HP has now finalised its new partner certification programmes, and as HP's
largest authorised trainer in the EMEA region and with many HP partners known to
have substantial training needs, orders in this core market are expected to pick
up significantly.
More recently, Computacenter and Spring IT Training have signed a partnership
agreement for Computacenter to outsource its training operation to Spring from 1
September 2003. Spring will provide sales and training expertise, enabling
Computacenter to continue to offer a full range of learning services to its
customers. This contract is expected to substantially increase Spring IT
Training's revenues and underpins our forecast of improved financial results in
the second half.
Spring Personnel
Spring Personnel, the Group's general staffing business, reported turnover of
#27.9 million in the period (2002: #25.0 million) and operating profits of #1.0
million (2002: #1.1 million).
Spring Personnel's temporary staffing revenues were ahead of budget, enabling
profitability to be maintained in line with last year, although demand for
permanent staff declined. In June 2003 Mark Ingram, previously Managing
Director of TRS Staffing Solutions, was appointed as the new Managing Director.
A number of management changes and new initiatives are already in place and we
intend to invest for growth in this division.
Discontinued operations
The pre-exceptional loss on discontinued operations in 2002 of #1.1 million
relates to the IT Staffing operation in the USA, which was closed prior to 30
June 2002.
Central costs
Central costs were further reduced to #1.9 million in the first six months of
2003 (2002: #2.8 million). It is anticipated that central costs will be
maintained at or below current levels, notwithstanding the acquisition of Best.
Exceptional items
Operating exceptional items of #1.6 million (2002: #4.2 million) comprise
property reorganisation costs (#1.3 million) and reorganisation and redundancy
costs (#0.3 million), within the IT Training business.
Earnings per share
Loss per share was 2.67p (2002: 6.39p).
Balance sheet
In the six months to 30 June 2003, the Group generated cash from trading
activities of #0.7 million (2002: #4.6 million). At 30 June 2003 Spring had net
funds of #40.2 million comprising cash balances of #46.7 million and loan notes
relating to the Best acquisition of #6.5 million. The net assets of the Group
were #71.9 million at 30 June 2003 (31 December 2002: #76.0 million).
Interim dividend
An interim dividend of 0.1p (2002: 0.1p) will be payable to shareholders on the
register on 19 September 2003 and will be paid on 28 November 2003.
CURRENT TRADING AND PROSPECTS
Spring Group made further good progress in the first half of 2003. By
continuing to invest in the business and acquiring the Best International
trading subsidiaries, we have doubled our market share to become the UK's
leading IT staffing company. With the Best businesses now substantially
integrated, I expect our unrivalled portfolio of services and our record
pipeline of new opportunities to deliver improved financial results in the
second half of 2003 and in 2004.
Richard Barfield
Chief Executive Officer
10 September 2003
INDEPENDENT REVIEW REPORT TO SPRING GROUP PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2003 which comprises the Group Profit and Loss
Account, Group Balance Sheet, Group Cash Flow Statement, Group Statement of
Total Recognised Gains and Losses, and related notes 1 to 9. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
The report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 "Review of interim financial information", issued by the
Auditing Practices Board. To the fullest extent permitted by the law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
"Review of interim financial information" issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
Ernst & Young LLP
Luton
10 September 2003
Spring Group plc
Group profit and loss account (unaudited)
For the six months ended 30 JUNE 2003
Year Six months Six months
ended ended ended
31 December 30 June 30 June
2002 2003 2002
#000 Notes #000 #000
_________ ______ ______
293,330 Turnover - continuing operations 1 145,749 148,378
(251,218) Cost of sales (126,048) (127,263)
_________ ______ ______
42,112 Gross profit 19,701 21,115
(52,266) Net operating expenses (24,239) (30,887)
_________ ______ ______
(10,154) Total operating loss 1 (4,538) (9,772)
_________ ______ ______
Continuing operations
Operating loss pre exceptional
(3,117) items and goodwill amortisation (2,651) (3,248)
(4,073) Exceptional items (1,597) (3,704)
(1,457) Goodwill amortisation (290) (1,191)
_________ ______ ______
(8,647) Total continuing operations 1 (4,538) (8,143)
(1,507) Discontinued operations 1 - (1,629)
_________ ______ ______
(10,154) Total operating loss 1 (4,538) (9,772)
_________ ______ ______
367 Additional profit on sale of subsidiary - -
Loss on disposal of fixed assets -
(558) continuing operations - (558)
Loss on disposal of fixed assets -
(132) discontinued operations - (132)
_________ ______ ______
Loss on ordinary activities before
(10,477) interest and taxation (4,538) (10,462)
1,637 Net interest receivable 635 971
_________ ______ ______
Loss on ordinary activities before
(8,840) taxation (3,903) (9,491)
192 Taxation - 173
_________ ______ ______
(8,648) Loss for the financial period (3,903) (9,318)
(292) Dividends (146) (146)
_________ ______ ______
(8,940) Transfer from reserves 6 (4,049) (9,464)
______ ______ ______
(5.93p) Basic and diluted loss per share 3 (2.67p) (6.39p)
0.2p Dividend per share 8 0.1p 0.1p
Spring Group plc
Group balance sheet (unaudited)
As at 3o june 2003
As at As at As at
31 December 30 June 30 June
2002 2003 2002
#000 Notes #000 #000
_________ ______ ______
Fixed assets
2,567 Intangible assets 16,901 2,394
4,925 Tangible assets 4,764 4,964
3,656 Investments 3,656 3,656
_________ ______ ______
11,148 25,321 11,014
Current assets
182 Stock 105 143
49,644 Debtors 61,433 54,173
972 Investments 749 50,721
51,672 Cash at bank and in hand 46,683 3,468
_________ ______ ______
102,470 108,970 108,505
Creditors-amounts falling due
(34,443) within one year (52,431) (39,885)
_________ ______ ______
68,027 Net current assets 56,539 68,620
_________ ______ ______
Total assets less current
79,175 liabilities 81,860 79,634
Creditors-amounts due after more than
one year
- Unsecured loan stock (2,500) -
- Convertible loan stock (3,000) -
- Finance leases - (17)
Provisions for liabilities and
(3,185) charges (4,417) (4,136)
_________ ______ ______
75,990 71,943 75,481
_________ ______ ______
Capital and reserves
15,077 Called up share capital 15,077 15,077
9,539 Share premium 9,539 9,539
11,406 Merger reserve 11,406 16,440
- Special reserve - 38,984
39,968 Profit and loss account 35,921 (4,559)
________ ______ ______
75,990 Equity shareholders' funds 6 71,943 75,481
________ ______ ______
Spring Group plc
GROUP CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2003
Six months Six months
Year ended ended ended
31 December 30 June 30 June
2002 2003 2002
#000 Notes #000 #000
_________ ______ ______
5,418 Net cashflow from trading activities 669 4,558
(5,487) Outflow relating to exceptional items (1,216) (3,312)
_________ ______ ______
(69) Cashflow from operating activities 4 (547) 1,246
Returns on investments and servicing of
1,764 finance 605 1,000
1,553 Taxation (6) 773
Capital expenditure and financial
(1,416) investment (314) (65)
_________ ______ ______
1,832 (262) 2,954
(2,740) Acquisitions and disposals 5 (4,578) (2,681)
(454) Equity dividends paid (146) (145)
_________ ______ ______
Net cashflow before management
(1,362) of liquid resources and financing (4,986) 128
40,068 Management of liquid resources 223 (10,926)
(101) Financing (228) (64)
_________ ______ ______
38,605 (Decrease) increase in cash for the period (4,991) (10,862)
_________ ______ ______
Spring Group plc
Group cash flow STATEMENT (UNAUDITED) (continued)
Reconciliation of net cash flow to movements in net funds
Six months ended Six months ended
Year ended 30 June 30 June
31 December 2003 2002
2002 #000 #000
#000 ______ ______
______
38,605 (Decrease) increase in cash (4,991) (10,862)
(40,068) Cashflow from management of liquid resources (223) 10,926
- Cashflow from change in lease financing - 11
101 Cashflow from change in other debt 228 53
______ ______ ______
(1,362) Change in net funds resulting from cashflows (4,986) 128
Loans and finance leases acquired
(32) with subsidiaries (23) (32)
- Non-cash movement - issue of loan stock (6,500) -
32 Exchange differences 2 47
______ ______ ______
(1,362) Change in net funds in the period (11,507) 143
53,029 Net funds brought forward 51,667 53,029
______ ______ ______
51,667 Net funds carried forward 40,160 53,172
______ ______ ______
Analysis of net funds
Other
31 December non- cash 30 June
2002 Cash flow Acquisition movements 2003
#000 #000 #000 #000 #000
______ ______ ______ ______ ______
Short term cash deposits 968 (223) - - 745
Cash at bank and in hand 51,672 (6,845) 1,854 2 46,683
Overdrafts - 5,300 (5,300) - -
Debt due within one year (973) 228 - (1,000) (1,745)
Debt due after more than
one year - - - (2,500) (2,500)
Convertible loan stock - - - (3,000) (3,000)
Finance leases - - (23) - (23)
______ ______ ______ ______ ______
51,667 (1,540) (3,469) (6,498) 40,160
______ ______ ______ ______ ______
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months Six months
Year ended ended ended
31 December 30 June 30 June
2002 2003 2002
#000 #000 #000
______ ______ ______
(8,648) Loss for the period (3,903) (9,318)
Exchange differences on
retranslation of net assets of
32 subsidiary undertakings 2 47
______ ______ ______
(8,616) (3,901) (9,271)
______ ______ ______
Spring Group plc
Notes to the Interim Results (UNAUDITED)
1. Segmental information
TURNOVER
Six months Six months
Year ended ended ended
31 December 30 June 30 June
2002 2003 2002
#000 #000 #000
______ ______ ______
223,391 IT Staffing 111,491 114,789
277 hy-phen 161 79
16,515 IT Training 6,213 8,534
53,147 Spring Personnel 27,884 24,976
______ ______ ______
293,330 Total 145,749 148,378
______ ______ ______
OPERATING PROFIT (LOSS)
Six months ended 30 June 2003
Before
exceptional
Year ended items and Exceptional
31 December goodwill items Goodwill
2002 amortisation (Note 2) amortisation Total
#000 #000 #000 #000 #000
_____ _____ _____ _____ _____
(2,404) IT Staffing 133 - (272) (139)
(1,681) hy-phen (988) - - (988)
(1,589) IT Training (905) (1,597) (18) (2,520)
2,575 Spring Personnel 1,004 - - 1,004
(5,548) Central costs (1,895) - - (1,895)
_____ _____ _____ _____ _____
(8,647) Continuing operations (2,651) (1,597) (290) (4,538)
(1,507) Discontinued operations - - - -
______ ______ ______ ______ ______
(10,154) Total (2,651) (1,597) (290) (4,538)
______ ______ ______ ______ ______
OPERATING PROFIT (LOSS) - Continued
Six months ended 30 June 2002
Before
exceptional
Year ended items and Exceptional
31 December goodwill items Goodwill
2002 amortisation (Note 2) amortisation Total
#000 #000 #000 #000 #000
______ ______ ______ ______ ______
(2,404) IT Staffing 107 (3,148) (820) (3,861)
(1,681) hy-phen (819) - (371) (1,190)
(1,589) IT Training (846) (76) - (922)
2,575 Spring Personnel 1,065 - - 1,065
(5,548) Central costs (2,755) (480) - (3,235)
______ ______ ______ ______ ______
(8,647) Continuing operations (3,248) (3,704) (1,191) (8,143)
Discontinued
(1,507) operations (1,086) (543) - (1,629)
______ ______ ______ ______ ______
(10,154) Total (4,334) (4,247) (1,191) (9,772)
______ ______ ______ ______ ______
2. Exceptional items
Six months Six months
Year ended ended ended
31 December 30 June 30 June
2002 2003 2002
#000 #000 #000
______ ______ ______
2,744 Property reorganisation costs 1,276 2,744
1,845 Reorganisation and redundancy costs 321 1,503
27 Other - -
______ ______ ______
4,616 1,597 4,247
______ ______ ______
3. Basic and diluted loss per share
The calculation of the loss per share is based on the weighted average number of
shares in issue during the period of 145,927,000 (2002: 145,927,000).
Six Six
Year Six months Six months
Year ended months ended months ended
ended 31 December ended 30 June ended 30 June
31 December 2002 30 June 2003 30 June 2002
2002 p per 2003 p per 2002 p per
#000 share #000 share #000 share
______ ______ ______ ______ ______ ______
Basic and diluted loss
(8,648) (5.93) per share (3,903) (2.67) (9,318) (6.39)
______ ______ ______ ______ ______ ______
The weighted average number of shares for the calculation of the diluted loss
per share in respect of the periods ended 30 June 2003 and 30 June 2002 is the
same as that for the basic loss per share as the exercise of share options would
have the effect of reducing the loss per ordinary share and is therefore not
dilutive under the terms of FRS14.
4. Reconciliation of operating loss to operating cash flows
Six months Six months
Year ended ended ended
31 December 30 June 30 June
2002 2003 2002
#000 #000 #000
______ ______ ______
(10,154) Operating loss (4,538) (9,772)
(18) Profit on sale of fixed assets (65) (7)
4,192 Depreciation and amortisation 1,354 2,626
(2) Decrease (increase) in stocks 77 37
9,158 (Increase) decrease in debtors (4,022) 5,221
(4,199) Increase (decrease) in creditors 6,456 1,236
Increase in provisions for liabilities
954 and charges 191 1,905
______ ______ ______
Net cashflow from operating
(69) activities (547) 1,246
______ ______ ______
5. Acquisition
On 23 June 2003, the Group acquired certain subsidiaries of Best International
Group plc for a total consideration, including costs, of #8.8 million. This
comprised cash of #1.0 million, unsecured loan notes of #3.5 million,
convertible unsecured loan notes of #3.0 million and acquisition costs of #1.3
million (of which #1.2 million is included within creditors at 30 June 2003).
The net liabilities acquired amounted to #5.8 million resulting in a goodwill
balance of #14.6 million.
6. Reconciliation of movements in shareholders' funds
Six months ended Six months ended
Year ended 30 June 30 June
31 December 2003 2002
2002 #000 #000
#000 ______ ______
______
(8,648) Loss for the financial period (3,903) (9,318)
(292) Dividends (146) (146)
______ ______ ______
(8,940) (4,049) (9,464)
Exchange differences on retranslation of
32 net assets of subsidiary undertakings 2 47
______ ______ ______
(8,908) Net change to shareholders' funds (4,047) (9,417)
84,898 Opening shareholders' funds 75,990 84,898
______ ______ ______
75,990 Closing shareholders' funds 71,943 75,481
______ ______ ______
7. Basis of preparation
The financial information in this report does not constitute statutory accounts
within the meaning of section 240(3) of the Companies Act 1985.
The unaudited interim statement for the six months ended 30 June 2003 has been
prepared on the basis of the accounting policies set out in the most recently
published financial statements of the Group for the year ended 31 December 2002.
The balance sheet as at 31 December 2002 and the profit and loss account and
cash flow statement for the year then ended are an abridged version of the
published accounts, which have been reported on without qualification by the
auditors and have been delivered to the Registrar of Companies.
8. Dividend
The dividend will be payable to shareholders on the register on 19 September
2003 and will be paid on 28 November 2003.
9. Date of approval of interim statements
The interim announcement covers the period 1 January 2003 to 30 June 2003 and
was approved by the Board on 10 September 2003.
The interim report will be sent to shareholders in due course. Further copies
will be available from the Company's registered office, Charter House, Woodlands
Road, Altrincham, Cheshire WA14 1HF, and can be accessed on the Spring Website,
www.spring.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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