REG - RTC Group PLC - Final results for the year ended 31 December 2019
24/02/2020 07:00
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RNS Number : 8249D RTC Group PLC 24 February 2020
24 February 2020
RTC Group Plc
("RTC", "the Company" or "the Group")
Final results for the year ended 31 December 2019
RTC Group Plc (AIM: RTC.L) is pleased to announce its audited results for the year ended 31 December 2019.
Highlights
· Group revenue £94.9m (2018: £87.8m), 8% increase.
· Profit from operations maintained at £2.0m (2018: £2.0m).
· Earnings per share (basic) 9.60p (2018: 10.20p).
· A final dividend is proposed of 2.76p per share making total
dividends in respect of the year to 31 December 2019 of 4.16p (2018: 3.85p),
8% increase.
· Net working capital debt reduced to £2.8m (2018: £4.5m). The
Group has no term debt.
· 75% of gross profit generated by our more resilient contract
business.
Commenting on the results Andy Pendlebury, CEO said:
"2019 was another extremely positive year for the Group, revenue, gross
profit, cash generation and shareholder dividends all increased in line with
market expectations.
I am extremely excited about our prospects as the work we have done to
position ourselves as a lead player in the infrastructure, rail, energy and
international sectors has yet to be fully exploited by the Group.
Finally, we are proud that we have consistently delivered on our dividend
commitment to our shareholders and our dividend yield is one of the best in
the sector."
Enquiries:
RTC Group Plc Tel: 0133 286 1835
Bill Douie, Chairman
Andy Pendlebury, Chief Executive
SPARK Advisory Partners Limited (Nominated Adviser)
Tel: 0203 368 3550
Matt Davis / Mark Brady
www.Sparkadvisorypartners.com (http://www.Sparkadvisorypartners.com)
Whitman Howard Limited (Broker) Tel: 020 7659 1234
Nick Lovering
www.Whitman-howard.com (http://www.Whitman-howard.com)
About RTC
RTC Group Plc is an AIM listed recruitment business that focuses on white and
blue-collar recruitment, providing temporary and permanent labour to a broad
range of industries and customers in both domestic and international markets
through its geographically defined operating divisions.
UK division
Through its Ganymede and ATA Recruitment brands the Group provides a wide
range of recruitment services in the UK.
Ganymede specialise in recruiting the best technical and engineering talent
and providing complete workforce solutions to help build and maintain
infrastructure and transportation for a wide range of UK and international
clients. Ganymede is a market leader in providing a diverse range of people
solutions to the rail, energy, construction, highways and transportation
sectors. With offices strategically located across the country, Ganymede
provides its clients with the benefit of a national network of skilled
personnel combined with local expertise.
ATA Recruitment provide high-quality technical recruitment solutions to the
manufacturing, engineering and technology sectors. Working as an engineering
recruitment partner supporting businesses across the UK. ATA Recruitment has a
strong track record of attracting and recruiting the best engineering talent
for our clients. ATA's regional offices which are strategically located in
Leicester and Leeds each have dedicated market-experts to ensure ATA delivers
excellence to both our clients and candidates.
The Group headquarters are located at the Derby Conference Centre which also
provides office accommodation for its operating divisions in addition to
generating rental and conferencing income from space not utilised by the
Group.
International division
Through its GSS brand the Group works with customers across the globe that are
focused on delivering projects in a variety of engineering sectors. GSS has a
track record of delivery in some of the world's most hostile locations.
Working closely with its customers GSS provides contract and permanent
staffing solutions on an international basis, providing key personnel into new
projects and supporting ongoing large-scale project staffing needs. GSS
typically recruit across a range of disciplines and skills from operators and
supervisors, through to senior management level.
www.rtcgroupplc.co.uk (http://www.rtcgroupplc.co.uk)
Chairman's statement
For the year ended 31 December 2019
I am pleased to present the final report for the year.
Group
The performance across both our UK and International divisions has been
extremely pleasing. Overall, 2019 has seen further growth in Group revenues
to £94.9m (2018: £87.8m).
UK division
Within the UK, our ATA brand navigated fragile market conditions to produce a
very creditable trading result. Ganymede continued to prosper with further
increases in demand in both the Rail industry and the Energy division despite
the slower than expected growth of our contract to train and supply operatives
to serve the roll out of the government smart meter policy. Within Central
Services revenues from the Derby Conference Centre increased and the facility
continued to provide a first-class headquarters and value add for our clients
as explained in the Chief Executive's statement.
International division
Internationally our GSS brand had an exceptional year's performance beating
its highest ever contribution to the Group.
Dividends
In pursuance of our policy, an interim dividend of 1.4p (2018: 1.3p) has been
paid. Your directors are now proposing a final dividend for the 2019 year of
2.76p (2018: 2.55p) per share, subject to approval at the Annual General
Meeting on 22 April 2020.
Outlook
Although there remain uncertainties for the UK economy in 2020 which are
likely to remain until our future trading arrangements with the European
Community are resolved, we enter 2020 following a healthy performance in 2019
with optimism. ATA Recruitment is continuing to perform at satisfactory
levels, and Ganymede is substantially insulated from any volatility in the
general UK markets by the contracts it has within both the Rail and Energy
industries. The Derby Conference Centre is experiencing improving demand for
its services.
Internationally, GSS has continuing flows of demand from its longstanding
client in Afghanistan and continues to develop business in the Middle East.
The establishment of strong and stable Government and the passing at long last
of our exit from the European Union give us cause to anticipate more
predictable and promising trading conditions although the progress to a final
trade agreement with the EU may cause 2020 to be a bumpy year. Recent clear
indications of strong increases in infrastructure spending and investment
culminating in the announcement of an urgent drive to construct and complete
our major expansion in High Speed Rail transport are expected to offer many
opportunities for the Group.
We view the future with confidence.
Staff
I should like to thank our staff at all levels for their loyalty, hard work
and enthusiasm.
W J C
Douie
23 February 2020
Chairman
Chief Executive's operational and strategic review
For the year ended 31 December 2019
Overview
2019 was another extremely positive year for the Group. Our business continued
to grow despite severe economic and geo-political uncertainty which impacted
the wider global and UK economies. Group revenue, gross profit, cash
generation and shareholder dividends all increased in line with market
expectations. The Group's long-term investment programme in apprentice
training and workforce upskilling remained at a constant, and in certain cases
enhanced level. These costs have to be recognised fully in the year incurred
and cannot be spread over the expected revenue recovery timeline. Therefore,
whilst we could, like many organisations have in the current climate, deferred
this investment to achieve both higher profit and associated earnings per
share, the Board did not see this as a necessary nor sensible strategy to
deploy. Furthermore, whilst the Board is cognisant of the importance of
meeting, and wherever possible exceeding annual profit targets, this will not
be done at any cost as creating long-term sustainable profit and cash flow
growth is our key priority to support our goal of growing dividends every year
- not an easy commitment to make or deliver - as being essential in
attracting and retaining a supportive shareholder community. We are proud that
we have consistently delivered on our dividend commitment to our shareholders
and our dividend yield is one of the best in the sector.
I am delighted that our results, when compared alongside the performance of
many of our publicly traded peers, especially the small cap contingent, fair
extremely well, and across a broad range of measures vindicate the strategic
direction being followed by the Board. They provide confidence that the range
of strategic imperatives outlined for shareholders in both our 2014 and 2017
business reviews are being implemented by strong management teams deployed
across each of our businesses and within the corporate centre of the Group.
Given that many of the current macro-economic challenges were neither present,
nor indeed envisaged when we redefined the vision and strategic direction of
the Group we believe our business model remains robust and once the economy
regains accelerated momentum, capable of generating additional organic led
growth opportunities for us to further grow shareholder value. I appreciate
that there is no guarantee that 2020 will deliver a vastly different landscape
than 2019 but by growing and using our balance sheet wisely, as we continue to
do, we will be well prepared for any eventuality encountered by the Group.
With regards to our financial prudence and treasury management I would like to
provide some clarity around our debt position as this has been a source of
difficulty facing a number of companies in our sector over the past 12-18
months. I believe it is worth outlining for our shareholders, our relative
position and attitude to the use of debt and its potential impact on
shareholder wealth. Typically, debt in our sector is raised for two
predominant reasons. Firstly, to finance business expansion through
acquisition activity. Our sector has seen profit multiples of target companies
(the multiple of net earnings before interest, tax, depreciation and
amortisation) rise to significantly high, and in our opinion unrealistic
valuations, and whilst this may provide short-term gains for shareholders,
overly ambitious synergy savings are rarely achieved with the consequences of
overpaying for targets providing unmanageable debt burdens. The impact on
shareholder wealth through overburdened balance sheets is extremely damaging
and in certain circumstances can be terminal. We will not do this to our
shareholders and will concentrate on investing in and building on organic
growth opportunities with existing and new clients. Funding this aspect of
growth is where our industry derives its second key source of debt from in
the form CID (Confidential Invoice Discounting). Through its banking facility,
the Group acts as a secondary source lender to clients through recruiting and
payrolling workers for them thereby bolstering their working capital
capabilities. For doing this the Group charges clients a fee (our margin) to
recover both its direct and indirect costs and a contribution to profit for
reinvestment and dividends to shareholders. The primary risk to our
shareholders is clients defaulting on their "working capital loans" or as it
is referred to bad debts, and this is mitigated for our shareholders by the
quality of due diligence in client selection and through our credit control
and treasury management. Over the past 5 years the Group has cumulatively
provided around £300m of these "working capital loans" to clients with a less
than 0.02% default rate. We therefore believe that our debt position is
extremely solid, and I hope this provides clarity and context to the debt
position held on the Group's balance sheet.
Divisional business review
UK division
Operational integration of ATA and Ganymede
For many years Ganymede and ATA have successfully competed in their respective
UK markets. Both businesses have enjoyed significant growth and have
established reputations for delivering first class recruitment solutions to a
range of clients in the rail, infrastructure, built environment and
manufacturing sectors. As CEO of the Group I am extremely proud of everybody
across both businesses for all the hard work that has gone into achieving this
success.
However, as eluded to in my 2017 SWOT analysis both the competitive landscape
and dynamics of the markets we serve are changing and our clients are
demanding a broader solution from a streamlined supply chain. In order to
compete and stay ahead of our competition we needed to change and adapt our
business model and structure to fit the new paradigm. In our current format
we have to approach clients multiple times through both businesses, set up
individual trading arrangements under both companies and submit two sets of
invoices for payments. This, when clients are looking to streamline supplier
relationships, reduce administration and transaction costs and award bigger
contracts with fewer suppliers, is both counter intuitive and potentially
damaging to the Group.
With this in mind, we integrated the ATA projects business with Ganymede
creating a highly focused white-and-blue collar business. Our ATA branch
network will continue to operate and grow in their current locations and
compete in their indigenous manufacturing, engineering and industrial markets
under the ATA Recruitment brand. Our commitment to grow all our branches
remains a key priority for the Group.
I believe having done this we will create a very focused and enlarged people
solutions business capable of competing with and beating much larger
competitors who currently dominate the infrastructure and transportation
marketplace. I also believe it will create opportunities for individuals
across both businesses to accelerate their career and personal growth plans
and help us become a more effective and efficient business by redefining our
cost structure to focus on sales and account management to harness growth.
Clearly there will be a number of challenges to overcome in ensuring a smooth
integration but I believe the collective capability of the two businesses will
achieve better growth and market positioning and I believe all concerned will
see this as a new beginning and launch pad for everybody in the business and I
have full confidence that the team led by Managing Director Paul Crompton have
an exciting and prosperous future ahead of them.
Ganymede
Ganymede had another outstanding year with both its Rail and Energy divisions
delivering record levels of growth. The Rail business has continued to build
on its reputation, presence and positioning in the Rail sector. Its solid
performance as a lead supplier to Network Rail culminated in Network Rail
exercising its option to extend its framework agreement until 31 March 2021 a
significant and stellar performance by the whole team. Ganymede is now widely
recognised as a leading exponent of safety critical working in the UK Rail
sector. The Businesses reputation was significantly enhanced following the
collapse of Carillion where Ganymede worked tirelessly alongside Network Rail
to ensure minimal disruption on a range of unfinished and vitally important
rail projects. In addition to strengthening its position with Network Rail,
Ganymede has been selected as a preferred supplier to a number of Tier 1 rail
suppliers broadening its footprint and involvement in other key rail
infrastructure projects. By merging Ganymede with ATA who are also heavily
involved in supplying white collar personnel to a broad range of rail focused
suppliers the business can now offer full 'cradle to grave' and through life
solutions to the sector which clients are increasingly demanding.
Ganymede's Energy business is now beginning to show the shoots of growth in
its smart meter roll out programme following a number of years of slower than
expected activity due to industry wide technology and compatibility issues.
Our strategic contract with SSE has seen a significant increase in demand
during the last quarter of 2019, which is extremely encouraging, and we
believe the next 3-5 years will see a steady and consistent increase in
headcount deployed on this type of activity. The Energy division is also
involved in discussions with a number of energy companies engaged in medium to
long-term roll out programmes for charging technology for smart cars. Like
domestic smart meter forecasts, growth in this sector is set to rise
significantly over the next 5-10 years and we believe given our experience and
existing relationships with key OEM's we are favourably placed to establish a
number of strategic partnerships. This is because this large-scale national
rollout programme would have similarities to the safety critical work we
currently perform for both Network Rail and SSE.
Ganymede has continued with its long-term investment in training across both
the sectors through its apprentice and operative upskilling programme. The
investment commitment is not insignificant and as previously alluded to, is
costed as incurred with revenue lagging investment in training. Whilst this
has a short impact on profits, the business is committed to generating revenue
over longer term as this provides a more consistent and steadier stream of
revenues.
During 2019 Ganymede invested in a number of safety initiatives and campaigns
which have improved communications and engagement with its workforce, and this
has driven significant improvements in safety performance which is a key
priority for both the Rail and Energy sectors. These initiatives are seen by
the Board as long-term investment priorities and are further examples of the
Group's attitude to business investment even during this difficult economic
climate as we believe it will benefit the shareholder in the long-term.
Finally, Ganymede invested in two new sub-divisions during 2019 again
incurring upfront investment costs and both are showing early signs of
promise. Firstly the newly formed trades and labour division was formed to
compliment the supply of rail engineering personnel with various non-rail
tradesmen as many projects now demand a complete end-to-end workforce
capability and secondly a small works business has been established to perform
small packages of work where Ganymede take wider control and responsibility
for both Network Rail and other Tier 1 suppliers. We believe by having a
holistic capability, including the ATA white collar project business, it
places Ganymede in a more favourable position to secure a new and enhanced
long-term relationship with Network Rail and its key Tier 1 partners.
ATA
The challenging headwinds experienced by ATA in the first half of 2019 did not
abate and like much of its competition ATA had to weather further and, in some
cases, worsening conditions. The impact was felt equally by both the projects
business where a number of new civil engineering projects were either held or
in certain cases shelved pending the outcome of Brexit and the turbulent
domestic political landscape. The ATA branch network which supports the UK
manufacturing, engineering and industrial sectors was impacted as falling
confidence dampened enthusiasm for capital investment initiatives and
headcount led growth.
We believe the decision to combine ATA projects with Ganymede will have a
positive impact during 2020 as it broadens its exposure to bigger and more
established projects as part of the Ganymede offering. In terms of the branch
network, ATA has always been firmly aligned to the direction of the wider
economy and this has never been more evident than during the uncertainties
created by Brexit. It has been a couple of extremely frustrating years for ATA
branches and the generalist recruitment sector per se. However, ATA and its
senior executive team, along with members of the Board, have endured many
cycles of muted business confidence in the UK and history shows that these
periods of stagnant or declining growth are normally followed by longer
periods of growth as operational headcount cuts, usually deeper than needed,
are reversed and depleted stock levels are replenished.
Furthermore, it is likely that a post-Brexit UK will be challenging for many
companies as the war for talent will intensify as businesses find it harder to
recruit from overseas. In this regard we believe that the ATA branch network
will be able to source candidates through its sister company GSS who has
access to a broad range of international recruitment partners. This could
provide a valuable source of competitive advantage as many companies try to
navigate through the EU settlement scheme, updated visa requirements and the
evolving immigration reform landscape.
Central Services
Our Conference centre (the DCC), a part of Central Services, continues to
provide first class headquarters for our Group financial directorate, human
resources and technology departments. It is also headquarters to our Ganymede
and ATA businesses and the Board. At the same time the DCC provides
conferencing, events and commercial office facilities and is widely recognised
as one of the most unique and respected venues across the East Midlands. In
addition to the direct value add it generates for the Group, the DCC has
played a significant role in helping our prime revenue generators through
offering a range of bolt on services to clients not offered by many of our
competitors. Additionally, the DCC has generated various and in certain
circumstances significant leads to our recruitment businesses and this
attitude of cooperation and inter-divisional business development is
encouraged across all Group operations.
International division
Our International business GSS is a clear market leader in the deployment and
management of large volume multi-nationality workers with a broad range of
skills into hostile environments for NATO partner suppliers. It is unrivalled
in the UK and has a range of unique skills and differentiators built up over
the ten years since it was established by the Group.
I am delighted to report that the business had another hugely successful year
culminating in its highest ever contribution to the Group. This achievement is
even more remarkable as during 2018 the business had over £0.7m of
non-recurring permanent fees from one client in the USA for a specific
recruitment project in Afghanistan. To fill this gap the business recruited
additional personnel for deployment in Afghanistan and other international
locations for existing clients. The business now has around 1,000 workers
deployed on blue chip international Government/NATO projects across a range of
locations including Afghanistan, Iraq, Bahrain, Oman and UAE. The business is
also currently in discussions with a range of USA and other international
contractors to expand both its service offering.
Outlook and future growth strategy
Any attempt at forecasting the outlook in the present economic climate is not
without difficulty and anybody purporting to do so accurately without clearly
identifying the accompanying and imminent risks runs the risk themselves of
misleading shareholders. That is not our style and I would like to outline the
key risks and uncertainties I see in delivering growth for our shareholders.
Firstly, we cannot avoid the continuing macro-economic and geo-political
fallout and continued threat from both the US/China trade war and the risk of
a disorderly exit from the European Union. Both have the potential to further
dampen the appetite for business investment, especially in the UK, and under
these circumstances it is not uncommon for candidates to defer career moves
thereby reducing supply capability. However, this is not untypical of
recruitment supply/demand cycles and once confidence returns sentiment tends
to reverse. To mitigate the potential of this threat and to counter the ebbs
and flows of traditional recruitment activity, we embarked on a strategic
change of direction when I joined the Group as CEO. Through building a
diversified portfolio of businesses supporting long-term indigenous
infrastructure programmes and projects with high value order book revenue.
This, complimented by long-term international defence related contracts, has
enabled the Board to build a solid foundation to mitigate the impact of
exposure the UK economy which historically represented 100% of Group revenue.
The second predominant risk causing sleepless nights for CEO's is IR35. The
IR35 cloud has been firmly on the horizon for twenty years as the initial
legislation was first passed in the 2000 Finance Bill. Whilst the
implementation date has been postponed on many occasions, HMRC is adamant it
is not going to kick the can down the road anymore and the government is
firmly committed to implementing its policy in April 2020. It is worth
outlining that the legislation designed to combat tax avoidance by workers
supplying services to clients through intermediaries is highly complex and
with employment law relying on caselaw to determine the legal status of
individuals, the complexity of the issue will be challenging for all concerned
for the foreseeable future. Presently a significant contingent of workers
deployed by the Group across its client base have been determined as residing
outside the scope of the legislation as they are employed by the Government
through Network Rail and the Government is responsible for determining the
status of all workers engaged under their auspices. The status of workers
engaged by Group within the private sector are subject to review by our
various clients and we are working closely with all our clients to establish
the most appropriate route to keeping the individuals engaged on their work
programmes from April 2020.
Whilst I am acutely aware that the concerns highlighted above could be
received negatively, that is not my intention. Far from it as I am extremely
excited about our prospects as the work we have done to position ourselves as
a lead player in the Infrastructure, Rail, Energy and International sectors
has yet to be fully exploited by the Group. Rather I believe it is my
responsibility to outline for our shareholders an honest and frank assessment
of the challenges we face along with a clear message as to what we are doing
to protect their interests. I believe this candour is what our shareholders
want from us.
A M
Pendlebury
23 February 2020
CEO
Finance Director's report
For the year ended 31 December 2019
Financial highlights
The Group delivered profit from operations of £2.0m (2018: £2.0m).
UK
The Group saw a mixed performance across its UK businesses, Ganymede and ATA
Recruitment, with areas such as technical engineering recruitment, both
permanent and contract, impacted by clients showing caution pending a
conclusion to Brexit negotiations. Whilst in areas such as contract
recruitment for rail clients and permanent recruitment for energy clients
demand was strong. As a result, revenue from permanent placements in the UK
was maintained at £2.8m (2018: £2.8m) and contract revenue was up £7.8m to
£90.3m (2018: £82.5m). Overall, the UK recruitment activities delivered
profit from operations of £3.7m (2018: £3.6m) an increase of 3% on the
previous year. Within Central Services, the Derby Conference Centre
contributed £0.9m (2018: £0.9m) gross profit.
International
The Group's international division delivered its most profitable year since
inception with revenues up £1.8m to £16.6m (2018: 14.8m) and profit from
operations breaking the £1m barrier at £1.1m (2018: £0.9m) despite the
absence of £0.7m of permanent fees delivered in 2018 as that contract ended
early in 2019.
Taxation
The tax charge for the year was £0.4m (2018: £0.4m). The variance between
this and the expected charge if a 19% corporation tax rate was applied to the
profit for the year is explained in note 3.
Dividends
During the year, the Company paid a final dividend in respect of the previous
year's results of £363,418 (2018: £326,984) which represents a payment of
2.55p (2018: 2.3p) per share and an interim dividend of £199,734 (2018:
£184,817) to its equity shareholders. This represents a payment of 1.4p
(2018: 1.3p) per share. Total dividend payments of £563,152 (2018: £511,801)
which equate to 3.95p per share (2018: 3.6p) were made during the year refer
to note 5.
A final dividend for the year ended 31 December 2019 of £393,760 (2018:
£362,780) has been proposed but has not been accrued within these financial
statements. This represents a payment of 2.76p (2018: 2.55p) per share.
Operational integration of ATA and Ganymede
To provide a simplified company structure and streamlined back office
procedures to underpin the operational integration of Ganymede and ATA
Recruitment (as set out in the Chief Executive's strategic report), the trade
and assets of ATA Recruitment Limited were hived-up into Ganymede Solutions
Limited on 31 December 2019. The assets were transferred at book value and
there was no impact on the Group financial statements.
Adoption of new accounting standards
During the year IFRS 16 Leases (effective 1 January 2019) was adopted which
has resulted in the Group recognising right of use assets and lease
liabilities for all qualifying contracts that are, or contain, a lease in the
statement of financial position. The Group has applied the modified
retrospective transition method and as such comparatives have not been
restated. The impact on profit before tax for the Group for the year was not
material and there was no impact on opening equity at 1 January 2019. The
Group also adopted IFRIC 23 which provides guidance on the accounting for
current and deferred tax liabilities and assets in circumstances in which
there is uncertainty over income tax treatments; this had no material impact
on the financial statements.
Own shares held
The cost of the Group's own shares purchased through the Employee Benefit
Trust is shown as a deduction from equity. 40,000 options were exercised
during the year and own shares held in the EBT were used to satisfy this
demand. The balance of £263,919 on the own shares held reserve within equity
reflects 377,027 shares remaining in the EBT that will be used to satisfy
future exercises.
Statement of financial position
The Group's statement of financial position has further strengthened compared
to the same point last year with net working capital increasing to £4.0m
(2018: £3.1m). The ratio of current assets to current liabilities was
improved at 1.3 (2018: 1.2). The Group's gearing ratio, which is calculated as
total borrowings over net assets was significantly improved at 0.6 (2018: 1.2)
largely as a result of change in mix of sales in favour of clients with
shorter payment terms. The Group has no term debt and is financed using its
invoice discounting and overdraft facilities with HSBC. Interest cover
decreased to 9.7 (2018: 16.4) as during the year there were higher interest
charges due to IFRS 16.
Cash flows
The Group generated a net cash inflow from operating activities of £2.9m
(2018: £1.0m) largely due to strict control over the level of trade debtors
year on year. Whilst revenues have increased during the year, the mix of those
sales has been more towards clients with shorter payment terms which is also
reflected in the movement in invoice discounting facility which shows a £1.8m
reduction in funds in use. Cash generated from operations was applied to
dividends £0.6m (2018: £0.5m) and the purchase of property plant and
equipment £0.3m (2018: £0.5m). Payments of £0.2m (2018: £Nil) in respect
of lease liabilities are also being shown within the cash flows from financing
activities following the adoption of IFRS 16. These were previously within the
profit from operations.
Prior period restatements
As explained in note 6, the 2018 consolidated statement of financial position
has been restated to present overdrafts of £1,454,000, which were previously
included in cash and cash equivalents, within liabilities due within 1 year.
This restatement has not impacted the previously reported profits, net current
assets or net assets. In addition, the consolidated cash flow statement has
been restated to present certain overdrafts, amounting to £827,000 within
financing activities rather than cash and cash equivalents.
Financing
The Group's current bank facilities include a net overdraft facility across
the Group of £50,000 and an invoice discounting facility of up to £9.0m with
HSBC at a margin of 1.5% above base. An increase in the facility up to £11m
has also been approved by HSBC but not yet invoked as the Group is operating
within its current facility. The Board closely monitors the level of facility
utilisation and availability to ensure there is enough headroom to manage
current operations and support the growth of the business. The Group
continues to be focused on cash generation and building a robust statement of
financial position to support the growth of the business.
S L
Dye
23 February 2020
Group Finance Director
Consolidated statement of comprehensive income
For the year ended 31 December 2019
2019 2018
Notes £'000 £'000
Revenue 2 94,949 87,806
Cost of sales (80,475) (73,908)
Gross profit 2 14,474 13,898
Administrative expenses (12,513) (11,918)
Profit from operations 1,961 1,980
Finance expense (203) (121)
Profit before tax 1,758 1,859
Tax expense 3 (390) (419)
Total profit and other comprehensive income for the period attributable to 1,368 1,440
owners of the Parent
Earnings per ordinary share
Basic 4 9.60p 10.20p
Fully diluted 4 8.59p 9.36p
Consolidated statement of changes in equity
For the year ended 31 December 2019
Share capital Share premium Own shares held Capital redemption reserve Share based payment reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2019 146 120 (292) 50 379 4,833 5,236
Total comprehensive income for the year - - - - - 1,368 1,368
Transactions with owners:
Dividends - - - - - (563) (563)
Share options exercised - - 28 - (15) (11) 2
Share based payment charge - - - - 193 - 193
Total transactions with owners - - 28 - 178 (574) (368)
At 31 December 2019 146 120 (264) 50 557 5,627 6,236
The information for the prior reporting period is as follows:
Share capital Share premium Own shares held Capital redemption reserve Share based payment reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2018 146 120 (473) 50 215 3,993 4,051
Total comprehensive income for the year - - - - - 1,440 1,440
Transactions with owners:
Dividends - - - - - (512) (512)
Share options exercised - - 181 - (76) (88) 17
Share based payment charge - - - - 240 - 240
Total transactions with owners - - 181 - 164 (600) (255)
At 31 December 2018 146 120 (292) 50 379 4,833 5,236
Consolidated statement of financial position
As at 31 December 2019
2019 2018
Restated (refer to note 6)
£'000 £'000
Assets
Non-current
Goodwill 132 132
Other intangible assets 234 306
Property, plant and equipment 1,680 1,648
Right of use assets 3,044 -
Deferred tax asset 95 66
5,185 2,152
Current
Inventories 10 8
Trade and other receivables 15,809 15,811
Cash and cash equivalents 798 1,546
16,617 17,365
Total assets 21,802 19,517
Liabilities
Current
Trade and other payables (8,493) (7,863)
Lease liabilities (282) -
Corporation tax (296) (261)
Current borrowings (3,570) (6,093)
(12,641) (14,217)
Non-current liabilities
Lease liabilities (2,855) -
Deferred tax liabilities (70) (64)
Net assets 6,236 5,236
Equity
Share capital 146 146
Share premium 120 120
Own shares held (264) (292)
Capital redemption reserve 50 50
Share based payment reserve 557 379
Retained earnings 5,627 4,833
Total equity 6,236 5,236
Consolidated statement of cash flows
For the year ended 31 December 2019
2019 2018
(restated refer to note 6)
£'000 £'000
Cash flows from operating activities
Profit before tax 1,758 1,859
Adjustments for:
Depreciation, loss on disposal and amortisation 693 412
Finance expense 203 121
Employee equity settled share options charge 194 240
Change in inventories (2) (2)
Change in trade and other receivables (18) (2,739)
Change in trade and other payables 629 1,553
Cash inflow from operations 3,457 1,444
Income tax paid (378) (320)
Interest paid (203) (121)
Net cash inflow from operating activities 2,876 1,003
Cash flows from investing activities
Purchase of property, plant and equipment and intangibles (314) (504)
Proceeds from asset disposals 20 -
Net cash used in investing activities (294) (504)
Cash flows from financing activities
Movement on invoice discounting facility (1,821) (73)
Movement on perpetual bank overdrafts (75) 195
Dividends paid (563) (512)
Payment of lease liabilities (246) -
Proceeds from exercise of share options 2 17
Net cash (outflow)/inflow from financing activities (2,703) (373)
Net (decrease)/increase in cash and cash equivalents (121) 126
Cash and cash equivalents at beginning of period 919 793
Cash and cash equivalents at end of period 798 919
1. Corporate information and basis of preparation
RTC Group Plc is a public limited company incorporated and domiciled in
England whose shares are publicly traded.
The announcement of results of the Group for the year ended 31 December 2019
was authorised for issue in accordance with a resolution of the directors on
23 February 2020.
The financial information included in this announcement has been compiled in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS"), including International Accounting
Standards ("IAS") and interpretations issued by the International Accounting
Standards Board ("IASB") and its committees, and as adopted by the EU. This
announcement does not itself however contain sufficient information to comply
with IFRS.
Other than the adoption of IFRS 16 which sets out the principles for
recognition, measurement and presentation of leases, and IFRIC 23 which
provides guidance on the accounting for current and deferred tax liabilities
and assets in circumstances in which there is uncertainty over income tax
treatments, which are both effective for accounting periods starting on or
after 1 January 2019, the accounting policies adopted are consistent with
those described in the annual financial statements for the year ended 31
December 2018.
There have been no significant changes in the basis upon which estimates have
been determined, compared to those applied at 31 December 2018 and no change
in estimate has had a material effect on the current period.
2. Segment analysis
Factors that management used to identify the Group's reportable segments
As a result of the operational integration of ATA and Ganymede during 2019, as
explained in the CEO's report, the Group has reviewed the determination of its
operating segments. This has resulted in the business being split into three
operating segments, with recruitment being split by geographical area rather
than by statutory entity. This reflects the integrated approach to the Group's
recruitment business in the UK and independent delivery of overseas
business. Three operating segments have therefore been agreed, based on the
geography of the business unit; United Kingdom and International and central
services.
This is consistent with the reporting for management purposes, with the Group
organised into two reportable segments, Recruitment and Central Services,
which are strategic business units that offer different products and services.
They are managed separately because each segment has a different purpose
within the Group and requires different technologies and marketing
strategies.
The comparative segmental information has been restated to reflect the changes
made in 2019.
Operating segments
Segment operating profit is the profit earned by each operating segment
defined above and is the measure reported to the Group's Board, the Group's
Chief Operating Decision Maker (CODM), for performance management and resource
allocation purposes. The Group manages the trading performance of each segment
by monitoring operating contribution and centrally manages working capital,
financing and equity.
Revenues within the recruitment operating segment have similar economic
characteristics and share a majority of the aggregation criteria set out in
IFRS 8:12 in particular the nature of the products and services, the type or
class of customers, the country in which the service is delivered and the
processes utilised to deliver the services and the regulatory environment for
the services.
The purpose of the Central Services segment is to
provide all central services for the Group including the Group's head office
facilities in Derby. It also generates income from excess space at the Derby
site including rental and conferencing facilities.
Revenue, gross profit and operating profit delivery
by geography:
Year ended 31 December 2019 Year ended 31 December 2018
UK UK Inter-national Recruitment Total Group UK Recruitment UK Inter-national Recruitment Total Group
Recruitment Central Central
Services Services
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 76,526 1,864 16,559 94,949 71,305 1,696 14,805 87,806
Cost of sales (64,680) (1,010) (14,785) (80,475) (60,108) (824) (12,976) (73,908)
Gross profit 11,846 854 1,774 14,474 11,197 872 1,829 13,898
Administrative expenses (7,852) (3,269) (701) (11,822) (7,368) (3,222) (917) (11,507)
Amortisation of intangibles (85) - - (85) (182) - - (182)
Depreciation of right of use assets (125) (214) - (339) - - - -
Depreciation (93) (170) (4) (267) (79) (146) (4) (229)
Total administrative expenses (8,155) (3,653) (705) (12,513) (7,629) (3,368) (921) 11,918
Profit from operations 3,691 (2,799) 1,069 1,961 3,568 (2,496) 908 1,980
The revenue reported above is generated from continuing operations with
external customers. There were no sales between segments in the year (2018:
Nil).
For segment reporting purposes revenue is analysed by the geographical
location in which the services are delivered.
The accounting policies of the operating segments are the same as the Group's
accounting policies. Segment profit represents the profit earned by each
segment without allocation of Group administration costs or finance costs.
During 2019, one customer in the UK segment
contributed 10% or more of total revenue being £31.3m (2018: £21.4m) and one
customer in the International segment also contributed 10% or more of total
revenue being £16.5m (2018: £14.0m).
Recruitment revenues are generated from permanent and temporary recruitment
and long-term contracts for labour supply. Within Central Services revenues
are generated from the rental of excess space and facilities at the Derby
site, described as Other below.
Revenue and gross profit by service classification for management purposes:
Revenue Gross profit
2019 2018 2019 2018
£'000 £'000 £'000 £'000
Permanent placements 2,819 3,588 2,819 3,588
Contract 90,266 82,522 10,801 9,438
Other 1,864 1,696 854 872
94,949 87,806 14,474 13,898
All operations are continuing. All assets and
liabilities are in the UK.
3. Tax expense
2019 2018
Continuing operations £'000 £'000
Current tax
UK corporation tax 402 367
Adjustments in respect of previous periods 11 38
413 405
Deferred tax
Origination and reversal of temporary differences (23) 14
Tax 390 419
Factors affecting the tax expense
The tax assessed for the year is higher than (2018:
higher than) would be expected by multiplying the profit by the standard rate
of corporation tax in the UK of 19% (2018: 19%). The differences are
explained below:
Factors affecting tax expense 2019 2018
£'000 £'000
Result for the year before tax 1,758 1,859
Profit multiplied by standard rate of tax of 19% (2018: 19%) 334 353
Non-deductible expenses 86 87
Tax credit on exercise of options (5) (25)
Other differences (36) (34)
Adjustment in respect of previous periods 11 38
390 419
4. Basic and diluted earnings per share
The calculation of basic earnings per share is based
on the earnings attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the year.
The calculation of the fully diluted earnings per
share is based on the basic earnings per share adjusted to allow for dilutive
potential ordinary shares.
Basic Fully diluted
2019 2018 2019 2018
Earnings £'000 1,368 1,440 1,368 1,440
Basic weighted average number of shares 14,254,557 14,114,625 14,254,557 14,114,625
Dilutive effect of share options - - 1,676,094 1,263,737
Fully diluted weighted average number of shares - - 15,930,651 15,378,362
Earnings per share (pence) 9.60p 10.20p 8.59p 9.36p
5. Dividends
2019 2018
£'000 £'000
Final dividend of 2.55p per share (2018: 2.3p) proposed and paid during the 363 327
year relating to the previous year's results.
Interim dividend of 1.4p per share (2018: 1.3p). 200 185
563 512
A final dividend of £393,760 (2018: £362,780) has been proposed but has not
been accrued within these financial statements. This represents a payment of
2.76p (2018: 2.55p) per share.
6. Prior period restatements
At 31 December 2018 cash and cash equivalents in the consolidated statement of
financial position, as originally presented, included bank overdrafts of
£1,454,000. Detailed consideration of the evidence supporting this treatment
has concluded that the conditions for this net presentation were not met and
the error has been corrected within the comparatives, reclassifying the
overdrafts to current liabilities. The restated cash and cash equivalents,
after this reclassification is £1,546,000.
At 1 January 2018 the restated cash and cash equivalents and overdrafts should
have been £1,733,000 and £1,572,000 respectively in the consolidated
statement of financial position.
In the consolidated statement of cash flows certain overdrafts at 31 December
2018, which represents a core element of the financing structure of the
relevant subsidiary, amounting to £827,000 (2017 £632,000) have been
adjusted to include the movement within financing activities and correct the
previous offset against the cash balances.
The correction of these errors has not had any impact on previously reported
profits, net current assets or net assets.
7. Report and accounts
The above financial information does not constitute the Company's statutory
accounts for the years ended 31 December 2019 or 2018 but is derived from
those accounts. The auditor has reported on these accounts; their report was
unqualified, did not draw any matters by way of emphasis without qualifying
their report and did not contain statements under s498 (2) or (3) Companies
Act 2006 or equivalent preceding legislation. The statutory accounts for 2018
have been filed with the Registrar of Companies.
Full audited accounts of RTC Group Plc for the year ended 31 December 2019
will be made available on the Company's website at www.rtcgroupplc.co.uk
(http://www.rtcgroupplc.co.uk) later today and will be dispatched to
shareholders on 23 March 2020 and then be available from the Company's
registered office - The Derby Conference Centre, London Road, Derby, DE24 8UX.
The Company's Annual General meeting will be held at 12 noon on 22 April 2020
at the offices of Gowling WLG (UK) LLP, 4 More London Riverside, London, SE1
2AU.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
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