RNS Number:4590J
MSB International PLC
01 April 2003
1 April 2003
PRESS RELEASE
MSB INTERNATIONAL PLC
Preliminary results for the year ended 31 January 2003
MSB International PLC ("MSB" or "the Company") today announces its preliminary
results for the year ended 31 January 2003.
Financial highlights:
* Turnover of #84 million (2002: #146 million)
* Cost base reduced with #9.2 million savings in total costs
* Profit before taxation and exceptional item at break even (2002: profit
of #3 million)
* Exceptional provision against the carrying value of MSB shares held by
MSB Incentive Scheme Trustee Limited of #0.4m
* Loss before taxation of #0.4m (2002: profit of #1.9m)
* Basic loss per share of 2.32p (2002: 6.4p profit). Basic loss per
share before exceptional item of 0.16p (2002: 10.4p profit).
* Final dividend of 1.4p making the total dividend for the year 2.1p
(2002: 2.8p)
* Operating cash inflow of #11 million (2002: #8.3 million) resulting in
a net cash balance of #6.2 million (2002: #3.4 million net borrowings)
Operational highlights:
* Sales model re-engineered with new sector-focused sales structure
* Continued investment in new recruitment divisions; MSB Finance and MSB
Sales launched
* New products and services developing deeper client relationships
* Commitment remains to core IT recruitment
* Paul Davies appointed as Non-Executive Chairman and Douglas
Adshead-Grant appointed as Finance Director in November 2002
* Nicholas Parker to step down as Non-Executive Director at the time of
our 2003 Interim results
Commenting on the results, Paul Davies, Chairman of MSB, said:
"The past year has been one full of challenges for MSB and it is a reflection on
the quality of both its management and staff that the Company continues to be a
leading provider of human capital solutions. In diversifying our service
offering with the launch of both MSB Finance and MSB Sales, we have taken
important steps to broaden our target markets.
"Trading in the first two months of this financial year has been in line with
management's expectations. Whilst market conditions continue to be tough, the
Board believes that the necessary steps have been taken for a return to positive
earnings and remains confident in the long term prospects for the Company.
"I believe we are well placed, with a solid balance sheet, to take advantage of
opportunities which now present themselves and am pleased to have joined MSB in
these exciting times."
- Ends -
For more information, please contact:
MSB International 020 8315 9000
Andrew Zielinski, Chief Executive
Merlin Financial 020 7606 1244
Paul Downes 07900 244 888
Vanessa Maydon 07802 961 902
Clare Maciocia 07876 561305
Attached:
Chairman's Statement
Chief Executive's Statement
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Statement of Group Total Recognised Gains and Losses
Movements in Shareholders' Funds
Preliminary Announcement Notes
CHAIRMAN'S STATEMENT
Introduction
This was a year of considerable change for MSB. Market conditions continued to
be extremely difficult with demand for our traditional services declining.
Increased focus on internal controls and strict financial management has
re-aligned our cost base to reflect reduced levels of revenue and has
considerably improved our cash position.
Several changes at both main Board and operational level have resulted in a
substantially new management team prepared to respond to the challenges and
opportunities which now present themselves.
This team continues to develop the existing business and has commenced
investigation into strategic initiatives aimed at enabling the Company to
respond to the new circumstances which it, along with the rest of the industry,
now faces.
Results and Dividend
Turnover for the year was #84 million (2002: #146 million) with profit before
taxation and exceptional item at breakeven (2002: #3 million profit). Basic loss
per share before exceptional item was 0.16p (2002: 10.4p profit) and after
exceptional item 2.32p (2002: 6.4p profit). Operating cash inflow of #11
million (2002: #8.3 million) resulted in a net cash balance of #6.2 million
(2002: #3.4 million net borrowings).
The Board is recommending a final dividend of 1.4p (2002: 1.4p), bringing the
total dividend for the year to 2.1p (2002: 2.8p).
Management and Organisation
There have been a number of changes to the Board in the period.
In August John Bateman stood down as Chief Executive and Andrew Zielinski was
promoted to the post after four years as Finance Director. As a result of this,
Douglas Adshead-Grant was appointed Finance Director in November joining us from
the Frozen Food division of Albert Fisher Group plc where he was the interim
Finance Director.
In October Charles Toner stood down as senior non-executive after three years
loyal service.
The Board would like to register their thanks to both John and Charles for their
commitment and guidance during what was a time of exceptional change for MSB.
Also in November, and following the resignation of John Bateman as Executive
Chairman, the Board invited me to join them as Non-Executive Chairman to oversee
the changes in strategy and business focus which would be needed for the next
phase of MSB's development.
At the beginning of the year MSB concentrated primarily on the provision of IT
and telecommunications contractors which historically had been a key driver in
the business model. In response to declining activity in this traditional
market, the Company instigated a sector focused sales structure supported by a
technical skills based resourcing division.
In parallel to this restructuring programme, several new self funding
initiatives were launched in the second half including MSB Finance ( a division
specialising in delivering finance, banking and accounts personnel ) and MSB
Sales ( a division providing permanent sales personnel to the IT and related
sectors ). Both divisions were founded around the recruitment of individuals
with a proven track record in their respective sectors and although in their
infancy, both are showing solid potential.
MSB People
The past year has been one full of challenge within MSB and it is a reflection
on the quality of both its management and staff that the Company has continued
to maintain its position as a leading provider of human capital solutions. We
have retained and secured many new customers by demonstrating continued
commitment to both clients and candidates in the professional manner which has
become expected of them. The Board would like to express their thanks and
appreciation to them all.
Current Trading and Prospects
The IT staffing sector has proven itself over many years to be a barometer of
the health of the IT market in general. When industries invest in latest
technologies to support growth in their own businesses so demand for IT skills
increases and the sector prospers. Similarly, when companies respond to tougher
conditions so they seek to reduce costs and IT investment is frequently an early
casualty.
Following the massive IT spends during the late 1990's most sectors have
steadily reduced IT budgets to match tougher economic conditions in their own
markets. Most of the IT industry has suffered the effects of this downturn and
MSB, along with its peers in IT skills resourcing, has been no exception.
The challenge we face in MSB at present, therefore, is to balance the need for
cost reductions in line with reduced revenues whilst retaining the capacity to
respond to and seek out growth opportunities. Overly aggressive cost control may
well maximise short term earnings but would undoubtedly restrict our ability to
benefit from any upturn in the IT investment cycle, thereby damaging our longer
term prospects.
Recent stringent cost cutting and re-organising exercises have been aimed at
achieving this balance. Overheads are now more appropriate for current trading
conditions but we have retained some capacity to support a strategy of widening
our service offerings. We are also mindful that at times such as these,
opportunities can present themselves for consolidation and whilst currently we
are not involved in any such activity, we will consider any suitable acquisition
prospect which could enhance shareholder value.
Trading in the first two months has been in line with management's expectations
and whilst market conditions continue to be tough, the Board believes that the
necessary actions have been taken for a return to positive earnings and remains
confident in the long term prospects for the Company.
Nicholas Parker
After 12 years of service on the Board of MSB, Nicholas Parker will be resigning
from his current role as Non-Executive Director at the announcement of the
interim results, having completed two consecutive periods in this position since
flotation. With the appointment of a new Chairman, Chief Executive and Finance
Director, Mr Parker believes that a new stability has been reached within the
Company and wishes to facilitate the ongoing restructuring of the Board, having
been a member of the team who have overseen the Company develop into a secure
and strong business. He will be retaining his position as a significant
shareholder, understanding that the results of recent management actions will
reap significant benefits within the coming years. He will also remain
available to the Board for advice and consultation, as required.
CHIEF EXECUTIVE'S STATEMENT
Introduction
Having held the position of Finance Director for nearly four years, I was
pleased to have been appointed Chief Executive Officer by the Board in August
2002.
When announcing the interim results on 1st October 2002, I stated that for the
remaining part of the financial year we needed to establish a period of
stability, focus on our strengths, support the core IT recruitment business and
invest in new recruitment services.
Since then, I can report that we have made real progress. Both the Operating
Board and management team have been strengthened; the remaining element in the
restructuring programme to streamline the organisational structure has been
concluded; and we have diversified into two new recruitment sectors, Finance and
Sales.
Finally, I very much welcome the appointment of Paul Davies as Non-Executive
Chairman, who brings with him a wealth of IT services industry experience and
contacts.
Results and Performance
Despite very challenging market conditions resulting in a 42% decline in
revenues year on year, a breakeven result before tax and exceptional items has
been achieved in line with market expectations.
Decisive expense reductions were made and tight cost control measures over
discretionary spend introduced. Restructuring led to a downsizing in the
support departments and also affected a number of senior sales and non-sales
management positions. Surplus office space has been re-let at our head office
in Bromley and vigilant cost management and efficient credit management have
resulted in significant cash generation. Strong cash management generated an
inflow of #11 million which was utilised in the repayment of a #5 million fixed
term loan, leaving cash balances of #6.2 million compared to net borrowings of
#3.4 million last year. As a result, we finish this financial year with a
long-term debt free, solid balance sheet.
Market Overview
It is impossible to disguise the fact that the markets in which we have been
operating have been unforgiving. Pockets of demand exist for specialist skills
which command premium rates and our increased focus on client relationships
enables us to capitalise on this. However, in the overall marketplace, lower
demand for recruitment services has seen continued pressure being exercised on
chargeable rates and margins have consequently suffered. The excess supply of
contractor labour over job demand continues to soften the market.
Traditional and Core Business
During the year, the Company successfully concluded the programme to re-engineer
its traditional IT core sales model. At the same time, the Resource Delivery
Division was established as a separate operating unit to continue to exploit
MSB's traditional strengths in technical skills resourcing. Adopting a sector
focused sales model ensures that we build long-term client relationships.
New Initiatives
The Company has acted swiftly in reducing the risk associated with its
dependency on the IT recruitment sector and responded through the introduction
of new initiatives.
Firstly, new recruitment services through a low risk and low cost organic route
were established. In August, two new divisions were opened: MSB Finance was
launched to recruit qualified accountants across a range of sectors; and MSB
Sales was formed to recruit Sales Executives. Today, both new recruitment
divisions have teams of highly experienced and skilled recruiters, based at the
Bromley Head Office, Central London, Manchester and Windsor. Although the new
divisions are operating in intensely competitive markets, they are performing
well.
Secondly, to complement the recruitment services, the Company has introduced
other products and services including, AudIT and HR Express. These services and
products are specifically designed to address clients' needs in human capital
management over and above the provision of labour.
Restructuring
Whilst we have reduced our cost base to reflect declining revenues, we have
retained sufficient resource to invest in new business initiatives and support
future growth. The headcount reduction during the year was principally in the
back office and administrative areas.
The restructuring programme was implemented to maximise our focus on sales
activities and was uppermost in our planning. Inevitably, some sales personnel
decided to leave as a result of the restructuring in the first half but since
then we have attracted new and experienced sales professionals and we continue
to invest in this area.
Business Development
The marketplace in which the Company operates is constantly changing in what is
currently a very sensitive economic climate and, as a result, we are regularly
monitoring and updating the Company strategy. Following a recently concluded
strategic review, the Company will retain its focus on the maintenance and
development of the IT recruitment business; continued examination of additional
recruitment sectors to broaden its base (reducing further risks associated with
its historical exposure to IT); and expand related recruitment services beyond
the provision of labour.
In conclusion, I believe this indicates the broad range of organic and potential
corporate growth opportunities available to MSB, ensuring that the Company is
well positioned with the right management team and model to move the Company
forward.
Consolidated Profit and Loss Account for the year ended 31 January 2003
Unaudited
Before Unaudited
Exceptional Exceptional Unaudited Audited
Year ended Year ended Year ended Year ended
31 Jan 2003 31 Jan 2003 31 Jan 2003 31 Jan 2002*
Note #'000 #'000 #'000 #'000
Turnover 84,062 - 84,062 145,987
Cost of Sales (71,252) - (71,252) (121,698)
Gross Profit 12,810 - 12,810 24,289
Administration Expenses - ongoing (12,667) - (12,667) (20,752)
Administration Expenses - exceptional 4 - - - (1,114)
Total Administration Expenses (12,667) - (12,667) (21,866)
Operating Profit 143 - 143 2,423
Amounts written off investment 4 - (422) (422) -
Interest payable and similar changes (142) - (142) (534)
(Loss)/Profit on ordinary activities 1 (422) (421) 1,889
before taxation
Tax on profit on ordinary activities 5 (32) - (32) (646)
(Loss)/Profit on ordinary activities (31) (422) (453) 1,243
after taxation
Dividend payable (410) - (410) (546)
-
Retained (loss)/profit (441) (422) (863) 697
Earnings per share
Basic (loss)/earnings per share 1 (0.16p) (2.16p) (2.32p) 6.4p
Diluted (loss)/earnings per share 1 (0.16p) (2.16p) (2.32p) 6.4p
*The 2002 results include exceptional costs amounting to #1,114,000 before
taxation and an associated tax credit of #331,000. Both basic and diluted
earnings per share (before the exceptional item) were 10.4p with the effect of
the exceptional item being (4.0p).
Consolidated Balance Sheet as at 31 January 2003
Unaudited Audited
As at As at
31 Jan 2003 31 Jan 2002
#'000 #'000
Fixed Assets
Tangible fixed assets 540 1,111
Investments 497 919
1,037 2,030
Current Assets
Debtors 11,588 23,627
Cash at bank and in hand 7,050 3,503
18,638 27,130
Creditors: amounts falling due within one year (5,256) (13,785)
Net current assets 13,382 13,345
Total assets less current liabilities 14,419 15,375
Provisions for liabilities and charges - (47)
Net assets 14,419 15,328
Capital and Reserves
Called up share capital 1,025 1,025
Share premium account 1,263 1,263
Profit and loss account 12,131 13,040
Equity shareholders' funds 14,419 15,328
Consolidated Cash Flow Statement for the year ended 31 January 2003
Unaudited Audited
Year Year
Ended Ended
31 Jan 2003 31 Jan 2002
Note #'000 #'000
Net cash inflow from operating activities 6 10,955 8,330
Returns on investments and servicing of finance:
Interest paid (189) (653)
Net cash outflow from returns on investment and servicing of (189) (653)
finance
Taxation paid (674) (410)
Capital Expenditure:
Purchase of tangible fixed assets (99) (580)
Proceeds from sale of tangible fixed assets 25 38
Net cash (outflow) from capital expenditure (74) (542)
Equity dividends paid to shareholders (410) (1,091)
Net cash inflow before management of liquid resources and 9,608 5,634
financing
Financing:
Repayment of term loan (5,000) -
Net cash inflow 4,608 5,634
Statement of Group Total Recognised Gains and Losses for the year ended 31
January 2003
Unaudited Audited
Year Year
Ended Ended
31 Jan 2003 31 Jan 2002
#'000 #'000
(Loss)/Profit for the year (453) 1,243
Exchange movements in reserves (46) (19)
Total recognised (losses)/gains for the year (499) 1,224
Movements in Shareholders' Funds for the Year ended 31 January 2003
Unaudited Audited
Year Year
Ended Ended
31 Jan 2003 31 Jan 2002
#'000 #'000
(Loss)/Profit attributable to shareholders (453) 1,243
Dividends (410) (546)
Retained (loss)/profit for the period (863) 697
Exchange movements in reserves (46) (19)
New share capital subscribed - 25
Net change in shareholders' funds (909) 703
Opening Shareholders' funds 15,328 14,625
Closing Shareholders' funds 14,419 15,328
Preliminary Announcement Notes
31 January 2003
1. Earnings per share has been calculated on the weighted average number
of ordinary shares in issue during the year entitled to dividend of 19,516,979
(2002: 19,511,838). Shares held by the Employee Benefit Trust are excluded from
the calculation. The fully diluted number of shares was 19,516,979 due to there
being no dilution at 31 January 2003 (2002: 19,511,838).
2. A copy of the 2003 Annual Report and Accounts will be sent to all
shareholders on 15 April 2003 and will be available from the registered office
of the Company at Hanover Place, 8 Ravensbourne Road, Bromley, Kent BR1 1HP.
3. The dividend will be paid on 30 May 2003 to shareholders registered
at the close of business on 5 May 2003, the dividend record date. The
ex-dividend date is 1 May 2003.
4. Exceptional Items
Unaudited Audited
Year ended Year ended
31 January 2003 31 January 2002
#'000 #'000
Amount provided for against Investments 422 -
Re-organisation Costs - 1,114
422 1,114
The exceptional charge of #421,929 relates to amounts provided for against
investments in own shares held by the MSB Incentive Scheme Trustee Limited.
5. Taxation
Unaudited Audited
Year ended Year ended
31 January 2003 31 January 2002
#'000 #'000
The taxation charge is made up as follows:
United Kingdom Corporation Tax at 30.0%
(2002 : 30%) 134 1,216
Taxation relief on exceptional item - (331)
Adjustment in respect of prior years 76 (223)
Deferred taxation (178) (16)
32 646
6. Reconciliation of Operating Profit to Cash inflow from Operating
Activities
Unaudited Audited
Year ended Year ended
31 January 2003 31 January 2002
#'000 #'000
Operating profit 143 2,423
Depreciation 651 706
(Profit) on disposal of tangible fixed assets (6) (2)
Decrease in debtors 12,217 10,997
(Decrease) / Increase in creditors (2,003) (5,841)
(Decrease) / Increase in provisions (47) 47
Net cash inflow from operating activities 10,955 8,330
7. The preliminary results for the year ended 31 January 2003 are
unaudited. The financial information set out in the announcement does not
constitute the Group's statutory accounts for the years ended 31 January 2003 or
31 January 2002. The financial information for the year ended 31 January 2002
is derived from the statutory accounts for that year which have been delivered
to the Registrar of Companies. The auditors reported on those accounts; their
report was unqualified and did not contain a statement under either Section 237
(2) or Section 237 (3) of the companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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