Newcourt Group Plc: Final Results

Newcourt Group Plc Final Results Year ended 31 December 2006 Highlights Year ended Year ended Year ended 31 Dec 2006 31 Dec 2005 31 Dec 2004 unaudited Change audited audited €’000 % €’000 €’000   Turnover 116,464  78% +  65,325  42,726    Gross profit 22,170  86% +  11,917  8,197    Trading profit* 11,175  105% +  5,454  2,800    Operating profit 6,739  121%+  3,054  1,007    Profit before tax 5,706  155% +  2,235  340    * Represents trading profit before goodwill, group overhead, once off tender costs and share option and warrant costs. Turnover increased by €51m (78%) on the prior year. €32.6m of this increase relates to contributions from 2006 acquisitions. The balance, €18.6m, relates to organic growth in turnover (28%). Trading profit increased by €5.7m (105%) on the prior year. Newcourt completed the following acquisitions during the year. The group also completed successful fundraisings in April 2006 and August 2006. Company Segment Activity Kenny-Whelan Recruitment and Contract Recruitment Associates Ltd Aviation Outsourcing The People Group Ltd Recruitment and Recruitment Aviation Outsourcing Security Technology Support Services and Electronic Security Ireland Ltd Student Accommodation Acuman Facilities Support Services and Facilities Management Management Ltd Student Accommodation Ecom/Interaction Ltd Support Services and Business Process Student Accommodation Outsourcing and Contact Centre Lost Control Services Support Services and Health and Safety Ltd (Nifast) Student Accommodation Training Ely Property Group plc Support Services and Student accommodation Student Accommodation provider Group management are pleased with the integration of these acquisitions and their strong contribution to the 2006 financial performance Chairman’s Statement I am pleased to present the results of Newcourt Group Plc for the year ended 31 December 2006. Results Pre-tax profits for the group for the year were €5.7 million after charging costs of €477k relating to tendering for a significant government outsourcing contract and goodwill amortisation of €2.5 million. This compares with a pre-tax profit of €2.2 million in the year to 31 December 2005 Turnover in 2006 amounted to €116.5 million, which compares to €65.3 million for the previous year. The total adjusted earnings per share was 9.97 cents, compared to 6.09 cents in 2005. Net debt, including deferred payments on acquisitions at the year end rose to €27 million from €4.6 million at the end of 2005, largely reflecting the costs of acquisitions, less additional funds generated and raised during the year. Dividends The board is not recommending the payment of a dividend. Personnel During the year Philip Cunningham retired as a Non Executive Director, having served on the board since April 2004. I would like to thank Philip for his very valuable contribution during his time as a member of the Board. Damien Murray joined the board as finance director on 1 June 2006. John Butler joined the board as a Non Executive Director on 12 July 2006. John is a former Managing Director of NCB Corporate Finance and a former Director of Davy Corporate Finance. Philip Marley joined the board as an Executive Director on 18 August 2006 following the acquisition of Ely Property Group plc of which he is CEO. Corporate Governance The Board and Management of Newcourt are committed to achieving the highest standards of Corporate Governance and Ethical Business Conduct. Outlook Newcourt has significantly developed the scale and size of its business over the past 12 months, whilst ensuring that all the appropriate structures are in place to manage that growth. The results for 2006 were very satisfactory and the group’s performance in the first months of 2007 is encouraging. Finally, on behalf of the board, I would like to thank all of the Management and Staff of Newcourt for their commitment and contribution during 2006. James Osborne Chairman March 2007 Chief Executive’s Review 2006 was a very positive year of growth and development for the Group. Organic growth continued at a very strong pace and we are extremely pleased with the integration of the seven acquisitions made during the year. In addition, more progress was made with the development of our recruitment business in Central Europe and the acquisition of Ely Property has brought us into the fast expanding student accommodation market both in Ireland and the UK. Employment in the group increased by 602 to 2,603 during the year. Operations For the purpose of financial reporting we have organised our business under two broad headings: 1. Support Services and Student Accommodation 2. Recruitment and Aviation Outsourcing Support Services and Student Accommodation Turnover in this division for the year at €87.9 million represents an increase of 63% on the previous year. Operating profit (before goodwill amortisation, share options, group and once off costs) grew by 88% to €7.9 million reflecting continued strong organic growth and significant contributions from the new acquisitions. The businesses within the division now includes: Manguarding, Electronic Security and Related Services Student Accommodation and Property Management Health and Safety Training and Consultancy Facilities Management Business Process Outsourcing and Contact Centre During the year, significant management time was spent in restructuring and refocusing the Electronic Security Business and I am happy to report that this effort is now bearing fruit. The acquisitions completed during the year have given the division new businesses and service offerings and, in addition, the Divisions Management Team has been significantly strengthened by the addition of the management teams of the newly acquired businesses. We are pleased with the division’s performance in the opening months of 2007. Recruitment and Aviation Outsourcing Turnover in this division of €28.5 million represents an increase of 152% over the previous year. Operating profit (before goodwill amortisation, group and other once off costs) grew by 162% to €3.3 million reflecting very strong organic growth and significant contributions from the two new acquisitions in this area. The aviation business grew strongly to new levels of profitability and turnover. The businesses within the division now includes: Mid-market Permanent and Temporary Recruitment Contract Recruitment – Pharmaceutical Industry Executive Search and Selection Senior Sales Marketing Recruitment Contract Recruitment – Aviation Pilot Training As with Support Services and Student Accommodation, this division’s management has been strengthened by the addition of the management of the newly acquired companies. Chief Executive’s Review (continued) Principal Risks and Uncertainties The Group is exposed to the economies of the Republic of Ireland and the United Kingdom. The directors have no reason to believe that these economies will not continue to perform in the medium term. The directors recognise that management and staff are a key ingredient in the success of the business and, consequently, the Group’s HR function is geared towards the retention and motivation of key personnel. The Group’s financial instruments comprise borrowing, cash and various items, such as trade debtors, trade creditors etc, that arise directly from its operations. The main purpose of the financial instruments not arising directly from operations is to raise finance for the Group’s operations. The Group may enter into derivative transactions such as interest rate swaps or forward foreign currency transactions in order to minimise its risks. The purpose of such transactions is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance. It is not Group policy to trade in financial instruments. The main risks arising from the Group’s financial instruments are interest rate, foreign exchange and liquidity risk. The Group’s policies for managing each of these risks are summarised below: Interest rate risk The Group finances its operations through a mixture of retained profits, bank and other borrowings, at both fixed and variable rates of interest, and working capital. The Group determines the level of borrowings at fixed rates of interest having regard to current market rates and expected future trends. Foreign exchange risk The Group is exposed to foreign exchange risk in relation to its activities in the United Kingdom. To balance this exposure the Group has secured an appropriate level of debt in the same currency. Liquidity risk The Group’s policy is that, in order to ensure continuity of funding, a significant portion of its borrowings should mature after more than one year. The Group achieves short-term flexibility by means of invoice finance and overdraft facilities. Looking Forward As with 2006, I believe that 2007 will continue to be a year of progress for our existing businesses. In addition, I have no doubt the management team will continue to assess further strategically targeted acquisitions and opportunities in the areas in which the group operates. As usual, I look forward to managing the development of our business in conjunction with my executive colleagues, John Barry, Philip Marley, Damien Murray and Hugh O’Neill. I would like to take this opportunity to thank our Chairman and the Board for their help and assistance during the past year and to thank the Executive Directors of our trading companies and the management and staff throughout the Group for their contribution to the successful development of Newcourt. Ted O’Neill Chief Executive March 2007 Consolidated Profit and Loss Account for the year ended 31 December 2006 Before goodwill and other costs Goodwill and other costs Total Before goodwill and other costs Goodwill and other costs Total 2006  2006  2006  2005  2005  2005  €’000 €’000 €’000 €’000 €’000 €’000 Turnover - continuing operations 83,904  -  83,904  65,325  -  65,325  - acquisitions 32,560    -    32,560  -    -    -  116,464  -  116,464  65,325  -  65,325  Cost of sales (94,294)   -    (94,294) (53,408)   -    (53,408) Gross profit 22,170  -  22,170  11,917  -  11,917  Administration expenses (10,995) -  (10,995) (6,463) -  (6,463) Once off tender costs -  (477) (477) -  -  -  Share options and warrants -  (211) (211) -  -  -  Exceptional item - IPO costs -    -    -  -    (340)   (340) Trading profit 11,175  (688) 10,487  5,454  (340) 5,114    Group overhead -  (1,220) (1,220) -  (934) (934) Amortisation of goodwill -    (2,528)   (2,528) -    (1,126)   (1,126) Operating profit - continuing operations 6,384  (2,153) 4,231  5,454  (2,400) 3,054  - acquisitions 4,791    (2,283)   2,508  -    -    -  11,175  (4,436) 6,739  5,454  (2,400) 3,054  Interest receivable 56  12  Interest payable and similar charges (1,089) (831) Profit on ordinary activities before taxation 5,706  2,235  Taxation (1,025) (538) Profit for the financial year 4,681  1,697    Basic earnings per ordinary share After once off costs, share options and warrants and goodwill amortisation 6.06 cents  3.27 cents  Before once off costs, share options and warrants and goodwill amortisation 10.23 cents  6.10 cents    Diluted earnings per ordinary share After once off costs, share options and warrants and goodwill amortisation 5.91 cents  3.27 cents  Before once off costs, share options and warrants and goodwill amortisation 9.97 cents  6.09 cents  Consolidated Statement of Total recognised gains and losses for the year ended 31 December 2006     2006  2005  €’000 €’000   Profit for the financial year 4,681  1,697  Exchange translation difference on foreign currency net investment (158) (35)   Total recognised gains and losses for the year 4,523  1,662  Consolidated Balance Sheet   at 31 December 2006 2006  2005  €’000 €’000   Fixed assets Tangible assets 6,224  3,133  Intangible assets – goodwill 65,477  20,985  Intangible assets – intellectual property -  133  71,701  24,251    Financial Assets Investment in joint venture undertaking: Share of gross assets 1,743  -  Share of gross liabilities (1,743) -  -  -    Current assets Stocks 6,523  491  Debtors 29,493  15,597  Cash at bank and in hand 7,805  9,099  43,821  25,187  Creditors (amounts falling due within one year) (41,111) (15,363) Net current assets 2,710  9,824    Total assets less current liabilities 74,411  34,075    Creditors (amounts falling due after more than one year) (20,232) (7,520) Provision for liabilities -  (39)     Net assets 54,179  26,516    Capital and reserves Called up share capital 21,733  17,076  Share premium account 27,602  9,330  Share options/warrant reserve 211  -  Other reserves (270) (112) Profit and loss account 4,903  222  Shareholders’ funds 54,179  26,516  Consolidated cash flow statement for the year ended 31 December 2006 2006  2005  €’000 €’000   Net cash inflow from operating activities 7,013  2,425  Returns on investment and servicing of finance (1,033) (2,819) Taxation (1,426) (543) Capital expenditure and financial investment (778) (752) Acquisitions and disposals (32,115) (3,568) Net cash outflow before financing (28,339) (5,257) Financing 27,056  13,556  (Decrease)/increase in cash during the year (1,283) 8,299    Reconciliation of net cash flow to movement in net debt (Decrease)/Increase in cash during the year (1,283) 8,299  Net increase in loans, overdrafts and invoice discounting facilities (9,822) (3,990) Repayment of finance leases 180  299  Changes in net (debt) cash resulting from cash flows (10,925) 4,608  Net debt at beginning of year (3,106) (7,230) Finance leases acquired with subsidiaries (77) -  New finance leases drawn down -  (484) Loans acquired with subsidiaries (3,308) -  Foreign exchange translation difference (11) -  Net debt at end of year (17,427) (3,106) Notes 1  Segmental analysis 2006  2005  €’000 €’000   The segmental analysis of turnover and operating profits are as follows:   Turnover by segment Support Services and Student Accommodation 87,931  54,000  Recruitment and Aviation outsourcing 28,533  11,325  Total turnover 116,464  65,325    Operating profit by segment Support Services and Student Accommodation 7,853  4,188  Recruitment and Aviation outsourcing 3,322  1,266  Trading profit 11,175  5,454  Goodwill and other costs (4,436) (2,400) Operating profit 6,739  3,054  Turnover by geographical analysis Republic of Ireland 88,639  42,070  Northern Ireland 27,259  23,097  Europe 566  158  Total turnover 116,464  65,325    Operating profit by geographical analysis Republic of Ireland 10,908  3,991  Northern Ireland 398  1,497  Europe (131) (34) Unallocated (4,436) (2,400) Total operating profit 6,739  3,054  Net Assets by segment   Support Services and Student Accommodation 41,376  21,824  Recruitment and Aviation outsourcing 12,803  4,692  Total Net Assets 54,179  26,516  Net Assets by geographical analysis Republic of Ireland 50,354  24,036  Northern Ireland 3,547  2,397  Europe 278  83  Total turnover 54,179  26,516  Notes (continued) 2  Other Costs 2006  2005  €’000 €’000   Once off tender costs 477  -  IPO Costs -  340  477  340  Once off tender costs comprise of costs incurred in preparing for the submission of a significant government outsourcing contract. 3  Employees 2006  2005  The average weekly number of employees, including executive directors, during the year, was as follows:   Support Services and Student Accommodation 2,232  1,721  Recruitment and Aviation Outsourcing 254  203  Administration 117  77  2,603  2,001  Notes (continued) 4  Earnings per share 2006  2005  €’000 €’000   Earnings as reported 4,681  1,697  Adjustment for once off costs 477  340  Adjustment for share options/warrants 211  -  Adjustment for goodwill amortisation 2,528  1,126  Adjusted earnings 7,897  3,163    Weighted average number of ordinary shares 77,190,601  51,882,232    Diluted weighted average number of ordinary shares 79,210,661  51,972,313    Basic earnings per ordinary share - After once off costs, share options and warrants and goodwill amortisation 6.06 cents  3.27 cents  - Before once off costs, share options and warrants and goodwill amortisation 10.23 cents  6.10 cents    Diluted earnings per ordinary share - After once off costs, share options and warrants and goodwill amortisation 5.91 cents  3.27 cents  - Before once off costs, share options and warrants and goodwill amortisation 9.97 cents  6.09 cents  Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary share options and warrants. Diluted earnings per share is calculated by adjusting for the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Options and warrants granted under Employee Share Option Schemes dilute the earnings per share by increasing the weighted average number of shares without changing the net profit. 5  Reconciliation of movements in shareholders’ funds 2006  2005  €’000 €’000 Shareholders’ funds at beginning of year 26,516  15,232  Total recognised gains and losses 4,523  1,662  Increase in share options/warrants reserve 211  -  Dividend paid -  (2,000) Nominal value of shares issued 4,657  4,757  Movement in share premium net of issue costs 18,272  6,865  Shareholders’ funds at end of year 54,179  26,516  Notes (continued) 6  Gross cash flows 2006  2005  €’000 €’000 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 6,739  3,054  Depreciation 1,091  640  Loss on disposal of intangible assets 133  -  (Loss)/profit on sale of tangible fixed assets 12  (17) Amortisation of goodwill 2,528  1,126  Share options and warrants 211  -  Increase in debtors (6,340) (4,851) Increase in creditors 7,502  2,691  Increase in stocks (4,863)* (218) Net cash inflow from operating activities 7,013  2,425    * The increase in stocks includes an amount of €5,245k relating to the development of student accommodation in Islington. All student accommodation developments are separately financed. Return on investment and servicing of finance Interest received 56  12  Interest paid (1,053) (790) Interest element of finance lease rental payments (36) (41) Dividend paid -  (2,000) (1,033) (2,819)   Capital expenditure and financial investment Payments to acquire tangible fixed assets (1,146) (815) Receipts from sale of tangible fixed assets 368  96  Payments to acquire intellectual property -  (33) (778) (752)   Acquisitions and disposals Payments in respect of the acquisition of subsidiary undertakings (33,755) -  Cash and cash equivalents acquired with subsidiary undertakings 3,157  -  Payments in respect of deferred consideration (1,517) (3,568) (32,115) (3,568)   Financing Issue of share capital 17,414  9,993  Drawdown of loans 10,540* 3,070  Repayment of finance leases (180) (299) (Decrease) / increase in invoice discounting facilities (718) 792  27,056  13,556    * Included in drawdown of loans is an amount of €4,448k in relation to the development of student accommodation in Islington. This development is separately financed. Notes (continued) 7  Analysis of changes in net debt   At 31 Dec 2005 Cashflows Other Acquisitions At 31 Dec 2006 €’000 €’000 €’000 €’000 €’000   Cash at bank and in hand 9,099  (1,283) (11) -  7,805  Bank loans, overdrafts and invoice discounting facilities (11,731) (9,822) -  (3,308) (24,861) Finance leases (474) 180  -  (77) (371) (3,106) (10,925) (11) (3,385) (17,427) 8  Analysis of borrowings: Bank loans, overdrafts and invoice discounting facilities 2006  2005  €’000 €’000 Repayable within one year 11,842* 4,489  Repayable between one and two years 2,850  1,018  Repayable between two and five years 7,449  3,382  Repayable after five years 2,720  2,842  24,861  11,731    * Included in loans repayable within one year is an amount of €4,448k in relation to the development of student accommodation in Islington. This development is separately financed.