Fairplace Consulting plc
31 October 2006
The Board of Directors of Fairplace Consulting plc announces the Group's
audited results for the twelve months to 30 June 2006.
Financial summary 2006
Year ended Year ended
30 June `06 30 June `05
�000 �000*
Turnover 5,289 4,844
Operating loss before goodwill amortisation (396) (252)
Goodwill amortisation (98) (191)
Loss on sale of investment (79) (779)
Impairment of goodwill (288) -
Loss before taxation (868) (1,223)
Net assets 1,387 1,770
Headlines 2006
* Group sales increase by 9.2% to �5.29m (2005: �4.84m)
* Sales of talent management services increase to 20.8% of UK sales (2005:
10.1%)
* Outplacement sales broadly maintained at �4.28m (2005: �4.39m)
* Operating loss before goodwill of �0.40m for full year (2005: loss of �
0.25m)
* Improved second half performance producing small operating profit before
goodwill for six months to 30 June 2006
* Two equity placings raising �0.50m net of fees
* Trading for first quarter 2007 in line with Board targets and ahead of
first quarter 2006
*Excluding discontinued business
For further information please contact:
Mark Allsup, Chairman
Fairplace Consulting plc
020 7816 0707
Brian Thorn
The Wriglesworth Consultancy
020 7845 7900
Chairman's Statement
Overview
While the full year operating loss is unsatisfactory, I am pleased to report
that the Company's trading performance showed improvement in the second half,
producing a small operating profit before goodwill for the six months to 30
June 2006.
The increase in annual sales in 2006 reflected continuing growth in talent
management revenues and greater regional outplacement activity which helped to
offset lower demand for City outplacement services.
Our medium term strategy is to create a diversified income stream from a more
even mix of career management and talent management services, a wider range of
client sectors and broader relationships with existing clients.
We made further progress with this plan in 2006: talent management revenues
grew to 20.8% of UK sales (2005: 10.1%); revenues from non financial sector
clients increased to 42.0% of UK sales (2005: 37.4%); and the number of clients
buying more than one service from Fairplace rose to 31 (2005: 22).
Despite the competitive market conditions, outplacement sales were broadly
maintained at �4.28million (2005: �4.39million).
In the current financial year, the Board's objective is to restore the
Company's profitability through growth in talent management revenues, control
of delivery costs and reduction of fixed costs, especially those related to
property.
Trading for the first quarter of the new financial year has been in line with
the Board's targets and ahead of the 2006 comparative quarter.
Results for the twelve months to 30 June 2006
Group sales for 2006 increased by 9.2% to �5.29million (2005: �4.84million
excluding discontinued business).
UK sales amounted to �4.86million (2005: �4.48million excluding discontinued
business), representing 92% of total Group sales.
The operating loss before goodwill for 2006 was �395,564 (2005: �251,605
excluding discontinued business). The higher operating loss for 2006 was partly
attributable to employee severance payments and related legal fees of �68,500
(2005: �nil). Professional costs relating to property and the establishment of
a new EMI plan were also a contributory factor.
The Board reviewed the carrying values of the Group's goodwill investments and
made a non-cash impairment provision in the Group accounts of �288,068. This
related to the carrying value of the Quantum acquisition made in June 2000.
The Group has incurred a further �79,348 of net costs in relation to the 2005
disposal of its distance-based division. These related primarily to additional
provisions required in respect of the disposal of the division's leasehold
commitments.
Financial
Fairplace carried out two placings of new shares during the twelve months to 30
June 2006.
The first placing in December 2005 raised �96,250 from directors, employees and
associates.
The second placing in March 2006 raised approximately �400,000 net of fees from
external investors and followed the appointments of CFA and Seymour Pierce
Ellis as NOMAD and Broker to the Company respectively.
Agreement was reached in April 2006 to accelerate the receipt of deferred
consideration relating to the disposal of the distance-based division amounting
to �82,500. We are seeking to dispose of surplus office space in Northampton
which related to this business.
At the financial year end the Group's cash balances amounted to �240,402 (2005
financial year end: overdraft borrowings of �244,462).
During the financial year, Fairplace assigned one of the floors at its main
offices in Cornhill, reducing floor space by 25%.
After a review of the alternatives available elsewhere, agreement has been
reached in principle to renew the leases on three remaining floors at Cornhill
for a further term from March 2007 at a lower annual rental. This would avoid
the costs associated with a major office move and reduce the Company's fixed
costs by approximately �100,000 pa in future.
Other measures have been taken to restrict operating costs, including limiting
marketing promotional expenditure and revising IT support arrangements.
The average number of full time employees was reduced to 34 (2005: 45)
reflecting the policy to utilise associate consultants for delivery of career
and talent management services.
International
Fairplace Italy's sales increased by 12.5% to �415,942 for the twelve months to
30 June 2006.
While recent client acquisitions have been encouraging, in view of Fairplace
Italy's limited size the Board's aim is to find a strategic local investment
partner, as this should enable opportunities in the expanding Italian
outplacement market to be more quickly realised.
The Company is in discussions to reduce its 40% shareholding in Fairplace
Portugal and to license our partners to use the Fairplace name in the local
market.
We will continue to service global client needs through the Career Partners
International network and affiliate relationships.
Management
There were a number of Board changes during the 2006 financial year.
Christopher Hoysted decided not to seek re-election as a non-executive director
at the 2005 Annual General Meeting.
Ken Brotherston joined the Board as a non-executive director with additional
strategic consulting responsibilities.
Clare Hanson stepped down from the Board after seven years as the Company's
Finance Director.
Board responsibility for finance is now shared by the Chairman and the CEO,
supported by the Finance Department. Alison Clifford, Financial Controller, has
also assumed the role of Company Secretary.
In February 2006, the Company granted a total of 480,000 share options at 15.5
pence to executive directors and staff under the new EMI plan. Share options
granted to executive directors may only be exercised if specific profit-related
performance criteria are achieved.
Annual General Meeting
This year's Annual General Meeting will be held at 11.00 am on 7 December 2006.
Current Trading and Outlook
Trading for the first quarter of the new financial year 2007 has been in line
with the Board's targets and ahead of the 2006 comparative quarter. However it
is too early to predict whether this trend will be maintained.
The Board anticipates that, pending a change in City outplacement market
conditions, the main drivers for growth will be sales of talent management and
regional outplacement services.
The Board will continue to focus on costs in order to meet its financial
objective for 2007.
Mark Allsup
Chairman
30 October 2006
Chief Executive's statement
The operating results for 2006 are clearly disappointing. Our dependence on
outplacement revenues and the financial services sector in particular, the
continuing shrinkage of the overall outplacement market and the marginal
pricing of volume providers all proved very challenging.
However, we did make worthwhile progress towards the objectives in our business
plan:
* We continued to grow our sales : in the last two financial years sales from
continuing operations have increased by a total of �1.2 million or 29%.
* While we incurred expenditure in building additional sales, we have created
important new revenue streams for the future. These are gaining momentum.
* In 2006 we generated sales of almost �1 million from talent management
services.
* We added 98 new clients. Of these 38 purchased non outplacement services.
* Over a third of our significant corporate clients bought two or more
services.
* We recently launched Talent Tracker, a 360 benchmarking product, which has
already had a positive impact on identification and coaching sales,
bringing scaleability to our talent management services.
* We built a technology platform providing clients with real time feedback on
our service delivery. This puts Fairplace on the client's desktop and will
facilitate increased sales.
* We invested in the training and accreditation of our employees and
associates, particularly related to coaching and psychometric assessment.
* We were proud to work with leading employers such as Nationwide Building
Society, Cooperative Financial Services, Outokumpu, Deloitte, MFI and
Littlewoods.
* Despite depressed conditions in the outplacement market, we secured a
greater market share in our prime market of one-to-one career coaching and
our overall UK market share for calendar year 2005 rose from 5.4% to 6.1% (
source: ACF )
* We increased the unit value of our programmes despite intense price
competition.
Our strategy going forward remains unchanged :
* We will continue to build our talent management business, targeting 30% of
UK sales this financial year. Talent management revenues have a greater
predictability than outplacement as assessment, coaching and leadership
development are services which organisations repeat purchase each year.
* We will maintain our geographic diversification, with business developers
now based in London, the Thames Valley, the Midlands and the NorthWest.
* We will balance our presence in the financial services sector with other
sectors, building upon our successes in professional services, TMT, retail,
manufacturing and the public sector.
* We will continue to sell new services to existing clients.
* We will increase our focus on high value one-to-one outplacement and career
coaching programmes, supported by our highly respected research capability.
* We will build new client relationships through our personal networks and
through continuing to develop our reputation as experts in career and
talent management.
* We will seek to partner employers of choice. We are particularly pleased to
be shortlisted for an award by Personnel Today for the career management
programmes we have delivered for Deloitte.
From a shareholder's perspective the last three years have not been easy or
rewarding. I am frustrated that the results have been slow in coming, but am
confident that we have now put in place the necessary foundations for success.
We have an excellent team and I pay tribute to their tenacity and dedication.
Michael Moran
Chief Executive
30 October 2006
Group profit and loss account
for the year ended 30 June 2006
2006 2005
� �
Turnover: 5,288,780 4,844,318
Continuing Operations - 528,750
Discontinued Operations 5,288,780 5,373,068
Administrative expenses: (5,684,344) (5,095,923)
Continuing Operations - (489,692)
Discontinued Operations (5,684,344) (5,585,615)
Operating loss before goodwill amortisation: (395,564) (251,605)
Continuing Operations - 39,058
Discontinued Operations (395,564) (212,547)
Goodwill amortisation: (98,041) (190,896)
Continuing Operations - (54,170)
Discontinued Operations (98,041) (245,066)
Operating loss: (493,605) (442,501)
Continuing Operations - (15,112)
Discontinued Operations (493,605) (457,613)
Loss on sale of investment (79,348) (779,196)
Impairment of goodwill (288,068) -
Interest receivable 528 7,113
Interest payable (7,547) (8,189)
Loss on ordinary activities before taxation (868,040) (1,237,885)
Taxation (10,574) 41,579
Loss for the financial year (878,614) (1,196,306)
Loss per share (13.08)p (21.75)p
Loss per share before goodwill amortisation
Fully diluted loss per share (11.62)p (17.29)p
(13.08)p (21.75)p
There are no other recognised gains or losses for the Group other than the
results for the year set out above.
Group balance sheet
at 30 June 2006
2006 2005
� �
Fixed assets: 600,000 986,109
Intangible assets 312,449 404,316
Tangible assets 912,449 1,390,425
Current assets: 19,523 18,235
Stock and work in progress 1,675,368 2,177,844
Debtors 240,402 -
Cash at bank and in hand 1,935,293 2,196,079
Creditors: amounts falling due within one year (1,460,311) (1,816,650)
Net current assets 474,982 379,429
Net assets 1,387,431 1,769,854
Capital and reserves: 1,020,026 825,026
Called up share capital 2,381,033 2,079,842
Share premium (2,013,628) (1,135,014)
Profit and loss account 1,387,431 1,769,854
Equity shareholders' funds
The financial statements and the related notes were approved by the Board on 30
October 2006 and were signed on its behalf by:
M W Allsup
M D Moran
Directors
30 October 2006
Group statement of cash flow
for the year ended 30 June 2006
2006 2005
� �
Cash flow from operating activities (67,947) (759,422)
Returns on investments and servicing of finance 528 7,113
Interest received (7,547) (8,189)
Other interest paid (7,019) (1,076)
Corporation tax refunded 24,260 46,741
Capital expenditure and financial investment (45,044) (17,068)
Purchase of tangible fixed assets 1,923 27,732
Sale of tangible fixed assets (43,121) 10,664
Acquisitions and disposals 82,500 82,121
Proceeds from sale of investment 82,500 82,121
Cash flow from Financing Activities 546,250 -
Issue of ordinary shares (50,059) -
Issue costs 496,191 -
Increase/(Decrease) in cash in the year 484,864 (620,972)
Notes
1. The financial information set out above does not comprise the Company's
statutory accounts. Statutory accounts for the previous financial year
ended 30 June 2005 have been delivered to the Registrar of Companies. The
Auditors' report on those accounts was unqualified and did not contain any
statement under Section 247 (2) or (3) of the Companies Act 1985. The
Auditors have given an unqualified opinion on the Accounts for the year
ended 30 June 2006, which will be delivered to the Registrar of Companies
following the Annual General Meeting.
2. The Directors do not propose a final dividend. The total for the year is
therefore nil pence per share (2005: nil pence per share).
3. Loss per share
The calculation of earnings per share is based on the loss after taxation of �
878,614 (2005: �1,196,306) and on the weighted average number of shares in
issue during the year of 6,712,670 (2005: 5,500,170).
The calculation of earnings per share before goodwill is based on the loss
after taxation but ignoring goodwill, giving �780,578 (2005: �951,240) and on
the weighted average number of shares in issue during the year of 6,712,670
(2005: 5,500,170).
The fully diluted earnings per share is based on the loss after taxation of �
878,614 (2005: �1,196,306) and on the weighted average number of shares,
assuming that all share options, with an exercise price of less than the market
price of the shares, were exercised at the beginning of the year, in issue
during the year of 6,712,670 (2005: 5,500,170).
4. The Company's accounting policies remain as stated in the Annual Report for
the year ended 30 June 2005.
5. Loss on disposal of investment
On 30 June 2005 the Company sold the business and assets of its distance-based
division to Working Transitions 2005 Ltd. The terms of disposal were an initial
payment of �225,000 plus deferred consideration of between �50,000 and �125,000
dependent upon the performance of Working Transitions 2005 Limited in the two
years following the disposal.
On 7 April 2006 the Company reached agreement to receive an accelerated payment
of deferred consideration of �82,500 of which �50,000 had been recognised in
prior years. The Company also provided for continuing lease costs relating to
the property previously occupied by the distance-based division resulting in a
charge of �111,848. Consequently, the net loss on the disposal of the
investment for the year was �79,348. This resulted in a loss on sale of the
investment in the year ending 30 June 2006.
Copies of the 2006 Report and Accounts will be available from the registered
office of Fairplace Consulting plc, 36-38 Cornhill, London EC3V 3PQ.
END
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