PRELIMINARY RESULTS: GROWTH STRATEGY DELIVERS RESULTS AND DEVELOPMENT
PLATFORM
Hat Pin, the human resources group operating through the market
leading brands Akamai Financial Markets, Kendall Tarrant Worldwide
and Saxton Bampfylde Hever, today announces preliminary results for
the twelve months to 31 December 2006.
Financial Highlights:
2006 2005 Change
* Turnover £14.53m £5.12m + 184%
* Normalised operating profit [1] £ 2.06m £0.63m + 227%
* Normalised eps 6.55p 4.22p + 55%
* Final dividend 1.27p 1.10p + 15%
[1] Results are presented on a normalised basis so as to provide a
better indication of the financial performance of the business.
Reconciliations of normalised results to their statutory equivalents
are shown in note 2.
Operational Highlights:
* Completed the integration of all recent acquisitions
* All business units contributed positively to year-end figures
* Solid organic growth from all three brands
* Expanded global footprint with further business openings in Asia
Angela Campbell-Noë, Chief Executive of Hat Pin plc commented: "This
has been another successful year of development for the group and the
pace of change has accelerated. The current year has begun well; we
started with strong forward order books and activity levels remain
high.
"We are expanding our Asian presence further into Singapore and
Japan, and we continue to pursue actively potential acquisitions of
leading brands, which we believe will complement our existing
business portfolio.
"It is a measure of the Board's confidence for the company's future
prospects that it is proposing an increase in the full year dividend
of 15% to 1.27 pence per share.
"We remain excited about the outlook for the group."
Ends
For further information, please contact:
Hat Pin plc +44 (0)20 7438 8600
Angela Campbell-Noë, Chief Executive
Paul Billett, Finance Director
Hogarth Partnership Limited +44 (0)20 7357 9477
Julian Walker
Notes to Editors
Hat Pin plc (www.hatpin.co.uk)
Hat Pin primarily operates in the provision of human resource. The
group currently operates through its three subsidiary brands - the
wholly-owned Akamai Financial Markets and Kendall Tarrant Worldwide,
and the 70%-owned Saxton Bampfylde Hever:
* Akamai Financial Markets (www.akamaifinancial.com) is a
specialist international executive search firm concentrating in
the financial services and financial markets arena, with leading
positions in London, Hong Kong and Singapore.
* Kendall Tarrant Worldwide (www.kendalltarrant.com) is the world's
leading and most successful recruitment business in the global
advertising and marketing communications sector, with offices in
London, New York, San Francisco, Hong Kong and Shanghai.
* Saxton Bampfylde Hever (www.saxbam.com) is a premium brand in the
executive search industry both in the private sector - where it
has an extensive track record in boardroom and senior management
appointments - and in the public and not-for-profit sectors - as
a leading adviser on senior appointments in higher education,
central government, charities and the arts.
Chairman's Statement
Hat Pin had another record year in 2006 as we continue to transform
the group. Turnover increased by 184% from £5.12m to £14.53m and
normalised operating profit grew from £0.63m to £2.06m, up 227%.
Normalised basic earnings per share increased by 55% from 4.22p to
6.55p. The Board is recommending a 15% increase in the dividend from
1.10p to 1.27p.
These results reflect a combination of strong organic growth and the
impact of earnings enhancing acquisitions. The Board believes that
the higher rate of dividend increase is appropriate and consistent
with its progressive dividend policy, given the scale of Hat Pin's
earnings growth.
There have been many highlights in our performance over the past
year, which are detailed in our Chief Executive's report. We have
anticipated trends by building capacity in the fastest growing
segments of our markets. Kendall Tarrant is at the forefront of
integrated communications and digital recruitment. Saxton Bampfylde
Hever has further expanded its research team, enabling it to provide
a global offering, including in emerging countries, to the biggest
companies in the FTSE100. Akamai is witnessing very high levels of
activity in the Far East, both in Hong Kong and in its newly opened
office in Singapore.
Such organic growth is an important part of our strategy. But we seek
to complement that with acquisitions meeting our stringent criteria.
Over the past fifteen months, we have bought 70% of Saxton Bampfylde
Hever and 100% of both Stolkin & Partners and Akamai Financial
Markets. The success of these acquisitions demonstrates our
capabilities of sourcing, selecting and completing transactions. We
have also proved that once acquired the businesses continue to
develop and grow.
A key to this is our philosophy of supported autonomy. The Board
believes that it must not only ask the question of what the operating
companies contribute to Hat Pin, but also what Hat Pin contributes to
the operating companies and the staff who work for them. Our Chief
Executive gives many examples of the latter in her report.
We therefore believe that we have become the parent of choice for
high quality brands in the recruitment sector. We are seeing a flow
of interesting opportunities, but our rejection rate is high because
we do not deviate from the principles that we have clearly
communicated to our shareholders.
I am delighted to welcome a large number of new, blue chip
institutional and independent shareholders to our register. As a
result of the £5.5m fundraising for the Akamai transaction, in which
I participated, there are now many institutions on our shareholder
list and we continue to appreciate their interest and advice.
I believe that for a business to prosper there has to be a productive
partnership between the shareholders, clients and staff. We are
proud, fortunate and grateful to have across our businesses
internationally such a broad range of clients who are so highly
regarded.
A measure of our ambition remains that we have made such a sizeable
investment in management, which goes beyond running a company of its
current size, even though it has already seen a quadrupling of its
market capitalisation since September 2005. I would like to thank
Angela Campbell-Noë, our Chief Executive, and Paul Billett, our
Finance Director, for their effort, determination and skill in
leading Hat Pin plc to this result.
We have begun 2007 well; we started with strong forward order books
and activity levels remain high - which gives us every confidence
that our growth plans are on track.
Terry Hitchcock
Non-Executive Chairman
Chief Executive's Review
I am pleased to report another highly successful year, in which we
have again delivered on our strategy of driving organic growth in all
of our operating brands and augmenting our progress by geographic
expansion and acquisition.
We have supported the autonomy of our brands and encouraged the
entrepreneurial strength of our management teams while retaining
control through strategic leadership from the Chief Executive's
office. The mutual respect that exists between the brands has led to
greater than anticipated co-operation and cross-fertilisation of
ideas, best practice and business contacts. Morale and momentum in
each of the brands remain high and dynamic.
The Hat Pin board is working well as a team. Over the past twelve
months, we have integrated all three acquisitions into the business,
managed the strategic expansion of our global footprint and developed
and successfully delivered a centralised IT platform and purchasing
system to support the operating businesses globally.
Since the year-end, we have been managing the strategic opening of
Kendall Tarrant in Singapore and Akamai in Tokyo, and we will shortly
be implementing a new joint venture to provide Akamai with
on-the-ground execution capabilities in India.
I am pleased with Hat Pin's overall pace of development and to report
that each of our current businesses has consolidated its own position
as a leader in its respective markets.
Akamai Financial Markets (www.akamaifinancial.com)
Akamai is an international executive search firm specialising in
financial markets, with a strong presence in London, Hong Kong and
Singapore. Hat Pin acquired 100% of Akamai in September 2006 for
consideration of £6.53m.
Akamai operates across a broad and well-balanced spectrum of the
financial markets with a particular focus on senior level
'Front-Office' mandates. Since it became part of Hat Pin, Akamai has
augmented its dominant position in the Asian market with the opening
of a new office in Singapore in order to further expand its regional
coverage into South and South East Asia. It is intended that over
time, Akamai will selectively transfer part of its research cost base
from Hong Kong to Singapore and look to expand its operating base
within the region.
On a broader level, Akamai is focused on expanding its global team
efforts across the sectors, particularly in wealth management and
investment banking, and has made some significant hires to bolster
its existing teams in these areas. Early benefits of this approach
have been seen in the recent award of new investment bank retained
mandates across Asia-Pacific, UK/Europe and the Middle East.
Akamai's senior management team was fully involved in the sale
process to Hat Pin and the successful brand name change to Akamai
Financial Markets (from Alexander Mann Financial Markets). In
addition, the management has helped to further endorse unity of
purpose and vision across their talented and cohesive team.
Akamai recorded turnover of £2,256,000 (up 84% on the same period in
2005) and operating profit of £298,000 (up 198%) in the three and a
half month period of 2006 when it was under Hat Pin ownership.
Kendall Tarrant Worldwide (www.kendalltarrant.com)
Kendall Tarrant Worldwide is the leading and most successful
recruitment business in the global advertising and marketing
communications sector, with offices in London, New York, San
Francisco, Hong Kong and Shanghai. 2006 was a record year for the
brand, with 12% organic operating profit growth being further
enhanced by the successful acquisition and subsequent integration of
Stolkin & Partners in March 2006. To capitalise on its success and to
ensure that it realises its international ambitions and potential I
have relinquished my global executive management role at Kendall
Tarrant to Gary Stolkin as of 1 January 2007.
The core advertising business has performed well and the investment
Kendall Tarrant has made over recent years in developing other areas
of the marketing communications sector continues to be successful.
The business now has burgeoning practices in integrated
communications (direct marketing, sales promotion, experiential and
sponsorship), digital and media.
The UK and European business had an excellent year with a number of
talented new consultants joining the company, and the management team
should be congratulated for the manner in which they led the
integration process of Stolkin & Partners. The business has moved
into new premises in Covent Garden and the morale of the combined
team is strong.
In Asia, Kendall Tarrant returned record profits in 2006. This is a
real testament to the hard work and commitment of the teams in Hong
Kong and Shanghai, and the focus for 2007 must be on expanding our
activities in the region and building on our success there. In the
US, Kendall Tarrant again had an excellent year with an important
contribution from our Latin American initiative.
Kendall Tarrant's turnover was up 29% at £6.59m (2005: £5.12m), and
operating profit was up 32% at £1.52m (2005: £1.15m).
Saxton Bampfylde Hever (www.saxbam.com)
Saxton Bampfylde Hever is a premium brand within the executive search
industry, both in the private sector where it has an extensive track
record in boardroom and senior management appointments and in the
public and not-for-profit sectors as a leading adviser on senior
appointments in higher education, central government, charities and
the arts. The business is 70% owned by Hat Pin and the management
team retains the remaining 30%.
Under its first full year of Hat Pin ownership, Saxton Bampfylde has
increased its focus on higher margin business and particularly on its
FTSE practice. It has shown 10% organic operating profit growth in
2006, with its FTSE practice showing organic growth of circa 20%.
Saxton Bampfylde has responded well to Hat Pin's ownership and the
brand culture and integrity remain dynamic. It continues to enjoy a
position of strong brand awareness in a buoyant market. While Saxton
Bampfylde has expanded the team at the critical research level, it
has not grown in consultant numbers and that will be an area of real
focus for the management team in 2007.
Saxton Bampfylde recorded turnover in 2006 of £5.68m, flat compared
to the 2005 figure of £5.70m. Its operating profit was £0.87m, 10%
ahead of the previous year (2005: £0.79m).
Dividend
Hat Pin remains well positioned to generate strong operating cash
flows and it continues to apply disciplined cash management and
strict financial planning practices. It is a measure of the Board's
confidence for the company's future prospects that it is proposing an
increase in the full year dividend of 15% to 1.27 pence per share.
Current Trading & Outlook
The year has begun well; we started with strong forward order books
and activity levels remain high. The first quarter has seen the
successful delivery of strategic plans, with Akamai ready to open in
Tokyo at the beginning of April and Kendall Tarrant opening in
Singapore in May. Additionally, we are pleased to have reached
agreement with a strategic partner in India to provide Akamai with
execution capabilities on the ground.
At the same time, we continue to pursue actively potential
acquisitions of leading brands, which we believe will further
complement our existing business portfolio.
We remain excited and confident about the opportunities and
challenges that face each of our businesses in 2007 and beyond, which
are ably led by talented management teams. I would particularly like
to thank all of our employees for their hard work and commitment. A
business like ours is only as good as its people and I believe we
have some of the best in the industry.
We are well positioned to capitalise on opportunities organically, to
expand our global footprint still further and also to continue to
offer an attractive proposition for growth through acquisition.
Angela Campbell-Noë
Chief Executive
Financial Review
Results
The Group's 2006 results demonstrate a clearly different financial
and corporate profile from those reported last year. The 2005 results
reflected a business based around Kendall Tarrant Worldwide, while
the 2006 figures incorporate for the first time the financial results
from the Group's three acquisitions - Saxton Bampfylde Hever (for the
full 12 months), Stolkin & Partners (from March 2006) and Akamai
Financial Markets (from September 2006).
Turnover for the year ended 31 December 2006 increased by 184% to
£14.53m (2005: £5.12m). Underlying turnover growth in the Kendall
Tarrant business was 13%, with the acquisitions generating the
remaining increase.
The Group's normalised operating profit for 2006 was £2.06m, up 227%
from £0.63m in 2005. The profit margin at this level has increased to
14.1% from 12.3% last year. The growth in underlying normalised
operating profit attributable to Kendall Tarrant was 12%, with the
balance accounted for by the contribution from the acquisitions.
Normalised operating profit is stated after the charge for share
options issued to employees of the Group required by FRS 20,
"Share-based Payment". This is the first year that the Group has been
required to apply FRS 20 and the financial statements have been
restated accordingly for the effect of its introduction on prior year
results. The charge for 2006 was £163,000 (2005: £128,000).
There was a net charge for interest in 2006 of £104,000 (2005: net
income of £28,000). The change from 2005 reflects the cost of the
bank borrowings that contributed to the funding arrangements for the
acquisitions of Saxton Bampfylde and Akamai.
Normalised profit before tax for 2006 was £1.95m (2005: £0.66m), up
195%. Normalised results are stated before goodwill amortisation and
exceptional items, which were as follows:
* Goodwill amortisation in respect of the goodwill arising on the
three acquisitions was £1.04m in 2006 (2005: £nil).
* During the year the Group disposed of two properties: (1) Kendall
Tarrant's London business left its previous premises to move into
a new property to provide longer-term capacity for its continuing
expansion. (2) On acquisition, Stolkin & Partners was integrated
into the Kendall Tarrant business, meaning that Stolkin &
Partners' existing property was surplus to requirements and
consequently disposed of. The exceptional costs arising from the
property disposals were £303,000 (2005: £nil).
Taxation
The normalised tax charge for 2006 is £604,000 (2005: £235,000),
representing an effective rate of 31.0% (2005: 29.9%). The tax credit
in respect of the exceptional items is £53,000 (2005: £nil), meaning
that the overall tax charge for 2006 is £551,000 (2005: £235,000).
Earnings per share
The normalised basic earnings per share for the year were 6.55p
(2005: 4.22p), up 55%. The normalised diluted earnings per share for
the year were 6.34p (2005: 3.98p), up 59%.
The basic loss per share and the diluted loss per share for the year
was 0.67p (2005: earnings of 4.22p and 3.98p respectively). The
decrease in basic and diluted earnings per share compared with last
year reflects the impact of the goodwill amortisation and exceptional
items described above.
Acquisitions
On 9 March 2006 Hat Pin acquired 100% of the issued share capital of
Stolkin & Partners Limited for consideration of £1.18m, payable over
three years.
On 15 September 2006 Hat Pin acquired 100% of the issued share
capital of Alexander Mann Financial Markets - immediately re-branded
Akamai Financial Markets - for consideration of £6.53 million,
payable in cash and shares. The majority of the consideration was
paid prior to the year end, with £0.71m deferred and payable during
2007. In addition, and as part of the acquisition agreement, a
deferred bonus scheme for Akamai management and staff was agreed,
meaning that bonuses of up to £3.50m can be earned based on Akamai's
financial performance in the years 2008, 2009 and 2010.
Cash flows
Cash generated from operating activities for the year was £365,000
(2005: £1.25m). Operating cash flows have remained strong during
2006, but were affected significantly by the timing of the
acquisition of Akamai. Akamai paid annual bonuses totaling £1.28m in
the final quarter of 2006, a period in which it contributed to the
Group an operating profit of £0.30m.
The other major cash flows in 2006 also related to the acquisition of
Akamai. There was a combined outflow in respect of consideration and
costs of £5.98m and inflows from the proceeds of a placing of new Hat
Pin shares, raising a net amount of £5.23m, and an additional bank
loan of £1.00m.
The net cash position as at 31 December 2006 was £1.83m (2005:
£1.96m). Net debt at 31 December 2006 was £1.00m (2005: £0.04m), the
increase largely reflecting the additional funding relating to the
acquisition of Akamai. The gross debt of £2.83m at the year end
(2005: £2.00m) comprises term loans repayable between now and
September 2009.
Dividends
The Board has proposed a final dividend of 1.27p per ordinary share,
up 15% on last year (2005: 1.10p). Assuming shareholders approve the
dividend at the forthcoming AGM, it will be paid on 1 June 2007 to
those shareholders on the register as at 9 May 2007.
Paul Billett
Finance Director
Consolidated profit and loss account for the year ended 31 December
2006
2006 2005
Continuing Continuing (Restated)
In £'000 Existing Acquisitions Total
Turnover 12,275 2,256 14,531 5,118
Administrative expenses (11,322) (2,369) (13,691) (4,488)
Normalised operating 1,758 298 2,056 630
profit [1]
Goodwill amortisation (628) (411) (1,039) -
Exceptional item (177) - (177) -
Operating profit/(loss) 953 (113) 840 630
Loss on disposal of fixed (126) -
assets
Interest receivable 67 35
Interest payable (171) (7)
Profit on ordinary
activities before
taxation 610 658
Taxation on profit on
ordinary activities (551) (197)
Profit on ordinary
activities after taxation 59 461
Equity minority interests (179) -
(Loss)/profit for the (120) 461
year
Basic (loss)/earnings per
share (note 3) (0.67p) 4.22p
Diluted (loss)/earnings
per
share (note 3) (0.67p) 3.98p
[1] Normalised operating profit is used so as to provide a better
indication of the financial performance of the business. Normalised
operating profit is calculated by adding back goodwill amortisation
and exceptional items.
All amounts relate to continuing activities.
Consolidated statement of total recognised gains and losses for the
year ended 31 December 2006
2006 2005
In £'000 (Restated)
(Loss)/profit for the financial year (120) 461
Foreign exchange differences (74) 102
Total recognised gains and losses for the year (194) 563
Prior year adjustment (180)
Total gains and losses recognised since last Annual (374)
Report
Consolidated and Company balance sheets as at 31 December 2006
Group Group Company Company
2006 2005 2006 2005
In £'000 (Restated) (Restated)
Fixed assets
Intangible assets 12,044 4,760 - -
Tangible assets 735 498 - -
Investments - - 16,222 5,815
12,779 5,258 16,222 5,815
Current assets
Debtors 5,191 2,813 602 669
Cash at bank 2,004 1,958 1 1
7,195 4,771 603 670
Creditors: Amounts falling due
within one year (7,373) (3,892) (4,326) (1,189)
Net current (178) 879 (3,723) (519)
(liabilities)/assets
Creditors: Amounts falling due
after more than one year (2,100) (1,333) (2,083) (1,333)
Net assets 10,501 4,804 10,416 3,963
Capital and reserves
Share capital 600 375 600 375
Share premium account 8,425 3,130 8,425 3,130
Merger reserve 370 - 370 -
Capital redemption reserve 3 3 3 3
Other reserves 420 257 420 257
Profit and loss account 446 809 598 198
Own shares held by the Employee
Benefit Trust (41) (41) - -
Shareholders' equity 10,223 4,533 10,416 3,963
Equity minority interests 278 271 - -
Capital employed 10,501 4,804 10,416 3,963
Consolidated cash flow statement for the year ended 31 December 2006
In £'000 2006 2005
Net cash inflow from operating activities 365 1,253
Returns on investments and servicing of finance (128) 11
Taxation (285) (312)
Capital expenditure and financial investment (398) (203)
Acquisitions (5,853) (2,049)
Equity dividends paid to shareholders (169) (110)
Net cash outflow before financing (6,468) (1,410)
Financing 6,341 2,132
(Decrease)/increase in cash (127) 722
Reconciliation to net debt
Net (debt)/cash at 1 January (42) 1,191
(Decrease)/increase in cash (127) 722
Increase in borrowings (834) (1,955)
Net debt at 31 December (1,003) (42)
Notes
1. The announcement set out above does not constitute a full
financial statement of the Company's affairs for the year ended 31
December 2006. The Company's auditors have reported on the full
accounts for 2006 and have accompanied them with an unqualified
report. The accounts have yet to be delivered to the Registrar of
Companies. The 2006 Annual Report will be posted to shareholders on
or around 5 April 2007. From that date, it will be available on the
Company's website (www.hatpin.co.uk) and copies will be available for
members of the public at the Company's registered office, Drury
House, 34-43 Russell Street, London, WC2B 5HA and from the Company's
nominated adviser and broker, Arden Partners plc, Nicholas House, 3
Laurence Pountney Hill, London, EC4R 0EU.
2. Normalised operating profit can be reconciled to the
statutory operating profit as shown:
In £000's 2006 2005
Normalised operating profit 2,056 630
Goodwill amortisation (1,039) -
Exceptional item (177) -
Statutory operating profit 840 630
Normalised profit after taxation can be reconciled to the statutory
(loss)/profit after taxation as shown:
In £000's 2006 2005
Normalised profit after taxation 1,169 461
Goodwill amortisation (1,039) -
Exceptional items (303) -
Tax on exceptional items 53 -
Statutory (loss)/profit after taxation (120) 461
3. The basic loss per ordinary share for the year has been
calculated on the loss on ordinary activities after taxation of
£120,000 (2005: profit of £461,000) divided by the weighted average
number of ordinary shares in issue during the year of 17,842,897
(2005: 10,920,687).
Diluted earnings per share dilutes the basic earnings per share to
take into account share options issued under the Group's employee
share option schemes. The calculation includes the weighted average
number of ordinary shares that would have been issued on the
conversion of all dilutive share options into ordinary shares. The
weighted average number of shares for this purpose in 2005 was
11,580,408. In 2006, because the effect of including the dilutive
options would be to decrease the loss per share, the diluted loss per
share is calculated using the same number of shares as for the
calculation for the basic loss per share. The loss after taxation
was unchanged from the basic figure.
Normalised earnings per share are calculated by adding back goodwill
amortisation and exceptional items. Normalised earnings per share
have been calculated on the normalised profit on ordinary activities
after taxation of £1,169,000 (2005: £461,000) divided by the weighted
average number of ordinary shares in issue during the year of
17,842,897 (2005: 10,920,687).
Diluted normalised earnings per share dilutes the basic normalised
earnings per share to take into account share options issued under
the Group's employee share option schemes. The weighted average
number of shares for this purpose was 18,431,469 (2005: 11,580,408).
The normalised profit after taxation was unchanged from the basic
normalised figure.
4. The directors recommend the payment of a final dividend of
1.27p per ordinary share (2005: 1.10p).
5. The Annual General Meeting is to be held at Hammonds, 7
Devonshire Square, Cutlers Gardens, London, EC2M 4YH on Tuesday 23
May 2007 at 11.30am.
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