Robert Walters results for year ended 31 Dec 2020

 

 

2 March 2021

 

ROBERT WALTERS PLC

(the "Company", or the "Group")

 

Results for the year ended 31 December 2020

 

PROFIT FOR THE YEAR AHEAD OF MARKET EXPECTATIONS.

FORWARD VISIBILITY LIMITED

 

Robert Walters plc (LSE: RWA), the leading international recruitment group, today announces its results for the year ended 31 December 2020.

 

Financial and Operational Highlights

 

	2020	2019	% change	% change (constant currency*)
Revenue	£938.4m	£1.22bn	(23%)	(23%)
Gross profit (net fee income)	£302.4m	£405.5m	(25%)	(26%)
Operating profit	£14.8m	£51.2m	(71%)	(71%)
Profit before taxation	£12.1m	£47.4m	(75%)	(75%)
Basic earnings per share	8.0p	48.4p	(83%)	N/A
Final dividend per share	11.0p	0.0p	N/A	N/A

* Constant currency is calculated by applying prior year exchange rates to local currency results for the current and prior years.

 

§ The Group's primary focus for the year has been ensuring the health, safety and wellbeing of our people and our clients and candidates.

§ Profit for the full year ahead of current market expectations.

§ Proven track record of delivering sensible and targeted short-term cost reduction and control measures in difficult times whilst maintaining the Group's ability to benefit from operational gearing when market conditions improve.

§ Pre-Covid investment in technology enabled all staff to seamlessly and productively transition to remote working without impacting our ability to service our client and candidate requirements.

§ Robust performance against the backdrop of the Covid pandemic, with Group net fee income down 25% (26%*) year-on-year to £302.4m (2019: £405.5m).

§ 78% (2019: 76%) of Group net fee income now derived from our international businesses.

§ Blend of revenue streams across permanent, contract and interim recruitment and recruitment process outsourcing enabled the Group to meet the varying needs of clients and candidates across the globe.

§ Asia Pacific net fee income down 25% (25%*) to £124.1m (£124.3m*) (2019: £164.6m) and operating profit decreased by 63% (64%*) to £8.4m (£8.3m*) (2019: £22.8m).

§ Europe net fee income down 21% (22%*) to £85.7m (£84.6m*) (2019: £108.7m) and operating profit decreased by 69% (70%*) to £4.7m (£4.7m*) (2019: £15.4m).

§ UK net fee income down 32% to £66.9m (2019: £98.4m) and operating profit down to £1.3m (2019: £11.7m).

§ Other International (the Americas, South Africa and the Middle East) net fee income was down 24% (23%*) to £25.7m (£26.3m*) (2019: £33.8m) and operating profit decreased by 71% (72%*) to £0.4m (£0.4m*) (2019: £1.3m).

§ Group headcount decreased by 22% to 3,147 (2019: 4,027). Reductions were a blend of natural attrition, performance management and right-sizing and focused in those geographies and disciplines hardest hit by the pandemic.

§ Reinstatement of dividend payments in November 2020 with interim dividend of 4.5p per share. Proposed final dividend of 11.0p per share (2019: 11.0p per share declared, subsequently cancelled).

§ Strong balance sheet with net cash of £155.5m as at 31 December 2020 (31 December 2019: £85.8m). The Group also has a £60m committed loan facility which expires in March 2024.

§ Strength of the Group's balance sheet meant no external fund-raising was required during the year.

 

Robert Walters, Chief Executive, said:

 

"Throughout this incredibly challenging period the wellbeing of our people has been our number one priority. The Group would not have been able to deliver such a robust performance without the unity of purpose and steadfastness displayed by our people across the globe. The global pandemic has stress-tested the culture and resilience of our business like never before and I have been both humbled and inspired by how our people have risen to the challenge with a singular focus on helping our clients and candidates.

 

"Group net fee income was down 26%* for the full year but the sequential quarter-on-quarter improvement in net fee income from quarter two onwards, combined with the short-term and targeted cost control measures put in place at the onset of the pandemic, has enabled the Group to deliver full-year profits ahead of market expectations.

 

"With new or extended lockdowns still occurring across much of the world, market conditions remain challenging and visibility is limited. That said, the speed at which vaccination programmes are progressing across many of the Group's markets coupled with signs of improvement in forward-looking indicators in Asia Pacific, the Group's largest region, provides a degree of cautious optimism for a longer-term economic recovery. Early 2021 trading is in line with current market expectations for the full year."

 

The Company will be holding a presentation for analysts at 10.30am today.

 

The Company will publish a trading update for the first quarter ending 31 March 2021 on 14 April 2021.

 

Further information

 

Robert Walters plc Robert Walters, Chief Executive Alan Bannatyne, Chief Financial Officer	+44 (0) 20 7379 3333
Williams Nicolson Steffan Williams	+44 7767 345 563

About Robert Walters Group

 

The Robert Walters Group is a market-leading international specialist professional recruitment group with over 3,100 staff spanning 31 countries. We specialise in the placement of the highest calibre professionals across the disciplines of accountancy and finance, banking, engineering, HR, IT, legal, sales, marketing, secretarial and support and supply chain, logistics and procurement. Our client base ranges from the world's leading blue-chip corporates and financial services organisations through to SMEs and start-ups. The Group's outsourcing division, Resource Solutions, is a market leader in recruitment process outsourcing and managed services.

 

www.robertwaltersgroup.com

 

Forward looking statements

 

This announcement contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them at the time of their approval of this announcement and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

 

 

 

 

 

Robert Walters plc

Results for the year ended 31 December 2020

 

Chairman's Statement

I would like to start this statement, my first as the new Chairman of the Robert Walters Group, by saying just how privileged I am to have joined the Board of one of the world's leading specialist professional recruitment businesses.

 

I would also like to extend the Board's sincere and heartfelt thanks to all our people across the globe for the enthusiasm, creativity and hard work they have demonstrated, to ensure we continued to support our colleagues, clients and candidates through the difficult circumstances of the global pandemic.

 

The Group has a proven track record of adopting sensible and targeted cost reduction and control measures in difficult times without damaging the long-term ability to quickly benefit from operational gearing when market conditions become more favourable. The swift action taken on costs at the onset of the pandemic, our pre-Covid investment in technology which enabled all staff to seamlessly and productively transition to remote working and the durability and commitment of our people across the globe has enabled the Group to deliver full-year profits ahead of market expectations, albeit at levels significantly below the prior year.

 

Revenue was down 23% (23%*) to £938.4m (2019: £1.22bn) and net fee income decreased by 25% (26%*) to £302.4m (2019: £405.5m). Operating profit decreased by 71% (71%*) to £14.8m (2019: £51.2m) and profit before taxation decreased by 75% (75%*) to £12.1m (2019: £47.4m). Earnings per share decreased by 83% to 8.0p per share (2019: 48.4p per share). The Group has further strengthened its balance sheet with net cash of £155.5m as at 31 December 2020 (31 December 2019: £85.8m). Our operations in Asia Pacific and Europe delivered particularly robust performances and 78% (2019: 76%) of the Group's net fee income is now derived from our international businesses.

 

The Group has always focused on building and maintaining a healthy blend of revenue streams and our end-to-end offering of permanent, contract, interim and recruitment process outsourcing has continued to provide a competitive advantage and enabled us to respond to the varying needs of our clients and candidates across the globe. Whilst all forms of recruitment were negatively impacted by the pandemic, permanent activity levels were most markedly affected, whilst contract and interim in particular showed more resilience. The Group's ratio of permanent and contract net fee income is 62% permanent to 38% contract (2019: 66%:34%).

 

The Group's strategy for growth is centred on expansion into new international markets and disciplines, but through downturns and periods of crisis we have also benefited from a commitment to maintaining our geographic footprint. We took the decision to maintain our presence in each of the 31 countries we operate in and we are confident that this investment will pay back as markets recover. Whilst every effort was made to preserve the Group's headcount, difficult decisions did have to be made with headcount decreasing by 22% to 3,147 (2019: 4,027). Reductions were a blend of natural attrition, performance management and right-sizing, and focused in those geographies and disciplines hardest hit by the pandemic.

 

Following the reinstatement of dividend payments with the interim dividend of 4.5p per share in November 2020, the Board has taken the decision to recommend a final dividend of 11.0p per share, which would result in a total dividend of 15.5p per share (2019: 4.5p after the cancellation of the final dividend as a result of Covid). The Board is authorised to re-purchase up to 10% of the Group's issued share capital but, given the level of market uncertainty and volatility experienced during the last year, did not exercise this authority. The Board will, however, be seeking approval for the renewal of this authority at the Group's Annual General Meeting on 12 May 2021.

 

Finally, on behalf of the Board, I would like to thank my predecessor, Carol Hui, who stepped down from her role as Chairman after completing her nine-year tenure on 31 December 2020. The Group benefited greatly from her stewardship, expertise and governance and we wish her well for the future.

 

Ron Mobed

Chairman

1 March 2021

 

*Constant currency is calculated by applying prior year exchange rates to local currency results for the current and prior years.

 

 

 

Chief Executive's Statement

 

The Covid global pandemic presented the Group with an unprecedented set of challenges during 2020. The outbreak was largely confined to the Asia Pacific region during the first two months of the year but quickly spread across the rest of the globe with virtually all our businesses impacted by the beginning of the second quarter.

 

Protecting the wellbeing of our people across the globe and the Group's culture has been our number one priority throughout this last year and whilst the global pandemic has stress-tested the culture and resilience of businesses across the globe like never before, the way our people have responded to these circumstances with a unity of purpose and steadfastness has been inspirational.

 

The Group's strong and experienced senior management team has successfully steered the business through a number of previous international crises. This experience was critical in ensuring swift and decisive action was taken to both protect the wellbeing of our people and the continuity of business with our clients and candidates.

 

Communication, Culture and Relationship Management

In times of crisis, regular and transparent communication is key. The Group's global senior management team met weekly throughout the year to ensure relevant information was readily available and prompt action could be taken to mitigate any risks to our people or the business more broadly. Global, regional and local management kept all staff fully up to date and informed on developments, in real time, through our global internal communications platform, Workplace from Facebook, as well as Microsoft Teams. The transparency and regular cadence of communication, both through our global technology platforms and, of course, essential one-to-one phone or video conversations, has been vital in fostering togetherness and unity during the periods when offices have been closed or were at reduced capacity. Our culture is heavily team-based and relationship-focused, and whilst there is no true replacement for face-to-face interaction, our technology and communications strategy has enabled us to preserve our culture and rally together throughout the pandemic.

 

The Group prides itself on the development of long-term relationships with clients and candidates. Our consultants act as advisers, whether or not a client is hiring or a candidate is seeking an immediate career move, and this consultative approach forms the ethos of our non-commission remuneration model. The pandemic presented huge challenges for our clients and candidates alike, from the debate on the future of work, through to questions about remote hiring and remote onboarding, or even simple CV help and advice for those looking to secure new roles. During the second quarter, we launched a global thought leadership and insights programme focused on helping our clients and candidates navigate the pandemic, and by the end of the year, had held over 150 webinars and round table events hosting over 18,000 clients and candidates. We also launched a global Talent Talk podcast series to debate hiring issues and provided career toolkits and advisory services for candidates looking to get back into work.

 

Technology

Prior to the pandemic, the Group invested heavily in both the necessary hardware and software to enable our staff to work remotely; whether on the move between meetings or from home as required. As such, we were able to seamlessly and productively transition to home-working as lockdowns and stay-at-home orders were imposed in most countries across the globe. Video CV and interviewing platforms were already well established across the Group, enabling our consultants to continue to deliver recruitment solutions to our clients and candidates with minimal disruption.

 

Balancing the Cost Base

Sensible and targeted short-term cost reduction and control measures were swiftly put in place at the onset of the pandemic but, most importantly, were balanced against the need to ensure the Group would be able to exit the pandemic in the strongest possible position so as to quickly take advantage of the inevitable economic recovery. Retention of the Group's key management and strongest performers was key and a number of strategic decisions were made to ensure the Group's platform for long-term growth remained strong, including voluntary Executive Director salary reductions of 20%, voluntary reduced working hour schemes for employees globally and reductions in all discretionary spending. The Group was also eligible to receive government subsidies in a number of countries across our global footprint. Over 85% of eligible staff worldwide opted in to the reduced hours scheme, which is further testament to the strength of the Group's culture and unity of purpose. The voluntary working hours scheme for all employees globally ended on 30 September 2020.

 

Balancing the cost base did unfortunately mean that tough decisions on headcount still had to be made, with reductions made through a blend of natural attrition, performance management and right-sizing focused in those geographies and disciplines most severely impacted by the pandemic. The agile nature of our business enabled us to preserve headcount wherever possible by redeploying consultants from disciplines suffering significant declines in recruitment activity to growth areas such as technology and digital.

 

Review of Operations

Recruitment activity levels reached a nadir during quarter two as organisations worked hard to adjust and adapt to the realities of operating in a pandemic. As the first lockdown measures were progressively eased towards the end of the second quarter, we saw a gradual increase in recruitment activity as crisis management gave way to a more business-as-usual approach.

 

Unsurprisingly, with so much market uncertainty and volatility, permanent recruitment activity was hardest hit, whilst contract and interim proved to be more resilient; however, all improved sequentially from quarter two onwards. From a discipline perspective, pockets of strong growth still existed across technology and transformation, digital, e-commerce, supply chain, logistics and healthcare, whereas sectors such as retail, aerospace and hospitality were hardest hit.

 

Asia Pacific (41% of Group net fee income)

Revenue was £373.6m (2019: £410.7m), net fee income decreased by 25% (25%*) to £124.1m (£124.3m*) (2019: £164.6m) and operating profit decreased by 63% (64%*) to £8.4m (£8.3m*) (2019: £22.8m).

 

Asia Pacific, the Group's largest and most profitable region, was first to be impacted by the pandemic during the first two months of 2020 but due to strong Government intervention in many locations, the region seems well placed to recover more quickly with forward-looking recruitment indicators showing signs of improvement, particularly during the fourth quarter.

 

In Asia, our market-leading business in Japan performed relatively robustly, with net fee income declining 21%* year-on-year despite significant volatility in both infection levels and Government stay-at-home orders throughout the year. Our business in Greater China produced mixed results; in Hong Kong, the pandemic exacerbated the instability already caused by the political unrest of 2019, resulting in net fee income declining 51%* year-on-year, whereas in Mainland China and Taiwan, results were less impacted with net fee income declining by 22%* and 9%* respectively.

 

The relative success with which Australia and particularly New Zealand have managed the impact of the pandemic has enabled our businesses there to produce resilient results. In Australia, our businesses in Adelaide, Perth and Sydney held up relatively well, however Melbourne was materially impacted by the extended lockdown in Victoria. In New Zealand, net fee income declined by just 12%* year-on-year underpinned by strength in technology and digital recruitment and a blend of private and public sector clients.

 

Although the impact on the recruitment process outsourcing market has been less pronounced in Asia Pacific versus the UK, recruitment volumes were still significantly down year-on-year. Despite this backdrop, Resource Solutions delivered a creditable performance with a net positive number of clients year-on-year.

 

Europe (28% of Group net fee income)

Revenue was £204.6m (2019: £252.5m), net fee income decreased by 21% (22%*) to £85.7m (£84.6m*) (2019: £108.7m) and operating profit decreased by 69% (70%*) to £4.7m (£4.7m*) (2019: £15.4m).

 

Our blend of permanent, contract and interim recruitment solutions provides the Group with a competitive advantage across the region with our teams able to respond to the varying nature of client and candidate needs. Our investment in further growing our contract and interim offering over the last few years paid dividends in 2020 as permanent recruitment activity levels fell more sharply in line with reduced client and candidate confidence.

 

Our well-established and market-leading businesses in the Netherlands and Belgium produced the strongest performances, with net fee income declining 14%* and 16%* respectively. Activity levels in Spain, where we now have over 70 consultants and three offices, also held up well with net fee income declining by 21%* year-on-year. Net fee income in Switzerland, where recruitment activity levels in our specialist mid-senior management market remained robust, declined by just 3%*.

 

In France, the Group's largest business in the region, net fee income declined by 30%*, although client and candidate confidence did improve as the year progressed. Interim recruitment activity remained relatively resilient with demand strongest across finance, HR and legal.

 

 

 

UK (22% of Group net fee income)

Revenue was £329.1m (2019: £514.0m), net fee income decreased by 32% to £66.9m (2019: £98.4m) and operating profit decreased to £1.3m (2019: £11.7m).

 

The clearance of the first major Brexit hurdle and a decisive General Election result made for a positive start to 2020 with client and candidate confidence showing clear signs of improvement. However, the onset of the pandemic and the announcement of a UK-wide lockdown in March significantly impacted hiring activity and confidence levels. Whilst there were marginal signs of quarter-on-quarter improvement as the year progressed, the recruitment market remained generally subdued with bright spots limited to pandemic-proof sectors such as technology, healthcare, logistics and fintech. Market sentiment was slightly more positive in the UK regions, with logistics hubs and shared service centres recruiting as organisations moved roles to lower-cost locations.

 

The pandemic also negatively impacted the recruitment process outsourcing market, with a number of clients imposing hiring freezes or substantially reducing their hiring requirements. Our Resource Solutions business was right-sized to reflect both our clients' hiring volumes and the ending of a small number of existing contracts. However, on a more positive note, the business continued to win a number of new deals and broadened our service delivery into new sectors including mining, property and healthcare. Of particular note, the Group is extremely proud that, over the last year, Resource Solutions has been working closely with the NHS in its fight against coronavirus, helping to manage the onboarding of both healthcare workers and vaccinators.

 

Other International (9% of Group net fee income)

Other International encompasses the Americas, South Africa and the Middle East. Revenue was £31.1m (2019: £38.9m), net fee income decreased by 24% (23%*) to £25.7m (£26.3m*) (2019: £33.8m) and operating profit decreased by 71% (72%*) to £0.4m (£0.4m*) (2019: £1.3m).

 

Our business in the US, where we have offices in New York, San Francisco and Los Angeles, held up strongly during the first half of the year. However, a rise in infection rates and the political uncertainty surrounding the presidential election meant activity levels in the second half were more subdued. Our newer businesses in Mexico and Chile held up well with the latter delivering a 15%* increase in net fee income, albeit from a low base. In the Middle East, we continued to invest in growing our footprint across the region with a new office opening in Abu Dhabi during the first half of the year.

 

Outlook

With new or extended lockdowns still occurring across much of the world, market conditions remain challenging and visibility is limited.

 

That said, the speed at which vaccination programmes are progressing across many of the Group's markets, coupled with signs of improvement in forward-looking indicators in Asia Pacific, the Group's largest region, provide a degree of cautious optimism for a longer-term economic recovery. Early 2021 trading is in line with current market expectations for the full year.

 

Robert Walters

Chief Executive

1 March 2021

 

*Constant currency is calculated by applying prior year exchange rates to local currency results for the current and prior years.

 

 

 

 

 

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF

ROBERT WALTERS PLC ON THE PRELIMINARY STATEMENT OF ANNUAL RESULTS

 

As the independent auditor of Robert Walters plc we are required by UK Listing Rules to agree to the publication of the company's preliminary statement of annual results for the year ended 31 December 2020 which include the financial and operational highlights, the Chairman's Statement, the Chief Executive's Statement, and summarised financial statements.

 

Use of our report

 

This report and our auditor's report on the company's financial statements are made solely to the company's members, as a body, in accordance with Chapter 3 of part 16 of the Companies Act 2006 and the terms of our engagement. Our audit work has been undertaken so that we might state to the company's members those matters we have agreed to state to them and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for our auditor's report on the financial statements or this report, or for the opinions we have formed.

 

Responsibilities of Directors and auditor

 

The Directors of the company are responsible for the preparation, presentation and publication of the preliminary statement of annual results in accordance with the UK Listing Rules. We are responsible for agreeing to the publication of the preliminary statement of annual results, having regard to the Financial Reporting Council's Bulletin "The Auditor's Association with Preliminary Announcements made in accordance with the requirements of UK Listing Rules".  We are not required to agree to the publication of the analyst presentation published alongside the preliminary statement of results.

 

Status of our audit of the financial statements

 

Our audit of the annual financial statements of the company is complete and we signed our auditor's report on 1 March 2021. Our auditor's report is not modified and contains no emphasis of matter paragraph.

 

Our auditor's report on the full financial statements contained the following information regarding key audit matters and how they were addressed by us in the audit, our application of materiality and the scope of our audit.

 

An overview of the scope of our audit

 

The Group has diverse international operations. Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

 

We designed an audit strategy to ensure we have obtained the required audit assurance for each component for the purposes of our Group audit opinion (ISA 600 (UK)).  Components were scoped in to address aggregation risk and to ensure sufficient coverage was obtained of group balances on which to base our audit opinion.  The coverage of our audit procedures is summarised graphically below and then detailed in the following table. 

 

Significant components	·      We focused our Group audit scope primarily on the audit work at four significant components, which were subject to full scope audit procedures. ·      These significant components contribute 26% (2019: 46%) of the Group profit before tax, 35% (2019: 36%) of the Group net fee income, and 63% (2019: 69%) of the Group revenue. ·      The four components considered to be significant were Robert Walters PLC, Resource Solutions Limited (UK), Robert Walters Operations Limited (UK) and Robert Walters Japan KK (Japan).  ·      For the Japanese component, following involvement in risk assessment and setting the overall audit approach and strategy with the component auditor (a BDO Member firm) at the planning stage, we performed a detailed review of the testing performed and attended remote meetings with local management and the component auditor to challenge conclusions reached. ·      The audits of the remaining UK significant components were performed by the group audit team.
Full scope audits	·      Eleven further components were subject to full scope audit procedures in addition to the four identified significant components above (Fifteen in total). ·      These components contribute 20% (2019: 26%) of the Group profit before tax, 27% (2019: 21%) of the Group net fee income, and 20%  (2019: 16%) of the Group revenue. ·      Full scope audit procedures were performed on components in the UK, Australia, Singapore, Belgium and France. ·      All testing was performed by BDO Member Firms under direction and supervision of the Group audit team.  ·      The Group audit team directed work for all full scope components through detailed instructions, remote briefings and review of selected working papers on significant risk areas.
Specified procedures	·      Specified procedures were performed by the Group audit team to address the risk of material misstatement arising from key balances in smaller components, with testing performed on certain material balances within these components.  ·      This specific scope testing was performed on components that contribute 28% (2019: 21%) of the Group profit before tax, 27% (2019: 27%) of the Group net fee income, and 15% (2019: 12%) of the Group revenue.  ·      These components included: o  Robert Walters BV o  Walters People BV o  Robert Walters Holding SAS Sucursal En Espana o  Robert Walters New Zealand Limited o  Robert Walters (Hong Kong) Limited o  Resource Solutions Consulting (Hong Kong) Limited o  Robert Walters Talent Consulting (Shanghai) Limited o  Robert Walters Korea Limited o  Robert Walters (Taiwan) Company Limited o  Agensi Pekerjaan Walters Sdn Bhd o  Resource Solutions Inc (Delaware) o  Robert Walters Luxembourg Investment SARL (Irish Branch) o  Robert Walters Recruitment (Thailand) Limited o  Robert Walters Associates California Inc.
Remaining components	·      All other components were scoped in for analytical review procedures performed by the Group audit team to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information.
Parent Company & Consolidation	·      The Parent Company is located in the UK and is audited by the Group audit team.  The Parent Company is treated as a significant component for the Group audit. ·      The Group audit team performed testing of the consolidation and related consolidation adjustments posted in preparation of the Group financial statements.

 

 

 

 

 

 

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

Key audit matter	·      Revenue recognition for permanent and temporary placements.
Description	·      The significant risk in revenue recognition lies within the valuation of accrued and uncollected revenues, due to the high degree of judgement and scope for fraud/error in the valuation. There is a risk that revenue that has not yet been invoiced, or has been invoiced but the cash not yet collected, does not exist.  ·      For permanent placements on non-retained assignments, as detailed in the summary of significant accounting policies, revenue is recognised when a start date is confirmed and a candidate has accepted in writing.  A provision is held for candidates who accept but are expected to reverse their acceptance at a consistent percentage of the accrued income balance based on historical experience. Whether the percentage applied remains valid is considered to be a matter of significant management judgment.  ·      For temporary placements, the Group's policy is to recognise revenue as the service is provided at contractually agreed rates.  There is a risk that timecards are not appropriately approved or are not submitted on time, or that incorrect rates are applied and therefore that the related revenue does not exist, is inaccurate or is not recognised in the appropriate financial year.
How we addressed the key audit matter in the audit	·      The operating effectiveness of key controls in the revenue cycle have been tested in the significant components where relevant.  For permanent placements, we have considered controls over the signing of the contract, evidence of candidate acceptance and allocation of cash receipts.  For temporary placements we checked that timecards and the rate applied have been appropriately approved. ·      Permanent placements recorded around year end were sampled and agreed to confirmation of candidate acceptance to ensure that the point of revenue recognition was supportable. ·      For those permanent candidates that had accepted but had not started at year end, where revenue is recorded in accrued income, we challenged the appropriateness of the provision rate applied by reference to the rate of historic and actual back outs post year end. o  We recalculated the accrued income and associated costs recognised for late timecards or timecards straddling the year end (where the approved timecard was submitted after the year end but related to services provided in the year).
Key observations communicated to the Audit Committee	·      We did not identify any significant deficiencies in internal control as a result of our audit work. ·      We did not identify any material indication that revenue, that has not yet been invoiced or has been invoiced but not cash collected, does not exist. ·      We consider the provision rate applied to permanent accrued income to be a reasonable and fair estimate based on past experience.

 

Implementation of IFRS 16 Leases, effective for the first time in the prior financial year, was considered to be a key audit matter in the prior year due to judgements and estimations required on transition.  We do not consider implementation of IFRS 16 Leases to be a key audit matter in the current financial year.

 

 

 

 

 

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

 

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:	Group	Parent Company
Materiality	£1.80m (2019: £2.40m)	£1.62m (2019: £1.87m)
Basis	5.0% of three year average profit before tax (2019: 5.0% profit before tax)	1.3% of net assets (2019: 1.7%)
Rationale	Profit before tax is considered to be the most appropriate benchmark based on market practice and investor expectations.    An average of three years has been applied to normalise results for the atypical impact of Covid-19 in the year.   The materiality applied equates to 14.8% of current year Group profit before tax, 0.6% of Group net fee income and 1.1% of Group net assets.	Net assets is considered to be the most appropriate benchmark as the Parent Company does not trade.

 

Further materiality measures applied in the conduct of the audit include:

	Measure	Application
Performance materiality	£1.26m (70% of materiality) (2019: £1.68m)	In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Component materiality	£0.53m - £1.62m (90% of materiality) (2019: £1.04m -£1.68m)	Our audit work at each component, excluding the Parent Company, was executed at levels of materiality applicable to each individual entity as approved by the Group audit team and in each case, lower than that applied to the Group.
Reporting threshold	£72,000 (2019: £100,000)	The amount agreed with the Audit and Risk Committee for which all individual audit differences in excess of this amount will be reported. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Qualitative disclosures	We also report to the Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

 

 

Procedures performed to agree to the preliminary statement of annual results

In order to agree to the publication of the preliminary statement of annual results of the company, we:

·    checked the accuracy of extraction of the financial information in the preliminary statement from the audited financial statements of the company;

·    considered whether any 'alternative performance measures' and associated narrative explanations may be misleading; and

·    read the management commentary and considered whether it is in conflict with the information that we have obtained in the course of our audit.

 

 

 

 

 

Mark Cardiff (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London, UK

1 March 2021

 

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated Income Statement

FOR THE YEAR ENDED 31 DECEMBER 2020

	2020	2019
Notes	£s millions	£s millions
Revenue                                                                                    1	938.4	1,216.1
Cost of sales	(636.0)	(810.6)
Gross profit (net fee income)	302.4	405.5
Administrative expenses	(287.6)	(354.3)
Operating profit	14.8	51.2
Finance income	1.0	0.6
Finance costs                                                                            2	(3.8)	(4.0)
Gain (loss) on foreign exchange	0.1	(0.4)
Profit before taxation	12.1	47.4
Taxation                                                                                    3	(6.4)	(13.4)
Profit for the year	5.7	34.0
Attributable to:
Owners of the Company	5.7	34.0
Earnings per share (pence):                                                  5
Basic	8.0	48.4
Diluted	7.5	44.9

 

The amounts above relate to continuing operations.

 

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 31 DECEMBER 2020

	2020	2019
	£s millions	£s millions
Profit for the year	5.7	34.0
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of overseas operations	3.4	(5.6)
Total comprehensive income and expense for the year	9.1	28.4
Attributable to:
Owners of the Company	9.1	28.4

 

 

Consolidated Balance Sheet

AS AT 31 DECEMBER 2020

	2020	2019
Notes	£s millions	£s millions
Non-current assets
Intangible assets                                                                      6	18.2	13.4
Property, plant and equipment                                                7	9.1	11.4
Right-of-use asset                                                                   8	59.5	72.9
Deferred tax assets	12.2	11.6
	99.0	109.3
Current assets
Trade and other receivables	153.0	209.7
Corporation tax receivables	5.1	2.6
Cash and cash equivalents	155.5	112.4
	313.6	324.7
Total assets	412.6	434.0
Current liabilities
Trade and other payables                                                      10	(170.5)	(161.9)
Corporation tax liabilities	(5.5)	(6.8)
Bank overdrafts and borrowings	-	(26.6)
Lease liability	(15.7)	(17.4)
Provisions	(2.0)	(1.3)
	(193.7)	(214.0)
Net current assets	119.9	110.7
Non-current liabilities
Lease liability	(48.1)	(58.1)
Deferred tax liabilities	(0.2)	-
Provisions	(1.3)	(1.3)
	(49.6)	(59.4)
Total liabilities	(243.3)	(273.4)
Net assets	169.3	160.6
Equity
Share capital	16.0	16.0
Share premium	22.2	22.2
Other reserves	(71.8)	(71.8)
Own shares held	(18.1)	(26.5)
Treasury shares held	(9.1)	(9.1)
Foreign exchange reserves	12.5	9.1
Retained earnings	217.6	220.7
Equity attributable to owners of the Company	169.3	160.6

 

 

 

Consolidated Cash Flow Statement

FOR THE YEAR ENDED 31 DECEMBER 2020

	2020	2019
Notes	£s millions	£s millions
Operating profit	14.8	51.2
Adjustments for:
Depreciation and amortisation charges	23.3	21.7
Impairment of intangible assets	0.6	-
Impairment of right-of-use assets	1.3	-
Loss on disposal of property, plant and equipment and computer software	0.3	0.1
Charge in respect of share-based payment transactions	2.2	5.6
Unrealised foreign exchange losses	1.2	(1.3)
Operating cash flows before movements in working capital	43.7	77.3
Decrease in receivables	64.2	25.5
Increase (decrease) in payables	5.7	(20.4)
Cash generated from operating activities	113.6	82.4
Income taxes paid	(14.7)	(12.6)
Net cash from operating activities	98.9	69.8
Investing activities
Interest received	1.0	0.6
Investment in intangible assets                                             6	(7.4)	(3.6)
Purchases of property, plant and equipment                         7	(2.5)	(5.9)
Net cash used in investing activities	(8.9)	(8.9)
Financing activities
Equity dividends paid                                                           4	(3.2)	(10.6)
Proceeds from issue of equity	0.7	0.3
Interest paid	(1.4)	(1.2)
Interest on lease liabilities	(2.4)	(2.8)
Principal paid on lease liabilities	(16.2)	(16.4)
Proceeds from financing facility	17.7	25.5
Repayment of financing facility	(44.3)	(4.5)
Purchase of own shares	-	(15.0)
Net cash used in financing activities	(49.1)	(24.7)
Net increase in cash and cash equivalents	40.9	36.2
Cash and cash equivalents at beginning of year	112.4	79.9
Effect of foreign exchange rate changes	2.2	(3.7)
Cash and cash equivalents at end of year	155.5	112.4

Consolidated Statement of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2020

	Share capital	Share premium	Other reserves	Own shares held	Treasury shares held	Foreign exchange reserves	Retained earnings	Total equity
Group	£s millions	£s millions	£s millions	£s millions	£s millions	£s millions	£s millions	£s millions
Balance at 1 January 2019	15.9	22.0	(71.8)	(18.3)	(9.1)	14.7	199.3	152.7
Profit for the year	-	-	-	-	-	-	34.0	34.0
Foreign currency translation differences	-	-	-	-	-	(5.6)	-	(5.6)
Total comprehensive income and expense for the year	-	-	-	-	-	(5.6)	34.0	28.4
Dividends paid (note 4)	-	-	-	-	-	-	(10.6)	(10.6)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	5.6	5.6
Deferred tax on share-based payment transactions	-	-	-	-	-	-	(1.1)	(1.1)
Transfer to own shares held on exercise of equity incentives	-	-	-	6.5	-	-	(6.5)	-
New shares issued and own shares purchased	0.1	0.2	-	(14.7)	-	-	-	(14.4)
Balance at 31 December 2019	16.0	22.2	(71.8)	(26.5)	(9.1)	9.1	220.7	160.6
Profit for the year	-	-	-	-	-	-	5.7	5.7
Foreign currency translation differences	-	-	-	-	-	3.4	-	3.4
Total comprehensive income and expense for the year	-	-	-	-	-	3.4	5.7	9.1
Dividends paid (note 4)	-	-	-	-	-	-	(3.2)	(3.2)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	2.2	2.2
Deferred tax on share-based payment transactions	-	-	-	-	-	-	(0.1)	(0.1)
Transfer to own shares held on exercise of equity incentives	-	-	-	7.7	-	-	(7.7)	-
New shares issued and own shares purchased	-	-	-	0.7	-	-	-	0.7
Balance at 31 December 2020	16.0	22.2	(71.8)	(18.1)	(9.1)	12.5	217.6	169.3

 

 

Statement of Accounting Policies

FOR THE YEAR ENDED 31 DECEMBER 2020

 

Accounting Policies Basis of preparation

Robert Walters plc is a public company limited by shares, incorporated and domiciled in the United Kingdom under the Companies Act. The financial report for the year ended 31 December 2020 has been prepared in accordance with the historical cost convention and with international accounting standards in conformity with the requirements of the Companies Act 2006 and with International Financial Reporting Standards (IFRSs) as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

 

The Group had net cash of £155.5m at 31 December 2020. Given the strong balance sheet and considerable financial resources, the Directors remains confident of the Group's long-term growth prospects and a diverse range of clients and suppliers across different geographic locations and sectors means that while some countries are incurring further peaks of the Covid outbreak, many other countries have returned to office working and are seeing an increase in productivity. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. After making enquiries, the Directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence and meet its liabilities as they fall due over the three-year assessment period. The Directors have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the entity's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. For this reason, the Directors continue to adopt the going concern basis in preparing the accounts.

 

The financial information in this announcement, which was approved by the Board of Directors on 1 March 2021, does not constitute the Company's statutory accounts for the year ended 31 December 2020 but is derived from these accounts. Statutory accounts for 2019 have been delivered to the Registrar of Companies and those for 2020 will be delivered following the Company's Annual General Meeting. The auditors have reported on these accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

 

The Annual General Meeting of Robert Walters plc will be held on 12 May 2021 at 11 Slingsby Place, St Martin's Courtyard, London WC2E 9AB.

 

1.	Segmental information
		2020	2019
		£s millions	£s millions
i)	Revenue:
	Asia Pacific	373.6	410.7
	UK	329.1	514.0
	Europe	204.6	252.5
	Other International	31.1	38.9
		938.4	1,216.1
ii)	Gross profit:
	Asia Pacific	124.1	164.6
	UK	66.9	98.4
	Europe	85.7	108.7
	Other International	25.7	33.8
		302.4	405.5