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UK — Network Group returns to profit despite reduced revenue

01 September 2010

Revenue was down by -4.7% or -1.2 million Pounds from 26.4 million Pounds in H1 2009 to 25.1 million Pounds in H1 2010 at Network Group Holdings Plc (NGH:LSE), the specialist recruitment and business outsourcing group.

Half year results for the six months ended 31 May 2010 published yesterday afternoon show that operating profit improved from a loss of -766,000 Pounds in H1 2009 to a profit of 779,000 in H1 2010.


Profit before tax improved from a loss of -954,000 Pounds in H1 2009 to a profit of 624,000 Pounds in H1 2010.

Revenue generated from recruitment activities was down to 22.1 million Pounds in H1 2010 compared to 23.4 million Pounds for the corresponding period last year. The operating profit for the period was 382,000 Pounds compared to an operating loss of -710,000 Pounds for the corresponding period last year.

The principal reason for the fall in revenue was that increased revenue from the healthcare sector has been more than offset by a combination of reduced activity in the construction sector and a fall in revenue in the IT sector. The additional revenue from acquisitions made during 2009 has been offset by the loss of revenue from businesses disposed of by the group in November and December 2009. However, despite reduced revenue from the businesses in the IT sector, the gross profit generated was maintained with the acquisition of a further IT business during the period.

There has been a significant increase in the profitability of the recruitment division compared to the corresponding period last year. In particular the businesses in the sales and marketing and healthcare sectors produced significantly improved results. An operating loss was produced by the group's education business, which has been sold following the balance sheet date. Despite reduced revenues in the construction sector, the losses from these businesses were reduced compared to the corresponding period last year.

Profitability has also improved as a result of the disposal of three loss making businesses in November and December which generated operating losses of -348,000 Pounds in the corresponding period last year.

Revenue generated by business process outsourcing (BPO) activities was up to 3.06 million Pounds in H1 2010 compared to 2.9 million Pounds for the corresponding period last year. The operating profit for the period was 698,000 Pounds compared to an operating profit of 234,000 Pounds for the corresponding period last year.
 
The division continues to benefit from the temporary recruitment revenues of its major customer whilst continuing to increase its customer base. The increase in profitability from the corresponding period is the result of increased revenues and significantly reduced costs. The division continues to drive new initiatives, which are expected to increase revenues and increase efficiency.

Network Group's Chairman, D. Waller, said "the group is continuing to experience improved market conditions in the majority of its businesses and remains cautiously optimistic for the foreseeable future. The group's diversity across business sectors has proved to be a major strength of the group coupled with an outstanding performance from our outsourcing business."

Network's Chief Executive Officer, T. Watts, added "the group remains focussed on the growth of both its specialist recruitment business and also its business process outsourcing operation. The group is actively seeking acquisitions that will enhance the shareholder value of the group. Our equity sharing principles remain a key motivator in the way the group operates and we believe this will give the group an advantage in attracting suitable businesses."

After the announcement yesterday Network Group's shares were unchanged at 29.50 Pence.

 

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