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UK – Seventh successive year of revenue growth at Rethink

03 April 2012

The Rethink Group (AIM: RTG), the UK recruitment, talent management and technology services company, has announced its final results for the year ended 31 December 2011.

Revenue grew by +40% to £78.9 million (2010: £56.4 million), following considerable growth in contractor numbers and in permanent placements. This is the seventh successive year of revenue growth since the Group formed.

The Recruitment Services division provides contract, interim, permanent and executive search solutions to a wide range of clients across a spectrum of global organisations. It saw contract revenue up +25% to £48.5 million (2010: £38.7 million) and permanent revenue up +48% to £6.7 million (2010: £4.4 million).

During the year, the company expanded the reach of their Energy division outside the UK and opened an office in Houston, USA, to support the demands of customers in this sector. They also established an executive search practice. Both operations were in the investment stage during 2011 and are budgeted to make positive contributions in 2012. Rethink have also started the roll-out of the Berkley Pharmaceutical and Life Science brand from Ireland into their UK offices.

The Talent Management business service provides Bonds clients with “an integrated management and recruitment delivery service related to key technology skilled resource”. The mix of business is mostly temporary contract with revenue up +88% to £19.6 million (2010: £10.4 million) and permanent revenue down from £361,000 to £276,000. Clients include M&S and Boots.

The Technology Services division grew +61%, from £2.3 million in 2010 to £3.7 million last year. Rethink works in a number of sectors, including local & central government, media, oil & gas, mining, energy, legal and FMCG. The division specialises in Enterprise Content Management and Business Intelligence.  The Technology Service offerings in consulting, software distribution and support have all grown over the year, with particular success in developing annuity revenues through the provision of IT service management and solutions delivered on their SaaS (Software as a Service) platform.

For the recruitment division, gross margins averaged 24.2% (2010 23.0%). Both contract volume and margins have performed well in challenging markets. At the year end, in excess of 800 contractors were on billing with clients, up from 560 at the end of 2010. For talent management, the gross margin was 9.6% (2010: 10.8%) and for technology services up to 76.2% (2010: 73.2%)

Operating profits overall increased by 53% to £2.3 million (2010: £1.5 million) but so did net debt up to £7.1 million (2010: £5.2 million) reflecting expansion and investment. Net income fell 37% to £1.3 million (2010: £2.1 million).

Rethink’s strategy is to continue to provide permanent personnel and expert contractor services to their clients. At the same time, through their Talent Management division, they hope to partner and support major blue chip clients in managing and identifying highly specialised technology people. The Technology Services division extends this model to the supply of technology solutions and expert consulting and project management services in the technology delivery field. Their goal is to be involved with their clients in a more holistic manner across both People Talent provision and Technology Services provision.

During the 2011, the company increased its staff to 173 employees (2010: 135), fee earners grew from 107 at the start of 2011 to 144 at the year end. Given the availability of a strong graduate pool in the UK, the Group saw an opportunity to develop its “Academy” Programme, with around 25 new employees joining the Academy in January 2012, doubling the number of trainees.

A final dividend of 0.134p per share and an interim dividend of 0.0986p per share have been paid (2010: interim dividend of 0.054p).  The Directors are recommending a final dividend of 0.233p per share.

According to the Chairman, John Sadiq, “Rethink has progressed well through difficult economic times. These conditions are certainly not over and we remain confident but suitably cautious. We believe 2012 will be another good year of operational and financial progress for Rethink and we look forward to reporting continuing success as we implement our stated strategy of increasing the embedded nature of our partnerships with clients. At the same time, the Group's strategy to continue to build revenue lines and generate profits outside of the UK will balance the Group's exposure to the UK economy and increase its international exposure to higher growth regions”.

In early trading, the share price jumped +10.4% to £10.90, 19.08% below its 52-week high of £13.47, set on 15 September 2011 but 24.6% higher than a year ago. The company is valued at £10.32 million.


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