RTC : Annual Report 2024

About this update from Rtc Group Plc

Annual Report for the year ended 31 December 2024 Stock code: RTC www.rtcgroupplc.co.uk Welcome to the RTC Group Annual Report 2024 Highlights Group revenue EBITDA* Diluted EPS £96.8m £3.3m 13.01p (2023: £98.8m) (2023: £3.8m) (2023: (12.72p) * Refer to the key performance indicators section for calculation. Group at a glance RTC Group Plc is an AIM listed recruitment business that focuses on white and blue-collar recruitment, providing temporary and permanent labour to a broad range of industries and customers, in both domestic and international markets, through its geographically defined operating divisions. UK division Through its Ganymede and ATA brands the Group provides a wide range of recruitment services in the UK. Ganymede specialise in recruiting the best technical and engineering talent and providing complete workforce solutions to help build and maintain infrastructure and transportation for a wide range of UK customers. Ganymede is a market leader in providing a diverse range of people solutions to the rail, energy, construction, highways, and transportation sectors. With offices strategically located across the country, Ganymede provides its customers with the benefit of a national network of skilled personnel combined with local expertise. Ganymede tailors its solutions to suit its customer s' needs. Whether it's recruiting permanent and temporary technical, engineering and safety-critical roles or providing fully managed workforce solutions of recruitment, training, account management, contingent labour and fleet provision, Ganymede works closely with its customers to understand their requirements, keeping their goals in mind every step of the way. ATA provide high-quality technical recruitment solutions to the manufacturing, engineering, and technology sectors. Working as an engineering recruitment partner supporting businesses across the UK, ATA has a strong track record of attracting and recruiting the best engineering talent for its customer s. ATA's regional offices which are strategically located in Leicester and Leeds each have dedicated market experts to ensure ATA delivers excellence to both its customers and candidates. The Group headquarters are located at the Derby Conference Centre which also provides office accommodation for its operating divisions in addition to generating rental and conferencing income from space not utilised by the Group. International division Internationally, through our GSS brand we work with customers across the globe that are focused on delivering projects in a variety of sectors. GSS has a track record of delivery in some of the world's most hostile locations. Working closely with its customers GSS provides contract and permanent staffing solutions on an international basis, providing key personnel into new projects and supporting ongoing large-scale project staffing needs. GSS typically recruit across a range of disciplines and skills from operators and supervisors, through to senior management level. Learn more RTC Group maintains a corporate website at www.rtcgroupplc.co.uk containing a wide range of information of interest including:  latest RNS releases; and  company reports. Contents Strategic report Chairman and Chief Executive's operational and strategic review ................................................ 2 Business model ..................................................................................................................................... 6 Key performance indicators ................................................................................................................ 7 Risk management ................................................................................................................................. 8 Finance Director's report ................................................................................................................... 10 Governance Section 172 statement ....................................................................................................................... 12 Directors' report .................................................................................................................................. 14 Corporate governance statement .................................................................................................... 19 Audit committee report ..................................................................................................................... 22 Remuneration report .......................................................................................................................... 24 Financial reports RTC Group Independent auditor's report to the members of RTC Group Plc ................................................ 26 Consolidated statement of comprehensive income ...................................................................... 31 Consolidated statement of changes in equity ................................................................................ 32 Consolidated statement of financial position ................................................................................. 34 Consolidated statement of cash flows ............................................................................................. 35 Notes to the Group financial statements ........................................................................................ 36 RTC Company Company statutory financial statements ......................................................................................... 58 Company statement of financial position ....................................................................................... 59 Company statement of changes in equity ...................................................................................... 60 Notes to the Company financial statements ................................................................................... 61 Shareholder information Directors and advisers ........................................................................................................................ 67 Chairman and Chief Executive 's operational and strategic review For the year ended 31 December 2024 Overview 2024 was another extremely satisfying year for RTC with the Group delivering an exceptional set of results in a difficult year for the recruitment sector. Despite a relatively small reduction in revenue at Group level, our UK and international business have delivered increased gross profit and this, when benchmarked across the broader recruitment sector, and in particular the quoted market contingent where sentiment has become increasingly subdued, is a significant achievement for the Group. Whilst modest in size when compared to many of our quoted peers I believe our performance should not be understated and our strategy of building a diverse and complementary portfolio of sector specific subsidiaries continues to build continuity of value for our shareholders. We have established market leading positions both in the UK and overseas and as we enter the 2025 financial year, we believe we can continue to unlock further earnings opportunities through our strong relationships with clients and our substantial order book which continues to provide the solid foundation for future growth and our long-term investment plans. During 2024 the Group achieved a number of significant financial milestones of which I am extremely proud, and which I believe deserve highlighting to our shareholders. Our cumulative revenue since I assembled new leadership and subsidiary management teams to deliver my vision and strategy for the Group's shareholders, has now surpassed £1bn with total gross profit generated approaching £200m and committed dividends of over £4m to our shareholders. It should be noted that, across the Group, at the core of this success, key individuals who started this journey with me remain in senior leadership positions in management teams across the Group with a significant number having over 20 years' service with their businesses. This is testament to, and a measure of, the exceptional culture which pervades RTC and bodes well for the long-term future of the Group. Our achievements are even more pleasing considering the multiple disruptions to our strategic progress caused by the global economic downturns as a consequence of the 2008/2009 financial crisis and the COVID epidemic of 2020/2021 and compounded by protracted industrial relations disturbances across the rail sector in the UK during 2023. Collectively these uncontrollable events denied the Group the opportunity to deliver even greater success for its shareholders. Our balance sheet continues to go from strength to strength with another year of extremely positive cash generation and we remain completely term debt free with zero gearing. During the year we took the opportunity to acquire a large holding of shares from a long-standing shareholder at a sensible price for our shareholders and through utilising free cash flow. Even taking account of this transaction, we increased the net assets of our balance sheet which has now grown, fully diluted, to 59p per share giving an annual increase of over 9% for our shareholders. Furthermore, our reported fully diluted earnings per share (eps) grew 2% from 12.72p to 13.01p per share. I note, however, that moving beyond standard accounting, and based on the year-end position, the increase in eps is no less than 8%, at 13.75p, a very positive outcome. As result of both our strong financial performance and our prudent treasury management, we are able to reward our shareholders with a very healthy final dividend of 5p representing an 11% increase year on year. It is also worth noting for reference that at year end our net assets represented nearly 60% of our closing share price. During the year the Group announced the appointment of three new directors to the Board. Paul Crompton, executive director, and Nick Spoliar and Wayne Thornhill as non-executive directors. All have exceptional experience and skills which I believe will help RTC execute its short, medium, and long-term strategic plans and establish a future for its shareholders capable of building on its outstanding successes to date. In conclusion, another strong set of results, another constructive year of value enhancement for our shareholders, a business with an outstanding balance sheet and long-term revenue visibility through its strong order book with blue chip clients and a company with strong independent yet interlinked subsidiary businesses with proven track records in both UK and International markets. Whilst there are unquestionable concerns clouding the confidence of the broader recruitment sector as we enter 2025, and the impact of rising employment costs through the combination of employer national insurance increases and the new Employment Rights Bill have yet to be fully digested, I remain cautiously optimistic of our prospects as we enter the new financial year. Business review UK Division In 2024, our UK recruitment division delivered an exceptionally strong performance, all the more so allowing for the general environment, yet again demonstrating resilience and adaptability in a challenging economy and an uncertain recruitment market. Whilst revenue was slightly down at £88.9m (2023: £91.2m), gross profit was up at £15.6m (2023: £15.3m), reflecting our commitment to both strategic focus and operational efficiency to maintain enhanced value creation. Ganymede Energy continued to build on the success it enjoyed in 2023 by delivering another strong performance in 2024 with a steady increase in gross profit, which is particularly pleasing given the ongoing, and well publicised challenges within the metering industry. Based on the latest government statistics, as of the end of September 2024, there were 37 million smart and advanced meters installed in homes and small businesses across the UK, accounting for 65% of all gas and electricity meters. Whilst the sector continues to face ongoing challenges, smart meters present significant long-term opportunities for our energy business as, in addition to the completion of existing planned installations, first generation installations are becoming increasingly obsolete and upgrades to first generation SMETS1 meters to ensure full interoperability remains a high priority. In addition, the decommissioning of Radio Teleswitch Service (RTS) meters, with around 600,000 still in operation and set for replacement before the RTS shutdown in June 2025, represents a crucial area of ongoing metering work in the immediate future. Furthermore, the upcoming 2G/3G network switch-off will necessitate the proactive replacement or upgrade of a significant volume of 2G/3G enabled meters to ensure continued communication and functionality. These essential transitions across the industry 's technology capability will drive significant activity in the medium term, and this will provide a strong pipeline of demand for Ganymede engineers. In addition to the continued metering rollout programme, our energy business is also seeing significant opportunities for medium to long-term growth in the wider decarbonisation of homes and the transformation of energy supply. As the UK accelerates its transition to a low-carbon economy through increased electrification, heat pump installations, and the expansion of renewable energy infrastructure, our expertise and market position leave us well-placed to support and benefit from these changes. Given our proven track record, market positioning, and secure order book in excess of £20 million, we remain firmly established as a leading labour supplier to the energy sector. The scale of the visible opportunity which lies ahead presents further significant opportunities for our business, reinforcing our confidence in the long-term growth and resilience of the energy division. Finally, our training centre which was established in 2023 to upskill Ganymede engineers is now also being used by our clients to train their employees justifying our investment commitment to the sector and enabling us to remain at the forefront of energy recruitment as the sector continues to expand. Throughout 2024, the mainstream UK recruitment market faced persistent challenges driven by economic uncertainty, suppressed client and candidate confidence, and extended hiring timescales, resulting in a sustained slowdown in vacancy numbers. Despite these headwinds, Ganymede and ATA's white -collar permanent recruitment teams delivered an extremely robust performance, resulting in an 8% increase in permanent recruitment fees compared to 2023. This was in marked contrast to its peer group which was typically reporting net fee income decline of anywhere between 20%-30%. A truly outstanding performance recognising the strong team effort within the division and highlighting why our strategy of long-term partnering with industry leaders remains pivotal to our continued success. Alongside this, both the Ganymede and ATA businesses capitalised on stronger demand for temporary and contract staff, achieving a combined 14% increase in contract gross profit, year on year. These increases in permanent fees and temporary and contract gross profit are extremely pleasing given the weakening sentiment impacting the sector. This success was underpinned by our strategic positioning across key growth sectors that continued to invest in talent throughout the year. Demand across our infrastructure, manufacturing, and transportation client base remained relatively resilient, driving sustained hiring activity enabling us to circumvent much of the negative market sentiment and deliver strong growth across all our target sectors. We are particularly encouraged with the accelerating growth we are seeing with clients servicing the water sector, which is set to benefit from the impending regulatory investment cycle, AMP8 (Asset Management Period 8) which runs from April 2025 to March 2030, and set to invest a projected £100bn in critical water infrastructure projects. Given our track record of providing personnel into safety critical environments, and our solid relationships with key sector suppliers we believe we are well placed to capture new opportunities as they emerge. In last year's annual report, I confirmed that our rail division was ideally positioned to capitalise on Network Rail's next five-year infrastructure investment plan (Control Period 7), which commenced in April 2024, and has an expected value of approximately £43 billion. However, the first nine months of CP7 have seen a slower than anticipated start, with Network Rail holding back and activity levels below initial expectations. Despite these challenges, our rail division still delivered a like-for-like performance at the gross profit level compared to a very strong 2023. This was achieved through robust revenue generation across other supply chain partners engaged in maintenance and renewals activities. Given our dominant position across key routes with Network Rail, I remain optimistic that the committed expenditure plans across the rail network in CP7 will materialise, and our rail division, which is widely recognised as a market leader in the sector, remains well positioned to maximise opportunities as investment activity accelerates. In 2023, we committed to a significant investment programme to replace our front-end recruitment software systems, consolidating them into a single and centralised cloud-based platform. This investment will enhance our recruitment efficiency, generating both stronger and more uniform compliance, while providing improved reporting capabilities for our subsidiary leadership and recruitment teams. I am pleased to report that the first phase of this transition is now complete, with the final phase scheduled to go live in Q2 2025. In summary, the UK division delivered another very strong financial performance in 2024, demonstrating its strength, resilience and adaptability in challenging market conditions. Despite industry and economic headwinds, we further consolidated our position across all our key sectors reinforcing the quality of our strategic focus and operational agility. Our increasing gross profit driven by the continued success of our recruitment divisions, and our expanding role in critical industries highlights our ability to deliver growth in a climate of uncertainty. Our strong market presence, combined with strategic investments in technology, operational efficiencies, and workforce development, positions us well to capitalise on opportunities and drive future growth. We see significant opportunities for continued success through the ongoing rollout of smart metering, the transition to net-zero energy solutions, and record investment plans within AMP8 and CP7, all of which we believe will continue to provide a substantial pipeline of work and order book generation. International division - Global Staffing Solutions (GSS) Our international business had another successful year with revenue up 6% and gross profit up over 30% reflecting both an increase in product mix and the impact of unique revenue generating initiatives by the business. In order to provide a recruitment solution to our largest international client, GSS 'wet leased' an airbus A320 and through its international recruitment reach, the business sourced, prepared and deployed 150 workers to Diego Garcia in the Chagos islands. The project which involved recruiting candidates from over 15 countries and mobilising them firstly to a central location for security clearance and capability authentication, was the first time a commercial project of this nature had been given military clearance for Diego Garcia. The project, which was an outstanding success, has further demonstrated the unique capabilities and project reach of GSS and contributed to a year-on-year increase in profit from operations of over 50%. A superb achievement by the team. Whilst international projects can by their very nature time expire, and associated revenues can fluctuate due to new project lead times, I am confident that our broad client base will continue to generate new opportunities for our international team, and I remain extremely confident in both its ability to identify and secure new opportunities as they emerge. Central services Yet again I am delighted that the Derby Conference Centre (DCC) continued to stand out in the highly crowded and immensely competitive East Midlands hospitality and conferencing sector. Whilst the business faced increased costs fuelled mainly through wages-based inflation, it performed extremely well and continued to deliver a positive contribution to the Group. In addition to its exceptional direct B2B and B2C sales success the business continues to collaborate with other Group businesses to develop complementary opportunities. Furthermore, the DCC is working with industry partners to develop long term hospitality and accommodation partnerships, and this has led to a number of long-term contracts with training companies and local companies in the East Midlands community. Finally, as has been widely reported across the hospitality sector, the changes outlined in the October 2024 budget present additional cost pressures to the business, with employer's national insurance increases, and minimum wage increases from April 2025 and Employment Rights Bill changes imminent. Outlook In assessing our future prospects, it would be irresponsible of me to not acknowledge potential headwinds threatening the broader UK economy and which in turn traditionally flow down to the recruitment sector. For many, 2025 has begun with a continuation of the trading challenges which began to emerge in 2024 as the post COVID hiring boom, which began in 2022, started to normalise. In addition, the acceleration of wage inflation coupled with a proliferation in operating costs has forced many companies to reconsider headcount plans. Also, and as alluded to earlier, there are further uncertainties arising from the national insurance increases which become effective from April and the proposed Employment Rights Bill announced in the October budget which have yet to be fully digested by industry. These concerns alongside other broader geopolitical headwinds will undoubtedly prolong unease across the business community. However, and whilst mindful of these challenges, I am confident that our strategy of building a diverse group of subsidiaries partnering with companies heavily invested in long-term capital-intensive infrastructure sectors will continue to provide us with a layer of protection from the peaks and troughs of the traditional recruitment cycle. Our solid order book across rail maintenance and renewals, and smart meter roll out and upgrades alongside other key infrastructure programmes, provides some clear visibility of revenue in 2025 and I remain cautiously confident in our short, medium and long-term prospects. Our people Once again, our excellent performance is as a direct result of the exceptional people, we employ across the Group. Earlier I drew reference to the length of service some of our senior leadership teams have with the company. These highly committed teams of people span our group finance, human resources, information technology departments and are embedded within each and every one of subsidiary businesses. The accumulation of both industry and company knowledge, experience and operational capability, coupled with the continual and unbridled enthusiasm and energy of everybody, combine to create the unique and distinct culture which permeates every corner of the Group and differentiates us as a company. A big thank you to everybody for all your hard work. A M Pendlebury 21 March 2025 Chairman and Chief Executive Business model Key performance indicators For the year ended 31 December 2024 An interim dividend of 1.1p per share (2023: 1.0p) was paid during the year. A final dividend for 2023 of 4.5p per share was paid in the year. A final dividend of 5.0p per share for the year ended 31 December 2024 has been proposed (refer Finance Director's Report and note 20). EBITDA is earnings before interest, tax, depreciation and amortisation and has been calculated as follows: profit from operations £2,625,000 + depreciation of owned assets £274,000 + amortisation of intangibles £47,000 + depreciation of right-of-use assets £328,000 = £3,274,000 (refer note 6). The diluted EPS of 13.01p is calculated using the weighted average number of shares during the year in accordance with IAS 33 (refer note 10). EPS based on the number of shares and live options at 31 December 2024 is 13.75p. Refer to the Finance Director's Report for commentary on the results for the year. Risk management For the year ended 31 December 2024 The corporate governance statement describes how the Group manages risk via its Board and Board sub-committees. Key business risks and how the Group mitigates these are detailed below: The economic cycle and economic conditions The Board takes account of on-going economic conditions and cycles. Currently there is significant uncertainty about the short and medium-term prospects for the UK economy and jobs market, influenced by government decisions in the last budget, proposed restrictive and costly legislation around worker's rights, and geo-political events. However, we believe that the sectors and customers we have built relationships with have fundamental long-term growth trends. Further, the deliberate positioning of our businesses in rail infrastructure, domestic energy and overseas activities that are not subject to short-term fluctuations in the UK economy enables the Group to capitalise on prevailing market conditions both in the UK and internationally. The Group remains focused on cash generation and keeping any debt at prudent levels. This risk is further mitigated by contracts which are not cyclical. The Group also maintains a regular dialogue with its bank to ensure that it has their backing. Loss of key customers Loss of a key customer or large contract continues to be a risk. To minimise this risk, our strategy is to retain existing customers and actively pursue new customers and longer-term contracts and to identify new market opportunities to spread the risk. We also take very seriously our commitment to providing excellent service and building and maintaining customer relationships. Competition The recruitment market continues to be very competitive placing pressure on margins. Our internal approval process ensures that new and existing business is conducted only at appropriate and sustainable margins. The Group Board signs off terms for significant framework agreements and contracts. Further, our engagement with customers is based upon the premise that we are specialists in our chosen markets and have in-depth knowledge of the areas that we focus on. We differentiate ourselves from the competition and attract customers through our service offering with solutions tailored to specific customer needs. Shortage of skilled candidates An ongoing shortage of skilled candidates in both permanent and temporary recruitment and thus increased competition can lead to lower margins, and counter offers from existing employers are commonplace. Our consultants are experts in their area of recruitment, build strong relationships with customers and candidates and actively manage the recruitment and offer process throughout ensuring that customer and candidate needs are met. Credit risk The inability of a key customer to pay amounts owing to us due to financial difficulties is an inherent risk. To minimise this risk, we have credit insurance and employ pro-active credit control techniques. In conjunction with our bank and credit insurers, we credit check new customers, subscribe to a monitoring service, and monitor payment patterns and debt levels against credit limits. The Board is regularly appraised of debt levels and ageing. Attracting and retaining key personnel The Group is reliant on its ability to recruit, train and retain its staff to deliver its growth plans. We continue to ensure that overall packages are competitive and include performance related incentives for staff. We have an Agile Working Policy which provides staff an opportunity for a good work-life balance, and we are a proactively inclusive employer. Succession plans are regularly reviewed. Compliance risks Increased employment law and regulations specific to certain business sectors and for temporary workers necessitate pre-employment checks and ongoing management of compliance. To mitigate these risks, all staff receive relevant training on the operating standards and regulations applicable to their role. Within each Group business independent teams check compliance. Compliance processes are tailored to specialisms, for example, ensuring the health and safety of temporary labour supplied into the rail industry and eligibility to work.

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