Rosemary Brook, Chairman of Argyll, said: “Shareholders will be disappointed with a forecast loss so soon after a return to profit. However, we are taking steps to rebuild a strong management team, invest in innovative services and market Kaizo’s core strengths and I believe that these are the right foundations for a return to growth and profit in 08/09”.
Dividend
In the light of current trading conditions the Board is not recommending the payment of a dividend.
END
Argyll reports £167k profit for the year ended March 31, 2007
The Argyll Consultancies PLC announced today results for its financial year ended March 31, 2007. Turnover at £3.2m was the same as the previous year’s, but there was a £478k improvement in profit performance, which resulted from lower costs and turned a pre-tax loss of £311k in 05/06 into a pre-tax profit of £167k in 06/07. The profit improvement, which was evident in Q4 of 05/06, was sustained throughout 06/07, every month of which showed a profit.
Argyll maintained its turnover by consolidating existing core services and developing innovative new services, particularly Word of Mouth Communications. One highlight of the year was Kaizo’s signing of a major annual contract for pan-European campaign development with Unilever’s Flora brand team. The company also developed ‘Simplycity – a possible world first in Word of Mouth - for Simple, the skincare brand owned by Accantia.
The reasons for the £487k reduction in administrative expenses, down from £3,489k in 05/06 to £3,002k in 06/07, were threefold. First, the restructuring of Argyll’s business and services, which was undertaken in 05/06, impacted on the year in question. The permanent headcount fell from an average of 43 in 05/06 to 33 in 06/07 and permanent employee costs fell from £2.0m to £1.5m. Second, the senior management team focused hard on monitoring and pursuing agreed KPIs, paying particular attention to the relationship between revenue and staff costs. Flexibility in staff resourcing and the control of staff costs was achieved through the use of contract staff, especially to manage the peaks and troughs of project work. Third, the change in the accounting estimate for the amortisation of acquisition costs, which was introduced in 05/06, resulted in a small charge of £7k for 06/07 compared to £103k for 05/06.
A category of expenditure which was higher in 06/07 than in 05/06 was establishment costs. In November 2006, Argyll moved from its Oxford Street office to managed offices off Chancery Lane. Although dilapidation costs had been accrued in earlier years, the costs associated with the move were incurred in 06/07.
Balance Sheet
Cash, at £389k, was lower than at the end of 05/06 when it amounted to £458k, mainly due to the payment of costs associated with the office move, in particular dilapidation costs, which amounted to £52k. In addition, fully depreciated fixtures and fittings and computer equipment, for which there was no longer a use after the move to managed offices, were eliminated from the balance sheet at zero net cost. All remaining bank loans were repaid in the year.
Financial Year 07/08
In the second half of 06/07 Argyll experienced increased employee churn, particularly at account director and associate director level. This unsettled some clients, which resulted in some contract terminations in Q4. Rhodri Harries, who joined Kaizo as Managing Director in April 07, has focused on attracting high calibre people to replace those that have left and good progress has been made to date. However, the downside is the pressure on costs of rising salaries, interim freelance support and recruitment fees at the same time as demands on time and money for marketing and business development to fuel the new business pipeline. The impact is being minimised by prudent cost measures, but the Board is forecasting a loss for the first half of 07/08 and has revised its forecasts for the full year ahead.