Shareholder Executive

Working Links

Purpose

Working Links operates nationally, bidding for and managing regional and local contracts from public funding bodies to promote greater equality of opportunity for disadvantaged people, families and communities, supporting their journey towards economic self sufficiency through, whenever appropriate, access to work.

Legal Status and Ownership details

Working Links (Employment) Ltd is a limited company registered in England and Wales. Mployment Limited, a wholly owned subsidiary of Mission Australia, and the Secretary of State for Work and Pensions each own one-third of the share capital, with Manpower plc and CapGemini UK plc holding a sixth each.

Objectives

The Government is clear that there is a strict division between its interests as a customer and contract provider (principally through the Department for Work and Pensions (DWP)) and its interests as a shareholder. As a shareholder, the Government's interest is to maintain and enhance the long-term value of Working Links. To this end the Government's objectives are to:

• grow the value of the business as measured by sustainable economic profit
• see sustained growth in profits and free cash flow based on a level of margins that allows for the costs and risk of the contracts undertaken, while recognising the need for significant further investment in the business
• respect the founding public-private culture and values of the business
• preserve and respect the entrepreneurial vigour of Working Links.

Financial Performance

£m	2008	2007	2006
Turnover	77	64	55
Operating Profit	1	1	4
Profit/(Loss) for the year	1	1	2
Net Cash flow	0	(0)	3
Net Operating Assets	12	10	9
RONA	10.8%	14.9%	40.6%
Shareholders' Funds	4	4	3
Dividends	0	0	-

Commentary

Working Links performance in the year reflected its strategic intent to focus on operational performance by generating new business and diversifying its operations. The business helped 15,510 disadvantaged or long term unemployed people into employment, a 23% increase on the previous year. Turnover increased 21% to £77.3m. This included £6m of revenue from new contracts won during the year, with a further £12m from contracts won in the previous year.

However, as in the previous year, increased turnover was more than offset by increased operating costs (up 23% to £76.0m). This was driven by the cost of setting up new Learning and Skills Council contracts as part of the diversification objectives and a 4% increase in average salaries. Working Links also absorbed inflationary increases in third party expenditure, while the funding for its larger contracts remained flat. As part of the diversification strategy, the Board also continued to invest heavily (£2.6m) in business development activities. This led to new business wins totalling £111m, including contracts for ESOL, Skills for Jobs, OLAS (Offender Learning and Skills Service) and HMP Sheppey, alongside the traditional sources of Jobcentre Plus and DWP. At year end Working Links estimated total future turnover from existing contracts was around £200m.

Overall profit for the year fell 22% from £918k to £716k. The Board declared a £480k dividend for the year, and donated £250k to the Links Foundation.

There were a number of changes to the Board. Yoav Michaely (Manpower) resigned in March 2007 and Martin Watkins (Mission Australia) in March 2008. They were replaced by Damian Whitman (Manpower) and Toby Hall (Mission Australia), who were appointed in May 2007 and March 2008 respectively. In July 2008, the Board appointed Breege Burke as Managing Director and Keith Faulkner as non-executive Chair in succession to Sir Anthony Cleaver. The new appointments will take effect from 1 October 2008.

Looking forward, Working Links will continue to focus on growing and diversifying the business by bidding for new DWP contracts and expanding further into skills delivery, social justice and other projects. The Board has also charged the business with improving profitability levels to generate a return for shareholders on the ongoing business development investment.