Norman Broadbent PLC Final Results and Annual Accounts

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Norman Broadbent PLC Final Results and Annual Accounts

Norman Broadbent (LSE:NBB)
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Norman Broadbent PLC

28 June 2019

Norman Broadbent plc

("Norman Broadbent", the "Company" or the "Group")

Final Results and Annual Accounts

The board (the "Board") of Norman Broadbent (AIM: NBB) - - a leading London listed Professional Services firm offering a diversified portfolio of integrated Leadership Acquisition & Advisory Services (Board & Leadership Search, Senior Interim Management, Research & Insight, Leadership Consulting & Assessment, and executive level Talent Solutions) - is pleased to announce its final results and annual accounts for the year ended 31 December 2018.

Highlights

-- Group Revenues increased by GBP2.9m (+44%) to GBP9.4m, our highest annual revenue in over 10 years

   --    Group Net Fee Income ("NFI") increased by GBP1.6m (+32%) to GBP6.6m 

-- 2018 Group operating performance (loss of GBP0.7m) a significant improvement on 2017 (loss of GBP1.6m)

-- 2018 Group operating performance includes a one off charge of GBP0.1m due to an increase in the provision for office dilapidations relating to our former offices

   --    Loss before tax reduced by GBP0.9m (-54%) to a 2018 loss before tax of GBP0.7m 

-- 2018 NFI mix: Search (including Research & Insight) 48%; Interim 23%; Solutions 26%; Consulting 3%. This further improved NFI mix evidences the success of our ongoing diversification strategy

   --    Interim Management NFI increased by GBP0.8m (+109%) to GBP1.5m 
   --    Executive Search NFI increased by GBP0.7m (+22%) to GBP3.7m 
   --    Solutions NFI increased by GBP0.4m (+45%) to GBP1.2m 

-- Phase 2 of transformation complete and significant progress made towards a return to profitability

A copy of the audited 2018 Annual Report (including the notice of Annual General Meeting ("AGM")) will be sent to shareholders today. The Annual Report will be available on the Company's website in due course, https://www.normanbroadbent.com/investor-relations

The Company's 80th AGM will be held at 10am on the 10th Floor, Portland House, Bressenden Place, London SW1E 5BH on 22 July 2019.

Mike Brennan, Group CEO of Norman Broadbent Group said:

"Our 2018 results evidence continued positive momentum. They show positive trajectory in top line growth, and a further significant reduction of losses. Our results have been driven by a strong and collegiate culture delivering high quality, impactful, and innovative solutions to clients.

Our long stated goal has been to diversify the business offering clients a wider range of high-value services. The diversification strategy is clearly working and is evidenced by the 2018 NFI mix (see above). We have created a more balanced Group combining recurring annuity revenue, with a range of consulting, research-related and high-quality fully-retained Talent Acquisition fees. Our market proposition not only benefits clients who can now access a wider range of integrated services, but also the Company. Importantly, it also strengthens our investor proposition as a more balanced NFI mix should create greater resilience and generate higher quality revenue.

With the Group delivering a significant set of results, I would like to thank my colleagues for their hard work, innovation and commitment, our clients for placing their continued trust in us, and our supportive shareholders."

For further information, please contact:

 
 Norman Broadbent plc 
  Mike Brennan / Will Gerrand               020 7484 0000 
 WH Ireland Limited 
  Adrian Hadden / Jessica Cave / Matthew 
  Chan                                      020 7220 1666 
 

CEO's Review

RESULTS FOR THE FINANCIAL YEAR

The table below summarises the results of the Group:

 
                                            Year ended  Year ended 
                                                31-Dec      31-Dec 
                                                  2018        2017 
                                              GBP000's    GBP000's 
                                            ----------  ---------- 
CONTINUING OPERATIONS 
REVENUE                                          9,414       6,523 
Cost of sales                                  (2,770)     (1,484) 
                                            ----------  ---------- 
GROSS PROFIT                                     6,644       5,039 
Operating expenses                             (7,308)     (6,599) 
                                            ----------  ---------- 
GROUP OPERATING LOSS                             (664)     (1,560) 
                                            ----------  ---------- 
Net finance cost                                  (77)        (42) 
                                            ----------  ---------- 
LOSS BEFORE TAX                                  (741)     (1,602) 
Income tax                                           -           - 
                                            ----------  ---------- 
Profit/(Loss) from discontinued operation            -           - 
                                            ----------  ---------- 
LOSS AFTER TAX                                   (741)     (1,602) 
                                            ----------  ---------- 
 

Strategic review

I am pleased to report that the considerable progress of last year has been reflected in our much improved 2018 financial results.

Our 2018 results evidence our continued positive momentum, a result of consistently delivering high quality innovative solutions for clients. There is positive trajectory in top line growth and a further significant reduction of losses.

Putting the needs of our clients first and foremost, we always seek to leverage the synergies between our complementary service lines to devise innovative solutions to drive positive outcomes. Our results reflect that clients (both current and new) are reacting positively to our approach. I'm delighted that after much hard work and commitment, our efforts are slowly being rewarded and we are increasingly seen as an agile, relevant, customer focused Professional Services business.

We completed our office move on the 30(th) of April 2018 and, in line with our strategy, the office reflects the "new" Norman Broadbent Group.

I would like to personally thank and acknowledge the loyalty and commitment of all of our employees during 2018. They have worked extremely hard, adapted to the changing market and embraced the "new" Norman Broadbent.

2018 trading and business review

As noted in 2017 we were (and remain) focussed on bringing in further innovative and entrepreneurial talent into the Group. As they became productive during 2018, they added to the already established team enabling the Group to continue to grow and improve our financial outlook.

Group turnover increased to GBP9,414,000 (2017: GBP6,523,000) whilst overall net revenues after associate and interim costs in the continuing businesses increased to GBP6,644,000 (2017: GBP5,039,000). Operating expenses increased to GBP7,308,000 (2017: GBP6,599,000), and operating losses from continuing operations decreased to GBP664,000 (2017: GBP1,560,000).

In addition to the commentary below note 2 of the Consolidated Financial Statements provides a detailed segmental breakdown of the 2018 Group results.

Norman Broadbent Executive Search ("NBES")

NBES remains the most significant part of the group and has undergone the most change in the past two years. During 2018 revenue increased by 22% to GBP3,737,000 (2017: GBP3,061,000), and the loss before tax reduced by 74% to GBP260,000 (2017: loss GBP1,005,000). The process of change in NBES, subject to scale, is now complete and the foundations for a return to profit have been laid with increased activity evidenced by 2018's Q4 being the best performance for a number of years. NBES is the leading contributor of cross referrals in the Group. Our continued drive to move it away from being a traditional and siloed business unit helped it contribute significantly to this year's results.

Norman Broadbent Interim Management ("NBIM")

NBIM is now established in our key areas of market and functional specialisations. Unlike many Interim providers NBIM is increasingly operating in the less transactional/commoditised and higher margin markets. As businesses are facing increasingly complex short term challenges, NBIM is frequently mandated to find and place senior level, high impact Interim professionals.

NBIM generated net revenues (after interim costs) of GBP1,484,000 (2017: GBP711,000) resulting in a profit of GBP87,000 (2017: loss GBP237,000). We anticipate seeing continued growth in this part of the business.

Norman Broadbent Solutions ("NBS")

Having been significantly restructured, repositioned and rebranded in 2016, NBS continues to successfully promote staff from within and attract new talent from competitors. Revenue increased to GBP1,196,000 (2017: GBP842,000) and NBS returned to a profit before tax of GBP74,000 (2017: loss before tax of GBP14,000).

As with NBES, we see significant opportunities in this part of the market as we blend service lines within our portfolio to provide optimal client solutions ranging from single hires through to longer-term team builds.

Research and Insight ("R&I")

During 2017 we began to invest in R&I, which, in addition to serving our own internal requirements, has started to provide complementary services to clients. R&I is an important strategic differentiator and an enabler of follow-on work, particularly Executive Search. Clients can be provided with research, market insight and business intelligence enabling them to make more informed 'people', organisational or commercial decisions. We see this as an exciting addition to our portfolio and it is a service we are increasingly offering to clients as part of our overall Advisory offering. The revenue arising is included within the Search business.

Norman Broadbent Leadership Consulting ("NBLC")

NBLC was not able to replicate the success of 2017, turnover (after associate costs) reduced from GBP516,000 in 2017 to GBP239,000 in 2018, resulting in a loss before tax of GBP38,000 in 2018 compared with a profit before tax of GBP294,000 in 2017. This reflected a pause in the assessment and development programmes of some of our larger customers.

Financial position

As at 31 December 2018, consolidated net assets were GBP1,268,000 (2017: GBP1,990,000) with net current liabilities of GBP454,000 (2017: Net Current Assets of GBP316,000). Group cash amounted to GBP684,000 (2017: GBP678,000).

Net cash inflow from operations in 2018 was GBP354,000 (2017: Outflow of GBP2,079,000). Net cash outflow from financing activities amounted to (GBP103,000) (2017: Inflow of GBP1,851,000). The 2017 inflow related primarily to the net funds received from the 2017 Subscription and Secured Loan Notes.

At 31 December 2018 the Group had GBP776,000 of funds drawn down against the revolving invoice discounting facility (2017: GBP851,000) against UK trade receivables of GBP2,076,000 (2017: GBP1,371,000).

The Directors continue to monitor and manage the Group's working capital carefully.

Current trading

The ongoing reinvention of Norman Broadbent Group is progressing. Our broader, more integrated service proposition is landing well with clients, the business is increasingly competitive, and culturally we are more innovative and collegiate. In summary, the Group is now more relevant and competitive in terms of pricing, proposition and people.

I am pleased to report that the Board is satisfied with the trading performance of the Group against plan at the date of these accounts. On behalf of the Board I would like to thank our shareholders for their continuing support, our clients for placing their trust in us, and finally our team. We are quite rightly proud of what we are achieving, much of which is down to the hard work, dedication and commitment of my colleagues.

MIKE BRENNAN

Group Chief Executive

27 June 2019

Strategic Report

THE BUSINESS MODEL

Norman Broadbent plc is a leading Professional Services firm with a specific focus on Talent Acquisition & Advisory Services. Since our formation nearly 40 years ago, we have developed a range of complementary service lines consisting of Board & Leadership/Executive Search, Senior Interim Management, Research & Insight, Leadership Consulting & Assessment, and executive level Recruitment Solutions.

The Group operates through independently managed service lines which collaborate and go to market both separately and together, and which share a set of core behavioural and brand values.

STRATEGY AND OBJECTIVES

The Group's strategy is focussed on further developing and strengthening its complementary portfolio of Talent Acquisition and Advisory services via further selective hires and concentrating on driving synergies via cross selling.

RESULTS FOR THE FINANCIAL YEAR

Group revenue from continued operations increased in the year by 44% to GBP9,414,000 (2017: GBP6,523,000), with gross profit of GBP6,644,000 (2017: GBP5,039,000). NBES fees increased by 22% to GBP3,737,000 (2017: GBP3,061,000) reflecting the tenure increase of fee earners. Net revenues from NBLC, NBS and NBIM were GBP2,919,000 (2017: GBP2,044,000), reflecting the significant development of NBI and NBS brands during 2017.

Operating expenditure increased to GBP7,308,000 (2017: GBP6,599,000), reflecting the increased cost of sales related bonuses paid in 2018 and an increase in the dilapidation provision for St James Square of GBP115,000.

The Group reported an operating loss from continued operations in 2018 of GBP664,000 (2017: GBP1,560,000) and a retained loss of GBP741,000 (2017: GBP1,602,000).

CASH FLOW AND BALANCE SHEET

Net cash inflow from operations in 2018 was GBP354,000 (2017: GBP2,079,000 outflow). The inflow reflects improved revenues. Net trade receivables at the year-end were GBP2,076,000 (2017: GBP1,371,000).

Net cash outflow from financing activities was GBP103,000 (2017: inflow of GBP1,851,000). The 2017 inflow related primarily to the net funds received from the fundraising in September 2017. At 31 December 2018, the Group had GBP776,000 of funds drawn down against the revolving invoice discounting facility (2017: GBP851,000) against UK trade receivables of GBP2,076,000 (2017: GBP1,371,000).

EARNINGS PER SHARE

The retained loss for 2018 has resulted in a reported loss per share of 1.42 pence (2017: loss per share 3.52 pence). After adding back the cost of share based payments the adjusted loss per share was 1.38 pence (2017: loss per share 3.48 pence).

GOING CONCERN

In light of the current financial position of the Group and on consideration of the business' forecasts and projections, taking account of possible changes in trading performance, the directors have a reasonable expectation that the Group has adequate available resources to continue as a going concern for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing their annual report and financial statements.

MONITORING, RISK AND KPIs

The directors have a responsibility for identifying risks facing each of the businesses and for putting in place procedures to mitigate and monitor risks. Board meetings incorporate, amongst other agenda items, a review of monthly management accounts, operational and financial KPIs and major issues and risks facing the business.

The most important KPIs used in monitoring the business are set out in the following table:

 
Key performance indicators               2018          2017 
                                 ------------  ------------ 
Revenue (continued operations)   GBP9,414,000  GBP6,523,000 
Operating loss                      (664,000)   (1,560,000) 
Debtor days                           73 days       78 days 
                                 ------------  ------------ 
 

The directors monitor revenue against annual targets, which are adjusted each year to ensure the Group remains on target to achieve its strategic growth plan. Further, given the significant restructuring and refocus of the group, the directors expect Group revenues and operating profits to improve over the next few years.

The principal risks faced by the Group in the current economic climate are considered to be financial, business environment and people related.

Financial - The main financial risks arising from the Group's operations are the adequacy of working capital, interest rate, liquidity and credit risk. These are monitored regularly by the Board and are disclosed further in notes 2 and 17 of the financial statements.

The business is in the later stages of the turnaround process and is budgeted to be self-funding. In turnarounds there is always a risk that the process could take longer than anticipated which could lead to short term working capital pressures. In the event of such an occurrence the company anticipates working closely with its supportive shareholders to access short term working capital funding.

Business Environment - Demand for services is affected by global and UK specific economic conditions and the level of economic activity in the regions and industries in which the Group operates. When conditions in the economy deteriorate or economic activity slows, many companies hire fewer permanent employees or rely on internal human resource departments to recruit staff. Whilst it appears that the global economy is still growing and the impact of Brexit on the UK economy is lower than expected, should conditions deteriorate in the future then demand for the services offered by the Group could weaken resulting in lower cash flows.

The Group attempts to mitigate this risk by operating across various diverse sectors where demand for such services is stronger.

People - The Group's most vital resource remains its employees and the directors remain committed to retaining and recruiting quality staff who share the Group's culture and values. In a people intensive business, the resignation of key staff, which could lead to them taking clients, candidates and colleagues to another employer, is a significant risk. The Group aims to mitigate this risk by offering competitive remuneration structures, whilst also insisting on employment contracts that contain restrictive covenants that limit a leaver's ability to approach existing clients, candidates and employees.

CAUTIONARY STATEMENT

The Group's Strategic Report has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed.

The Strategic Report contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

The directors, in preparing this Strategic Report, have complied with s414C of the Companies Act 2006. The Strategic Report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Norman Broadbent plc and its subsidiary undertakings when viewed as a whole.

   Mike Brennan                                              Will Gerrand 
   Director                                                         Director 
   27 June 2019                                                 27 June 2019 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2018

 
                                                     2018           2017 
                                            Note  GBP'000        GBP'000 
                                                  -------  ------------- 
CONTINUING OPERATIONS 
Revenue                                        1    9,414          6,523 
Cost of sales                                     (2,770)        (1,484) 
                                                  -------  ------------- 
Gross profit                                   2    6,644          5,039 
Operating expenses                                (7,308)        (6,599) 
                                                  -------  ------------- 
Operating loss from continued operations            (664)        (1,560) 
Net finance cost                               6     (77)           (42) 
                                                  -------  ------------- 
LOSS ON ORDINARY ACTIVITIES BEFORE INCOME 
 TAX                                           3    (741)        (1,602) 
Income tax expense                             5        -              - 
                                                  -------  ------------- 
LOSS FROM CONTINUING OPERATIONS                     (741)        (1,602) 
                                                  -------  ------------- 
 
 
LOSS FOR THE PERIOD                                 (741)        (1,602) 
                                                  -------  ------------- 
 
TOTAL COMPREHENSIVE INCOME FOR THE YEAR             (741)        (1,602) 
                                                  -------  ------------- 
Loss attributable to: 
- Owners of the Company                             (763)        (1,543) 
- Non-controlling interests                            22           (59) 
                                                  -------  ------------- 
Loss for the year                                   (741)        (1,602) 
                                                  -------  ------------- 
 
Total comprehensive income attributable 
 to: 
- Owners of the Company                             (763)        (1,543) 
- Non-controlling interests                            22           (59) 
                                                  -------  ------------- 
                                                    (741)        (1,602) 
                                                  -------  ------------- 
Total comprehensive income for the year 
Loss per share 
- Basic                                        7  (1.42)p        (3.52)p 
- Diluted                                         (1.42)p        (3.52)p 
Adjusted loss per share 
- Basic                                        7  (1.38)p        (3.48)p 
- Diluted                                         (1.38)p        (3.48)p 
Loss per share - continuing operations 
- Basic                                        7  (1.42)p        (3.52)p 
- Diluted                                         (1.42)p        (3.52)p 
 
 
 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2018

 
                                                       2018      2017 
                                            Notes   GBP'000   GBP'000 
                                                   --------  -------- 
Non-Current Assets 
Intangible assets                               9     1,363     1,363 
Property, plant and equipment                  10       155        47 
Prepayments and accrued income                 12       135       195 
Deferred tax assets                             5        69        69 
                                                   --------  -------- 
TOTAL NON-CURRENT ASSETS                              1,722     1,674 
                                                   --------  -------- 
Current Assets 
Trade and other receivables                    12     2,175     2,093 
Cash and cash equivalents                      13       684       678 
                                                   --------  -------- 
TOTAL CURRENT ASSETS                                  2,859     2,771 
                                                   --------  -------- 
TOTAL ASSETS                                          4,581     4,445 
                                                   --------  -------- 
Current Liabilities 
Trade and other payables                       14     2,025     1,179 
Loan notes                                     15       272       300 
Bank overdraft and interest bearing loans      15       776       851 
Provisions                                     20       240       125 
Corporation tax liability                                 -         - 
                                                   --------  -------- 
TOTAL CURRENT LIABILITIES                             3,313     2,455 
                                                   --------  -------- 
NET CURRENT LIABILITES                                (454)       316 
                                                   --------  -------- 
Non-Current Liabilities 
Provisions                                     20         -         - 
                                                   --------  -------- 
TOTAL LIABILITIES                                     3,313     2,455 
                                                   --------  -------- 
TOTAL ASSETS LESS TOTAL LIABILITIES                   1,268     1,990 
                                                   --------  -------- 
EQUITY 
Issued share capital                           17     6,266     6,266 
Share premium account                          17    13,706    13,706 
Retained earnings                                  (18,667)  (17,923) 
                                                   --------  -------- 
EQUITY ATTRIBUTABLE TO OWNERS OF THE 
 COMPANY                                              1,305     2,049 
Non-controlling interests                              (37)      (59) 
                                                   --------  -------- 
TOTAL EQUITY                                          1,268     1,990 
                                                   --------  -------- 
 

These financial statements were approved by the Board of Directors on 27 June 2019

Signed on behalf of the Board of Directors

   M Brennan                                      W Gerrand 
   Director                                            Director 

Company No 00318267

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2018

CONSOLIDATED GROUP

 
                                           Attributable to owners of the Company 
                              ---------------------------------------------------------------- 
                                 Share     Share   Retained    Total  Non-controlling    Total 
                               Capital   Premium   Earnings   Equity        interests   Equity 
                               GBP'000   GBP'000    GBP'000  GBP'000          GBP'000  GBP'000 
                              --------  --------  ---------  -------  ---------------  ------- 
Balance at 1st January 
 2017                            6,143    12,685   (16,394)    2,434                -    2,434 
Loss for the year                    -         -    (1,543)  (1,543)             (59)  (1,602) 
Total comprehensive income 
 for the year                                       (1,543)  (1,543)             (59)  (1,602) 
                              --------  --------  ---------  -------  ---------------  ------- 
Transactions with owners 
 of the Company, recognised 
 directly in equity: 
Issue of ordinary shares           123     1,021          -    1,144                -    1,144 
Credit to equity for share 
 based payments                      -         -         14       14                -       14 
                              --------  --------  ---------  -------  ---------------  ------- 
Total transactions with 
 owners of the Company, 
 recognised directly in 
 equity                            123     1,021         14    1,158                -    1,158 
                              --------  --------  ---------  -------  ---------------  ------- 
Total transactions with 
 owners of the Company             123     1,021         14    1,158                -    1,158 
                              --------  --------  ---------  -------  ---------------  ------- 
Balance at 31st December 
 2017                            6,266    13,706   (17,923)    2,049             (59)    1,990 
                              --------  --------  ---------  -------  ---------------  ------- 
 
Balance at 1st January 
 2018                            6,266    13,706   (17,923)    2,049             (59)    1,990 
                              --------  --------  ---------  -------  ---------------  ------- 
Loss for the year                                     (763)    (763)               22    (741) 
Total comprehensive income 
 for the year                                         (763)    (763)               22    (741) 
                              --------  --------  ---------  -------  ---------------  ------- 
Transactions with owners 
 of the Company, recognised 
 directly in equity: 
Issue of ordinary shares             -         -          -        -                -        - 
Credit to equity for share 
 based payments                                          19       19                        19 
                              --------  --------  ---------  -------  ---------------  ------- 
Total transactions with 
 owners of the Company, 
 recognised directly in 
 equity                              -         -         19       19                -       19 
                              --------  --------  ---------  -------  ---------------  ------- 
Total transaction with 
 owners of the Company               -         -         19       19                -       19 
                              --------  --------  ---------  -------  ---------------  ------- 
Balance at 31st December 
 2018                            6,266    13,706   (18,667)    1,305             (37)    1,268 
                              --------  --------  ---------  -------  ---------------  ------- 
 

Share Capital

This represents the nominal value of shares that have been issued by the Company.

Share Premium

This reserve records the amount above the nominal value received for shares issued by the Company. Share premium may only be utilised to write-off any expenses incurred or commissions paid on the issue of those shares, or to pay up new shares to be allotted to members as fully paid bonus shares.

Retained Earnings

This reserve comprises all current and prior period retained profits and losses after deducting any distributions made to the Company's shareholders.

CONSOLIDATED STATEMENT OF CASH FLOW

For the year ended 31 December 2018

 
                                                        2018     2017 
                                              Notes  GBP'000  GBP'000 
                                                     -------  ------- 
Net cash used in operating activities           (i)      354  (2,079) 
Cash flows from investing activities 
 and servicing of finance 
Net finance cost                                        (77)     (42) 
Payments to acquire tangible fixed assets        10    (168)     (16) 
Net cash used in investing activities                  (245)     (58) 
                                                     -------  ------- 
Cash flows from financing activities 
Proceeds/(Repayment) of borrowings               15     (28)      300 
Net cash inflows from equity placing             17        -    1,144 
Increase/(Repayment) in invoice discounting      15     (75)      407 
                                                     -------  ------- 
Net cash from financing activities                     (103)    1,851 
                                                     -------  ------- 
Net (decrease)/increase in cash and cash 
 equivalents                                               6    (286) 
Net cash and cash equivalents at beginning 
 of period                                               678      963 
Effects of exchange rate changes on cash 
 balances held in foreign currencies                       -        1 
                                                     -------  ------- 
Net cash and cash equivalents at end 
 of period                                               684      678 
                                                     -------  ------- 
Analysis of net funds 
Cash and cash equivalents                                684      678 
Borrowings due within one year                       (1,048)  (1,151) 
Borrowings due within more than one year                   -        - 
                                                     -------  ------- 
(Net debt)/cash                                (ii)    (364)    (473) 
                                                     -------  ------- 
 

Note (i)

Reconciliation of operating loss to net cash from operating activities

 
                                                        2018     2017 
                                                     GBP'000  GBP'000 
                                                     -------  ------- 
Operating loss from continued operations               (664)  (1,560) 
Depreciation/impairment of property, plant and 
 equipment                                                60       37 
Share based payment charge                                19       14 
Decrease/(Increase) in trade and other receivables      (22)    (707) 
(Decrease)/Increase in trade and other payables          846      137 
(Decrease)/Increase Provisions                           115        - 
Taxation paid                                              -        - 
                                                     -------  ------- 
Net cash used in operating activities                    354  (2,079) 
                                                     -------  ------- 
 

Note (ii)

Reconciliation of movement of debt

 
                                                          2018     2017 
                                                       GBP'000  GBP'000 
                                                       -------  ------- 
Net (decrease)/increase in cash and cash equivalents         6    (286) 
New Borrowings                                               -    (300) 
Repayment of Borrowings                                     28        - 
(Increase)/Repayment in invoice discounting                 75    (407) 
Exchange difference on cash and cash equivalents             -        1 
-----------------------------------------------------  -------  ------- 
Movement in Borrowings for the Period                      109    (992) 
Net Borrowings at the Start of the Period                (473)      519 
                                                       -------  ------- 
Net Borrowings at the end of the Period                  (364)    (473) 
                                                       -------  ------- 
 

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2018

   1.       SIGNIFICANT ACCOUNTING POLICIES 

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to both years presented unless otherwise stated.

   1.1     Basis of preparation 

The consolidated financial statements of Norman Broadbent plc ("Norman Broadbent" or "the Company") have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value through profit or loss. The consolidated financial statements are presented in pounds and all values are rounded to the nearest thousand (GBP000), except when otherwise indicated.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 1.21 of the published annual accounts.

1.1.1 Going concern

The Group reported an operating loss from continued operations in the year to 31 December 2018 of GBP0.7m compared with an operating loss of GBP1.6m in 2017. In September 2017 the Group raised GBP1.2m of new equity (before expenses) from existing institutional shareholders which has enabled the business to restructure further, to hire additional fee generating staff across the Group and to provide a more stable working capital position.

The Consolidated Statement of Financial Position shows a net asset position at 31 December 2018 of GBP1.3m (2017: GBP2m) with cash at bank of GBP0.7m (2017: GBP0.7m). At the date that these financial statements were approved the Group had no overdraft facility, and secured loan notes of GBP0.3m and its receivable finance (Leumi ABL) which is 100% secured by the Group's trade receivables.

In light of the current financial position of the Group and on consideration of the business' forecasts and projections, taking account of possible changes in trading performance, the directors have a reasonable expectation that the Group has adequate available resources to continue as a going concern for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing their annual report and financial statements.

   2        SEGMENTAL ANALYSIS 

Management has determined the operating segments based on the reports reviewed regularly by the Board for use in deciding how to allocate resources and in assessing performance. The Board considers Group operations from both a class of business and geographic perspective. Each class of business derives its revenues from the supply of a particular recruitment related service, from retained executive search through to executive assessment and coaching. Business segment results are reviewed primarily to operating profit level, which includes employee costs, marketing, office and accommodation costs and appropriate recharges for management time.

Group revenues are primarily driven from UK operations, however when revenue is derived from overseas business the results are presented to the Board by geographic region to identify potential areas for growth or those posing potential risks to the Group.

   i)        Class of Business: 

The analysis by class of business of the Group's turnover and profit before taxation is set out below:

2018

 
                          NBES     NBLC      NBS     NBIM  Disc Operation  Unallocated    Total 
                       GBP'000  GBP'000  GBP'000  GBP'000         GBP'000      GBP'000  GBP'000 
                       -------  -------  -------  -------  --------------  -----------  ------- 
Revenue                  3,737      345    1,196    4,136               -            -    9,414 
Cost of sales             (12)    (106)        -  (2,652)               -            -  (2,770) 
                       -------  -------  -------  -------  --------------  -----------  ------- 
Gross profit             3,725      239    1,196    1,484               -            -    6,644 
Operating expenses     (3,908)    (272)  (1,115)  (1,384)               -        (569)  (7,248) 
Depreciation and 
 amort.                   (57)        -      (2)      (1)               -            -     (60) 
Finance costs             (20)      (5)      (5)     (12)               -         (35)     (77) 
                       -------  -------  -------  -------  --------------  -----------  ------- 
Profit/(Loss) before 
 tax                     (260)     (38)       74       87               -        (604)    (741) 
                       -------  -------  -------  -------  --------------  -----------  ------- 
 

2017

 
                          NBES     NBLC      NBS     NBIM  Disc Operation  Unallocated    Total 
                       GBP'000  GBP'000  GBP'000  GBP'000         GBP'000      GBP'000  GBP'000 
                       -------  -------  -------  -------  --------------  -----------  ------- 
Revenue                  3,061      728      842    1,892               -            -    6,523 
Cost of sales             (66)    (212)     (25)  (1,181)               -            -  (1,484) 
                       -------  -------  -------  -------  --------------  -----------  ------- 
Gross profit             2,995      516      817      711               -            -    5,039 
Operating expenses     (3,954)    (215)    (824)    (942)               -        (627)  (6,562) 
Depreciation and 
 amort.                   (31)      (1)      (4)      (1)               -            -     (37) 
Finance costs             (15)      (6)      (3)      (5)               -         (13)     (42) 
Profit/(Loss) before 
 tax                   (1,005)      294     (14)    (237)               -        (640)  (1,602) 
                       -------  -------  -------  -------  --------------  -----------  ------- 
 
   ii)       Revenue and gross profit by geography 
 
                       2018     2017          2018          2017 
                    Revenue  Revenue  Gross Profit  Gross Profit 
                    -------  -------  ------------  ------------ 
United Kingdom        8,671    6,196         5,901         4,712 
Rest of the world       743      327           743           327 
                    -------  -------  ------------  ------------ 
Total                 9,414    6,523         6,644         5,039 
                    -------  -------  ------------  ------------ 
 
   3        LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 
 
                                                    2018     2017 
                                                 GBP'000  GBP'000 
                                                 -------  ------- 
Loss on ordinary activities before taxation is 
 stated after charging: 
Depreciation and impairment of property, plant 
 and equipment                                        60       37 
Gain on foreign currency exchange                      -        - 
Staff costs (see note 4)                           5,332    4,652 
Operating lease rentals: 
  Land and buildings                                 270      409 
Auditors' remuneration: 
  Audit work                                          47       45 
  Non-audit work                                       -        - 
                                                 -------  ------- 
 

The Company audit fee in the year was GBP47,000 (2017: GBP45,000).

   4        STAFF COSTS 

The average number of full time equivalent persons (including directors) employed by the Group during the period was as follows:

 
                             2018  2017 
                              No.   No. 
                             ----  ---- 
Sales and related services     37    32 
Administration                 18    17 
                             ----  ---- 
                               55    49 
                             ----  ---- 
 

Staff costs (for the above persons):

 
                                    GBP'000  GBP'000 
                                    -------  ------- 
Wages and salaries                    4,746    4,037 
Social security costs                   567      458 
Defined contribution pension cost       142      143 
Share based payment expense              19       14 
                                    -------  ------- 
                                      5,474    4,652 
                                    -------  ------- 
 

The emoluments of the directors are disclosed as required by the Companies Act 2006 in the Published accounts in the Directors' Remuneration Report. The table of directors' emoluments has been audited and forms part of these financial statements. This also includes details of the highest paid director.

   5        TAX EXPENSE 
   (a)      Tax charged in the income statement 

Taxation is based on the loss for the year and comprises:

 
                                                      2018     2017 
                                                   GBP'000  GBP'000 
                                                   -------  ------- 
Current tax: 
United Kingdom corporation tax at 19% (2017: 
 19%) based on loss for the year                         -        - 
Foreign Tax                                              -        - 
                                                   -------  ------- 
Total current tax                                        -        - 
                                                   -------  ------- 
Deferred tax: 
Origination and reversal of temporary differences        -        - 
                                                   -------  ------- 
Tax charge/(credit)                                      -        - 
                                                   -------  ------- 
 
   (b)      Reconciliation of the total tax charge 

The difference between the current tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows:

 
                                                    2018     2017 
                                                 GBP'000  GBP'000 
                                                 -------  ------- 
Loss on ordinary activities before taxation        (763)  (1,602) 
                                                 -------  ------- 
Tax on loss on ordinary activities at standard 
 UK corporation tax rate of 19% (2017: 19%)        (145)    (305) 
Effects of: 
Expenses not deductible                               17       23 
Substantial shareholding exemption 
Capital allowances in excess of depreciation           6        4 
Provision Movement                                     1        - 
Pension accrual movement                             (2)      (3) 
Losses bought forward utilised                      (30)     (56) 
Adjustment to losses carried forward                 153      337 
                                                 -------  ------- 
Current tax charge for the year                        -        - 
                                                 -------  ------- 
 
   (c)      Deferred tax 
 
                                           Tax losses    Total 
                                              GBP'000  GBP'000 
                                           ----------  ------- 
At 1 January 2018                                (69)     (69) 
                                           ----------  ------- 
At 31 December 2018                              (69)     (69) 
                                           ----------  ------- 
Credited to the income statement in 2018 
At 31 December 2018                              (69)     (69) 
                                           ----------  ------- 
 

At 31 December 2018 the Group had capital losses carried forward of GBP8,130,000 (2017: GBP8,130,000). A deferred tax asset has not been recognised for the capital losses as the recoverability in the near future is uncertain. The Group also has GBP14,133,106 (2017: GBP13,510,042 ) trading losses carried forward, which includes GBP8,987,000 losses transferred from BNB Recruitment Consultancy Ltd in 2011. A deferred tax asset of GBP1,285,075 (2017: GBP1,288,061) has not been recognised in the financial statements due to the inherent uncertainty as to the quantum and timing of its utilisation.

The analysis of deferred tax in the consolidated balance sheet is as follows:

 
                                 2018     2017 
                              GBP'000  GBP'000 
                              -------  ------- 
Deferred tax assets: 
 Tax losses carried forward        69       69 
                              -------  ------- 
Total                              69       69 
                              -------  ------- 
 
   6        NET FINANCE COST 
 
                                                  2018     2017 
                                               GBP'000  GBP'000 
                                               -------  ------- 
Interest payable on Loan Notes and Invoicing 
 facility                                           77       42 
                                               -------  ------- 
Total                                               77       42 
                                               -------  ------- 
 
   7        EARNINGS PER SHARE 
   i)        Basic earnings per share 

This is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period:

 
                                                     2018          2017 
                                             ------------  ------------ 
Loss attributable to owners of the company      (763,000)   (1,543,350) 
                                             ------------  ------------ 
Weighted average number of ordinary shares     53,885,570    43,882,363 
                                             ------------  ------------ 
Total                                          53,885,570    43,882,363 
                                             ------------  ------------ 
 
   ii)       Diluted earnings per share 

This is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares in the form of employee share options. For these options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to the outstanding options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

The grants of options in 2018 and 2017 have both profitability and share price exercise criteria.

 
                                                   2018         2017 
                                             ----------  ----------- 
Loss attributable to owners of the company    (763,000)  (1,543,350) 
                                             ----------  ----------- 
Weighted average number of ordinary shares   53,885,570   43,882,363 
                                             ----------  ----------- 
Total                                        53,885,570   43,882,363 
                                             ----------  ----------- 
 
   iii)      Adjusted earnings per share 

An adjusted earnings per share has also been calculated in addition to the basic and diluted earnings per share and is based on earnings adjusted to eliminate the effects of charges for share based payments. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the Group.

 
                         2018         2018        2018     2017         2017        2017 
                                               Diluted                           Diluted 
                               Basic pence   pence per           Basic pence   pence per 
                      GBP'000    per share       share  GBP'000    per share       share 
                      -------  -----------  ----------  -------  -----------  ---------- 
Basic earnings 
Loss after tax          (763)       (1.42)      (1.42)  (1,543)       (3.52)      (3.52) 
                      -------  -----------  ----------  -------  -----------  ---------- 
Adjustments 
Share based payment 
 charge                    19         0.04        0.04       14         0.04        0.04 
                      -------  -----------  ----------  -------  -----------  ---------- 
Adjusted earnings       (744)       (1.38)      (1.38)  (1,529)       (3.48)      (3.48) 
                      -------  -----------  ----------  -------  -----------  ---------- 
 
   8        PROFIT OF PARENT COMPANY 

As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these accounts. The parent company's loss for the year amounted to GBP605,000 (2017: GBP875,000).

   9        INTANGIBLE ASSETS 
 
                                       Goodwill 
                                        arising 
                               on consolidation 
                                        GBP'000 
                              ----------------- 
Group 
 Balance at 1 January 2017                3,690 
Balance at 31 December 2017               3,690 
                              ----------------- 
Balance at 31 December 2018               3,690 
                              ----------------- 
Provision for impairment 
Balance at 1 January 2017                 2,327 
Balance at 31 December 2017               2,327 
                              ----------------- 
Balance at 31 December 2018               2,327 
Net book value 
At 1 January 2017                         1,363 
                              ----------------- 
At 31 December 2017                       1,363 
                              ----------------- 
At 31 December 2018                       1,363 
                              ----------------- 
 

Goodwill acquired through business combinations is allocated to cash-generating units (CGU) identified at entity level. The carrying value of intangibles allocated by CGU is shown below:

 
                                        Norman Broadbent 
                                              Leadership 
                      Norman Broadbent        Consulting    Total 
                               GBP'000           GBP'000  GBP'000 
                      ----------------  ----------------  ------- 
At 1 January 2017                1,303                60    1,363 
                      ----------------  ----------------  ------- 
At 31 December 2017              1,303                60    1,363 
                      ----------------  ----------------  ------- 
At 31 December 2018              1,303                60    1,363 
                      ----------------  ----------------  ------- 
 

In line with International Financial Reporting Standards, goodwill has not been amortised from the transition date, but has instead been subject to an impairment review by the directors of the Group. As set out in accounting policy note 1, the directors test the goodwill for impairment annually. The recoverable amount of the Group's CGUs are calculated on the present value of their respective expected future cash flows, applying a weighted average cost of capital in line with businesses in the same sector. Pre-tax future cash flows for the next five years are derived from the approved forecasts for the 2018 financial year.

The key assumption applied to the forecasts for the business is that return on sales for Norman Broadbent is expected to be a minimum of 10% per annum for the foreseeable future (2017: 10%) and 19% for Norman Broadbent Leadership Consulting (2017: 19%). Return on sales defined as the expected profit before tax on net revenue. There are only minimal non cash flows included in profit before tax. The rate used to discount the forecast cash flows is 9% (2017: 9%).

The five year forecasts have been prepared using conservative revenue growth rates to reflect the uncertainty that is still present in the economy. Based on the above assumptions, at 31 December 2018 the recoverable value of the Norman Broadbent CGU is GBP1,563,000 and the Norman Broadbent Leadership Consulting CGU is GBP299,000.

   10.     PROPERTY, PLANT AND EQUIPMENT 
 
                                  Land and  Office and 
                                 buildings    computer       Fixtures 
                               - leasehold   equipment   and fittings    Total 
                                   GBP'000     GBP'000        GBP'000  GBP'000 
                              ------------  ----------  -------------  ------- 
Group 
 Cost 
Balance at 1 January 2017               84         146             57      287 
Additions                                -          16              -       16 
Disposals                                -           -              -        - 
                              ------------  ----------  -------------  ------- 
Balance at 31 December 2017             84         162             57      303 
                              ------------  ----------  -------------  ------- 
Additions                                -          14            154      168 
Disposals                                -           -              -        - 
                              ------------  ----------  -------------  ------- 
Balance at 31 December 2018             84         176            211      471 
                              ------------  ----------  -------------  ------- 
Accumulated depreciation 
Balance at 1 January 2017               62         110             47      219 
Charge for the year                     16          18              3       37 
Disposals                                -           -              -        - 
                              ------------  ----------  -------------  ------- 
Balance at 31 December 2017             78         128             50      256 
                              ------------  ----------  -------------  ------- 
Charge for the year                      5          14             41       60 
Disposals                                -           -              -        - 
                              ------------  ----------  -------------  ------- 
Balance at 31 December 2018             83         142             91      316 
                              ------------  ----------  -------------  ------- 
Net book value 
At 1 January 2017                       22          36             10       68 
                              ------------  ----------  -------------  ------- 
At 31 December 2017                      6          34              7       47 
                              ------------  ----------  -------------  ------- 
At 31 December 2018                      1          34            120      155 
                              ------------  ----------  -------------  ------- 
 

The Group had no capital commitments as at 31 December 2018 (2017: GBPNil).

The above assets are owned by Group companies; the Company has no fixed assets.

   11      INVESTMENTS 
 
                                  Shares in 
                                 subsidiary 
                               undertakings 
                                    GBP'000 
                              ------------- 
Company 
 Cost 
Balance at 1 January 2017             5,802 
                              ------------- 
Disposals (see note below)              (6) 
                              ------------- 
Balance at 31 December 2017           5,796 
                              ------------- 
Disposals                                 - 
                              ------------- 
Balance at 31 December 2018           5,796 
                              ------------- 
Provision for impairment 
Balance at 1 January 2017             3,926 
Impairment for the year                 227 
                              ------------- 
Balance at 31 December 2017           4,153 
                              ------------- 
Impairment for the year                   - 
                              ------------- 
Balance at 31 December 2018           4,153 
                              ------------- 
Net book value 
At 1 January 2017                     1,876 
                              ------------- 
At 31 December 2017                   1,643 
                              ------------- 
At 31 December 2018                   1,643 
                              ------------- 
 

In 2017, the Company wrote off the value of dormant overseas subsidiaries.

At 31 December 2018 the Company held the following ownership interests:

 
                                                                            Description and 
                          Country of incorporation                           proportion of 
 Principal Group           or registration                                   shares held by 
  investments:             and operation             Principal activities    the Company 
-----------------------  -------------------------  ---------------------  -------------------- 
 Norman Broadbent         England and Wales          Executive search       100% ordinary 
  Executive Search                                                           shares 
  Ltd 
 Norman Broadbent         England and Wales          Executive search       100% ordinary 
  Overseas Ltd                                                               shares 
 Norman Broadbent         England and Wales          Assessment, coaching   100% ordinary 
  Leadership Consulting                               and talent mgmt.       shares 
  Limited 
 Norman Broadbent         England and Wales          Mezzanine level        100% ordinary 
  Solutions Ltd                                       search                 shares 
 Bancomm Ltd **           England and Wales          Dormant                100% ordinary 
                                                                             shares 
 Norman Broadbent         Republic of Ireland        Dormant                100% ordinary 
  Ireland Ltd* **                                                            shares 
 Norman Broadbent         England and Wales          Interim Management     75% ordinary shares 
  Interim Management 
  Ltd 
 
   *   100 % of the issued share capital of this company is owned by Norman Broadbent Overseas Ltd. 

** These companies are exempt from audit by virtue of provisions in the Companies Act 2006. Where required limited assurance procedures have been completed.

The registered office for the subsidiaries are Portland House, Bressenden Place London SW1E 5BH with the exception of Norman Broadbent Ireland Limited.

   12      TRADE AND OTHER RECEIVABLES 
 
                                      Group            Company 
                                 ----------------  ---------------- 
                                    2018     2017     2018     2017 
                                 GBP'000  GBP'000  GBP'000  GBP'000 
                                 -------  -------  -------  ------- 
Trade receivables                  2,076    1,371        -        - 
Less: provision for impairment         -        -        -        - 
                                 -------  -------  -------  ------- 
Trade receivables - net            2,076    1,371        -        - 
Other debtors                         98      334                 5 
Prepayments and accrued income       136      583      208      283 
Due from Group undertakings            -        -    5,050    5,344 
                                 -------  -------  -------  ------- 
Total                              2,310    2,288    5,258    5,632 
                                 -------  -------  -------  ------- 
Non-Current                          135      195      135      195 
Current                            2,175    2,093    5,123    5,437 
                                 -------  -------  -------  ------- 
                                   2,310    2,288    5,258    5,632 
                                 -------  -------  -------  ------- 
 

Non-current trade receivables is in relation to the cash consideration due from the sale of SMS in 2016.

As at 31 December 2018, Group trade receivables of GBP1,885,000 (2017: GBP838,000), were past their due date but not impaired. They relate to customers with no default history. The aging profile of these receivables is as follows:

 
                                      Group              Company 
                                ------------------  ----------------- 
                                    2018      2017     2018      2017 
                                 GBP'000   GBP'000  GBP'000   GBP'000 
                                --------  --------  -------  -------- 
Up to 3 months                     1,747       820        -         - 
3 to 6 months                        120        18        -         - 
6 to 12 months                        18         -        -         - 
                                --------  --------  -------  -------- 
Total                              1,885       838        -         - 
                                --------  --------  -------  -------- 
 
 

The largest amount due from a single trade debtor at 31 December 2018 represents 8% (2017: 14%) of the total trade receivables balance outstanding.

As at 31 December 2018, no group trade receivables (2017: no group trade receivables) were considered impaired. No provision for impairment has been recognised in the financial statements. Movements on the Group's provision for impairment of trade receivables are as follows:

 
                                              2018     2017 
                                           GBP'000  GBP'000 
                                           -------  ------- 
At 1 January                                     -       14 
Provision for receivable impairment              -        - 
Receivables written-off as uncollectable         -     (14) 
                                           -------  ------- 
At 31 December                                   -        - 
                                           -------  ------- 
 

There are no material difference between the carrying value and the fair value of the Group's and parent Company's trade and other receivables.

   13      CASH AND CASH EQUIVALENTS 
 
                                Group            Company 
                           ----------------  ---------------- 
                              2018     2017     2018     2017 
                           GBP'000  GBP'000  GBP'000  GBP'000 
                           -------  -------  -------  ------- 
Cash at bank and in hand       684      678      280      588 
                           -------  -------  -------  ------- 
Total                          684      678      280      588 
                           -------  -------  -------  ------- 
 

There is no material difference between the carrying value and the fair value of the Group's and parent Company's cash at bank and in hand.

   14      TRADE AND OTHER PAYABLES 
 
                                          Group            Company 
                                     ----------------  ---------------- 
                                        2018     2017     2018     2017 
                                     GBP'000  GBP'000  GBP'000  GBP'000 
                                     -------  -------  -------  ------- 
Trade payables                           650      602       80       51 
Due to Group undertakings                  -        -    1,437    1,521 
Other taxation and social security       765      292        -        - 
Other payables                            35       21        -        - 
Accruals                                 575      264       45       58 
                                     -------  -------  -------  ------- 
Total                                  2,025    1,179    1,562    1,630 
                                     -------  -------  -------  ------- 
 

There is no material difference between the carrying value and the fair value of the Group's and parent company's trade and other payables.

   15      BORROWINGS 
 
                                      Group            Company 
                                 ----------------  ---------------- 
                                    2018     2017     2018     2017 
                                 GBP'000  GBP'000  GBP'000  GBP'000 
Maturity profile of borrowings 
 Current 
Bank overdrafts and interest 
 bearing loans: 
Invoice discounting facility 
 (see note (a) below)                776      851        -        - 
Secured Loan notes                   272      300      272      300 
                                 -------  -------  -------  ------- 
Total                              1,048    1,151      272      300 
                                 -------  -------  -------  ------- 
 

The carrying amounts and fair value of the Group's borrowings, which are all denominated in sterling, are as follows:

 
                                Carrying amount      Fair value 
                               -----------------  ---------------- 
                                   2018     2017     2018     2017 
                                GBP'000  GBP'000  GBP'000  GBP'000 
                               --------  -------  -------  ------- 
Bank overdrafts and interest 
 bearing loans: 
Invoice discounting facility        776      851      776      851 
Secured Loan notes                  272      300      272      300 
                               --------  -------  -------  ------- 
Total                             1,048    1,151    1,048    1,151 
                               --------  -------  -------  ------- 
 
   a)       Invoice discounting facilities: 

Norman Broadbent Executive Search Limited, NBS, NBIM and NBLC operate independent invoice discounting facilities, provided by Leumi ABL Limited. Leumi ABL Ltd holds all assets debentures for each company (fixed and floating charges) and also a cross corporate guarantee and indemnity deed dated 20 July 2011. The financial terms of the facilities are outlined below:

Norman Broadbent Executive Search Limited:

Funds are available to be drawn down at an advance rate of 75% against trade receivables of Norman Broadbent Executive Search Limited that are aged less than 120 days, with the facility capped at GBP1,500,000. At 31 December 2018, the outstanding balance on the facility of GBP369,969 (2017: GBP456,291) was secured by trade receivables of GBP860,137 (2017: GBP555,244). Interest is charged on the drawn down funds at a rate of 2.40% (2017: 2.40%) above the bank base rate.

Norman Broadbent Solutions Limited:

Funds are available to be drawn down at an advance rate of 75% against trade receivables of Norman Broadbent Solutions Limited that are aged less than 120 days, with the facility capped at GBP750,000. At 31 December 2018, the outstanding balance on the facility of GBP139,813 (2017: GBP136,271) was secured by trade receivables of GBP263,604 (2017: GBP166,500). Interest is charged on the drawn down funds at a rate of 2.40% (2016: 2.40%) above the bank base rate.

Norman Broadbent Interim Management Limited:

Funds are available to be drawn down at an advance rate of 75% against trade receivables of Norman Broadbent Interim Management Limited that are aged less than 120 days, with the facility capped at GBP750,000. At 31 December 2018, the outstanding balance on the facility of GBP246,441 (2017: GBP225,454) was secured by trade receivables of GBP701,821 (2017: GBP251,076). Interest is charged on the drawn down funds at a rate of 2.40% (2016: 2.40%) above the bank base rate.

Norman Broadbent Leadership Consulting

Funds are available to be drawn down at an advance rate of 75% against trade receivables of Norman Broadbent Leadership Consulting Limited that are aged less than 120 days, with the facility capped at GBP500,000. At 31 December 2018 the outstanding balance on the facility of GBP19,861 (2017: GBP33,113) was secured by trade receivables of GBP50,474 (2017: GBP38,659). Interest is charged on the drawn down funds at a rate of 2.40% above the bank base rate.

   b)       Secured Loan Notes 

The GBP300,000 loan note was issued in August 2017 with an interest rate of 12% up to its 31 October 2018 redemption date. With effect from 1 November 2018 the interest rate is 20%

   16      FINANCIAL INSTRUMENTS 

The principal financial instruments used by the Group, from which financial instrument risk arises, are summarised below. All financial assets and liabilities are measured at amortised cost which is not considered to be materially different to fair value.

 
                                Amortised Cost 
                               ---------------- 
                                  2018     2017 
                               GBP'000  GBP'000 
                               -------  ------- 
Group 
 Financial Assets 
Trade and other receivables      2,204    1,965 
                               -------  ------- 
Financial Liabilities 
Trade and other payables         2,027    1,179 
Secured loan notes                 272      300 
Invoice discounting facility       776      851 
                               -------  ------- 
 
 
                               Amortised Cost 
                              ---------------- 
                                 2018     2017 
                              GBP'000  GBP'000 
                              -------  ------- 
Company 
 Financial Assets 
Trade and other receivables     5,058    5,609 
                              -------  ------- 
Financial Liabilities 
Trade and other payables        1,562    1,630 
Secured loan notes                272      300 
                              -------  ------- 
 

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. Details on these risks and the policies set out by the Board to reduce them can be found in the published annual accounts.

   17      SHARE CAPITAL AND PREMIUM 
 
                                                      2018     2017 
                                                   GBP'000  GBP'000 
                                                   -------  ------- 
Allotted and fully paid: 
 Ordinary Shares: 
53,885,570 Ordinary shares of 1.0p each (2017: 
 53,885,570)                                           539      539 
                                                   -------  ------- 
Deferred Shares: 
23,342,400 Deferred A shares of 4.0p each (2017: 
 23,342,400)                                           934      934 
907,118,360 Deferred shares of 4.0p each (2017: 
 907,118,360)                                        3,628    3,628 
1,043,566 Deferred B shares of 42.0p each (2017: 
 1,043,566)                                            438      438 
2,504,610 Deferred shares of 29.0p each (2017: 
 2,504,610)                                            727      727 
                                                   -------  ------- 
                                                     5,727    5,727 
                                                   -------  ------- 
Total                                                6,266    6,266 
                                                   -------  ------- 
 

Deferred A Shares of 4.0p each

The Deferred A Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry a right to repayment only after the holders of Ordinary Shares have received a payment of GBP10,000 per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof. The rights attaching to the shares shall not be varied by the creation or issue of shares ranking parri passu with or in priority to the Deferred A Shares.

Deferred Shares of 4.0p each

The Deferred Shares carry no right to dividends, distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry a right to repayment only after payment of capital paid up on Ordinary Shares plus a payment of GBP10,000 per Ordinary Share. The Company retains the right to transfer or cancel the shares without payment to the holders thereof.

Deferred B Shares of 42.0p each

The Deferred B Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry the right to repayment only after the holders of Ordinary Shares have received a payment of GBP10 million per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof. The rights attaching to the shares shall not be varied by the creation or issue of shares ranking parri passu with or in priority to the Deferred B Shares.

Deferred Shares of 29.0p each

The Deferred Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry the right to repayment only after the holders of Ordinary Shares have received a payment of GBP10,000 per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof.

A reconciliation of the movement in share capital and share premium is presented below:

 
                                 No. of 
                               ordinary  Ordinary  Deferred     Share 
                                 shares    shares    shares   premium    Total 
                                 (000s)    (000s)    (000s)    (000s)   (000s) 
                              ---------  --------  --------  --------  ------- 
At 1 January 2017                41,633       416     5,727    12,685   18,828 
Proceeds from share placing 
 (note (a) below)                12,252       123         -     1,021    1,144 
                              ---------  --------  --------  --------  ------- 
At 31 December 2017              53,885       539     5,727    13,706   19,972 
                              ---------  --------  --------  --------  ------- 
 
At 31 December 2018              53,885       539     5,727    13,706   19,972 
                              ---------  --------  --------  --------  ------- 
 
   a)       Share placing September 2017 

On 29 September 2017, the Company issued 12,252,250 new ordinary 1.0p shares for a total cash consideration of GBP1,225,225. Transaction costs of GBP81,444 were incurred resulting in net cash proceeds of GBP1,143,781.

   18      SHARE BASED PAYMENTS 
   18.1   Share Options 

The Company has an approved EMI share option scheme for full time employees and directors. The exercise price of the granted options is equal to the market price of the shares on the date of the grant. The Company has no legal or constructive obligation to repurchase or settle the options or warrants in cash.

Options under the Company EMI scheme are conditional on the employee completing three years' service (the vesting period). The EMI options vest in three equal tranches on the first, second and third anniversary of the grant. The options have a contractual option term of either seven or ten years.

Movements in the number of share options and their related weighted average exercise prices are as follows:

 
                             Approved EMI 
                          share option scheme 
                      -------------------------- 
                      Avg. exercise 
                          price per    Number of 
                          share (p)      options 
                      -------------  ----------- 
At 1 January 2017             16.21    4,217,887 
Granted                       13.50      380,951 
Forfeited                     18.95  (1,500,327) 
                      -------------  ----------- 
At 31 December 2017           14.54    3,098,511 
                      -------------  ----------- 
Granted                       13.50    1,054,191 
Forfeited                     13.50    (603,555) 
                      -------------  ----------- 
At 31 December 2018           14.41    3,549,147 
                      -------------  ----------- 
 

Share options outstanding at the end of the year have the following expiry date and exercise prices:

 
                              Share options 
               ----------  -------------------- 
                 Exercise 
 Expiry date    price per 
                    share 
                      (p)       2018       2017 
               ----------  ---------  --------- 
2021                 65.5     62,153     62,153 
2023                 13.5  2,051,852  3,036,358 
2024                 13.5    380,951          - 
2025                 13.5  1,054,191          - 
               ----------  ---------  --------- 
Total                      3,549,147  3,098,511 
               ----------  ---------  --------- 
 

Out of the 3,549,147 outstanding options (2017: 3,098,511), no options were exercisable at the year end (2017: None) as they were all 'underwater'.

The significant inputs into the model in valuing the 2018 option grant were weighted average share price of 12 pence at the grant date, exercise price of 13.5p, volatility of 28%, dividend yield of 0% (2017 and 2016: 0%), an expected option life of 10 years (2017 and 2016: 10 years) and an annual risk-free interest rate of 0.652%. The expected volatility was estimated by reference to the historical volatility of the Company's share price and those of UK quoted companies in a similar business sector. The risk-free interest rate is estimated as the yield on zero coupon UK government bonds of a term consistent with the contractual life of the options granted. Minimal share options were granted during 2018, therefore the same assumptions were used as per the prior year. There was no significant change in the company or shareholding during 2018.

   19      LEASES 

Operating leases

The Group leases its premises and the lease is tenant repairing.

As at 31 December 2018, the total future value of minimum lease payments due are as follows:

 
                                                     Land and Buildings 
                                                    -------------------- 
                                                         2018       2017 
                                                      GBP'000    GBP'000 
                                                    ---------  --------- 
Within one year                                           160         82 
Later than one year and not later than five years          32          - 
                                                    ---------  --------- 
Total                                                     192         82 
                                                    ---------  --------- 
 
   20      PROVISIONS 
 
                                       Group 
                                     2018     2017 
                                  GBP'000  GBP'000 
                                  -------  ------- 
At 1 January                          125      125 
Provisions made during the year       115        - 
                                  -------  ------- 
At 31 December                        240      125 
                                  -------  ------- 
Current liability                     240      125 
Non-current liability                   -        - 
                                  -------  ------- 
At 31 December                        240      125 
                                  -------  ------- 
 

The Company moved its head office in April 2018. Under the terms of the previous lease the Company is obliged to return vacant possession to the landlord with the office returned to its original state. The Company is currently in negotiations with the Landlord as to the value of a settlement.

   21      PENSION COSTS 

The Group operated several defined contribution pension schemes for the business. The assets of the schemes were held separately from those of the Group in independently administered funds. The pension cost represents contributions payable by the Group to the funds and amounts to GBP141,000 (2017: GBP142,000). At the year end GBP19,000 of contributions were outstanding (2017: GBP10,000).

   22      RELATED PARTY TRANSACTIONS 

The following transactions were carried out with related parties:

   (a)      Purchase of services: 
 
                                 2018    2017 
                               GBP000  GBP000 
                               ------  ------ 
Brian Stephens & Company Ltd       20      24 
Total                              20      24 
                               ------  ------ 
 

Brian Stephens & Company Ltd invoiced the Group for the provision of services of B Stephens of GBP20,000 (2017 total: GBP24,000). B Stephens is a director of Brian Stephens & Company Ltd.

All related party expenditure took place via "arms-length" transactions.

    (b)     Key management compensation: 

Key management includes Executive and Non-Executive Directors. The compensation paid or payable to the directors can be found in the Directors' Remuneration Report.

   (c)      Year-end payables arising from the purchases of services: 
 
                                 2018    2017 
                               GBP000  GBP000 
                               ------  ------ 
Brian Stephens & Company Ltd        2       6 
                               ------  ------ 
Total                               2       6 
                               ------  ------ 
 

Payables to related parties arise from purchase transactions and are due one month after date of purchase. Payables bear no interest.

   23      CONTINGENT LIABILITY 

The Company is a member of the Norman Broadbent plc Group VAT scheme. As such it is jointly accountable for the combined VAT liability of the Group. The total VAT outstanding in the Group at the year-end was GBP377,000 (2017: GBP122,000).

   24      AVAILIABILITY OF ACCOUNS AND NOTICE OF ANNUAL GENERAL MEETING 

Copies of the Final Report and Annual Accounts (including the notice of Annual General Meeting) will be posted to shareholders on 28(th) of June 2019 and will shortly be available to view on the Company's website (www.normanbroadbent.com/information/investor-relations).

Notice is hereby given that the 80th Annual General Meeting ("AGM") of Norman Broadbent plc will be held at 10am on the 10th Floor, Portland House, Bressenden Place, London SW1E 5BH on 22 July 2019.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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June 28, 2019 02:00 ET (06:00 GMT)

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