TIDMNAK

RNS Number : 7408W

Nakama Group Plc

13 December 2019

13 December 2019

Nakama Group plc

("Nakama" or the "Group")

Unaudited Interim Results

Nakama Group plc (AIM: NAK), the AIM quoted recruitment consultancy working across UK and Asia, providing recruitment services for the web, interactive, digital media, IT and business change sectors, announces its half year report for the six months ended 30 September 2019.

Highlights

-- Progress made towards gaining financial stability and winning new business by leveraging client relationships

   --     Progress made to making the business more stable, particularly from a personnel perspective 
   --     Net fee income ("NFI") of GBP1.5 million (2018: GBP2.7 million; *Adjusted: GBP2.2 million) 

-- Permanent placement revenues of GBP1.0 million (2018: GBP1.7 million; *Adjusted GBP1.4 million)

   --     Contractor revenues were GBP3.7 million (2018: GBP6.3 million; *Adjusted GBP5.6 million) 
   --     Overall headcount reduced by 30% to 40, reducing the Company's cost base 

-- H1 performance was a significant reduction on H1 2018, however a marked improvement on H2 2018

   --     Profit before tax of GBP20,000 (2018: profit of GBP186,000; *Adjusted GBP223,000) 

-- Challenges ahead due to the Group's tight cash position, caused primarily by debtor collection issues in Hong Kong

   --     The Board are considering restructuring options 

*Adjusted figures exclude discontinued operations of Nakama Melbourne and Nakama Sydney

Robert Thesiger, Chief Executive Officer of Nakama Group, commented: "The first half of 2019/20 has seen numerous challenges across the Group. However, I am encouraged with the results and resultant relative stability that the business is now displaying compared to H2 2018."

 
 
   Enquiries: 
 
   Nakama Group plc                    www.nakamaglobal.com 
 Robert Thesiger, Chief Executive 
  Officer                              00 44 18 8334 1144 
 Tim Sheffield, Chairman               00 44 20 7236 2400 
 
 Allenby Capital Limited (Nominated 
  Adviser & Broker)                    www.allenbycapital.com 
 Nick Naylor / Nicholas Chambers       00 44 20 3328 5656 
 

About Nakama Group plc:

Nakama Group plc (AIM: NAK) is a recruitment consultancy which places people into specialist and management positions in the digital, data, creative, media, marketing and technology disciplines with offices in the UK and Asia. The UK operation also specialises in the insurance and wealth management sectors, specifically in business change and IT, through the brand Highams Recruitment.

The Group's speciality is finding excellent career opportunities and assignments for senior digital, IT, business and professional services talent. The team at Nakama seek to develop their relationships and networks to ensure the Group obtains the best available positions for such talent, whilst ensuring that the skills and personalities of its staff are compatible with the need of its clients.

Nakama Group plc was created in October 2011 through the acquisition of Nakama Ltd UK and its subsidiaries in Hong Kong, Singapore and Sydney by AIM listed Highams Systems Services Group plc.

Chief Executive's review

The main challenge that the Group inherited from 2018 related to employee engagement and, as a result of several factors, we made some key decisions relating to staff. We have replaced both Managing Directors of our London and Hong Kong offices in the first three months of H1 and furthermore, with the implementation of a robust performance management program, we have seen several staff exit the business due to underperformance. Staff headcount has been somewhat supplemented by the hiring of experienced consultants, particularly in Hong Kong and London and headcount has been further increased with the recruitment of dedicated researchers across the Group. Overall headcount has decreased year on year as we continue to manage the cost base in line with revenues to ensure the business returns to profitability.

The business has seen a marked increase in communication across the Group and this has led to leveraging client relationships across our offices. Furthermore, we have introduced a more regional focus in Asia so that our business units can diversify into new locations and better leverage existing client relationships. We have seen success from this, particularly from our Hong Kong office that has generated revenue both within Japan and Singapore. In addition, our Highams business has been leveraging its relationships for our Nakama London business.

Our Highams business continues to deliver solid results and it is now key that we grow this business into other of the Group's existing locations, specifically Asia. Our Nakama London office has continued to find trading challenging but with a renewed focus on client delivery we have begun to see more stability in recent months.

Overall, the business has seen many challenges in H1 but compared to H2 2018/19, we have gained stability in personnel, greater leverage of our client base and communication between offices and a renewed focus on our core markets.

Outlook

The UK remains a particularly challenging recruitment environment with the general election, BREXIT and proposed changes to IR35 all combining to produce an uncertain outlook for the Group. The political unrest in Hong Kong remains a concern but, as yet, we have not seen this have a material impact on trading.

The Asia region, as a whole, remains highly attractive and future growth of the business will be focussed on developing our Highams brand in to both Hong Kong and Singapore whilst also expanding our Nakama business more regionally. We will continue to manage the business in accordance with driving profitability and shareholder value.

Whilst trading in the first half of the current year has been broadly in line with management's expectations for the year to date, the Group's financial stability has come under increasing pressure as a result of several recent cash squeezes. The primary cause of this is as a result of the political and economic unrest in Hong Kong which has led to unscheduled delays in the Group receiving customer payments. This has had a knock on impact on the Group's cash position.

It is the Board's belief that the Group requires an injection of capital in order for it to continue to implement its short-term growth plans. Discussions in recent months with Nakama's major shareholders have led the Board to conclude that an equity fundraise would be difficult to complete. Consequently, the Board are considering a number of restructuring options to improve the Group's cash position.

The Board will make further announcements in due course.

Robert Thesiger

Chief Executive Officer

 
 CONSOLIDATED STATEMENT 
  OF COMPREHENSIVE INCOME 
 For the six months to 
  30 September 2019                            6 Months             6 Months             6 Months 
                                                     to                   to                   to 
                                              30-Sep-19            30-Sep-18            30-Sep-18 
                                                                                        *Adjusted 
                                                GBP'000              GBP'000              GBP'000 
 
 Revenue                                          4,767                8,031                7,010 
 Cost of sales                                  (3,237)              (5,366)              (4,829) 
                                        ---------------  -------------------  ------------------- 
 Net Fee Income                                   1,530                2,665                2,181 
                                        ---------------  -------------------  ------------------- 
                                                    32%                  33%                  31% 
 Administrative cost                            (1,503)              (2,454)              (1,947) 
                                        ---------------  -------------------  ------------------- 
 Operating profit                                    27                  211                  234 
 Finance costs                                      (7)                 (25)                 (11) 
 Profit on ordinary activities 
  before taxation                                    20                  186                  223 
                                        ---------------  -------------------  ------------------- 
 Tax expense                                        (8)                    -                    - 
                                        ---------------  -------------------  ------------------- 
 Profit for the period 
  attributable to equity 
  shareholders                                       12                  186                  223 
                                        ===============  ===================  =================== 
 
 Profit per share 
 Basic and diluted profit 
  per share from continuing 
  operations                                     0.01 p               0.16 p               0.19 p 
 
 

*Adjusted figures exclude discontinued operations of Nakama Melbourne and Nakama Sydney

 
 CONSOLIDATED STATEMENT OF RECOGNISED 
  INCOME AND EXPENSE                         6 Months     6 Months     6 Months 
                                                   to           to           to 
 For the six months to 30 September         30-Sep-19    30-Sep-18    30-Sep-18 
  2019 
                                                                     *Adjusted 
                                              GBP'000      GBP'000      GBP'000 
 
 Profit for the period                             12          162          223 
 Foreign currency translation 
  difference                                      (6)           24           24 
                                          -----------  -----------  ----------- 
 Total recognised income and 
  expense for the period attributable 
  to equity shareholders                            6          186          247 
                                          -----------  -----------  ----------- 
 

*Adjusted figures exclude discontinued operations of Nakama Melbourne and Nakama Sydney

 
 CONSOLIDATED STATEMENT OF CHANGES IN 
  EQUITY 
 As at 30 September 2019 
 
                                                                      Employee   Currency    Retained 
                                                                         share    reserve    earnings 
                                        Share      Share     Merger    benefit                            Total 
                                      capital    premium    reserve    reserve                           equity 
                                      GBP'000    GBP'000    GBP'000    GBP'000    GBP'000     GBP'000   GBP'000 
 
 At 1 April 2018                        1,602      2,580         90       (61)       (13)     (4,337)     (139) 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ----------  -------- 
 
 Profit for the year                                                                              323       323 
 Other comprehensive Loss                                                              18                    18 
 Total Comprehensive loss for the 
  year                                                                                 18         323       341 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ----------  -------- 
 
 At 1 April 2019                        1,602      2,580         90       (61)          5     (4,014)       202 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ----------  -------- 
 
 Profit for the six months                                                                         12        12 
 Other comprehensive Income                                                           (6)                   (6) 
 Total Comprehensive profit for 
  the 6 months                                                                        (6)          12         6 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ----------  -------- 
 At 30 September 2019                   1,602      2,580         90       (61)        (1)     (4,002)       208 
----------------------------------  ---------  ---------  ---------  ---------  ---------  ----------  -------- 
 
 
 Consolidated balance sheet 
 As at 30 September 2019 
 
                                                         31 Mar 
                                          30 Sep 2019      2019 
 
                                              GBP'000   GBP'000 
 Assets 
 Non-current Assets 
 Property, plant and equipment                     17         8 
 Deferred Tax asset                                18        18 
--------------------------------------  -------------  -------- 
 Total                                             35        26 
 
 Current assets 
 Trade and other receivables                    1,677     1,599 
 Cash and cash equivalents                          8       166 
 
 Total                                          1,685     1,765 
--------------------------------------  -------------  -------- 
 Total assets                                   1,720     1,791 
--------------------------------------  -------------  -------- 
 
 Liabilities 
 Current Liabilities 
 Trade and other payables                       (991)   (1,151) 
 Borrowings                                     (521)     (438) 
 Total                                        (1,512)   (1,589) 
--------------------------------------  -------------  -------- 
 Net assets                                       208       202 
--------------------------------------  -------------  -------- 
 
 
 Equity 
 Ordinary shares                                1,602     1,602 
 Share premium                                  2,580     2,580 
 Merger reserve                                    90        90 
 Employee share benefit trust reserve            (61)      (61) 
 Currency reserve                                  12        18 
 Retained earnings                            (4,015)   (4,027) 
-------------------------------------- 
 Total equity                                     208       202 
--------------------------------------  -------------  -------- 
 
 
 CONSOLIDATED STATEMENT OF CASH FLOWS 
 to 30 September 2019 
 
                                                         6 months          6 months 
                                                               to                to 
                                                      30 Sep 2019       30 Sep 2018 
                                                          GBP'000           GBP'000 
 Cash flows from operating activities 
 Profit before taxation                                        20               186 
 Depreciation of property, plant and equipment                  4                18 
 Net finance costs                                              7                25 
 Tax credit/(paid)                                            (8)                 - 
 (Increase)/Decrease in trade and other 
  receivables                                                (78)               483 
 Decrease in trade and other payables                       (160)             (154) 
                                                 ----------------  ---------------- 
 Net cash generated by operating activities                 (215)               558 
-----------------------------------------------  ----------------  ---------------- 
 Cash flows from investing activities 
 Purchase of property plant and equipment                    (13)                 - 
                                                 ----------------  ---------------- 
 Net cash outflow from investing activities                  (13)                 - 
-----------------------------------------------  ----------------  ---------------- 
 Financing activities 
 Increase/(Decrease) in borrowings                             83             (546) 
 Finance cost paid                                            (7)              (25) 
                                                 ----------------  ---------------- 
 Net cash outflow from financing activities                    76             (571) 
-----------------------------------------------  ----------------  ---------------- 
 Net changes in cash and cash equivalents                   (152)              (13) 
 Cash and cash equivalents, beginning 
  of year                                                     166               141 
 Effect of foreign exchange rate movements                    (6)                55 
                                                 ----------------  ---------------- 
 Cash and cash equivalents at end of period                     8               183 
-----------------------------------------------  ----------------  ---------------- 
 

Notes to the Interim Report

1. Basis of Preparation

This unaudited consolidated interim financial information has been prepared in accordance with Financial Reporting Standard 100 Application of Financial Reporting Requirements ("FRS100") and Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101"). It does not constitute the Group's statutory financial statements for those periods. The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 March 2020. The comparative financial information for the half year ended 30 September 2018 has not been audited. A copy of the full year audited statutory financial statements for the year ending 31 March 2019 has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2)-498(3) of the Companies Act 2006.

The financial information in the Interim Report is presented in Sterling and all values are rounded to the nearest thousand pounds (GBP'000) except when otherwise indicated.

2. Earnings per share

 
                                 6 months                           6 months 
                                to 30 Sep                              to 30 
                                     2019                           Sep 2018 
                                Unaudited                          Unaudited 
                                 Weighted                           Weighted 
                                  average                            Average 
                                                                      number 
                                number of    Earnings                     of        Earnings 
                   Profit          shares   per share    Profit       shares       per share 
                  GBP'000            '000           p   GBP'000         '000               p 
 
 Basic and 
  diluted 
  earnings per 
  share                12         117,791        0.01       186    117,791     0.16 
 
 

3. Segmental Analysis

 
 The Group has 2 main reportable segments based on the location from 
  which revenue is derived: 
 Asia Pacific - This segment includes Hong Kong, Singapore and 
  Australia. 
 UK - The segment includes candidates placed in the UK. 
 These segments are monitored by the board 
 of directors. 
 
 Factors that management used to identify the Group's reportable 
  segments 
 
 The Group's reportable segments are strategic business units 
  that, although supplying very similar service offering, operate 
  in distinct markets and are therefore managed on a day to day 
  basis by separate teams. 
 
 Measurement of operating segment profit or loss, assets 
  and liabilities 
 
 The Group evaluates performance on the basis of profit or loss 
  from operations before tax, head office costs and amortisation. 
 
 

The Board does not review assets and liabilities by segment.

 
                                       Asia Pacific            UK         Total 
                                        30 Sep 2019   30 Sep 2019   30 Sep 2019 
                                            GBP'000       GBP'000       GBP'000 
 
  Revenue from external customers               884         3,883         4,767 
                                      -------------  ------------ 
 
   Segment profit/(loss) before tax             (3)            15            12 
                                      -------------  ------------  ------------ 
 
 
 
                                       Asia Pacific            UK         Total 
                                            30 Sept    30 Sept 18 
                                                 18                  30 Sept 18 
                                            GBP'000       GBP'000       GBP'000 
 
  Revenue from external customers             2,239         5,792         8,031 
                                      -------------  ------------ 
 
   Segment profit before tax                    190            37           227 
                                      -------------  ------------  ------------ 
 
 
                                     Asia Pacific           UK        Total 
                                          30 Sept   30 Sept 18 
                                               18                30 Sept 18 
                                        *Adjusted    *Adjusted    *Adjusted 
                                          GBP'000      GBP'000      GBP'000 
 
  Revenue from external customers           1,227        5,792        7,019 
                                    -------------  ----------- 
 
   Segment profit before tax                  229           37          266 
                                    -------------  -----------  ----------- 
 

*Adjusted figures exclude discontinued operations of Nakama Melbourne and Nakama Sydney

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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December 13, 2019 02:00 ET (07:00 GMT)

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