HYDG.L Regulatory News (HYDG)

22 March 2016

HYDROGEN GROUP PLC

("Hydrogen" or the "Company" or the "Group")

(AIM: HYDG)

Final results for the year ended 31 December 2015 and Board changes

Hydrogen, the global specialist recruitment group, announces final results for the year ended 31 December 2015

Key points

· Group revenue to 31st December 2015 totalled £122.8m (2014: £169.4m)

· Full year Net Fee Income was 34% lower (33% on a like for like basis), at £18.6m (2014: £28.2m)

· Adjusted EBITDA (£0.04m) (2014: £3.15m)*

· Loss before tax and after exceptional items for the year of £6.2m (2014: profit: £0.4m)

· Loss before tax and exceptional items £0.7m (2014: profit: £2.4m)

· Exceptional items of £5.5m (2014:£2.0m) including goodwill impairment charge of £3.5m (2014: £nil)

· Strong cash flow generated during the year giving net cash at year end £2.6m (2014: Net debt: £6.7m)

· £3.0m Revolving Credit Facility repaid early as it was surplus to requirements

· Richard Green appointed as Non-Executive Director

* Adjusted EBITDA is earnings before interest, taxation, depreciation and amortisation, excluding exceptional items and share based payments.

Stephen Puckett, Chairman, commented:

"Hydrogen's plan for 2016 is to remain focused on sustainable, profitable business. Having invested and re-focused the business during 2015 we are beginning to see growth in our international contractor numbers which should provide a base for all of our international offices to be profitable in 2016.

However, the Board sees opportunities for development and will continue to invest in areas where growth can be delivered at acceptable levels of profitability.

Hydrogen has been through a difficult period of restructuring and cost reductions. The Group is now firmly focused on its core opportunities. The changes implemented are intended to ensure that the Board delivers on its key objectives of improving profitability, increasing cash generation and growing the Group's revenue."

Enquiries:

Hydrogen Group plc 020 7002 0000

Ian Temple CEO

Colin Adams CFO

Shore Capital (NOMAD and Broker) 020 7468 7904

Bidhi Bhoma

Edward Mansfield

Notes to Editors:

Hydrogen is a global specialist recruitment business. We build relationships by finding specialist candidates our clients have difficulty sourcing, placing exceptional, hard to find professionals in countries across the world, on both a contract and permanent basis. Our joined-up practice teams combine international reach with local expertise and specialist knowledge, to provide visibility of world class candidates.

http://www.hydrogengroup.com

CHAIRMAN'S STATEMENT

2015 Performance

Net Fee Income ("NFI") for the full year was 34% lower, at £18.6m (2014: £28.2m). Despite difficult trading conditions, particularly in Oil & Gas and a high degree of change within the business, loss before taxation and exceptional items for the year to 31 December 2015 was £0.7m (2014: profit £2.4m). Reported loss before tax for the year, taking account of exceptional items, was £6.2m (2014 profit before tax: £0.4m). Cost savings resulted in administration costs for the year falling by £6.4m to £19.2m (2014: £25.6m). A key focus for management during 2015 was cash generation and the business had a very strong cash performance ending the year with net cash of £2.6m (2014: net debt £6.7m). The Group also had a Revolving Credit Facility ("RCF") of £3.0m, which was repaid and cancelled in February 2015 as it was surplus to funding requirements.

In 2015 the Board took the decision to focus more heavily on its contract business. This has impacted profitability but, the Board believes, will result in the Group having a more robust and profitable business model in the medium term. The Board appreciates the efforts of all the staff who have continued to deliver the standards of service expected by our clients and candidates, despite the changes going on within the business. In December we announced that we had signed an extension for a further two years as a supplier of Change Management staff to a FTSE100 Retail Bank. We are delighted to have renewed this contract with one of our key banking clients, which demonstrates both the strength of our proposition and our ability to deliver high-quality solutions.

Strategy

During the year a thorough review of strategy was undertaken. The business is now refocused around its core purpose: empowering the careers of our candidates and staff and powering our clients and our business. Having weathered the changes in management and the oil price drop the immediate priority is to return to profitable growth.

Dividend

The Board does not propose paying a dividend in respect of 2015 (2015: 4.6p).

The Board

Anne Baldock is today stepping down from the board which she joined in September 2012 and has been senior independent Non-Executive Director since March 2015. I would like to thank Anne for her support and guidance over the last few years.

Richard Green is joining the board with effect from today. Richard is a seasoned Non-Executive Director, is a Chartered Accountant with a successful career in Private Equity and has been an adviser and Non-Executive Director to a large number of small companies. Richard is currently Non-Executive Director on the board of Northern Venture Trust plc and Qannas Investments Ltd . Richard will be Senior Independent Director and the Chair of the Audit and Remuneration Committees.

These appointments preserve the separation of roles on the Board. They are in line with the Group's existing governance arrangements which take account of the guidelines contained in the QCA 2013 Corporate Governance Code for Small and Mid-Size Quoted Companies.

Current Trading and Outlook

Hydrogen's plan for 2016 is to remain focused on robust, profitable, business. Having invested and re-focused the business during 2015 we are beginning to see growth in our international contractor numbers which should provide a sustainable base for all of our international offices to be profitable in 2016.

Hydrogen has been through a difficult period of restructuring and cost reductions. The Group is now firmly focused on its core opportunities. The changes implemented are intended to ensure that the Board delivers on its key objectives of improving profitability, increasing cash generation and growing the Group's revenue.

Stephen Puckett

Chairman

22 March 2016

BUSINESS REVIEW

Refocusing the business in 2015

In Q1 2015 we announced the departure of our CEO and CFO and have had to deal with many challenges associated with re-basing our business and cost base as a result of the downturn in the Oil and Gas market. Since being appointed CEO I have carried out a detailed review of the marketplace and our positioning within it. There have been a number of factors affecting the business:

1. The loss of a long standing leadership team

2. The dramatic collapse of the oil price affecting nearly 40% of our business

3. An increase in demand and therefore power to candidates

4. An increase in margin pressure making recruitment more transactional

5. Digital disruption with the rise of social networking

6. Greater emphasis on diversity and compliance by our clients

7. Increases in cost pressures

As a result of this review we have re-launched our strategy. Hydrogen is a strong brand name within the marketplace that is highly recognised and our aim is to continue to grow.

We have identified our core purpose as 'Empowering careers. Powering business'. Empowering careers responds to the needs of two of our key stakeholders namely our candidates and our staff. The best people want to work with a market leading recruiter that helps them take control of their career. Powering business answers the needs of our other two key stakeholders our clients and our shareholders.

Our mission is 'The specialist recruitment consultancy built on quality relationships in a digital world'.

We deliver this through our four key ingredients:

· Ultra niche markets;

· Off-grid insights;

· People matter; and

· Global platform.

The way we do it is through living our values:

· Passionate;

· Accountable;

· Collaborative; and

· Expert.

When conducting our review we looked at each business unit from each of these perspectives. What has become clear is that when we are acting in this way we develop strong profitable businesses.

Our people

We have built a new senior operational team including Colin Adams joining as CFO in May 2015. The team was completed at the start of 2016 and is focused on executing our turnaround plan. I would like to thank our staff as they have responded to the challenges we have faced with great fortitude.

Professional Support Services

During the first half of the year we decided to withdraw from a number of unprofitable areas where the market had become commoditised and transactional which resulted in a reduction of NFI of 24% from the Professional Support Services segment. The Professional Support Services operating segment delivered 68% of total Group NFI (2014: 58%).

Technical and Scientific

The oil price drop had a dramatic effect on our business in 2015 particularly as our business was focused around exploration and production causing a 48% reduction in NFI from our Technical and Scientific operating segment.

International business

As much of our international business was in upstream oil and gas our international business was severely disrupted by the reduction in the oil price. This caused us to refocus our international operations and downsize them to enable them to be profitable in 2016. This resulted in international NFI in 2015 being 36% of total NFI (2014: 37%).

Permanent and Contract

We place candidates in both permanent and contract roles. Permanent placements play to our experience in finding rare skills and satisfying the demand for niche, specialist skills. Contract provides more predictable revenue. Contract represented 57% of total NFI in 2015 (2014: 54%) and the contract book is expected to continue to exceed 50% of total NFI going forward.

Clients and Candidates

The development of different recruitment practices from 2010 to 2014 helped the Group to reduce risk by diversifying away from a reliance on UK based financial businesses. We have strong, client relationships built on our longstanding track record of delivery and powering their businesses. We would like to thank all our clients for their support over the last year.

We have a very strong candidate database and proven methodology for building candidate relationships in our core practices. We work with highly talented candidates and contractors and would like to thank them for trusting us to empower their careers.

Current Trading

Hydrogen is coming through a difficult period and there are certainly continuing challenges, both from external factors such as the dramatic and sustained decline in the Oil and Gas market and internal factors such as management changes.

The business is well financed and cash generative, with a strong platform, hard working people and a solid client base capable of delivering profit.

The business has experienced a solid start to the year with a number of contract wins and is focused on returning to profitable growth in 2016

FINANCIAL REVIEW

Revenue

Group revenue to 31 December 2015 totalled £122.8m (2014: £169.4m).

Net fee income (NFI)

NFI (shown as gross profit in the income statement) comprises the total placement fees of permanent candidates and the margin earned on placement of contract candidates.

Overall, there was a reduction in Group NFI of 34% (33% on a like for like basis) to £18.6m (2014: £28.2m).

As mentioned in the Interim Report, a material drop in the oil price has forced oil companies to significantly reduce their levels of hiring in upstream exploration. This has continued into the second half of the year and is the main contributor behind decline in activity levels and margins in the Oil and Gas practices in all our offices and was the main contributing factor behind the resultant fall in NFI. In addition to downsizing our Oil and Gas practices, in the early part of the year we closed our UK Technology Permanent business, which had been consistently loss making, to focus our resources on the more profitable Contract revenue. Throughout the second half of 2015 a considerable amount of resource was channelled into refocussing the niche propositions of each of the practices. This was a necessary exercise to put the business on a much stronger footing to start growing NFI in 2016. For 2015 most of the practices consolidated their positions whilst going through this process and, as a result, with the exception of Legal and Technology practices in Singapore, did not demonstrate any notable growth in NFI over the previous year.

Operating segments

NFI from the Technical and Scientific operating segment totalled £6.0m (2014: £11.7m), and contributed 33% (2014: 42%) of total NFI. The lower contribution to the Group was primarily due to the continued decline in activity levels and margins in the Oil and Gas sector.

NFI in the Professional Support Services operating segment was £12.5m (2014: £16.5m). The closure of our UK Technology Permanent Business was the main contributory factor. One customer in the Professional Support Services segment represented approximately 16% of total NFI for 2015 (2014:12%). NFI from this customer declined in the first half of the year but stabilised in the second half. A new agreement has been signed with this customer to 31 December 2017. No other customer represents more than 5% of NFI.

The decline in activity levels in the Oil and Gas sector has impacted on all our overseas offices as well. In Asia we saw a 34% NFI growth in our legal practice and 62% growth in our Technology practice although this only partially offset the decline in Oil and Gas NFI. Overall, Rest of world NFI decreased 36% to £6.6m (2014: £10.3m)

Oil and Gas NFI is predominantly contract and this is the main factor contributing to the reduction in contract NFI which reduced to £10.5m (2014: £15.2m). In our permanent business, the permanent contract market in Oil and Gas completely dried up during 2015. In addition, we closed our Technology Permanent business. Permanent NFI reduced to £8.0m (2014: £12.9m). The balance between contract and permanent business continues to move in favour of contract, with fees from contract placements representing 57% of NFI and permanent fees 43% of NFI (2014: 54%:46%).

Exceptional Costs

The Board continued its comprehensive review of the business throughout 2015 to bring operating costs down in line with the reduction in NFI, closing unprofitable practices such as the UK Tech permanent placement business, impairing leasehold improvements on the floors sub-let at our London Head Office and impairing software development that was not supported by future economic value to the Group. The carrying value of goodwill predominantly relates to the UK element of the Professional Support Services operating segment. Following a review of the carrying value and the reduced activity during 2015, the Board considers it appropriate to take an impairment charge of £3.5m (2014: £nil). In total the Group has taken an exceptional charge of £5.5m (2014: £2.0m) associated with the one-off costs of these changes.

Cost savings resulted in administration costs for the year reducing by £6.4m to £19.2m (2014: £25.6m).

Headcount

Total headcount at 31 December 2015 was 30% lower than 2014, at 199 (2014: 285). Average total headcount for the year was 227, 34% down on the previous year (2014: 343).

Finance costs

Finance costs halved from the previous year to £0.1m (2014: £0.2m).

(Loss) / Profit before taxation

Loss before taxation for the year before exceptional items was £0.6m (2014: Profit £2.4m). Adjusted EBITDA was (£0.04m), (2014: £3.15m). Adjusted EBITDA is calculated before exceptional items of £5.49m (2014: £1.99m) and a share based payment charge of £0.17m (2014: £0.02m).

Taxation

There was a nil tax charge for the year (2014: £0.5m), giving an effective tax rate of 0% (2014: 100%).

In total, at the reporting date, the Group had unutilised tax losses of £3.9m (2014: £2.4m) available for offset against future profits, for which no deferred tax assets had been recognised.

Dividend

The Board does not propose paying a dividend in respect of 2015 (2015: 4.6p).

Earnings per share

Basic loss per share was 27.52p (2014: 0.42p). Diluted loss per share was 26.12p (2014: 0.41p). Pre exceptional items, basic loss per share was 3.12p (2014: earnings, 8.47p), and diluted loss per share was 2.96p (2014: earnings, 8.25p)

Balance Sheet

Net assets at 31 December 2014 decreased by £6.8m to £18.4m (2014: £25.2m).

The carrying value of goodwill was impaired by £3.5m (2014: £nil) to £10.1m (2014: £13.7m). Impairment charges were taken on software development of £0.4m, which is included in other intangible assets. The cost of the development was not supported by any future economic value to the Group. In addition, on property, plant and equipment, an impairment charge of £0.6m on the leasehold improvements on the two floors sub-let was taken.

Trade and other receivables reduced by 50% to £15.6m (2014: £31.1m). At the end of 2014 there was a delay in payment of £5.0m from a client which resulted in a temporary increase in trade receivables to £16.2m. Trade receivables at the end of 2015 were 60% down on 2014 at £6.4m. The main reasons for the reduction were improved working capital management, lower NFI in 2015 and the receipt of the delayed payment of £5m in early 2015. Days sales outstanding decreased to 22 days (2014: 31 days).

Time worked by contractors for the month of December is accrued on a gross basis in the financial statements, with revenue to be billed included in prepayments and accrued income within current assets, and payments due to contractors included in accruals and deferred income within current liabilities. Fees recognised for permanent placements not yet invoiced or with start dates after 31 December 2015 (forward fees) are also included in prepayments and accrued income. The 38% drop in accrued income to £9.0m (2014: £14.5m) is consistent with the 34% drop in NFI during the year. The slightly higher rate of reduction can be attributed to the increased focus on reducing the time to invoice the client.

Principal risks and uncertainties

Hydrogen does not have any contractual arrangements with any single significant individual or company which are essential to the continuation of the business.

The Board has continued to review the risks and uncertainties affecting the business during 2015. A summary of principal business risks, which include changes in the macro economic climate which could influence recruitment decisions and risks to short term performance, and commentary on any changes to those risks since the year end, will be included in the Annual Report.

The profile of business risks fluctuates from time to time and the actions being taken to manage and control risks are intended to mitigate the effects on the business, but cannot eliminate risks absolutely.

There is a clear framework of authorities within the business, up to and including a schedule of matters which can be agreed only by the Board. The Board has not delegated its responsibility for financial risk management, including the management of treasury activities.

Treasury management and currency risk

Approximately 81% of the Group's revenue in 2015 (2014: 83%) was denominated in Sterling. For contract revenue, the Group aims to pay and bill in the same currency to provide a natural hedge for the majority of its revenues. The Group has not utilised foreign currency options during the year to manage the foreign exchange risk on its non-Sterling fees.

Cash flow and cash position

The Group started 2015 with net debt of £6.7m and was cashflow positive during the year, generating £11.5m from operating activities (2014: £0.2m). There was, however, a delay in a client payment of £5.0m over the 2014 financial year end which, when adjusted for, reduces the £11.4m generated from operating activities to £6.4m.

The cash impact of exceptional items was an outflow of £1.2m (2014: £1.5m).

A final dividend for 2014 of £0.7m was paid in May 2015.

At 31st December 2015 the Group had net cash of £2.6m (2014 net debt: £6.7m).

Bank facilities

The Group has an Invoice Discounting Facility of £18.0m, which was renewed in February 2015 with a commitment to April 2018. The maximum utilisation in 2015 was 54% (2014: 71%).

The Group also had a Revolving Credit Facility ("RCF") of £3.0m, for a three year term to July 2015. In February 2015 the Group repaid and cancelled the RCF as it was surplus to funding requirements.

Reserves

As a result of the Group's trading performance and the exceptional costs incurred during the year the consolidated group balance sheet at 31st December 2015 had negative retained earnings of £2.1m (2014 retained earnings: £4.9m. However, the parent company has retained earnings of £10.0m (2014: £13.5m). 

Ian Temple

Chief Executive

21 March 2016

The Board of Directors announces the following audited results for the year ended 31 December 2015, which were approved by the Board on 21 March 2016.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 31 December 2015

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2015

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2015

1 Basis of preparation

Hydrogen Group plc is the Group's ultimate parent company. The Company is a limited liability company incorporated and domiciled in the United Kingdom. The registered office address and principal place of business is 30 Eastcheap, London, EC3M 1HD, England. Hydrogen Group plc's shares are listed on the AIM Market.

The consolidated financial statements of Hydrogen Group plc have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union and also comply with IFRIC interpretations and Company Law applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention. The Group's accounting policies, as set out below, have been consistently applied to all the periods presented.

The factors considered by the Directors in exercising their judgment of the Group's ability to continue to operate in the foreseeable future are set out in the Annual Report and summarised in the Financial Review. The Group has prepared financial forecasts for the period to 30 June 2017 and the directors have a reasonable expectation that the Group will have sufficient cashflow and available resources to continue operating in the foreseeable future. On these grounds the Board considers it reasonable to continue to adopt the going concern basis for the preparation of the financial statements.

The consolidated financial statements for the year ended 31 December 2015 (including comparatives) are presented in GBP '000, and were approved and authorised for issue by the Board of Directors on 21 March 2016. The full Annual Report and Accounts will be presented at the Company's next Annual General Meeting and will be filed with the Registrar of Companies.

2 Segment reporting

a) Revenue, gross profit and operating profit by discipline

For management purposes, the Group is organised into the following two operating segments:

- Professional Support Services (the operating segment includes legal, finance, business transformation and technology recruitment),

- Technical and Scientific (the operating segment includes oil and gas, power and life sciences recruitment).

The operating segments noted reflect the information that is regularly reviewed by the Group's Chief Operating Decision Maker which is the Board of Hydrogen Group plc. Both of these operating segments have similar economic characteristics. 

Non-allocated costs represent central management costs that are not allocated to operating segments.

Revenue reported above represents revenue generated from external customers. There were no sales between segments in the year (2014: Nil).

The accounting policies of the operating segments are the same as the Group's accounting policies described above. Segment profit represents the profit earned by each segment without allocation of central administration costs, finance costs and finance income.

There is one external customer that represented 32% of the entity's revenues, with revenue of £39.4m, and approximately 16% of the Group's NFI, included in the Professional Support Services segment (2014: one customer, revenue £53.8m, Professional Support Services segment).

(b) Revenue and gross profit by geography:

 (c) Revenue and gross profit by recruitment classification:

The information reviewed by the Chief Operating Decision Maker, or otherwise regularly provided to the Chief Operating Decision Maker, does not include information on total assets and liabilities. The cost to develop this information would be excessive in comparison to the value that would be derived.

3 Finance costs

4 Finance Income

5 Exceptional items

Exceptional items are costs that are separately disclosed due to their material and non-recurring nature. They have arisen as a result of the comprehensive review of the Group's operations and actions taken to reduce the Group's administration costs:

6 Dividends

No interim dividend during the year was paid in respect of the year ended 31 December 2015 (2014: 1.5p per share).

The final dividend in relation to 2014 was recommended on 3 March 2015, and was not recognised as a liability in the year ended 31 December 2014.

The Board does not propose a final dividend for the year ended 31 December 2015 (2014: 3.1p per share).

7 Tax

There has been no deferred tax charge relating to share options charged directly to equity (2014: £3,000) (see note 11).

In total, at the reporting date, the Group had tax losses of £3.9m (2014: £2.4m) available for offset against future profits, for which no deferred tax assets have been recognised.

8 Loss per share

(Loss)/earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue.

Fully diluted (loss)/ earnings per share is calculated by adjusting the weighted average number of ordinary shares by existing share options and share incentive plans, assuming dilution through conversion of all existing options and shares held in share plans.

9 Goodwill

Goodwill arising on business combinations is tested annually for impairment or more frequently if there are indications that the value of goodwill may have been impaired. Goodwill has been tested for impairment by comparing the carrying value with the recoverable amount.

The recoverable amount is determined on a value-in-use basis utilising the value of cash flow projections over eight years, which is estimated by management to be the duration of the recruitment cycle. The first year of the projections is based on detailed budgets prepared as part of the Group's performance and control procedures. Subsequent years are based on extrapolations using the key assumptions listed below. Cash flows are discounted by the cash generating unit's weighted average cost of capital. Management believes that no reasonably possible change to the key assumptions given below would cause the carrying value to materially exceed the recoverable amount.

Management determines that there has been no further impairment in the carrying value of goodwill.

The key assumptions for revenue growth rates and discount rates used in the impairment review are stated below: 

For the purposes of the goodwill impairment review the Board consider it prudent to assume no revenue growth for 2016-23. However, the Group's internal detailed operating budgets do assume net fee income growth of 7% for 2016. Overall growth rate assumptions have not been utilised in generating revenue forecasts.

The revenue growth rates for 2016-23 are the Group's own internal forecasts, supported by external industry reports predicting improving conditions in the industry, with demand for the industry's services anticipated to pick up.

The discount rate used is an estimate of the Group's weighted average cost of capital, based on the risk adjusted average weighted cost of its debt and equity financing.

10 Other intangible assets

Amortisation on intangible assets is charged to Administration expenses in the Consolidated Statement of Comprehensive Income.

11 Property, plant and equipment

Depreciation on property, plant and equipment is charged to Administration expenses in the Consolidated Statement of Comprehensive Income.

The impairment loss on computer and office equipment and leasehold improvements relate to surplus facilities at the Group's Eastcheap premises.

12 Deferred tax

No reversal of deferred tax is expected within the next twelve months (2014: Nil).

In total, at the reporting date, the Group had unutilised tax losses of £3.9m (2014: £2.4m) available for offset against future profits, for which no deferred tax assets had been recognised.

13 Trade and other receivables

As at 31 December 2015, the average credit period taken on sales of recruitment services was 22 days (2014: 31 days) from the date of invoicing, and the receivables are predominantly non-interest bearing. An allowance of £93,000(2014: £109,000) has been made for estimated irrecoverable amounts. Due to the short-term nature of trade and other receivables, the Directors consider that the carrying value approximates to their fair value. Bad debt expense recognised in the year was £48,000 (2014: £102,000).

Accrued income principally comprises accruals for amounts to be billed for contract staff for time worked in December, and amounts to be billed for permanent placements with a start date in 2016. Other receivables due after more than 12 months are predominantly rental deposits on leasehold properties.

The Group does not provide against receivables solely on the basis of the age of the debt, as experience has demonstrated that this is not a reliable indicator of recoverability. The Group provides fully against all receivables where it has positive evidence that the amount is not recoverable.

The Group uses an external credit scoring system to assess the creditworthiness of new customers. The Group supplies mainly FTSE 100 and other major companies and major professional partnerships.

Included in the Group's trade receivable balances are receivables with a carrying amount of £1.2m (2014: £6.5m) which are past due date at the reporting date for which the Group has not provided as the amounts are still considered recoverable. The Group does not hold any collateral over these balances.

In determining the recoverability of trade receivables the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The Directors believe that there is no further credit provision required.

There are no individually impaired trade receivables that have been placed in administration or liquidation included in the allowance for doubtful debts. (2014: £nil).

As at 31 December trade receivables to a value of £3.4m were subject to an invoice financing facility (2014: £9.3m).

14 Cash and cash equivalents

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less, less bank overdrafts repayable on demand. The carrying amount of these assets approximates their fair value.

15 Trade and other payables

Accruals principally comprise accruals for amounts owed to contract staff for time worked in December.

The average credit period taken on trade purchases, excluding contract staff costs, by the Group is 29 days (2014: 13 days), based on the average daily amount invoiced by suppliers. Interest is charged by suppliers at various rates on payables not settled within terms. The Group has procedures to ensure that payables are paid to terms wherever possible. Due to the short-term nature of trade and other payables, the Directors consider that the carrying value approximates to their fair value.

16 Borrowings

All borrowing is at floating interest rates. Interest on the invoice discounting facility is charged at 1.7% over UK Base Rate on actual amounts drawn down, and the margin is fixed to April 2018. The weighted average interest rate for the year charged on amounts drawn down on invoice discounting was 1.7% (2014: 2.35%).

In September 2012 the Group agreed a £3.0 million revolving credit facility (RCF) with its bankers for a three year period. The facility was repaid and cancelled in February 2015.