NAK.L Regulatory News (NAK)

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014 ("MAR")

 14 December 2020

 Nakama Group plc

("Nakama" or the "Company")

Final results for the year ended 31 March 2020

Nakama (AIM:NAK) announces its final audited results for the year ended 31 March 2020, together with the publication of its annual report and accounts (the "Annual Report").

The Company will post the Annual Report to shareholders this week and make a copy available on its website www.nakamagroupplc.com.

Financial Overview

· Group revenue decreased by 27.5 per cent. to £9.7m (2019: £13.4m)

· Net fee income reduced by 29.5 per cent. to £2.9m (2019: £4.1m)

· Net fee income percentage decreased to 30.0 per cent. (2019: 30.8 per cent.)

· Operating profit moved to a loss of £182,000 (2019: profit £91,000)

Enquiries:

CHAIRMAN'S STATEMENT

Chairman

11 December 2020

CEO'S STATEMENT

* EBITDA - Earnings before interest, tax, depreciation and amortization

Nakama Singapore had a satisfactory H1, however, H2 saw a dramatic decrease in activity and revenues and as such management changes were needed. Unfortunately, the replacement MD took office at the outset of COVID 19 and as such has had a limited amount of time to re-grow the business.

Highams continued to trade in line with expectations but was impacted by the onset (now deferred) of changes to IR35. This had an immediate impact on our contractor revenue base.

As mentioned in previous market updates, the onset of COVID-19 had an immediate and material impact on the Group's trading in Q1 2020 especially in APAC. This combined with the proposed changes to IR35 (later revised) saw the Group's revenue decrease almost immediately, particularly in Hong Kong and Singapore.

Furthermore, the impact of BREXIT negotiations has also seen client confidence reduce during 2020 and this has had an impact on volumes of business particularly in Highams.

Robert Thesiger

Chief Executive Officer

11 December 2020

The independent auditor's report in the Annual Report contains a section regarding material uncertainty related to going concern, which is reproduced below.

In forming our opinion on the financial statements we have considered the adequacy of the disclosures made in the financial statements concerning the Company's and Group's ability to continue as a going concern. We draw your attention to the Group's Strategic Report and Note 2 to the financial statements (The "Going Concern" wording from Note 2 in the Annual Report is reproduced in full at the start of the Notes section of this announcement) which explain that the Company's and Group's ability to continue as a going concern relies on the proposed sale of the Group's trading businesses to Sanderson Group. The completion of the sale is conditional on the passing by shareholders of a resolution agreeing to the terms and conditions of sale, and there not having occurred any material adverse change in the business, operations, assets, liabilities, financial or trading condition or operating results of the trading businesses, and that the sale will complete by 4 January 2021.

Completion of the sale is inherently uncertain which casts significant doubt on the Group and ability to continue as a going concern. These financial statements do not include the adjustments that would result if the Group and the Parent Company were unable to continue as a going concern. Our opinion is not modified in respect of this matter.

Given the judgements involved in assessing the going concern assertion, we considered going concern to be a Key Audit Matter.

CONSOLIDATED  INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2020

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2020

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 31 MARCH 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2020

NOTES TO THE FINANCIAL STATEMENTS

 A full set of notes to the Financial Statements is included in the Annual Report.

Basis of Preparation

This announcement and the financial information were approved by the Board on 11 December 2020. The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 March 2020 and 31 March 2019. Statutory accounts for the years ended 31 March 2020 and 31 March 2019 have been reported on by the Independent Auditors.

The Independent Auditors' Reports on the Annual Report and Financial Statements for the year ended 31 March 2020 was unqualified, did not contain a statement under 498(2) or 498(3) of the Companies Act 2006, but included a Material Uncertainty Related to Going Concern paragraph, as the group's ability to continue as a going concern relies on the proposed sale of the Group's trading businesses.

The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 March 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 March 2019 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 March 2020 will be delivered to the Registrar in due course.

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), IFRIC interpretations and the parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared under the historical cost convention.

The preparation of Financial Statements in conformity with IFRS require the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial information, including the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

Copies of the statutory accounts for the year ended 31 March 2020 will be posted to all shareholders. Additional copies will be available from the Company Secretary, Nakama Group plc, Bourne House, 475 Godstone Road, Whyteleafe, Surrey, CR3 0BL and will be available to download from the investor relations section on the Company's website www.nakamagroupplc.com.

Going concern

The directors have recently announced the sale of the Group's trading businesses to Sanderson Group as it has become increasingly clear that without an injection of capital the Group may not be able to continue to trade. Further details of the proposed sale are set out in a circular sent to shareholders on 10 December 2020. Should the proposed sale proceed, which is subject to shareholder approval, the Company will because an AIM Rule 15 cash shell. As such, the Company will either be required to make an acquisition or acquisitions constituting a reverse takeover under AIM Rule 14 on or before the date falling six months from the date of becoming a cash shell or be re-admitted to trading on AIM as an investing company under the AIM rules (which requires the raised of at least £6m million) failing which, the Ordinary Shares, would then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM would be cancelled six months from the date of any suspension should the suspension not have been lifted beforehand.

Should the sale of the trading businesses not proceed, the directors believe that without additional funding and a material improvement in market conditions it will not be possible to grow the trading businesses further or to maintain the Group as a going concern. Should the sale of the Trading Businesses not proceed, the Directors believe they will be forced to take steps to protect the interests of the Group's creditors. However, the directors are confident that the proposed sale will proceed and subsequently the Company will make an acquisition and therefore they continue to adopt the going concern basis of accounting in preparing the financial statements.

Operating segments are reported on a geographical basis.

The Group has two main reportable segments based on the location revenue is derived from:

• Asia Pacific - This segment includes Australia (discontinued), Hong Kong and Singapore.

• UK - The UK segment includes candidates placed in the UK and Europe.

These segments are monitored by the Board of Directors and are reported in a manner consistent with the internal reporting provided to them. The Board of Directors are considered to be the chief operating decision makers. All revenue is derived from the supply of recruitment and human resource services.

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that, although supplying the same product offerings, 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 accounts policies of the operating segments are the same as those described in the summary of significant accounting policies.

The Group evaluates performance on the basis of profit or loss from operations before tax not including overhead costs incurred by the head office such as plc AIM related costs not recharged, exceptional items, amortisation and share based payments.

The Board does not review assets and liabilities by segment.

The Group makes sales to Europe and Asia. Operations in USA and Australia have been discontinued. All revenue is derived from the provision of services. An analysis of sales revenue by country is given below:

There was one client in the United Kingdom who accounted for £1.4 million or 14% of Group revenue (2019: £2.3 million: 17%).

The profit/(loss) on ordinary activities before taxation is stated after charging:

The analysis of auditor's remuneration is as follows:

The relationship between the expected tax expense based on the effective tax rate of the Group at 19% (2019: 19%) and the tax expense actually recognised in the income statement can be reconciled as follows:

The weighted average number of shares excludes 183,953 (2019: 183,953) shares held by the Employee Share Benefit Trust.

* No diluted earnings per share is shown where the effect would be anti-dilutive.

All amounts are receivable within one year. The carrying value of trade receivables is considered a reasonable approximation of fair value. All of the receivables have been reviewed for indicators of impairment and no provision (2019: £nil) has been considered necessary. Some of the receivables are past due as at the reporting date. The age of trade receivables past due but not impaired is as follows:

All amounts are payable within one year. The carrying values are considered to be a reasonable approximation of fair value. The contractual maturity trade payables are as follows:

At the time of signing these financial statements, there is an ongoing claim for the repayment of intercompany balances with Nakama Sydney. The group has obtained professional opinion and been advised that the amount is not due. Consequently, no provision has been included within these financial statements. All other financial liabilities including borrowings are repayable on demand.

The Group has confidential invoice discounting facilities of £2,500,000 (2019: £2,500,000). The facilities are secured by cross guarantees and debentures. The carrying values are to be considered to be a reasonable approximation of fair value. All the borrowings relate to the UK operations.

At the time of signing these financial statements, there is an ongoing claim for the repayment of intercompany balances with Nakama Sydney. The group has obtained professional opinion and been advised that the amount is not due. Consequently, no provision has been included within these financial statements.

The company has been affected post year end by the Coronavirus pandemic and there is a proposed sale of the trading businesses.