Norman Broadb Regulatory News (NBB)

NORMAN BROADBENT PLC - Final Results and Annual Accounts

PR Newswire

London, June 2

3 June 2016

Norman Broadbent plc

(“Norman Broadbent” or “the Company” or “the Group”)

Final Results and Annual Accounts

Norman Broadbent, a leading provider of executive search, leadership consultancy and complementary recruitment services is pleased to announce its final results and annual accounts for the year ended 31 December 2015.

All businesses within the Group restructured in 2015

The restructuring forms a key part of continuation of the turnaround strategy

Group operating loss from continued operations decreased to £190,000 (2014: £823,000)

The Group has recorded a small profit in Q1 2016

Group revenue from continuing operations increased by 17% to £8,644,000 (2014: £7,396,000)

Gross profit from continued operations increased marginally to £6,897,000 (2014: £6,884,000)

Operating expenses decreased by 8% to £7,087,000 (2014: £7,707,000)

Growing annuity revenue

Year end cash of £448,000 (2014: £506,000)

Appointment of Mike Brennan as Group CEO in April 2016

For further information please contact:

Norman Broadbent plcScanes Bentley/Mike Brennan/James Webber 020 7484 0000

Allenby Capital LimitedVirginia Bull/Alex Brearley/Simon Clements 020 3328 5656

CHAIRMAN’S REVIEW

INTRODUCTION

Since 2013, Norman Broadbent plc has embarked on a significant restructuring and diversification. During this period gross revenues have increased by 16% from £7.6m in 2013 (£6.6m from continuing operations) to £8.8m in 2015 (£8.6m from continuing operations). Furthermore, the loss for the financial period has decreased from £1.1m in 2013 and £1.7m in 2014, to £0.5m in 2015 (including £0.2m of exceptional items and £0.1m of losses in discontinued operations).

RESULTS FOR THE FINANCIAL YEAR

The table below summarises the results of the Group:

Group revenue from continued operations increased by 17% to £8,644,000 (2014: £7,396,000), with gross profit increasing marginally to £6,897,000 from £6,884,000 in 2014. Group operating losses from continued operations decreased to £190,000 (2014: £823,000) reflecting continued investment in AGP, NBIM and SMS (together, the “New Businesses”). As part of the continued turnaround strategy, all businesses within the Group were restructured during 2015.

The loss after tax, pre-exceptional items and minority interests, was £291,000 (2014: £1,149,000) including £315,000 of losses attributable to the new businesses (2014: £871,000). Note 3 of the Consolidated Financial Statements provides a detailed segmental breakdown of the 2015 Group results.

Norman Broadbent Executive Search (“NBES”) revenue declined by 3% to £4,885,000 (2014: £5,041,000), primarily due to a slowdown in trading in September and October which recovered in November and December. Despite the decline in revenues, NBES still posted a £326,000 profit before tax (2014: £526,000).

Following the restructuring in late 2014 and early 2015, Norman Broadbent Leadership Consulting (“NBLC”) posted a 27% increase in revenues to £601,000 (2014: £473,000). Encouragingly, profit before tax was £70,000 (2014: Loss £142,000). NBLC continues to have a high quality product range which is helping to attract new clients (some via the Norman Broadbent Group) as well as repeat business from existing customers.

AGP, our growing mezzanine-level search business, has been significantly restructured over the last 12 months. Whilst AGP revenues remained similar to the prior year at £993,000 (2014: £1,077,000), encouragingly losses decreased to £100,000 (2014: £531,000).

Overall Social Media Search (“SMS”), our social media recruitment business, had a disappointing 2015 with revenues declining by 30% to £370,000 (2014: £525,000), however the losses have reduced from £314,000 in 2014 to £90,000 in 2015. As a result of the declining revenue, the business was restructured and the core offering refined.

Norman Broadbent Interim Management (“NBIM”), our board level interim proposition, had a disappointing year and was restructured at the end of 2015. The Board continue to see an interim offering as important to our long term growth strategy and are seeking to rebuild the team.

INTERNATIONAL

The Group has closed its operations in both Singapore and the USA. While the Group is now physically UK based (with offices in London & Glasgow), it operates with a global reach. 

LOAN NOTE

In October 2015, the Group announced that it had raised £350,000 through the issue of secured loan notes (“2015 Loan Notes”). Of the £350,000 nominal issued, £200,000 was subscribed for by Downing One VCT plc and PFS Downing UK Micro Cap Growth Fund (together “Downing”) split as to £146,000 and £54,000 respectively, with the remaining £150,000 being subscribed for by Moulton Goodies Limited, a company beneficially owned by Jon Moulton. The 2015 Loan Notes are repayable on 31 October 2017 and bear interest at 12 per cent. per annum which is payable in cash, quarterly in arrears. The proceeds of the 2015 Loan Notes have been used for working capital purposes, including continued restructuring associated costs.

FINANCIAL POSITION

As at 31 December 2015, consolidated net assets were £1,205,000 (2014: £1,690,000) with net current assets decreasing to £166,000 from £278,000 in 2014. Group cash amounted to £448,000 (2014: £506,000).

Net cash outflow from operations in 2015 was £590,000 (2014: £453,000). The losses arising from the development of AGP, NBIM and SMS resulted in a cash outflow of £315,000. Net cash inflow from financing activities amounted to £595,000 (2014: £358,000) relating primarily to the net funds received from the 2015 Loan Notes.

At 31 December 2015, the Group had a £350,000 loan note (2014: £0) and £918,000 of funds drawn down against the revolving invoice discounting facility (2014: £673,000) against UK trade receivables of £1,264,000 (2014: £999,000).

NEW MANAGEMENT

As highlighted in the 2015 interim results, during 2015 Pierce Casey, Sue O’Brien, Bruce Lakefield and Jan Cameron left the Company and PLC Board. I was appointed Executive Chairman in July 2015 and in support of our growth plan the Board has been seeking a Group CEO.

I am both pleased and excited that Mike Brennan joined the Company as Group CEO in April 2016. Mike has over 20 years’ experience within the global executive recruitment market and more recently in the broader Recruitment Process Outsourcing (“RPO”) markets. Most recently Mike worked at Alexander Mann Solutions Limited (“AMS”), gaining valuable RPO experience across a number of sectors and geographies. In 1994, Mike founded Alexander Mann Financial Markets Limited (“AMFM”), with investor backing from Alexander Mann Group Limited (“AMG”), selling his 50% stake to AMG in 1997. Following the sale Mike continued as a Managing Director with AMFM, and in 2006 led the sale of AMFM (latterly branded Akamai Financial Markets Limited) to Hat Pin plc (“Hat Pin”) on behalf of Advent International Corporation and AMG. Following the sale Mike briefly served as a director of Hat Pin before co-founding Human Capital Resources plc (“HCR”) serving as CEO. Mike subsequently re-joined AMS in 2013.

CURRENT TRADING

I am pleased to report that in the first quarter of 2016 the Group made a small profit. The Board, now strengthened with Mike Brennan as Group CEO, is encouraged by the progress being made by what is now a more streamlined and focussed Group.

SCANES BENTLEY

Non-Executive Chairman

STRATEGIC REPORT

THE BUSINESS MODEL

Norman Broadbent plc is a human capital consulting group which provides a broad range of people solutions including board and executive search, senior interim management, leadership consulting and assessment, executive RPO and mezzanine level search, social media consulting and research.

The Group operates through independently managed and separately branded businesses which trade independently but collectively share a set of core behavioural and brand values.

STRATEGY AND OBJECTIVES

The core elements of the Group’s strategy are:

To develop a diversified group of complementary, human capital businesses.

To continue building the core Norman Broadbent UK search business through the hiring of Tier 1 search professionals.

To further develop the Norman Broadbent brand, through organic growth and acquisition.

RESULTS FOR THE FINANCIAL YEAR

Group revenue from continued operations increased in the year by 17% to £8,644,000 (2014: £7,396,000). NBES fees declined by 3% to £4,885,000 (2014: £5,041,000) reflecting a downturn in trading in September and October and the resulting reduction in fee generating headcount. NBLC revenue increased by 27% to £601,000 (2014: £473,000) and revenues from AGP, NBIM and SMS increased to £3,154,000 (2014: £1,806,000).

Operating expenditure decreased by 8% to £7,087,000 (2014: £7,707,000), reflecting the positive impact of the restructuring that took place in all businesses during 2015.

The impact of the New Businesses however has meant that the Group reported an operating loss from continued operations in 2015 of £190,000 (2014: £823,000) and a retained loss, excluding minority interests, of £425,000 (2014: £1,455,000). The executive search business reported a profit before tax of £326,000 (2014: £526,000), NBLC reported a profit before tax of £70,000 (2014: Loss £142,000) and the New Businesses reported a loss of £315,000 (2014: £871,000).

CASH FLOW AND BALANCE SHEET

Net cash outflow from operations in 2015 was £590,000 (2014: £453,000) with the majority of these funds invested in the development of AGP, NBIM and SMS. Group debtor days have increased to 67 days with net trade receivables at the year-end standing at £1,570,000 (2014: £1,339,000). Management continue to monitor this Key Performance Indicator and aim to maintain debtor days at a level which is no higher than 60. However, there is the commercial reality of providing services to large blue chip multinational businesses who often demand payment terms of up to 90 days.

Net cash inflow from financing activities amounted to £595,000 (2014: £358,000) relating primarily to the net funds received from the loan note issue in October 2015. At 31 December 2015, the Group had a £350,000 loan note (2014: £0) and £918,000 of funds drawn down against the revolving invoice discounting facility (2014: £673,000) against UK trade receivables of £1,264,000 (2014: £999,000). 

EARNINGS PER SHARE

The retained loss for 2015 has resulted in a reported loss per share of 2.59 pence (2014: loss per share 9.85 pence). There was no share based payments charge during the year.

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:

* NBES Only

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. As expected, revenues from existing businesses remained relatively flat (NBES & NBLC). Further, given the steady increase in revenues from the new subsidiaries 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 interest rate, liquidity and credit risk. These are monitored regularly by the Board and are disclosed further in notes 2 and 19 of the financial statements.

In October 2015, the Group raised £350,000 through the issue of loan notes to existing institutional shareholders. This debt raise followed successful share placings in November 2014, October 2013, November 2012 and May 2011, raising £500,000, £700,000, £727,000 and £1,750,000 respectively, which have provided the Group with the financing to progress towards its stated objectives.

Business Environment­ – Demand for services is affected by global economic conditions and the level of economic activity in the regions and industries in which the Group operates. When conditions in the global economy deteriorate or economic activity slows, many companies hire fewer permanent employees or rely on internal human resource departments to recruit staff. Whilst there are signs that the global economy is starting to recover, should conditions deteriorate further 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, whilst also extending its services into new geographic regions, where demand for such services are 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

This 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.

SCANES BENTLEY RICHARD ROBINSON

Non-Executive Chairman Company Secretary

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

Re-presented

2014 re-presented to show the discontinued operation separately from continued operations as required by IFRS 5.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2015

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 2015

Re-presented

1. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out in the Report & Annual Accounts. 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 (£000), 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. 

1.2 Going concern

The Group reported an operating loss from continued operations in the year to 31 December 2015 of £0.2m compared with an operating loss of £0.8m in 2014. Although still loss making, 2015 was a further positive step in the turnaround of the Group with the expectation of returning to operating profitability in 2016. Losses in the non-search subsidiaries are dramatically reduced from the c. £1m in 2014, to £0.2m in 2015. Encouragingly both NBES & NBLC had a profitable 2015.

The Consolidated Statement of Financial Position shows a net asset position at 31 December 2015 of £1.2m (2014: £1.7m) with cash at bank of £0.4m (2015: £0.5m). At the date that these financial statements were approved the Group had no overdraft facility and the only debt was the £350k loan note (existing institutional shareholders) 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:

ii) Revenue and gross profit by geography

3. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION

The Company audit fee in the year was £12,500 (2014: £12,000).

4. TAX EXPENSE

(a) Tax charged in the income statement

 (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:

 (c) Deferred tax

At 31 December 2015 the Group had capital losses carried forward of £8,130,000 (2014: £8,130,000). 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 £11,812,042 (2014: £11,531,767) trading losses carried forward, which includes £8,987,000 losses transferred from BNB Recruitment Consultancy Ltd in 2011. A deferred tax asset of £1,355,756 (2014: £1,424,000) 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:

5. NET FINANCE COST

6. NON-RECURRING EXCEPTIONAL ITEMS

Non-recurring exceptional items in 2015 comprised costs and contractual payments incurred by the Group in relation to the restructuring of the Board. This included the retirement of P Casey and S O’Brien and J Cameron leaving the Group. They are highlighted in the consolidated statement of comprehensive income because separate disclosure is considered appropriate in understanding the underlying performance of the business. In 2014, the Group disposed of Norman Broadbent SPRL for £120,000 on 8 May 2014, resulting in a disposal of goodwill of £112,000 in the Consolidated Statement of Financial Position, and a loss on disposal of £128,000 in the Company Statement of Financial Position. On 27 May 2014, the Group sold its 20 % stake in NBS Norman Broadbent SA for £92,000, which completed on 30 July 2014. The sale resulted in an impairment to goodwill of £446,946 in the Consolidated Statement of Financial Position and a profit of £92,000.

7. DISCONTINUED OPERATION

During 2015, the Group ceased its operations in both Singapore and the USA. These two segments were not a discontinued operation or classified as held for sale at 31 December 2014 and the comparative consolidated statement of comprehensive income has been re-presented to show the discontinued operation separately from continued operations.

Re-presented

Effect of disposal on the financial position of the Group

8. 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:

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 two categories of dilutive potential ordinary shares: share options and warrants. For these options and warrants, 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 warrants and 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.

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.

9. 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 £119,000 (2014: £364,000).

10. INTANGIBLE ASSETS

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:

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 2016 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 15% per annum for the foreseeable future (2014: 13%) and 9% for Human Asset Development International (2014: 9%). 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 12% which is the interest rate on the secured loan notes (2014: 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 2015 the recoverable value of the Norman Broadbent CGU is £2,800,000 and the Human Asset Development International CGU is £468,000. Return on sales would need to fall below 7% for the Norman Broadbent goodwill to be impaired and below 4% for Human Asset Development International goodwill to be impaired.

11. PROPERTY, PLANT AND EQUIPMENT

The Group had no capital commitments as at 31 December 2015 (2014: £Nil). 

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

12. INVESTMENTS

In 2012, the Company acquired a 51 % interest in Acker Deboeck and Company for a total consideration of £249,000. The Group disposed of Norman Broadbent SPRL (formally Acker Deboeck and Company) for £120,000 on 8 May 2014 (see note 9). In 2014, the Company disposed of Norman Broadbent SPRL for £120,000 (see note 9).

At 31 December 2015 the Company held the following ownership interests:

* 100 % of the issued share capital of this company is owned by Norman Broadbent Overseas Ltd.

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

13. TRADE AND OTHER RECEIVABLES

As at 31 December 2015, Group trade receivables of £1,111,000 (2014: £995,000) 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:

The largest amount due from a single debtor at 31 December 2015 represents 11% (2014: 8.9%) of the total trade receivables balance outstanding.

As at 31 December 2015, Group trade receivables of £72,000 (2014: £180,000) were past their due date and considered impaired. A provision for impairment for the full amount has been recognised in the financial statements. Movements on the Group’s provision for impairment of trade receivables are as follows:

Other than the impairment provision provided for aged trade receivables above, there are no other material difference between the carrying value and the fair value of the Group’s and parent Company’s trade and other receivables.

14. CASH AND CASH EQUIVALENTS

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.

15. TRADE AND OTHER PAYABLES

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.

16. BORROWINGS

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

a) Invoice discounting facilities:

Norman Broadbent Executive Search Limited, AGP and NBIM 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 £1,500,000. At 31 December 2015, the outstanding balance on the facility of £608,000 (2014: £508,000) was secured by trade receivables of £775,000 (2014: £682,000). Interest is charged on the drawn down funds at a rate of 2.50% (2014: 2.50%) above the bank base rate.

AGP (NB) Limited:

Funds are available to be drawn down at an advance rate of 75% against trade receivables of AGP (NB) Limited that are aged less than 120 days, with the facility capped at £750,000. At 31 December 2015, the outstanding balance on the facility of £186,000 (2014: £45,000) was secured by trade receivables of £264,000 (2014: £126,000). Interest is charged on the drawn down funds at a rate of 2.75% (2014: 2.75%) above the bank base rate.

Norman Broadbent Interim Management Limited:

Funds are available to be drawn down at an advance rate of 90% against trade receivables of Norman Broadbent Interim Management Limited that are aged less than 120 days, with the facility capped at £750,000. At 31 December 2015, the outstanding balance on the facility of £124,000 (2014: £120,000) was secured by trade receivables of £225,000 (2014: £191,000). Interest is charged on the drawn down funds at a rate of 2.75% (2014: 2.75%) above the bank base rate.

b) Secured Loan Notes

The 2015 Loan Notes will be repayable on 31 October 2017 and bear interest at 12 per cent per annum which is payable in cash, quarterly in arrears. The loan notes are secured via a second floating charge over the property or undertakings of the Company.

17. FINANCIAL INSTRUMENTS

The principle 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.

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 Note 2.

18. SHARE BASED PAYMENTS18.1 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 ten years.

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

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

Out of the 337,944 outstanding options (2014: 731,213), no options were exercisable at the year end (2014: None) as they were all ‘underwater’.

The weighted average fair value of the share options granted in 2013, determined using the Trinomial Valuation Model, was 23.8 pence (options granted in 2011: 37.5 pence and options granted in 2010: 21.3 pence). The significant inputs into the model were weighted average share price of 42.5 pence at the grant date (2011: 65.5 pence and 2010: 52.5 pence), exercise price shown above, volatility of 75% (2011 and 2010: 75%), dividend yield of 0% (2011 and 2010: 0%), an expected option life of 10 years (2011 and 2010: 10 years) and an annual risk-free interest rate of 3.38% (2011: 3.38% and 2010: 3.65%). 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.

19. 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 £169,000 (2014: £210,000). At the year end £7,000 of contributions were outstanding (2014: £12,000).

20. RELATED PARTY TRANSACTIONS

The following transactions were carried out with related parties:

Purchase of services:

During the year Adelaide Capital Limited invoiced the Group for the directors’ fees of P Casey £20,000, and £125,000 in relation to contractual payments due on leaving the Company (2014 total: £50,000). P Casey is a director of Adelaide Capital Limited. Brian Stephens & Company Ltd invoiced the Group for the directors’ fees of B Stephens £20,000, £5,000 consultancy and business related travel costs of £5,000 (2014 total: £30,000). B Stephens is a director of Brian Stephens & Company Ltd.

* The amount paid to Adelaide Capital Limited, a wholly owned company of P Casey, is included in the total sums paid to P Casey of £175,000 for 2015 (see Directors Remuneration Report).

Taxation and company secretarial services of £13,000 (2014: £13,000) were acquired from Anderson Barrowcliff LLP, an accountancy firm of which R Robinson was a partner during the year. The remaining director fees for R Robinson were paid through PAYE £25,000 (2014 total: £33,000). Consultancy services were acquired from Scanes Bentley & Associates Ltd, S Bentley is a director of Scanes Bentley & Associates Ltd. During the year the Group acquired research services from Connecting Corporates Limited £35,000 (2014: £24,000). The Group owns a 51% stake in Connecting Corporates Limited.

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

Sale of services

In the prior year the Group invoiced NBS Norman Broadbent SA for royalty income £76,000. The Group sold its 20% stake in NBS Norman Broadbent SA during 2014. During the year the Group recharged group services incurred for the benefit of Connecting Corporates Limited to Connecting Corporates Limited at cost £17,000 (2014: £13,000).

All related party transactions took place at “arms-length”.

Provision of loans

During the year the Group provided additional loans of £40,000 to Connecting Corporates Limited to support working capital requirements of this company (2014: £305,000). The loans are non-interest bearing and are repayable on demand. At the year end, £345,000 (2014: £305,000) was outstanding and due to the Group.

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.

Year-end payables arising from the purchases of services:

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

Year-end receivables arising from the sale of services:

Receivables owed by related parties arise from sales transactions and are due one month after date of purchase. Payables bear no interest.

26. 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 £211,000 (2014: £67,000).

AVAILIBILITY OF ACCOUNTS 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 today and will shortly be available to view on the Company's website (www.normanbroadbent.com/information/investor-relations).

Notice is hereby given that the 77th Annual General Meeting (“AGM”) of Norman Broadbent plc will be held at 11am at the Royal Automobile Club, 89 Pall Mall, London, SW1Y 5HS on 29 June 2016.