Norman Broadb Regulatory News (NBB)

For immediate release 3 May 2011

Norman Broadbent plc

("Norman Broadbent" or "the Company")

Final Results for the year ended 31 December 2010

Norman Broadbent plc, a leading provider of executive search, and leadership consultancy services, announces its audited results for the year ended 31 December 2010.

Financial Highlights

·; Revenue increased to £6.1 million (2009: £6 million), with executive search revenues up 9% to £5.7 million (2009: £5.2 million)

·; Profit before tax of £1.0 million including gain on disposal of £0.8 million (2009 : loss of £3.45 million),

·; Operating profit of £229,000 (2009: loss of £3.2 million), after restructuring costs

·; Adjusted earnings per share of 5.69p (2009: loss per share of 56.57p)

·; Restructuring programme implemented in 2009 resulted in a reduction of operating expenditure of 22% to £5.8million (2009: £7.4million)

·; £2m cash raised through equity placement during year

·; Equity shareholders' funds increased to £978,000 (2009: deficit of £2.4million)

Proposed Share Placing Announced Today

·; £1.75m through a proposed placing of 2,692,308 new ordinary shares at 65p per share

·; Additional capital raised will be issued to support growth strategy

·; Subject to shareholder approval at Annual General Meeting

Operational Highlights

·; Transformational year - operational integration of Norman Broadbent and Garner International

·; Revenue per consultant and per assignment increased significantly (consultant headcount of 20 in 2010 compared with 29 in 2009)

·; Acquisition of board assessment, coaching and development business, Human Asset Development International Limited ("HADIL")

·; Andrew Garner, founder of Garner and architect of current group to retire on 30 June 2011

·; Organic strategy to double search revenues by 2014

·; Expansion of HADIL, additional international licensed businesses and new international offices to provide extra growth

Pierce Casey, Executive Chairman, said:

"2010 has been a transformational year for Norman Broadbent which has seen the successful operational integration of the executive search businesses of Norman Broadbent and Garner International under the Norman Broadbent brand, a brand which has 30 years of positive, high profile, board level recognition.

"Trading in the first quarter of 2011 has been both profitable and satisfactory. Notwithstanding the time lag in revenue generation through the active recruitment of new senior executives, the outlook for 2011 as a whole remains positive.

"Longer term, we are committed to creating a top tier executive search business across a variety of territories, in tandem with a broader suite of human capital services, including executive assessment, evaluation, coaching and an enhanced board level interim service."

CHAIRMAN'S STATEMENT

Introduction

2010 has been a transformational year for Norman Broadbent plc ("Norman Broadbent" or "the Company"), which has seen the successful operational integration of the executive search businesses of Norman Broadbent and Garner International ("Garner") under the Norman Broadbent brand, a brand which has 30 years of positive, high profile, board level recognition. The integration of the business has been facilitated and reinforced by the Company's move to a single office in St James's Square, in central London.

In May 2010, the Company was refinanced through the issue of new ordinary shares raising £2.04 million, and a negotiated reduction of £3.5 million in the amount due to the vendors of Norman Broadbent. The year has seen the Company return to profitability with a profit after tax of £1.07 million and an operating profit of £0.23 million, compared to a loss after tax of £3.45 million and an operating loss of £3.2 million in 2009. The operating profit is struck after taking into account the impact of a variety of one-off integration costs.

At present, the Company is predominantly an executive search business with emerging revenue streams in board assessment, evaluation and coaching and board level interim services. In addition, the Company has a number of overseas licence agreements, in Spain, the Middle East, Italy and Canada, which extend the Norman Broadbent reach, creating mutually beneficial search opportunities and a seamless service to an increasing number of global accounts. The international reputation of Norman Broadbent is well regarded, with Krista Walochik, CEO of Norman Broadbent Spain, a board member of the Association of Executive Search Consultants ("AESC"), the global gold standard body in our industry.

With the successful completion of the rebranding, the property move and integration of the search businesses, the Company and its management are now focussed on delivering a strategic growth programme. This will be facilitated by the announcement today of a placing to raise £1.75 million.

Results for 2010

The Company returned to profitability in 2010; the table below summarises the results:

Executive search revenue increased by 9% compared with 2009, notwithstanding the fact that the number of search consultants decreased from 29 in 2009 to 20 in 2010, due to a material increase in revenue per consultant. Moreover, the average fee per assignment increased, and this trend has continued in 2011.

A decline in interim services revenue reflects the decision made in 2009 to cut the Company's exposure to its interim contracting business, which was felt by the board to be excessively cash and capital intensive and a risk in an uncertain market. A revised formula was recently devised whereby the interim contracting services are now supported by operating in partnership with third parties who provide the contracting aspects of the service.

In December 2010, the Company acquired Human Asset Development International Limited ("HADIL"), an experienced board assessment, coaching and development business with a blue chip client base. HADIL's business is an attractive and complementary addition to our portfolio as it is scalable and does not create conflicts of interest with the executive search business. The recent recognition that public and large private companies have an ongoing need to review board structures and maintain robust board assessment and appraisal processes leaves HADIL well placed, as a separately branded entity, to grow its business.

During 2010, the Company incurred a number of non-recurring costs relating to relocation, rebranding and restructuring, together with professional costs associated with the share issue, company general meetings, the renegotiation of the deferred consideration and the reorganisation of the group, including the liquidation of a subsidiary, BNB Recruitment Consultancy Limited ("BNBRC"). The board believes that, in view of these costs, the operating profit of £0.23 million was a creditable performance.

The Company reported basic earnings per share of 20.00 pence in 2010 (2009: loss per share of 146.17 pence). Adjusting for the one-off gain on the liquidation of BNBRC and adding back share based payment and impairment charges, the adjusted earnings per share was 5.69 pence (2009: loss per share of 56.57 pence).

Now that the integration of the businesses has been largely completed we will continue to review our business processes for more operational efficiency. In addition some structural, legacy cost items will be dealt with in 2011 generating further savings, albeit with some associated initial costs.

Financial position

The financial position of the Company improved substantially over the course of 2010 as a result of the share issue of £2.04 million, the reduction in deferred consideration of £3.5 million, the £0.8 million credit associated with the liquidation of BNBRC, and the operating profit recorded for the year. Net assets amounted to £1.0 million as at 31 December 2010, compared to a deficiency of £2.4 million, with net bank debt at £0.7 million.

Board changes and senior management

Andrew Garner, the founder of Garner, who was instrumental in bringing the two companies together, announced his intention to retire earlier this month and he will step down from the board at the forthcoming Annual General Meeting ("AGM") on 31 May 2011. The Board is very grateful to Andrew for his immense contribution since 1997. His foresight in driving the Norman Broadbent acquisition and building a strong robust team to carry on his legacy is a testament to his leadership.

John Bartle CBE has indicated that he also intends to step down at the AGM to pursue his other business and personal interests. John has provided an enormous contribution in his 11 year tenure and the Board wishes him well in the future. 

I became executive chairman on 5 April 2011. Our principal activity, executive search, is managed under the direction of Sue O'Brien, supported by Ben Felton and Jan Cameron as chief financial officer and group services director respectively.

I am pleased to note that we have appointed a number of significant leaders to the search business. David Chancellor, previously head of the board practice at Robert Walters, is heading up a new CFO board practice and Adam Turner, previously a partner at Odgers Berndtson, is leading the Private Equity and Professional Services area.

Along with Sue, the UK executive search senior management team consists of Adam, David and Jerry Daniels, who has led the growth of the technology, media and telecoms area, and we anticipate announcing the recruitment of further senior consultants to augment the board practice in the coming months.

Strategy

The Company is committed to:

·; Organically building the core UK search business. The target is to double the current annual search revenues to £11.5 million by 2014 which, on the newly integrated cost base, should generate significant profits for the Company.

·; Growing the board assessment and development offering through investment in HADIL, continue developing the senior Interim business and identifying appropriate add on human capital investment opportunities

·; Growing the number of members in our international licensed business while working closely with our existing licensees to build on cross sell opportunities

·; Selectively opening a small number of international offices, concentrating on Europe and Asia. 

Proposed share issue

To facilitate the implementation of our growth strategy, the Board has decided to raise £1.75 million through the proposed placing of 2.69 million new ordinary shares at a price of 65 pence, subject to shareholder approval at the AGM. The funds raised from the issue of these shares, combined with a conservative increase in our banking facilities which we anticipate that the placing will release, will provide the capital to implement our strategy.

We are pleased that the placing will strengthen our share register with the introduction of new high quality institutional investors.

We propose to utilise the existing share option scheme to incentivise our current talented executives and employees and key individuals who join the team in the future.

Current trading and outlook

Trading in the first quarter has been both profitable and satisfactory. Notwithstanding the time lag in revenue generation through the active recruitment of new senior executives, the outlook for 2011 as a whole remains positive.

Longer term, we are committed to creating a top tier executive search business across a variety of territories, in tandem with a broader suite of human capital services, including executive assessment, evaluation, coaching and an enhanced board level interim service.

Since rebranding last year we are mindful that the Norman Broadbent brand has broad recognition, not just in London but in Europe and the Far East. We wish to maximise shareholder return through attracting and retaining the best talent to capitalise on our own marque in what is an attractive, high margin business once scale is achieved. 

Consolidated Statement of Comprehensive Income for the year ended 31 December 2010

Consolidated Statement of Financial Position as at 31 December 2010

Statement of Changes in Equity for the year ended 31 December 2010

Consolidated Statement of Cashflows for the year ended 31 December 2010

Notes to the Financial Statements

1. ACCOUNTING POLICIES

Basis of preparation

The consolidated financial statements of "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 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 Company'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 the notes to the Report and Accounts.

The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 December 2010 or 31 December 2009. Statutory accounts for 31 December 2009 have been delivered to the Registrar of Companies and those for 31 December 2010 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis of matter without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2010 or for 2009.

Going Concern

The Group has returned to profitability in the year to 31 December 2010, reporting a modest operating profit of £229,000, compared with an operating loss of £3,197,000 in 2009. The significant losses incurred in 2009 put pressure on the working capital of the Group, however the directors took a number of actions in 2010 to strengthen the balance sheet and ensure that the Group can continue as a going concern:

·; In April 2010 the directors were forced to place one of the subsidiary companies, BNBRC, into liquidation. Although this decision was taken as a last resort it has resulted in a significant reduction in Group liabilities.

·; In May 2010 the directors reached an agreement with the vendor of the Norman Broadbent companies to reduce the total consideration due on the acquisition from £5,500,000 to £2,040,000, of which £1,031,000 has been paid to date. The remaining consideration will be payable in cash instalments totalling £550,000 between 2011 and 2012, with the balance settled by royalties received directly from an overseas licensee. These revised terms have significantly reduced the Group's obligations under the agreement and consequently improved future cash flow resources.

·; On 27 May 2010 the Company raised £2,035,000 by the subscription of new equity shares and as stated in the Chairman's statement, the Company intends to raise a further £1.75 million through the issue of new shares in May 2011, subject to receiving the necessary shareholder approval at the forthcoming AGM. The Company's bankers have also confirmed their intention to extend the Group's facilities through to 31 July 2012.

As a result of the above actions and on consideration of the Group's 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, profit before taxation and net assets/ (liabilities) is set out below:

The unallocated costs refer to central costs of the Group including salaries, professional and other costs, which are not directly attributable to the delivery of the services. The four segments shown represent the management information provided to the Board and in the opinion of the directors reflect the nature of the Group's services.

ii) Geographic Region:

The analysis by geographic region of the Group's turnover, profit before taxation and net assets/ (liabilities) is set out below:

Turnover by location is not materially different from turnover by destination.

3. PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

The Company audit fee in the year was £11,000 (2009: £8,000).  

4. TAX EXPENSE

(i) Tax charged in the income statement

(ii) 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:

(iii) Deferred tax

At 31 December 2010 the Group had capital losses carried forward of £8,130,000 (2009: £6,528,000). A deferred tax asset has not been recognised for the capital losses as the recoverability in the near future is uncertain. The Group is also currently in discussion with HM Revenue & Customs in connection with the recovery of significant tax losses from BNBRC. As neither the quantum of the losses nor the outcome of the discussions is certain, it is not deemed appropriate to disclose a deferred tax asset in these financial statements.

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

5. NET FINANCE COST

6. EARNINGS PER SHARE

i) Basic earnings per share

This iscalculated 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.

The calculations for comparative periods for both basic and diluted losses per share have been restated based on the new consolidated ordinary share capital.

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 impairment of intangibles, charges for share based payments and the one-off gain on the disposal of the group subsidiary. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the Group.

7. 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:

The goodwill attributed to the Norman Broadbent entity can be split into two further CGU's, cash generated from the retained Executive Search business of £1,100,000 (2009: £1,100,000) and cash generated from International Royalties of £650,000 (2009: £650,000).

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 on page 18, 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 approved forecasts for the 2011 financial year.

The key assumption applied to the forecasts for the business is that return on sales is expected to be a minimum of 10% per annum for the foreseeable future. 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%.

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 2010 the recoverable value of the Norman Broadbent CGU is £2,470,000 and HADIL CGU is £270,000. Return on sales would need to fall below 7% for Norman Broadbent goodwill to be impaired and 2% for HADIL goodwill to be impaired.

8. PROPERTY, PLANT AND EQUIPMENT

The Group had no capital commitments as at 31 December 2010 (2009: £Nil).

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

9. INVESTMENTS

* The 50% shareholding in this company is owned by Garner International Limited, a wholly owned subsidiary of the Company.

** The 20% shareholding in this company is owned by Norman Broadbent Overseas Limited, a wholly owned subsidiary of the Company.

10. TRADE AND OTHER RECEIVABLES

As at 31 December 2010, Group trade receivables of £555,000 (2009: £300,000) 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 2010 represents 20.16% (2009: 9.51%) of the total trade receivables balance outstanding.

As at 31 December 2010, Group trade receivables of £145,000 (2009: £142,000) were past their due date and 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.

11. 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.

12. TRADE AND OTHER PAYABLES

Comparative figures have been restated as follows:

·; a £60,000 loan from a shareholder was previously disclosed under 'Directors' loans' in 2009 rather than under 'Other payables'

·; a £12,000 loan from a director was previously disclosed under 'Other payables' in 2009 rather than under 'Directors' loans'.

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.

13. BORROWINGS

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