Norman Broadb Regulatory News (NBB)

Norman Broadbent plc

("Norman Broadbent" or "the Company")

Norman Broadbent plc, a leading provider of executive search, and leadership consultancy services, today announces its audited results for the year ended 31 December 2011.

Financial highlights

·; Revenue increased to £6.9 million from £6.11 million for the year ended 31 December 2010, an increase of 13 per cent

·; Operating profit of £0.3 million before restructuring costs, compared with £0.37 million in 2010

·; Investment of £0.8 million in restructuring costs during 2011 to re-configure UK search practice

Share placing and financial position

·; £1.75 million raised in May 2011 through a placing of 2,692,308 new ordinary shares at 65p per share

·; Addition of new institutional investors to the Company's share register following the placing

·; Funds being used for strategic growth

·; Equity shareholders' funds increased to £2.29 million (2010: £0.98 million)

·; New, substantially increased, invoice-discounting facilities put in place during 2011

Operational highlights

·; 10 senior appointments in the UK search practice, including three managing directors and the establishment of a dedicated board practice

·; Business repositioned to a tier 1 firm under Sue O'Brien, UK CEO

·; Singapore and United States subsidiaries established (Q1 2012)

·; Additional offices opened in Latin America and Tunisia through our international licence partners

·; Jock Lennox appointed chairman of HADIL, the Company's board assessment and evaluation subsidiary

·; Interim joint venture established with Alium Partners

·; Satisfactory results from the Company's international licence partners

·; Discussions continuing on French and German openings, although market uncertainty makes the Company cautious in the short term

·; Strong new client wins in 2011, an increase of 52 per cent over 2010

·; Despite the consultant re-structuring in the year, retention of existing clients remains strong

Pierce Casey, Executive Chairman of Norman Broadbent, said:

"During 2011 the executive search consultant team in London was re-structured substantially, coupled with the formation of a new board practice. The rapport within the re-structured team has been very encouraging with a marked increase in new clients alongside strong retention within our established client base.

"We are very pleased with our international expansion with new subsidiaries in Singapore and the United States and, through our licence partners, new offices in Latin America and North Africa.

"Core UK search revenues were up 16 per cent in Q1 2012 as compared with Q1 2011 in a tough market which is encouraging."

For further information please contact:

Norman Broadbent plc 020 7484 0000

Pierce Casey/Sue O'Brien/Ben Felton

Merchant Securities Limited 020 7628 2200

Simon Clements/Virginia Bull

Pelham Bell Pottinger

Damian Beeley 020 7861 3139

07950 481795

dbeeley@pelhambellpottinger.co.uk

Stephanie Sheffrin 020 7861 3932

ssheffrin@pelhambellpottinger.co.uk

Notes to Editors

Norman Broadbent plc is a leading provider of executive search and leadership consultancy services. It offers board and executive search services, interim management services and leadership consultancy services, such as executive assessment and development, talent management, and executive coaching services. Headquartered in London, the group operates globally and has offices in Amman, Barcelona, Beiruit, Dubai, Dublin, Limassol, Milan, Madrid, Paris, Riyadh, Singapore, Los Angeles, Tunis and Bogota.

For further information visit www.normanbroadbent.com

Chairman's statement

INTRODUCTION

Norman Broadbent plc (the "Company" or the "Group") is a human capital consultancy which operates principally as a global executive search business headquartered in London. In partnership with our licencees we also operate in Spain, Italy, the Middle East and North Africa. We have recently extended our reach through new subsidiaries in Singapore and the United States. In addition, the Company offers board level coaching and assessment, through our wholly owned subsidiary Human Asset Development International Limited (HADIL). The Company offers a board level interim service in association with our global strategic partner Alium Partners.

Following a share placing in May 2011 raising £1.75 million, the Company embarked on a fundamental restructure and expansion of the core executive search business through the appointment of 10 senior executives, the creation of a new board practice and the development of our board level coaching and assessment business.

Overseas coverage has been increased, resulting in recent (post balance sheet) openings of wholly-owned subsidiaries in the US and of an 80 per cent subsidiary in Singapore in association with our Middle East / North Africa (MENA) licencee. In addition our Spanish licencee has opened an office in Latin America and our MENA licencee has opened an office in Tunisia. The Company is committed to further overseas diversification in line with client demand and on a revenue-led basis.

RESULTS FOR THE FINANCIAL YEAR

The table below summarises the results for the Group:

Revenue for the year rose to £6.9 million, an increase of 13 per cent, while operating profit before the well-flagged restructuring costs (referred to in the Chairman's statement for the six months ended 30 June 2011) was £301,000, reduced from £373,000.

As anticipated, 2011 was a year of significant change in terms of the core London executive search team with 10 new senior appointments, eight of whom joined in the second half of the year. The immediate impact of a substantial number of consultants leaving and joining, on a virtually overlapping basis, is a decline in short term revenue. Therefore, the modest 4 per cent increase in UK Executive Search revenue from £5.72 million to £5.93 million was satisfactory and in-line with our expectations.

In the Chairman's statement for the six months to 30 June 2011, I also stated that "having radically restructured our UK executive search business, albeit at some considerable investment, we are confident that return on this investment will have a significant impact as soon as Q1 2012". I am pleased to report that UK Executive Search revenues have increased 16 per cent in Q1 2012 compared with Q1 2011. This has been achieved in a tough market where other public recruitment companies are facing flat or declining UK revenues.

Our board assessment and evaluation business generated revenues of £591,000 in its first full year which was satisfactory. While the net revenue of the board level interim service was modest at £47,000 it provided additional benefits through our ability to provide a fuller service offering to our clients.

Overseas royalties increased marginally to £333,000, reflecting growth from the Middle East, a small decrease from Spain and flat revenues in Italy. The Company sees North America as a long term core market, best serviced on a subsidiary basis and, in tandem with the incorporation of our US subsidiary, has terminated its small historic relationship in Canada.

In the Chairman's statement for the six months ended 30 June 2011, I reported restructuring costs of £410,000 for that period with an estimated £350,000 for the second half of 2011, making a total of £760,000. The actual annual charge of £802,000 was marginally ahead of that figure.

The operating loss, after the £802,000 restructuring costs, was £501,000 compared with an operating profit of £229,000 last year. The loss after taxation was £561,000 compared with a profit after taxation of £1,071,000 in 2010, which included a one-off gain on disposal of a subsidiary of £837,000.

FINANCIAL POSITION

The consolidated group balance sheet was strengthened during the year by the placing in May of 2.69 million shares at 65 pence each raising £1.75 million for the Company. Consolidated group net assets at 31 December 2011 were £2.29 million (2010: £0.98 million). Cash at bank as at 31 December 2011 was £0.65 million (2010: £0.14 million). During the year, the Company paid £250,000 of deferred consideration, repaid £150,000 of term loans and invested heavily in the planned restructuring, along with upfront investment in the launch of Singapore and the US which took place in 2012.

BUSINESS DEVELOPMENT

During the year our client base diversified and broadened with revenue from new clients representing 54 per cent of turnover compared with 31 per cent in 2010. Included in the new clients were six FTSE 100, and five FTSE 250 companies. Despite the restructuring of our consultant team we have retained our existing client base. This is a tribute both to our long-term team members and the 10 senior executives recruited from tier 1 and strategic boutique search firms during the year. The rapport within the restructured team has been most encouraging.

The introduction of our board practice in September 2011 has been successful both as a stand-alone offering, and as a springboard for our senior executive offering.

We have also strengthened co-operation with our overseas licencees and, following the formation of our new Singapore and US subsidiaries, we are increasingly able to offer our clients global solutions.

We have also put increased emphasis on improved research, "best in class" information technology and focused marketing events in a drive to maximise our business development efforts. The launch of the Norman Broadbent Quarterly Board Index has created an enthusiastic response from clients and journalists alike.

STRATEGY

I set out the Company's Strategy in the Chairman's statement accompanying the results for the six months to 30 June 2011.

Demonstrably, we have made good progress in the past six months including:

̶ Increasing UK search revenue materially in Q1 2012

̶ The expansion of our international network to Latin America

̶ The creation of subsidiaries in Singapore and the US

We are reviewing a number of additional development opportunities with a view to further expanding our search and assessment/coaching offerings in the UK and overseas. We believe that continued internationalisation, coupled with broadened human capital offerings is fundamental to growing substantial shareholder value.

CURRENT TRADING AND OUTLOOK

Our core UK executive search practice increased revenue by 16 per cent in the first quarter to 31 March 2012, compared with the first quarter last year. This level of increased revenue, on a profitable basis, is encouraging.

In common with our industry peer group we find it difficult to predict the timing of a robust recovery in the UK. Consequently we will continue to focus on gaining market share through our experienced consultants delivering a superior service. We will also selectively grow our international business.

Following the completion of the restructure, we anticipate a profitable result for the full year, notwithstanding start-up costs in Singapore and the US.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2011

There are no recognised gains and losses other than as stated above.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2011

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2011

CONSOLIDATED STATEMENT OF CASHFLOWS

For the year ended 31 December 2011

NOTES TO THE FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

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 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 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 2011 or 31 December 2010. Statutory accounts for 31 December 2010 have been delivered to the Registrar of Companies and those for 31 December 2011 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 2011 or for 2010.

Going concern

The Group reported an operating loss in the year to 31 December 2011 of £501,000 compared with an operating profit of £229,000 in 2010. However these losses were primarily driven by one-off planned restructuring costs totalling £802,000, which are not expected to be repeated in 2012. In order to ensure the Group continues to operate as a going concern and to maintain a strong balance sheet the directors took a number of actions in 2011:

·; On 31 May 2011 the Company raised £1,750,000 by the subscription of new equity shares as stated in the Chairman's statement on page 2. The cash was primarily raised to drive profitable growth of the UK Search business through the hiring of Tier 1 search consultants and to fund modest international growth.

·; In June 2011, the Group entered into an agreement with a new commercial finance company providing an improved invoicing discounting facility (facility increased from £700,000 to £1,500,000 with an advance rate of 75% of trade receivables compared with 60% previously). This provided an immediate boost to working capital of £150,000 and most importantly provides the financial headroom to support a significant increase in future trading.

·; The search business employed 10 new senior consultants during the year. They all have proven track records of individually generating revenue levels above the current group average, which is expected to improve both revenue and profit margins.

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. (LOSS) / PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

The Company audit fee in the year was £10,000 (2010: £11,000).  

4. RE-STRUCTURING COSTS

Re-structuring costs include personnel costs relating to the hiring of new consultants, exiting of under-performing staff and external recruitment consultancy costs relating to the new hires.

These items have been highlighted in the consolidated statement of comprehensive income because separate disclosure is considered appropriate in understanding the underlying performance of the business. For the purposes of consistency, similar re-structuring costs incurred in 2010 have been separately identified below and on the face of the consolidated statement of comprehensive income.

5. STAFF COSTS

The emoluments of the directors are disclosed as required by the Companies Act 2006 on page 9 of the Report and Accounts in the Directors' Remuneration Report

6. 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 2011 the Group had capital losses carried forward of £8,130,000 (2010: £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 £10,000,000 (2010: £496,000) trading losses carried forward, which includes £8,987,000 losses transferred from BNB Recruitment Consultancy Ltd in the year. A deferred tax asset of £1,740,000 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:

7. NET FINANCE COST

8. EARNINGS PER SHARE

i) Basic earnings per share

This is calculated by dividing the profit attributable to equity holdersof 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 impairment of intangibles, charges for share based payments and the one-off gain on the disposal of the group subsidiary in 2010. 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 £150,000 (2010: loss of £139,000).

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:

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 (2010: £1,100,000) and cash generated from International Royalties of £650,000 (2010: £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 of the Report and Accounts, 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 2012 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 2011 the recoverable value of the Norman Broadbent CGU is £3,088,000 and Human Asset Development International CGU is £306,000. Return on sales would need to fall below 7% for Norman Broadbent goodwill to be impaired and below 2% for Human Asset Development International goodwill to be impaired.

11. PROPERTY, PLANT AND EQUIPMENT