Norman Broadb Regulatory News (NBB)

Norman Broadbent plc

("Norman Broadbent", the "Company" or the "Group")

FINAL RESULTS

Norman Broadbent (AIM: NBB), a leading London quoted Executive Search and Interim Management firm offering a diversified portfolio of integrated Leadership Acquisition & Advisory Services, is pleased to announce its audited final results for the year ended 31 December 2022 ("FY22").

FINANCIAL HIGHLIGHTS

• Organic revenue growth of 33% to (£8.70 million) (2021: £6.55 million). Search revenue increased year-on-year by 30.9%, and interim revenue by 49.8% with focus on delivering core services 

• Net Fee Income ('NFI') grew by 25% to £7.35 million (2021: £5.86 million)

• Positive underlying EBITDA1 of £93,000, up £396,000 (2021: LBITDA of £303,000)

• Improvement in debtor days to 56 (2021: 66 days)

• At 31 December 2022, £483,000 (2021: £952,000) of funds drawn down against the Company's revolving invoice discounting facility against UK trade receivables of £2,133,000 (2021: £1,732,000)

• Group cash at 31 December 2022 £50,000 (2021: £459,000). Net cash outflow from operations in 2022 reduced to £33,000 (2021 outflow: £446,000)

STRATEGIC HIGHLIGHTS

• Reset and reinforced values and performance-based culture whilst substantially growing fee generating and research headcount in both search and senior interim leadership

• Average fees up 50% over the previous year

• Investment in upgrading marketing team and brand refresh to reflect our modern and dynamic business

• Expanded and developed research and delivery team to improve capability and capacity through improved processes and support technologies

• Platform now in place to fuel and support accelerated growth

The Company's Annual Report and Accounts will be available later today on the Company's website, https://www.normanbroadbent.com/company-documents/

Kevin Davidson, Group CEO of Norman Broadbent plc said:

"I am delighted with the dedication of the entire team with FY22 representing a turning point in the performance of the business bringing it back to pre-pandemic levels with considerable forward momentum. A refreshed culture based on values and performance with a substantially larger fee generating and support team along with investments in new technology, business processes and a greatly enhanced brand image, reflected through our new logo, website and collateral, coalesce to form a very strong platform and engine for future growth, both organic and inorganic

With average fee levels up 50% within FY22, Norman Broadbent is rapidly re-establishing its position at the senior end of the executive search and interim management industry, realigning with the brands incredibly strong and trusted heritage."

[1]Underlying EBITDA excludes share based payment charges

For further Information, please contact:

Norman Broadbent plc   020 7484 0000

Kevin Davidson, CEO

Mehr Malik, CFO

Shore Capital (Nominated Adviser and Broker) 020 7408 4090

Tom Griffiths / Tom Knibbs (Corporate Advisory)

Henry Willcocks (Corporate Broking)

CHAIRMAN'S STATEMENT

Since my appointment as Chair in June 2021, the Company has undergone significant and very positive change which has put it back onto a path of profitable growth.

Following the subsequent arrival of Kevin Davidson as CEO in September 2021 and the appointment of Mehr Malik as CFO in January 2023, an exceptional leadership team has been appointed. Huge steps forward have been made in defining our culture, growing the headcount with quality hires and creating a clear vision for the future.

This has translated into significant business growth and positive underlying EBITDA in 2022. 

A culture of genuine inclusion with a focus on Equality, Diversity and Inclusion (ED&I) and an unwavering commitment to customer service and delivery has been installed. The client facing team has been enhanced by a significant number of experienced new hires and the research team has been expanded to keep pace.

I am extremely pleased with the ongoing performance of the new team and their actions to date. There is a palpable shift in energy and optimism across the business and the future is exciting.

The Board's strategy for sustainably profitable expansion has been vindicated and will be continued through the remainder of 2023 and into 2024.

Pleasingly, the Company's accelerated growth continued in the first quarter of 2023 both at the top and bottom lines. With a number of new hires still to join, we expect this trend to continue for the remaining quarters of the year.

I would like to thank the entire team for their unwavering commitment, our clients for partnering with us and our shareholders for their continued support.

Peter Searle

Chair

30th May 2023

CEO's REVIEW

RESULTS FOR THE YEAR

The table below summarises the Group's results:

2022 was a pivotal year in the turnaround of Norman Broadbent. Our strategic objective was to establish the platform necessary to support and accelerate sustainable growth, whilst also delivering improved revenues and to report a positive underlying EBITDA1 for the year. I am delighted that all of these objectives were met and, with considerable forward momentum taking us into 2023, I am confident that we have the business back on a very positive trajectory.

Net Fee Income ('NFI') in 2022 grew by 25% to £7.347 million (2021: £5.859 million) and the Company generated underlying EBITDA1 of £93,000 which represents a positive swing of £396,000 (2021: LBITDA of £303,000). The strategic pillars of the business were all appropriately redefined and considerably strengthened during 2022. This refreshed platform will drive and support the Company's rapid growth projections, organically and inorganically, should appropriate opportunities arise.

The 5 strategic priorities for the year ahead continue to be the following:

CULTURE

Culture is the fundamental building block of any organisation, necessary to drive performance, improve employee retention and attraction, and deliver positive outcomes for all stakeholders. We have invested heavily in the culture reset which was necessary towards the end of 2021 and the beginning of 2022. We have now established a values driven, ambitious, collaborative and growth oriented culture, underpinned by trust and a commitment to exceptional performance.

Following this reset, we undertook independent quarterly employee engagement surveys throughout 2022, with the results showing an 'engaged' or 'highly engaged' workforce in every period. Our results were consistently above average for businesses of a similar size.

Furthermore, we had virtually zero regretted leavers in 2022 whilst recruiting 17 very high calibre and culturally aligned colleagues across fee generation, research and marketing.

1 Underlying EBITDA excludes share based payment charges

MARKET POSITIONING

The level of mandates in terms of both seniority and fee levels has grown consistently throughout 2022 which is demonstrated by our average fee levels having increased by 50% during the year. This was a clear mission that we set when I joined the Company and a necessary journey that we are on in re-establishing Norman Broadbent as the pre-eminent executive search and interim leadership partner across our chosen markets. Our board practice also delivered a growing number of high-quality mandates throughout the year across plc, the private (private equity and family owned) and public sectors - a trend which is reflective of our brand elevation and supportive of our future ambitions.

We recruited an experienced Head of Marketing & Business Development in the summer of 2022 and following the culture reset, refreshed the Company's logo, redesigned the website and all collateral to better represent the modern, dynamic and values-based consultancy which we are. We are also investing in software and staff training to ensure that we have the capacity, without compromising the high levels of quality, necessary to support the rapid increase in demand for client materials.

RESEARCH AND DELIVERY 

In 2022, the research team more than doubled in size and a new breed of Principals was recruited and developed who are capable of handling complex project management and delivery tasks, thereby freeing up fee generating capacity. In addition, the Company invested in a new CRM and assignment management software platform to support improvements in internal processes.

As a result of investments in our team and processes, the productivity, quality and consistency of our research function has improved considerably and we are now in a position to scale much more smoothly and effectively given the more defined processes, divisions of labour and career paths adopted.

The appointment of a Chief Operating Officer to drive improvements in service levels, productivity and consistency across the organisation delivered considerable value in 2022 with a number of further strengthening initiatives underway for 2023.

FINANCIAL STABILITY AND PERFORMANCE

In 2022, net cash outflow from operating activities was closer to neutral with a net outflow of £33,000 representing an improvement of £413,000 (2021 outflow: £446,000). Our focus in the year has been on improving working capital management; which continues into 2023.

As at 31 December 2022, the Group had consolidated net assets of £670,000 (2021: £836,000) with £483,000 (2021: £952,000) of funds drawn down against the revolving invoice discounting facility against UK trade receivables of £2,133,000 (2021: £1,732,000).

Whilst investing in growth, we have been disciplined over costs and I am delighted that in December 2022 we were able to sub-let some space in the London office to absorb some of the overcapacity. The income from this entirely offsets the ongoing costs associated with the new Aberdeen and Edinburgh offices which were opened in August 2022 and October 2022 respectively.

We have an excellent new CFO in Mehr Malik who joined on 16 January 2023 and is having an immediate impact. Under her stewardship, in 2023, the support and finance functions will be modernised with better use of technology to ensure the platform is efficient and scalable.

BUSINESS FOCUS

Whilst continuing to offer a full range of leadership advisory services, the Company has had a clear focus on its executive search brand and re-establishing its position at the forefront of this increasingly fragmented market. Norman Broadbent is still recognised as a leader in the field of executive search but, in recent years one which had dropped off the radar of many. Executive search will continue to be the core of the business as we also grow interim management (represented 21% of NFI in 2022) and our other leadership advisory service offerings.

The fee generation hires made in 2022 meaningfully expand the Company's position in the following sectors: Industrial, Retail & Consumer, Private Equity/Venture Capital, HR, Legal and Change & Transformation across executive search and senior interim management.

During 2022, Norman Broadbent placed leaders across the UK, Europe, the US and Middle East. Placements were also made in Asia and leadership advisory projects completed in Africa. The Company has established itself on a number of Preferred Supplier Lists ('PSLs') with substantial blue-chip clients operating internationally, especially in the Natural Resources and burgeoning Energy sectors. Norman Broadbent has a considerable track record across these value chains from nuclear and conventional hydrocarbon through energy transition to renewables of all descriptions, including wind, solar, carbon capture and storage and the emerging hydrogen economy. Working with asset owners, developers, constructors, equipment and service providers, technology innovators and investors, the Company is well placed to capitalise on the continued and forecast buoyancy of each of these sectors.

Our growing Retail & Consumer practice is also well positioned with particular strength and brand recognition across procurement, supply chain and commercial leadership where there is considerable focus throughout the industry with associated investment. The Company has also secured a position on a number of significant PSLs in this sector and is leveraging its deep functional expertise to support a broad range of executive search and interim leadership requirements across the market.

CURRENT TRADING AND OUTLOOK

Norman Broadbent is very much back on track compared to where the business has been for a number of years. We have ambitious, but achievable organic growth targets over the next couple of years which we are confident will double NFI to £15 million by 2025. The Board continues to focus on overheads and productivity improvements as the Company grows which will enable it to deliver a target EBITDA of £1.25 million in 2025 as growth becomes ever more accretive through seniority of mandates, economies of scale and efficiency improvements. The lease on the Company's London office ends in September 2024. This should enable the Company to seamlessly relocate to a more appropriately sized and better located office, suitable for modern working practices by late 2024. The Board anticipates office relocation would provide annual cost savings.

The previously announced regional growth in Scotland is progressing well with a team leader appointed and an established team of six seasoned executive search and interim management professionals hired. The Edinburgh and Aberdeen offices are now open and, adding to the Company's existing locations in London and Knutsford, these will provide excellent national coverage in major decision making and HQ hubs. As our work overseas continues to grow, it remains our intention to establish international offices in order to better capitalise on our expanding track record and client network.

The Company is managing its resources carefully in order to strike the optimal balance between pace of organic growth, short-term profitability and cash generation. As the business is now on a more stable footing and sustainable growth trajectory, corporate development activity will be increased in 2023 to identify and assess the potential for smaller, strategic acquisitions and large-scale transformational opportunities in the future.

The Board continues to monitor carefully the evolving macro-economic climate and believes that the Company is well positioned in stable and growing markets, notably across Industrials and, in particular, Energy, Power, Chemicals, Transport & Infrastructure, including Civil Aviation. All of these sectors continue to attract significant capital investment whilst also experiencing extreme imbalances in the supply of, and demand for, senior leadership talent. The Company is also effectively leveraging its functional expertise across these markets, particularly in Digital & Tech, Finance, Change & Transformation, HR and Legal.

Norman Broadbent plc is looking to the future with confidence. There are clearly macro-economic headwinds which we are monitoring carefully, but with a heavy bias towards growing and counter-cyclical sectors, a refreshed culture, an absolute focus on quality and the ongoing attraction of exceptionally talented and dedicated colleagues, the Board is confident that the Company can continue to grow rapidly whilst also delivering positive and sustainable EBITDA.

SUMMARY

2022 marked the beginning of the turnaround of Norman Broadbent plc; returning to pre-pandemic levels, delivering 25% growth in NFI and a positive underlying EBITDA1 with very strong forward momentum into 2023. 

With the team, culture, tools and processes in place to re-establish our place at the forefront of the executive search and interim leadership market, the Board is looking to the future with great optimism and excitement.

Kevin Davidson

Group Chief Executive

30th May 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2022

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 31 December 2022

These financial statements were approved by the Board of Directors on 30th May, 2023

Signed on behalf of the Board of Directors

K Davidson

Director

Company No 00318267

` CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2022

CONSOLIDATED GROUP

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 and credits for share based payments.

CONSOLIDATED STATEMENT OF CASH FLOWFor the year ended 31 December 2022

Note(i) Reconciliation of operating profit / (loss) to net cash from operating activities

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2022

1. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below. 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" ,"the Company" or "the Group") have been prepared in accordance with International Financial Reporting Standards as adopted by the UK (IFRS as adopted by the UK), 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 1.20.

1.1.1 GOING CONCERN

The Group reported an operating loss from continued operations in the year to 31 December 2022 of £0.3m compared with an operating loss of £0.6m in 2021. Consolidated net current liabilities are £0.3m (2021: £0.5m).

The Consolidated Statement of Financial Position shows a net asset position at 31 December 2022 of £0.7m (2021: £0.8m) with cash at bank of £0.05m (2021: £0.5m). At the date that these financial statements were approved the Group had no overdraft facility, a CBILS loan of £0.20m and its receivable finance facility (Metrobank) which is 100% secured by the Group's trade receivables. A convertible loan note instrument issued by two major shareholders in May 2022 has provided a further £400,000 of funding.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. In light of the current financial position of the Group and on consideration of the business' forecasts and projections which have taken account of 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.

1.1.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

a) New and amended accounting standards adopted by the Company

There are no new standards impacting the Company that will be adopted in the financial statements for the period ended 31 December 2022, and which have given rise to changes in the Company's accounting policies.

b) Standards, amendments and interpretations to existing standards that are not yet effective and have not yet been adopted early by the Company

c)

There are a number of standards, amendments to standards, and interpretations which have been issued by IASB that are effective in future accounting periods that the Company has decided not to adopt early

The following standards and amendments are effective after 31 December 2022:

• IFRS 17 Insurance Contracts - Applicable to annual reporting periods beginning on or after 1 January 2023

• Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) - Annual reporting periods beginning on or after 1 January 2023

• Amendments to IFRS 17 - Annual reporting periods beginning on or after January 2023

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) - Annual reporting periods beginning on or after 1 January 2023

• Definition of Accounting Estimates (Amendments to IAS 8) - Annual reporting periods beginning on or after 1 January 2023

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) - Annual reporting periods beginning on or after 1 January 2023

The Company is currently assessing the impact of the new accounting standards and amendments. The Company does not believe that these amendments will have a significant impact on the financial statements of the Company.

OTHER

The Company does not expect any other standards issued by IASB, but not yet effective, to have material impact on the Company.

1.2 BASIS OF CONSOLIDATION AND BUSINESS COMBINATIONS

1.2.1 BUSINESS COMBINATIONS

Business combinations are accounted for using the acquisition method as at the acquisition date - i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus

• if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

• the net amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

1.2.2 NON-CONTROLLING INTERESTS

For each business combination, the Group elects to measure any non-controlling interests in the acquiree either at fair value or at their proportionate share of the acquiree's identifiable net assets, which are generally at fair value.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

1.2.3 SUBSIDIARIES

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing if the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated.

1.3 GOODWILL

Goodwill arising on acquisition of subsidiaries is included in the Consolidated Statement of Financial Position as an asset at cost less impairment. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently where there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

1.4 IMPAIRMENT OF NON-FINANCIAL ASSETS

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

1.5 FINANCIAL ASSETS AND LIABILITIES

Financial assets and liabilities are recognised initially at their fair value and are subsequently measured at amortised cost. For trade receivables, trade payables and other short-term financial liabilities this generally equates to original transaction value.

1.6 PROPERTY, PLANT AND EQUIPMENT

The cost of property, plant and equipment is their purchase cost, together with any incidental costs of acquisition.

Depreciation is calculated so as to write off the cost of the assets, less their estimated residual values, over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:

Office and computer equipment - 25% - 50% per annum on cost

Fixtures and fittings - 25% - 33% per annum on cost (or over the life of the lease whichever is shorter)

Land and buildings leasehold - over 3 - 5 years straight line

Right of use asset - straight line over shorter of estimated useful life and lease term

1.7 TRADE RECEIVABLES

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

1.8 CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand and deposits held at call with banks. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

1.9 INVESTMENTS

Investments in subsidiary undertakings are stated at cost less provision for any impairment in value. Investments are tested annually for impairment and whenever events or changes in circumstance indicate that the carrying amount may not be recoverable an impairment loss is recognised immediately for the amount by which the investment's carrying amount exceeds its recoverable value.

1.10 BORROWINGS

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

1.11 INVOICE DISCOUNTING FACILITY

The terms of this arrangement are judged to be such that the risk and rewards of ownership of the trade receivables do not pass to the finance provider. As such the receivables are not derecognised on draw-down of funds against this facility. This facility is recognised as a liability for the amount drawn.

1.12 TRADE PAYABLES

Trade payables are non-interest bearing and are initially recognised at fair value and then subsequently measured at amortised cost.

1.13 OPERATING SEGMENTS

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group Executive Committee that makes strategic decisions.

1.14 FOREIGN CURRENCY TRANSLATION

a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in sterling, which is the Company's functional and the Group's presentation currency.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Consolidated Statement of Comprehensive Income within 'net finance income'. All other foreign exchange gains and losses are presented in the income statement within 'operating expenses'.

1.15 TAXATION

Taxation currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all material taxable timing differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from an initial recognition of goodwill or from the initial recognition (other than in the business combination) of other assets and liabilities in the transaction that affects neither the tax profit nor the accounting profit.

Deferred tax is calculated using the tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

1.16 REVENUE RECOGNITION

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities and is recognised at a specific point in time. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described below.

a) Executive search services

Executive Search services are provided on a retained basis and the Group generally invoices the client at pre-specified milestones agreed in advance at a specific point in time. Typically, this will be in three stages; retainer, shortlist and completion fee. Revenue is recognised on completion of defined stages of work during the recruitment process including the completion of a candidate shortlist and placement of a candidate. Revenue is deferred for any invoices raised but unearned at the year end.

b) Short-term contract and interim business

Revenue is recognised as services are rendered, validated by receipt of a client approved timesheet or equivalent. Fixed Term Contracts or Candidate conversions are recognised on client approval and invoice date and are invoiced at a specific point in time.

c) Assessment, career coaching and talent management

Revenue is recognised in line with delivery. Where revenue is generated by contracts covering a number of sessions then revenue is recognised over the contract term based on the average number of sessions taken up and is invoiced at a specific point in time.

d) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

1.17 PENSIONS

The Group operates a number of defined contribution funded pension schemes for the benefit of certain employees. The costs of the pension schemes are charged to the income statement as incurred.

1.18 LEASES

The Group leases its offices and various office equipment. Rental contracts are typically made for fixed periods of 3 to 5 years but may have extension options.

Contracts may contain both lease and non-lease components. The company allocates the consideration in the contract to the lease and non-lease components based on their relative standalone prices.

However, for leases of property for which the company is a lessee and for which it has major leases, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the company.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

•  Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

•  Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

•  Amounts expected to be payable by the company under residual value guarantees;

•  The exercise price of a purchase option if the company is reasonably certain to exercise that option; and

•  Payments of penalties for terminating the lease, if the lease term reflects the company exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the company, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

• The amount of the initial measurement of lease liability;

• Any lease payments made at or before the commencement date less any lease incentives received; and

• Any initial direct costs.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. Right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of assets.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets (items less than £1,000) are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

1.19 SHARE OPTION SCHEMES

For equity-settled share-based payment transactions the Group, in accordance with IFRS 2, measures their value and the corresponding increase in equity indirectly, by reference to the fair value of the equity instruments granted. The fair value of those equity instruments is measured at grant date, the EBITDA Options using a Binomial option model and the Share Price Options using a Monte Carlo simulation model. The expense is apportioned over the vesting period of the financial instrument and is based on the numbers which are expected to vest and the fair value of those financial instruments at the date of grant. If the equity instruments granted vest immediately, the expense is recognised in full.

1.20 CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

a) Impairment of goodwill - determining whether goodwill is impaired requires an estimation of the value in use of cash-generating units (CGUs) to which goodwill has been allocated. The value in use calculation requires an estimation of the future profitability expected to arise from the CGU and a suitable discount rate in order to calculate present value.

b) Impairment of investments - determining whether investments are impaired requires an estimation of the value in use of each subsidiary. The value in use calculation requires an estimation of the future profitability expected to arise from each subsidiary and a suitable discount rate in order to calculate present value.

c) Revenue recognition - revenue is recognised based on estimated timing of delivery of services based on the assignment structure and historical experience. Were these estimates to change then the amount of revenue recognised would vary.

d) Share-based payments - the expense recognised for the share-based payments scheme, reflects the number of share options granted that will vest and management's expectations regarding share lapses and non-market performance conditions. All options are subject to both time vesting and performance conditions.

2 FINANCIAL RISK MANAGEMENT

The financial risks that the Group is exposed to through its operations are interest rate risk, liquidity risk and credit risk.

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

There have been no substantive changes in the Group's exposure to financial risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods, unless otherwise stated in this note.

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's Executive Committee.

The Board receives monthly reports from the Group Chief Financial Officer, through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible, without unduly affecting the Group's competitiveness and flexibility. Further details regarding specific policies are set out below:

2.1 INTEREST RATE RISK

The Group's interest rate risk arises from short term borrowings issued at a variable interest rate. At 31 December 2022 the balance outstanding on the invoice discounting facility was £0.5 million (2021: £1.0 million) and this balance increases and decreases in line with the outstanding trade receivables.

2.2 LIQUIDITY RISK

Liquidity risk arises from the Group's management of working capital and the finance charges. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, the Group monitors its requirements on a rolling monthly basis. The Board receives cash flow projections as well as monthly information regarding cash balances. At the balance sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under reasonably expected circumstances.

2.3 CREDIT RISK

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers before entering contracts.

Each new customer is analysed individually for creditworthiness before the Group's standard payment and delivery terms and conditions are offered. The Board determines concentrations of credit risk by reviewing the trade receivables' ageing analysis.

The Board monitors the ageing of credit sales regularly and at the reporting date does not expect any losses from non-performance by the counterparties other than those specifically provided for (see Note 13). The Directors are confident about the recoverability of receivables based on the blue chip nature of its customers, their credit ratings and the very low levels of default in the past.

2.4 CAPITAL RISK MANAGEMENT

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

3 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 revenue level.

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 is set out below:

ii) Revenue and gross profit by geography

4 PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

The Company audit fee for the year was £50,800 (2021: £43,000).

5 STAFF COSTS

The average number of full time equivalent persons (including Directors) employed by the Group during the year was as follows:

Staff costs (for the above persons):

The emoluments of the Directors are disclosed as required by the Companies Act 2006 on page 22 in the Directors' Remuneration Report. The table of Directors' emoluments has been audited and forms part of these financial statements. This also includes details of the highest paid Director.

6 TAX EXPENSE

(a) Tax charged in the income statement

Taxation is based on the loss for the year and comprises:

(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 2022 the Group had capital losses carried forward of £8,129,000 (2021: £8,129,000) and trading losses carried forward of £14,879,676 (2021: £14,497,676). A deferred tax asset has not been recognised for the capital losses as the recoverability in the near future is uncertain.

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 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 one category of dilutive potential ordinary shares in the form of employee share options. For these options 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 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 profit for the year amounted to £664,000 (2021: Loss £4,407,000).

10 INTANGIBLE ASSETS

Goodwill acquired through business combinations is allocated to cash-generating units (CGU) identified at divisional level. The carrying value of intangible assets 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 on page 41, 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 2023 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 5% per annum for the foreseeable future (2021: 5%). Return on sales is 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 10%-12.5% (2021: 10%).

11. PROPERTY, PLANT AND EQUIPMENT

The Group had no capital commitments as at 31 December 2022 (2021 : £Nil).

12 INVESTMENTS

During the year to 31 December 2022 the Company held the following ownership interests:

The registered office for the subsidiaries are Millbank Tower, 21-24 Millbank London SW1P 4QPP with the exception of Norman Broadbent Ireland Limited.

13 TRADE AND OTHER RECEIVABLES

As at 31 December 2022, Group trade receivables of £935,000 (2021: £967,000), were past their due date but not impaired, save as referred to below. They relate to customers with no default history. The ageing profile of these receivables is as follows:

The largest amount due from a single trade debtor at 31 December 2022 represents 15% (2021: 9%) of the total trade receivables balance outstanding.

As at 31 December 2022 group trade receivables considered impaired were £2,000 (2021: £14,000). Movements on the Group's provision for impairment of trade receivables are as follows:

There are no 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:

The Group operates an invoice discounting facility with Metro Bank. All Group invoices are raised through Norman Broadbent Executive Search Ltd and as such Metrobank (SME Invoice Finance Ltd) holds an all asset debenture for Norman Broadbent plc and Norman Broadbent Executive Search Limited. Funds are available to be drawn down at an advance rate of 88% against trade receivables of Norman Broadbent Executive Search Ltd that are aged less than 120 days with the facility capped at £1,500,000. At December 31 2022, the outstanding balance on the facility of £0.5m was secured by trade receivables of £2.1m. Interest is charged on the drawn down funds at a rate of 2.4% above the bank base rate.

b) Loans

In November 2020 the Group received a CBILS Loan of £250,000 for a term of 6 years. Repayment of capital and interest began in January 2022, and from this month the loan incurs interest at 4.75% above the Metro Bank UK base rate. Metro Bank holds an all asset fixed and floating charge over Norman Broadbent Executive Search Ltd linked to this facility.

On 20th May 2022 convertible loan notes of £400,000 nominal value were issued to Downing Strategic Micro-Cap Investment Trust Plc and Moulton Goodies Limited, each of whom subscribed £200,000. The loan notes are only convertible after the first anniversary date, up to 50% of the outstanding amount plus any compounded interest in accordance with the terms of the secured loan instrument and security provided by Norman Broadbent Executive Search Ltd.

17 FINANCIAL INSTRUMENTS

The principal financial instruments used by the Group and Company, 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 CAPITAL AND PREMIUM

Deferred A Shares of 4.0p each

The Deferred A Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry a right to repayment only after the holders of Ordinary Shares have received a payment of £10,000 per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof. The rights attaching to the shares shall not be varied by the creation or issue of shares ranking pari passu with or in priority to the Deferred A Shares.

Deferred Shares of 0.4p each

The Deferred Shares carry no right to dividends, distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry a right to repayment only after payment of capital paid up on Ordinary Shares plus a payment of £10,000 per Ordinary Share. The Company retains the right to transfer or cancel the shares without payment to the holders thereof.

Deferred B Shares of 42.0p each

The Deferred B Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry the right to repayment only after the holders of Ordinary Shares have received a payment of £10 million per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof. The rights attaching to the shares shall not be varied by the creation or issue of shares ranking pari passu with or in priority to the Deferred B Shares.

Deferred C Shares of 29.0p each

The Deferred Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry the right to repayment only after the holders of Ordinary Shares have received a payment of £10,000 per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof.

A reconciliation of the movement in share capital and share premium is presented below:

During the year 1,076,753 Ordinary Shares were issued at a consideration of 3.75 pence per share.

19 SHARE BASED PAYMENTS

The Company operates an equity-settled share-based payment scheme for employees of the group. The scheme is an executive Enterprise Management Incentive ("EMI") share option scheme. The company granted 9,950,000 options as part of the scheme on 17 March 2022. All options are subject to both time vesting conditions and performance conditions. 50% of the Options are subject to market-based share price performance conditions (the "Share Price Options") and 50% are subject to certain EBITDA performance conditions (the "EBITDA Options").

Time vesting conditions

A quarter of the options vest on each anniversary of the grant date up to the fourth anniversary (17 March 2026). No options can be exercised until at least the second anniversary of the grant date (24 months).

EBITDA performance conditions

Subject to the time vesting conditions, the EBITDA Options will vest subject to the achievement of certain EBITDA targets in any financial year from the grant date to the year ending 31 December 2025.

The EBITDA performance conditions are classed as non-market performance conditions. As such, these are not directly captured in the option valuation but are considered when calculating the associated P&L charge of the EBITDA Options.

Share Price performance condition

Subject to the time vesting condition, the Share Price Options will vest in quarters subject to the Company's 3-month average share price meeting certain targets at any time from the grant date up to 30 June 2026.

The share price performance conditions are classified as a market-based performance condition.

The Share Price Option can only vest following the achievement of both the relevant time based and Share Price performance conditions. The date on which a Share Price condition could be met may differ to the applicable time vesting date.

The exercise price of the options outstanding at 31 December 2022 was £nil (2022: n/a) and their weighted average remaining contractual life was 6.2 years (2021 n/a).

None of the options outstanding at 31 December 2022 had vested (2021: n/a).

The weighted average fair value of each option granted during 2022 was £0.07.

The exercise price of the options outstanding at 31 December 2022 was £nil (2022: n/a) and their weighted average remaining contractual life was 6.2 years (2021 n/a).

None of the options outstanding at 31 December 2022 had vested (2021: n/a).

The weighted average fair value of each option granted during 2022 ranged between £0.039 -£0.058.

The following information is relevant in the determination of the fair value of options granted during the year under the equity-settled share-based payment schemes operated by the Company