Norman Broadb Regulatory News (NBB)

NORMAN BROADBENT PLC - Half-year Report

PR Newswire

London, September 29

30 September 2016

Norman Broadbent plc(“Norman Broadbent” or “the Company” or “the Group”)Interim Results

Norman Broadbent (AIM: NBB) - a provider of time efficient, cost effective Board & Executive Search, Senior Interim Management, Solutions, Insight and Leadership Consulting services to companies ranging from established corporations to high-growth innovators - today announces its unaudited interim results for the six months ended 30 June 2016.

Highlights

Mike Brennan, CEO of Norman Broadbent, said:

“Given the rightsizing of the cost base in recent years, we are now entering a new phase of growth underpinned by the £2.3m of new capital raised in September 2016 from both existing and new shareholders. This capital will stabilise the business from an operational perspective, has allowed us to repay expensive debt, but more importantly enable the business to scale up through the hiring of new and experienced fee earners across all of our three core offerings of Executive Search, Solutions and Interim Management. We expect to start to see the benefit of these new hires in 2017.”

For further information please contact:

Norman Broadbent plc

Mike Brennan/James Webber 020 7484 0000

Allenby Capital

Nick Naylor/Liz Kirchner 020 3328 5656

Notes to Editors

Norman Broadbent plc is a provider of time efficient, cost effective Board & Executive Search, Senior Interim Management, Solutions, Insight and Leadership Consulting services to companies ranging from established corporations to high-growth innovators.

For further information visit www.normanbroadbent.com

CEO Review:

Summarised Financial Results:

The table below summarises the results for the Group.

In the first half of 2016 management continued its focus on the necessary restructuring of the Group’s businesses, resulting in a number of planned reductions in headcount. As a result of these actions, net fee income (after interim costs) declined by 16% to £3.2m (H1 2015: £3.8m), however encouragingly group losses reduced by 21% to £0.10m (H1 2015: £0.13m).

Norman Broadbent Executive Search (“NBES”) revenue declined by 15% to £2.4m (H1 2015: £2.8m) reflecting the impact of planned reduction in fee generating headcount. Encouragingly, the net profit margin increased to 14% reflecting the positive impact of restructuring the business in Q3 of 2015. Moving into the second half of 2016 and 2017, our key focus will be on the recruitment of senior consultants within our existing practices as well improving consultant productivity. Group wide productivity will be driven by our new Head of Business Development, the appointment of a Group Head of Research & Insight and a more holistic approach to account management.

Norman Broadbent Leadership Consulting (“NBLC”) had a slow first six months of 2016 with revenues excluding associate costs of £0.2m (H1 2015: £0.4m). The decline was in part due to a large assessment project with a FTSE 100 business being put on hold. The NBLC business operates using an associate model, therefore if revenues decrease then the associated operating costs will also fall. The business was marginally loss making in H1 2016, however this loss includes the cost of two employees who left the business in Q2 2016. Despite the small revenue contribution to the Group, NBLC has a high quality product range which through better account management can be sold more effectively across the Group.

Encouragingly AGP, which will be rebranded to NB Solutions (“NBS”), increased gross profit by 26% to £0.4m (H1 2015: £0.3m), however, disappointingly the business was still loss making. As a result, the business was restructured with a number of staff leaving in Q2 2016. Since the restructure we have appointed a new divisional managing director, re-defined NBS’ proposition and are in the process of re-building the team to enable NBS to leverage the NBES business more effectively.

The Group has been missing a high value interim executive offering of significant scale since the business was restructured in 2015. Such a business gives clients flexibility during periods of economic uncertainty, and can also be effectively cross-sold by the Group. In light of this the Board is delighted to announce that we have appointed a new divisional managing director who will join the Group from a well-regarded competitor at the beginning of October 2016.

Social Media Search (“SMS”) has been restructured significantly in recent years and its core offering refined. The business is now underpinned by long term annuity contracts and encouragingly revenues increased by 46% to £0.3m (H1 2015: £0.2m), however the business was marginally loss making. This loss, however, includes the cost of two underperforming consultants who were exited from the business in June 2016.

Financial Position

Equity shareholders’ funds were £1.1m as at 30 June 2016 (£1.2m at 31 December 2015), with net current assets of £0.1m (£0.2m at 31 December 2015). Cash and cash equivalents at 30 June 2016 stood at £0.3m, down from £0.4m at 31 December 2015, reflecting the continued investment in the new businesses (most notably AGP). The balance on the Group’s revolving invoice discounting facility was £0.6m (£0.9m at 31 December 2015), reflecting a trade receivables balance of £0.9m (£1.2m at 31 December 2015).

Board Changes

As highlighted in the 2015 full year results, I joined the Company as Group CEO in April 2016. Following my appointment and the £2.3m equity raise in September 2016, Frank Carter has joined the business as Non-Executive Chairman, taking over from Scanes Bentley. Frank has been an adviser to the Company since June 2016. Frank has most recently worked as a Senior Adviser to KPMG, following 18 years as a Senior Partner in the firm's Corporate Finance business. Frank is a highly experienced corporate adviser with over 25 years’ experience advising at board level on a range of strategic matters and transactions across a wide variety of sectors. He has worked in the UK, Europe and the US with major corporates, listed and private companies, financial sponsors and the public sector.

Finally, Richard Robinson announced his retirement as a Non-Executive Director of the Company on the 19th September 2016. The Board wishes to express its gratitude to Richard for his considerable contribution to the business over many years. In the short term, Richard will remain in his role as Company Secretary.

Current Trading

Since the period end, we have concentrated on investing in hiring new talent across our three brands and on further reductions in costs including exiting poor performers. This investment in our staff will continue into 2017 and beyond.

Monday 3rd October will see the formal launch of the rebranded business units Norman Broadbent Interim Management and NB: Solutions under new and revitalised leadership.

We anticipate that the refocussing and repositioning of the business and the refreshment of our brands will result in an improved financial performance with the benefits coming through during the second half of 2017.

Mike BrennanGroup CEO

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the six month period ended 30 June 2016

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 June 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six month period ended 30 June 2016

CONSOLIDATED STATEMENT OF CASH FLOWFor the six month period ended 30 June 2016

NOTES TO THE FINACIAL STATEMENTS

1. ACCOUNTING POLICIES

1.1 Basis of preparation

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group’s statutory financial statements for the year ended 31 December 2015, prepared under International Financial Reporting Standards (IFRS), have been filed with the Registrar of Companies. The auditor’s report on those statements was unqualified.

The interim financial information for the six months ended 30 June 2016, has been prepared in accordance with the AIM Rules for Companies. The Group has not elected to apply IAS 34 ‘Interim Financial Reporting’. The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 December 2016 and are unchanged from those disclosed in the Group’s Annual Report for the year ended 31 December 2015. The interim financial statements have not been audited.

1.2 Basis of consolidation and business combinations

The Group financial statements consolidate those of the Company and of the following subsidiary undertakings:

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

2. COPIES OF THE UNAUDITED INTERIM REPORT

Copies of this report are available on request from the Company's registered office at 12 St James’s Square, London, SW1Y 4LB and will shortly be available on the Company’s website at www.normanbroadbent.com.

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 operating profit level, which includes employee costs, marketing, office and accommodation costs and appropriate recharges for management time.

Group revenues are primarily driven from UK operations, however when revenue is derived from overseas business the results are presented to the Board by geographic region to identify potential areas for growth or those posing potential risks to the Group.

i) Class of Business:

The analysis by class of business of the Group’s turnover and profit before taxation is set out below:

ii) Revenue and gross profit by geography:

4. EARNINGS PER ORDINARY SHARE

i) Basic earnings per share:

This is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the period:

ii) Diluted earnings per share:

This is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has two categories of dilutive potential ordinary shares; share options and warrants. For these options and warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company’s shares) based on the monetary value of the subscription rights attached to the outstanding warrants and options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

iii) Adjusted earnings per share

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 charges for share based payments. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the Group.

5. PROVISIONS

On the 6 March 2013 the Company signed a new ten year lease with a five year break for its main office in London. On signing the new lease the Company inherited the office fit-out from the previous tenant. Under the terms of the new lease the Company is obliged to return vacant possession to the landlord with the office returned to its original state. The Company has had the present cost of the future works required to return the office to its original state valued by an independent firm of advisors and this non-current liability of £125,000 is provided for in the financial period. The Company received a one-off payment of £250,000 in 2013 from the previous tenant in satisfaction of various costs and liabilities that it inherited with the new lease.

6. EXCEPTIONAL ITEMS

7. DISCONTINUED OPERATION

During 2015, the Group ceased its operations in both Singapore and the USA. These two segments were classified as discontinued operations as at 30 June 2015 and at 31 December 2015. .

8. RELATED PARTY TRANSACTIONS

Brian Stephens & Company Limited invoiced the Group for the directors’ fees and corporate finance services of B Stephens (£10,000) and business related travel costs of £2,000. B Stephens is a director of Brian Stephens & Company Limited. Taxation services of £5,000, accounting services of £8,000 and business related travel cost of £1,000 were acquired from Anderson Barrowcliff LLP, an accountancy firm of which R Robinson was a partner in the prior year. 

During the period the Group acquired research services from Connecting Corporates Limited of £7,000. The Group owns a 51 per cent stake in Connecting Corporates Limited.

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

During the prior period the Group recharged group services incurred for the benefit of Connecting Corporates Limited to Connecting Corporates Limited at a cost of £8,000.

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