PRP.L Regulatory News (PRP)

14 November 2019

Prime People Plc

Interim Results

Prime People Plc ("Prime People" or the "Group"), the global specialist recruitment business for professional and technical staff working in the Real Estate & Built Environment, Energy & Environmental and Technology, Digital & Data Analytics sectors, announces its unaudited interim results for the six months ended 30 September 2019.

CHAIRMAN'S STATEMENT

Overview

I am pleased to report the results for Prime People Plc for the half-year ended 30 September 2019.

The Group recorded a profit before tax for the period of £1.73m (H1 2019: £1.59m) on revenue of £13.17m

(H1 2019: £12.57m).

Financial Results

Group revenue of £13.17m was 4.72% higher than the same period last year (H1 2019: £12.57m).

Group Net Fee Income ("NFI") was £8.80m (H1 2019: £7.99m). Our overseas business showed strong performance, with NFI for Asia increasing to £4.83m (H1 2019: £3.87m) and contributing 57.90% of Group permanent NFI (H1 2019: 52.16%). NFI recorded during the period by our Hong Kong subsidiary, Command Recruitment Group (HK) Ltd ("CMD"), was £2.28m (H1 2019: £1.68m), detailed in Note 3(a) within the NFI for the Group's Asia regional performance. NFI for the UK business was £3.71m (H1 2019: £3.86m) and Rest of World was £0.26m (H1 2019: £0.27m).

Contract NFI represented 5.17% of Group NFI against 7.21% in H1 2019.

Administrative costs for the Group were £7.07m (H1 2019: £6.40m) during the period which included planned expenditure for enhancing technology to drive efficiencies across our business, greater advertising spend, and higher professional costs associated with our continued focus on organic growth.

In the UK, profit before tax was £0.48m against £0.62m in H1 2019. Our Asia business, which covers the Group activities in Hong Kong and Singapore, generated a profit before tax before adjustment for minority interest of £1.24m for the period (H1 2019: £0.95m), of which £0.84m related to CMD (H1 2019: £0.58m).

Our newly established business in Germany, disclosed under Rest of the World, reported a small profit and is indicating good opportunities for growth.

The charge for Group taxation of £0.31m (H1 2019: £0.10m) is based on the expected annual effective tax rate of 19% in UK (H1 2019: 19%), 16.5% in Hong Kong (H1 2019: 16.50%), and 17% in Singapore (H1 2019: 17%).

Basic earnings per share for the period were 9.33p (H1 2019: 10.95p).

Cash Flow

The Group continues to maintain a strong net cash position. At the start of the current financial year, the Group had cash of £2.31m, and at the period end, had cash of £3.04m (H1 2019: £1.79m).

Dividend

The Board will be declaring an interim dividend of 1.80p per share (2019: 1.80p) payable on 6 December 2019 to those shareholders on the register on 22 November 2019.

Outlook

The present focus for the Group is managing the business for increased productivity and profitability. Notwithstanding the mixed and uncertain economic picture of today's markets, we continue to seek opportunities to create shareholder value though both organic and non-organic growth.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

Robert Macdonald

Executive Chairman

14 November 2019

For further information please contact:

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2019

The above results relate to continuing operations.

The notes below form an integral part of this unaudited condensed consolidated interim report.

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As at 30 September 2019

The notes below form an integral part of this unaudited condensed consolidated interim report.

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2019

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2019

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW

For the six months ended 30 September 2019

The notes below form an integral part of this unaudited condensed consolidated interim report.

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2019

1. General information

Prime People Plc ('the Company') and its subsidiaries (together 'the Group') is an international recruitment services organisation with offices in the United Kingdom, the Middle East and the Asia Pacific region from which it serves an international client base. The Group offers both permanent and contract specialist recruitment consultancy for large and medium sized organisations.

Prime People Plc is the Group's ultimate parent company. The Company is a limited liability company incorporated and domiciled in the United Kingdom. The address of Prime People Group's registered office and its principal place of business is 2 Harewood Place, London, W1S 1BX, England. Prime People Group's shares are quoted on the AIM Market of the London Stock Exchange ("AIM"). The registered number of the Company is 1729887.

This unaudited condensed consolidated interim report for the six months ended 30 September 2019 (including comparatives) is presented in GBP '000 and was approved and authorised for issue by the Board of Directors on 14 November 2019.

Copies of the interim results are available at the Company's registered office and on the Company's website - www.prime-people.co.uk.

This unaudited condensed consolidated interim report does not constitute statutory accounts of the Group within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2019 has been extracted from the statutory accounts for that year, which have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2. Basis of preparation

The unaudited condensed consolidated interim report for the six months ended 30 September 2019 has been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRSs") and in accordance with 'IAS 34, Interim financial reporting', as adopted by the European Union. The condensed consolidated interim report should be read in conjunction with the annual financial statements for the year ended 31 March 2019 which were, with exception of the adoption of IFRS 16 Accounting for Leases, prepared in accordance with IFRSs as adopted by the European Union.

The Group was profitable for the period and has considerable financial resources comprising £3.04m of net cash at 30 September 2019. After making enquiries, the Directors have formed a judgement, at the time of approving the six months results, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months. For this reason, the Directors continue to adopt the going concern basis in preparing the condensed set of financial statements.

These financial statements have been prepared under the historical cost convention.

IFRS 16 - Leases

IFRS 16 became effective for accounting periods beginning on or after 1 January 2019 and has superseded IAS 17 Leases.

IFRS 16 distinguishes leases and service contracts based on whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting and has been replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet) except for short term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others.

Directors have completed their detailed review of IFRS 16 and further guidance on this change in accounting policy is given in note 12 below.

3. Segment reporting

(a) Revenue and net fee income by geographical region

All revenues disclosed by the Group are derived from external customers and are for the provision of recruitment services. The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit before taxation represents the profit earned by each segment after allocations of central administration costs.

(b) Revenue and net fee income by classification

(c) Profit before taxation by geographical region

Operating profit is the measure of profitability regularly viewed by the Board, which collectively acts as the Chief Decision Maker. Consequently, no segmental analysis of interest or tax expenses is provided.

(d) Segment Assets and Liabilities by Geographical Region

The analysis above is of the carrying amount of reportable segment assets and liabilities. Segment assets and liabilities include items directly attributable to a segment and include income tax assets and liabilities.

4. Income tax expense

The charge for taxation on profits for the interim period amounted to £308k (2018: £104k) an effective rate of 17.81% (2018: 6.55%).

5. Dividends

The interim dividend for 2020 of 1.80 pence (2019: 1.80 pence paid on 7 December 2018), was approved by the board on 14 November 2019 and will be paid on 6 December 2019 to those shareholders whose names are on the register on 22 November 2019.

6. Earnings per share

Earnings per share (EPS) are calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.

Fully diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by existing share options assuming dilution through conversion of all existing options.

Earnings and weighted average number of shares from continuing operations used in the calculations are shown below:

7. Reconciliation of profit before tax to cash flow from operating activities

8. Reconciliation of net cash flow to movement in net funds

9. Trade and other receivables

10. Trade and other payables

11. Treasury Shares

At 30 September 2019, the total number of ordinary shares held in Treasury and their values were as follows:

12. Changes in accounting policies

Adjustments recognised on adoption of IFRS 16

This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements. The Group has adopted the IFRS 16 modified retrospective approach from 1 April 2019 but has not restated comparatives for the 31 March 2019 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 April 2019.

The weighted average incremental borrowing rate used is 8.47%.

The Group has elected not to recognise the right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less or leases that are of low value (£5,000). Lease payments associated with these leases are expensed on a straight-line basis over the lease term.

The table below summarises the IFRS 16 impact on transition for lease liabilities and the corresponding right-of-use assets along with the movement from 1 April 2019 to 30 September 2019:

13. Related Party Transactions

Prime People Plc provides various management services to its subsidiary undertakings. These services take the form of centralised finance and operations support. The total amount charged by the Company to its subsidiaries during the period is £462k (2018: £384k). The balance owed to the subsidiary undertakings at the period-end is £1m (2018: £409k).