PRP.L Regulatory News (PRP)

19th November 2018

Prime People Plc

Unaudited Condensed Consolidated Interim Report

for the six months ended 30 September 2018

CHAIRMAN'S STATEMENT

Overview

I am pleased to report the results for Prime People Plc for the half-year ended 30 September 2018.

As referred in our 2018 Annual Report, the Financial Statements for H1 reflect the Group's adoption of IFRS 15, which has required a change in the Group's accounting policy for revenue recognition. We are now reporting revenue based on invoices delivered as opposed to the previous treatment based on the value of contracts formed.

Further detail on the impact of the IFRS 15 is set out in Note 2 of the financial statements.

The Group recorded a profit before tax for the period of £1.59m (H1 2018: £0.65m) on revenue of £12.57m (H1 2018: £11.27m). It is estimated that the Group's profit before tax for H1 2019, if prepared under the previous accounting standard and adjusted for the contribution from Command Recruitment Group (HK) Ltd ("CMD"), in which we acquired a 60% holding in October 2017, would have been in line with last year. During the period, after deducting minorities, CMD contributed profit before tax of £0.35m.

The change in accounting policy did not have any impact on the reporting of Net Fee Income ("NFI") of our contract business or that reported by CMD.

Financial Results

Group revenue was 11.54% higher than the same period last year at £12.57m (H1 2018: £11.27m).

Group NFI, which now describes invoices delivered during the period, was £7.99m (H1 2018: £6.15m). Our overseas business, which includes a contribution from CMD, showed strong NFI performance increasing to £4.13m (H1 2018: £2.31m) and contributed 55.76% of Group permanent NFI (H1 2018: 42.27%). NFI recorded by CMD during the period was £1.68m (H1 2018: £Nil), disclosed in Note 3 under the Group's Asia regional performance. NFI for the UK business remained stable at £3.86m (H1 2018: £3.84m).

As noted above, contract NFI is not affected by IFRS 15 and decreased by 16.28% against the comparative period, as a consequence of a change in public sector client requirements resulting from ITEPA Act 2003 legislative changes. The ratio of NFI derived from contract as against permanent placements was 7:93 (2017: 11:89).

CHAIRMAN'S STATEMENT (cont)

Administrative costs for the group were £6.40m during the period (H1 2018: £5.50m). The increase over the first six months of last year relates to the inclusion of CMD operating costs, investment in a new CRM system, improved information technology platforms, increased spend on talent training and higher property costs associated with our Hong Kong office relocation at the start of the period.

In the UK, profit before tax grew to £0.62m from £0.51m in the same period in the prior year.

Our Asia business, which covers the Group activities in Hong Kong and Singapore, closed H1 2019 with profit before tax of £0.95m (H1 2018: £0.26m), of which £0.58m related to CMD before adjustment for minority interest.

Our business in Dubai, disclosed under Rest of the World below, reported a small profit of £21k which is an improvement on the reported loss of £117k in the comparative period last year.

The charge for taxation of £0.10m (H1 2018: £0.14m) is based on the expected annual effective tax rate of 19% (2017: 19%).

Basic earnings per share for the period were 12.60p (2017: 4.16p).

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 £1.23m, and at this period end, had cash of £1.77m (H1 2018: £2.57m), after paying £0.44m for assets in Asia.

Dividend

The Board will be declaring an increased interim dividend of 1.80p (2017: 1.75p) payable on 7 December 2018 to those shareholders whose names are on the register on 30 November 2018.

Outlook

Given the uncertainties of UK markets through to March 2019 and potentially beyond, we do not expect the second half trading to exceed the first half. We expect underlying trading from our Asia offices to be comparable to the first half of this financial year.

The present focus for the Group is managing the business costs in relation to revenue, improving productivity and increasing profitability. Notwithstanding the mixed economic picture in today's markets, we continue to seek opportunities to create shareholder value.

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

19th November 2018

For further information please contact:

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2018

The above results relate to continuing operations.

The notes on pages 8 to 15 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 2018

The notes on pages 8 to 15 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 2018

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2018

PRIME PEOPLE PLC

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW

For the six months ended 30 September 2018

The notes on pages 8 to 15 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 2018

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 Alternative Investment Market (AIM) of the London Stock Exchange. The registered number of the company is 1729887.

This unaudited condensed consolidated interim report for the six months ended 30 September 2018 (including comparatives) is presented in GBP '000 and was approved and authorised for issue by the Board of Directors on 19 November 2018.

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 2018 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 2018 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 2018 which were prepared in accordance with IFRSs as adopted by the European Union.

The Group was profitable for the period and has considerable financial resources comprising £1.77m of net cash at 30 September 2018. 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.

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2018

Basis of preparation (continued)

The Group adopted IFRS 15 standard- Revenue from Contracts with Customers from 1st April 2018. Under the standard, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange of transferring goods or services to a customer.

The Group has applied IFRS 15 using the cumulative effect method - i.e. by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity at 1 April 2018. Therefore, the comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. The following table summarise the impacts of adopting IFRS 15 on the Group's consolidated interim report for the period ending 30 September 2018.

The resulting changes in the timing of revenue and cost recognition aligns the financial results more closely with the timing of the delivery of services to our clients. The standard introduces direct link between the value provided to a client and the timing of revenue recognition, as revenue is recognised when a candidate starts an assignment.

Permanent revenue is recognised from permanent placements based on a percentage of candidate's remuneration package. The impact of the transition to IFRS 15 resulted in revenue recognised at the point that the candidate starts the job, as opposed to the previous policy which recognised permanent revenue at the date an offer is made. A provision is made against cancellation of placements shortly after commencement of employment. The transition to IFRS 15 on permanent revenue has been accounted for under the cumulative effect method.

Contract revenue, which represents amounts billed for the services of temporary staff, including the salary costs of these staff, is recognised when the service has been provided. This basis of revenue recognition is consistent with IFRS 15 with no effect on revenue earned on temporary placements.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of the condensed consolidated interim report

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2018

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

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2018

(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 £104k (2017: £139k) an effective rate of 19% (2017: 19%).

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2018

Segment reporting (continued)

5. Dividends

The interim dividend for 2019 of 1.80 pence (2018: 1.75 pence paid on 24 November 2017), was approved by the board on 19 November 2018 and will be paid on 7 December 2018 to those shareholders whose names are on the register on 30 November 2018.

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:

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2018

Earnings per share (continued)

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

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

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2018

9. Trade and other receivables

10. Trade and other payables

11. Treasury Shares

At 30 September 2018, the total number of ordinary shares held in Treasury and their values were as follows:

PRIME PEOPLE PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 September 2018

12. 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 £384k (2017: £352k). The balance owed to the subsidiary undertakings at the period-end is £409k (2017: £689k).