Norman Broadbent plc (AIM: NBB), a leading London listed Professional Services firm offering a diversified portfolio of integrated Leadership Acquisition & Advisory Services (Board & Leadership Search, Senior Interim Management, Research & Insight, Leadership Consulting & Assessment, and executive level Talent Solutions) – has announced its final results and annual accounts for the year ended 31 December 2019.
Highlights
· Norman Broadbent Group returns to profit
· Revenue increase YOY by £2.1m (+22%)
· Net Fee Income (NFI) increased YOY by £1.0m (+14%)
· Group Profit before tax of £84k, an improvement of £0.8m from 2018
· Interim Management NFI increased by £0.8m (+51%) to £2.2m
· Solutions NFI increased by £0.6m (+53%) to £1.8m
· Executive Search NFI decreased by £0.4m (-11%) to £3.3m
· 23% of 2019 Group NFI generated via internal referrals evidencing collaborative business culture
· Further improved NFI mix evidences ongoing creation of a more balanced Group
A copy of the audited 2019 Annual Report (including the notice of Annual General Meeting (“AGM”)) will be sent to shareholders today. The Annual Report will be available on the Company’s website in due course, https://www.normanbroadbent.com/investor-relations
The Company’s AGM will be held at 10am on the 7th Floor, Millbank Tower, 21-24 Millbank, London SW1P 4QP (and by Zoom conference software meeting) on 28th July 2020.
Mike Brennan, Group CEO of Norman Broadbent Group said:
“Having posted a positive set of 2019 Group results, we came into 2020 with good momentum and plans for further growth. We opened a new office in the North of England, relocated to better Central London offices, and were actively seeking to appoint additional team members in both centres. Then, we, like many businesses, were impacted by the Covid-19 pandemic.
Notwithstanding that, the early and decisive actions taken by us, combined with our broader portfolio of services, leaves us better placed to respond to these challenges than many. Similarly, our collaborative and innovative culture will stand us in good stead when compared to more traditional and siloed competitors.
I and the Board would like to thank our shareholders for their continuing support, and our clients for placing their trust in us. I would also like to pay tribute to our team, all of whom have made considerable sacrifices in recent months. It is an honour to be their CEO, and I am proud of their achievements, much of which is down to their hard work, dedication, and commitment.”
RESULTS FOR THE FINANCIAL YEAR
The table below summarises the results of the Group:
| Year ended 31-Dec 2019 | Year ended 31-Dec 2018 | |
| £000’s | £000’s | |
| CONTINUING OPERATIONS REVENUE | 11,486 | 9,414 |
| Cost of sales | (3,879) | (2,770) |
| NET FEE INCOME (GROSS PROFIT) | 7,607 | 6,644 |
| Operating expenses | (7,462) | (7,308) |
| GROUP OPERATING PROFIT / (LOSS) | 145 | (664) |
| Net finance cost | (61) | (77) |
| PROFIT BEFORE TAX | 84 | (741) |
| Income tax | – | – |
| PROFIT / (LOSS) AFTER TAX | 84 | (741) |
Strategic review
Since my appointment as Group CEO, our team has worked hard to build the ‘new’ Norman Broadbent Group. During 2019 we continued our focus on identifying client needs/future risks, leveraging synergies between our complementary service lines, increasing internal collaboration and crafting bespoke solutions. This means that irrespective of the service line clients first connect with, we always aim to deliver tailored innovative solutions drawing on our full range of resources rather than supplying a traditional, transactional, siloed service. I am pleased to report that clients are reacting positively to our approach. This has been reflected in the trajectory of our 2019 results which has seen continued Revenue/NFI growth and a return to profitability. I am delighted that after much hard work and commitment, our efforts are being rewarded and we are increasingly seen as an agile, relevant, customer focused Professional Services business.
2019 trading and business review
In 2019, Group turnover increased to £11,486,000 (2018: £9,414,000) whilst overall net revenues after associate and interim costs in the continuing businesses increased to £7,607,000 (2018: £6,644,000). Although we continued to invest in innovative entrepreneurial talent, a focus on cost management ensured that operating expenses increased only marginally to £7,462,000 (2018: £7,308,000). Operating profit from continuing operations was £145,000 which is a very welcome positive swing from the 2018 operating loss of £664,000.
In addition to the commentary on the individual business areas set out below, note 3 of the Consolidated Financial Statements provides a detailed segmental breakdown of the 2019 Group results.
Norman Broadbent Executive Search (“NBES”)
During 2019 NBES Net Fee Income decreased by 11% to £3,326,000 (2018: £3,725,000) off the back of lower headcount. The loss before tax increased to £280,000 (2018: loss £260,000).
NBES is the leading contributor of cross referrals within the Group, generating £871,000 in new business for other teams. This level of cross referral is directly linked to the positive, more collegiate, cultural change which has occurred in the Group. The increase in internal referrals contributed significantly to our 2019 results.
Norman Broadbent Interim Management (“NBIM”)
NBIM is now established in our key areas of market and functional specialisations and has successfully leveraged the heritage high-end Norman Broadbent brand. As businesses are facing increasingly complex short-term challenges, much of NBIM’s activity is focused on client mandates to find and place senior level, high impact Interim professionals. Unlike many Interim providers, NBIM does not focus on the transactional commoditised lower margin end of the market. NBIM generated Net Fee Income (after interim costs) of £2,235,000 (2018: £1,484,000) resulting in a profit of £248,000 (2018 £87,000).
Norman Broadbent Solutions (“NBS”)
Following a change in leadership in 2018, NBS has further improved its performance and enhanced its proposition/market position. This has enabled us to successfully promote staff from within whilst attracting new talent from competitors. Net Fee Income increased to £1,830,000 (2018: £1,196,000) generating a profit before tax of £204,000 (2018 £74,000). We see significant opportunities in the market as we blend service lines within our portfolio to provide optimal client solutions ranging from single hires through to longer-term team builds.
Research and Insight (“R&I”)
R&I not only supports our own internal requirements, but also provides complementary services to clients. R&I is an important strategic differentiator and an enabler of follow-on work, particularly for NBES and NBS. Clients can be provided with research, market insight and business intelligence enabling them to make more informed ‘people’, organisational or commercial decisions and is available across all our service areas. The revenue arising is included within the Search business.
Norman Broadbent Leadership Consulting (“NBLC”)
NBLC saw NFI (after associate costs) decrease from £239,000 in 2018 to £216,000 in 2019. This resulted in a loss before tax of £76,000 in 2019 compared with a loss before tax of £38,000 in 2018. We are committed to NBLC and have recently invested in additional leadership to help fuel growth.
Financial position
As at 31 December 2019, consolidated net assets were £1,365,000 (2018: £1,268,000) with net current liabilities of £219,000 (2018: Net Current Liabilities of £454,000). Group cash amounted to £432,000 (2018: £684,000).
Net cash outflow from operations in 2019 was (£182,000) (2018: Inflow £354,000). Net cash inflow from financing activities amounted to £21,000 (2018: outflow £103,000).
At 31 December 2019 the Group had £950,000 (2018: £776,000) of funds drawn down against the revolving invoice discounting facility against UK trade receivables of £2,733,000 (2018: £2,076,000).
The Directors continue to monitor and manage the Group’s working capital carefully.
Covid-19
As concerns about Covid-19 began to emerge in March, we moved swiftly to ensure we were appropriately positioned to deal with a period of extended uncertainty. Staffing changes were made, and a small number of team members were furloughed or released from their contracts. Our remaining colleagues moved quickly to remote working.
As the business embraced technology to assist in remote working and continued candidate and client interaction, trading continued uninterrupted as staff seamlessly adapted to the new working environment.
This not only highlights the agility of the Norman Broadbent team, but also evidences the strength of our 40-year old brand and how the Group’s more diverse portfolio of services are particularly relevant in today’s markets. Building on those strengths and our investment in digital marketing, both Interim and Solutions have seen continued business opportunities from existing and new clients.
With a slowdown in the market (particularly in Search) there has been some reduction in revenues to date. These however have been offset by the sensible and prudent cost measures taken. Additional emphasis has been placed on cash collections and we have subsequently seen a reduction in debtor days during 2020. This, combined with modest positive EBITDA in March, April, and May, helped protect cashflow and the Group’s cash position.
Prior to lockdown, the Group successfully relocated its London office to Millbank Tower, SW1 while also opening new operations in the North of England. A full risk assessment of the Group’s office accommodation has now taken place and, while those staff looking to restart office-based working can return to a compliant and safe working environment, we anticipate operating flexibility (office and working from home) for some time.
Arrangements for AGM
The AGM will take place on July 28th, 2020 at 10 AM. In light of Covid-19, shareholder attendance at the meeting will be primarily via Zoom conferencing software. Shareholders attending via Zoom who wish to vote on the AGM’s resolutions will need to do so by proxy. Full details on how to gain access to the meeting and vote by proxy are provided in the notice of Annual General Meeting sent to Shareholders.
Board Changes
Steve Smith joined the Company and the Board as CFO and COO on 30 March 2020 replacing Will Gerrand who has left the Group. The Board would like to thank Will for his contributions over the past two and a half years and we wish him well for the future. Steve, along with our senior leadership team, has already proven exceptional in helping us deal with the challenges presented by Covid-19.
There is currently a process underway to recruit and appoint a new Non-Executive Chair to the board. Brian Stephens is due to retire from the Board by rotation. Brian has indicated that, while he will be offering himself for re-election at the upcoming AGM, having been a Director for 10 years, he is intending to stand down from the Board following a period of hand over to the new Non-Executive Chair.
Outlook
Having posted a positive set of 2019 Group results, we came into 2020 with good momentum and plans for further growth. We opened a new office in the North of England, relocated to better Central London offices, and were actively seeking to appoint additional team members in both centres. Then, we, like many businesses, have been impacted by the Covid-19 pandemic.
While the likely duration and overall severity of Covid-19’s economic impact is not yet known, we assume it will take some time for the overall UK search and recruitment market to recover. Accordingly, it is too early to have a definitive view on its ultimate impact on the outcome for the year to December 2020.
Notwithstanding that, the early and decisive actions taken by us, combined with our broader portfolio of services, leaves us better placed to respond to these challenges than many. Similarly, our collaborative and innovative culture will stand us in good stead when compared to more traditional and siloed competitors.
I and the Board would like to thank our shareholders for their continuing support, and our clients for placing their trust in us. I would also like to pay tribute to our team. who have made considerable sacrifices during the Covid-19 crisis. It is an honour to be their CEO, and I am proud of their achievements, much of which is down to their hard work, dedication, and commitment.
Mike Brennan
Group Chief Executive
26 June 2020
Strategic Report
THE BUSINESS MODEL
The Norman Broadbent Group is a leading Professional Services firm focussing on Talent Acquisition & Advisory Services. Since our formation nearly 40 years ago we have developed a range of complementary services consisting of Board & Leadership Search, Senior Interim Management, Research & Insight, Leadership Consulting, and Solutions. With a range of services designed to meet customer needs at different stages in their growth or the economic cycle, our innovative and flexible approach enables us to help clients in a creative and bespoke way. By operating within sector ‘hubs’ as opposed to siloed service lines, we are able to service clients better and more collaboratively. As a result of this collaboration, c.23% of 2019 NFI was generated via internal cross-referrals.
STRATEGY AND OBJECTIVES
The Group’s strategy is to further develop, strengthen and scale our complementary portfolio of Talent Acquisition & Advisory services. This could be achieved via further selective hires, new partnerships and greater innovation. Ultimately our aim is to help clients make better informed, more effective buying decisions to ensure successful outcomes.
RESULTS FOR THE FINANCIAL YEAR
Group revenue from continued operations increased in the year by 22% to £11,486,000 (2018: £9,414,000), with gross profit of £7,607,000 (2018: £6,644,000). NBES NFI decreased by 11% to £3,326,000 (2018: £3,725,000) off the back of lower headcount. NFI from NBLC, NBS and NBIM was £4,281,000 (2018: £2,919,000), reflecting the significant development of NBI and NBS during 2019.
Operating expenditure increased to £7,462,000 (2018: £7,308,000), reflecting the increased sales related bonuses payable in relation to 2019.
The Group reported an operating profit from continued operations in 2019 of £145,000 (2018: operating loss £664,000) and a retained profit of £84,000 (2018: retained loss £741,000).
CASH FLOW AND BALANCE SHEET
Net cash outflow from operations in 2019 was £182,000 (2018: net cash inflow from operations £354,000). Net trade receivables at the year-end were £2,733,000 (2018: £2,076,000).
Net cash inflow from financing activities was £21,000 (2018: net cash outflow of £103,000). At 31 December 2019, the Group had £950,000 (2018: £776,000) of funds drawn down against the revolving invoice discounting facility against UK trade receivables of £2,733,000 (2018: £2,076,000).
EARNINGS PER SHARE
The retained profit for 2019 has resulted in a reported profit per share of 0.04 pence (2018: loss per share 1.42 pence). After adding back the cost of share based payments, the adjusted profit per share was 0.06 pence (2018: loss per share 1.38 pence).
GOING CONCERN
In light of the current financial position of the Group and on consideration of the business’ forecasts and projections, taking account of possible changes in trading performance, the Directors have a reasonable expectation that the Group has adequate available resources to continue as a going concern for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing their annual report and financial statements.
DIRECTORS’ DUTIES
The Directors of the Company, as those of all UK companies must act in accordance with a set of general duties. These duties are detailed in section 172 of the UK Companies Act 2006 which is summarised as follows :
‘A Director of a company must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its shareholders as a whole and, in doing so have regard (amongst other matters) to :
· the likely consequences of any decisions in the long-term;
· the interests of the company’s employees;
· the need to foster the company’s business relationships with suppliers, clients and others;
· the impact of the company’s operations on the community and environment;
· the desirability of the company maintaining a reputation for high standards of business conduct, and
· the need to act fairly as between shareholders of the Company’
As part of their induction, a Director is briefed on their duties and they can access professional advice on these, from the Company Secretary, Nomad, or if they judge it necessary, from an independent advisor. The following paragraphs summarise how the Directors’ fulfil their duties:
MONITORING, RISK AND KPIs
The Directors have a responsibility for identifying risks facing each of the businesses and for putting in place procedures to mitigate and monitor risks. Board meetings incorporate, amongst other agenda items, a review of monthly management accounts, operational and financial KPIs and major issues and risks facing the business.
The most important KPIs used in monitoring the business are set out in the following table:
| Key performance indicators | 2019 | 2018 |
| Revenue (continued operations) | £11,486,000 | £9,414,000 |
| Operating profit / (loss) | £145,000 | (£664,000) |
| Debtor days | 72 days | 61 days |
The Directors monitor revenue against annual targets, which are adjusted each year to ensure the Group remains on target to achieve its strategic growth plan. Further, given the significant restructuring and refocus of the group in the recent past, the Directors expect Group revenues and operating profits to improve over the next few years.
The principal risks faced by the Group in the current economic climate are considered to be financial, business environment and people related.
Financial – The main financial risks arising from the Group’s operations are the adequacy of working capital, interest rate, liquidity and credit risk. These are monitored regularly by the Board and are disclosed further in notes 2 and 17 of the financial statements.
The business is in the later stages of the turnaround process and is budgeted to be self-funding. In turnarounds there is always a risk that the process could take longer than anticipated which could lead to short term working capital pressures. In the event of such an occurrence the Company anticipates working closely with its supportive shareholders to access short term working capital funding.
Business Environment – Demand for services is affected by global and UK specific economic conditions and the level of economic activity in the regions and industries in which the Group operates. When conditions in the economy deteriorate or economic activity slows, many companies hire fewer permanent employees or rely on internal human resource departments to recruit staff.
The Group attempts to mitigate this risk by operating across various diverse sectors where demand for such services is stronger.
Covid-19 Pandemic – on 23 March 2020 the UK economy was placed in a state of lockdown as part of the Government’s response to the emerging pandemic. The Group has reacted by making staffing changes with a small number of individuals furloughed or released from their contracts with the remaining team members moving to remote working. As the lockdown is lifted, the Group’s offices have reopened with the majority of staff continuing to work remotely.
Despite reduced revenue as a result of the crisis, trading in March, April and May has been EBITDA positive reflecting the action taken by management. The Board anticipates, market conditions permitting, a staged return of furloughed employees during 2020.
However if the impact of the pandemic were to lead to further reductions in the size of the UK recruitment and search markets or continue over an extended period with reductions in or the removal of the government support measures this could have an adverse impact on the group’s trading and liquidity.
The Group anticipates that the Government’s support measures are likely to continue and that schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS) packages (currently unavailable to the Group) may see a change in criteria.
People – The Group’s most vital resource remains its employees and the Directors remain committed to retaining and recruiting quality staff who share the Group’s culture and values. In a people intensive business, the resignation of key staff, which could lead to them taking clients, candidates and colleagues to another employer, is a significant risk. The Group aims to mitigate this risk by offering competitive remuneration structures, whilst also insisting on employment contracts that contain restrictive covenants that limit a leaver’s ability to approach existing clients, candidates and employees.
CAUTIONARY STATEMENT
The Group’s Strategic Report has been prepared solely to provide additional information to shareholders to assess the Company’s strategies and the potential for those strategies to succeed.
The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
The Directors, in preparing this Strategic Report, have complied with s414C of the Companies Act 2006. The Strategic Report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Norman Broadbent plc and its subsidiary undertakings when viewed as a whole.
Mike Brennan Steve Smith
Director Director
26 June 2020 26 June 2020
