Norman Broadbent Q&A: WH Ireland analyst delighted with update (LON:NBB)

Norman Broadbent plc (LON:NBB) is the topic of conversation when Nick Spoilar, Research Director at WH Ireland joins DirectorsTalk.

Norman Broadbent have published their H1 trading update, Nick.  What did you make of it?

I was delighted with it, Darren. Notwithstanding the pandemic, they still succeeded in posting a small EBITDA profit, confirming the turnaround that we have seen in recent years following the appointment of Mike Brennan as CEO who set an innovative and successful strategic course for the company, generating new business streams which now make up more than 50% of the business. We also rate a decline of under 10% in Net Fee Income against the backdrop of lockdown and when faced with the immense challenges of the last few months as a very positive outcome. Finally, it is good to see that new FD Steve Smith has got his feet under the desk and is making a positive impact.  

How has the company fared during the pandemic?

A relatively modest decline as reported in the recent update was a result of effective and proactive action taking out costs and husbanding cash and, at less than 10%, was far lower than the declines reported by some other players in the larger sector. The company moved swiftly into remote working and then started to reopen offices in a timely way. As expected and seen elsewhere in the sector, Executive Search volumes fell, but this was offset by good progress made by Interim and Solutions, businesses which were started by the current CEO as part of the company’s refocussing. The rebalancing of the business over recent years sees Executive Search now accounting for well under 50% of both sales (29%) and gross profits (46%).

What are the company’s key strengths?

Organised on a “hub” basis, with each sector or functional hub bringing together varied expertise and key knowledge, the first key strength is that of an integrated business. No less than 22% of overall sales result from internal referrals. Beyond the significant asset of the Norman Broadbent brand – still one of the most recognisable, if not the most recognisable names in the business, the company offers clients depth and a one-stop shop providing solutions flexibly. Against the backdrop of inevitable industry restructuring, it is well-placed in our view to benefit from growth opportunities that may arise.

How do you view the outlook?

I expect the positive profit trajectory we have seen to continue, given the combination of underlying progress in the Interims and Solutions business with the impact of cost-reductions and efficient working. It remains to be seen when forecasts may resume, but it is encouraging to see how the company has taken a smaller hit from the pandemic than many peers, essentially we believe as a result of a range of proactive actions it has taken.

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