Final Results

RNS Number : 7137F

Norman Broadbent PLC

03 May 2011

 



For immediate release                                                                                                                                         3 May 2011

Norman Broadbent plc

("Norman Broadbent" or "the Company")

Final Results for the year ended 31 December 2010

Norman Broadbent plc, a leading provider of executive search, and leadership consultancy services, announces its audited results for the year ended 31 December 2010.

Financial Highlights

·    Revenue increased to £6.1 million (2009: £6 million), with executive search revenues up 9% to £5.7 million (2009: £5.2 million)

·    Profit before tax of £1.0 million including gain on disposal of £0.8 million (2009 : loss of £3.45 million),

·    Operating profit of £229,000 (2009: loss of £3.2 million), after restructuring costs

·    Adjusted earnings per share of 5.69p (2009: loss per share of 56.57p)

·    Restructuring programme implemented in 2009 resulted in a reduction of operating expenditure of 22% to £5.8million  (2009: £7.4million)

·    £2m cash raised through equity placement during year

·    Equity shareholders' funds increased to £978,000 (2009: deficit of £2.4million)

Proposed Share Placing Announced Today

·    £1.75m through a proposed placing of 2,692,308 new ordinary shares at 65p per share

·    Additional capital raised will be issued to support growth strategy

·    Subject to shareholder approval at Annual General Meeting

Operational Highlights

·    Transformational year - operational integration of Norman Broadbent and Garner International

·    Revenue per consultant and per assignment increased significantly (consultant headcount of 20 in 2010 compared with 29 in 2009)

·    Acquisition of board assessment, coaching and development business, Human Asset Development International Limited ("HADIL")

·    Andrew Garner, founder of Garner and architect of current group to retire on 30 June 2011

·    Organic strategy to double search revenues by 2014

·    Expansion of HADIL, additional international licensed businesses and new international offices to provide extra growth

Pierce Casey, Executive Chairman, said:

"2010 has been a transformational year for Norman Broadbent which has seen the successful operational integration of the executive search businesses of Norman Broadbent and Garner International under the Norman Broadbent brand, a brand which has 30 years of positive, high profile, board level recognition.

"Trading in the first quarter of 2011 has been both profitable and satisfactory.  Notwithstanding the time lag in revenue generation through the active recruitment of new senior executives, the outlook for 2011 as a whole remains positive.

"Longer term, we are committed to creating a top tier executive search business across a variety of territories, in tandem with a broader suite of human capital services, including executive assessment, evaluation, coaching and an enhanced board level interim service."

Norman Broadbent plc	Tel: [phone]
Pierce Casey/Sue O'Brien/Ben Felton
Merchant Securities Limited	Tel: [phone]
John East/Simon Clements
Buchanan Communications Limited	Tel: [phone]
Tim Anderson / Isabel Podda

CHAIRMAN'S STATEMENT

Introduction

2010 has been a transformational year for Norman Broadbent plc ("Norman Broadbent" or "the Company"),  which has seen the successful operational integration of the executive search businesses of Norman Broadbent and Garner International ("Garner") under the Norman Broadbent brand, a brand which has 30 years of positive, high profile, board level recognition. The integration of the business has been facilitated and reinforced by the Company's move to a single office in St James's Square, in central London.

In May 2010, the Company was refinanced through the issue of new ordinary shares raising £2.04 million, and a negotiated reduction of £3.5 million in the amount due to the vendors of Norman Broadbent. The year has seen the Company return to profitability with a profit after tax of £1.07 million and an operating profit of £0.23 million, compared to a loss after tax of £3.45 million and an operating loss of £3.2 million in 2009. The operating profit is struck after taking into account the impact of a variety of one-off integration costs.

At present, the Company is predominantly an executive search business with emerging revenue streams in board assessment, evaluation and coaching and board level interim services.  In addition, the Company has a number of overseas licence agreements, in Spain, the Middle East, Italy and Canada, which extend the Norman Broadbent reach, creating mutually beneficial search opportunities and a seamless service to an increasing number of global accounts. The international reputation of Norman Broadbent is well regarded, with Krista Walochik, CEO of Norman Broadbent Spain, a board member of the Association of Executive Search Consultants ("AESC"), the global gold standard body in our industry.

With the successful completion of the rebranding, the property move and integration of the search businesses, the Company and its management are now focussed on delivering a strategic growth programme. This will be facilitated by the announcement today of a placing to raise £1.75 million.

Results for 2010

The Company returned to profitability in 2010; the table below summarises the results:

Revenue	2010 £000	2009 £000
Executive Search	5,718	5,249
HADIL	48	-
Interim	19	507
Overseas royalties	326	277
	6,111	6,033
Operating profit/(loss)	229	(3,197)
Finance cost	(53)	(24)
Gain / (prov.) on disposal	837	(226)
Profit/(loss) before tax	1,013	(3,447)
Tax credit/(charge)	58	(9)
Profit/(loss) after tax	1,071	(3,456)
EPS - basic	20.00p	(146.17)p
EPS - adjusted	5.69p	(56.57)p

Executive search revenue increased by 9% compared with 2009, notwithstanding the fact that the number of search consultants decreased from 29 in 2009 to 20 in 2010, due to a material increase in revenue per consultant.  Moreover, the average fee per assignment increased, and this trend has continued in 2011.

A decline in interim services revenue reflects the decision made in 2009 to cut the Company's exposure to its interim contracting business, which was felt by the board to be excessively cash and capital intensive and a risk in an uncertain market.  A revised formula was recently devised whereby the interim contracting services are now supported by operating in partnership with third parties who provide the contracting aspects of the service.

In December 2010, the Company acquired Human Asset Development International Limited ("HADIL"), an experienced board assessment, coaching and development business with a blue chip client base.  HADIL's business is an attractive and complementary addition to our portfolio as it is scalable and does not create conflicts of interest with the executive search business.  The recent recognition that public and large private companies have an ongoing need to review board structures and maintain robust board assessment and appraisal processes leaves HADIL well placed, as a separately branded entity, to grow its business.

During 2010, the Company incurred a number of non-recurring costs relating to relocation, rebranding and restructuring, together with professional costs associated with the share issue, company general meetings, the renegotiation of the deferred consideration and the reorganisation of the group, including the liquidation of a subsidiary, BNB Recruitment Consultancy Limited ("BNBRC").  The board believes that, in view of these costs, the operating profit of £0.23 million was a creditable performance.

The Company reported basic earnings per share of 20.00 pence in 2010 (2009: loss per share of 146.17 pence).  Adjusting for the one-off gain on the liquidation of BNBRC and adding back share based payment and impairment charges, the adjusted earnings per share was 5.69 pence (2009: loss per share of 56.57 pence).

Now that the integration of the businesses has been largely completed we will continue to review our business processes for more operational efficiency. In addition some structural, legacy cost items will be dealt with in 2011 generating further savings, albeit with some associated initial costs.

Financial position

The financial position of the Company improved substantially over the course of 2010 as a result of the share issue of £2.04 million, the reduction in deferred consideration of £3.5 million, the £0.8 million credit associated with the liquidation of BNBRC, and the operating profit recorded for the year.  Net assets amounted to £1.0 million as at 31 December 2010, compared to a deficiency of £2.4 million, with net bank debt at £0.7 million.

Board changes and senior management

Andrew Garner, the founder of Garner, who was instrumental in bringing the two companies together, announced his intention to retire earlier this month and he will step down from the board at the forthcoming Annual General Meeting ("AGM") on 31 May 2011.  The Board is very grateful to Andrew for his immense contribution since 1997.  His foresight in driving the Norman Broadbent acquisition and building a strong robust team to carry on his legacy is a testament to his leadership.

John Bartle CBE has indicated that he also intends to step down at the AGM to pursue his other business and personal interests.  John has provided an enormous contribution in his  11 year tenure and the Board wishes him well in the future. 

I became executive chairman on 5 April 2011.  Our principal activity, executive search, is managed under the direction of Sue O'Brien, supported by Ben Felton and Jan Cameron as chief financial officer and group services director respectively.

I am pleased to note that we have appointed a number of significant leaders to the search business.  David Chancellor, previously head of the board practice at Robert Walters, is heading up a new CFO board practice and Adam Turner, previously a partner at Odgers Berndtson, is leading the Private Equity and Professional Services area.

Along with Sue, the UK executive search senior management team consists of Adam, David and Jerry Daniels, who has led the growth of the technology, media and telecoms area, and we anticipate announcing the recruitment of further senior consultants to augment the board practice in the coming months.

Strategy

The Company is committed to:

·    Organically building the core UK search business.  The target is to double the current annual search revenues to £11.5 million by 2014 which, on the newly integrated cost base, should generate significant profits for the Company.

·    Growing the board assessment and development offering through investment in HADIL, continue developing the senior Interim business and identifying appropriate add on human capital investment opportunities  

·    Growing the number of members in our international licensed business while working closely with our existing licensees to build on cross sell opportunities

·    Selectively opening a small number of international offices, concentrating on Europe and Asia. 

Proposed share issue

To facilitate the implementation of our growth strategy, the Board has decided to raise £1.75 million through the proposed placing of 2.69 million new ordinary shares at a price of 65 pence, subject to shareholder approval at the AGM.  The funds raised from the issue of these shares, combined with a conservative increase in our banking facilities which we anticipate that the placing will release, will provide the capital to implement our strategy.

We are pleased that the placing will strengthen our share register with the introduction of new high quality institutional investors.

We propose to utilise the existing share option scheme to incentivise our current talented executives and employees and key individuals who join the team in the future.

Current trading and outlook

Trading in the first quarter has been both profitable and satisfactory.  Notwithstanding the time lag in revenue generation through the active recruitment of new senior executives, the outlook for 2011 as a whole remains positive.

Longer term, we are committed to creating a top tier executive search business across a variety of territories, in tandem with a broader suite of human capital services, including executive assessment, evaluation, coaching and an enhanced board level interim service.

Since rebranding last year we are mindful that the Norman Broadbent brand has broad recognition, not just in London but in Europe and the Far East.  We wish to maximise shareholder return through attracting and retaining the best talent to capitalise on our own marque in what is an attractive, high margin business once scale is achieved. 

Consolidated Statement of Comprehensive Income for the year ended 31 December 2010

	Note	Year ended  31 December 2010	Year ended 31 December 2009
		£000	£000
REVENUE	2	6,111	6,033
Cost of sales		(83)	-
GROSS PROFIT	2	6,028	6,033
Operating expenses		(5,812)	(9,287)
Other income		13	57
GROUP OPERATING PROFIT/(LOSS)		229	(3,197)
Net finance cost	5	(53)	(24)
Share of profit of associates		-	-
Gain / (provision) on disposal of a Group subsidiary	16	837	(226)
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE INCOME TAX	3	1,013	(3,447)
Income tax credit / (expense)	4	58	(9)
PROFIT/(LOSS) FOR THE YEAR		1,071	(3,456)
			(Restated)
Earnings/(loss) per share	6
- Basic		20.00p	(146.17)p
- Diluted		19.60p	(146.17)p
Adjusted  earnings/(loss) per share	6
- Basic		5.69p	(56.57)p
- Diluted		5.58p	(56.57)p

Consolidated Statement of Financial Position as at 31 December 2010

	Notes	As at 31 December 2010	As at 31 December 2009
		£000	£000
Non-Current Assets
Intangible assets	7	1,810	1,750
Property, plant and equipment	8	177	106
Associates		5	-
Deferred tax assets	4	69	-
TOTAL NON-CURRENT ASSETS		2,061	1,856
Current Assets
Trade and other receivables	10	1,972	1,021
Cash and cash equivalents	11	140	65
TOTAL CURRENT ASSETS		2,112	1,086
TOTAL ASSETS		4,173	2,942
Current Liabilities
Trade and other payables	12	1,350	3,045
Deferred consideration	13	250	493
Bank overdraft and interest bearing loans	13	658	712
Corporation tax liability		1	1
TOTAL CURRENT LIABILITIES		2,259	4,251
NET CURRENT  LIABILITIES		(147)	(3,165)
Non-Current Liabilities
Deferred consideration	13	759	975
Interest bearing loans	13	177	111
TOTAL LIABILITIES		3,195	5,337
TOTAL ASSETS LESS TOTAL
LIABILITIES		978	(2,395)
Issued share capital		5,804	5,711
Share premium account		6,985	4,871
Retained earnings		(11,811)	(12,977)
TOTAL EQUITY		978	(2,395)

Statement of Changes in Equity for the year ended 31 December 2010

	Attributable to equity holders of the business
	Share Capital £000	Share Premium £000	Retained Earnings £000	Total Equity £000
Balance at 1st January 2009	5,709	4,868	(9,533)	1,044
Loss for the year	-	-	(3,456)	(3,456)
Total recognised income and expense for the year	-	-	(3,456)	(3,456)
Issue of ordinary shares	2	3	-	5
Credit to equity for share based payments	-	-	12	12
Balance at 31st December 2009	5,711	4,871	(12,977)	(2,395)
Balance at 1st January 2010	5,711	4,871	(12,977)	(2,395)
Profit for the year	-	-	1,071	1,071
Total recognised income and expense for the year	-	-	1,071	1,071
Issue of ordinary shares	93	2,114	-	2,207
Credit to equity for share based payments	-	-	95	95
Balance at 31st December 2010	5,804	6,985	(11,881)	978

Consolidated Statement of Cashflows for the year ended 31 December 2010

			(Restated)
	Notes	Year ended  31 December 2010	Year ended 31 December 2009
		£000	£000
Net cash used in operating activities		(897)	(307)
Cash flows from investing activities and servicing of finance
Net finance cost		(53)	(24)
Dividends received		13	57
Payments to acquire tangible fixed assets	8	(184)	(87)
Repayment of deferred consideration		(366)	(287)
Disposal of subsidiary, net of cash disposed of	16	(178)	-
Acquisition of other investments		(65)	-
Net cash used in investing activities		(833)	(341)
Cash flows from financing activities
Net cash inflows from equity placing		1,805	5
Repayment of secured loans		(219)	(210)
(Repayment of) / advances from directors		(13)	100
Advance of unsecured borrowings		-	60
Payment of transaction costs		-	(40)
Increase in invoice discounting		232	156
Net cash from financing activities		1,805	71
Net increase/(decrease) in cash and cash equivalents		75	(578)
Net cash and cash equivalents at beginning of period		65	643
Net cash and cash equivalents at end of period		140	65
Analysis of net funds
Cash and cash equivalents		140	65
Borrowings due within one year		(658)	(772)
Borrowings due after one year		(177)	(111)
Directors loan account		(7)	(212)
Deferred consideration		(1,009)	(1,468)
Net funds		(1,711)	(2,498)
Note (i)
Reconciliation of operating profit to net cash from operating activities		2010 £000	2009 £000
Operating profit		229	(3,197)
Depreciation/impairment of property, plant and equipment		79	179
Loss on disposal of property, plant and equipment		34	-
Impairment of goodwill		-	1,880
Share based payment charge		71	12
Dividends received		(13)	(57)
(Increase) / decrease in trade and other receivables		(1,042)	992
Decrease in trade and other payables		(244)	(21)
Taxation paid		(11)	(95)
Net cash used in operating activities		(897)	(307)

Notes to the Financial Statements

1.       ACCOUNTING POLICIES

Basis of preparation

The consolidated financial statements of "the Company" have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS.  The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value through profit or loss. 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise its judgement in the process of applying the Company's accounting policies.  The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in the notes to the Report and Accounts.

The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 December 2010 or 31 December 2009. Statutory accounts for 31 December 2009 have been delivered to the Registrar of Companies and those for 31 December 2010 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis of matter without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2010 or for 2009.

Going Concern

The Group has returned to profitability in the year to 31 December 2010, reporting a modest operating profit of £229,000, compared with an operating loss of £3,197,000 in 2009.  The significant losses incurred in 2009 put pressure on the working capital of the Group, however the directors took a number of actions in 2010 to strengthen the balance sheet and ensure that the Group can continue as a going concern:

·       In April 2010 the directors were forced to place one of the subsidiary companies, BNBRC, into liquidation.  Although this decision was taken as a last resort it has resulted in a significant reduction in Group liabilities.

·       In May 2010 the directors reached an agreement with the vendor of the Norman Broadbent companies to reduce the total consideration due on the acquisition from £5,500,000 to £2,040,000, of which £1,031,000 has been paid to date.  The remaining consideration will be payable in cash instalments totalling £550,000 between 2011 and 2012, with the balance settled by royalties received directly from an overseas licensee.  These revised terms have significantly reduced the Group's obligations under the agreement and consequently improved future cash flow resources.

·       On 27 May 2010 the Company raised £2,035,000 by the subscription of new equity shares and as stated in the Chairman's statement, the Company intends to raise a further £1.75 million through the issue of new shares in May 2011, subject to receiving the necessary shareholder approval at the forthcoming AGM.  The Company's bankers have also confirmed their intention to extend the Group's facilities through to 31 July 2012.     

As a result of the above actions and on consideration of the Group's 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.

2.       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, profit before taxation and net assets/ (liabilities) is set out below:

	BUSINESS SEGMENTS
2010	Executive Search £000	Overseas Royalties £000	Interim £000	Assessment, coaching & talent mgmt. £000	Unallocated £000	Total £000
Revenue	5,718	326	19	48	-	6,111
Cost of sales	(79)	-	-	(4)	-	(83)
Gross profit	5,639	326	19	44	-	6,028
Operating expenses	(5,298)	(146)	-	(39)	(250)	(5,733)
Other operating income	13	-	-	-	-	13
Finance costs	(53)	-	-	-	-	(53)
Depreciation and amortisation	(79)	-	-	-	-	(79)
Share of profit of associate	-	-	-	-	-	-
Gain on disposal of Group subsidiary	-	-	-	-	837	837
Profit before tax	222	180	19	5	587	1,013
Net assets	943	-	5	30	-	978

	BUSINESS SEGMENTS
2009	Executive Search £000	Overseas Royalties £000	Interim £000	Assessment, coaching & talent mgmt. £000	Unallocated £000	Total £000
Revenue	5,249	277	507	-	-	6,033
Cost of sales	-	-	-	-	-	-
Gross profit	5,249	277	507	-	-	6,033
Operating expenses	(6,546)	-	(521)	-	(161)	(7,228)
Other operating income	57	-	-	-	-	57
Finance costs	(24)	-	-	-	-	(24)
Depreciation and amortisation	(179)	-	-	-	-	(179)
Impairment of goodwill	-	-	-	-	(1,880)	(1,880)
Provision for disposal of Group subsidiary	-	-	-	-	(226)	(226)
Profit before tax	(1,443)	277	(14)	-	(2,267)	(3,447)
Net liabilities	(2,395)	-	-	-	-	(2,395)

The unallocated costs refer to central costs of the Group including salaries, professional and other costs, which are not directly attributable to the delivery of the services.  The four segments shown represent the management information provided to the Board and in the opinion of the directors reflect the nature of the Group's services.

ii)      Geographic Region:

The analysis by geographic region of the Group's turnover, profit before taxation and net assets/ (liabilities) is set out below:

	BUSINESS SEGMENTS
2010	Executive Search £000	Overseas Royalties £000	Interim £000	Assessment, coaching & talent mgmt. £000	Unallocated £000	Total £000
Revenue
United Kingdom	5,335	-	19	25	-	5,379
Europe	282	283	-	23	-	588
Other	101	43	-	-	-	144
Total	5,718	326	19	48	-	6,111
Gross profit
United Kingdom	5,256	-	19	21	-	5,296
Europe	282	283	-	23	-	588
Other	101	43	-	-	-	144
Total	5,639	326	19	44	-	6,028
Profit/(Loss) before tax
United Kingdom	222	-	19	5	587	833
Europe	-	162	-	-	-	162
Other	-	18	-	-	-	18
Total	222	180	19	5	587	1,013
Net assets
United Kingdom	943	-	5	30	-	978
Total	943	-	5	30	-	978

	BUSINESS SEGMENTS
2009	Executive Search £000	Overseas Royalties £000	Interim £000	Assessment, coaching & talent mgmt. £000	Unallocated £000	Total £000
Revenue & Gross Profit
United Kingdom	5,000	-	507	-	-	5,507
Europe	69	250	-	-	-	319
Other	180	27	-	-	-	207
Total	5,249	277	507	-	-	6,033
Profit/(Loss) before tax
United Kingdom	(1,270)	-	(14)	-	(2,267)	(3,551)
Europe	17	250	-	-	-	267
Other	(190)	27	-	-	-	(163)
Total	(1,443)	277	(14)	-	(2,267)	(3,447)
Net liabilities
United Kingdom	(2,395)	-	-	-	-	(2,395)
Total	(2,395)	-	-	-	-	(2,395)

Turnover by location is not materially different from turnover by destination.

3.       PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

	2010	2009
	£000	£000
Profit / (loss) on ordinary activities before taxation is stated after charging:
Depreciation and impairment of property, plant and equipment	79	179
Loss on foreign currency exchange	13	9
Operating lease rentals:
Land and buildings	356	308
Auditors' remuneration:
Audit work	30	38
Non-audit work	-	-
Impairment of goodwill	-	1,880

The Company audit fee in the year was £11,000 (2009: £8,000).  

4.       TAX EXPENSE

(i)       Tax charged in the income statement

Taxation is based on the profit for the year and comprises:	2010 £000	2009 £000
Current tax:
United Kingdom corporation tax at 28% (2009: 28%) based on profit for the year	27	24
Adjustment in respect of prior years	(16)	(15)
Total current tax	11	9
Deferred tax:
Origination and reversal of temporary differences	(69)	-
Tax (credit)/charge	(58)	9

(ii)      Reconciliation of the total tax charge

The difference between the current tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows:

	2010	2009
	£000	£000
Profit/(loss) on ordinary activities before taxation	1,013	(3,447)
Tax on profit on ordinary activities at standard UK corporation tax rate of 28% (2009: 28%)	284	(965)
Effects of:
Expenses not deductible	56	637
Gain on disposal of group subsidiary	(234)	-
Adjustment in respect of prior year	(16)	(15)
Non-taxable income	(4)	(16)
Capital allowances in excess of depreciation	(23)	34
Utilisation of ACT	(23)	-
Utilisation of losses brought forward	(44)	-
Adjustment to losses carried forward	36	353
Recognition of deferred tax balances	(69)	-
Group relief	-	(13)
Other adjustments	(21)	(6)
Current tax (credit)/charge for the year	(58)	9

(iii)    Deferred tax

	Tax losses	Total
	£000	£000
At 01 January 2009	-	-
(Credited) / charged to the income statement	-	-
At 31 December 2009	-	-
Credited to the income statement	(69)	(69)
At 31 December 2010	(69)	(69)

At 31 December 2010 the Group had capital losses carried forward of £8,130,000 (2009: £6,528,000).  A deferred tax asset has not been recognised for the capital losses as the recoverability in the near future is uncertain. The Group is also currently in discussion with HM Revenue & Customs in connection with the recovery of significant tax losses from BNBRC.  As neither the quantum of the losses nor the outcome of the discussions is certain, it is not deemed appropriate to disclose a deferred tax asset in these financial statements.

The analysis of deferred tax in the consolidated balance sheet is as follows:

	2010	2009
Deferred tax assets:	£000	£000
Tax losses carried forward	69	-
Total	69	-

5.       NET FINANCE COST

	2010	2009
	£000	£000
Interest payable on bank loans and overdrafts	(53)	(24)
Total	(53)	(24)

6.       EARNINGS PER SHARE

i)        Basic earnings per share

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

	2010	2009
Profit/(Loss) attributable to shareholders	£1,071,000	£(3,456,000)
Weighted average number of ordinary shares	5,351,530	2,364,301

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.

	2010	2009
Profit/(Loss) attributable to shareholders	£1,071,000	£(3,456,000)
Weighted average number of ordinary shares	5,351,530	2,364,301
- assumed conversion of share options	64,970	-
- assumed conversion of warrants	46,608	-
Total	5,463,108	2,364,301

The calculations for comparative periods for both basic and diluted losses per share have been restated based on the new consolidated ordinary share capital.

iii)      Adjusted earnings per share

An 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 the effects of impairment of intangibles, charges for share based payments and the one-off gain on the disposal of the group subsidiary.  It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the Group.

	2010	2010	2010	2009	2009	2009
	£000	Basic    pence per share	Diluted pence per share	£000	Basic    pence per share	Diluted pence per share
Basic earnings
Profit after tax	1,071	20.00	19.60	(3,456)	(146.17)	(146.17)
Adjustments
Gain on disposal of subsidiary	(837)	(15.64)	(15.32)	226	9.56	9.56
Share based payment charge	71	1.33	1.30	12	0.51	0.51
Impairment of intangible assets	-	-	-	1,880	79.53	79.53
Adjusted earnings	305	5.69	5.58	(1,338)	(56.57)	(56.57)

7.       INTANGIBLE ASSETS

Group	Goodwill  arising on consolidation £000
Cost
Balance at 1 January 2009	7,049
Subsequent adjustment to goodwill on acquisition	(3,419)
Balance at 31 December 2009	3,630
Additions	60
Balance at 31 December 2010	3,690
Provision for impairment
Balance at 1 January 2009	-
Impairment in the year	1,880
Balance at 31 December 2009	1,880
Impairment in the year	-
Balance at 31 December 2010	1,880
Net book value
At 1 January 2009	7,049
At 31 December 2009	1,750
At 31 December 2010	1,810

Goodwill acquired through business combinations is allocated to cash-generating units (CGU) identified at entity level.  The carrying value of intangibles allocated by CGU is shown below:

	Garner International £000	Norman Broadbent £000	Human Asset Development International £000	Total £000
At 1 January 2009	959	6,090	-	7,049
At 31 December 2009	-	1,750	-	1,750
At 31 December 2010	-	1,750	60	1,810

The goodwill attributed to the Norman Broadbent entity can be split into two further CGU's, cash generated from the retained Executive Search business of £1,100,000 (2009: £1,100,000) and cash generated from International Royalties of £650,000 (2009: £650,000).

In line with International Financial Reporting Standards, goodwill has not been amortised from the transition date, but has instead been subject to an impairment review by the directors of the Group.  As set out in accounting policy note 1 on page 18, the directors test the goodwill for impairment annually.  The recoverable amount of the Group's CGUs are calculated on the present value of their respective expected future cash flows, applying a weighted average cost of capital in line with businesses in the same sector.  Pre-tax future cash flows for the next five years are derived from approved forecasts for the 2011 financial year.

The key assumption applied to the forecasts for the business is that return on sales is expected to be a minimum of 10% per annum for the foreseeable future.  Return on sales defined as the expected profit before tax on net revenue.  There are only minimal non cash flows included in profit before tax.  The rate used to discount the forecast cash flows is 12%.

The five year forecasts have been prepared using conservative revenue growth rates to reflect the uncertainty that is still present in the economy.  Based on the above assumptions, at 31 December 2010 the recoverable value of the Norman Broadbent CGU is £2,470,000 and HADIL CGU is £270,000.  Return on sales would need to fall below 7% for Norman Broadbent goodwill to be impaired and 2% for HADIL goodwill to be impaired.

8.       PROPERTY, PLANT AND EQUIPMENT

Group	Land and buildings - leasehold £000	Office and computer equipment £000	Fixtures and fittings £000	Total £000
Cost
Balance at 1 January 2009	17	199	77	293
Additions	-	84	3	87
Balance at 31 December 2009	17	283	80	380
Additions	66	77	41	184
Disposals	-	(215)	7	(208)
Balance at 31 December 2010	83	145	128	356
Accumulated depreciation
Balance at 1 January 2009	10	27	58	95
Charge for the year	4	161	14	179
Balance at 31 December 2009	14	188	72	274
Charge for the year	19	47	13	79
Disposals	-	(184)	10	(174)
Balance at 31 December 2010	33	51	95	179
Net book value
At 1 January 2009	7	172	19	198
At 31 December 2009	3	95	8	106
At 31 December 2010	50	95	33	177

The Group had no capital commitments as at 31 December 2010 (2009: £Nil). 

The above assets are owned by Group companies; the Company has no fixed assets.

9.       INVESTMENTS

Company	Shares in subsidiary undertakings
	£000
Cost
Balance at 1 January 2009	10,747
Subsequent adjustment to cost of subsidiaries	(3,419)
Balance at 31 December 2009	7,328
Additions	60
Disposal of subsidiary	(1,602)
Balance at 31 December 2010	5,786
Provision for impairment
Balance at 1 January 2009	3,518
Impairment in the year	2,010
Balance at 31 December 2009	5,528
Impairment in the year	-
Disposal of subsidiary	(1,602)
Balance at 31 December 2010	3,926
Net book value
At 1 January 2009	7,229
At 31 December 2009	1,800
At 31 December 2010	1,860

Principal Group investments:	Country of incorporation or registration and operation	Principal activities	Description and proportion of shares held by the Company
Garner International Limited	England and Wales	Executive search	100% ordinary shares
Bancomm Limited	England and Wales	Executive search	100% ordinary shares
Norman Broadbent Overseas Limited	England and Wales	Executive search	100% ordinary shares
Human Asset Development International Limited	England and Wales	Assessment, coaching and talent mgmt.	100% ordinary shares
NBBI Limited*	England and Wales	Interim Management	50% ordinary shares
Substantial Share Holdings:
NBS Norman Broadbent SA**	Spain	Executive Search	20% ordinary shares

* The 50% shareholding in this company is owned by Garner International Limited, a wholly owned subsidiary of the Company.

** The 20% shareholding in this company is owned by Norman Broadbent Overseas Limited, a wholly owned subsidiary of the Company.

10.     TRADE AND OTHER RECEIVABLES

	2010 £000	2009 £000
Trade receivables	1,584	845
Less: provision for impairment	(145)	(142)
Trade receivables - net	1,439	703
Other debtors	258	91
Prepayments and accrued income	275	227
Due from Group undertakings	-	-
Total	1,972	1,021

As at 31 December 2010, Group trade receivables of £555,000 (2009: £300,000) were past their due date but not impaired.  They relate to customers with no default history.  The aging profile of these receivables is as follows:

	2010 £000	2009 £000
Up to 3 months	413	187
3 to 6 months	86	30
6 to 12 months	56	83
Total	555	300

The largest amount due from a single debtor at 31 December 2010 represents 20.16% (2009: 9.51%) of the total trade receivables balance outstanding.

As at 31 December 2010, Group trade receivables of £145,000 (2009: £142,000) were past their due date and impaired.  A provision for impairment for the full amount has been recognised in the financial statements.  Movements on the Group's provision for impairment of trade receivables are as follows:

	2010 £000	2009 £000
At 1 January	142	31
Provision for receivable impairment	145	142
Receivables written-off as uncollectable	(142)	(31)
At 31 December	145	142

Other than the impairment provision provided for aged trade receivables above, there are no other material difference between the carrying value and the fair value of the Group's and parent company's trade and other receivables.

11.     CASH AND CASH EQUIVALENTS

	2010 £000	2009 £000
Cash at bank and on hand	140	65
Total	140	65

There is no material difference between the carrying value and the fair value of the Group's and parent company's cash at bank and in hand.

12.     TRADE AND OTHER PAYABLES

	2010 £000	(Restated) 2009 £000
Trade payables	479	370
Due to Group undertakings	-	-
Other taxation and social security	359	1,786
Other payables	239	152
Directors' loans	7	212
Accruals	266	525
Total	1,350	3,045

Comparative figures have been restated as follows:

·           a £60,000 loan from a shareholder was previously disclosed under 'Directors' loans' in 2009 rather than under 'Other payables'

·           a £12,000 loan from a director was previously disclosed under 'Other payables' in 2009 rather than under 'Directors' loans'.

There is no material difference between the carrying value and the fair value of the Group's and parent company's trade and other payables.

13.     BORROWINGS

Maturity profile of borrowings	2010 £000	(Restated) 2009 £000
Current
Bank overdrafts and interest bearing loans:
Invoice discounting facility	610	378
Bank overdraft	-	150
Interest bearing loan	48	184
	658	712
Deferred consideration	250	493
Directors' loans	7	212
Other loans	-	60
	915	1,477
Non-Current
In more than one year but no more than two:
Interest bearing loans	163	111
Deferred consideration	300	250
In more than two years but no more than five:
Interest bearing loan	14	-
Deferred consideration	459	725
	936	1,086
Total	1,851	2,563

The carrying amounts and fair value of the Group's borrowings, which are all denominated in sterling, are as follows:

		Carrying amount		Fair value
		2010 £000	(Restated) 2009 £000	2010 £000	(Restated) 2009 £000
Bank overdrafts and interest bearing loans		835	823	835	823
Deferred consideration		1,009	1,468	1,009	1,468
Directors' loans		7	212	7	212
Other loans		-	60	-	60
Total		1,851	2,563	1,851	2,563

i)        Bank overdrafts and interest bearing loans

Bank loans and overdrafts are secured by a fixed and floating charge over the assets of the Group and by separate all money guarantees of restricted amounts from A C Garner.  The following debentures are also in place as security for the bank loans:

a)   Unlimited debenture dated 3 November 2000 from Garner International Limited;

b)   Omnibus guarantee and set off agreement dated 6 November 2000 between the bank, the Company and Garner International Limited.

In December 2010 the balance of £75,000 outstanding on the term loan and the bank overdraft of £150,000 were consolidated into one term loan, repayable by 31 January 2013.  Interest on the loan is charged at 4% above the bank base rate (2009: 3.5%). 

ii)         Invoice discounting facility

Garner International Limited operates an invoice discounting facility.  Funds are available to be drawn down at an advance rate of 60% against trade receivables that are aged less than 120 days, with the facility capped at £700,000.  At 31 December 2010, the outstanding balance on the facility of £610,000 (2009: £378,000) was secured by trade receivables of £1,334,000 (2009: £620,000).  Interest is charged on the drawn down funds at a rate of 1.75% above the bank base rate (2009: 1.75%).  

iii)        Deferred consideration

The balance outstanding at 31 December 2010 is due to be settled by a cash payment of £250,000 on 15 June 2011, a subsequent cash payment of £300,000 on 15 June 2012 and £459,000 of additional payments equivalent to royalty income and dividends from an overseas licensee.   These additional payments will be made quarterly and will continue until the balance has been fully settled.  This element of the deferred consideration can only be settled through the income received from the overseas licensee with no recourse to the Company should the revenue stream reduce or cease completely in the future.  The balance outstanding on the deferred consideration is non-interest bearing and is part secured by a £95,765 personal guarantee by A C Garner, a director of the Company.  This guarantee reduces on a pound for pound basis.  

iv)        Directors'  and other loans

Directors' and other loans are non-interest bearing and are repayable on demand.

14.     FINANCIAL INSTRUMENTS

The principle financial instruments used by the Group, from which financial instrument risk arises, are summarised below. All financial assets and liabilities are measured at amortised cost which is not considered to be materially different to fair value.

	Amortised Cost
	2010 £000	2009 £000
Financial Assets
Trade and other receivables	1,972	1,021
Cash and cash equivalents	140	65
Financial Liabilities
Trade and other payables	1,350	3,045
Bank overdrafts and interest bearing loans	835	823
Deferred consideration	1,009	1,468
Corporation tax liability	1	1

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments.  Details on these risks and the policies set out by the Board to reduce them can be found in Note 2 of the Report and Accounts.

15.     PENSION COSTS

The Group operated several defined contribution pension schemes for the business.  The assets of the schemes were held separately from those of the Group in independently administered funds.  The pension cost represents contributions payable by the Group to the funds and amounts to £127,000 (2009: £131,000). All costs were fully paid at the year end.

16.     GAIN/(PROVISION) ON DISPOSAL OF SUBSIDIARY

On 26 March 2010, the trade, employees and fixed assets of BNBRC and Bancomm Limited, both 100% owned subsidiaries of the Company, were transferred to Garner International Limited, a fellow Group subsidiary, for a total consideration of £90,627.  This transfer was a planned initiative to consolidate the operations of the executive search business following the acquisition of three Norman Broadbent trading companies in December 2008.

On 15 April 2010 the Company was placed into voluntary creditors' liquidation.  The company had net liabilities, including inter-company debts, of £1.65 million.

Between 1 January 2010 and 15 April 2010 when the liquidator was appointed, BNBRC generated revenues of £185,000 and incurred expenditure of £404,000. These amounts are accounted for in the consolidated statement of comprehensive income on a line by line basis.  The net loss for the period is offset by the release of a £226,000 provision, made in the 31 December 2009 financial statements to reflect the subsidiary accounts having been prepared on a break-up basis.

The disposal of the subsidiary and its net liabilities has led to a gain in the Group consolidated financial statements of £837,000, detailed below.  The assets and liabilities of the company are disclosed at their carrying value as at 15 April 2010 when the company left the Group.

BNB Recruitment Consultancy Limited	2010 £000	2009 £000
Trade and other receivables	(92)	-
Cash and cash equivalents	(48)	-
Trade and other payables	881	-
Legal costs associated with liquidation	(130)	-
Release/(provide) for preparation of subsidiary accounts on a break-up basis	226	(226)
Total	837	(226)

The disposal of the subsidiary had the following impact on the Group cash position:

	2010 £000	2009 £000
Cash at bank and in hand (BNB Recruitment Consultancy Limited)	(48)	-
Legal and professional costs incurred by the Group relating to the disposal	(130)	-
Total	(178)	-

17.     RELATED PARTY TRANSACTIONS

The following transactions were carried out with related parties:

i.  Sale of services:

During the year, the Group invoiced NBBI Limited, an Associate company, £4,470 (2009: £Nil) for the provision of sales and research services.  The charges reflect the costs incurred by the Group on behalf of the Associate and are calculated in line with a formal Joint Venture Agreement set up between the parties.

ii. Purchase of services:

	2010 £000	2009 £000
Adelaide Capital Limited	20	-
Anderson Barrowcliff LLP	43	24
Total	63	24

Adelaide Capital Limited invoiced the Group for business related travel costs of P Casey and B Stephens and certain due diligence costs incurred prior to their appointment as directors of the Company.  P Casey and B Stephens are directors of Adelaide Capital Limited.

Taxation and company secretarial services are acquired from Anderson Barrowcliff LLP, an accountancy firm of which R Robinson is a partner.  Anderson Barrowcliff also invoices the Group for R Robinson's director's fees.

iii. Key management compensation:

Key management includes executive and non-executive directors.  The compensation paid or payable to the directors can be found in the Directors' Remuneration Report on of the Report and Accounts.

iv. Year-end payables arising from the purchases of services:

	2010 £000	2009 £000
Adelaide Capital Limited	10	-
Anderson Barrowcliff LLP	11	10
Total	21	10

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

v. Loans from related parties:

In order to assist the working capital position, certain directors advanced loans to the Group, which are non-interest bearing and have no formal repayment terms. 

	2010 £000	2009 £000
At 1 January	212	112
Loans advanced to the Group during the year	-	100
Loans repaid during the year	(13)	-
Loans converted in to equity during the year	(192)	-
At 31 December	7	212

vi. Personal guarantees from directors:

At 31 December 2010 A C Garner had the following personal guarantees:

·           £200,000 as security for the Group bank loans and overdraft.

·           £95,765 as security for the deferred consideration. This guarantee decreases on a pound-for-pound basis.

18.     CONTINGENT LIABILITY

The Company is a member of the Norman Broadbent plc Group VAT scheme.  As such it is jointly accountable for the combined VAT liability of the Group. The total VAT outstanding in the Group at the year-end was £193,000 (2009: £426,000).

19.     AVAILABILITY OF REPORT AND ACCOUNTS

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

 

END

 

 

FR SELFMAFFSEIL