Half-year Report

RNS Number : 0245N

Parity Group PLC

20 September 2019

 

PARITY GROUP PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2019

20 September 2019

Parity Group plc ("Parity" or the "Group" or the "Company"), the data and technology focussed professional services business, announces its half year results for the six months ended 30 June 2019.

Headlines:

·     Phase 1 of a comprehensive transformation programme, commenced in March under new CEO, completed

·     Annualised gross operating costs reduced by £2.08m, a higher than anticipated gross cost saving, including a net headcount reduction of 35%

·     After £0.93m investment in the transformation programme, net annualised cost savings of £1.15m achieved

·     Investment in the transformation program:

o  Following the appointment of the new Head of Consultancy division, Antonio Acuña MBE, a new Commercial Director, Christopher Jones, and Head of Learning and Development, Dianne Martin, have been appointed

o  The new Parity brand and associated marketing campaigns have been launched since the half year end

o  Commenced an evaluation of Artificial Intelligence and technological advancement opportunities in the recruitment market

·     Board anticipates making a modest level of adjusted pre-tax profit for the full year 2019

·     Continuing difficult market conditions in the traditional UK recruitment market including loss of major Scottish Government contract announced in March 2019 only partially offset by recent wins in Consultancy business

o  New initial consultancy retainer contract just signed with Compass Group plc

o  Two new contract wins with the Department of Education

o  New contract with BAT

·     Continued positive cash flow from operating activities⁽³⁾ of £0.08m despite £0.41m outflow in relation to restructuring costs

·     Period on period reduction in net debt⁽³⁾ to £1.2m (30 June 2018: £1.9m, 31 December 2018: £1.1m)

·     £10m credit facility with current provider extended on improved terms for a further two years until May 2021.

Six months ended 30 June 2019

	Six months to 30.06.19 (Unaudited) £'000	Six months to 30.06.18 (Unaudited) £'000	Incr./ (Decr.) %
Revenue	44,514	43,220	3%
Adjusted profit before tax(1)	203	847	(76%)
(Loss)/profit before tax(2)	(541)	847	-
Net cash flow from operating activities(3)	77	(238)	-
Net debt(3)	1,174	1,891	(38%)

1.          On a Continuing basis, before non-recurring items

2.          On a Continuing basis

3.          Pre the adoption of IFRS 16

John Conoley, Non-Executive Chairman of Parity Group plc, said:

"The period we are reporting on includes the first four months under our new Chief Executive, Matthew Bayfield, who was appointed in February 2019. He and the senior management team have moved quickly to restructure the business, executing the plan set out earlier in the year.

"The Board is confident in reaching a modest level of adjusted profitability for the year, which will be a significant achievement by the management team given the extent of the transformation being undertaken and following the loss of the very large legacy contract with the Scottish Govt in Q1. The precise year end achievement will depend on the timing and mix of contracts closed in the remainder of the year."

Matthew Bayfield, Chief Executive, said:

"Due to changing client demand we are moving Parity's focus from a single line of business dependent upon relatively low margin recruitment revenues into a multi-line business built around consultancy, learning and development and strategic recruitment in the data world.

"The restructuring programme that we embarked upon earlier in the year has gone deeper into the organisation and has had to be more comprehensive than we originally anticipated. This more comprehensive transformation programme has had an expected impact on our short term gross revenue, however we are seeing the first signs that the plan will deliver higher margins and robust profitability in the medium term.

"A new senior team has been recruited which is focussed on higher margin opportunities and new service lines. The second phase of our transformation plan is about taking the new Parity business model to market with a renewed marketing and communications focus.

 "Whilst we still have a long way to go, we have a clear vision, a good plan and the support of our clients in what we are setting out to achieve, which is helping us develop a growing pipeline of new revenue opportunities. In the last few months we have signed new contracts with, amongst others, the Department of Education, BAT and The Crown Commercial Service and are delighted to report today a new retainer consultancy relationship with Compass Group."

For further information, contact:

Matthew Bayfield CEO Roger Antony GFD		Parity Group plc	020 8543 5353
David Beck		Donhead Consultants	07836 293383
Mike Coe Chris Savidge		WH Ireland	01179 453470

This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of Parity Group plc. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to (i) adverse changes to the current outlook for the UK IT recruitment and solutions market, (ii) adverse changes in tax laws and regulations, (iii) the risks associated with the introduction of new products and services, (iv) pricing and product initiatives of competitors, (v) changes in technology or consumer demand, (vi) the termination or delay of key contracts and (vii) volatility in financial markets.
 

Overview:

Due to changing client demand we are moving Parity's focus from a single line of business dependent upon relatively low margin recruitment revenues into a multi-line business built around consultancy, learning and development and strategic recruitment in the data world.

The restructuring programme that we embarked upon earlier in the year has gone deeper into the organisation and has had to be more comprehensive than we originally anticipated. This more comprehensive transformation programme has had an impact on our short term profitability however we can see the first signs that the plan will deliver in the medium term.

A new senior team has been recruited who are focussed on higher margin opportunities and new service lines. The second phase of our transformation plan is about taking the new Parity business model to market with a renewed marketing and communications focus.

 Whilst we still have a long way to go, we have a clear vision, a good plan and the support of our clients in what we are setting out to achieve, which is helping us develop a growing pipeline of new revenue opportunities. In the last few months we have signed new contracts with amongst others the Department of Education, BAT and The Crown Commercial Service and are delighted to report today a new retainer consultancy relationship with Compass Group.

About us:

45 years of trusted relationships with our clients Parity provides expertise that delivers positive growth for our clients through realising the true value of their data. We are passionate about empowering business and government to make better commercial decisions based on reliable data. Specifically, we advise on data and we provide access to skills either as a managed service, through resourcing in the contract and permanent market, or as part of a learning and development programme. Our work comes from a mix of long-term contracts with public and private sector organisations as well as expanded projects with existing clients as a result of strong relationships and a track record of high client satisfaction. Around 60 staff work in our offices in Belfast, Edinburgh, London and Manchester and we had, during H1 2019, over 1,000 associates supporting clients around the UK and Ireland.

OUR STRATEGIC GOAL To equip clients with the talent, skills and advice necessary to make bold data-led business decisions confidently.

OUR FINANCIAL GOAL To grow margin and net profitability.

OUR OPERATING MODEL Applying an account management approach to ensure clients can choose the right mix of our support in consulting, resourcing, and learning and development.

OUR PURPOSE We are the trusted partner of data driven transformation.

OUR MISSION We provide expertise that delivers positive growth for clients through realising the true value of their data.

OUR VISION To build the world's most dynamic community of data experts, enabling our clients to realise their vision.

Transformation to deliver growth

New Operating Model

Since the appointment of Matthew Bayfield as Chief Executive in February this year the Group has adopted a new and more client focused operating model. Clients are now offered a suite of integrated services through a single account management structure. Working with our clients we identify their needs and design a solution that can encompass consultancy, learning and development or strategic recruitment, or any combination of the three. We have put this client centric account management at the heart of our business to improve the quality of our client relationships and to ensure our clients are able to access the full range of services that Parity can offer them.

The success of this new model will be judged on the depth of our client relationships and our ability to help our clients realise the value of their data and make better commercial decisions based on reliable data. When successfully in place the new model will also transform the profitability of Parity as we will have moved from low margin and increasingly commoditised recruitment into, data focused consultancy, learning and development and strategic recruitment for data people; service lines that attract significantly higher margins.

Investment in New Strategic Hires

Critical to the success of our new model is the quality of our people and especially the leaders of each of our service lines. We have invested in new team members who will work together as part of a new executive operating board to oversee the implementation of our new model and complete the transformation of the business. We have recently completed this process with the appointment of a new Head of Learning and Development and a Commercial Director.

Senior hires made in the last six months as part of the transformation programme have been as follows:

·     Antonio Acuña MBE appointed as Head of Consulting in April

·     Dianne Martin appointed as Head of Learning and Development in August

·     Chris Jones appointed as Commercial Director in September

·     Shaun O'Hara engaged as People Officer, focussed on Transformation

Investment in Branding and New Website

As we move to a new way of working and the transformation of our business it has been important to refresh and update the Parity brand which had not seen any significant investment for over ten years.

In July we launched our new identity which reflects the new integrated offering. Our new website went live at the same time with a fresh look and modern feel, we have unified Parity's web presence to reflect the integrated offering and increase both client and candidate interaction.

The new brand is central to the second phase of our transformation as we initiate a new marketing strategy to support growth and generate leads via the website.

Aligning our Cost Base

A further critical element of our transformation plan has been to align our cost base to our new operating model, both reducing overall costs and moving costs into account management and the three service lines that support the model. We have achieved a gross annualised saving of £2.08m (£1.15m net of investments) and a net reduction of 35% in our headcount.

As part of the review of our cost base we have been able to move resources away from low margin commoditised recruitment to higher margin work, and redeployed resource to improve the consistency of our client relationships. Whilst the net 35% reduction in headcount relates predominately to a reduction in recruitment sales staff, the annualised savings figure also includes reductions in general and administration, IT and property costs. There were one off costs of the restructuring of £0.74m in the first half.

Financial Review

Revenue

Group revenues were up by 3% or £1.3m year on year. Lower margin recruitment revenues were up by 7% or £2.8m reflecting higher contractor volumes which averaged 1,021 in H1 2019 (H1 2018: 953 contractors). Whilst there was an increase in the year on year average, we saw a downward trajectory over H1 with the number of contractors on billing decreasing from 995 to 913 over the six months. The reduction was due in part to the expected run off of contractors under the Scottish Government framework which we announced in March 2019, and also as a result of challenging trading conditions in the UK recruitment market.

Consultancy revenues were down by £1.55m or 30% due to the inclusion of revenues from the significant MoD contract in the comparative period. The MoD contract ran until August 2018 but was not renewed. Consultancy revenues in H1 2019 included £0.2m from new higher margin data consultancy work.

Selling Contribution

External contribution margin for recruitment was £3.9m at a margin of 9.6% (H1 2018: £3.8m at 10.1%) and for consultancy was £0.8m at a margin of 21% (H1 2018: £1.4m at 27%). Group selling contribution to overheads was £2.4m (H1 2018: £2.8m) down by 14% or £0.4m due to the sales mix between recruitment and consultancy.

Result Before Tax     

The Group reported a loss before tax for the six months of £0.5m (H1 2018: profit of £0.8m) and an adjusted profit before tax (excluding non-recurring items) of £0.2m (H1 2018: £0.8m). Non-recurring items were £0.7m (H1 2018: £nil) and reflect the charge for specific restructuring costs. The restructuring costs primarily related to the headcount reduction, but also included onerous property lease costs in respect of office relocations.  

Cash and Net Debt

Free cash flow from operating activities, pre the adoption of IFRS 16, was an inflow of £0.1m (H1 2018: outflow of £0.2m) and was after an outflow of £0.4m in respect of restructuring costs. We achieved a further improvement in debtor days to 16 days (H1 2018: 20 days).

Net debt, pre the adoption of IFRS 16, at the end of June was £1.2m (30 June 2018: £1.9m; 31 December 2018: £1.1m). During the period we finalised renewal of our credit facility with PNC who have acted as the Company's lenders since 2010. The £10m facility is subject to a minimum period of two years, expiring May 2021, with an improved discount rate of 2.00% + base (previously 2.35% + base).

Defined Benefit Pension

The final salary pension scheme deficit was £1.1m at 30 June 2019 (30 June 2018: £0.9m; 31 December 2018 £1.9m). The deficit has reduced by £0.8m since the 2018 year end despite a fall in discount rates. The improvement was partly due to an increase in the value of scheme investments and partly as a result of actions taken by the Board and the Trustees to reduce scheme risk.

The results of the triennial review as at 5 April 2018 were agreed during the period. As part of the agreement, minimum contributions to the scheme will remain at similar levels to contributions made in 2018 at £0.3m per year.    

Outlook

Trading conditions in the UK recruitment market continue to be extremely challenging, which supports the Board's view of the need to change the Parity business model. To that end we have implemented the first phase of a transformation programme that we believe will improve the medium-term profitability of the business.

We are encouraged by the recently announced contract wins and renewals, and our growing pipeline in higher margin service lines, but recognise that it will take time for the benefits of our change programme to translate into improved financial returns. The Board anticipate making a modest level of adjusted pre-tax profit in the full year 2019. The precise year end achievement will depend on the timing and mix of contracts closed in the remainder of the year.

We remain excited by the scale of opportunity in the data market. The second half will see further progress with the transformation plan as we take the new Parity offer to our clients with enhanced marketing and client communications. We look forward with increasing confidence to 2020 now that we have the right people and the right plan in place. The next phase of the investment programme will include an evaluation of technology opportunities for competitive advantage and operational efficiency.

Consolidated condensed income statement

For the six months ended 30 June 2019

			Six months to 30.06.19 (Unaudited)			Six months to 30.06.18 (Unaudited)			Year to 31.12.18 (Audited)
	Notes	Before non-recurring items £'000	Non-recurring items (note 4) £'000	After non-recurring items          £'000		£'000		Before non-recurring items £'000	Non-recurring items (note 4) £'000	After non-recurring items £'000
Continuing operations Revenue	2, 3	44,514	-	44,514		43,220		86,112	-	86,112
Employee benefit costs		(2,906)	(500)	(3,406)		(3,098)		(5,976)	(299)	(6,275)
Depreciation, amortisation and impairment		(410)	(174)	(584)		(112)		(194)	-	(194)
All other operating expenses		(40,784)	(70)	(40,854)		(38,984)		(78,724)	(196)	(78,920)
Total operating expenses		(44,100)	(744)	(44,844)		(42,194)		(84,894)	(495)	(85,389)
Operating profit/(loss)		414	(744)	(330)		1,026		1,218	(495)	723
Finance costs	5	(211)	-	(211)		(179)		(365)	-	(365)
Profit/(loss) before tax		203	(744)	(541)		847		853	(495)	358
Tax (charge)/credit	7	(71)	135	64		(88)		(16)	79	63
Profit/(loss) for the period from continuing operations		132	(609)	(477)		759		837	(416)	421
Discontinued operations Loss from discontinued operations after tax	6	-	-	-		(388)		(381)	-	(381)
Profit/(loss) for the period attributable to owners of the parent		132	(609)	(477)		371		456	(416)	40
(Loss)/earnings per share - Continuing operations
Basic (loss)/earnings per share Diluted (loss)/earnings per share	8 8			(0.47p) (0.47p)		0.74p 0.73p				0.41p 0.41p
(Loss)/earnings per share - Continuing and discontinued operations
Basic (loss)/earnings per share Diluted (loss)/earnings per share	8 8			(0.47p) (0.47p)		0.36p 0.36p				0.04p 0.04p

 

Consolidated condensed statement of comprehensive income

For the six months ended 30 June 2019

		Six months to 30.06.19 (Unaudited) £'000	Six months to 30.06.18 (Unaudited) £'000	Year to 31.12.18 (Audited)          £'000
(Loss)/profit for the period		(477)	371	40
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations		-	-	(3)
Items that will never be reclassified to profit or loss
Remeasurement of defined benefit pension scheme		857	124	(1,005)
Deferred taxation on remeasurement of defined benefit pension scheme		(146)	(21)	171
Other comprehensive income/(expense) for the period after tax		711	103	(837)
Total comprehensive income/(expense) for the period attributable to owners of the parent		234	474	(797)

 

Consolidated condensed statement of changes in equity

For the six months ended 30 June 2019

Six months to 30 June 2019 (Unaudited)

	Share capital £'000	Share premium reserve £'000	Capital redemption reserve £'000	Other reserves £'000	Retained earnings £'000	Total £'000
At 31 December 2018	2,053	33,244	14,319	34,560	(77,612)	6,564
Adoption of IFRS 16 (note 1)	-	-	-	-	6	6
Revised at 1 January 2019	2,053	33,244	14,319	34,560	(77,606)	6,570
Share options - value of employee services	-	-	-	-	116	116
Transactions with owners	-	-	-	-	116	116
Loss for the period	-	-	-	-	(477)	(477)
Other comprehensive income for the period after tax	-	-	-	-	711	711
At 30 June 2019	2,053	33,244	14,319	34,560	(77,256)	6,920

Six months to 30 June 2018 (Unaudited)

	Share capital £'000	Share premium reserve £'000	Capital redemption reserve £'000	Other reserves £'000	Retained earnings £'000	Total £'000
At 1 January 2018	2,043	33,211	14,319	44,160	(86,544)	7,189
Issue of new ordinary shares	10	33	-	-	-	43
Share options - value of employee services	-	-	-	-	27	27
Transactions with owners	10	33	-	-	27	70
Profit for the period	-	-	-	-	371	371
Other comprehensive income for the period after tax	-	-	-	-	103	103
At 30 June 2018	2,053	33,244	14,319	44,160	(86,043)	7,733

Year to 31 December 2018 (Audited)

	Share capital £'000	Share premium reserve £'000	Capital redemption reserve £'000	Other reserves £'000	Retained earnings £'000	Total £'000
At 1 January 2018	2,043	33,211	14,319	44,160	(86,544)	7,189
Issue of new ordinary shares	10	33	-	-	-	43
Share options - value of employee services	-	-	-	-	129	129
Transactions with owners	10	33	-	-	129	172
Profit for the year	-	-	-	-	40	40
Other comprehensive expense for the year after tax	-	-	-	-	(837)	(837)
Reallocation of impairment charge	-	-	-	(9,600)	9,600	-
At 31 December 2018	2,053	33,244	14,319	34,560	(77,612)	6,564

 

Consolidated condensed statement of financial position

As at 30 June 2019

	Notes	As at 30.06.19 (Unaudited) £'000	As at 30.06.18 (Unaudited) £'000	As at 31.12.18 (Audited) £'000
Assets Non-current assets
Goodwill		4,594	4,594	4,594
Other intangible assets		93	139	86
Property, plant and equipment		92	61	69
Right-of-use assets	1	710	-	-
Deferred tax assets		1,071	810	1,153
Total non-current assets		6,560	5,604	5,902
Current assets
Trade and other receivables		11,063	13,279	12,018
Cash and cash equivalents		5,152	5,461	5,829
Total current assets		16,215	18,740	17,847
Total assets		22,775	24,344	23,749
Liabilities
Current liabilities
Loans and borrowings		(6,326)	(7,364)	(6,919)
Lease liabilities	1	(625)	-	-
Trade and other payables		(7,365)	(8,324)	(8,261)
Provisions		(168)	-	(43)
Total current liabilities		(14,484)	(15,688)	(15,223)
Non-current liabilities
Loans and borrowings		-	(2)	-
Lease liabilities	1	(256)	-	-
Provisions		(20)	(19)	(20)
Retirement benefit liability	9	(1,095)	(902)	(1,942)
Total non-current liabilities		(1,371)	(923)	(1,962)
Total liabilities		(15,855)	(16,611)	(17,185)
Net assets		6,920	7,733	6,564
Shareholders' equity
Called up share capital		2,053	2,053	2,053
Share premium account		33,244	33,244	33,244
Capital redemption reserve		14,319	14,319	14,319
Other reserves		34,560	44,160	34,560
Retained earnings		(77,256)	(86,043)	(77,612)
Total shareholders' equity		6,920	7,733	6,564

 

Consolidated condensed statement of cash flows

For the six months ended 30 June 2019

	Notes	Six months to 30.06.19 (Unaudited) £'000	Six months to 30.06.18 (Unaudited) £'000	Year to 31.12.18 (Audited)          £'000
Cash flows from operating activities
(Loss)/profit for the period		(477)	371	40
Adjustments for:
Net finance expense	5	211	179	365
Share-based payment expense		116	27	129
Income tax credit	7	(64)	(85)	(236)
Amortisation of intangible assets		35	99	165
Depreciation of property, plant and equipment		20	37	53
Depreciation and impairment of right-to-use assets		529	-	-
Loss on disposal of discontinued operation	6	-	312	306
		370	940	822
Working capital movements
Decrease/(increase) in trade and other receivables		955	(958)	204
Decrease in trade and other payables		(896)	(96)	(141)
Increase in provisions		125	1	45
Payments to retirement benefit plan	9	(103)	(125)	(326)
Net cash flow from/(used in) operating activities		451	(238)	604
Investing activities
Purchase of intangible assets		(42)	-	(14)
Purchase of property, plant and equipment		(43)	(11)	(35)
Net proceeds from disposal of subsidiary	6	-	14	114
Net cash flow (used in)/from investing activities		(85)	3	65
Financing activities
Issue of ordinary shares		-	43	43
(Repayment)/drawdown of finance facility		(585)	771	330
Principal repayment of lease liabilities	1	(374)	-	-
Interest paid	5	(84)	(86)	(181)
Net cash (used in)/from financing activities		(1,043)	728	192
Net (decrease)/increase in cash and cash equivalents		(677)	493	861
Cash and cash equivalents at the beginning of the period		5,829	4,968	4,968
Cash and cash equivalents at the end of the period		5,152	5,461	5,829

 

Notes to the interim results

1              Accounting policies

Basis of preparation

The condensed interim financial statements comprise the unaudited results for the six months to 30 June 2019 and 30 June 2018 and the audited results for the year ended 31 December 2018. The financial information for the year ended 31 December 2018 herein does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for 2018 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for 2018 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The condensed financial statements for the period ended 30 June 2019 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The information in these condensed financial statements does not include all the information and disclosures made in the annual financial statements.

The condensed financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU in a manner consistent with the accounting policies set out in the Group financial statements for the year ended 31 December 2018, with the exception of new standards, amendments and interpretations effective as of 1 January 2019 as detailed below. IFRS are subject to amendment and interpretation by the International Accounting Standards Board (IASB) and there is an ongoing process of review and endorsement by the European Commission. Any standards, amendments or interpretations that have been issued but not yet effective have not been adopted early by the Group.

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

Financial instruments

Unless otherwise indicated, the carrying amounts of the Group's financial assets and liabilities are a reasonable approximation of their fair values.

Accounting policies: new standards, amendments and interpretations

IFRS 16 'Leases'

The Group adopted IFRS 16 from 1 January 2019, replacing IAS 17 'Leases' and related interpretations. This represents a change in accounting for lease arrangements in which the Group acts as lessee whereby operating leases previously treated solely through profit and loss are to be recorded in the statement of financial position in the form of a right-of-use asset and a lease liability, subject to exemptions for low value and short-term leases. The nature of the costs changes from operating expenses to predominantly depreciation with an interest expense on the lease liability. The Group has been impacted by IFRS 16 on its leases for property.

In accordance with the transition provisions of IFRS 16, comparative information has not been restated, with the cumulative effect of initially applying the standard recognised as an adjustment to retained earnings at 1 January 2019. Lease liabilities previously assessed as operating leases have been measured on 1 January 2019 at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at that date of 3.10%. Associated right-of-use assets have been measured at amounts equal to the lease liabilities, adjusted for any prepaid or accrued lease payments.

The Group has applied practical expedients permitted by IFRS 16, including relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review and excluding initial direct costs for the measurement of right-of-use assets at 1 January 2019.

1              Accounting policies (continued)

Application resulted in the recognition of total lease liabilities of £1,060,000 and right-of-use assets of £1,066,000, with an adjustment to retained earnings of £6,000. At 30 June 2019 the difference between the lease liabilities and right-of-use assets mainly relates to an impairment to the right-of-use assets. Depreciation on right-of-use assets for the six months to 30 June 2019 was £355,000.

The amounts recognised in relation to right-of-use assets and lease liabilities at the interim balance sheet date are as follows:

	(Unaudited) £'000
Lease liabilities
Operating lease commitments disclosed at 31 December 2018	1,132
Not recognised within the scope of IFRS 16	(39)
Effect of discounting using incremental borrowing rate	(33)
Recognised on application of IFRS 16 on 1 January 2019	1,060
Other finance leases at 1 January 2019	8
Additions	173
Interest expense	14
Principal repayment	(374)
At 30 June 2019	881
Right-of-use assets
Recognised on application of IFRS 16 on 1 January 2019	1,066
Additions	173
Depreciation	(355)
Impairment (note 4)	(174)
At 30 June 2019	710

2              Segmental information

During the period, the Group initiated a strategic reorganisation such that reporting of financial information to the Chief Operating Decision Maker (the Group Board) by operating segments changed. The Group currently has three operating segments, being Recruitment (previously Parity Professionals), Consultancy (previously Parity Consultancy Services) and, since 2019, Learning & Development. The three service lines are supported by a single sales, marketing and back office function. Accordingly, internal overheads are not allocated to service lines. In accordance with IFRS 8 'Operating Segments', segmental information from prior periods has been restated.

Six months to 30 June 2019 (Unaudited)	Recruitment	Consultancy	Learning & Development	Total
Continuing operations	£'000	£'000	£'000	£'000
Gross revenue from external customers	40,920	3,594	-	44,514
Contractor costs	(36,973)	-	-	(36,973)
Net revenue	3,947	3,594	-	7,541
Sub-contracted direct costs	-	(2,843)	-	(2,843)
External contribution	3,947	751	-	4,698
Internal sales and delivery costs				(2,266)
Contribution				2,432
Group and shared service costs				(1,492)
Depreciation and amortisation				(410)
Share-based payment				(116)
Operating profit before non-recurring items				414
Finance costs				(211)
Adjusted profit before tax				203
Non-recurring items				(744)
Loss before tax				(541)

2              Segmental information (continued)

Six months to 30 June 2018 (Unaudited, Restated)	Recruitment		Consultancy		Total
Continuing operations	£'000		£'000		£'000
Gross revenue from external customers	38,078		5,142		43,220
Contractor costs	(34,230)		-		(34,230)
Net revenue	3,848		5,142		8,990
Sub-contracted direct costs	-		(3,756)		(3,756)
External contribution	3,848		1,386		5,234
Internal sales and delivery costs					(2,448)
Contribution					2,786
Group and shared service costs					(1,621)
Depreciation and amortisation					(112)
Share-based payment					(27)
Operating profit before non-recurring items					1,026
Finance costs					(179)
Adjusted profit before tax					847
Non-recurring items					-
Profit before tax					847
Year to 31 December 2018 (Audited, Restated)	Recruitment		Consultancy		Total
Continuing operations	£'000		£'000		£'000
Gross revenue from external customers	77,616		8,496		86,112
Contractor costs	(69,935)		-		(69,935)
Net revenue	7,681		8,496		16,177
Sub-contracted direct costs	-		(6,500)		(6,500)
External contribution	7,681		1,996		9,677
Internal sales and delivery costs					(5,034)
Contribution					4,643
Group and shared service costs					(3,102)
Depreciation and amortisation					(194)
Share-based payment					(129)
Operating profit before non-recurring items					1,218
Finance costs					(365)
Adjusted profit before tax					853
Non-recurring items					(495)
Profit before tax					358

All segment assets and liabilities are based in the UK.

3              Revenue

The Group's revenue from external customers disaggregated by pattern of revenue recognition is as follows:

	Six months to 30.06.19 (Unaudited)		Six months to 30.06.18 (Unaudited)		Year to 31.12.18 (Audited)
Continuing operations	Recruitment £'000	Consultancy £'000	Recruitment £'000	Consultancy £'000	Recruitment £'000	Consultancy £'000
Services transferred over time	40,602	3,594	37,712	5,142	76,978	8,496
Services transferred at a point in time	318	-	366	-	638	-
Revenue from external customers	40,920	3,594	38,078	5,142	77,616	8,496

3              Revenue (continued)

The Group's revenue from external customers disaggregated by primary geographical market is as follows:

	Six months to 30.06.19 (Unaudited)		Six months to 30.06.18 (Unaudited)		Year to 31.12.18 (Audited)
Continuing operations	Recruitment £'000	Consultancy £'000	Recruitment £'000	Consultancy £'000	Recruitment £'000	Consultancy £'000
UK	39,590	3,594	37,889	5,142	76,033	8,496
Rest of EU	1,330	-	189	-	1,583	-
Revenue from external customers	40,920	3,594	38,078	5,142	77,616	8,496

4              Non-recurring items

Continuing operations	Six months to 30.06.19 (Unaudited) £'000	Six months to 30.06.18 (Unaudited) £'000	Year to 31.12.18 (Audited) £'000
Restructuring
- Employee benefit costs	500	-	279
- Impairment of right-of-use assets	174	-	-
- Other operating costs	70	-	122
Legal costs	-	-	74
Past service cost for defined benefit pension scheme	-	-	20
	744	-	495

Non-recurring items during 2019 included:

·      Costs related to the restructuring of the Group, aligning the organisation to its refocused strategy. Costs include employee termination payments, impairments to right-of-use assets and provisions for costs from vacated property, and fees for related professional services

The impairment of right-of-use assets of £174,000 relates to the Group's vacated office premises and is equal to the difference between the carrying value of the assets and the expected recoverable amount from subletting from the premises. Further onerous costs in respect of the premises are included within provisions.

Non-recurring items during 2018 included:

·      Costs related to restructuring of the Parity Consultancy Services division. Costs include employee termination payments, fees for professional services and costs of changes in management structure

·      Legal costs for professional services fees in respect of one-off cases

·      Past service cost for the Group's defined benefit pension scheme in respect of GMP equalisation

5              Finance costs

	Six months to 30.06.19 (Unaudited) £'000	Six months to 30.06.18 (Unaudited) £'000	Year to 31.12.18 (Audited) £'000
Interest expense on lease liabilities	14	-	-
Interest expense on other financial liabilities	84	86	181
Net finance costs in respect of post-retirement benefits	113	93	184
Total finance costs	211	179	365

The interest expense on other financial liabilities represents interest paid on the Group's asset-based financing facilities.

6              Discontinued operations

In April 2018 the Group sold Inition Limited. As such, Inition Limited's operating result for the comparative periods, as well as the loss on disposal of Inition Limited is presented as discontinued.

7              Taxation

Continuing operations	Six months to 30.06.19 (Unaudited) £'000	Six months to 30.06.18 (Unaudited) £'000	Year to 31.12.18 (Audited) £'000
Recognised in the income statement
Current tax charge	-	-	-
Deferred tax (credit)/charge	(64)	88	(63)
Total tax (credit)/charge	(64)	88	(63)
Recognised in other comprehensive income
Deferred tax charge/(credit)	146	21	(171)

8              Earnings per ordinary share

Basic earnings per share is calculated by dividing the basic earnings for the period by the weighted average number of fully paid ordinary shares in issue during the period.  Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares.

	Six months to 30.06.2019 (Unaudited)			Six months to 30.06.2018 (Unaudited, restated)			Year to 31.12.2018 (Audited)
	Loss £'000	Weighted average number of shares 000's	Loss per share Pence	Earnings/ (loss) £'000	Weighted average number of shares 000's	Earnings/ (loss) per share Pence	Earnings/ (loss) £'000	Weighted average number of shares 000's	Earnings/ (loss) per share Pence
Continuing operations
Basic (loss)/earnings per share	(477)	102,624	(0.47)	759	102,302	0.74	421	102,464	0.41
Effect of dilutive options	-	-	-	-	1,412	-	-	1,126	-
Diluted (loss)/earnings per share	(477)	102,624	(0.47)	759	103,714	0.73	421	103,590	0.41
Discontinued operations
Basic loss per share	-	-	-	(388)	102,302	(0.38)	(381)	102,464	(0.37)
Effect of dilutive options	-	-	-	-	-	-	-	-	-
Diluted earnings per share	-	-	-	(388)	102,302	(0.38)	(381)	102,464	(0.37)
Continuing and discontinued operations
Basic (loss)/earnings per share	(477)	102,624	(0.47)	371	102,302	0.36	40	102,464	0.04
Effect of dilutive options	-	-	-	-	1,412	-	-	1,126	-
Diluted (loss)/earnings per share	(477)	102,624	(0.47)	371	103,714	0.36	40	103,590	0.04

As at 30 June 2019 the number of ordinary shares in issue was 102,624,020 (30 June 2018 and 31 December 2018:  102,624,020). 

9              Pension commitments

The Group provides employee benefits under various arrangements, through defined benefit and defined contribution pension plans, the details of which are disclosed in the 2018 Annual Report and Accounts. At the interim balance sheet date, the major assumptions used in assessing the defined benefit pension scheme liability have been reviewed and updated based on a roll-forward of the last formal actuarial valuation, which was carried out as at 5 April 2018.

The following changes in estimate have been applied to the IAS 19 valuation as at 30 June 2019:

	30.06.19	30.06.18	31.12.18
Rate of increase in pensions in payment	3.7-3.9%	3.7-3.9%	3.7-4.0%
Discount rate	2.3%	2.7%	2.8%
Retail price inflation	3.3%	3.2%	3.4%
Consumer price inflation	2.3%	2.2%	2.4%

The deficit has reduced by £0.8m since the 2018 year end despite a fall in discount rates. The improvement was partly due to an increase in the value of scheme investments and partly as a result of actions taken by the board and the Trustees to reduce scheme risk.

10           Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are therefore not disclosed in this note.

There were no other related party transactions during the period (2018: none).

11           Events after the reporting period

There are no events after the reporting period not reflected in the interim financial statements.

Statement of Directors' responsibilities

The Directors confirm, to the best of their knowledge:

·           The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union;

·           The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year, and gives a true and fair view of the assets, liabilities, financial position and profit for the period of the Group; and

·           The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority, being a disclosure of related party transactions and changes therein since the previous annual report.

By order of the Board

John Conoley

Non-Executive Chairman

20 September 2019

 

END

 

 

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