The board of Norman Broadbent plc (LON: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 31st December 2020.
· Year on year NFI decrease of 18% driven by Covid 19 pandemic largely mitigated by quick and decisive cost control measures
· Positive EBITDA and gross margin increase to 80%
· 15 day improvement in debtors days (to 57 days) assisting with Group liquidity
· £250,000 Coronavirus Business Interruption Loan secured in December 2020
· New Invoice Finance Facility active in early 2021 resulted in improved cashflow into the Group
· 25% of 2020 Group NFI generated by internal referrals further evidencing collaborative business culture
· Further improved NFI mix evidences ongoing creation of a more balanced Group
A copy of the audited 2020 Annual Report (including the notice of Annual General Meeting) 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 25th June 2021.
Mike Brennan, Group CEO of Norman Broadbent Group said:
“The Group 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, like many businesses, we were impacted by the Covid-19 pandemic.
The early and very decisive actions taken by us, combined with our broader portfolio of services and collaborative and innovative culture, meant we were better placed to respond to these challenges than others. It was not easy, but our team rose to the challenge!
I 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 a personal tribute to our team who showed real commitment 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, loyalty, and dedication.”
RESULTS FOR THE FINANCIAL YEAR
The table below summarises the results of the Group:
|Year ended||Year ended|
|Cost of sales||(1,530)||(3,879)|
|NET FEE INCOME (GROSS PROFIT)||6,286||7,607|
|Depreciation and amortisation||(222)||(93)|
|GROUP OPERATING PROFIT / (LOSS)||(153)||145|
|Net finance cost||(40)||(61)|
|PROFIT / (LOSS) BEFORE TAX||(193)||84|
|PROFIT / (LOSS) AFTER TAX||(193)||84|
Since my appointment as Group CEO, our team has worked hard to build the ‘new’ Norman Broadbent Group. Our approach – to build a complementary, relevant, and synergistic range of services – proved to be of significant benefit during the pandemic as the needs of clients shifted during unprecedented times. As the need for our Search-driven service slowed during the pandemic for example, calls for Interim Management expertise grew as clients wanted short-term immediate solutions to previously unencountered business problems. Our aim has always been to build a ‘hedged’ and balanced business which could cater to client needs at different points in their evolution or the economic cycle. This portfolio approach coupled with our collegiate team-based approach enabled us to trade through the pandemic.
2020 trading and business review
In 2020, as a direct result of the Covid 19 Pandemic, Group turnover reduced to £7,816,000 (2019: £11,486,000) whilst overall net revenues after associate and interim costs in the continuing businesses reduced to £6,286,000 (2019: £7,607,000). Although we continued to invest in innovative entrepreneurial talent, a focus on cost management ensured that operating expenses reduced significantly to £6,217,000 (2019: £7,369,000). EBITDA has reduced from £238,000 in 2019 to £69,000 in 2020.
In October 2020, the Group agreed to acquire the outstanding non controlling interest of 25% in Norman Broadbent Interim Management Ltd for a combination of cash and Norman Broadbent PLC shares. This formed part of a restructuring exercise which has now combined all existing Norman Broadbent trading subsidiaries into the Norman Broadbent Executive Search business. This has allowed a simplified and more cost effective business structure. Additionally, the business has reorganised to operate under a number of client focused sector and functional based hubs.
As at 31 December 2020, consolidated net assets were £1,106,000 (2019: £1,365,000) with net current liabilities of (£504,000) (2019: Net Current Liabilities of (£219,000). Group cash amounted to £367,000 (2019: £432,000).
Net cash inflow from operations in 2020 was £515,000 (2019 outflow: £182,000). Net cash outflow from financing activities amounted to £492,000 (2019: inflow £21,000).
At 31 December 2020 the Group had £577,000 (2019: £950,000) of funds drawn down against the revolving invoice discounting facility against UK trade receivables of £1,449,000 (2019: £2,733,000).
The Directors continue to monitor and manage the Group’s working capital carefully.
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 was some reduction in revenues. These however were largely offset by the sensible and prudent cost measures taken. Additional emphasis was placed on cash collections and we subsequently saw a reduction in debtor days during 2020. This, combined with modest positive EBITDA, helped protect cashflow and the Group’s cash position.
Arrangements for AGM
The AGM will take place on June 25th, 2021 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 notes to the notice of AGM set out in the Notice of AGM.
Alan Howarth joined the Board as Non Executive Chair on 1st August 2020 replacing Brian Stephens who resigned from the Board on 26th August 2020. The Board would like to thank Brian for his considerable contributions over the past 10 years and we wish him well for the future.
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.
The early and decisive actions taken by us, combined with our broader portfolio of services have continued into 2021 and leave 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.
Group Chief Executive
21 May 2020
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.25% of 2020 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 reduced in the year by 32% to £7,816,000 (2019: £11,486,000), with gross profit of £6,286,000 (2019: £7,607,000).
Operating expenditure decreased to £6,439,000 (2019: £7,462,000).
The Group EBITDA has reduced to £69,000 in 2020, (2019 EBITDA : £238,000) with an operating loss from continued operations in 2020 of £153,000 (2019 operating profit £145,000) and a retained loss in 2020 of £193,000 (2019: retained profit £84,000).
CASH FLOW AND BALANCE SHEET
Net cash inflow from operations in 2020 was £515,000 (2019: net cash outflow from operations £182,000). Net trade receivables at the year-end were £1,449,000 (2019: £2,733,000).
Net cash outflow from financing activities was £492,000 (2019: net cash inflow of £21,000). At 31 December 2020, the Group had £577,000 (2019: £950,000) of funds drawn down against the revolving invoice discounting facility against UK trade receivables of £1,449,000 (2019: £2,733,000).
EARNINGS PER SHARE
The retained loss for 2020 has resulted in a reported loss per share of 0.59 pence (2019: profit per share 0.04 pence).
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.
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. Our Board meetings incorporate, amongst other agenda items, a review of monthly management accounts, operational and financial KPIs, major issues and monthly update and review of a risk register that addresses the risks facing the business.
The most important KPIs used in monitoring the business are set out in the following table:
|Key performance indicators||2020||2019|
|Debtor days||57 days||72 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 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 was lifted, the Group’s offices have reopened with the majority of staff continuing to work remotely.
The Group was successful in securing a £250,000 CBILS loan and also rearranged a more favourable Invoice Finance Facility in early 2021. Combined with improved collections and debtor days, these facilities have helped to improve the Group’s liquidity.
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.
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
21 May 2020 21 May 2020