PARITY GROUP PLC

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021

 

27 April 2022

 

Parity Group plc ("Parity" or the "Group"), the data and technology focused professional services business, announces its full year results for the year ended 31 December 2021.

Headlines

2021 has been a year of two halves with a management change mid-year to refocus the business on its heritage and strength in recruitment, rebuilding capability to take advantage of growing market opportunities.

·    The management structure has been streamlined, creating a much simpler, balanced organisation with clear lines of accountability and unlocking cost to invest in key customer-facing areas.

·  The recruitment operation has been rebuilt, is highly motivated and operating well, delivering strong conversion rate performance.

·   Improvements in customer relationship management and customer satisfaction has begun to reverse previous declines in share of customer-wallet.  Amongst early signs of success with the refocused strategy is a material increase in revenue at three of the Group's top five customers and 'exclusivity' arrangements with two others.

·    An academy has been set up to develop talent inhouse, this has already delivered success.

·    The overall cost base of the Group has been reduced and is significantly more scalable.

·    Adjusted EBITDA for 2021 of £0.1m.

·    The defined benefit pension scheme surplus increased from £0.2m to £1.9m.

Key Financials

	Financial highlights for 2021
	GBP million	2021	2020
	Revenue	47.0	57.8
	Net Fee Income	4.1	5.6
	Adjusted EBITDA  1	0.1	1.1
	Operating (loss)/profit before non underlying items	(0.3)	0.5
	Loss before tax	(1.1)	(0.3)
	Net (debt)/cash (£million) 2	(1.2)	0.2
	Defined benefit pension surplus (£ million)	1.9	0.2
	Notes:
	1 - Adjusted to exclude non underlying items
	2 - Net (debt)/cash represents cash and cash equivalents less loans and borrowings and excluding leases

 

 

 

 

 

Mark Braund, Executive Chairman of Parity Group plc, said:

"2021 has been a year of two halves, the first continuing the pursuit of a strategy that failed to ignite, the second reclaiming the original purpose of the Parity business, that of being a trusted and successful provider of recruitment solutions.

Step-change improvements to back-office processes and systems alongside the re-building of a capable and scalable recruitment solutions team places us in a strong position to benefit from the continuing demand for digital transformation.  As organisations adapt to new ways of doing business, we are supplying our clients with the talented and experienced people that make this change possible.

The response from colleagues has been tremendous; their inspiration, enthusiasm and hard work has helped us rapidly refocus the business and, combined with strong demand in Parity's core markets, I believe we can re-establish growth and profitability in the near to medium term"

 

Investor presentation

Mark Braund and Mike Johns will provide a live presentation relating to Full year results to 31 December 2021 via the Investor Meet Company platform on 4th May 2022 at 11:00am BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Parity Group plc via:

https://www.investormeetcompany.com/parity-group-plc/register-investor

Investors who already follow Parity Group plc on the Investor Meet Company platform will automatically be invited.

 

Contacts
Parity Group PLC	www.parity.net
Mark Braund, Executive Chairman Mike Johns, CFO	+ 44 (0) 20 8171 1729
finnCap Ltd (Nomad & Broker)	https://www.finncap.com/
Jonny Franklin-Adams / Simon Hicks / Fergus Sullivan	+44 (0) 20 7220 0500

 

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.

 

 

Chairman's Statement

Parity is a people business.  At its core, the Company has a strong heritage and brand, recognised for its strengths in engaging and placing talented professionals to carry out important work in both the public and commercial sectors.

Over the last few years the business had lost sight of these strengths as it pursued a strategy in a different direction.  Unfortunately, this did not deliver the performance expected.

A change in key management in June 2021 led to a review of opportunities for the business.  The decision was made to refocus on Parity's core competence in recruitment solutions, where its brand and reputation is strong and where market activity provides a wealth of opportunities for value and growth.

As a result, 2021 became a year of two halves, the first continuing the pursuit of a strategy that failed to ignite, the second reclaiming the original purpose of the Parity business, that of being a trusted and successful provider of recruitment solutions.

As a supplier of critical and in demand IT and data skills we have continued to meet the needs of existing clients during the year and have had notable successes in the second half of 2021, growing 3 of our largest accounts, one of which has more than doubled in size over the last 18-months.  We are suppliers on the UK's key public sector frameworks for IT and Data resources and see an opportunity in 2022 to grow this further.

High employee turnover over the previous three years and the impact of working remotely from home during the pandemic has meant that a key focus for us during the second half of 2021 has been rebuilding employee morale and motivation. 

We have made rapid progress creating a new culture within the business that will enable us to foster growth and development.  We have established an academy structure around our core recruitment team to develop our own talent and this is already adding value with a second cohort joining the academy in January 2022.  As a business we seek to offer opportunities for all and are proud of our diverse and inclusive workforce.  Whilst we strive for more, we are proud of the fact that we have a gender balanced workforce.

Parity is now smaller than it has been historically, however changes in back-office processes and systems alongside the re-building of a capable and scalable recruitment solutions team places us in a strong position to benefit from the continuing demand for digital transformation.  As businesses adapt to new ways of doing business post Covid, we are supplying our clients with the talented and experienced people that make this change possible.

Over the last three years the Group has actively transformed itself into highly flexible business, its cloud infrastructure and digital backbone combined with a hybrid working environment enable the business to adapt and scale to meet future opportunities and challenges. Alongside this we have put in place a new three-year asset based lending facility in 2021 with Leumi ABL that will provide support and flexibility as we grow the business.

People, remain critical to the success of most if not all, commercial and public service activities.  As technology advances, talent is relied on to define and architect solutions, integrate and implement components, manage change and continuously develop advances that deliver improvements to the way things work.

This all takes place in a market where the best talent is demanding more flexibility whilst the ecosystem demands greater productivity.  Demand for talent to support this ever-changing environment continues unabated.  It is into this environment Parity has strong foundations to acquire and provide solutions that deliver value.

As we chart our path forwards, we are excited by the opportunity. 

We end as we start, our business is all about people and the changes over the last six to nine months have only been made possible by our talented and committed teams in Edinburgh and London.  On behalf of my colleagues, I wish to thank the whole team at Parity for their work so far, we have more to do, however the base from which we move forward is now solid.

 

Operational and Financial Review

Overview

·    During 2021 the business continued to develop key relationships with growth in 3 of top 5 client accounts.

·    The refocus of investment to support the development and growth of the core recruitment business has been delivered in 2021 without increasing costs.

·    As a result the Group recorded a modest Adjusted EBITDA profit of £0.1m for 2021 (2020: £1.1m).

·    The Group maintains its strong cash collection with a DSO of 17 days (2020: 14 days) and no bad debts.

·    During 2021 the Group replaced its previous asset based lending facility (ABL) with a new 3 year debt facility provided by Leumi ABL, increasing funding flexibility across both billed and unbilled assets.

·    As a consequence of the changes to the business in 2021 the Group made increased use of its ABL facility and at 31 December 2021 the net debt was £1.2m (2020: net cash of £0.2m).

·    The defined benefit pension scheme surplus has increased significantly during 2021 to £1.9m.

 

 

Performance highlights for 2021
	2021			2020
	Adjusted 1	Reported		Adjusted 1	Reported		Variance 2
Revenue (£ million)	47.0	47.0		57.8	57.8		-19%
Net Fee Income (£ million)	4.1	4.1		5.6	5.6		-27%
EBITDA (£ million) 3	0.1	(0.4)		1.1	0.7		-89%
Operating (loss)/profit (£ million)	(0.3)	(0.8)		0.5	0.0		-157%
(Loss)/profit before tax (£ million)	(0.6)	(1.1)		0.1	(0.3)		-552%
Basic earnings per share (pence)	(0.08)	(0.62)		(0.02)	(0.46)
Net (debt)/cash (£million) 4	(1.2)	(1.2)		0.2	0.2
Notes
1 - Excludes from the Income Statement the impact of non-underlying items of £0.5m in 2021 (2020:  £0.4m)
2 - Variance compares 2021 adjusted against 2020 adjusted to provide a consistent view of performance
3 - EBITDA is calculated as Operating profit excluding Amortisation and Depreciation and share based payments
4 - Net cash represents cash and cash equivalents less loans and borrowings and excluding leases

 

The financial performance in 2021 reflects the challenging year for the Group.

Whilst our strong position in the public sector helped cushion the impact of Covid in 2020, the return of the market and contractor mobility/churn in particular, exposed the lack of depth in the recruitment team and the business was unable to take advantage of the increasingly buoyant recruitment market during 2021. This has had a significant impact upon performance in 2021.

To address this, investment in H2 2021 was redirected to rebuilding the recruitment capability. A reallocation of resource from non-core activities to support client facing recruitment along with a streamlining of the extended management team meant that this was achieved without an increase in operating costs (non-underlying costs excluded). This close management of costs within the Group has enabled the Group to deliver a modest Adjusted EBITDA for 2021 despite the fall in Net Fee Income.

 

Revenue

Year on year revenue has declined by 19% to £47m, driven by a fall in contract recruitment revenue that makes up 97% of total revenue.

The impact of an under resourced recruitment team and lack of additional capacity to pursue new business has been a year on year fall in the number of contractors by 20%.  This decline in contractor numbers has in part been offset by an increase in average billing rates by 8% during the year, reaching £504/day in December 2021.

This increase is attributable to two factors:

·    Over the last 2 years the business has been increasingly focusing its contract recruitment on higher value IT resources.

·   The increased enforcement of IR35 legislation and potential for large penalties has prompted many organisations to take a conservative approach to IR35 assessments. The impact of this is an increase in roles deemed to be inside IR35. To attract candidates, clients are in most cases having to increase rates to offset the increased tax burden a contractor faces if inside IR35.

Non recruitment revenues totalled £1.3m in 2021 (2020: £1.6m).

 

Net Fee Income

Total Net Fee Income was £4.1m in 2021, a fall of £1.5m (27%) over 2020. Of this £0.3m is attributable non-recruitment Net Fee Income and the remaining £1.2m is a direct consequence of the lower Contract Recruitment Net Fee income, of £3.4m (2020: £4.6m).

Lower contractor numbers in 2021 account for £1.1m of the drop in Contract Recruitment Net Fee Income. In parallel with the reduction in contractors the underlying % margin has fallen from 8.2% to 7.4% resulting in a £0.4m reduction in Net Fee Income. This margin dilution reflects the impact of the under resourced recruitment team who were successfully able to support and grow large key accounts but unable to manage and pursue smaller higher margin accounts. These two adverse variances are partially tempered by the increase in billing rate during the year which has flowed through to Net Fee income, adding £0.3m.

With the new recruitment team in place there is now resourcing to cover all accounts and with a renewed focus on engaging with contractors there will be a push to win back higher margin business in 2022.

Segmental performance

As noted previously, the key driver of the lower revenue and net fee income has been a fall in contractor numbers. This has had an impact on both public and private sector income streams with a lack of capacity in the recruitment team during the first three quarters of the year limiting the ability to manage beyond key accounts.

In the public sector specifically, this has resulted in a decline in net fee income by 27%, driven by the loss of contractors in the first three quarters. The slight drop in % margin reflects the loss of some smaller, higher margin accounts.

Private sector has maintained revenue in line with the prior year at £14.5m as a result of strong growth in a key account during the year that has offset lower contractor numbers elsewhere and the impact of the failure to establish a sustainable and scalable consultancy division.

Net fee income for private sector has dropped by £0.5m with growth from the key account adding £0.2m to net fee income but insufficient to offset a fall of £0.4m due to lower contractor numbers in smaller accounts where margins are higher. Additionally, the failure to generate new consulting opportunities was responsible for a further £0.2m of the drop in Net fee income.

The fall in net fee income as a % of revenue between 2020 and 2021 reflects a change in revenue mix, with a fall in high % margin consulting income being replaced by lower margin contract recruitment.

Selling and Administration Costs

2021 was a year of two halves for expenditure, H1 2021 began with the business making further investments in management and new business capability to support the continual development of non-recruitment activities. Following the change in management in June 2021 investment shifted towards recruitment, rebuilding the capacity in the team during H2 2022 to take advantage of future opportunities in the market.

Resources engaged in non-core activities were reduced during H2 2021 and the management team streamlined to facilitate the investment in additional recruitment resources. This created £1.1m (Annualised) of capacity to re-invest in recruitment and new business resources.

In addition to hiring experienced recruitment professionals, investment has also been made into long term development of employees with the creation of an academy structure focused on developing talent in house. The first cohort through the academy are already thriving and second intake started in January 2022, this structure will support the Group's organic growth and profitability in future years.

 

	Operating costs before non-underlying items
	GBP million	H1	H2	FY21	H2 vs H1
	Selling & Administration expenses	(2.1)	(1.9)	(4.0)	-9.1%
	Share-based payment charges	0.0	0.1	0.1	n/a
	Depreciation & amortisation	(0.2)	(0.3)	(0.5)	14.6%
	Total	(2.3)	(2.1)	(4.4)	-9.5%

 

Selling and Administration costs for H2 2021 were 9% lower than H1 2021, this variance is primarily the result of the switch from non-core activities into core recruitment and gives the Group scope to invest further in 2022. Against prior year, Selling and Administration costs are 10% lower.

Depreciation and amortisation

In accordance with IFRS 16, the 2021 results are presented with lease assets and liabilities recognised in the Group's Statement of Financial Position, where the Group is the lessee.    

Non-underlying items

The Board measures the performance of the Group after excluding costs (and income) that would not be incurred during the normal operation of the business and classify these exceptional costs under the category of non-underlying items. With the change in management in June 2021 and subsequent refocus around the recruitment business the non-underlying costs incurred in 2021 total £0.6m (2020: £0.4m) and relate almost entirely to the costs of departing employees. A detailed analysis of the non-underlying items is provided in note 5.

Taxation

The tax income on profit before tax was £0.47m (2020: charge of £0.15m), mainly representing a deferred tax adjustment in respect of recognition of tax losses that were not recognised previously. The Group did not provide for corporation tax payable in 2021 due to the utilisation of Group relief and the availability of carried forward deductible timing differences and tax losses.

Earnings per share and dividend

The basic loss per share from continuing operations was 0.62 pence (2020: loss of 0.46 pence per share). The Group's results for both 2021 and 2020 were impacted by restructuring costs.

The Board does not propose a dividend for 2021 (2020: nil).

 

 

Statement of financial position

Trade and other receivables

The Group continues to maintain its strong performance on trade debtors, keeping a close relationship with clients to ensure both prompt payment and quick resolution of any issues, this approach has both maintained low debtor days and also ensured that the business has no bad debt. Group debtor days (calculated on billings on a countback basis) at the end of the year were 17 days (2020: 14 days).

Overall trade and other receivables decreased during the year to £4.8m (2020: £6.1m), the main driver being the reduction in contractor numbers.

Trade and other payables

Trade and other payables decreased during the year by £1.3m to £3.6m (2020: £4.9m). Of this, key variances were £0.6m decrease attributable to the reduction in contractor numbers and a further £0.3m to the payment of VAT deferred in 2020 under the Covid-19 VAT deferral scheme.

At the year end, creditor days were 23 days (2020: 23 days).

Loans and borrowings

Loans and borrowings represent the Group's debt under its asset-based lending ("ABL") facility. This is a working capital facility and linked to the same cycle as trade receivables. In April 2021 the Group switched its ABL facility from PNC to Leumi ABL. As a result of this switch the amount that can be borrowed against billed and unbilled receivables increased and borrowing costs reduced because the Group will only pay fees on amounts it borrows (under the previous PNC facility the Group were charged a 1% fee for any unutilised facility). The facility in place with Leumi ABL is for a minimum of 3 years giving the Group the support it needs to optimise its working capital requirements.

In 2021 the average borrowings were £2.5m (2020: £1.6m) and the Group only borrowed more than £3 million for 79 days during the year (2020: 29 days).

Cash flow and net debt

Net cash outflow in the year (excluding IFRS16 adj) was £1.4m. Of this, £0.2m related to ongoing operating activities and a further £0.4m the impact of the non-underlying costs. In addition, the Group incurred £0.1m of capital expenditure for the development of a data warehouse to provide business intelligence to the Group. The balance of the cash outflow is made up of primarily of pension costs of £0.3m (included within the FY21 finance costs of £0.4m) and the repayment of £0.3m of VAT deferred under the government Covid scheme.

 

Defined benefit pension surplus

Solid investment management of the Defined Benefit pension scheme assets has further increased the surplus from £0.2m at the beginning of the year to £1.9m at the end of 2021. Whilst financial markets are currently volatile based on world events and there is always potential for surplus position to change, the strength of the scheme's assets, is now sufficient for the Group and Trustees to target, over the medium term, a buyout of the scheme.

During 2021 the Group paid £0.3m contributions to the scheme.

 

 

 

Consolidated Income Statement for the year ended 31 December 2021

	Notes	2021 £'000	2020          £'000
Revenue	3	46,962	57,827
Contractor costs		(42,882)	(52,266)
Net Fee Income		4,080	5,561
Operating costs before non-underlying items	4	(4,349)	(5,091)
Operating (loss)/profit before non-underlying items		(269)	470
Non-underlying items	5	(553)	(447)
Operating (loss)/profit		(822)	23
Finance costs	7	(281)	(348)
Loss before tax		(1,103)	(325)
Analysed as:
Adjusted (loss)/profit before tax1		(550)	122
Non-underlying items	5	(553)	(447)
Tax credit/ (charge)	9	467	(145)
Loss for the year attributable to owners of the parent		(636)	(470)
Loss per share Basic Diluted	10 10	(0.62p) (0.62p)	(0.46p) (0.46p)

 

All activities comprise continuing operations.

 

¹ Adjusted (loss)/profit before tax is a non-IFRS alternative performance measure, defined as (loss)/profit before tax and non-underlying items.

 

 

 

Consolidated Statement of Comprehensive Income for the year ended 31 December 2021
 

	Notes	2021 £'000	2020 £'000
Loss for the year		(636)	(470)
Other comprehensive income
Items that will never be reclassified to profit or loss
Remeasurement of defined benefit pension scheme	22	1,620	1,041
Deferred taxation on remeasurement of defined pension scheme	15	(567)	(198)
Other comprehensive income for the year after tax		1,053	843
Total comprehensive income for the year attributable to owners of the parent		417	373

 

Statements of Changes in Equity for the year ended 31 December 2021 

Consolidated	Share capital £'000	Share premium reserve £'000	Capital redemption reserve £'000	Other reserves £'000	Retained earnings £'000	Total £'000
At 1 January 2020 (reported)	2,053	33,244	14,319	34,560	(77,753)	6,423
Effect of correction of material misstatement (Note 28)	-	-	-	-	(247)	(247)
At 1 January 2020 (restated)	2,053	33,244	14,319	34,560	(78,000)	6,176
Share options - value of employee services	-	-	-	-	90	90
Transactions with owners	-	-	-	-	90	90
Loss for the year	-	-	-	-	(470)	(470)
Remeasurement of defined benefit pension scheme	-	-	-	-	1,041	1,041
Deferred taxation on remeasurement of defined pension scheme taken directly to equity	-	-	-	-	(198)	(198)
At 31 December 2020 (reported)	2,053	33,244	14,319	34,560	(77,290)	6,886
Effect of correction of material misstatement	-	-	-	-	(247)	(247)
At 31 December 2020 (restated)	2,053	33,244	14,319	34,560	(77,537)	6,639
Shares issues in the period	9	26	-	-	-	35
Share options - value of employee services	-	-	-	-	(64)	(64)
Transactions with owners	9	26	-	-	(64)	(29)
Loss for the year	-	-	-	-	(636)	(636)
Remeasurement of defined benefit pension scheme	-	-	-	-	1,620	1,620
Deferred taxation on remeasurement of defined pension scheme taken directly to equity	-	-	-	-	(567)	(567)
At 31 December 2021	2,062	33,270	14,319	34,560	(77,184)	7,027

 

 

 

Statements of Financial Position as at 31 December 2021

Company number 3539413		Consolidated
	Notes	2021 £'000	31 December 2020 as restated £'000	1 January 2020 as restated £'000
Assets Non-current assets
Goodwill	11	4,594	4,594	4,594
Other intangible assets	12	84	6	32
Property, plant and equipment	13	15	23	43
Right-of-use assets	14	149	247	395
Trade and other receivables	16	29	87	-
Deferred tax assets	15	528	627	970
Retirement benefit asset	22	1,939	208	-
Total non-current assets		7,338	5,792	6,034
Current assets
Trade and other receivables	16	4,768	6,062	6,739
Cash and cash equivalents		1,121	3,172	4,116
Total current assets		5,889	9,234	10,855
Total assets		13,227	15,026	16,889
Liabilities Current liabilities
Loans and borrowings	17	(2,279)	(2,941)	(2,719)
Lease liabilities	14	(242)	(321)	(325)
Trade and other payables	18	(3,608)	(4,857)	(6,259)
Provisions	19	-	(139)	(324)
Total current liabilities		(6,129)	(8,258)	(9,627)
Non-current liabilities
Lease liabilities	14	(29)	(87)	(173)
Provisions	19	(42)	(42)	(21)
Retirement benefit liability	22	-	-	(892)
Total non-current liabilities		(71)	(129)	(1,086)
Total liabilities		(6,200)	(8,387)	(10,713)
Net assets		7,027	6,639	6,176
Shareholders' equity
Called up share capital	23	2,062	2,053	2,053
Share premium reserve	21	33,270	33,244	33,244
Capital redemption reserve	21	14,319	14,319	14,319
Other reserves	21	34,560	34,560	34,560
Retained earnings	21	(77,184)	(77,537)	(78,000)
Total shareholders' equity		7,027	6,639	6,176

In accordance with Section 408 of the Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. The profit for the year dealt with in the accounts of the Company was £700,000 (2020: loss of £2,909,000).

 

 

 

Statements of Cash Flows for the year ended 31 December 2021

		Consolidated
	Notes	2021 £'000	2020 £'000
Operating activities Loss for the year		(636)	(470)
Adjustments for:
Net finance expense	7	281	348
Share-based payment expense/(credit)	8	(64)	90
Income tax (credit)/ charge	9	(467)	145
Amortisation of intangible assets	12	3	26
Shares issued in lieu of Directors fees	21	35	-
Depreciation of property, plant and equipment	13	12	20
Depreciation and impairment of right-of-use assets	14	414	540
Loss on write down of lease assets	14	31	-
Lease liability credit	14	-	(21)
		(391)	678
Working capital movements
Decrease in trade and other receivables	16	1,352	764
Decrease in trade and other payables	18	(1,249)	(1,402)
Decrease in provisions	19	(139)	(165)
Payments to retirement benefit plan	22	(322)	(325)
Net cash flows (used in)/from operating activities		(749)	(450)
Investing activities
Purchase of property, plant and equipment	13	(4)	-
Development of intangible assets	12	(81)	-
Net cash flows used in investing activities		(85)	-
Financing activities
(Repayment)/drawdown of finance facility	17	(662)	222
Principal repayment of lease liabilities	14	(490)	(649)
Interest paid	7	(65)	(67)
Net cash flows used in financing activities		(1,217)	(494)
Net decrease in cash and cash equivalents		(2,051)	(944)
Cash and cash equivalents at the beginning of the year		3,172	4,116
Cash and cash equivalents at the end of the year		1,121	3,172

 

Notes to the Financial Statements for the year ended 31 December 2021

1          Accounting policies

Basis of preparation

Parity Group plc (the "Company") is a company incorporated and domiciled in the UK.

Both the parent company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with company law and UK adopted international accounting standards. Financial Information is presented in £'000.

The financial information set out in this document does not constitute the Group's statutory accounts for the years ended 31 December 2021 or 2020 but is derived from those accounts. Statutory accounts for 2020 have been delivered to the registrar of companies. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not contain an Emphasis of Matter highlighting a materiality uncertainly related to going concern and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Statutory accounts for 2021 will be delivered to the registrar of companies in due course. The auditors have reported on those accounts; their reports were (i) unqualified, and (ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial statements for the year ended 31 December 2021 (including the comparatives for the year ended 31 December 2020) were approved and authorised for issue by the Board of Directors on 27 April 2022. This results announcement for the year ended 31 December 2021 was also approved by the Board on 27 April 2022.

The principal accounting policies adopted in the preparation of the financial statements are set out below.  The policies have been consistently applied to all the years presented unless otherwise stated.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Directors' Report (Review of business and future developments).  The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Operational and Financial Review and in note 20 to the financial statements.  Note 20 also includes the Group's objectives for managing capital.

As outlined in note 20, the Group meets its day to day working capital requirements through an asset-based finance facility. The facility contains certain financial covenants which have been met throughout the period. During the period the PNC facility was replaced in April 2021 with a new asset based lending facility provided by Leumi ABL. This new facility runs for 3 years and provides up to £9m of borrowing.

The financial statements have been prepared on a going concern basis. The Directors have reviewed the Group's cash flow forecasts for the period to 31 December 2023, taking account of reasonably possible changes in trading performance. Discussion of this risk is included within Principal Risks and Uncertainties. Downside sensitivities have included reduced levels of new business in these scenarios, the Directors do not anticipate issues with the Group's financing requirements.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2021. Subsidiaries are entities controlled by the Group. Control exists when the Group has: ·      existing rights that give it the ability to direct the relevant activities that significantly affect the subsidiary's returns; and ·      exposure, or rights, to variable returns from its involvement with the subsidiary; and ·      the ability to use its power over the subsidiary to affect the amount of the Group's returns.   The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.   The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

 

In accordance with Section 408 of the Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. The profit for the year dealt with in the accounts of the Company was £700,000 (2020: loss of £2,909,000).

 

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The related costs of acquisition other than those associated with the issue of debt or equity securities, are recognised in the profit and loss as incurred. The acquiree's identifiable assets and liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 'Business Combinations' are recognised at their fair value at the acquisition date.

 

Accounting policies: new standards, amendments and interpretations effective and adopted by the Group

 

There are no other standards, amendments or interpretations effective this year which have a significant impact on these financial statements.

 

Accounting policies: new standards, amendments and interpretations that are not yet effective and have not been adopted early by the Group

 

At the date of authorisation of these financial statements, several new, but not yet effective, standards, amendments to existing standards and interpretations have been published. None of these have been adopted early by the Group. New standards, amendments and interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group.

 

Measurement convention

The financial statements are prepared on the historical cost basis. Non-current assets are stated at the lower of previous carrying amount and fair value less costs to sell.   Alternative performance measure In the reporting of its financial performance, the Group uses certain measures that are not defined under IFRS, the Generally Accepted Accounting Principles ("GAAP") under which the Group reports. The Directors believe that these non-GAAP measures assists with the understanding of the performance of the business. These non-GAAP measures are not a substitute, or superior to, any IFRS measures of performance but they have been included as the Directors consider them to be an important means of comparing performance year-on-year and they include key measures used within the business for assessing performance. Non-underlying items The presentation of the alternative performance measure of adjusted profit before tax excludes non-underlying items. The Directors consider that an underlying profit measure better illustrates the underlying performance of the Group and allows a more meaningful comparison of performance across periods. Items are classified as non-underlying by nature of their magnitude, incidence or unpredictable nature and their separate identification results in a calculation of an underlying profit measure that is consistent with that reviewed by the Board in their monitoring of the performance of the Group. Events which may give rise to the classification of items as non-underlying include gains or losses on the disposal of a business, restructuring of a business, transaction costs, litigation and similar settlements, asset impairments and onerous contracts. Adjusted EBITDA Operating profit before non-underlying items and before the deduction of depreciation, amortisation changes and shared based payments. This is considered a useful measure, commonly accepted and widely used when evaluation business performance and used by the Directors to evaluate performance of the Group and its subsidiaries. Adjusted EBITDA     (£ 000's) 2021 2020 Operating (loss)/ profit (822) 23 Add back:     Adjustment for amortisation & depreciation 460 586 Adjustment for share based payment charge/(income) (64) 90 EBITDA (426) 699 Non underlying costs 553 447 Adjusted EBITDA 127 1,146     Net debt Net debt is the amount of bank debt less available cash balances and is regarded as a useful measure of the level of external debt utilised by the Group to fund its operations. Net debt is also presented on a pre-IFRS 16 basis which excludes lease liabilities.

Revenue recognition The Group generates revenue principally through the provision of recruitment and consultancy services.   To determine whether to recognise revenue, the Group follows a five-step process: 1.     Identifying the contract with the customer; 2.     Identifying the performance obligations; 3.     Determining the transaction price; 4.     Allocating the transaction price to the performance obligations; and 5.     Recognising revenue when and as performance obligations are satisfied. Revenue is recognised either at a point in time or over time, when the group satisfies performance obligations by transferring promised services to its customers. Revenue is measured at the transaction price, being the amount of consideration expected to be entitled in exchange for services to a customer, net of refund liabilities and value added tax.   Revenue for the provision of recruitment services The performance obligation is the provision of temporary or permanent workers to customers. For temporary workers, the performance obligations are satisfied over time as the customer receives the benefit of the temporary worker, in line with time worked by the temporary worker at pre-determined rates. For permanent workers, the performance obligation is measured at a point in time, which is at the point that the permanent worker commences employment, as before this time the Group does not create or enhance an asset for the customer and there is no enforceable right to payment until then. Refund liabilities related to permanent workers are calculated based on a probabilistic estimate using historic refund levels.   The Group presents revenues gross of the costs of the temporary workers where it acts as principal under IFRS 15 and net of the costs of temporary workers where it acts as agent. The Group acts as principal in the large majority of its contracts, where it has the primary responsibility for fulfilling the promise to supply a worker to a customer and has control over that supply. The Group acts as agent where it does not have such control.   Revenue for the provision of consultancy services Performance obligations on consultancy services contracts are satisfied over time if the service creates an asset that the customer controls and the Group has an enforceable right to payment. Revenue is measured using an input measure, such as days worked as a proportion of total days to be worked, towards the satisfaction of an obligation.

In obtaining some contracts, the Group may incur a number of incremental costs, such as commissions paid to sales staff. As the amortisation period of these costs, if capitalised, would be less than one year, the Group makes use of the practical expedient in IFRS 15 and expenses them as incurred.

 

Financing income and expenses

Financing expenses comprise interest payable and finance leases recognised in profit or loss using the effective interest method, unwinding of the discount on the retirement benefit scheme liabilities, and net foreign exchange losses that are recognised in the income statement (see Foreign currencies accounting policy). Financing income comprises the expected return on the retirement benefit scheme assets, interest receivable on funds invested, dividend income, and net foreign exchange gains.   Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity's right to receive payments is established. Foreign currency gains and losses are reported on a net basis.

 

 

 

 

Dividends

Final dividends proposed by the Board of Directors and unpaid at the balance sheet date are not recognised in the financial statements until they have been approved by the shareholders at the Annual General Meeting. Interim dividends, which do not require shareholder approval, are recognised when paid.

 

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.   A deferred tax asset for deductible temporary differences is not recognised unless it is probable that there will be taxable profits in the foreseeable future against which the deferred tax asset can be utilised.  A deferred tax asset for unused tax losses carried forward is recognised on the same basis as for deductible temporary differences.  However, the existence of the unused tax losses is strong evidence that future taxable profit may not be available.  Therefore, when an entity has a history of recent losses, the entity recognises a deferred tax asset arising from unused tax losses only to the extent that there is convincing evidence that sufficient taxable profit will be available against which the unused tax losses can be utilised.    Foreign currencies Company Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.  All differences are taken to the income statement.   Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.   Group On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income. On disposal of a foreign operation, the cumulative exchange differences recognised in other comprehensive income relating to that operation up to the date of disposal are transferred to the consolidated income statement as part of the profit or loss on disposal.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. The Chief Operating Decision Maker is the Group Board.

Intangible assets

Goodwill

Goodwill represents the excess of the cost of acquisition of a business combination over the Group's share of the fair value of identifiable net assets of the business acquired.   After initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the investee.   Gains and losses on disposal of a business include the carrying amount of goodwill relating to the business sold in determining the gain or loss on disposal, except for goodwill arising on business combinations on or before 31 December 1997 which has been deducted from shareholders' equity and remains indefinitely in shareholders' equity.

Software

The carrying amount of software is its cost less any accumulated amortisation and provision for impairment. Software is amortised on a straight-line basis over its expected useful economic life of three to seven years.

 

Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and provision for impairment.

 

Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful economic life, as follows:

 

Leasehold improvements	The lesser of the asset life and the remaining length of the lease
Office equipment	Between 3 and 5 years

 

The carrying value of property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

Impairment of non-financial assets (excluding deferred tax assets)

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount, the latter being the higher of the fair value less costs to sell associated with the cash generating unit (CGU) and its value in use.  Value in use calculations are performed using cash flow projections for the CGU to which the goodwill relates, discounted at a pre-tax rate which reflects the asset specific risks and the time value of money.

 

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

 

Goodwill is tested for impairment at each reporting date. The carrying value of other intangible assets and property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

 

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets, being the cash generating unit. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. 

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

Cash and cash equivalents

Cash and short-term deposits in the consolidated balance sheet compromise cash at bank and in hand and short-term deposits with the original maturity of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above. Amounts drawn down from the asset-based lending facility with Leumi are shown within loans and borrowings on the consolidated balance sheet.

 

Financial instruments

Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows expire or when substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

 

Except for trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs. Financial assets, other than those designated and effective as hedging instruments, are classified as either amortised cost, fair value through profit or loss (FVTPL) or fair value through other comprehensive income (FVOCI). In the periods presented, the Group has no financial assets categorised as FVTPL or FVOCI.

 

The Group's financial assets include cash and cash equivalents and trade and other receivables. After initial recognition, these are measured at amortised cost using the effective interest method. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, except for impairment of trade receivables which is presented within operating expenses. Unless otherwise indicated, the carrying amounts of the Group's financial assets are a reasonable approximation of their fair values.   Impairment provisions are recognised using the expected credit loss model. Measurement of expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. The Group makes use of a simplified approach for trade and other receivables and contract assets and records impairment as a lifetime expected credit loss, being the expected shortfalls in contractual cash flows, considering the potential for default. The Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses.

 

Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand, short term deposits and other short term liquid investments. In the statement of cash flows, cash and cash equivalents comprise cash and cash equivalents, net of bank overdrafts.   The Group's financial liabilities include bank borrowings, finance leases and trade and other payables. Financial liabilities are initially measured at fair value and subsequently measured at amortised cost using the effective interest method. All interest related charges that are reported in profit and loss are presented within net finance expenses. In the periods presented, the Group has no financial liabilities categorised as FVTPL. Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values.

 

Amounts recoverable on contracts and accrued income

Amounts recoverable on contracts which are expected to benefit performance and be recoverable over the life of the contracts are recognised in the statement of financial position within trade and other receivables and charged to the income statement over the life of the contract so as to match costs with revenues.   Amounts recoverable on contracts are stated at the net sales value of work done less amounts received as progress payments on account.  Where progress payments exceed the sales value of work done, they are included in payables as payments in advance.

Accrued income primarily arises where temporary workers have provided their services but approved timesheets are outstanding. As such, the amount incurred and margin earned thereon has yet to be invoiced onto the client. In making an accrual for time worked by contractors at the balance sheet date, management make an estimate of the time worked based on knowledge of the contracts in place, the number of working days outstanding and experience adjustments from prior periods.

 

 

Leased assets

At the commencement of a lease, the Group recognises a right-of-use asset and a lease liability. The right-of-use asset is measured at cost, comprising the initial measurement of the lease liability, any initial direct costs incurred, an estimate of any restoration costs and any lease payments made in advance of the lease commencement date, net of any incentives received. The lease liability is measured at the present value of the minimum lease payments discounted using the rate implicit in the lease, or if that cannot be determined, which is generally the case for the leases in the Group, the Group's incremental borrowing rate is used. Lease payments to be made under lease extensions are included when the option to extend is reasonably certain to be taken up. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification.   Expected lives of right-of-use assets are determined by reference to the lease term and depreciated over the lease term on a straight-line basis.   Provisions A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.   From time to time the Group faces the potential of legal action in respect of employment or other contracts. In such situations, where it is probable that a payment will be required to settle the action, provision is made for the Group's best estimate of the outcome.   Where leasehold properties are surplus to requirements, provisions are made for the best estimates of the unavoidable net future costs.   Provisions for dilapidation charges that will crystallise at the end of the period of occupancy are provided for in full on non-serviced properties.   Pensions The Group operates a small number of retirement benefit schemes.  With the exception of the 'Parity Retirement Benefit Plan', all of the schemes are defined contribution plans and the assets are held in separate, independently administered funds.  The Group's contributions to defined contribution plans are charged to the income statement in the period to which the services are rendered by the employees, and the Group has no further obligation to pay further amounts.   The 'Parity Retirement Benefit Plan' is a defined benefit pension fund with assets held separately from the Group. This fund has been closed to new members since 1995 and with effect from 1 January 2005 was also closed to future service accrual.   A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of defined benefit pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets at bid price, and any unrecognised past service costs are deducted. The liability discount rate is the yield at the balance sheet date on AA credit rated bonds denominated in the currency of, and having maturity dates approximating to, the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of benefits available in the form of any future refunds from the plan, reductions in future contributions to the plan or on settlement of the plan and takes into account the adverse effect of any minimum funding requirements.

Share capital

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

 (a)     they include no contractual obligations upon the company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the company (or Group); and

(b)     where the instrument will or may be settled in the company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company's own equity instruments or is a derivative that will be settled by the company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.  Where the instrument so classified takes the legal form of the company's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.    For the purposes of the disclosures given in note 20, the Group considers its capital to comprise its cash and cash equivalents, its asset-based bank borrowings, and its equity attributable to equity holders, comprising issued capital, reserves and retained earnings, as disclosed in the statement of changes in equity.

Financial guarantee contracts

Where Group companies enter into financial guarantee contracts and guarantee the indebtedness of other companies within the Group, the company considers these to be insurance arrangements and accounts for them as such. In this respect, the company does not recognise liabilities under the contracts until it becomes probable that any Group company will be required to make a payment under the guarantee.

Share-based payment transactions Share-based payment arrangements in which the Group and Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group and Company.   The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards.  The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted.  The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.   Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period.

Significant management judgements in applying accounting policies and estimation uncertainty

When preparing the financial statements, management make a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. The following are the judgements made by management in applying the accounting policies of the Group and the estimates that have the most significant effect on the financial statements.

 

Significant management judgements Recognition of deferred tax asset A deferred tax asset has been recognised for unused tax losses carried forward within Parity Consultancy Services Limited as management believes that given the significant increase in the Retirement benefit asset during the period there is sufficient certainty that a proportion of the tax losses carried forward would be utilised to offset any charge arising from the realisation of the surplus on the Retirement benefit asset. Accordingly management have decided to include within the financial statements a deferred tax asset in Parity consultancy Services Limited equal to the tax charge calculated on the Retirement benefit asset during the year of £1.9m.

Revenue recognition The main area of judgement in revenue recognition relates to the determination of whether the Group acts as principal or agent in its contractual arrangements for the provision of temporary workers to customers. The factors considered by management to result in recognition of revenue as principal include that the Group: ·      has a direct relationship with the worker and is responsible for paying the worker; ·      has the primary responsibility for organising the service engagements and fulfilling the promise to supply a worker to a customer; and ·      the Group has control over the supply of the worker.   Estimation uncertainty Retirement benefit liability The costs, assets and liabilities of the defined benefit scheme operated by the Group are determined using methods relying on actuarial estimates and assumptions. Details of the key assumptions and sensitivities on those assumptions are set out in note 22. The Group takes advice from independent actuaries relating to the appropriateness of the assumptions. Changes in the assumptions used may have a material effect on the income statement and the statement of financial position within the next year.

2      Segmental information

 

Factors that management used to identify the Group's reporting segments

In accordance with IFRS 8 'Operating Segments' the Group's management structure, and the reporting of financial information to the Chief Operating Decision Maker (the Group Board), have been used as the basis to define reporting segments.

 

Description of the types of services from which each reportable segment derives its revenues

During the period the Group derived revenue from two operating segments relating to customer sectors, being the public sector and private sector. The reporting of financial information presented to the Chief operating Decision maker, being the Group board of directors, is consistent with these reporting segments. These reporting segments are supported by a combined back office and therefore there is no allocation of overheads between sectors.

 

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

 

 

 

	Public sector 2021	Private sector 2021	Total 2021
	£'000	£'000	£'000
Revenue	32,544	14,418	46,962
Contractor costs	(29,691)	(13,191)	(42,882)
Net fee income	2,853	1,227	4,080

 

	Public sector 2020	Private sector 2020	Total 2020
	£'000	£'000	£'000
Revenue	43,283	14,544	57,827
Contractor costs	(39,405)	(12,861)	(52,266)
Net fee income	3,878	1,683	5,561

 

All segment assets and liabilities are based in the UK.

 

3      Revenue

 

All of the Group's revenue derives from contracts with customers. Trade receivables, amounts recoverable on contracts and accrued income as presented in note 16 arise from contracts with customers. Changes to the Group's contract assets are attributable solely to the satisfaction of performance obligations.

 

 

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

 

	2021 £'000	2020 £'000
Services transferred over time Services transferred at a point in time	46,934 28	57,790 37
Revenue	46,962	57,827

 

 

 

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

 

	2021 £'000	2020 £'000
United Kingdom European Union	43,967 2,994	55,235 2,577
Other	1	15
Revenue	46,962	57,827

 

The largest single customer in the public sector contributed 26% or £8.2m to public sector revenue (2020: 25% or £11.0m). The largest single customer in the private sector contributed 79% or £11.7m to private sector revenue (2020: 46% or £6.7m).

 

4              Operating expenses

			Consolidated
			2021 £'000	2020 £'000
Employee benefit costs -   wages and salaries -   social security costs -   other pension costs			2,818 316 86	2,975 342 102
			3,220	3,419
Depreciation, amortisation and impairment
Amortisation of intangible assets - software			3	26
Depreciation of leased property, plant and equipment Depreciation of owned property, plant and equipment Depreciation of right-of-use assets Impairment of right-of-use assets			- 12 414 31	- 20 540 -
			460	586
All other operating expenses
Occupancy costs IT costs			43 236	44 464
Net exchange (gain)/loss			15	(2)
Equity settled share-based payment charge			(64)	90
Other operating costs			992	937
			1,222	1,533
Total operating expenses			4,902	5,538

 

During the year the Group obtained the following services from the Group's auditors:

	Grant Thornton UK LLP
Consolidated	2021 £'000	2020 £'000
Fees payable to the auditor of the Group's annual financial statements	15	15
Fees payable to the Group's auditor for other services	-	-
The audit of the Company's subsidiaries pursuant to legislation	67	58
Total	82	73
Tax compliance	17	16
Other services	-	16
Total fees	105	89

 

All other services have been performed in the UK.

 

5            Non-underlying items

		2021 £'000	2020 £'000
Restructuring
-     Costs related to employees		502	370
-     Costs related to premises		31	(11)
-     Other costs		20	88
		553	447

Items are classified as non-underlying by nature of their magnitude, incidence or unpredictable nature and their separate identification results in a calculation of an underlying profit measure that is consistent with that reviewed by the Board in their monitoring of the performance of the Group.

Non-underlying items during 2021 include costs related to changes in senior management of the Group, including employee termination payments.

6          Average staff numbers

 

The average number of staff employed by the Group during the year was as follows:

 

		2021 Number	2020 Number
Group		38	44

 

The total above includes 4 (2020: 5) employees of the Company.

 

At 31 December 2021, the Group had 35 employees (2020: 41).

 

7         Finance costs

			2021 £'000	2020 £'000
Interest expense on financial liabilities			65	67
Interest expense on lease liabilities			8	19
Interest income on lease assets			(3)	(4)
Net finance costs in respect of post-retirement benefits			211	266
			281	348

The interest expense on financial liabilities represents interest paid on the Group's asset-based financing facilities. A 1% increase in the base rate would have increased annual borrowing costs by approximately £25,000 (2020: £17,000).

 

8    Share-based payments

 

The Group operates several share-based reward schemes for employees:

 

·      HMRC approved schemes for Executive Directors and senior staff;

·      an unapproved scheme for Executive Directors and senior staff; and

·      a Save As You Earn Scheme for all employees.

 

Under the approved and unapproved schemes, options vest if the share price averages a target price for 5 consecutive days over a three-year period from the date of grant. Options lapse if the individual leaves the Group, except under certain circumstances such as leaving by reason of redundancy, when the options lapse 12 months after the leaving date.

 

In May 2021 the Save As You Earn Scheme was closed for all new participants and current participants were granted six months to either purchase shares at the exercise price of 10 pence per share or to withdraw their funds from the scheme. As at the end of 2021 all funds were withdrawn and the Save As You Earn Scheme was closed.

 

All employee options have a maximum term of ten years from the date of grant. The total share-based remuneration recognised in the income statement was a gain of £64,000 (2020: loss of £90,000). Share-based remuneration relating to key management personnel is disclosed in note 25.

 

	2021 Weighted average exercise price (p)	2021 Number	2020 Weighted average exercise price (p)	2020 Number
Outstanding at beginning of the year	9	11,919,040	11	11,157,040
Granted during the year	7	6,000,000	9	6,000,000
Exercised during the year	-	-	-	-
Lapsed during the year	(9)	(9,909,040)	(11)	(5,238,000)
Outstanding at the end of the year	7	8,010,000	9	11,919,040

 

The exercise price of options outstanding at the end of the year and their weighted average contractual life fell within the following ranges:

 

2021 Exercise price (p)	2021 Weighted average contractual life (years)		2021 Number		2020 Exercise price (p)		2020 Weighted average contractual life (years)		2020 Number
7-11	9		8,000,000		7-11		9		10,379,040
11-17	-		-		11-17		7		1,500,000
17-28	1		10,000		17-28		2		40,000
			8,010,000						11,919,040

Of the total number of options outstanding at the end of the year 10,000 (2020: 840,000) had vested and were exercisable at the end of the year. The weighted average exercise price of those options was 26 pence (2020: 9 pence).

 

No options were exercised during the year (2020: none). 

 

2,500,000 options were granted during the year (2020: 6,000,000) at a weighted average fair value of 1 pence (2020: 2 pence). In addition, 3,500,000 share warrants were granted during the year (2020: nil) at a weighted average fair value of 1 pence (2020: nil).

 

The following information is relevant in determining the fair value of options granted during the year under equity-settled share-based remuneration schemes operated by the Group. There are no cash-settled schemes.

 

		2021	2020
Option valuation model		Stochastic	Stochastic
Weighted average share price at grant date (p)		7	7
Weighted average exercise price (p)		7	8
Weighted average contractual life (years)		10	10
Weighted average expected life (years)		5	5
Expected volatility		47.7-48.0%	47.6-48.0%
Weighted average risk-free rate		0.61%	0.09%
Expected dividend growth rate		0%	0%

The volatility assumption is calculated as the historic volatility of the share price over a 5 year period prior to grant date.

 

Share options issued to defined benefit pension scheme

In December 2010 the Group issued 1,000,000 share options in Parity Group plc to the pension scheme at an exercise price of 9 pence per share. These options may be exercised at the discretion of the Trustees; they vested on grant and have no expiry date. Any gain on exercise is to be used to reduce the scheme deficit. These options were valued using the stochastic method. The share price on the grant date was 15.75 pence.  Whilst the options do not have an expiry date, for valuation purposes it is assumed that the expected life of the options is 8 years. The expected volatility is 64.2% and the average risk-free rate assumed was 3.4%.

 

9          Taxation

			2021 £'000	2020 £'000
Current tax
Current tax on profit for the year			-	-
Total current tax expense			-	-
Deferred tax
Accelerated capital allowances			(2)	(4)
Recognition of deferred tax asset on past trading losses			(678)	-
Origination and reversal of other temporary differences Adjustments in respect of prior periods Change in corporation tax rate			98 115 -	2 230 (83)
Total deferred tax charge			(467)	145
Tax charge			(467)	145

The adjustment in respect of prior periods of £115,000 (2020: £230,000) largely relates to decisions to claim or disclaim capital allowances.

 

There is no current tax payable by the Group for 2021 (2020: £nil).    

 

The Group's profits for this accounting period are subject to tax at a rate of 19% (2020: 19%).

 

The reasons for the difference between the actual tax credit for the year and the standard rate of corporation tax in the UK applied to profit for the year are as follows:

2021 £'000

2020 £'000

 

Loss before tax			(1,103)	(325)
Expected tax credit based on the standard rate of UK
corporation tax of 19% (2020: 19%)			(210)	(62)
Expenses not allowable for tax purposes Adjustments in respect of prior periods Tax losses not recognised			- 115 253	(2) 230 85
Tax losses recognised			(678)	-
Change in corporation tax rate			33	(83)
Other			20	(23)
Tax charge			(467)	145

Tax on each component of other comprehensive income is as follows:

		2021			2020
	Before tax £'000	Tax £'000	After tax £'000	Before tax £'000	Tax £'000	After tax £'000
Remeasurement of defined benefit pension scheme	1,620	(567)	1,053	1,041	(198)	843

 

 

10           Earnings per ordinary share

 

Basic earnings per share is calculated by dividing the basic earnings for the year by the weighted average number of fully paid ordinary shares in issue during the year. 

 

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.

	Loss 2021 £'000		Weighted average number of shares 2021 '000		Loss per share 2021 Pence	Loss 2020 £'000	Weighted average number of shares 2020 '000		Loss per share 2020 Pence
Basic	(636)		102,854		(0.62)	(470)	102,624		(0.46)
Effect of dilutive options	-		-		-	-	-		-
Diluted	(636)		102,854		(0.62)	(470)	102,624		(0.46)

As at 31 December 2021 the number of ordinary shares in issue was 103,075,633 (2020: 102,624,020). There were 8,010,000 options that had a potential dilutive effect in 2021 (2020: Nil).

 

11       Goodwill

 

The carrying amount of goodwill is allocated to the Group's two separate continuing cash generating units (CGUs), being Parity Professionals Limited and Parity Consultancy Services Limited.

 

Carrying amounts are as follows:

	Parity Professionals Limited £'000	Parity Consultancy Services Limited £'000	Total £'000
Carrying value
Balance at 1 January 2020 and 31 December 2020	2,642	1,952	4,594
Balance at 1 January 2021 and 31 December 2021	2,642	1,952	4,594

 

Goodwill was tested for impairment in accordance with IAS 36 at the year end and no impairment charge was recognised. Impairment calculations include the effect of changes following the application of IFRS 16.

 

The recoverable amounts of the CGUs are based on value in use calculations using the pre-tax cash flows based on forecasts approved by management for 2022. Years from 2023 to 2027 are based on the forecast for 2022 projected forward at expected growth rates, with no growth assumed beyond these years. This approach is considered prudent based on current expectations of the 2022 long-term growth rate.

 

 

Major assumptions are as follows:

	Parity Professionals Limited %	Parity Consultancy Services Limited %
2021
Discount rate	11.5	11.5
Forecast revenue growth	5.0-11.5	11.3-14.9
Operating margin 2022	3.3	14.0
Operating margin 2023 onward	4.8-5.8	14.7-15.3
2020
Discount rate	11.3	11.3
Forecast revenue growth	12.2-13.3	10.0-15.9
Operating margin 2021	3.0	4.0
Operating margin 2022 onward	3.7-3.8	4.1-12.1

 

Discount rates are based on the Group's weighted average cost of capital.

 

Forecast revenue growth rates are based on past experience and future expectations of economic conditions. Growth for the CGUs is assumed to be higher than the long-term growth rate for the UK economy due to the following factors:

·      There is focused investment in growing new clients and service lines, including areas that are seeing significant growth post the Covid-19 pandemic;

·      The business recruited additional heads to focus on key areas of new business within recruitment including value added services and permanent recruitment; and

·      Market indicators and recent engagements with clients support the increased demand for high skilled IT and data professionals and help underwrite the growth forecasts.

 

A 10% change in any of the underlying assumptions used in the discounted cash flow forecasts would not lead to the carrying value of goodwill being materially in excess of their recoverable amounts.

 

 

 

12       Other intangible assets

	Software		Intellectual property		Total
	2021	2020	2021	2020	2021	2020
	£'000	£'000	£'000	£'000	£'000	£'000
Consolidated
Cost
At 1 January	408	408	-	-	408	408
Additions Disposals	- -	- -	81 -	- -	81 -	- -
At 31 December	408	408	81	-	489	408
Accumulated amortisation
At 1 January	402	376	-	-	402	376
Charge for the year Disposals	3 -	26 -	- -	- -	3 -	26 -
At 31 December	405	402	-	-	405	402
Net book value	3	6	81	-	84	6

 

In 2021 the Group invested in the development of a data warehouse to support the ongoing business operations. The additions to Intellectual Property represent the costs associated with building the data warehouse and creating the data asset within the data warehouse.

 

 

As at 31 December 2021, the Group had no capital commitments contracted for but not provided for the purchase of intangible assets (2020: £nil).

 

13       Property, plant and equipment

 

	Leasehold improvements		Office equipment		Total
	2021	2020	2021	2020	2021	2020
	£'000	£'000	£'000	£'000	£'000	£'000
Consolidated
Cost
At 1 January	-	-	204	204	204	204
Additions Disposals	- -	- -	4 -	- -	4 -	- -
At 31 December	-	-	208	204	208	204
Accumulated depreciation
At 1 January	-	-	181	161	181	161
Charge for the year Disposals	- -	- -	12 -	20 -	12 -	20 -
At 31 December	-	-	193	181	193	181
Net book value	-	-	15	23	15	23

 

 

As at 31 December 2021, the Group had no capital commitments contracted for but not provided for the purchase of property, plant and equipment (2020: £nil).

14           Leases

 

The Group holds leases for its main office premises. Each lease is reflected on the balance sheet as a right-of-use asset and a lease liability unless exempt. The statement of financial position includes the following amounts in relation to leases where the Group is a lessee:

 

			2021 £'000	2020 £'000
Right-of-use assets
Buildings			149	247
IT equipment			-	-
			149	247
Lease liabilities
Current			242	321
Non-current			29	87
			271	408

Additions to right-of-use assets during the year were £345,000 (2020: £562,000). The total cash outflow for lease liabilities during the year was £490,000 (2020: £649,000).

Amounts recognised in profit or loss in respect of the above leases are as follows:

			2021 £'000	2020 £'000
Depreciation charge on right-of-use assets
-     Buildings			414	537
-     IT equipment			-	3
Impairment charge on right-of-use-assets
-     Buildings			31	-
Total depreciation and impairment charge on right-of-use assets			445	540
Rent concession			-	(21)
Interest expense included in finance costs			8	19

 

Future minimum lease payments at 31 December 2021 were as follows:

	Minimum		Present
	payments	Interest	value
	2021	2021	2021
	£'000	£'000	£'000
Less than one year	246	(3)	243
Between one and two years	29	-	29
Between two and three years	-	-	-
	275	(3)	272

 

At 31 December 2021, the Group was committed to £nil (2020: £nil) of future lease payments in respect of leases not yet commenced.

 

All leases held during 2021 were accounted for under IFRS 16.

 

 

15           Deferred taxation

	Consolidated
	2021	2020
	£'000	£'000
At 1 January	627	970
Recognised in other comprehensive income
Remeasurement of defined benefit pension scheme	(567)	(198)
Recognised in the income statement
Adjustments in relation to prior periods	(115)	(230)
Recognition of deferred tax asset for prior trading losses	678	-
Change in corporation tax rate	-	83
Capital allowances in excess of depreciation	2	4
Other short-term timing differences	(97)	(2)
At 31 December	528	627

 

The deferred asset of £528,000 (2020: £627,000) comprises:

	Consolidated
	2021 £'000	2020 £'000
Depreciation in excess of capital allowances	520	632
Other short-term timing differences	8	34
Retirement benefit (asset)/liability	-	(39)
	528	627

 

A deferred tax asset for unused tax losses carried forward is normally recognised on the same basis as for deductible temporary differences.  However, the existence of the unused tax losses is itself strong evidence that future taxable profit may not be available.  Therefore, when an entity has a history of recent losses, the entity recognises a deferred tax asset arising from unused tax losses only to the extent that there is convincing evidence that sufficient taxable profit will be available against which the unused tax losses can be utilised. At the balance sheet date, the Directors considered recognising a deferred tax asset for previously unrecognised unused tax losses carried forward by Parity Consultancy Services Limited. The review concluded that as Parity Consultancy Services Limited has a deferred tax liability of £678,000 (2020: £39,000) related to its defined benefit pension plan, a deferred tax asset for previously unrecognised unused tax losses of £678,000 would be recognised to offset the liability.

 

The Directors believe that the deferred tax asset recognised is recoverable based on the future earning potential of the Group and the individual subsidiaries. The forecasts for Parity Professionals Limited comfortably support the unwinding of the deferred tax asset held by this company of £256,000 (2020: £335,000). Parity Consultancy Services Limited currently has a deferred tax asset of £272,000 (2020: £292,000) which can be offset against the deferred tax liability to be unwound on the same defined benefit scheme .

 

The Group has unrecognised carried forward tax losses of £32,679,000 (2020: £29,392,000). The Group has unrecognised capital losses carried forward of £282,441,000 (2020: £282,441,000). These losses may be carried forward indefinitely.

 

The Company has unrecognised carried forward tax losses of £26,522,000 (2020: £23,511,000). The Company has unrecognised capital losses carried forward of £281,875,000 (2020: £281,875,000). These losses may be carried forward indefinitely.

 

16       Trade and other receivables

	Consolidated
	2021 £'000	2020 £'000
Amounts falling due within one year:
Trade receivables	2,116	2,197
Accrued income	2,435	3,591
Amounts owed by subsidiary undertakings	-	-
Other receivables	75	110
Prepayments	142	164
	4,768	6,062
Amounts falling due after one year:
Amounts owed by subsidiary undertakings	-	-
Other receivables	29	87
	29	87
Total	4,797	6,149

The fair values of trade and other receivables are not considered to differ from the values set out above. 

 

£2,116,000 (2020: £2,197,000) of the Group's trade receivables and £2,435,000 (2020: £3,591,000) of the total of the Group's accrued income and amounts recoverable on contracts, are pledged as collateral for the asset-based borrowings. These borrowings fluctuate daily and at 31 December 2021 totalled £2,279,000 (2020: £2,941,000).

 

The movement in accrued revenue on contracts during the period is shown below:

	Contract Assets
	2021 £'000	2020 £'000
At 1 January	3,591	3,882
Billed and cash received during the year	(3,591)	(3,882)
Amounts accrued at year end	2,435	3,591
At 31 December	2,435	3,591

 

The Group records impairment losses on its trade receivables separately from gross receivables.  Factors considered in making provisions for receivables include the ability of the customer to settle the debt, the age of the debt and any other circumstance particular to the transaction that may impact recoverability.

 

The balance of impaired losses for the Group at 31 December 2021 was £nil (2020: £9,000). All debts at 31 December 2021 are considered to be recoverable.

 

The Company holds interest-bearing loan agreements with some of its subsidiary undertakings. Interest on all loans is charged at 2.0% above the prevailing Bank of England base rate. The Company's receivables due from subsidiary undertakings were reviewed for impairment at the balance sheet date based on the performance of 2021 and on subsequent years' forecast projections. A discounted future cash flow method was employed for the review.  As a result of this review, no provision was deemed necessary. The assessment was performed on a value in use basis using a discount rate of 9.3% (2020: 11.3%) and the other parameters used in the goodwill impairment review, as outlined in note 11.

 

As at 31 December 2021 trade receivables of £523,000 (2020: £374,000) were past due but not impaired.  These relate to customers where there is no evidence of unwillingness or of an inability to settle the debt. The ageing of Group trade receivables is as follows:

	2021			2020
	Gross £'000	Impaired £'000	Total £'000	Gross £'000	Impaired £'000	Total £'000
Not past due	1,593	-	1,593	1,823	-	1,823
31-60 days and past due	310	-	310	323	-	323
61-90 days	131	-	131	36	-	36
>90 days	82	-	82	24	(9)	15
Total	2,116	-	2,116	2,206	(9)	2,197

 

The Company had no provisions for trade receivables, as it has no trade receivables. Other receivables in the Group and the Company were not past due and not impaired.

 

17       Loans & borrowings

	Consolidated
	2021 £'000	2020 £'000
Current Bank and other borrowings due within one year or on demand:
Asset-based financing facility	2,279	2,941

 

Changes in liabilities from financing activities
	Loans and borrowings
	£000
Balance at 1 January 2021	2,941
Repayment of borrowings	(662)
Balance at 31 December 2021	2,279

Further details of the Group's banking facilities are given in note 20.

 

18       Trade and other payables

	Consolidated
	2021   £'000	2020 restated £'000
Amounts falling due within one year:
Payments in advance	11	27
Trade payables	2,494	3,168
Amounts due to subsidiary undertakings	-	-
Other tax and social security payables	367	912
Other payables and accruals	736	750
	3,608	4,857
Amounts falling due after one year:
Amounts due to subsidiary undertakings	-	-
Total	3,608	4,857
The fair value of trade and other payables has not been separately disclosed as, due to their short duration, the Directors consider the carrying amounts recognised in the statement of financial position to be a reasonable approximation of their fair value.

19       Provisions

Consolidated	Leasehold dilapidations £'000	Restructuring £'000	Total £'000
At 1 January 2021	42	139	181
Used in year	-	(45)	(45)
Reversed in year	-	(94)	(94)
Created in year	-	-	-
At 31 December 2021	42	-	42
Due within one year	-	-	-
Due after one year	42	-	42
Total	42	-	42

The Company had no provisions at 31 December 2021 (2020: £nil).

 

Leasehold dilapidations Leasehold dilapidations relate to the estimated cost of returning leasehold properties to their original state at the end of the lease in accordance with the lease terms. Dilapidation charges that will crystallise at the end of the period of occupancy are provided for in full on all properties. Based on current lease expiry dates it is estimated these provisions will be settled over a period of one to three years. The main uncertainty relates to the estimation of the costs that will be incurred at the end of the lease.

 

20       Financial instruments - risk management

 

The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.   There have been no substantive changes in the Group's exposure to financial instrument risks and the methods used to measure them from previous periods unless otherwise stated in this note.

 

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are trade receivables, cash and cash equivalents, trade and other payables and bank borrowings.

 

A summary by category of the financial instruments held by the Group is provided below:

Consolidated		Amortised  cost £'000	Total £'000
As 31 December 2021
Financial assets
Non-current trade and other receivables		29	29
Cash and cash equivalents		1,121	1,121
Trade and other short-term receivables		4,626	4,626
		5,776	5,776
Financial liabilities
Asset-based financing facility		2,279	2,279
Lease liabilities		272	272
Trade and other short-term payables		3,597	3,597
		6,148	6,148
As 31 December 2020 (Restated)
Financial assets
Non-current trade and other receivables		87	87
Cash and cash equivalents		3,172	3,172
Trade and other short-term receivables		5,898	5,898
		9,157	9,157
Financial liabilities
Asset-based financing facility		2,941	2,941
Lease liabilities		408	408
Trade and other short-term payables		4,830	4,830
		8,179	8,179

 

 

Fair values of financial instruments

The fair values of all of the Group's and the Company's financial instruments are the same as their carrying values.

 

General objectives, policies and processes - risk management

The Group is exposed through its operations to the following financial instrument risks: credit risk; liquidity risk; interest rate risk; and foreign currency risk.

 

The policy for managing these risks is set by the Board following recommendations from the Chief Financial Officer. Certain risks are managed centrally, while others are managed locally following guidelines communicated from the centre. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The policy for each of the above risks is described in more detail below.

 

Credit risk Credit risk arises from the Group's trade and other receivables. It is the risk that the counterparty fails to discharge their obligation in respect of the instrument.   The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers before entering contracts. Such credit ratings are then factored into the credit assessment process to determine the appropriate credit limit for each customer. The Group does not collect collateral to mitigate credit risk.   The Group operates primarily in the UK with 94% of generated revenues from the UK (2020: 96%). Approximately 69% (2020: 75%) of the Group's turnover is derived from the public sector. The largest customer balance represents 27% (2020: 20%) of the trade receivables balance.

Quantitative disclosures of the credit risk exposure in relation to financial assets are set out below. Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in note 16.

	2021		2020
	Carrying value £'000	Maximum exposure £'000	Carrying value £'000	Maximum exposure £'000
Financial assets
Cash and cash equivalents	1,121	1,121	3,172	3,172
Trade and other receivables	4,655	4,655	5,985	5,985
	5,776	5,776	9,157	9,157

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates.   It is Group policy that all external Group borrowings are drawn down on the asset-based financing facilities arranged with our bankers which bear a floating rate of interest based on the Leumi base rate. Borrowings against the asset-based financing facilities are typically drawn or repaid on a daily basis in order to minimise borrowings and interest costs and transaction charges. Although the Board accepts that this policy neither protects the Group entirely from the risk of paying rates in excess of current market rates, nor eliminates the cash flow risk associated with interest payments, it considers that it achieves an appropriate balance of these risks.    Throughout 2021 the Group's variable rate borrowings were denominated in Sterling and Euro. Interest costs on borrowings from the asset-based financing facility with PNC (January - May) and Leumi ABL (May - December) was charged at 2.00% above base rate for all of 2021 (2020: 2.00%). The Leumi facility has a 3 year term of commitment, although amounts are repayable upon demand under certain circumstances such as default. If interest rates on borrowings had been 1% higher/lower throughout the year with all other variables held constant, the loss after tax for the year would have been approximately £25,000 higher/lower (2020: £17,000) and net assets £25,000 lower/higher (2020: £17,000). The Directors consider a 1% change in base rates is the maximum likely change over the next year, being the period to the next point at which these disclosures are expected to be made.   The Company holds interest-bearing loan agreements with some of its subsidiary undertakings. Interest on all loans is charged at 2.0% above the prevailing Bank of England base rate, except for one loan with Parity International B.V. which is charged at 2.0% above the prevailing European Central Bank base rate. As at 31 December 2021, the loan balance due by the Company to Parity International BV, translated into Sterling, was £28,066,000 (2020: £29,469,000).   Foreign exchange risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.   The Group no longer has any active overseas operations but does retain certain overseas subsidiaries that are not trading. The Group's net assets arising from overseas operations are exposed to currency risk resulting in gains or losses on retranslation into sterling. The asset exposure is mainly in respect of intercompany balances.
The Group does not hedge its net investment in overseas operations as it does not consider that the potential financial impact of such hedging techniques warrants the reduction in volatility in consolidated net assets.   The business has limited transactions in foreign currency. The hedging of individual contracts is considered on a case by case basis. Owing to the small value and volume of such contracts no hedging transactions were entered in 2021 or 2020.   During 2014, the underlying denomination of a large intercompany balance between the Company and one of the Group's inactive overseas subsidiaries was revised, whereby the denomination of the loan was revised from Sterling to Euros and thus subject to exchange rate fluctuations in the books of the Company. In 2021 the Company recorded a translation gain of £1,965,000 (2020: loss of £1,681,000). As at 31 December 2021, the loan balance due by the Company, translated into Sterling, was £28,066,000 (2020: £29,469,000).   The currency profile of the Group's net financial assets was as follows:
	Functional currency of individual entity
	Sterling			Euro		Total
Net foreign currency financial assets	2021 £'000	2020 £'000	2021 £'000		2020 £'000	2021 £'000	2020 £'000
Sterling	-	-	(2,462)		(2,411)	(2,462)	(2,411)
Euro	(27,279)	(29,021)	-		-	(27,279)	(29,021)
US Dollar	4	4	-		-	4	4
Total net exposure	(27,275)	(29,017)	(2,462)		(2,411)	(29,737)	(31,428)

The currency profile of the Company's net financial assets was as follows:

	Sterling
Net foreign currency financial assets	2021 £'000	2020 £'000
Euro	(27,680)	(29,292)
US Dollar	4	4
Total net exposure	(27,676)	(29,288)

Sensitivity analysis - Group and Company

If the exchange rate between Sterling and the Euro had been 10% higher/lower at the balance sheet date, with all other variables held constant, the effect on equity for the year would have been approximately £2,728,000 higher/lower (2020: £2,902,000). A 10% fluctuation in any other currency exchange rate would not have a significant impact on profit and loss, nor equity.

 

Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges on its borrowings under its asset-based financing arrangements. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The liquidity of each Group entity is managed centrally, with daily transfers to operating entities to maintain a pre-determined cash balance. Normal supplier terms range from 2 weeks to 30 days. The level of the Group facility is approved periodically by the Board and negotiated with the Group's current bankers. At the reporting date, cash flow projections were considered by the Board and the Group is forecast to have sufficient funds and available funding facilities to meet its obligations as they fall due.

The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:

 

Consolidated   At 31 December 2021	Up to 1 month £'000	Between 1 month and 1 year £'000	Over  1 year £'000	Total £'000
Trade and other payables	3,597	-	-	3,597
Lease liabilities	243	29	-	272
Borrowings	2,279	-	-	2,279
Total	6,119	29	-	6,148
At 31 December 2020 (Restated)	Up to 1 month £'000	Between 1 month and 1 year £'000	Over  1 year £'000	Total £'000
Trade and other payables	4,830	-	-	4,830
Lease liabilities	321	57	30	408
Borrowings	2,941	-	-	2,941
Total	8,092	57	30	8,179

 

More detail on trade and other payables is given in note 18.

 

Capital disclosures

The capital structure of the Group consists of cash and cash equivalents, equity attributable to equity holders, and asset-based financing. There is no other long-term external debt, except for lease liabilities which are explained more fully in note 14.

 

During 2021 The Group uses two asset-based financing facilities. The first facility was with PNC Business Credit, a member of The PNC Financial Services Group, Inc. and this agreement ran from January until May. In May a new asset-based finance facility was agreed with LEUMI UK which is still being utilised. Both facilities enable the Group to borrow against both trade debt and accrued income and the current Leumi facility provides for borrowing of up to £9.0m depending on the availability of appropriate assets as security.

 

The Group's and Company's objectives when maintaining capital are:

·      to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

·      to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

 

 

 

The Group's net debt position is as follows:

Consolidated	2021 £'000	2020 £'000
Cash and cash equivalents	1,121	3,172
Asset-based borrowings	(2,279)	(2,941)
Net cash before lease liabilities	(1,158)	231
Lease liabilities	(272)	(408)
Net (debt)/cash	(1,430)	(177)

The Board regularly reviews the adequacy of resources available and considers the options available to increase them. The asset-based borrowing facility contains certain externally imposed financial covenants which have been met throughout the period.

 

The Company does not currently have distributable reserves available for dividend payments. A capital reconstruction will be necessary to create reserves available for distribution. The Board will keep possible capital reconstruction options under review.

 

21       Reserves

 

The Board is not proposing a dividend for the year (2020: nil pence per share). 

 

The following describes the nature and purpose of each reserve within shareholders' equity:

 

Share capital

Share capital consists of ordinary share capital and previously consisted of deferred share capital.

 

Ordinary share capital

Share capital is the amount subscribed for ordinary shares at nominal value. During 2021, 451,613 ordinary shares were issued. No share options were exercised during the year (2020: none). 

 

Share premium reserve

Share premium is the amount subscribed for share capital in excess of nominal value. During 2021 451,613 ordinary shares were issued at a premium of 5.75p per share (2020: none).

 

Capital redemption reserve

A capital redemption reserve of £14,319,000 was created during 2017 when the Directors resolved to cancel the deferred shares of Parity Group plc.

 

Other reserves

Other reserves of the Group relate principally to a reserve created following a change of the Group's ultimate parent and a corresponding Scheme of Arrangement in July 1999, and a reserve created following the reorganisation of the Group's capital structure in 2002 that resulted in the Company increasing its investment in subsidiary undertakings.

 

Retained earnings

Retained earnings represent the cumulative net gains and losses recognised in the income statement.

 

22           Pension commitments 

 

The Group operates a small number of pension schemes. With the exception of the Parity Group Retirement Benefits Plan, all of the schemes are defined contribution plans and the assets are held in separately administered funds. Contributions to defined contribution schemes from during the year were £86,000 (2020: £102,000). 

 

Defined benefit plan

In March 1995, the Group established the Parity Retirement Benefits Plan, renamed as the Parity Group Retirement Benefits Plan ("the Plan"), following a Scheme of Arrangement in 1999, in order to facilitate the continuance of pension entitlements for staff transferring from other schemes following acquisitions in 1994. The Plan is governed by the Trustees of the plan and is administered by Cartwright Group Limited in accordance with the Trust Deed and Rules, solely for the benefit of its members and other beneficiaries. The Trustees comprise an independent Chairman, one member representative and one employer representative. It is a funded defined benefit scheme and has been closed to new members since 1995. With effect from 1 January 2005 this scheme was also closed to future service accrual and future contributions paid into money purchase arrangements.

 

The weighted average liability duration is approximately 13 years (2020: 14 years) and can be attributed to the scheme members as follows:

	Number of members	Weighted average liability duration (years)
Pensioner members	61	13
Deferred members	6	18
Total	67	13

 

There were no retirements during the year (2020: one). There was a reduction by 2 total members during the year (2020: no change).

 

The Plan is funded by the Group based on the triennial actuarial valuation of the scheme's technical provisions. The actuarial valuation is subject to more prudent assumptions than the accounting valuation under IAS 19. The triennial actuarial valuation due at April 2018 was finalised during 2019 and resulted in an increase in monthly contributions from £17,260 per month to £24,300 per month. Funding requirements are formally set out in the Statement of Funding Principles, Schedule of Contributions and Recovery Plan agreed between the Trustees and the Group.

 

The valuation for IAS 19 has been provided by Cartwright Group Limited, a company that specialises in providing actuarial services, as at 31 December 2021.

 

Principal actuarial assumptions

	2021	2020
Rate of increase of pensions in payment	3.8-4.0%	3.6-3.9%
Discount rate	1.9%	1.3%
Retail price inflation	3.6%	3.2%
Consumer price inflation	2.6%	2.2%

 

In accordance with the revised IAS 19, the assumption for future investment returns is the same discount rate of 2.0% (2020: 2.0%) used in calculating the pension liabilities.

 

The underlying mortality assumption used is in accordance with the standard table known as S1PA_H, S1PA or S1PA_L mortality, dependent on the size of each member's pension, using the CMI_2020 projection based on year of birth with a long-term rate of improvement of 1.25% p.a. (2020: CMI_2019 and 1.25% p.a.). This results in the following life expectancies:

·      Male aged 65 at 31 December 2021 has a life expectancy of 86 years (2020: 86 years)

·      Female aged 65 at 31 December 2021 has a life expectancy of 89 years (2020: 89 years)

 

Guaranteed Minimum Payment ("GMP") equalisation

During 2018 the High Court of Justice in England made judgement in a case relating to GMP equalisation. The court held that pensions earned between 1990 and 1997 must be equalised between men and women for the effect of GMPs. Most sections of the Group's scheme were unaffected since they were opted in to the Second State Pension, with just one section opted out. The actuary estimates that the impact to the scheme will be to increase liabilities by between £10,000 and £30,000. Accordingly, an adjustment is recorded in these accounts to increase the scheme deficit by £20,000 (2020: £20,000), first recognised as a past service cost recognised in the income statement for the year ended 31 December 2018.   

 

 

 

 

Reconciliation to consolidated statement of financial position

	2021 £'000	2020 £'000
Fair value of plan assets	24,478	25,143
Present value of funded obligations	(22,539)	(24,935)
At the end of the year	1,939	208

Reconciliation of plan assets

	2021 £'000	2020 £'000
At the beginning of the year	25,143	22,670
Expected return	320	442
Contribution by Group	322	325
Benefits paid	(964)	(990)
Expenses met by scheme	(213)	(247)
Actuarial (loss)/ gain	(130)	2,943
Plan assets at the end of the year	24,478	25,143

Contributions to the scheme included £nil of additional payments (2020: £nil). The actuarial loss on plan assets relates to the fall in value of the scheme's investments reflecting uncertainty in global equity markets experienced in 2021.

 

 

Composition of plan assets

	2021 £'000	2020 £'000
Diversified growth funds - Quoted	24,308	20,139
Liability driven investment funds - Quoted	-	4,827
Options in Parity Group plc	96	96
Cash	74	81
Total plan assets	24,478	25,143

 

Reconciliation of plan liabilities

	2021 £'000	2020 £'000
At the beginning of the year	24,935	23,562
Interest cost	318	461
Benefits paid	(964)	(990)
Actuarial (gain)/loss	(1,750)	1,902
Plan liabilities at the end of the year	22,539	24,935

 

Amounts recognised in the consolidated income statement

	2021 £'000	2020 £'000
Included in finance costs
Expected return on plan assets, net of expenses	107	195
Unwinding of discount on plan liabilities (interest cost)	(318)	(461)
Net finance costs in respect of post-retirement benefits	(211)	(266)

 

 

Amounts recognised in the consolidated statement of comprehensive income

	2021 £'000	2020 £'000
Actuarial (loss)/gain on plan assets	(130)	2,943
Actuarial gain/(loss) on plan liabilities	1,750	(1,902)
Remeasurement of defined benefit pension scheme	1,620	1,041

The asset recognised under this scheme is not limited under IFRIC 14 as the Group has an unconditional right to realise the economic benefit of these assets during the life of the plan or when the plan is settled.

 

Defined benefit obligation trends

	2021 £'000	2020 £'000	2019 £'000	2018 £'000	2017 £'000
Plan assets	24,478	25,143	22,670	20,099	21,880
Plan liabilities	(22,539)	(24,935)	(23,562)	(22,041)	(22,939)
Surplus/(deficit)	1,939	208	(892)	(1,942)	(1,059)
Experience adjustments on assets	(130)	2,943	2,761	(1,586)	609
	(0.5%)	13.3%	13.9%	(7.3%)	2.9%
Experience adjustments on liabilities	1,750	(1,902)	(1,830)	581	(191)
	7.2%	(8.3%)	(8.4%)	2.6%	(0.8%)

 

Sensitivity analysis

	Liabilities	Assets	Surplus/(deficit)	Increase/ (decrease) in surplus
Effect of change in assumptions	£'000	£'000	£'000	£'000
No change	22,539	24,478	1,863	-
0.25% rise in discount rate	21,805	24,478	2,597	734
0.25% fall in discount rate	23,273	24,478	1,129	(734)
0.25% rise in inflation	22,639	24,478	1,763	(100)
0.25% fall in inflation	22,439	24,478	1,963	100

 

 

23       Share capital

 

Authorised share capital

	Ordinary shares 2p each
	2021	2021
	Number	£'000
Authorised at 1 January and 31 December	409,044,603	8,181

Issued share capital

	Ordinary shares 2p each
	2021	2021
	Number	£'000
Issued and fully paid at 1 January	102,624,020	2,053
Shares issued during the year	451,613	9
Issued and fully paid at 31 December	103,075,633	2,062

 

24       Contingencies

 

In the normal course of business, the Group is exposed to the risk of claims in respect of contracts where the customer or supplier is dissatisfied with the performance, pricing and/or completion of the contracted service or product. Such claims are normally resolved by a combination of negotiation, further work by Parity or the supplier, and/or monetary settlement without formal legal process being necessary. Occasionally, such claims progress into legal action. At the present time, Group management believes the resolution of any known claims or legal proceedings will not have a material further impact on the financial position of the Group.

 

 

 

 

25       Key management remuneration

 

Key management comprises the Group's Board of Directors, along with Group's executive committee of senior management. The total remuneration received by key management for 2021 was £1,118,000 (2020: £1,209,000). Remuneration comprises emoluments received, pension contributions, share-based payment charges and compensation for loss of office. Remuneration of the Board of Directors, including that of the highest paid Director Matthew Bayfield, is disclosed in detail within the remuneration report.

 

	2021 £'000	2020 £'000
Short-term employee benefits	843	955
Post-employment benefits	32	29
Compensation for loss of office	308	145
Share-based payments (note 8)	(65)	80
	1,118	1,209

26           Related party transactions
 

Consolidated

During the year the Group engaged the marketing services of CRM Squad. The Executive Chairman Mark Braund is an owner and Director of CRM Squad.  The total value of services received from CRM squad in 2021 is £12,180. (2020: none).

 

Company

Details of the Company's holdings in Group undertakings are given in note 27. The Company entered into transactions with Group undertakings as shown in the table below:

	Operating expenses 2021 £'000	Finance income 2021 £'000	Finance expense 2021 £'000	Operating expenses 2020 £'000	Finance income 2020 £'000	Finance expense 2020 £'000
Expenses incurred from Group subsidiaries	(208)	-	(1,350)	(327)	-	(1,348)
Income generated from Group subsidiaries	-	1,181	-	-	1,195	-

 

The Company had the following amounts payable to and recoverable from Group undertakings:

 

	2021 £'000	2020 £'000
Amounts owed by subsidiary undertakings (note 16):
Falling due within one year	925	925
Falling due after one year	129,973	134,662
Amounts due to subsidiary undertakings (note 18):
Falling due within one year	(14,844)	(13,764)
Falling due after one year	(132,335)	(134,476)

27       Subsidiaries

 

The principal subsidiaries of Parity Group plc, which have been included in these consolidated financial statements, are Parity Professionals Limited and Parity Consultancy Services Limited. Parity Professionals Limited and Parity Consultancy Services Limited are wholly owned by Parity Holdings Limited and incorporated in the United Kingdom. Parity Holdings Limited is a direct subsidiary of Parity Group plc and is incorporated in the United Kingdom.

 

Parity Professionals Limited is a specialist IT and data recruitment services company. Parity Consultancy Services Limited provides IT and data services including consultancy and value added recruitment services.

 

During 2021, management continued to simplify the group structure. All UK dormant companies have been wound up and will be struck off in due time.

 

 

The remaining Group subsidiaries are listed below. These are either discontinued or dormant, are wholly owned by the Group ultimate parent Parity Group plc.

 

Parity Eurosoft Limited

Parity International BV (registered at Keizersgracht 62-64, 1015 CS Amsterdam, Netherlands)

Parity Limited

Parity Resources Limited

Parity Solutions (Dublin 1999) Limited (registered at 13-18 City Quay, Dublin 2 D02 ED70, Ireland)

Parity Solutions (Ireland) Limited (registered at Northern Ireland Science Park, Queens Road, Belfast BT3 9DT)

Personnel Solutions Inc. (registered at 39 Broadway, New York, NY10006, USA)

Teltech International Corp. (registered at 39 Broadway, New York, NY10006, USA)

 

28           Prior period adjustment
 

During the year, the Group discovered that contractor expenses has been erroneously understated in 2017 and 2018 by a cumulative amount of £247,000. As a consequence, operating costs for the Group were understated in those years and closing accruals have been understated since 2017. The understatement represents a prior period error under IAS 8 and is accounted for by correcting retrospectively in these financial statements. As the error occurred before the earliest period presented in these financial statements, the Group has restated the opening balances of assets, liabilities and equity for the earliest period presented. The adjustment was posted to contractor accruals within current liabilities on the statement of financial position.

 

Reconciliation of changes is Equity

	1 January 2019 £'000	1 January 2020 £'000
Equity as previously reported	(77,612)	(77,753)
Adjustment to prior year
Restatement of contractor expense accruals	(247)	(247)
Equity as adjusted	(77,859)	(78,000)
Analysis of the effect upon equity
Retained earnings	(247)	(247)