NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2022

1.          SIGNIFICANT ACCOUNTING POLICIES

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

 

1.1       BASIS OF PREPARATION

 

The consolidated financial statements of Norman Broadbent plc ("Norman Broadbent" ,"the Company" or "the Group") have been prepared in accordance with International Financial Reporting Standards as adopted by the UK (IFRS as adopted by the UK), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value through profit or loss. The consolidated financial statements are presented in pounds and all values are rounded to the nearest thousand (£000), except when otherwise indicated.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 1.20.

 

1.1.1          GOING CONCERN

 

The Group reported an operating loss from continued operations in the year to 31 December 2022 of £0.3m compared with an operating loss of £0.6m in 2021. Consolidated net current liabilities are £0.3m (2021: £0.5m).

 

The Consolidated Statement of Financial Position shows a net asset position at 31 December 2022 of £0.7m (2021: £0.8m) with cash at bank of £0.05m (2021: £0.5m). At the date that these financial statements were approved the Group had no overdraft facility, a CBILS loan of £0.20m and its receivable finance facility (Metrobank) which is 100% secured by the Group's trade receivables. A convertible loan note instrument issued by two major shareholders in May 2022 has provided a further £400,000 of funding.

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. In light of the current financial position of the Group and on consideration of the business' forecasts and projections which have taken account of trading performance, the Directors have a reasonable expectation that the Group has adequate available resources to continue as a going concern for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing their annual report and financial statements.

 

1.1.2          CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

a)            New and amended accounting standards adopted by the Company

There are no new standards impacting the Company that will be adopted in the financial statements for the period ended 31 December 2022, and which have given rise to changes in the Company's accounting policies.

 

b)            Standards, amendments and interpretations to existing standards that are not yet effective and have not yet been adopted early by the Company

c)            

There are a number of standards, amendments to standards, and interpretations which have been issued by IASB that are effective in future accounting periods that the Company has decided not to adopt early

 

The following standards and amendments are effective after 31 December 2022:

 

•           IFRS 17 Insurance Contracts - Applicable to annual reporting periods beginning on or after 1 January 2023

•           Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) - Annual reporting periods beginning on or after 1 January 2023

•           Amendments to IFRS 17 - Annual reporting periods beginning on or after January 2023

•           Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) - Annual reporting periods beginning on or after 1 January 2023

•           Definition of Accounting Estimates (Amendments to IAS 8) - Annual reporting periods beginning on or after 1 January 2023

•           Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) - Annual reporting periods beginning on or after 1 January 2023

 

The Company is currently assessing the impact of the new accounting standards and amendments. The Company does not believe that these amendments will have a significant impact on the financial statements of the Company.

 

OTHER

 

The Company does not expect any other standards issued by IASB, but not yet effective, to have material impact on the Company.

 

1.2          BASIS OF CONSOLIDATION AND BUSINESS COMBINATIONS

 

1.2.1       BUSINESS COMBINATIONS

 

Business combinations are accounted for using the acquisition method as at the acquisition date - i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

 

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus

• if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

• the net amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

 

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

 

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

 

1.2.2          NON-CONTROLLING INTERESTS

 

For each business combination, the Group elects to measure any non-controlling interests in the acquiree either at fair value or at their proportionate share of the acquiree's identifiable net assets, which are generally at fair value.

 

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

 

1.2.3       SUBSIDIARIES

 

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing if the Group controls another entity.

 

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated.

 

1.3          GOODWILL

 

Goodwill arising on acquisition of subsidiaries is included in the Consolidated Statement of Financial Position as an asset at cost less impairment. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently where there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

 

1.4          IMPAIRMENT OF NON-FINANCIAL ASSETS

 

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

 

1.5          FINANCIAL ASSETS AND LIABILITIES

 

Financial assets and liabilities are recognised initially at their fair value and are subsequently measured at amortised cost. For trade receivables, trade payables and other short-term financial liabilities this generally equates to original transaction value.

 

1.6          PROPERTY, PLANT AND EQUIPMENT

 

The cost of property, plant and equipment is their purchase cost, together with any incidental costs of acquisition.

 

Depreciation is calculated so as to write off the cost of the assets, less their estimated residual values, over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:

 

Office and computer equipment - 25% - 50% per annum on cost

 

Fixtures and fittings - 25% - 33% per annum on cost (or over the life of the lease whichever is shorter)

 

Land and buildings leasehold - over 3 - 5 years straight line

 

Right of use asset - straight line over shorter of estimated useful life and lease term

 

1.7          TRADE RECEIVABLES

 

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

 

1.8          CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents include cash in hand and deposits held at call with banks. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

 

1.9          INVESTMENTS

 

Investments in subsidiary undertakings are stated at cost less provision for any impairment in value. Investments are tested annually for impairment and whenever events or changes in circumstance indicate that the carrying amount may not be recoverable an impairment loss is recognised immediately for the amount by which the investment's carrying amount exceeds its recoverable value.

 

1.10        BORROWINGS

 

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

 

1.11        INVOICE DISCOUNTING FACILITY

 

The terms of this arrangement are judged to be such that the risk and rewards of ownership of the trade receivables do not pass to the finance provider. As such the receivables are not derecognised on draw-down of funds against this facility. This facility is recognised as a liability for the amount drawn.

 

1.12        TRADE PAYABLES

 

Trade payables are non-interest bearing and are initially recognised at fair value and then subsequently measured at amortised cost.

 

1.13        OPERATING SEGMENTS

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group Executive Committee that makes strategic decisions.

 

1.14        FOREIGN CURRENCY TRANSLATION

 

a)            Functional and presentation currency

 

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in sterling, which is the Company's functional and the Group's presentation currency.

 

b)            Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

 

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Consolidated Statement of Comprehensive Income within 'net finance income'. All other foreign exchange gains and losses are presented in the income statement within 'operating expenses'.

 

1.15        TAXATION

 

Taxation currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all material taxable timing differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

 

Such assets and liabilities are not recognised if the temporary difference arises from an initial recognition of goodwill or from the initial recognition (other than in the business combination) of other assets and liabilities in the transaction that affects neither the tax profit nor the accounting profit.

Deferred tax is calculated using the tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

1.16        REVENUE RECOGNITION

 

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities and is recognised at a specific point in time. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described below.

 

a)            Executive search services

 

Executive Search services are provided on a retained basis and the Group generally invoices the client at pre-specified milestones agreed in advance at a specific point in time. Typically, this will be in three stages; retainer, shortlist and completion fee. Revenue is recognised on completion of defined stages of work during the recruitment process including the completion of a candidate shortlist and placement of a candidate. Revenue is deferred for any invoices raised but unearned at the year end.

 

b)            Short-term contract and interim business

 

Revenue is recognised as services are rendered, validated by receipt of a client approved timesheet or equivalent. Fixed Term Contracts or Candidate conversions are recognised on client approval and invoice date and are invoiced at a specific point in time.

 

c)             Assessment, career coaching and talent management

 

Revenue is recognised in line with delivery. Where revenue is generated by contracts covering a number of sessions then revenue is recognised over the contract term based on the average number of sessions taken up and is invoiced at a specific point in time.

 

d)            Interest income

 

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

 

1.17        PENSIONS

 

The Group operates a number of defined contribution funded pension schemes for the benefit of certain employees. The costs of the pension schemes are charged to the income statement as incurred.

 

1.18        LEASES

 

The Group leases its offices and various office equipment. Rental contracts are typically made for fixed periods of 3 to 5 years but may have extension options.

 

Contracts may contain both lease and non-lease components. The company allocates the consideration in the contract to the lease and non-lease components based on their relative standalone prices.

 

However, for leases of property for which the company is a lessee and for which it has major leases, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

 

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the company.

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

•  Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

•  Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

•  Amounts expected to be payable by the company under residual value guarantees;

•  The exercise price of a purchase option if the company is reasonably certain to exercise that option; and

•  Payments of penalties for terminating the lease, if the lease term reflects the company exercising   that option.

 

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the company, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

 

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

Right-of-use assets are measured at cost comprising the following:

 

•  The amount of the initial measurement of lease liability;

•  Any lease payments made at or before the commencement date less any lease incentives received; and

•  Any initial direct costs.

 

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. Right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of assets.

 

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets (items less than £1,000) are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

 

1.19        SHARE OPTION SCHEMES

 

For equity-settled share-based payment transactions the Group, in accordance with IFRS 2, measures their value and the corresponding increase in equity indirectly, by reference to the fair value of the equity instruments granted. The fair value of those equity instruments is measured at grant date, the EBITDA Options using a Binomial option model and the Share Price Options using a Monte Carlo simulation model. The expense is apportioned over the vesting period of the financial instrument and is based on the numbers which are expected to vest and the fair value of those financial instruments at the date of grant. If the equity instruments granted vest immediately, the expense is recognised in full.

 

1.20        CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

 

a)            Impairment of goodwill - determining whether goodwill is impaired requires an estimation of the value in use of cash-generating units (CGUs) to which goodwill has been allocated. The value in use calculation requires an estimation of the future profitability expected to arise from the CGU and a suitable discount rate in order to calculate present value.

b)            Impairment of investments - determining whether investments are impaired requires an estimation of the value in use of each subsidiary. The value in use calculation requires an estimation of the future profitability expected to arise from each subsidiary and a suitable discount rate in order to calculate present value.

c)             Revenue recognition - revenue is recognised based on estimated timing of delivery of services based on the assignment structure and historical experience. Were these estimates to change then the amount of revenue recognised would vary.

d)            Share-based payments - the expense recognised for the share-based payments scheme, reflects the number of share options granted that will vest and management's expectations regarding share lapses and non-market performance conditions. All options are subject to both time vesting and performance conditions.

 

 

2              FINANCIAL RISK MANAGEMENT

 

The financial risks that the Group is exposed to through its operations are interest rate risk, liquidity risk and credit risk.

 

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

 

There have been no substantive changes in the Group's exposure to financial risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods, unless otherwise stated in this note.

 

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's Executive Committee.

 

The Board receives monthly reports from the Group Chief Financial Officer, through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. 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. Further details regarding specific policies are set out below:

 

2.1          INTEREST RATE RISK

 

The Group's interest rate risk arises from short term borrowings issued at a variable interest rate. At 31 December 2022 the balance outstanding on the invoice discounting facility was £0.5 million (2021: £1.0 million) and this balance increases and decreases in line with the outstanding trade receivables.

 

2.2          LIQUIDITY RISK

 

Liquidity risk arises from the Group's management of working capital and the finance charges. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, the Group monitors its requirements on a rolling monthly basis. The Board receives cash flow projections as well as monthly information regarding cash balances. At the balance sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under reasonably expected circumstances.

 

2.3          CREDIT RISK

 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. 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.

 

Each new customer is analysed individually for creditworthiness before the Group's standard payment and delivery terms and conditions are offered. The Board determines concentrations of credit risk by reviewing the trade receivables' ageing analysis.

 

The Board monitors the ageing of credit sales regularly and at the reporting date does not expect any losses from non-performance by the counterparties other than those specifically provided for (see Note 13). The Directors are confident about the recoverability of receivables based on the blue chip nature of its customers, their credit ratings and the very low levels of default in the past.

 

2.4          CAPITAL RISK MANAGEMENT

 

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

 

3           SEGMENTAL ANALYSIS

 

Management has determined the operating segments based on the reports reviewed regularly by the Board for use in deciding how to allocate resources and in assessing performance. The Board considers Group operations from both a class of business and geographic perspective. Each class of business derives its revenues from the supply of a particular recruitment related service, from retained executive search through to executive assessment and coaching. Business segment results are reviewed primarily to revenue level.

Group revenues are primarily driven from UK operations. However when revenue is derived from overseas business the results are presented to the Board by geographic region to identify potential areas for growth or those posing potential risks to the Group.

 

i)          Class of business:

 

The analysis by class of business of the Group's turnover and is set out below:

	2022	2021
	£'000	£'000
Revenue - Search	5,666	4,330
Revenue - Interim Management	2,920	1,949
Revenue - Leadership Consulting	111	270
	8,697	6,549
Cost of sales	(1,350)	(690)
Gross profit	7,347	5,859
Operating expenses	(7,254)	(5,854)
Depreciation and amortisation	(223)	(229)
Restructuring costs	-	(308)
Share based payment charge	(131)	-
Finance costs	(77)	(41)
Profit/(Loss) before tax	(338)	(573)

ii)          Revenue and gross profit by geography

	2022	2021	2022	2021
	Revenue	Revenue	Gross Profit	Gross Profit
	£'000	£'000	£'000	£'000
United Kingdom	6,660	5,717	5,627	5,027
Rest of the world	2,037	832	1,720	832
Total	8,697	6,549	7,347	5,859

 

4           PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

	2022	2021
	£'000	£'000
Profit / (Loss) on ordinary activities before taxation is stated after charging:
Depreciation and impairment of property, plant and equipment	223	227
Staff costs (see note 5)	6,004	4,555
Auditors' remuneration:
Audit work	51	43
Non-audit work	-	-

The Company audit fee for the year was £50,800 (2021: £43,000).

 

5           STAFF COSTS

 

The average number of full time equivalent persons (including Directors) employed by the Group during the year was as follows:

	2022	2021
	No.	No.
Sales and related services	36	30
Administration	9	15
	45	45

Staff costs (for the above persons):

	£'000	£'000
Wages and salaries	5,095	3,952
Social security costs	586	419
Defined contribution pension cost	192	184
	131	4,555

 

The emoluments of the Directors are disclosed as required by the Companies Act 2006 on page 22 in the Directors' Remuneration Report. The table of Directors' emoluments has been audited and forms part of these financial statements. This also includes details of the highest paid Director.

 

6           TAX EXPENSE

 

(a)        Tax charged in the income statement

Taxation is based on the loss for the year and comprises:

	2022	2021
	£'000	£'000
Current tax:
United Kingdom corporation tax at 19% (2021: 19%) based on loss for the year	-	-
Foreign Tax	-	-
Total current tax	-	-
Deferred tax:
Origination and reversal of temporary differences	-	69
Tax charge/(credit)	-	69

(b)        Reconciliation of the total tax charge

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

	2022	2021
	£'000	£'000
Profit / (Loss) on ordinary activities before taxation	(338)	(573)
Tax on profit / (loss) on ordinary activities at standard UK corporation tax rate of 19% (2021: 19%)	(64)	(109)
Effects of:
Expenses not deductible	6	7
Share option costs	25	-
Depreciation in excess of capital allowances	(6)	32
Provision movement Group relief	(1) -	1 -
Release of deferred tax asset	-	69
Adjustment to losses carried forward	40	69
Current tax charge for the year	-	69

(c)        Deferred tax

	Tax losses	Total
	£'000	£'000
At 1 January 2022	-	-
Charged to the income statement in 2022	-	-
At 31 December 2022	-	-

 

At 31 December 2022 the Group had capital losses carried forward of £8,129,000 (2021: £8,129,000) and trading losses carried forward of £14,879,676 (2021: £14,497,676). A deferred tax asset has not been recognised for the capital losses as the recoverability in the near future is uncertain.

 

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

	2022	2021
	£'000	£'000
Deferred tax assets: Tax losses carried forward	-	-
Total	-	-

7           NET FINANCE COST

	2022	2021
	£'000	£'000
Interest payable on leases, invoicing facility and other loans	77	41
Total	77	41

8           EARNINGS PER SHARE

i)           Basic earnings per share

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

	2022	2021
Profit/(Loss) attributable to owners of the company	£(338,000)	£(642,000)
Weighted average number of ordinary shares	60,879,205	56,487,344
Total	60,879,205	56,487,344

ii)          Diluted earnings per share

This is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares in the form of employee share options. For these options a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to the outstanding options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

 

	2022	2021
Profit/(Loss) attributable to owners of the company	£(338,000)	£(642,000)
Weighted average number of ordinary shares	60,879,205	56,487,344
Total	60,879,205	56,487,344

 

iii)         Adjusted earnings per share

An adjusted earnings per share has also been calculated in addition to the basic and diluted earnings per share and is based on earnings adjusted to eliminate the effects of charges for share based payments. It has been calculated to allow shareholders to gain a clearer understanding of the trading performance of the Group.

	2022	2022	2022	2021	2021	2021
	£'000	Basic pence per share	Diluted pence per share	£'000	Basic pence per share	Diluted pence per share
Basic earnings
Profit/(Loss) after tax	(338)	(0.56)	(0.56)	(642)	(1.14)	(1.14)
Adjustments
Share based payment charge	131	0.22	0.22	-	-	-
Adjusted earnings	(207)	(0.34)	(0.34)	(642)	(1.14)	(1.14)

 

9           PROFIT OF PARENT COMPANY

As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these accounts. The parent company's profit for the year amounted to £664,000 (2021: Loss £4,407,000).

10         INTANGIBLE ASSETS

	Goodwill arising on consolidation
	£'000
Group Balance at 1 January 2021	3,690
Balance at 31 December 2021	3,690
Balance at 31 December 2022	3,690
Provision for impairment
Balance at 1 January 2021	2,327
Balance at 31 December 2021	2,327
Balance at 31 December 2022	2,327
Net book value
At 1 January 2021	1,363
At 31 December 2021	1,363
At 31 December 2022	1,363

 

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

	Norman Broadbent	Norman Broadbent Leadership Consulting	Total
	£'000	£'000	£'000
At 1 January 2021	1,303	60	1,363
At 31 December 2021	1,303	60	1,363
At 31 December 2022	1,303	60	1,363

 

In line with International Financial Reporting Standards, goodwill has not been amortised from the transition date, but has instead been subject to an impairment review by the Directors of the Group. As set out in accounting policy note 1 on page 41, the Directors test the goodwill for impairment annually. The recoverable amount of the Group's CGUs are calculated on the present value of their respective expected future cash flows, applying a weighted average cost of capital in line with businesses in the same sector. Pre-tax future cash flows for the next five years are derived from the approved forecasts for the 2023 financial year.

 

The key assumption applied to the forecasts for the business is that return on sales for Norman Broadbent is expected to be a minimum of 5% per annum for the foreseeable future (2021: 5%). Return on sales is defined as the expected profit before tax on net revenue. There are only minimal non cash flows included in profit before tax. The rate used to discount the forecast cash flows is 10%-12.5% (2021: 10%).

11.        PROPERTY, PLANT AND EQUIPMENT

	Land and buildings - leasehold	Right of Use asset	Office and computer equipment	Fixtures and fittings	Total
	£'000	£'000	£'000	£'000	£'000
Group Cost
Balance at 1 January 2021	94	408	254	50	806
Additions	-	366	55	-	421
Disposals	-	-	-	-	-
Balance at 31 December 2021	94	774	309	50	1,227
Additions	6	34	59	-	99
Disposals	-	-	-	-	-
Balance at 31 December 2022	100	808	368	50	1,326
Accumulated depreciation
Balance at 1 January 2021	87	163	177	47	474
Charge for the year	5	169	50	3	227
Disposals	-	-	-	-	-
Balance at 31 December 2021	92	332	227	50	701
Charge for the year	8	168	47	-	223
Disposals	-	-	-	-	-
Balance at 31 December 2022	100	500	274	50	924
Net book value
At 1 January 2021	7	245	77	3	332
At 31 December 2021	2	442	82	-	526
At 31 December 2022	-	308	94	-	402

The Group had no capital commitments as at 31 December 2022 (2021 : £Nil).

 

 

12         INVESTMENTS

	Shares in subsidiary undertakings
	£'000
Company Cost
Balance at 1 January 2021	5,935
Balance at 31 December 2021	5,935
Balance at 31 December 2022	5,935
Provision for impairment
Balance at 1 January 2021	4,249
Impairment for the year	486
Balance at 31 December 2021	4,735
Impairment for the year	-
Balance at 31 December 2022	4,735
Net book value
At 1 January 2021	1,686
At 31 December 2021	1,200
At 31 December 2022	1,200

 

During the year to 31 December 2022 the Company held the following ownership interests:

Principal Group investments:	Country of incorporation or registration and operation	Principal activities	Description and proportion of shares held by the Company
Norman Broadbent Executive Search Ltd	England and Wales	Executive search	100% ordinary shares
Norman Broadbent Overseas Ltd	England and Wales	Non Trading (Dissolved 11th Oct 2022)	100% ordinary shares
Norman Broadbent Leadership Consulting Limited	England and Wales	Assessment, coaching and talent management (Dissolved 11th Oct 2022)	100% ordinary shares
Norman Broadbent Solutions Ltd	England and Wales	Mezzanine level search (Dissolved 11th Oct 2022)	100% ordinary shares
Bancomm Ltd	England and Wales	Dormant (Dissolved 4th Oct 2022)	100% ordinary shares
Norman Broadbent Ireland Ltd	Republic of Ireland	Dormant	100% ordinary shares
Norman Broadbent Interim Management Ltd	England and Wales	Interim Management (Dissolved 11th October 2022)	100% ordinary shares

 

The registered office for the subsidiaries are Millbank Tower, 21-24 Millbank London SW1P 4QPP with the exception of Norman Broadbent Ireland Limited.

 

13         TRADE AND OTHER RECEIVABLES

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Trade receivables	2,135	1,746	-	-
Less: provision for impairment	(2)	(14)	-	-
Trade receivables - net	2,133	1,732	-	-
Other debtors	48	127	-	-
Prepayments and accrued income	139	56	7	14
Due from Group undertakings	-	-	1,550	1,371
Total	2,320	1,915	1,557	1,385
Non-Current	-	-	--	-
Current	2,320	1,915	1,557	1,385
	2,320	1,915	1,557	1,385

 

As at 31 December 2022, Group trade receivables of £935,000 (2021: £967,000), were past their due date but not impaired, save as referred to below. They relate to customers with no default history. The ageing profile of these receivables is as follows:

	Group		Company
	2022	2021	2022		2021
	£'000	£'000	£'000		£'000
Up to 3 months	765	811	-		-
3 to 6 months	115	136	-		-
6 to 12 months	55	20	-	-
Total	935	967	-		-

 

The largest amount due from a single trade debtor at 31 December 2022 represents 15% (2021: 9%) of the total trade receivables balance outstanding.

 

As at 31 December 2022 group trade receivables considered impaired were £2,000 (2021: £14,000). Movements on the Group's provision for impairment of trade receivables are as follows:

 

	2022	2021
	£'000	£'000
At 1 January	14	60
Provision for receivable impairment	-	-
Receivables written-off as uncollectable	(12)	(46)
At 31 December	2	14

There are no material difference between the carrying value and the fair value of the Group's and parent Company's trade and other receivables.

14         CASH AND CASH EQUIVALENTS

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Cash at bank and in hand	50	459	6	170
Total	50	459	6	170

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

15         TRADE AND OTHER PAYABLES

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Trade payables	212	184	8	26
Due to Group undertakings	-	-	-	1,157
Other taxation and social security	330	344	(2)	(4)
Other payables	24	151	-	-
Accruals	1,440	1,048	46	69
Total	2,006	1,727	52	1,248

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

16         BORROWINGS

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Maturity profile of borrowings Current
Invoice discounting facility (see note (a) below)	483	952	-	-
Loans (see note (b) below)	-	-	46	-
Non Current Loans (see note (b) below)	618	250	572	250
Total	1,101	1,202	618	250

 

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

	Carrying amount		Fair value
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Bank overdrafts and interest bearing loans:
Invoice discounting facility	483	952	483	952
Loans (see note (b) below)	618	250	618	250
Total	1,101	1,202	1,101	1,202

a)          Invoice discounting facilities:

The Group operates an invoice discounting facility with Metro Bank.  All Group invoices are raised through Norman Broadbent Executive Search Ltd and as such Metrobank (SME Invoice Finance Ltd) holds an all asset debenture for Norman Broadbent plc and Norman Broadbent Executive Search Limited.  Funds are available to be drawn down at an advance rate of 88% against trade receivables of Norman Broadbent Executive Search Ltd that are aged less than 120 days with the facility capped at £1,500,000.  At December 31 2022, the outstanding balance on the facility of £0.5m was secured by trade receivables of £2.1m.  Interest is charged on the drawn down funds at a rate of 2.4% above the bank base rate.

b)          Loans

In November 2020 the Group received a CBILS Loan of £250,000 for a term of 6 years. Repayment of capital and interest began in January 2022, and from this month the loan incurs interest at 4.75% above the Metro Bank UK base rate. Metro Bank holds an all asset fixed and floating charge over Norman Broadbent Executive Search Ltd linked to this facility.

 

On 20th May 2022 convertible loan notes of £400,000 nominal value were issued to Downing Strategic Micro-Cap Investment Trust Plc and Moulton Goodies Limited, each of whom subscribed £200,000. The loan notes are only convertible after the first anniversary date, up to 50% of the outstanding amount plus any compounded interest in accordance with the terms of the secured loan instrument and security provided by Norman Broadbent Executive Search Ltd.

 

17         FINANCIAL INSTRUMENTS

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

	Amortised Cost
	2022	2021
Group	£'000	£'000
Financial assets
Trade and other receivables	2,133	1,732
Other debtors	48	127
	2,181	1,859
Financial liabilities
Trade creditors	212	184
Accrual and deferred income	1,440	1,048
Other creditors	24	151
Bank Loans - Current	483	952
Bank Loans - Greater than one year	618	250
	2,777	2,585

 

	Amortised Cost
	2022	2021
Company	£'000	£'000
Financial Assets
Amounts owed by group undertakings	1,550	1,371
	1,550	1,371
Financial liabilities
Trade and other payables	8	26
Amounts owed to group undertakings	-	1,157
Accruals and deferred income	46	69
Bank loans - greater than one year	572	250
	626	1,502

 

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

18         SHARE CAPITAL AND PREMIUM

	2022	2021
	£'000	£'000
Allotted and fully paid: Ordinary Shares:
61,817,510 Ordinary shares of 1.0p each (2021: 60,740,757)	618	607
Deferred Shares:
23,342,400 Deferred A shares of 4.0p each (2021: 23,342,400)	934	934
907,118,360 Deferred shares of 0.4p each (2021: 907,118,360)	3,628	3,628
1,043,566 Deferred B shares of 42.0p each (2021: 1,043,566)	438	438
2,504,610 Deferred C shares of 29.0p each (2021: 2,504,610)	727	727
Total	6,345	6,334

Deferred A Shares of 4.0p each

 

The Deferred A Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry a right to repayment only after the holders of Ordinary Shares have received a payment of £10,000 per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof. The rights attaching to the shares shall not be varied by the creation or issue of shares ranking pari passu with or in priority to the Deferred A Shares.

 

Deferred Shares of 0.4p each

 

The Deferred Shares carry no right to dividends, distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry a right to repayment only after payment of capital paid up on Ordinary Shares plus a payment of £10,000 per Ordinary Share. The Company retains the right to transfer or cancel the shares without payment to the holders thereof.

 

Deferred B Shares of 42.0p each

 

The Deferred B Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry the right to repayment only after the holders of Ordinary Shares have received a payment of £10 million per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof. The rights attaching to the shares shall not be varied by the creation or issue of shares ranking pari passu with or in priority to the Deferred B Shares.

 

Deferred C Shares of 29.0p each

 

The Deferred Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the Company. In the event of a winding up, the shares carry the right to repayment only after the holders of Ordinary Shares have received a payment of £10,000 per Ordinary Share. The Company retains the right to cancel the shares without payment to the holders thereof.

 

A reconciliation of the movement in share capital and share premium is presented below:

	No. of ordinary shares (000s)	Ordinary shares £(000s)	Deferred shares £(000s)	Share premium £(000s)	Total £(000s)
At 1 January 2021	55,218	552	5,727	13,763	20,042
Issued during the year	5,523	55	-	317	372
At 31 December 2021	60,741	607	5,727	14,080	20,414
Issued during the year	1,076	11	-	30	41
At 31 December 2022	61,817	618	5,727	14,110	20,455

During the year 1,076,753 Ordinary Shares were issued at a consideration of 3.75 pence per share.

 

19         SHARE BASED PAYMENTS

 

The Company operates an equity-settled share-based payment scheme for employees of the group. The scheme is an executive Enterprise Management Incentive ("EMI") share option scheme. The company granted 9,950,000 options as part of the scheme on 17 March 2022. All options are subject to both time vesting conditions and performance conditions. 50% of the Options are subject to market-based share price performance conditions (the "Share Price Options") and 50% are subject to certain EBITDA performance conditions (the "EBITDA Options").

 

Time vesting conditions

 

A quarter of the options vest on each anniversary of the grant date up to the fourth anniversary (17 March 2026). No options can be exercised until at least the second anniversary of the grant date (24 months).

 

EBITDA performance conditions

 

Subject to the time vesting conditions, the EBITDA Options will vest subject to the achievement of certain EBITDA targets in any financial year from the grant date to the year ending 31 December 2025.

The EBITDA performance conditions are classed as non-market performance conditions. As such, these are not directly captured in the option valuation but are considered when calculating the associated P&L charge of the EBITDA Options.

 

Share Price performance condition

 

Subject to the time vesting condition, the Share Price Options will vest in quarters subject to the Company's 3-month average share price meeting certain targets at any time from the grant date up to 30 June 2026.

 

The share price performance conditions are classified as a market-based performance condition.

 

The Share Price Option can only vest following the achievement of both the relevant time based and Share Price performance conditions. The date on which a Share Price condition could be met may differ to the applicable time vesting date.

	EBITDA Options
	2022	2022	2021	2021
	Weighted average Exercise price		Weighted average Exercise price
	(£)	Number	(£)	Number
Outstanding at 1 January	-	-	-	-
Granted during the year	-	4,975,000	-	-
Forfeited during the year	-	-	-	-
Outstanding at 31 December	-	4,975,000	-	-

 

The exercise price of the options outstanding at 31 December 2022 was £nil (2022: n/a) and their weighted average remaining contractual life was 6.2 years (2021 n/a).

 

None of the options outstanding at 31 December 2022 had vested (2021: n/a).

The weighted average fair value of each option granted during 2022 was £0.07.

 

	Share Price Option
	2022	2022	2021	2021
	Weighted average Exercise price		Weighted average Exercise price
	(£)	Number	(£)	Number
Outstanding at 1 January	-	-	-	-
Granted during the year	-	4,975,000	-	-
Forfeited during the year	-	-	-	-
Outstanding at 31 December	-	4,975,000	-	-

 

The exercise price of the options outstanding at 31 December 2022 was £nil (2022: n/a) and their weighted average remaining contractual life was 6.2 years (2021 n/a).

 

None of the options outstanding at 31 December 2022 had vested (2021: n/a).

The weighted average fair value of each option granted during 2022 ranged between £0.039 -£0.058.

 

The following information is relevant in the determination of the fair value of options granted during the year under the equity-settled share-based payment schemes operated by the Company

 

	2022
	£
Equity-settled - EBITDA Option
Option pricing model used	Binomial option model
Weighted average share price at grant date	0.07
Exercise price	-
Weighted average contractual life of the options (in years)	7 years
Expected volatility	58.9%
Expected dividend yield	0.0%
Risk-free interest rate	1.31%
	2022
	£
Equity-settled - Share Price Option
Option pricing model used	Monte Carlo simulation
Weighted average share price at grant date	0.07
Exercise price	-
Weighted average contractual life of the options (in years)	7 years
Expected volatility	58.9%
Expected dividend yield	0.0%
Risk-free interest rate	1.31%

 

The volatility assumption, measured at the standard deviation of expected share price returns, is based on a weighted average statistical analysis of the company's daily share price over a 4-year basis.

 

The share-based remuneration expense disclosed in key management personnel compensation compromises:

	2022	2021
	£	£
Share-based payment recognised in the income statement	130,581	nil

 

 

20         LEASES

 

The Group has adopted IFRS Leases 16 for its treatment of the lease properties in Millbank Tower, London, and Booth Park, Knutsford and Rubislaw Terrace, Aberdeen.

 

Under IFRS 16, the Group has recognised within the Consolidated Balance Sheet a right-of-use asset and a lease liability for all applicable leases. Within the Consolidated Income Statement, operating lease rental charges have been replaced with depreciation and interest expense.

 

Set out below are the accounting policies of the Group under IFRS 16, which have been applied from the date of initial application.

 

Right-of-use assets :  The Group recognises right-of-use assets at the commencement date of the lease and they are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

 

Lease liabilities :  At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

 

Consolidation Statement	2022  £'000	2021  £'000
Depreciation expense	(168)	(169)
Operating Profit	(168)	(169)
Finance Costs	(25)	(27)
Profit before Tax	(193)	(196)

 

Consolidated Statement of Financial Position	Right-of-use assets £'000	Lease liabilities £'000
As at 1 January 2021	245	(245)
Additions	366	(366)
Disposals	-	-
Depreciation expense	(169)	-
Interest expense	-	(27)
Payments	-	140
At 31 December 2021	442	(498)
Additions	34	(34)
Disposals	-	-
Depreciation expense	(168)	-
Interest expense	-	(25)
Payments	-	200
At 31 December 2022	308	(357)
Impact on Consolidated Statement of Financial Position	2022 £'000	2021 £'000
Right-of-use assets	308	442
Total Assets	308	442
Lease liabilities - less than one year	(203)	(200)
Lease liabilities - more than one year	(155)	(298)
Total Liabilities	(358)	(498)
Equity	(50)	(56)

 

21         PENSION COSTS

 

The Group operates several defined contribution pension schemes for the business. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension cost represents contributions payable by the Group to the funds and amounted to £192,000 (2021: £184,000). At the year end £14,000 of contributions were outstanding (2021: £19,000).

 

22         RELATED PARTY TRANSACTIONS

 

The following transactions were carried out with related parties:

 

Key management compensation:

Key management includes Executive and Non-Executive Directors. The compensation paid or payable to the directors can be found in the Directors' Remuneration Report.

 

23         CONTINGENT LIABILITY

 

The Company is a member of the Norman Broadbent plc Group VAT scheme. As such it is jointly accountable for the combined VAT liability of the Group. The total VAT outstanding in the Group at the year end was £123,000 (2021: £205,000).

 

24         POST BALANCE SHEET EVENT

 

The Company repaid half of the funds raised by the issue of the Convertible Loan Notes of £400,000 on 19th May 2023.  Downing Strategic Micro-Cap Investment Trust Plc and Moulton Goodies Limited each received a repayment of £100,000 (plus interest).