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Prime People PLC  -  PRP   

Final Results & Notice of AGM

Released 07:00 22-Jun-2017

RNS Number : 8096I
Prime People PLC
22 June 2017
 

22 June 2017

 

Prime People Plc

Results for the year ended 31 March 2017

 

Prime People Plc ("Prime People" or the "Group"), the global specialist recruitment business for professional and technical staff working in the Real Estate & Built Environment, Energy & Environmental and Insight & Analytics sectors, today announces its audited results for the year ended 31 March 2017.

 

Highlights:

 


Year ended

31 March

2017

Year ended

31 March

2016

Gross fee income

Net fee income ("NFI")

£24.21m

£13.10m

£20.75m

£12.28m

Profit before tax

£1.90m

£2.15m

Profit after tax

£1.61m

£1.70m

Fully diluted earnings per share

12.97p

13.52p

Dividends for the year

5.00p

4.84p*

 

*Total Dividends in 2016 were 8.84p including a Special Dividend of 4p.

 

Peter Moore, Managing Director of Prime People, said:

 

"I am pleased to report a good set of results with Gross Fee Income up 16.67% and Net Fee Income up 6.68%.

Operating profit for the year was £1.90m, slightly down on £2.15m in 2016, reflecting increases in staff costs associated with conserving talent and investing to nurture future productivity across the Group. There were a number of good performances within UK property, in particular, Contract and Residential teams generated improved NFI. Our Asia business, particularly Singapore, continued to develop strongly.

 

We have maintained a strong cash position and propose a final dividend of 3.25p, which combined with the interim dividend of 1.75p per share, will result in a total dividend of 5.00p for the 2017 financial year. (2016: 8.84p - which included a special interim dividend of 4.00p and second interim dividend of 3.09p)

 

Current activity is encouraging across the group and we are confident the business is well positioned to exploit opportunities as they arise."

 

Annual General Meeting ("AGM")

 

The AGM will be held on Monday 24 July 2017 at 11.00am at 2 Harewood Place, London, W1S 1BX.  All shareholders are encouraged to attend. The Notice of AGM will be posted to shareholders today and will be made available on the Company website: http://www.prime-people.co.uk/ .

 

-Ends-

 

For further information please contact:

Prime People

020 7318 1785

Robert Macdonald, Executive Chairman


Peter Moore, Managing Director

Donka Zaneva-Todorinski, Finance Director




Cenkos Securities

020 7397 8900

Elizabeth Bowman


Julian Morse (Sales/Broking)




 

Chairman's Statement

 

Performance

 

The year ended 31 March 2017 was overall an encouraging one with our clients continuing to compete for scarce talent. In the UK, the referendum to remain or leave the EU occurring at the end of our first quarter slowed activity both sides of 23 June 2016 but, with a good recovery in the second half we achieved a full year NFI broadly in line with 2016. NFI comprises the total placement fees of permanent candidates and the margin earned in the placement of contract staff. Our businesses in Asia performed particularly well with both NFI and profit contribution being well ahead of the prior year.

 

I am pleased to report we closed the year with Revenue of £24.21m (2016: £20.76m) and NFI of £13.10m. This is a 6.68% increase on last year (2016: £12.28m). NFI in the second half of the year of £6.77m was 7.00% higher than the first half of 2017, and it is encouraging to see a second half increase over the comparable period in 2016 of 11.55%.

 

There were a number of good performances within UK property. In particular, Contract and Residential teams generated improved NFI. Our Asia business, particularly Singapore, continued to develop strongly.

 

There was a reduction in operating profit for the year from £2.15m in 2016 to £1.90m in 2017. In the UK, our core business in property was particularly affected in quarters one and two by the considerable negative sentiment for the sector surrounding the uncertainties of the EU referendum. Our Prime Energy business, servicing the renewable market in the UK suffered difficulty following the change in government subsidy for the sector. The Group supported the team to refocus on expanding its reach in new territories. There were also costs associated with conserving talent and, whilst total headcount increase was limited, there was investment in staff to support future productivity across the Group.

 

The conversion rate, which compares operating profit to NFI, decreased from 17.50% to 14.54% which is in line with the costs mentioned above.

 

During the year NFI productivity per head rose to £102.33k (2016: £99.03k).

 

 

The ratio of NFI derived from contract as against permanent placements has slightly increased in the

year from 9:91 in 2016 to 10:90, as a result of increase in the contract team size.

 

Cash Flow

 

The Group continues to maintain a strong net cash position. At the start of the year the Group had cash of £0.95m which increased to £2.40m by the end of the year. The increase is primarily due to growth in the contract business and Asia's positive performance. Contract NFI grew by 28.32% to £1.45m (2016: £1.13m) and Asia NFI increased by 39.94% to £5.08m (2016: £3.63m).

 

Dividend

 

During the year, an interim dividend of 1.75p per share (2016: 1.75p) was paid to shareholders. The Board will be recommending a final dividend of 3.25p (2016: 0.00p) per share. This will result in a total dividend payment of 5.00p for the 2017 financial year (2016: 8.84p - which included a special interim dividend of 4.00p and a second interim dividend of 3.09p).

 

Share Buy Back

 

During the year 129,500 shares were purchased at a cost of £111,390 through the Group's buyback programme (2016: nil shares purchased). The Board will be seeking shareholder approval for renewal of the authority to repurchase up to 10% (2016: 10%) of the Group's issued share capital at the Annual General Meeting.

 

New Issue of Ordinary Shares

 

During the year the Company did not apply to issue new shares for admission on AIM (2016: 96,250).

 

Board

The Board believes it has continued to operate corporate governance standards appropriate to an AIM listed company of its size. There have been no changes to the Board during the year. Although not required to do so, the Directors have resolved that they will retire at least once every three years and seek reappointment by shareholder at the next AGM.

 

The Board members have a mix of skills, experience, gender and backgrounds that are considerable support to the business.

 

People

 

The average number of staff increased from 124 last year to 128 this year and we anticipate that headcount at the end of the current financial year  will have increased further.

 

The Group has a diverse cultural and ethnic profile within the business and at the end of 2017 had a global 54:46 (2016: 52:48) male: female gender ratio.

 

The success of the Group is dependent on having competent and committed people and the Board would like to thank all the members of our staff for their hard work, commitment and contribution over the last year.

 

Current trading and outlook

Current activity is encouraging and we are confident the business is well positioned to exploit opportunities as they arise. We have continued to advance our overseas strategy by extending our reach in Asia. The Group has strong and well-established client relationships and committed talent ready to exploit current and new opportunities.

 

The Board is conscious of macro-economic uncertainties, such as the effects for us of the negotiations over the UK's departure from EU membership and possible turbulence in our overseas markets that may affect our clients' hiring plans. The Group continues to seek opportunities for expansion, reacting swiftly to market conditions as they affect individual revenue lines. The Group will continue to invest in people and the technology that allows us to grow shareholders returns by offering our clients innovative approaches to recruitment and globally connected service.

 

Robert Macdonald

Executive Chairman

 

 

Strategic Report

 

Overview

 

The Group provides permanent and contract recruitment services to selected, niche industry sectors. The built environment continues to be the Group's largest market, served through its main subsidiary, Macdonald & Company. As distinct brands, Prime Insight and Prime Energy serve the data analysis & customer insight and renewable energy & sustainability sectors respectively.

 

Our employees are vital to the continued success of the business and we invest heavily in them. As such, we take time to find and train the best talent that shares our ambition - to be the best, not simply the biggest.

 

The business is organised into teams of specialist consultants, each managed by a team leader who is responsible for performance within the operating framework approved by the Board. The Group operates a policy of open communication in the belief that its employees are well placed to suggest operational improvements and emergent strategies that will increase earnings.

 

The Group is committed to managing its talent on merit alone and provides equal opportunities for all current and future employees. It gives full and fair consideration to applications for employment from disabled persons, where a disabled person may adequately carry out the requirements of any position within the physical constraints of the Company's offices.

 

The Group has two locations in the UK, the London head office and Manchester, with offices in Hong Kong (established in 2007), Dubai (established in 2008), Singapore (established in 2012), and a franchise in South Africa (established in 2008).

 

Group Revenue and NFI improved in 2017. However, as referred to in the Chairman's Statement, set against this were the operational issues faced by some of our UK teams. As property sector sentiment was disturbed by the referendum in quarters one and two it was decided to hold on to staff and this together with expense associated with repositioning the Prime Energy team in the UK were major contributors to our delivering a reduced operating profit of £1.90m (2016: £2.15m). The recovery in the second half in property sector performance justified our decision in the first half of the year to maintain head-count.

 

The UK permanent recruitment market was adversely affected by the uncertainty in the UK property sector caused by the EU referendum. However, performance in the UK was supported by increased NFI from our Contract and Residential teams as well as a good performance from our recently established Real Estate Banking and Investment team.

 

From the twelve UK and Overseas teams, under which the Group operates, Hong Kong and Singapore, were the leading contributors to Group NFI, and made substantial contributions to overall Group profit.

 

Our Dubai business saw a decline in its revenue, as a result of general instability in the region.

 

As indicated above, our Asia businesses continued to mature and finished the year strongly, with the Prime Insight team there contributing materially to the growth of business in the region.

 

The Board remains committed in its pursuit of sustainable NFI growth and cash generation. It continues to maintain careful control on expenditure in the pursuit of profitability. Cultivating strong client relationships, investing in the best technology and employing the best people are the foundations of the Group's success. With uncertain global growth and a world economy increasingly exposed to risk it is important that we remain flexible, able to serve our clients wherever demand may be, and that we closely monitor individual NFI performance against costs. Tight management control of remuneration and expenditure, together with a focus on improved productivity per head and conversion ratios, position the Group to prosper.

 

Regional Performance

 

UK

 


2017

£m

2016

£m




Revenue

18.56

16.25

Net fee income (NFI)

7.44

7.77

Operating profit

0.82

1.53

 Operating profit as % of NFI

11.02%

19.69%

Average number of employees

87

84


 

 

UK revenue increased by 14.22% to £18.56m (2016: £16.25m) with a decrease in NFI of 4.25% to £7.44m (2016: £7.77m).

 

Contract represented 17.36% (2016: 14.52%) of total UK NFI in 2017 while permanent NFI declined by 9.84%

 

NFI for the region was flat largely as a consequence of the lack of performance in quarters one and two of our property business, affected by referendum uncertainty. As mentioned in the Chairman's Report, there were difficulties for the Prime Energy team as a result of the change in

 

government policy which gave rise to material costs involved in the refocusing of the team.

 

Additionally, we suffered staff turnover in our Manchester office causing revenue delay and profit impact.

 

Our Contract, Residential and Real Estate Banking & Investment teams delivered strong NFI growth during the year and performed in line with profit expectations.

 

Asia

 


2017

£m

2016

£m




Revenue

5.08

3.63

Net fee income (NFI)

5.08

3.63

Operating profit

1.04

0.46

Operating profit as % of NFI

20.47%

12.67%

Average number of employees

33

33

 

NFI grew by 39.94% to £5.08m (2016: £3.63m).The region is covered by our offices in Hong Kong and Singapore and represents 38.78% of Group NFI (2016: 29.56 %).

 

Both Asia teams benefited from increased productivity and maturing business lines. In 2017, we expanded our Prime Insight team in Singapore which offers our clients broader service range and better ability to serve markets in mainland China and the region.

 

 

Rest of the World


2017

£m

2016

£m




Revenue

0.58

0.88

Net fee income (NFI)

0.58

0.88

Operating profit

0.05

0.16

Operating profit as % of NFI

8.62%

18.18%

Average number of employees

4

7

 

The region is covered by our offices in Dubai and South Africa.

 

Whilst the regions covered made a small profit this year, with NFI declining and a conversion rate of 8.62%, the outlook for the regions in the new financial year looks stable and are expected to be profitable

 

 

Peter Moore

Managing Director

 

 

Financial Review

Revenue

 

The Group achieved a 16.62% increase in revenue to £24.21m (2016: £20.76m).

 

Net Fee Income (NFI)

 

Overall the Group delivered a 6.68% increase in total NFI to £13.10m (2016: £12.28m). NFI from permanent business increased by 5.92% to £11.81m (2016: £11.15m). Fees from our contract business, which represents 9.85% of total NFI (2016: 9.20%), increased to £1.29 million from £1.13m last year.

 

NFI from international placements, which is included in our permanent business, increased by 25.50% to £5.66m (2016: £4.51m). UK NFI of £7.44m reduced 4.26% (2016: £7.77m) affected by the referendum.

 

Administration Costs

 

Administration costs for the year increased by 10.46% to £11.19m (2016: £10.13m). The increase primarily related to higher staff costs.

 

Profit before Taxation

 

Profit before taxation decreased by 11.62% to £1.90m (2016: £2.15m).

 

Taxation

 

The taxation charge is £0.29m on profit before taxation of £1.90m (from ordinary activities) which gives an effective tax rate of 15.26% (2016: 21.40%). The reasons for the difference from the standard UK corporation tax rate of 20% are detailed in note 7 of the accounts.

 

Earnings per Share

 

Basic earnings per share decreased by 5.05 % to 13.14p (2016: 13.84p). The diluted earnings per share, taking into account existing share options, decreased by 4.07% to 12.97p (2016: 13.52p).

 

Dividend

 

An interim dividend of 1.75p (2016: 1.75p) was paid on 25 November 2016 to shareholders on the register at close of business on 18 November 2016.

The interim dividend was approved by the Board on 8 November 2016.

 

As outlined in the Chairman's statement, the Board propose a final dividend of 3.25p per share which will, subject to shareholder approval at the Annual General Meeting be paid on 28th July 2017 to shareholders who are on the register on 21st July 2017, making a total dividend paid to shareholders for the year of 5.00p per ordinary share. (2016: 8.84p - included a special dividend of 4.00p).

 

Balance Sheet

 

Net assets at 31 March 2017 have increased to £15.06m (2016: £13.42m).

 

Trade receivables at the year end, were down on last year at £2.44m (2016: £2.71m) which reflects the decreased credit period taken by clients to 45 days (2016: 55 days).

 

Treasury Management and Currency Risk

 

Approximately 76.66% of the Group's revenue in 2017 (2016: 78.27%) was denominated in Sterling. Consequently the Group has a degree of currency exposure in accounting for overseas operations.

 

Currently, the Group policy is not to hedge against this exposure but it does seek to minimise the effect by converting into Sterling all cash balances in foreign currency that are not required for local short term working capital needs.

The Group operates a centralised treasury function, with no borrowing facilities, and is confident the net cash within the Group is sufficient to meet current and foreseeable liabilities as they fall due.

 

Cash Flow and Cash Position

 

At the start of the year the Group had cash of £0.95m. After net taxation payments of £0.52m (2016: £0.41m) cash generated from operations was £1.46m (2016: £1.96m).

 

During the year the Group spent £0.05m (2016: £0.09m) on its Customer Relationship Management systems and paid dividends to shareholders of £0.21m (2016: £1.95m).

 

As at 31 March 2017 the Group cash was £2.40m.

 

Whilst the Group considers Net Fee Income (NFI) to be the key indicator of the performance of the business there are other measures which were reported to senior management as follows:

 

• Conversion ratio (operating profit divided by NFI) decreased to 14.54% (2016: 17.50 %)

• Productivity (NFI divided by total average headcount) increased to £102.33k (2016: £99.03k)

• Ratio of billing headcount to support headcount slightly reduced to 3.2 (2016: 3.4)

• Percentage of NFI paid to staff increased to 66.26% (2016: 63.69%)

 

These key performance indicators form the basis for reviewing the progress of the business.

 

 

Statement of Directors' Responsibilities

 

The Directors are responsible for preparing the Strategic Report, the Directors' Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and applicable law.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:

      • select suitable accounting policies and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose, with reasonable accuracy at any time, the financial position of the Company and its Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website; the work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2017

 

 


Note

2017

2016




£'000

£'000






Revenue

2, 3


24,213

20,755

Cost of sales


 

 

(11,115)

(8,475)

 

Net fee income

 

 

 

 

 

13,098

 

12,280

Administrative expenses


 

 

(11,194)

(10,131)

 

Operating profit

 

 

4

 

 

 

 

1,904

 

2,149

 






 

Profit before taxation


 

 

 

1,904

 

 

2,149

Income tax expense

7

 

 

(292)

(459)

 

Profit for the year

 

Other comprehensive income

Items that will or may be reclassified

to profit or loss:

 

Exchange profit on translating foreign operations

 


 

 

           

 

1,612

 

 

 

 

 

 

270

 

1,690

 

 

 

 

21

 

Other Comprehensive income

for the year, net of tax

 



 

 

270

 

 

21

 

Total comprehensive income for the year



 

 

1,882

 

 

1,711

 






Attributable to:



 

 


Equity shareholders of the parent



1,880

1,711

 











Earnings per share

9




Basic earnings per share



13.14p

13.84p

Diluted earnings per share



12.97p

13.52p





















The above results relate to continuing operations

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 March 2017

 


Called up

share capital

Capital

Redemp-

tion

reserve

Treasury

shares

Share

premium

account

Merger

reserve

Share

option

reserve

Trans-

lation

reserve

Retained

Earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











 

At 1 April 2015

 

 

1,219

 

 

9

 

 

(21)

 

 

5,370

 

 

173

 

 

212

 

 

442

 

 

6,070

 

 

13,474











Profit for the year

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,690

 

1,690











Other comprehensive income

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

21

 

 

-

 

 

21





















Adjustment  in respect of share schemes

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

88

 

 

-

 

 

78

 

 

166











Issues of ordinary shares

 

10

 

-

 

-

 

1

 

-

 

-

 

-

 

-

 

11





















Dividend

 

-

-

-

-

-

-

-

(1,946)

(1,946)

 

At 31 March 2016

 

 

 

1,229

 

 

9

 

 

(21)

 

 

5,371

 

 

173

 

 

300

 

 

463

 

 

5,892

 

 

13,416











Profit for the year

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,612

 

1,612











Other comprehensive income

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

270

 

 

-

 

 

270





















Adjustment  in respect of share schemes

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(20)

 

 

-

 

 

108

 

 

88











Shares purchased for treasury

 

Shares issued from treasury

 

Adjustment on share disposal

 

 

-

 

 

 

-

 

 

-

 

-

 

 

 

-

 

 

-

 

(111)

 

 

 

13

 

 

98

 

-

 

 

 

-

 

 

-

 

 

-

 

 

 

-

 

 

-

 

-

 

 

 

-

 

 

-

 

-

 

 

 

-

 

 

-

 

-

 

 

 

-

 

 

(98)

 

(111)

 

 

 

13

 

 

-











Dividend

 

-

-

-

-

-

-

-

(215)

(215)











At 31 March 2017

 

 

1,229

 

9

 

(21)

 

5,371

 

173

 

280

 

733

 

7,299

 

15,073











 

 

Consolidated Statement of Financial Position

As at 31 March 2017

 

 



2017


2016


Note

            £'000


            £'000






Assets





Non - current assets





 Goodwill

11

9,769


9,769

 Property, plant and equipment

 Deferred tax asset

10

16

136

43


229

-








9,948


9,998











Current assets





  Trade and other receivables

13

5,101


4,939

  Cash at bank and in hand

21

2,409


953

 








7,510


5,892






Total assets

 


17,458


15,890











Liabilities





Current liabilities










  Trade and other payables

15

2,310


2,216

  Current tax liabilities

 


75


249






 

 


2,385


2,465






Non-current liabilities





  Deferred tax liabilities

 

16

-


9








-

 


9






Total liabilities

 


2,385


2,474






Net assets


15,073


13,416






 

 

Consolidated Statement of Financial Position

As at 31 March 2017

                                                                                                                                   



2017

2016



Note

£'000


£'000







Capital and reserves attributable to the

Company's equity holders

Called up share capital


17

1,229


1,229

Capital redemption reserve fund


18

9


9

Treasury shares


18

(21)


(21)

Share premium account


18

5,371


5,371

Merger reserve


18

173


173

Share option reserve


18

280


300

Translation reserve


18

733


463

Retained earnings


18

7,299


5,892













Total equity



15,073


13,416

 







 

 

The financial statements on pages 21 to 54 were approved by the Board of Directors and authorised for issue on 21 June 2017 and are signed on its behalf by:

 

R J G Macdonald                 D Zaneva-Todorinski

 

 

 

Company Statement of Financial Position

As at 31 March 2017

 

 



2017


2016


Note

£'000


£'000






Assets





Non-current assets





  Investment in subsidiaries

12

11,156


11,176

  Deferred tax asset

 

16

-


-






 

 


11,156


11,176






Current assets





  Trade and other receivables

13

6


14

  Cash and cash equivalents

 

21

636


633






 

 


642


647






Total assets

 


11,798


11,823











Liabilities





Current liabilities





  Other payables

 

15

779


959






Total liabilities

 


779


959






Net assets

 


11,019


10,864











Capital and reserves attributable to the

Company's equity holders

  Called up share capital

17

1,229


1,229

  Capital redemption reserve fund

18

9


9

  Treasury shares

18

(21)


(21)

  Share premium account

18

5,371


5,371

  Merger reserve

18

173


173

  Share option reserve

18

280


300

  Retained earnings

 

18

3,978


3,803






Total equity

 


11,019


10,864






 

 

The Company's retained earnings includes profit for the year of £487,456 (2016: £890,249).

 

The financial statements of Prime People Plc, Company Number 1729887 were approved by the Board and authorised for issue on                 and are signed on its behalf by:

 

 

R J G Macdonald                                             D Zaneva-Todorinski

 

 

Company Statement of Changes in Equity

For the year ended 31 March 2017

 

Company

Called up

share

capital

Capital

Redemp-

tion

reserve

Treasury

shares

Share

premium

account

Merger reserve

Share

option

reserve

Retained

earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 April 2015

1,219

9

(21)

5,370

173

15

4,844

11,609










Total comprehensive income for the year

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

890

 

 

 

890

 

 

 

 

 

 

 

 

 

Issue of ordinary shares

 

10

 

-

 

-

 

1

 

-

 

-

 

-

 

11










Adjustment in respect of share options

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(15)

 

 

15

 

 

-










Investment in subsidiaries

 

-

 

-

 

-

 

-

 

-

 

300

 

-

 

300










Dividend

 

-

-

-

-

-

-

(1,946)

(1,946)

At 31 March 2016

 

1,229

9

(21)

5,371

173

300

3,803

10,864










Total comprehensive income for the year

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

488

 

 

 

488

 

 

 

 

 

 

 

 

 

Shares issued from treasury

 

-

 

-

 

13

 

-

 

-

 

-

 

-

 

13



















Shares purchased for treasury

 

 

 

-

 

 

-

 

 

 

(111)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(111)

Adjustment on share disposal

 

 

-

 

-

 

98

 

-

 

-

 

-

 

(98)

 

-

Investment in subsidiaries

 

-

 

 

-

 

-

 

-

 

 

-

 

 

(20)

 

 

-

 

 

(20)

Dividend

 

-

-

-

-

-

-

(215)

(215)










At 31 March 2017

 

1,229

 

9

 

(21)

 

5,371

 

173

 

280

 

3,978

 

11,019










 

 

Group and Company Cash Flow Statement

For the year ended 31 March 2017

 


Group

Company


2017

2016

2017

2016


Note

£'000

£'000

£'000

£'000







Cash generated from (used in) underlying operations

 

20

 

1,981

 

2,369

 

(126)

 

1,278

 

Income tax paid


(521)

(411)

(10)

(6)













Net cash from/(used by) operating activities

 


 

1,460

 

1,958

 

(136)

 

1,272

 







Cash flows from investing activities












Net purchase of property, plant and equipment


 

(53)

 

(97)

 

-

 

-

Dividend received


-

-

450

850













Net cash (used in)/from investing activities


 

(53)

 

(97)

 

450

 

850







Cash flows from financing activities












Issue of ordinary share capital


2

11

2

11

Shares issued from treasury


115

-

13

-

Shares purchased for treasury


(111)

-

(111)

-

Dividend paid to shareholders


(215)

(1,946)

(215)

(1,946)

 

Net cash used in financing activities


 

 

(209)

 

 

(1,935)

 

 

(311)

 

 

(1,935)

 

Net increase/ (decrease) in cash and cash equivalents


 

 

1,198

 

 

(74)

 

 

3

 

 

(187)

Cash and cash equivalents at beginning of the year


 

953

 

1,009

 

633

 

446

 

Effect of foreign exchange rate changes


 

 

258

 

 

18

 

 

-

 

 

-





 

 


Cash and cash equivalents at the end of the year

 

 

21

 

2,409

 

953

 

636

 

633







 

Notes to the Financial Statements

For the year ended 31 March 2017

 

1   Nature of Operations

 

Prime People Plc ('the Company') and its subsidiaries (together 'the Group') is an international recruitment services organisation with offices in the United Kingdom, the Middle East and the Asia Pacific region from which it serves an international client base. The Group offers both permanent and contract specialist recruitment consultancy for large and medium sized organisations.

 

The Company is a public limited company which is quoted as an AIM Company and is incorporated and domiciled in the UK. The address of the registered office and the principal place of business is 2 Harewood Place, London W1S 1BX. The registered number of the Company is 1729887.

 

2   Summary of Significant Accounting Policies

 

Basis of Preparation

 

The financial statements of Prime People Plc consolidate the results of the Company and all its subsidiary undertakings. As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company has not been included as part of these financial statements. The amount of profit after tax and before dividends dealt within the financial statements of the parent is £487,456 (2016: £890,249). The financial statements have been prepared on a going concern basis.

 

The consolidated financial statements of Prime People Plc have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union and also comply with IFRIC interpretations and Company Law applicable to Companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention modified as necessary so as to include any items at fair value, as required by accounting standards. 

 

The consolidated financial statements for the year ended 31 March 2017 (including comparatives) are presented in GBP '000.

 

The accounting polices applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2017 and are described below.

 

International Accounting Standards (IAS/IFRS) and Interpretations in issue but not yet EU approved

 

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective. These have not been adopted early by the Group and the initial assessment indicates that either they will not be relevant or will not have a material impact on the Group:

 

Standards

·     FRS 14 Regulatory Deferral Accounts (Issued January 2014, effective date 1 January 2016)

·     IFRS 16 Leases (Issued January 2016, effective date 1 January 2019)  

 

Amendments (Effective date for all amendments is deferred indefinitely)

·     Amendments to IFRS 10 and IAS 28: Sales or Contribution of Assets between an Investor and its Associate or Joint Venture (Issued on 11 September 2014)

2     Summary of Significant Accounting Policies (continued)

International Accounting Standards (IAS/IFRS) and Interpretations in issue but not yet EU approved

(continued)

 

Amendments (Effective date for all amendments listed is 1 January 2017)

·     Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (Issued January 2016)

·     Amendments to IAS 7: Disclosure Initiative (Issued January 2016)

 

Amendments (Effective date for all amendments listed is 1 January 2018)

 

·     Clarifications to IFRS 15 Revenue from Contracts with Customers (issued on 12 April 2016)

 

·      Clarifications to IFRS 15 Revenue from Contracts with Customers (Issued April 2016, effective date 1 January 2018)

 

·     Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016)

 

·     Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued on 12 September 2016)

 

·     IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016)

 

·     Amendments to IAS 40: Transfers of Investmenty Property (issued on 8 December 2016)

 

International Accounting Standards (IAS/IFRS) and Amendments (and EU adopted) but not yet effective

 

·     IFRS 9 Financial Instruments (Issued on 24 July 2014, effective date 1 January 2018)

·     IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014) including amendments to IFRS 15: Effective date of IFRS 15 (issued on 11 September 2015), effective date for both is 1 January 2018

 

The directors do not expect the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future periods, except for disclosure of IFRS 15 that may have an impact on revenue recognition and related disclosures. Beyond the information above it is not practicable to provide a reasonable estimate of the impact of IFRS 15 until a detailed review has been completed.

 

Consolidation

 

Subsidiaries are all 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. 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.

 

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

 

Inter-Company transactions and balances on transactions between Group companies are eliminated in preparing the consolidated financial statements.

 

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Going Concern

 

The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval of the financial statements and have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Revenue recognition

 

a)   Revenue

 

Revenue, which excludes value added tax ("VAT"), constitutes the value of services undertaken by the Group from its principal activities, which are recruitment consultancy and other ancillary services. These consist of:

 

-     Revenue from contract placements, which represents amounts billed for the services of contract staff, including the salary of these staff. This is recognised when the service has been provided;

 

-     Revenue from permanent placements, which is based on a percentage of the candidate's remuneration package and is derived from both retained assignments (income recognised on completion of defined stages of work) and non-retained assignments (income recognised at the date an offer is accepted by a candidate, a start date has been agreed but employment has not yet commenced). The latter includes revenue anticipated but not invoiced at the balance sheet date, which is correspondingly accrued on the balance sheet within prepayments and accrued income. A provision is made against accrued income based on past historical experience for possible cancellations of placements prior to, or shortly after, the commencement of employment; and

 

-     Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

 

b)   Cost of Sales

 

Cost of sales consists of the salary cost of contract staff and costs incurred on behalf of clients, principally advertising costs.

 

c)   Net Fee Income

 

Net fee income represents revenue less cost of sales and consists of the total placement fees of permanent candidates, the margin earned on the placement of contract candidates and the margin on advertising income.

 

d)   Foreign Currency Translation

 

(i)         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 presentation currency.

 

(ii)    Transactions and Balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. 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.

 

(iii) Group Companies

 

On consolidation the results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·     assets and liabilities for each year end presented are translated at the closing rate of that year end;

 

·     income and expenses for each statement of comprehensive income are translated at average exchange rates; and

 

·     all resulting exchange differences are recognised in other comprehensive income.

 

e)   Intangible Assets

 

(i)         Goodwill

 

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'.

 

As permitted by the exception in IFRS1 'First time adoption of International Reporting Standards', the Group has elected not to apply IFRS3 'Business combinations' to goodwill arising on acquisition that occurred before the date of transition to IFRS.

 

Separately recognised goodwill is reviewed annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value.

 

(ii)        Computer Software

 

Computer software acquired by the Group is stated at cost. These costs are amortised to write the cost off in equal annual instalments over three years.

 

f)    Property, Plant and Equipment

 

All property, plant and equipment are stated at historical cost less accumulated depreciation less provisions for impairment. Depreciation is provided on all property, plant and equipment using the straight-line method at rates calculated to write off the cost less estimated residual values over their estimated useful lives, as follows:

 

·     Leasehold improvements over the expected period of the lease.

·     Furniture, fittings and computer equipment 25% - 33%

 

The gain or loss arising on disposal or retirement of an asset is determined by comparing the sales proceeds with the carrying amount of the asset and is recognised as income.

 

g)   Impairment of Assets

 

Assets that have an indefinite useful economic life 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).

 

h)   Taxation

 

The tax expense represents the sum of the current tax expense and deferred tax expense.

 

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or 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 substantially enacted by the balance sheet date.

 

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

 

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

 

i)    Leased Assets and Obligations

 

All of the Group's leases are operating leases and the annual rentals are charged to profit and loss on a straight line basis over the lease term.

 

The benefit of rent free periods received for entering into a lease is spread evenly over the lease term.

 

j)    Pension Costs

 

The Group operates defined contribution pension scheme. The Group adopts the minimum legally required employer contribution rate of 1% of qualifying earnings and up to the maximum earning threshold for automatic enrolment for 2016-17, as set by the Pension Regulator.

The assets of the scheme are held separately from those of the Group in independently administered workplace pension -NEST. The pension costs charged to the income statement represent the contributions payable by the Group to Nest during the year.

 

The Pension liabilities at the Balance Sheet date represent employer and employee pension contributions, that are payable to the pension provider by the 22nd date of each month.

 

k)   Segmental Reporting

 

IFRS8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Board of Directors to allocate resources to the segment and to assess their performance.

 

l)    Financial instruments

 

Financial assets and liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provision of the instrument.

 

m)  Financial assets

 

The Group's financial assets comprise cash and various other receivable balances that arise from its operations. Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.  Loans and receivables are initially measured at fair value and subsequently at amortised cost using the effective interest rate method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

Financial assets are assessed for impairment at each balance sheet date, and are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

 

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.  When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profit or loss account. If in a subsequent period the amount of the impairment loss decreases and the decreases can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit and loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

 

Cash and cash equivalents includes cash in hand and bank deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts are classified with current liabilities in the statement of financial position.

 

n)   Financial liabilities and equity

 

Financial liabilities and equity instruments are initially measured at fair value and are classified according to the substance of the contractual arrangements entered into. Financial liabilities are subsequently measured at

amortised cost. The Group's financial liabilities comprise trade payables, borrowings, bank overdrafts and other payable balances that arise from its operations. They are classified as 'financial liabilities measured at amortised cost'.

 

o)   Share-Based Compensation

 

The Group operates equity-settled share-based compensation plans.

 

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). At the balance sheet date the number of outstanding options is adjusted to reflect those options that have been granted during the year or have lapsed in the year.

 

p)   Dividend Distribution

 

A final dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividend distributions are recognised in the period in which they are approved and paid.

 

q)   Critical Accounting Estimates and Judgements

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and judgements. It also requires management to exercise judgement in the process of applying the Company's accounting policies.

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described below:

 

Revenue Recognition

 

Revenue from permanent placements is recognised when a candidate formally accepts an offer of employment, a start date has been agreed, but employment has not commenced. A 'fall-through' provision is made by management, based on historical experience, for the proportion of those placements where the offer of employment is not taken up. Management have reviewed the past assumptions made with respect to the 'fall-through' provisions and consider that they remain reasonable. The fall through provision is estimated at 18.90% of those offers where employment has yet to commence (2016: 20.02%). The Directors consider that a change in the range of possible outcomes, or sensitivity, would not have a material impact on the business.  

 

Goodwill Impairment

 

The Group's determination of whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill is allocated. This requires estimation of future cash flows and the selection of a suitable discount rate details of which are disclosed in note 11.

 

q)    Critical Accounting Estimates and Judgements (continued)

 

Trade Receivables

 

There is uncertainty regarding customers who may not be able to pay as their debts fall due.  In reviewing the appropriateness of the provisions in respect of recoverability of trade receivables, consideration has been given to the ageing of the debt and the potential likelihood of default, taking into account current economic conditions. Details of the total amount of receivables past due and the movement in allowance for doubtful debts are disclosed in note 13.

 

3     Segment Reporting

 

a)     Revenue and Net Fee Income, by Geographical Region

 



Revenue

Net fee income



2017

2016

2017

2016



£'000

£'000

£'000

£'000






UK

 


18,558

16,249

7,443

7,774

Asia

 


5,075

3,626

5,075

3,626

Rest of World


580

880

580

880

 

 


 

24,213

 

20,755

 

13,098

 

12,280








 

All revenues disclosed by the Group are derived from external clients and are for the provision of recruitment services.  The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 2. Segment profit before taxation represents the profit earned by each segment after allocations of central administration costs.

 

b)     Revenue and Net Fee Income, by Classification

 


Revenue

Net fee income


2017

2016

2017

2016


£'000

£'000

£'000

£'000






Permanent





-UK

-Asia

-Rest of World

 

6,004

5,075

580

 

6,653

3,626

880

5,991

5,075

580

6,645

3,626

880

 

Contract (UK)

12,554

9,596

1,452

1,129

 

Total

 

24,213

 

20,755

 

13,098

 

12,280






 

3  Segment Reporting (continued)

 

c)     Profit before Taxation by Geographical Region

 


2017


2016


£'000


£'000





UK

823


1,527





Asia

1,035


460





Rest of World

46


162





Operating Profit

1,904


2,149









Profit before taxation

1,904


2,149





 

Operating profit is the measure of profitability regularly reviewed by the Board, which collectively acts as the Chief Operating Decision Maker. Consequently, no segmental analysis of interest or tax expenses is provided.

Segment operating profit is the profit earned by each operating unit and includes inter segment revenues totalling £0.76m (2016 £0.71m) for the UK, and charges of £0.68m (2016 £0.60m) for Asia and £0.08m (2016 £0.11m) for the rest of the world.

 

d)     Segment Assets and Liabilities by Geographical Region

 



Total non-current assets

Total liabilities



2017

2016

2017

2016



£'000

£'000

£'000

£'000







UK

 


9,934

9,962

1,286

1,441

Asia

 


19

27

1,019

910

Rest of World

 


3

9

73

121

 

Total


 

9,956

 

9,998

 

2,378

 

2,472

 






 

The analysis above is of the carrying amount of reportable segment assets, liabilities and non-current assets.  Segment assets and liabilities include items directly attributable to a segment and include income tax assets and liabilities.  Non-current asset include property, plant and equipment and computer software.

 

4     Profit on ordinary activities before taxation

 


2017

2016


£'000

£'000




Profit for the year  is arrived at after charging:

 



Depreciation                      - owned assets

158

188

Operating lease rentals       - land and buildings

521

487

Loss on disposal of fixed assets

1

-

Exchange rate loss

26

33

The analysis of auditors remuneration is as follows:



Audit of company

Audit of subsidiaries

21

24

21

23

Total audit fees

45

44

Advisory Services (related to FRS102 transition)

-

4

 

Total fees

 

45

 

48

 

5     Directors' emoluments

 


2017

2016


£'000

£'000

 

Emoluments for qualifying services

 

544

 

482





544

482

 







Highest paid Director:



Emoluments for qualifying services

229

229







 

 

Details of Directors' emoluments and interests, which form part of these financial statements, are provided in the Director's Remuneration report on pages 16 to 18.

 

 

6     Employees

 

Group

2017

2016


Number

Number

The average monthly number of employees of the Group during the year, including Directors, was as follows:






Consultants

95

91

Management and administration

25

26

Temporary staff

 

8

7




 

 

128

124




 

Company

2017

2016


Number

Number

The average monthly number of employees of the Company during the year, including Directors, was as follows:



 

Management

 

5

 

 

5




 

Staff costs for all employees, including Directors, but excluding contract staff placed with clients are as follows and have been included in Administration expenses in the consolidated statement of comprehensive income:

 

Group

2017

2016


£'000

£'000




Wages and salaries

7,860

6,984

Social security costs

655

598

Pension contributions

75

73

Share option charge

89

166








8,679

7,821

 

Remuneration of key management

2017

2016


£'000

£'000




Short term employee benefits (excluding social security costs)

1,195

1,090

Share based payments

24

35








1,219

1,125

 

Key management includes executive Directors and senior divisional managers

 

7     Taxation on Profits on Ordinary Activities

 


2017

2016


£'000

£'000

 

a)   Analysis of tax charge in the year



 

Current tax



UK Corporation tax

209

375

Foreign tax

107

87

Foreign tax over provision in prior years

28

(4)







Total current tax

344

458

 

Deferred tax



Origination and reversal of temporary differences

Deferred tax on fair value share option charge

(9)

(43)

1

-







Total charge on profit for the year

 

292

459







UK corporation tax is calculated at 20% (2016: 20%) of the estimated assessable profits for the year.   Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

 

b)   The charge for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:

 


2017

£'000

2016

£'000




Profit before taxation

1,904

2,149

 







Tax at UK corporation tax rate of 20% (2016: 20%) on profit on ordinary activities

 

381

 

430

Effects of:



Expenses not deductible for tax purposes

22

8

Capital allowances for the period less than depreciation

14

11

Tax losses not utilised/utilised

(2)

21

Tax rate differences

(35)

(19)

Temporary differences recognised

9

19

Overprovision in prior years

Tax exemption

(28)

(17)

(4)

-

 

Total current tax

344

466

 

Deferred Tax



Origination and reversal of temporary differences

(52)

(7)




 

Tax charge for the year

 

 

292

459

 




 

8     Dividends

 


2017

2016


£'000

£'000




 

Special second interim dividend for 2017: 0.00p per share (2016: 3.09p per share)

Final dividend for 2016: 0.00p per share (2015: 3.09p per share)

 

-

-

                

488

376

Interim dividend for 2017: 1.75p per share (2016: 1.75p per share)

Special dividend for 2017: 0.00p per share (2016: 4.00p per share)

Second Interim dividend for 2017: 0.00p per share (2016: 3.09p per share)

215

-

-

212

490

380





215

1,946

 

An interim dividend of 1.75p (2016: 1.75p) was paid on 25 November 2016 to shareholders on the register at the close of business on 18 November 2016. The interim dividend was approved by the Board on 8 November 2016.

 

A final dividend of 3.25p per share which will, subject to shareholder approval at the Annual General Meeting be paid on 28th July 2017 to shareholders who are on the register on 21st July 2017, making a total dividend paid to shareholders for the year of 5.00p per ordinary share. (2016: 8.84p).

 

9     Earnings per share

 

Earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

 

Fully diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by existing share options assuming dilution through conversion of all existing options.

 

Earnings and weighted average number of shares from continuing operations used in the calculations are shown below.

 


2017

2016


£'000

£'000




Profit for the year and earnings used in basic and diluted earnings per share

1,612

1,690











Number

Number

 

Weighted average number of shares used for basic earnings per share

 

12,271,923

 

12,211,950

Dilutive effect of share options

 

195,634

290,730




Diluted weighted average number of shares used for diluted earnings per share

12,467,557

12,502,680








Pence

Pence




 

Basic earnings per share

 

13.14p

 

13.84p

Diluted earnings per share

12.97p

13.52p







 

10   Property, Plant and Equipment

 


Fixtures, fittings and equipment

 

 

Total

Group

£'000


£'000





Cost




At 1 April 2015

1,057


1,057

Additions

97


97

Disposals

(44)


(44)

Exchange difference

8


8





At 1 April 2016

1,118


1,118

Additions

53


53

FinDisposals

(124)


(124)

Exchange difference

28


28





At 31 March 2017

 

1,075


1,075









Depreciation




At 1 April 2015

741


741

Provision for the year

188


188

Disposals

(44)


(44)

Exchange rate loss

4


4





At 1 April 2016

889


889

Provision for the year

158


158

Disposals

(123)


(123)

Exchange rate gain

15


15





At 31 March 2017

939


939









 

Net book value




At 31 March 2017

136

 


136





 

At 31 March 2016

 

 

229


 

229

 





At 31 March 2015

 

316


316





 

11   Goodwill 

 


£'000

 

Cost


At 1 April 2015, 1 April 2016 and 31 March 2017

9,769

 



 

The total carrying value of goodwill is £9.77m, which relates to the acquisition of the Macdonald & Company Group of companies in January 2006, has been tested for impairment with the recoverable amount being determined from value in use calculations.

 

The assessment is based on UK projected results. The recoverable amount is determined on a value in use basis utilising the value of cash flow projections over five years with terminal value added for the UK business segment.  The first year of the projections is based on detailed budgets prepared and approved by management. Subsequent years are based on extrapolations.

 

The key assumptions in calculating the value in use is that the Group will meet its budgeted growth in UK net fee income of 25.88% in the year to 31 March 2018.  After the end of the period covered by the budget a 2.50% growth rate is applied. This growth rate represents the average rate of growth in the markets in which the Group operates. A discount rate of 6.60% has been applied which represents the weighted average costs of capital for the Group.

 

Based upon this analysis the asset has not been impaired since the 'recoverable amount' (being the greater of the net realisable value and the value in use) is in excess of its carrying amount by £3.79m.  A number of potential sensitivity scenarios have been considered and these would indicate impairment in the carrying value of goodwill if the discount rate were to be increased to 11.59% or if the operating profit reduced to £1.07m with no future growth. Management believes the assessment is reasonable based on average UK operating profit achieved for the past 3 years above £1.1m.

 

12   Investments

 

Company

 

 

 

Shares in

subsidiary

undertakings



£'000

Cost

 



At 1 April 2015 and 1 April 2016


11,176

Decrease in investment in subsidiaries from share option reserve charge

 


 

(20)

As at 31 March 2017


11,156

 

The share option reserve relates to employee share option arrangements provided to employees of the Group subsidiary companies.      

 

12   Investments (continued)

 

The following are subsidiary undertakings at the end of the year and have all been included in the consolidated financial statements:

 



Country of incorporation


Principal

Activity


Registered

Address








Macdonald &  Company

Group Limited


England and Wales


Holding Company


2 Harewood Place Hanover Square London W1S 1BX








Macdonald & Company Property Limited


England and Wales


Recruitment


2 Harewood Place Hanover Square London W1S 1BX








Macdonald and Company Freelance Limited


England and Wales


Recruitment


2 Harewood Place Hanover Square London W1S 1BX








Macdonald and Company (Overseas) Limited


England and Wales


Dormant


2 Harewood Place Hanover Square London W1S 1BX








Macdonald & Company Ltd


Hong Kong


Recruitment


Room 601,6/F., Tower 1, Admiralty Centre, 18 Harcourt Road,

Hong Kong








Ru Yi Consulting Limited


Hong Kong


Dormant


Room 601,6/F., Tower 1, Admiralty Centre, 18 Harcourt Road,

Hong Kong








Macdonald and Company Pte Limited


Singapore


Recruitment


63 Market Street #05-02, Bank of Singapore Centre, Singapore 048942








Macdonald & Company Pty Ltd


Australia


Dormant


Storey Blackwood & Co

Level 4,222 Clarence Street, Sydney NSW 2000 Australia








Macdonald & Company Recruitment Proprietary Ltd


South Africa


Dormant


1 Emfuleni, 79 Crassula Crescent, Woodmead, Johannesburg, 2052 South Africa








The Prime Organisation Ltd


England and Wales


Dormant


2 Harewood Place Hanover Square London W1S 1BX

 

 

For all undertakings listed above, the country of operation is the same as its country of incorporation.

The Group holds 100% of all classes of issued share capital. The percentage of the issued share capital held is equivalent to the percentage of voting rights for all companies.

 

13   Trade and other Receivables

 



Group


Company


2017

2016


2017

2016



£'000


£'000


£'000


£'000

Current









Trade receivables


2,435


2,706


-


-

Allowance for doubtful debts


(24)


(40)


-


-

Other receivables


72


69


3


-

Prepayments and accrued income

 


2,618


2,204


3


14












5,101


4,939


6


14










 

At 31 March 2017, the average credit period taken on sales of recruitment services was 45 days (2016: 55 days) from the date of invoicing.  An allowance of £24,000 (2016: £40,000) has been made for estimated irrecoverable amounts. Due to the short-term nature of trade and other receivables, the Directors consider that the carrying value approximates to their fair value. 

 

Prepayments and accrued income principally comprise amounts to be billed for permanent placements with a start date within three months from the start of the new financial year.

           

The Group does not provide against receivables solely on the basis of the age of the debt, as experience has demonstrated that this is not a reliable indicator of recoverability.  The Group provides fully against all receivables where it has positive evidence that the amount is not recoverable.

 

The ageing of trade receivables at the reporting date was:

 


Gross trade
receivables


Provisions


Gross trade
receivables

Provisions


2017


2017


2016

2016


£'000


£'000


£'000

£'000

















Not past due

1,598


15


1,607


33

Past due 0-30 days

657


2


630


-

Past due 30-90 days

Past due more than 90 days

166

14


-

7


469

-


7

-


 

2,435


 

24


 

2,706


 

40









 

Movement in allowance for doubtful debts:

 



2017


2016



£'000


£'000






1 April 2016


40


102

Impairment losses recognised


24


40

Amounts written off as uncollectable

Amounts paid by the client


(31)

(6)


(97)

(5)

Impairment losses reversed


(3)


-

 

31 March 2017


 

24


 

40











 

14   Financial Instruments

 



Group

 


Company



2017


2016


2017


2016


Note

£'000


£'000


£'000


£'000










Loans and receivables









Trade and other receivables

13

4,092


4,087


2


5

Cash and cash equivalents

 


2,409


953


636


633












6,501


5,040


638


638










 

Cash is held either on current account or on short term deposits at floating rates of interest determined by the relevant bank's prevailing base rate.

 



Group


Company



2017


2016


2017


2016


Note

£'000


£'000


£'000


£'000










Financial liabilities and fair value through profit and loss









Trade and other payables

 

15

438


452


1


2












438


452


1


2

 

The Group has not renewed its borrowing facilities with Barclays Bank Plc as the Board consider that the net cash within the Group is sufficient to meet existing and foreseeable liabilities as they fall due.

There is no material difference between the book values of the Group's financial assets and liabilities and their fair values.

 

The Group and the Company do not hold any derivative financial instruments.

 

15   Trade and other Payables

 



Group

Company

 



2017


2016


2017


2016



£'000


£'000


£'000


£'000

Current









Trade payables


108


267


-


1

Other payables


330


185


1


-

Amount owed to subsidiary undertakings


 

-


 

-


 

739


 

923

Taxation and social security


667


664


14


9

Accruals and deferred income

 


1,205


1,100


25


26












2,310


2,216


779


959









 

Due to the short-term nature of the trade and other payables, the Directors consider that the carrying value approximates to their fair value.  Trade payables are generally on 30-60 day terms.  No payables are past their due date.

 

16      Deferred Tax

 

Group (Liability)



Share
Options

Total





£'000


£'000








At 1 April 2015




16


16

Credit to income

 


 

 


(7)


(7)








At 31 March 2016




9


9

Credit to income

 




(9)


(9)








At 31 March 2017

 




-


-











Group (Asset)

Share Options

Total



£'000


£'000






At 1 April 2016


-


-






Credit to income


43


43

 

 

At March 2017


 

43


 

43











 

17   Share Capital

 


2017

 

2016


Number


£'000


Number


£'000









ALLOTTED CALLED UP







Ordinary shares of 10p each








 

As at 1 April

 

12,290,199


 

1,229


 

12,193,949


 

1,219

 

Shares issued during the year

 

-


 

-


 

96,250


 

10

 

At 31 March

 

 

12,290,199


 

1,229


 

12,290,199


 

1,229

 

 

Share capital includes unpaid shares of 33,000 (2016: 93,250)

 

The Company has one class of ordinary shares which carries no right to fixed income and which represents 100% of the total issued nominal value of all share capital.

 

Each share carries the right to one vote at general meetings of the company.  No person has any special rights of control over the company's share capital and all its issued shares are fully paid.

 

Pursuant to shareholder resolutions at the AGM of the Company on 20 July 2016, the Company has the following authorities during the period up to the next AGM.

 

-     to issue new/additional ordinary shares to existing shareholders through a rights issue up to a maximum nominal amount of £409,632 representing one third of the then issued share capital of the Company;

 

-     to issue new/additional ordinary shares to new shareholders up to a maximum nominal amount of £409,632 representing one third of the issued shares capital of the Company

 

-     to allot equity securities for cash, without the application of pre-emption rights, up to a maximum nominal amount of £61,451 representing 5% of the then issued share capital of the Company; and

 

-     to purchase through the market up to 10% of the Company's issued share capital, subject to certain restrictions on price.

 

Shareholders will be asked to renew these authorities at the AGM in 2017 on 24 July 2017.

 

Capital Risk Management

 

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising returns to shareholders through the optimisation of debt and equity balances. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent comprising issued capital reserves and earnings.

 

The Group manages the capital structure and makes adjustments to it in the light of changes to economic conditions and risks. In order to manage capital the Group has continued to consider and adjust the level of dividends paid to shareholders and also made purchases of its own shares which are held as Treasury Shares. As part of its strategy of seeking to optimise the Group's debt and equity balance the Group also considers the appropriate level of external borrowing and, as disclosed in Note 14, has taken the decision not to renew its overdraft facilities with Barclays Bank.

 

Employee Share Schemes

 

The Company operates two share options schemes.

 

Enterprise Management Incentive Share Option Scheme

 

At 31 March 2017 the following options had been granted and remained outstanding in respect of the Company's ordinary shares:

 

Year of grant

Exercise Price

Pence

Exercise

Period

Number of options

31 March

2016

Granted

Exercised

Forfeited

Number of Options

31 March 2017

2008/9

20.77

2011-2016*

48000

-

-

(48,000)


-


31.50

2014-2019*

100,000

-

-

(100,000)


-

2009/10

42.00

2013-2018

8,000

-

(5,000)



3,000


 

2011/12

68.00

2014-2019

3,000

-

-

-


3,000

2013/14

NilNil

2016-2021

2019-2021

19,000

81,250

-

-

(7,000)

-

-

(13,000)


12,000

68,250

2014/15

10.00

10.00

2016-2021

2019-2021

184,500

340,500

-

-

(120,500)

-

(16,000)

(61,000)


48,000

279,500

 

2015/16

 

 

 

 

2016/17

 

 

 

 

10.00

10.00

    58.00

    58.00

 

   50.00

   50.00

   90.00

   90.00

 

 

2017-2022

2020-2022

2017-2022

2020-2022

 

2019-2024

2022-2027

2019-2024

2022-2027

 

 

20,000

30,000

52,000

103,000

 

-

-

-

-

 

 

-

-

-

-

 

25,000

55,000

25,000

40,000

 

 

 -

 -

-

-

 

-

-

-

-

 

 

-

-

(7,000)

(13,000)

 

-

-

-

-


 

20,000

30,000

45,000

90,000

 

25,000

55,000

25,000

40,000

 

 

Weighted average exercise price 2017 (pence)

 

19.64p

 

67.93p 

 

 

 

11.21p

 

 

0.24p  


 

 

30.37p

 

Total 2016


 

984,734

 

205,000

 

(96,250)

 

(104,234)


 

989,250

 

-

Weighted average exercise price 2016 (pence)

 

 

 

15.27p    

 

 

46.29p  

 

 

1.31p

 

 

0.48p


 

 

19.64p








 

*These options have fully vested

 

There were 743,750 options outstanding at 31 March 2017 (2016: 989,250) which had a weighted average price per share of 30.37p (2016: 19.64p). The options vest over a period of two to five years conditional upon the option holders continued employment with the Company.

 

The conditions applying to those options which are fully vested have been achieved. The number of outstanding options that will vest is dependent on the achievement of a number of key performance measures of the group, measured at a regional and consolidated level for the financial years 2016 and 2017.  The fair value of the employee services received in exchange for the grant of the share options is charged to the profit and loss account over the vesting period of the share option, based on the number of options which are expected to become exercisable. 

 

 


2017

2016

Option pricing model used

      Black-Scholes

 Black-Scholes

Weighted average share price at grant date (in pence)

94.00, 96.30 & 91.55

                116.00

Exercise price (in pence)

50 & 90

10 & 58

Fair value of options granted during the year

41.12

104.81

Expected volatility (%)

20.0 & 24.0

30.0

Risk-free interest rate (%)

4.25

4.0

Expected life of options (years)

2 & 5

2 & 5

 

Expected volatility was determined by reference to historical volatility of the Company's share price.

 

The share based payment credit recognised within the income statement during the period was £88,632 (2016: expense £170,000).

 

 

18   Reserves

 

Capital Redemption Reserve Fund

 

The capital redemption reserve relates to the cancellation of the Company's own shares.

 

Treasury Shares

 

At 31 March 2017, the total number of ordinary shares held in Treasury and their values were as follows:

 


2017

2016


Number

£'000

Number

£'000






As at 1 April

21,276

21

21,276

21

Shares purchased for treasury

129,500

111

-

-

Shares issued from treasury

(132,500)

(13)

-

-

Equity reclassification on disposal of treasury shares

 

-

 

(98)

 

-

 

-

                                                                                                                                          

As at 31 March

 

18,276

 

21

 

21,276

 

                 21

 

Nominal value


 

2


 

                  2

Market value


16


                   21

 

The maximum number of shares held in treasury during the year was 18,276 shares representing 0.15% of the called-up ordinary share capital of the Company (2016: 21,276 representing 0.2% of the called-up ordinary share capital of the Company).

 

Merger Reserve

 

The merger reserve represents the fair value of the consideration given in excess of the nominal value of the ordinary shares issued to acquire subsidiaries.

 

Share Option Reserve

 

The reserve represents the cumulative amounts charged to profit in respect of employee share option arrangements where the scheme has not yet been settled by means of an award of shares to an individual.

 

Share Premium Account

 

The balance on the share premium account represents the amounts received in excess of the nominal value of the ordinary shares.

Translation Reserve

 

The foreign currency translation reserve comprises all presentation foreign exchange differences arising from translation of the financial statements of foreign operations into the presentation currency of the Group accounts.

 

Retained Earnings

 

The balance held on this reserve is the accumulated retained profits of the Group.

 

19   Operating Lease Commitments

 

As at 31 March 2017 the Group was committed to making the following total payments in respect of non-cancellable operating leases:

 



 

 

 

 

 

 

 

 

Land and buildings

2017

 

 

 

Land and

buildings

2016






£'000


£'000









Amounts payable








Within one year





545


448

Within one to two years





294


408

Within two to five years





696


660

After five years

 





169


602














1,704


2,118









 

The Group leases various offices under non-cancellable operating lease agreements. The leases have varying terms as disclosed above.

 

20   Reconciliation of Profit before Tax to Net Cash Inflow from Operating Activities

 


Group

Company


2017

£'000

2016

£'000

2017

£'000

2016

£'000






Profit before taxation

1,904

2,149

48

50

 

Adjust for:





Depreciation

158

188

-

-

Share based payment expense

(Profit)/Loss on sale of tangible asset

(13)

1

166

-

-

-

-

-






 

Operating cash flow before changes in working capital

 

2,050

 

2,503

 

48

 

50






(Increase)/decrease in receivables

(163)

(401)

                9

484

Increase/(decrease) in payables

 

94

267

(183)

744






Cash generated from / (used by) underlying operations

1,981

2,369

(126)

1,278

 

 

21   Analysis of Cash less overdrafts

 

 

Group

At 1 April

2016

 

 

Cash flow

 

 

 

At 31 March 2017


£'000


£'000


£'000







Cash at bank and in hand

 

953


1,456


2,409







Total cash

953


1,456


2,409













 

 

Company

At 1 April 2016

 

 

Cash flow

 

 

 

At 31 March 2017


£'000


£'000


£'000







Cash at bank and in hand

  633


3


636







Total cash

633


3


636













 

22                     Financial Risk Management

 

The Board of Directors has overall responsibility for the risk management policies that are applied by the business to identify and control the risks faced by the Group.

 

The Group has exposure from its use of financial instruments to foreign currency risk, credit risk and liquidity risk.

 

Foreign Currency

 

The Group publishes its consolidated financial statements in Sterling.  The functional currencies of the Group's main operating subsidiaries are Sterling, the Singapore Dollar, the Hong Kong Dollar and the UAE Dirham.

 

The Group's international operations account for approximately 23.37% (2016: 21.72%) of revenue and approximately 19.70% (2016: 19.85%) of the Group's assets and consequently the Group has a degree of translation exposure in accounting for overseas operations.

 

Currently the Group's policy is not to hedge against this exposure but it does seek to minimise this exposure by converting into sterling all cash balances in foreign currency that are not required for capital monetary needs.  The settlement of intercompany balances held with foreign operations is neither planned nor likely to occur in the foreseeable future. Therefore, exchange differences arising from the translation of the net investments are recognised in Other Comprehensive income.

 

Credit Risk

 

The Group's principal financial assets are bank balances, trade and other receivables. The Group's credit risk is primarily in respect of trade receivables. Credit risk refers to the risk that a client will default on its contractual obligations resulting in financial loss to the Group. The Group does not have any significant credit risk exposure to any individual client. At the year end no customer represented more than 9.07% (2016: 6.82%) of the total balance of trade receivables.

 

In reviewing the appropriateness of the provisions in respect of recoverability of trade receivables, consideration has been given to the ageing of the debt and the potential likelihood of default, taking into account current economic conditions.

It is the Directors' opinion that no further provision for doubtful debts is required.

 

Liquidity Risk

 

The Group manages it liquidity risk by maintaining adequate cash and or credit facilities to meet forecast cash requirements of the Group. Management monitors its forecasted cash flow requirements at a Group level based on monthly returns made by the Group's operating units.

 

The Group has no financial liabilities other than short term trade payables and accruals as disclosed in note 16, all due within one year of the year end.

 

The Group has net funds of £2.40m (2016: £0.95m) which the Board consider are more than adequate to meet future working capital requirements and to take advantage of business opportunities.

 

23   Related Party Transactions

 

Prime People Plc provides various management services to its subsidiary undertakings. These services take the form of centralised finance and operations support. The total amount charged by the Company to its subsidiaries during the year is £200k (2016: £205k). The balance owed to the subsidiary undertakings at the year end is £739k (2016: £923k).

 

The Company also provides corporate guarantees on the subsidiary bank accounts. At 31 March 2017 amounts overdrawn by subsidiary bank accounts were £nil (2016: £222,350).

 

The Directors receive remuneration from the Group, which is disclosed in the Directors' Remuneration Report. As shareholders, the Directors also received dividends in the year from the Company amounting to £120,312 (2016: £605,384).

 

Directors

 

Robert Macdonald                         (Executive Chairman)

Peter Moore                                 (Managing Director)

Donka Zaneva-Todorinski              (Finance Director)

Chris Heayberd                             (Non-Executive Director)

John Lewis OBE                           (Non-Executive Director)

Simon Murphy                             (Non-Executive Director)

 

 

Secretary and Registered Office

 

Donka Zaneva-Todorinkski, 2 Harewood Place, London, W1S 1BX.

 

 

Registered Number

 

1729887

 

 

Stockbrokers & Nominated Advisers

 

Cenkos Securities Plc, 6.7.8 Tokenhouse Yard, London, EC2R 7AS

 

 

Auditor

 

Crowe Clark Whitehill LLP, St Bride's House, 10 Salisbury Square, London, EC4Y 8EH

 

 

Principal Bankers

 

Barclays Bank Plc, Corporate Banking, 1 Churchill Place, London E14 5HP

 

 

Registrars

 

Neville Registrars Limited, Neville House, Laurel Lane, Halesowen, West Midlands, B63 3DA.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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