Final Results

25 April 2013 Norman Broadbent plc ("Norman Broadbent" or "the Company") Final Results Norman Broadbent plc, a leading provider of executive search and leadership consultancy services, announces its audited financial results for the year ended 31 December 2012. Financial highlights * Revenue increased to Â£7.6 million from Â£6.9 million for the year ended 31 December 2011, an increase of 10.6 per cent. * Results summary: * Revenue 2012 2011 Â£000 Â£000 Executive Search / Interim 6,673 5,976 Assessment & Leadership Consulting 586 591 Overseas royalties 339 333 Social Media Search & Consulting 36 - 7,634 6,900 Group operating profit before restructuring costs 293 301 Restructuring costs (331) (802) Operating loss (38) (501) Finance cost (35) (34) Loss before tax (73) (535) Tax charge (42) (26) Loss after tax (115) (561) EPS - basic (1.16)p (5.96)p EPS - adjusted (0.52)p (5.16)p * Group operating profit before restructuring costs maintained at Â£293,000 (2011: Â£301,000). * Oversubscribed placing of Â£742,560 in November 2012 to facilitate an acquisition and establishment of new subsidiaries. * Year-end cash of Â£1.0 million (2011: Â£0.65 million). * No bank debt other than invoice discounting facility following repayment of the outstanding term loan and deferred consideration. * Net assets increased to Â£3.2 million (2011: Â£2.3 million). Pierce Casey, Executive Chairman of Norman Broadbent, said: "We remain committed to achieving increased market share in the UK search market whilst pursuing geographical and product diversification on a cost efficient basis. This allows us to enhance our relationship with our UK clients, attract new clients and to develop scale through overseas revenues. The brand of Norman Broadbent is strong, not just in the UK but around the globe and should continue to strengthen throughout 2013." For further information please contact: Norman Broadbent plc 020 7484 0000 Pierce Casey/Sue O'Brien/Ben Felton Sanlam Securities UK Limited 020 7628 2200 Simon Clements/Virginia Bull/Catherine Miles Notes to Editors Norman Broadbent plc is a leading provider of executive search and leadership consultancy services. It offers board and executive search services, interim management services and leadership consultancy services, such as executive assessment and development, talent management, and executive coaching services. Headquartered in London, the group operates globally and has offices in Barcelona, Bogota, Brussels, Dublin, Limassol, Milan, Madrid, Paris, Singapore, Los Angeles and across the Middle East and North Africa. For further information visit www.normanbroadbent.com CHAIRMAN'S STATEMENT INTRODUCTION Norman Broadbent plc (the "Company" or the "Group") is a human capital consultancy which operates as a global executive search and leadership consultancy business, headquartered in London. It has a network of subsidiary and licenced international offices providing international reach across Europe, Asia, North America, Latin America, Middle East and North Africa. Following an oversubscribed share placing in November 2012 raising Â£742,560, the Group has extended its product offering via the establishment of two complementary, but separately branded businesses - Arcus Global Partners and Connecting Corporates - which provide flexible solutions to clients in the market `below' our traditional board search practice and harness the power of social media. The Company also acquired a controlling stake in an established, profitable Belgian leadership consulting and search business to extend the geographic reach of the Norman Broadbent business. The Group continues to appraise further opportunities to diversify both geographically and in terms of product offerings. RESULTS FOR THE FINANCIAL YEAR The table below summarises the results of the Group: Revenue 2012 2011 Â£000 Â£000 Executive Search / Interim 6,673 5,976 Assessment & Leadership Consulting 586 591 Overseas royalties 339 333 Social Media Search & Consulting 36 - 7,634 6,900 Group operating profit before 293 301 restructuring costs Restructuring costs (331) (802) Operating loss (38) (501) Finance cost (35) (34) Loss before tax (73) (535) Tax charge (42) (26) Loss after tax (115) (561) EPS - basic (1.16)p (5.96)p EPS - adjusted (0.52)p (5.16)p Group revenue for the year increased to Â£7.6 million from Â£6.9 million in 2011, an increase of 10.6 per cent, while operating profit before non-recurring restructuring costs was maintained at Â£293,000 compared with Â£301,000 in the previous year. The loss after tax, pre-minority interests, narrowed substantially to Â£115,000 from a loss of Â£561,000 in 2011. Core board and executive search revenues increased by 11.7 per cent to Â£6.7 million from Â£6.0 million in 2011. The search business contributed an operating profit before restructuring costs of Â£476,000 (2011: Â£464,000) which includes the impact of start-up losses in the newly formed international subsidiaries in the USA and Singapore. The UK leadership consulting and assessment business did well to withstand the sad death in October 2012 of the founder of HADIL, who had remained a significant revenue producer. We appointed his successor Carole Bodell, an experienced leader in human capital businesses, to lead the business in November. Traction is now increasing albeit following an expected time lag. In order to leverage off the core brand, we have now integrated the business into Norman Broadbent Leadership Consulting. With HADIL's core of exceptional occupational psychologists the practice is well placed to drive greater brand recognition of our leadership assessment services. Overseas royalties totalled Â£339,000 (2011: Â£333,000) which was highly creditable given the weak economies pertaining in Spain and Italy, and the on-going geo-political tensions in the Middle East. CORPORATE DEVELOPMENTS 2012 was another year of significant development for the Company with further expansion overseas combined with strategic diversification of our core products offerings. In November 2012, the Company acquired a 51 per cent stake in Acker Deboeck & Company, a well-established and profitable leadership consulting and search business based in Brussels. This firm, now rebranded Norman Broadbent, has integrated well into the Group. It has particularly enhanced the existing UK and international leadership consulting teams and the Directors believe that leadership assessment and consulting will be an area of revenue growth over the next few years given current market trends. The two new international search businesses incorporated during the year in Singapore and USA, are now gaining traction in their respective territories with the increased brand awareness starting to lead to new business flow. Since the year ended 31 December 2012, we have also established (through our Belgian subsidiary) a dedicated Paris based executive search company led by an experienced local search professional. As part of a strategy to leverage the Group's strengths and diversify from a reliance on traditional retained executive search, the Company completed a successful, oversubscribed share placing in November 2012, raising Â£742,560, with some of the funds going towards establishing two complementary businesses: Arcus Global Partners, led by Simon Vaughan-Edwards who joined the Group in March 2013, has been formed to provide existing and new clients with innovative, tactical or strategic solutions for their human capital needs. This ranges from contingent search for roles below full and operating board level, through to short term contracting, in-house RPO solutions, talent mapping and candidate pipeline provision. Connecting Corporates, trading through the established brands of "WinningWork" and "Social Media Search", provides rapid, bespoke, candidate lists for client's in-house recruitment teams, using innovative search techniques through multiple social media and online channels. WinningWork is a sales management tool used to exploit social media to drive sales in professional service firms and those operating in a B2B environment. I am pleased to report that, although both businesses are at a very early stage of development, they have started well; attracting high calibre talent, working closely with the Norman Broadbent Executive Search team and are currently operating in line with management's expectations. FINANCIAL POSITION The consolidated Group statement of financial position was strengthened through the November 2012 placing of 2,121,600 new ordinary shares, raising Â£727,560 net of Â£15,000 expenses. As at 31 December 2012 consolidated net assets were Â£ 3.2 million, compared to Â£2.3 million as at 31 December 2011. Group net current assets increased to Â£1.09 million (2011: Â£0.47 million) while Group cash increased to Â£1.0 million (Â£0.65 million). During the year under review, the Group repaid its residual term loan of Â£ 109,000 in full and in addition reduced the outstanding deferred consideration from the Norman Broadbent acquisition in 2008 from Â£481,000 to Â£73,000 at 31 December 2012. This Â£73,000 balance was repaid shortly after the year end. The Group now has no bank debt other than its on-going invoice discounting facility, which had a balance outstanding of Â£965,000 at the year-end (2011: Â£ 625,000). This was higher in 2012 due to the increase in sales and the improved aging profile of the trade receivables at the year-end compared with 2011. From March 2013, all Spanish royalties are retained by the Company, as compared to the previous arrangement whereby the payments flowed through on a quarterly basis to satisfy the outstanding deferred consideration. OPERATIONAL EFFICIENCIES As a group we continually review our processes and our cost base to ensure it is effective, cost efficient and fit for the changing market conditions in which we operate. During the year we agreed new, more efficient IT contracts and moved our core database onto an innovative cloud based product. Since the year end we have signed a new lease on our head office in St James's Square on more favourable terms and we expect to have sufficient space to accommodate the new UK subsidiary businesses until at least the end of 2013. These savings will have a meaningful positive impact on the monthly fixed overhead of the Group from the second quarter of 2013. BUSINESS DEVELOPMENT Our UK search practice has a quality, though relatively concentrated client base from which it continues to enjoy considerable repeat levels of business. Over recent years it is evident that the retained executive search market has become more competitive as clients successfully source more senior talent online or through contingent suppliers. Our Group now has the ability to provide these solutions to UK clients through Arcus Global Partners and Connecting Corporates, thereby allowing us to expand our client base both in retained search and these new complimentary services. Over time we anticipate extending the Arcus Global Partners and Connecting Corporates offerings internationally. CURRENT TRADING AND OUTLOOK The continued diversification in 2012 and early 2013 has resulted in a more robust Group with a compelling suite of service offerings in an environment where traditional retained search has seen revenues decline across the industry, but particularly in the UK and Europe. Our UK search revenues for the first quarter of 2013 were lower than the first quarter in 2012, in part due to the industry challenges and partly caused by a reduced number of search consultants compared with last year. However, we have a lower comparable fixed cost base, no further expected restructuring costs and the operational efficiencies flagged above should compensate for this reduction in revenues. The current UK search pipeline is reasonable and we are pleased with initial progress in the new USA, Singapore and Paris offices following recent successful launch events in these territories. The Board believes that our more potent, diversified offerings will, in the absence of unforeseen circumstances, lead to a larger more profitable Group over the next few years. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2012 Note 2012 2011 Â£000 Â£000 REVENUE 2 7,634 6,900 Cost of sales (208) (109) GROSS PROFIT 2 7,426 6,791 Operating expenses (7,133) (6,515) Other income - 25 GROUP OPERATING PROFIT BEFORE RE-STRUCTURING 293 301 COSTS Re-structuring costs 4 (331) (802) GROUP OPERATING LOSS (38) (501) Net finance cost 7 (35) (34) LOSS ON ORDINARY ACTIVITIES BEFORE 3 (73) (535) INCOME TAX Income tax expense 6 (42) (26) LOSS FOR THE YEAR (115) (561) OTHER COMPREHENSIVE INCOME Foreign currency translation 2 - differences - foreign operations TOTAL COMPREHENSIVE INCOME FOR THE (113) (561) YEAR Loss attributable to: * Owners of the Company (127) (561) * Non-controlling interests 12 - Loss for the year (115) (561) Total comprehensive income attributable to: * Owners of the Company (127) (561) * Non-controlling interests 14 - Total comprehensive income for the (113) (561) year Loss per share 8 - Basic (1.16)p (5.96)p - Diluted (1.16)p (5.96)p Adjusted loss per share 8 - Basic (0.52)p (5.16)p - Diluted (0.52)p (5.16)p CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2012 Notes 2012 2011 Â£000 Â£000 Non-Current Assets Intangible assets 10 1,922 1,810 Property, plant and equipment 11 139 131 Deferred tax assets 6 69 69 TOTAL NON-CURRENT ASSETS 2,130 2,010 Current Assets Trade and other receivables 14 2,267 1,829 Cash and cash equivalents 15 1,009 650 TOTAL CURRENT ASSETS 3,276 2,479 TOTAL ASSETS 5,406 4,489 Current Liabilities Trade and other payables 16 1,075 980 Deferred consideration 17 73 300 Bank overdraft and interest bearing 17 965 734 loans Corporation tax liability 72 - TOTAL CURRENT LIABILITIES 2,185 2,014 NET CURRENT ASSETS 1,091 465 Non-Current Liabilities Deferred consideration 17 - 181 TOTAL LIABILITIES 2,185 2,195 TOTAL ASSETS LESS TOTAL LIABILITIES 3,221 2,294 EQUITY Issued share capital 19 5,857 5,833 Share premium account 19 9,572 8,758 Retained earnings (12,353) (12,297) EQUITY ATTRIBUTABLE TO OWNERS OF THE 3,076 2,294 COMPANY Non-controlling interests 145 - TOTAL EQUITY 3,221 2,294 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2012 Attributable to owners of the Company Share Share Retained Total Non-controlling Total Capital Premium Earnings interests Equity Equity Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Balance at 1st January 2011 5,804 6,985 (11,811) 978 - 978 Loss for the year - - (561) (561) - (561) Total comprehensive income - - (561) (561) - (561) for the year Transactions with owners of the Company, recognised directly in equity: Issue of ordinary shares 29 1,773 - 1,802 - 1,802 Credit to equity for share - - 75 75 - 75 based payments Total transactions with 29 1,773 75 1,877 - 1,877 owners of the Company, recognised directly in equity Balance at 31st December 5,833 8,758 (12,297) 2,294 - 2,294 2011 Balance at 1st January 2012 5,833 8,758 (12,297) 2,294 - 2,294 Loss for the year - - (127) (127) 12 (115) Total other comprehensive - - - - 2 2 income Total comprehensive income - - (127) (127) 14 (113) for the year Transactions with owners of the Company, recognised directly in equity: Issue of ordinary shares 24 814 - 838 - 838 Credit to equity for share - - 71 71 - 71 based payments Acquisition of subsidiary - - - - 131 131 with non-controlling interests Total transactions with 24 814 71 909 131 1,040 owners of the Company, recognised directly in equity Balance at 31st December 5,857 9,572 (12,353) 3,076 145 3,221 2012 CONSOLIDATED STATEMENT OF CASH FLOW For the year ended 31 December 2012 Notes 2012 2011 Â£000 Â£000 Net cash used in operating activities (250) (561) Cash flows from investing activities and servicing of finance Net finance cost (35) (35) Dividends received - 25 Payments to acquire tangible fixed assets 11 (92) (33) Repayment of deferred consideration (408) (528) Net cash inflow on acquisition of 23 181 - subsidiary Net cash used in investing activities (354) (571) Cash flows from financing activities Net cash inflows from equity placing 19 727 1,750 Repayment of secured loans (109) (116) Repayment of directors' loans - (7) Increase in invoice discounting 341 14 Net cash from financing activities 959 1,641 Net increase in cash and cash equivalents 356 510 Net cash and cash equivalents at beginning of period 650 140 Effects of exchange rate changes on cash balances held 4 - in foreign currencies Net cash and cash equivalents at end of period 1,009 650 Analysis of net funds Cash and cash equivalents 1,009 650 Borrowings due within one year (965) (734) Borrowings due after one year - - Deferred consideration (73) (481) Net funds (29) (565) Note (i) Reconciliation of operating loss to net cash from 2012 2011 operating activities Â£000 Â£000 Operating loss (38) (501) Depreciation/impairment of property, plant and equipment 84 79 Share based payment charge 71 75 Dividends received - (25) (Increase)/decrease in trade and other (438) 144 receivables Increase/(decrease) in trade and other payables 165 (306) Taxation paid (94) (27) Net cash used in operating activities (250) (561) 1. ACCOUNTING POLICIES Basis of preparation The consolidated financial statements of Norman Broadbent plc ("Norman Broadbent" or "the Company") have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), 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 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 notes to the financial statements. The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 December 2012 or 31 December 2011. Statutory accounts for 31 December 2011 have been delivered to the Registrar of Companies and those for 31 December 2012 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis of matter without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2012 or for 2011. Going concern The Group reported an operating loss in the year to 31 December 2012 of Â£38,000 compared with an operating loss of Â£501,000 in 2011. However these losses were primarily driven by residual one-off planned restructuring costs in the UK search business totalling Â£331,000 (2011: 802,000), which will not be repeated in 2013. The Consolidated Statement of Financial Position shows a strong net asset position at 31 December 2012 of Â£3.22 million (2011: Â£2.29 million) with cash at bank of Â£1.01 million (2011: Â£0.65 million). At the date that these financial statements were approved the only bank debt owed by the Company was its invoice discounting facility which is secured by the Group's trade receivables. In light of the current financial position of the Group and on consideration of the business' forecasts and projections, taking account of possible changes in trading performance, the directors have a reasonable expectation that the Group has adequate available resources to continue as a going concern for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing their annual report and financial statements. 2. 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 operating profit level, which includes employee costs, marketing, office and accommodation costs and appropriate recharges for management time. 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, profit before taxation and net assets/ (liabilities) is set out below: BUSINESS SEGMENTS 2012 Executive Overseas Interim Assessment, Social Un- Total Search Royalties coaching & Media allocated Â£000 talent Search & Â£000 Â£000 Â£000 mgmt. Consulting Â£000 Â£000 Â£000 Revenue 6,607 339 66 586 36 - 7,634 Cost of sales (118) - - (89) (1) - (208) Gross profit 6,489 339 66 497 35 - 7,426 Operating (5,931) (119) - (612) (32) (357) (7,051) expenses Other operating - - - - - - - income Re-structuring (331) - - - - - (331) costs Finance costs (31) - - - - (4) (35) Depreciation and (82) - - - - - (82) amort. Profit/(loss) 114 220 66 (115) 3 (361) (73) before tax Net assets 3,129 - - 89 3 - 3,221 BUSINESS SEGMENTS 2011 Executive Overseas Interim Assessment, Social Un-allocated Total Search Royalties coaching & Media Â£000 talent Search & Â£000 Â£000 Â£000 Â£000 mgmt. Consulting Â£000 Â£000 Revenue 5,929 333 47 591 - - 6,900 Cost of sales (50) - - (59) - - (109) Gross profit 5,879 333 47 532 - - 6,791 Operating expenses (5,336) (119) - (580) - (401) (6,436) Other operating 25 - - - - - 25 income Re-structuring (512) - - - - (290) (802) costs Finance costs (34) - - - - - (34) Depreciation and (79) - - - - - (79) amort. Profit/(loss) (57) 214 47 (48) (691) (535) before tax Net assets 2,312 - - (18) - 2,294 The unallocated costs refer to central costs of the Group including salaries, professional and other costs, which are not directly attributable to the delivery of the services. The four segments shown represent the management information provided to the Board and in the opinion of the directors reflect the nature of the Group's services. ii) Geographic Region: The analysis by geographic region of the Group's turnover, profit before taxation and net assets/ (liabilities) is set out below: BUSINESS SEGMENTS 2012 Executive Overseas Interim Assessment, Social Un-allocated Total Search Royalties coaching & Media Â£000 talent Search & Â£000 Â£000 Â£000 Â£000 mgmt. Consulting Â£000 Â£000 Revenue United Kingdom 6,413 - 66 471 36 - 6,986 Europe 148 275 - 114 - - 537 Other 46 64 - 1 - - 111 Total 6,607 339 66 586 36 - 7,634 Gross profit United Kingdom 6,302 - 66 428 35 - 6,831 Europe 148 275 - 69 - - 492 Other 39 64 - - - - 103 Total 6,489 339 66 497 35 - 7,426 Profit/(loss) before tax United Kingdom 114 - 66 (63) 3 (361) (241) Europe - 157 - (51) - - 106 Other - 63 - (1) - - 62 Total 114 220 66 (115) 3 (361) (73) Net assets United Kingdom 3,129 - - 89 3 - 3,221 Total 3,129 - - 89 3 - 3,221 BUSINESS SEGMENTS 2011 Executive Overseas Interim Assessment, Social Un-allocated Total Search Royalties coaching & Media Â£000 talent Search & Â£000 Â£000 Â£000 Â£000 mgmt. Consulting Â£000 Â£000 Revenue United Kingdom 5,284 - 34 356 - - 5,674 Europe 333 263 10 235 - - 841 Other 312 70 3 - - - 385 Total 5,929 333 47 591 - - 6,900 Gross profit United Kingdom 5,234 - 34 309 - - 5,577 Europe 333 263 10 223 - - 829 Other 312 70 3 - - - 385 Total 5,879 333 47 532 - - 6,791 Profit/(Loss) before tax United Kingdom (57) - 34 (40) - (691) (754) Europe - 164 10 (8) - - 166 Other - 50 3 - - - 53 Total (57) 214 47 (48) - (691) (535) Net assets United Kingdom 2,312 - - (18) - - 2,294 Total 2,312 - - (18) - - 2,294 Turnover by location is not materially different from turnover by destination. 3. (LOSS) / PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2012 2011 Â£000 Â£000 Loss on ordinary activities before taxation is stated after charging: Depreciation and impairment of property, plant and 84 79 equipment Loss on foreign currency exchange 16 19 Operating lease rentals: Land and buildings 327 305 Auditors' remuneration: Audit work 34 33 Non-audit work - - The Company audit fee in the year was Â£11,500 (2011: Â£10,000). 4. RE-STRUCTURING COSTS Re-structuring costs include residual personnel costs relating to the hiring of new consultants in 2011, exiting of under-performing staff and external recruitment consultancy costs relating to the new hires. These items have been highlighted in the consolidated statement of comprehensive income because separate disclosure is considered appropriate in understanding the underlying performance of the business. 2012 2011 Â£000 Â£000 Personnel 331 677 Consultancy - 125 Total re-structuring costs 331 802 5. STAFF COSTS The average number of full time equivalent 2012 2011 persons (including directors) No. No. employed by the Group during the period was as follows: Sales and related services 25 23 Administration 30 30 55 53 Staff costs (for the above persons): Â£000 Â£000 Wages and salaries 4,605 4,254 Social security costs 476 439 Defined contribution pension cost 206 177 Share based payment expense (note 71 75 20) 5,358 4,945 The emoluments of the directors are disclosed as required by the Companies Act 2006 on page 9 of the Report and Accounts in the Directors' Remuneration Report. 6. TAX EXPENSE (a) Tax charged in the income statement Taxation is based on the profit for 2012 2011 the year and comprises: Â£000 Â£000 Current tax: United Kingdom corporation tax at 42 26 24.5% (2011: 26.5%) based on profit for the year Adjustment in respect of prior years - - Total current tax 42 26 Deferred tax: Origination and reversal of temporary differences - - Tax charge/(credit) 42 26 (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: 2012 2011 Â£000 Â£000 Loss on ordinary activities before (73) (535) taxation Tax on loss on ordinary activities at (18) (142) standard UK corporation tax rate of 24.5% (2011: 26.5%) Effects of: Expenses not deductible 32 50 Foreign tax suffered 18 - Non-taxable income (1) (7) Capital allowances in excess of 14 12 depreciation Utilisation of ACT (2) (4) Adjustment to losses carried forward (1) 113 Other adjustments - 4 Current tax charge/(credit) for the 42 26 year (c) Deferred tax Tax losses Total Â£000 Â£000 At 01 January 2011 (69) (69) Credited to the income statement in - - 2011 At 31 December 2011 (69) (69) Credited to the income statement in - - 2012 At 31 December 2012 (69) (69) At 31 December 2012 the Group had capital losses carried forward of Â£8,130,000 (2011: Â£8,130,000). A deferred tax asset has not been recognised for the capital losses as the recoverability in the near future is uncertain. The Group also has Â£10,000,000 (2011: Â£10,000,000) trading losses carried forward, which includes Â£8,987,000 losses transferred from BNB Recruitment Consultancy Ltd in 2011. A deferred tax asset of Â£1,613,000 has not been recognised in the financial statements due to the inherent uncertainty as to the quantum and timing of its utilisation. The analysis of deferred tax in the consolidated balance sheet is as follows: 2012 2011 Deferred tax assets: Â£000 Â£000 Tax losses carried forward 69 69 Total 69 69 7. NET FINANCE COST 2012 2011 Â£000 Â£000 Interest payable on bank loans and overdrafts 35 34 Total 35 34 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: 2012 2011 Loss attributable to shareholders Â£(127,000) Â£(561,000) Weighted average number of ordinary 10,929,676 9,416,510 shares 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 two categories of dilutive potential ordinary shares: share options and warrants. For these options and warrants, 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 warrants and 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. 2012 2011 Loss attributable to shareholders Â£(127,000) Â£(561,000) Weighted average number of ordinary 10,929,676 9,416,510 shares - assumed conversion of share options - 49,272 - assumed conversion of warrants - 55,343 Total 10,929,676 9,521,125 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. 2012 2012 2012 2011 2011 2011 Â£000 Basic Diluted Â£000 Basic Diluted pence pence pence pence per per per per share share share share Basic earnings Loss after tax (127) (1.16) (1.16) (561) (5.96) (5.96) Adjustments Share based payment charge 71 0.64 0.64 75 0.80 0.80 Adjusted earnings (56) (0.52) (0.52) (486) (5.16) (5.16) 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 Â£192,000 (2011: loss of Â£150,000). 10. INTANGIBLE ASSETS Group Goodwill arising on consolidation Â£000 Balance at 1 January 2011 3,690 Balance at 31 December 2011 3,690 Additions (Note 24) 112 Balance at 31 December 2012 3,802 Provision for impairment Balance at 1 January 2011 1,880 Balance at 31 December 2011 1,880 Balance at 31 December 2012 1,880 Net book value At 1 January 2011 1,810 At 31 December 2011 1,810 At 31 December 2012 1,922 Goodwill acquired through business combinations is allocated to cash-generating units (CGU) identified at entity level. The carrying value of intangibles allocated by CGU is shown below: Norman Human Asset Total Broadbent Development International Â£000 Â£000 Â£000 At 1 January 2011 1,750 60 1,810 At 31 December 2011 1,750 60 1,810 At 31 December 2012 1,862 60 1,922 The goodwill attributed to the Norman Broadbent entity can be split into two further CGU's, cash generated from the retained Executive Search and leadership consultancy business of Â£1,212,000 (2011: Â£1,100,000) and cash generated from International Royalties of Â£650,000 (2011: Â£650,000). 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 18, 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 2013 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 10 per cent per annum for the foreseeable future (2011: 10 per cent) and 7% for Human Asset Development International (2011: 10 per cent). Return on sales 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 12 per cent (2011: 12 per cent). The five year forecasts have been prepared using conservative revenue growth rates to reflect the uncertainty that is still present in the economy. Based on the above assumptions, at 31 December 2012 the recoverable value of the Norman Broadbent CGU is Â£2,991,000 and the Human Asset Development International CGU is Â£180,000. Return on sales would need to fall below 7 per cent for the Norman Broadbent goodwill to be impaired and below 2 per cent for Human Asset Development International goodwill to be impaired. 11. PROPERTY, PLANT AND EQUIPMENT Group Land and Office Fixtures Motor Total buildings and and Vehicles - computer fittings Â£000 leasehold equipment Â£000 Â£000 Â£000 Â£000 Cost Balance at 1 January 2011 83 145 128 - 356 Additions - 32 1 - 33 Disposals (21) (1) - - (22) Balance at 31 December 2011 62 176 129 - 367 Additions - 53 - - 53 Arising on acquisition of - 7 19 13 39 subsidiaries (note 23) Disposals - - - - - Balance at 31 December 2012 62 236 148 13 459 Accumulated depreciation Balance at 1 January 2011 33 51 95 - 179 Charge for the year 20 48 11 - 79 Disposals (21) (1) - - (22) Balance at 31 December 2011 32 98 106 - 236 Charge for the year 22 49 11 2 84 Disposals - - - - - Balance at 31 December 2012 54 147 117 2 320 Net book value At 1 January 2011 50 94 33 - 177 At 31 December 2011 30 78 23 - 131 At 31 December 2012 8 89 31 11 139 The Group had no capital commitments as at 31 December 2012 (2011: Â£Nil). The above assets are owned by Group companies; the Company has no fixed assets. 12. INVESTMENTS Company Shares in subsidiary undertakings Â£000 Cost Balance at 1 January 2011 5,786 Balance at 31 December 2011 5,786 Additions (see note below) 255 Balance at 31 December 2012 6,041 Provision for impairment Balance at 1 January 2011 3,926 Balance at 31 December 2011 3,926 Impairment in the year - Balance at 31 December 2012 3,926 Net book value At 1 January 2011 1,860 At 31 December 2011 1,860 At 31 December 2012 2,115 During the year, the company acquired a 51 per cent interest in Acker Deboeck and Company for a total consideration of Â£248,000 (see note 23). The Company also incorporated wholly owned subsidiaries in Singapore and USA, with combined share capital of Â£7,000. Funding for the growth of these subsidiaries will be provided through Group treasury in the form of inter-company loans. At 31 December 2012 the Company held the following ownership interests: Principal Group Country of Principal Description and investments: incorporation activities proportion of or registration shares held by and operation the Company Norman Broadbent Executive England and Executive 100% ordinary Search Ltd Wales search shares Norman Broadbent Overseas England and Executive 100% ordinary Ltd Wales search shares Human Asset Development England and Assessment, 100% ordinary International Wales coaching and shares talent mgmt. Ltd Arcus Global Partners Ltd England and Contingent 100% ordinary (formerly NBBI Ltd) Wales Search shares Norman Broadbent Inc United States Executive 100% ordinary of America search shares The NB Consultancy Singapore Executive 100% ordinary (Singapore) Pte. Ltd search shares Norman Broadbent SPRL Belgium Executive 51% ordinary (formerly Acker Deboeck search, shares and Company) assessment, coaching and talent mgmt. Connecting Corporates Ltd England and Social Media 51% ordinary Wales Search & shares Consulting Bancomm Ltd England and Dormant 100% ordinary Wales shares Norman Broadbent Ireland Republic of Dormant 100% ordinary Ltd** Ireland shares Substantial Shareholdings: NBS Norman Broadbent SA* Spain Executive 20% ordinary search, shares assessment, coaching and talent mgmt. * The 20% shareholding in this company is owned by Norman Broadbent Overseas Ltd, a wholly owned subsidiary of the Company. ** The 100% shareholding in this company is owned by Norman Broadbent Overseas Ltd. 13. INVESTMENTS IN ASSOCIATES 2012 2011 Â£000 Â£000 At 1 January - 5 Acquisition of shares in associate - 5 Consolidation of wholly owned - (10) subsidiary At 31 December - - 14. TRADE AND OTHER RECEIVABLES Group Company 2012 2011 2012 2011 Â£000 Â£000 Â£000 Â£000 Trade receivables 1,655 1,319 - - Less: provision for impairment (20) (87) - - Trade receivables - net 1,635 1,232 - - Other debtors 354 185 50 40 Prepayments and accrued income 278 412 5 6 Due from Group undertakings - - 1,513 1,262 Total 2,267 1,829 1,568 1,308 As at 31 December 2012, Group trade receivables of Â£836,000 (2011: Â£820,000) were past their due date but not impaired. They relate to customers with no default history. The aging profile of these receivables is as follows: Group Company 2012 2011 2012 2011 Â£000 Â£000 Â£000 Â£000 Up to 3 months 800 624 - - 3 to 6 months 1 31 - - 6 to 12 months 35 165 - - Total 836 820 - - The largest amount due from a single debtor at 31 December 2012 represents 10.86% (2011: 11.07%) of the total trade receivables balance outstanding. As at 31 December 2012, Group trade receivables of Â£20,000 (2011: Â£87,000) were past their due date and impaired. A provision for impairment for the full amount has been recognised in the financial statements. Movements on the Group's provision for impairment of trade receivables are as follows: 2012 2011 Â£000 Â£000 At 1 January 87 145 Provision for receivable impairment 20 87 Receivables written-off as (87) (145) uncollectable At 31 December 20 87 Other than the impairment provision provided for aged trade receivables above, there are no other material difference between the carrying value and the fair value of the Group's and parent company's trade and other receivables. 15. CASH AND CASH EQUIVALENTS Group Company 2012 2011 2012 2011 Â£000 Â£000 Â£000 Â£000 Cash at bank and on hand 1,009 650 592 366 Total 1,009 650 592 366 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. 16. TRADE AND OTHER PAYABLES Group Company 2012 2011 2012 2011 Â£000 Â£000 Â£000 Â£000 Trade payables 479 369 73 59 Due to Group undertakings - - 957 764 Other taxation and social security 317 323 (3) (11) Other payables 75 122 - - Accruals 204 166 38 25 Total 1,075 980 1,065 837 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. 17. BORROWINGS Group Company Maturity profile of borrowings 2012 2011 2012 2011 Â£000 Â£000 Â£000 Â£000 Current Bank overdrafts and interest bearing loans: Invoice discounting facility 965 625 - - Interest bearing loan - 109 - 109 965 734 - 109 Deferred consideration 73 300 73 300 1,038 1,034 73 409 Non-Current In more than one year but no more than two: Deferred consideration - 181 - 181 - 181 - 181 Total 1,038 1,215 73 590 The carrying amounts and fair value of the Group's borrowings, which are all denominated in sterling, are as follows: Carrying amount Fair value 2012 2011 2012 2011 Â£000 Â£000 Â£000 Â£000 Bank overdrafts and interest bearing 965 734 965 734 loans Deferred consideration 73 481 73 481 Total 1,038 1,215 1,038 1,215 a. Invoice discounting facility Norman Broadbent Executive Search Limited operates an invoice discounting facility. Funds are available to be drawn down at an advance rate of 75% against trade receivables of Norman Broadbent Executive Search Limited that are aged less than 120 days, with the facility capped at Â£1,500,000. At 31 December 2012, the outstanding balance on the facility of Â£965,000 (2011: Â£625,000) was secured by trade receivables of Â£1,450,000 (2011: Â£1,229,000) and a cross corporate guarantee and indemnity deed dated 20 July 2011. Interest is charged on the drawn down funds at a rate of 2.75% above the bank base rate (2011: 2.75%). b. Deferred consideration The balance outstanding at 31 December 2012 of Â£73,000 was settled in full on 7 February 2013. There are no further liabilities, warranties or obligations outstanding in relation to the deferred consideration. 18. FINANCIAL INSTRUMENTS The principle financial instruments used by the Group, 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 Group 2012 2011 Â£000 Â£000 Financial Assets Trade and other receivables 2,267 1,829 Cash and cash equivalents 1,009 650 Financial Liabilities Trade and other payables 1,075 980 Bank overdrafts and interest bearing loans 965 734 Deferred consideration 73 481 Corporation tax liability 72 - Amortised Cost Company 2012 2011 Â£000 Â£000 Financial Assets Trade and other receivables 1,676 1,308 Cash and cash equivalents 592 366 Financial Liabilities Trade and other payables 1,173 837 Bank overdrafts and interest bearing loans - 109 Deferred consideration 73 481 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 of the Report and Accounts. 19. SHARE CAPITAL AND PREMIUM Allotted and fully paid: 2012 2011 Â£000 Â£000 Ordinary Shares: 13,048,686 Ordinary shares of 1.0p each (2011: 130 106 10,607,801) Deferred Shares: 23,342,400 Deferred A shares of 4.0p each (2011: 934 934 23,342,400) 907,118,360 Deferred shares of 0.4p each (2011: 3,628 3,628 907,118,360) 1,043,566 Deferred B shares of 42.0p each (2011: 438 438 1,043,566) 2,504,610 Deferred shares of 29.0p each (2011: 727 727 2,504,610) 5,727 5,727 Total 5,857 5,833 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 Â£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 parri 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 Â£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 Â£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 parri passu with or in priority to the Deferred B Shares. Deferred 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 Â£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 Deferred Share Total ordinary shares shares premium shares Â£000 (000s) Â£000 Â£000 Â£000 At 1 January 2011 7,719 77 5,727 6,985 12,789 Proceeds from share placing 2,692 27 - 1,723 1,750 (note a) Transaction costs related to - - - (54) (54) share placing Shares issued on conversion 118 1 - 53 54 of options/warrants Shares issued to employees 79 1 - 51 52 At 31 December 2011 10,608 106 5,727 8,758 14,591 Proceeds from share placing 2,122 21 - 721 742 (note b) Transaction costs related to - - - (15) (15) share placing Shares issued on acquisition 319 3 - 108 111 (note 23) At 31 December 2012 13,049 130 5,727 9,572 15,429 a. Share placing in May 2011: At the Annual General Meeting of the Company on 31 May 2011, a special resolution was passed to allot 2,692,308 new ordinary 1.0p shares for a total cash consideration of Â£1,750,000. b) Share placing in November 2012: On 13 November 2012, the Company issued 2,121,600 new ordinary 1.0p shares for a total cash consideration of Â£742,000. Transaction costs of Â£15,000 were incurred resulting in net cash proceeds of Â£727,000. 20. SHARE BASED PAYMENTS 20.1 Share Options The Company has an approved EMI share option scheme for full time employees and directors and had an unapproved share option scheme under which options to subscribe for the Company's shares were granted to connected parties, which expired in 2011. The exercise price of the granted options is equal to the market price of the shares on the date of the grant. The Company has no legal or constructive obligation to repurchase or settle the options or warrants in cash. Options under the Company EMI scheme are conditional on the employee completing three years' service (the vesting period). The EMI options vest in three equal tranches on the first, second and third anniversary of the grant. The options have a contractual option term of ten years. Options under the unapproved scheme lapsed in March 2011. Movements in the number of share options and their related weighted average exercise prices are as follows: Approved EMI share Unapproved share option scheme option scheme Avg. Number of Avg. Number of exercise options exercise options price per price per share (p) share (p) At 1 January 2011 68.70 387,211 168.90 26,625 Granted 65.50 955,393 - - Forfeited 96.82 (141,499) 168.90 (26,625) Exercised 52.50 (19,047) - - At 31 December 2011 63.01 1,182,058 - - Forfeited 63.05 (185,819) - - At 31 December 2012 62.92 996,240 - - Share options outstanding at the end of the year have the following expiry date and exercise prices: Expiry date Exercise Share options price per share (p) 2012 2011 2020 52.50 198,094 226,665 2021 65.50 798,146 955,393 Total 996,240 1,182,058 Out of the 996,240 outstanding options (2011: 1,182,058), no options were exercisable at the year end (2011: 75,555) as they were all `underwater'. The weighted average fair value of the share options granted in 2011, determined using the Trinomial Valuation Model, was 37.5 pence (options granted in 2010: 21.3 pence). The significant inputs into the model were weighted average share price of 65.5 pence at the grant date (2010: 52.5 pence), exercise price shown above, volatility of 75% (2010: 85%), dividend yield of 0% (2010: 0%), an expected option life of 10 years (2010: 10 years) and an annual risk-free interest rate of 3.38% (2010: 3.65%). The expected volatility was estimated by reference to the historical volatility of the Company's share price and those of UK quoted companies in a similar business sector. The risk-free interest rate is estimated as the yield on zero coupon UK government bonds of a term consistent with the contractual life of the options granted. 20.2 Warrants On 14 June 2010, the Company issued warrants over shares in the Company to two directors and a connected party on the basis of one warrant for one ordinary share. The warrants have an exercise price of 45 pence, can be exercised in full or in part immediately and expire on 31 May 2013. Movements in the number of warrants and their related weighted average exercise prices are as follows: Warrants Avg. Number of exercise warrants price per share (p) At 1 January 2011 49.35 292,776 Forfeited 90.00 (28,333) Exercised 45.00 (97,777) At 31 December 2011 45.00 166,666 Granted - - Forfeited - - Exercised - - At 31 December 2012 45.00 166,666 Warrants outstanding at the end of the year have the following expiry date and exercise prices: Expiry date Exercise Warrants price per share (p) 2012 2011 2013 45.00 166,666 166,666 Total 166,666 166,666 Out of the 166,666 outstanding warrants (2011: 166,666), 166,666 warrants were exercisable in the year (2011: 166,666). See Note 65 for the total expense recognised in the income statement for share options and warrants granted to directors and employees. 21. LEASES Operating leases The Group leases all its premises. The terms of the leases vary for each property and are tenant repairing. As at 31 December 2012, the total future value of minimum lease payments are due as follows: Land and Buildings 2012 2011 Â£000 Â£000 Within one year 156 440 Later than one year and not later than five years - 117 Total 156 557 On the 6 March 2013 the directors signed a new lease for the Company's principle office at 12 St James's Square, London on substantially improved financial terms. The new lease commences on 30 April 2013 for 10 years with the option to break after 5 years. 22. PENSION COSTS The Group operated several defined contribution pension schemes for the business. The assets of the schemes were held separately from those of the Group in independently administered funds. The pension cost represents contributions payable by the Group to the funds and amounts to Â£182,000 (2011: Â£177,000). At the year end Â£18,000 of contributions were outstanding (2011: Â£ 17,000). 23. BUSINESS COMBINATIONS On the 1 November 2012, the Company obtained control of Acker Deboeck and Company SPRL, an executive search and leadership consultancy business headquartered in Brussels, by acquiring 51 per cent of the shares and voting interests in the company. The acquisition of Acker Deboeck, renamed Norman Broadbent SPRL in January 2013, will extend the European reach of the Norman Broadbent executive search brand whilst significantly enhancing the leadership consulting and board evaluation services of the Group. In the two months to 31 December 2012, Acker Deboeck contributed revenue of Â£ 114,000 and profit before tax of Â£34,000 to the Group's results. If the acquisition had occurred on 1 January 2012, management estimates that the subsidiary would have contributed revenue of Â£560,000 and pre-tax profit for the year of Â£140,000. The following summarises the major classes of consideration transferred and the recognised amounts of assets acquired and liabilities assumed at the acquisition date. Consideration transferred: Â£000 Cash 137 Equity instruments (319,285 ordinary 1.0p shares - note 111 19) Total 248 a. Equity Instruments issued - the fair value of the ordinary shares issued was based on the listed share price of the Company at 1 November 2012 of 35 pence per share. Identifiable assets acquired and liabilities assumed: Â£000 Property, plant and equipment 39 Trade and other receivables 74 Cash and cash equivalents 318 Trade and other payables (29) Corporation tax (135) Total 267 The following fair values have been determined on a provisional basis: a. Trade receivables comprise gross contractual amounts of Â£60,000 and Â£14,000 of assignment related expenses due to be recharged to clients. Whilst there is no expectation or track record of bad debts in the company, should any of the outstanding invoices become uncollectable then an adjustment to the fair value of trade receivables would be necessary. b. The corporation tax liability of Â£135,000 represents a provision for the expected tax liability of the company calculated by an independent tax firm. Once the formal year end tax computation has been prepared any material adjustments to the provision would need to be factored in to the acquisition calculation. If new information obtained within one year from the acquisition date about facts and circumstances that existed at the acquisition date identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, then the acquisition accounting will be revised. Goodwill: Goodwill was recognised as a result of the acquisition as follows: Â£000 Total consideration transferred 248 Non-controlling interests, based on their proportionate 131 interest in the recognised amounts of assets and liabilities of Acker Deboeck Fair value of identifiable net assets (267) Total 112 The goodwill is attributable mainly to the skills and technical talent of Acker Deboeck's employees and the enhanced revenue generating ability of the Group, particularly the leadership consulting and board evaluation services, for which Acker Deboeck has a demonstrable track record of delivering. Acquisition-related costs: The Company incurred acquisition related legal costs of Â£10,000. These costs have been included in "operating expenses" in the consolidated statement of comprehensive income. 24. RELATED PARTY TRANSACTIONS The following transactions were carried out with related parties: a. Purchase of services: b. 2012 2011 Â£000 Â£000 Adelaide Capital Limited 141 166 Anderson Barrowcliff LLP 31 35 Brian Stephens & Company Ltd 5 - Andrew Garner Associates Limited - 261 NBS Norman Broadbent SA 8 9 Total 185 471 During the year Adelaide Capital Limited invoiced the Group for the directors' fees of P Casey (Â£125,000), B Stephens (Â£15,000) and business related travel costs of Â£1,000. From October 2012 Brian Stephens & Company Ltd invoiced the Group for the directors' fees of B Stephens (Â£5,000). P Casey and B Stephens were directors of Adelaide Capital Limited during the year. B Stephens is a director of Brian Stephens & Company Ltd. Taxation and company secretarial services of Â£11,000 were acquired from Anderson Barrowcliff LLP, an accountancy firm of which R Robinson is a partner. Anderson Barrowcliff also invoices the Group for R Robinson's director's fees (Â£20,000). During the year the company incurred rechargeable costs (Â£4,000) and fee splits relating to jointly executed overseas searches (Â£4,000) from NBS Norman Broadbent SA. The Group owns a 20% stake in NBS Norman Broadbent SA. All related party expenditure took place via "arms-length" transactions. b. Sale of services c. 2012 2011 Â£000 Â£000 NBS Norman Broadbent SA 253 236 Total 253 236 During the year the company invoiced NBS Norman Broadbent SA for royalty income (Â£241,000), rechargeable costs (Â£4,000) and fee splits relating to jointly executed overseas searches (Â£8,000). All related party transactions took place at "arms-length". c. 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 on page 9. d. Year-end payables arising from the purchases of services: e. 2012 2011 Â£000 Â£000 Adelaide Capital Limited 21 19 Anderson Barrowcliff LLP 6 4 Brian Stephens & Company Ltd 4 - NBS Norman Broadbent SA 5 - Total 36 23 Payables to related parties arise from purchase transactions and are due one month after date of purchase. Payables bear no interest. e. Year-end receivables arising from the sale of services: f. 2012 2011 Â£000 Â£000 NBS Norman Broadbent SA 68 50 Total 68 50 Receivables owed by related parties arise from sales transactions and are due one month after date of purchase. Payables bear no interest. f. Loans from related parties: In order to assist the working capital position, certain directors have historically advanced loans to the Group, which were non-interest bearing and had no formal repayment terms. 2012 2011 Â£000 Â£000 At 1 January - 7 Loans repaid during the year - (7) At 31 December - - 26. 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 Â£162,000 (2011: Â£ 115,000). Under Section 17 of the Landlord and Tenant (Covenants) Act 1995 the Company has a contingent liability in respect of the lease on its previous registered office, which was assigned to a third party in April 2010. The Company could be required to meet the financial obligations of the lease should the assignee default on lease payments. The maximum potential liability would be Â£120,000 per annum expiring on 31 December 2015. The directors believe the likelihood of the assignee defaulting prior to expiry is remote due to the financial health and balance sheet position of the tenant, reviewed in their last published financial statements in March 2013. 27. AVAILABILITY OF REPORT AND ACCOUNTS Copies of the report and accounts will be posted to shareholders shortly and will be available on request from the Company's registered office at 12 St James's Square, London, SW1Y 4LB. Copies are also available on the Company's website: www.normanbroadbent.com

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