Final Results

28 May 2014 Norman Broadbent plc ("Norman Broadbent" or "the Group" or "the Company") Final Audited Results Norman Broadbent, a leading provider of executive search, leadership consultancy services and complementary recruitment services, announces its audited financial results for the year ended 31 December 2013. FINANCIAL HIGHLIGHTS - The Group continued to support its comprehensive diversification programme in 2013 with substantial additional investment in the two new businesses and it is anticipated that the investment process will be completed during 2014 - James Webber, our new CFO, joined the management team in early March 2014. In addition to being CFO, James has now been appointed by the Board to be Group Chief Operating Officer with immediate effect. James brings extensive experience in business services to Norman Broadbent, having worked in the office of the COO of EY, and has a background in corporate finance at a senior level - In May 2014, the Company sold Norman Broadbent SPRL, our 51 per cent. owned Belgium subsidiary which has been rebranded to Executive Talent Development, and has mutually agreed to end its licence agreement and sell our 20 per cent. holding in Norman Broadbent Spain, resulting in a refocused core executive search and leadership consulting business in the UK and USA - To further strengthen our Norman Broadbent brand, we are delighted to announce that Arcus Interim Partners will be renamed NB Interim with Justin Whitehouse who joined us earlier this year as the Managing Director - Results summary: 2013 2012 Revenue £000 £000 Executive Search * 5,639 6,673 Assessment coaching & talent management 1,144 586 Arcus 252 - Connecting Corporates 304 36 Overseas royalties 212 339 7,551 7,634 Operating loss (1,070) (38) Dividends received 18 - Finance cost (30) (35) Loss before tax (1,082) (73) Tax charge (70) (42) Loss after tax (1,152) (115) Loss attributable to: - Owners of the Company (1,050) (127) - Minority interest (102) 12 Loss for the year (1,152) (115) EPS - basic (7.85)p (1.16)p EPS - adjusted (7.40)p (0.52)p * Includes Interim in 2012 - Group revenue in the year was broadly flat at £7,551,000 (2012: £7,634,000) - UK executive search operating profit increased to £141,000 compared with £114,000 in the previous year - Group operating loss increased to £1,070,000 compared with a loss of £38,000 in the previous year reflecting, inter alia, the continued investment in the new subsidiary businesses (start-up losses of £640,000) and losses of £81,000 from the post year end discontinued Paris office (2012: nil) combined with the losses of £208,000 from the offices in Singapore and the USA(2012: nil) - Year end cash of £579,000 (2012: £1,009,000) - No bank debt other than the invoice discounting facility - The Group raised £700,000 in October 2013 primarily to provide growth capital for the accelerated development of the two new subsidiary businesses - Net assets of £2,800,000 (2012: £3,221,000) Pierce Casey, Chairman of Norman Broadbent, said: "In 2013 we continued to invest in growing our enhanced suite of service offerings and your Board believes that our management teams are well placed to successfully execute our broadened strategy profitably. Since year end, your Company has streamlined its international operations, refocusing on our core executive search and leadership consulting businesses in the UK and USA, and Arcus and Connecting Corporates. Your Board has sold Norman Broadbent SPRL, our 51 per cent. owned Belgian subsidiary to existing management. The company has been rebranded to Executive Talent Development. We wish Michel Debeock and his colleagues every success for the future. Further, following discussions with our colleagues in Norman Broadbent Spain (in which we hold a 20 per cent. equity interest) we have mutually agreed to end our license agreement and sell our 20 per cent. holding to the other existing shareholders. We wish Krista Walochik, Chairman, and her colleagues every success in their re-branded independent business. Finally, in March 2014 the Board terminated the Norman Broadbent executive search and leadership consulting licenses in Italy and the Middle East /North Africa both on a mutually agreed basis. This renewed focus now provides for a streamlined Group, with control of the Norman Broadbent brand worldwide." For further information please contact: Norman Broadbent plc Pierce Casey/Sue O'Brien/James 020 7484 0000 Webber Sanlam Securities UK Limited Simon Clements/Virginia 020 7628 2200 Bull/Catherine Miles Notes to Editors Norman Broadbent plc is a leading provider of senior and board executive search and leadership consultancy and assessment services. Through Arcus Global Partners the Group also provides specialist contingent offerings, including RPO and interim solutions. Connecting Corporates through Social Media Search provides digital research to assist in house recruitment and via Winning Work assists professional service firms to drive sales by bespoke exploitation of social media. Headquartered in London, the Group also has offices in Los Angeles with a representative office in Singapore. For further information visit www.normanbroadbent.com CHAIRMAN'S STATEMENT INTRODUCTION Norman Broadbent plc (the "Norman Broadbent" or Company" or the "Group") is a human capital consultancy group operating both in the UK and overseas. RESULTS FOR THE FINANCIAL YEAR The table below summarises the results of the Group: 2013 2012 Revenue £000 £000 Executive Search * 5,639 6,673 Assessment coaching & talent management 1,144 586 Arcus 252 - Connecting Corporates 304 36 Overseas royalties 212 339 7,551 7,634 Operating loss (1,070) (38) Dividends received 18 - Finance cost (30) (35) Loss before tax (1,082) (73) Tax charge (70) (42) Loss after tax (1,152) (115) Loss attributable to: - Owners of the Company (1,050) (127) - Minority interest (102) 12 Loss for the year (1,152) (115) EPS - basic (7.85)p (1.16)p EPS - adjusted (7.40)p (0.52)p * Includes Interim in 2012 Group revenue decreased marginally to £7,551,000 from £7,634,000 in 2012, while the operating loss increased to £1,070,000 compared with a loss of £38,000 in the previous year. The loss after tax, pre-minority interests, was £1,152,000 compared to £115,000 in 2012. Executive search revenue of £5,639,000 (2012: £6,673,000) reflects a fall of 15.7 per cent. in UK executive search revenues to £5,409,000 from £6,413,000 in 2012 and an increase of 18.6 per cent. in overseas executive search revenues to £230,000 from £194,000 in 2012. The reduction in UK executive search revenues reflected a reduction in fee generating headcount during the year, but with higher profitability. The table below summarises the operating losses and profits of the Group: 2013 2012 (Loss)/Profit £000 £000 Executive Search * (148) 180 Assessment coaching & talent management (86) (115) Arcus (427) - Connecting Corporates (213) 3 Overseas royalties 105 220 Central costs (313) (361) Loss before tax (1,082) (73) Tax charge (70) (42) Loss after tax (1,152) (115) Loss attributable to: - Owners of the Company (1,050) (127) - Minority interest (102) 12 Loss for the year (1,152) (115) EPS - basic (7.85)p (1.16)p EPS - adjusted (7.40)p (0.52)p * Includes Interim in 2012 The executive search operating loss for the period included a UK executive search operating profit of £141,000 (2012: £114,000). Overseas executive search operating losses amounted to £289,000 (2012: nil). The overseas executive search operating losses reflected £208,000 of operating losses in Singapore and the USA (2012: nil) and £81,000 to the French office (2012: nil). Assessment, coaching and talent management revenues grew by 95 per cent. to £1,144,000 (2012: £586,000) reflecting a full 12 month performance of our Belgium subsidiary Norman Broadbent SPRL (2012: 2 months) and broadly flat UK Assessment, coaching and talent management revenues. The operating loss of £86,000 (2012: £115,000 loss) reflected profitable operations in Belgium and a loss in the UK as the business was repositioned following the death of its founder in late 2012. The UK business, under the leadership of Carole Bodell, now has a high quality product range and is attracting exciting new clients. AGP (previously known as Arcus Global Partners) and Connecting Corporates, the two new subsidiary businesses established in early 2013 and late 2012 respectively, have between them generated £556,000 in revenue (2012: £36,000) and as anticipated generated start-up losses totalling £640,000 (2012: Profit £3,000), reflecting inter alia the accelerated hiring of key personnel. Revenue from overseas royalties totalled £212,000 (2012: £339,000), a decline of 37 per cent. as a result of the difficult trading conditions experienced by licensees in Italy and the Middle East. CORPORATE DEVELOPMENTS AND BRAND MANAGEMENT The Company has invested substantially in AGP and Connecting Corporates, both of which have now built strong teams and are creating promising revenue streams from quality corporate clients. We anticipate that both businesses, while absorbing resources in the short term, will become profitable during the year. Since year end, your Company has streamlined its international operations, refocussing on our core executive search and leadership consulting businesses in the UK and USA, and AGP and Connecting Corporates. The Board has sold Norman Broadbent SPRL, our 51 per cent. owned Belgian subsidiary to existing management. The Company has been rebranded to Executive Talent Development. We wish Michel Debeock and his colleagues every success for the future. Further, following discussions with our colleagues in Norman Broadbent Spain (in which we hold a 20 per cent. equity interest) we have mutually agreed to end our license agreement and sell our 20 per cent. holding to the other existing shareholders. We wish Krista Walochik, Chairman, and her colleagues every success in their re-branded independent business. Finally, in March 2014 the Board terminated the Norman Broadbent executive search and leadership consulting licenses in Italy and the Middle East /North Africa both on a mutually agreed basis. The decision reflected the de-minimus revenues arising from these licenses and offices due to local market conditions, and in the case of the Middle East / North Africa a significant downsizing of its executive search team. This refocusing has provided the Board with the opportunity to review how best to enhance the value of the Norman Broadbent brand and IP internationally. SHARE PLACING In October 2013, the Group raised £700,000 (£684,000 net of expenses) through the issue, principally to existing institutional investors, of 1,750,000 new ordinary shares in the capital of the Company at a price of 40 pence per share (the "October Subscription"). The proceeds are being utilised primarily to accelerate the growth of AGP and Connecting Corporates. FINANCIAL POSITION The consolidated Group statement of financial position was strengthened through the October subscription. As at 31 December 2013, consolidated net assets were £2,800,000, compared to £3,221,000 as at 31 December 2013. Group net current assets decreased to £762,000 (2012: £1,091,000). Group cash amounted to £579,000 (2012: £1,009,000). Net cash outflow from operations in 2013 was £732,000 (2012: £250,000) with £640,000 of these funds reflecting the start-up losses arising from the development of Arcus and Connecting Corporates. Net cash inflow from financing activities amounted to £521,000 (2012: £959,000) relating primarily to the net funds received from the October Subscription. At 31 December 2013, the only exposure to bank borrowings was the Group's revolving invoice discounting facility, and funds drawn down against this facility were £802,000 (2012: £965,000) against UK trade receivables of £1,255,000 (2012: £1,450,000). DIVERSITY OF PRODUCT OFFERINGS; STRATEGIC OUTLOOK To further reinforce the Norman Broadbent brand, Arcus Global Partners has been rebranded as AGP , and Arcus Interim Partners has been renamed NB Interim Management with Justin Whitehouse, who joined us earlier this year, as the Managing Director. With the additions of AGP, NB Interim Management and Connecting Corporates, and refocussing on our core executive search and leadership consulting businesses, the Group is positioning itself to ensure our business is fit for purpose in an ever evolving recruitment market and to meet our client's needs across the spectrum. - Norman Broadbent retains its focus on board, Chairman, Executive and Non-Executive directors and senior executive level search services with a focus on "Beyond the Obvious" solutions and building better boards with diverse skill sets. - NB Interim Management a dedicated senior interim management service focussed on enhanced client returns on investment and long term benefits. - NB Leadership Consulting focus on bespoke board and senior management assessment and development services for corporates, professional service providers and private equity companies. - AGP: An innovative and flexible recruitment business offering clients a solution driven approach including single assignments, talent pooling and executive RPO. - Connecting Corporates: A social media consultancy that helps build and manage executive profiles for business development, networking, outplacement or employee brand positioning. - Social Media Search: A digital business that creates rapid turnaround lists for in-house recruiters, creating virtual communities for future hiring programmes and pre-qualified candidates for specific hiring needs. APPOINTMENT OF GROUP CHIEF OPERATING OFFICER AND STAFF James Webber, our new CFO, joined the management team in early March 2014 enabling a smooth handover from Ben Felton who, as previously announced, resigned with effect from 30 March 2014 to take up a position at a larger organisation. We thank Ben for his role over the past five years and wish him every success in his new role. In addition to being CFO, James has now been appointed by the Board to Group Chief Operating Officer with immediate effect James brings extensive experience in business services to Norman Broadbent, having worked in the office of the COO of EY, and has a background in corporate finance at a senior level. The expanded Group now comprises 80 people in the UK and your Board would like to express its thanks to all our management teams and staff, particularly in view of the diversification programme taking place through our new complementary subsidiaries. CURRENT TRADING Trading in January and February 2014 in UK executive search was strong whilst March 2014 was disappointing. Overall, Group revenues in the first quarter of 2014 were marginally ahead of the same period last year. For the second quarter to 30 June 2014 the UK executive search team anticipates an encouraging performance based on activity to date and the current strong pipeline, and our start up bespoke contingency, and digital start ups are contributing to growing revenues in a satisfactory way. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2013 Note 2013 2012 £000 £000 REVENUE 1/2 7,551 7,634 Cost of sales (392) (208) GROSS PROFIT 2 7,159 7,426 Operating expenses (8,354) (7,133) Other income 125 - GROUP OPERATING (LOSS)/PROFIT) (1,070) 293 BEFORE RESTRUCTURING COSTS Re-structuring costs 4 - (331) GROUP OPERATING LOSS (1,070) (38) Dividends received 18 - Net finance cost 7 (30) (35) LOSS ON ORDINARY ACTIVITIES BEFORE INCOME TAX 3 (1,082) (73) Income tax expense 6 (70) (42) LOSS FOR THE YEAR (1,152) (115) OTHER COMPREHENSIVE INCOME Foreign currency translation differences - foreign (12) 2 operations TOTAL COMPREHENSIVE INCOME FOR THE YEAR (1,164) (113) Loss attributable to: - Owners of the Company (1,050) (127) - Non-controlling interests (102) 12 Loss for the year (1,152) (115) Total comprehensive income attributable to: - Owners of the Company (1,062) (127) - Non-controlling interests (102) 14 Total comprehensive income for the year (1,164) (113) Loss per share 8 - Basic (7.85)p (1.16)p - Diluted (7.85)p (1.16)p Adjusted loss per share 8 - Basic (7.40)p (0.52)p - Diluted (7.40)p (0.52)p CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2013 Notes 2013 2012 £000 £000 Non-Current Assets Intangible assets 10 1,922 1,922 Property, plant and equipment 11 172 139 Deferred tax assets 6 69 69 TOTAL NON-CURRENT ASSETS 2,163 2,130 Current Assets Trade and other receivables 13 2,339 2,267 Cash and cash equivalents 14 579 1,009 TOTAL CURRENT ASSETS 2,918 3,276 TOTAL ASSETS 5,081 5,406 Current Liabilities Trade and other payables 15 1,333 1,075 Deferred consideration 16/17 - 73 Bank overdraft and interest bearing loans 16/17 802 965 Corporation tax liability 21 72 TOTAL CURRENT LIABILITIES 2,156 2,185 NET CURRENT ASSETS 762 1,091 Non-Current Liabilities Provisions 21 125 - TOTAL LIABILITIES 2,281 2,185 TOTAL ASSETS LESS TOTAL LIABILITIES 2,800 3,221 EQUITY Issued share capital 18 5,875 5,857 Share premium account 18 10,238 9,572 Retained earnings (13,356) (12,353) EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 2,757 3,076 Non-controlling interests 43 145 TOTAL EQUITY 2,800 3,221 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2013 Attributable to owners of the Company Non- Share Share Retained Total controlling Total Capital Premium Earnings Equity interests Equity £000 £000 £000 £000 £000 £000 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 income - - - - 2 2 Total comprehensive income for the year - - (127) (127) 14 (113) Transactions with owners of the Company, recognised directly in equity: Issue of ordinary shares 24 814 - 838 - 838 Credit to equity for share based payments - - 71 71 - 71 Acquisition of subsidiary with non-controlling interests - - - - 131 131 Total transactions with owners of the Company, recognised directly in equity 24 814 71 909 131 1,040 Balance at 31st December 2012 5,857 9,572 (12,353) 3,076 145 3,221 Balance at 1st January 2013 Loss for the year - - (1,050) (1,050) (102) (1,152) Total other comprehensive income - - (12) (12) - (12) Total comprehensive income for the year - - (1,062) (1,062) (102) (1,164) Transactions with owners of the Company, recognised directly in equity: Issue of ordinary shares 18 666 - 684 - 684 Credit to equity for share based payments - - 59 59 - 59 Total transactions with owners of the Company, recognised directly in equity 18 666 59 744 - 744 Balance at 31st December 2013 5,875 10,238 (13,356) 2,757 43 2,800 CONSOLIDATED STATEMENT OF CASH FLOW For the year ended 31 December 2013 Notes 2013 2012 £000 £000 Net cash used in operating activities (i) (732) (250) Cash flows from investing activities and servicing of finance Net finance cost (30) (35) Dividends received 17 - Payments to acquire tangible fixed assets 11 (122) (92) Repayment of deferred consideration (73) (408) Net cash inflow on acquisition of subsidiary 23 - 181 Net cash used in investing activities (208) (354) Cash flows from financing activities Net cash inflows from equity placing 18 684 727 Repayment of secured loans - (109) (Repayment)Increase in invoice discounting 16 (163) 341 Net cash from financing activities 521 959 Net increase in cash and cash equivalents (419) 355 Net cash and cash equivalents at beginning of period 1,009 650 Effects of exchange rate changes on cash balances held in foreign (11) 4 currencies Net cash and cash equivalents at end of period 579 1,009 Analysis of net funds Cash and cash equivalents 579 1,009 Borrowings due within one year (802) (965) Deferred consideration - (73) Net funds (223) (29) Note (i) Reconciliation of operating loss to net cash from operating activities 2013 2012 £000 £000 Operating loss (1,070) (38) Depreciation/impairment of property, plant and equipment 89 84 Share based payment charge 60 71 Increase in trade and other receivables (72) (438) Increase in trade and other payables 257 165 Increase in provisions 125 - Taxation paid (121) (94) Net cash used in operating activities (732) (250) NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES The principle accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to both years presented unless otherwise stated. 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 the 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 2013 or 31 December 2012. Statutory accounts for 31 December 2012 have been delivered to the Registrar of Companies and those for 31 December 2013 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 2013 or for 2012. Going concern The Group reported an operating loss in the year to 31 December 2013 of £1.07 million compared with an operating loss of £0.04 million in 2012. These consolidated losses were primarily driven by the expected start-up losses of two new subsidiary businesses established in early 2013 (totalling £0.71 million) and continued losses incurred in the wholly owned overseas offices in Singapore, USA and France (totalling £0.29 million) which were established in the last 24 months. The Consolidated Statement of Financial Position shows a strong net asset position at 31 December 2013 of £2.80 million (2012: £3.22million) with cash at bank of £0.58 million (2012: £1.01 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 2013 Assessment, Arcus Global Social Media Executive Overseas coaching & Partners Search & Un- Search Royalties talent mgmt. Consulting allocated Total £000 £000 £000 £000 £000 £000 £000 Revenue 5,639 212 1,144 252 304 - 7,551 Cost of sales (101) - (287) (1) (3) - (392) Gross profit 5,538 212 857 251 301 - 7,159 Operating expenses (5,724) (107) (934) (674) (512) (313) (8,264) Other operating income 142 - - - - - 142 Finance (costs) / income (31) - 2 (1) - - (30) Depreciation and amort. (73) - (11) (3) (2) - (89) Loss before tax (148) 105 (86) (427) (213) (313) (1,082) Net assets 3,537 - (37) (470) (229) - 2,800 BUSINESS SEGMENTS 2012 Assessment, Social Media Executive Overseas coaching & Search & Un- Search Royalties talent mgmt. Interim Consulting allocated Total £000 £000 £000 £000 £000 £000 £000 Revenue 6,607 339 586 66 36 - 7,634 Cost of sales (118) - (89) - (1) - (208) Gross profit 6,489 339 497 66 35 - 7,426 Operating expenses (5,931) (119) (612) - (32) (357) (7,051) Other operating income - - - - - - - Re-structuring costs (331) - - - - - (331) Finance costs (31) - - - - (4) (35) Depreciation and amort. (82) - - - - - (82) Profit/(loss) before tax 114 220 (115) 66 3 (361) (73) Net assets 3,129 - 89 - 3 - 3,221 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 five 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 2013 Assessment, Arcus Global Social Media Executive Overseas coaching & Partners Search & Un- Search Royalties talent mgmt. Consulting allocated Total £000 £000 £000 £000 £000 £000 £000 Revenue United Kingdom 5,409 - 461 238 304 - 6,412 Europe 53 194 677 14 - - 938 Other 177 18 6 - - - 201 Total 5,639 212 1,144 252 304 - 7,551 Gross profit United Kingdom 5,351 - 410 237 301 - 6,299 Europe 53 194 447 14 - - 708 Other 134 18 - - - - 152 Total 5,538 212 857 251 301 - 7,159 Profit/(loss) before tax United Kingdom 141 - (238) (427) (213) (313) (1,051) Europe (81) 105 152 - - - 176 Other (208) - - - - - (208) Total (148) 105 (86) (427) (213) (313) (1,082) Net assets United Kingdom 3,537 - (37) (470) (229) - 2,800 Total 3,537 - (37) (470) (229) - 2,800 BUSINESS SEGMENTS 2012 Assessment, Social Media Executive Overseas coaching & Search & Un- Search Royalties talent mgmt. Interim Consulting allocated Total £000 £000 £000 £000 £000 £000 £000 Revenue United Kingdom 6,413 - 471 66 36 - 6,986 Europe 148 275 114 - - - 537 Other 46 64 1 - - - 111 Total 6,607 339 586 66 36 - 7,634 Gross profit United Kingdom 6,302 - 428 66 35 - 6,831 Europe 148 275 69 - - - 492 Other 39 64 - - - - 103 Total 6,489 339 497 66 35 - 7,426 Profit/(Loss) before tax United Kingdom 114 - (63) 66 3 (361) (241) Europe - 157 (51) - - - 106 Other - 63 (1) - - - 62 Total 114 220 (115) 66 3 (361) (73) Net assets United Kingdom 3,129 - 89 - 3 - 3,221 Total 3,129 - 89 - 3 - 3,221 Turnover by location is not materially different from turnover by destination. 3. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 2013 2012 £000 £000 Loss on ordinary activities before taxation is stated after charging: Depreciation and impairment of property, plant and equipment 89 84 (Gain) / loss on foreign currency exchange (3) 16 Operating lease rentals: Land and buildings 426 327 Auditors' remuneration: Audit work 42 34 Non-audit work - - The Company audit fee in the year was £12,000 (2012: £11,500). 4. RESTRUCTURING 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. 2013 2012 £000 £000 Personnel - 331 Total re-structuring costs - 331 5. STAFF COSTS The average number of full time equivalent persons (including directors) 2013 2012 employed by the Group during the period was as follows: No. No. Sales and related services 35 25 Administration 45 30 80 55 Staff costs (for the above persons): £000 £000 Wages and salaries 4,950 4,605 Social security costs 527 476 Defined contribution pension cost 203 206 Share based payment expense 60 71 5,740 5,358 The emoluments of the directors are disclosed as required by the Companies Act 2006 in the Directors' Remuneration Report. The table of directors' emoluments has been audited and forms part of the financial statements. This also includes details of the highest paid director. 6. TAX EXPENSE (a) Tax charged in the income statement 2013 2012 Taxation is based on the profit for the year and comprises: £000 £000 Current tax: United Kingdom corporation tax at 23.25% (2012: 24.5%) based on profit for the year 19 29 Foreign Tax 51 13 Adjustment in respect of prior years - - Total current tax 70 42 Deferred tax: Origination and reversal of temporary differences - - Tax charge/(credit) 70 42 (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: 2013 2012 £000 £000 Loss on ordinary activities before taxation (1,082) (73) Tax on loss on ordinary activities at standard UK corporation tax rate of 23.25% (2012: 24.5%) (252) (18) Effects of: Expenses not deductible 33 32 Foreign tax suffered 19 18 Non-taxable income (4) (1) Capital allowances in excess of depreciation 9 14 Utilisation of ACT (13) (2) Marginal rate relief (2) Adjustment to losses carried forward 280 (1) Current tax charge for the year 70 42 (c) Deferred tax Tax losses Total £000 £000 At 01 January 2012 (69) (69) Credited to the income statement in 2012 - - At 31 December 2012 (69) (69) Credited to the income statement in 2013 - - At 31 December 2013 (69) (69) At 31 December 2013 the Group had capital losses carried forward of £8,130,000 (2012: £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 £10,843,243 (2012: £10,000,000) trading losses carried forward, which includes £8,987,000 losses transferred from BNB Recruitment Consultancy Ltd in 2011. A deferred tax asset of £1,557,000 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: 2013 2012 Deferred tax assets: £000 £000 Tax losses carried forward 69 69 Total 69 69 7. NET FINANCE COST 2013 2012 £000 £000 Interest payable on bank loans and overdrafts 30 35 Total 30 35 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: 2013 2012 Loss attributable to shareholders £(1,050,000) £(127,000) Weighted average number of ordinary shares 13,385,224 10,929,676 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. 2013 2012 Loss attributable to shareholders £(1,050,000) £(127,000) Weighted average number of ordinary shares 13,385,224 10,929,676 - assumed conversion of share options - - - assumed conversion of warrants - - Total 13,385,224 10,929,676 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. 2013 2013 2013 2012 2012 2012 Basic pence per Diluted pence Basic pence per Diluted pence share per share share per share £000 £000 Basic earnings Loss after tax (1,050) (7.85) (7.85) (127) (1.16) (1.16) Adjustments Share based payment charge 60 0.45 0.45 71 0.64 0.64 Adjusted earnings (990) (7.40) (7.40) (56) (0.52) (0.52) 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 £128,000 (2012: £192,000). 10. INTANGIBLE ASSETS Goodwill arising on consolidation Group £000 Balance at 1 January 2012 3,690 Additions (note 24) 112 Balance at 31 December 2012 3,802 Balance at 31 December 2013 3,802 Provision for impairment Balance at 1 January 2012 1,880 Balance at 31 December 2012 1,880 Balance at 31 December 2013 1,880 Net book value At 1 January 2012 1,810 At 31 December 2012 1,922 At 31 December 2013 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: Human Asset Development Norman Broadbent International £000 £000 Total £000 At 1 January 2012 1,750 60 1,810 At 31 December 2012 1,862 60 1,922 At 31 December 2013 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 £1,212,000 (2012: £1,212,000) and cash generated from International Royalties of £650,000 (2012: £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, 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 2014 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 (2012: 10 per cent) and 7 per cent. for Human Asset Development International (2012: 7 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 (2012: 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 2013 the recoverable value of the Norman Broadbent CGU is £2,600,000 and the Human Asset Development International CGU is £400,000. 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 Land and Office and buildings - computer Fixtures and Motor leasehold equipment fittings Vehicles Total £000 £000 £000 £000 £000 Cost Balance at 1 January 2012 62 176 129 - 367 Additions - 53 - - 53 Arising on acquisition of subsidiaries - 7 19 13 39 Disposals - - - - - Balance at 31 December 2012 62 236 148 13 459 Additions 81 38 3 - 122 Disposals (59) (99) (87) - (245) Balance at 31 December 2013 84 175 64 13 336 Accumulated depreciation Balance at 1 January 2012 32 98 106 - 236 Charge for the year 22 49 11 2 84 Disposals - - - - - Balance at 31 December 2012 54 147 117 2 320 Charge for the year 20 50 14 5 89 Disposals (59) (99) (87) - (245) Balance at 31 December 2013 15 98 44 7 164 Net book value At 1 January 2012 30 78 23 - 131 At 31 December 2012 8 89 31 11 139 At 31 December 2013 69 77 20 6 172 The Group had no capital commitments as at 31 December 2013 (2012: £Nil). The above assets are owned by Group companies; the Company has no fixed assets. 12. INVESTMENTS Shares in subsidiary undertakings Company £000 Cost Balance at 1 January 2012 5,786 Additions (see note below) 255 Balance at 31 December 2012 6,041 Additions (see note below) 10 Balance at 31 December 2013 6,051 Provision for impairment Balance at 1 January 2012 3,926 Balance at 31 December 2012 3,926 Impairment in the year - Balance at 31 December 2013 3,926 Net book value At 1 January 2012 1,860 At 31 December 2012 2,115 At 31 December 2013 2,125 During the year, the entire issued share capital of £10,000 in Arcus Global Partners Limited was acquired from Norman Broadbent Executive Search Limited, a wholly owned subsidiary, to the Company. In 2012, the company acquired a 51 per cent interest in Acker Deboeck and Company for a total consideration of £248,000 (see note 24). The Company also incorporated wholly owned subsidiaries in Singapore and USA, with combined share capital of £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 2013 the Company held the following ownership interests: Principal Group investments: Country of incorporation Principal activities Description and proportion or registration and of shares held by the operation Company Norman Broadbent Executive Search Ltd England and Wales Executive search 100% ordinary shares Norman Broadbent Overseas Ltd England and Wales Executive search 100% ordinary shares Norman Broadbent Leadership Consulting England and Wales Assessment, coaching 100% ordinary shares Limited (formerly Human Asset Development and talent mgmt. International Ltd) Arcus Global Partners Ltd England and Wales Contingent Search 100% ordinary shares Norman Broadbent Inc United States of America Executive search 100% ordinary shares The NB Consultancy (Singapore) Pte. Ltd Singapore Executive search 100% ordinary shares Norman Broadbent SPRL Belgium Executive search, 51% ordinary shares assessment, coaching and talent mgmt. Norman Broadbent S.A.S.*** France Executive search 51% ordinary shares Connecting Corporates Ltd England and Wales Social Media Search & 51% ordinary shares Consulting Bancomm Ltd England and Wales Dormant 100% ordinary shares Norman Broadbent Ireland Ltd** Republic of Ireland Dormant 100% ordinary shares Substantial Shareholdings: NBS Norman Broadbent SA* Spain Executive search, 20% ordinary shares assessment, coaching and talent mgmt. * 20% of the issued share capital of this company is owned by Norman Broadbent Overseas Ltd, a wholly owned subsidiary of the Company. ** 100% of the issued share capital of this company is owned by Norman Broadbent Overseas Ltd. *** 100% of the issued share capital of this company is owned by Norman Broadbent SPRL which is 51% owned by the Company. 13. TRADE AND OTHER RECEIVABLES Group 2013 2012 £000 £000 Trade receivables 1,829 1,655 Less: provision for impairment (72) (20) Trade receivables - net 1,757 1,635 Other debtors 417 354 Prepayments and accrued income 165 278 Due from Group undertakings - - Total 2,339 2,267 As at 31 December 2013, Group trade receivables of £1,197,000 (2012: £836,000) 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 2013 2012 £000 £000 Up to 3 months 869 800 3 to 6 months 238 1 6 to 12 months 90 35 Total 1,197 836 The largest amount due from a single debtor at 31 December 2013 represents 6.8% (2012: 10.86%) of the total trade receivables balance outstanding. As at 31 December 2013, Group trade receivables of £72,000 (2012: £20,000) were past their due date and considered 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: 2013 2012 £000 £000 At 1 January 20 87 Provision for receivable impairment 72 20 Receivables written-off as uncollectable (20) (87) At 31 December 72 20 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. 14. CASH AND CASH EQUIVALENTS Group 2013 2012 £000 £000 Cash at bank and on hand 579 1,009 Total 579 1,009 There is no material difference between the carrying value and the fair value of the Group's and parent company's cash at bank and in hand. 15. TRADE AND OTHER PAYABLES Group 2013 2012 £000 £000 Trade payables 389 479 Due to Group undertakings - - Other taxation and social security 353 317 Other payables 72 75 Accruals 519 204 Total 1,333 1,075 There is no material difference between the carrying value and the fair value of the Group's and parent company's trade and other payables. 16. BORROWINGS Group Maturity profile of borrowings 2013 2012 £000 £000 Current Bank overdrafts and interest bearing loans: Invoice discounting facility (see note (a) below) 802 965 802 965 Deferred consideration - 73 802 1,038 Total 802 1,038 The carrying amounts and fair value of the Group's borrowings, which are all denominated in sterling, are as follows: Carrying amount Fair value 2013 2012 2013 2012 £000 £000 £000 £000 Bank overdrafts and interest bearing loans 802 965 802 965 Deferred consideration - 73 - 73 Total 802 1,038 802 1,038 a) Invoice discounting facilities: Norman Broadbent Executive Search Limited and Arcus Global Partners Limited operate independent invoice discounting facilities, provided by Leumi ABL Limited, which are secured by the trade receivables of the respective companies and also a cross corporate guarantee and indemnity deed dated 20 July 2011. The financial terms of the facilities are outlined below: Norman Broadbent Executive Search Limited: 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 £1,500,000. At 31 December 2013, the outstanding balance on the facility of £680,000 (2012: £965,000) was secured by trade receivables of £1,104,000 (2012:£1,450,000). Interest is charged on the drawn down funds at a rate of 2.50% above the bank base rate (2012: 2.75%). Arcus Global Partners Limited: Funds are available to be drawn down at an advance rate of 85% against trade receivables of Arcus Global Partners Limited that are aged less than 120 days, with the facility capped at £750,000. At 31 December 2013, the outstanding balance on the facility of £122,000 (2012: £Nil) was secured by trade receivables of £151,000. Interest is charged on the drawn down funds at a rate of 2.75% above the bank base rate. 17. 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 2013 2012 £000 £000 Financial Assets Trade and other receivables 2,383 2,267 Cash and cash equivalents 579 1,009 Financial Liabilities Trade and other payables 1,333 1,075 Bank overdrafts and interest bearing loans 802 965 Deferred consideration - 73 Corporation tax liability 21 72 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 financial statements. 18. SHARE CAPITAL AND PREMIUM 2013 2012 Allotted and fully paid: £000 £000 Ordinary Shares: 14,798,686 Ordinary shares of 1.0p each (2012: 13,048,686) 148 130 Deferred Shares: 23,342,400 Deferred A shares of 4.0p each (2012: 23,342,400) 934 934 907,118,360 Deferred shares of 0.4p each (2012: 907,118,360) 3,628 3,628 1,043,566 Deferred B shares of 42.0p each (2012: 1,043,566) 438 438 2,504,610 Deferred shares of 29.0p each (2012: 2,504,610) 727 727 5,727 5,727 Total 5,875 5,857 Deferred A Shares of 4.0p each The Deferred A Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the company. In the event of a winding up, the shares carry a right to repayment only after the holders of Ordinary Shares have received a payment of £10 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 £10,000 per Ordinary Share. The company retains the right to transfer or cancel the shares without payment to the holders thereof. Deferred B Shares of 42.0p each The Deferred B Shares carry no right to dividends or distributions or to receive notice of or attend general meetings of the company. In the event of a winding up, the shares carry the right to repayment only after the holders of Ordinary Shares have received a payment of £10 million per Ordinary Share. The company retains the right to cancel the shares without payment to the holders thereof. The rights attaching to the shares shall not be varied by the creation or issue of shares ranking 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 £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 Ordinary Deferred Share shares shares shares premium Total (000s) £000 £000 £000 £000 At 1 January 2012 10,608 106 5,727 8,758 14,591 Proceeds from share placing (note (a) 2,122 21 - 721 742 below) Transaction costs related to share - - - (15) (15) placing Shares issued on acquisition 319 3 - 108 111 At 31 December 2012 13,049 130 5,727 9,572 15,429 Proceeds from share placing (note (b) 1,750 18 - 682 700 below) Transaction costs related to share - - - (16) (16) placing At 31 December 2013 14,799 148 5,727 10,238 16,113 a) 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 £742,000. Transaction costs of £15,000 were incurred resulting in net cash proceeds of £727,000. b) Share placing in October 2013: On 22 October 2013, the Company issued 1,750,000 new ordinary 1.0p shares for a total cash consideration of £700,000. Transaction costs of £16,000 were incurred resulting in net cash proceeds of £684,000. 19. SHARE BASED PAYMENTS 19.1 Share Options The Company has an approved EMI share option scheme for full time employees and directors. 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. Movements in the number of share options and their related weighted average exercise prices are as follows: Approved EMI share option scheme Avg. exercise price Number of options per share (p) At 1 January 2012 63.01 1,182,058 Forfeited 63.05 (185,818) At 31 December 2012 62.92 996,240 Forfeited 61.13 (84,962) Granted 42.50 91,765 At 31 December 2013 61.20 1,003,042 Share options outstanding at the end of the year have the following expiry date and exercise prices: Expiry date Exercise price per Share options share (p) 2013 2012 2020 52.50 169,523 198,094 2021 65.50 741,754 798,146 2023 42.50 91,765 - Total 1,003,042 996,240 Out of the 1,003,042 outstanding options (2012: 996,240), no options were exercisable at the year end (2012: None) as they were all `underwater'. The weighted average fair value of the share options granted in 2013, determined using the Trinomial Valuation Model, was 23.8 pence (options granted in 2011: 37.5 pence and options granted in 2010: 21.3 pence). The significant inputs into the model were weighted average share price of 42.5 pence at the grant date (2011: 65.5 pence and 2010: 52.5 pence), exercise price shown above, volatility of 75% (2011 and 2010: 75%), dividend yield of 0% (2011 and 2010: 0%), an expected option life of 10 years (2011 and 2010: 10 years) and an annual risk-free interest rate of 3.38% (2011: 3.38% and 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. 19.2 Warrants On 14 June 2010, the Company issued warrants over shares in the Company to two directors on the basis of one warrant for one ordinary share. The warrants had an exercise price of 45 pence, could be exercised in full or in part immediately and expired on 31 May 2013. Movements in the number of warrants and their related weighted average exercise prices are as follows: Warrants Avg. exercise price per share (p) Number of warrants At 1 January 2012 45.00 166,666 At 31 December 2012 45.00 166,666 Forfeited 45.00 (166,666) At 31 December 2013 - - There were no Warrants outstanding at the end of the year. See Note 6 of the report and accounts for the total expense recognised in the income statement for share options and warrants granted to directors and employees. 20. 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 2013, the total future value of minimum lease payments are due as follows: Land and Buildings 2013 2012 £000 £000 Within one year 297 156 Later than one year and not later than five years 1,028 - Total 1,325 156 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. 21. PROVISIONS Group 2013 2012 £000 £000 At 1 January - - Provisions made during the year 125 - At 31 December 125 - Current liability - - Non-current liability 125 - At 31 December 125 - On the 6 March 2013 the Company signed a new ten year lease with a five year break for its main office in London. On signing the new lease the Company inherited the office fit-out from the previous tenant. Under the terms of the new lease the Company is obliged to return vacant possession to the landlord with the office returned to its original state. The Company has had the present cost of the future works required to return the office to its original state valued by an independent firm of advisors and this non-current liability of £125,000 has been provided for in the financial period. The Company received a one-off payment of £250,000 from the previous tenant in satisfaction of various costs and liabilities that it inherited with the new lease. The net balance of this receipt has been reported within Other Income in the Consolidated Statement of Comprehensive Income. 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 £203,000 (2012: £206,000). At the year end £23,000 of contributions were outstanding (2012: £18,000). 23. BUSINESS COMBINATIONS There were no business combinations during 2013. 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, extended the European reach of the Norman Broadbent executive search brand whilst significantly enhancing the leadership consulting and board evaluation services of the Group. 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: 2012 £000 Cash 137 Equity instruments (319,285 ordinary 1.0p shares - note 20) 111 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: £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 were determined on a provisional basis: (a) Trade receivables comprise gross contractual amounts of £60,000 and £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 £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. No new information has been obtained in the 12 months from the acquisition date which would require the acquisition accounting to be revised by a material amount. Goodwill: Goodwill was recognised as a result of the acquisition as follows: £000 Total consideration transferred 248 Non-controlling interests, based on their proportionate interest in the recognised amounts of assets and liabilities of Acker Deboeck 131 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 £10,000. These costs were included in "operating expenses" in the consolidated statement of comprehensive income in 2012. 24. RELATED PARTY TRANSACTIONS The following transactions were carried out with related parties: (a) Purchase of services: 2013 2012 £000 £000 Adelaide Capital Limited 52 141 Anderson Barrowcliff LLP 14 31 Brian Stephens & Company Ltd 22 5 Norman Broadbent SAS 37 8 Arquius Colombia SAS 48 - Connecting Corporates Limited 11 - Total 184 185 During the year Adelaide Capital Limited invoiced the Group for the directors' fees of P Casey £31,000 and corporate finance services £21,000 (2012 total: £141,000). P Casey is a director of Adelaide Capital Limited. Brian Stephens & Company Ltd invoiced the Group for the directors' fees of B Stephens £20,000 and business related travel costs £2,000 (2012 total: £5,000). B Stephens is a director of Brian Stephens & Company Ltd. Taxation and company secretarial services of £9,000 were acquired from Anderson Barrowcliff LLP, an accountancy firm of which R Robinson is a partner. Anderson Barrowcliff also invoiced the Group for R Robinson's director's fees £5,000. The remaining director fees for R Robinson was paid through PAYE £15,000 (2012 total: £31,000). During the year the Group incurred fee splits relating to jointly executed overseas searches £37,000 from Norman Broadbent SAS (2012: £8,000). The Group owns a 51% stake in Norman Broadbent SAS. During the year the Group incurred fee splits relating to jointly executed overseas searches £48,000 from Arquius Colombia SAS (2012: nil). The Group owns a 20% stake in NBS Norman Broadbent SA which owns 95% of Arquius Colombia SAS. During the year the Group acquired research services from Connecting Corporates Limited £11,000 (2012: nil). The Group owns a 51% stake in Connecting Corporates Limited. All related party expenditure took place via "arms-length" transactions. (a) Sale of services 2013 2012 £000 £000 NBS Norman Broadbent SA 175 253 Norman Broadbent SPRL 11 - Connecting Corporates Limited 42 - Total 228 253 During the year the Group invoiced NBS Norman Broadbent SA for royalty income £175,000 (2012: £253,000). The Group owns a 20% stake in NBS Norman Broadbent SA. During the year the Company invoiced Norman Broadbent SPRL for management fees £11,000 (2012: nil). During the year the Group recharged group services incurred for the benefit of Connecting Corporates Limited to Connecting Corporates Limited at cost £42,000 (2012: nil). All related party transactions took place at "arms-length". (b) Provision of loans 2013 2012 £000 £000 Connecting Corporates Limited 275 - Total 275 - During the year the Group provided loans to Connecting Corporates Limited to support working capital requirements of this company £275,000 (2012: nil). The loans are non-interest bearing and are repayable on demand. At the year end, £275,000 (2012: nil) was outstanding and due to the Group. (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 in the financial statements. (d) Year-end payables arising from the purchases of services: 2013 2012 £000 £000 Adelaide Capital Limited - 21 Anderson Barrowcliff LLP - 6 Brian Stephens & Company Ltd 6 4 NBS Norman Broadbent SA - 5 Connecting Corporates Limited 11 - Norman Broadbent SAS 37 - Arquius Colombia SAS 19 - Total 73 36 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: 2013 2012 £000 £000 NBS Norman Broadbent SA 47 68 Norman Broadbent SPRL 5 - Connecting Corporates Limited 42 - Total 94 68 Receivables owed by related parties arise from sales transactions and are due one month after date of purchase. Payables bear no interest. 25. 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 £147,000 (2012: £162,000). 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 £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. 26. POST BALANCE SHEET EVENTS On 8 May 2014, the Group sold its 51 per cent. stake in Norman Broadbent SPRL for £120,000 (compared to a cash investment of £137,000) to existing management. The consideration represents 51 per cent. of the net asset value of Norman Broadbent SPRL. Post year end this will result in an impairment in the Consolidated Statement of Financial Position of goodwill of £112,000, and a loss on disposal of the investment of £128,000 in the Company Statement of Financial Position. On 27 May 2014, the Group agreed to sell its 20 per cent. stake in NBS Norman Broadbent SA. The transaction, whilst binding, is due for completion on 30 July 2014. Post completion the Group will review the carrying value of goodwill in the Consolidated Statement of Financial Position, and calculate the profit on disposal of the investment in the Company Statement of Financial Position. 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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