TIDMKLN
RNS Number : 9192R
Kellan Group (The) PLC
14 March 2016
14 March 2016
The Kellan Group PLC
("Kellan", the "Company" or "Group")
Preliminary Results for the year ended 31 December 2015
The Company is pleased to announce its annual results for the
year ended 31 December 2015. Kellan is a market leading recruitment
business operating across a wide range of functional disciplines
and industry sectors.
Headline figures
-- Full year revenue of GBP24.9 million representing an increase
of 8.3% (2014: GBP23 million).
-- H2 2015 revenue of GBP13.4 million grew by 16.4% compared
with H1 2015 (GBP11.5 million); while H2 net fee income (NFI) of
GBP4 million grew by 7.9% compared to H1 2015 (GBP3.7 million).
-- Full year adjusted EBITDA profit of GBP1.02 million compared
to a profit of GBP0.73 million in 2014.
-- Total net profit for 2015 of GBP0.43 million compared with a
net loss of GBP0.06 million in 2014.
-- Operating profit of GBP0.82 million compared with an
operating profit of GBP0.26 million in 2014.
-- Continued streamlining with administrative expenses reduced
by 11.1% year-on-year from GBP7.7 million in 2014 to GBP6.9
million. Excluding the effect of share based payments (2015;
GBP150,000 favourable adjustment; 2014; GBP78,000 charge), the
like-for-like administrative expenses have reduced 8.2% from GBP7.7
million to GBP7 million.
-- Profit of 0.13p per basic share and 0.11p per diluted share
(2014: loss 0.02p for both basic and diluted).
ENQUIRIES:
The Kellan Group PLC
Rakesh Kirpalani, Group Finance Tel: 020 7268
Director 6200
Allenby Capital Limited
David Worlidge / James Thomas Tel: 020 3328
5656
Executive Chairman's Statement
I am pleased to announce that the Group has continued to build
on progress made in previous years; especially in relation to
overall profitability. Group sales have increased 8.3% from GBP23
million in 2014 to GBP24.9 million in 2015, whilst administrative
expenses have reduced by 11.1% from GBP7.7 million in 2014 to
GBP6.9 million in 2015. Overall profit for 2015 was GBP0.43 million
compared to a loss of GBP0.06 million in 2014.
From a trending perspective, adjusted EBITDA has moved from a
loss of GBP0.35 million in 2013 to earnings of GBP0.73 million in
2014 and earnings of GBP1.02 million in 2015.
A new CRM system went live in Q4 2015 for Berkeley Scott and RK
Group, with Quantica completed in Q1 2016. The new system is
already helping deliver better results with much improved search
functionality and reduced administrative burden enabling staff to
focus on increasing sales. We have continued investment in IT
systems with a new fleet of front end hardware installed for every
member of staff during 2015. Our back-end IT infrastructure project
completed during the year to further strengthen our working
environment.
I attended my first Group annual conference in January 2016 and
was very pleased to see the enthusiasm, high spirit and camaraderie
engrained with all our staff which will drive us to achieve
continued success during 2016.
My sincerest thanks go to all our customers, staff and all our
loyal shareholders for their long standing support.
Richard Ward
Executive Chairman
11 March 2016
Strategic report
Business Model
Kellan Group plc (the "Group" or the "Company" or "Kellan"), is
a market leading recruitment business operating across a wide range
of functional disciplines and industry sectors. The Company joined
the AIM market in December 2004.
A review of the business and a detailed explanation of
performance and key performance indicators is set out below.
Business review
With the UK recruitment market providing good opportunities with
some specialist sectors doing significantly better than others, the
Group has proactively taken the opportunity to ensure it is in the
strongest position possible. Business operations are focussed in
our core markets being Hospitality & Leisure, Technology and
Accounting & Finance. While we also operate in certain other
niche areas, our aim is to continue to develop our core businesses
in major city centres. The diverse brands within the Group de-risk
the overall impact of a potentially inconsistent market, and we saw
some strong performances within various parts of our business
during 2015. The consolidation of offices into multi sector
operations continues to benefit the business in effective
management and control along with developing critical mass creating
a much improved and vibrant business environment.
Berkeley Scott's temporary recruitment operation grew NFI by
6.7% from GBP2.89 million in 2014 to GBP3.08 million in 2015, with
all temporary locations delivering year-on-year growth. The
investment in headcount across all four temp locations allowed our
temporary recruiters the opportunity to spend more time client
facing and driving sales growth.
Several new national accounts were won in 2015 predominantly in
the contract and facilities management sector.
Continued investment and expansion has seen Berkeley Scott
return to the Birmingham market in Q1 2016.
NFI from Berkeley Scott's permanent recruitment operation
declined by 7.5% from GBP2.03 million in 2014 to GBP1.88 million in
2015. The teams were successfully re-established in both Leeds and
Manchester to service the Northern Hospitality market delivering
NFI growth of GBP0.17 million (39.6%) on 2014. All sectors of the
perm business achieved good results but the chef market was
particularly buoyant largely due to the widely publicised chef
shortage. The perm businesses also benefited from increased demand
from the hotel sector, particularly through new openings in the
north of England.
Berkeley Scott's London perm business underperformed during H1
2015, but following a management restructure is showing signs of
progress. The London team secured client contracts with new start
up restaurants in the fine dining space along with branded, smaller
independents, brassiere style establishment and late night bars and
also made significant progress into the senior levels placements
especially within the executive chef market.
The RK Group's NFI was flat year-on-year at GBP1.4 million with
the RK Accountancy business delivering good growth in 2015, with
annual NFI increasing by 14.3% from GBP1.1 million in 2014 to
GBP1.3 million in 2015. The Manchester team has also secured
recruitment partner of choice status for some of the region's
largest organisations including Co-operative Group, Hilti, Northern
Rail, LF, Steria and Sodexo.
Investment was made to revise the training and development
programmes which contributed to staff retention levels being high
and the graduate training programme delivering strong results.
Throughout 2016, the business will continue to invest in an
expansion plan that includes increasing headcount in all existing
branches. The business also re-entered the Midlands market with a
central Birmingham operation in Q1 2016.
The RK Search and HR businesses declined year-on-year by GBP0.2
million due to the loss of residual NFI from a client whose hiring
requirements reduced substantially. As this is not a core
operation, the Group divested from this to focus on the accountancy
business which is more profitable and delivering good results.
The Quantica Group saw a management restructuring and the
closure of the loss-making Midlands operation in April 2015. This
resulted in an overall decline in NFI of 17.6% from GBP1.65 million
in 2014 to GBP1.36 million in 2015. NFI from continuing operations
delivered strong results, with NFI increasing by 31.9% from GBP0.91
million in 2014 to GBP1.2 million in 2015. Quantica Technology was
able to take advantage of demand and increase growth in contract
business in the UK, particularly from within the telecoms sector.
Quantica Technology made good progress expanding into Europe with
client wins in Spain, Portugal and Germany.
With a new CRM system implemented in Q1 2016 and continuing
investment in our people, we are in an excellent position to take
advantage of this buoyant market.
Financial Review
The Group's revenue for the year ended 31 December 2015 was
GBP24.9 million representing an increase of 8.3% (2014: GBP23
million). This produced NFI of GBP7.7 million for the year ended 31
December 2015, a decrease of 3.7% (2014: GBP8 million). 2015 full
year adjusted EBITDA profit of GBP1.02 million compared to a profit
of GBP0.73 million in 2014.
Temporary NFI growth was offset by Permanent NFI decline with
Temporary NFI increasing by 12.2% from GBP3.69 million in 2014 to
GBP4.14 million in 2015; whilst Permanent NFI declined by 17% from
GBP4.3 million in 2014 to GBP3.57 million in 2015. The Perm NFI
shortfall was primarily made up of our loss making Quantica
Technology Midlands operation and underperformance across London
Perm Hospitality during H1 2015. The London Perm team has improved
significantly during H2 and is well positioned to deliver good
results in 2016.
Administrative expenses have decreased to GBP6.9 million in the
year ended 31 December 2015, from GBP7.7 million in 2014, which
represents a reduction of 11.1% year-on-year. During the year, the
Group carried out a review of the outstanding options. After
considering the number of options that are expected to vest, a
favourable share based payment adjustment of GBP150,000 has been
included in administrative expenses in the 2015 accounts. Excluding
the effect of share based payments (2015; GBP150,000 favourable
adjustment; 2014; GBP78,000 charge), the like-for-like
administrative expenses have reduced 8.2% from GBP7.7 million to
GBP7 million.
Cashflow
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Net cash inflow at an operating level was GBP0.53 million for
the year ended 31 December 2015 (2014: inflow of GBP0.91 million).
Investing activities comprised of capital expenditure of GBP161,000
(2014: GBP231,000). Net cash inflow from financing activities
amounted to GBP146,000 (2014: outflow of GBP305,000) comprising
movement on the invoice discounting facility balances, the
servicing of loan interest and repayment of GBP15,000 to one loan
note holder. The net increase in cash and cash equivalents in the
period was GBP516,000 (2014: GBP374,000).
Monitoring, risk and KPIs
Risk management is an important part of the management process
throughout the Group. The composition of the Board is structured to
give balance and expertise when considering governance, financial
and operational recruitment issues. Meetings incorporate, amongst
other agenda items, a review of monthly management accounts,
operational and financial KPIs and major issues and risks facing
the business.
The most important KPIs used in monitoring the business are as
follows:
Year ended Year ended
31 December 31 December
2015 2014
Revenue GBP24,864,000 GBP22,963,000
Net Fee Income GBP7,701,000 GBP7,994,000
Adjusted EBITDA GBP1,021,000 GBP727,000
Adjusted EBITDA as a %
of Net Fee Income 13.26% 9.09%
Days sales outstanding
(DSO) 39 42
Headroom on Confidential GBP1,634,000 GBP1,993,000
Invoice Discounting "CID"
facility
-- Financial - The main financial risks arising from the Group's
activities are liquidity risk and credit risk. These are monitored
by the Board and are disclosed further in notes 1 and 16 of the
financial statements.
Based on the Group's latest cash flow forecasts and current
trading performance, it is not expected that any further funding
will be required for the foreseeable future. The directors'
consideration of the appropriateness of the going concern basis in
preparing the financial statements is set out in note 1 to the
financial statements.
-- Market - the Group operates in a dynamic market place and
constantly seeks to ensure the solutions it offers to customers are
competitive. By operating in diverse sectors, the Group is, to some
degree, protected from a deteriorating market. The Group is
operating at a near 50/50 mix of temporary and permanent
recruitment fees, which de-risks the overall impact of a
potentially inconsistent market.
-- People - In a people intensive business, the resignation of
key individuals (both billing consultants and influential
management) and the potential for them to exit the business taking
clients, candidates and other employees to their new employers is a
risk. Kellan mitigates this risk through a number of methods
including the application of competitive pay structures and share
plans to incentivise retention. In addition, the Group's employment
contracts contain restrictive covenants that reduce a leaver's
ability to approach Kellan clients, candidates and employees for
certain periods following the end of their employment with the
Group.
The Strategic Report was approved by order of the Board on 11
March 2016
Rakesh Kirpalani Richard Ward
Group Finance Director Executive Chairman
11 March 2016
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2015
Year
Year ended ended
31 December 31 December
2015 2014
Note GBP000 GBP000
------------------------------ ----- ------------ ------------
Revenue 24,864 22,963
Cost of sales (17,163) (14,969)
------------------------------ ----- ------------ ------------
Gross profit/net fee income 7,701 7,994
Administrative expenses (6,877) (7,735)
------------------------------ ----- ------------ ------------
Operating profit 2 824 259
Finance income 8 5
Finance expenses 5 (406) (319)
Profit/(loss) before tax 3 426 (55)
Tax credit 6 - -
------------------------------ ----- ------------ ------------
Profit/(loss) for the period 426 (55)
------------------------------ ----- ------------ ------------
Attributable to:
Equity holders of the parent 426 (55)
------------------------------ ----- ------------ ------------
Profit/(Loss) per share in
pence
Basic 0.13 (0.02)
Diluted 7 0.11 (0.02)
------------------------------ ----- ------------ ------------
The above results relate to continuing operations.
There are no other items of comprehensive income for the year or
for the comparative year.
The notes form part of these financial statements
Consolidated statement of financial position
as at 31 December 2015
As at As at
31 December 31 December
2015 2014
Note GBP000 GBP000
------------------------------- ----- ------------ -------------
Non-current assets
Property, plant and equipment 9 382 332
Intangible assets 10 6,129 6,345
6,511 6,677
------------------------------- ----- ------------ -------------
Current assets
Trade and other receivables 12 4,415 3,855
Cash and cash equivalents 13 1,708 1,192
------------------------------- ----- ------------ -------------
6,123 5,047
------------------------------- ----- ------------ -------------
Total assets 12,634 11,724
------------------------------- ----- ------------ -------------
Current liabilities
Loans and borrowings 14 2,887 3,753
Trade and other payables 15 3,056 2,949
Provisions 18 67 154
------------------------------- ----- ------------ -------------
6,010 6,856
------------------------------- ----- ------------ -------------
Non-current liabilities
Loans and borrowings 14 3,095 1,660
Provisions 18 42 2
3,137 1,662
------------------------------- ----- ------------ -------------
Total liabilities 9,147 8,518
------------------------------- ----- ------------ -------------
Net assets 3,487 3,206
------------------------------- ----- ------------ -------------
Equity attributable to equity
holders of the parent
Share capital 19 4,274 4,274
Share premium 20 14,746 14,711
Convertible debt reserve 20 170 164
Warrant reserve 20 - 36
Capital redemption reserve 20 2 2
Retained earnings (15,705) (15,981)
------------------------------- ----- ------------ -------------
Total equity 3,487 3,206
------------------------------- ----- ------------ -------------
These financial statements were approved by the Board of
directors on 11 March 2016 and were signed on its behalf by:
Consolidated statement of changes in equity
for the year ended 31 December 2015
Capital
Share Share Convertible Warrant redemption Retained Total
capital premium reserve reserve reserve earnings Equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- -------- -------- ------------ -------- ----------- --------- --------
Balance at
1 January
2014 4,273 14,647 172 36 2 (16,004) 3,126
---------------------- --- -------- -------- ------------ -------- ----------- --------- --------
Total comprehensive
loss for
the year
ended 31
December
2014 - - - - - (55) (55)
Share-based
payment - - - - - 78 78
Issue of
shares 1 64 - - - - 65
Equity component
of convertible
loan notes - - (8) - - - (8)
---------------------- --- -------- -------- ------------ -------- ----------- --------- --------
Balance at
31 December
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2014 4,274 14,711 164 36 2 (15,981) 3,206
Total comprehensive
profit for
the year
ended 31
December
2015 - - - - - 426 426
Share-based
payment adjustment - - - - - (150) (150)
Issue of
shares 19 - 35 - - - - 35
Equity component
of convertible
loan notes 14 - - 6 (36) - - (30)
Balance at
31 December
2015 4,274 14,746 170 - 2 (15,705) 3,487
---------------------- --- -------- -------- ------------ -------- ----------- --------- --------
The notes form part of these financial statements
Consolidated statement of cash flows
for the year ended 31 December 2015
Year
Note Year ended ended
31 December 31 December
2015 2014
GBP000 GBP000
Cash flows from operating activities
Profit / (loss) for the period 426 (55)
Adjustments for:
Depreciation and amortisation 327 339
Interest paid 370 235
Amortisation of loan costs 29 27
Equity settled convertible
loan interest 7 57
Equity-settled share-based
payment (adjustment)/expense (150) 78
1,009 681
(Increase)/decrease in trade
and other receivables (560) 77
Increase in trade and other
payables 108 189
(Decrease) in provisions (47) (37)
-------------------------------------- ----- ------------ ------------
Net cash inflow/(outflow) from
operating activities 510 910
-------------------------------------- ----- ------------ ------------
Cash flows from investing activities
Acquisition of property, plant
and equipment 9 (161) (231)
-------------------------------------- ----- ------------ ------------
Net cash outflow from investing
activities (161) (231)
-------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Increase/(decrease) of invoice
discounting facility balances 458 (81)
Interest paid and loan costs (276) (224)
Repayment of term loan borrowings (15) -
Net cash (outflow)/inflow from
financing activities 167 (305)
-------------------------------------- ----- ------------ ------------
Net increase in cash and cash
equivalents 516 374
Cash and cash equivalents at
the beginning of the period 1,192 818
-------------------------------------- ----- ------------ ------------
Cash and cash equivalents at
the end of the period 13 1,708 1,192
-------------------------------------- ----- ------------ ------------
The notes form part of these financial statements
Notes to the financial statements
(forming part of the financial statements)
1 Accounting policies
Basis of preparation
This announcement and the financial information were approved by
the Board on 11 March 2016. The financial information set out in
this announcement does not constitute the Company's statutory
accounts for the years ended 31 December 2015 and 31 December 2014.
Statutory accounts for the years ended 31 December 2015 and 31
December 2014 have been reported on by the Independent Auditors.
The Independent Auditors' Reports on the Annual Report and
Financial Statements for 2014 and 2015 were unqualified and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Statutory accounts for the year ended 31 December 2014 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2015 will be delivered to the Registrar
in due course.
Going concern
The financial statements have been prepared on a going concern
basis.
Based on the Group's latest trading expectations and associated
cash flow forecasts, the directors have considered the cash
requirements of the Company and the Group will be able to operate
within its existing facilities for at least the next twelve months
following approval of these financial statements. These facilities
comprise an invoice discounting facility of up to GBP4 million
dependent on trading levels. The Directors recognise that there is
a general sensitivity to the wider macro-economic environment,
however, based on the ongoing support from major shareholders,
current market outlook and management's trading expectations; the
Directors are confident that the Group will be able to meet its
liabilities as they fall due for the foreseeable future. It is on
this basis that the Directors consider it appropriate to prepare
the Group's financial statements on a going concern basis.
Measurement convention
The financial statements are prepared on the historical cost
basis.
Basis of consolidation
Subsidiaries are entities controlled by the Group.
The Company controls a subsidiary if all three of the following
elements are present; power over the subsidiary, exposure to
variable returns from the subsidiary, and the ability of the
investor to use its power to affect those variable returns. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
Property, plant and equipment
Items of property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses. Depreciation is
charged to the income statement on a straight-line basis over the
estimated useful lives of each part of an item of property, plant
and equipment. Land is not depreciated. The annual rates used are
generally:
-- motor vehicles and computer equipment 25%
-- office equipment 10% - 33%
-- short leasehold premises over the duration of the lease
Goodwill
Goodwill represents amounts arising on the acquisition of
subsidiaries. Subject to the transitional relief in IFRS 1, all
business combinations are accounted for by applying the purchase
method. In respect of business acquisitions that have occurred
since 1 October 2005, goodwill represents the difference between
the cost of the acquisition and the fair value of the net
identifiable assets acquired. Identifiable intangibles are those
which can be sold separately or which arise from legal or
contractual rights regardless of whether those rights are
separable.
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash-generating units and is not
amortised but is tested annually for impairment.
Externally acquired intangible assets
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques (see
section related to critical estimates and judgements on page
20).
Amortisation is recognised in profit and loss on a straight-line
basis over the estimated useful lives of intangible assets, other
than goodwill, from the date that they are available for use.
The significant intangibles recognised by the Group, their
useful economic lives and the methods used to determine the cost of
intangibles acquired in a business combination are as follows:
Intangible asset Useful economic life Valuation method
Brand name 10 years Relief from royalty method
Customer relations 10 years Means extended excess method
Cash and cash equivalents
Cash and cash equivalents comprise cash balances on current
accounts and call deposits
Impairment
The carrying values of assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If
any such indication exists, the recoverable amount of the asset is
estimated. Where the asset does not generate cash flows which are
independent from other assets, the recoverable amount of the
cash-generating unit to which the asset belongs is estimated.
The recoverable amount of a non-financial asset is the higher of
its fair value less costs to sell, and its value-in-use.
Value-in-use is the present value of the future cash flows expected
to be derived from an asset or cash-generating unit calculated
using a suitable discount factor.
An impairment loss is recognised in the statement of
comprehensive income whenever the carrying amount of an asset or
cash-generating unit exceeds its recoverable amount
Goodwill is tested for impairment annually or whenever there is
an indication that the asset may be impaired. Any impairment
recognised on goodwill is not reversed.
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The impairment review is assessed by reference to value in use,
using internal forecasts and estimated growth rates to forecast
future cash flows, and a suitable discount rate based on the
Group's weighted average cost of capital. Any impairment is
recognised immediately in the income statement and is not
subsequently reversed.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event, and it is probable that an outflow of economic benefits
will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected
future cash flows at a pre-tax risk-free rate.
Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension
plans are recognised as an expense in the income statement as
incurred.
Share-based payment transactions
The grant date fair value of options granted to employees is
recognised as an employee expense, with a corresponding increase in
equity, over the period in which the employees become
unconditionally entitled to the options. The fair value of the
options granted is measured using the Black Scholes option
valuation model, taking into account the terms and conditions upon
which the options were granted. The amount recognised as an expense
is adjusted to reflect the actual number of share options that
vest, except where forfeiture is due only to share prices not
achieving market vesting conditions.
Revenue and income recognition
Revenue, which excludes value added tax ("VAT"), constitutes the
value of services undertaken by the Group as its principal
activities, which are recruitment consultancy and other ancillary
services. These consist of:
-- Revenue from temporary placements, which represents amounts
billed for the services of temporary staff including the salary
cost of these staff. This is recognised when the service has been
provided;
-- Revenue for permanent placements, which is based on a
percentage of the candidate's remuneration package, is recognised
at the date at which a candidate commences employment. Provision is
made for the expected cost of meeting obligations where employees
do not work for the specified contractual period.
-- Revenue from amounts billed to clients for expenses incurred
on their behalf (principally advertisements) is recognised when the
expense is incurred.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the
income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense.
Taxation
Tax on the profit or loss for the period comprises current and
deferred tax charge.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in
respect of previous periods.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the balance sheet
date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
Financial assets
Loans and receivables
Trade and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as
loans and receivables. They are initially measured at fair value
and subsequently at amortised cost less any provision for
impairment. A provision for impairment of trade and other
receivables is established when there is objective evidence that
the Group will not be able to collect all amounts due according to
the original terms of the receivables. This provision represents
the difference between the asset's carrying amount and the present
value of estimated future cash flows. The amount of the provision
is recognised in the income statement.
Cash and cash equivalents include cash in hand, deposits at call
with banks and bank overdrafts. Bank overdrafts where there is no
right of set-off are shown within borrowings in current liabilities
on the balance sheet.
Financial liabilities and equity instruments
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangements. Financial liabilities are classified as
either "financial liabilities at fair value through profit or loss
(FVTPL)" or "other financial liabilities".
When the company issues multiple instruments in a single
transaction the proceeds are allocated to each separate instrument
in accordance with their respective fair values. Where convertible
debt is issued the company determines the allocation of the
proceeds to the debt and equity components by first of all
determining the fair value of debt and then subtracting the amount
of the debt from the proceeds of the instrument as a whole to
determine the equity component.
Where a restructuring of debt arises the terms are reviewed to
consider whether there has been a substantial modification and if
so that there is an extinguishment of the existing debt and the
recognition of a new financial liability based on the amended
terms.
Financial liabilities at FVTPL
This category comprises only out-of-the-money interest rate
derivatives. They are carried in the balance sheet at fair value
with subsequent movements in fair value taken to the income
statement in the finance income or expense line. Other than these
derivative financial instruments, the Group does not have any
liabilities held for trading nor has it designated any financial
liabilities as being at fair value through profit or loss.
Other financial liabilities
Trade and other payables are recognised on the trade date of the
related transactions. Trade payables are not interest bearing and
are stated at the amount payable which is fair value on initial
recognition.
Interest bearing loans are recognised initially at fair value,
net of direct issue costs incurred, and are subsequently carried at
amortised cost using the effective interest method.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Adoption of new and revised standards
The new standards, interpretations and amendments, effective
from 1 January 2015, have not had a material effect on the
financial statements.
The amendments and interpretations to published standards that
have an effective date on or after 1 January 2016 or later periods
have not been adopted early by the Group and are not expected to
materially affect the Group when they do come in to effect, with
the exception of IFRS 16.
International Accounting Standards Effective
(IAS/IFRS) date
IFRS 16* Leases 01/01/2019
* These standards and interpretations are not endorsed by the EU
at present.
Use of estimates and judgements
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
In particular, information about significant areas of estimation
uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognised in
the financial statements is included below:
(a) Impairment of intangibles
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment and other assets where there
has been an indication of impairment. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the choice
of a discount rate in order to calculate the present value of the
cash flows. Actual outcomes may vary particularly in light of the
current volatility of the recruitment sector to changes in the
wider macro-economic environment. More information including
carrying values is included in note 10.
(b) Useful lives of intangible assets and property, plant and
equipment
Intangible assets and property, plant and equipment are
amortised or depreciated over their useful lives. Useful lives are
based on the management's estimates of the period that the assets
will generate revenue, which are periodically reviewed for
continued appropriateness. Changes to estimates can result in
significant variations in the carrying value and amounts charged to
the consolidated income statement in specific periods. More details
including carrying values are included in notes 9 and 10.
(c) Share-based payments
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Employee services received are measured by reference to the fair
value of the equity instruments at the date of grant, excluding the
impact of any non-market vesting conditions. The fair value of
share options is estimated by using the Black Scholes valuation
model on the date of grant based on certain assumptions. The charge
also depends on estimates of the number of options that will
ultimately vest based on the satisfaction of non-market and service
vesting conditions. No options were granted in the current or the
prior year.
(d) Determination of fair values of intangible assets acquired
in business combinations
The fair value of brand names is based on the discounted
estimated royalty payments that would have been avoided as a result
of the brand name being used. The fair value of customer relations
is based on the discounted
mean extended excess future cash flows from existing customers.
These methods require the estimation of future cash flows, the
choice of a suitable royalty and discount rates in order to
calculate the fair values.
(e) Onerous leases and dilapidations
Inherent uncertainties in estimates of rents that will be
received in the future on vacant property when determining the
onerous lease obligation and estimating the cost of returning the
properties to their original state at the end of the lease.
(f) Convertible loan notes and warrants
The fair value of warrants is estimated by using the Black
Scholes valuation model on the date of grant based on certain
assumptions. In determining the fair value of the convertible
option, estimates are made of the market rate of interest for
similar company debt issues when discounting cash flows relating to
the debt component.
(g) Permanent placement provision
A provision is made for the expected cost of meeting obligations
where employees do not work for the specified contractual
period.
2 Reconciliation of operating loss to Adjusted EBITDA and
EBITA
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------------------ ------------ ------------
Operating profit 824 259
Add back
Amortisation of intangible assets 216 191
Share-based payments (adjustment)/charge (150) 78
Restructuring costs 20 51
Adjusted EBITA 910 579
------------------------------------------- ------------ ------------
Depreciation 111 148
------------------------------------------- ------------ ------------
Adjusted EBITDA 1,021 727
------------------------------------------- ------------ ------------
3 Expenses and auditors' remuneration
Included in profit/(loss) before tax is the following:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
----------------------------------- ------------ ------------
Pension contributions 78 82
Depreciation of owned property,
plant and equipment 111 148
Amortisation of intangible assets 216 191
Operating leases rentals - hire
of plant and machinery 15 24
Operating leases rentals - hire
of other assets 245 527
------------------------------------ ------------ ------------
Auditors' remuneration:
Amounts payable to BDO LLP in respect of both audit and
non-audit services are set out below:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
----------------------------------------- ------------ ------------
Fees payable to the auditors for
the audit of the Company's annual
accounts 12 12
------------------------------------------ ------------ ------------
Fees payable to the auditors for
other services:
The audit of the Company's subsidiaries 16 16
Other services relating to taxation 4 4
------------ ------------
20 20
------------------------------------------ ------------ ------------
4 Staff numbers and costs
The weighted average number of persons employed by the Group
(including directors) during the period, analysed by category, was
as follows:
Number of
employees
--------------
2015 2014
----------------------------------------- ------ ------
Recruitment 87 88
Administrative staff 24 25
Temporary workers (whose costs are
included in cost of sales and services
charged within revenue) 1,036 984
----------------------------------------- ------ ------
1,147 1,097
----------------------------------------- ------ ------
The aggregate payroll costs of these persons were as
follows:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
-------------------------------- ------------ ------------
Wages and salaries 20,876 18,484
Social security costs 1,014 1,036
Other pension costs 78 82
--------------------------------- ------------ ------------
21,968 19,602
Share-based payments (see note
17) (150) 78
--------------------------------- ------------ ------------
21,818 19,680
-------------------------------- ------------ ------------
Directors' and key management personnel remuneration:
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. During the period these were considered to
be the directors of the Company.
Year Year
Ended ended
31 December 31 December
2015 2014
GBP000 GBP000
-------------------------------- ------------ ------------
Emoluments 422 177
Company contributions to money
purchase pension schemes 29 13
Share-based payments (81) 32
--------------------------------- ------------ ------------
370 222
-------------------------------- ------------ ------------
There were 3 directors in defined contribution pension schemes
during the period (2014: 2).
The total amount payable to the highest paid director in respect
of emoluments was GBP192,200 (2014: GBP164,791). Company pension
contributions of GBP14,000 (2014: GBP12,336) were made to a money
purchase scheme on their behalf.
No options were exercised by directors during the current or
prior periods.
5 Finance expense
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
Interest expense on financial
liabilities 377 292
Amortisation of loan costs 29 27
Finance expenses 406 319
-------------------------------- ------------ ------------
6 Taxation
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Reconciliation of effective tax rate
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
----------------------------------- ------------ ------------
Profit/(loss) before tax for the
period 426 (55)
Total tax credit - -
----------------------------------- ------------ ------------
Profit/(loss) after tax 426 (55)
------------------------------------ ------------ ------------
Tax using the UK corporation tax
rate of 20% (2014: 21%) 85 (12)
Non-deductible expenses including
impairment 2 5
Losses carried forward (87) 7
Total tax (credit) - -
------------------------------------ ------------ ------------
7 Profit/(loss) per share
Basic and diluted profit/(loss) per share
The calculation of basic profit per share for the year ended 31
December 2015 was based on the profit attributable to ordinary
shareholders of GBP426,000 (2014: loss of GBP55,000) and a weighted
average number of ordinary shares outstanding of 339,401,134 (2014:
336,707,670) calculated as follows:
Weighted average number of shares 2015 2014
-------------------------------------- ------------ ------------
Issued ordinary shares at 1 January 337,894,529 334,667,538
Effect of shares issued 1,506,605 2,040,132
Weighted average number of shares
used in basic profit/(loss) per
share 339,401,134 336,707,670
-------------------------------------- ------------ ------------
Effect of convertible debt 139,190,000 139,940,000
Effect of employee share options 4,053,600 11,913,208
-------------------------------------- ------------ ------------
Weighted average number of shares
used in diluted profit/(loss) per
share 482,644,734 488,560,878
-------------------------------------- ------------ ------------
Profit/(loss) for the year in pounds 426,000 (55,000)
-------------------------------------- ------------ ------------
Basic profit/(loss) per share in
pence 0.13 (0.02)
-------------------------------------- ------------ ------------
Diluted profit/(loss) per share
in pence 0.11 (0.02)
-------------------------------------- ------------ ------------
There was no dilution in the prior period due to the loss in the
period.
8 Operating segments
Operating segments are components of an entity about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker ("Executive
Chairman") in deciding how to allocate resources and in assessing
performance.
The Group identifies its reportable operating segments by
divisions, each of which is run by a business leader. Each
identifiable business division operates in a different market of
recruitment, has its own brand, engages in business activities from
which it may earn revenues and incur expenses, discrete financial
information is readily available and its operating results are
regularly reviewed by the Executive Chairman. Operating segment
results are reviewed to controllable contribution level which is
gross profit less employee costs and marketing costs directly
controlled by the business leader of that division.
Each division derives its revenues from supplying one or more of
contingent permanent, contract, temporary and retained search
recruitment services. The RK Search and RKHR divisions have been
aggregated as they individually fall under the threshold for
separate disclosure and have similar economic characteristics.
Transactions with the Group's largest customer do not account for
more than 10% of the Group's revenues and the Group's revenues
attributed to foreign countries are immaterial for the purpose of
segmental reporting. Assets and liabilities are reviewed at a Group
level and are not reviewed by the Executive Chairman on a segmental
basis.
2015 2014
Operating Segment GBP000 GBP000
--------------------- --------------------------- -------- --------
Revenue 17,300 15,772
Net Fee Income 4,958 4,917
------------------------------------------------- -------- --------
Berkeley Scott Controllable contribution 2,728 2,693
--------------------- --------------------------- -------- --------
Revenue 4,149 3,457
Net Fee Income 1,068 1,180
------------------------------------------------- -------- --------
Quantica Technology Controllable contribution 53 175
--------------------- --------------------------- -------- --------
Revenue 2,480 2,023
Net Fee Income 1,281 1,115
------------------------------------------------- -------- --------
RK Accountancy Controllable contribution 518 374
--------------------- --------------------------- -------- --------
Revenue 643 869
Net Fee Income 294 473
------------------------------------------------- -------- --------
Quantica S&S Controllable contribution 112 200
--------------------- --------------------------- -------- --------
RK Search and
RKHR Revenue 292 842
Net Fee Income 100 309
------------------------------------------------- -------- --------
(Aggregated) Controllable contribution 39 155
--------------------- --------------------------- -------- --------
Other Costs (2,429) (2,870)
------------------------------------------------- -------- --------
Revenue 24,864 22,963
Net Fee Income 7,701 7,994
Controllable contribution 3,450 3,597
Other costs (2,429) (2,870)
------------------------------------------------- -------- --------
Kellan Group
Total Adjusted EBITDA 1,021 727
--------------------- --------------------------- -------- --------
The total of the reportable segments' Adjusted EBITDA for the
year agrees to the reconciliation to Group operating loss (see note
2).
9 Property, plant and equipment
Short
leasehold Computer
premises and
and office
Improvements Equipment Total
GBP000 GBP000 GBP000
----------------------------- ------------- ---------- -------
Cost
Balance at 1 January 2014 683 1,718 2,401
Additions 80 151 231
Disposals (5) - (5)
----------------------------- ------------- ---------- -------
Balance at 31 December 2014 758 1,869 2,627
Additions (4) 165 161
Disposals - - -
----------------------------- ------------- ---------- -------
Balance at 31 December 2015 754 2,034 2,788
----------------------------- ------------- ---------- -------
Depreciation and impairment
Balance at 1 January 2014 604 1,548 2,152
Depreciation charge for the
period 45 103 148
Disposals (5) - (5)
----------------------------- ------------- ---------- -------
Balance at 31 December 2014 644 1,651 2,295
Depreciation charge for the
period 28 83 111
Disposals - - -
----------------------------- ------------- ---------- -------
Balance at 31 December 2015 672 1,734 2,406
Net book value
At 31 December 2013 79 170 249
----------------------------- ------------- ---------- -------
At 31 December 2014 114 218 332
----------------------------- ------------- ---------- -------
At 31 December 2015 82 300 382
----------------------------- ------------- ---------- -------
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10 Intangible assets
Customer
Brand
Goodwill name relations Total
GBP000 GBP000 GBP000 GBP000
----------------------------- --------- ------- ---------- -------
Cost
Balance at 1 January
2014, 31 December
2014 and 31 December
2015 24,717 922 3,609 29,248
------------------------------ --------- ------- ---------- -------
Amortisation and impairment
Balance at 1 January
2014 18,967 520 3,225 22,712
Amortisation - 51 140 191
Impairment charge - - - -
----------------------------- --------- ------- ---------- -------
Balance at 31 December
2014 18,967 571 3,365 22,903
------------------------------ --------- ------- ---------- -------
Amortisation - 128 88 216
Impairment charge - - - -
----------------------------- --------- ------- ---------- -------
Balance at 31 December
2015 18,967 699 3,453 23,119
------------------------------ --------- ------- ---------- -------
Net book value
At 31 December 2013 5,750 402 384 6,536
------------------------------ --------- ------- ---------- -------
At 31 December 2014 5,750 351 244 6,345
------------------------------ --------- ------- ---------- -------
At 31 December 2015 5,750 223 156 6,129
------------------------------ --------- ------- ---------- -------
Goodwill
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------------------ ------------ ------------
Berkeley Scott Regional (Former
Gold Helm Roche) branch network 1,920 1,920
Berkeley Scott London (Former Sherwoods)
branch network 569 569
RK Group 654 654
Quantica Technology 1,429 1,429
Quantica Search & Selection 1,149 1,149
Other 29 29
------------------------------------------ ------------ ------------
5,750 5,750
------------------------------------------ ------------ ------------
The impairment review undertaken in 2015 resulted in a nil
impairment charge (2014: nil).
The recoverable amounts of all the above CGUs have been
determined from value in use calculations based on cash flow
projections from budgets covering a five-year period to 31 December
2020. The major assumptions are as follows:
A discount rate of 12.91% (2014: 13.24%) has been applied to the
CGUs listed above. Discount rates are based on management's
assessment of specific risks related to the CGUs, which
approximates to the Group's pre-tax weighted average cost of
capital. An increase in the discount rate of 1% would not result in
an impairment.
NFI and operating margins have been based on past performance
and future expectations in the light of anticipated economic and
market conditions. Cash flows for 2016 to 2020 are based on the
forecast figures of each CGU for 2016 to 2020 based on a
conservative approach whilst considering the anticipated economic
conditions, corporate strategy and the related risk, market
intelligence/sentiment and specific knowledge of the individual
CGUs. NFI growth has been restricted to 3% for cash flows extending
beyond five years.
NFI assumptions for the cash flows for 2016 to 2020 are as
follows: 5% per annum for Berkeley Scott Regional (Former Gold Helm
Roche) branch network, 8% per annum for Berkeley Scott London
(Former Sherwoods) branch network, 7% per annum for RK Group, 15%
per annum for Quantica Technology and 10% per annum for Quantica
Search & Selection. If the following changes were made to the
above key assumptions, the carrying amount and recoverable amount
would be equal. RK Group NFI growth reduced from 7% to 3.3%,
Quantica Technology NFI growth reduced from 15% to 8.9% and
Quantica Search & Selection NFI growth reduced from 10% to
6.5%.
An adjustment to reduce the forecast net cash flows by 5% would
not result in an impairment.
11 Deferred tax assets and liabilities
At 31 December 2015 the amount of deductible temporary
differences, unused tax losses and unused tax credits are as
follows:
31 December 31 December
2015 2014
GBP000 GBP000
---------------------------------------- ------------ ------------
Trading losses carried forward 6,325 6,863
Capital losses carried forward 620 620
Decelerated capital allowances 538 1,022
Other deductible temporary differences 385 267
---------------------------------------- ------------ ------------
7,868 8,772
---------------------------------------- ------------ ------------
There is also a temporary difference in respect of the fair
value adjustments for intangible assets on previous acquisitions of
GBP379,000 (2014: GBP595,000) for which a corresponding deferred
tax liability has been recognised and offset against an equivalent
deferred tax asset in respect of unused tax losses, resulting in a
net position of GBPnil. In respect of the excess balances from the
table above, a deferred tax asset has not been recognised as there
is insufficient evidence that future taxable profits will be
available against which the asset can be utilised.
12 Trade and other receivables
31 December 31 December
2015 2014
GBP000 GBP000
--------------------------------- ----------------- --------------
Trade receivables 4,131 3,586
Other receivables 21 23
Prepayments and accrued income 263 246
-------------------------------------- ------------ ------------
4,415 3,855
---- ------------ ------------
An analysis of the allowance against accounts receivable and
details of trade receivables past due and not impaired is included
in note 16.
13 Cash and cash equivalents
31 December 31 December
2015 2014
GBP000 GBP000
--------------------------- ------------ ------------
Cash and cash equivalents 1,708 1,192
--------------------------- ------------ ------------
14 Interest-bearing loans and borrowings
The carrying value and face value of loans and borrowings are as
follows:
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------ ------------ ------------
Non-current liabilities
Convertible loan notes 1,860 413
Other loans 1,235 1,247
3,095 1,660
------------------------------ ------------ ------------
Current liabilities
Convertible loan notes - 1,324
Invoice discounting facility 2,887 2,429
------------------------------ ------------ ------------
2,887 3,753
------------------------------ ------------ ------------
Terms and debt repayment schedule
Carrying Carrying
Face Face
value Amount value amount
31 December 31 December 31 December 31 December
Year
Nominal of 2015 2015 2014 2014
interest
Currency rate maturity GBP000 GBP000 GBP000 GBP000
------------- ---------- --------- --------- ------------ ------------ ------------ ------------
Convertible
loan notes Sterling 12% 2017 1,346 1,332 1,361 1,324
Convertible
loan notes Sterling 4% 2017 600 528 600 413
Other
loan Sterling 4% 2017 1,260 1,235 1,260 1,247
3,206 3,095 3,221 2,984
------------------------ --------- --------- ------------ ------------ ------------ ------------
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The invoice discounting facility balance utilised of
GBP2,887,000 (2014: GBP2,429,000) is secured through deeds of
composite guarantees and mortgage debentures on Group companies.
The invoice discounting facility has an interest rate of 1.6% above
Barclay's base rate.
In February 2015, the Company reached an agreement with all
holders of the GBP1,361,000 Loan Notes (originally repayable in
February 2015), to repay one loan note holder GBP15,000 and extend
the redemption date for the remaining GBP1,346,000 Loan Notes by a
period of two years which will now be redeemable on 14 February
2017. The interest payable by the Company to the Loan Notes holders
will be 10 per cent, payable in cash bi-annually, for the year to
14 February 2016, rising to 12 per cent, payable in cash
bi-annually, for the year to 14 February 2017.
The Loan Notes can also be converted at the option of the note
holders into ordinary share capital at any point up to the date of
maturity. The extension of the loan note repayment date was
reviewed and treated as a modification of the original liability in
accordance with IAS39.
The GBP600,000 of convertible loan notes issued during 2013,
remains repayable at par in September 2017 with interest payable at
a rate of 4% per annum. These loan notes are redeemable at the
option of the Company at par value at any point up to the date of
maturity. They can also be converted at the option of the note
holder into ordinary share capital at a fixed share price but only
to the extent that existing loan note holders in the Company
convert some or all of their loan notes and only to the extent that
the conversion would not result in Mr PA Bell holding an increased
percentage interest in the Company as it was immediately prior to
any conversion by an existing loan note holder.
The equity element of the convertible loan notes has been
separately classified within equity and issue costs allocated to
the respective debt and equity components.
The other loan with a value of GBP1,260,000 is with the major
shareholder Mr PA Bell and is repayable in September 2017. Interest
is payable on this loan at a rate of 4% per annum.
The convertible loan notes and other loan are secured on the
assets of the Group but subordinated to the bank under the terms of
an inter-creditor deed.
15 Trade and other payables
31 December 31 December
2015 2014
GBP000 GBP000
--------------------------------- ------------ ------------
Trade payables 74 54
Social security and other taxes 965 997
Other creditors 589 362
Accruals and deferred income 1,428 1,536
--------------------------------- ------------ ------------
3,056 2,949
--------------------------------- ------------ ------------
Trade payables are non-interest bearing and are normally settled
within 45 day terms.
16 Financial instruments
Financial risk management
The Group is exposed through its operations to the following
financial risks:
-- Liquidity risk;
-- Interest rate risk;
-- Credit risk; and
-- Foreign currency risk.
Liquidity risk
Liquidity risk is managed centrally on a Group basis. The
Group's policy in respect of liquidity risk is to maintain a
mixture of long term and short term debt finance, including an
invoice discounting facility, to ensure the Group has sufficient
funds for operations for the foreseeable future. Budgets and
forecasts are agreed and set by the Board in advance to enable the
Group's cash requirements to be anticipated.
Interest rate risk
Debt is maintained at bank variable rates which inherently bring
interest rate risk. Convertible loan notes and related party loans
are maintained at the fair value of interest rates on issue. The
Group maintains detailed cash flow forecasts enabling it to factor
incremental changes in interest rates into its risk profile and
liquidity and react accordingly.
Credit risk
The Group's principal financial assets are bank balances and
cash and trade and other receivables. The Group's credit risk is
primarily attributable to its trade receivables.
The Group's policy in respect of trade receivables credit risk
requires appropriate credit checks on potential customers before
sales are made, the appropriate limiting of credit to each customer
and the close monitoring of KPI trending such as days' sales
outstanding and debtor ageing. The Group records impairment losses
on its trade receivables separately from the gross receivable and
calculates the allowance based on evidence of its likely recovery.
At the balance sheet date there were no significant concentrations
of credit risk.
The Group's credit risk on liquid funds is limited due to the
Group's policy of monitoring counter party exposures and only
transacting with high credit-quality financial institutions.
Foreign currency risk
The Group's foreign currency denominated activity is not
significant and the impact of foreign exchange movements on
reported profits, net assets and gearing are not significant. The
day-to-day transactions of overseas branches are carried out in
local currency and Group exposure to currency risk at a
transactional level is minimal.
The Group does not enter into speculative treasury arrangements
and there are no significant balances or exposures denominated in
foreign currencies.
Capital risk management
The Group manages its capital to ensure that entities within the
Group will be able to continue as a going concern whilst optimising
the debt and equity balance.
In managing its capital, the Group's primary objective is to
ensure its ability to provide a return for its equity shareholders
through capital growth. In order to achieve this objective, the
Group seeks to maintain a gearing ratio that balances risks and
returns at an acceptable level and also to maintain a sufficient
funding base to enable the Group to meet its working capital and
strategic investment needs. In making decisions to adjust its
capital structure to achieve these aims, the Group considers not
only its short-term position but also its long-term operational and
strategic objectives. The Group's gearing profile, being the
carrying amount of loans and borrowings of GBP5,982,000 (2014:
GBP5,413,000) as a percentage of total equity GBP3,487,000 (2014:
GBP3,206,000) decreased to 172% from 169% during the year.
Trade receivables impairment
Movement on trade receivables impairment provision:
31 December 31 December
2015 2014
GBP000 GBP000
---------------------------------- -------------- ------------
Provision brought forward 100 100
Increase/(decrease) in provision 1 -
---------------------------------- -------------- ------------
Provision carried forward at
year end 101 100
----------------------------------- -------------- ------------
The trade receivables past due and not impaired at the balance
sheet date amounted to GBP2,426,000 (2014: GBP1,755,000) and
comprised GBP1,659,000 (2014: GBP1,391,000) overdue by up to 30
days, GBP599,000 (2014: GBP253,000) overdue by 30-60 days and
GBP168,000 (2014: GBP111,000) overdue by more than 60 days.
The directors consider that all these receivables are fully
recoverable.
Categories of financial instruments
Financial assets
The financial assets of the Group comprised:
Loans and
receivables
2015 2014
GBP000 GBP000
------------------------------- ------- -------
Current financial assets
Trade and other receivables 4,152 3,609
Net cash and cash equivalents 1,708 1,192
------------------------------------ ------- -------
Total financial assets 5,860 4,801
------------------------------------ ------- -------
Financial liabilities
The financial liabilities of the Group comprised:
Measured at
amortised cost
2015 2014
GBP000 GBP000
------------------------------------- -------- --------
Current financial liabilities
Trade and other payables 1,628 1,413
Loans and borrowings 2,887 3,753
------------------------------------- -------- --------
Total current financial liabilities 4,515 5,166
Non-current financial liabilities
Loans and borrowings 3,095 1,660
Total financial liabilities 7,610 6,826
------------------------------------- -------- --------
The invoice discounting balance amounted to GBP2,887,000 (2014:
GBP2,429,000) and is secured by cross guarantees and mortgage
debentures on certain Group companies. GBP1,222,000 of the
convertible loan notes are unsecured (2014: GBP1,222,000), and the
remaining GBP550,000 of convertible loan notes (2014: GBP550,000)
are secured on the assets of the Group but subordinated to the
GBP1,235,000 (2014: GBP1,247,000) other loan from Mr PA Bell which
in turn is subordinated to the invoice discounting facility and
overdraft under the terms of an inter-creditor deed.
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The directors consider that the carrying amounts of financial
assets and liabilities recorded at amortised cost in the financial
statements approximate their fair values. The fair value of the
items classified as loans and borrowings is classified as Level 3
in the fair value hierarchy: The fair value for disclosure purposes
has been determined using discounted cash flow pricing models.
Significant inputs include the discount rate used to reflect the
associated credit risk.
Effective interest rates - Group
In respect of income-earning financial assets and
interest-bearing financial liabilities, the following table
indicates their effective interest rates at the balance sheet date
and the periods in which they mature.
2015 2014
--------------------------------------------------- -------------------------------------------------
0 to 2 to 0 to 1 to 2 to
Effective <1 1 to <5 Effective <1 <2 <5
interest Total years <2 years years interest Total years years years
rate GBP000 GBP000 GBP000 GBP000 rate GBP000 GBP000 GBP000 GBP000
------------- ---------- -------- -------- ---------- ------- ---------- -------- -------- ------- --------
Cash
and
cash
equivalents 0.1% 1,708 1,708 - - 0.1% 1,192 1,192 - -
Convertible
loan 12% (1,324) - (1,324) - 10% (1,324) (1,324) - -
Convertible
loan 12% (536) - (536) - 12% (413) - - (413)
Invoice
discounting 2.1% (2,887) (2,887) - - 2.7% (2,429) (2,429) - -
Other
loan 4% (1,235) - (1,235) - 4% (1,247) - - (1,247)
------------- ---------- -------- -------- ---------- ------- ---------- -------- -------- ------- --------
(4,274) (1,179) (3,095) - (4,221) (2,561) - (1,660)
------------- ---------- -------- -------- ---------- ------- ---------- -------- -------- ------- --------
The above table is based on the balances at the balance sheet
date. The effect of future interest cash flows and sensitivities
applied thereon can be determined from the above effective interest
rates.
17 Employee benefits
Defined contribution plans
The Group operates a number of defined contribution pension
plans. The total expense relating to these plans in the current
period was GBP78,000 (2014: GBP82,000). GBP9,000 of pension
contributions remained outstanding at the period end (2014:
GBP9,000).
Share-based payments
The Group has 1 share option scheme with options remaining
unexercised at 31 December 2015:
2004 Approved EMI Scheme - 4,125,000 vested options remain
unexercised at 31 December 2015
The ability of a company to utilise EMI options is governed by
conditions, including those of size, that are prescribed by the
HMRC. A reduction in headcount and net assets since 2009 has
resulted in the Group becoming eligible to grant new EMI options
during the year.
17 Employee benefits continued
The number and weighted average exercise prices of share options
- are as follows:
31 December 31 December
2015 2014
Weighted Number Weighted Number
average of options average of options
exercise exercise
price price
GBP GBP
------------------------ --------- ------------ --------- ------------
Outstanding at the
beginning of the
period 0.02 12,176,667 0.02 16,276,667
Options granted during
the period - - - -
Options exercised
during the period - - - -
Options forfeited
during the period 0.03 (9,051,667) 0.03 (4,100,000)
------------------------ --------- ------------ --------- ------------
Outstanding at the
end of the period 0.02 4,125,000 0.02 12,176,667
------------------------ --------- ------------ --------- ------------
Exercisable at the
end of the period 0.02 4,125,000 0.03 10,614,617
------------------------ --------- ------------ --------- ------------
The exercise price of options outstanding at the end of the
period ranged between GBP0.02 and GBP0.03 (2014: GBP0.02 and
GBP0.03) and their weighted residual contractual life was 5 years
(2014:6 years). All options currently in issue have vested as at 31
December 2015. There were no options exercised during the current
or prior period. The weighted average fair value of each option
granted during the period was nil as no options were granted (2014:
GBPnil).
The fair value of employee share options is measured using the
Black Scholes model. No options were granted in 2015.
18 Provisions
Onerous
Contracts and
Dilapidations
GBP000
---------------------------- ---------------------------------------
Balance at 1 January 2015 156
Provisions made during
the period 11
Provisions used during
the period (58)
---------------------------- ---------------------------------------
Balance at 31 December
2015 109
---------------------------- ---------------------------------------
Non-current at 31 December
2014 2
Current at 31 December
2014 154
---------------------------- ---------------------------------------
156
---------------------------- ---------------------------------------
Non-current at 31 December
2015 42
Current at 31 December
2015 67
---------------------------- ---------------------------------------
109
---------------------------- ---------------------------------------
Onerous contracts and dilapidations predominantly relate to the
costs payable on properties which have been vacated and incremental
costs that will be incurred on exiting existing properties where a
commitment to do so exists at the balance sheet date.
19 Capital
Share capital
Allotted, called up and fully 31 December 31 December
paid 2015 2014
Ordinary shares of GBP0.0001 each
(339,645,061 shares; 2014: 337,894,529) 34 34
Deferred shares of GBP0.02 each
(212,872,170 shares) 4,240 4,240
------------------------------------------ ------------ ------------
4,274 4,274
------------------------------------------ ------------ ------------
The holders of ordinary shares are entitled to receive dividends
when declared and are entitled to one vote per share at meetings of
the Company The deferred shares do not carry any dividend and
voting rights and have limited rights in a winding up of the
company.
In February 2015 the Company issued 1,750,532 ordinary shares of
0.01p each in settlement of interest of GBP35,011 on loan notes in
issue.
20 Reserves
Share premium
The share premium account represents the excess of the proceeds
from the issue of shares over the nominal value of shares issued
less related issue costs.
Convertible debt reserve
The convertible reserve represents the equity component of the
convertible loan note.
Warrant reserve
Warrant reserve represents the proceeds received from
unexercised and unlapsed warrants issued in the past. All warrants
have now lapsed.
Capital redemption reserve
The capital redemption reserve relates to the cancellation of
the Company's own shares.
21 Operating leases
The total future minimum lease payments of non-cancellable
operating lease rentals are payable as follows:
31 December 31 December
2015 2014
GBP000 GBP000
----------------------- ------------ ------------
Less than 1 year 344 335
Between 1 and 5 years 896 786
More than 5 years 1 -
----------------------- ------------ ------------
1,241 1,121
----------------------- ------------ ------------
During the period GBP245,166 was recognised as an expense in the
income statement in respect of operating leases (2014: GBP551,000),
excluding amounts charged in respect of onerous contracts.
22 Related party transactions
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