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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Partway Group Plc | LSE:PTY | London | Ordinary Share | GB00B1235860 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.875 | 0.85 | 0.90 | 0.875 | 0.8425 | 0.875 | 0.00 | 08:00:25 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computer Related Svcs, Nec | 41.6M | -1.72M | -0.0166 | -0.52 | 896.76k |
From Apr 2019 to Apr 2024
TIDMPTY
RNS Number : 6293Z
Parity Group PLC
22 September 2020
PARITY GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2020
22 September 2020
Parity Group plc ("Parity" or the "Group" or the "Company"), the data and technology focussed professional services business, announces its half year results for the six months ended 30 June 2020.
Headlines:
-- Return to a more active market post the initial Covid related downturn in H1. Recent new business wins include:
o Parity has been granted two new lots on the Digital and Technology Services Dynamic Purchasing System for the Scottish Government. The framework agreement covers the provision of high-end digital specialists and cyber security specialists.
o In partnership with CyberGym, Parity has won a place on the Northern Ireland Co-Operation Overseas (NI.CO) Cyber Security Training Services Framework to provide consultancy and recruitment support.
o The Company has also started work on various permanent roles covering data and digital specialist roles in international markets.
-- Transformation programme effectively complete with annualised gross operating cost savings achieved in excess of GBP4m. No material non-underlying costs anticipated in H2.
-- After GBP1.8m of re-investment in transformation, including IT infrastructure, recruitment and marketing, net annualised operating costs have reduced by GBP2.4m, the full impact of these savings to be felt in 2021.
-- Wind down of low-margin Scottish government contract still contributing to reduction in net revenue from (GBP6.1m in H2 2019 to GBP5.3m H1 2020) but adjusted operating profit now growing, GBP0.03m in H2 2019 to GBP0.25 in H1 2020
-- The Board anticipates the 2020 full year adjusted profit before tax will be similar to that achieved in 2019 of GBP115,000.
-- Net cash before lease liabilities as at 30 June 2020 of GBP0.65m compared to net debt before lease liabilities of GBP1.17m as at 30 June 2019.
Key Financials
For the six months ended 30 June 2020
Hot Features
Premium
Six months Six months Year
to 30.06.20 to 30.06.19 to 31.12.19
(Unaudited) (Unaudited) (Audited)
(Restated) (Restated)
GBP'000 GBP'000 GBP'000
---------------------------------------- -------------- ------------- -------------
Revenue 29,949 44,514 80,409
Net revenue 5,339 7,541 13,616
Operating profit before non-underlying
items 246 414 447
Adjusted profit before tax(1) 61 203 115
Loss before tax (383) (541) (1,057)
Net cash/(debt) excluding lease
liabilities 654 (1,174) 1,397
---------------------------------------- -------------- ------------- -------------
(1) Profit before tax and non-underlying items
John Conoley, Non-Executive Chairman of Parity Group plc, said:
"We are pleased to be able to report an adjusted profit before tax in the first half year despite the impact of the Covid pandemic. Since the period end we have seen an improvement in market conditions and have converted some important opportunities into new business. The management team and staff are all to be congratulated on how they have responded to the business and personal challenges they have faced this year."
Matthew Bayfield, Chief Executive, said:
"We are digital and data specialists and the world is becoming ever more reliant on people with the skills to manage data and to be able to do so remotely. The changes brought on by Covid have brought us opportunities as well as challenges, we have remained close to our clients and are benefitting from not having furloughed any of our staff.
"With more remote working, cyber security has become an even more critical business function and we are well placed to help our clients manage their needs in this area. Working with CyberGym we see particularly strong growth opportunities in this market segment.
"The Company is now much closer to being where we set out to be when I became CEO eighteen months ago. We are leaner and more efficient, are clearer in our market position and have recruited a team who can deliver on the business plan, our prospects are good."
Contacts Parity Group PLC www.parity.net Matthew Bayfield, CEO + 44 (0) 208 543 5353 Mike Johns, CFO Donhead Consultants david@donheadconsultants.com David Beck +44 7836 293383 WH Ireland Limited www.whirelandcb.com Mike Coe/ Chris Savidge +44 (0) 117 945 3470
This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of Parity Group plc. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to (i) adverse changes to the current outlook for the UK IT recruitment and solutions market, (ii) adverse changes in tax laws and regulations, (iii) the risks associated with the introduction of new products and services, (iv) pricing and product initiatives of competitors, (v) changes in technology or consumer demand, (vi) the termination or delay of key contracts and (vii) volatility in financial markets.
Financial Review
Overview
Parity has traded profitably (excluding the impact of non-underlying items) through the Covid pandemic. Having chosen not to furlough any of its staff in order to remain close to its clients, the business is now starting to see the benefit, with a returning new business market and an increase in opportunities to tender. The sudden and significant shift to more people working from home has increased the demand for digital specialists in fields such as cyber security and has emphasised the need for clients to invest in robust data management and security. This optimism is necessarily tempered by the continuing uncertainty with regard to the ongoing Covid pandemic and the potential economic impacts of a recession.
Over the last 18 months Parity has shifted its focus towards achieving net revenues that produce a higher margin. The planned reduction in gross revenues has continued during the period with the wind down of the Scottish government framework, however operating profit before non-underlying items as a percentage of net revenue has started to increase, rising to 4.6% from 3.3% in the prior year period. Our new business wins and prospects are expected to improve net margins as we offer a combination of strategic high-end recruitment and data consultancy.
The business has been restructured to allow it to bring in the skills required to build a more profitable, higher margin business model. The benefits to the company's net profitability of this restructuring are beginning to become apparent. The end of the transformation programme and the underlying costs associated with it will allow future net operating profit to flow through to profit before tax.
Impact of transformation programme
2020 was planned as a year of transition for Parity with the completion of the business transformation, further investment in the business and the expectation of closing new business opportunities during the year. The transformation of the business has continued as planned, investing in a new operating model and moving the business towards higher margin business in the key sectors of data, digital transformation and cyber security. However the Covid pandemic has had a huge impact upon our clients in both public and private sectors, with the private sector clients being hit the hardest. This resulted in a sudden and sharp downturn in new business opportunities and many existing projects being affected as the lockdown came into effect during March 2020.
Despite these unprecedented events Parity's longstanding relationships with its clients (particularly in the public sector) and the fact that it had already started to realign its cost base in 2019 has meant that even with lower than predicted revenues during the period the Group has navigated H1, remaining financially strong and delivering a modest adjusted profit before tax.
As part of the business transformation the directors have reviewed the key performance measures used to manage the business and this has been reflected in changes to the presentation of the financial statements.
Net revenue (as defined in Note 1 to the 2019 Report and Accounts) more accurately reflects the income generated by the Group for the services that it delivers and will be used as the key performance measure for income.
The directors recognise that it is important to track the operational performance of the business and that costs and revenues not part of the underlying operating model should be disclosed separately to allow a fair comparison of performance between periods. In addition to reporting on statutory profit measures the directors also track profit/(loss) adjusted to exclude items classified as non-underlying. By their nature, items that the Group had previously classified as non-recurring would now all be included within the definition of non-underlying.
With the business now client focused, the Group no longer operates recruitment and consultancy as separate divisions, instead segmenting its business by public sector and private sector reflecting the different attributes of clients in these two distinct sectors. Segmental reporting for the business going forward will be on this basis.
Net Revenue
Net revenue in the six months to 30 June 2020 of GBP5.3m was 29% lower than prior year (H1 2019: GBP7.5m). The majority of the reduction in net revenue is directly attributable to the planned wind down of the Scottish Government framework (originally announced in early 2019). The impact of the Covid-19 pandemic has been to significantly reduce new placements within existing projects, the duration of contract extensions, and limit new business opportunities that the Group had expected would replace natural contract completions.
In the immediate aftermath of the lockdown some clients took the decision to pause or slow down projects, impacting extension rates for contractors in April and May. Since June, the Group has started to see a recovery in both extension rates and new placements as clients have been able to again focus on the key data and digital transformation projects that we are supporting.
Result Before Tax
The Group reported a loss before tax for the six months of GBP0.4m (H1 2019: loss of GBP0.5m) and an adjusted profit before tax (excluding non-underlying items) of GBP0.1m (H1 2019: GBP0.2m).
During H1 2020 the GBP2.2m reduction in net revenue year on year was offset by a GBP2.0m reduction in operating costs before non-underlying items during the same period. The largest component of the reduction in operating costs is attributable to the realignment of the cost base with a GBP1.5m saving against the same period in 2019. This has enabled the business to invest GBP0.5m back into the business during the period (H1 2019: GBP0.2m). The investment has been in both key new hires and infrastructure including the implementation of new digital technologies across the Group.
Non-underlying items of GBP0.4m in the period (H1 2019: GBP0.7m) consisted primarily of costs related to employee changes. The Group does not currently anticipate any further material non-underlying items related to the business transformation in the second half.
Cash and Net Debt
Net cash, excluding adjustments for IFRS 16 lease liabilities, as at 30 June 2020 was GBP0.65m (30 June 2019: net debt of GBP1.17m).
During H1 2020 the Group took advantage of the government VAT deferral scheme, delaying Q1 VAT payments of GBP0.3m. This was offset by the payment in the period of non-underlying costs totalling GBP0.4m and normal working capital variations resulting in a net cash outflow during the six months of GBP0.7m (H1 2019: GBP0.1m).
Despite the disruption caused by Covid-19 the Group has benefited from its decision not to furlough staff and keep a close relationship with all its clients thus maintaining its strong performance on the conversion of income to cash with debtor days remaining exceptionally low at 14 days (H1 2019: 16 days).
The Group continues to have access to a GBP10m credit facility with PNC that will remain in place until at least May 2021.
Defined Benefit Pension
The final salary pension scheme deficit was GBP0.5m at 30 June 2020 (30 June 2019: GBP1.1m; 31 December 2019 GBP0.9m). Despite the disruption to markets caused by the Covid-19 pandemic the investment strategy followed by the Trustees has contributed to a reduction in the calculated deficit of GBP0.4m since the 2019 year end.
As part of its short term actions to provide maximum financial flexibility during the initial stages of the Covid-19 pandemic the board and Trustees agreed a three month deferral of planned contributions by the Group starting in June and totalling GBP0.1m. The continued resilience of the Group through the pandemic to date has enabled it to reinstate contributions and in September 2020 the Group will catch up on the deferred payments. The Group is forecasting that it will meet its overall target for contributions in the year of GBP0.3m.
Outlook
Recent new contracts provide a level of confidence that the business will trade profitably in the second half of the year, the Board anticipates the 2020 full year adjusted profit before tax will be similar to that achieved in 2019 of GBP115,000.
The majority of the Group's net revenue continues to come from the UK Government's core IT frameworks, GCloud and DOS (2019 spend GBP1.5bn) and with the Company's investment in people, marketing and technology, the business is well placed. These factors, combined with the full year effect of a lower cost base, allows the Board to anticipate a significant uplift in net profitability in the 2021 financial year.
Whilst uncertainties remain as to the macro economic impact of the pandemic in 2021 the comprehensive transformation programme that is now complete has significantly improved the company's operational gearing. Future net revenue growth will therefore have a more significant impact on profitability.
About us:
45 years of trusted relationships with our clients
Parity provides expertise that delivers positive growth for
our clients through realising the true value of their data.
We are passionate about empowering business and government
to make better commercial decisions based on reliable data.
Specifically, we advise on data and we provide access to skills
either as a managed service, through resourcing in the contract
and permanent market, or as part of a learning and development
programme.
Our work comes from a mix of long-term contracts with public
and private sector organisations as well as expanded projects
with existing clients as a result of strong relationships
and a track record of high client satisfaction.
Around 40 staff work in our offices in Edinburgh, London and
Manchester and we had, during H1 2020, over 700 associates
supporting clients around the UK and Ireland.
OUR STRATEGIC GOAL OUR FINANCIAL GOAL OUR OPERATING MODEL
To equip clients with To grow margin and Applying an account
the talent, skills net profitability. management approach
and advice necessary to ensure clients can
to make bold data-led choose the right mix
business decisions of our support in consulting,
confidently. resourcing, and learning
and development.
OUR PURPOSE OUR MISSION OUR VISION
We are the trusted We provide expertise To build the world's
partner of data driven that delivers positive most dynamic community
transformation. growth for clients of data experts, enabling
through realising the our clients to realise
true value of their their vision.
data.
Consolidated condensed income statement
For the six months ended 30 June 2020
Six months Six months Year
to 30.06.20 to 30.06.19 to 31.12.19
(Unaudited) (Unaudited) (Audited)
(Restated) (Restated)
Notes GBP'000 GBP'000 GBP'000
---------------------------------------- ------- -------------- ------------- -------------
Revenue 3 29,949 44,514 80,409
Contractor costs (24,610) (36,973) (66,793)
---------------------------------------- ------- -------------- ------------- -------------
Net revenue 5,339 7,541 13,616
---------------------------------------- ------- -------------- ------------- -------------
Operating costs before non-underlying
items (5,093) (7,127) (13,169)
---------------------------------------- ------- -------------- ------------- -------------
Operating profit before non-underlying
items 246 414 447
---------------------------------------- ------- -------------- ------------- -------------
Non-underlying items 4 (444) (744) (1,172)
---------------------------------------- ------- -------------- ------------- -------------
Operating loss (198) (330) (725)
---------------------------------------- ------- -------------- ------------- -------------
Finance costs 5 (185) (211) (332)
---------------------------------------- ------- -------------- ------------- -------------
Loss before tax (383) (541) (1,057)
---------------------------------------- ------- -------------- ------------- -------------
Analysed as:
Adjusted profit before tax(1) 61 203 115
Non-underlying items 4 (444) (744) (1,172)
---------------------------------------- ------- -------------- ------------- -------------
Tax credit/(charge) 6 95 64 (25)
---------------------------------------- ------- -------------- ------------- -------------
Loss for the period attributable
to owners of the parent (288) (477) (1,082)
---------------------------------------- ------- -------------- ------------- ------------- Loss per share Basic 7 (0.28p) (0.47p) (1.05p) Diluted 7 (0.28p) (0.47p) (1.05p) --------------- ---- --------- --------- ---------
All activities comprise continuing operations.
(1) Adjusted profit before tax is a non-IFRS alternative performance measure, defined as profit before tax and non-underlying items.
Consolidated condensed statement of comprehensive income
For the six months ended 30 June 2020
Six months Six months Year
to 30.06.20 to 30.06.19 to 31.12.19
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- ------------- -------------
Loss for the period (288) (477) (1,082)
Other comprehensive income
Items that will never be reclassified
to profit or loss
Remeasurement of defined benefit pension
scheme 400 857 931
Deferred taxation on remeasurement
of defined benefit pension scheme (76) (146) (158)
------------------------------------------- -------------- ------------- -------------
Other comprehensive income for the
period after tax 324 711 773
------------------------------------------- -------------- ------------- -------------
Total comprehensive income/(expense)
for the period attributable to owners
of the parent 36 234 (309)
------------------------------------------- -------------- ------------- -------------
Consolidated condensed statement of changes in equity
For the six months ended 30 June 2020
Six months to 30.06.20 (Unaudited)
Share Capital
Share premium redemption Other Retained
capital reserve reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- ------------ ---------- ---------- ---------
At 1 January 2020 2,053 33,244 14,319 34,560 (77,753) 6,423
Share options - value of
employee services - - - - 43 43
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Transactions with owners - - - - 43 43
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Loss for the period - - - - (288) (288)
Other comprehensive income
for the period - - - - 324 324
At 30 June 2020 2,053 33,244 14,319 34,560 (77,674) 6,502
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Six months to 30.06.19 (Unaudited)
Share Capital
Share premium redemption Other Retained
capital reserve reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- ------------ ---------- ---------- ---------
At 31 December 2018 2,053 33,244 14,319 34,560 (77,612) 6,564
Adoption of IFRS 16 - - - - 6 6
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Revised at 1 January 2019 2,053 33,244 14,319 34,560 (77,606) 6,570
Share options - value of
employee services - - - - 116 116
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Transactions with owners - - - - 116 116
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Loss for the period - - - - (477) (477)
Other comprehensive income
for the period - - - - 711 711
At 30 June 2019 2,053 33,244 14,319 34,560 (77,256) 6,920
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Year to 31.12.09 (Audited)
Share Capital
Share premium redemption Other Retained
capital reserve reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- ------------ ---------- ---------- ---------
At 31 December 2018 2,053 33,244 14,319 34,560 (77,612) 6,564
Adoption of IFRS 16 - - - - 6 6
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Revised at 1 January 2019 2,053 33,244 14,319 34,560 (77,606) 6,570
Share options - value of
employee services - - - - 162 162
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Transactions with owners - - - - 162 162
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Loss for the year - - - - (1,082) (1,082)
Other comprehensive income
for the year - - - - 773 773
At 31 December 2019 2,053 33,244 14,319 34,560 (77,753) 6,423
---------------------------- --------- --------- ------------ ---------- ---------- ---------
Consolidated condensed statement of financial position
As at 30 June 2020
As at As at As at
30.06.20 30.06.19 31.12.19
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ ------------- ------------- -----------
Assets
Non-current assets
Goodwill 4,594 4,594 4,594
Other intangible assets 17 93 32
Property, plant and equipment 34 92 43
Right-of-use assets 387 710 395
Deferred tax assets 990 1,071 970
Other receivables 115 - -
------------------------------- ------ ------------- ------------- -----------
Total non-current assets 6,137 6,560 6,034
------------------------------- ------ ------------- ------------- -----------
Current assets
Trade and other receivables 5,603 11,063 6,739
Cash and cash equivalents 3,705 5,152 4,116
Total current assets 9,308 16,215 10,855
------------------------------- ------ ------------- ------------- -----------
Total assets 15,445 22,775 16,889
------------------------------- ------ ------------- ------------- -----------
Liabilities
Current liabilities
Loans and borrowings (3,051) (6,326) (2,719)
Lease liabilities (597) (625) (325)
Trade and other payables (4,539) (7,365) (6,012)
Provisions (122) (168) (324)
Total current liabilities (8,309) (14,484) (9,380)
------------------------------- ------ ------------- ------------- -----------
Non-current liabilities
Lease liabilities (115) (256) (173)
Provisions (22) (20) (21)
Retirement benefit liability 8 (497) (1,095) (892)
Total non-current liabilities (634) (1,371) (1,086)
------------------------------- ------ ------------- ------------- -----------
Total liabilities (8,943) (15,855) (10,466)
------------------------------- ------ ------------- ------------- -----------
Net assets 6,502 6,920 6,423
------------------------------- ------ ------------- ------------- ----------- Shareholders' equity Called up share capital 2,053 2,053 2,053 Share premium account 33,244 33,244 33,244 Capital redemption reserve 14,319 14,319 14,319 Other reserves 34,560 34,560 34,560 Retained earnings (77,674) (77,256) (77,753) ------------------------------- ------ ------------- ------------- ----------- Total shareholders' equity 6,502 6,920 6,423 ------------------------------- ------ ------------- ------------- -----------
Consolidated condensed statement of cash flows
For the six months ended 30 June 2020
Six months Six months Year
to 30.06.20 to 30.06.19 to 31.12.19
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ------- -------------- ------------- -------------
Cash flows from operating activities
Loss for the period (288) (477) (1,082)
Adjustments for:
Net finance expense 5 185 211 332
Share-based payment expense 43 116 162
Income tax (credit)/charge 6 (95) (64) 25
Amortisation of intangible assets 15 35 52
Depreciation of property, plant
and equipment 9 20 56
Depreciation and impairment
of right-to-use assets 300 529 840
Lease liability credit (11) - -
Loss on write down of assets - - 16
-------------------------------------- ------- -------------- ------------- -------------
158 370 401
Working capital movements
Decrease in trade and other
receivables 1,194 955 5,233
Decrease in trade and other
payables (1,473) (896) (2,249)
(Decrease)/increase in provisions (201) 125 282
Payments to retirement benefit
plan 8 (135) (103) (249)
-------------------------------------- ------- -------------- ------------- -------------
Net cash flow (used in)/from
operating activities (457) 451 3,418
-------------------------------------- ------- -------------- ------------- -------------
Investing activities
Purchase of intangible assets - (42) -
Purchase of property, plant
and equipment - (43) (44)
Net cash flow used in investing
activities - (85) (44)
-------------------------------------- ------- -------------- ------------- -------------
Financing activities
Drawdown/(repayment) of finance
facility 332 (585) (4,192)
Principal repayment of lease
liabilities (249) (374) (764)
Interest paid 5 (37) (84) (131)
-------------------------------------- ------- -------------- ------------- -------------
Net cash from/(used in) financing
activities 46 (1,043) (5,087)
-------------------------------------- ------- -------------- ------------- -------------
Net decrease in cash and cash
equivalents (411) (677) (1,713)
-------------------------------------- ------- -------------- ------------- -------------
Cash and cash equivalents at the beginning
of the period 4,116 5,829 5,829
----------------------------------------------- -------------- ------------- -------------
Cash and cash equivalents at the end
of the period 3,705 5,152 4,116
----------------------------------------------- -------------- ------------- -------------
Notes to the interim results
1 Accounting policies
Basis of preparation
The condensed interim financial statements comprise the unaudited results for the six months to 30 June 2020 and 30 June 2019 and the audited results for the year ended 31 December 2019. The financial information for the year ended 31 December 2019 herein does not constitute the full statutory accounts for that period. The 2019 Annual Report and Accounts have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for 2019 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
The condensed financial statements for the period ended 30 June 2020 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting'. The information in these condensed financial statements does not include all the information and disclosures made in the annual financial statements.
The condensed financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) in a manner consistent with the accounting policies set out in the Group financial statements for the year ended 31 December 2019 except as detailed below. IFRS are subject to amendment and interpretation by the International Accounting Standards Board (IASB) and there is an ongoing process of review and endorsement. Several amendments and interpretations apply for the first time for periods beginning on or after 1 January 2020 and those that had an impact on the condensed interim financial statements are listed below. Any standards, amendments or interpretations that have been issued but not yet effective have not been adopted early by the Group.
Going concern
The interim financial statements have been prepared on a going concern basis as the directors are satisfied that the Group has sufficient resources to continue in operational existence for the foreseeable future. The directors have reviewed the Group's cash flow forecasts for the period to 31 December 2021, taking account of reasonably possible changes in trading performance, including potential downsides from the ongoing impacts of Covid-19. The Directors acknowledge the significant ongoing uncertainty caused by the Covid-19 pandemic and continue to closely monitor the outlook for the Group, however having considered trading performance during the pandemic to date and having greater visibility over the severity of its impact so far, the Directors do not consider this to cause material uncertainty on the Group's going concern.
Financial instruments
Unless otherwise indicated, the carrying amounts of the Group's financial assets and liabilities are a reasonable approximation of their fair values.
Presentation of income statement
During the period, the directors undertook a review of the financial statements of the Group and this resulted in a change to the presentation of the income statement. The revised presentation, which involves moving from a classification of expenses by nature to a classification of expenses by function, was deemed to be more appropriate and provides information that is more reliable and relevant to users of the financial statements. In particular, presenting net revenue gives a better understanding of the income generated by services provided by the Group. For recruitment services provided by the Group, net revenue is defined as the margin earned on the placement of contractors, and for other services provided by the Group, net revenue is defined as the total fees earned. In accordance with IAS 1 'Presentation of Financial Statements', the Group has re-presented the income statements for comparative periods.
Alternative performance measure
The Group uses the alternative performance measure of adjusted profit before tax to report its results. This is a non-IFRS alternative performance measure, defined as profit before tax and non-underlying items.
Non-underlying items
The presentation of adjusted profit before tax excludes non-underlying items. The directors consider that an underlying profit measure better illustrates the underlying performance of the Group and allows a more meaningful comparison of performance across periods. Items are classified as non-underlying by nature of their magnitude, incidence or unpredictable nature and their separate identification results in a calculation of an underlying profit measure that is consistent with that reviewed by the Board in their monitoring of the performance of the Group.
In previous periods, the Group's results separately presented non-recurring items as a separate section of the income statement. The directors consider that all items previously classified as non-recurring are non-underlying and have reclassified these costs as such for all comparative periods in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'.
Accounting policies: new standards, amendments and interpretations
IFRS 16 'Leases'
IFRS 16 was amended effective 1 June 2020 to provide a practical expedient for lessees accounting for rent concessions that arise as a direct consequence of the Covid-19 pandemic. This practical expedient means the lessee does not need to assess whether the rent concession meets the definition of a lease modification. The Group has elected to use the practical expedient retrospectively for all rent concessions that meet the criteria in the period ended 30 June 2020, meaning that the Group is not required to remeasure the lease liability at a revised discount rate and the effect of a reduction in the lease liability is reflected in profit or loss, rather than recorded against the right-of-use asset. The reduction in the Group's lease liabilities recorded in profit or loss for the period ended 30 June 2020 is GBP11,000.
2 Segmental information
During the period, the Group changed the structure of its organisation to be based around a combined operating model targeted on finding the right solution or combination of solutions to each clients' needs by way of a single account management function. As such the previous reporting segments based on the service lines of Recruitment and Consultancy are no longer the basis on which the Group is managed and resources are allocated. The basis by which the Group is now organised and its operating model is structured is by customer sectors, being the public sector and the private sector. The reporting of financial information presented to the Chief Operating Decision Maker, being the Group board of directors, is consistent with these reporting segments. As these reporting segments are supported by a combined back office, there is no allocation of overheads.
In accordance with IFRS 8 'Operating Segments', segmental information from comparative periods has been restated.
Six months to 30.06.20 (Unaudited)
Public sector Private Total
sector
GBP'000 GBP'000 GBP'000
Revenue 22,297 7,652 29,949
Contractor costs (18,091) (6,519) (24,610)
------------------------------------ ---------------- ---------- ---------
Net revenue 4,206 1,133 5,339
------------------------------------ ---------------- ---------- ---------
Six months to 30.06.19 (Unaudited)
(Restated) Public sector Private Total
sector
GBP'000 GBP'000 GBP'000
Revenue 32,524 11,990 44,514
Contractor costs (26,662) (10,311) (36,973)
------------------------------------ ---------------- ---------- ---------
Net revenue 5,862 1,679 7,541
------------------------------------ ---------------- ---------- ---------
Year to 31.12.19 (Audited) (Restated)
Public sector Private Total
sector
GBP'000 GBP'000 GBP'000
Revenue 58,117 22,292 80,409
Contractor costs (47,489) (19,304) (66,793)
--------------------------------------- ---------------- ---------- ---------
Net revenue 10,628 2,988 13,616
--------------------------------------- ---------------- ---------- ---------
3 Revenue
The Group's revenue from external customers disaggregated by pattern of revenue recognition is as follows:
Six months Six months Year to
to 30.06.20 to 30.06.19 31.12.19
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
--------------------------------- ------------- ------------- -----------
Services transferred over time 29,934 44,196 80,023
Services transferred at a point
in time 15 318 386
Revenue 29,949 44,514 80,409
--------------------------------- ------------- ------------- -----------
The Group's revenue from external customers disaggregated by primary geographical market is as follows:
Six months Six months Year to
to 30.06.20 to 30.06.19 31.12.19
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
---------------- ---- ------------- ------------- -----------
United Kingdom 28,665 43,184 78,004
European Union 1,284 1,330 2,405
Revenue 29,949 44,514 80,409
---------------------- ------------- ------------- -----------
4 Non-underlying items
Six months Six months Year to
to to 31.12.19
30.06.20 30.06.19 (Audited)
(Unaudited) (Unaudited) (Restated)
(Restated) GBP'000
GBP'000 GBP'000
---------------------------------- ------------- ------------- ------------
Restructuring
- Costs related to employees 352 500 940
- Costs related to premises 3 174 230
- Other costs 89 70 68
Receipt from previously impaired
receivable - - (66)
---------------------------------- ------------- ------------- ------------
444 744 1,172
---------------------------------- ------------- ------------- ------------
Items are classified as non-underlying by nature of their magnitude, incidence or unpredictable nature and their separate identification results in a calculation of an underlying profit measure that is consistent with that reviewed by the Board in their monitoring of the performance of the Group. In previous periods, the Group's results separately presented non-recurring items as a separate section of the income statement. The directors consider that all items classified as non-recurring in previous periods are non-underlying and have reclassified these costs as such.
Non-underlying items during 2020 include costs related to the ongoing restructuring of the Group, including employee termination payments and fees for professional services.
5 Finance costs
Six months Six months Year to
to to 31.12.19
30.06.20 30.06.19 (Audited)
(Unaudited) (Unaudited) GBP'000
GBP'000 GBP'000
--------------------------------------- ------------- ------------- -----------
Interest expense on financial
liabilities 37 84 131
Interest expense on lease liabilities 10 14 24
Interest income on lease liabilities (2) - -
Net finance costs in respect of
post-retirement benefits 140 113 177
Total finance costs 185 211 332
--------------------------------------- ------------- ------------- -----------
The interest expense on financial liabilities represents interest paid on the Group's asset-based financing facilities.
6 Taxation
Six months Six months Year to
to to 31.12.19
30.06.20 30.06.19 (Audited)
(Unaudited) (Unaudited) GBP'000
GBP'000 GBP'000
------------------------------------ ------------- ------------- -----------
Recognised in the income statement
Current tax charge - - -
Deferred tax (credit)/charge (95) (64) 25
------------------------------------ ------------- ------------- -----------
Total tax (credit)/charge (95) (64) 25
------------------------------------ ------------- ------------- -----------
Recognised in other comprehensive
income
Deferred tax charge 76 146 158 ------------------------------------ ------------- ------------- ----------- 7 Earnings per ordinary share
Basic earnings per share is calculated by dividing the basic earnings for the period by the weighted average number of fully paid ordinary shares in issue during the period. Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares.
Six months to 30.06.20 Six months to 30.06.19 Year to 31.12.19
(Unaudited) (Unaudited) (Audited)
------------------- ------------------------------- ------------------------------- -------------------------------
Weighted Weighted Weighted
average average average
number Loss number Loss number Loss
Loss of per Loss of per Loss of per
GBP'000 shares share GBP'000 shares share GBP'000 shares share
000's Pence 000's Pence 000's Pence
------------------- ---------- --------- -------- ---------- --------- -------- ---------- --------- --------
Basic loss
per share (288) 102,624 (0.28) (477) 102,624 (0.47) (1,082) 102,464 (1.05)
Effect of dilutive - - - - - - - - -
options
Diluted loss
per share (288) 102,624 (0.28) (477) 102,624 (0.47) (1,082) 102,464 (1.05)
As at 30 June 2020 the number of ordinary shares in issue was 102,624,020 (30 June 2019 and 31 December 2019: 102,624,020).
8 Pension commitments
The Group provides employee benefits under various arrangements, through defined benefit and defined contribution pension plans, the details of which are disclosed in the 2019 Annual Report and Accounts. At the interim balance sheet date, the major assumptions used in assessing the defined benefit pension scheme liability have been reviewed and updated based on a roll-forward of the last formal actuarial valuation, which was carried out as at April 2018.
The following estimates have been applied to the IAS 19 valuation:
30.06.20 30.06.19 31.12.19
--------------------------------- --------- --------- ---------
Rate of increase in pensions in 3.6-3.9% 3.7-3.9% 3.6-3.9%
payment
Discount rate 1.5% 2.3% 2.0%
Retail price inflation 3.1% 3.3% 3.2%
Consumer price inflation 2.1% 2.3% 2.2%
--------------------------------- --------- --------- ---------
The deficit has reduced by GBP395,000 since 31 December 2019 despite a fall in discount rates. The improvement was partly due to an increase in the value of scheme investments and partly as a result of actions taken by the board and the Trustees to reduce scheme risk.
9 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are therefore not disclosed.
There were no other related party transactions during the period (2019: none).
10 Events after the reporting period
There are no events after the reporting period not reflected in the interim financial statements.
Statement of directors' responsibilities
The directors confirm, to the best of their knowledge:
-- The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
-- The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year, and gives a true and fair view of the assets, liabilities, financial position and profit for the period of the Group; and
-- The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority, being a disclosure of related party transactions and changes therein since the previous annual report.
By order of the Board
John Conoley
Non-Executive Chairman
22 September 2020
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IR UAUVRRSUKUAR
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