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Prime People Plc LSE:PRP London Ordinary Share GB00B4ZG0R74 ORD 10P
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Prime People PLC Final Results

04/11/2020 11:12am

UK Regulatory (RNS & others)


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TIDMPRP

RNS Number : 2550E

Prime People PLC

04 November 2020

4 November 2020

Prime People Plc

Results for the year ended 31 March 2020

Prime People Plc ("Prime People" or the "Group"), the global specialist recruitment business for professional and technical staff working in the Real Estate & Built Environment, Digital & Data Analytics sectors, today announces its audited results for the year ended 31 March 2020.

The Group's Annual Report and Accounts and Notice of General Meeting will be published shortly and are available to view on the Company's website at http://prime-people.co.uk/ . The GM will be held on 23 November 2020 at 11.00 am at 2 Harewood Place, London, W1S 1BX.

Highlights:

 
                                                  Year ended   Year ended 
                                                    31 March     31 March 
                                                        2020         2019 
-----------------------------------  ----------  -----------  ----------- 
 Revenue                                           GBP23.99m    GBP24.66m 
 
  Net Fee Income ("NFI")                           GBP15.52m    GBP15.78m 
 Operating Profit before tax 
  and Goodwill impairment                Note 1     GBP1.96m     GBP2.47m 
 Operating Profit before tax, 
  Goodwill impairment and after                     GBP1.80m     GBP1.96m 
  non-controlling interest 
 Fully diluted earnings per 
  share before Goodwill impairment       Note 2       13.28p       13.37p 
 Dividends for the year                  Note 3        1.80p        5.20p 
-----------------------------------  ----------  -----------  ----------- 
 

Note 1. Operating profit for the year ended 31 March 2020 is before goodwill impairment of GBP4.0m

Note 2. Fully diluted earnings per share for the year ended 31 March 2020 are based on operating profit before goodwill impairment of GBP4.0m

Note 3. In addition to the interim dividend, in the year ended 31 March 2020 a return of capital of 16.25p per share was paid to shareholders

Peter Moore, Managing Director of Prime People, said:

"The Covid-19 pandemic started in the early part of 2020, and while not having a material impact on performance for the year ended 31 March 2020, nonetheless, slowed activity in our final quarter. Overall, the Group delivered an acceptable performance given that our Asian markets slowed rapidly in early Q4 as the pandemic took hold in the region ahead of the UK downturn later in the quarter. I would like to personally thank all our team for their dedication, everyone has adapted and embraced the rapid changes to working practices and the business environment Covid-19 has created. The Group continues to maintain a good net cash position. At the start of the year the Group had cash of GBP2.3m which had declined slightly to GBP2.1m by the year end."

For further information, please contact:

 
 
Prime People                                 020 7318 1785 
Robert Macdonald, Executive Chairman 
 Peter Moore, Managing Director 
 Donka Zaneva-Todorinski, Finance Director 
 
 
Cenkos Securities plc                        020 7397 8900 
Katy Birkin/Harry Hargreaves 
 

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

PRIME PEOPLE PLC

Chairman's Statement

Performance

The Covid-19 pandemic started in the early part of 2020, and while not having a material impact on performance for the year ended 31 March 2020, nonetheless, slowed activity in our final quarter.

Overall, the Group delivered an acceptable performance given that our Asian markets slowed rapidly in early Q4 as the pandemic took hold in the region ahead of the UK downturn later in the quarter. In the UK, although Net Fee Income ("NFI") performance was broadly consistent with the prior year, operating costs were higher due to staff turnover and localised investment in IT infrastructure and advertising.

Internationally the business has made good progress with a continuing positive growth performance in Asia including a material contribution from our majority investment in Command Recruitment Group (H.K.) Limited, and the Rest of The World breaking even this year.

We closed the year with headline Revenue of GBP23.9m (2019: GBP24.6m) and NFI of GBP15.5m (2019 GBP15.7m). NFI comprises the total fees for permanent candidates and the margin earned in the placement of contract staff.

Operating Profit, before Goodwill impairment of GBP4.0m, was GBP2.0m compared to the prior year of GBP2.4m, the decline attributable to a combination of lower NFI and higher operating costs.

The Group conversion rate, excluding Goodwill impairment, and which compares operating profit to NFI, was 12.9% (2019: 15.6%).

The Board have carefully considered the prospects of the Group's UK operation and market and believe it prudent to recognise an impairment charge of GBP4.0m against the carrying value of Goodwill. Further details of the goodwill impairment are disclosed in note 11.

Cash Flow

The Group continues to maintain a good net cash position. At the start of the year the Group had cash of GBP2.3m which had declined slightly to GBP2.1m by the year end.

Dividend

During the year, an interim Dividend of 1.8p per share was paid (2019: 1.8p). In light of the significant uncertainty created by Covid- 19, the Board is taking all measures to protect cash while at the same time ensuring the Group is properly positioned to service its markets as and when normality begins to return. Consequently, as previously reported, the Board will not be recommending a final Dividend this year (2019: 3.4p per share). This will result in a total Dividend payment of 1.8p for the 2020 financial year against 5.2p for 2019. Subject to market conditions and cash, the Group remains committed to paying progressive dividends as soon as appropriate.

Return of Capital

As of 31 March 2019, the Group had net cash of GBP2.3m which had increased to approximately GBP3.0m as of 30 September 2019. A large proportion of this net cash was considered by the Board to be surplus, at that time, to the day-to-day needs of the business. The Group's cash position had strengthened over the course of the last year, during which period the Group had continued to focus on its core markets to deliver organic revenue growth.

The Board therefore considered that the Group had sufficient funds for the purposes of pursuing its organic growth plans and concluded that it was appropriate for the Company to return surplus cash to Shareholders by way of a Capital Reduction.

The return of cash amounted to 16.25p per share and was paid to shareholders in January 2020.

Share Buy Back

During the year 19,000 shares were purchased through the Group's buyback programme at a cost of GBP20,950. In the year 231,750 ordinary shares were transferred from Treasury to satisfy demand arising from the part paid share incentive scheme for key personnel. At the year end the Group held no shares in Treasury.

Board

The Board believes it has continued to operate corporate governance standards appropriate to an AIM quoted company of its size. Simon Murphy stepped down from the Board in February 2020, and we extend our thanks to him for his diligent service to the Group during his tenure as a Director. Although not required to do so, the Directors have resolved that they will retire at least once every three years and seek re-appointment by shareholders at the next AGM.

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

People

The average number of staff (excluded Temporary Contractors) reduced from 138 last year to 137 this year.

The Group has a diverse cultural and ethnic profile within its businesses and at the year-end had a global 60:40 male to female gender ratio.

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

Current trading and outlook

All our markets have been and continue to be impacted by Covid-19, and although we have experienced reasonable progress in the UK following the easing of the lockdown imposed on 26(th) March 2020, levels of activity have not recovered fully to pre Covid-19 levels. This is also the case in Asia although the region did not suffer as severe a contraction in trading as the UK. We are anticipating a gradual improvement in trading in H2 to 31(st) March 2021. Significant new lockdown measures could see progress slow.

As an international Group, we may be impacted by geopolitical uncertainty, and although our Hong Kong business continues to trade well, it is too early to assess the longer-term impact of the political landscape following recent Chinese intervention.

Post year end, in July 2020, we secured a GBP2.0m CBILS facility from our bank, to provide additional working capital to support the Group in the months ahead. Alongside this, on a weekly basis, we have implemented highly sensitive systems for the monitoring of trading and cash flow forecasts.

We believe that with our renewed management focus on the key business drivers, and optimising interaction between our regions, the Group is well positioned to respond swiftly across all businesses to changes impacting our activity. We are confident about our abilities to generate worthwhile, long-term returns and will continue to invest for future.

Robert Macdonald

Executive Chairman

PRIME PEOPLE PLC

Strategic Report

Overview

The Group provides Permanent and Contract recruitment services to selected, niche industry sectors. Our business model is built around our people, all of whom are specialists in their industry verticals.

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

The built environment continues to be the Group's largest market, served through its main subsidiary, Macdonald & Company. During the various degrees of lockdown, as Governments attempted to control the pandemic in their countries, it has become clear that many people can work productively from home and the long term impact of remote working on our core markets remain unclear.

Operating as distinct brands, the sectors served by Prime Insight, Prime Energy and Command are technology & digital transformation; renewable energy & sustainability; and infrastructure, construction, and design respectively.

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

The Group is committed to managing its talent on merit and provides equal opportunities for all current and future employees. It gives full and fair consideration to applications for employment from disabled persons, where a disabled person may adequately carry out the requirements of any position within the physical constraints of the Company's offices. The Board is concerned to provide a healthy corporate culture and in pursuit of its objectives and strategy seeks regular input through open meetings with its staff.

The Group has two locations in the UK, the London head office and Manchester, and international offices in Hong Kong (established in 2007), Dubai (established in 2008), Singapore (established in 2012), Frankfurt (established in January 2019), and a franchise in South Africa (established in 2008).

Overall, the UK permanent recruitment businesses performed satisfactorily with our built environment teams delivering consistent results while the Contract business experienced a reduction in NFI.

In Asia NFI continued to grow. The Hong Kong office with the combined businesses of Macdonald and Command contributed the majority of the region's NFI.

Our small Macdonald business in Dubai continues to face challenging market conditions and we have made changes to realign it to the expected medium-term demand. Our Command business operates across the Middle East particularly in Saudi Arabia and we are optimistic as to its future performance in this region.

Cultivating strong client relationships, investing in the best technology, and employing the best people are the foundations of the Group's success. With global growth seriously impacted by Covid-19 and a world economy increasingly exposed to political and macro-economic risk it is important that we remain flexible, are able to serve our clients wherever demand may be and that we closely monitor individual NFI performance against costs.

Tight management control of both expenditure and cash resource, together with a focus on improved productivity per head and NFI conversion rates, will position the Group to recover as and when markets stabilise post Covid- 19.

Regional Performance

United Kingdom

 
                                        2020     2019 
                                        GBPm     GBPm 
 
 Revenue                               15.70    16.47 
 Net Fee Income (NFI)                   7.26     7.60 
 Adjusted Operating Profit (Note 1)     0.30     0.92 
 Adjusted Operating Profit as % of 
  NFI                                  4.55%   12.10% 
 Average number of employees              71       77 
 

Note 1. Operating Profit is before Goodwill impairment costs of GBP4.0m.

Revenue reduced by 4.7% to GBP15.7m (2019: GBP16.5m) with NFI reducing by 4.5% to GBP7.3m (2019: GBP7.6m).

Permanent NFI decreased by 2.3% in the year and represents 87.4% (2019: 85.1%) of total UK NFI in 2020.

As a result of an internal accounting change to allocate central costs more proportionately to the regions in which they were incurred, the UK was subject to an increased charge in the year amounting to circa GBP0.3m. Increased costs related to planned investment in our Information Technology, brand marketing and advertising.

Contract NFI reduced by 17% in the year compared to a reduction of 7.7% in the previous year and represents 13.0% (2019: 14.6%) of total UK NFI in 2020 .

Asia Pacific

 
                                   2020     2019 
                                   GBPm     GBPm 
 
 Revenue                           8.18     7.77 
 Net Fee Income (NFI)              8.12     7.77 
 Operating Profit                  1.67     1.52 
 Operating Profit as % of NFI    20.68%   19.56% 
 Average number of employees         60       57 
 

NFI grew by 5.2% to GBP8.1m (2019: GBP7.8m) and includes contribution from Command of GBP3.6m (2019: GBP3.9m). The region is covered by our offices in Hong Kong and Singapore and represents 52.5 % of Group NFI (2019: 49.2%).

Command Operating Profit, unadjusted for Minority Interest, was approximately 85% of the reported Operating Profit in the region.

The 2018 investment in 60% of the equity of Command strengthened our presence and performance in the region particularly with its winning of substantial business from an extensive set of linked real estate infrastructure projects in the Middle East. The projects are of a long-term nature and we expect that Command's involvement will continue throughout the current financial year.

With the good performance of Command, and the investment in establishing our Insight and Analytics team in the region, the business is now well placed to expand its reach and growth.

Rest of the World

 
                                  2020     2019 
                                  GBPm     GBPm 
 
 Revenue                          0.14     0.42 
 Net Fee Income (NFI)             0.14     0.42 
 Operating Profit/(loss)          0.00   (0.02) 
 Operating Profit as % of NFI    0.00%   -4.76% 
 Average number of employees         2        4 
 

The region is covered by a small office in Dubai, and a franchise agreement in South Africa.

The Dubai business continues to face challenging market conditions and we have made changes to realign it to the expected medium-term demand.

Peter Moore

Managing Director

Financial Review

Revenue

The Group's Revenue was GBP23.9m, which represents a small decline compared to 2019 (GBP24.6m).

Net Fee Income (NFI)

Overall Group NFI was GBP15.5m which is a small decrease of 1.8% compared to the prior year.

The split of net fee income was 94% from Permanent Sales (2019: 93%) and 6.0% from Contract Sales (2019: 7.0%).

The Group generated 53.2% of its Net Fee Income from outside the UK (2019: 51.9%).

Administration Costs

Administration costs for the year were GBP13.5m, an increase of 1.5% on 2019.

In light of the uncertainty of future profit generation from the UK markets, an impairment charge of GBP4.0m has been recognised against the carrying value Goodwill of Macdonald & Company Group Ltd in accordance with IAS 36, details of which are set out in note 11.

Profit before Taxation

Operating Profit before taxation and Goodwill impairment was GBP2m (2019 GBP2.4m) and reported Operating Loss was GBP2.1m after Goodwill Impairment.

Taxation

The taxation charge is GBP0.18m on profit before taxation and goodwill impairment of GBP2m (from Ordinary Activities) which gives an effective tax rate of 8.9% (2019: 12.1%). The reasons for the difference from the standard UK corporation tax rate of 19% are detailed in note 7.

Earnings per Share

Basic earnings per share decreased to a loss per share of (19.36)p (2019:13.72p) The diluted earnings per share, without taking into account existing share options, decreased to a loss per share of (19.36)p (2019: 13.38p).

Balance Sheet

Net Assets at 31 March 2020 were GBP9.5m compared to the prior year Net Assets of GBP15.0m. The reduced Net Assets at year-end are after return of capital to Shareholders of GBP2m, Dividend payment of GBP1m and Goodwill impairment of GBP4.0m.

Trade Receivables net of provisions for doubtful debts at the year-end were GBP2.97m (2019: GBP3.54m) and reflect the reduced average credit period taken by clients to 75 days (2019: 131 days). The decrease in debtor days is explained by stronger collection from certain Command clients in Saudi Arabia.

Treasury Management and Currency Risk

Approximately 65.4% of the Group's revenue in 2020 (2019: 66.79%) was denominated in Sterling. Consequently, the Group has a currency exposure in accounting for overseas operations.

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

Cash Flow and Cash Position

At the start of the year the Group had Cash of GBP2.3m. After net taxation payments of GBP0.16m (2019: GBP0.11m) cash generated from operations was GBP3.4m (2019: GBP2.04m).

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Strategic Report, the Directors' Report and the Financial Statements in accordance with applicable law and regulations.

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

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

   --    select suitable accounting policies and then apply them consistently. 
   --    make judgments and accounting estimates that are reasonable and prudent. 

-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements.

-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

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

They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other information included in the Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom.

The maintenance and integrity of the Prime People Plc web site is the responsibility of the directors.

Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual reports may differ from legislation in other jurisdictions.

PRIME PEOPLE PLC

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2020

 
                                        Note                                2020        2019 
                                                                         GBP'000     GBP'000 
 
                                         2, 
 Revenue                                  3                               23,992      24,660 
 Cost of sales                                                           (8,471)     (8,873) 
-------------------------------------  -----  ----------------  ----------------  ---------- 
 
   Net Fee Income                         2                               15,521      15,787 
 Administrative expenses                                                (13,560)    (13,316) 
  Goodwill impairment                    11                              (4,018)           - 
-------------------------------------  -----  ----------------  ----------------  ---------- 
 
   Operating (loss)/profit                4                              (2,057)       2,471 
 Interest payable                                                           (76)           - 
 
   (Loss)/profit before 
   taxation                                                              (2,133)       2,471 
 Income tax expense                      7                                 (175)       (298) 
-------------------------------------  -----  ----------------  ----------------  ---------- 
 
   (Loss)/profit for the 
   year 
                                                                                       2,173 
   Other comprehensive income                                            (2,308) 
   Items that will or may 
   be reclassified 
   to profit or loss: 
 
   Exchange (loss)/ profit 
   on translating foreign 
   operations                                                              (105)         106 
-------------------------------------  -----  ----------------  ----------------  ---------- 
 
   Other Comprehensive (loss)/income 
   for the year, net of 
   tax                                                                     (105)         106 
 
   Total comprehensive (loss)/income 
   for the year                                                          (2,413)       2,279 
 
 (Loss)/profit attributable 
  to: 
 Equity shareholders of 
  the parent                                                             (2,384)       1,660 
 Non-controlling interest                                                     76         513 
 
 Total comprehensive (loss)/income 
  attributable to: 
 Equity shareholders of 
  the parent                                                             (2,489)       1,766 
 Non-controlling interest                                                     76         513 
 
 (Loss)/earnings per share               9 
 Basic (loss)/earnings 
  per share                                                             (19.36)p      13.72p 
 Diluted (loss)/earnings 
  per share                                                             (19.36)p      13.38p 
 
 
 
 

The above results relate to continuing operations.

PRIME PEOPLE PLC

Consolidated Statement of Changes in Equity

For the year ended 31 March 2019

 
                   Called      Capital   Treasury     Share    Merger     Share   Translation   Retained          Total   Non-controlling      Total 
                       up   Redemption     shares   premium   reserve    option       reserve   Earnings   attributable          interest     equity 
                    share      reserve              account             reserve                               to equity 
                  capital                                                                                       holders 
                                                                                                                 of the 
                                                                                                                 parent 
                  GBP'000      GBP'000    GBP'000   GBP'000   GBP'000   GBP'000       GBP'000    GBP'000        GBP'000           GBP'000    GBP'000 
---------------  --------  -----------  ---------  --------  --------  --------  ------------  ---------  -------------  ----------------  --------- 
 
 
   At 31 March 
   2018             1,229            9      (421)     5,371       173       314           490      7,764         14,929                75     15,004 
 
 
 IFRS 15 
  adjustment 
  for revenue 
  recognition           -            -          -         -         -         -             -    (1,976)        (1,976)                 -    (1,976) 
 
 Total 
  comprehensive 
  income for 
  the 
  year                  -            -          -         -         -         -             -      1,659          1,659               513      2,172 
 
 Other 
  comprehensive 
  income                -            -          -         -         -         -           106          -            106                 -        106 
 
 Adjustment in 
  respect of 
  share 
  schemes               -            -          -         -         -        23             -          -             23                 -         23 
 
 Shares 
  purchased 
  for treasury          -            -       (26)         -         -         -             -          -           (26)                 -       (26) 
 
 Shares issued 
  from treasury         -            -        246         -         -         -             -          -            246                 -        246 
 
 Adjustment on 
  share 
  disposal              -            -         40         -         -         -             -          5             45                 -         45 
 
 Dividend               -            -          -         -         -         -             -      (595)          (595)                 -      (595) 
---------------  --------  -----------  ---------  --------  --------  --------  ------------  ---------  -------------  ----------------  --------- 
 
 At 31 March 
  2019              1,229            9      (161)     5,371       173       337           596      6,857         14,411               588     14,999 
---------------  --------  -----------  ---------  --------  --------  --------  ------------  ---------  -------------  ----------------  --------- 
 

PRIME PEOPLE PLC

Consolidated Statement of Changes in Equity

For the year ended 31 March 2020

 
                   Called      Capital   Treasury     Share    Merger     Share   Translation   Retained          Total   Non-controlling      Total 
                       up   Redemption     shares   premium   reserve    option       reserve   Earnings   attributable          interest     equity 
                    share      reserve              account             reserve                               to equity 
                  capital                                                                                       holders 
                                                                                                                 of the 
                                                                                                                 parent 
                  GBP'000      GBP'000    GBP'000   GBP'000   GBP'000   GBP'000       GBP'000    GBP'000        GBP'000           GBP'000    GBP'000 
---------------  --------  -----------  ---------  --------  --------  --------  ------------  ---------  -------------  ----------------  --------- 
 
 
   At 31 March 
   2019             1,229            9      (161)     5,371       173       337           596      6,857         14,411               588     14,999 
 
 
 IFRS 16 
  adjustment 
  for leases            -            -          -         -         -         -             -      (297)          (297)                 -      (297) 
 
 Total 
  comprehensive 
  loss for the 
  year                  -            -          -         -         -         -             -    (2,384)        (2,384)                76    (2,308) 
 
 Other 
  comprehensive 
  loss                  -            -          -         -         -         -         (105)          -          (105)                 -      (105) 
 
 Adjustment in 
  respect of 
  share 
  schemes               -            -          -         5         -     (150)             -        236             91                 -         91 
 
 Issue of 
  ordinary 
  shares                2            -          -         -         -         -             -          -              2                 -          2 
 
 Capital 
  repayment             -            -          -   (2,000)         -         -             -          -        (2,000)                 -    (2,000) 
 
 Shares 
  purchased 
  for treasury          -            -       (23)         -         -         -             -          -           (23)                 -       (23) 
 
 Shares issued 
  from treasury         -            -         34         -         -         -             -          -             34                 -         34 
 
 Adjustment on 
  share 
  disposal              -            -        150         -         -         -             -      (150)              -                 -          - 
 
 Dividend               -            -          -         -         -         -             -      (948)          (948)                 -      (948) 
---------------  --------  -----------  ---------  --------  --------  --------  ------------  ---------  -------------  ----------------  --------- 
 
 At 31 March 
  2020              1,231            9          -     3,376       173       187           491      3,314          8,781               664      9,445 
---------------  --------  -----------  ---------  --------  --------  --------  ------------  ---------  -------------  ----------------  --------- 
 

PRIME PEOPLE PLC

Consolidated Statement of Financial Position

As at 31 March 2020

 
                                                      2020                            2019 
                                      Note         GBP'000                           GBP'000 
 
 Assets 
 Non - current assets 
    Goodwill                           11            6,509                            10,527 
     Property, plant and equipment     10            1,890                               752 
      Deferred tax asset               16                                                 40 
                                                        40 
 
                                                     8,439                            11,319 
 
 Current assets 
    Trade and other receivables        13            3,868                             4,646 
    Cash at bank and in hand           21            2,055                             2,309 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
                                                     5,923                             6,955 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
 Total assets                                       14,362                            18,274 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
 
 Liabilities 
 Current liabilities 
    Trade and other payables           15            3,205                             3,080 
    Lease liabilities                                  497                                 - 
    Current tax liability                              166                               173 
    Deferred tax liability             16               22                                 - 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
                                                     3,890                             3,253 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
 Non-current liabilities 
    Deferred tax liability             16                -                                22 
    Lease liability                                  1,027                                 - 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
 Total liabilities                                   4,917                             3,275 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
 Net assets                                          9,445                            14,999 
-----------------------------------  -----  --------------  ----  -------------------------- 
 
 

PRIME PEOPLE PLC

Consolidated Statement of Financial Position

As at 31 March 2020

 
                                        2020      2019 
                              Note   GBP'000   GBP'000 
 
 Capital and reserves attributable to the 
  Company's equity holders 
 Called up share capital       17      1,231     1,229 
 Capital redemption 
  reserve fund                 18          9         9 
 Treasury shares               18          -     (161) 
 Share premium account         18      3,376     5,371 
 Merger reserve                18        173       173 
 Share option reserve          18        187       337 
 Translation reserve           18        491       596 
 Retained earnings             18      3,314     6,857 
 
 
                                       8,781    14,411 
 Non-controlling interest                664       588 
 
 
 Total equity                          9,445    14,999 
---------------------------  -----  --------  -------- 
 
 

The financial statements were approved by the Board of Directors and authorised for issue on 3 November 2020 and are signed on its behalf by:

   R J G Macdonald                                            D Zaneva-Todorinski 

PRIME PEOPLE PLC

Company Statement of Financial Position

As at 31 March 2020

 
                                             2020          2019 
                                   Note   GBP'000       GBP'000 
 
 Assets 
 Non-current assets 
    Investment in subsidiaries      12      7,137        11,213 
 
                                            7,137        11,213 
--------------------------------  -----  --------      -------- 
 
 Current assets 
    Trade and other receivables     13      3,145           124 
    Cash and cash equivalents       21        876           322 
--------------------------------  -----  --------      -------- 
 
                                            4,021           446 
--------------------------------  -----  --------      -------- 
 
 Total assets                              11,158        11,659 
--------------------------------  -----  --------      -------- 
 
 
 Liabilities 
 Current liabilities 
     Trade and other payables       15      3,912         1,125 
      Current tax liability                     3 
--------------------------------  -----  --------      -------- 
 
 Total liabilities                          3,915         1,125 
--------------------------------  -----  --------      -------- 
 
 Net assets                                 7,243        10,534 
--------------------------------  -----  --------      -------- 
 
 
 Capital and reserves attributable to the 
  Company's equity holders 
 Called up share capital            17      1,231         1,229 
 Capital redemption reserve 
  fund                              18          9             9 
 Treasury shares                    18          -         (161) 
 Share premium account              18      3,376         5,371 
 Merger reserve                     18        173           173 
 Share option reserve               18        187           337 
 Retained earnings                  18      2,267         3,576 
--------------------------------  -----  --------      -------- 
 
 Total equity                               7,243        10,534 
--------------------------------  -----  --------      -------- 
 
 

The Company's retained earnings includes (loss)/profit for the year of (GBP524,296) (2019: GBP458,173).

The financial statements of Prime People Plc, Company Number 01729887 were approved by the Board and authorised for issue on 3 November 2020 and are signed on its behalf by:

   R J G Macdonald                                            D Zaneva-Todorinski 

PRIME PEOPLE PLC

Company Statement of Changes in Equity

For the year ended 31 March 2020

 
 Company          Called         Capital            Treasury   Share            Merger          Share             Retained   Total 
                   up             Redemp-             shares    premium          reserve         option           earnings 
                   share          tion                          account                          reserve 
                   capital        reserve 
                       GBP'000         GBP'000       GBP'000          GBP'000        GBP'000         GBP'000       GBP'000   GBP'000 
 
 At 1 April 
  2018               1,229                   9         (421)        5,371              173               314         3,748    10,423 
 
 Total 
  comprehensive 
  income for 
  the year          -                        -             -     -                -                        -           458       458 
 
 Shares 
  purchased 
  for treasury               -               -          (26)                -          -                   -             -      (26) 
 
 Shares issued 
  from treasury              -               -           246                -          -                   -             -       246 
 
 Adjustment 
  on share 
  disposal                   -               -            40                -          -                   -          (35)         5 
 
 Investment 
  in 
  subsidiaries               -               -             -     -                -                       23             -        23 
 
 Dividend                    -               -             -                -               -              -         (595)     (595) 
---------------  -------------  --------------  ------------  ---------------  --------------  -------------  ------------  -------- 
 At 31 March 
  2019               1,229                   9         (161)        5,371              173               337         3,576    10,534 
---------------  -------------  --------------  ------------  ---------------  --------------  -------------  ------------  -------- 
 
 
 Total 
  comprehensive 
  loss for the 
  year              -                        -             -     -                -                        -         (524)     (524) 
 
 Issue of 
  ordinary 
  shares            2                        -             -     -                -                        -             -         2 
 
 Adjustment 
  for share 
  schemes           -                        -             -     5                -                        -           (5)         - 
 
 Capital 
  repayment                  -               -             -          (2,000)               -              -             -   (2,000) 
 
 Shares 
  purchased 
  for treasury               -               -          (23)                -               -              -             -      (23) 
 
 Shares issued 
  from treasury              -               -            34                -               -              -             -        34 
 
 Adjustment 
  on share 
  disposal                   -               -           150                -               -          (150)         (150)     (150) 
 
 
 Dividend                    -               -             -                -               -              -         (630)     (630) 
---------------  -------------  --------------  ------------  ---------------  --------------  -------------  ------------  -------- 
 
 
   At 31 March 
   2020             1,231                    9             -     3,376            173                    187         2,267     7,243 
---------------  -------------  --------------  ------------  ---------------  --------------  -------------  ------------  -------- 
 
 

PRIME PEOPLE PLC

Group and Company Cash Flow Statement

For the year ended 31 March 2020

 
                                                   Group                                      Company 
                                                2020                  2019                  2020                  2019 
                          Note               GBP'000               GBP'000               GBP'000               GBP'000 
 
 Cash generated from 
  (used 
  in) underlying 
  operations                20                 3,642                 2,146                 (276)                   241 
 Income tax paid                               (160)                 (111)                   (8)                   (9) 
 
 
 Net cash from/ (used 
  in) 
  operating activities                         3,482                 2,035                 (284)                   232 
-----------------------  -----  --------------------  --------------------  --------------------  -------------------- 
 
 Cash flows (used in)/ 
 from investing 
 activities 
 Net purchase of 
  property, 
  plant and equipment, 
  and 
  software                                     (122)                 (727)                     -                     - 
 Dividend received                                 -                     -                 3,450                   450 
 
 Net cash (used 
  in)/from 
  investing activities                         (122)                 (727)                 3,450                   450 
 
 
 Cash flows from 
 financing 
 activities 
 Issue of ordinary 
  share 
  capital                                          2                     -                     2                     - 
 Shares issued from 
  treasury                                         -                   260                    34                   246 
 Shares purchased for 
  treasury                                      (21)                     -                  (21)                  (26) 
 Shares issued and                                 -                     -                   (2)                     - 
 moved 
 to treasury 
 Return of capital from 
  share premium                              (2,000)                     -               (2,000)                     - 
 Dividend paid to 
  shareholders                                 (948)                 (595)                 (625)                 (595) 
 Lease payments                                (566)                     -                     -                     - 
-----------------------  -----  --------------------  --------------------  --------------------  -------------------- 
 
 Net cash used in 
  financing 
  activities                                 (3,533)                 (335)               (2,612)                 (375) 
-----------------------  -----  --------------------  --------------------  --------------------  -------------------- 
 
 Net (decrease)/ 
  increase 
  in cash and cash 
  equivalents                                  (173)                   973                   554                   307 
-----------------------  -----  --------------------  --------------------  --------------------  -------------------- 
 
 Cash and cash 
  equivalents 
  at beginning of the 
  year                                         2,309                 1,234                   322                    15 
 Effect of foreign 
  exchange 
  rate changes                                  (81)                   102     -                                     - 
-----------------------  -----  --------------------  --------------------  --------------------  -------------------- 
 
 
 Cash and cash 
  equivalents 
  at the end of the 
  year                      21                 2,055                 2,309                   876                   322 
-----------------------  -----  --------------------  --------------------  --------------------  -------------------- 
 
 

PRIME PEOPLE PLC

Notes to the Financial Statements

For the year ended 31 March 2020

   1     Nature of Operations 

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

The Company is a public limited company which is quoted as an AIM Company and is incorporated and domiciled in the UK. The address of the registered office and the principal place of business is 2 Harewood Place, London W1S 1BX. The registered number of the Company is 01729887.

   2     Summary of Significant Accounting Policies 

Basis of Preparation

The financial statements of Prime People Plc consolidate the results of the Company and all its subsidiary undertakings. As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company has not been included as part of these financial statements. The financial statements have been prepared on a going concern basis.

The consolidated financial statements of the Group and Company have been prepared on going concern basis, and in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union and comply with IFRIC interpretations and Company Law applicable to Companies reporting under IFRS, and in accordance with the Companies Act 2006. The consolidated financial statements have been prepared under the historical cost convention modified as necessary to include any items at fair value, as required by accounting standards. The Parent Company's Financial Statements have also been prepared in accordance with IFRS and the Companies Act 2006.

The consolidated financial statements for the year ended 31 March 2020 (including comparatives) are presented in GBP '000.

The accounting polices applied by the Group in these consolidated financial statements are the same as those applied in its consolidated Financial Statements as at and for the year ended 31 March 2019, except for lease recognition and uncertainty over income tax treatments which are covered in more detail in Notes 2(i) and 19 and are described below.

Adjustments recognised on adoption of IFRS 16

The Group has adopted IFRS 16 for the first time in these financial statements. This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements. The Group has adopted the modified retrospective approach which does not require the restatement of comparative information. 2019 figures have therefore not been restated and IFRS 16 has an impact from 1 April 2019.

The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 April 2019.

The weighted average incremental borrowing rate used is 3.77%.

From 1 April 2019 the Group no longer records a rental expense within its operating costs but instead records a depreciation charge in respect of the right-of-use assets within operating costs, and an interest charge on the lease liabilities within its finance costs.

On adoption of IFRS 16, the Group recognises within the balance sheet a right-of-use asset and a corresponding lease liability for all applicable leases. Within the income statement, operating lease rentals payable has been replaced by depreciation and interest expense. This has resulted in an increase in operating profit and finance costs.

Measurement of right-of-use assets

In applying IFRS 16 for the first time right of use assets are initially measured on a retrospective basis as if the new rules had always been applied. Other right of use assets are measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

lease payments made at or before commencement of the lease.

initial direct costs incurred; and

the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations).

using hindsight in determining the lease term where the lease agreement contains options to extend or terminate the contract

accounting for operating leases with remaining lease terms of less than 12 months as at 1 April 2019 as short- term leases

Adjustments recognised in the balance sheet as at 1 April 2019

The change in Accounting Policy affected the following balance sheet items on 1 April 2019

right-of-use assets - increase by GBP1.47m

lease liabilities - increase by GBP1.76m

net impact on retained earnings on 1 April 2019 was a decrease of GBP0.30m

The Group has applied the simplified transition approach where it does not restate any comparative information. Instead the cumulative effect of applying the standard is recognised as an adjustment to the opening balance of retained earnings at the date of initial adoption.

The Group has elected not to recognise the right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less or leases that are of low value (GBP5,000). Lease payments associated with these leases are expensed on a straight-line basis over the lease term.

The table below summarises the IFRS 16 impact on transition for lease liabilities and the corresponding right-of-use assets along with the movement from 1 April 2019 to 31 March 2020:

 
 Lease liability                                        GBP'000 
 Operating lease commitment disclosed as at 31 March 
  2019                                                    1,817 
 Less short-term and low value lease                       (27) 
 Exchange difference                                        104 
-----------------------------------------------------  -------- 
 Operating lease commitment at 31 March 2019 falls 
  under IFRS 16                                           1,894 
 
 Discounted using borrowing incremental rate at 
  initial application                                     (134) 
 
 Lease liabilities recognised at 1 April 2019             1,760 
 
 
 Lease liabilities movement from 1 April 2019 to 
  31 March 2020 
 At 1 April 2019                                          1,760 
 New lease in period                                        212 
 Lease payments                                           (566) 
 Interest charge                                             71 
 Exchange difference                                         48 
-----------------------------------------------------  -------- 
 Total lease liabilities at 31 March 2020                 1,525 
 
 Current lease liabilities                                  497 
 Non-current lease liabilities                            1,027 
 
 
 Right-of-use assets 
                               31 March 2020   1 April 2019 
                                     GBP'000        GBP'000 
 Properties                            1,284          1,463 
 Total right-of-use-assets             1,284          1,463 
----------------------------  --------------  ------------- 
 

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

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

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

IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Issued on 31 October 2018, effective 1 January 2020)

IFRS 3 Business Combinations (Issued on 22 October 2018, effective 1 January 2020)

Revised Conceptual Framework for Financial Reporting (Issued 29 March 2018, effective 1 January 2020)

IAS 1 - Presentation of Financial Statements

Amendments to IAS 1 clarify the criteria used to determine whether liabilities are classified as current or non-current. This will be based on the Group's right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. 'Settlements' include the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments are effective for annual reporting periods beginning on or after 1 January 2023.

The Group does not believe that the amendments to IAS 1 will have a significant impact on the classification of its liabilities.

Consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured at the aggregate of the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Acquisition related costs are recognised in profit or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition date fair value . The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

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

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

Going Concern

The directors have taken consideration of the impact of Covid- 19 on the business and the withdrawal of the United Kingdom from the European Union.

The Group's activities are funded by a combination of its operating cashflows, a GBP2m CBILS loan and Invoice Finance facility in the UK of GBP2m. The Board has reviewed the Group's profit and cash flow forecasts, and applied sensitivities to the underlying assumptions including impact of Covid-19 outbreak and the potential consequences for the Group. These projections indicate that the Group expects to meet its obligations as they fall due with the use of existing facilities and to continue to meet its covenant requirements. The Directors note that the Group is trading adequately and has sufficient working capital and other finance available to continue trading for a period of not less than 12 months from the date of issue of the Annual Report and Accounts. As such, the Directors consider it appropriate to continue to prepare the financial statements on a Going Concern basis.

Revenue recognition

Revenue

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

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

Revenue from Permanent placements, which is based on a percentage of the candidate's remuneration package and is derived from both retained assignments (where income is recognised on completion of defined stages of work) and non-retained assignments. Revenue is recognised once value has been received by the customer and when the performance obligations have been satisfied. Revenue from non-retained, permanent-placement assignments is now recognised when a candidate commences employment.

   b)   Cost of Sales 

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

   c)   Net Fee Income 

Net Fee Income represents Revenue less Cost of Sales and consists of the total placement fees of Permanent candidates and the margin earned on the placement of Contract candidates.

   d)   Foreign Currency Translation 

Functional and Presentation Currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Sterling, which is the Company's functional and presentation currency.

   (ii)    Transactions and Balances 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income.

(iii) Group Companies

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

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

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

all resulting exchange differences are recognised in other comprehensive income.

   e)   Intangible Assets 

Goodwill

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

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

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

Intangible assets that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful life. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with any changes being accounted for on a prospective basis.

   f)    Property, Plant and Equipment 

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

Furniture, fittings and computer equipment 25% - 33%

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

   g)   Impairment of Assets 

Assets that have an indefinite useful economic life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

   h)   Taxation 

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.

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

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

   i)    Leases 

IFRS 16 was adopted on 1 April 2019 without the restatement of comparative figures. For an explanation of the transitional requirements that were applied as at 1 April 2019, see note 2 above. The following policies apply subsequent to the date of initial application, 1 April 2019.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case applying a single discount rate to leases with reasonably similar characteristics. The Group does not have any leases with variable lease payments.

When the group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being depreciated over the revised remaining lease term.

   j)    Pension Costs 

The Group operates a defined contribution pension scheme. The Group adopts both the minimum legally required employer contribution rate of 3% of qualifying earnings, and the maximum earning threshold for automatic enrolment for 2019-20, as set by the Pension Regulator.

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

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

   k)   Segmental Reporting 

IFRS 8 requires operating segments to be identified based on internal reports that are regularly reviewed by the Board of Directors to allocate resources to the segment and to assess their performance.

   l)    Financial instruments 

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

m) Financial assets

The Group's financial assets comprise cash and various other receivable balances that arise from its operations.

This includes the Group's trade and other receivables. They are initially recorded at fair value and subsequently measured at amortised cost. For trade receivables amortised cost includes an allowance for expected credit losses. This is assessed applying a provision percentage of expected loss to each of these which is assessed by reference to past default experience. Trade receivables are only written off once the potential of collection is considered to be nil and any local requirements such as withholding sales taxes are met.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets except for trade receivables, where the carrying amount is reduced using an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profit or loss account.

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

The Group's operating activities in the UK are part funded by Invoice Financing facilities. Movements in the Invoice Discounting balance are shown within financing activities in the Group's Cash flow Statement. Interest charges on invoice discounting are included in finance costs and service charges are included in administrative costs in the Group's Income Statement.

   n)   Financial liabilities and equity 

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

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

   o)   Share-Based Compensation 

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

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

   p)   Dividend Distribution 

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

   q)   Critical Accounting Estimates and Judgements 

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

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

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

Revenue Recognition

Revenue from permanent placements is recognised when a candidate commences employment.

Goodwill Impairment

The Group tests goodwill for impairment at least annually. The recoverable amount is determined based on value-in-use calculations. This method requires the estimation of future cash flows and the assessment of a suitable discount rate in order to calculate their present value. Details of the impairment review are disclosed in note 11.

Trade Receivables

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

   3     Segment Reporting 
   a)     Revenue and Net Fee Income, by Geographical Region 

Information provided to the Board is focused on regions and as a result, reportable segments are on a regional basis.

 
                                                                     Revenue                                                           Net fee income 
                              2020                                                                                       2019            2020            2019 
                           GBP'000                                                                                    GBP'000         GBP'000         GBP'000 
 
 UK                         15,677                                                                                     16,472           7,262           7,599 
 Asia                        8,176                                                                                      7,770           8,120           7,770 
 Rest                          139                                                                                        418             139             418 
 of 
 World 
-------  --------  ---------------  -----------------------------------------------------------------------------------------  --------------  -------------- 
 
                            23,992                                                                                     24,660          15,521          15,787 
                   ---------------  -----------------------------------------------------------------------------------------  --------------  -------------- 
 
 
 

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

   b)     Revenue and Net Fee Income, by Classification 
 
                             Revenue                 Net fee income 
                         2020           2019            2020         2019 
                      GBP'000        GBP'000         GBP'000      GBP'000 
 
 Permanent 
 - UK                   6,344         6,501            6,344        6,493 
  - Asia                8,110          7,770           8,110        7,770 
  - Rest of World         139           418              139          418 
 Contract 
 - UK                   9,333          9,971             918        1,106 
  - Asia                   66              -              10            - 
------------------  ---------  -------------  --------------  ----------- 
 
   Total               23,992         24,660          15,521       15,787 
------------------  ---------  -------------  --------------  ----------- 
 
 
   c)     Profit before Taxation by Geographical Region 
 
                                                     2020                 2019 
                                                  GBP'000              GBP'000 
 
 UK - operations                                      299                  928 
 UK - impairment of investment asset              (4,018)                    - 
 
 Asia                                               1,672                1,523 
 
 Rest of World                                       (10)                   20 
 
 
 Operating (loss)/profit                          (2,057)                2,471 
 
   Net finance income                                (76)                    - 
-------------------------------------  ------------------  ------------------- 
 
 
   (Loss)/profit before taxation                  (2,133)                2,471 
-------------------------------------  ------------------  ------------------- 
 
 

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

Segment operating profit is the profit earned by each operating unit and includes inter segment revenues totalling GBP0.80m (2019: GBP0.83m) for the UK, and charges of GBP0.80m (2019: GBP0.77m) for Asia and nil for the rest of the world (2019: GBP0.06m).

Intersegmental revenue and charges relate to transfer of services from one subsidiary of the Group to another. They are based on arm's length calculations and in proportion to segmental headcount as percentage of the total Group headcount.

   d)     Segment Assets and Liabilities by Geographical Region 
 
                      Total assets              Total liabilities 
                       2020       2019              2020             2019 
                    GBP'000    GBP'000           GBP'000          GBP'000 
 
 UK                   9,418     12,502               386            2,036 
 Asia                 4,867      5,375             4,522            1,159 
 Rest of World           77        397                 9               80 
----------------  ---------  ---------  ----------------  --------------- 
 
   Total             14,362     18,274             4,917            3,275 
----------------  ---------  ---------  ----------------  --------------- 
 
 

The analysis above is of the carrying amount of reportable segment assets and liabilities. Segment assets and liabilities include items directly attributable to a segment and include income tax assets and liabilities.

4 Profit on ordinary activities before taxation

 
                                                                   2020             2019 
                                                                GBP'000          GBP'000 
 
 Profit for the year is arrived at after charging: 
 Depreciation - owned assets and leased assets                      737              220 
 Operating lease rentals - land and buildings                         -              586 
 Loss/(profit) on disposal of fixed assets                          374              (1) 
 Exchange rate loss                                                  29                3 
 
 The analysis of auditor's remuneration is as 
  follows: 
 Audit of Company                                                    31               23 
 Audit of subsidiaries                                               53               36 
---------------------------------------------------  ------------------  --------------- 
 Total audit fees                                                    84               59 
---------------------------------------------------  ------------------  --------------- 
 
   5   Directors' emoluments 
 
                                            2020          2019 
                                         GBP'000       GBP'000 
 
   Emoluments for qualifying services        538           562 
 
                                             538           562 
--------------------------------------  --------  ------------ 
 
 
 Highest paid Director: 
 Emoluments for qualifying services          210           231 
 
 
 

Details of Directors' emoluments and interests, which form part of these financial statements, are provided in the Director's Remuneration report in the Annual Report.

   6     Employees 
 
 Group                                                  2020       2019 
                                                      Number     Number 
 
   The average monthly number of employees of the 
   Group during the year, including Directors, was 
   as follows: 
 
 Consultants                                             107        106 
 Management and administration                            30         32 
 Temporary staff                                          30         37 
---------------------------------------------------  -------  --------- 
 
                                                         167        175 
---------------------------------------------------  -------  --------- 
 
 
 
 Company                                               2020     2019 
                                                     Number   Number 
 
   The average monthly number of employees of the 
   Company during the year, including Directors, 
   was as follows: 
 
   Management                                             6        5 
--------------------------------------------------  -------  ------- 
 
 

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

 
 Group                                 2020              2019 
                                    GBP'000           GBP'000 
 
 Wages and salaries                   8,795             8,360 
 Social security costs                  741               709 
 Pension contributions                   65                84 
 Share option charge                     49                57 
 
 
                                      9,650             9,210 
-----------------------  ------------------  ---------------- 
 
 
 Remuneration of key management       2020      2019 
                                   GBP'000   GBP'000 
 
 Short-term employee benefits        1,568     1,139 
 Social security costs                 151       115 
 Share-based payments                   38        33 
 Pension contributions                  11        49 
 
 
                                     1,768     1,336 
--------------------------------  --------  -------- 
 

Key management includes executive Directors and senior divisional managers.

   7      Taxation on Profits on Ordinary Activities 
 
                                                              2020       2019 
                                                           GBP'000    GBP'000 
 Analysis of tax charge in the year 
 Current tax 
 UK Corporation tax                                            118        173 
 Foreign tax                                                    97        129 
 Foreign tax over-provision in prior years                    (40)          - 
 
 
 Total current tax                                             175        302 
 Deferred tax 
 Deferred tax on fair value share option charge                  -        (4) 
 
 Total charge on profit for the year                           175        298 
------------------------------------------------------  ----------  --------- 
 
 
 UK corporation tax is calculated at 19% (2019: 19%) of the estimated 
  assessable profits for the year. Taxation for other jurisdictions 
  is calculated at the rates prevailing in the respective jurisdictions. 
 
  b) The charge for the year can be reconciled to the profit per 
  the consolidated statement of comprehensive income as follows: 
                                                              2020       2019 
                                                           GBP'000    GBP'000 
 
 (Loss) / profit before taxation                           (2,133)      2,471 
------------------------------------------------------  ----------  --------- 
 
 
 Tax at UK corporation tax rate of 19% (2019: 
  19%) on profit on ordinary activities                      (405)        470 
 Effects of: 
 Expenses not deductible for tax purposes                       18          8 
 Capital allowances for the period less than 
  depreciation                                                (22)       (26) 
 Depreciation on non-qualifying assets                         116          - 
 Increase in general debt provision                             26          - 
 Tax losses not utilised/(utilised)                              -          2 
 Tax rate differences                                        (250)      (125) 
 Exchange rate differences                                    (23)          - 
 Temporary differences recognised                              (3)       (34) 
 Permanent timing differences                                  727        (2) 
 Share option charge/exercised                                 (9)          5 
 
 Total current tax                                             175        298 
 
   Deferred Tax                                                  -          - 
 
 Tax charge for the year                                       175        298 
------------------------------------------------------  ----------  --------- 
 
 
   8      Dividends 
 
                                                         2020          2019 
                                                      GBP'000       GBP'000 
 
 Final dividend for 2019: 3.40p per share (2018: 
  3.25p per share)                                        411           383 
 Interim dividend for 2020: 1.80p per share (2019: 
  1.80p per share)                                        220           212 
 Command Recruitment Group (HK) Limited dividend          317             - 
  to non-controlling shareholders 
---------------------------------------------------  --------  ------------ 
 
                                                          948           595 
---------------------------------------------------  --------  ------------ 
 

A final dividend of 3.40p (2018: 3.25p) was paid on 2 August 2019 to shareholders on the register on 19 July 2019.

An interim dividend of 1.80p (2019: 1.80p) was paid on 6 December 2019 to shareholders on the register at the close of business on 22 November 2019. The interim dividend was approved by the Board on 11 November 2019.

A final dividend of GBP1m was approved by the directors of the partly owned (60%) subsidiary Command Recruitment (H.K) Group Limited in December 2019. 75% of the declared dividend was paid on 31 December 2019, with the remainder payable by 31 December 2020.

The Board did not and will not recommend any final dividend for the year to 31 March 2020.

   9      Earnings per share 

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

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

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

 
                                                                2020           2019 
                                                             GBP'000        GBP'000 
 
 (Loss) / profit for the year and earnings used 
  in basic and diluted earnings per share                    (2,384)          1,660 
 
 
 
                                                              Number         Number 
 
   Weighted average number of shares used for basic 
   earnings per share                                     12,307,273     12,094,523 
 Dilutive effect of share options                                  -        307,031 
----------------------------------------------------  --------------  ------------- 
 
      Diluted weighted average number of shares used 
                      for diluted earnings per share      12,307,273     12,401,554 
----------------------------------------------------  --------------  ------------- 
 
 
                                                               Pence          Pence 
 
                                                             (19.36) 
 Basic (loss)/earnings per share                                   p         13.72p 
                                                             (19.36) 
 Diluted (loss)/earnings per share                                 p         13.38p 
 
 

The following table shows earnings per share as they would be without the effect of goodwill impairment.

 
 
                                                             GBP'000             GBP'000 
 
 Profit for the year and earnings used in basic 
  and diluted earnings per share prior to goodwill 
  impairment                                                   1,635              1,660 
 
 
                                                              Number         Number 
 
 Weighted average number of shares used for basic 
  earnings per share                                      12,307,273     12,094,523 
 Dilutive effect of share options                                  -          307,031 
 
 
         Diluted weighted average number of shares used 
                         for diluted earnings per share   12,307,273     12,401,554 
 
 
                                                               Pence             Pence 
 
 Basic earnings per share prior to goodwill impairment        13.28p            13.72p 
 Diluted earnings per share prior to goodwill 
  impairment                                                  13.28p            13.38p 
 
 
   10   Property, Plant and Equipment 
 
                                Fixtures,   Right-of-use                    Total 
                                fittings,       assets - 
                            and equipment       Land and 
                                               buildings 
 Group                            GBP'000        GBP'000                  GBP'000 
 
 Cost 
 At 1 April 2018                    1,368              -                    1,368 
 Additions                            727              -                      727 
 Disposals                          (133)              -                    (133) 
  Exchange difference                  18              -                       18 
------------------------  ---------------  -------------  ----------------------- 
 
 At 1 April 2019                    1,980          2,932                    4,912 
 Additions                            122            212                      334 
 Disposals                           (28)              -                     (28) 
 Exchange difference                   37             62                       99 
------------------------  ---------------  -------------  ----------------------- 
 
 At 31 March 2020                   2,111          3,206                    5,317 
------------------------  ---------------  -------------  ----------------------- 
 
 
 Depreciation 
 At 1 April 2018                    1,126              -                    1,126 
 Provision for the year               220              -                      220 
 Disposals                          (133)              -                    (133) 
  Exchange difference                  15              -                       15 
------------------------  ---------------  -------------  ----------------------- 
 
 At 1 April 2019                    1,228          1,469                    2,697 
 Provision for the year               283            440                      723 
 Disposals                           (28)              -                     (28) 
 Exchange difference                   22             13                       35 
------------------------  ---------------  -------------  ----------------------- 
 
 At 31 March 2020                   1,505          1,922                    3,427 
 
 
 
   Net book value 
 At 31 March 2020                     606          1,284                    1,890 
------------------------  ---------------  -------------  ----------------------- 
 
 
   At 31 March 2019                   752              -                      752 
------------------------  ---------------  -------------  ----------------------- 
 
 At 31 March 2018                     242              -                      242 
------------------------  ---------------  -------------  ----------------------- 
 
 

11 Goodwill

 
                                                           GBP'000 
 
   Cost 
 At 1 April 2019                                            10,527 
 Goodwill impairment                                       (4,018) 
-------------------------------  --------------------------------- 
 
 At 31 March 2020                                            6,509 
-------------------------------  --------------------------------- 
 
 
 

The total carrying value of goodwill is GBP6.51m, which relates to the acquisition of the Macdonald & Company Group in January 2006 and Command Recruitment Group (H.K.) Limited in October 2017. Goodwill is reviewed and tested for impairment on an annual basis or more frequently if there is an indication that goodwill might be impaired. Goodwill has been tested for impairment by comparing the carrying amount of the group of cash generating units (CGUs) the goodwill has been allocated to, with the recoverable amount of those CGUs. The recoverable amounts of the CGUs are their value in use.

The assessment for Macdonald & Company Group is based on UK projected operating profit. Whilst the assessment model has remained consistent with prior years, the impact of Covid- 19 has influenced the basis of forecasting that has been applied. The recoverable amount is determined on a value-in-use basis utilising the value of cash flow projections over five years with terminal value which equates to an earnings multiple of six times year 5 earnings of the UK CGU. This has changed from prior years' model, where a multiple of 10 was applied.

As the business has been impacted by Covid-19, the forecast results for the first year are significantly reduced from previous years. As the 2021 forecast is not reflective of the expected business performance going forward post pandemic, management used the second year as a base with the expectation that the business will return to reduced but nevertheless normal NFI levels. The second year UK segment profit forecast shows a recovery with operating profit improvement, although it is still below levels achieved in the past.

 
                      % Rate 
   Assumptions         used 
 Growth rate (NFI)     4- 6% 
                     ------- 
 Cost increases         5-8% 
                     ------- 
 Discount rate         6.49% 
                     ------- 
 

A key assumption in the forecasts applied is that the impact of the pandemic will recede to an extent and allow the business to improve performance, although still at significantly reduced levels. As 2022 has been used as the base year for the modelling, growth rates have only been applied in 2023, 2024 and 2025, of 6%, 4% and 4% respectively. These rates are more than the 2% that has been applied in previous years, but also reflect the fact that the business is starting from a significantly reduced position, with capacity for growth.

The model has applied a terminal value of 6 times year 5 earnings. A pre-tax discount rate of 6.49% (2019: 6.60%) has been applied, representing the weighted average cost of capital for the Group. The reduced discount rate reflects the fact that the Group have taken on CBILS debt bearing interest at 3.99%.

As a result of the impairment reviews carried out at 31 March 2020, an impairment charge of GBP4m (2019: Nil) has been recognised for the UK business segment, reducing the carrying amount of goodwill in respect of that business to GBP5.75m.

Potential sensitivity scenarios have been considered. With a 1.0% increase in the discount rate the level of impairment recognised will reduce at the rate of approximately GBP0.27m. Different modelled scenarios indicate that the impairment could be both less or more than the GBP4m recognised.

Management are confident the assessment is reasonable as the NFI activity in the first six months post 31 March 2020 is in line with the forecast applied.

Goodwill recognised on the business combination in 2018 with Command recruitment Group (HK) limited was GBP758k. The assessment of Command Recruitment Group (H.K) Limited is based on projected results in Hong Kong and Dubai. The approach is the same as that used for Macdonald & Company Group. In assessing value in use, the estimated future cash flows are calculated by preparing cash flow forecasts derived from the most recent financial forecasts for five years. T his analysis does not indicate any impairment. Several potential sensitivity scenarios have been considered and these would only indicate impairment in the carrying value of goodwill if the discount rate were to be increased to 26% and if the forecast operating profit is underachieved by 52%. Management believes that both scenarios are unlikely as Command continues to profitable and perform in line with management expectations. As a result, the Group has continued to make significant investments in the business to accelerate its growth in line with the Group's strategy to build a strong presence in Hong Kong and maximise the long-term growth opportunities available in the market.

   12    Investments 
 
 Company shares in subsidiary undertakings        2020      2019 
                                               GBP'000   GBP'000 
 Cost 
 At 1 April 19                                  11,213    11,190 
 Impairment of investment asset                (3,926)         - 
 (Decrease)/ increase in shares from 
  subsidiary from share option reserve           (150)        23 
--------------------------------------------  --------  -------- 
 At 31 March 20                                  7,137    11,213 
--------------------------------------------  --------  -------- 
 

The investment value is linked to the Goodwill and accordingly the impairment in the carrying value of the UK CGU, is an indication that there is an impairment in the underlying investment. The model and assumptions applied to assessing the Goodwill impairment have been applied to the carrying value of the investment and an impairment has been recognised in the period.

Non-Controlling Interest

The following table summarises the information relating to Command Recruitment Group (HK) Limited, that is a subsidiary with material non-controlling interest ("NCI"), before any intra-group eliminations.

 
                                                       2020      2019 
                                                    GBP'000   GBP'000 
 NCI percentage                                         40%       40% 
 
 Non-current assets                                     288       110 
 Current assets                                       1,892     2,237 
 Non-current liabilities                              (145)         - 
-------------------------------------------------  --------  -------- 
 Net assets                                           2,035     2,347 
-------------------------------------------------  --------  -------- 
 Net assets attributable to NCI                         814       939 
-------------------------------------------------  --------  -------- 
 Revenue                                              3,596     3,972 
 Operating profit                                     1,412       907 
 Other comprehensive (loss)/ income                    (35)        20 
-------------------------------------------------  --------  -------- 
 Total comprehensive income                           1,372     1,414 
-------------------------------------------------  --------  -------- 
 Operating profit allocated to NCI                      565       566 
 Other comprehensive (loss)/ income allocated 
  to NCI                                               (14)         8 
-------------------------------------------------  --------  -------- 
 Cash flows from operating activities                 4,831     2,585 
 Cash flows from financing activities (dividends      (318)         - 
  to NCI: nil) 
-------------------------------------------------  --------  -------- 
 Net increase /(decrease) in cash and cash 
  equivalents                                         4,513     2,585 
-------------------------------------------------  --------  -------- 
 

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

 
                            Country of       Principal activity   Registered address 
                             incorporation 
 Macdonald & Company        England and      Holding Company      2 Harewood Place, Hanover 
  Group Limited              Wales                                 Square, London, W1S 
                                                                   1BX 
 Macdonald & Company        England and      Recruitment          2 Harewood Place, Hanover 
  Property Limited           Wales                                 Square, London, W1S 
                                                                   1BX 
 Macdonald and Company      England and      Recruitment          2 Harewood Place, Hanover 
  Freelance Limited          Wales                                 Square, London, W1S 
                                                                   1BX 
 Macdonald & Company        England and      Dormant              2 Harewood Place, Hanover 
  (Overseas) Limited         Wales                                 Square, London, W1S 
                                                                   1BX 
 Macdonald & Company        Hong Kong        Recruitment          29th Floor 
  Ltd                                                              3 Lockhart Road 
                                                                   Wan Chai, Hong Kong 
 Ru Yi Consulting           Hong Kong        Dormant              29th Floor 
  Limited                                                          3 Lockhart Road 
                                                                   Wan Chai, Hong Kong 
 Macdonald & Company        P.R. China       Recruitment          1503M, 15/F, Tower 
  (Shenzhen) limited                                               2, Kerry Plaza, No.1 
                                                                   Zhong Xin Si Road, 
                                                                   Futian District, Shenzhen 
                                                                   518048, P.R. China 
 Macdonald and Company      Singapore        Recruitment          63 Market Street #05-02, 
  Pte Limited                                                      Bank of Singapore Centre, 
                                                                   Singapore 048942 
 Macdonald & Company        Australia        Dormant              Storey Blackwood & 
  Pty Ltd                                                          Co, Level 4, 222 Clarence 
                                                                   Street, Sydney NSW 
                                                                   2000 Australia 
 Macdonald & Company        South Africa     Dormant              1 Emfuleni, 79 Crassula 
  Recruitment Proprietary                                          Crescent, Woodmead, 
  Ltd                                                              Johannesburg, 2052 
                                                                   South Africa 
 The Prime Organisation     England and      Dormant              2 Harewood Place, Hanover 
  Ltd                        Wales                                 Square, London, W1S 
                                                                   1BX 
 Command Recruitment        Hong Kong        Recruitment          29th Floor 
  Group (H.K.) Limited                                             3 Lockhart Road 
                                                                   Wan Chai, Hong Kong 
 Blackbox Compliance        Singapore        Recruitment          63 Market Street #05-02, 
  Pte. Limited                                                     Bank of Singapore Centre, 
                                                                   Singapore 048942 
 

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

The Group holds 100% of all classes of issued share capital except in the case of Command Recruitment Group (H.K.) Limited, where it owns 60%, and Blackbox Compliance Pte. Limited where it owns 40%. The percentage of the issued share capital held is equivalent to the percentage of voting rights for all companies.

   13    Trade and other receivables 
 
                                                         Group                          Company 
                                                     2020               2019          2020       2019 
                                                  GBP'000            GBP'000       GBP'000    GBP'000 
 Current 
 Trade receivables                                  3,312              4,156             -          - 
 Allowance for doubtful debts                       (340)              (621)             -          - 
 Other receivables                                    284                243           133        119 
 Amounts owed by subsidiary                             -                  -         3,000          - 
  company 
 Prepayments and accrued income                       612                868            12          5 
------------------------------------  -------------------   ----------------      --------   -------- 
 
                                                    3,868              4,646         3,145        124 
 -----------------------------------  -------------------   ----------------      --------   -------- 
 
 
 

At 31 March 2020, the average credit period taken on sales of recruitment services was 75 days (2019: 131 days) from the date of invoicing. An allowance of GBP340,000 (2019: GBP621,000) has been made for estimated irrecoverable amounts. Due to the short-term nature of trade and other receivables, the Directors consider that the carrying value approximates to their fair value.

A provision for impairment of trade receivables has been made. In reviewing the appropriateness of the provision, consideration has been given to the ageing of the debt and the potential likelihood of default, taking into account current economic conditions.

The ageing of trade receivables at the reporting date was:

 
                              Gross   Provisions    Expected     Gross trade   Provisions       Expected 
                              trade                     Loss     receivables                   Loss rate 
                        receivables                     rate 
                               2020         2020        2020            2019         2019           2020 
                            GBP'000      GBP'000           %         GBP'000      GBP'000              % 
 
 
 Not past due 0 
  -30days                     1,548           50        3.2%           1,654           68           4.1% 
 Past due 30-90 
  days                          792           80       10.2%           1,435          157          10.9% 
 Past due more than 
  90 days                       972          210       21.6%           1,067          396          37.1% 
--------------------  -------------  -----------  ----------   -------------  -----------  ------------- 
                       3,312                 340                       4,156          621 
 
 
 
 

The expected loss rates for trade receivables and contract assets are based on the payment profile and the shared credit risk characteristics arising in the different industries in which the Group operates. The Company has incorporated forward-looking information based on the clients' industries and financial position, including the assessment of any perceived impact of Covid- 19. Based on the Group's assessment, no expected credit loss allowance has been recognised in the financial year ended 31 March 2020.

Movement in allowance for doubtful debts:

 
                                             2020       2019 
                                          GBP'000    GBP'000 
 
 1 April 2019                                 621        178 
 Impairment losses recognised                 340        621 
 Amounts written off as uncollectable        (38)      (117) 
 Amounts paid by the client                 (452)       (61) 
 Impairment losses reversed                 (131)          - 
--------------------------------------   --------  --------- 
 
   31 March 2020                              340        621 
 
 
 
   14    Financial Instruments 
 
                                               Group              Company 
                                            2020      2019      2020      2019 
                                  Note   GBP'000   GBP'000   GBP'000   GBP'000 
 
 Financial assets at amortised 
  cost 
 Trade and other receivables       13      3,256     3,778       133       119 
 Amounts owed by subsidiary 
  company                          13          -         -     3,000         - 
 Cash and cash equivalents                 2,055     2,309       876       322 
-------------------------------  -----  --------  --------  --------  -------- 
 
                                           5,311     6,087     4,009       441 
-------------------------------  -----  --------  --------  --------  -------- 
 
 

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

 
                                               Group                           Company 
                                            2020           2019           2020                 2019 
                             Note        GBP'000        GBP'000        GBP'000              GBP'000 
 
 
 Financial liabilities at 
  amortised cost 
 
 Trade and other payables      15          1,619          1,123          3,873                1,097 
 Accruals                     15             901          1,227             35                   27 
 
                                           2,520          2,350          3,908                1,124 
--------------------------  -----  -------------  -------------  -------------  ------------------- 
 

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

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

   15    Trade and other Payables 
 
                                            Group                      Company 
                                      2020                2019        2020        2019 
                                   GBP'000             GBP'000     GBP'000     GBP'000 
Current 
Trade payables                         371                 316           1           3 
Other payables                       1,248                 807           -           1 
Amount owed to subsidiary 
 undertakings                            -                   -       3,872       1,093 
Taxation and social security           685                 730           4           6 
Accruals                               901               1,227          35          27 
 
                                     3,205        3,080              3,912       1,130 
 
 

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

   16    Deferred Tax 
 
Group (Liability)       Other temporary            Total 
                            differences 
                                GBP'000          GBP'000 
 
At 1 April 2018                       -                - 
Credit to income                     22               22 
 
At 31 March 2019                     22               22 
Debit to income                       -                - 
 
 
At 31 March 2020                     22               22 
 
 
Group (Asset)             Share Options            Total 
                                GBP'000          GBP'000 
 
At 1 April 2018                      45               45 
Debit to income                     (5)                - 
 
At 31 March 2019                     40               45 
Debit to income                       -              (5) 
 
 
  At 31 March 2020                   40               40 
 
 
 
   17    Share Capital 
 
                                     2020                     2019 
                                 Number   GBP'000      Number         GBP'000 
 
ALLOTTED CALLED UP 
Ordinary shares of 10p each 
As at 1 April                 12,290,199    1,229  12,290,199           1,229 
Shares issued during the 
 year                             17,074        2           -               - 
At 31 March                   12,307,273    1,231  12,290,199           1,229 
 
 

Share capital includes unpaid shares of nil (2019: nil).

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

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

Pursuant to shareholder resolutions at the AGM of the Company on 22 September 2020, the Company has the following authorities during the period up to the next AGM:

to issue new/additional ordinary shares to existing shareholders through a rights issue up to a maximum nominal amount of GBP410,242 representing one- third of the Company's issued share capital;

to issue new/additional ordinary shares to new shareholders up to a maximum nominal amount of GBP410,242 representing one third of the issued shares capital of the Company;

to allot equity securities for cash, without the application of pre-emption rights, up to a maximum nominal amount of GBP184,609 representing 15% of the Company's issued share capital of the Company;

to purchase through the market up to 15% of the Company's issued share capital, subject to certain restrictions on price; and

to make off-market purchases of its ordinary shares for the purposes of or pursuant to an employee 'share scheme with the maximum aggregate number of ordinary shares authorised to be purchased is 4,102,424 representing approximately one-third of the Company's issued ordinary share capital.

Capital Risk Management

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

The Group manages the capital structure and adjusts it in the light of changes to economic conditions and risks. In order to manage capital, the Group has continued to consider and adjust the level of dividends paid to shareholders and made purchases of its own shares which are held as Treasury Shares.

Employee Share Schemes

The Company operates two share options schemes with one of them, the Save as You Earn scheme, being dormant.

Enterprise Management Incentive Share Option Scheme

At 31 March 2020 the following options had been granted and remained outstanding in respect of the Company's ordinary shares:

 
      Year  Exercise   Exercise            Number of        Granted        Exercised      Forfeited       Number of 
  of grant     Price    Period               options                                                        Options 
               Pence                        31 March                                                       31 March 
                                                2019                                                           2020 
   2011/12     68.00  2014-2019                3,000              -                -              -           3,000 
   2013/14     10.00  2016-2021               12,000              -          (3,000)              -           9,000 
               10.00   2019-2021              40,250              -         (19,250)       (15,000)           6,000 
   2014/15     10.00  2016-2021               20,000              -         (10,000)              -          10,000 
               10.00   2019-2021             229,500              -        (174,500)       (30,000)          25,000 
   2015/16     10.00  2020-2022               30,000              -                -              -          30,000 
               58.00   2017-2022              25,000              -         (10,000)              -          15,000 
               58.00   2020-2022              60,000              -                -       (10,000)          50,000 
   2016/17     50.00  2019-2024               15,000              -         (15,000)              -               - 
               50.00   2022-2027              45,000              -                -       (35,000)          10,000 
               90.00   2019-2024              20,000              -                -        (5,000)          15,000 
               90.00   2022-2027              25,000              -                -        (5,000)          20,000 
2018/19        10.00  2020-2028               80,000              -                -              -          80,000 
2019/20        50.00  2022-2029                    -         15,000                -              -          15,000 
               50.00   2024-2029                   -         50,000                -              -          50,000 
               42.50   2022-2029                   -         30,000                -              -          30,000 
Total 2020                                   604,750         95,000        (231,750)      (100,000)         368,000 
 
  Weighted average exercise 
  price 2020 (pence)                          26.96p          47.63           17.25p          36.8p          35.73p 
 
  Total 2019                                 662,750         90,000         (30,000)      (118,000)         604,750 
Weighted average exercise 
 price 2019 (pence)                           28.37p        10.00p            10.00p         10.00p          27.84p 
 
 

There were 368,000 options outstanding at 31 March 2020 (2019: 604,750) which had a weighted average price per share of 35.73p (2019: 27.84p) and a weighted average contractual life of 4.3 years. The options vest over a period of two to four years conditional upon the option holders continued employment with the Company.

The conditions applying to those options which are fully vested have been achieved. The number of outstanding options that will vest is dependent on the achievement of several key performance measures of the group, measured at a regional and consolidated level for the financial years 2019 and 2020. The fair value of the employee services received in exchange for the grant of the share options is charged to the profit and loss account over the vesting period of the share option, based on the number of options which are expected to become exercisable.

 
                                            2020           2019 
Option pricing model used               Black-Scholes  Black-Scholes 
Weighted average share price at grant   91.00 & 81.50  76.00 & 74.00 
 date (in pence) 
Exercise price (in pence)               50.00 & 42.50      10.00 
Fair value of options granted during 
 the year                                   46.44          68.98 
Expected volatility (%)                      20             20 
Risk-free interest rate (%)                   4              4 
Expected life of options (years)            2 & 5          2 & 5 
 

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

The share-based payment expense recognised within the income statement during the period was GBP48,836 (2019: expense GBP57,306).

   18    Reserves 

Capital Redemption Reserve Fund

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

Treasury Shares

At 31 March 2020, the total number of ordinary shares of 10p held in Treasury and their values were as follows:

 
                                            2020                       2019 
                                             Number  GBP'000          Number  GBP'000 
 
As at 1 April                               195,676      161         505,676      421 
Shares purchased for treasury                36,074       23          34,000       26 
Shares issued from treasury               (231,750)     (34)       (344,000)    (246) 
Loss on treasury shares 
 disposal                                              (150)                     (40) 
 
  As at 31 March                                  -        -         195,676      161 
 
  Nominal value                                            -                       20 
Market value                                               -                      156 
 

The maximum number of shares held in treasury during the year was 195,676 shares representing 1.6% of the called-up ordinary share capital of the Company (2019: 505,676 representing 4.1% of the called-up ordinary share capital of the Company).

Merger Reserve

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

Share Option Reserve

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

Share Premium Account

The balance on the share premium account represents the amounts received in excess of the nominal value of the ordinary shares. On 3 January 2020 a special resolution was passed to return GBP2m of this reserve to the shareholders.

Translation Reserve

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

Retained Earnings

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

   19    Leases 

The Group has adopted IFRS 16 Leases for the first time in the financial statements. The Group has opted to apply the transition approach which does not require the restatement of comparative information. Further details are provided in note 1.

The Group's leases are property leases. These include leases for the offices from which the businesses across the Group operate and these have terms of typically 1 to 10 years. The movements in the carrying value of right-of-use assets is provided below.

 
                                                                                 Right-of-use 
                                                                             asset - Property 
                                                                                      GBP'000 
Cost 
At 1 April 2019                                                                         2,994 
Additions                                                                                 212 
At 31 March 2020                                                                        3,206 
 
Accumulated depreciation 
At 1 April 2019                                                                         1,482 
Depreciation                                                                              440 
At 31 March 2020                                                                        1,922 
 
 
Net Book Value as at 31 March 
 2020                                                                                     1,284 
 
 
 

Additional disclosures as required under IFRS 16 Leases are provided in the table below:

 
                                           2020 
                                        GBP'000 
Depreciation of right-of-use assets         440 
Interest on lease obligations                71 
Cash outflow for leases                     566 
Additions to right-of-use-assets            212 
 
   20    Reconciliation of Profit before Tax to Net Cash Inflow from Operating Activities 
 
                                                       Group                 Company 
                                                 2020             2019      2020      2019 
                                              GBP'000          GBP'000   GBP'000   GBP'000 
 
(Loss)/ Profit before taxation                (2,133)            2,471   (3,965)        10 
 
  Adjust for: 
Depreciation of property, plant and 
 equipment and software amortisation              737              220         -         - 
Impairment of goodwill                          4,018                -     3,926         - 
Share-based payment expense                        49        38                -         - 
Loss on sale of tangible asset                      1                1         -         - 
Finance costs                                      76                -         -         - 
 
 
  Operating cash flow before changes 
  in working capital                            2,748            2,730      (39)        10 
 
IFRS 15 adjustment on reserves b/f                  -          (1,976)         -         - 
(Increase)/decrease in receivables                778              976   (3,021)     (115) 
Increase/(decrease) in payables                   116              416     2,784       346 
 
Cash generated from / (used by) underlying 
 operations                                     3,642            2,146     (276)       241 
 

Changes in financial liabilities arise solely from financing cashflows and leases.

   21    Analysis of Cash less overdrafts 
 
Group                                At 1 April    Cash flow   At 31 March 
                                           2019                       2020 
                                        GBP'000      GBP'000       GBP'000 
 
Cash at bank and in hand                  2,309        (254)           2,055 
 
Total cash                                2,309        (254)           2,055 
 
 
 
 
 
Company                        At 1 April  Cash flow  At 31 March 
                                     2019                    2020 
                                  GBP'000    GBP'000      GBP'000 
 
Cash at bank and in hand              322        554          876 
 
Total cash                            322        554          876 
 
 
 
   22    Financial Risk Management 

The Board of Directors has overall responsibility for the risk management policies that are applied by the business to identify and control the risks faced by the Group. The Group has exposure from its use of financial instruments to foreign currency risk, credit risk and liquidity risk.

Foreign Currency

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

The Group's international operations account for approximately 34.66% (2019: 31.53% of revenue and approximately 24.27% (2019: 29.64%) of the Group's assets and consequently the Group has a degree of translation exposure in accounting for overseas operations.

The Group exposure to foreign currency risk is as follows:

 
As at 31 March 
 2020                             Euro      AUD      USD      HK$       S$      AED 
                               GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
Cash at bank                        66        7        1      259      211      410 
Trade and other receivables          -        -        -    1,350      299      336 
Trade and other payables             -        -        -  (1,101)    (117)    (115) 
Net exposure                        66        7        1      508      393      631 
 
 
As at 31 March 
 2019                             Euro      AUD      USD      HK$       S$      AED 
                               GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
Cash at bank                        78        -       32      645       95      805 
Trade and other receivables          -        -        -      648      140    1,389 
Trade and other payables             -        -        -     (27)      (4)        - 
Net exposure                        78        -       32    1,266      231    2,194 
 

Sensitivity analysis - currency risk

A 10% weakening of Sterling against the above currencies at 31 March 2020 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis is applied currency by currency in isolation, i.e. ignoring the impact of currency correlation, and assumes that all other variables, interest rates, remain constant. The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain adverse market conditions occur. Actual results in the future may differ materially from those projected, due to developments in the global financial markets which may cause fluctuations in interest and exchange rates to vary from the hypothetical amounts disclosed in the table below, which therefore should not be considered a projection of likely future events and losses.

 
                      2020 equity  2020 PTB  2019 equity  2019 PBT 
                          GBP'000   GBP'000      GBP'000   GBP'000 
Euro                          (6)       (6)          (7)       (7) 
US Dollar                       -         -          (3)       (3) 
Hong Kong Dollar             (46)      (46)        (115)     (115) 
Singapore Dollar             (36)      (36)         (21)      (21) 
UAE Dirham                   (57)      (57)        (199)     (199) 
Australian Dollar             (1)       (1)            -         - 
 

A 10% strengthening of Sterling against the above currencies at 31 March 2020 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

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

Credit Risk

The Group's principal financial assets are bank balances, trade and other receivables. The Group's credit risk is primarily in respect of trade receivables. Credit risk refers to the risk that a client will default on its contractual obligations resulting in financial loss to the Group. The Group's largest credit risk exposure to a single client is in the UK and represents 6.43% of the Group trade receivables balance. Although there is no indication that the debt is uncollectable, the Directors are of the opinion that adequate provision is in place to cover any potential default by this client. Public investment funds in Hong Kong and Saudi Arabia accounted for 12.57% and 8.48% of Group trade receivables respectively. Apart from this exposure, at the year-end no other

customer represented more than 5.73% (2019:   4.86% ) of the total balance of trade receivables. 

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

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

Liquidity Risk

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

The Group has no financial liabilities other than short-term trade payables and accruals as disclosed in note 15, all due within one year of the year end.

The Group has net funds of GBP2.06m (2019: GBP2.31m) which the Board consider are more than adequate to meet future working capital requirements and to take advantage of business opportunities.

As at 31 March 2020, the Group's financial liabilities have contractual maturities as follows:

 
                                                Between   Between 
                          Less than    6 - 12   1 and 2   2 and 5 
                           6 months    months     years     years  Over 5 years 
At 31 March 20              GBP'000   GBP'000   GBP'000   GBP'000       GBP'000 
 
Trade payables                  371         -         -         -             - 
Other payables                1,248         -         -         -             - 
Taxation and social 
 security                       440       245         -         -             - 
Accruals                        901         -         -         -             - 
Lease liabilities               254       243       500       508            20 
Total contractual 
 cash flows                   3,214       488       500       508            20 
 
 
 
                                                Between   Between 
                          Less than    6 - 12   1 and 2   2 and 5 
                           6 months    months     years     years  Over 5 years 
At 31 March 19              GBP'000   GBP'000   GBP'000   GBP'000       GBP'000 
 
Trade payables                  316         -         -         -             - 
Other payables                  807         -         -         -             - 
Taxation and social 
 security                       730         -         -         -             - 
Accruals                      1,227         -         -         -             - 
 
Total contractual 
 cash flows                   3,080         -         -         -             - 
 
 

The amounts disclosed in the table are the contractual undiscounted cash flows.

   23    Related Party Transactions 

Prime People Plc provides various management services to its subsidiary undertakings. These services take the form of centralised finance and operations support. The total amount charged by the Company to its subsidiaries during the year is GBP215k (2019: GBP215k). The balance owed to the subsidiary undertakings at the year-end is GBP3.87m (2019: GBP1.09m).

The Company also provides corporate guarantees on the subsidiary bank accounts. At 31 March 2020 amounts overdrawn by subsidiary bank accounts were GBPnil (2019: GBPnil).

The Directors receive remuneration from the Group, which is disclosed in the Directors' Remuneration Report. As shareholders, the Directors also received dividends in the year from the Company amounting to GBP318,213 (2019: GBP359,697).

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END

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November 04, 2020 06:12 ET (11:12 GMT)

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