TIDMKLN
RNS Number : 6845I
Kellan Group (The) PLC
23 March 2018
23 March 2018
The Kellan Group PLC
("Kellan", the "Company" or "Group")
Audited Annual Results for the year ended 31 December 2017
Notice of Annual General Meeting
The Company is pleased to announce its annual results for the
year ended 31 December 2017. Kellan is a market leading recruitment
business operating across a wide range of functional disciplines
and industry sectors.
The Annual General Meeting of the Company will be held at the
Company's offices at 4th Floor, 27 Mortimer Street, London, W1T 3BL
at 2pm on 27 April 2018.
Headline figures
-- Full year revenue of GBP22.0 million representing
an increase of 0.5% (2016: GBP21.9 million).
-- H2 2017 revenue of GBP11.7 million grew by
13.7% compared with H1 2017 (GBP10.3 million);
while H2 net fee income (NFI) of GBP3.4 million
grew by 8.0% compared to H1 2017 (GBP3.2
million).
-- Full year adjusted EBITDA (note 2) profit
of GBP1 million compared to a profit of GBP0.8
million in 2016.
-- Operating profit of GBP0.7 million compared
with an operating profit before impairment
of GBP0.4 million in 2016.
-- Net profit of GBP0.4 million compared with
a net loss (including non-cash impairment
charge) of GBP2.5 million in 2016, and a
net profit of GBP0.1 million (excluding the
non-cash impairment charge of GBP2.6 million)
in 2016.
-- Continued streamlining with administrative
expenses reduced by 6.7% year-on-year from
GBP6.4 million in 2016 to GBP5.9 million
in 2017.
Executive Chairman's Statement
Group sales have increased by 0.5% from GBP21.9 million in 2016
to GBP22.0 million in 2017, while administrative expenses have
reduced by 6.7% from GBP6.4 million in 2016 to GBP5.9 million in
2017. The impairment review undertaken in 2017 resulted in no
impairment charge (2016: GBP2.6 million impairment charge
(non-cash) in relation to Quantica Group). Excluding the effect of
the GBP2.6 million goodwill impairment in 2016, year-on-year
earnings before tax increased from GBP0.1 million in 2016 to GBP0.4
million in 2017. Adjusted EBITDA for 2017 of GBP1.02 million
compared with GBP0.77 million in 2016 is very encouraging.
Berkeley Scott's 2017 NFI grew by 9.7% over 2016 with both
temporary and permanent operations seeing growth. The temporary
operation for 2017 grew by 13.4% over 2016, and the permanent
operation grew by 2.2%. The Birmingham and London offices saw the
2017 NFI grow significantly over 2016, while the Bristol office
declined by 17.5% due to a reduced headcount.
NFI from the RK business declined by 32.2% from GBP1.35 million
in 2016 to GBP0.91 million in 2017. However following changes in
senior management in Q1 2017 and local management in H2 2017, the
business returned to growth in H2 2017, with NFI increasing 8.6%
over H1 2017. Although productivity remains low, the business has
shifted focus to develop separate temporary and permanent
operations, which positions the business well to grow in 2018 and
2019. The phrase; one step back to achieve two steps forward is
relevant here.
NFI from the Quantica business declined by GBP0.35 million in
2017, although GBP0.32 million related to the closure of
underperforming operations in Leeds and London. While the remaining
Technology operation was broadly flat year-on-year, the Retail and
Manufacturing operations underperformed. As a result, the Retail
operation has been closed and the Manufacturing team was changed
through Q4 2017 and Q1 2018.
The Group leveraged its back office support function to generate
an added income stream by providing back-office Finance support to
businesses. During 2017, the Group generated revenue of GBP217,000
via this model.
I am very pleased with the impact made to the business by our
Managing Director Liam Humphreys, who was appointed in November
2016. Under his leadership, the operational team is demonstrating
good signs of growth in Berkeley Scott and positive progress in
other divisions. His hands on approach was much needed to provide a
clear steer of direction. Overall Group performance to date for
2018 is ahead of Board expectation and I am confident that the
changes implemented will lead the Group to increase its revenue in
2018 and beyond.
My sincerest thanks go to our staff, all our customers, and to
all our loyal shareholders for their continued support.
Richard Ward
Executive Chairman
22 March 2018
Strategic report
Business Model
Kellan Group plc (the "Group" or the "Company" or "Kellan"), is
a market leading recruitment business operating across a wide range
of functional disciplines and industry sectors. The Company joined
AIM, a market of the London Stock Exchange, in December 2004.
A review of the business and a detailed explanation of
performance and key performance indicators is set out below.
Business review
The UK recruitment market is providing good opportunities with
some specialist sectors doing significantly better than others, the
Group has proactively taken the opportunity to ensure it is in the
strongest position possible. Business operations are focussed in
our core markets being Hospitality & Leisure, Technology and
Accounting & Finance. While we also operate in certain other
niche areas, our aim is to continue to develop our core businesses
in major city centres. The diverse brands within the Group de-risk
the overall impact of a potentially inconsistent market, and
despite the overall decline in NFI, we saw some strong performances
within various parts of our business during 2017.
Berkeley Scott's temporary recruitment operation grew NFI by
13.4% from GBP3.1 million to GBP3.4 million in 2017. NFI from the
Leeds and Manchester offices declined by 5.3% year-on-year, while
all other offices delivered good growth. The Birmingham and London
businesses performed particularly well and represent significant
opportunities for 2018. Our strong track record of delivery and
quality saw our volumes increase in most of our large accounts.
This, combined with a policy of client diversity and an increased
client base, helped us grow most of our teams. A number of
operational improvements were identified across the year, which
resulted in a 10.4% year-on-year increase in average productivity
per fee earner.
NFI from Berkeley Scott's permanent recruitment operation was
flat year-on-year at GBP1.5 million. The management was
restructured in early 2017 following the decline in NFI in 2016. As
a result of this change, the average fee earners reduced by 23.2%
year-on-year, while still delivering the same NFI as 2016. This led
to an overall increase in productivity per fee earner of 31.6%. We
pursued higher value roles where clients require a higher level of
service and knowledge which saw a 5.7% rise in our average fee. We
have embarked on a process of narrowing the focus of our people and
therefore increasing their levels of specialisation leading to
improved fill-rates.
The RK Group underperformed in 2017, with NFI declining 32.2%
from GBP1.35 million in 2016 to GBP0.91 million in 2017. NFI
declined significantly in H1 2017 as we implemented a number of
changes within the management team. The NFI recovered in H2 2017,
with RK Group delivering 8.6% NFI growth in H2 2017 compared to H1
2017.
In addition we changed the strategic focus of a number of
individuals in order to develop our capability within the temporary
market, moving away from a "Dual Desk" policy. This has led to a
consistent growth of temporary/interim work in the second half of
the year which will continue to build a secure base for the
group.
Whilst the finance recruitment market is highly developed and
competitive we are well positioned to continue this trend of growth
across 2018
The Quantica Group's NFI declined by GBP0.35 million (41.2%)
from GBP0.84 million in 2016 to GBP0.49 million in 2017. GBP0.32
million of this decline relates to the closure of the
underperforming Leeds operation in 2016 and the closure of the
underperforming London operation in Q1 2017. Although Quantica
Group's NFI reduced GBP0.35 million year-on-year, Quantica's
controllable contribution was flat year-on-year. This has led to
several managerial changes and a refocusing on the core markets of
Manufacturing and Technology. These markets remain strong and
present good opportunities for growth in 2018.
Financial Review
The Group's revenue for the year ended 31 December 2017 was
GBP22.0 million representing an increase of 0.5% (2016: GBP21.9
million). This produced NFI of GBP6.6 million for the year ended 31
December 2017, a decrease of 2.2% (2016: GBP6.8 million). 2017 full
year adjusted EBITDA (note 2) was a profit of GBP1 million compared
to a profit of GBP0.8 million in 2016.
Temporary NFI increased by 9.2% from GBP3.7 million in 2016 to
GBP4.0 million in 2017, whilst permanent NFI declined by 15.8% from
GBP3.1 million in 2016 to GBP2.6 million in 2017. Permanent NFI
declined due to underperformance from RK Group and Quantica Group
with RK Group declining by GBP0.34 million and Quantica Group
declining by GBP0.18 million.
The administrative expenses have decreased to GBP5.9 million in
the year ended 31 December 2017, from GBP6.4 million in 2016, which
represents a reduction of 6.7% year-on-year.
Cashflow
Net cash inflow at an operating level was GBP0.78 million for
the year ended 31 December 2017 (2016: GBP0.68 million). Investing
activities comprised of capital expenditure of GBP29,000 (2016:
GBP28,000). Net cash outflow from financing activities amounted to
GBP676,000 (2016: GBP448,000) comprising movement on the invoice
discounting facility balances, the servicing of loan interest and
the repayment of GBP666,000 to the loan note holders. The net
increase in cash and cash equivalents in the period was GBP72,000
(2016: GBP202,000).
On 15 September 2017, the Company announced that it had agreed
terms to purchase the outstanding GBP523,000 loan notes which were
due for repayment on 20 September 2022, for the purchase price of
GBP366,100 (such sum being equal to 70 per cent. of the principal
GBP523,000). This was funded by drawdown on the existing
confidential invoice discounting facility provided by Barclays. The
Barclays drawdown is currently at a substantially lower rate of 2%
(1.5% over base) than the interest on the Loan Notes (5%) and
ensures the Company uses its cheapest means of funding first.
In summary, before the first refinancing and redemption
transaction dated 26 October 2016, the Group had loan notes
amounting to GBP3,206,000 outstanding, with GBP1,346,000 due for
repayment on 14 February 2017 and the remaining GBP1,860,000 due
for repayment on 20 September 2017. Following the transactions
announced on 26 October 2016, 5 January 2017 and 15 September 2017,
the Group has loan notes amounting to GBP1,860,000 outstanding and
due for repayment on 20 September 2022.
Monitoring, risk and KPIs
Risk management is an important part of the management process
throughout the Group. The composition of the Board is structured to
give balance and expertise when considering governance, financial
and operational recruitment issues. Meetings incorporate, amongst
other agenda items, a review of monthly management accounts,
operational and financial KPIs and major issues and risks facing
the business.
The most important KPIs used in monitoring the business are as
follows:
Year ended Year ended
31 December 31 December
2017 2016
Revenue GBP22,037,000 GBP21,932,000
Net Fee Income GBP6,636,000 GBP6,783,000
Adjusted EBITDA (Note 2) GBP1,015,000 GBP772,000
Adjusted EBITDA as a % of Net
Fee Income 15.30% 11.38%
Days sales outstanding (DSO)
(Note 12) 39 38
Headroom on Confidential Invoice GBP2,035,620 GBP1,952,000
Discounting "CID" facility
The principal risks faced by the Group in the current economic
climate are considered to be financial, market and people
related:
-- Financial - The main financial risks arising from the Group's
activities are liquidity risk and credit risk. These are monitored
by the Board and are disclosed further in notes 1 and 16 of the
financial statements.
Based on the Group's latest cash flow forecasts and current
trading performance, it is not expected that any further funding
will be required for the foreseeable future. The directors'
consideration of the appropriateness of the going concern basis in
preparing the financial statements is set out in note 1 to the
financial statements.
-- Market - the Group operates in a dynamic market place and
constantly seeks to ensure the solutions it offers to customers are
competitive. By operating in diverse sectors, the Group is, to some
degree, protected from a deteriorating market. The Group is
operating at a 60/40 mix of temporary and permanent recruitment
fees at NFI level (2016: near 50/50), which de-risks the overall
impact of a potentially inconsistent market.
-- People - In a people intensive business, the resignation of
key individuals (both billing consultants and influential
management) and the potential for them to exit the business taking
clients, candidates and other employees to their new employers is a
risk. Kellan mitigates this risk through a number of methods
including the application of competitive pay structures and share
plans to incentivise retention. In addition the Group's employment
contracts contain restrictive covenants that reduce a leaver's
ability to approach Kellan clients, candidates and employees for
certain periods following the end of their employment with the
Group.
The Strategic Report was approved by order of the Board on 22
March 2018.
Rakesh Kirpalani Richard Ward
Group Finance Director Executive Chairman
22 March 2018
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
Year ended Year ended
31 December 31 December
2017 2016
Note GBP'000 GBP'000
------------------------------ ----- ------------ ------------
Revenue 8 22,037 21,932
Cost of sales 8 (15,401) (15,149)
------------------------------ ----- ------------ ------------
Gross profit/net fee income 8 6,636 6,783
Administrative expenses (5,944) (6,369)
Operating profit before
impairment charge 692 414
Impairment of goodwill 10 - (2,578)
------------------------------ ----- ------------ ------------
Operating profit/(loss) 2 692 (2,164)
Finance expenses 5 (235) (322)
Profit/(Loss) before tax 3 457 (2,486)
Taxation 6 (70) -
------------------------------ ----- ------------ ------------
Profit/(Loss) for the period 387 (2,486)
------------------------------ ----- ------------ ------------
Attributable to:
Equity holders of the parent 387 (2,486)
------------------------------ ----- ------------ ------------
Profit/(Loss) per share
in pence
Basic 7 0.13 (0.73)
Diluted 7 0.13 (0.73)
------------------------------ ----- ------------ ------------
The above results relate to continuing operations.
There are no other items of comprehensive income for the year or
for the comparative year.
The notes form part of these financial statements.
Consolidated statement of financial position
As at 31 December 2017
As at As at
31 December 31 December
2017 2016
Note GBP'000 GBP'000
-------------------------------- ----- ------------ -------------
Non-current assets
Intangible assets 10 3,172 3,335
Property, plant and equipment 9 199 290
3,371 3,625
-------------------------------- ----- ------------ -------------
Current assets
Trade and other receivables 12 4,362 4,359
Cash and cash equivalents 13 1,982 1,910
-------------------------------- ----- ------------ -------------
6,344 6,269
-------------------------------- ----- ------------ -------------
Total assets 9,715 9,894
-------------------------------- ----- ------------ -------------
Current liabilities
Loans and borrowings 14 3,230 3,375
Trade and other payables 15 2,829 2,956
Provisions 18 15 8
-------------------------------- ----- ------------ -------------
6,074 6,339
-------------------------------- ----- ------------ -------------
Non-current liabilities
Loans and borrowings 14 1,543 1,881
Provisions 18 70 75
1,613 1,956
-------------------------------- ----- ------------ -------------
Total liabilities 7,687 8,295
-------------------------------- ----- ------------ -------------
Net assets 2,028 1,599
-------------------------------- ----- ------------ -------------
Equity attributable to equity
holders of the parent
Share capital 19 4,274 4,274
Share premium 20 14,746 14,746
Capital contribution reserve 20 810 768
Capital redemption reserve 20 2 2
Retained earnings (17,804) (18,191)
-------------------------------- ----- ------------ -------------
Total equity 2,028 1,599
-------------------------------- ----- ------------ -------------
These financial statements were approved by the Board of
directors on 22 March 2018 and were signed on its behalf by:
Richard Ward Rakesh Kirpalani
Director Director
The notes form part of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2017
Capital Capital
Share Share Convertible contribution redemption Retained Total
capital premium reserve reserve reserve earnings Equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ -------- -------- ------------ ------------- ----------- --------- ---------
Balance
at
1 January
2016 4,274 14,746 170 - 2 (15,705) 3,487
----------------------------- -------- -------- ------------ ------------- ----------- --------- ---------
Total comprehensive
loss for
the year
ended 31
December
2016 - - - - - (2,486) (2,486)
Capital
contribution - - - 768 - - 768
Equity component
of convertible
loan notes - - (170) - - - (170)
----------------------------- -------- -------- ------------ ------------- ----------- --------- ---------
Balance
at
31 December
2016 4,274 14,746 - 768 2 (18,191) 1,599
Total comprehensive
loss for
the year
ended 31
December
2017 - - - - - 384 384
Capital
contribution - - - 42 - - 42
Balance
at
31 December
2017 4,274 14,746 - 810 2 (17,807) 2,025
----------------------------- -------- -------- ------------ ------------- ----------- --------- ---------
The notes form part of these financial statements.
Consolidated statement of cash flows
for the year ended 31 December 2017
Note Year ended Year ended
31 December 31 December
2017 2016
GBP'000 GBP'000
Cash flows from operating
activities
Profit/(Loss) for the year 387 (2,486)
Adjustments for:
Depreciation and amortisation 283 335
Impairment of goodwill - 2,578
Interest paid 235 305
Amortisation of loan costs - 17
905 749
(Increase)/Decrease in trade
and other receivables (3) 56
Decrease in trade and other
payables (127) (101)
Increase/(Decrease) in provisions 2 (26)
----------------------------------- ----- ------------ ------------
Net cash inflow from operating
activities 777 678
----------------------------------- ----- ------------ ------------
Cash flows from investing
activities
Acquisition of property,
plant and equipment 9 (29) (28)
----------------------------------- ----- ------------ ------------
Net cash outflow from investing
activities (29) (28)
----------------------------------- ----- ------------ ------------
Cash flows from financing
activities
Increase of invoice discounting
facility balances 155 188
Interest paid and loan costs (165) (270)
New loan receipt - 366
Repayment of loan notes (666) (732)
Net cash outflow from financing
activities (676) (448)
----------------------------------- ----- ------------ ------------
Net increase in cash and
cash equivalents 72 202
Cash and cash equivalents
at the beginning of the year 1,910 1,708
----------------------------------- ----- ------------ ------------
Cash and cash equivalents
at the end of the year 13 1,982 1,910
----------------------------------- ----- ------------ ------------
The notes form part of these financial statements.
Notes to the financial statements
(forming part of the financial statements)
Accounting policies
Basis of preparation
This announcement and the financial information were approved by
the Board on 22 March 2018. The financial information set out in
this announcement does not constitute the Company's statutory
accounts for the years ended 31 December 2017 and 31 December 2016.
Statutory accounts for the years ended 31 December 2017 and 31
December 2016 have been reported on by the Independent Auditors.
The Independent Auditors' Reports on the Annual Report and
Financial Statements for 2017 and 2016 were unqualified and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Statutory accounts for the year ended 31 December 2016 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2017 will be delivered to the Registrar
in due course.
Going concern
The financial statements have been prepared on a going concern
basis.
Based on the Group's latest trading expectations and associated
cash flow forecasts, the directors have considered the cash
requirements of the Company and the Group will be able to operate
within its existing facilities for at least the next twelve months
following approval of these financial statements. These facilities
comprise an invoice discounting facility of up to GBP4 million
dependent on trading levels. The Directors recognise that there is
a general sensitivity to the wider macro-economic environment,
however, based on the ongoing support from major shareholders,
current market outlook and management's trading expectations; the
Directors are confident that the Group will be able to meet its
liabilities as they fall due for the foreseeable future. It is on
this basis that the Directors consider it appropriate to prepare
the Group's financial statements on a going concern basis.
Measurement convention
The financial statements are prepared on the historical cost
basis.
Basis of consolidation
Subsidiaries are entities controlled by the Group.
The Company controls a subsidiary if all three of the following
elements are present; power over the subsidiary, exposure to
variable returns from the subsidiary, and the ability of the
investor to use its power to affect those variable returns. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
Property, plant and equipment
Items of property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses. Depreciation is
charged to the income statement on a straight-line basis over the
estimated useful lives of each part of an item of property, plant
and equipment. Land is not depreciated. The annual rates used are
generally:
-- Computer equipment 25%
-- Office equipment 10% - 33%
-- Short leasehold premises and improvements over the duration of the lease
Goodwill
Goodwill represents amounts arising on the acquisition of
subsidiaries. Subject to the transitional relief in IFRS 1, all
business combinations are accounted for by applying the purchase
method. Impairment tests on goodwill are undertaken annually at the
financial year end. Goodwill represents the difference between the
cost of the acquisition and the fair value of the net identifiable
assets acquired. Identifiable intangibles are those which can be
sold separately or which arise from legal or contractual rights
regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash-generating units and is not
amortised but is tested annually for impairment.
Externally acquired intangible assets
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques (see
section related to critical estimates and judgements on page
22).
Amortisation is recognised in administration costs within the
statement of comprehensive income on a straight-line basis over the
estimated useful lives of intangible assets, other than goodwill,
from the date that they are available for use.
The significant intangibles recognised by the Group, their
useful economic lives and the methods used to determine the cost of
intangibles acquired in a business combination are as follows:
Intangible asset Useful economic life Valuation method
Brand name 10 years Relief from royalty method
Customer relations 10 years Means extended excess method
Cash and cash equivalents
Cash and cash equivalents comprise cash balances
on current accounts and call deposits.
Impairment
The carrying values of assets are reviewed at each reporting
date to determine whether there is any indication of impairment. If
any such indication exists, the recoverable amount of the asset is
estimated. Where the asset does not generate cash flows which are
independent from other assets, the recoverable amount of the
cash-generating unit to which the asset belongs is estimated.
The recoverable amount of a non-financial asset is the higher of
its fair value less costs to sell, and its value-in-use.
Value-in-use is the present value of the future cash flows expected
to be derived from an asset or cash-generating unit calculated
using a suitable discount factor.
An impairment loss is recognised in the statement of
comprehensive income whenever the carrying amount of an asset or
cash-generating unit exceeds its recoverable amount
Goodwill is tested for impairment annually or whenever there is
an indication that the asset may be impaired. Any impairment
recognised on goodwill is not reversed.
The impairment review is assessed by reference to value in use,
using internal forecasts and estimated growth rates to forecast
future cash flows, and a suitable discount rate based on the
Group's weighted average cost of capital. Any impairment is
recognised immediately in the statement of comprehensive income and
is not subsequently reversed.
Provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the
expected future cash flows at a pre-tax risk-free rate.
Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension
plans are recognised as an expense in the statement of
comprehensive income as incurred.
Share-based payment transactions
The grant date fair value of options granted to employees is
recognised as an employee expense, with a corresponding increase in
equity, over the period in which the employees become
unconditionally entitled to the options. The fair value of the
options granted is measured using the Black Scholes option
valuation model, taking into account the terms and conditions upon
which the options were granted. The amount recognised as an expense
is adjusted to reflect the actual number of share options that
vest, except where forfeiture is due only to share prices not
achieving market vesting conditions.
Revenue and income recognition
Revenue, which excludes value added tax ("VAT"), constitutes the
value of services undertaken by the Group as its principal
activities, which are recruitment consultancy and other ancillary
services. These consist of:
-- Revenue from temporary placements, which represents amounts
billed for the services of temporary staff including the salary
cost of these staff. This is recognised when the service has been
provided;
-- Revenue for permanent placements, which is based on a
percentage of the candidate's remuneration package, is recognised
at the date at which a candidate commences employment. Provision is
made for the expected cost of meeting obligations where employees
do not work for the specified contractual period.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the
statement of comprehensive income on a straight-line basis over the
term of the lease. Lease incentives received are recognised in the
statement of comprehensive income as an integral part of the total
lease expense.
Taxation
Tax on the profit or loss for the period comprises current and
deferred tax charge.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in
respect of previous periods.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the balance sheet
date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
Financial assets
Loans and receivables
Trade and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as
loans and receivables. They are initially measured at fair value
and subsequently at amortised cost less any provision for
impairment. A provision for impairment of trade and other
receivables is established when there is objective evidence that
the Group will not be able to collect all amounts due according to
the original terms of the receivables. This provision represents
the difference between the asset's carrying amount and the present
value of estimated future cash flows. The amount of the provision
is recognised in the statement of comprehensive income.
Cash and cash equivalents include cash in hand, deposits at call
with banks and bank overdrafts. Bank overdrafts where there is no
right of set-off are shown within borrowings in current liabilities
on the statement of financial position.
Financial liabilities and equity instruments
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangements. Financial liabilities are classified as
either "financial liabilities at fair value through profit or loss
(FVTPL)" or "other financial liabilities".
When the company issues multiple instruments in a single
transaction the proceeds are allocated to each separate instrument
in accordance with their respective fair values. Where convertible
debt is issued the company determines the allocation of the
proceeds to the debt and equity components by first of all
determining the fair value of debt and then subtracting the amount
of the debt from the proceeds of the instrument as a whole to
determine the equity component.
Where a restructuring of debt arises the terms are reviewed to
consider whether there has been a substantial modification and if
so that there is an extinguishment of the existing debt and the
recognition of a new financial liability based on the amended
terms.
Other financial liabilities
Trade and other payables are recognised on the trade date of the
related transactions. Trade payables are not interest bearing and
are stated at the amount payable which is fair value on initial
recognition.
Interest bearing loans are recognised initially at fair value,
net of direct issue costs incurred, and are subsequently carried at
amortised cost using the effective interest method.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Adoption of new and revised standards
The new standards, interpretations and amendments, effective
from 1 January 2017, have not had a material effect on the
financial statements.
The amendments and interpretations to published standards that
have an effective date on or after 1 January 2018 or later periods
have not been adopted early by the Group and are not expected to
materially affect the Group when they do come in to effect, with
the exception of IFRS 16 which at the date of transition, would add
an asset of GBP0.70 million and a liability of GBP0.70 million.
There would be no material change on the profit for the period.
International Accounting Standards Effective
(IAS/IFRS) date
IFRS 9 Financial Instruments 01/01/2018
Revenue from Contracts with
IFRS 15 Customers 01/01/2018
-------- ---------------------------- -------------
IFRS 16 Leases 01/01/2019
-------- ---------------------------- -------------
Use of estimates and judgements
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
In particular, information about significant areas of estimation
uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognised in
the financial statements is included below:
(a) Impairment of intangibles
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment and other assets where there
has been an indication of impairment. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the choice
of a discount rate in order to calculate the present value of the
cash flows. Actual outcomes may vary particularly in light of the
current volatility of the recruitment sector to changes in the
wider macro-economic environment. More information including
carrying values is included in note 10.
(b) Useful lives of intangible assets and property, plant and
equipment
Intangible assets excluding goodwill and property, plant and
equipment are amortised or depreciated over their useful lives.
Useful lives are based on the management's estimates of the period
that the assets will generate revenue, which are periodically
reviewed for continued appropriateness. Changes to estimates can
result in significant variations in the carrying value and amounts
charged to the consolidated income statement in specific periods.
More details including carrying values are included in notes 9 and
10.
(c) Share-based payments
Employee services received are measured by reference to the fair
value of the equity instruments at the date of grant, excluding the
impact of any non-market vesting conditions. The fair value of
share options is estimated by using the Black Scholes valuation
model on the date of grant based on certain assumptions. The charge
also depends on estimates of the number of options that will
ultimately vest based on the satisfaction of non-market and service
vesting conditions. No options were granted in the current or the
prior year.
(d) Onerous leases and dilapidations
There are inherent uncertainties in estimates of rents that will
be received in the future on vacant property when determining the
onerous lease obligation and estimating the cost of returning the
properties to their original state at the end of the lease.
2 Reconciliation of operating profit/(loss) to Adjusted EBITDA
and EBITA
Adjusted EBITDA is earnings before interest, taxes, depreciation
and amortisation adjusted for any one off or non-cash
administrative expenses.
Year Year
ended ended
31 December 31 December
2017 2016
GBP'000 GBP'000
----------------------------------- ------------ ------------
Operating profit/(loss) 692 (2,164)
Add back
Amortisation of intangible assets 163 216
Impairment of goodwill - 2,578
Restructuring costs 40 23
Adjusted EBITA 895 653
------------------------------------ ------------ ------------
Depreciation 120 119
------------------------------------ ------------ ------------
Adjusted EBITDA 1,015 772
------------------------------------ ------------ ------------
3 Expenses and auditors' remuneration
Included in profit/(loss) before tax are the following:
Year Year
ended ended
31 December 31 December
2017 2016
GBP'000 GBP'000
----------------------------------- ------------ ------------
Pension contributions 99 76
Depreciation of owned property,
plant and equipment 120 119
Amortisation of intangible assets 163 216
Operating leases rentals - hire
of plant and machinery 29 24
Operating leases rentals - hire
of other assets 321 325
------------------------------------ ------------ ------------
Auditors' remuneration:
Amounts payable to Moore Stephens LLP (2016: BDO LLP) in respect
of both audit and non-audit services are set out below:
Year Year
ended ended
31 December 31 December
2017 2016
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Fees payable to the auditors for
the audit of the Company's annual
accounts 10 13
------------------------------------------ ------------ ------------
Fees payable to the auditors for
other services:
The audit of the Company's subsidiaries 15 18
Other services relating to taxation - 4
------------ ------------
15 22
------------------------------------------ ------------ ------------
4 Staff numbers and costs
The weighted average number of persons employed by the Group
(including directors) during the period, analysed by category, was
as follows:
Number of
employees
--------------
2017 2016
----------------------------------------- ------ ------
Recruitment 66 76
Administrative staff 22 21
Temporary workers (whose costs are
included in cost of sales and services
charged within revenue) 991 993
----------------------------------------- ------ ------
1,079 1,090
----------------------------------------- ------ ------
The aggregate payroll costs of these persons were as
follows:
Year Year
ended ended
31 December 31 December
2017 2016
GBP'000 GBP'000
-------------------------------- ------------ ------------
Wages and salaries 17,720 17,998
Social security costs 1,005 979
Contribution to money purchase
pension scheme 99 76
--------------------------------- ------------ ------------
18,824 19,053
-------------------------------- ------------ ------------
Directors' and key management personnel remuneration:
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. During the period these were considered to
be the directors of the Company as disclosed on page 8.
Year Year
ended ended
31 December 31 December
2017 2016
GBP'000 GBP'000
-------------------------------- ------------ ------------
Emoluments 338 426
Company contributions to money
purchase pension schemes 23 27
361 453
-------------------------------- ------------ ------------
There were 4 directors in defined contribution pension schemes
during the period (2016: 4).
The total amount payable to the highest paid director in respect
of emoluments was GBP162,004 (2016: GBP192,427). Company pension
contributions of GBP13,336 (2016: GBP13,336) were made to a money
purchase scheme on his behalf.
No options were exercised by directors during the current or
prior periods.
5 Finance expense
Year Year
ended ended
31 December 31 December
2017 2016
GBP'000 GBP'000
Interest expense on financial
liabilities 235 305
Amortisation of loan costs - 17
Finance expenses 235 322
-------------------------------- ------------ ------------
6 Taxation
Reconciliation of effective tax rate
Year Year
ended ended
31 December 31 December
2017 2016
GBP'000 GBP'000
----------------------------------- ------------ ------------
Profit/(Loss) before tax for the
period 457 (2,486)
Total tax credit - -
----------------------------------- ------------ ------------
Profit/(Loss) after tax 457 (2,486)
------------------------------------ ------------ ------------
Tax using the UK corporation tax
rate of 19.25% (2016: 20%) 88 (497)
Non-deductible expenses including
impairment 56 564
Deferred tax not recognised in
respect of losses (74) (67)
Total tax charge 70 -
------------------------------------ ------------ ------------
A reduction in the UK corporation tax rate from 20% to 19% took
effect from 1 April 2017, therefore the effective tax rate for 2017
is 19.25%. A further reduction in the UK corporation tax rate to
17% from 1 April 2020 was substantively enacted on 6 September
2016.
7 Profit/(Loss) per share
Basic and diluted profit/(loss) per share
The calculation of basic profit/(loss) per share for the year
ended 31 December 2017 was based on the profit attributable to
ordinary shareholders of GBP384,000 (2016: loss of GBP2,486,000)
and a weighted average number of ordinary shares outstanding of
339,401,134 (2016: 339,401,134) calculated as follows:
Weighted average number of shares 2017 2016
-------------------------------------- ------------ ------------
Issued ordinary shares at 1 January 339,645,061 339,645,061
Effect of shares issued - -
Weighted average number of shares
used in basic profit/(loss) per
share 339,645,061 339,645,061
-------------------------------------- ------------ ------------
Effect of employee share options 2,000,000 2,375,000
-------------------------------------- ------------ ------------
Weighted average number of shares
used in diluted profit/(loss) per
share 341,645,061 342,020,061
-------------------------------------- ------------ ------------
Profit/(Loss) for the year in pounds 384,000 (2,486,000)
-------------------------------------- ------------ ------------
Basic profit/(loss) per share in
pence 0.13 (0.73)
-------------------------------------- ------------ ------------
Diluted profit/(loss) per share
in pence 0.13 (0.73)
-------------------------------------- ------------ ------------
There was no dilution in the prior period due to the loss in the
period.
8 Operating segments
Operating segments are components of an entity about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker ("Executive
Chairman") in deciding how to allocate resources and in assessing
performance.
The Group identifies its reportable operating segments by
divisions, each of which is run by a business leader. Each
identifiable business division operates in a different market of
recruitment, has its own brand, engages in business activities from
which it may earn revenues and incur expenses, discrete financial
information is readily available and its operating results are
regularly reviewed by the Executive Chairman. Operating segment
results are reviewed to controllable contribution level which is
gross profit less employee costs and marketing costs directly
controlled by the business leader of that division.
Each division derives its revenues from supplying one or more of
contingent permanent, contract, temporary and retained search
recruitment services. Assets and liabilities are reviewed at a
Group level and are not reviewed by the Executive Chairman on a
segmental basis.
2017 2016
Operating Segment GBP'000 GBP'000
------------------- --------------------------- -------- --------
Revenue 18,673 17,237
Net Fee Income 5,014 4,572
----------------------------------------------- -------- --------
Berkeley Scott Controllable contribution 2,936 2,419
------------------- --------------------------- -------- --------
Revenue 1,490 2,191
Net Fee Income 913 1,347
----------------------------------------------- -------- --------
RK Group Controllable contribution 229 532
------------------- --------------------------- -------- --------
Revenue 1,657 2,477
Net Fee Income 492 837
----------------------------------------------- -------- --------
Quantica Group Controllable contribution 128 261
------------------- --------------------------- -------- --------
Other Revenue 217 27
Other Net Fee Income 217 27
----------------------------------------------- -------- --------
Other Controllable contribution 217 27
------------------- --------------------------- -------- --------
Other Costs (2,495) (2,467)
----------------------------------------------- -------- --------
Revenue 22,037 21,932
Net Fee Income 6,636 6,783
Controllable contribution 3,510 3,239
Other costs (2,495) (2,467)
----------------------------------------------- -------- --------
Kellan Group
Total Adjusted EBITDA 1,015 772
------------------- --------------------------- -------- --------
The total of the reportable segments' Adjusted EBITDA for the
year agrees to the reconciliation to Group operating loss (see note
2).
9 Property, plant and equipment
Short
leasehold Computer
premises and
and office
Improvements Equipment Total
GBP'000 GBP'000 GBP'000
----------------------------- ------------- ---------- --------
Cost
Balance at 1 January 2016 754 2,034 2,788
Additions 1 27 28
Disposals - (427) (427)
----------------------------- ------------- ---------- --------
Balance at 31 December 2016 755 1,634 2,389
Additions - 29 29
Disposals (323) (644) (967)
----------------------------- ------------- ---------- --------
Balance at 31 December 2017 432 1,019 1,451
----------------------------- ------------- ---------- --------
Depreciation and impairment
Balance at 1 January 2016 672 1,734 2,406
Depreciation charge for the
period 20 99 119
Disposals - (426) (426)
----------------------------- ------------- ---------- --------
Balance at 31 December 2016 692 1,407 2,099
Depreciation charge for the
period 20 100 120
Disposals (323) (644) (967)
----------------------------- ------------- ---------- --------
Balance at 31 December 2017 389 863 1,252
Net book value
At 31 December 2015 82 300 382
----------------------------- ------------- ---------- --------
At 31 December 2016 63 227 290
----------------------------- ------------- ---------- --------
At 31 December 2017 43 156 199
----------------------------- ------------- ---------- --------
10 Intangible assets
Customer
Brand
Goodwill name relations Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- -------- ---------- --------
Cost
Balance at 1 January
2016, 31 December
2016 and 31 December
2017 24,717 922 3,609 29,248
------------------------------ --------- -------- ---------- --------
Amortisation and impairment
Balance at 1 January
2016 18,967 699 3,453 23,119
Amortisation - 128 88 216
Impairment charge 2,578 - - 2,578
------------------------------ --------- -------- ---------- --------
Balance at 31 December
2016 21,545 827 3,541 25,913
------------------------------ --------- -------- ---------- --------
Amortisation - 95 68 163
Impairment charge - - - -
----------------------------- --------- -------- ---------- --------
Balance at 31 December
2017 21,545 922 3,609 26,076
------------------------------ --------- -------- ---------- --------
Net book value
At 31 December 2015 5,750 223 156 6,129
------------------------------ --------- -------- ---------- --------
At 31 December 2016 3,172 95 68 3,335
------------------------------ --------- -------- ---------- --------
At 31 December 2017 3,172 - - 3,172
------------------------------ --------- -------- ---------- --------
Goodwill
31 December 31 December
2017 2016
GBP'000 GBP'000
----------------------------------- ------------ ------------
Berkeley Scott Regional (Formerly
Gold Helm Roche) branch network 1,920 1,920
Berkeley Scott London (Formerly
Sherwoods) branch network 569 569
RK Group 654 654
Other 29 29
----------------------------------- ------------ ------------
3,172 3,172
----------------------------------- ------------ ------------
The recoverable amounts of all the above CGUs have been
determined from value in use calculations based on cash flow
projections from budgets covering a five year period to 31 December
2022. The major assumptions are as follows:
A discount rate of 6.29% (2016: 8.90%) has been applied to the
CGUs listed above. Discount rates are based on management's
assessment of specific risks related to the CGUs, which
approximates to the Group's pre-tax weighted average cost of
capital.
NFI and operating margins have been based on past performance
and future expectations in the light of anticipated economic and
market conditions. Cash flows for 2018 to 2022 are based on the
forecast figures of each CGU for 2018 to 2022 based on a
conservative approach whilst considering the anticipated economic
conditions, corporate strategy and the related risk, market
intelligence/sentiment and specific knowledge of the individual
CGUs. NFI growth has been restricted to 2% for cash flows extending
beyond five years.
NFI assumptions for the cash flows for 2018 to 2022 are as
follows: 5% per annum for Berkeley Scott Regional (Formerly Gold
Helm Roche) branch network, 5% per annum for Berkeley Scott London
(Formerly Sherwoods) branch network, 8% average per annum for RK
Group. If the following changes were made to the above key
assumptions, the carrying amount and recoverable amount would be
equal. RK Group NFI growth reduced from 8% to 5%, Berkeley Scott
London NFI growth reduced from 5% to a decline of 30% and Berkeley
Scott Regional NFI growth reduced from 5% to a decline of 14%.
An adjustment to reduce the forecast net cash flows by 5% would
not result in an impairment. An increase in the discount rate of 1%
would not result in an impairment.
11 Deferred tax assets and liabilities
At 31 December 2017 the amount of deductible temporary
differences, unused tax losses and unused tax credits are as
follows:
31 December 31 December
2017 2016
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Trading losses carried forward 6,405 6,653
Capital losses carried forward 620 620
Decelerated capital allowances 655 1,037
Other deductible temporary differences 101 101
---------------------------------------- ------------ ------------
7,781 8,411
---------------------------------------- ------------ ------------
There is also a temporary difference in respect of the fair
value adjustments for intangible assets on previous acquisitions of
GBP274,000 (2016: GBP274,000) for which a corresponding deferred
tax liability has been recognised and offset against an equivalent
deferred tax asset in respect of unused tax losses, resulting in a
net position of GBPnil. In respect of the excess balances from the
table above, a deferred tax asset has not been recognised as there
is insufficient evidence that future taxable profits will be
material enough to reliably recognise a deferred tax asset.
12 Trade and other receivables
31 December 31 December
2017 2016
GBP'000 GBP'000
-------------------------------- ------------- ------------
Trade receivables 4,056 3,766
Other receivables 69 250
Prepayments and accrued income 237 343
--------------------------------- ------------ ------------
4,362 4,359
-------------------------------- ------------ ------------
Days sales outstanding for 2017 was 39 days (2016: 38 days)
presenting a delay in cash collection of 1 day. An analysis of the
allowance against accounts receivable and details of trade
receivables past due and not impaired is included in note 16.
13 Cash and cash equivalents
31 December 31 December
2017 2016
GBP'000 GBP'000
--------------------------- ------------ ------------
Cash and cash equivalents 1,982 1,910
--------------------------- ------------ ------------
14 Loans and borrowings
The carrying value and face value of loans and borrowings are as
follows:
31 December 31 December
2017 2016
GBP'000 GBP'000
------------------------------ ------------ ------------
Non-current liabilities
Other loans 1,543 1,881
1,543 1,881
------------------------------ ------------ ------------
Current liabilities
Loan notes - 300
Invoice discounting facility 3,230 3,075
------------------------------ ------------ ------------
3,230 3,375
------------------------------ ------------ ------------
Terms and debt repayment schedule
Carrying Carrying
Face Face
value Amount value amount
31 December 31 December 31 December 31 December
Year
Nominal of 2017 2017 2016 2016
interest
Currency rate maturity GBP'000 GBP'000 GBP'000 GBP'000
------------ ---------- --------- --------- ------------ ------------ ------------ ------------
Secured
loan Sterling 10% 2022 1,260 1,045 1,260 994
Secured
loan Sterling 10% 2022 600 498 600 474
Secured
loan Sterling 10% 2022 - - 523 413
Loan notes Sterling 12% 2017 - - 300 300
1,860 1,543 2,683 2,181
----------------------- --------- --------- ------------ ------------ ------------ ------------
The invoice discounting facility balance utilised of
GBP3,230,000 (2016: GBP3,075,000) is secured through deeds of
composite guarantees and mortgage debentures on Group companies.
The invoice discounting facility has an interest rate of 1.5% above
Barclays base rate.
In September 2017 the Company agreed terms to purchase from BMN
Commercial Limited ("BMN Commercial") all of the outstanding
Secured Fixed Rate Secured Loan Notes 2022 (the "Loan Notes") that
were issued to BMN Commercial pursuant to the terms of a Fixed Rate
Secured Loan Note Instrument dated 26 October 2016 ("2016 Loan Note
Instrument") and which Loan Notes were outstanding in the principal
sum of GBP523,000. The purchase price for all the Loan Notes is
GBP366,100 (such sum being equal to 70 per cent. of the aggregate
principal amount ("Purchase Price").
The Purchase Price was funded by drawdown on the existing
confidential invoice discounting facility provided to the Company
by Barclays. The Barclays drawdown is at a substantially lower rate
of 1.5% over base (2%), than the interest on the Loan Notes (5%)
and ensures the Company uses its cheapest means of funding first.
In addition, the purchase of the Loan Notes improved the balance
sheet to the extent of the discount obtained.
In summary, before the first refinancing and redemption
transaction dated 26 October 2016, the Group had loan notes
amounting to GBP3,206,000 outstanding with GBP1,346,000 due for
repayment on 14 February 2017 and the remaining GBP1,860,000 due
for repayment on 20 September 2017. Following the transactions
announced on 26 October 2016, 5 January 2017 and 15 September 2017,
the Group has loan notes amounting to GBP1,860,000 outstanding and
due for repayment on 20 September 2022.
Additionally, the Company also has a revolving secured facility
of GBP516,100 from BMN Commercial (ranking behind Barclays) capable
of drawdown at any time up to 20 August 2022, carrying an interest
rate of 5% per annum and repayable on 20 September 2022 ("the
Revolving Facility").
15 Trade and other payables
31 December 31 December
2017 2016
GBP'000 GBP'000
--------------------------------- ------------ ------------
Trade payables 58 53
Other creditors 666 631
Social security and other taxes 1,081 1,175
Accruals and deferred income 1,024 1,097
--------------------------------- ------------ ------------
2,829 2,956
--------------------------------- ------------ ------------
Trade payables are non-interest bearing and are normally settled
within 45 day terms.
16 Financial instruments
Financial risk management
The Group is exposed through its operations to the following
financial risks:
-- Liquidity risk;
-- Interest rate risk;
-- Credit risk;
-- Market risk;
-- Foreign currency risk and
-- Capital risk management
Liquidity risk
Liquidity risk is managed centrally on a Group basis. The
Group's policy in respect of liquidity risk is to maintain a
mixture of long term and short term debt finance, including an
invoice discounting facility, to ensure the Group has sufficient
funds for operations for the foreseeable future. Budgets and
forecasts are agreed and set by the Board in advance to enable the
Group's cash requirements to be anticipated.
Interest rate risk
Debt is maintained at bank variable rates which inherently bring
interest rate risk. Related party loans are maintained at the fair
value of interest rates on issue. The Group maintains detailed cash
flow forecasts enabling it to factor incremental changes in
interest rates into its risk profile and liquidity and react
accordingly.
Credit risk
The Group's principal financial assets are bank balances and
cash and trade and other receivables. The Group's credit risk is
primarily attributable to its trade receivables.
The Group's policy in respect of trade receivables credit risk
requires appropriate credit checks on potential customers before
sales are made, the appropriate limiting of credit to each customer
and the close monitoring of KPI trending such as days' sales
outstanding and debtor ageing. The Group records impairment losses
on its trade receivables separately from the gross receivable and
calculates the allowance based on evidence of its likely recovery.
At the balance sheet date there were no significant concentrations
of credit risk.
The Group's credit risk on liquid funds is limited due to the
Group's policy of monitoring counter party exposures and only
transacting with high credit-quality financial institutions.
Market risk
The Group operates in a dynamic market place and constantly
seeks to ensure the solutions it offers to customers are
competitive. By operating in diverse sectors, the Group is, to some
degree, protected from a deteriorating market. The Group aims to
operate a 50/50 mix of temporary and permanent recruitment fees at
NFI level, which de-risks the overall impact of a potentially
inconsistent market.
Foreign currency risk
The Group's foreign currency denominated activity is not
significant and the impact of foreign exchange movements on
reported profits, net assets and gearing are not significant. The
day-to-day transactions of overseas revenues are carried out in
local currency and Group exposure to currency risk at a
transactional level is minimal.
The Group does not enter into speculative treasury arrangements
and there are no significant balances or exposures denominated in
foreign currencies.
Capital risk management
The Group manages its capital to ensure that entities within the
Group will be able to continue as a going concern whilst optimising
the debt and equity balance.
In managing its capital, the Group's primary objective is to
ensure its ability to provide a return for its equity shareholders
through capital growth. In order to achieve this objective, the
Group seeks to maintain a gearing ratio that balances risks and
returns at an acceptable level and also to maintain a sufficient
funding base to enable the Group to meet its working capital and
strategic investment needs. In making decisions to adjust its
capital structure to achieve these aims, the Group considers not
only its short-term position but also its long-term operational and
strategic objectives. The Group's gearing profile, being the
carrying amount of loans and borrowings of GBP4,773,000 (2016:
GBP5,256,000) as a percentage of total equity GBP2,025,000 (2016:
GBP1,599,000) decreased to 236% from 329% during the year.
Trade receivables impairment
Movement on trade receivables impairment provision:
31 December 31 December
2017 2016
GBP'000 GBP'000
------------------------------ -------------- ------------
Provision brought forward 101 101
Provision carried forward at
year end 101 101
------------------------------- -------------- ------------
The trade receivables past due and not impaired at the balance
sheet date amounted to GBP2,054,000 (2016: GBP1,770,000) and
comprised GBP1,365,000 (2016: GBP1,299,000) overdue by up to 30
days, GBP499,000 (2016: GBP402,000) overdue by 30-60 days and
GBP190,000 (2016: GBP69,000) overdue by more than 60 days.
The directors consider that all receivables are fully
recoverable.
Categories of financial instruments
Financial assets
The financial assets of the Group comprised:
Loans and
receivables
2017 2016
GBP'000 GBP'000
------------------------------- -------- --------
Current financial assets
Trade and other receivables 4,125 4,016
Net cash and cash equivalents 1,982 1,910
------------------------------------ -------- --------
Total financial assets 6,107 5,926
------------------------------------ -------- --------
Financial liabilities
The financial liabilities of the Group comprised:
Measured at
amortised cost
2017 2016
GBP'000 GBP'000
------------------------------------- -------- --------
Current financial liabilities
Trade and other payables 724 684
Loans and borrowings 3,230 3,375
------------------------------------- -------- --------
Total current financial liabilities 3,954 4,059
Non-current financial liabilities
Loans and borrowings 1,543 1,881
Total financial liabilities 5,497 5,940
------------------------------------- -------- --------
The invoice discounting balance amounted to GBP3,230,000 (2016:
GBP3,075,000) and is secured by cross guarantees and mortgage
debentures on certain Group companies. The loan from BMN Commercial
Limited for GBP1,860,000 (2016: GBP2,383,000) is subordinated to
the invoice discounting facility and overdraft under the terms of
an inter-creditor deed. The carrying amount of these loans at the
balance sheet date is GBP1,543,000 (2016: 1,881,000).
The directors consider that the carrying amounts of financial
assets and liabilities recorded at amortised cost in the financial
statements approximate their fair values. The fair value of the
items classified as loans and borrowings is classified as Level 3
in the fair value hierarchy: The fair value for disclosure purposes
has been determined using discounted cash flow pricing models.
Significant inputs include the discount rate used to reflect the
associated credit risk.
Effective interest rates - Group
In respect of income-earning financial assets and
interest-bearing financial liabilities, the following table
indicates their effective interest rates at the balance sheet date
and the periods in which they mature. The following financial
liabilities are stated at face value.
2017 2016
-------------------------------------------------- --------------------------------------------------
0 to 1 to 2 to 0 to 1 to 2 to
Effective <1 <2 <5 Effective <1 <2 <5
interest Total years years years interest Total years years years
rate GBP'000 GBP'000 GBP'000 GBP'000 rate GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- -------- -------- -------- -------- ---------- -------- -------- -------- --------
Cash
and
cash
equivalents 0.1% 1,982 1,982 - - 0.1% 1,910 1,910 - -
Loan
notes - - - - - 12% (300) (300) - -
Invoice
discounting 2% (3,230) (3,230) - - 2.1% (3,075) (3,075) - -
Secured
loan 10% (1,260) - - (1,260) 10% (1,260) - - (1,260)
Secured
loan 10% (600) - - (600) 10% (600) - - (600)
Secured
loan - - - - - 10% (523) - - (523)
(3,108) (1,248) - (1,860) (3,848) (1,465) - (2,383)
------------- ---------- -------- -------- -------- -------- ---------- -------- -------- -------- --------
The above table is based on the balances at the balance sheet
date. The effect of future interest cash flows and sensitivities
applied thereon can be determined from the above effective interest
rates. With the exception of the invoice discounting facility, all
interest rates are fixed.
17 Employee benefits
Defined contribution plans
The Group operates a number of defined contribution pension
plans. The total expense relating to these plans in the current
period was GBP99,000 (2016: GBP76,000). GBP11,000 of pension
contributions remained outstanding at the period end (2016:
GBP10,000).
Share-based payments
The Group has 1 share option scheme with options remaining
unexercised at 31 December 2017:
2004 Approved EMI Scheme - 2,000,000 vested options remain
unexercised at 31 December 2017
The ability of a company to utilise EMI options is governed by
conditions, including those of size, that are prescribed by
HMRC.
The number and weighted average exercise prices of share options
- are as follows:
31 December 31 December
2017 2016
Weighted Number Weighted Number
average of options average of options
exercise exercise
price price
GBP GBP
-------------------- --------- ----------- --------- ------------
Outstanding at the
beginning of the
year 0.02 2,375,000 0.02 4,125,000
Options forfeited
during the year 0.03 (375,000) 0.03 (1,750,000)
-------------------- --------- ----------- --------- ------------
Outstanding at the
end of the year 0.02 2,000,000 0.02 2,375,000
-------------------- --------- ----------- --------- ------------
Exercisable at the
end of the year 0.02 2,000,000 0.02 2,375,000
-------------------- --------- ----------- --------- ------------
The exercise price of options outstanding at the end of the
period was GBP0.026 (2016: ranged between GBP0.02 and GBP0.03) and
their weighted residual contractual life was 3 years (2016: 4
years). All options currently in issue have vested as at 31
December 2017. There were no options exercised during the current
or prior period. The weighted average fair value of each option
granted during the period was nil as no options were granted (2016:
GBPnil).
The fair value of employee share options is measured using the
Black Scholes model. No options were granted in 2017.
18 Provisions
Onerous
Contracts and
Dilapidations
GBP'000
---------------------------- ---------------
Balance at 1 January 2017 83
Provisions made during
the period 3
Provisions used during
the period (1)
---------------------------- ---------------
Balance at 31 December
2017 85
---------------------------- ---------------
Non-current at 31 December
2016 75
Current at 31 December
2016 8
---------------------------- ---------------
83
---------------------------- ---------------
Non-current at 31 December
2017 70
Current at 31 December
2017 15
---------------------------- ---------------
85
---------------------------- ---------------
Onerous contracts and dilapidations predominantly relate to the
costs payable on properties which have been vacated and incremental
costs that will be incurred on exiting existing properties where a
commitment to do so exists at the balance sheet date.
19 Capital
Share capital
31 December 31 December
2017 2016
GBP'000 GBP'000
Allotted, called up and fully
paid
Ordinary shares of GBP0.0001 each
(339,645,061 shares; 2016: 339,645,061) 34 34
Deferred shares of GBP0.02 each
(212,872,170 shares; 2016: 212,872,170) 4,240 4,240
------------------------------------------ ------------ ------------
4,274 4,274
------------------------------------------ ------------ ------------
The holders of ordinary shares are entitled to receive dividends
when declared and are entitled to one vote per share at meetings of
the Company The deferred shares do not carry any dividend and
voting rights and have limited rights in a winding up of the
company.
20 Reserves
Share premium
The share premium account represents the excess of the proceeds
from the issue of shares over the nominal value of shares issued
less related issue costs.
Capital redemption reserve
The capital redemption reserve relates to the cancellation of
the Company's own shares.
Capital contribution reserve
The capital contribution reserve represents contributions from
shareholders.
21 Operating leases
The total future minimum lease payments of non-cancellable
operating lease rentals are payable as follows:
31 December 31 December
2017 2016
GBP'000 GBP'000
----------------------- ------------ ------------
Less than 1 year 370 395
Between 1 and 5 years 118 444
More than 5 years 1 -
----------------------- ------------ ------------
489 839
----------------------- ------------ ------------
During the period GBP350,186 was recognised as an expense in the
income statement in respect of operating leases (2016: GBP348,893),
excluding amounts charged in respect of onerous contracts.
22 Related party transactions
The Company has Loan Notes amounting to GBP1,860,000 with BMN
Commercial Limited, which are due for repayment in September 2022.
Under the AIM Rules, BMN Commercial Limited is deemed to be a
related party as the owners of BMN Commercial Limited are relatives
of a substantial shareholder.
There was interest of GBP99,165 paid to BMN Commercial Limited
for the year ended 31 December 2017 (2016: GBP60,947).
Clement May Limited
R Ward is a director of Clement
May Limited 2017 2016
Receipts for services provided
to Clement May Limited GBP24,000 GBP25,577
Support on the Spot Limited
R Ward is a director of Support
on the Spot Limited 2017 2016
Payments for services provided
by Support on the Spot Limited GBP31,069 GBP233,848
Receipts for services provided
to Support on the Spot Limited GBP4,800 -
Amounts due from Support on the
Spot Limited at the year end GBP30,000 -
The ultimate controlling party of the Company is Mr PA Bell.
23 Notice of Annual General Meeting
The Annual General Meeting of the Company will be held at the
Company's offices at 4th Floor, 27 Mortimer Street, London, W1T 3BL
at 2pm on 27 April 2018. The annual report will be posted to
shareholders shortly and is available from the Company's website
www.kellangroup.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UUUARWAAOUUR
(END) Dow Jones Newswires
March 23, 2018 03:00 ET (07:00 GMT)
Kellan Group (LSE:KLN)
Gráfico Histórico do Ativo
De Dez 2024 até Jan 2025
Kellan Group (LSE:KLN)
Gráfico Histórico do Ativo
De Jan 2024 até Jan 2025
