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