UK revenue increased by 14.22% to £18.56m (2016: £16.25m) with a decrease in NFI of 4.25% to £7.44m (2016: £7.77m).

 

Contract represented 17.36% (2016: 14.52%) of total UK NFI in 2017 while permanent NFI declined by 9.84%

 

NFI for the region was flat largely as a consequence of the lack of performance in quarters one and two of our property business, affected by referendum uncertainty. As mentioned in the Chairman's Report, there were difficulties for the Prime Energy team as a result of the change in

 

government policy which gave rise to material costs involved in the refocusing of the team.

 

Additionally, we suffered staff turnover in our Manchester office causing revenue delay and profit impact.

 

Our Contract, Residential and Real Estate Banking & Investment teams delivered strong NFI growth during the year and performed in line with profit expectations.

 

Asia

 

	2017 £m	2016 £m
Revenue	5.08	3.63
Net fee income (NFI)	5.08	3.63
Operating profit	1.04	0.46
Operating profit as % of NFI	20.47%	12.67%
Average number of employees	33	33

 

NFI grew by 39.94% to £5.08m (2016: £3.63m).The region is covered by our offices in Hong Kong and Singapore and represents 38.78% of Group NFI (2016: 29.56 %).

 

Both Asia teams benefited from increased productivity and maturing business lines. In 2017, we expanded our Prime Insight team in Singapore which offers our clients broader service range and better ability to serve markets in mainland China and the region.

 

 

Rest of the World

	2017 £m	2016 £m
Revenue	0.58	0.88
Net fee income (NFI)	0.58	0.88
Operating profit	0.05	0.16
Operating profit as % of NFI	8.62%	18.18%
Average number of employees	4	7

 

The region is covered by our offices in Dubai and South Africa.

 

Whilst the regions covered made a small profit this year, with NFI declining and a conversion rate of 8.62%, the outlook for the regions in the new financial year looks stable and are expected to be profitable

 

 

Peter Moore

Managing Director

 

 

Financial Review

Revenue

 

The Group achieved a 16.62% increase in revenue to £24.21m (2016: £20.76m).

 

Net Fee Income (NFI)

 

Overall the Group delivered a 6.68% increase in total NFI to £13.10m (2016: £12.28m). NFI from permanent business increased by 5.92% to £11.81m (2016: £11.15m). Fees from our contract business, which represents 9.85% of total NFI (2016: 9.20%), increased to £1.29 million from £1.13m last year.

 

NFI from international placements, which is included in our permanent business, increased by 25.50% to £5.66m (2016: £4.51m). UK NFI of £7.44m reduced 4.26% (2016: £7.77m) affected by the referendum.

 

Administration Costs

 

Administration costs for the year increased by 10.46% to £11.19m (2016: £10.13m). The increase primarily related to higher staff costs.

 

Profit before Taxation

 

Profit before taxation decreased by 11.62% to £1.90m (2016: £2.15m).

 

Taxation

 

The taxation charge is £0.29m on profit before taxation of £1.90m (from ordinary activities) which gives an effective tax rate of 15.26% (2016: 21.40%). The reasons for the difference from the standard UK corporation tax rate of 20% are detailed in note 7 of the accounts.

 

Earnings per Share

 

Basic earnings per share decreased by 5.05 % to 13.14p (2016: 13.84p). The diluted earnings per share, taking into account existing share options, decreased by 4.07% to 12.97p (2016: 13.52p).

 

Dividend

 

An interim dividend of 1.75p (2016: 1.75p) was paid on 25 November 2016 to shareholders on the register at close of business on 18 November 2016.

The interim dividend was approved by the Board on 8 November 2016.

 

As outlined in the Chairman's statement, the Board propose a final dividend of 3.25p per share which will, subject to shareholder approval at the Annual General Meeting be paid on 28^th July 2017 to shareholders who are on the register on 21^st July 2017, making a total dividend paid to shareholders for the year of 5.00p per ordinary share. (2016: 8.84p - included a special dividend of 4.00p).

 

Balance Sheet

 

Net assets at 31 March 2017 have increased to £15.06m (2016: £13.42m).

 

Trade receivables at the year end, were down on last year at £2.44m (2016: £2.71m) which reflects the decreased credit period taken by clients to 45 days (2016: 55 days).

 

Treasury Management and Currency Risk

 

Approximately 76.66% of the Group's revenue in 2017 (2016: 78.27%) was denominated in Sterling. Consequently the Group has a degree of currency exposure in accounting for overseas operations.

 

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

The Group operates a centralised treasury function, with no borrowing facilities, and is confident the net cash within the Group is sufficient to meet current and foreseeable liabilities as they fall due.

 

Cash Flow and Cash Position

 

At the start of the year the Group had cash of £0.95m. After net taxation payments of £0.52m (2016: £0.41m) cash generated from operations was £1.46m (2016: £1.96m).

 

During the year the Group spent £0.05m (2016: £0.09m) on its Customer Relationship Management systems and paid dividends to shareholders of £0.21m (2016: £1.95m).

 

As at 31 March 2017 the Group cash was £2.40m.

 

Whilst the Group considers Net Fee Income (NFI) to be the key indicator of the performance of the business there are other measures which were reported to senior management as follows:

 

• Conversion ratio (operating profit divided by NFI) decreased to 14.54% (2016: 17.50 %)

• Productivity (NFI divided by total average headcount) increased to £102.33k (2016: £99.03k)

• Ratio of billing headcount to support headcount slightly reduced to 3.2 (2016: 3.4)

• Percentage of NFI paid to staff increased to 66.26% (2016: 63.69%)

 

These key performance indicators form the basis for reviewing the progress of the business.

 

 

Statement of Directors' Responsibilities

 

The Directors are responsible for preparing the Strategic Report, the Directors' Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

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

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

      • select suitable accounting policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

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

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website; the work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

 

 

	Note	2017		2016
			£'000	£'000
Revenue	2, 3		24,213	20,755
Cost of sales			(11,115)	(8,475)
Net fee income			13,098	12,280
Administrative expenses			(11,194)	(10,131)
Operating profit	4		1,904	2,149
Profit before taxation			1,904	2,149
Income tax expense	7		(292)	(459)
Profit for the year   Other comprehensive income Items that will or may be reclassified to profit or loss:   Exchange profit on translating foreign operations			1,612             270	1,690         21
Other Comprehensive income for the year, net of tax			270	21
Total comprehensive income for the year			1,882	1,711
Attributable to:
Equity shareholders of the parent			1,880	1,711
Earnings per share	9
Basic earnings per share			13.14p	13.84p
Diluted earnings per share			12.97p	13.52p

The above results relate to continuing operations

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 March 2017

 

	Called up share capital		Capital Redemp- tion reserve	Treasury shares	Share premium account	Merger reserve	Share option reserve	Trans- lation reserve	Retained Earnings	Total
	£'000	£'000		£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2015	1,219	9		(21)	5,370	173	212	442	6,070	13,474
Profit for the year	-	-		-	-	-	-	-	1,690	1,690
Other comprehensive income	-	-		-	-	-	-	21	-	21
Adjustment  in respect of share schemes	-	-		-	-	-	88	-	78	166
Issues of ordinary shares	10	-		-	1	-	-	-	-	11
Dividend	-	-		-	-	-	-	-	(1,946)	(1,946)
At 31 March 2016	1,229	9		(21)	5,371	173	300	463	5,892	13,416
Profit for the year	-	-		-	-	-	-	-	1,612	1,612
Other comprehensive income	-	-		-	-	-	-	270	-	270
Adjustment  in respect of share schemes	-	-		-	-	-	(20)	-	108	88
Shares purchased for treasury   Shares issued from treasury   Adjustment on share disposal	-       -     -	-       -     -		(111)       13     98	-       -     -	-       -     -	-       -     -	-       -     -	-       -     (98)	(111)       13     -
Dividend	-	-		-	-	-	-	-	(215)	(215)
At 31 March 2017	1,229	9		(21)	5,371	173	280	733	7,299	15,073

 

Consolidated Statement of Financial Position

 

 

		2017		2016
	Note	£'000		£'000
Assets
Non - current assets
Goodwill	11	9,769		9,769
Property, plant and equipment  Deferred tax asset	10 16	136 43		229 -
		9,948		9,998
Current assets
Trade and other receivables	13	5,101		4,939
Cash at bank and in hand	21	2,409		953
		7,510		5,892
Total assets		17,458		15,890
Liabilities
Current liabilities
Trade and other payables	15	2,310		2,216
Current tax liabilities		75		249
		2,385		2,465
Non-current liabilities
Deferred tax liabilities	16	-		9
		-		9
Total liabilities		2,385		2,474
Net assets		15,073		13,416

 

 

Consolidated Statement of Financial Position

As at 31 March 2017

                                                                                                                                   

		2017		2016
		Note	£'000		£'000
Capital and reserves attributable to the Company's equity holders
Called up share capital		17	1,229		1,229
Capital redemption reserve fund		18	9		9
Treasury shares		18	(21)		(21)
Share premium account		18	5,371		5,371
Merger reserve		18	173		173
Share option reserve		18	280		300
Translation reserve		18	733		463
Retained earnings		18	7,299		5,892
Total equity			15,073		13,416

 

 

The financial statements on pages 21 to 54 were approved by the Board of Directors and authorised for issue on 21 June 2017 and are signed on its behalf by:

 

R J G Macdonald                 D Zaneva-Todorinski

 

 

 

Company Statement of Financial Position

 

 

		2017		2016
	Note	£'000		£'000
Assets
Non-current assets
Investment in subsidiaries	12	11,156		11,176
Deferred tax asset	16	-		-
		11,156		11,176
Current assets
Trade and other receivables	13	6		14
Cash and cash equivalents	21	636		633
		642		647
Total assets		11,798		11,823
Liabilities
Current liabilities
Other payables	15	779		959
Total liabilities		779		959
Net assets		11,019		10,864
Capital and reserves attributable to the Company's equity holders
Called up share capital	17	1,229		1,229
Capital redemption reserve fund	18	9		9
Treasury shares	18	(21)		(21)
Share premium account	18	5,371		5,371
Merger reserve	18	173		173
Share option reserve	18	280		300
Retained earnings	18	3,978		3,803
Total equity		11,019		10,864

 

 

The Company's retained earnings includes profit for the year of £487,456 (2016: £890,249).

 

The financial statements of Prime People Plc, Company Number 1729887 were approved by the Board and authorised for issue on                 and are signed on its behalf by:

 

 

R J G Macdonald                                             D Zaneva-Todorinski

 

 

Company Statement of Changes in Equity

 

Company	Called up share capital	Capital Redemp- tion reserve	Treasury shares	Share premium account	Merger reserve	Share option reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2015	1,219	9	(21)	5,370	173	15	4,844	11,609
Total comprehensive income for the year	-	-	-	-	-	-	890	890
Issue of ordinary shares	10	-	-	1	-	-	-	11
Adjustment in respect of share options	-	-	-	-	-	(15)	15	-
Investment in subsidiaries	-	-	-	-	-	300	-	300
Dividend	-	-	-	-	-	-	(1,946)	(1,946)
At 31 March 2016	1,229	9	(21)	5,371	173	300	3,803	10,864
Total comprehensive income for the year	-	-	-	-	-	-	488	488
Shares issued from treasury	-	-	13	-	-	-	-	13
Shares purchased for treasury	-	-	(111)	-	-	-	-	(111)
Adjustment on share disposal	-	-	98	-	-	-	(98)	-
Investment in subsidiaries	-	-	-	-	-	(20)	-	(20)
Dividend	-	-	-	-	-	-	(215)	(215)
At 31 March 2017	1,229	9	(21)	5,371	173	280	3,978	11,019

 

 

Group and Company Cash Flow Statement

 

		Group		Company
		2017	2016	2017	2016
	Note	£'000	£'000	£'000	£'000
Cash generated from (used in) underlying operations	20	1,981	2,369	(126)	1,278
Income tax paid		(521)	(411)	(10)	(6)
Net cash from/(used by) operating activities		1,460	1,958	(136)	1,272
Cash flows from investing activities
Net purchase of property, plant and equipment		(53)	(97)	-	-
Dividend received		-	-	450	850
Net cash (used in)/from investing activities		(53)	(97)	450	850
Cash flows from financing activities
Issue of ordinary share capital		2	11	2	11
Shares issued from treasury		115	-	13	-
Shares purchased for treasury		(111)	-	(111)	-
Dividend paid to shareholders		(215)	(1,946)	(215)	(1,946)
Net cash used in financing activities		(209)	(1,935)	(311)	(1,935)
Net increase/ (decrease) in cash and cash equivalents		1,198	(74)	3	(187)
Cash and cash equivalents at beginning of the year		953	1,009	633	446
Effect of foreign exchange rate changes		258	18	-	-
Cash and cash equivalents at the end of the year	21	2,409	953	636	633

 

Notes to the Financial Statements

 

1   Nature of Operations

 

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

 

The Company is a public limited company which is quoted as an AIM Company and is incorporated and domiciled in the UK. The address of the registered office and the principal place of business is 2 Harewood Place, London W1S 1BX. The registered number of the Company is 1729887.

 

2   Summary of Significant Accounting Policies

 

Basis of Preparation

 

The financial statements of Prime People Plc consolidate the results of the Company and all its subsidiary undertakings. As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company has not been included as part of these financial statements. The amount of profit after tax and before dividends dealt within the financial statements of the parent is £487,456 (2016: £890,249). The financial statements have been prepared on a going concern basis.

 

The consolidated financial statements of Prime People Plc have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union and also comply with IFRIC interpretations and Company Law applicable to Companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention modified as necessary so as to include any items at fair value, as required by accounting standards. 

 

The consolidated financial statements for the year ended 31 March 2017 (including comparatives) are presented in GBP '000.

 

The accounting polices applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2017 and are described below.

 

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

 

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

 

Standards

·     FRS 14 Regulatory Deferral Accounts (Issued January 2014, effective date 1 January 2016)

·     IFRS 16 Leases (Issued January 2016, effective date 1 January 2019)  

 

Amendments (Effective date for all amendments is deferred indefinitely)

·     Amendments to IFRS 10 and IAS 28: Sales or Contribution of Assets between an Investor and its Associate or Joint Venture (Issued on 11 September 2014)

2     Summary of Significant Accounting Policies (continued)

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

(continued)

 

Amendments (Effective date for all amendments listed is 1 January 2017)

·     Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (Issued January 2016)

·     Amendments to IAS 7: Disclosure Initiative (Issued January 2016)

 

Amendments (Effective date for all amendments listed is 1 January 2018)

 

·     Clarifications to IFRS 15 Revenue from Contracts with Customers (issued on 12 April 2016)

 

·      Clarifications to IFRS 15 Revenue from Contracts with Customers (Issued April 2016, effective date 1 January 2018)

 

·     Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016)

 

·     Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued on 12 September 2016)

 

·     IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016)

 

·     Amendments to IAS 40: Transfers of Investmenty Property (issued on 8 December 2016)

 

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

 

·     IFRS 9 Financial Instruments (Issued on 24 July 2014, effective date 1 January 2018)

·     IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014) including amendments to IFRS 15: Effective date of IFRS 15 (issued on 11 September 2015), effective date for both is 1 January 2018

 

The directors do not expect the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future periods, except for disclosure of IFRS 15 that may have an impact on revenue recognition and related disclosures. Beyond the information above it is not practicable to provide a reasonable estimate of the impact of IFRS 15 until a detailed review has been completed.

 

Consolidation

 

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

 

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

 

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

 

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

 

Going Concern

 

The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval of the financial statements and have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Revenue recognition

 

a)   Revenue

 

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

 

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

 

-     Revenue from permanent placements, which is based on a percentage of the candidate's remuneration package and is derived from both retained assignments (income recognised on completion of defined stages of work) and non-retained assignments (income recognised at the date an offer is accepted by a candidate, a start date has been agreed but employment has not yet commenced). The latter includes revenue anticipated but not invoiced at the balance sheet date, which is correspondingly accrued on the balance sheet within prepayments and accrued income. A provision is made against accrued income based on past historical experience for possible cancellations of placements prior to, or shortly after, the commencement of employment; and

 

-     Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

 

b)   Cost of Sales

 

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

 

c)   Net Fee Income

 

Net fee income represents revenue less cost of sales and consists of the total placement fees of permanent candidates, the margin earned on the placement of contract candidates and the margin on advertising income.

 

d)   Foreign Currency Translation

 

(i)         Functional and Presentation Currency

 

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

 

(ii)    Transactions and Balances

 

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

 

(iii) Group Companies

 

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

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

 

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

 

·     all resulting exchange differences are recognised in other comprehensive income.

 

e)   Intangible Assets

 

(i)         Goodwill

 

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

 

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

 

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

 

(ii)        Computer Software

 

Computer software acquired by the Group is stated at cost. These costs are amortised to write the cost off in equal annual instalments over three years.

 

f)    Property, Plant and Equipment

 

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

 

·     Leasehold improvements over the expected period of the lease.

·     Furniture, fittings and computer equipment 25% - 33%

 

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

 

g)   Impairment of Assets

 

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

 

h)   Taxation

 

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

 

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

 

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

 

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

 

i)    Leased Assets and Obligations

 

All of the Group's leases are operating leases and the annual rentals are charged to profit and loss on a straight line basis over the lease term.

 

The benefit of rent free periods received for entering into a lease is spread evenly over the lease term.

 

j)    Pension Costs

 

The Group operates defined contribution pension scheme. The Group adopts the minimum legally required employer contribution rate of 1% of qualifying earnings and up to the maximum earning threshold for automatic enrolment for 2016-17, as set by the Pension Regulator.

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

 

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

 

k)   Segmental Reporting

 

IFRS8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Board of Directors to allocate resources to the segment and to assess their performance.

 

l)    Financial instruments

 

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

 

m)  Financial assets

 

The Group's financial assets comprise cash and various other receivable balances that arise from its operations. Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.  Loans and receivables are initially measured at fair value and subsequently at amortised cost using the effective interest rate method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

Financial assets are assessed for impairment at each balance sheet date, and are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

 

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.  When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profit or loss account. If in a subsequent period the amount of the impairment loss decreases and the decreases can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit and loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

 

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

 

n)   Financial liabilities and equity

 

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

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

 

o)   Share-Based Compensation

 

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

 

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

 

p)   Dividend Distribution

 

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

 

q)   Critical Accounting Estimates and Judgements

 

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

 

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

 

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

 

Revenue Recognition

 

Revenue from permanent placements is recognised when a candidate formally accepts an offer of employment, a start date has been agreed, but employment has not commenced. A 'fall-through' provision is made by management, based on historical experience, for the proportion of those placements where the offer of employment is not taken up. Management have reviewed the past assumptions made with respect to the 'fall-through' provisions and consider that they remain reasonable. The fall through provision is estimated at 18.90% of those offers where employment has yet to commence (2016: 20.02%). The Directors consider that a change in the range of possible outcomes, or sensitivity, would not have a material impact on the business.  

 

Goodwill Impairment

 

The Group's determination of whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill is allocated. This requires estimation of future cash flows and the selection of a suitable discount rate details of which are disclosed in note 11.

 

q)    Critical Accounting Estimates and Judgements (continued)

 

Trade Receivables

 

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

 

3     Segment Reporting

 

a)     Revenue and Net Fee Income, by Geographical Region

 

		Revenue			Net fee income
		2017		2016	2017		2016
		£'000		£'000	£'000		£'000
UK		18,558		16,249	7,443		7,774
Asia		5,075		3,626	5,075		3,626
Rest of World		580		880	580		880
		24,213		20,755	13,098		12,280

 

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

 

b)     Revenue and Net Fee Income, by Classification

 

	Revenue		Net fee income
	2017	2016	2017	2016
	£'000	£'000	£'000	£'000
Permanent
-UK -Asia -Rest of World	6,004 5,075 580	6,653 3,626 880	5,991 5,075 580	6,645 3,626 880
Contract (UK)	12,554	9,596	1,452	1,129
Total	24,213	20,755	13,098	12,280

 

3  Segment Reporting (continued)

 

c)     Profit before Taxation by Geographical Region

 

	2017		2016
	£'000		£'000
UK	823		1,527
Asia	1,035		460
Rest of World	46		162
Operating Profit	1,904		2,149
Profit before taxation	1,904		2,149

 

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

Segment operating profit is the profit earned by each operating unit and includes inter segment revenues totalling £0.76m (2016 £0.71m) for the UK, and charges of £0.68m (2016 £0.60m) for Asia and £0.08m (2016 £0.11m) for the rest of the world.

 

d)     Segment Assets and Liabilities by Geographical Region

 

		Total non-current assets		Total liabilities
		2017	2016	2017	2016
		£'000	£'000	£'000	£'000
UK		9,934	9,962	1,286	1,441
Asia		19	27	1,019	910
Rest of World		3	9	73	121
Total		9,956	9,998	2,378	2,472

 

The analysis above is of the carrying amount of reportable segment assets, liabilities and non-current assets.  Segment assets and liabilities include items directly attributable to a segment and include income tax assets and liabilities.  Non-current asset include property, plant and equipment and computer software.

 

4     Profit on ordinary activities before taxation

 

	2017	2016
	£'000	£'000
Profit for the year  is arrived at after charging:
Depreciation                      - owned assets	158	188
Operating lease rentals       - land and buildings	521	487
Loss on disposal of fixed assets	1	-
Exchange rate loss	26	33
The analysis of auditors remuneration is as follows:
Audit of company Audit of subsidiaries	21 24	21 23
Total audit fees	45	44
Advisory Services (related to FRS102 transition)	-	4
Total fees	45	48

 

5     Directors' emoluments

 

	2017	2016
	£'000	£'000
Emoluments for qualifying services	544	482
	544	482
Highest paid Director:
Emoluments for qualifying services	229	229

 

 

Details of Directors' emoluments and interests, which form part of these financial statements, are provided in the Director's Remuneration report on pages 16 to 18.

 

 

6     Employees

 

Group	2017	2016
	Number	Number
The average monthly number of employees of the Group during the year, including Directors, was as follows:
Consultants	95	91
Management and administration	25	26
Temporary staff	8	7
	128	124

 

Company	2017	2016
	Number	Number
The average monthly number of employees of the Company during the year, including Directors, was as follows:
Management	5	5

 

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

 

Group	2017	2016
	£'000	£'000
Wages and salaries	7,860	6,984
Social security costs	655	598
Pension contributions	75	73
Share option charge	89	166
	8,679	7,821

 

Remuneration of key management	2017	2016
	£'000	£'000
Short term employee benefits (excluding social security costs)	1,195	1,090
Share based payments	24	35
	1,219	1,125

 

Key management includes executive Directors and senior divisional managers

 

7     Taxation on Profits on Ordinary Activities

 

	2017	2016
	£'000	£'000
a)   Analysis of tax charge in the year
Current tax
UK Corporation tax	209	375
Foreign tax	107	87
Foreign tax over provision in prior years	28	(4)
Total current tax	344	458
Deferred tax
Origination and reversal of temporary differences Deferred tax on fair value share option charge	(9) (43)	1 -
Total charge on profit for the year	292	459
UK corporation tax is calculated at 20% (2016: 20%) of the estimated assessable profits for the year.   Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.   b)   The charge for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:
	2017 £'000	2016 £'000
Profit before taxation	1,904	2,149
Tax at UK corporation tax rate of 20% (2016: 20%) on profit on ordinary activities	381	430
Effects of:
Expenses not deductible for tax purposes	22	8
Capital allowances for the period less than depreciation	14	11
Tax losses not utilised/utilised	(2)	21
Tax rate differences	(35)	(19)
Temporary differences recognised	9	19
Overprovision in prior years Tax exemption	(28) (17)	(4) -
Total current tax	344	466
Deferred Tax
Origination and reversal of temporary differences	(52)	(7)
Tax charge for the year	292	459

 

8     Dividends

 

	2017	2016
	£'000	£'000
Special second interim dividend for 2017: 0.00p per share (2016: 3.09p per share) Final dividend for 2016: 0.00p per share (2015: 3.09p per share)	- -	488 376
Interim dividend for 2017: 1.75p per share (2016: 1.75p per share) Special dividend for 2017: 0.00p per share (2016: 4.00p per share) Second Interim dividend for 2017: 0.00p per share (2016: 3.09p per share)	215 - -	212 490 380
	215	1,946

 

An interim dividend of 1.75p (2016: 1.75p) was paid on 25 November 2016 to shareholders on the register at the close of business on 18 November 2016. The interim dividend was approved by the Board on 8 November 2016.

 

A final dividend of 3.25p per share which will, subject to shareholder approval at the Annual General Meeting be paid on 28^th July 2017 to shareholders who are on the register on 21^st July 2017, making a total dividend paid to shareholders for the year of 5.00p per ordinary share. (2016: 8.84p).

 

9     Earnings per share

 

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

 

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

 

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

 

	2017	2016
	£'000	£'000
Profit for the year and earnings used in basic and diluted earnings per share	1,612	1,690
	Number	Number
Weighted average number of shares used for basic earnings per share	12,271,923	12,211,950
Dilutive effect of share options	195,634	290,730
Diluted weighted average number of shares used for diluted earnings per share	12,467,557	12,502,680
	Pence	Pence
Basic earnings per share	13.14p	13.84p
Diluted earnings per share	12.97p	13.52p

 

10   Property, Plant and Equipment

 

	Fixtures, fittings and equipment		Total
Group	£'000		£'000
Cost
At 1 April 2015	1,057		1,057
Additions	97		97
Disposals	(44)		(44)
Exchange difference	8		8
At 1 April 2016	1,118		1,118
Additions	53		53
FinDisposals	(124)		(124)
Exchange difference	28		28
At 31 March 2017	1,075		1,075
Depreciation
At 1 April 2015	741		741
Provision for the year	188		188
Disposals	(44)		(44)
Exchange rate loss	4		4
At 1 April 2016	889		889
Provision for the year	158		158
Disposals	(123)		(123)
Exchange rate gain	15		15
At 31 March 2017	939		939
Net book value
At 31 March 2017	136		136
At 31 March 2016	229		229
At 31 March 2015	316		316

 

11   Goodwill 

 

	£'000
Cost
At 1 April 2015, 1 April 2016 and 31 March 2017	9,769

 

The total carrying value of goodwill is £9.77m, which relates to the acquisition of the Macdonald & Company Group of companies in January 2006, has been tested for impairment with the recoverable amount being determined from value in use calculations.

 

The assessment is based on UK projected results. The recoverable amount is determined on a value in use basis utilising the value of cash flow projections over five years with terminal value added for the UK business segment.  The first year of the projections is based on detailed budgets prepared and approved by management. Subsequent years are based on extrapolations.

 

The key assumptions in calculating the value in use is that the Group will meet its budgeted growth in UK net fee income of 25.88% in the year to 31 March 2018.  After the end of the period covered by the budget a 2.50% growth rate is applied. This growth rate represents the average rate of growth in the markets in which the Group operates. A discount rate of 6.60% has been applied which represents the weighted average costs of capital for the Group.

 

Based upon this analysis the asset has not been impaired since the 'recoverable amount' (being the greater of the net realisable value and the value in use) is in excess of its carrying amount by £3.79m.  A number of potential sensitivity scenarios have been considered and these would indicate impairment in the carrying value of goodwill if the discount rate were to be increased to 11.59% or if the operating profit reduced to £1.07m with no future growth. Management believes the assessment is reasonable based on average UK operating profit achieved for the past 3 years above £1.1m.

 

12   Investments

 

Company		Shares in subsidiary undertakings
		£'000
Cost
At 1 April 2015 and 1 April 2016		11,176
Decrease in investment in subsidiaries from share option reserve charge		(20)
As at 31 March 2017		11,156

 

The share option reserve relates to employee share option arrangements provided to employees of the Group subsidiary companies.      

 

12   Investments (continued)

 

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

 

		Country of incorporation		Principal Activity		Registered Address
Macdonald &  Company Group Limited		England and Wales		Holding Company		2 Harewood Place Hanover Square London W1S 1BX
Macdonald & Company Property Limited		England and Wales		Recruitment		2 Harewood Place Hanover Square London W1S 1BX
Macdonald and Company Freelance Limited		England and Wales		Recruitment		2 Harewood Place Hanover Square London W1S 1BX
Macdonald and Company (Overseas) Limited		England and Wales		Dormant		2 Harewood Place Hanover Square London W1S 1BX
Macdonald & Company Ltd		Hong Kong		Recruitment		Room 601,6/F., Tower 1, Admiralty Centre, 18 Harcourt Road, Hong Kong
Ru Yi Consulting Limited		Hong Kong		Dormant		Room 601,6/F., Tower 1, Admiralty Centre, 18 Harcourt Road, Hong Kong
Macdonald and Company Pte Limited		Singapore		Recruitment		63 Market Street #05-02, Bank of Singapore Centre, Singapore 048942
Macdonald & Company Pty Ltd		Australia		Dormant		Storey Blackwood & Co Level 4,222 Clarence Street, Sydney NSW 2000 Australia
Macdonald & Company Recruitment Proprietary Ltd		South Africa		Dormant		1 Emfuleni, 79 Crassula Crescent, Woodmead, Johannesburg, 2052 South Africa
The Prime Organisation Ltd		England and Wales		Dormant		2 Harewood Place Hanover Square London W1S 1BX

 

 

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

The Group holds 100% of all classes of issued share capital. The percentage of the issued share capital held is equivalent to the percentage of voting rights for all companies.

 

13   Trade and other Receivables

 

			Group				Company
	2017			2016			2017	2016
		£'000			£'000		£'000		£'000
Current
Trade receivables		2,435			2,706		-		-
Allowance for doubtful debts		(24)			(40)		-		-
Other receivables		72			69		3		-
Prepayments and accrued income		2,618			2,204		3		14
		5,101			4,939		6		14

 

At 31 March 2017, the average credit period taken on sales of recruitment services was 45 days (2016: 55 days) from the date of invoicing.  An allowance of £24,000 (2016: £40,000) has been made for estimated irrecoverable amounts. Due to the short-term nature of trade and other receivables, the Directors consider that the carrying value approximates to their fair value. 

 

Prepayments and accrued income principally comprise amounts to be billed for permanent placements with a start date within three months from the start of the new financial year.

           

The Group does not provide against receivables solely on the basis of the age of the debt, as experience has demonstrated that this is not a reliable indicator of recoverability.  The Group provides fully against all receivables where it has positive evidence that the amount is not recoverable.

 

The ageing of trade receivables at the reporting date was:

 

	Gross trade receivables		Provisions		Gross trade receivables		Provisions
	2017		2017		2016		2016
	£'000		£'000		£'000		£'000
Not past due	1,598		15		1,607		33
Past due 0-30 days	657		2		630		-
Past due 30-90 days Past due more than 90 days	166 14		- 7		469 -		7 -
	2,435		24		2,706		40

 

Movement in allowance for doubtful debts:

 

		2017		2016
		£'000		£'000
1 April 2016		40		102
Impairment losses recognised		24		40
Amounts written off as uncollectable Amounts paid by the client		(31) (6)		(97) (5)
Impairment losses reversed		(3)		-
31 March 2017		24		40

 

14   Financial Instruments

 

		Group				Company
		2017		2016		2017		2016
	Note	£'000		£'000		£'000		£'000
Loans and receivables
Trade and other receivables	13	4,092		4,087		2		5
Cash and cash equivalents		2,409		953		636		633
		6,501		5,040		638		638

 

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

 

		Group				Company
		2017		2016		2017		2016
	Note	£'000		£'000		£'000		£'000
Financial liabilities and fair value through profit and loss
Trade and other payables	15	438		452		1		2
		438		452		1		2

 

The Group has not renewed its borrowing facilities with Barclays Bank Plc as the Board consider that the net cash within the Group is sufficient to meet existing and foreseeable liabilities as they fall due.

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

 

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

 

15   Trade and other Payables

 

		Group			Company
		2017		2016		2017		2016
		£'000		£'000		£'000		£'000
Current
Trade payables		108		267		-		1
Other payables		330		185		1		-
Amount owed to subsidiary undertakings		-		-		739		923
Taxation and social security		667		664		14		9
Accruals and deferred income		1,205		1,100		25		26
		2,310		2,216		779		959

 

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

 

16      Deferred Tax

 

Group (Liability)			Share Options		Total
				£'000		£'000
At 1 April 2015				16		16
Credit to income				(7)		(7)
At 31 March 2016				9		9
Credit to income				(9)		(9)
At 31 March 2017				-		-
Group (Asset)			Share Options		Total
				£'000		£'000
At 1 April 2016				-		-
Credit to income				43		43
At March 2017				43		43

 

17   Share Capital

 

	2017			2016
	Number		£'000		Number		£'000
ALLOTTED CALLED UP
Ordinary shares of 10p each
As at 1 April	12,290,199		1,229		12,193,949		1,219
Shares issued during the year	-		-		96,250		10
At 31 March	12,290,199		1,229		12,290,199		1,229

 

Share capital includes unpaid shares of 33,000 (2016: 93,250)

 

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

 

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

 

Pursuant to shareholder resolutions at the AGM of the Company on 20 July 2016, the Company has the following authorities during the period up to the next AGM.

 

-     to issue new/additional ordinary shares to existing shareholders through a rights issue up to a maximum nominal amount of £409,632 representing one third of the then issued share capital of the Company;

 

-     to issue new/additional ordinary shares to new shareholders up to a maximum nominal amount of £409,632 representing one third of the issued shares capital of the Company

 

-     to allot equity securities for cash, without the application of pre-emption rights, up to a maximum nominal amount of £61,451 representing 5% of the then issued share capital of the Company; and

 

-     to purchase through the market up to 10% of the Company's issued share capital, subject to certain restrictions on price.

 

Shareholders will be asked to renew these authorities at the AGM in 2017 on 24 July 2017.

 

Capital Risk Management

 

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

 

The Group manages the capital structure and makes adjustments to it in the light of changes to economic conditions and risks. In order to manage capital the Group has continued to consider and adjust the level of dividends paid to shareholders and also made purchases of its own shares which are held as Treasury Shares. As part of its strategy of seeking to optimise the Group's debt and equity balance the Group also considers the appropriate level of external borrowing and, as disclosed in Note 14, has taken the decision not to renew its overdraft facilities with Barclays Bank.

 

Employee Share Schemes

 

The Company operates two share options schemes.

 

Enterprise Management Incentive Share Option Scheme

 

At 31 March 2017 the following options had been granted and remained outstanding in respect of the Company's ordinary shares:

 

Year of grant	Exercise Price Pence	Exercise Period	Number of options 31 March 2016	Granted	Exercised	Forfeited	Number of Options 31 March 2017
2008/9	20.77	2011-2016*	48000	-	-	(48,000)		-
	31.50	2014-2019*	100,000	-	-	(100,000)		-
2009/10	42.00	2013-2018	8,000	-	(5,000)			3,000
2011/12	68.00	2014-2019	3,000	-	-	-		3,000
2013/14	NilNil	2016-2021 2019-2021	19,000 81,250	- -	(7,000) -	- (13,000)		12,000 68,250
2014/15	10.00 10.00	2016-2021 2019-2021	184,500 340,500	- -	(120,500) -	(16,000) (61,000)		48,000 279,500
2015/16         2016/17	10.00 10.00     58.00     58.00      50.00    50.00    90.00    90.00	2017-2022 2020-2022 2017-2022 2020-2022   2019-2024 2022-2027 2019-2024 2022-2027	20,000 30,000 52,000 103,000   - - - -	- - - -   25,000 55,000 25,000 40,000	-  - - -   - - - -	- - (7,000) (13,000)   - - - -		20,000 30,000 45,000 90,000   25,000 55,000 25,000 40,000
Total 2017			989,250	145,000	(132,500)	(258,000)		743,750
Weighted average exercise price 2017 (pence)			19.64p	67.93p	11.21p	0.24p		30.37p
Total 2016			984,734	205,000	(96,250)	(104,234)		989,250
- Weighted average exercise price 2016 (pence)			15.27p	46.29p	1.31p	0.48p		19.64p

 

*These options have fully vested

 

There were 743,750 options outstanding at 31 March 2017 (2016: 989,250) which had a weighted average price per share of 30.37p (2016: 19.64p). The options vest over a period of two to five years conditional upon the option holders continued employment with the Company.

 

The conditions applying to those options which are fully vested have been achieved. The number of outstanding options that will vest is dependent on the achievement of a number of key performance measures of the group, measured at a regional and consolidated level for the financial years 2016 and 2017.  The fair value of the employee services received in exchange for the grant of the share options is charged to the profit and loss account over the vesting period of the share option, based on the number of options which are expected to become exercisable. 

 

 

	2017	2016
Option pricing model used	Black-Scholes	Black-Scholes
Weighted average share price at grant date (in pence)	94.00, 96.30 & 91.55	116.00
Exercise price (in pence)	50 & 90	10 & 58
Fair value of options granted during the year	41.12	104.81
Expected volatility (%)	20.0 & 24.0	30.0
Risk-free interest rate (%)	4.25	4.0
Expected life of options (years)	2 & 5	2 & 5

 

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

 

The share based payment credit recognised within the income statement during the period was £88,632 (2016: expense £170,000).

 

 

18   Reserves

 

Capital Redemption Reserve Fund

 

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

 

Treasury Shares

 

At 31 March 2017, the total number of ordinary shares held in Treasury and their values were as follows:

 

	2017		2016
	Number	£'000	Number	£'000
As at 1 April	21,276	21	21,276	21
Shares purchased for treasury	129,500	111	-	-
Shares issued from treasury	(132,500)	(13)	-	-
Equity reclassification on disposal of treasury shares	-	(98)	-	-
As at 31 March	18,276	21	21,276	21
Nominal value		2		2
Market value		16		21

 

The maximum number of shares held in treasury during the year was 18,276 shares representing 0.15% of the called-up ordinary share capital of the Company (2016: 21,276 representing 0.2% of the called-up ordinary share capital of the Company).

 

Merger Reserve

 

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

 

Share Option Reserve

 

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

 

Share Premium Account

 

The balance on the share premium account represents the amounts received in excess of the nominal value of the ordinary shares.

Translation Reserve

 

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

 

Retained Earnings

 

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

 

19   Operating Lease Commitments

 

As at 31 March 2017 the Group was committed to making the following total payments in respect of non-cancellable operating leases:

 

					Land and buildings 2017		Land and buildings 2016
					£'000		£'000
Amounts payable
Within one year					545		448
Within one to two years					294		408
Within two to five years					696		660
After five years					169		602
					1,704		2,118

 

The Group leases various offices under non-cancellable operating lease agreements. The leases have varying terms as disclosed above.

 

20   Reconciliation of Profit before Tax to Net Cash Inflow from Operating Activities

 

	Group		Company
	2017 £'000	2016 £'000	2017 £'000	2016 £'000
Profit before taxation	1,904	2,149	48	50
Adjust for:
Depreciation	158	188	-	-
Share based payment expense (Profit)/Loss on sale of tangible asset	(13) 1	166 -	- -	- -
Operating cash flow before changes in working capital	2,050	2,503	48	50
(Increase)/decrease in receivables	(163)	(401)	9	484
Increase/(decrease) in payables	94	267	(183)	744
Cash generated from / (used by) underlying operations	1,981	2,369	(126)	1,278

 

 

21   Analysis of Cash less overdrafts

 

 

Group	At 1 April 2016		Cash flow		At 31 March 2017
	£'000		£'000		£'000
Cash at bank and in hand	953		1,456		2,409
Total cash	953		1,456		2,409

 

 

Company	At 1 April 2016		Cash flow		At 31 March 2017
	£'000		£'000		£'000
Cash at bank and in hand	633		3		636
Total cash	633		3		636

 

22                     Financial Risk Management

 

The Board of Directors has overall responsibility for the risk management policies that are applied by the business to identify and control the risks faced by the Group.

 

The Group has exposure from its use of financial instruments to foreign currency risk, credit risk and liquidity risk.

 

Foreign Currency

 

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

 

The Group's international operations account for approximately 23.37% (2016: 21.72%) of revenue and approximately 19.70% (2016: 19.85%) of the Group's assets and consequently the Group has a degree of translation exposure in accounting for overseas operations.

 

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

 

Credit Risk

 

The Group's principal financial assets are bank balances, trade and other receivables. The Group's credit risk is primarily in respect of trade receivables. Credit risk refers to the risk that a client will default on its contractual obligations resulting in financial loss to the Group. The Group does not have any significant credit risk exposure to any individual client. At the year end no customer represented more than 9.07% (2016: 6.82%) of the total balance of trade receivables.

 

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

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

 

Liquidity Risk

 

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

 

The Group has no financial liabilities other than short term trade payables and accruals as disclosed in note 16, all due within one year of the year end.

 

The Group has net funds of £2.40m (2016: £0.95m) which the Board consider are more than adequate to meet future working capital requirements and to take advantage of business opportunities.

 

23   Related Party Transactions

 

Prime People Plc provides various management services to its subsidiary undertakings. These services take the form of centralised finance and operations support. The total amount charged by the Company to its subsidiaries during the year is £200k (2016: £205k). The balance owed to the subsidiary undertakings at the year end is £739k (2016: £923k).

 

The Company also provides corporate guarantees on the subsidiary bank accounts. At 31 March 2017 amounts overdrawn by subsidiary bank accounts were £nil (2016: £222,350).

 

The Directors receive remuneration from the Group, which is disclosed in the Directors' Remuneration Report. As shareholders, the Directors also received dividends in the year from the Company amounting to £120,312 (2016: £605,384).

 

Directors

 

Robert Macdonald                         (Executive Chairman)

Peter Moore                                 (Managing Director)

Donka Zaneva-Todorinski              (Finance Director)

Chris Heayberd                             (Non-Executive Director)

John Lewis OBE                           (Non-Executive Director)

Simon Murphy                             (Non-Executive Director)

 

 

Secretary and Registered Office

 

Donka Zaneva-Todorinkski, 2 Harewood Place, London, W1S 1BX.

 

 

Registered Number

 

1729887

 

 

Stockbrokers & Nominated Advisers

 

Cenkos Securities Plc, 6.7.8 Tokenhouse Yard, London, EC2R 7AS

 

 

Auditor

 

Crowe Clark Whitehill LLP, St Bride's House, 10 Salisbury Square, London, EC4Y 8EH

 

 

Principal Bankers

 

Barclays Bank Plc, Corporate Banking, 1 Churchill Place, London E14 5HP

 

 

Registrars

 

Neville Registrars Limited, Neville House, Laurel Lane, Halesowen, West Midlands, B63 3DA.