PARITY GROUP PLC
Parity Group plc
Dawson House, 5 Jewry Street, London EC3N 2EX
Tel: 0845 873 0790
www.parity.net
stock code: PTY
Perivan Financial Print 240188
Parity Group plc Report and Accounts
Year ended 31 December 2015
About Parity
Parity Group has two independent trading divisions:
Parity Group is:
Driving Change, People Led,
Technology Enabled.
Parity Group provides organisations
with the right people, with the right
skills and the right technology through
two complementary service offerings.
Parity Professionals
Providing targeted recruitment
of temporary and permanent
professionals and career development
through training and coaching services.
We ensure our clients have both the
capacity and capability to transform
organisational performance in high
growth and rapidly evolving markets.
Parity Consultancy Services
Providing clients with niche expertise
driven by senior industry-experienced
consultants, exploiting technology and
maximising the potential of information
to provide competitive advantage.
Contents
01 Headlines
Strategic Report
02 Chairman’s Statement
04 Strategy
05 Operating Review
07 Financial Review
Governance
10 Board of Directors
11 Directors’ Report
13 Social, Environmental & Ethical Policies
14 Corporate Governance Report
18 Remuneration Report
23
Independent Auditor’s Report to the Members of Parity
Group Plc
Accounts, notes and other information
24 Consolidated Income Statement
25 Statement of Comprehensive Income
26 Statement of Changes in Equity
27 Statements of Financial Position
28 Statements of Cash Flows
29 Notes to the Accounts
60 Corporate Information
60 Advisors
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Headlines
Parity Group plc (“Parity” or the “Group”), the UK IT and Consultancy
Services Company, announces its audited preliminary results for the year
ended 31 December 2015
Headlines
❚ New growth strategy building on:
o the core service offerings of IT Resources and Talent Management under the Parity
Professionals division, and
o the Parity Solutions offering now under a new Parity Consultancy Services division
❚
Marked increase in adjusted EBITDA1 to £1.20m in H2 2015 from £0.38m in H1 2015 and a
resilient performance overall
Strong improvement in new client activity for Parity Professionals with 128 new clients in the
financial period (95 in 2014)
The first major win for Parity Consultancy Services division with Parity Solutions awarded a
significant high profile management information contract with the MoD valued at £2.20m
Implementation of £1m annualised cost saving programme from H2 2015 following the exit from
the digital acquisition strategy
❚
❚
❚
Results summary:
❚ Revenues reduced to £84.84m (2014: £92.26m)
❚ Adjusted EBITDA1 of £1.58m (2014: £1.60m)
❚ First positive cash flow from operations in five years of £0.18m
❚ Net cash inflow from operations £0.18m (2014: £1.87m cash outflow)
❚ Net debt £7.38m (2014: £6.61m)
❚ Profit before tax and before non-recurring items and impairment of £0.14m (2014: £0.41m)
❚
Non-recurring costs of £2.06m (2014: £0.81m) and £1.99m goodwill impairment (2014: nil) related to the
Inition service offering
o Parity Professionals – Specialising in the sourcing, development and placing of professional staff
• Revenue £78.19m (2014: £84.47m)
• Divisional contribution2 £2.28m (2014: £2.49m)
o Parity Consultancy Services – Niche expertise creating technology solutions
• Revenue £6.65m (2014: £7.80m)
• Divisional contribution2 £0.80m (2014: £0.68m)
1 In assessing the performance of the business, the directors use a non-GAAP measure “Adjusted EBITDA” being the measure of EBITDA, prior to non-recurring items
and share based compensation as detailed in note 4.
2 Divisional contribution in this narrative refers to the segment contribution before Group costs3, tax, interest, non-recurring items and share based payment charge.
3 Group costs include directors’ salaries and costs relating to group activities and are not allocated to reporting segments.
4 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, (vii) fluctuations in exchange rates and (viii) volatility in financial markets.
01
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Chairman’s Statement
Lord Freeman – Non-Executive Chairman
Financials
The Group’s financial performance in 2015 was reassuringly resilient during a year of significant change as the strategy for the
business developed. Whilst revenues for the Group reduced to £84.84m (2014: £92.26m), the business maintained adjusted
EBITDA in-line with last year at £1.58m (2014: £1.60m). There has been a strong improvement in revenues and profit in H2
compared to H1 and the business has now completed a £1m cost reduction programme which will generate a full year benefit in
2016 and beyond.
Revenue
Divisional contribution
Group costs
Adjusted EBITDA
2015
H1
41,175
1,205
(821)
384
H2
YEAR
43,667
1,872
(676)
1,196
84,842
3,077
(1,497)
1,580
2014
YEAR
92,264
3,174
(1,570)
1,604
Parity Professionals has shown encouraging growth through the year and became the hub for the majority of Group activities. We
ceased our digital business acquisition strategy and the SuperCommunications division was renamed Parity Consultancy Services
to align with the new technology consulting strategy. After a carefully managed transition, there is a refreshing enthusiasm and
confidence in the new structure and the opportunities it provides for the Group and our clients.
Parity Professionals revenues recovered through the year from a lower comparable start point and ended on £78.19m (2014:
£84.47m) with a resultant Divisional Contribution of £2.28m (2014: £2.49m). Encouragingly, the trend of increasing revenues,
profitability and margins from H1 into H2 has been maintained into the first two months of 2016.
Parity Consultancy Services revenues have reduced (2015 £6.65m, 2014: £7.80m), though the rationalisation of the business and
the growth through the year in Parity Solutions has helped the business to achieve a growth in Divisional Contribution to £0.80m
(2014: £0.68m) with margins improving strongly. Inition remains as a standalone technology node within this division.
Non-recurring costs and impairment increased as a result of exiting the digital acquisition strategy and the subsequent restructure.
Cash and Dividend
Cash has been impacted by the exit from the digital acquisition strategy, due to the non-recurring costs involved in the previously
announced closure of Golden Square and rationalising the management structure. As a result, cash and cash equivalents at year
end were £2.65m (2014: £2.97m) with net debt being £7.38m (2014: £6.61m).
PNC have provided our banking arrangements since 2010. Having reviewed our current facility and reviewed financial forecasts and
projections, with reasonable sensitivities applied, the Board is satisfied the funding arrangements are sufficient to meet the Group’s
needs for the foreseeable future.
No dividend is payable for this year, but the Board intends to keep this policy under review.
Board Changes
There have been a number of changes to the Board in the year, primarily driven by the exit from the digital business acquisition
strategy. The Board was realigned to focus on the core business offerings of recruitment, talent management and consultancy
services with an exciting new growth strategy.
Andy Law, former Chairman of the SuperCommunications division, left the Board on the 13 August 2015. David Courtley also
stepped down as Non-Executive Director on 13 August 2015.
Alan Rommel was appointed to the Board on 13 August and promoted to Group CEO on 4th November 2015 to lead the new
growth strategy. Alan has been with Parity for over 20 years and has a strong background in the recruitment and talent management
industry.
Alastair Woolley retired as Group Finance Director on 27 May 2015 and Mike Aspinall was appointed as Group Finance Director on
14 September 2015.
On the 4 November 2015 both Philip Swinstead OBE, the former Group Executive Chairman, and Paul Davies, Chairman of the
Parity Professionals division, retired from the Board, and I took over as Group Non-Executive Chairman. Both Philip and Paul were
founders of Parity. The Board and the Group are indebted to them both for their tireless work over the years. They left the Group in a
stable position with a clear vision and strong, energetic leadership.
02
Parity Group plc
Report and Accounts 2015
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Chairman’s Statement continued
Current Trading and Future Prospects
The core businesses of Parity Professionals and Parity Consultancy Services are following an exciting growth path under the
leadership of Alan Rommel, the newly appointed Group CEO. It is very pleasing to see the early signs of success in building the
enlarged client base and leveraging existing relationships with new client services across the businesses. The core London
businesses are relocating to a single office which will facilitate improved communication and collaboration amongst the teams at no
additional cost. 2016 has started with the strong momentum carried forward from the second half of 2015 and the executive
management team, and all of the Parity staff, are focused on building profitability, ensuring the core business remains cash-
generative and value enhancing for shareholders. The Board thanks all of the staff for their commitment in the year.
The Board is dedicated to driving profitability, cash flow and shareholder value and looks forward to 2016 with confidence.
Lord Freeman,
Non-Executive Chairman
16 March 2016
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03
Strategy
Alan Rommel – Chief Executive Officer
Overview
After the carefully managed restructuring in 2015, Parity is now
focused on its established and proven business model
providing clients with both the people and the technology to
drive change through two strongly defined and complementary
business units:
• Parity Professionals: specialising in the sourcing,
development and placing of professional staff through the IT
Resources and Talent Management offerings
• Parity Consultancy Services: niche expertise creating
technology solutions through the Parity Solutions and Inition
offerings
Parity is Driving Change, People-Led, Technology-Enabled.
This new and exciting strategic ambition supports our clients as
they adapt to the rapidly changing IT market.
We have a clear 3-year plan built around growth, market
leadership and future investment. This will be achieved through
organic expansion of our established and trusted offerings, and
through strategic investment in the higher margin consultancy
proposition.
Within the Consultancy Services division, we will continue to
build upon the existing expertise of Parity Solutions which
already provides a solid base of technical knowledge for
consultancy, systems integration and bespoke development
projects. This consulting expertise can be rapidly scaled with
contractor and associate support from the Professionals
division, whilst maintaining the controls, processes and
assurance of a consultancy model, thus adding value through
the management of client projects.
Additionally, we plan to expand our range of technology
consulting services by developing practices led by senior
business and technical experts where the Group already has
significant agency business, providing a true leadership edge.
We have restructured and reduced central costs to support the
new focus on the profitable core. As a result, Parity has
become a more efficient and simpler business with proven
strengths in human capital and technology-enabled change
management. This stable platform for growth provides:
• Client flexibility, combining niche services into an integrated
solution
• Multi-channel sales
• Opportunity to leverage cross-sales
• Consulting model with rapidly scalable staffing model with
access to niche contract and associate expertise through
Parity Professionals, with a resulting low bench cost
The strategy is based on three main pillars:
Growth
With the focus on a future opportunity that builds on the stable
core business and the skills of the dedicated, experienced and
enthusiastic management team, the Group plans to grow
organically by leveraging its scale, targeting growing markets
which are undergoing change and where there is resultant high
demand for people and technology to support change.
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Parity Group plc
Report and Accounts 2015
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We have already established a programme of collaboration
which has resulted in the identification and development of a
number of opportunities and is gaining further momentum after
a successful cross-business launch in January 2016.
We are now committed to self-fund growth, however it should
be expected that there will be a lead time to build some of the
niche market consultancy practices. There is great strength in
our core offering, and people who provide a dedicated and
excellent service to clients. It is these strengths that will underlie
the growth for the business.
Market Leadership
Each business unit will maintain its own direct sales approach
but the Group is building an overarching capability in Change
Management and moving the proposition up the value chain.
Whilst having a range of individual ‘product’ offerings, the
businesses will support each other and the client will be able to
combine the modular services into a more integrated solution.
Through a broad range of individual specialisms, Parity aims to
provide market leading Change Management services –
People-led, Technology-enabled.
Future Investment
Parity will build upon the established and profitable foundations
with a clear and unified client proposition – maximising the
effectiveness of people, processes and systems within our
clients’ organisations.
Parity Professionals will self-fund internal investment to support
organic growth within the core services, and by adding capacity
in new high growth and high demand markets.
Parity Consultancy Services will build upon the Business
Intelligence consultancy service through Parity Solutions, and
create additional specific niche practices led by senior
professionals where the Group already has existing opportunity
to leverage additional services. This approach is already being
successfully deployed in the MoD where the wider support of
the group is proving extremely effective, allowing the service to
scale quickly without the associated bench costs. In addition to
the enhanced sales and marketing capability, this is evidence of
the great opportunity to leverage our existing client base to
provide additional, higher value services.
Summary
With the increased clarity of a more aligned and targeted
business strategy through these three pillars, we are confident
that we can build on the underlying strengths in the business
and provide further growth opportunity. This confidence is
further enhanced by the momentum carried forward from H2
trading into early 2016.
Parity is well placed to capitalise on the opportunities in the
market, leveraging the strength of the resources business
combined with building the consultancy proposition, to improve
margins, and support the Board’s commitment to driving
profitability, positive cash flows and shareholder value.
Operating Review
Overview
The re-organisation has provided a clear focus on our
established and profitable services, maximising the
effectiveness of people, processes and systems within our
clients’ organisations. The Group as a whole has been building
momentum through 2015, improving the sales pipeline and
growing profitability. This has been achieved through self-
funded investment, increasing the capacity and the focus of the
sales teams, improved marketing, and by continuing to improve
operational efficiency to capitalise on the opportunities in a
resilient UK economy.
We are an agile business, building margins across the different
service lines, and winning larger scale programmes with a
rapidly scalable and cost-effective delivery model.
Through the year, Parity Professionals has significantly
increased contractor volumes and permanent fees, whilst
increasing average margins. As a profitable part of the
business, Parity Solutions was to be integrated within Parity
Professionals but we have decided to take a different approach
as the Solutions team demonstrated a capability to win and
deliver larger scale programmes with the support of the wider
business. We will now build upon the core offering of Parity
Solutions having created a new consultancy business – Parity
Consultancy Services. The Group has built a stronger pipeline
across every service line which gives increasing confidence in
the outlook into 2016 and beyond.
Our clients need for change is driven by both advances in
technology, and by the demands of increasingly technology
‘savvy’ users – be they employees within the organisation
driving the requirements, or their own customers demanding
more. Parity, as both a people and technology provider, is
ideally placed to service our clients’ needs, enabling the
changes which will drive their growth.
Parity is:
Driving Change, People-Led, Technology-Enabled.
PARITY PROFESSIONALS
Overview
Parity Professionals has a clear ‘people’ focus – building
capacity and capability for our clients to transform
organisational performance. This has elevated the proposition
for the recruitment and placement services and increased
breadth of services to include talent development which
differentiates the business from its peers.
We have invested in building the brand and the extended
service offerings which has enabled a further shift from arms-
length transactional delivery towards a more consultative, value-
adding and higher margin service. As clients demand access to
highly productive professionals to support their evolution, we
have created a broad range of integrated HR services – from
graduate recruitment and induction through to senior level
recruitment and development programmes, maximising the
impact and efficiency of their management and staff.
Revenues in the year reduced by 7% to £78.19m (2014:
£84.47m) with contribution reducing by 8% to £2.28m (2014:
£2.49m) on a like for like basis. (i.e. with all operating overheads
allocated to the business). The full year performance in
Professionals was adversely impacted by the previously
mentioned loss of a major contract at the end of 2014; both
revenues and contribution have demonstrated significant
improvement from H1 to H2 in the year, and H2 2015 finished
marginally up on H2 2014.
The IT Resources Offering
The recruitment business entered 2015 with a high level of
activity but with contractor volumes impacted by the
cancellation of a major contract at the end of 2014. Whilst
divisional revenues for the year dropped, the team has made
significant progress through the year in terms of contractor and
permanent fee growth and improvement in contribution.
The underlying momentum has been built by successfully
adding 104 new clients in the year (vs 79 in 2014) and
improving average margins across our offices. With an
improvement in the volume of opportunities, conversion rates
and placements over 2014, we have achieved an increase in
Gross Profit generated on new deals written of 29%.
Permanent fees grew by 38% in the year due to the speed in
which we responded to an increase in demand for niche skills
as we built a new permanent team dedicated to target skills
verticals. It is our intention to replicate this model of niche
specialism in growing markets for our London and Edinburgh
offices.
The Talent Management Offering
The business continues to offer HR consultancy, training and
advisory services to government and industry.
Parity continued to manage the highly regarded FastStream
graduate recruitment programme on behalf of HMRC with the
contract being renewed for a further 12 months taking us into
our 12th year of successful delivery. Public sector spend on
funded development and employment support in Northern
Ireland is being reduced and as a result our INTRO graduate
programme is unlikely to continue. The team will build upon
their credentials by offering graduate recruitment and
development programmes direct to end clients as well as their
leadership and coaching services. We are adding scale to the
sales team in mainland GB where sales achieved significant
growth in 2015 with much less reliance on public sector spend.
The team have won 24 new clients in the year (16 in 2014)
including some larger scale and higher margin programmes
with well-known blue-chips including adidas and Coca-Cola. A
closer working relationship across Parity Professionals is
proving that clients see the value in an integrated solution.
PARITY CONSULTANCY SERVICES
At the core of the new Parity Consultancy Services business,
the Parity Solutions offering allows our clients to combine
expertise and technology to provide a competitive advantage.
This expertise creates an important differentiator between the
people-led Parity Professionals business and the technology-
enabled Parity Consultancy Services. The in-house
development team are building expertise in big data solutions
and the wider Business Intelligence market. This expanding
market has already resulted in the award of a significant
high-profile management information contract with the MoD to
deliver the next phase of the Military Capability Output Costing
System (MCOCS). This major Business Intelligence initiative is
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05
Operating Review continued
worth over £2m for the first two years and has supported a
growing pipeline in other related areas through the year.
We will build the consultancy proposition further with new
practices in markets that are undergoing significant change that
have access to funding to support the transition, such as
Health and Utilities where we already have significant market
presence and expertise across the Group. As with the MoD we
will further develop this knowledge with niche technology
expertise driven by senior industry-experienced consultants,
underwritten with the delivery capability of a trusted brand.
Inition remains in its own right as a small but exciting
technology node specialising in Virtual and Augmented Reality
to create installation-based experiences and exciting marketing
solutions. During the year, Inition has increased the focus on
account management resulting in greater visibility of a growing
pipeline.
Alan Rommel,
Chief Executive Officer
16 March 2016
06
Parity Group plc
Report and Accounts 2015
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stock code: PTY
Financial Review
Mike Aspinall – Group Finance Director
Divisional performance
Continuing operations
Parity Professionals
Parity Consultancy Services
Total divisional
Revenue
Contribution
2015
£’000
78,190
6,652
84,842
2014
£’000
84,466
7,798
92,264
2015
£’000
2,276
801
3,077
2014
£’000
2,491
683
3,174
Whilst revenue for the Group decreased by 8.0% to £84.84m (2014: £92.26m), divisional contribution margin increased to 3.6%
(2014: 3.4%). The main driver of the year on year movement was the low starting point to 2015 due to a strategic decision by a
client to move a significant contract to a master vendor agreement with another supplier at the end of 2014. Momentum grew
steadily during the year, with H2 revenues up 6.0% and H2 contribution up 36.2% on H1, and both above the equivalent period in
2014, allowing the Group to finish the year strongly.
Within Parity Professionals, IT Resources revenues were down 7.5%, due to the low 2015 starting point. Revenue and margins built
during the year, with H2 revenues of £39.4m up 7.2% and H2 contribution up 19.3% on H1, and both marginally up on the
comparable period last year.
Parity Consultancy Services benefited from Solutions winning the MCOCS Management Information programme for the MoD in H2
as well as continued work with long-standing client BAT to offset the low starting point to 2015. Inition revenues were up 7.3% year
on year and overall divisional margins increased to 12.0% (2014: 8.8%), helped in part by a £0.62m reduction in divisional
overheads.
Reconciliation of divisional contribution to operating profit/(loss) from continuing operations
Divisional contribution
Group costs
Depreciation and amortisation
Share-based payment charges
Operating profit/(loss) before non-recurring items
Non-recurring items (continuing operations)
Impairment
Operating (loss)/profit from continuing operations
2015
£’000
3,077
(1,497)
(719)
(152)
709
(2,058)
(1,994)
(3,343)
2014
£’000
3,174
(1,570)
(477)
(242)
885
(814)
–
71
Group costs fell to £1.50m (2014: £1.57m), reflecting the share of the cost reduction program implemented following the strategy
change at the end of H1.
Depreciation and amortisation has risen in 2015 to £0.72m (2014: £0.48m) due to the full year effect of investments in 2014 in core
management information systems and in Inition’s product portfolio.
Share based payment charges have fallen as there was a reduction in the number of share options issued to employees in 2015.
Non-recurring items
Continuing operations
Impairment loss
Restructuring costs
– Employee benefit costs
– Write down of tangible fixed assets
– Other operating costs
Transaction costs
Property provisions
Gain on acquisition
2015
£’000
1,994
1,404
341
126
125
62
–
4,052
2014
£’000
–
405
–
129
166
169
(55)
814
07
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Financial Review continued
Impairment
At the year end, the directors considered the carrying value of
all intangible assets, reviewing the underlying assumptions for
both cash flows projections and discount rates specific to the
cash generating unit concerned. As a result of this review, the
directors considered it prudent to increase the discount rate
associated with the Inition service offering and an impairment
loss of £1.99m was booked.
Other non-recurring items
Employee benefit costs relate to compensation payments
incurred in exiting the digital acquisition strategy, the
streamlining of the Board and the closure of the Golden Square
Content service offering. The impairment of tangible fixed
assets relates to the closure of Golden Square.
The transaction costs relate to an aborted transaction in H1.
Property provisions represent empty office provisions related to
the relocation of the PLC head office.
Earnings per share and dividend
The basic loss per share from continuing operations was
3.85 pence (2014: 0.43 pence).
The Board does not propose a dividend for 2015 (2014: nil),
but will continue to review this policy each year.
Statement of Financial Position
Intangible fixed assets
During 2015, the Company invested £0.28m (2014: £1.06m) in
intellectual property relating principally to further enhancements
to three successful and in-demand products in the Inition
service offering, and the development of core programmes for
the Talent Management service offering. There was a residual
amount related to the completion of certain features of the new
management information systems introduced in 2014.
Carrying value of goodwill was impacted by a £1.99m
impairment related to the Inition service offering.
Trade receivables and accrued income
Trade and other receivables increased by £0.1m to £15.6m
(2014: £15.5m) due to an increase in year-end activity and
billings compared to the same period last year, offset by a slight
improvement in debtor days. At the end of the year, calculated
on billings on a countback basis, debtor days decreased to
31 days (2014: 33 days).
Trade and other payables
Trade and other payables increased during the year to £8.6m
(2014: £8.3m). The increase is due to restructuring related
non-recurring costs payable in 2016, offset by a reduction in
the brought forward payable balance following payment of the
final tranche of the Inition earn out in H1 2015.
Other financial liabilities
Other financial liabilities represent the Group’s debt under the
asset-based lending facility. This is a working capital facility and
is consequently linked to the same cycle as the trade
receivables. The asset-based lending facility with PNC provides
for borrowing of up to £15m depending on the availability of
appropriate assets as security. Interest on borrowings is
charged at 2.5% over the prevailing base rate. The current
facility is subject to a minimum period up to 31 December
2016, at which point the facility becomes evergreen rolling over
on the same terms, with six months’ notice from either party.
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The bank has not drawn to the attention of the Group any
matters to suggest that this facility will not be continued.
Cash flow and net debt
The Group realised positive net cash flows from operating
activities of £0.18m (2014: £1.91m cash outflow); the first
positive operating cash flow in five years, helped in part by
lower payments to the retirement benefit plan. With the final
Inition earn-out payment now made, and lower non-recurring
costs and affordability linked pension contributions, the Group
looks forward to a period of positive operating cash flows.
Net debt increased to £7.38m (2014: £6.61m), due mostly to
cash non-recurring costs in the year and the final earn out
payment for Inition.
Provisions
Provisions are all property related and have significantly
decreased during the year to £0.01m (2014: £0.08m) reflecting
the final unwinding of provisions built up in previous years for
empty properties. The 2015 provision is for leasehold
dilapidations on current properties.
Pension Fund
During 2015, the Group agreed a payment holiday with the
trustees of the Pension fund from January to December 2015.
Payments therefore reduced in the year to £0.03m (2014:
£0.89m). The pension fund realised an actuarial gain of £0.85m
during the year as the present value of liabilities reduced
following an upwards revision to the discount rate to 3.8%
(2014: 3.5%).
In March 2016, we reached agreement with the trustees of the
defined benefit pension scheme to reduced deficit reduction
contributions, linking amounts payable to Group performance
and affordability on a sliding scale as part of the current triennial
valuation review. Reduced cash commitments over the next
three years will help the Group’s interest cover ratio and cash
generating capability.
Principal risks and uncertainties
Market
The Group continues to monitor its exposure to the public
sector and while the Group’s exposure has reduced over recent
years, it still remains exposed to potential public sector budget
reductions and changes to recruitment.
The Group trades almost exclusively in the UK, and is aware of
the changing competitive environment that faces both its
divisions. As a result, there is a major emphasis on addressing
the lower volume but higher margin niche sectors and
opportunities in the Parity Professionals division and the new
growth areas for the Parity Consultancy Services division.
People
Our people are the most important part of our service and
having appropriately trained and motivated staff helps us
reduce the risk of poor service delivery. Share plans are used to
incentivise and retain senior staff in the medium term. HR
policies and procedures are reviewed regularly to ensure the
business recruits and retains appropriately trained and
experienced staff.
Financial
The Group actively monitors its liquidity position to ensure it has
sufficient available funds and working capital in order to operate
and meet its planned commitments and has a credit risk policy
that requires appropriate status checks and or references as
necessary.
Technology
As an IT services provider the Group relies on its IT,
telecommunications and infrastructure systems to perform and
manage the services we provide to clients. The Group reviews
its own disaster recovery systems regularly in order to minimise
the risk of prolonged disruption to systems.
Legal
The Board recognises that non-compliance with relevant laws
and regulations can result in substantial fines or penalties.
Suitable controls are built into our service delivery processes to
reduce the risk of non-compliance.
Mike Aspinall
Group Finance Director
16 March 2016
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09
Board of Directors
Lord Freeman
Non-Executive Chairman1, 2, 3
Roger Freeman, 73, was appointed Non-executive Chairman in
November 2015 and is Chairman of the remuneration and
nominations committees. Roger joined as a Non-Executive
Director in 2007. After qualifying as a Chartered Accountant in
1969 he joined Lehman Brothers, the US Investment Bank, and
was a Partner in the London Office until 1983 when he entered
the House of Commons. He served as a Minister between 1986
and 1997 including Cabinet Minister for Public Service. He
became a Life Peer in 1997 and also became a Partner with
PricewaterhouseCoopers for whom he now chairs their UK
Advisory Board. He is Chairman of the Trustees of the Thales
UK Pension Fund.
Neal Ransome
Non-Executive Director1, 2, 3
Neal Ransome, 55, was appointed to the Board as a
Non-Executive Director in September 2013 and is Chairman of
the audit committee. Neal retired from PwC in 2013 where he
was a Corporate Finance Partner and Chief Operating Officer of
PwC’s Advisory line of service. In addition to his direct
managerial experience in a large services organisation, Neal has
over 20 years’ experience of advising clients on their M&A
activities. Neal is also a Non-executive Director of Quercus
(General Partner) Limited and Trustee and Council Member of
the RSPB.
Alan Rommel
Chief Executive Officer
Alan Rommel, 44, is the Chief Executive Officer of Parity and
was appointed to the Board in August 2015. Alan joined Parity
following completion of his degree in Economics and Business
Studies from the University of Sheffield. Alan is a specialist in
the sector with over 20 years’ recruitment experience and a
solid understanding of the industry. He spent 5 years as MD of
Parity Resources before promotion in 2013 to CEO of Parity
Professionals which was created by combining the recruitment
and talent management services. In addition to holding a
number of senior posts within the Parity Group, Alan was
elected to the APSCo (The Association of Professional Staffing
Companies) Executive Committee for 3 terms covering the
period 2010 – 2014.
Mike Aspinall
Group Finance Director
Mike Aspinall, 43, is the Group Finance Director of Parity Group
plc and was appointed to the Board in September 2015. Prior
to joining Parity, Mike was CFO at Picsolve International Limited
for 3 years, an Eight Roads/Fidelity private equity backed
company, and has previously worked as the finance director in
a number of venture capital and owner managed companies.
Mike trained and qualified with Arthur Andersen.
1 Member of the nominations committee
2 Member of the remuneration committee
3 Member of the audit committee
10
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Directors’ Report
The Directors present their report and the audited accounts for
the year ended 31 December 2015.
Principal activities
The Group delivers a range of recruitment and business and
technology solutions to clients across the public and private
sectors. During the period under review the Group operated
through two divisions; Parity Professionals and Parity
Consultancy Services (formerly SuperCommunications).
The principal activity of the Parity Professionals division is to
provide recruitment, predominately interim recruitment, and
graduate placement services, to a diverse range of clients. In
2015 its clients’ market sectors included central and local
government within the public sector and FMCG, Insurance, Oil,
and Transport in the private sector.
The principal activities of the Parity Consultancy Services division
comprise business intelligence solutions, delivering creative
technology solutions, and the resale of latest technology
equipment. Parity Consultancy Services delivered its services
during the year to central government departments in the public
sector, and to Manufacturing, Oil, Retail, IT, Telecommunications
and Automotive clients in the private sector.
Review of business and future developments
A review of the business and its outlook, including commentary
on the key performance indicators of turnover, gross margin,
contribution, debtor days and net debt, and the principal risks
and uncertainties facing the Group is included in the Chairman’s
Statement, Strategy, Operating Review and Financial Review on
pages 2 to 9. The Group’s social, environmental and ethical
policies are set out on page 13. A statement on the application
of the going concern principle is set out below. Details of
financial instruments are set out in note 22 to the financial
statements. Each of the above is incorporated in this report by
reference.
Group results
The Group loss from continuing operations before taxation for
the year was £3,909,000 (2014: £408,000) after charging
non-recurring items of £4,052,000 (2014: £814,000). After a tax
expense of £6,000 (2014: £25,000) and a loss after tax from
discontinued operations of £4,000 (2014: £5,000), the retained
loss of £3,919,000 (2014: £438,000) has been transferred to
reserves. The results for the year are set out in the consolidated
income statement on page 24.
Hargreave Hale Limited
Philip Swinstead
Killik & Co
David Courtley
Timothy Watts
Dominion Holdings
Citrine Investments
Barclays Wealth
TD Direct Investing
Dividends
The Directors do not recommend a final dividend (2014: nil
pence per ordinary share). The total dividends for the year were
nil pence per ordinary share (2014 nil pence per ordinary share).
Pension
The Group operates a defined contribution pension scheme.
There is also a defined benefit scheme which is closed both to
new members and to future service accrual. Details of the
defined benefit pension scheme are given in note 24.
Purchase of own shares
At the end of the year, the Company had authority, under the
shareholders’ resolution of 27 May 2015, to purchase in the
market 10,172,652 of the Company’s ordinary shares at prices
ranging between two pence and an amount equal to 105% of
the average of the middle market prices quoted in the five
business days immediately preceding the day of purchase. No
purchases were made during the year. The Directors intend to
seek renewal of this authority at the forthcoming Annual
General Meeting.
Board of Directors
Biographical information on each of the Directors as at
16 March 2016 is set out on page 10, together with details of
membership of the Board committees.
In accordance with the Company’s Articles of Association, Alan
Rommel and Mike Aspinall, who were both appointed after the
announcement of the 2015 AGM, will retire and offer
themselves for re-election at the 2016 Annual General Meeting.
Directors’ interests
The Directors’ beneficial interests in the ordinary share capital of
the Company are set out within the remuneration report on
page 22.
Principal shareholders
At the close of business on 8 March 2016 (being the latest
practical date prior to the signing of the Directors’ Report) the
Company had received notification of the following substantial
interests representing over 3% of the issued share capital:
Number of
Ordinary 2p shares
Percentage
held
15,056,315
14,958,215
6,557,322
6,521,739
5,140,000
4,950,000
4,823,766
3,765,423
3,104,269
14.79
14.69
6.44
6.40
5.05
4.86
4.74
3.70
3.05
11
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Corporate social responsibility
The Group recognises its corporate social responsibilities and
reports on these in a separate statement of social,
environmental and ethical policies on page 13. This statement
covers the Group’s Employment Policies, Environmental Policy
and Health and Safety Policy.
Directors’ and officers’ liability insurance and indemnity
The Company has purchased insurance to cover its Directors
and officers against their costs in defending themselves in any
legal proceedings taken against them in that capacity and in
respect of damages resulting from the unsuccessful defence of
any proceedings.
Corporate Governance
The Corporate Governance Report on pages 14 to 17 forms
part of the Directors’ Report.
Auditor
Resolutions will be proposed at the Annual General Meeting to
reappoint KPMG LLP as auditor to the Company and to
authorise the Directors to determine their remuneration.
Post Balance Sheet Events
There were no material post balance sheet events.
Annual General Meeting
The resolutions to be proposed at the Annual General Meeting,
together with the explanatory notes, will appear in the Notice of
the Annual General Meeting which will be circulated with the
annual report when sent to all Shareholders.
By order of the Board
Mike Aspinall
Director
16 March 2016
Directors’ Report continued
Capital structure
The Company has two classes of shares in issue, ordinary
shares of 2p and deferred shares of 0.04p. The ordinary shares
are listed on the London Stock Exchange and ordinary
shareholders are entitled to vote at Company meetings, to
receive dividends and to the return of their capital in the event of
liquidation, with the exception of ordinary shares held by the
Parity Group plc Employee Share Ownership Trust which are not
entitled to receive dividends. The deferred shares are not listed,
have no voting rights, no rights to dividends and the right only to
a very limited return on capital in the event of liquidation.
The Directors are not aware of any restrictions on transfers of
shares in the Company or on voting rights or of any agreements
between holders of the Company’s shares which may result in
such restrictions.
Going concern
The Group’s business activities, together with the factors likely
to affect its future development, performance and position are
set out above (Review of business and future developments).
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Financial
Review on pages 7 to 9 and in note 22 to the financial
statements. Note 22 also includes the Group’s objectives for
managing capital.
As outlined in note 22, the Group meets its day to day working
capital requirements through an asset-based lending facility. The
facility contains certain financial covenants which have been met
throughout the period. The current facility is subject to a
minimum period up to 31 December 2016, at which point the
facility becomes evergreen, rolling over on the same terms, with
six months’ notice from either party. The bank has not drawn to
the attention of the Group any matters to suggest that this
facility will not be continued on acceptable terms.
The Group’s forecasts and projections, taking account of
reasonably possible changes in trading performance, show that
the Group will be able to operate within the level of its current
facility for the foreseeable future.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and
Accounts.
The Company is not party to any significant agreements that
take effect, alter or terminate upon a change of control of the
Company following a takeover bid. There are no agreements
between the Company and its Directors or employees providing
for compensation for loss of office or employment that occurs
because of a takeover bid.
Payments to suppliers
The Group seeks to abide by the payment terms agreed with
suppliers when it is satisfied that the supplier has provided the
goods or services in accordance with the agreed terms and
conditions. In the United Kingdom and Ireland the Group agrees
payment terms with its suppliers when it enters into binding
purchase contracts.
12
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Social, Environmental and Ethical Policies
Employment policies
As a professional services business, Parity’s strength derives
from the commitment, capability and cultural diversity of its
employees. The Group aims to adopt a policy of diversity at all
levels including selection, role assignment, teamwork and
individual career development. The Group encourages the
participation of all employees in the operation and development
of the business by offering open access to senior management,
including the Executive Directors, and adopting a policy of
regular communications through road shows and the intranet.
The Group incentivises employees through share-based
incentives and the payment of bonuses and commissions linked
to performance objectives. Where appropriate these objectives
are linked to profitability. The Group also has a structured
approach to performance appraisal and career development
and ensures that every employee has an annual performance
review and has clear objectives and performance standards.
Health & safety
The health and safety of Parity’s employees is paramount.
Group policy is to provide and maintain safe and healthy
working conditions, equipment and systems of work for all
employees and to provide such information, training and
supervision as is needed for this purpose.
Appropriate written health and safety information outlining the
Group’s policy in each area is issued to all new employees. This
includes:
• First aid — Each office has a person qualified in first aid. First
aid boxes are readily accessible and records kept of all
accidents and injuries.
• Fire safety — Each office has an evacuation marshal who will
liaise with building management or local emergency
authorities, as appropriate. Evacuation assembly points are
agreed for every location and a full evacuation carried out
every six months. Fire alarms are tested regularly.
• Employees’ health — Any employee who believes he/she is
suffering from an illness or condition related to their working
environment is encouraged to report this to his/her manager
for investigation.
Annual Health and Safety audits are carried out at every Parity
office to ensure high standards are maintained.
As part of its benefits package Parity offers a number of benefits
to support the health and well being of its staff, as well as an
Employee Assistance helpline.
Social responsibilities
It is Group policy to be a good corporate citizen wherever it
operates. As part of the Group’s social responsibility, employees
are encouraged to become involved in their local communities
and fund raising events for charity.
Environmental policy
While Parity Group’s operations by their very nature have
minimal environmental impact, the Group recognises its
responsibilities to protect and sustain the environment and its
resources. The Group’s policy is to meet or exceed the statutory
requirements in this area and it has adopted a code of good
environmental practice, particularly in its main areas of
environmental impact, namely energy efficiency, use and
recycling of resources and transport.
Transport
Public transport is used whenever possible. Interest-free season
ticket loans are made to staff as part of the benefits package.
Teleconference facilities are extended to main office locations to
minimise business travel and increase efficiency. PCs (portable
or desktop) are made available to staff where needed to facilitate
home working and minimise the need to travel to offices.
Energy
Only energy-efficient computers and peripherals are acquired
and they are turned off at the end of each day. As a normal part
of its operations the Group seeks to occupy offices which have
efficient building management systems and, ideally, low energy
lighting. Office lighting is turned off at the end of each day.
Whenever economically justifiable, the paper and other
consumables used are made from environmentally-friendly or
recycled material or from renewable resources.
Recycling
The Group makes every effort to recycle office paper and
envelopes. Appropriate containers are provided at all offices and
all paper collected is sent to recycling plants. The Group also
recycles as much other material, such as toner cartridges, as is
economically viable. When replaced, computers and peripherals
are offered to employees at market value, local schools or
charities, or sent to recycling plants.
Ethics
Parity Group is committed to maintaining the highest standards
of ethics, professionalism and business conduct as well as
ensuring that we act in accordance with the law at all times. The
Group supports and promotes the principles of equal
opportunities in employment and promotes a culture where
every employee is treated fairly. A culture of teamwork,
openness, integrity and professionalism forms a key element of
our company principles and values which sets out the standards
of behaviour we expect from all our employees.
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13
Corporate Governance Report
Introduction
As the Company is AIM listed, it is not required to follow the
provisions of The UK Corporate Governance Code published by
the Financial Reporting Council in September 2014 (the Code).
However, the Board continues to maintain that high standards of
corporate governance remain a key priority and that it will seek
to continue to follow the Code as far as is practicable and
appropriate, having regard to the size and resources of the
Company and to the Quoted Companies Alliance Corporate
Governance Code for Small and Mid-Size Quoted Companies.
Accordingly, this report sets out how the Company applies
elements of the Code that are deemed appropriate.
provide a sounding board for the Group Executive Chairman as
well as serving as an intermediary for the other Directors when
necessary. He was also an additional contact point for
shareholders if they had reason for concern, when contact
through the normal channels of the Group Executive Chairman
and other Executive Directors had failed to resolve their
concerns, or where such contact was inappropriate. Neal
Ransome became the Senior Independent Director when Lord
Freeman stepped up to the role of Non-Executive Chairman.
During the year Lord Freeman, as Senior Independent Director,
met the Non-Executive Director without the Group Executive
Chairman and the other Executive Directors present.
Going concern
The Board confirms that, after making enquiries, the Directors
have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence
for the foreseeable future. For this reason, they continue to
adopt the going concern basis in preparing the accounts.
Further details are outlined in the Directors’ Report on page 11.
The workings of the Board and its Committees
The Board
At the date of this report, the Board comprises the Non-
Executive Chairman, Lord Freeman, Non-Executive Director,
Neal Ransome, Group Chief Executive, Alan Rommel and Group
Finance Director, Mike Aspinall. During the year Alastair Woolley
stepped down as Group Finance Director on 27 May 2015,
David Courtley stepped down as a Non-Executive Director on
13 August 2015, Andy Law stepped down as Executive
Chairman of the SuperCommunications division on 13 August
2015, Philip Swinstead OBE stepped down as Group Executive
Chairman on 4 November 2015 and Paul Davies stepped down
as Executive Chairman of the Parity Professionals division on
4 November 2015. Alan Rommel joined the board on 13 August
2015 as Chief Executive Officer of the Parity Professionals
division and was appointed Group Chief Executive on
4 November 2015, and Mike Aspinall joined the board as Group
Finance Director on 14 September 2015. The table on page 20
sets out the dates of tenure of the current Directors on the
Board. The Directors’ biographies, which are set out on
page 10, illustrate the range of business backgrounds, skills,
independence and experience contributed by each Board
member.
Non-Executive Chairman
The Non-Executive Chairman, Lord Freeman, is responsible for
the leadership of the Board, ensuring its effectiveness on all
aspects of its role. This includes ensuring that Board meetings
are held in an open manner, that the Directors receive accurate,
timely and clear information and allowing sufficient time for
agenda items to be discussed. Annual appraisals are held of
each Director, providing feedback and reviewing any training or
development needs. The Chairman is also responsible for
effective communications with shareholders, and relaying any
shareholder concerns to the Directors. During the year both the
Group Executive Chairman and subsequently the Non-Executive
Chairman met the Non-Executive Directors without the
Executive Directors present.
Senior Independent Director
Lord Freeman acted as the Deputy Chairman and Senior
Independent Director during Philip Swinstead’s tenure as Group
Executive Chairman. One of his prime responsibilities was to
14
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Re-election of Directors
All Directors will submit themselves for election or re-election at
the next Annual General Meeting following their appointment
and retire by rotation, offering themselves for re-election. The
names of those Directors submitted for election at the
forthcoming Annual General Meeting are set out in the Directors’
report on page 11 and in the separate Notice of Annual General
Meeting sent to all Shareholders. The Non-Executive Chairman
confirms that the performance of each Director continues to be
effective and the individuals continue to demonstrate
commitment to their role.
Company Secretary
All Directors have access to the advice and services of the
Company Secretary, who is responsible for ensuring that Board
procedures, applicable rules and regulations are observed.
There is an agreed procedure for Directors to obtain
independent professional advice, if necessary, at the Company’s
expense.
New Directors receive a comprehensive, formal and tailored
induction to the Group’s operations including corporate
governance, the legislative framework and visits to Group
premises.
Board meetings
The Board has meetings scheduled regularly throughout the
year to set long term objectives and to monitor progress against
those objectives. Additional meetings are also held as business
dictates. A table showing the number of meetings of the Board
and its Committees held during the year, and attendance at
those meetings by each Board member, is set out on page 15.
The Board maintains close dialogue by email, telephone and
conference calls between scheduled meetings. The Board has a
formal schedule of matters reserved for its specific approval
which was reviewed during the year and includes a review of
Group strategic, operational and financial matters such as
proposed acquisitions and divestments. It approves the annual
accounts and interim report, the annual budget, significant
transactions, major capital expenditure and reviews the
effectiveness of the system of internal control and the risks
faced by the Group. It covers all controls, including financial,
operational, compliance and risk management. Authority is
delegated to management through Group authorisation limits on
a structured basis, ensuring that proper management oversight
exists at the appropriate level. The Group authorisation levels
were reviewed by the Board in November 2015.
All members of the Board are normally supplied in advance of
meetings with the agenda and supporting papers covering the
matters which are to be considered. If unable to attend a
meeting the Director is able to provide feedback to the
Chairman, the Chair of the Committee or the Company
Secretary and their comments are then communicated at the
meeting. A procedure exists for the Directors, in the furtherance
of their duties, to take independent professional advice if
required. If a Director has any concerns about a particular issue,
such concerns are recorded in the minutes of the relevant Board
meeting. In the event that a Director resigned over a matter that
was of concern to him, such concerns would be communicated
to the other Directors. All Directors have the opportunity to
undertake relevant training.
The operational businesses are divided into two separate
divisions, Parity Professionals comprising Parity Resources and
Talent Management and Parity Consultancy Services (formerly
known as SuperCommunications) comprising Parity Solutions
and Inition. Each business has a Managing Director. The
operational boards of each business meet monthly. The
meetings are attended by the Group Chief Executive and/or the
Group Finance Director and relevant members of their finance
and operational teams. Any key issues arising from these
meetings are reported to the Board. Non-executive Directors are
invited to visit the Group’s premises and are encouraged to have
an informal dialogue with the divisions.
Performance evaluation
The Board undertook an annual evaluation of its own
performance and that of its Committees and individual Directors
in the year. The performance of the Non-Executive Chairman
was reviewed by the other Non-Executive Director. The outcome
of the evaluation of the Board is reviewed by the Board as a
whole and the results are used to assist the Board in developing
its approach going forward.
Board balance and independence
The Board has a balance of Executive and Non-Executive
Directors such that no individual or small group of individuals
can dominate the Board’s decision making. The Board has a
range of backgrounds and skills. The Non-Executive Directors
ensure that independent judgement is brought to Board
discussions and decisions. The Board are aware of the
importance of attaining an improved gender balance.
The Board considers that there are no relationships or
circumstances which are likely to affect the independent
judgement of the Non-Executive Directors.
Attendance at board and committee meetings
During the year 11 scheduled Board meetings and 3 ad hoc
Board meetings were convened as necessary to deal with
various matters. Details of attendance at Board meetings is
summarised below. Committee attendance is shown for
Committee members only.
Audit
Nominations
Remuneration
Number held
Number attended1
Philip Swinstead2
Lord Freeman
Paul Davies3
Alastair Woolley4
David Courtley5
Andy Law6
Neal Ransome
Alan Rommel7
Mike Aspinall8
Board
14
8/10
12/14
9/10
3/5
7/8
5/8
12/14
6/6
5/5
3
–
3/3
–
–
1/1
–
3/3
–
–
4
–
4/4
–
–
3/3
–
4/4
–
–
1 All Directors who were members of the Board at the time attended the Group’s Annual General Meeting on 27 May 2015.
2 Stepped down from the Board 4 November 2015.
3 Stepped down from the Board 4 November 2015.
4 Stepped down from the Board 27 May 2015.
5 Stepped down from the Board, Audit Committee, Nomination and Remuneration Committees 13 August 2015.
6 Stepped down from the Board 13 August 2015.
7 Appointed to the Board 13 August 2015.
8 Appointed to the Board 14 September 2015.
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6/6
–
–
3/3
–
6/6
–
–
15
Corporate Governance Report continued
Committees
The Audit, Remuneration and Nomination Committees of the
Board each have formal written terms of reference. These terms
of reference are made available on request to the Company
Secretary, can be inspected at the Company’s head office and
are also available in the Corporate Governance section of the
Group’s website.
Audit Committee
During the year the Audit Committee was chaired by Neal
Ransome. Details of Neal Ransome’s recent and relevant
financial experience are set out in his biography on page 10. The
Audit Committee meets three times a year. Lord Freeman is the
other member of the Audit Committee; David Courtley was a
member in the year until 13 August 2015.
Audit committee meetings are attended by the external auditors
and all of the Executive Directors, at the invitation of the
Committee. The external auditors meet separately with the Audit
Committee on request, without the presence of the Executive
Directors, to ensure open communication.
The Audit Committee reviews and, as appropriate, actively
engages in the processes for financial reporting, internal control,
risk assessment, audit, compliance assurance and considers
the independence of the Group’s external auditor as well as the
effectiveness of the Group’s system of accounting, its internal
financial controls, external audit process and risk management.
The Audit Committee’s principal terms of reference include:
• the oversight responsibilities described in the foregoing
paragraph;
• reviewing compliance with laws, regulations and the Group’s
code of conduct and policies;
• monitoring the integrity of the Group’s financial statements
and announcements relating to the Group’s financial
performance and reviewing significant financial reporting
judgements, changes in accounting policies and practices,
significant adjustments resulting from the audit and the
application of the going concern assumption;
• reviewing the findings of the external audit with the external
auditor;
• making recommendations to the Board, for it to put to the
shareholders for their approval, regarding the appointment,
re-appointment and removal of the external auditor and
approving the remuneration and terms of engagement of the
external auditor;
• monitoring and reviewing the external auditor’s independence
and the effectiveness of the audit process;
• developing and implementing policy on the engagement of
the external auditors to supply non-audit services;
• reviewing the risk management framework and risk
assessments;
• reviewing the Group’s arrangements for its employees to
raise concerns, in confidence, about possible wrong doing in
financial reporting or other matters; and
• reviewing and monitoring the adequacy and effectiveness of
the Company’s internal financial controls, internal control, and
risk management systems.
16
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
In order to ensure an appropriate balance between cost
effectiveness, objectivity and independence, the Audit
Committee reviews the nature of all services, including non-audit
work, provided by the external auditor each year. The Group
normally expects to retain the external auditor to provide
audit-related services, including work in relation to shareholder
circulars and similar services. The external auditor provided
audit-related services during 2015, details of which are set out
in note 3 to the accounts.
Remuneration Committee
The Remuneration Committee comprises all of the Non-
Executive Directors and is Chaired by Lord Freeman. Details of
the responsibilities of the Remuneration Committee are set out
in the remuneration report on pages 18 to 22. Where necessary,
specialist external consultants are used to assist the Committee.
David Courtley was a member in the year until 13 August 2015.
Nomination Committee
The Nomination Committee comprises all of the Non-Executive
Directors and is chaired by Lord Freeman. David Courtley was a
member in the year until 13 August 2015. It is responsible for
proposing candidates for appointment to the Board, having due
regard to the balance and structure of the Board, as well as
succession planning. During the year the Committee considered
the size, composition, skills, experience and independence of
the Board having regard to the requirements of the business.
The process for new Board appointments includes an initial
search, preliminary interviews and discussions. Following this
process, recommendations are then made by the Committee to
the Board on merit against objective criteria. Where necessary
external recruitment consultants are used to assist the process.
Investor relations
The Company engages where possible in regular dialogue with
its major Shareholders through presentations and meetings after
the announcement of the Group’s full year and interim results.
Private and institutional shareholders are given an opportunity to
communicate directly with the Board at the Annual General
Meeting. Shareholders’ queries received via the Company
Secretary’s email address at cosec@parity.net or by telephone
to the Group’s head office are responded to in person by the
Company Secretary or by another appropriate employee.
All members of the Board usually attend the Annual General
Meeting. The chairmen of the Audit, Remuneration and
Nomination Committees will normally be available to answer
Shareholders’ questions at that meeting. Notice of the Meeting
is posted to Shareholders with the report and accounts no fewer
than 21 clear days prior to the date of the Annual General
Meeting. The information sent to Shareholders includes a
summary of the business to be covered at the Annual General
Meeting, where a separate resolution is proposed for each
substantive matter. The Group’s annual report and accounts,
interim report and other stock exchange announcements are
published on the Group’s website at www.parity.net.
Annual Report
The Annual Report is designed to present a fair, balanced and
understandable view of the Group’s activities and prospects.
The Operating & Financial Review provides an assessment of
the Group’s affairs and position. The Annual Report and Interim
Report are sent to all Shareholders on the Register.
Statement of Directors’ responsibilities in respect of the
Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report
and the Group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare group and
parent company financial statements for each financial year.
Under that law they are required to prepare the group financial
statements in accordance with IFRSs as adopted by the EU and
applicable law and have elected to prepare the parent company
financial statements on the same basis.
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 of the group and parent company and
of their profit or loss for that period. In preparing each of the
group and parent company financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and
prudent;
• state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
parent company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with
the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors’ Report that complies with
that law and those regulations.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on the Parity Group
website. Financial statements are published on the Company’s
website in accordance with AIM company requirements
governing the preparation and dissemination of financial
statements. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the on-going integrity of the
financial statements contained therein.
Internal control
The Board is ultimately responsible for the Group’s system of
internal control and for reviewing its effectiveness and is assisted
in this respect by the Audit Committee. Such a system is
designed to manage rather than eliminate the risk of failure to
achieve business objectives and can only provide reasonable
and not absolute assurance against material misstatement or
loss. The Group’s system of internal control, which materially
complies with the Financial Reporting Council’s Risk
Management, Internal Control and Related Financial and
Business Reporting September 2014 guidance has been in
place throughout the year and up to the date of this report. The
Directors confirm that they have reviewed the effectiveness of
the Group’s system of internal controls during the year.
The Group did not consider it necessary to have a separate
internal audit function, but will continue to keep the need under
review.
Risk management
The Group is exposed through its operations to the following
financial risks:
• Interest rate risk;
• Foreign currency risk;
• Liquidity risk; and
• Credit risk
The policies for managing these risks are set by the Board
following recommendations from the Group Finance Director.
Certain risks are managed centrally, while others are managed
locally following guidelines communicated from the centre. The
policies for each of the above risks, and the nature and extent of
those risks, are described in detail in note 22 to the financial
statements. Other risks and uncertainties are discussed in the
Financial Review on page 7.
Each of the persons who is a Director as at the date of approval
of this annual report confirms that:
• so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
• the Director has taken all the steps that he ought to have
taken as a Director in order to make himself aware of any
relevant audit information and to establish that the
Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies Act
2006.
Suzanne Chase
Company Secretary
16 March 2016
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Remuneration Report
Remuneration committee
The remuneration committee comprises Lord Freeman as
Chairman, and Neal Ransome. David Courtley was a member
in the year until 13 August 2015. Directors are excluded from
discussions about their personal remuneration.
The committee is responsible for reviewing the Group’s
remuneration policy, the emoluments of the Executive Directors
and other senior management and the Group’s pension
arrangements and for making recommendations thereon to the
Board. The committee also makes recommendations to the
Board in respect of awards of options under the Senior
Executive Share Option Plan, Executive Share Option and
Sharesave Schemes and in respect of employees who should
be invited to participate in the Co-investment Scheme. It also
reviews the terms of service contracts with senior employees
and Executive Directors and any compensation arrangements
resulting from the termination by the Company of such
contracts.
The committee has access to external advisors to assist it with
ensuring that salary and benefit packages are competitive and
appropriate. In addition, committee members keep themselves
fully informed of all relevant developments and best practice by
reading the circulars on remuneration and related matters that
the Company receives from its advisers and, if appropriate, by
attending seminars. Pension advice is provided by Cartwright
Group Limited. Advice on share options and Co-investment
Plans is provided by Pinsent Masons, who also provide other
legal services to the Group.
The Board determines the remuneration of all Non-executive
Directors within the limits set out in the Company’s Articles of
Association. Non-executive Directors are not involved in any
decisions about their own remuneration. Details of Directors’
remuneration for the year ended 31 December 2015 are set out
in the table on page 20.
Remuneration policy
Parity aims to recruit, motivate and retain high calibre
executives capable of achieving the objectives of the Group and
to encourage and reward appropriately superior performance in
a manner which enhances shareholder value. Accordingly, the
Group operates a remuneration policy which ensures that there
is a clear link to business strategy and a close alignment with
shareholder interests and current best practice, and aims to
ensure that senior executives are rewarded fairly for their
respective individual contributions to the Group’s performance.
The four key elements of the remuneration package of senior
executives, including Executive Directors, in the Group in 2015
were basic annual salary and benefits in kind; performance
bonus payments; long term incentives including share options;
and pension arrangements.
Salaries and benefits are reviewed annually. In order to assess
the competitiveness of the pay and benefits packages offered
by the Group, comparisons are made to those offered by
similar companies. These are chosen with regard to the size of
the company (turnover, profits and employee numbers); the
diversity and complexity of their businesses; the geographical
spread of their businesses; and their growth, expansion and
change profile.
Performance bonus
The terms of the incentive bonus for Executive Directors are
agreed annually. For 2015 no target was set and no
18
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
performance bonuses were earned by, or paid to, Executive
Directors in 2015.
Long-term incentive arrangements
The long-term incentive arrangements operated by the
Company for Executive Directors comprise Share Option
Schemes including a Co-investment Scheme.
Share option schemes
During 2015 the Group operated three types of share option
scheme: an Executive Share Option Plan, a Savings Related
Share Option Scheme (Sharesave Scheme), and a Senior
Executive Share Option Plan.
Executive share option plans
The Group operates both an HMRC Approved Share Option
Plan and an Unapproved Share Option Plan for options
awarded to UK employees in excess of the HMRC limit of
£30,000. Share options are granted to Executive Directors and
other senior employees over a period of time and according to
performance.
The rules of the Executive Share Option Plans allow for annual
grants to be awarded equivalent to a value of up to one times
salary or up to two times salary in exceptional circumstances. A
limit of 15% of the issued share capital of the Company in a ten
year period, on a rolling basis, is applicable to the headroom
available to award options over the life of the Schemes. Rules
of the current Plans expire in May 2019. The terms and
conditions of existing share options have not been varied in the
year.
Executive Share Options granted after 2004 are exercisable in
normal circumstances between three and ten years after the
date of grant. The exercise of the options is conditional upon
the share price either outperforming the average Total
Shareholder Return performance of a comparator group
comprising a basket of companies in the IT services sector, or
outperforming a target price.
The exercise of share options is satisfied either through shares
issued by the Company or through purchases in the market via
the Employee Benefit Trust. In the event that an employee
resigns, the options that they hold will lapse. Options are
granted at nil cost. The option exercise price is set at the
closing mid-market share price on date of grant without any
discount.
On 15 April 2009 150,000 share options were awarded under
this scheme to Alan Rommel. The exercise price of the options
is 9 pence, and the options are subject to a performance
condition based upon the Group’s share price outperforming
the average total shareholder return of a comparator group of IT
companies. The options vested after 3 years and the
performance condition was met. The options lapse in 10 years
from the grant date if not exercised.
On 19 May 2010 a further 150,000 share options were
awarded under this scheme to Alan Rommel. The exercise
price of the options is 8.75 pence, and the options are subject
to a performance condition based upon the Group’s share price
outperforming the average total shareholder return of a
comparator group of IT companies. The options vested after
3 years and the performance condition was met. The options
lapse in 10 years from the grant date if not exercised.
On 28 September 2010 a further 100,000 share options were
awarded under this scheme to Alan Rommel. The exercise
price of the options is 7.5 pence, and the options are subject to
a performance condition based upon the Group’s share price
outperforming the average total shareholder return of a
comparator group of IT companies. The options vested after
3 years and the performance condition was met. The options
lapse in 10 years from the grant date if not exercised.
On 8 March 2013 a further 160,000 share options were
awarded under this scheme to Alan Rommel. The exercise
price of the options is 26.5 pence, and the options are subject
to a performance condition being that the share price must be
greater than or equal to 33.125 pence for 5 consecutive days.
The options vested after 3 years and will lapse in 10 years from
the grant date if not exercised.
On 18 March 2014 a further 600,000 share options were
awarded under this scheme to Alan Rommel. The exercise
price of the options is 21.12 pence, and the options are subject
to a performance condition being that the share price must be
greater than or equal to 26.4 pence for 5 consecutive days. The
options will vest in 3 years and lapse in 10 years from the grant
date if not exercised.
On 27 November 2014 2,000,000 share options were awarded
under this scheme to Andy Law. The exercise price of the
options is 16.75 pence, and the options are subject to a
performance condition being that the share price must be
greater than or equal to 20.94 pence for 5 consecutive days.
The options will vest in 3 years and lapse in 10 years from the
grant date if not exercised. Mr Law stepped down from the
Board on 13 August 2015, and his options lapsed on his
termination date 1 March 2016.
Senior Executive Share Option Plan
The Senior Executive Share Option Plan was approved by
shareholders on 19 February 2009 and renewed at an EGM on
25 October 2010. The maximum number of shares over which
options may be granted under the Senior Executive Share
Option Plan is 10% of the company’s issued share capital.
Following his appointment as CEO, Paul Davies was granted
2,851,633 options under the Senior Executive Share Option
Plan in October 2010. The exercise price is 10 pence per share
and there are no performance conditions. The options had all
vested by the balance sheet date. Mr Davies resigned from the
Board on 4 November 2015, and surrendered his options under
this scheme on the date of his resignation.
There are no other live options under the Senior Executive
Share Option Plan.
Sharesave schemes
All UK employees, including the Executive Directors, are eligible
to participate in the Group’s savings related option scheme
(Sharesave Scheme) which enables them to subscribe for
ordinary shares in the Company. Options granted under the
Sharesave Scheme do not have performance related conditions
attached to them.
There were no grants made under the Sharesave scheme in
2015.
Co-investment scheme
The Co-investment Scheme was approved by shareholders in
2004. Members are invited to join by the Board, having regard
to the recommendations of the remuneration committee. At
present the scheme is open to the Chief Executive Officer,
Group Finance Director and the Managing Directors of the
business units and one other senior executive. Under the rules
of the scheme, members are entitled to invest up to 50% of the
bonus that they earn under the Annual Performance Bonus
Scheme in Parity shares. The shares are held on behalf of the
employee and, providing the employee remains in Parity’s
employment, any bonuses invested will be matched in number
by the Company on a sliding scale of up to 1.5 for 1 at the end
of a defined period of up to three years following the date of
purchase.
The award of matching shares is subject to the share price
outperforming the average Total Shareholder Return
performance of a comparator group comprising a basket of
companies in the IT services sector and the period during
which the employee has to hold shares before they are
matched by the Company increases from one year to three
years. Depending on the Group’s performance over those three
years, the shares purchased by the employee will be matched
on a sliding scale up to a maximum of 1.5-to-1 for outstanding
performance.
None of the Directors have awards outstanding under the
Co-investment Scheme.
Share price
The Parity Group plc mid-market share price on 31 December
2015 was 11.5 pence. During the period 1 January to
31 December 2015 shares traded at market prices between
7.37 pence and 16.12 pence.
Directors’ pension information
Alan Rommel and Mike Aspinall are entitled to a contributory
company pension contribution of 5% of basic salary. Up until
30 June 2014, Paul Davies was entitled to a non-contributory
company pension contribution of 11% of basic salary. As from
1 July 2014, Paul Davies has received an amount equal to 11%
of his basic salary as an additional payment which is paid as
part of his monthly salary as a director, up to the date he
stepped down from the board. Alastair Woolley was entitled to
a contributory company pension contribution of 5% of basic
salary up to his resignation. Andy Law was entitled to a
contributory company pension contribution of 2% of basic
salary up to his resignation.
Non-executive Directors’ remuneration
The Board determines the remuneration of the Non-executive
Directors with the benefit of independent advice when required.
The fees are set at a level which will attract individuals with the
necessary experience and ability to make a significant
contribution to the Group and are benchmarked against those
fees paid by other UK listed companies.
The Non-executive Directors do not receive bonuses or pension
contributions and are not eligible for grants under any of the
Group’s share incentive schemes. They are entitled to be
reimbursed for reasonable expenses incurred by them in
carrying out their duties as Directors of the Company.
Service contracts and letters of appointment
The Group’s policy is that no Director has a service contract
with a notice period of greater than one year or has provision
for pre-determined compensation on termination which
exceeds one year’s salary, bonus and benefits in kind. Non-
executive Directors have letters of appointment which set out
the terms of their appointments. All Board appointments are
subject to the Company’s articles of association.
19
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Remuneration Report continued
Contractual arrangements for current Directors are summarised below:
Director
Lord Freeman1
Alan Rommel
Mike Aspinall
Neal Ransome1
Contract date
1 July 2007
13 August 2015
14 September 2015
26 September 2013
Notice period
Contractual termination payment
n/a
12 months
6 months
n/a
n/a
12 months rolling
6 months rolling
n/a
1 The appointment of Non-executive Directors is terminable at the will of the parties.
Other non-executive posts
Subject to the approval of the Board, the Executive Directors may hold external non-executive appointments. The Group believes
that such appointments provide a valuable opportunity in terms of personal and professional development. Fees derived from such
appointments may be retained by the Executive Director concerned.
Directors’ remuneration
The remuneration of the Directors who served during the year is set out below:
Salary/
fees
2015
£’000
Benefits
2015
£’000
Compensation for
loss of office
2015
£’000
Total emoluments
2015
£’000
Company pension
contributions12
2015
£’000
Share Based
Payment
2015
£’000
Executive Directors
A Rommel1
M Aspinall2
P Swinstead3,7
P Davies4,7
A Woolley5
A Law6,7
Non-executive Directors
Lord Freeman
N Ransome
D Courtley8
Total emoluments
56
41
228
114
65
125
38
40
25
732
5
4
–
16
5
3
–
–
–
33
–
–
–
–
43
–
–
–
–
43
61
45
228
130
113
128
38
40
25
808
3
2
–
–
3
3
–
–
–
11
10
–
–
–
(38)
46
–
–
–
18
20
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Directors’ remuneration continued
Salary/
fees
2014
£’000
280
183
155
17
40
40
17
40
772
Benefits
2014
£’000
Compensation
for loss of office
2014
£’000
Total emoluments
2014
£’000
Company pension
contributions12
2014
£’000
Share Based
Payment
2014
£’000
–
18
10
–
–
–
–
–
28
–
–
–
–
–
–
–
–
–
280
201
165
17
40
40
17
40
800
–
12
8
–
–
–
–
–
20
–
–
31
4
–
–
–
–
35
Executive Directors
P Swinstead
P Davies9
A Woolley
A Law10
Non-executive Directors
Lord Freeman
D Courtley
P Luff11
N Ransome
Total emoluments
Notes
1 A Rommel was appointed on 13 August 2015
2 M Aspinall was appointed on 14 September 2015
3 P Swinstead resigned as a Board director on 4 November 2015
4 P Davies resigned as a Board director on 4 November 2015
5 A Woolley resigned on 27 May 2015
6 A Law resigned as a Board director on 13 August 2015
7 Following their respective resignations from the Board, P Swinstead, P Davies and A Law are serving their notice periods on gardening leave.
8 D Courtley resigned on 13 August 2015
9 P Davies stepped down as Chief Executive Officer with effect from 1 July 2014, to become Chairman of Parity Professionals division, thereby continuing as a Board
director. A revised Service Agreement was entered into on that date.
10 A Law was appointed 27 November 2014
11 P Luff did not stand for election on 29 May 2014.
12 Company pension contributions disclosed in the table above represent the contractual pension entitlements due to the Directors of the company.
Executive Directors’ share options
Paul Davies
Senior Executive share
option plan 2010
Alan Rommel
Executive share option plan
2009
2010
2010
2012
2013
2014
As at
1 January
2015
Lapsed/
Surrendered
in the
year
2,851,633
(2,851,633)
150,000
150,000
100,000
40,000
160,000
600,000
–
–
–
(40,000)
–
–
Sub-total
1,200,000
(40,000)
Exercised
in the
year
Awarded
in the
year
As at
31 December
2015
Exercise
period
Exercise
price
per share
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2011-2017
£0.1000
150,000
2012-2019
150,000
2013-2020
100,000
2013-2020
–
2015-2022
160,000
2016-2023
600,000
2017-2024
1,160,000
£0.0900
£0.0875
£0.0750
£0.2625
£0.2650
£0.2112
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Remuneration Report continued
Executive Directors’ share options continued
As at
1 January
2015
Lapsed/
Surrendered
in the
year
Exercised
in the
year
Awarded
in the
year
As at
31 December
2015
Exercise
period
Exercise
price
per share
Alastair Woolley
Executive share option plan
2011
2012
2013
2014
Sub-total
Andy Law
300,000
(300,000)
60,000
300,000
340,000
(60,000)
(300,000)
(340,000)
1,000,000
(1,000,000)
Executive share option plan
2014
Total
2,000,000
–
7,051,633
(3,891,633)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2014-2021
2015-2022
2016-2023
2017-2024
£0.2800
£0.2625
£0.2625
£0.2112
–
–
–
–
–
2,000,000
2017-2024
£0.1675
3,160,000
Directors’ interests in shares
The beneficial interests of the Directors who served during the year and their families in the ordinary share capital of the Company
are shown below:
Philip Swinstead1
Lord Freeman
Paul Davies
Alastair Woolley
David Courtley
Andy Law
Alan Rommel
Mike Aspinall
Neal Ransome
At 31 December 2014
(or date of appointment
if later)
% issued share capital
(or date of resignation) % issued share capital
Shareholding as at
31 December 2015
13,186,470
6,250
1,275,556
56
6,521,739
–
3,128
–
33,000
12.96
13,295,215
0.01
1.26
–
6.41
–
–
–
0.03
6,250
1,275,556
56
6,521,739
–
3,128
–
33,000
13.07
0.01
1.25
–
6.40
–
–
–
0.03
1 Following his resignation on 4 November 2015, Philip Swinstead’s total interest in the Group had increased to 14,958,215 Ordinary Shares at the balance sheet date.
For and on behalf of the Board
Lord Freeman
Chairman of the remuneration committee
16 March 2016
22
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Independent Auditor’s Report to the Members of Parity Group Plc
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion the information given in the Strategic Report and
the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following where the
Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations we
require for our audit.
Andrew Turner (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
E14 5GL
London
United Kingdom
16 March 2016
We have audited the financial statements of Parity Group Plc for
the year ended 31 December 2015 set out on pages 24 to 59.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU and, as
regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company and the company’s members, as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on page 17, the directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility is
to audit, and express an opinion on, the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for
Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at www.
frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at
31 December 2015 and of the group’s loss for the year then
ended;
• the group financial statements have been properly prepared
in accordance with IFRSs as adopted by the EU;
• the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU
and as applied in accordance with the provisions of the
Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
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23
Consolidated Income Statement
for the year ended 31 December 2015
Before non-
recurring items
2015
£’000
Notes
Non-recurring
items
2015
(note 5)
£’000
Total
2015
£’000
Before non-
recurring items
2014
£’000
Non-recurring
items
2014
(note 5)
£’000
2
3
3
14
3
7
7
11
84,842
(7,800)
(719)
–
(75,614)
(84,133)
709
506
(1,072)
143
(258)
–
84,842
(1,404)
(341)
(1,994)
(313)
(4,052)
(4,052)
–
–
(4,052)
252
(9,204)
(1,060)
(1,994)
(75,927)
(88,185)
(3,343)
506
(1,072)
(3,909)
(6)
(115)
(3,800)
(3,915)
92,264
(9,064)
(477)
–
(81,838)
(91,379)
885
694
(1,173)
406
(184)
222
–
(405)
(129)
–
(280)
(814)
(814)
–
–
(814)
159
(655)
Total
2014
£’000
92,264
(9,469)
(606)
–
(82,118)
(92,193)
71
694
(1,173)
(408)
(25)
(433)
8
(4)
–
(4)
(5)
–
(5)
(119)
(3,800)
(3,919)
217
(655)
(438)
12
(3.85p)
(0.43p)
Continuing operations
Revenue
Employee benefit costs
Depreciation & amortisation
Impairment loss
All other operating expenses
Total operating expenses
Operating profit/(loss)
Finance income
Finance costs
Profit/(loss) before tax
Tax (charge)/credit
(Loss)/profit for the year from
continuing operations
Loss for the year from
discontinued operations
(Loss)/profit for the year
attributable to owners of
the parent
Basic and diluted loss
per share
The notes on pages 29 to 59 form part of the financial statements.
24
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Statements of Comprehensive Income
for the year ended 31 December 2015
Loss for the year
Other comprehensive income:
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Items that will never be reclassified to profit or loss
Remeasurement of defined benefit pension scheme
Other comprehensive income for the year net of tax
Total comprehensive income for the year attributable to equity holders of
the parent
The notes on pages 29 to 59 form part of the financial statements.
Consolidated
Notes
2015
£’000
(3,919)
24
42
42
848
848
890
2014
£’000
(438)
67
67
(649)
(649)
(582)
(3,029)
(1,020)
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Statements of Changes in Equity
for the year ended 31 December 2015
Consolidated
At 1 January 2015
Loss for the year
Exchange differences on translation of
foreign operations
Remeasurement of defined benefit
pension scheme
Issue of new ordinary shares
Share options – value of employee services
Share
capital
£’000
2,035
Deferred
shares
£’000
14,319
Share
premium
reserve
£’000
33,189
Other
reserves
£’000
44,160
–
–
–
2
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
–
Retained
earnings
£’000
(84,812)
(3,919)
42
848
–
152
At 31 December 2015
2,037
14,319
33,195
44,160
(87,689)
Consolidated
At 1 January 2014
Loss for the year
Exchange differences on translation of
foreign operations
Remeasurement of defined benefit
pension scheme
Issue of new ordinary shares
Share options – value of employee services
Share
capital
£’000
2,033
Deferred
shares
£’000
14,319
–
–
–
2
–
–
–
–
–
–
Share
premium
reserve
£’000
33,183
–
–
–
6
–
Other
reserves
£’000
Retained
earnings
£’000
44,160
(84,034)
–
–
–
–
–
(438)
67
(649)
–
242
Total
£’000
8,891
(3,919)
42
848
8
152
6,022
Total
£’000
9,661
(438)
67
(649)
8
242
At 31 December 2014
2,035
14,319
33,189
44,160
(84,812)
8,891
Company
At 1 January 2015
Loss for the year
Issue of new ordinary shares
Share options – value of employee services
Share
capital
£’000
2,035
–
2
–
Deferred
shares
£’000
14,319
–
–
–
Share
premium
reserve
£’000
33,189
–
6
–
Other
reserves
£’000
22,729
–
–
–
Retained
earnings
£’000
(51,657)
(1,558)
–
38
Total
£’000
20,615
(1,558)
8
38
At 31 December 2015
2,037
14,319
33,195
22,729
(53,177)
19,103
Company
At 1 January 2014
Loss for the year
Issue of new ordinary shares
Share options – value of employee services
Share
capital
£’000
2,033
–
2
–
Deferred
shares
£’000
14,319
–
–
–
Share
premium
reserve
£’000
33,183
–
6
–
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
22,729
(51,214)
21,050
–
–
–
(491)
–
48
(491)
8
48
At 31 December 2014
2,035
14,319
33,189
22,729
(51,657)
20,615
The notes on pages 29 to 59 form part of the financial statements.
26
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Statements of Financial Position
As at 31 December 2015
Company number 3539413
Assets
Non-current assets
Intangible assets and goodwill
Property, plant and equipment
Trade and other receivables
Investment in subsidiaries
Deferred tax assets
Current assets
Stocks and work in progress
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Provisions
Non-current liabilities
Loans and borrowings
Trade and other payables
Provisions
Retirement benefit liability
Total liabilities
Net assets
Shareholders’ equity
Called up share capital
Share premium account
Other reserves
Retained earnings
Total shareholders’ equity
Notes
13,14
15
18
30
16
17
18
19
20
21
19
20
21
24
25
23
23
23
Consolidated
Company
2015
£’000
2014
£’000
2015
£’000
2014
£’000
7,113
180
–
–
507
7,800
61
15,619
2,648
18,328
26,128
9,307
602
–
–
536
–
2
113,332
20,527
–
–
2
103,460
20,527
–
10,445
133,861
123,989
27
15,524
2,974
18,525
28,970
–
3,350
18
3,368
–
3,407
102
3,509
137,229
127,498
(10,016)
(8,574)
–
(9,559)
(8,314)
(82)
–
(9,561)
–
(18,590)
(17,955)
(9,561)
–
(7,518)
(69)
(7,587)
(11)
–
(14)
(1,491)
(1,516)
(23)
–
–
(2,101)
(2,124)
–
–
(108,565)
(99,296)
–
–
–
–
(108,565)
(99,296)
(20,106)
(20,079)
(118,126)
(106,883)
6,022
8,891
19,103
20,615
16,356
33,195
44,160
16,354
33,189
44,160
(87,689)
(84,812)
6,022
8,891
16,356
33,195
22,729
(53,177)
19,103
16,354
33,189
22,729
(51,657)
20,615
Approved by the Directors and authorised for issue on 16 March 2016.
The notes on pages 29 to 59 form part of the financial statements.
Alan Rommel
Chief Executive Officer
Mike Aspinall
Finance Director
27
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Statements of Cash Flows
for the year ended 31 December 2015
Cash flows from operating activities
Loss for year
Adjustments for:
Finance income
Finance expense
Share-based payment expense
Income tax expense/(credit)
Amortisation of intangible assets
Depreciation of property, plant and equipment
Impairment of goodwill
Loss on disposal of intangible assets
Loss on disposal of property, plant and equipment
Gain on acquisition
Working Capital
Increase in stocks and work in progress
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in provisions
Payments to retirement benefit plan
Cash generated from operations
Income taxes received/(paid)
Net cash flows from operating activities
Investing activities
Acquisition of subsidiaries
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Issue of ordinary shares
Proceeds from/(repayment of) finance facility
Net movements on intercompany funding
Interest paid
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate movement on intercompany balances
Cash and cash equivalents at the end of the year
The notes on pages 29 to 59 form part of the financial statements.
28
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Consolidated
Company
Notes
2015
£’000
2014
£’000
2015
£’000
2014
£’000
(3,919)
(438)
(1,558)
(491)
7
7
10
11
13
15
14
13
5
9
24
9
13
15
25
7
(506)
1,072
152
6
546
173
1,994
3
341
–
(138)
(34)
(96)
522
(68)
(28)
158
23
181
(250)
(349)
(92)
(691)
8
476
–
(300)
184
(326)
2,974
–
2,648
(694)
1,173
242
25
216
261
–
–
129
(55)
859
(8)
838
(1,836)
(838)
(873)
(2,077)
1,568
38
(249)
(2,357)
1,337
48
(332)
–
1
–
–
–
–
–
1
–
–
–
–
(2,277)
(1,794)
–
(1,374)
1,536
(68)
–
–
(1,701)
2,427
(893)
–
(1,858)
(2,183)
(1,961)
(9)
–
–
(1,867)
(2,183)
(1,961)
(623)
(1,064)
(137)
(1,824)
8
(407)
–
(312)
(711)
(4,402)
7,376
–
2,974
–
–
(1)
(1)
8
–
2,391
(299)
2,100
(84)
102
–
18
–
–
(1)
(1)
5
8
–
2,320
(301)
2,027
65
37
–
102
Notes to the Accounts
1 Accounting policies
Basis of preparation
Parity Group plc (the “Company”) is a company incorporated and domiciled in the UK.
Both the parent company financial statements and the group financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”). On publishing
the parent company financial statements here together with the group financial statements, the Company is taking advantage of
the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes that form a
part of these approved financial statements.
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have
been consistently applied to all the years presented unless otherwise stated.
The financial statements have been prepared on a going concern basis. The Group’s business activities, together with the
factors likely to affect its future development, performance and position are set out in the Directors’ Report (Review of business
and future developments). The financial position of the Group, its cash flows, liquidity position and borrowing facilities are
described in the Financial Review on pages 7 to 9 and in note 22 to the financial statements. Note 22 also includes the Group’s
objectives for managing capital.
As outlined in note 22, the Group meets its day to day working capital requirements through an asset-based finance facility. The
facility contains certain financial covenants which have been met throughout the period. The current facility is subject to a
minimum period up to 31st December 2016, at which point the facility becomes evergreen rolling over on the same terms, with
six months’ notice from either party. The bank has not drawn to the attention of the Group any matters to suggest that this
facility will not be continued.
The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the
Group will be able to operate within the level of its current facility for the foreseeable future.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December
2015. Subsidiaries are entities controlled by the Group. Control exists when the Group has:
•
•
•
existing rights that give it the ability to direct the relevant activities that significantly affect the subsidiary’s returns; and
exposure, or rights, to variable returns from its involvement with the subsidiary; and
the ability to use its power over the subsidiary to affect the amount of the Group’s returns.
The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.
Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent
accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions
and dividends are eliminated in full.
In accordance with Section 408 of the Companies Act 2006, the Company has not presented its own Income Statement or
Statement of Comprehensive Income. The loss for the year dealt with in the accounts of the Company was £1,558,000 (2014:
£491,000).
Business Combinations
The acquisition of subsidiaries is accounted for using the purchase method. The related costs of acquisition other than those
associated with the issue of debt or equity securities, are recognised in the profit and loss as incurred. The acquiree’s identifiable
assets and liabilities and contingent liabilities that meet the conditions for recognition under IFRS3 (2008) “Business
combinations” are recognised at their fair value at the acquisition date.
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29
Notes to the Accounts continued
1 Accounting policies continued
Changes in accounting policies: new standards, interpretations and amendments effective in 2015 adopted by the
Group and published standards not yet effective
No new standards, amendments to published standards or interpretations of existing standards effective in 2015 had a material
impact on the Group’s 2015 financial statements. The following new standards and interpretations to existing standards have
been published that are mandatory for the Group’s future accounting, which the Group does not expect to have significant
impact on its accounting policies or disclosures:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
IFRS 9 ‘Financial Instruments’ (not yet effective)
IFRS10 ‘Consolidated financial statements (not yet effective)
IFRS 11 ‘Joint arrangements’ (effective 2 November 2015) – amendment
IFRS 12 ‘Disclosure of involvement with other entities’ (not yet effective)
IFRS 14 ‘ Regulatory Deferral Accounts’ (not yet effective)
IFRS 15 ‘Revenue from Contracts with customers’ (not yet effective)
IFRS 16 ‘Leases’ (not yet effective)
IAS 1 ‘Financial Statement Presentation’ (effective 8 December 2015)
IAS 12 ‘Income taxes’ (not yet effective)
IAS 16 ‘Property, Plant and equipment (effective 2 December 2015)
IAS 27 Separate Financial Statements’ (effective 18 December 2015)
IAS 28 ‘Investments in associates’ (not yet effective)
IAS 38 ‘Intangible assets’ (effective 2 December 2015)
Annual improvements to IFRS 2012-2014 Cycle (effective 15 December 2015)
In accordance with the transitional provisions of IFRS 10, the Group reassessed the control conclusion for its investees at
1 January 2014. No modifications of previous conclusions about control regarding the Group’s investees were required.
Measurement convention
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at
their fair value: derivative financial instruments and financial instruments classified as fair value through the profit or loss or as
available-for-sale. Non-current assets are stated at the lower of previous carrying amount and fair value less costs to sell.
Revenue recognition
The Group generates revenue principally through the provision of recruitment and technology services, and to a lesser extent,
through the resale of 3D equipment.
The Group recognises revenue when certain criteria are met: there is clear evidence that a contract exists, the amount of
revenue can be measured reliably, it is probable that future economic benefits will flow to the Group, the stage of completion can
be measured reliably where services are delivered, and the significant risks and rewards of ownership, including effective control,
are transferred to clients where equipment is sold. Revenue is measured at the fair value of the consideration received or
receivable, net of discounts, volume rebates and value added tax.
Revenue on contracts for the supply of professional services at pre-determined rates is recognised as and when the work is
performed, irrespective of the duration of the contract. Permanent placement staffing revenue is recognised when candidates
commence employment. Rebates may be applicable on a sliding scale where the candidate’s employment is terminated within 9
weeks. Rebate provisions are created based on the experience of claims.
The Group presents interim recruitment revenues, and the related direct costs of services, in accordance with IAS 18’s guidance
– Principal versus Agency Considerations. The Group acts as principal in all of its interim recruiting transactions in that it carries
the risks and rewards of ownership e.g. it has the obligation to pay the contractor, and it carries the risks of non-payment due to
insolvency or poor performance, and also the risk of pricing reductions. Accordingly, in respect of interim recruitment, the Group
reports gross revenues and gross direct costs.
Revenue is recognised on fixed price contracts while the contract is in progress, using the percentage of completion method,
having regard to the proportion of the total contract costs which have been incurred at the reporting date. Provision is made for
all foreseeable future losses.
Revenue from systems integration and consulting services under time and material arrangements is recognised as the services
are rendered. Revenue for equipment sales is recognised at the point of delivery, which is the point when the significant risks and
rewards of ownership of the equipment have passed to the buyer.
30
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
1 Accounting policies continued
Non-recurring items
Items which are both material and non-recurring are presented as non-recurring items within the relevant Income Statement
category. The separate reporting of non-recurring items helps provide a better indication of the Group’s underlying business
performance. Events which may give rise to the classification of items as non-recurring, if of a significantly material value, include
gains or losses on the disposal of a business, restructuring of a business, transaction costs, litigation and similar settlements,
asset impairments, onerous contracts, and gains on bargain purchases.
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
Financing income and expenses
Financing expenses comprise interest payable, finance charges on shares classified as liabilities and finance leases recognised
in profit or loss using the effective interest method, unwinding of the discount on the retirement benefit scheme liabilities, and net
foreign exchange losses that are recognised in the income statement (see foreign currency accounting policy). Financing income
comprises the expected return on the retirement benefit scheme assets, interest receivable on funds invested, dividend income,
and net foreign exchange gains.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend
income is recognised in the income statement on the date the entity’s right to receive payments is established. Foreign currency
gains and losses are reported on a net basis.
Dividends
Final dividends proposed by the Board of Directors and unpaid at the year end are not recognised in the financial statements
until they have been approved by the shareholders at the Annual General Meeting. Interim dividends, which do not require
shareholder approval, are recognised when paid.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
Foreign currencies
Company
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are
taken to the Income Statement.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated
at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.
Group
On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date.
Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at
actual rate are recognised in Other Comprehensive Income. On disposal of a foreign operation, the cumulative exchange
differences recognised in Other Comprehensive Income relating to that operation up to the date of disposal are transferred to the
consolidated Income Statement as part of the profit or loss on disposal.
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or
geographical area of operations or its subsidiary acquired exclusively with a view to resale, that has been disposed of, has been
abandoned or that meets the criteria to be classified as held for sale.
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31
Notes to the Accounts continued
1 Accounting policies continued
Discontinued operations are presented in the Income Statement (including in the comparative period) as a single line which
comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the re-
measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued operations.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision
Maker. The Chief Operating Decision Maker is the Group Board.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of acquisition of a business combination over the Group’s share of the fair value of
identifiable net assets of the business acquired.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-
generating units and is not amortised but is tested annually for impairment. In respect of equity accounted investees, the
carrying amount of goodwill is included in the carrying amount of the investment in the investee.
Gains and losses on disposal of a business include the carrying amount of goodwill relating to the business sold in determining
the gain or loss on disposal, except for goodwill arising on business combinations on or before 31 December 1997 which has
been deducted from Shareholders’ equity and remains indefinitely in Shareholders’ equity.
Software
The carrying amount of software is its cost less any accumulated amortisation and any provision for impairment. Software is
amortised on a straight line basis over its expected useful economic life of three to seven years.
Intellectual Property
Intellectual property represents the expenditure incurred on developing new, innovative products/services that are expected to
generate future economic benefits. The carrying amount of intellectual property is its cost less any accumulated amortisation
and any provision for impairment. Intellectual property is amortised on a straight line basis over two years, with amortisation
commencing from the date that the products/services are available for sale.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment.
Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual
value of each asset on a straight line basis over its expected useful economic life, as follows:
Leasehold improvements
Office equipment
The lesser of the asset life and the remaining length of the lease
Between 3 and 5 years
The carrying value of property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate
the carrying value may not be recoverable.
Impairment of non-financial assets (excluding deferred tax assets)
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, the
latter being the higher of the fair value less costs to sell associated with the CGU and its value in use. Value in use calculations
are performed using cash flow projections for the CGU to which the goodwill relates, discounted at a pre-tax rate which reflects
the asset specific risks and the time value of money.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce
the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the
unit (group of units) on a pro rata basis.
Goodwill is tested for impairment at each reporting date. The carrying value of other intangible assets and property, plant and
equipment is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups
of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is
allocated to cash-generating units, or (“CGU”). Subject to an operating segment ceiling test, for the purposes of goodwill
impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested
reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business
combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
32
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
1 Accounting policies continued
Financial assets
The Group’s financial assets fall into the categories discussed below, with the allocation depending to an extent on the purpose
for which the asset was acquired.
Unless otherwise indicated, the carrying amounts of the Group’s financial assets are a reasonable approximation of their fair
values. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any
impairment losses.
Loans and receivables: these assets are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables).
They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue, less
provision for impairment.
The effect of discounting on these financial instruments is not considered to be material.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the
counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the
terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a
separate allowance account with the loss being recognised within other operating expenses in the Income Statement.
On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the
associated provision.
Investments: investments in subsidiary undertakings are recorded at cost. The carrying values of investments are reviewed for
impairment if events or changes in circumstances indicate that the carrying value may not be recoverable.
Cash and cash equivalents: cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in
hand, short term deposits and other short-term liquid investments. In the Cash Flow Statement, cash and cash equivalents
comprise cash and cash equivalents as defined above, net of bank overdrafts.
Stocks and work in progress
Stocks are stated at the lower of cost and net realisable value. Cost comprises equipment for resale. Net realisable value
represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and
distribution.
Costs recoverable on contracts which are expected to benefit performance and be recoverable over the life of the contracts are
recognised in the Statement of Financial Position as work in progress and charged to the Income Statement over the life of the
contract so as to match costs with revenues.
Work in progress is stated at the lower of cost and net realisable amount and represents that element of start-up costs which, at
the reporting date, has not been charged to the Income Statement. Cost includes materials, direct labour and an attributable
portion of overheads based on normal levels of activity. Net realisable amount is based on estimated selling price, less further
costs expected to be incurred to completion and disposal including provision for contingencies and anticipated future losses.
Amounts recoverable on contracts and payments in advance
Amounts recoverable on contracts are stated at the net sales value of work done less amounts received as progress payments
on account. Where progress payments exceed the sales value of work done, they are included in payables as payments in
advance.
Financial liabilities
All of the Group’s financial liabilities are classified as financial liabilities carried at amortised cost. The Group does not use
derivative financial instruments or hedge account for any transactions.
Unless otherwise indicated, the carrying amounts of the Group’s financial liabilities are a reasonable approximation of their fair
values.
Financial liabilities include the following items:
•
•
•
Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
Finance leases which are initially measured at fair value and subsequently carried at amortised cost using the effective
interest method.
Bank borrowings, which are initially recognised at fair value net of any transaction costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the
liability carried in the consolidated Statement of Financial Position. Interest expense in this context includes initial transaction
costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
33
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Notes to the Accounts continued
1 Accounting policies continued
Operating Leases
Rentals paid under operating leases are charged to income on a straight line basis over the term of the lease. Lease incentives
received are recognised in the income statement as an integral part of the total lease expense.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific
to the liability.
From time to time the Group faces the potential of legal action in respect of employment or other contracts. In such situations,
where it is probable that a payment will be required to settle the action, provision is made for the Group’s best estimate of the
outcome.
Where leasehold properties are surplus to requirements, provisions are made for the best estimates of the unavoidable net future
costs.
Provisions for dilapidation charges that will crystallise at the end of the period of occupancy are provided for in full on non-
serviced properties.
Pensions
The Group operates a number of retirement benefit schemes. With the exception of the ‘Parity Retirement Benefit Plan’, all of the
schemes are defined contribution plans and the assets are held in separate, independently administered funds. The Group’s
contributions to defined contribution plans are charged to the Income Statement in the period to which the services are rendered
by the employees, and the Group has no further obligation to pay further amounts.
The ‘Parity Retirement Benefit Plan’ is a defined benefit pension fund with assets held separately from the Group. This fund has
been closed to new members since 1995 and with effect from 1 January 2005 was also closed to future service accrual.
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in
respect of defined benefit pension plans is calculated by estimating the amount of future benefit that employees have earned in
return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value
of any plan assets at bid price, and any unrecognised past service costs are deducted. The liability discount rate is the yield at
the balance sheet date on AA credit rated bonds denominated in the currency of, and having maturity dates approximating to,
the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method.
When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of benefits available in
the form of any future refunds from the plan, reductions in future contributions to the plan or on settlement of the plan and takes
into account the adverse effect of any minimum funding requirements.
Share capital
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they
meet the following two conditions:
(a)
(b)
they include no contractual obligations upon the company (or group as the case may be) to deliver cash or other financial
assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially
unfavourable to the company (or group); and
where the instrument will or may be settled in the company’s own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the company’s own equity instruments or is a derivative that will be settled by the
company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the company’s own shares, the amounts presented in these financial statements for called up
share capital and share premium account exclude amounts in relation to those shares.
For the purposes of the disclosures given in note 22, the Group considers its capital to comprise its cash and cash equivalents,
its asset-based bank borrowings, and its equity attributable to equity holders, comprising issued capital, reserves and retained
earnings, as disclosed in the statement of changes in equity.
Financial guarantee contracts
Where Group companies enter into financial guarantee contracts and guarantee the indebtedness of other companies within the
Group, the company considers these to be insurance arrangements and accounts for them as such. In this respect, the
company treats the guarantee contract as a contingent liability until such time that it becomes probable that any Group
company will be required to make a payment under the guarantee.
34
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
1 Accounting policies continued
Employee Share Ownership Plan (ESOP)
As the Company is deemed to have control of its ESOP trust, it is treated as an agent and consolidated for the purposes of the
consolidated financial statements. The ESOP’s assets (other than investments in the Company’s shares), liabilities, income and
expenses are included on a line-by-line basis in the consolidated financial statements. The ESOP’s investment in the Company’s
shares is deducted from shareholders’ equity in the Consolidated Statement of Financial Position as if they were treasury shares.
Share-based payment transactions
Share-based payment arrangements in which the Group and Company receives goods or services as consideration for its own
equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity
instruments are obtained by the Group and Company.
The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The fair
value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon
which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for
which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately
recognised as an expense is based on the number of awards that do meet the related service and non-market performance
conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the
share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and
actual outcomes.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the Income Statement over the remaining vesting period.
Significant accounting estimates and judgements
The preparation of financial statements under IFRS requires the Group to make estimates and assumptions regarding the future.
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. Actual results may differ from these
estimates. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount
of assets and liabilities within the next financial year are discussed below.
Retirement benefit liability
The costs, assets and liabilities of the defined benefit scheme operated by the Group are determined using methods relying on
actuarial estimates and assumptions. Details of the key assumptions are set out in note 24. The Group takes advice from
independent actuaries relating to the appropriateness of the assumptions. Changes in the assumptions used may have a
significant effect on the Income Statement and the Statement of Financial Position.
Recoverability of deferred tax assets
The deferred tax assets are reviewed for recoverability and recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. This is determined based on management estimates
and assumptions as to the future profitability of the related business units. The forecasts for the business used in this review
were the same as those used in the review of impairment of goodwill (see note 14). The deferred tax asset would not require
writing down if the forecast future profitability of Parity Professionals Limited was 10% lower.
Intangible assets – intellectual property
The Group capitalises costs incurred in developing its range of technologies and services where management believe that future
economic benefits will flow from the Group’s intellectual property. The development of new technologies is most prevalent within
Inition, the Group’s innovative 3D offering. In assessing the carrying value of the intellectual property, management estimate
future related revenues, by analysing its order book and qualified sales pipeline. Management are also required to make a
judgement on the useful life of the Group’s intellectual property, which they base on the useful lives of previously developed
technologies and services, and the current pace of change within the industry.
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35
Notes to the Accounts continued
1 Accounting policies continued
Significant accounting estimates and judgements continued
Impairment of goodwill
The Group is required to test whether goodwill has suffered any impairment. The recoverable amounts of cash generating units
have been determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows
expected to arise from the continuing operation of the cash generating unit and the choice of a suitable discount rate in order to
calculate the present value (see note 14). If forecast future profitability were 10% lower, a further impairment loss of £116,000
would be recognised in respect of the Inition CGU only.
Investments in subsidiaries
The Company reviews its investment in subsidiaries to test whether any impairment has been suffered. The recoverable amounts
are determined using discounted future cash flows. If forecast future cash generation were 10% lower the investment would be
impaired by £116,000.
Intercompany receivables
The Company reviews receivables due from subsidiary undertakings to test whether they are recoverable. Provision is made for
where there is uncertainty as to full recovery.
2 Segmental information
Factors that management used to identify the Group’s reporting segments
In accordance with IFRS 8 ‘Operating Segments’ the Group’s management structure, and the reporting of financial information to
the Chief Operating Decision Maker (the Group Board), have been used as the basis to define reporting segments. Whilst the
Group has three defined cash generating units (see note 14), the Group Board reviews financial information at aggregated,
divisional level, where offerings are similar in nature. The components of each segment are described below.
The internal financial information prepared for the Group Board includes contribution at a segmental level, and the Group Board
allocates resources on the basis of this information.
Adjusted EBITDA as defined in note 4, profit before tax, and assets and liabilities are internally reported at a Group level.
Description of the types of services from which each reportable segment derives its revenues
The Group has two segments:
•
•
Parity Professionals – this segment provides IT recruitment services across all UK markets. It also provides graduate
selection, training, placement and career development services. Parity Professionals provides 92% (2014: 92 %) of the
continuing Group’s revenues.
Parity Consultancy Services – this segment delivers business intelligence solutions designed around client problems and
unique 3D creative technology. Parity Consultancy Services provides 8% (2014: 8 %) of the continuing Group’s revenues.
Group costs include directors’ salaries and costs relating to Group activities and are not allocated to reporting segments for
internal reporting purposes.
Measurement of operating segment contribution
The accounting policies of the operating segments are the same as those described in the summary of significant accounting
policies.
The Group evaluates performance on the basis of contribution from operations before tax not including non-recurring items, such
as restructuring costs.
Inter-segment sales are priced on the same basis as sales to external customers, with a discount applied to encourage the use of
group resources at a rate acceptable to the tax authorities.
36
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
2 Segmental information continued
Revenue from external customers
Attributable costs
Segmental contribution
Group costs
Adjusted EBITDA
Depreciation and amortisation
Share based payment
Impairment losses
Non-recurring items
Finance income
Finance costs
Parity
Professionals
2015
£’000
78,190
(75,914)
2,276
Parity
Consultancy
Services
2015
£’000
Before non-
recurring
items
£’000
Non-
recurring
items
£’000
6,652
84,842
(5,851)
(81,765)
801
3,077
(1,497)
1,580
(719)
(152)
–
–
–
–
–
–
–
–
–
(1,994)
(2,058)
506
(1,072)
–
–
Profit/(loss) before tax (continuing activities)
–
–
143
(4,052)
Parity
Professionals
2014
£’000
84,466
(81,975)
2,491
Parity
Consultancy
Services
2014
£’000
7,798
(7,115)
683
Revenue from external customers
Attributable costs
Segmental contribution
Group costs
Adjusted EBITDA
Depreciation and amortisation
Share based payment
Non-recurring items
Finance income
Finance costs
Profit/(loss) before tax (continuing activities)
–
–
Before non-
recurring
items
£’000
Non-
recurring
items
£’000
92,264
(89,090)
3,174
(1,570)
1,604
(477)
(242)
–
694
(1,173)
406
–
–
–
–
–
–
–
(814)
–
–
(814)
Total
2015
£’000
84,842
(81,765)
3,077
(1,497)
1,580
(719)
(152)
(1,994)
(2,058)
506
(1,072)
(3,909)
Total
2014
£’000
92,264
(89,090)
3,174
(1,570)
1,604
(477)
(242)
(814)
694
(1,173)
(408)
The continuing Group operates exclusively in the UK. All revenues are generated and all segment assets are located in the UK.
57% (2014: 64 %) or £44.8m (2014: £54.1m) of the Parity Professionals revenue was generated in the Public Sector. 21%
(2014: 19%) or £1.4m (2014: £1.5m) of the Parity Consultancy Services revenue was generated in the Public Sector.
The largest single customer in Parity Professionals contributed revenue of £11.8m or 15% and was in the private sector (2014:
£14.3m or 16% and in the private sector). The largest single customer in Parity Consultancy Services contributed revenue of
£2.4m or 35% and was in the private sector (2014: £3.2m or 41% and in the private sector).
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Notes to the Accounts continued
3 Operating costs
Continuing operations
Employee benefit costs
– wages and salaries
– social security costs
– other pension costs
Depreciation and amortisation
Amortisation of intangible assets – software
Depreciation of leased assets
Depreciation of tangible assets
Write down of tangible fixed assets
All other operating expenses
Contractor costs
Sub-contracted direct costs
Operating lease rentals – plant and machinery
– land and buildings
Sub-let income – land and buildings
Other occupancy costs
IT costs
Net exchange loss
Equity settled share based payment charge
Impairment Losses
Other operating costs
Total operating expenses
Disclosures relating to the remuneration of Directors are set out on page 20.
During the year the Group obtained the following services from the Group’s auditor, KPMG LLP:
Audit of the Parent Company and consolidated financial statements
Other services:
Audit of the Company’s subsidiaries
Interim review
Tax compliance
Other
Consolidated
2015
£’000
2014
£‘000
8,228
8,252
762
214
939
278
9,204
9,469
546
27
146
341
1,060
72,073
977
37
1,131
(150)
263
296
12
152
1,994
1,136
77,921
88,185
216
29
232
–
477
78,377
1,065
54
1,366
(339)
326
367
6
242
–
783
82,247
92,193
Consolidated
2015
£’000
11
65
6
27
33
131
142
2014
£‘000
11
69
6
23
56
154
165
All other services have been performed in the United Kingdom.
Other refers to services provided in relation to aborted acquisition activity, and advice relating to the Retirement Benefit Plan.
38
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
4 Reconciliation of operating(loss)/ profit to adjusted EBITDA
Operating (loss)/profit from continuing operations
Non-recurring items
Share-based payment charges
Depreciation and amortisation
Adjusted EBITDA
Note
5
3
3
2015
£’000
(3,343)
4,052
152
719
2014
£’000
71
814
242
477
1,580
1,604
The directors use EBITDA before non-recurring items and share-based payment charges (‘Adjusted EBITDA’) as a key
performance measure of the business.
5 Non-recurring items
Continuing Operations
Transaction costs
Impairment of goodwill
Gain on acquisition
Restructuring
– Employee benefit costs
– Write down of tangible fixed assets
– Other operating costs
Property provisions
Note
14
9
2015
£’000
125
1,994
–
1,404
341
126
62
4,052
2014
£’000
166
–
(55)
405
129
–
169
814
The continuing operations non-recurring charge for 2015 includes an impairment charge, transaction costs, restructuring costs
and a charge relating to surplus property. The goodwill impairment charge of £1,994,000 relates solely to the Group’s investment
in Inition Limited (see note 14). Transaction costs refer to the professional services incurred in the Group’s acquisition programme.
This initiative was discontinued during the year. £737,200 of the restructuring costs relate to the closure of the Golden Square
business, including a £341,000 write down of tangible fixed assets. A further £659,200 relates to compensation payments made
in respect of redundancies following the Group’s decision to discontinue its digital acquisition initiative, and £454,600 relates to
compensation payments in relation to Board changes.
The continuing operations non-recurring charge for 2014 included transaction costs, restructuring costs and a charge relating to
surplus property. Transaction costs referred to professional services incurred in the Group’s acquisition programme. £277,478 of
the restructuring costs related to compensation payments incurred in reorganising the Golden Square business following its
acquisition in May 2014. A further £127,827 related to compensation payments made in realigning the previously shared back
office functions, to the intended future needs of the Group’s two segments. The charge for surplus properties included a charge of
£168,935 relating to excess property costs acquired with the Golden Square business, £76,000 relating to excess space at the
Wimbledon office, and releases of £108,000 relating mainly to a lower dilapidations charge for the Wimbledon office than
previously provided for. The other operating costs of £129,000 related to the loss on disposal of plant and equipment following
the restructuring of the Golden Square business.
6 Average staff numbers
Continuing operations
Professionals – United Kingdom1
Consultancy Services – United Kingdom, including corporate office2
1 Includes 19 (2014: 24) employees providing shared services across the Group.
2 Includes 8 (2014: 8) employees of the Company.
At 31 December 2015, the Group had 135 continuing employees (2014: 159).
2015
Number
2014
Number
92
57
149
93
72
165
39
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Notes to the Accounts continued
7 Finance income and costs
Finance income
Finance income in respect of post-retirement benefits
Finance costs
Interest expense on financial liabilities
Finance costs in respect of post-retirement benefits
2015
£’000
2014
£’000
506
506
300
772
694
694
312
861
1,072
1,173
The interest expense on financial liabilities represents interest paid on the Group’s asset-based financing facilities. A 1% increase
in the base rate would increase annual borrowing costs by approximately £100,000.
8 Discontinued operations
The results of discontinued operations include the results of other statutory entities still owned by the Group which sold their
businesses in 2005 and 2006. These entities are not held for sale.
The post-tax result of discontinued operations was determined as follows:
Expenses other than finance costs
Pre-tax loss
Taxation
Loss for the year
2015
£’000
2014
£’000
(4)
(4)
–
(4)
(5)
(5)
–
(5)
For 2015 and 2014 the pre-tax loss before non-recurring items relates to legacy overseas subsidiaries of the Group, and
comprises company secretarial and accounting fees.
The Statement of Cash Flows includes a £4,000 cash outflow (2014: £5,000 cash outflow) from operating activities in respect of
discontinued operations.
9 Acquisition of subsidiary
On 30 April 2014, Parity Consultancy Services Limited (then SuperCommunications Limited), a wholly owned subsidiary of the
Group, acquired the trade and assets of Golden Square Post Productions Limited from its administrator. The consideration paid
was £373,000 for net assets of £428,000 resulting in a non-recurring gain of £55,000 in 2014.
On 29 May 2012, the Group acquired Inition Limited. The Sale and Purchase agreement included additional cash consideration
subject to the ongoing performance on Inition up to 31 March 2014. During 2015, the final earn-out payment of £0.25m was paid
to the vendors.
10 Share based payments
The Group operates several share based reward schemes for employees:
•
•
•
•
•
A United Kingdom tax authority approved scheme for executive directors and senior staff;
An unapproved scheme for executive directors and senior staff;
A Co-Investment Scheme for senior management;
A Save As You Earn Scheme for all employees; and
A Senior Executive Share Option Plan for Executive Directors.
Under the approved and unapproved schemes and co-investment scheme, options vest if the share price averages a target price
for 20 consecutive days over a three year period from the date of grant. Options lapse if the individual leaves the Group, except
under certain circumstances such as leaving by reason of redundancy, when the options lapse 12 months after the leaving date.
Save As You Earn options lapse if not exercised within six months after the vesting date. They are also subject to continued
employment within the Group.
40
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
10 Share based payments continued
Options under the Senior Executive Share Option Plan have no performance conditions other than continued employment within
the Group and must be exercised within five years of the date of grant.
All employee options other than those issued under the Senior Executive Share Option Plan have a maximum term of ten years
from the date of grant. The total share-based remuneration recognised in the Income Statement was £152,000 (2014: £242,000).
Outstanding at beginning of the year
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at the end of the year
2015
Weighted
average
exercise
price (p)
2015
Number
18 13,536,921
–
8
16
19
–
(97,500)
(4,986,836)
8,452,585
2014
Weighted
average
exercise
price (p)
16
20
8
22
2014
Number
7,849,445
6,372,705
(102,500)
(582,729)
18 13,536,921
The exercise price of options outstanding at the end of the year and their weighted average contractual life fell within the following
ranges:
Exercise
price (p)
7.5-10
17-28
2015
Weighted average
contractual life (years)
4
8
Number
1,250,000
7,202,583
8,452,583
Exercise
price (p)
7.5 - 10
17 - 28
2014
Weighted average
contractual life (years)
2
8
Number
4,199,133
9,337,788
13,536,921
Of the total number of options outstanding at the end of the year 1,782,500 (2014: 4,499,133) had vested and were exercisable
at the end of the year. The weighted average exercise price of those options was 14 pence (2014: 11 pence).
97,500 (2014: 102,500) options were exercised during the year at an average exercise price of 8 pence (2014: 8 pence)
There were no new options granted during the year. The weighted average fair value of option granted in 2014 was 9 pence.
The following information is relevant in determining the fair value of options granted during the year under equity–settled share-
based remuneration schemes operated by the Group. There are no cash-settled schemes.
Option pricing model
Weighted average share price at grant date (p)
Weighted average exercise price (p)
Weighted average contractual life (years)
Weighted average expected life (years)
Expected volatility
Weighted average risk free rate
Expected dividend growth rate
2015
Stochastic
2014
Stochastic
–
–
–
–
–
–
–
20
20
10
5
54-74%
1.37%
0%
The volatility assumption is calculated as the historic volatility of the share price over a 3 and 5 year period prior to grant date.
Share options issued to defined benefit pension scheme
In December 2010 the Group issued 1,000,000 share options in Parity Group plc to the pension scheme at an exercise price of
9 pence per share. These options may be exercised at the discretion of the Trustees; they vested on grant and have no expiry
date. Any gain on exercise is to be used to reduce the scheme deficit. These options were valued using the stochastic method.
The share price on the grant date was 15.75 pence. Whilst the options do not have an expiry date, for valuation purposes it is
assumed that the expected life of the options is 8 years. The expected volatility is 64.2% and the average risk free rate assumed
was 3.4%.
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Notes to the Accounts continued
11 Taxation
Current tax (credits)/expense
Current tax on loss for the year
Total current tax (credit)/expense
Deferred tax expense/(credit)
Accelerated capital allowances
Origination and reversal of other temporary differences
Change in corporation tax rate
Adjustments in respect of prior periods
Total tax expense
Tax expense on continuing operations
2015
£’000
2014
£’000
(23)
(23)
(21)
(7)
56
1
29
6
9
9
(19)
–
–
35
16
25
The standard rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the Group’s
profits for this accounting period are subject to tax at a rate of 20.25%. The Finance No. 2 Bill 2015 became substantively
enacted on 26 October 2015 and further reduced the UK corporation tax rate to 19% with effect from 1 April 2017 and then to
18% from 1 April 2018. The tax rate of 18% has been applied in calculating the UK deferred tax position at 31 December 2015.
The 2015 tax expense is after a tax credit of £252,000 (2014: £159,000) in respect of non-recurring items.
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United
Kingdom applied to losses for the year are as follows:
Loss for the year
Income tax expense
Loss before income tax
Expected tax credit based on the standard rate of United
Kingdom corporation tax of 20.25% (2014: 21.5%)
Expenses/(income) not allowable for tax purposes
Adjustment for under provision in prior years
Reduction in deferred tax asset due to change in enacted rate
Tax losses not recognised
Deferred tax not provided
Tax on each component of other comprehensive income is as follows:
Exchange differences on translation
of foreign operations
Actuarial gain/(loss) on defined benefit
pension scheme
Before tax
£’000
2015
Tax
£’000
After tax
£’000
Before tax
£’000
42
848
890
–
–
–
42
848
890
67
(649)
(582)
2015
£’000
(3,919)
6
(3,913)
(792)
449
(32)
56
272
53
6
2014
Tax
£’000
–
–
–
2014
£’000
(438)
25
(413)
(89)
27
35
–
135
(83)
25
After tax
£’000
67
(649)
(582)
42
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
12 Earnings per ordinary share
Basic earnings per share is calculated by dividing the basic earnings from continuing operations for the year by the weighted
average number of fully paid ordinary shares in issue during the year.
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. None of the
potential ordinary shares are dilutive, as the Group made a loss on continuing activities during the year.
Basic loss per share
Effect of dilutive options
Diluted loss per share
Weighted
average number
of shares
2015
000’s
Earnings
2015
£’000
(3,919)
101,731
–
–
(3,919)
101,731
Earnings
per share
2015
Pence
(3.85)
–
(3.85)
Weighted
average number
of shares
2014
000’s
Earnings
2014
£’000
(438)
101,655
–
–
(438)
101,655
Earnings
per share
2014
Pence
(0.43)
–
(0.43)
As at 31 December 2015 the number of ordinary shares in issue was 101,824,020 (2014: 101,726,520).
Basic and diluted earnings per share from discontinued operations was 0.00p (2014: basic and diluted loss per share 0.00p).
13 Intangible assets
Software
Intellectual Property
Goodwill
Total
2015
£’000
Cost
At 1 January
1,219
Additions
Disposals
Impairment
66
–
–
2014
£’000
727
492
–
–
At 31 December
1,285
1,219
Accumulated amortisation
At 1 January
233
Charge for the year 262
Disposals
At 31 December
Net book amount
–
495
790
21
212
–
233
986
2015
£’000
572
283
(3)
–
852
4
284
–
288
564
2014
£’000
–
572
–
–
572
–
4
–
4
2015
£’000
2014
£’000
2015
£’000
2014
£’000
7,753
7,753
9,544
–
–
(1,994)
5,759
–
–
–
7,753
–
–
–
–
–
–
–
–
349
(3)
(1,994)
7,896
237
546
–
783
8,480
1,064
–
–
9,544
21
216
–
237
568
5,759
7,753
7,113
9,307
During 2015, the Inition business invested in enhancing certain of its existing technologies in addition to developing new
technologies. This resulted in additional intellectual property of £157,000. Other additions to IP included content development for
the Talent Management business.
In 2014, the Inition business invested in developing a range of new products and in developing a new website. This resulted in the
addition of £477,000 of intellectual property. Other additions to IP included the development of GroupSeer, a venture between the
Group and The Royal Holloway College, aimed at creating a marketing internet search engine.
As at 31 December 2014 the Professionals division had virtually completed its project to implement a new financial system, CRM
and website. During 2014 costs of £446,000 were capitalised in relation to the project.
The Company does not hold any intangible assets.
Neither the Group nor the Company had any additional capital commitments for the purchase of intangible assets as at the
balance sheet date.
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Notes to the Accounts continued
14 Goodwill
The carrying amount of goodwill is allocated to the Group’s cash generating units (CGUs). During the year the Group announced
the discontinuation of its SuperCommunications division, a CGU as at 31 December 2014. Therefore, as at the 31 December
2015, the Group allocated the carrying value of its goodwill to three separate CGU’s, being Parity Professionals, Parity Solutions
and Inition.
Carrying amounts are as follows:
Carrying value
Balance at 1 January and 31 December 2014
Balance at 1 January 2015
Impairment losses
Balance at 31 December 2015
Professionals
Solutions
£’000
£’000
Inition
£’000
Total
£’000
2,642
2,642
–
2,642
1,952
1,952
–
1,952
3,159
3,159
(1,994)
1,165
7,753
7,753
(1,994)
5,759
Goodwill was tested for impairment in accordance with IAS 36 at the year end. An impairment charge of £1,994,000 was
recorded in respect of the Group’s investment in Inition Limited. The impairment charge was driven by the Group’s decision to
discontinue its digital “buy and build” acquisition initiative, and to subsequently focus management attention on its core
businesses.
The recoverable amounts of the CGUs are based on value in use calculations using the pre-tax cash flows based on budgets
approved by management for 2016. Years from 2017 onward are based on the budget for 2016 projected forward at expected
growth rates. This is considered prudent based on current expectations of the 2016 long-term growth rate.
Major assumptions are as follows:
2015
Discount rate
Forecast revenue growth
Operating margin 2016
Operating margin 2017 onward
2014
Discount rate
Forecast revenue growth
Operating margin 2015
Operating margin 2016 onward
Professionals
%
Solutions
%
Inition
%
6.9
4.8
3.1
4.5
9.2
15.8
15.6
9.9
5.4
3.0 – 3.5 16.1 – 16.9
9.5 – 10.0
8.0
2.2
2.5
4.3
14.7
18.5
6.5
7.4
(4.3)
3.1 – 3.2 15.1 – 17.2
7.1 – 9.3
Discount rates are based on the Group’s weighted average cost of capital adjusted for the specific risks of each cash generating
unit.
Forecast revenue growth is expressed as the compound growth rate over the next 4 years. For all CGUs the rates are based on
past experience of growth in revenues and future expectations of economic conditions.
Operating margins are based on past experience adjusted for investments, and cost action taken in 2015 that will reduce costs in
the future.
A 10% change in the underlying assumptions used in the discounted cash flow forecasts for Inition would result in a further
impairment loss of up to £116,000. A 10% change in any of the underlying assumptions used in the discounted cash flow
forecasts for the other two CGU’s would not lead to the carrying value of goodwill being in excess of their recoverable amount.
An increase of 1% to the discount rate used in relation to the Inition CGU i.e. an increase from 15.6% to 16.6%, would result in a
further impairment of £45,000.
44
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
15 Property, plant and equipment
Consolidated
At cost
Balance at 1 January 2014
Additions
Acquisition
Disposals
Balance at 31 December 2014
Balance at 1 January 2015
Additions
Disposals
Balance at 31 December 2015
Accumulated depreciation
Balance at 1 January 2014
Depreciation charge for the year
Disposals
Balance at 31 December 2014
Balance at 1 January 2015
Depreciation charge for the year
Disposals
Balance at 31 December 2015
Net book value
At 1 January 2014
At 31 December 2014
At 31 December 2015
Leasehold
improvements
£’000
Office
equipment
£’000
Total
£’000
936
3,313
4,249
–
–
(920)
16
16
–
–
16
768
72
(824)
16
16
–
–
16
168
–
–
137
574
(168)
3,856
137
574
(1,088)
3,872
3,856
3,872
92
(445)
92
(445)
3,503
3,519
3,147
3,915
189
(82)
261
(906)
3,254
3,270
3,254
3,270
173
(104)
173
(104)
3,323
3,339
166
602
180
334
602
180
45
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Notes to the Accounts continued
15 Property, plant and equipment continued
Company
At Cost
Balance at 1 January 2014
Additions
Balance at 31 December 2014
Balance at 1 January 2015
Balance at 31 December 2015
Accumulated amortisation
Balance at 1 January 2014
Depreciation charge for the year
Balance at 31 December 2014
Balance at 1 January 2015
Depreciation charge for the year
Balance at 31 December 2015
Net book value
At 1 January 2014
At 31 December 2014
At 31 December 2015
Leasehold
improvements
£’000
Office
equipment
£’000
Total
£’000
1
–
1
1
1
1
–
1
1
–
1
–
–
–
2
1
3
3
3
–
1
1
1
–
1
2
2
2
3
1
4
4
4
1
1
2
2
–
2
2
2
2
Following the closure of the Golden Square business, its tangible fixed assets were written down resulting in a loss on disposal of
£341,000.
As at 31 December 2015, neither the Group nor the Company had any capital commitments contracted for but not provided, for
the purchase of tangible assets (2014: £nil).
Leased plant and equipment
At 31 December 2015 the total net carrying value of the leased equipment was £nil (2014: £191,375).
In April 2014, the Group acquired Golden Square, including several digital technology assets that were held under finance lease
agreements. At 31 December 2014 Inition had one 3D camera held under a finance lease agreement.
16 Deferred tax
At 1 January
Recognised in other comprehensive income
Actuarial gain/(loss) on defined benefit pension scheme
Recognised in the income statement
Change in enacted tax rate
Adjustments in relation to prior periods
Depreciation in excess of capital allowances
Other short term timing differences
At 31 December
The deferred tax asset of £507,000 (2014: £536,000) comprises:
Depreciation in excess of capital allowances
Short term and other timing differences
46
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Consolidated
2015
£’000
536
–
(56)
(1)
21
7
507
2014
£’000
552
–
–
(35)
19
–
536
Consolidated
2015
£’000
447
60
507
2014
£’000
476
60
536
16 Deferred tax continued
A deferred tax asset on tax losses brought forward is not recognised unless it is more likely than not that there will be taxable profits
in the foreseeable future against which the deferred tax asset can be offset. The Directors believe that the deferred tax asset
recognised is recoverable based on the future earning potential of the Group.
The forecasts for the business used in this review were the same as those used in the review of the impairment of goodwill (see
note 14). The forecasts for Parity Professionals comfortably support the unwinding of the deferred tax asset held by this division of
£479,000 (2014: £536,000).
The deferred tax asset at 31 December 2015 has been calculated on the rate of 18% substantively enacted at the balance sheet
date.
The movements in deferred tax assets during the period are shown below:
Depreciation in excess of capital allowances
Other short-term timing differences
Depreciation in excess of capital allowances
Other short-term timing differences
Asset
2015
£’000
447
60
507
Asset
2014
£’000
476
60
536
(Charged)/
credited to
(Charged)/
credited to
other
income comprehensive
income
2015
statement
2015
£’000
£’000
(16)
(13)
(29)
–
–
–
(Charged)/
credited to
(Charged)/
credited to
other
income comprehensive
income
2014
statement
2014
£’000
£’000
19
(35)
(16)
–
–
–
The Group has unrecognised carried forward tax losses of £30,611,584 (2014: £28,802,000). The Company has unrecognised
carried forward tax losses of £24,229,376 (2014: £21,409,000). The Group has unrecognised capital losses carried forward of
£281,875,386 (2014: £281,875,386). These losses may be carried forward indefinitely.
17 Work in progress
Work in progress:
Net costs less foreseeable losses
Consolidated
2015
£’000
2014
£’000
61
27
Stocks refers to 3D equipment purchased for resale, and are stated at the lower of cost and net realisable value.
18 Trade and other receivables
Amounts falling due within one year:
Trade receivables
Accrued income
Amounts recoverable on contracts
Amounts owed by subsidiary undertakings
Other receivables
Prepayments
Amounts falling due after one year:
Amounts owed by subsidiary undertakings
Total
Consolidated
2015
£’000
9,365
4,707
946
–
259
342
2014
£’000
10,636
3,568
695
–
312
313
Company
2015
£’000
2014
£’000
–
–
–
–
–
–
3,346
3,405
–
4
–
2
15,619
15,524
3,350
3,407
–
–
15,619
15,524
113,332
116,682
103,460
106,867
47
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Notes to the Accounts continued
18 Trade and other receivables continued
The fair values of trade and other receivables are not considered to differ from the values set out above.
£8,998,000 (2014: £10,176,000) of the Group’s trade receivables, and £4,262,000 (2014: £3,946,000) of the total of the Group’s
accrued income and amounts recoverable on contracts, are pledged as collateral for the asset-based borrowings. These
borrowings fluctuate daily and at the year end totalled £9,973,000 (2014: £9,498,000).
The Group records impairment losses on its trade receivables separately from gross receivables. Factors considered in making
provisions for receivables include the ability of the customer to settle the debt, the age of the debt and any other circumstance
particular to the transaction that may impact recoverability. The movements on the allowance account during the year are
included within operating costs in the consolidated income statement and are summarised below:
Opening balance
Increases in provisions
Written off against provisions
Recovered amounts reversed
Closing balance
Consolidated
2015
£’000
–
7
–
–
7
2014
£’000
33
–
(33)
–
–
The balance provided at 31 December 2015 was greater than 60 days old. The allowance account represents full provision
against specific gross debts.
All other debts at 31 December 2015 are considered to be recoverable.
As at 31 December 2015 trade receivables of £1,532,000 (2014: £1,970,000) were past due, but not impaired. These relate to
customers where there is no evidence of unwillingness or of an inability to settle the debt. The ageing of Group trade receivables
is as follows:
Not past due
31-60 days, and past due
61-90 days
>90 days
Total
Gross
£’000
7,833
922
393
224
9,372
Impaired
£’000
–
–
–
(7)
(7)
2015
Total
£’000
7,833
922
393
217
Gross
£’000
8,666
1,152
564
254
9,365
10,636
Impaired
£’000
–
–
–
–
–
2014
Total
£’000
8,666
1,152
564
254
10,636
The Company had no provisions for trade receivables, as it has no trade receivables. Other receivables in the Group and the
Company were not past due and not impaired.
The Company’s receivables due from subsidiary undertakings were reviewed for impairment at the year end based on the
performance of 2015 and on subsequent years forecast projections. A discounted future cash flow method was employed for the
review. As a result of this review, no provision was deemed necessary. The assessment was performed on a value in use basis
using discount rates of between 4.5% and 15.6% (2014: between 6.5% and 8.0%) and the other parameters used in the goodwill
impairment review, as outlined in note 14.
48
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
19 Loans & Borrowings
Non-current
Finance lease liabilities
Current
Bank and other borrowings due within one year or on demand:
Asset-based financing facility
Current portion of finance lease liabilities
Finance lease liabilities
Less than one year
Between one and two years
Future
minimum
lease
payments
2015
£’000
47
11
58
Present
value of
minimum
lease
payments
2015
£’000
43
11
54
Future
minimum
lease
payments
2014
£’000
61
23
84
Interest
2015
£’000
4
–
4
Further details of the Group’s banking facilities are given in note 22.
20 Trade and other payables
Consolidated
2015
£’000
2014
£’000
11
11
23
23
9,973
43
10,016
Interest
2014
£’000
9
3
12
9,498
61
9,559
Present
value of
minimum
lease
payments
2014
£’000
52
20
72
Amounts falling due within one year:
Payments in advance
Trade payables
Amounts due to subsidiary undertakings
Other tax and social security payables
Other payables and accruals
Amounts falling due after one year:
Amounts due to subsidiary undertakings
Total
Consolidated
Company
2015
£’000
259
5,424
–
1,377
1,514
8,574
–
8,574
2014
£’000
439
5,366
–
1,199
1,310
8,314
–
8,314
2015
£’000
2014
£’000
–
–
–
–
9,149
7,393
32
380
35
90
9,561
7,518
108,565
118,126
99,296
106,814
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49
Notes to the Accounts continued
21 Provisions
Consolidated
At 1 January 2015
Created in year
Utilised in year
Unwind of discount
At 31 December 2015
Due within one year or less
Due after more than one year
Total
Company
At 1 January 2015
Utilised in year
Unwind of discount
At 31 December 2015
Due within one year or less
Due after more than one year
Total
Leasehold
dilapidations Onerous leases
£’000
£’000
Total
£’000
13
2
–
(1)
14
–
14
14
–
–
–
–
–
–
–
69
–
(70)
1
–
–
–
–
69
(70)
1
–
–
–
–
82
2
(70)
–
14
–
14
14
69
(70)
1
–
–
–
–
Leasehold dilapidations
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the lease in
accordance with the lease terms. Dilapidation charges that will crystallise at the end of the period of occupancy are provided for in
full on all non-serviced properties. Based on current lease expiry dates it is estimated these provisions will be settled over a period
of two to three years. The main uncertainty relates to the estimation of the costs that will be incurred at the end of the lease.
Onerous leases
This provision relates to office space no longer occupied by the Group, and represents the excess of rents payable over rents
receivable on sub-let office space.
22 Financial instruments – risk management
The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies
and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of
these risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks and the methods used to measure
them from previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are trade receivables, cash and
cash equivalents, trade and other payables and bank borrowings.
A summary by category of the financial instruments held by the Group is provided below:
Consolidated
As at 31 December 2015
Financial assets
Net cash and cash equivalents
Trade and other short term receivables
Financial liabilities
Asset-based financing facility
Finance lease liabilities
Trade and other short term payables
50
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
Amortised
cost
£’000
Loans and
receivables
£’000
Total
£’000
–
–
–
2,648
15,277
17,925
9,973
54
8,315
18,342
–
–
–
–
2,648
15,277
17,925
9,973
54
8,315
18,342
22 Financial instruments – risk management continued
As at 31 December 2014
Financial assets
Net cash and cash equivalents
Trade and other short term receivables
Financial liabilities
Asset-based financing facility
Finance Lease liabilities
Trade and other short term payables
Amortised
cost
£’000
Loans and
receivables
£’000
–
–
–
2,974
15,211
18,185
9,498
84
7,875
17,457
–
–
–
–
Total
£’000
2,974
15,211
18,185
9,498
84
7,875
17,457
A summary by category of the financial instruments held by the Company is provided below:
Company
As at 31 December 2015
Financial assets
Non-current trade and other receivables
Net cash and cash equivalents
Trade and other short term receivables
Financial liabilities
Trade and other short term payables
Non-current trade and other payables
As at 31 December 2014
Financial assets
Non-current trade and other receivables
Net cash and cash equivalents
Trade and other short term receivables
Financial liabilities
Trade and other short term payables
Non-current trade and other payables
Amortised
cost
£’000
Loans and
receivables
£’000
Total
£’000
–
–
–
–
113,332
113,332
18
3,346
18
3,346
116,696
116,696
9,561
108,565
118,126
–
–
–
9,561
108,565
118,126
–
–
–
–
103,460
103,460
102
3,405
102
3,405
106,967
106,967
7,518
99,296
106,814
–
–
–
7,518
99,296
106,814
Non-current amounts due to subsidiary undertakings have no specific repayment terms but are subject to notice periods of at
least one year.
Fair values of financial instruments
The fair values of all of the Group’s, and of the Company’s, financial instruments are the same as their carrying values.
General objectives, policies and processes – risk management
The Group is exposed through its operations to the following financial instrument risks: credit risk; liquidity risk; interest rate risk;
and foreign currency risk.
The policy for managing these risks is set by the Board following recommendations from the Finance Director. Certain risks are
managed centrally, while others are managed locally following guidelines communicated from the centre. The overall objective of
the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and
flexibility. The policy for each of the above risks is described in more detail below.
51
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Notes to the Accounts continued
22 Financial instruments – risk management continued
Credit risk
Credit risk arises from the Group’s trade and other receivables. It is the risk that the counterparty fails to discharge their obligation
in respect of the instrument.
The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers before
entering contracts. Such credit ratings are then factored into the credit assessment process to determine the appropriate credit
limit for each customer. The Group does not collect collateral to mitigate credit risk.
The Group operates exclusively in the UK. Approximately 54% (2014: 60 %) of the Group’s turnover is derived from the public
sector. The largest customer balance represents 22% (2014: 22 %) of the trade receivable balance.
Quantitative disclosures of the credit risk exposure in relation to financial assets are set out below. Further disclosures regarding
trade and other receivables, which are neither past due nor impaired, are provided in note 18.
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
2015
Carrying value
£’000
Maximum
exposure
£’000
2014
Carrying value
£’000
Maximum
exposure
£’000
2,648
15,277
17,925
2,648
15,277
17,925
2,974
15,211
18,185
2,974
15,211
18,185
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
interest rates.
It is Group policy that all external Group borrowings are drawn down on the asset-based financing facilities arranged with our
bankers which bear a floating rate of interest based on the PNC base rate. Borrowings against the asset-based financing facilities
are typically drawn or repaid on a daily basis in order to minimise borrowings and interest costs and transaction charges. Although
the Board accepts that this policy neither protects the Group entirely from the risk of paying rates in excess of current market
rates, nor eliminates the cash flow risk associated with interest payments, it considers that it achieves an appropriate balance of
these risks.
Throughout 2015 and 2014 the Group’s variable rate borrowings were denominated in Sterling. Interest costs on borrowings from
the asset-based financing facility with PNC was charged at 2.5% above base rate. Amounts under this facility are repayable upon
demand.
If interest rates on borrowings had been 1% higher/lower throughout the year with all other variables held constant, the loss after
tax for the year would have been approximately £100,000 higher/lower and net assets £100,000 higher/lower. The Directors
consider a 1% change in base rates is the maximum likely change over the next year, being the period to the next point at which
these disclosures are expected to be made.
The Company holds interest bearing loan agreements with some of its subsidiary undertakings. Interest on all loans is charged at
2.0% above the prevailing Bank of England base rate, except for one loan with Parity International B.V. which is charged at 2.0%
above the prevailing European Central Bank base rate. As at the 31 December 2015, the loan balance due by the Company to
Parity International BV, translated into Sterling, was £22,993,000 (2014: £23,499,000 payable).
Foreign exchange risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates.
The Group no longer has any active overseas operations, but does retain certain overseas subsidiaries that are not trading and
are in the process of being closed down. The Group’s net assets arising from overseas operations are exposed to currency risk
resulting in gains or losses on retranslation into sterling. The asset exposure is mainly in respect of intercompany balances.
The Group does not hedge its net investment in overseas operations as it does not consider that the potential financial impact of
such hedging techniques warrants the reduction in volatility in consolidated net assets.
The continuing business has few transactions in foreign currency. The hedging of individual contracts is considered on a case by
case basis. Owing to the small value and volume of such contracts no hedging transactions were entered in 2015 or 2014.
During 2014, the underlying denomination of a large intercompany balance between the Company and one of the Group’s inactive
overseas subsidiaries was revised. As at 31 December 2013, the Company held a loan balance due to the relevant subsidiary of
£24,471,000 which was denominated in Sterling. The base currency of the Company is Sterling and the overseas subsidiary’s
base currency is Euros. In 2014, the denomination of the loan was revised to Euros, and thus subject to exchange rate
fluctuations in the books of the Company. As a result, in 2015 the Company recorded a translation gain of £965,000 (2014:
£1,440,000). As at the 31 December 2015, the loan balance due by the Company, translated into Sterling, was £22,993,000
(2014: £23,499,000).
52
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
22 Financial instruments – risk management continued
Foreign exchange risk continued
The currency profile of the Group’s net financial assets was as follows:
Sterling
Euro
US Dollar
Total
Functional currency of individual entity
Net foreign currency
financial assets
2015
£’000
2014
£’000
–
–
(22,988)
(23,485)
2015
£’000
131
–
2014
£’000
84
–
18
4
1,150
1,178
2015
£’000
966
–
–
2014
£’000
966
–
–
2015
£’000
1,097
2014
£’000
1,050
(22,988)
(23,485)
1,168
1,182
Sterling
Euro
US Dollar
Total net
exposure
(22,970)
(23,481)
1,281
1,262
966
966
(20,723)
(21,253)
The profile of the Company’s net financial assets was as follows:
Net foreign currency financial assets
Sterling
Euro
US Dollar
Total net exposure
Functional currency: Sterling
2014
2015
£’000
–
£’000
–
(22,988)
(23,485)
18
4
(22,970)
(23,481)
Sensitivity analysis – Group and Company
If the exchange rate between Sterling and the Euro had been 10% higher/lower at the balance sheet date, with all other variables
held constant, the effect on equity for the year would have been approximately £2,299,300 higher/lower. A 10% fluctuation in any
other currency exchange rate would not have a significant impact on profit and loss, nor equity.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges on its borrowings under its asset-
based financing arrangements. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall
due.
The liquidity of each Group entity is managed centrally, with daily transfers to operating entities to maintain a pre-determined cash
balance. Normal supplier terms range from 2 weeks to 30 days. The level of the Group facility is approved periodically by the
Board and negotiated with the Group’s current bankers. At the reporting date, cash flow projections were considered by the
Board and the Group is forecast to have sufficient funds and available funding facilities to meet its obligations as they fall due.
The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:
Consolidated
At 31 December 2015
Trade and other payables
Borrowings
Total
Consolidated
At 31 December 2014
Trade and other payables
Borrowings
Total
Up to
1 month
£’000
8,574
9,984
18,558
Up to
1 month
£’000
8,231
9,498
17,729
Over
1 month
£’000
–
43
43
Over
1 month
£’000
83
84
167
Total
£’000
8,574
10,027
18,601
Total
£’000
8,314
9,582
17,896
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Notes to the Accounts continued
22 Financial instruments – risk management continued
Liquidity risk continued
Company
At 31 December 2015
Trade and other payables
Total
Company
At 31 December 2014
Trade and other payables
Total
Up to
1 month
£’000
9,561
9,561
Up to
1 month
£’000
7,518
7,518
Between
1 and
12 months
£’000
Over
1 year
£’000
Total
£’000
–
–
108,565
108,565
118,126
118,126
Between
1 and
12 months
£’000
–
–
Over
1 year
£’000
99,296
99,296
Total
£’000
106,814
106,814
More detail on trade and other payables is given in note 20.
Capital disclosures
The capital structure of the Group consists of cash and cash equivalents, equity attributable to equity holders, and asset-based
finance. There is no long-term external debt, except for a small number of finance leases. The leases represent a liability of
£54,000 and are repayable within two years. The Company is funded through equity and intercompany loans.
The Group uses an asset-based finance facility with PNC Business Credit, a member of The PNC Financial Services Group, Inc.
The facility, which enables the Group to borrow against both trade debt and accrued income and provides for borrowing of up to
£15.0m depending on the availability of appropriate assets as security.
The Group’s and Company’s objectives when maintaining capital are:
•
•
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders
and benefits for other stakeholders; and
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
Cash and cash equivalents
Asset-based borrowings
Finance lease liabilities
Net Debt
2015
£’000
2,648
(9,973)
(54)
2014
£’000
2,974
(9,498)
(84)
(7,379)
(6,608)
The Board regularly reviews the adequacy of resources available and considers the options available to increase them. The
asset-based borrowing facility contains certain externally imposed financial covenants which have been met throughout the
period.
The Company does not have distributable reserves available for dividend payments. A capital reconstruction would be necessary
to create reserves available for distribution.
23 Reserves
The Board is not proposing a dividend for the year (2014: nil pence per share).
The following describes the nature and purpose of each reserve within owners’ equity:
Share capital is the amount subscribed for ordinary share capital at nominal value.
During 2015, 97,500 share options were exercised, increasing the Group’s share capital from £16,353,638 to £16,355,588.
Deferred share capital is the nominal value assigned to the deferred share capital.
Share premium is the amount subscribed for share capital in excess of nominal value.
Following the exercise of share options during 2015, the share premium increased from £33,189,314 to £33,195,689.
Other Reserves of the Group of £44,160,000 relate principally to a reserve created following a change of the Group’s ultimate
parent, and a corresponding Scheme of Arrangement in July 1999.
Other Reserves of the Company of £22,729,000 relate to a reorganisation of the Group’s capital structure in 2002, which resulted
in the Company increasing its investment in subsidiary undertakings.
Retained earnings represent the cumulative net gains and losses recognised in the Income Statement.
Consolidated retained earnings are stated after adjustment for the ESOP’s investment in the Company’s shares of £351,000 (2014: £351,000).
54
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
24 Pension commitments
The Group operates a number of pension schemes. With the exception of the Parity Group Retirement Benefit Plan, all of the
schemes are defined contribution plans and the assets are held in separately administered funds. Contributions to defined
contribution schemes were £214,000 (2014: £278,000).
Defined benefit plan
In March 1995, the Group established the Parity Retirement Benefit Plan, renamed as the Parity Group Retirement Benefit Plan,
following a Scheme of Arrangement in 1999, in order to facilitate the continuance of pension entitlements for staff transferring
from other schemes following acquisitions in 1994. This is a funded defined benefit scheme and has been closed to new
members since 1995. With effect from 1 January 2005 this scheme was also closed to future service accrual and future
contributions paid into money purchase arrangements.
Principal actuarial assumptions
Rate of increase of pensions in payment
Discount rate
Retail price inflation
Consumer price inflation
2015
%
2014
%
3.6% – 3.9% 3.5% – 3.8%
3.8%
3.1%
2.1%
3.5%
3.0%
2.0%
Note: the rate of increase in pensionable salaries is no longer applicable as the scheme is closed for future service.
In accordance with the revised IAS19, the assumption for future investment returns is the same discount rate (3.5%) used in
calculating the pension liabilities. The scheme’s assets are invested in equities, gilts and bonds in approximately equal
proportions.
The underlying mortality assumption used is in accordance with the standard table known as S1PA_H, S1PA or S1PA_L mortality,
dependent on the size of each member’s pension, using the CMI_2015 projection based on year of birth with a long term rate of
improvement of 1.25% p.a. (2014: 1.25% p.a.).
Contributions
In 2014 contributions were initially at a rate of £680,000 before being increased to £711,000 per annum on 1 August 2014.
During March 2015 the Trustees agreed to a temporary suspension of contributions, and subsequently extended this agreement
until July 2016. In February 2016, a lump sum contribution of £100,000 was made by the Group. In March 2016, agreement was
reached with the trustees of the defined benefit pension scheme to reduce deficit reduction contributions, linking amounts
payable to company performance and affordability on a sliding scale as part of the 2015 triennial valuation review.
In 2012 an issue was made to the Plan of 1,000,000 share options in Parity Group plc at an exercise price of 9 pence per share
to be exercised at the discretion of the Trustees and any gain to be used for the benefit of the Plan. These options vested on
grant and have no expiry date.
Reconciliation to consolidated statement of financial position
Fair value of plan assets
Present value of funded obligations
At the end of the year
Reconciliation of plan assets
At the beginning of the year
Expected return
Contribution by Group
Benefits paid
Expenses met by scheme
Actuarial (loss)/gain
At the end of the year
2015
£’000
2014
£’000
19,703
20,356
(21,194)
(22,457)
(1,491)
(2,101)
2015
£’000
2014
£’000
20,356
17,421
693
28
(786)
(187)
(401)
19,703
777
873
(895)
(71)
2,251
20,356
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Notes to the Accounts continued
24 Pension commitments continued
Composition of plan assets
Equities
Gilts
Bonds
Options in Parity Group plc
Cash
Total
Reconciliation of plan liabilities
At the beginning of the year
Interest cost
Benefits paid
Actuarial (gain)/loss
At the end of the year
2015
£’000
6,722
6,436
6,404
96
45
2014
£’000
6,518
6,906
6,793
96
43
19,703
20,356
2015
£’000
2014
£’000
22,457
19,591
772
(786)
(1,249)
21,194
861
(895)
2,900
22,457
The actuarial gain for the year of £1,249,000 (2014: loss of £2,900,000) in respect of plan liabilities is mainly as a result of the
change in the discount rate assumption. The assumption is based upon the yield on AA rated corporate bonds, and these
increased during 2015. The loss in 2014 was as a result of a significant fall in the yield on AA rated corporate bonds.
The cumulative amount of actuarial losses recognised since 1 January 2002 in other comprehensive income is £5,970,000 (2014:
£6,818,000). The Group is unable to disclose how much of the pension scheme deficit recognised on 1 January 2002 and taken
directly to equity is attributable to actuarial gains and losses since inception of the pension scheme because that information is
not available.
Amounts recognised in the consolidated income statement
Included in Finance Income
Expected return on plan assets
Included in Finance Costs
Unwinding of discount on plan liabilities (interest cost)
2015
£’000
506
772
2014
£’000
694
861
The actual return on plan assets was £105,000 (2014: £3,028,000). This represents the sum of the expected return on assets
and the actuarial gain.
Defined benefit obligation trends
Plan assets
Plan liabilities
Deficit
Experience adjustments on assets
Experience adjustments on liabilities
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
19,703
20,356
17,421
16,260
15,206
(21,194)
(22,457)
(19,591)
(19,667)
(17,673)
(1,491)
(401)
(2.0%)
(1,249)
(5.6%)
(2,101)
2,251
12.4%
2,900
14.8%
(2,170)
(34)
(0.2%)
(255)
(1.3%)
(3,407)
(2,467)
441
2.7%
2,016
11.4%
755
5.2%
674
4.0%
56
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
24 Pension commitments continued
Sensitivity Analysis
Effect of change in assumptions
No change
0.25% rise in discount rate
0.25% fall in discount rate
0.25% rise in inflation
0.25% fall in inflation
25 Share capital
Authorised share capital
Authorised at 1 January
Authorised at 31 December
Issued share capital
Liabilities
£’000
21,194
20,474
21,953
21,226
21,069
Assets
£’000
19,703
19,703
19,703
19,703
19,703
Surplus/
(Deficit)
£’000
(1,491)
(771)
(2,250)
(1,523)
(1,366)
Ordinary shares 2p each
Deferred shares of 0.04p each
2015
Number
409,044,603
409,044,603
2015
£’000
8,181
8,181
2015
Number
35,797,769,808
35,797,769,808
2015
£’000
14,319
14,319
Ordinary shares 2p each
Deferred shares of 0.04p each
2015
Number
2015
£000
2015
Number
2015
£000
Increase/
(Decrease)
in deficit
£’000
–
(720)
759
32
(125)
Total
2015
£’000
22,500
22,500
Total
2015
£000
Issued and fully paid at 1 January
101,726,520
2,035
35,797,769,808
14,319
16,354
Share options exercised
97,500
2
–
–
2
Issued and fully paid at 31 December
101,824,020
2,037
35,797,769,808
14,319
16,356
The deferred shares are not listed on the London Stock Exchange, have no voting rights, no rights to dividends and the right only
to a very limited return on capital in the event of liquidation.
Shares held by ESOP/Treasury Shares
Ordinary shares held by the ESOP
2015
Number
43,143
2014
Number
43,143
The shares held by the ESOP are expected to be issued under share option contracts.
26 Operating lease commitments
Operating leases – lessee
The total future minimum rents payable under non-cancellable operating leases are as follows:
Continuing operations
Amounts payable:
Within one year
Between two and five years
Land and
buildings
2015
£’000
Plant and
machinery
2015
£’000
Land and
buildings
2014
£’000
Plant and
machinery
2014
£’000
508
90
598
27
35
62
882
256
1,138
26
–
26
Operating leases – lessor
Certain properties may have been vacated by the Group prior to the end of the lease term. Where possible the Group always
endeavours to sublet such vacant space. An onerous provision is recognised where the rents receivable over the lease term are
less than the obligation to the head lessor.
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Notes to the Accounts continued
26 Operating lease commitments continued
Operating leases – lessor continued
The total future minimum rents receivable under non-cancellable operating leases on sublet properties are as follows:
Continuing operations
Amounts receivable:
Within one year
Between two and five years
27 Contingencies
Land and
buildings
2015
£’000
Land and
buildings
2014
£’000
–
–
–
146
–
146
In the normal course of business, the Group is exposed to the risk of claims in respect of contracts where the customer or
supplier is dissatisfied with the performance, pricing and/or completion of the contracted service or product. Such claims are
normally resolved by a combination of negotiation, further work by Parity or the supplier, and/or monetary settlement without
formal legal process being necessary. Occasionally, such claims progress into legal action. At the present time, Group
management believes the resolution of any known claims or legal proceedings will not have a material further impact on the
financial position of the Group.
28 Key management remuneration
Key management comprises the Board of Directors. The total remuneration received by key management for 2015 was £837,000
(2014: £855,000). This comprises emoluments received, pension contributions, compensation for loss of office and share based
payment charges. Key management remuneration is disclosed in detail within the remuneration report.
Salary and fees
Other short term benefits
Post employments benefits
Compensation for loss of office
Share-based payments
29 Related party transactions
2015
£’000
732
33
11
43
18
837
2014
£’000
772
28
20
–
35
855
Consolidated
During the period the Group transacted with one entity over which one of the Group’s directors had control or significant influence,
as follows:
Director
D. Courtley
Transaction
IT interim recruitment
Transaction value
Balance outstanding
2015
£’000
81
2014
£’000
399
2015
£’000
–
2014
£’000
–
The Group provided IT contractors to Mozaic Services Limited, a company that is significantly influenced by Mr D Courtley.
Amounts were billed at normal market rates for such services, and were due and payable under standard client payment terms.
Company
Details of the Company’s holding in Group undertakings are given in note 30. The Company entered into transactions with other
Group undertakings as shown in the table below.
Amounts incurred from Group subsidiaries
Amounts charged to Group subsidiaries
Operating
costs
2015
£’000
(457)
–
Finance
income
2015
£’000
Finance
expense
2015
£’000
–
(1,269)
1,112
–
Operating
costs
2014
£’000
(621)
–
Finance
income
2014
£’000
–
917
Finance
expense
2014
£’000
(1,036)
–
At 31 December, the Company had the following amounts payable to / recoverable from Group undertakings.
58
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
29 Related party transactions continued
Company continued
Amounts owed by subsidiary undertakings
Falling due within one year (note 18)
Falling due after one year (note 18)
Amounts due to subsidiary undertakings
Falling due within one year (note 20)
Falling due after one year (note 20)
30 Subsidiaries
2015
£’000
2014
£’000
3,346
3,405
113,332
103,460
(9,149)
(7,393)
(108,565)
(99,296)
The principal subsidiaries of Parity Group plc, which have been included in these consolidated financial statements, are Parity
Professionals Limited, Parity Solutions Limited, and Inition Limited. Parity Professionals Limited and Parity Solutions Limited are
wholly owned by Parity Holdings Limited and incorporated in the United Kingdom. Inition Limited is wholly owned by Parity
Consultancy Services Limited (formerly SuperCommunications Limited) and is incorporated in the United Kingdom. Parity
Consultancy Services Limited is a direct subsidiary of Parity Holdings Limited, and Parity Holdings Limited is a direct subsidiary of
Parity Group plc.
Parity Professionals Limited is a specialist IT recruitment and talent management services company. Parity Solutions Limited
delivers technology solutions. Inition Limited specialises in 3D solutions and equipment.
GPSeer Limited is a small venture with The Royal Holloway University of London in which the Group has 60% of the voting rights.
Its sole purpose is the development of its innovative social media search algorithm.
The Company’s investment in subsidiaries was reviewed for impairment at the year end based on the performance of 2015 and
on subsequent years forecast projections. A discounted future cash flow method was employed for the review. As a result of this
review, no provision was deemed necessary, leaving a carrying value of £20,527,000 (2014: £20,527,000). The assessment was
performed on a value in use basis using discount rates of between 4.5% and 15.6% (2014: between 6.5% and 8.0%) and the
other parameters used in the goodwill impairment review, as outlined in note 14.
The remaining Group subsidiaries are either discontinued or dormant, and are listed below:
Parity Technology Laboratories Limited
Performance Agency Limited
Pointy Stick Limited (dissolved on 23 February 2016)
Prime Selection Limited
Readypatch Limited
Scene Systems Limited
Software 92 Limited
Systems Support Services
Technology Media Limited
TMS Information Solutions Limited
Tobruk Limited
Trident Computer Services plc
Class Limited
Comtec Computer Training Limited
Comtec International Limited
CSS Software Solutions Limited
Disqo Limited
ESP (Europe) Limited
Eurosoft Germany Limited
Eurosoft Solutions (France) Limited
Eurosoft Solutions Limited
Golden Square Content Limited
IC Software Limited
Information Mapping Limited
Inition LLC (registered in the US)
Interactive Developments (Scotland) Limited
Interactive Developments Limited
Intercity Consultants Limited
Integer79 Limited
Made Content Limited
Online Personnel Services Limited
Parity Computing Limited
Parity Eurosoft BV (registered in the Netherlands)
Parity Eurosoft Limited
Parity Group Quest Trustee Limited
Parity International BV (registered in the Netherlands)
Parity International plc
Parity Limited
Parity Management Limited
Parity Permanent Investments Limited
Parity Selection Limited
Parity Solutions (Ireland) Limited
59
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Corporate information
Registered office
Dawson House
5 Jewry Street
London, EC3N 2EX
Tel: 0845 873 0790
Registered in England & Wales No. 3539413
Registrars
Equiniti Limited,
Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6DA
Tel: 0871 384 2382
Equiniti offer a range of information on-line. You can access
information on your shareholding, indicative share prices and
dividend details and find practical help on transferring shares or
updating your details at www.shareview.co.uk
Enquiries concerning shareholdings in Parity Group plc
should be directed, in the first instance, to the Registrars,
Equiniti, as above.
Investor relations
MHP Communications
60 Great Portland Street
London
W1W 7RT
Tel: 020 3128 8100
Further information for shareholders including copies of the
Annual and Interim Reports can be obtained from the company
secretary’s office at the registered office address below or from
the Parity Group website at www.parity.net
The Company Secretary
Parity Group PLC
Dawson House
5 Jewry Street
London, EC3N 2EX
Or by email to: cosec@parity.net
Advisors
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Bankers
RBS Group
9th Floor
280 Bishopsgate
London
EC2M 4RB
PNC Business Credit
8-14 The Broadway
Hayward’s Heath
West Sussex
RH16 3AP
Nominated advisors & brokers
Investec
2 Gresham Street
London
EC2V 7QP
Solicitors
Pinsent Masons
30 Crown Place
Earl Street
London
EC2A 4ES
60
Parity Group plc
Report and Accounts 2015
www.parity.net
stock code: PTY
PARITY GROUP PLC
Parity Group plc
Dawson House, 5 Jewry Street, London EC3N 2EX
Tel: 0845 873 0790
www.parity.net
stock code: PTY
Perivan Financial Print 240188
Parity Group plc Report and Accounts
Year ended 31 December 2015