249360 Parity Group Cover Spread 5mm Spine.qxp_Layout 1 26/04/2018 12:09 Page 1
Parity Group plc
Report and Accounts
Year Ended 31 December 2017
Parity Group plc
Tel: 020 8543 5353
Dawson House, 5 Jewry Street London EC3N 2EX
www.parity.net Stock code: PTY
Perivan Financial Print 249360
249360 Parity Group Cover Spread 5mm Spine.qxp_Layout 1 26/04/2018 12:09 Page 2
Contents
Overview
Highlights and Headlines
Strategic report
Chairman’s statement
About Parity
CEO statement
Operational and financial review
Governance
Board of Directors
Directors’ report
Social, environmental & ethical policies
Corporate governance report
Remuneration report
Independent Auditor’s report to
the members of Parity Group plc
Consolidated income statement
Consolidated statement of comprehensive income
Statements of changes in equity
Statements of financial position
Statements of cash flows
Notes to the accounts
Corporate Information
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249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:34 Page 1
Driving Change
People Led
Technology Enabled
Parity is a leading partner in driving digital transformation
through consultancy, technology and people solutions.
Parity helps customers implement technology solutions to
transform their business through distinctive, integrated and
complementary services.
Parity Consultancy Services
Focussed on dynamic, high
growth services with large,
long-term contracts at higher
margins, particularly Data
Solutions – enabling more
effective decision making.
Parity Professionals
Targeted recruitment of
temporary and permanent
professionals with high demand
skills to support IT and business
change programmes.
The combination of these services ensures Parity remains
innovative, flexible and scalable.
1
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Highlights and Headlines
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Financial Headlines:
Strong momentum in Consultancy Services drove double digit profit growth
• Group revenues1 of £83.82m (2016: £91.76m)
• Significant growth in Parity Consultancy Services’ (“Consultancy Services”) revenues reflecting strategic priorities
to build higher value business:
• Consultancy Services revenue up by 78.7% to £9.54m (2016: £5.34m) reflected increased momentum during
the year:
110% increase to £5.62m in H2 2017 (H2 2016: £2.68m)
48% increase to £3.93m in H1 2017 (H1 2016: £2.66m)
o
o
• Parity Professionals’ (“Professionals”) revenue2 down by 7.9% to £80.04m (2016: £86.90m)
• Operating profit1 before non-recurring costs3 up 16.4% to £2.06m (2016: £1.77m)
• Improved operating margin to 2.5% (2016: 1.9%) with increased Consultancy Services revenues and continuing cost
and operational controls:
o Consultancy Services’ contribution4 up by 26% to £1.15m (2016: £0.91m); representing 33% of Group
contribution4 (2016: 25%)
o Professionals’ contribution4 reduced by 13.2% to £2.31m (2016: £2.66m) with revenue reduction due to
increased contractor churn following UK taxation reforms
• Profit before tax1 increased by 73% to £1.66m (2016: £0.96m) reflecting improved business mix and no non-recurring
costs in 2017
• Basic earnings per share5 2.15p (2016: 0.87p)
Improved Balance Sheet with further reduction in net debt:
• Further significant reduction in net debt to £1.6m (2016: £4.4m)
• Cash inflow from operations at £3.0m (2016: £3.4m) with further positive working capital swing
Including inter-segment revenues
1. On a continuing basis
2.
3. Non-recurring costs were £nil (2016: £0.36m)
4. Before Group costs6, depreciation and amortisation, and share based charges
5. After tax credit of £0.53m (2016: £0.08 tax charge)
6. Group costs include Board Directors’ salaries and costs relating to Group activities and are not allocated to reporting segments
2 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 3
Highlights and Headlines (continued)
Consultancy Services
revenue up by
78.7% to £9.54m
Operational Headlines:
• Delivering against growth strategy
o Successfully rebalancing the Group towards higher margin Consultancy Services which now represents 33% of
contribution (2016: 25%)
o Improving client base with longer-term revenue visibility
o Driving improvement in operating margin
• Clear focus and positioned to grow in attractive markets
o Strengthening sales and marketing with senior hires to drive focus on data technology solutions to deliver business
intelligence and cost modelling applications
o Increased collaboration across the Group enabling a shift towards managed service projects whilst both divisions
maintain expertise in their service lines
• Continued momentum with further development of Consultancy Services
o Operational restructure to enable next stage of growth in both Data and Outcome Managed Services
o Post-period end, awarded significant contract extensions with ESFA, BAT and MCOCS with a total opportunity of
£5.3m
• Progress in Professionals
o Strong sales activity illustrated by improvement in KPIs including number of placements and new clients billed in
the year
o Further growth in permanent recruitment of 24% improving branding in high growth Digital Transformation markets
o Key framework wins with significant revenue potential:
• managed service for IT recruitment with Primark, major brand in the Private Sector
• Public Sector framework wins with Ordnance survey, Scottish Government Dynamic Purchasing System for
Digital Services, amongst others
• Key extensions on the Scottish Government Interim frameworks, Scottish Water framework and an extension
for the service wrap of the Cabinet Office FastStream graduate recruitment scheme
“
Over the past year I have
worked closely with Parity on a
number of projects. Each and every
time the quality of service and the
response times have been
excellent.”
Service Manager, Top 10 UK University
3
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249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 4
Chairman’s Statement
INTRODUCTION
2017 was an important year for Parity, one in which good
operational management
continuing
improvement despite the risk and headwinds of the
IR35 regulatory changes to the taxation of intermediaries
which offered a significant challenge to our industry.
created
STRATEGY
Importantly, the management team has begun further
activity to leverage the consulting services side of the
business, to drive operating margin improvement. The
Board will seek to accelerate growth in the consulting
business, whilst sustaining investment in the traditional
professional services side of the business.
Strategically, Parity believes it has established a clear point
of differentiation from competitors due to the synergy
between its consulting and professional services divisions.
We are now highly focussed on exploiting this advantage
and we are investing in key hires to optimise the
opportunities which we believe exist. We also believe that
a focus on Data Management, which we first identified as
an opportunity 18 months ago, now has the potential to
become a leading offering for the Group in 2018.
RESULTS
It has been particularly pleasing in 2017 to see strong
customer relationship management lead to a 73% increase
in profit before tax to £1.66m (2016: £0.96m). This was
further leveraged by strong working capital management,
with Group debtor days at a record low of 20 days (2016:
29 days). As a result of strong cash generation, we were
able to reduce net debt substantially to £1.6m at 31
December 2017 (2016: £4.4m), whilst also investing for
future growth.
Key relationships held by the business for many years such
as the Education and Skills Funding Agency, British
American Tobacco and the Ministry of Defence, continued
to widen and deepen, and we were able to announce post-
close extensions on these contracts. New clients have
been developed such as Primark, the high street retailer,
and this together with the combination of good
relationship management and increasing traction from
new relationships underpin the outlook for 2018.
4 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
DISCONTINUED OPERATIONS
The final legacy from the previous strategy is the Group’s
bespoke 3D development arm, Inition which has for some
time been a non-core asset. It has been held for sale and
accounted for as a discontinued operation in these
accounts. Despite having good skills and some specific
successes, the business had a disappointing year in 2017
due to its lack of scale and lack of synergy with the rest of
the Group. Following a diligent process, the Board remains
optimistic of a sale of the business to a home where a
greater synergy can be achieved, and will keep this plan
under review.
DIVIDEND
The Board will not declare a dividend at this time but looks
forward to restoring a dividend in the medium term.
PEOPLE
We would like to thank the wider team across Parity for
all their hard work and commitment in helping the
management team drive the business forward. It is a
testament to this hard work that we have been able to
make such strong progress with our strategy and achieve
such a robust performance despite considerable change.
BOARD
As first announced on 23 March 2017, I joined the Board
as Group Non-Executive Chairman on 27 April 2017,
replacing Lord Freeman.
CURRENT TRADING AND OUTLOOK
Trading in the current financial year remains in line with
expectations and the Board remains confident in the
outlook and continues to target investment to support
strategic progress. We believe our continued drive to
rebalance revenues towards the higher margin consulting
arm of the business positions us well to deliver both
growth and further improvements in profitability in 2018
and beyond.
John Conoley
Non-Executive C hairman
9 April 2018
249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 5
About Parity
Parity Group enables people led, technology driven
change
Parity drives digital transformation through consultancy,
technology and people solutions. It helps customers
transform the way they deliver their services to improve
speed, efficiency and effectiveness.
Its distinctive,
integrated offering combines:
• The consulting business which has secured large
ongoing contracts at higher margins which we have
now focussed on dynamic, high growth services
• The recruitment business which provides access to
high-calibre and hard-to-find expertise direct to
clients and for Parity managed projects
Parity Consultancy Services
Helping clients to make the best use of technology to
inform better decision making
This division is focused on successful project delivery
driven by senior industry-experienced consultants. They
guide development of data strategy and deliver data
solutions which generate competitive advantage by
closing the gap between information and insight, enabling
more effective decision making.
Parity Professionals
Helping clients to recruit the best people to deliver real
benefit to your business
This division provides targeted recruitment of temporary
and permanent professionals to support IT and business
change programmes. They ensure clients have both the
capacity and capability to transform organisational
performance in high growth and rapidly evolving markets.
Group
By aligning both divisions, Parity provides an attractive
combination of trusted consultancy advice with access to
the best delivery expertise. When necessary, we
supplement our industry and technology specialists with
access to the broader contractor market through Parity
Professionals. As a client-centric organisation, this enables
us to fulfil their needs through a broad range of services
ensuring Parity remains innovative, flexible and very
scalable. The model is now proven, and we look forward
to accelerating it during 2018 and 2019.
www.parity.net
www.parityprofessionals.co.uk
www.parityconsultancyservices.co.uk
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249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 6
CEO Statement
Alan Rommel – Chief Executive Officer
Introduction
I am delighted by the continuing improvement in the
Group’s performance, as shown by five consecutive halves
of improving comparative metrics, all achieved through
self-funded growth. I would like to thank all my colleagues
at Parity for their continued support in delivering this
positive run of results.
We have plenty still to do to build on our strategic
improvement of the business and we would like to thank
our shareholders who have been both patient and
supportive during our journey to this point. Our focus in
2018 is on demonstrating that the consulting arm, working
in tandem with the recruitment division, can deliver
sustained growth and profitability improvements, to the
benefit of our shareholders.
We aim to grow Group revenues, with further focus on the
development of the consultancy business driving margins,
and to manage that growth with continued strong cost
management.
Our lead offering in support of our consulting proposition
is Data Management - the provision of data-driven insight,
with which we have already demonstrated success with
BAT, MoD and in the Education and Utilities sectors. We
believe this is an attractive area to focus on due to strong
market growth rates and the impact of an increase in
demand for relatively scarce IT and digital specialist skills
across the broader market. The benefits of having an
aligned recruitment business in Parity Professionals
specialising in the sourcing of these niche skills has been
demonstrated by the significant increase in collaboration
and inter-company trading.
The Sector
Parity as a Group is addressing the needs of a large, high
demand and growing market.
In early 2018, Mavenlink published a report in conjunction
with Research Now, detailing the results of a survey of 576
executives (Director and above) from service-centric
companies in North America, Europe and Asia-Pacific. 65%
of these executives stated that they had had to turn down
work in the last 12 months:
• 82% said they did not have enough resources;
• 18% said they did not have the right skill set; and
• 50% said contractors/freelancers/sub-contractors
were very important to delivery, and a further 31%
said they were critical to delivery.
6 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
With regards to the market for Consultancy Services’ data
offering more specifically, research by Gartner in 2017
forecast that the global Business Intelligence (BI) and
Analytics market would grow from $18bn to $23bn by
2020.
Gartner estimated that the global Master Data
Management (MDM) market was worth between $3-5bn
in 2016. Furthermore, the MDM market is expected to
experience significant growth with MarketsandMarkets
forecasting a compound annual growth rate of 23.3% to
2020.
In addition, market reports indicate that there continues
to be a shortage of people with the necessary digital skills
to meet the demands of the market. Clients are
increasingly reliant upon agencies and third party
suppliers to provide access to the necessary skills or
outsource the projects in part or in whole.
We are very well positioned as a Group to exploit this
opportunity. We have a strong reputation with long-
standing relationships in both divisions, established over
45 years of delivering successful projects. Our clients
benefit through our deliberate strategy of aligning our
services to provide flexible access to a substantial resource
pool. Digitalisation of services is a global trend that is
creating new business possibilities and new business
models for our customers. Our services are part of the
platform that enables this disruption, driving their
businesses forwards, with Gold Partnerships with Oracle
and Microsoft positioning us at the forefront of technology
developments.
Parity’s Competitive Advantage
Parity has a proactive and well-received integrated model
and this underpins our consultancy business with the very
best expertise available in the market, while maximising
our exposure to opportunities. This enables flexibility,
speed to scale up for new opportunities, and cost effective
delivery.
Parity can apply delivery models to suit its clients’ specific
needs at every stage of their development lifecycle, for
example it can:
• provide full delivery of data projects;
• manage project teams to deliver outcomes-based
managed services; and
• supply contract or permanent IT skills to supplement
internal staff.
This distinctive, integrated approach is a key point of
differentiation that we plan to exploit further.
249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 7
CEO Statement (continued)
“
I don’t know how to truly
express our gratitude and
appreciation to the Parity team for
the extremely high quality,
efficiency and speed of service;
every time it was beyond
exceptional. Many, many thanks!”
Project Manager, Manufacturing Client
2017 Performance
Our emerging strategy has already driven growth in the
more profitable Consultancy Services where we also
benefit from greater visibility of future revenues. The
Group has continued to make progress in line with
expectations, simplifying the structure and improving
focus on profitable activities which are symbiotic,
benefiting both operating divisions. The management
team is pleased to have achieved strategic progress
including:
• profit growth, supported by significant revenue
growth in Consultancy Services with the benefit of
greater collaboration with the Professionals Division;
loss making Talent
from non-core,
• the exit
Management Services;
• improved new sales KPIs in Parity Professionals
against a headwind of disruption caused by changes
to the application of taxation to Public Sector off
lesser extent,
payroll workers (IR35) and to
uncertainty surrounding the impact of Brexit in the
UK; and
• strong financial controls, which resulted in strong
cash generation and a significant further reduction
in net debt.
2018 Outlook
Our recent strong run of securing new clients, major
frameworks and contract extensions, in combination with
additional investment in key sales and marketing functions
in the first half, leaves us well positioned to benefit in
future periods. We have continued to trade in line with
expectations in the first two months of the current year
and we remain confident in the improving pipeline of
opportunities for both divisions, which we expect to
benefit the second half and beyond.
Alan Rommel
Chief Executive Officer
9 April 2018
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249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 8
Operational and Financial Review
Alan Rommel – Chief Executive Officer
Roger Antony – Group Finance Director
Continuing Operations
Key Financials
Revenue
Operating profit before non-recurring items
Net debt
Ratios
Operating margin %
Net debt / EBITDA ratio
2017
£000’s
83,815
2,056
(1,632)
2.5%
0.7
2016
£000’s
Incr./(Decr.)
%
(8.7%)
16.4%
(62.8%)
91,764
1,766
(4,386)
1.9%
2.0
The Group’s financial performance demonstrates the encouraging progress in rebalancing the business by growing revenues
in the Consultancy Services division which generates greater yields. Consultancy Services now delivers 33.2% of Group
contribution from 11.4% of external revenues.
The 9% decline in Group revenue for the year from £91.8m to £83.8m is predominately a result of the effect of the IR35
reforms on the Professionals division. A significant increase in Consultancy Services’ revenues helped to partially offset the
impact. The improved revenue mix gave rise to a 16% increase in Group operating profit before non-recurring items (non-
recurring items were £nil in 2017), with the Group operating margin improving from 1.9% to 2.5%. We achieved a second
successive year of cash conversion in excess of 100% of EBITDA in 2017, enabling us to reduce net debt from £7.4m at the
end of 2015 to £1.6m at the end of 2017, with the net debt/EBITDA ratio at the end of year improved to 0.7x (2016: 2.0x).
Divisional performance
Revenue
Parity Professionals
Parity Consultancy Services
Less inter-segment revenue
Group revenue
Divisional contribution
Parity Professionals
Parity Consultancy Services
Total divisional contribution
2017
£000’s
80,036
9,543
(5,764)
83,815
2,307
1,148
3,455
Reconciliation of divisional contribution to operating profit from continuing operations
Divisional contribution
Group costs
Depreciation and amortisation
Share-based payment charges
Operating profit before non-recurring items
Non-recurring items (continuing operations)
Operating profit from continuing operations
8 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
2016
£000’s
Incr./(Decr.)
%
86,900
5,345
(481)
91,764
2,660
910
3,570
2017
£’000
3,455
(1,045)
(286)
(68)
2,056
-
2,056
(7.9%)
78.5%
-
(8.7%)
(13.3%)
26.2%
(3.2%)
2016
£’000
3,570
(1,383)
(365)
(56)
1,766
(355)
1,411
249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 9
Operational and Financial Review (continued)
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(cid:18)(cid:381)(cid:374)(cid:400)(cid:437)(cid:367)(cid:410)(cid:258)(cid:374)(cid:272)(cid:455)
Divisional performance (continued)
The Consultancy Services business has grown in line with
our strategic intent with a significant improvement in
revenue of 78.5% to £9.5m (2016: £5.3m). This growth has
clearly demonstrated the opportunities in aligning delivery
within the business to support rapid scaling in higher value
services with inter segment revenues of £5.76m (2016:
£0.48m). This revenue growth supported a strong 26.2%
increase in divisional contribution to £1.15m (2016:
£0.91m), whilst we also continued to invest for growth.
As anticipated, Professionals’ revenues reduced by 7.9%
to £80.0m (2016: £86.9m) as contractor volumes were
impacted by IR35 with a corresponding reduction in
divisional contribution of 13.3% to £2.31m (2016:
£2.66m).
Parity Consultancy Services
The consultancy business has undergone a service driven
structural re-organisation to improve focus and align sales
and delivery functions around core propositions. This
provides clarity and ownership to our client facing
activities, centred on the provision of data solutions and
on delivery of IT projects for our clients.
Data-driven insight is critical to optimising operations and
developing informed business strategies for our clients.
Consultancy Services has created a suite of tools and
capabilities to support the development of the Data
Strategy through to the delivery of Data Analytics. We help
clients understand the key data that they need to gain real
insight, with a Data Maturity Diagnostic which
benchmarks the organisation to define the start point. Our
services then take the client from their current position to
where they need to be, ensuring that the investment
made in driving their data strategy does not just provide
the same management information that the client always
had in a different format.
In addition, Consultancy Services is still able to use its
project management and technical delivery expertise,
supported by contract staffing from Parity Professionals
and our internal permanent staff to provide “Outcome
Managed Services”. We work alongside clients on key
projects where they don’t have the internal capability or
bandwidth, offering access to skilled resource, sharing
delivery risk and saving money in comparison to a full
project outsource by managing the flexible resource levels
to suit project demands.
Growth in the business is creating a much better balance
with strong, higher margin and higher value sales linked
with greater project scale and duration. Improving visibility
of recurring revenues provides a strong foundation from
which to build. We are pleased to report that all key
contracts for the business have been extended. In the past
two years, the client base has significantly increased in size
to 21 clients and revenues have more than doubled. We are
equally proud to have retained long-term relationships with
the MoD and BAT alongside newer significant wins including
the Education and Skills Funding Agency.
The business has successfully tendered for the Dynamic
Procurement System for the Scottish Government, adding
to the award of G-Cloud and the Digital Outcomes and
Specialists frameworks which provide access to our
specialist services to Public Sector clients in England,
Wales and Northern Ireland.
Consultancy Services ended the year with an improving
pipeline and stronger visibility on orders with H1 2018
contracted revenues over 33% above H1 2017 contracted
revenues (£2.8m vs £2.1m, measured at the end of
February).
We saw approximately a 10% increase in internal staff days
delivered in the year compared to 2016, though by far the
greatest increase in delivered days was from contract staff
supplied by Professionals. Whilst this underwrites the
benefit of the businesses being aligned, it has held back
operating margin. The division’s overheads also included
talent investment as we continue to develop the division’s
proposition in line with the Group’s strategy. Continuing
to broaden the client base whilst delivering projects with
similar core skills will enable further permanent
recruitment activity to support project delivery which will
help to improve operating margin.
9
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Operational and Financial Review (continued)
Parity Professionals
Professionals provides targeted recruitment of temporary
and permanent professionals with the staff to deliver
business change programmes. We supply a broad range
of skills from project management through to the niche
skills in Digital, Data and Information Security required to
ensure our clients can deliver their projects.
Professionals has a strong reputation and a well-
established client base in the Public Sector. As highlighted
in the interim financial results, contractor volumes were
impacted due to the implementation of IR35 reforms
applied to Public Sector workers in April 2017. The average
number of contractors on billing in the Professionals
division during the year was 6.6% lower at 942 (2016:
1,009), resulting from an initial post IR35 implementation
drop in overall contractor numbers of approximately 15%
in April. The remainder of the year has seen volumes
recover towards pre-implementation levels. Investment
was sustained in the profitable recruitment business with
costs controlled in part by the exit from a significantly
reduced Talent Management team which failed to
generate traction in training and development services in
the year.
Underwriting these decisions, we are pleased to report an
improvement in the key sales activities at the front end
which mitigated the increased churn in our contractor base.
Sales activity generated an increase in new candidate
placements of 7.7% and the margin generated from these
new placements increased by 9.2% in comparison to 2016,
driving the growth trend in contractor volumes from April.
We are continuing to invest in training and to build both
contract and permanent sales capacity.
Permanent placements help to develop our market
knowledge and brand awareness in niche sectors with both
the client and the candidate community. Whilst contract
placements provide more predictable longer-term revenue,
the improvement in our permanent capability has supported
our new client acquisition strategy. We improved revenues
on permanent placements by 24% to £657,000 (2016:
£530,000), targeting niche skills verticals with strong growth
in digital skills to the SME sector.
The long-standing contract covering the service-wrap for
the Public Sector FastStream Graduate intake was
extended for a further 12 months to November 2018. We
extended key Public Sector framework contracts with the
Scottish Government, G-Cloud and Non-Medical Non-
Clinical (NMNC), and continued to build our client base
with 120 new clients in the year, 80 of which were in the
Private Sector. As with permanent placements, we are
seeing increased penetration into the SMEs, assisting with
digital skills which provides a positive balance to
10 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
maintaining supply to the larger volume clients that
provide longer-term visibility. Professionals improved
operational profitability with higher conversion of
opportunity to placement, and performed strongly against
our peers. This is evidenced by our improved ranking in
the Recruiter Hot 100 which assesses profitability per head
across the agency sector. Our position improved from 59th
place to 43rd.
Group Costs
Group costs reduced to £1.05m (2016: £1.38m) as a result
of lower headcount and cost savings, for example reduced
insurance costs, through actions taken by management.
The absence of non-recurring items in 2017 provides
greater clarity to the Group’s profitability.
Taxation
The tax credit on continuing profit before tax was £0.53m
(2016: tax charge of £0.07m) mainly representing a deferred
tax credit in respect of Consultancy Services. The division
previously carried forward an unrecognised deferred tax
asset in respect of deductible timing differences that had not
been recognised due to historic financial performance. Given
the recent turnaround of the division it is considered more
likely than not that there will be sufficient taxable profits for
the timing differences to be deducted, and the
corresponding asset was recognised in accordance with IAS
12. We have taken a prudent view on the division’s carried
forward tax losses which remain unrecognised, but will keep
this under review.
The Group did not provide for corporation tax payable in
2017 due to the utilisation of Group relief and the
availability of carried
forward deductible timing
differences and tax losses.
Discontinued operations
Inition was held for sale during 2017 and accordingly its
results are presented as discontinued. During 2017 Inition
incurred an operating loss after tax of £0.9m (2016: £0.1m).
In addition, a non-cash charge of £1.1m (2016: £nil) was
incurred in respect of the impairment of the remaining
goodwill relating to Inition. Other discontinued costs
include professional advisor fees incurred in connection
with actions taken to divest of Inition.
Earnings per share and dividend
The basic earnings per share from continuing operations
were 2.15 pence (2016: 0.87 pence). The increase is driven
by profit before tax growth and the deferred tax credit.
The Board does not propose a dividend for 2017 (2016:
nil), but will continue to review this policy and will seek to
restore a dividend in the medium term.
249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 11
Operational and Financial Review (continued)
Statement of Financial Position
Trade and other receivables
Trade and other receivables decreased by £2.4m to
£12.0m (2016: £14.4m). The decrease is principally
attributable to an improvement in debtor collections in
the Professionals division. Group debtor days, calculated
on billings on a countback basis, decreased to a record low
of 20 days (2016: 29 days).
Trade and other payables
Trade and other payables decreased slightly during the
year to £8.3m (2016: £9.1m). At the year end, creditor
days were 28 days (2016: 26 days).
Loans and borrowings
Loans and borrowings 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
Business Credit (“PNC”), a leading secured finance lender,
allows for borrowing of up to £15m depending on the
availability of appropriate assets as security. The current
facility, which has been in place since 2010, was renewed
on 1 September 2016, and runs until the end of 2018, at
which point PNC have indicated a willingness to renew the
facility. The interest rate applied to borrowings was 2.35%
over the prevailing base rate.
Cash flow and net debt
The Group generated positive net cash flows from
operating activities of £3.0m (2016: £3.4m), driven by
EBITDA and a positive working capital swing with a
reduction in debtor days to 20 (2016: 29 days). The £3.0m
cash generated was after an outflow of £0.7m in respect
of discontinued operations, and despite the reversal of
£0.6m fees in advance carried forward from 2016.
As a result of the positive cash flow, net debt reduced to
£1.6m (2016: £4.4m).
Positive net cash flow
Reduced net debt
to £1.6m (2016: £4.4m)
Defined Benefit Pension Deficit
During the year the Group agreed to the trustees’ proposal
to implement liability driven investment (“LDI”). LDI seeks
to reduce volatility of the scheme deficit by hedging
against liability risks, which was considered to be
appropriate given the maturity of the scheme (88% of
members are pensioners).
At the year end the deficit had decreased to £1.06m
(2016: £1.85m), primarily due to a good return on the
scheme assets.
Share Capital
In May 2017 we cancelled the legacy deferred shares in
issue. The deferred shares were not listed, and effectively
carried no rights. As a result, share capital reduced to
£2.0m (2016: £16.3m) and a capital redemption reserve
of £14.3m was created (2016: £nil).
Principal risks and uncertainties
The Board maintains a close watch on issues that affect our
business, markets and the wider economy. Whilst the
markets that we operate in can be cyclical in their nature,
we take necessary action to mitigate the risk and potential
impact profile. We have provided a sample below:
o Macro-economic uncertainty
Client project decisions can stall and recruitment
activity are affected by confidence. We operate a
largely elastic cost base with flexible resourcing and
costs (both staffing and commissions) related to
activity levels, and managed offices on shorter-term
contracts with options to exit. The expected increase
in interest rates has been mitigated with significantly
reduced debt, with our debtor days below market
norms (20 days).
o Brexit
The Group operates predominately in the UK and
notwithstanding delays due to the wider macro-
economic uncertainty, is not expected to suffer a direct
long-term negative impact due to Brexit, as it is
supported by the strong underlying UK economy.
Demand for the Group’s services could reduce as an
indirect result of impact of Brexit on the UK economy,
although Brexit has also driven additional opportunity
to the Group with established Public Sector clients
creating additional infrastructure in preparation.
o Legislation – e.g. IR35, GDPR
IR35 has increased the ‘churn’ rate of contractors in
the Public Sector as they leave to work in roles which
are not assessed to be within IR35, elsewhere in the
Public Sector, or leave for roles in the Private Sector
which are assessed differently. Our exposure was
greater than most with a high concentration of Public
Sector contractors.
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249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 12
Operational and Financial Review (continued)
Principal risks and uncertainties (continued)
o Legislation – e.g. IR35, GDPR (continued)
Parity tracks changes directly and as an active
founding member of the Association of Professional
Staffing Companies (APSCo) which lobbies and
advises on changes. An internal working group
changed our processes and ensured all stakeholders
(client, candidate and staff) were informed through
the transition. The processes are now business as
usual, sales activities have increased, and our broader
managed services in the consulting business have
expanded to support clients who are also impacted
by increased churn. If the same rules are applied to
the Private Sector as rumoured, we will be very well
prepared. We are following the same principles with
a working group in place focused on GDPR.
o Strategy fails to deliver anticipated growth
The Group’s anticipated growth may not be
achievable if the Group is unable to implement its
strategy effectively. The Board seeks to mitigate this
through a robust assessment of its opportunities, the
feedback from its clients and potential clients, clear
priorities and focus on delivering key objectives and
incentivising its team to deliver against those
objectives.
o Loss of key client accounts
A portion of the Group’s revenues are dependent on
the award of framework agreements as an approved
supplier. It is possible that the Group will lose this
status. We seek to mitigate this through closely
monitoring our service
level agreements and
ensuring the quality of our delivery. The Group also
has a deliberate focus on winning new client
framework agreements to continue to diversify its
revenue streams.
o Staff
The risk is that staff do not have the development or
the tools to perform at their best, and without a clear
career path we experience increased staff turnover.
Parity has invested in additional direct training and
training resource for staff. We support staff to achieve
expectations in their roles and there is clarity on the
development required. We support staff by reviewing
and acquiring new tools to help them perform at their
best, and provide competitive remuneration and
incentives
staff
for 2017 demonstrated
engagement
retention. Our
support
survey
to
12 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
improvement in all primary metrics, and we score as
good as, or better than the industry ‘norm’ in each of
these metrics. In addition, the Group has various
share plans at its disposal, to provide staff with the
opportunity to benefit from the success of the Group
with minimal financial risk.
o 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.
o 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.
Alan Rommel
Chief Executive Officer
9 April 2018
Roger Antony
Group Finance Director
9 April 2018
“
In all the years I have worked
with Parity I have found the level of
knowledge and professionalism to be
outstanding. A real pleasure to work
with people who always go above and
beyond what is expected.”
Technical Consultant, IT Services Client
249360 Parity Group_pp01-pp13.qxp 26/04/2018 12:10 Page 13
CASE STUDY
Data Solutions
Ministry of Defence (MCOCS)
Parity are responsible for the delivery of
cost-modelling to determine built-up, through-
life costs for all military capability under the
control of the MoD.
Parity’s hybrid team of employed and contract
consultants have developed the SDS+
application to validate and manage the core
master data.
Our Data Architect is responsible for the Master
Data Management of the costing data, providing
the definition and documentation of the
processes, governance and standards which are
applied to the data.
The programme has been running since 2015,
generating £5m in revenues for Parity and
identifying in excess of £15m in savings for MoD.
2015
Programme
start date
£5m
In revenues
for Parity
£15m
In savings
for MoD
13
249360 Parity Group_pp14-pp34.qxp 26/04/2018 12:11 Page 14
Board of Directors
John Conoley 1, 2, 3
Non-Executive Chairman
John Conoley, 57, joined the Board as Group non-
executive Chairman on 27 April 2017, and is Chairman of
the Nominations Committee. John Conoley brings over 30
years IT industry knowledge and significant executive and
non-executive Board level experience of AIM listed
technology software and services businesses. John’s
current roles include eServGlobal, the innovative mobile
financial services plc, where he has served as both
is currently Executive
Non-Executive Director and
Chairman. He previously served as CEO of London
listed Psion PLC, and as a Non-Executive Director
of
talent management
the
technology platform.
NetDimensions,
David Firth 1, 2, 3
Non-Executive Director
David Firth, 57, was appointed to the Board as a
Non-Executive Director on the 14 September 2016 and is
Chairman of the Remuneration and Audit Committees.
David was previously the Finance Director of Penna
Consulting plc for over 16 years and has a wealth of
experience in the people management and consultancy
markets. Prior to that, David has held senior finance
positions in public companies across a number of sectors
including financial markets, recruitment, IT services, motor
retailing and advertising. He was a member of the finance
team at Parity for the period 1993 to 1999 and served as
its Group Finance Director from 1995. David is currently
also a Non-Executive Director at Best of the Best plc, the
online competitions organiser.
Alan Rommel
Chief Executive Officer
Alan Rommel, 46, 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’
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.
recruitment experience and a
Roger Antony
Group Finance Director
Roger Antony, 50, is the Group Financial Director and was
appointed to the Board on 22 April 2016. Roger had been
with Parity for over 18 years prior to his appointment,
holding the position of Group Financial Controller since
2006, and prior to that the role of Financial Controller for
the International Resources Division. Roger joined the
Group after qualifying as an accountant in 1997, and
previously held managerial roles within a variety of listed
entity finance departments. He has a thorough
understanding, and experience, of the IT Services sector.
1 Member of the nominations committee
2 Member of the remuneration committee
3 Member of the audit committee
14 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp14-pp34.qxp 26/04/2018 12:11 Page 15
Directors’ Report
The Directors present their report and the audited accounts for the year ended 31 December 2017.
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.
recruitment, predominately
The principal activity of the Parity Professionals division is
to provide
interim
recruitment, and graduate placement services, to a
diverse range of clients. In 2017 its clients’ market sectors
included central and local government within the public
sector and Utilities, FMCG, Insurance, Oil, and Transport
in the private sector.
The principal activities of the Parity Consultancy Services
division comprise business
intelligence solutions,
technology solutions and business consultancy services.
Parity Consultancy Services delivered its services during
the year to central government departments in the public
sector, and to FMCG and legal clients in the private sector.
is
included
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
in the Chairman’s Statement,
CEO Statement and the Operational and Financial Review
on pages 4 to 12. The Group’s social, environmental and
ethical policies are set out on pages 18 and 19. A
statement on the application of the going concern
principle is set out below. Details of financial instruments
are set out in note 20 to the financial statements. Each of
the above is incorporated in this report by reference.
Group results
The Group profit from continuing operations before
taxation for the year was £1.66m (2016: £0.96m). After
a tax credit of £0.53m (2016: tax charge of £0.08m) and a
loss after tax from discontinued operations of £2.18m
retained profit of £0.01m
(2016: £0.08m),
(2016: £0.81m) has been transferred to reserves. The
results for the year are set out in the consolidated income
statement on page 35.
the
Dividends
The Directors do not recommend a final dividend (2016: nil
pence per ordinary share). The total dividends for the year
were nil pence per ordinary share (2016: 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 22.
Purchase of own shares
At the end of the year, the Company had authority, under
the shareholders’ resolution of 25 May 2017, to purchase
in the market 10,212,402 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
9 April 2018 is set out on page 14, together with details of
membership of the Board committees.
The Company’s Articles of Association also require that each
Director retire from office and seek reappointment at the
third annual general meeting after the general meeting at
which he was last appointed, or reappointed. None of the
Directors are due for re-election at the next AGM.
Directors’ interests
The Directors’ beneficial interests in the ordinary share
capital of the Company are set out within the
remuneration report on page 29.
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Directors’ Report (continued)
Principal shareholders
At the close of business on 6 April 2018 (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:
Philip Swinstead
Hargreave Hale Limited
Timothy Watts
David Courtley
Barclays Wealth
Citrine Investments
Killik Asset Management
Interactive Investor
Dominion Holdings
Hargreaves Landsdown Asset Management
Brewin Dolphin
Redmayne Bentley Stockbrokers
Equiniti Financial Services
Number of
Ordinary 2p shares
Percentage
Held
12,043,751
9,200,000
8,700,000
6,566,031
5,966,996
5,558,766
5,470,020
5,256,734
4,400,000
4,028,543
3,640,084
3,558,082
3,219,543
11.79
9.01
8.52
6.43
5.84
5.44
5.36
5.15
4.31
3.94
3.56
3.48
3.15
Capital structure
The Company has one class of share in issue, ordinary shares of 2p. The shares are listed on the London Stock Exchange and
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 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 Directors have reviewed the Group’s cash flow forecasts for the period to 31 December 2019, taking account of
reasonably possible changes in trading performance. The financing facility provided by PNC is due for renewal on
31 December 2018 and PNC have formally indicated a willingness in principle to renew at this point. After making appropriate
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, except for the finance facility agreement with PNC. 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.
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 pages 18 and 19. This statement covers the Group’s Employment Policies,
Environmental Policy and Health and Safety Policy.
16 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp14-pp34.qxp 26/04/2018 12:11 Page 17
Directors’ Report (continued)
“
Parity have always
exceeded expectations, in any
management, development or
service activity.”
Data Analytics Lead, Manufacturing
Client, Research and Development
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.
Political donations
There were no political donations made by the Group
during the year (2016: none).
Corporate Governance
The Corporate Governance Report on pages 21 to 25 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.
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
Roger Antony
Director
9 April 2018
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Social, Environmental & 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,
career
development.
teamwork
individual
and
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. An
Employee Voice forum was introduced during 2017
in order to create more opportunities for upward
ideas from all
communication and generation of
employees. The forum comprises volunteer staff members
from different office locations.
independent organisation and
The Group also encourages all employees to participate in
an annual employee survey. The survey is administered by
an
responses are
anonymous. Results are communicated to staff with
proposed actions to address any identified issues. The
results from the 2017 survey reflected above average staff
engagement and satisfaction, and an overall improvement
on the 2016 results.
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.
18 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
• 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 support national charities
and also become involved in their local communities and
fund raising events.
The Group encourages employees who undertake
volunteer work and firmly believes that the experience
individual’s personal
gained contributes
development. Where possible, the Group provides
flexibility with working hours to accommodate such
commitments outside of work.
the
to
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 where this is
appropriate for their role.
249360 Parity Group_pp14-pp34.qxp 26/04/2018 12:11 Page 19
Social, Environmental & Ethical Policies (continued)
Environmental policy (continued)
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.
“
I’d say the best
vendor I ever have the pleasure
of working with.”
Technical Consultant, IT Services Client
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.
Paper usage
The Group constantly strives to implement paper-saving
practices to reduce wastage. Examples include: electronic
timesheets, E-invoicing, E-payslips, and electronic expense
claims.
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.
Anti-Bribery Act
Parity’s Anti-Bribery and Corruption policy is written to
follow the UK regulatory requirements in relation to the
Anti-Bribery Act. The policy has Executive Director
ownership and is available on the Group’s intranet. Client
and supplier arrangements are regularly reviewed and
guidance forms part of each employee’s induction.
Modern Slavery Policy
Parity Group has a zero-tolerance approach to modern
slavery and is committed to acting ethically and with
integrity in all its business dealings and relationships, and
to implement and enforce effective systems and controls
to ensure modern slavery is not taking place anywhere in
its own business, or its supply chain. The following actions
have been taken during 2017.
• Supply Chain Review - we continue to take positive
steps to improve supply chain transparency. As our
supplier chain is mainly made up of UK based
suppliers of professional services, computer software
and equipment, office supplies and our contractor
and associate workers, we believe that we operate a
supply chain with a very low inherent risk of slavery
and human trafficking potential. Nevertheless, we
have amended our contractual clauses with suppliers
to ensure their suitability and ongoing compliance to
the Modern Slavery Act 2015. We will continue to
assess and manage the risk in our supply chain as part
of an annual review of our policy.
• Staff Training - we have provided training to all our
employees on the Modern Slavery Act 2015 in order
to provide general awareness across the company and
ensure all employees are aware of
their
responsibilities. This training has now been built into
our staff induction processes to ensure it is provided
to all new recruits coming on board.
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TESTIMONIAL
Candidate
Server Engineer
“
I have been working with Parity for several months.
They are very efficient and provide an exceptional
service. I have dealt with several staff from Parity all of which were
friendly, approachable, helpful and understanding. Demonstrated
professionalism and passion and dependable. I appreciate their quick
response, efficiency and prompt follow-up to my requests.”
20 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp14-pp34.qxp 26/04/2018 12:11 Page 21
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 (the Code). However, the
Board is committed to maintaining high standards of
corporate governance and seeks 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.
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 pages 15 to 17.
The workings of the Board and its Committees
The Board
At the date of this report, the Board comprises the Non-
Executive Chairman,
John Conoley, Non-Executive
Director, David Firth, Group Chief Executive, Alan Rommel
and Group Finance Director, Roger Antony. During the year
John Conoley was appointed Non-Executive Chairman on
27 April 2017 with Lord Freeman stepping down from this
role on the same date. The table on page 28 sets out the
dates of tenure of the current Directors on the Board. The
Directors’ biographies, which are set out on page 14,
illustrate the range of business backgrounds, skills,
independence and experience contributed by each Board
member.
Non-Executive Chairman
The Non-Executive Chairman, John Conoley, 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 the
Non-Executive Chairman met with the other Non-
Executive Director without the Executive Directors being
present.
Senior Independent Director
David Firth acted as the de facto Senior Independent
Director during 2017. He was an additional contact point
for shareholders if they had reason for concern, when
contact through the normal channels of the Executive
Directors and Chairman had failed to resolve their
concerns, or where such contact was inappropriate.
Re-election of Directors
Directors appointed since the last annual General
Meeting, and those retiring by rotation will submit
themselves for election or re-election at the next Annual
General Meeting, as set out in the Directors’ report on
page 15 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 review and approve the Group’s strategy and
to monitor progress against set 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 22.
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.
including financial,
operational, compliance and risk management. During
2017 the Board continued to regularly track potential risks
associated with Brexit.
It covers all controls,
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Corporate Governance Report (continued)
Board meetings (continued)
The Board delegates specific responsibilities to three
Committees: The Audit Committee, The Remuneration
Committee and the Nomination Committee. 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
December 2017.
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 continuing operational businesses are divided into
two separate divisions, Parity Professionals and Parity
Consultancy Services. Inition is a non-core separate
business offering, acquired under the previous strategy,
and was held for sale during 2017. Each division or
business offering has a Managing Director. The operational
board comprises the Chief Executive Officer, the Group
Finance Director and the divisional Managing Directors.
The operational board meetings are held monthly and are
attended by other senior management as appropriate.
Regular updates are provided by the heads of Shared
Service functions such as Marketing, HR and IT. Any key
issues arising from these meetings are reported to the
main 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 for 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 greater diversity
amongst its members.
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 5 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.
Board
Audit
Nomination
Remuneration
Number held
Number attended1
John Conoley2
David Firth
Alan Rommel
Roger Antony
Lord Freeman3
16
11/11
13/16
16/16
16/16
4/5
3
2/2
3/3
-
-
1/1
1
-
1/1
-
-
1/1
3
1/1
3/3
-
-
2/2
1
2
3
All Directors who were members of the Board at the time attended the Group’s Annual General Meeting on 25 May 2017
Appointed to the Board 27 April 2017
Stepped down from the Board 27 April 2017
22 Parity Group plc www.parity.net
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249360 Parity Group_pp14-pp34.qxp 26/04/2018 12:11 Page 23
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
David Firth was appointed Chair of the Audit Committee
on 6 October 2016. Details of Davids’s recent and relevant
financial experience are set out in his biography on
page 14. John Conoley was appointed as the other
member of the Audit Committee after Lord Freeman
stepped down on 27 April 2017. The Audit Committee
meets three times a year.
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
the
engagement of the external auditors to supply non-
audit services;
implementing policy on
• 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.
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 non-audit related services, including
work in relation to shareholder circulars and similar
services. The external auditor provided non-audit related
services during 2017, details of which are set out in note
3 to the accounts.
Remuneration Committee
The Remuneration Committee comprises both Non-
Executive Directors and is chaired by David Firth. John
Conoley became a member after Lord Freeman stepped
down on 27 April 2017. Details of the responsibilities of
in the
the Remuneration Committee are set out
remuneration report on pages 26 to 29. Where necessary,
specialist external consultants are used to assist the
Committee.
Nomination Committee
The Nomination Committee comprises both Non-Executive
Directors and is chaired by John Conoley. John Conoley was
appointed Chairman after Lord Freeman stepped down on
27 April 2017. David Firth is the other member of the
Nomination committee. The Committee 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.
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Corporate Governance Report (continued)
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 is 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. As required by the AIM Rules of the London Stock
Exchange they are required to prepare the Group financial
statements in accordance with International Financial
Reporting Standards as adopted by the EU (IFRSs as
adopted by the EU) and applicable law and have elected
to prepare the parent Company financial statements on
the same basis.
24 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
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,
relevant and reliable;
• state whether they have been prepared in accordance
with IFRSs as adopted by the EU;
• assess the Group and parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
• use the going concern basis of accounting unless they
either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.
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 are responsible for such internal control as they
determine is necessary to enable the preparation of
financial statements that are free from material
misstatement, whether due to fraud or error, and 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 Strategic Report and 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.
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Corporate Governance Report (continued)
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 20 to the financial statements. Other risks
and uncertainties are discussed in the Operational and
Financial Review on pages 11 and 12.
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.
Roger Antony
Company Secretary
9 April 2018
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Remuneration Report
Remuneration Committee
The Remuneration Committee comprises David Firth as Chairman, and John Conoley who joined on 27 April 2017. Lord
Freeman was Chairman in the year until 27 April 2017 when he stepped down. 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 Plan 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 in relation to the defined
benefit scheme and advice is taken on an ad hoc basis in relation to the defined contribution scheme. 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 2017 are set out in the table on page 28.
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 2017
were basic annual salary and benefits in kind; performance bonuses; 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 an incentive bonus for Executive Directors are agreed annually. For 2017, performance targets were set, but
were not met, and no performance bonuses were earned by, or paid to, Executive Directors in 2017.
Share option schemes
During 2017 the Group operated two types of share option scheme: An Executive Share Option Plan, and a Savings Related
Share Option Scheme (Sharesave Scheme).
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.
26 Parity Group plc www.parity.net
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Remuneration Report (continued)
Executive share option plans (continued)
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.
Share options awarded to the Executive Directors are disclosed in the table under the section Directors’ Remuneration
within the Remuneration Report on page 29. All of the options awarded to the Executive Directors have vested or lapsed,
with the exception of the following grant:
On 19 September 2016 1,500,000 share options were awarded under this scheme to Alan Rommel and 800,000 share
options were awarded to Roger Antony. The exercise price of the options is 8.62 pence and the share options granted have
been divided into thirds with each third being subject to the following performance condition:
i) To exercise the first third (1/3 in total) of the share options awarded, the share price must be greater than or equal
to 10.74 pence for 5 consecutive days.
ii) To exercise the second third (2/3 in total) of the share options awarded the share price must be greater than or equal
to 12.93 pence for 5 consecutive days.
iii) To exercise the final third (100% in total) of the share options awarded the share price must be greater than or equal
to 15.08 pence for 5 consecutive days.
All of the share options awarded to the Executive Directors vest in 3 years from the grant date, and lapse in 10 years from
the grant date if not exercised.
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 2017.
Share price
The Parity Group plc mid-market share price on 31 December 2017 was 9.375 pence. During the period 1 January to
31 December 2017 shares traded at market prices between 7.625 pence and 12.875 pence.
Directors’ pension information
Alan Rommel and Roger Antony are entitled to a contributory company pension contribution of 5% of basic salary.
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.
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Remuneration Report (continued)
Service contracts and letters of appointment (continued)
Contractual arrangements for current Directors are summarised below:
Director
John Conoley1
David Firth1
Alan Rommel
Roger Antony
Contract date
Notice period
Contractual
termination
payment
27 April 2017
31 May 2016
12 August 2015
22 April 2016
3 months
n/a
12 months
6 months
3 months rolling
n/a
12 months rolling
6 months rolling
1 Unless otherwise specified, 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
2017
£’000
Compensation
for loss
of office
2017
£’000
Benefits
2017
£’000
Total
Company
pension
emoluments contributions7
2017
£’000
2017
£’000
Executive Directors
A Rommel 200
R Antony 150
Non-Executive Directors
John Conoley1 41
Lord Freeman2 13
41
D Firth
Total emoluments 445
13
12
–
–
–
25
–
–
–
–
–
–
213
162
41
13
41
470
10
8
–
–
–
18
Salary/
Fees
2016
£’000
200
96
48
40
13
31
428
Executive Directors
A Rommel
R Antony3
M Aspinall4
Non-Executive Directors
Lord Freeman
D Firth5
N Ransome6
Total emoluments
Compensation
for loss
of office
2016
£’000
Benefits
2016
£’000
Total
Company
pension
emoluments contributions7
2016
£’000
2016
£’000
14
8
3
–
–
–
25
–
–
87
–
–
–
87
214
104
138
40
13
31
540
10
5
2
–
–
–
17
Share
Based
Payments
2017
£’000
20
10
–
–
–
30
Share
Based
Payments
2016
£’000
25
8
–
–
–
–
33
J Conoley was appointed as a Board Director on 27 April 2017
Lord Freeman resigned as a Board Director on 27 April 2017
Notes
1.
2.
3. R Antony was appointed as a Board Director on 22 April 2016
4. M Aspinall resigned as a Board Director on 22 April 2016
5. D Firth was appointed as a Board Director on 14 September 2016
6. N Ransome resigned as a Board Director on 6 October 2016
7. Company pension contributions disclosed in the table above represent the contractual pension entitlements due to the Directors of the company.
28 Parity Group plc www.parity.net
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Remuneration Report (continued)
Executive Directors’ share options
Lapsed/
As at Surrendered
1 January in the
2017 year
Exercised
in the
year
Awarded
As at
in the 31 December
2017
year
Alan Rommel
Executive share option plan
2009 150,000
2010 150,000
2010 100,000
2013 160,000
2014 600,000
2016 1,500,000
Sub-total 2,660,000
Roger Antony
Executive share option plan
2010 100,000
2013 20,000
2014 160,000
2016 800,000
Sub-total 1,080,000
Total 3,740,000
–
–
–
–
(600,000)
–
(600,000)
–
–
(160,000)
–
(160,000)
(760,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150,000
150,000
100,000
160,000
-
1,500,000
2,060,000
100,000
20,000
–
800,000
920,000
2,980,000
Exercise
price
per
share
£0.0900
£0.0875
£0.0750
£0.2650
£0.2112
£0.0862
Exercise
period
2012-2019
2013-2020
2013-2020
2016-2023
n/a
2019-2026
2013-2020
2016-2023
n/a
2019-2026
£0.0875
£0.2650
£0.2112
£0.0862
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.
At 31 December
2016 (or date of
appointment
if later)
Shareholding as at
31 December 2017
(or date of
resignation)
% issued
share capital
–
6,250
100,000
210,632
100,000
–
0.01
0.10
0.21
0.10
–
6,250
100,000
410,632
100,000
% issued
share capital
–
0.01
0.10
0.40
0.10
John Conoley
Lord Freeman
David Firth
Alan Rommel
Roger Antony
For and on behalf of the Board
David Firth
Chairman of The Remuneration Committee
9 April 2018
29
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Independent
auditor’s report
to the members of Parity Group plc
Materiality:
group financial
statements as a whole
Coverage
£0.84m (2016:£0.85m)
1.00% (2016: 0.92%) of total
group revenues
100% (2016:100%) of group
profit before tax
Risks of material misstatement vs 2016
Recurring risks
Revenue recognition (cid:379)(cid:377)
Recoverability of parent (cid:379)(cid:377)
company’s investment in
subsidiaries
1. Our opinion is unmodified
We have audited the financial statements of Parity
Group Plc (“the Company”) for the year ended 31
December 2017 which comprise the Consolidated
Income Statement, Statement of Comprehensive
Income, Statements of Changes in Equity,
Statements of Financial Position, Statements of
Cash Flows and the related notes, including the
accounting policies in note 1.
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
2017 and of the Group’s profit for the year then
ended;
— the group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union (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.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We have fulfilled our ethical
responsibilities under, and are independent of the
Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to
listed entities. We believe that the audit evidence
we have obtained is a sufficient and appropriate
basis for our opinion.
30 Parity Group plc www.parity.net
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Independent Auditor’s Report (continued)
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
The risk
Our response
Revenue recognition
(£84m; 2016: £92m)
Refer to page 8 (Audit Committee
Report on Audit Strategy), page 7
(Audit Committee report on Audit
Findings) and page 50 (financial
disclosures)
Although we do not consider revenue to
be an area with a high risk of significant
misstatement, or requiring a significant
level of judgement, it is considered to be
one of the key drivers of results and as
such had the greatest effect on our audit
and allocation of resources in the
planning and completing our audit.
The majority of the Group’s revenue is
derived from the supply of professional
services at pre determined rates. This
revenue is recognised as and when the
work is performed based on timesheets
submitted by contractors. At year end
the Group estimates adjustments for
revenue from any work carried out
during the year where timesheets were
not submitted before year end.
Revenue from consultancy service
contracts also contributes towards the
Group’s revenue. Contracts can either
be fixed price or time and materials
based. Fixed price contract revenue is
recognised based on the percentage of
completion method. Time and materials
contract revenue is recognised as the
services are rendered.
Our procedures included:
—
—
—
—
—
Control operation: assessing the
operating effectiveness of IT systems
and manual data entry controls used in
the timesheet and hourly rate input
processes to assess the accuracy of
contractor billing data.
Control operation: assessing the
operating effectiveness of controls over
the timesheet approval and sales invoice
authorisation processes to obtain
comfort over the hours worked.
Test of details: Using Data and Analytics
procedures to identify customers,
contractors or individual projects with
unusually high or low gross margins
during the year. We investigated any
outliers by agreeing to supporting
documentation.
Test of details: Selecting a sample of
invoices and other revenue adjustments
processed at the year-end and
challenging whether revenue had been
accurately recorded in the correct period
by comparing to supporting
documentation.
Reperformance: Recalculating the
revenue recognised in respect of a
sample of revenue contracts recognised
on a percentage of completion basis.
This included comparing the contract
terms, days currently worked on the
project according to timesheets and
estimated days to complete to assess if
revenue had been correctly calculated.
To assess the reasonableness of the
estimated days to complete we
considered the historical accuracy of
forecasting and corroborated judgements
involved in estimates through
discussions with project level staff.
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Independent Auditor’s Report (continued)
2. Key audit matters: our assessment of risks of material misstatement (continued)
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
Recoverability of parent
company’s investment in
subsidiaries
(£21m; 2016: £21m)
Refer to page 75 (financial
disclosures).
The risk
Our response
Low risk, high value
Our procedures included:
The carrying amount of the parent
company’s investments in subsidiaries
represents 14% (2016: 14%) of the
company’s total assets. Their
recoverability is not at a high risk of
significant misstatement or subject to
significant judgement. However, due to
their materiality in the context of the
parent company financial statements,
this is considered to be the area that had
the greatest effect on our overall parent
company audit.
— Tests of detail: Comparing the carrying
amount of 100% of investments with the
relevant subsidiaries’ financial statements to
identify whether their net assets, being an
approximation of their minimum recoverable
amount, were in excess of their carrying
amount and assessing whether those
subsidiaries have historically been profit-
making. For the investments where the
carrying amount exceeded the net asset
value, comparing the carrying amount of the
investment with the expected value of the
business based on discounted forecasted
cash flows.
— Assessing subsidiary audits: Assessing
the work performed as part of our audit of
subsidiaries and considering the results of
that work, on those subsidiaries’ profits and
net assets.
32 Parity Group plc www.parity.net
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Independent Auditor’s Report (continued)
3. Our application of materiality and an overview of the
scope of our audit
Total revenue
£84m (2016: £92m)
Group Materiality
£0.84m (2016: £0.85m)
Materiality for the group financial statements as a whole was
set at £0.84m, determined with reference to a benchmark of
group revenue, of which it represents 1.00% (2016: 0.92%).
We consider total revenue to be the most appropriate
benchmark as it provides a more stable measure year on
year than group profit before tax.
Materiality for the parent company financial statements as a
whole was set at £0.835m (2016: £0.85m), determined
with reference to a benchmark of company total assets, of
which it represents 0.55% (2016: 0.58%).
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding £0.04m,
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 12 (2016: 27) components, we subjected the
9 active subsidiaries (2016: 12) to full scope audits for group
purposes. The Group team approved the component
materialities, which ranged from £0.05m to £0.835m,
having regard to the mix of size and risk profile of the Group
across the components. All work was carried out by the
group engagement team at the group’s London head office
only.
The components within the scope of our work accounted
for the percentages illustrated opposite.
£0.84m
Whole financial
statements materiality
(2016: £0.85m)
£0.835m
Range of materiality at 9
components
(£0.05m-£0.835m)
Total Revenue
Group materiality
£0.04m
Misstatements reported to the
audit committee (2016:
£0.04m)
Group revenue
Group profit before tax
0
0
100%
(2016 100%)
100
100
0
0
100%
(2016 100%)
100
100
Group total assets
0
0
100%
(2016 100%)
100
100
Key:
Full scope for group audit purposes 2017
Full scope for group audit purposes 2016
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Independent Auditor’s Report (continued)
4. We have nothing to report on going concern
7. Respective responsibilities
We are required to report to you if we have concluded that
the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty
that may cast significant doubt over the use of that basis for
a period of at least twelve months from the date of approval
of the financial statements. We have nothing to report in
these respects.
5. We have nothing to report on the other information in
the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have
not identified material misstatements in the other
information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports for
the financial year is consistent with the financial
statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required 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.
We have nothing to report in these respects
Directors’ responsibilities
As explained more fully in their statement set out on page
24, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error; assessing the Group and,
parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe
our responsibilities
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.
Kelly Dunn (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
9 April 2018
34 Parity Group plc www.parity.net
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Consolidated income statement
for the year ended 31 December 2017
Continuing operations
Revenue
Employee benefit costs
Depreciation, amortisation & impairment
All other operating expenses
Total operating expenses
Operating profit/(loss)
Finance costs
Profit/(loss) before tax
Tax credit/(charge)
Profit/(loss) for the year from
continuing operations
Discontinued operations
Loss from discontinued operations,
net of tax
Profit/(loss) for the year
attributable to owners of the parent
Earnings per share – Continuing operations
Basic earnings per share
Diluted earnings per share
Notes
2
3
3
3
6
9
7
10
10
Earnings per share – Continuing and discontinued operations
Basic earnings per share
Diluted earnings per share
10
10
The notes on pages 41 to 75 form part of the financial statements.
Before non-
recurring
items
2016
£’000
Non-
recurring
Items
(note 4)
2016
£’000
Total
2017
£’000
83,815
(5,939)
(286)
(75,534)
(81,759)
2,056
(394)
1,662
534
91,764
(6,245)
(365)
(83,388)
(89,998)
1,766
(452)
1,314
(154)
-
(260)
(115)
20
(355)
(355)
-
(355)
79
(276)
2,196
1,160
(2,182)
(78)
-
14
1,082
(276)
2.15p
2.08p
0.01p
0.01p
Total
2016
£’000
91,764
(6,505)
(480)
(83,368)
(90,353)
1,411
(452)
959
(75)
884
(78)
806
0.87p
0.83p
0.79p
0.76p
35
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249360 Parity Group_pp35-pp40.qxp 26/04/2018 12:12 Page 36
Consolidated statement of comprehensive income
for the year ended 31 December 2017
Profit 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
Deferred taxation on remeasurement of defined 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 41 to 75 form part of the financial statements.
Notes
2017
£’000
14
2016
£’000
806
(39)
(13)
22
14
800
(136)
625
(413)
-
(426)
639
380
36 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp35-pp40.qxp 26/04/2018 12:12 Page 37
Statements of changes in equity
for the year ended 31 December 2017
Consolidated
At 1 January 2017
Profit for the year
Exchange differences on
translation of foreign
operations
Remeasurement of
defined benefit pension
scheme
Deferred taxation on
remeasurement of
defined pension scheme
taken directly to equity
Issue of new ordinary
shares
Share options – value of
employee services
Cancellation of deferred
shares
Share
capital
£’000
2,037
-
-
-
-
6
-
-
14,319
33,195
-
-
-
-
-
-
(14,319)
-
-
-
-
16
-
-
Deferred
shares
£’000
Share
Capital
premium redemption
reserve
£’000
reserve
£’000
Consolidated
At 1 January 2016
Profit for the year
Exchange differences on
translation of foreign
operations
Remeasurement of
defined benefit
pension scheme
Share options – value of
employee services
Share
capital
£’000
2,037
-
-
-
-
14,319
33,195
-
-
-
-
-
-
-
-
At 31 December 2016
2,037
14,319
33,195
Deferred
shares
£’000
Share
Capital
premium redemption
reserve
£’000
reserve
£’000
Other
reserves
£’000
Retained
earnings
£’000
44,160
(87,251)
14
Total
£’000
6,460
14
-
-
-
-
-
-
-
14,319
14,319
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(39)
(39)
800
800
(136)
(136)
-
68
-
22
68
-
Other
reserves
£’000
Retained
earnings
£’000
44,160
(87,689)
806
Total
£’000
6,022
806
(13)
(13)
(413)
(413)
58
58
44,160
(87,251)
6,460
37
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At 31 December 2017
2,043
-
33,211
44,160
(86,544)
7,189
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
22,729
(57,709)
14,571
-
-
-
-
(2,149)
(2,149)
-
46
-
22
46
-
22,729
(59,812)
12,490
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
22,729
(53,177)
19,103
-
-
(4,531)
(4,531)
(1)
(1)
22,729
(57,709)
14,571
249360 Parity Group_pp35-pp40.qxp 26/04/2018 12:12 Page 38
Statements of changes in equity (continued)
for the year ended 31 December 2017
Deferred
shares
£’000
Share
Capital
premium redemption
reserve
£’000
reserve
£’000
Company
At 1 January 2017
Loss for the year
Issue of new ordinary
shares
Share options – value of
employee services
Cancellation of
deferred shares
Share
capital
£’000
2,037
-
6
-
-
14,319
33,195
-
-
-
(14,319)
-
16
-
-
At 31 December 2017
2,043
-
33,211
Company
At 1 January 2016
Loss for the year
Share options – value of
employee services
Share
capital
£’000
2,037
-
-
Deferred
shares
£’000
Share
Capital
premium redemption
reserve
£’000
reserve
£’000
14,319
33,195
-
-
-
-
-
-
-
-
14,319
14,319
-
-
-
-
At 31 December 2016
2,037
14,319
33,195
The notes on pages 41 to 75 form part of the financial statements.
38 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp35-pp40.qxp 26/04/2018 12:12 Page 39
Statements of financial position
As at 31 December 2017
Company number 3539413
Consolidated
Company
Assets
Non-current assets
Intangible assets and goodwill
Property, plant and equipment
Trade and other receivables
Investment in subsidiaries
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Total assets
Liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Liabilities classified as held for sale
Total current liabilities
Non-current liabilities
Loans and borrowings
Trade and other payables
Provisions
Retirement benefit liability
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Called up share capital
Share premium reserve
Capital redemption reserve
Other reserves
Retained earnings
Total shareholders’ equity
Notes
11,12
13
15
28
14
15
16
17
18
16
17
18
19
22
23
21
21
21
21
2017
£’000
4,821
78
-
-
919
5,818
12,033
4,968
791
17,792
23,610
2016
£’000
5,055
72
-
-
409
5,536
14,373
4,272
2,389
21,034
26,570
2017
£’000
2016
£’000
-
-
122,170
20,527
-
142,697
2,202
116
-
2,318
-
1
122,736
20,527
-
143,264
3,370
111
-
3,481
145,015
146,745
(6,592)
(8,349)
(395)
(8,636)
(9,104)
(483)
(15,336)
(18,223)
(8)
-
(18)
(1,059)
(1,085)
(22)
-
(17)
(1,848)
(1,887)
-
(11,141)
-
(11,141)
-
(121,384)
-
-
-
(10,919)
-
(10,919)
-
(121,255)
-
-
(121,384)
(121,255)
(16,421)
(20,110)
(132,525)
(132,174)
7,189
6,460
12,490
14,571
2,043
33,211
14,319
44,160
(86,544)
7,189
16,356
33,195
-
44,160
(87,251)
6,460
2,043
33,211
14,319
22,729
(59,812)
12,490
16,356
33,195
-
22,729
(57,709)
14,571
Approved by the Directors and authorised for issue on 9 April 2018.
The notes on pages 41 to 75 form part of the financial statements.
Alan Rommel
Chief Executive Officer
Roger Antony
Finance Director
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249360 Parity Group_pp35-pp40.qxp 26/04/2018 12:12 Page 40
Statements of cash flows
for the year ended 31 December 2017
Cash flows from operating activities
Profit/(loss) for year
Adjustments for:
Net finance expense
Share-based payment expense/(credit)
Income tax (credit)/expense
Intercompany loans written off
Amortisation of intangible assets
Depreciation of property,
plant and equipment
Impairment of goodwill
Loss on write down of intangible assets
Working capital movements
Decrease in work in progress
Decrease/(increase) in trade
and other receivables
(Decrease)/increase in trade
and other payables
Increase in provisions
Payments to retirement benefit plan
Net cash flows from operating activities
Investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Issue of ordinary shares
Repayment of finance facility
Net movements on intercompany funding
Interest paid
Net cash from financing activities
Notes
6
8
7,9
27
11
13
11,12
11
22
12
13
6
2017
£’000
14
394
68
(619)
-
341
106
1,165
3
1,472
3
2,619
(910)
1
(184)
3,001
(5)
(91)
(96)
22
(2,032)
-
(199)
(2,209)
Consolidated
Company
2016
£’000
2017
£’000
2016
£’000
806
452
58
44
-
652
147
-
115
(2,149)
(4,531)
1,457
46
(244)
327
-
1
-
-
3,665
(1)
(362)
-
-
1
-
-
2,274
(562)
(1,228)
44
330
962
33
(231)
3,412
(22)
(129)
(151)
-
(1,360)
-
(277)
(1,637)
-
2
(21)
-
-
(581)
-
-
-
22
-
759
(195)
586
5
111
116
-
(1,185)
1,848
-
-
(565)
-
-
-
-
-
931
(273)
658
93
18
111
Net increase in cash and cash equivalents
696
1,624
Cash and cash equivalents at
the beginning of the year
Cash and cash equivalents
at the end of the year
4,272
2,648
4,968
4,272
The notes on pages 41 to 75 form part of the financial statements.
40 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp41-pp54.qxp 26/04/2018 12:13 Page 41
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 Operational and Financial Review on pages 8 to 12 and in note 20 to the financial statements.
Note 20 also includes the Group’s objectives for managing capital.
As outlined in note 20, 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 facility was renewed during 2016,
on favourable terms, and is currently subject to a minimum period up to 31 December 2018, at which point the facility becomes
evergreen rolling over on the same terms, with six months’ notice from either party. However, the bank who provide the facility,
PNC, has formally indicated a willingness in principle to renew the facility when the minimum term expires.
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 2017. 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 £2,149,000 (2016:
£4,531,000).
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.
41
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Notes to the accounts (continued)
1 Accounting policies (continued)
Changes in accounting policies: new standards, interpretations and amendments effective in 2017 adopted by the
Group and published standards not yet effective
No new standards, amendments to published standards or interpretations of existing standards effective in 2017 had a
material impact on the Group’s 2017 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 2 ‘Classification and Measurement of Share-based Payment Transactions’ (effective 1 January 2018) - amendment
• IFRS 4 ‘Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts’ (effective 1 January 2018) - amendment
• IFRS 9 ‘Financial Instruments’ (effective 1 January 2018)
• IFRS 15 ‘Revenue from Contracts with customers’ (effective 1 January 2018)
• IFRS 16 ‘Leases’ (effective 1 January 2019)
• IAS 7 ‘Disclosure Initiative’ (effective 1 January 2018)
• IAS 12 ‘Recognition of Deferred Tax Assets for Unrealised Losses’ (effective 1 January 2018) - amendment
An assessment of the impact of IFRS 15 has been completed following a comprehensive review of the contracts that exist
across the Group’s revenue streams. The review has concluded that revenue recognition under IFRS 15 is expected to be
consistent with current practice for the Group’s revenue and had IFRS 15 been applied in the current reporting period, it
would not have had a material impact on the financial statements.
Under IFRS 16 the Group’s operating leases will be accounted for as right of use assets, which will be largely offset by
equivalent lease liabilities. The assets will be recognised as property, plant and equipment and the lease liability will increase
net debt. The impact to profit before tax is not expected to be material.
It is not anticipated that there will be a material impact in respect of IFRS 9, as the Group has minimal financial assets (except
for trade debtors).
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 consultancy services.
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, and the stage of
completion can be measured reliably where services are delivered. 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 nine 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 IFRS 15’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.
42 Parity Group plc www.parity.net
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Notes to the accounts (continued)
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 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 for deductible temporary differences is not recognised unless it probable that there will be taxable
profits in the foreseeable future against which the deferred tax asset can be utilised. A deferred tax asset for unused tax
losses carried forward is recognised on the same basis as for deductible temporary differences. However, the existence of
the unused tax losses is strong evidence that future taxable profit may not be available. Therefore, when an entity has a
history of recent losses, the entity recognises a deferred tax asset arising from unused tax losses only to the extent that
there is convincing evidence that sufficient taxable profit will be available against which the unused tax losses can be utilised.
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Notes to the accounts (continued)
1 Accounting policies (continued)
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.
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.
44 Parity Group plc www.parity.net
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Notes to the accounts (continued)
1 Accounting policies (continued)
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 The lesser of the asset life and the remaining length of the lease
Office equipment 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.
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.
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Notes to the accounts (continued)
1 Accounting policies (continued)
Financial assets (continued)
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.
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable
that they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to
sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities
on a pro rata basis, except that no loss is allocated to work in progress, financial assets, deferred tax assets or employee
benefit assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses
on initial classification as held-for-sale and subsequent gains and losses on remeasurement are recognised in profit or loss.
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.
Accrued income
Accrued income primarily arises where temporary workers have provided their services but approved timesheets are
outstanding. As such, the amount incurred and margin earned thereon has yet to be invoiced onto the client.
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.
46 Parity Group plc www.parity.net
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Notes to the accounts (continued)
1 Accounting policies (continued)
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.
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 small 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.
47
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Notes to the accounts (continued)
1 Accounting policies (continued)
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)
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
(b) 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 20, 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.
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.
48 Parity Group plc www.parity.net
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Notes to the accounts (continued)
1 Accounting policies (continued)
Significant accounting estimates and judgements (continued)
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 22. 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, and there is convincing evidence that
sufficient taxable profits will be available against which unused tax losses 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 12).
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.
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. The Group has two continuing defined cash generating units (see note 12) which form the basis of each operating
segment. 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.
Segmental contribution, defined as divisional revenues less attributable overheads, 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 – provides targeted recruitment of temporary and permanent professionals to support IT and business
change programmes. Parity Professionals provides 89% (2016: 94%) of the continuing Group’s revenues.
• Parity Consultancy Services – provides business and IT consultancy services focusing on the provision of data solutions
and delivery of IT projects. Parity Consultancy Services provides 11% (2016: 6%) 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.
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Notes to the accounts (continued)
2 Segmental information (continued)
Revenue from external customers
Inter-segment revenue
Segment revenue
Attributable costs
Segmental contribution
Group costs
Depreciation and amortisation
Share based payment
Operating profit
Finance costs
Profit before tax (continuing activities)
Parity
Professionals
2017
£’000
74,272
5,764
80,036
(77,729)
2,307
Parity
Professionals
2016
£’000
Parity
Before
Consultancy non-recurring Non-recurring
Items
2017
£’000
Services
2017
£’000
Items
2017
£’000
9,543
-
9,543
(8,395)
1,148
83,815
5,764
89,579
(86,124)
3,455
(1,045)
(286)
(68)
2,056
(394)
1,662
Parity
Before
-
-
-
-
-
-
-
-
-
-
-
Consultancy non-recurring Non-recurring
Items
2016
£’000
Services
2016
£’000
Items
2016
£’000
86,419
481
86,900
(84,240)
2,660
5,345
-
5,345
(4,435)
910
Revenue from external customers
Inter-segment revenue
Segment revenue
Attributable costs
Segmental contribution
Group costs
Depreciation and amortisation
Share based payment
Other non-recurring items
Operating profit
Finance costs
Profit/(loss) before tax (continuing activities)
91,764
481
92,245
(88,675)
3,570
(1,383)
(365)
(56)
-
1,766
(452)
1,314
-
-
-
-
-
-
(115)
-
(240)
(355)
-
(355)
Total
2017
£’000
83,815
5,764
89,579
(86,124)
3,455
(1,045)
(286)
(68)
2,056
(394)
1,662
Total
2016
£’000
91,764
481
92,245
(88,675)
3,570
(1,383)
(480)
(56)
(240)
1,411
(452)
959
The continuing Group operates exclusively in the UK. All revenues are generated and all segment assets are located in the
UK. Inter-segment revenue in the year is a result of Parity Professionals selling IT recruitment services to Parity Consultancy
Services.
68% (2016: 61%) or £50.4m (2016: £52.7m) of the Parity Professionals revenue from external customers was generated in
the public sector. 82% (2016: 57%) or £7.8m (2016: £3.0m) of the Parity Consultancy Services revenue was generated in the
Public Sector.
The largest single customer in Parity Professionals contributed revenue of £8.8m or 11% and was in the public sector (2016:
£10.8m or 12% and in the public sector). The largest single customer in Parity Consultancy Services contributed revenue of
£4.4m or 46% and was in the Public Sector (2016: £2.9m or 54% and in the Public Sector).
50 Parity Group plc www.parity.net
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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 property, plant and equipment
Depreciation of owned property, plant and equipment
Write down of intangible assets
All other operating expenses
Contractor costs
Sub-contracted direct costs
Operating lease rentals
- plant and machinery
- land and buildings
Other occupancy costs
IT costs
Equity settled share based payment charge
Other operating costs
Total operating expenses
Disclosures relating to the remuneration of Directors are set out on page 28.
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
2017
£’000
5,138
609
192
5,939
239
9
38
-
286
73,088
228
17
659
98
278
66
1,100
75,534
81,759
Consolidated
2017
£’000
12
65
6
27
26
124
136
2016
£’000
5,688
639
178
6,505
294
35
36
115
480
80,409
350
27
775
147
348
56
1,256
83,368
90,353
2016
£’000
11
65
6
27
17
115
126
All other services have been performed in the United Kingdom.
Other refers to services provided in relation to advice relating to the Retirement Benefit Plan, transaction costs and assistance
provided with research and development tax credit applications.
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Notes to the accounts (continued)
4 Non-recurring items
Continuing operations
Write down of GPSeer
- Write down of intangible assets
- Other operating costs
Total write down of GPSeer
Restructuring
- Employee benefit costs
- Other operating costs
Transaction costs
Property provisions
Insolvency dividend
2017
£’000
2016
£’000
-
-
-
-
-
-
-
-
-
115
152
267
260
36
52
46
(306)
355
There were no non-recurring charges within continuing operations during 2017.
The continuing operations non-recurring charge for 2016 included:
• The write down of assets in the GPSeer joint venture. GPSeer was an initiative under the previous digital strategy to
develop a cutting-edge internet search engine. Since the change in strategy, no further development work has been
performed by the Group.
• Restructuring costs including compensation payments incurred to downsize the Talent Management service offering in
Northern Ireland, the cost of Board changes aligned to the Group’s strategy, and residual expenses incurred to close the
Golden Square service offering.
• Transaction costs relating to professional services incurred to implement the Board’s strategy to focus on core business.
• Property provisions represent empty property costs incurred as a result of centralising the London office.
• The insolvency dividend relates to a one-off payment received in 2016 from the administrators of a legacy overseas
subsidiary.
5 Average staff numbers
Continuing operations
Professionals – United Kingdom 1
Consultancy Services – United Kingdom, including corporate office 2
Discontinued operations
Consultancy Services
1
2
Includes 22 (2016: 22) employees providing shared services across the Group.
Includes 4 (2016: 7) employees of the Company.
At 31 December 2017, the Group had 105 continuing employees (2016: 112).
6 Finance costs
Finance costs
Interest expense on financial liabilities
Net finance costs in respect of post-retirement benefits
2017
Number
2016
Number
85
25
110
22
2017
£’000
199
195
394
89
28
117
22
2016
£’000
277
175
452
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 £53,000.
52 Parity Group plc www.parity.net
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Notes to the accounts (continued)
7 Discontinued operations
In December 2016 the Group Board committed to a plan to sell the Inition cash generating unit following the strategic
decision made in May 2015 to place greater focus on the Group’s core business. As such, Inition’s operating result for the
current and comparative year, as well as impairment of goodwill associated with the Inition cash generating unit is presented
as discontinued.
The results of discontinued operations also include expenses incurred that are associated with the planned disposal of
Inition.
The post-tax result of discontinued operations was determined as follows:
Revenue
Expenses
Impairment of goodwill
Pre-tax loss
Taxation credit
Loss for the year
Basic loss per share
Diluted loss per share
Note
10
10
2017
£’000
2,324
(3,426)
(1,165)
(2,267)
85
(2,182)
2.14p
2.07p
2016
£’000
3,263
(3,372)
-
(109)
31
(78)
0.08p
0.07p
The loss from the discontinued operation of £2,182,000 (2016: £78,000) is attributable entirely to the owners of the
Company.
Cash flows (used in)/from discontinued operations:
Net cash (used in)/from operating activities
Net cash used in investing activities
Net cash flows for the year
2017
£’000
(674)
(38)
(712)
2016
£’000
45
(88)
(43)
8 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; and
• a Save As You Earn Scheme for all employees.
Under the approved and unapproved schemes, options vest if the share price averages a target price for 5 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.
All employee options have a maximum term of ten years from the date of grant. The total share-based remuneration
recognised in the Income Statement was £68,000 (2016: £58,000). Share-based remuneration relating to key management
personnel is disclosed in note 26.
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Notes to the accounts (continued)
8 Share based payments (continued)
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
2017
Weighted
average
exercise
price (p)
15
-
8
22
11
2017
Number
8,420,851
-
(300,000)
(3,565,851)
4,555,000
2016
Weighted
average
exercise
price (p)
19
9
-
19
15
2016
Number
8,452,583
3,100,000
-
(3,131,732)
8,420,851
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
2017
Weighted
average
contractual
life (years)
7
5
Number
3,900,000
655,000
4,555,000
2016
Weighted
average
contractual
life (years)
8
7
Exercise
price (p)
7.5-10
17-28
Number
4,200,000
4,220,851
8,420,851
Of the total number of options outstanding at the end of the year 1,455,000 (2016: 2,030,000) had vested and were
exercisable at the end of the year. The weighted average exercise price of those options was 17 pence (2016: 17 pence).
300,000 options were exercised during the year (2016: nil) at an average exercise price of 8 pence (2016: nil).
There were no options granted during the year (2016: 3,100,000 options granted at a weighted average fair value of 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
2017
Stochastic
2016
Stochastic
-
-
-
-
-
-
-
9
9
10
5
43 - 50%
0.27%
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%.
54 Parity Group plc www.parity.net
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249360 Parity Group_pp55-pp63.qxp 26/04/2018 12:14 Page 55
Notes to the accounts (continued)
9 Taxation
Current tax expense
Current tax on profit for the year
Total current tax expense
Deferred tax (credit)/expense
Accelerated capital allowances
Origination and reversal of other temporary differences
Recognition of deferred tax previously unprovided
Change in corporation tax rate
Adjustments in respect of prior periods
Total deferred tax (credit)/expense
Tax (credit)/expense on continuing operations
2017
£’000
2016
£’000
112
112
68
-
(675)
-
(39)
(646)
(534)
5
5
39
3
-
20
8
70
75
The tax (credit)/expense on continuing operations excludes the tax credit from discontinued operations of £85,000 (2016:
£31,000). This has been included in ‘profit/(loss) from discontinued operations, net of tax’ (see note 7).
The tax credit from discontinued operations of £85,000 comprises a current tax credit of £112,000 and a deferred tax expense
of £27,000. As such, there is no current tax payable by the Group for 2017.
The standard rate of corporation tax in the UK changed from 20% to 19% with effect from 1 April 2017. Accordingly, the
Group’s profits for this accounting period are subject to tax at a rate of 19.25% (2016: 20%). A further reduction to 17%
(effective 1 April 2020) was substantively enacted on 15 September 2016. As such, the tax rate of 17% has been applied in
calculating the UK deferred tax position of the Group at 31 December 2017.
The reasons for the difference between the actual tax (credit)/charge for the year and the standard rate of corporation tax
in the United Kingdom applied to losses for the year are as follows:
Profit before tax from continuing operations
Expected tax charge based on the standard rate of United
Kingdom corporation tax of 19.25% (2016: 20%)
Expenses not allowable for tax purposes
Adjustments in respect of prior periods
Decrease in deferred tax asset due to change in enacted rate
Accelerated capital allowances
Utilisation of unprovided tax losses carried forward
Recognition of deferred tax asset previously unprovided
Tax (credit)/expense on continuing operations
Tax on each component of other comprehensive income is as follows:
2017
£’000
1,662
320
10
(39)
-
(9)
(141)
(675)
(534)
2016
£’000
959
192
5
8
20
-
(150)
-
75
Exchange differences on
translation of foreign operations
Actuarial gain/(loss) on
defined benefit pension scheme
Before tax
£’000
2017
Tax
£’000
After tax
£’000
Before tax
£’000
2016
Tax
£’000
After tax
£’000
(39)
800
761
-
(39)
(13)
(136)
(136)
664
625
(413)
(426)
-
-
-
(13)
(413)
(426)
55
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Notes to the accounts (continued)
10 Earnings per ordinary share
Basic earnings per share is calculated by dividing the basic earnings 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.
Weighted
average
number of
shares
2017
£’000
Earnings
2017
£’000
Earnings
per share
2017
Pence
Earnings
2016
£’000
Weighted
average
number of
shares
2016
£’000
Earnings
per share
2016
Pence
2,196
-
2,196
102,087
3,263
105,350
2.15
-
2.08
884
-
884
101,824
4,691
106,515
0.87
-
0.83
Continuing operations
Basic earnings per share
Effect of dilutive options
Diluted earnings per share
As at 31 December 2017 the number of ordinary shares in issue was 102,124,020 (2016: 101,824,020).
Basic loss per share from discontinued operations was 2.14p (2016: 0.08p). Diluted loss per share from discontinued
operations was 2.07p (2016: 0.07p).
Basic loss per share from continuing and discontinued operations was 0.01p (2016: 0.79p). Diluted loss per share from
continuing and discontinued operations was 0.01p (2016: 0.76p).
11 Intangible assets
Intellectual
Software Property Goodwill Total
2017
£’000
2017
£’000
2017
£’000
2017
£’000
2016
£’000
2016
£’000
2016
£’000
Cost
At 1 January
Additions
Disposals
Impairment
Transferred to assets
held for sale
1,083
5
-
-
1,285
22
(51)
-
-
(173)
At 31 December
1,088
1,083
Accumulated amortisation
At 1 January
Charge for the year
Disposals
Transferred to assets
held for sale
At 31 December
Net book amount
637
224
-
-
861
227
495
287
(51)
(94)
637
446
109
-
-
-
-
109
94
15
-
-
109
-
852
-
-
(115)
(628)
109
288
365
-
(559)
94
15
2016
£’000
7,896
22
(51)
(115)
4,594
-
-
-
5,759
-
-
-
5,786
5
-
-
-
(1,165)
-
(1,966)
4,594
4,594
5,791
5,786
-
-
-
-
-
-
-
-
-
-
731
239
-
-
970
783
652
(51)
(653)
731
4,594
4,594
4,821
5,055
At 31 December 2016 the intangible assets held in the Inition business unit were reclassified as held for sale.
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.
56 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group_pp55-pp63.qxp 26/04/2018 12:14 Page 57
Notes to the accounts (continued)
12 Goodwill
The carrying amount of goodwill is allocated to the Group’s two separate continuing cash generating units (CGUs) being;
Parity Professionals and Parity Consultancy Services. At 31 December 2016, the goodwill associated with the Inition CGU
was reclassified as held for sale.
Carrying amounts are as follows:
Carrying value
Balance at 1 January 2017
Balance at 31 December 2017
Balance at 1 January 2016
Transferred to assets held for sale
Balance at 31 December 2016
Parity
Professionals
£’000
Parity
Consultancy
Services
£’000
2,642
2,642
2,642
-
2,642
1,952
1,952
1,952
-
1,952
Inition
£’000
-
-
1,165
(1,165)
-
Total
£’000
4,594
4,594
5,759
(1,165)
4,594
Goodwill was tested for impairment in accordance with IAS 36 at the year end and no impairment charge was recognised.
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 2018. Years from 2019 to 2021 are based on the budget for 2018 projected forward at expected
growth rates. Years from 2022 onward assume no further growth. This approach is considered prudent based on current
expectations of the 2018 long-term growth rate.
Major assumptions are as follows:
Parity
Parity Consultancy
Professionals Services
% %
2017
Discount rate 13.0 11.5
Forecast revenue growth 5.0 10.0
Operating margin 2018 2.6 10.0
Operating margin 2019 onward 3.0 - 3.6 10.7 - 12.9
2016
Discount rate 5.5 3.1
Forecast revenue growth 5.5 9.9
Operating margin 2017 3.5 18.4
Operating margin 2018 onward 3.4 - 3.9 19.0 - 19.9
Discount rates are based on the Group’s weighted average cost of capital adjusted for the specific risks of each cash
generating unit. In 2017 the Directors considered it appropriate to increase the WACC in light of industry and sector
comparables.
Forecast revenue growth is expressed as the compound growth rate over the next 4 years from 2018 to 2021. 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.
A 10% change in any of the underlying assumptions used in the discounted cash flow forecasts would not lead to the carrying
value of goodwill being in excess of their recoverable amount.
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Notes to the accounts (continued)
13 Property, plant and equipment
Consolidated
At cost
Balance at 1 January 2016
Additions
Transferred to assets held for sale
Disposals
Balance at 31 December 2016 and 1 January 2017
Additions
Disposals
Balance at 31 December 2017
Accumulated depreciation
Balance at 1 January 2016
Depreciation charge for the year
Transferred to assets held for sale
Disposals
Balance at 31 December 2016 and 1 January 2017
Depreciation charge for the year
Disposals
Balance at 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016
At 31 December 2017
Company
At Cost
Balance at 1 January 2016
Balance at 31 December 2016 and 1 January 2017
Balance at 31 December 2017
Accumulated depreciation
Balance at 1 January 2016
Depreciation charge for the year
Balance at 31 December 2016 and 1 January 2017
Depreciation charge for the year
Balance at 31 December 2017
Net book value
At 1 January 2016
At 31 December 2016
At 31 December 2017
Leasehold
Office
improvements equipment
£’000
£’000
16
-
-
-
16
-
-
16
16
-
-
16
-
-
16
-
-
-
3,503
129
(193)
(375)
3,064
53
(1,976)
1,141
3,323
147
(103)
(375)
2,992
47
(1,976)
1,063
180
72
78
Leasehold
Office
improvements equipment
£’000
£’000
1
1
1
1
-
1
-
1
-
-
-
3
3
3
1
1
2
1
3
2
1
-
Total
£’000
3,519
129
(193)
(375)
3,080
53
(1,976)
1,157
3,339
147
(103)
(375)
3,008
47
(1,976)
1,079
180
72
78
Total
£’000
4
4
4
2
1
3
1
4
2
1
-
During 2017, a review of the Group’s fixed asset registers was undertaken. The review identified fully depreciated items,
with a cost value of £1,976,000, that was no longer used by the Group. As such, the Group recognised a £1,976,000 disposal
for office equipment at cost and the associated accumulated depreciation.
58 Parity Group plc www.parity.net
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Notes to the accounts (continued)
13 Property, plant and equipment (continued)
At 31 December 2016, the property plant and equipment held in the Inition business unit were reclassified as held for sale.
As at 31 December 2017, neither the Group nor the Company had any capital commitments contracted for but not provided,
for the purchase of tangible assets (2016: £nil).
Leased plant and equipment
At 31 December 2017 the total net carrying value of the leased equipment was £18,000 (2016: £27,000).
14 Deferred tax
At 1 January
Recognised in other comprehensive income
Remeasurement of defined benefit pension scheme
Recognised in the income statement
Change in enacted tax rate
Adjustments in relation to prior periods
Capital allowances in excess of depreciation
Other short-term timing differences
Recognition of deferred tax previously unprovided
Transferred to assets held for sale
At 31 December
The deferred tax asset of £919,000 (2016: £409,000) comprises:
Depreciation in excess of capital allowances
Short term and other timing differences
Retirement benefit liability
Consolidated
2017
£’000
409
(136)
-
39
(68)
-
675
-
919
Consolidated
2017
£’000
685
54
180
919
2016
£’000
507
-
(24)
6
(23)
(3)
-
(54)
409
2016
£’000
355
54
-
409
A deferred tax asset for deductible temporary differences 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 utilised. At the Balance Sheet date,
the Directors assessed the probability of future taxable profits being available against which Parity Consultancy Services
could recognise a deferred tax asset for previously unrecognised deductible temporary differences. The review concluded
that it is probable that future taxable profits will be available. As such, the Directors have recognised a deferred tax asset
for all deductible temporary differences available to Parity Consultancy Services.
A deferred tax asset for unused tax losses carried forward is recognised on the same basis as for deductible temporary
differences. However, the existence of the unused tax losses is itself strong evidence that future taxable profit may not be
available. Therefore, when an entity has a history of recent losses, the entity recognises a deferred tax asset arising from
unused tax losses only to the extent that there is convincing evidence that sufficient taxable profit will be available against
which the unused tax losses can be utilised. At the balance sheet date, the Directors considered recognising a deferred tax
asset for previously unrecognised unused tax losses carried forward by Parity Consultancy Services. The review concluded
that given the division’s history of relatively recent tax losses and the additional requirement of providing convincing evidence
that sufficient taxable profit will be available, a prudent approach would be taken and deferred tax would remain
unrecognised for tax losses carried forward by the division.
59
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Notes to the accounts (continued)
14 Deferred tax (continued)
The Directors believe that the deferred tax asset recognised is recoverable based on the future earning potential of the
Group and the individual cash generating divisions. The forecasts for Parity Professionals comfortably support the unwinding
of the deferred tax asset held by this division of £380,000 (2016: £409,000) and the forecasts for Parity Consultancy Services
comfortably support the unwinding of the deferred tax asset held by this division of £539,000 (2016: £nil).
The deferred tax asset at 31 December 2017 has been calculated on the rate of 17% 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
Retirement benefit liability
Depreciation in excess of capital allowances
Other short-term timing differences
Trading losses
Asset
2017
£’000
685
54
180
919
Asset
2016
£’000
355
54
-
409
Credited to
Charged
to other
income comprehensive
income
2017
£’000
statement
2017
£’000
Transferred to
assets held
for sale
2017
£’000
330
-
316
646
-
-
(136)
(136)
-
-
-
-
(Charged)/
credited to
income
statement
2016
£’000
Charged
to other
comprehensive
income
2016
£’000
Transferred to
assets held
for sale
2016
£’000
(59)
(6)
21
(44)
-
-
-
-
(33)
-
(21)
(54)
The Group has unrecognised carried forward tax losses of £29,485,138 (2016: £30,078,882). The Company has unrecognised
carried forward tax losses of £24,537,730 (2016: £24,301,882). The Group has unrecognised capital losses carried forward
of £281,936,691 (2016: £281,875,386). These losses may be carried forward indefinitely.
60 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
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Notes to the accounts (continued)
15 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
Company
2017
£’000
5,812
3,250
2,541
-
136
294
12,033
-
12,033
2016
£’000
7,577
2,588
3,771
-
84
353
14,373
-
14,373
2017
£’000
-
-
-
2,200
-
2
2,202
2016
£’000
-
-
-
3,367
-
3
3,370
122,170
124,372
122,736
126,106
The fair values of trade and other receivables are not considered to differ from the values set out above.
£5,812,000 (2016: £7,430,000) of the Group’s trade receivables, and £4,941,000 (2016: £5,748,000) 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 £6,581,000 (2016: £8,613,000).
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
2017
£’000
2016
£’000
-
-
-
-
-
7
4
(2)
(9)
-
The balance of impaired losses for the continuing Group at 31 December 2017 was £nil (2016: nil). All debts at 31 December
2017 are considered to be recoverable.
As at 31 December 2017 trade receivables of £737,000 (2016: £1,335,000) 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
5,074
588
112
37
5,811
2017
Impaired
£’000
-
-
-
-
-
Total
£’000
5,074
588
112
37
5,811
Gross
£’000
6,242
957
250
128
7,577
2016
Impaired
£’000
-
-
-
-
-
Total
£’000
6,242
957
250
128
7,577
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Notes to the accounts (continued)
15 Trade and other receivables (continued)
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 2017 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 11.5% and 13.0% (2016: between 3.1% and 5.5%) and the other parameters
used in the goodwill impairment review, as outlined in note 12.
16 Assets and liabilities classified as held for sale and included in disposal groups
The major classes of assets and liabilities comprising the operations classified as held for sale are set out below.
Goodwill
Intangible assets - software
Intangible assets - intellectual property
Property, plant and equipment - office equipment
Trade and other receivables
Work in progress
Deferred tax asset
Total assets classified as held for sale
Trade and other payables
Provisions
Total liabilities associated with assets classified as held for sale
Consolidated
2017
£’000
-
44
-
69
637
14
27
791
(365)
(30)
(395)
2016
£’000
1,165
79
69
90
915
17
54
2,389
(453)
(30)
(483)
Net assets of disposal group
396
1,906
Goodwill was assessed for impairment at the Balance Sheet date and written down to £nil (2016: £1,165,000) based on
the expected sale price for the Inition cash generating unit.
Trade and other receivables of £637,000 (2016: £915,000) is net of a provision for doubtful debts of £134,000 (2016: £nil).
62 Parity Group plc www.parity.net
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Notes to the accounts (continued)
17 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
Future
minimum
lease
payments
2017
£’000
11
8
19
Interest
2017
£’000
-
-
-
Less than one year
Between one and two years
Changes in liabilities from financing activities
Balance at 1 January 2017
Repayment of borrowings
Payment of finance lease liabilities
Balance at 31 December 2017
Further details of the Group’s banking facilities are given in note 20.
18 Trade and other payables
Consolidated
2017
£’000
8
8
6,581
11
6,592
Interest
2016
£’000
2
-
2
2016
£’000
22
22
8,613
23
8,636
Present
value of
minimum
lease
payments
2016
£’000
23
22
45
Present
value of
Future
minimum minimum
lease
payments
2016
£’000
lease
Payments
2017
£’000
11
8
19
25
22
47
Loans and Finance lease
liabilities
£’000
45
-
(26)
19
borrowings
£’000
8,613
(2,032)
-
6,581
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
2017
£’000
16
5,318
-
1,450
1,565
8,349
-
8,349
2016
£’000
594
6,018
-
1,126
1,366
9,104
-
9,104
2017
£’000
-
14
10,967
21
139
11,141
2016
£’000
-
-
10,724
21
174
10,919
121,384
132,525
121,255
132,174
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Notes to the accounts (continued)
19 Provisions
Consolidated
At 1 January 2017
Created in year
At 31 December 2017
Due after more than one year
Total
Leasehold
dilapidations
£’000
17
1
18
18
18
Total
£’000
17
1
18
18
18
At the Balance Sheet date the Company had no provisions (2016: No provisions).
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.
20 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 2017
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
As at 31 December 2016
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
64 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
Amortised
cost
£’000
Loans and
receivables
£’000
-
-
-
4,968
11,739
16,707
6,581
19
8,333
14,933
-
-
-
-
-
-
4,272
14,020
18,292
8,613
45
8,510
17,168
-
-
-
-
Total
£’000
4,968
11,739
16,707
6,581
19
8,333
14,933
4,272
14,020
18,292
8,613
45
8,510
17,168
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Notes to the accounts (continued)
20 Financial instruments – risk management (continued)
A summary by category of the financial instruments held by the Company is provided below:
Company
As at 31 December 2017
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 2016
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
-
-
-
-
122,170
116
2,200
124,486
11,141
121,384
132,525
-
-
-
-
-
-
-
122,736
111
3,367
126,214
10,919
121,255
132,174
-
-
-
Total
£’000
122,170
116
2,200
124,486
11,141
121,384
132,525
122,736
111
3,367
126,214
10,919
121,255
132,174
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.
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 69% (2016: 61%) of the Group’s turnover is derived from the Public
Sector. The largest customer balance represents 29% (2016: 19%) 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 15.
65
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Notes to the accounts (continued)
20 Financial instruments – risk management (continued)
Credit risk (continued)
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
2017
2016
Carrying
value
£’000
Maximum
exposure
£’000
Carrying
value
£’000
Maximum
exposure
£’000
4,968
11,739
16,707
4,968
11,739
16,707
4,272
14,020
18,292
4,272
14,020
18,292
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 2017 and 2016 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 2.35% above base rate throughout 2017 (2016: 2.5% until
1 September 2016 and 2.35% subsequently). 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 £53,000 higher/lower and net assets £53,000 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 31 December 2017, the loan balance due by the Company
to Parity International BV, translated into Sterling, was £27,463,000 (2016: £26,696,000 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 2017 or 2016.
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 2017 the Company recorded a translation loss of £1,092,000
(2016: loss of £3,212,000). As at the 31 December 2017, the loan balance due by the Company, translated into Sterling, was
£27,463,000 (2016: £26,696,000).
66 Parity Group plc www.parity.net
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Notes to the accounts (continued)
20 Financial instruments – risk management (continued)
Foreign exchange risk (continued)
The currency profile of the Group’s net financial assets was as follows:
Functional currency of individual entity
Sterling
Euro
US Dollar
Total
Net foreign currency 2017 2016 2017 2016
financial assets £’000 £’000 £’000 £’000
2017
£’000
2016
£’000
2017
£’000
2016
£’000
Sterling - - (2,236)
Euro (27,455) (26,694) -
US Dollar 5 4 -
Total net exposure (27,450) (26,690) (2,236)
219
-
1,350
1,569
-
-
-
-
966
-
-
966
(2,236)
(27,455)
5
(29,686)
1,185
(26,694)
1,354
(24,155)
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
2016
£’000
2017
£’000
-
(27,455)
5
(27,450)
-
(26,694)
4
(26,690)
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 £2,746,300 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 2017
Trade and other payables
Borrowings
Total
At 31 December 2016
Trade and other payables
Borrowings
Total
Up to
1 month
£’000
8,333
6,581
14,914
Up to
1 month
£’000
8,510
8,613
17,123
Over
1 month
£’000
-
19
19
Over
1 month
£’000
-
45
45
Total
£’000
8,333
6,600
14,933
Total
£’000
8,510
8,658
17,168
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Notes to the accounts (continued)
20 Financial instruments – risk management (continued)
Liquidity risk (continued)
Company
At 31 December 2017
Trade and other payables
Total
At 31 December 2016
Trade and other payables
Total
Up to
1 month
£’000
11,141
11,141
Up to
1 month
£’000
10,919
10,919
Between
1 and 12
months
£’000
-
-
Between
1 and 12
months
£’000
-
-
Over
1 year
£’000
121,384
121,384
Over
1 year
£’000
121,255
121,255
Total
£’000
132,525
132,525
Total
£’000
132,174
132,174
More detail on trade and other payables is given in note 18.
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 £19,000 (2016: £45,000) 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
2017
£’000
4,968
(6,581)
(19)
(1,632)
2016
£’000
4,272
(8,613)
(45)
(4,386)
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 currently have distributable reserves available for dividend payments. A capital reconstruction will
be necessary to create reserves available for distribution. The Board plan to review possible capital reconstruction options
in the near future.
68 Parity Group plc www.parity.net
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Notes to the accounts (continued)
21 Reserves
The Board is not proposing a dividend for the year (2016: nil pence per share).
The following describes the nature and purpose of each reserve within owners' equity:
Share capital
Share capital consists of ordinary share capital and previously consisted of deferred share capital.
Ordinary share capital
Share capital is the amount subscribed for ordinary share capital at nominal value.
During 2017 300,000 share options were exercised, increasing the Group’s ordinary share capital from £2,036,480 to
£2,042,480 (2016: no change to ordinary share capital).
Deferred share capital
Deferred share capital is the nominal value assigned to the deferred share capital.
In May 2017 the Directors resolved to compulsorily reacquire and cancel the deferred shares of Parity Group plc. As such,
the deferred share capital at year end was £nil (2016: £14,319,108).
Share premium reserve
Share premium is the amount subscribed for share capital in excess of nominal value.
Following the exercise of share options in 2017, the share premium reserve increased from £33,195,689 to £33,212,189
(2016: There was no change to the share premium reserve).
Capital redemption reserve
A capital redemption reserve of £14,319,108 was created during 2017 when the Directors resolved to cancel the deferred
shares of Parity Group plc (2016: £nil).
Other reserves
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 principally to a reserve created following the reorganisation of the
Group’s capital structure in 2002, which resulted in the Company increasing its investment in subsidiary undertakings.
Retained earnings
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
(2016: £351,000).
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Notes to the accounts (continued)
22 Pension commitments
The Group operates a small number of pension schemes. With the exception of the Parity Group Retirement Benefits Plan,
all of the schemes are defined contribution plans and the assets are held in separately administered funds. Contributions to
defined contribution schemes from continuing operations during the year were £192,000 (2016: £178,000).
Defined benefit plan
In March 1995, the Group established the Parity Retirement Benefits Plan, renamed as the Parity Group Retirement Benefits
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. The Plan is governed by the Trustees of the plan and is
administered by Cartwright Group Limited in accordance with the Trust Deed and Rules, solely for the benefit of its members
and other beneficiaries. The Trustees comprise an independent Chairman, one ‘member’ representative and one ‘employer’
representative. It 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.
The weighted average liability duration is approximately 14 years and can be attributed to the scheme members as follows:
Pensioner members
Deferred members
Total
No. of
members
Weighted average
liability duration
(years)
60
8
68
14
20
14
During the year one deferred member elected to transfer out of the Plan.
The Plan is funded by the Group based on a separate actuarial valuation for funding purposes. The actuarial valuation is
subject to more prudent assumptions than the valuation under IFRS 19. The next triennial actuarial valuation is due as at
April 2018. Funding requirements are formally set out in the Statement of Funding Principles, Schedule of Contributions
and Recovery Plan agreed between the Trustees and the Group.
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 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. As a result, monthly
contributions of £15,000 resumed from May 2016 until March 2035, with conditional annual bonus payments predicated
on the Group’s financial performance and the divestment of non-core assets. The contributions increase each year in line
with RPI from the 1st January with the first increase applied on 1st January 2017. The balance of the deficit is expected to
be met by asset outperformance. The core contributions in 2018 are expected to be £16,700 per month to allow for increased
scheme expenses in addition to the inflationary increase.
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.
In 2017 the Trustees changed the investment strategy and fund choices in order to reduce the volatility of the deficit whilst
increasing the longer term expected investment return. This was achieved by using liability driven investment, which provides
leveraged exposure to bond-like assets. The leverage was used to reduce deficit volatility and has allowed a greater share of
the assets to be invested in growth assets, as set out in the Composition of Plan Assets table on page 71. The liability driven
investments significantly reduced both interest rate and inflation risk so that, using a stochastic ‘value at risk’ model, the
overall investment risk reduced by approximately one third. The main funding risks are as follows:
• Investment return risk – if the assets underperform the assumed returns in setting the funding targets then additional
contributions may be required;
• Longevity risk – if the future improvements in mortality exceed the assumptions then additional contributions may be
required;
• Foreign currency exchange rate risk – the diversified growth funds have the option to use foreign currency as an asset
class. The diversified growth funds are actively managed and, consequently, any foreign currency exposure is
constantly monitored and addressed where the risk/reward balance is not appropriate.
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Notes to the accounts (continued)
22 Pension commitments (continued)
The valuation for IAS 19 has been provided by Cartwright Group Limited, a company that specialises in providing actuarial
services, as at 31 December 2017.
Principal actuarial assumptions
Rate of increase of pensions in payment
Discount rate
Retail price inflation
Consumer price inflation
2017
2016
3.7% - 3.9%
2.45%
3.3%
2.3%
3.7% - 4.0%
2.6%
3.4%
2.4%
In accordance with the revised IAS19, the assumption for future investment returns is the same discount rate (2.45%) used
in calculating the pension liabilities.
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. (2016: 1.25% p.a.). This results in the following life expectancies:
• Male aged 65 at 31.12.17 has a life expectancy of 87 years (2016: 87 years)
• Female aged 65 at 31.12.17 has a life expectancy of 89 years (2016: 89 years)
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 gain
At the end of the year
2017
£’000
21,880
(22,939)
(1,059)
2017
£’000
22,465
559
184
(1,792)
(145)
609
21,880
Benefits paid during 2017 included a lump sum payment to one member who opted to transfer out of the Plan.
Composition of plan assets
Diversified growth funds – Quoted
Liability driven investment funds – Quoted
Equities – Quoted
Gilts
Bonds
Options in Parity Group plc
Cash
Total
2017
£’000
12,881
8,829
-
-
-
96
74
21,880
2016
£’000
22,465
(24,313)
(1,848)
2016
£’000
19,703
728
231
(1,006)
(117)
2,926
22,465
2016
£’000
-
-
7,993
7,114
7,087
96
175
22,465
71
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Notes to the accounts (continued)
22 Pension commitments (continued)
Reconciliation of plan liabilities
At the beginning of the year
Interest cost
Benefits paid
Actuarial (gain)/loss
At the end of the year
Amounts recognised in the consolidated income statement
Included in Finance Costs
Expected return on plan assets
Unwinding of discount on plan liabilities (interest cost)
Net finance costs in respect of post-retirement benefits
Amounts recognised in the consolidated statement of comprehensive income
Remeasurement of defined benefit pension scheme
Actuarial gain on plan assets
Actuarial gain/(loss) on plan liabilities
Remeasurement of defined benefit pension scheme
Defined benefit obligation trends
Plan assets
Plan liabilities
Deficit
Experience adjustments on assets
Experience adjustments on liabilities
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
2017
£’000
21,880
(22,939)
(1,059)
609
2.9%
(191)
(0.8%)
2016
£’000
22,465
(24,313)
(1,848)
2,926
15.0%
3,339
15.9%
Liabilities
£’000’s
22,939
22,175
23,744
23,058
22,823
2015
£’000
19,703
(21,194)
(1,491)
(401)
(2.0%)
(1,249)
(5.6%)
Assets
£’000’s
21,880
21,880
21,880
21,880
21,880
72 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
2017
£’000
24,313
609
(1,792)
(191)
22,939
2017
£’000
414
(609)
(195)
2017
£’000
609
191
800
2014
£’000
20,356
(22,457)
(2,101)
2,251
12.4%
2,900
14.8%
Deficit
£’000’s
(1,059)
(295)
(1,864)
(1,178)
(943)
2016
£’000
21,194
786
(1,006)
3,339
24,313
2016
£’000
611
(786)
(175)
2016
£’000
2,926
(3,339)
(413)
2013
£’000
17,421
(19,591)
(2,170)
(34)
(0.2%)
(255)
(1.3%)
Increase/
(Decrease)
in deficit
£’000’s
-
(764)
805
119
(116)
249360 Parity Group_pp64-pp76.qxp 26/04/2018 12:15 Page 73
Notes to the accounts (continued)
23 Share capital
Authorised share capital
Ordinary shares
2p each
Deferred shares of
0.04p each
2017
number
Authorised at 1 January
Cancelation of deferred shares
Authorised at 31 December
409,044,603
-
409,044,603
Issued share capital
2017
£’000
2017
number
8,181 35,797,769,808
(35,797,769,808)
-
-
8,181
2017
£’000
14,319
(14,319)
-
Total
2017
£’000
22,500
(14,319)
8,181
Total
2017
£’000
16,356
6
(14,319)
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Ordinary shares
2p each
Deferred shares of
0.04p each
2017
number
2017
£’000
2017
number
101,824,020
300,000
-
2,037 35,797,769,808
-
(35,797,769,808)
6
-
2017
£’000
14,319
-
(14,319)
Issued and fully paid at
1 January
Issue of new ordinary shares
Cancelation of deferred shares
Issued and fully paid at
31 December
102,124,020
2,043
-
-
2,043
In May 2017, the Directors resolved to cancel the deferred shares of Parity Group plc. Upon cancellation, the value of the
deferred shares transferred to a capital redemption reserve within owners’ equity.
The deferred shares were not listed on the London Stock Exchange, had 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
2017
Number
43,143
2016
Number
43,143
The shares held by the ESOP are expected to be issued under share option contracts.
24 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
Over five years
Land and
buildings
2017
£’000
Plant and
machinery
2017
£’000
Land and
buildings
2016
£’000
Plant and
machinery
2016
£’000
650
349
34
1,033
8
11
-
19
676
207
-
883
17
18
-
35
The increase in land and buildings operating lease commitments is due to a five-year lease extension for the Group’s
Manchester office that was agreed during 2017.
73
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Notes to the accounts (continued)
25 Contingencies
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.
26 Key management remuneration
Key management comprises the Group’s Board of Directors and the Managing Directors of Parity Professionals and Parity
Consultancy Services. The total remuneration received by key management for 2017 was £803,000 (2016: £909,000). This
comprises emoluments received, pension contributions and share based payment charges (2016: included compensation
for loss of office). Remuneration of the Board of Directors, including that of the highest paid Director A Rommel, is disclosed
in detail within the remuneration report on page 28.
Short term employee benefits
Post employment benefits
Compensation for loss of office
Share-based payments (note 8)
2017
£’000
741
28
-
34
803
2016
£’000
740
28
87
54
909
27 Related party transactions
Consolidated
There were no related party transactions during the year (2016: none).
Company
Details of the Company’s holding in Group undertakings are given in note 28. The Company entered into transactions with
other Group undertakings as shown in the table below.
Operating Finance
expenses income
2017 2017
£’000 £’000
Expenses incurred from
Group subsidiaries (490) -
Income generated from
Group subsidiaries 30 1,441
Subsidiary
Finance
loans
expense written off
2017
£’000
2017
£’000
Operating
expenses
2016
£’000
Finance
income
2016
£’000
Finance
expense
2016
£’000
(1,609)
(1,341)
(528)
-
(1,451)
-
1,668
-
1,272
-
At 31 December, the Company had the following amounts payable to/recoverable from Group undertakings.
Amounts owed by subsidiary undertakings
Falling due within one year (note 15)
Falling due after one year (note 15)
Amounts due to subsidiary undertakings
Falling due within one year (note 18)
Falling due after one year (note 18)
74 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
2017
£’000
2016
£’000
2,200
122,170
3,367
122,736
(10,967)
(121,384)
(10,724)
(121,255)
249360 Parity Group_pp64-pp76.qxp 26/04/2018 12:15 Page 75
Notes to the accounts (continued)
28 Subsidiaries
The principal subsidiaries of Parity Group plc, which have been included in these consolidated financial statements, are Parity
Professionals Limited, Parity Consultancy Services Limited, and Inition Limited. Parity Professionals Limited and Parity
Consultancy Services Limited are wholly owned by Parity Holdings Limited and incorporated in the United Kingdom. Inition
Limited has been included in these Consolidated financial statements as a discontinued operation and as assets and associated
liabilities held for sale. Inition Limited is wholly owned by Parity Solutions Limited and is incorporated in the United Kingdom.
Parity Solutions Limited is a direct subsidiary of Parity Holdings Limited and is incorporated in the United Kingdom. Parity
Holdings Limited is a direct subsidiary of Parity Group plc and is incorporated in the United Kingdom.
Parity Professionals Limited is a specialist IT recruitment services company. Parity Consultancy Services Limited provides
business and IT consultancy services focusing on the provision of data solutions and delivery of IT projects. Inition Limited
specialises in virtual reality, augmented reality and 3D solutions.
The Company’s investment in continuing subsidiaries was reviewed for impairment at the year end based on the performance
of 2017 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 (2016: £20,527,000). The
assessment was performed on a value in use basis using discount rates of between 11.5% and 13.0% (2016: between 3.1% and
5.5%) and the other parameters used in the goodwill impairment review, as outlined in note 12.
The remaining Group subsidiaries are either discontinued or dormant, are wholly owned by the Group ultimate parent Parity
Group plc, and are registered in the UK at Dawson House, 5 Jewry Street, London EC3N 2EX unless stated otherwise in the
list below:
Parity Eurosoft Ltd
Parity International BV (registered at Keizersgracht 62-64, 1015 CS Amsterdam, Netherlands)
Parity Ltd
Parity Resources Ltd
Parity Solutions (Dublin 1999) Ltd (registered at Molyneux House, Bride Street, Dublin 8, Ireland)
Parity Solutions (Ireland) Ltd (registered at Northern Ireland Science Park, Queens Road, Belfast BT3 9DT)
Personnel Solutions Inc. (registered at 39 Broadway, New York, NY10006, USA)
Teltech International Corp. (registered at 39 Broadway, New York, NY10006, USA)
During 2017 a Group simplification project was undertaken which resulted in 35 previously discontinued or dormant Group
subsidiaries being dissolved.
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75
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
WH Ireland
24 Martin Lane
London
EC4R 0DR
Solicitors
Pinsent Masons
30 Crown Place
London
EC2A 4ES
249360 Parity Group_pp64-pp76.qxp 26/04/2018 12:15 Page 76
Corporate information
Registered office
Dawson House
5 Jewry Street
London, EC3N 2EX
Tel: 020 8543 5353
Registered in England & Wales No. 3539413
Registrars
Equiniti Limited,
Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6DA
Tel: 037 1384 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
6 Agar Street
London
WC2N 4HN
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
76 Parity Group plc www.parity.net
Report and Accounts 2017 stock code: PTY
249360 Parity Group Cover Spread 5mm Spine.qxp_Layout 1 26/04/2018 12:09 Page 1
Parity Group plc
Report and Accounts
Year Ended 31 December 2017
Parity Group plc
Dawson House, 5 Jewry Street London EC3N 2EX
Tel: 020 8543 5353
www.parity.net Stock code: PTY
Perivan Financial Print 249360