PRIME PEOPLE PLC
Annual Report and Financial Statements for the Year Ended 31 March 2018
________________________________________________________________________________________
Contents
Page
1
3
Chairman's statement
Strategic report
9
Report of the Directors
12
Statement of Directors’ responsibilities
13
Corporate governance
17
Remuneration report
20
25
26
28
30
31
32
33
65
66
Independent Auditor’s report
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of financial position
Company statement of financial position
Company statement of changes in equity
Group and Company cash flow statement
Notes to the financial statements
Directors and Advisers
Board of Directors
PRIME PEOPLE PLC
Chairman's Statement
Performance
Overall the year ended 31 March 2018 was a good
one for us in the UK where our permanent
business performed well, and UK contract
business held up in the face of IR35 realignments.
However, in contrast, our international business
fell below the performance levels that we were
hoping for making a lower contribution than in the
previous year.
In October 2017 we were pleased to announce the
acquisition of 60% of the equity of Command
Recruitment Group (HK) Limited (CMD) a
recruitment group focussed in the Architecture,
Design, construction and engineering sectors. The
new business has allowed the company to continue
to advance its international strategy by extending
its reach and capability both in Asia and the
Middle East. CMD is trading in line with our
expectations.
We closed the year with Revenue of £22.92m
(2017: £24.21m) and NFI of £13.15m. NFI
comprises the total placement fees of permanent
candidates and the margin earned in the placement
of contract staff. This is a 0.38% increase on last
year (2017: £13.10m). NFI in the second half of
the year of £7.00m was 13.83% higher than the
first half of 2018, and it is encouraging to see a
second half increase over the comparable period in
2017 of 3.40%.
There were number of good performances within
the UK permanent property business and, in
particular, Real Estate Banking and Investment
generated improved NFI as did our Special
Projects team.
Increased staff costs across the group, including
hiring and establishments costs of a new Hong
Kong Insights Team, together with an exceptional
investment to maintain and improve our Customer
Relationship Management systems impacted on
operating profit which was £1.19m, (2017:
£1.9m).
The conversion rate, which compares operating
profit to NFI, was 9.08% (2017:14.54%) primarily
because of the increased costs mentioned above.
During the year NFI productivity per head was
£96.26k (2017: £102.33k).
The ratio of NFI derived from contract as against
permanent placements was 9:91 (2017:10:90).
Cash Flow
The Group continues to maintain a good net cash
position. At the start of the year the Group had
cash of £2.40m and £1.23m at the year end. This is
after the consideration and professional and other
costs of approximately £1m paid for the purchase
of Command Group and the £0.41m purchase of
shares into treasury, referred to below.
Dividend
During the year, a final dividend of 3.25p per
share was paid (2016:0.00p) and an interim
dividend of 1.75p per share (2017: 1.75p) was paid
to shareholders. The Board will be recommending
a final dividend of 3.25p (2017: 3.25p) per share.
This will result in a total dividend payment of
5.00p for the 2018 financial year (2017: 5.00p).
Subject to market conditions and cash, the Group
to pay dividend on a
intends
progressive basis.
to continue
Share Buy Back
During the year 497,400 shares were purchased at
a cost of £408,107 through the Group’s buyback
programme (2017:129,500). At year end the
Group held 565,676 shares in treasury (2017:
18,276). The Board will be seeking shareholder
approval for renewal of the authority to repurchase
up to 10% (2017: 10%) of the Group’s issued
share capital at the Annual General Meeting.
1
PRIME PEOPLE PLC
Chairman's Statement (continued)
Board
Current trading and outlook
We have continued to advance our overseas
strategy by extending our reach in Asia and expect
an increase in contribution from this area in 2019.
The Group retains strong and well-established
client relationships and committed talent ready to
exploit current and new opportunities.
Whilst the Board is alert to macro-economic
uncertainties, such as the effects of the UK’s
departure from the EU and possible turbulence in
our overseas markets, the Group will continue to
react swiftly to market conditions. The Group
continues to invest in people and the technology to
allow it to grow shareholders’ returns by offering
its clients innovative approaches to recruitment
and a globally connected service.
The Board believes it has continued to operate
corporate governance standards appropriate to an
AIM listed company of its size. There have been
no changes to the Board during the year. Although
not required to do so, the Directors have resolved
that they will retire at least once every three years
and seek reappointment by shareholder at the next
AGM.
The Board members have a mix of skills,
experience, gender and backgrounds that are a
considerable support to the business.
People
The average number of staff (excluding temporary
contractors) increased from 120 last year to 136
this year.
The Group has a diverse cultural and ethnic profile
within the business and at the end of 2018 had a
global 54:46 male to female gender ratio (2017:
54:46).
The success of the Group is dependent on having
competent and committed people and the Board
would like to thank all the members of our staff
for their hard work, commitment and contribution
over the last year.
Robert Macdonald
Executive Chairman
2
PRIME PEOPLE PLC
Strategic Report
Overview
The Group provides permanent and contract
recruitment services to selected, niche industry
sectors.
The built environment continues to be the Group’s
largest market, served through its main subsidiary,
Macdonald & Company. During this year the
Company’s acquisition of Command Recruitment
the Group’s
limited extended
Group
capabilities and reach in the built environment
sector both in Asia and the Middle East.
(HK)
As distinct brands, Prime Insight and Prime
Energy serve the data analysis & customer insight
and renewable energy & sustainability sectors
respectively.
Our employees are vital to the continued success
of the business and we invest heavily in them. As
such, we take time to find and train the best talent
that shares our ambition - to be the best, not
simply the biggest.
The business is organised into teams of specialist
consultants, each managed by a team leader who is
responsible for performance within the operating
framework approved by the Board. The Group
operates a policy of open communication in the
belief that its employees are best placed to suggest
operational improvements and emergent strategies
that will increase earnings.
The Group is committed to managing its talent on
merit and provides equal opportunities for all
current and future employees. It gives full and fair
consideration to applications for employment from
disabled persons, where a disabled person may
adequately carry out the requirements of any
position within the physical constraints of the
Company’s offices.
The Group has two locations in the UK, the
London head office and Manchester, with offices
in Hong Kong (established in 2007), Dubai
(established in 2008), Singapore (established in
2012), and a franchise in South Africa (established
in 2008).
Group Revenue fell by 5.36% in the year to
£22.92m (2017: £24.21m) primarily due to a lower
level of contract business as contractors realigned
to PAYE status under IR35.
3
NFI for the Group increased by 0.374% to
£13.15m (2017: £13.1m) but after taking account
of increased administration costs the business
delivered a reduced operating profit of £1.19m
(2017: £1.9m).
Overall the UK permanent recruitment businesses
performed well supported by increased NFI from
our Real Estate Banking & Finance team and
continued growth in our Residential team. Against
this our contract business saw a reduction in NFI
as a consequence of realignment of contractors to
PAYE status under IR35.
Both Hong Kong and Singapore experienced
difficult and uncertain market conditions each
business seeing a reduction in NFI in the year.
this our newly acquired Command
Against
business helped to minimise the reduction such
that by the end of the year NFI was broadly the
same as last year.
Our Dubai business continued to face challenging
market conditions and we have made changes to
realign it to expected medium term demand. We
are monitoring the office’s establishment closely
in the light of the needs of Command, whose
business operates across the Middle East, given
they are optimistic as to future performance of
their business in this region.
The Board remains committed in its pursuit of
sustainable NFI growth and cash generation.
Whilst costs have increased in the year we
continue to focus on improving the profitability of
the business and cost reductions where possible.
Cultivating strong client relationships, investing in
the best technology and employing the best people
are the foundations of the Group’s success. With
uncertain global growth and a world economy
increasingly exposed to risk it is important that we
remain flexible, able to serve our clients wherever
demand may be, and that we closely monitor
individual NFI performance against costs. Tight
management
and
expenditure, together with a focus on improved
productivity per head and conversion rates,
position the Group to prosper.
remuneration
control of
PRIME PEOPLE PLC
Strategic Report
Regional Performance
UK
Revenue
Net fee income (NFI)
Operating profit
Operating profit as % of NFI
Average number of employees
UK revenue decreased by 5.60% to £17.52m
(2017: £18.56m) whereas NFI increased by 4.17%
to £7.75m (2017: £7.44m).
Permanent NFI increased by 8.61% in the year
compared to a reduction of 7.4% in the previous
year and represents 86.2% (2017: 82.64%) of total
UK NFI in 2018.
The UK Permanent teams supporting the built
environment and energy sectors provided the
strongest NFI growth for the Group in the year.
This was not the case for our UK Prime Insight
team where NFI in the year reduced by 50% and
consequently we have re-deployed the UK Insights
team members to other parts of the UK business.
For the forthcoming year our Insights business
2018
£m
17.52
7.75
0.91
2017
£m
18.56
7.44
0.82
11.74%
11.02%
80
87
will be and are focusing on strong activity in the
Asia market.
Contract NFI reduced by 17.05% in the year
compared to an increase of 14.16% in the previous
year and represents 13.8% (2017: 17.36%) of total
UK NFI in 2018.
Despite the turbulence resulting from the changes
in legislation during the year, which created
uncertainties for number of contractors, our
contract business has reacted well. We are
encouraged by the increase in those contractors
who have chosen to become pay-rolled employees
and we are confident that this trend will continue.
4
PRIME PEOPLE PLC
Strategic Report
Asia
Revenue
Net fee income (NFI)
Operating profit
Operating profit as % of NFI
Average number of employees
to £5.06m (2017:
NFI decreased by 0.39%
£5.08m). £5.06m also includes contribution from
Command of 0.84m. The region is covered by our
offices
in Hong Kong and Singapore and
represents 38.48% of Group NFI (2017: 38.78 %).
In 2018, we established our Insight and Analytics
team in Hong Kong offering our clients a broader
service range and better ability to serve key
markets in mainland China and the region. The
Rest of the World
2018
£m
5.06
5.06
0.49
9.68%
47
2017
£m
5.08
5.08
1.04
20.47%
33
substantial investment in establishing the Insights
and Analytics team in Hong Kong is showing
promise of providing a base for
improved
performance in 2019.
Revenue
Net fee income (NFI)
Operating profit
Operating profit as % of NFI
Average number of employees
The region is covered by our offices in Dubai and South Africa.
2018
£m
0.34
0.34
-0.20
-58.82%
5
2017
£m
0.58
0.58
0.05
8.62%
4
5
PRIME PEOPLE PLC
Strategic Report
Financial Review
Revenue
Group revenue declined by 5.33% to £22.92m
(2017: £24.21m).
Net Fee Income (NFI)
Overall the Group delivered a 0.38% increase in
total NFI to £13.15m (2017: £13.10m). NFI from
to
permanent business
£12.08m (2017: £11.81m). Fees from our contract
business, which represents 8.13% of total NFI
(2017: 9.85%), decreased to £1.07 million from
£1.29m last year.
increased by 2.29%
NFI from international placements, which is
included in our permanent business, decreased by
4.59% to £5.40m (2017: £5.66m). UK NFI of
£7.75m increased 4.17% (2017: £7.44m).
Administration Costs
Administration costs for the year increased by
6.79% to £11.95m (2017: £11.19m). The increase
primarily related to higher staff costs.
Profit before Taxation
Profit before taxation decreased by 37.37% to
£1.19m (2017: £1.90m).
Taxation
increased credit period taken by clients to 69 days
(2017: 45 days).
Treasury Management and Currency Risk
Approximately 76.44% of the Group’s revenue in
2018 (2017: 76.66%) was denominated in Sterling.
Consequently, the Group has a degree of currency
exposure in accounting for overseas operations.
Currently the Group policy is not to hedge against
this exposure, but it does seek to minimise the
effect by converting into Sterling all cash balances
in foreign currency that are not required for local
short term working capital needs.
The Group operates a centralised
function.
treasury
During the year we moved our main banking
arrangements from Barclays to HSBC and took the
opportunity to establish a confidential invoice
discounting arrangement with them in the UK to
provide flexibility for cashflow and treasury
management.
The Group is confident that the net cash within the
Group is sufficient to meet current and foreseeable
liabilities as they fall due.
The taxation charge is £0.17m on profit before
taxation of £1.19m (from ordinary activities)
which gives an effective tax rate of 14.29% (2017:
15.26%). The reasons for the difference from the
standard UK corporation tax rate of 19% are
detailed in note 7 of the accounts.
Cash Flow and Cash Position
At the start of the year the Group had cash of
£2.41m. After net taxation payments of £0.26m
(2017: £0.52m) cash generated from operations
was £1.06m (2017: £1.46m).
Earnings per Share
Basic earnings per share decreased by 33.64% to
8.72p (2017: 13.14p). The diluted earnings per
share options,
share,
decreased by 33.85% to 8.58p (2017: 12.97p).
considering
existing
Balance Sheet
Net assets at 31 March 2018 have decreased to
£14.54m (2017: £15.06m).
Trade receivables net of provision for doubtful
debts at the year end, were up on last year at
the
£2.86m
(2017: £2.41m) which
reflects
6
PRIME PEOPLE PLC
Strategic Report
Financial Review
Cash Flow and Cash Position (cont)
on
During the year the Group spent £0.23m (2017:
its Customer Relationship
£0.05m)
the
Management systems; paid £0.78m
for
purchase of a 60%
in Command
Recruitment Group (HK) Limited; paid £0.41m for
the purchase of treasury shares and paid dividends
to shareholders of £0.61m (2017: £0.21m). As at
31 March 2018 the Group cash was £1.23m.
interest
Measurements of performance in 2018
Whilst the Group considers Net Fee Income (NFI)
to be the key indicator of the performance of the
business there are other measures which were
reported to senior management as follows:
- Conversion rate (operating profit divided by
NFI) decreased to 9.08% (2017: 14.54 %)
- Productivity (NFI divided by total average
staff)
temporary
excluding
headcount
decreased to £96.26k (2017: £102.33k)
- Ratio of billing headcount
to
support
headcount stayed the same at 3.2 (2017: 3.2)
- Percentage of NFI paid to staff increased to
71.47% (2017: 66.26%)
These key performance indicators form the basis
for reviewing the progress of the business.
Principal Risks and Uncertainties
Risk management is an important part of the
management process throughout the Group. The
composition of the Board is structured to give
balance and expertise when considering the principal
risks and uncertainties of the Group.
The Group’s strategy is designed to allow the
business to grow without increasing risk beyond an
acceptable limit. The profile of risks fluctuates from
time to time and, whilst the Group cannot eliminate
risk altogether, the actions being taken to manage
and control risks are intended to mitigate the effects
on the business. The Board reviews the principal
risks and uncertainties facing the Group on a regular
basis. The Board’s approach is to ascertain the key
risks and develop plans to reduce the potential effects
of these risks on the business. The principal risks
identified are as follows:
7
Dependence on Key People
The sustainable success of the Group is dependent on
the continued service of senior management and key
people. The loss of the services of the senior
management and other key people could have a
material effect on the business. To address this, the
Group has put in to place an internal talent
acquisition function and invested in management
information systems,
training and development
programmes, competitive pay structures and long-
term remuneration plans, the aim of which is to
retain the key employees. The Group is fortunate to
have the loyalty of the senior management team
which allows the business to progress, even in
uncertain markets.
Competitors
The Group’s focus is on specialist, niche sectors
where clients need expert knowledge and high levels
of service. We concentrate on markets where there is
a shortage of supply of suitable candidates and
opportunities to build strong and fruitful long-term
relationships with clients. The Directors believe that
the Group is well positioned in its chosen markets.
Whilst the Group seeks to continue to improve its
competitive positions, the actions of current, or
indeed potential, competitors may adversely affect
the Group’s business.
Strength of Property Markets
The market for built environment recruitment
services, from which the Group obtains the major
part of its revenue, is expected to be unpredictable in
the United Kingdom given the uncertainties around
leaving the EU. The effect of this on the property
market is uncertain but it could have material adverse
effects on profitability and cash flows of the
business. That said, the performance in the revenue
line has settled at a profitable level post 23rd June
2016 referendum. Our contract business has some
reliance on the public sector and this with recent
introduction of additional IR35 legislation could
have an impact on this business line in the short term
and possibly also the long term.
The Group is using business models that evolve to
operate in more innovative ways.
PRIME PEOPLE PLC
Strategic report
Financial Review
The Group seeks to maximise its potential by
understanding its position in the market, which will
ultimately help turn further challenges into potential
opportunities.
Macro-economic factors
Persistent slow growth in the global economy has
effects that trigger reduced output, and with it,
demand and investment. A return of financial
turmoil, impairing confidence globally in the next
twelve months could hamper job creation in our
business areas. The Board sees opportunities for
development and will continue to invest in areas
where growth can be delivered at acceptable levels of
profitability, increasing cash generation and growing
Group
is geographically
diversified, spanning over different countries which
reduces the reliance on the success of any particular
market.
revenue. The Group
Regulatory position
The increase in regulatory scrutiny and demands on
compliance are having an effect on hiring. The
Group
is aware of continuing challenges as
procurement practice evolves but remains committed
to being fully compliant in each of the regions in
which it operates. In order to reduce the legal and
compliance risks, fee earners and support staff
receive regular training and updates on changes in
legal and compliance requirements.
Information Technology
The Group is highly dependent on certain technology
systems and the infrastructure on which they operate
in order to maintain its client and candidate database.
These systems rely on specific suppliers who provide
the technology infrastructure and disaster recovery
solutions. The performance of these suppliers is
continually monitored to ensure that the services are
available and maintained. The Group is aware of the
increasing potential challenges to data integrity and
security from both internal and external sources.
infrastructure are
the systems and
Therefore,
regularly
to ensure
reviewed and upgraded
appropriate provision of functionality and resilience
to support the business as it develops.
Foreign Exchange Risk
The Group’s international operations account for
23.57% of
and
approximately 27.33% of the Group’s assets
(2017: 26.00%). Consequently, the Group has a
(2017: 23.36%)
revenue
degree of translation exposure in accounting for
overseas operations and expects this to increase in
line with the growth of the Group outside the
United Kingdom. Currently, the Group’s policy is
not to hedge against this exposure. However, the
Group seeks
this exposure by
converting into sterling all cash balances received
in foreign currency that are not required for local
short term working capital needs. The Group will
continue to monitor its policies in this area.
to minimise
Treasury Policies, Liquidity and Financial Risk
Surplus funds are held to support short term working
capital requirements. These funds are
invested
through the use of short term and period deposits,
with a policy of maximising fixed interest returns,
whilst providing the flexibility required to fund on-
going operations and to invest cash safely and
profitably.
Although the financial risks to which the Group is
exposed are currently considered to be minor, future
interest rate, liquidity and foreign currency risks
could arise. An additional bout of exchange rate
depreciations in emerging market economies and a
sharp decline in capital inflows could force a rapid
compression of domestic demand. The depreciation
of Sterling might have tangible impact on UK
business. The Board continues to focus on cash flow
forecasting and to manage financial and foreign
exchange risk in order to define and understand the
Group foreign exchange exposures and to ensure the
quality of information on each exposure. The Board
will continually review its existing policies and make
changes as required to limit the financial risks of the
business.
Credit Risk Management
Credit risk refers to the risk that counterparty will
default on its contractual obligations resulting in
financial loss to the Group. The principal credit risk
arises from the Group’s trade receivables. Client
credit terms and cash collections are managed
carefully, and cash balances and cash flow forecast
are reviewed weekly. Monthly credit evaluation is
performed on the financial condition of accounts
receivable based on payment history and third-party
credit references with appropriate provisions being
made.
Peter Moore
Managing Director
8
PRIME PEOPLE PLC
Report of the Directors for the Year Ended 31 March 2018
The Directors submit their report and the audited Group financial statements of Prime People Plc for the year
ended 31 March 2018. Prime People Plc is a public listed company, incorporated and domiciled in England
and its shares are quoted on the AIM Market.
Directors
The directors who served during the year were:
Robert Macdonald
Peter Moore
Donka Zaneva-Todorinski
Chris Heayberd
John Lewis
Simon Murphy
As permitted by legislation, the company has chosen to set out the information regarding likely financial risk
management objectives and policies and future developments in the business of the company, which would
otherwise be required to be contained in the director's report, within strategic report.
Substantial Shareholders
At 21 June 2018, other than the Director’s interests shown in the Directors’ remuneration report on page 19
the Company were not required to notify any interests under the Disclosure and Transparency Rules.
The mid-market quotation of the Company’s shares at close of business on 31 March 2018 was 78.50p. The
highest and lowest mid-market quotations in the period from 1 April 2017 to 31 March 2018 were 110.00p
and 78.5p.
Going concern
The Group has two revenue streams permanent and temporary recruiting. The Group has experienced a 5.33%
revenue decline in 2018 primarily as a result of a reduction in contract revenue in the year.
The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval
of the financial statements. After reviewing these forecasts and having made appropriate enquiries, the
Directors have a reasonable expectation that the Group has adequate resources to continue operating for the
foreseeable future. The Group continues to adopt the going concern basis when preparing the financial
statements.
Environmental Policy
The Group recognises its responsibilities for the environment and gives due consideration to the possible
effects of its activities on the environment. As such, our environmental impact comes from the running of our
business generating carbon emissions through the consumption of gas and electricity, transport activities and
commuting, as well as office-based waste such as paper and toners. We do not consider that the Group’s
activities have a major effect on the environment. However, it is the Group’s aim to reduce the environmental
impact of its activities and to operate in an environmentally responsible manner. We are, therefore, committed
to the following principles to ensure the business operates in an environmentally sensitive manner:
•
•
•
Encouraging the re-use and re-cycling of products and waste from our offices;
Ensuring efficient use of materials and energy; and
Purchasing environmentally friendly materials where appropriate.
9
PRIME PEOPLE PLC
Report of the Directors for the Year Ended 31 March 2018
Political Donations
The Group made no political donations during the year (2017: Nil).
Workplace Pensions
In line with the law on workplace pensions the Group continues to operate a defined contribution plan and
automatically enrols certain UK employees into NEST pension scheme.
Capital Structure
Details of the allotted and issued share capital are shown in note 17. The Company has one class of ordinary
shares which carry no right to fixed income and which represents 100% of the total issued nominal value of
all share capital. Each share carries the right to one vote at general meetings of the company.
Details of employee share schemes are set out in note 17.
Dividend
During the year, a final dividend of 3.25p per share was paid (2016:0.00p) on 28 July 2017 to shareholders on
the register on 21 July 2017. The final dividend was approved by shareholders on 24 July 2017. An interim
dividend of 1.75p (2017: 1.75p) was paid on 21 November 2017 to shareholders on the register at close of
business on 17 November 2017. The interim dividend was approved by the Board on 8 November 2017.
As outlined in the Chairman’s statement, the Board propose a final dividend for 2018 of 3.25p per share
which will, subject to shareholder approval at the Annual General Meeting be paid on 27th July 2018 to
shareholders who are on the register on 13th July 2018, making a total dividend paid to shareholders for the
year of 5.00p per ordinary share. (2017: 5.00p).
Annual General Meeting (“AGM”)
The AGM will be held on Monday 19 July 2018 at 11.00am at 2 Harewood Place, London, W1S 1BX. All
shareholders are encouraged to attend. The resolutions to be put forward to the AGM are detailed in the
Notice of AGM, which is being circulated separately to all shareholders.
Authority to purchase own shares
The Directors were given authority at last year’s AGM to purchase through the market, up to 10% of the
Company’s issued share capital, subject to certain restrictions on price. A request for renewal of the authority
is included in the resolutions for this year’s AGM.
During the year the company purchased 497,400 shares (2017: 129,500 shares). The purchased shares are held
in treasury and will be utilised to meet current and future obligations arising from share incentive
arrangements with employees of the Company.
Statement as to disclosure of information to auditors
The Directors, who were in office on the date of approval of these financial statements, have confirmed that,
as far as they are aware, there is no relevant audit information of which the auditors are unaware. The
Directors have confirmed that they have taken appropriate steps to make them aware of any relevant audit
information and to establish that it has been communicated to the auditors.
10
PRIME PEOPLE PLC
Report of the Directors for the Year Ended 31 March 2018
Auditor
Crowe Clark Whitehill LLP has expressed its willingness to continue in office and a resolution to re-appoint
the firm as Auditor and authorising the Directors to set their remuneration will be proposed at the forthcoming
Annual General Meeting.
By order of the Board
Peter Moore
Managing Director
11
PRIME PEOPLE PLC
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the financial statements in accordance with International Financial Reporting
Standards (IFRSs’) as adopted by the EU and applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the
group for that period. In preparing these financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
•
state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the company's transactions and disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other
information included in the Annual Report and Financial Statements is prepared in accordance with applicable
law in the United Kingdom.
The maintenance and integrity of the Prime People Plc web site is the responsibility of the directors; the work
carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred in the accounts since they were initially
presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other
information included in annual reports may differ from legislation in other jurisdictions.
12
PRIME PEOPLE PLC
Corporate Governance
Statement by the Directors on Corporate Governance
The Board of the Company is committed to achieving high standards of corporate governance, professional
integrity and ethics. The Directors have developed governance policies appropriate for the size of the group,
with reference to the main provisions of the Corporate Governance Guidelines for Smaller Quoted Companies
published by the Quoted Companies Alliance and the UK Corporate Governance Code.
A statement of the Directors’ responsibilities in respect of the financial statements is set out on page 12.
The Board has established two committees being the Audit Committee and the Remuneration Committee each
of which operates with defined terms of reference.
Membership of these committees as at the date of this report, the number of meetings held in 2018 and the
attendance record are summarised in the table below:
Directors
Board
Audit
Committee
Remuneration
Committee
Robert Macdonald – Executive Chairman
6/6 (Chair)
Peter Moore – Managing Director
Donka Zaneva-Todorinski – Finance Director
Chris Heayberd – Non-Executive Director
John Lewis – Non-Executive Director
Simon Murphy – Non-Executive Director
6/6
6/6
6/6
6/6
6/6
N
N
N
N
N
N
N
N
1/1
1/1 (Chair)
1/1(Chair)
1/1
Below is a brief description of the role of the Board and its Committees, followed by a statement regarding
the Group’s system of internal controls.
The Board and its Operation
The Board of Prime People Plc is the body responsible for corporate governance, establishing policies and
objectives, and reviewing the management of the Group’s resources.
The Board consists of an Executive Chairman, Robert Macdonald, two other Executive Directors and three
Non-Executive Directors.
The Non-Executive Directors are John Lewis, Simon Murphy and Chris Heayberd. They receive a fixed fee
for their services and their interests in the shares of the Company are set out in the Remuneration Report on
page 17.
Biographical details for all the Directors are shown on pages 66 and 67.
The Board meets at least five times each year, or more frequently where business needs require, and the
Directors receive monthly management accounts detailing the performance of the Group. The Board has a
general responsibility for overseeing all day to day matters of the Group with specific responsibility for;
reviewing trading performance; resources (including key appointments); finding, setting and monitoring
strategy; examining acquisition opportunities; and reporting to shareholders.
13
PRIME PEOPLE PLC
Corporate Governance
The Board and its Operation (continued)
The Non-Executive Directors have a responsibility to ensure the strategies proposed by the Executive
Directors are fully considered and to bring their judgment to bear in this role.
To enable the Board to function effectively and Directors to discharge their responsibilities, full and timely
access is given to all relevant information. In the case of Board meetings, this consists of a comprehensive set
of papers, including monthly business progress reports and discussion documents regarding specific matters.
Directors are free to, and regularly make further enquiries where they feel it is necessary and they are able to
take independent professional advice as required at the Company's expense. This is in addition to the access
which every Director has to the Company secretary.
The Board considers itself to be a "small board", and therefore has not set up a separate Nomination
Committee. Appointments to the Board of both Executive and Non-Executive Directors are based on
approval by the full Board.
The Board has considered the matter of the independence of its Non-Executive Directors who have served for
more than 5 years or have had previous executive roles. As the Board considers itself to be a “small board”
and having regard to the professional qualifications and standing of its Non-Executive Directors as set out in
Biographical details for all the Directors on pages 66 and 67.
Any Director appointed during the year is required, under the provisions of the Company's Articles of
Association, to retire and seek reappointment by shareholders at the next Annual General Meeting. The
Articles also require that one-third of the Directors retire by rotation each year and seek reappointment at the
Annual General Meeting.
The Directors have resolved that they will retire at least once every three years even though not required by
the Company's Articles.
The Executive Directors abstain from any discussion or voting at full board meetings on Remuneration
Committee recommendations where the recommendations have a direct bearing on their own remuneration
package.
Remuneration of Non-Executive Directors is determined by the Board. Non-executive Directors abstain from
discussions concerning their own remuneration.
The Company publishes a full annual report and financial statements which are available on the Prime People
website, to shareholders on request and to other parties who have an interest in the Group's performance.
All shareholders have the opportunity to put questions at the Company's Annual General Meeting.
Audit Committee
The Audit Committee comprises the three Non-Executive Directors of the Company and is chaired by Simon
Murphy. During the year the committee met once which was considered sufficient by both committee
members to deal with matters referred to it in the year. By invitation, the meetings are also attended by the
Finance Director.
The Audit Committee’s principal tasks are to ensure the integrity of the Company’s Financial Reporting
process, review the effectiveness of the Group’s internal controls including risk management, review the
scope of the work of the external auditor and their independence, consider issues raised by the external
auditor, review audit effectiveness and review the half-yearly and annual accounts focusing in particular on
accounting policies and compliance and on areas of management judgement and estimates.
14
PRIME PEOPLE PLC
Corporate Governance
Remuneration Committee
The Remuneration Committee comprises the three Non-Executive Directors of the Company and is chaired by
John Lewis.
The committee reviews the Group policy on the Executive Directors’ remuneration and terms of employment;
makes recommendations on this; and also approves the provision of policies for the remuneration of senior
employees, including share schemes.
The principal terms of reference of the committee are set out in the Remuneration Report on page 17. The
report also contains full details of Directors' remuneration and a statement of the Company's remuneration
policy. The committee meets when required to consider all aspects of the executive Directors' remuneration,
drawing on outside advice as necessary.
Internal Controls
The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness
which, by its nature, can only provide reasonable and not absolute assurance against material misstatement or
loss.
When undertaking their review, the Directors have considered all material controls including operational,
compliance and risk management, as well as financial.
The Board has assessed the effectiveness of the Group’s internal control systems for the period 1 April 2017
to the date of approval of the financial statements and believes it has the procedures in place to safeguard the
Group’s assets and to ensure the reliability of information used within the business and for publication.
Key elements of the system of internal control are as follows:
Group Organisation
The Board of Directors meets up to six times a year and more frequently when required focusing mainly on
strategic issues, operational and financial performance. The Directors have in place an organisational structure
with clearly defined levels of responsibility and delegation of authority.
The Operational Management Board meets quarterly. It acts as a conduit between the Board of Directors and
the Group subsidiaries by providing information, advice and guidance to all staff. It has responsibilities for
setting up, monitoring and control of the business operations globally.
Annual Business Plan
The Group has a comprehensive budgeting system with an annual budget approved by the Board.
Monthly Forecasting
The Group prepares monthly fee income forecasts by individual businesses which are compared to budget.
Financial Reporting
Detailed monthly reports are produced showing a comparison of results against budget, forecast and the prior
year with performance monitoring and explanations provided for significant variances. Any significant
adverse variances are examined, and remedial action taken where necessary.
Capital Expenditure
Capital expenditure requests are reviewed by the Board. Appropriate due diligence work will be carried out if
a business is to be acquired.
15
PRIME PEOPLE PLC
Corporate Governance
Internal Controls (continued)
Levels of authority
There are clear levels of authority, delegation and management structure.
Risk Management
The Directors and operating Company management have a clear responsibility for identifying risks facing
each of the businesses and for putting in place procedures to mitigate and monitor risks. Risks are assessed
during the annual budget process, which is monitored by the Board, and the ongoing Group strategy process.
Whistle blowing Policy
The Company is committed to maintaining the highest ethical standards and the personal and professional
integrity of its employees, suppliers, contractors and consultants. It encourages all individuals to raise any
concerns that they may have about the conduct of others in the business or the way in which the business is
run. The aim of the policy is to ensure that, as far as is possible, our employees are able to tell us about any
wrong doing at work which they believe has occurred or is likely to occur.
Dialogue with shareholders
Many of those who continue to hold shares in the Company are, or have been, employed within the business.
The original owners of Macdonald & Company Group still hold considerable share interests and retain a
strong interest in the Company’s success and reputation.
The Board consider that the Annual Report and Accounts, taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the company’s position and
performance, business model and strategy.
Robert Macdonald
Chairman
16
PRIME PEOPLE PLC
Remuneration Report
The role of the Remuneration Committee
The Remuneration Committee met once this year and comprises John Lewis and Simon Murphy. The
Committee is chaired by John Lewis.
The purpose of the Remuneration Committee is to review, on behalf of the Board, the remuneration policy for
the Chairman, Executive Directors and other Senior Executives and to determine the level of remuneration,
incentives and other benefits, compensation payments and terms of employment of the Executive Directors
and other Senior Executives. It seeks to provide a remuneration structure that strongly aligns the interests of
management with those of shareholders.
Remuneration Policy
The main aim of the Committee is to attract, retain and motivate high calibre individuals with a compensation
comprising of basic salary, incentives and rewards which are linked to the overall performance of the Group
and which are comparable to pay levels in companies of similar size and in similar business sectors.
Directors’ Service Contracts
The Executive Chairman and Managing Director have service contracts which contain a notice period of one
year which are terminable by either party giving one year’s notice. The service contracts also contain
restrictive covenants preventing them from competing with the Group for one year following the termination
of employment and preventing both Directors from soliciting key employees, clients and candidates of the
employing Group and Group companies for 12 months following termination of employment. There are no
provisions for liquidated damages on the early termination of any of the Directors’ service contracts, nor
provisions for mitigating damages.
The Finance Director has a service contract which contains a notice period of 3 months which is terminable
by either party giving 3 months’ notice. The service contract also contains restrictive covenants preventing her
from competing with the Group for 3 months following the termination of employment and preventing her
from soliciting key employees, clients and candidates of the employing Group and Group companies for 3
months following termination of employment.
Non-Executive Directors’ Remuneration and Terms of Services
All Non-Executive Directors have letters of appointment which entitle either party to give three months’
notice. The remuneration of the Non-Executive Directors is determined by the Board. The Non-Executive
Directors do not receive any pension or other benefits, other than out of pocket expenses, from the Group, nor
do they participate in any bonus schemes.
The remuneration agreed by the Committee for the Executive Directors contains some or all of the following
elements: a base salary and benefits, defined pension contributions, an annual bonus reflecting Group and
individual performance and share options.
Base Salary and Benefits
The Committee establishes salaries and benefits by reference to those prevailing in the employment market
generally for Executive Directors of companies of comparable status and market value. Reviews of such base
salary and benefits are conducted annually by the committee.
17
PRIME PEOPLE PLC
Remuneration Report
Emoluments of Directors
The aggregate emoluments of Directors who served during the year are shown in the table below.
Emoluments include management salaries, pension contributions, fees as Directors and benefits. Emoluments
shown are in respect of each Director's period in office during the year as a Board member of Prime People
Plc, and include emoluments from the Company and its subsidiary undertakings.
Notes
Salaries and
fees
Benefits
Pension
Executive Chairman
Robert Macdonald
3
113,284
4,332
£
£
Executive Directors
Peter Moore
Donka Zaneva-
Todorinski
Non-Executive Directors
John Lewis
Simon Murphy
Chris Heayberd
1 & 3
192,386
106,000
8,116
1,871
25,000
25,000
30,900
-
-
-
£
-
385
391
-
-
-
2018
Total
£
2017
Total
£
117,616
141,962
200,887
229,370
108,262
108,456
25,000
19,768
25,000
19,768
30,900
25,378
492,570
14,319
776
507,665
544,702
Notes to the emoluments:
1. Peter Moore is the highest paid Director,
2. Benefits include subscriptions, medical and travel allowance,
3. The Group operates a defined contribution pension scheme. Pension payments made to directors in the year relate to
the minimum required employer contribution rate of 1% set by the Pension Regulator.
18
PRIME PEOPLE PLC
Remuneration Report
Directors’ interests in shares
Directors’ beneficial interest in the shares of the Company at 31 March 2018 was as follows:
Ordinary
shares of 10p
each held at
31 March
2018
Percentage of
issued share
capital at
31 March
2018
Ordinary
shares of 10p
each held at
31 March
2017
Percentage of
issued share
capital at
31 March
2017
2,780,000
2,907,721
1,250
1,074,750
330,000
24,000
22.62%
23.66%
0.01%
8.74%
2.70%
0.20%
2,780,000
2,907,721
1,250
1,062,000
330,000
24,000
22.62%
23.66%
0.01%
8.64%
2.70%
0.20%
Robert Macdonald
Peter Moore
Donka Zaneva-Todorinski
John Lewis
Simon Murphy
Chris Heayberd
Share option schemes
As at 31 March 2018 Directors’ options on ordinary shares of 10p each granted under the Prime People
Enterprise Management Incentive Scheme, were as follows:
Director
Year of
grant
Exercise
price
Granted
Number of
options
31 March
2017
Cancelled Exercised Number of
options
31 March
2018
Donka Zaneva-
Todorinski
2013/14
2014/15
10.00p
10.00p
2015/16
58.00p
1,250
15,000
10,000
-
-
-
-
-
-
-
-
-
1,250
15,000
10,000
Directors’ Insurance
Directors’ and officers’ liability insurance is provided at the cost of the Group for all Directors and Officers.
Annual Resolution
Shareholders will be given the opportunity to approve the Remuneration report at the Annual General
Meeting.
John Lewis
Chairman of the Remuneration Committee
19
PRIME PEOPLE PLC
Independent Auditor’s Report
Independent Auditor’s Report to the Members of Prime People Plc
Opinion
We have audited the financial statements of Prime People plc (the “Parent Company”) and its subsidiaries (the
“Group”) for the year ended 31 March 2018, which comprise:
•
•
•
•
•
the Group Statement of Comprehensive Income for the year ended 31 March 2018;
the Group and Parent Company Statements of Financial Position as at 31 March 2018;
the Group and Parent Company Statements of Cash Flows for the year then ended;
the Group and Parent Company Statements of Changes In Equity for the year then ended; and
the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
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 March 2018 and of the Group’s profit for the period then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union 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 under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the Group
in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to
report to you when:
• The directors’ use of the going concern basis of accounting in the preparation of the financial statements
is not appropriate; or
• The directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the Group’s or the Parent Company’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
20
PRIME PEOPLE PLC
Independent Auditor’s Report (continued)
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if
it could reasonably be expected to change the economic decisions of a user of the financial statements. We
used the concept of materiality to both focus our testing and to evaluate the impact of misstatements
identified.
Based on our professional judgement, we determined overall materiality for the Group financial statements as
a whole to be £170,000 (FY17 £180,000), based on 0.75% of Group revenue.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for
the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted
for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having
regard to the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related
party transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £5,000 (2017: £10,000).
Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required
on qualitative grounds.
Overview of the scope of our audit
The Group’s operations are mainly based in the UK, Hong Kong and Singapore. We performed a full scope
audit on all trading components of the Group. The finance function is based in the UK at one central
operating location. The audit team visited this location and performed a full scope audit.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included 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.
This is not a complete list of all risks identified by our audit.
Key audit matter
Impairment of goodwill
How the scope of our audit addressed the key audit
matter
The Group held goodwill of £10.5m (2017: £9.8m) at
the year end. There is a risk that the carrying value of
goodwill may be higher than the recoverable amount.
Management has performed an assessment a full
impairment review for goodwill and no impairment
was recorded.
We evaluated and challenged the directors’ future
cash flow forecasts and the process by which they
were drawn up and tested the underlying value in use
calculations. We compared management’s forecast
with the latest Board approved budget and found
them to be reasonable.
When a review for impairment is conducted, the
recoverable amount is determined based on value in
the directors’
use calculations which rely on
assumptions and estimates of
trading
future
performance.
We challenged:
- The key assumptions for short- and long-term
growth rates in the forecasts by comparing them
with historical results, as well as economic and
industry forecasts for
the UK recruitment
market; and
21
PRIME PEOPLE PLC
Independent Auditor’s Report (continued)
Key audit matter
Impairment of goodwill (continued)
How the scope of our audit addressed the key audit
matter
The key assumptions applied by the directors in the
impairment reviews are country-specific discount
rates and future growth
- The discount rate used in the calculations by
assessing the cost of capital for the Group and
comparable organisations.
We performed sensitivity analysis on
assumptions within the cash flow forecasts.
the key
This included sensitising the discount rate applied to
the future cash flows, and the short and longer-term
growth rates.
Revenue recognition for permanent placements
The Group has reported permanent placement
revenues of £11.95m (2017: £11.66m).
For permanent placements revenue is recognised at
the date of acceptance. There is a risk around the
timing of the recognition of revenue as a contract
may be agreed with a customer and candidate several
months in advance of the start of employment.
Consequently, there is a risk that:
-
revenue recognition may occur before revenue
recognition criteria have been met
revenue is not recognised in the correct period
the placement is not taken up as agreed, which
could result
the reversal of previously
in
recorded revenue
-
-
result
in a goodwill
We ascertained the extent to which a change in these
assumptions, both individually or in aggregate,
would
impairment, and
considered the likelihood of such events occurring.
We also ensured that sufficient and appropriate
disclosure regarding such events was included in the
Group’s financial statements.
We performed following procedures on all trading
components:
- Updated our understanding of
the revenue
processes.
- Selected a sample of permanent placement
revenue transactions for detailed transaction
testing to verify that the revenue recognition
criteria had been met and to verify that the
transaction had actually occurred and was
recorded at the correct value. We performed
analytical procedures.
- Performed period-end cut off testing focusing on
material items to check all revenue recognition
criteria for the placements had been met and
revenue had been recognised in the correct
period.
- Compared
level of actual permanent
placement revenue reversals, which occur as a
result
contractual
placements, to the provision recorded against
accrued income to determine if the provision was
appropriate.
non-completion
the
of
of
22
PRIME PEOPLE PLC
Independent Auditor’s Report (continued)
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole.
They were not designed to enable us to express an opinion on these matters individually and we express no
such opinion.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
•
•
the information given in the Strategic Report and the Directors' Report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the Directors’ Report and Strategic Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent Company and their environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or
the Directors’ Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns;
or
•
certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 12 the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s 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 the directors either intend to liquidate the group or the
Parent Company or to cease operations, or have no realistic alternative but to do so.
23
PRIME PEOPLE PLC
Independent Auditor’s Report (continued)
Auditor’s responsibilities for the audit of the financial statements
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 an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a 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 the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
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.
Stacy Eden (Senior Statutory Auditor)
for and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London
21st June 2018
24
PRIME PEOPLE PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2018
Revenue
Cost of sales
Net fee income
Administrative expenses
Operating profit
Profit before taxation
Income tax expense
Profit for the year
Other comprehensive income
Items that will or may be reclassified
to profit or loss:
Exchange (loss)/profit on translating
foreign operations
Other Comprehensive income
for the year, net of tax
Total comprehensive income for the
year
Attributable to:
Equity shareholders of the parent
Non-controlling interest
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
2, 3
2
4
7
9
2018
£’000
2017
£’000
22,916
(9,769)
24,213
(11,115)
13,147
(11,954)
13,098
(11,194)
1,193
1,904
1,193
1,904
(166)
(292)
1,027
1,612
(243)
270
(243)
270
784
1,882
779
5
1,880
-
8.72p
8.58p
13.14p
12.97p
The above results relate to continuing operations
25
PRIME PEOPLE PLC
Consolidated Statement of Changes in Equity
For the year ended 31 March 2018
Called up
share
capital
Capital
Redemption
reserve
Treasury
shares
Share
premium
account
Merger
reserve
Share
option
reserve
Translation
reserve
Retained
Earnings
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Total
attributable to
equity holders
of the parent
£’000
Non-
controlling
interest
Total
equity
£’000
£’000
At 1 April 2016
1,229
Profit for the year
Other comprehensive
income
Adjustment in respect of
share schemes
Shares purchased for
treasury
Shares issued from
treasury
Adjustment on share
disposal
Dividend
-
-
-
-
-
-
-
At 31 March 2017
1,229
9
-
-
-
-
-
-
-
9
(21)
5,371
173
-
-
-
(111)
13
98
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300
-
-
(20)
-
-
-
-
463
-
270
-
-
-
-
-
5,892
1,612
-
108
-
-
(98)
(215)
13,416
1,612
270
88
(111)
13
-
(215)
(21)
5,371
173
280
733
7,299
15,073
-
-
-
-
-
-
-
-
-
13,416
1,612
270
88
(111)
13
-
(215)
15,073
26
PRIME PEOPLE PLC
Consolidated Statement of Changes in Equity
For the year ended 31 March 2018
Called up
share
capital
Capital
Redemption
reserve
Treasury
shares
Share
premium
account
Merger
reserve
Share
option
reserve
Translation
reserve
Retained
Earnings
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Total
attributable to
equity holders
of the parent
£’000
Non-
controlling
interest
Total
equity
£’000
£’000
At 31 March 2017
1,229
9
(21)
5,371
173
280
733
7,299
15,073
-
15,073
Total comprehensive
income for the year
Other comprehensive
income
Adjustment in respect of
share schemes
Shares purchased for
treasury
Shares issued from
treasury
Acquisition of
subsidiary with Non-
Controlling Interest
Adjustment on share
disposal
Dividend
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(408)
3
-
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34
-
-
-
-
-
-
1,022
1,022
(243) -
(243)
-
-
-
-
-
-
60
-
-
-
(5)
(612)
94
(408)
3
-
-
(612)
5
-
-
-
-
70
-
-
1,027
(243)
94
(408)
3
70
-
(612)
At 31 March 2018
1,229
9
(421)
5,371
173
314
490
7,764
14,929
75
15,004
27
PRIME PEOPLE PLC
Consolidated Statement of Financial Position
As at 31 March 2018
Assets
Non – current assets
Goodwill
Property, plant and equipment
Deferred tax asset
Current assets
Trade and other receivables
Current tax asset
Cash at bank and in hand
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liability
Non-current liabilities
Deferred tax liability
Total liabilities
Net assets
Note
11
10
16
13
21
15
16
28
2017
£’000
2018
£’000
10,527
242
45
9,769
136
43
10,814
9,948
5,616
41
1,234
6,891
5,101
-
2,409
7,510
17,705
17,458
2,679
-
2,679
22
2,701
2,310
75
2,385
-
2,385
15,004
15,073
PRIME PEOPLE PLC
Consolidated Statement of Financial Position
As at 31 March 2018
Note
2018
£’000
Capital and reserves attributable to the
Company’s equity holders
Called up share capital
Capital redemption reserve fund
Treasury shares
Share premium account
Merger reserve
Share option reserve
Translation reserve
Retained earnings
17
18
18
18
18
18
18
18
Non-controlling interest
Total equity
1,229
9
(421)
5,371
173
314
490
7,764
14,929
75
15,004
2017
£’000
1,229
9
(21)
5,371
173
280
733
7,299
15,073
-
15,073
The financial statements on pages 25 to 62 were approved by the Board of Directors and authorised for issue
on 21st June 2018 and are signed on its behalf by:
R J G Macdonald
D Zaneva-Todorinski
29
PRIME PEOPLE PLC
Company Statement of Financial Position
As at 31 March 2018
Assets
Non-current assets
Investment in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Other payables
Total liabilities
Net assets
Capital and reserves attributable to the
Company’s equity holders
Called up share capital
Capital redemption reserve fund
Treasury shares
Share premium account
Merger reserve
Share option reserve
Retained earnings
Note
12
13
21
15
17
18
18
18
18
18
18
2018
£’000
11,190
11,190
9
15
24
2017
£’000
11,156
11,156
6
636
642
11,214
11,798
791
791
779
779
10,423
11,019
1,229
9
(421)
5,371
173
314
3,748
1,229
9
(21)
5,371
173
280
3,978
Total equity
10,423
11,019
The Company’s retained earnings includes profit for the year of £386,536 (2017: £487,456).
The financial statements of Prime People Plc, Company Number 01729887 were approved by the Board and
authorised for issue on 21st June 2018 and are signed on its behalf by:
R J G Macdonald
D Zaneva-Todorinski
30
PRIME PEOPLE PLC
Company Statement of Changes in Equity
For the year ended 31 March 2018
Company
Called
up
share
capital
£’000
Capital
Redemp-
tion
reserve
£’000
Treasury
shares
Share
premium
account
Merger
reserve
Share
option
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
£’000
At 1 April 2016
1,229
9
(21)
5,371
173
300
3,803
10,864
Total
comprehensive
income for the
year
Issue of
ordinary shares
Shares
purchased for
treasury
Adjustment on
share disposal
Investment in
subsidiaries
Dividend
At 31 March
2017
Total
comprehensive
income for the
year
Shares
purchased for
treasury
Shares issued
from treasury
Adjustment on
share disposal
Investment in
subsidiaries
Dividend
At 31 March
2018
-
-
-
-
-
-
-
-
-
13
-
(111)
-
-
-
98
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
488
488
-
-
13
(111)
-
(98)
-
(20)
-
(20)
-
(215)
(215)
1,229
9
(21)
5,371
173
280
3,978
11,019
-
-
-
-
-
-
-
-
-
(408)
3
5
-
-
-
-
-
-
-
-
-
-
-
-
387
387
-
-
(5)
(408)
3
-
-
-
-
-
-
-
-
-
-
-
34
-
-
(612)
34
(612)
1,229
9
(421)
5,371
173
314
3,748
10,423
31
PRIME PEOPLE PLC
Group and Company Cash Flow Statement
For the year ended 31 March 2018
Group
2018
£’000
2017
£’000
Company
2018
£’000
Note
Cash generated from (used in)
underlying operations
20
1,320
1,981
Income tax paid
(256)
(521)
(43)
(11)
2017
£’000
(126)
(10)
Net cash from/(used by) operating
activities
Cash flows from/(used in)
investing activities
Net purchase of property, plant and
equipment
Purchase of subsidiary, net of cash
acquired
Dividend received
Net cash from / (used in) investing
activities
Cash flows from financing
activities
Issue of ordinary share capital
Shares issued from treasury
Shares purchased for treasury
Dividend paid to shareholders
Net cash used in financing
activities
Net (decrease)/ increase in cash
and cash equivalents
Cash and cash equivalents at
beginning of the year
Effect of foreign exchange rate
changes
1,064
1,460
(54)
(136)
(209)
(771)
-
(53)
-
-
-
-
-
-
450
450
(980)4
(53)
450
450
-
-
(408)
(612)
2
115
(111)
(215)
-
3
(408)
(612)
2
13
(111)
(215)
(1,020)
(209)
(1,017)
(311)
(936)
1,198
(621)
3
2,409
(239)
953
258
636
633
-
15
-
636
Cash and cash equivalents at the
end of the year
21
1,234
2,409
32
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
1 Nature of Operations
Prime People Plc (‘the Company’) and its subsidiaries (together ‘the Group’) is an international recruitment
services organisation with offices in the United Kingdom, the Middle East and the Asia Pacific region from
which it serves an international client base. The Group offers both permanent and contract specialist
recruitment consultancy for large and medium sized organisations.
The Company is a public limited company which is quoted as an AIM Company and is incorporated and
domiciled in the UK. The address of the registered office and the principal place of business is 2 Harewood
Place, London W1S 1BX. The registered number of the Company is 01729887.
2 Summary of Significant Accounting Policies
Basis of Preparation
The financial statements of Prime People Plc consolidate the results of the Company and all its subsidiary
undertakings. As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the
Company has not been included as part of these financial statements. The financial statements have been
prepared on a going concern basis.
The consolidated financial statements of Prime People Plc have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as endorsed by the European Union and also comply
with IFRIC interpretations and Company Law applicable to Companies reporting under IFRS. The
consolidated financial statements have been prepared under the historical cost convention modified as
necessary so as to include any items at fair value, as required by accounting standards.
The consolidated financial statements for the year ended 31 March 2018 (including comparatives) are
presented in GBP ’000.
The accounting polices applied by the Group in these consolidated financial statements are the same as those
applied in its consolidated financial statements as at and for the year ended 31 March 2017 and are described
below.
International Accounting Standards (IAS/IFRS) and Interpretations in issue but not yet EU approved
At the date of authorisation of these financial statements, certain new standards, amendments and
interpretations to existing standards have been published by the IASB but are not yet effective. These have not
been adopted early by the Group and the initial assessment indicates that either they will not be relevant or
will not have a material impact on the Group:
International Accounting Standards (IAS/IFRS) and Amendments (and EU adopted) but not yet
effective
•
•
•
IFRS 9 Financial Instruments (Issued on 24 July 2014, effective date 1 January 2018)
IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014) and amendments to IFRS
15: Effective date of IFRS 15 (issued on 11 September 2015), effective date 1 January 2018
IFRS 16 Leases (Issued January 2016, effective date 1 January 2019)
33
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
2 Summary of Significant Accounting Policies (continued)
Amendments:
• Clarifications to IFRS 15 Revenue from Contracts with Customers (issued on 12 April 2016, effective
date 1 January 2018)
• Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions
(issued on 20 June 2016, effective date 1 January 2018)
• Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
(issued on 12 September 2016, effective date 1 January 2018)
• Amendments to IAS 40: Transfers of Investment Property (issued on 8 December 2016, effective date
1 January 2018)
• Annual Improvements to IFRS Standards 2014-2016 Cycle (issued on 8 December 2016, effective
date 1 January 2018)
• Amendments to IFRS 9: Prepayment Features with Negative Compensation (issued on 12 October
2017, effective date 1 January 2019)
IFRS 15 - Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from
contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to
which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new
revenue standard will supersede all current revenue recognition requirements under IFRS. IFRS 15 requires
revenue to be recognised once value has been received by the customer and when the performance obligations
have been satisfied.
34
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
Summary of Significant Accounting Policies (continued)
Revenue from permanent placement
Currently revenue is recognised from permanent placements on a contingent basis and is typically based on a
percentage of the candidate’s remuneration package, with the revenue being recognised at the date an offer is
accepted by a candidate and where a start date has been determined. It includes revenue anticipated, but not
invoiced, at the balance sheet date, which is correspondingly accrued on the balance sheet within accrued
income. A provision is made against accrued income for possible cancellations of placements prior to, or
shortly after, the commencement of employment.
Our review has concluded that the current basis of revenue recognition is not consistent with IFRS 15 and the
performance obligation (the placement of the candidate) under IFRS 15 is only satisfied when the candidate
starts the job. We have therefore changed our revenue recognition policy from April 2018.
The impact of the transition to IFRS 15 will result in revenue currently recognised at the date an offer is made,
being deferred to the point that the candidate starts the job. Where this period crosses the year end there will
be a deferral of revenue from one period to the next under IFRS 15.
On transition to IFRS 15 in the March 2019 financial statements, this change will be accounted for under the
cumulative effect method, and will result in a reduction in the retained earnings of the group of £1.74m. Had
this change in policy been applied in the current year it would not have had a material impact on the revenue
or profit for the year.
Temporary revenue
Revenue from temporary placements, which represents amounts billed for the services of temporary staff,
including the salary cost of these staff, is recognised when the service has been provided. Our review has
concluded that this basis of revenue recognition is consistent with IFRS 15 and no adjustment is required as a
result of the transition to IFRS 15 for revenue earned from temporary placements.
IFRS 16 - Leases
On adoption of IFRS 16 the Group will recognise within the balance sheet a right of use asset and a
corresponding lease liability for all applicable leases. Within the income statement, operating lease rentals
payable will be replaced by depreciation and interest expense. This will result in an increase in operating
profit and an increase in finance costs.
If IFRS 16 had been applied in the current accounting period, assets and liabilities would have increased by
approximately £2.2m with an immaterial impact on the reported results.
IFRS 9 - Financial Instruments
Our review concluded that IFRS 9 will not have a material impact on the Group’s financial statements once it
becomes effective from 1 January 2018.
Consolidation
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are de-consolidated from the
date that control ceases.
35
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
Consolidation (continued)
Business combinations are accounted for using the acquisition method of accounting. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the cost of
acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as
goodwill.
Inter-Company transactions and balances on transactions between Group companies are eliminated in
preparing the consolidated financial statements.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Going Concern
The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval
of the financial statements and have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the
going concern basis of accounting in preparing the financial statements.
Revenue recognition
a) Revenue
Revenue, which excludes value added tax (“VAT”), constitutes the value of services undertaken by the Group
from its principal activities, which are recruitment consultancy and other ancillary services. These consist of:
- Revenue from contract placements, which represents amounts billed for the services of contract staff,
including the salary of these staff. This is recognised when the service has been provided;
- Revenue from permanent placements, which is based on a percentage of the candidate’s remuneration
package and is derived from both retained assignments (income recognised on completion of defined
stages of work) and non-retained assignments (income recognised at the date an offer is accepted by a
candidate, a start date has been agreed but employment has not yet commenced). The latter includes
revenue anticipated but not invoiced at the balance sheet date, which is correspondingly accrued on the
balance sheet within prepayments and accrued income. A provision is made against accrued income based
on past historical experience for possible cancellations of placements prior to, or shortly after, the
commencement of employment; and
b) Cost of Sales
Cost of sales consists of the salary cost of contract staff and costs incurred on behalf of clients, principally
advertising costs.
c) Net Fee Income
Net fee income represents revenue less cost of sales and consists of the total placement fees of permanent
candidates and the margin earned on the placement of contract candidates.
36
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
2 Summary of Significant Accounting Policies (continued)
d) Foreign Currency Translation
(i)
Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (‘the functional currency’). The consolidated
financial statements are presented in Sterling, which is the Company’s functional and presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the consolidated statement of comprehensive income.
(iii) Group Companies
On consolidation the results and financial position of all the Group entities that have a functional currency
different from the presentation currency are translated into the presentation currency as follows:
•
•
•
assets and liabilities for each year end presented are translated at the closing rate of that year end;
income and expenses for each statement of comprehensive income are translated at average exchange
rates; and
all resulting exchange differences are recognised in other comprehensive income.
e)
Intangible Assets
(i)
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in ‘intangible assets’.
As permitted by the exception in IFRS1 ‘First time adoption of International Reporting Standards’, the Group
has elected not to apply IFRS3 ‘Business combinations’ to goodwill arising on acquisition that occurred
before the date of transition to IFRS.
Separately recognised goodwill is reviewed annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed. Determining whether goodwill is
impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been
allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise
from the cash generating unit and a suitable discount rate in order to calculate present value.
37
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
2 Summary of Significant Accounting Policies (continued)
f) Property, Plant and Equipment
All property, plant and equipment are stated at historical cost less accumulated depreciation less provisions
for impairment. Depreciation is provided on all property, plant and equipment using the straight-line method
at rates calculated to write off the cost less estimated residual values over their estimated useful lives, as
follows:
• Furniture, fittings and computer equipment 25% – 33%
The gain or loss arising on disposal or retirement of an asset is determined by comparing the sales proceeds
with the carrying amount of the asset and is recognised within profit and loss.
g)
Impairment of Assets
Assets that have an indefinite useful economic life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units).
h) Taxation
The tax expense represents the sum of the current tax expense and deferred tax expense.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported
in the statement of comprehensive income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group’s
liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the
balance sheet date.
Deferred income tax is provided in full, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is
determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
i) Leased Assets and Obligations
All of the Group’s leases are operating leases and the annual rentals are charged to profit and loss on a
straight-line basis over the lease term.
The benefit of rent free periods received for entering into a lease is spread evenly over the lease term.
38
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
2 Summary of Significant Accounting Policies (continued)
j) Pension Costs
The Group operates a defined contribution pension scheme. The Group adopts both the minimum legally
required employer contribution rate of 1% of qualifying earnings, and the maximum earning threshold for
automatic enrolment for 2017-18, as set by the Pension Regulator.
The assets of the scheme are held separately from those of the Group in independently administered
workplace pension -NEST. The pension costs charged to the income statement represent the contributions
payable by the Group to Nest during the year.
The Pension liabilities at the Balance Sheet date represent employer and employee pension contributions, that
are payable to the pension provider by the 22nd date of each month.
k) Segmental Reporting
IFRS8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed
by the Board of Directors to allocate resources to the segment and to assess their performance.
l) Financial instruments
Financial assets and liabilities are recognised in the Group’s balance sheet when the Group becomes a party to
the contractual provision of the instrument.
m) Financial assets
The Group’s financial assets comprise cash and various other receivable balances that arise from its
operations. Trade receivables, loans and other receivables that have fixed or determinable payments that are
not quoted in an active market are classified as loans and receivables. Loans and receivables are initially
measured at fair value and subsequently at amortised cost using the effective interest rate method, less any
impairment.
Financial assets are assessed for impairment at each balance sheet date, and are impaired where there is
objective evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been impacted.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes
in the carrying amount of the allowance account are recognised in the profit or loss account. If in a subsequent
period the amount of the impairment loss decreases and the decreases can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss is reversed through
profit and loss to the extent that the carrying amount of the financial asset at the date the impairment is
reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
Cash and cash equivalents includes cash in hand and bank deposits that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts are classified with
current liabilities in the statement of financial position.
39
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
2 Summary of Significant Accounting Policies (continued)
n) Financial liabilities and equity
Financial liabilities and equity instruments are initially measured at fair value and are classified according to
the substance of the contractual arrangements entered into. Financial liabilities are subsequently measured at
amortised cost. The Group’s financial liabilities comprise trade payables, bank overdrafts and other payable
balances that arise from its operations. They are classified as ‘financial liabilities measured at amortised cost’.
o) Share-Based Compensation
The Group operates equity-settled share-based compensation plans.
The fair value of the employee services received in exchange for the grant of the options is recognised as an
expense. The total amount to be expensed over the vesting period is determined by reference to the fair value
of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability
and sales growth targets). At the balance sheet date the number of outstanding options is adjusted to reflect
those options that have been granted during the year or have lapsed in the year.
p) Dividend Distribution
A final dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s
financial statements in the period in which the dividends are approved by the Company’s shareholders.
Interim dividend distributions are recognised in the period in which they are approved and paid.
q) Critical Accounting Estimates and Judgements
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates and judgements. It also requires management to exercise judgement in the process of applying the
Company’s accounting policies.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the amount recognised in the financial statements
are described below:
Revenue Recognition
Revenue from permanent placements is recognised when a candidate formally accepts an offer of
employment, a start date has been agreed, but employment has not commenced. A ‘fall-through’ provision is
made by management, based on historical experience, for the proportion of those placements where the offer
of employment is not taken up. Management have reviewed the past assumptions made with respect to the
‘fall-through’ provisions and consider that they remain reasonable. The fall-through provision is estimated at
16.0% of those offers where employment has yet to commence (2017: 18.9%). The Directors consider that a
change in the range of possible outcomes, or sensitivity, would not have a material impact on the business.
Goodwill Impairment
The Group’s determination of whether goodwill is impaired requires an estimation of the value in use of the
cash generating units to which goodwill is allocated. This requires estimation of future cash flows and the
selection of a suitable discount rate details of which are disclosed in note 11.
40
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
2 Summary of Significant Accounting Policies (continued)
q) Critical Accounting Estimates and Judgements (continued)
Trade Receivables
There is uncertainty regarding customers who may not be able to pay as their debts fall due. In reviewing the
appropriateness of the provisions in respect of recoverability of trade receivables, consideration has been
given to the ageing of the debt and the potential likelihood of default, taking into account current economic
conditions. Details of the total amount of receivables past due and the movement in allowance for doubtful
debts are disclosed in note 13.
3 Segment Reporting
a) Revenue and Net Fee Income, by Geographical Region
Information provided to the Board is focused on regions and as a result, reportable segments are on a regional
basis.
UK
Asia
Rest of World
Revenue
Net fee income
2018
£’000
2017
£’000
2018
£’000
17,515
18,558
7,746
5,060
5,075
5,060
2017
£’000
7,443
5,075
341
580
341
580
22,916
24,213
13,147
13,098
All revenues disclosed by the Group are derived from external clients and are for the provision of recruitment
services. The accounting policies of the reportable segments are the same as the Group’s accounting policies
described in note 2. Segment profit before taxation represents the profit earned by each segment after
allocations of central administration costs.
b) Revenue and Net Fee Income, by Classification
Permanent
-UK
-Asia
-Rest of World
Contract (UK)
Total
Revenue
2018
£’000
2017
£’000
Net fee income
2017
£’000
2018
£’000
6,551
5,060
341
6,004
5,075
580
6,548
5,060
341
5,991
5,075
580
10,964
12,554
1,198
1,452
22,916
24,213
13,147
13,098
41
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
3 Segment Reporting (continued)
c) Profit before Taxation by Geographical Region
UK
Asia
Rest of World
Operating Profit
Net finance income
Profit before taxation
2018
£’000
906
489
(202)
1,193
-
2017
£’000
823
1,035
46
1,904
-
1,193
1,904
Operating profit is the measure of profitability regularly reviewed by the Board, which collectively acts as the
Chief Operating Decision Maker. Consequently, no segmental analysis of interest or tax expenses is provided.
Segment operating profit is the profit earned by each operating unit and includes inter segment revenues
totalling £0.72m (2017: £0.76m) for the UK, and charges of £0.63m (2017: £0.68m) for Asia and £0.09m
(2017: £0.08m) for the rest of the world.
Intersegmental revenue and charges relate to transfer of services from one subsidiary of the Group to another.
They are based on arm’s length calculations and in proportion to segmental headcount as percentage of the
total Group headcount.
d) Segment Assets and Liabilities by Geographical Region
UK
Asia
Rest of World
Total
Total assets
Total liabilities
2018
£’000
2017
£’000
2018
£’000
2017
£’000
12,896
12,931
1,382
1,293
3,562
3,874
950
1,019
1,247
653
369
73
17,705
17,458
2,701
2,385
The analysis above is of the carrying amount of reportable segment assets and liabilities. Segment assets and
liabilities include items directly attributable to a segment and include income tax assets and liabilities.
42
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
4 Profit on ordinary activities before taxation
Profit for the year is arrived at after charging:
- owned assets
- land and buildings
Depreciation
Operating lease rentals
Loss/(profit) on disposal of fixed assets
Exchange rate loss
The analysis of auditor’s remuneration is as follows:
Audit of Company
Audit of subsidiaries
Total audit fees
5 Directors’ emoluments
Emoluments for qualifying services
Highest paid Director:
Emoluments for qualifying services
2018
£’000
2017
£’000
123
740
-
(5)
25
35
60
158
521
1
26
21
24
45
2018
£’000
2017
£’000
508
544
508
544
201
229
Details of Directors’ emoluments and interests, which form part of these financial statements, are provided in
the Director’s Remuneration report on pages 17 to 19.
43
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
6 Employees
Group
The average monthly number of employees of the Group during the year,
including Directors, was as follows:
Consultants
Management and administration
Temporary staff
Company
2018
Number
2017
Number
104
32
43
179
95
25
8
128
2018
Number
2017
Number
The average monthly number of employees of the Company during the
year, including Directors, was as follows:
Management
6
5
Staff costs for all employees, including Directors, but excluding contract staff placed with clients are as
follows and have been included in Administration expenses in the Consolidated statement of comprehensive
income:
Group
Wages and salaries
Social security costs
Pension contributions
Share option charge
Remuneration of key management
Short-term employee benefits
Social security costs
Share-based payments
Pension contributions
Key management includes executive Directors and senior divisional managers.
44
2018
£’000
8,612
704
(14)
94
2017
£’000
7,860
655
75
89
9,396
8,679
2018
£’000
1,129
118
25
2
2017
£’000
1,195
111
24
2
1,274
1,332
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
7 Taxation on Profits on Ordinary Activities
a) Analysis of tax charge in the year
Current tax
UK Corporation tax
Foreign tax
Foreign tax over-provision in prior years
Total current tax
Deferred tax
Origination and reversal of temporary differences
Deferred tax on fair value share option charge
2018
£’000
2017
£’000
134
12
-
146
22
(2)
209
107
28
344
(9)
(43)
Total charge on profit for the year
166
292
UK corporation tax is calculated at 19% (2017: 20%) of the estimated assessable profits for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
b) The charge for the year can be reconciled to the profit per the consolidated statement of
comprehensive income as follows:
Profit before taxation
Tax at UK corporation tax rate of 19% (2017: 20%) on profit on ordinary
activities
Effects of:
Expenses not deductible for tax purposes
Depreciation for the period less than capital allowances
Tax losses not utilised/(utilised)
Tax rate differences
Temporary differences recognised
Overprovision in prior years
Group relief
Total current tax
Deferred Tax
Origination and reversal of temporary differences
Tax charge for the year
45
2018
£’000
2017
£’000
1,193
1,904
227
381
28
(20)
6
(11)
(20)
(64)
-
22
14
(2)
(35)
9
(28)
(17)
146
344
20
(52)
166
292
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
8 Dividends
Final dividend for 2017: 3.25p per share (2016: 0.00p per share)
Interim dividend for 2018: 1.75p per share (2017: 1.75p per share)
2018
£’000
2017
£’000
398
214
-
215
612
215
A final dividend of 3.25p (2017: 3.25p) was paid on 28 July 2017 to shareholders on the register on 21 July
2017.
An interim dividend of 1.75p (2017: 1.75p) was paid on 24 November 2017 to shareholders on the register at
the close of business on 17 November 2017. The interim dividend was approved by the Board on 8 November
2017.
A final dividend of 3.25p per share will, subject to shareholder approval at the Annual General Meeting, be
paid on 27 July 2018 to shareholders who are on the register on 20 July 2018, making a total dividend paid to
shareholders for the year of 5.00p per ordinary share. (2017: 5.00p)
46
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
9 Earnings per share
Earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year.
Fully diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by
existing share options assuming dilution through conversion of all potentially dilutive existing options.
Earnings and weighted average number of shares from continuing operations used in the calculations are
shown below.
Profit for the year and earnings used in basic and diluted earnings per share
2018
£’000
1,027
2017
£’000
1,612
Number
Number
Weighted average number of shares used for basic earnings per share
Dilutive effect of share options
11,784,523
184,146
12,271,923
195,634
Diluted weighted average number of shares used for diluted earnings per
share
11,968,669
12,467,557
Basic earnings per share
Diluted earnings per share
Pence
Pence
8.72p
8.58p
13.14p
12.97p
47
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
10 Property, Plant and Equipment
Group
Cost
At 1 April 2016
Additions
Disposals
Exchange difference
At 1 April 2017
Additions
Acquisition
Disposals
Exchange difference
At 31 March 2018
Depreciation
At 1 April 2016
Provision for the year
Disposals
Exchange difference
At 1 April 2017
Provision for the year
Acquisition
Disposals
Exchange difference
At 31 March 2018
Net book value
At 31 March 2018
At 31 March 2017
At 31 March 2016
Fixtures,
fittings and
equipment
£’000
1,118
53
(124)
28
1,075
209
115
-
(31)
1,368
889
158
(123)
15
939
123
91
0
(27)
Total
£’000
1,118
53
(124)
28
1,075
209
115
-
(31)
1,368
889
158
(123)
15
939
123
91
0
(27)
1,126
1,126
242
136
229
242
136
229
48
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
11 Goodwill
Cost
At 1 April 2016, 1 April 2017
Additions
At 31 March 2018
£’000
9,769
758
10,527
The total carrying value of goodwill is £10.53m, which relates to the acquisition of the Macdonald &
Company Group of companies in January 2006 and Command Recruitment Group (H.K.) Limited in October
2017. It has been tested for impairment with the recoverable amount being determined from value-in-use
calculations.
The assessment for Macdonald & Company Group is based on UK projected results. The recoverable amount
is determined on a value-in-use basis utilising the value of cash flow projections over five years with terminal
value added for the UK business segment. The first year of the projections is based on detailed budgets
prepared and approved by management. Subsequent years are based on extrapolations.
The key assumption in calculating the value in use is that the Group will meet its budgeted growth in UK net
fee income of 7.57% in the year to 31 March 2019. For the year after the end of the period covered by the
budget a growth rate of 11.50% is applied. This is followed by an assumed growth rate of 10%, which is
deemed reasonable and represents an above-average rate of growth in the markets in which the Group
operates. The rate reflects the average growth rate for the UK business over the past four years and is based on
continuation of historic organic growth for the same period. A discount rate of 6.60% has been applied,
representing the weighted average cost of capital for the Group.
Based upon this analysis the asset has not been impaired, since the ‘recoverable amount’ (being the greater of
the net realisable value and the value in use) exceeds the carrying amount by £3.36m. A few potential
sensitivity scenarios have been considered and these would indicate impairment in the carrying value of
goodwill if the discount rate were to be increased to 10.93% or if there were no future growth. Management
believes the assessment is reasonable based on average UK operating profit achieved for the past three years
above £1.12m.
The assessment of Command Recruitment Group (H.K) Limited is based on projected results in Hong Kong
and Dubai. The approach is the same as that used for Macdonald & Company Group. In assessing value in
use, the estimated future cash flows are calculated by preparing cash flow forecasts derived from the most
recent financial budget and projections for five years, followed by an assumed growth rate of 0%which does
not exceed the long-term average growth rate of the relevant markets. This analysis does not indicate any
material impairment. Several potential sensitivity scenarios have been considered and these would only
indicate material impairment in the carrying value of goodwill if the discount rate were to be increased to 9%
or if the budgeted operating profit is underachieved by 15%. Management believes that both scenarios are
unlikely as Command continues to perform in line with management expectations. As a result, the Group has
continued to make significant investments in the business to accelerate its growth in line with the Group’s
strategy to build a strong presence in Hong Kong, and maximise the long-term growth opportunities available
in the market.
49
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
12
Investments
Company shares in subsidiary undertakings
Cost
At 1 April
Increase/ (decrease) in shares from subsidiary
from share option reserve
At 31 March
2018
£’000
2017
£’000
11,156
11,176
34
(20)
11,190
11,156
50
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
12
Investments (continued)
The following are subsidiary undertakings at the end of the year and have all been included in the
consolidated financial statements:
Country of
incorporation
England and Wales
Holding Company
Principal activity
Registered address
Macdonald & Company
Group Limited
Macdonald & Company
Property Limited
Macdonald and Company
Freelance Limited
Macdonald & Company
(Overseas) Limited
Macdonald & Company
Ltd
England and Wales
Recruitment
England and Wales
Recruitment
England and Wales
Dormant
Hong Kong
Recruitment
Ru Yi Consulting Limited Hong Kong
Dormant
Macdonald and Company
Pte Limited
Singapore
Recruitment
Macdonald & Company
Pty Ltd
Australia
Dormant
Macdonald & Company
Recruitment Proprietary
Ltd
South Africa
Dormant
The Prime Organisation Ltd England and Wales
Dormant
Command Recruitment
Group (H.K.) Limited
Hong Kong
Recruitment
2 Harewood Place,
Hanover Square,
London, W1S 1BX
2 Harewood Place,
Hanover Square,
London, W1S 1BX
2 Harewood Place,
Hanover Square,
London, W1S 1BX
2 Harewood Place,
Hanover Square,
London, W1S 1BX
Room 601,6/F., Tower 1,
Admiralty Centre, 18
Harcourt Road, Hong
Kong
Room 601,6/F., Tower 1,
Admiralty Centre, 18
Harcourt Road, Hong
Kong
63 Market Street #05-02,
Bank of Singapore
Centre, Singapore
048942
Storey Blackwood & Co,
Level 4, 222 Clarence
Street, Sydney NSW
2000 Australia
1 Emfuleni, 79 Crassula
Crescent, Woodmead,
Johannesburg, 2052
South Africa
2 Harewood Place,
Hanover Square,
London, W1S 1BX
Room 1101, 11/F,
Chinachem Hollywood
Plaza, 1-13 Hollywood
Road, Central, Hong
Kong
For all undertakings listed above, the country of operation is the same as its country of incorporation.
The Group holds 100% of all classes of issued share capital except in the case of Command Recruitment Group
(H.K.) Limited, where it owns 60%. The percentage of the issued share capital held is equivalent to the
percentage of voting rights for all companies.
51
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
13 Trade and other receivables
Current
Trade receivables
Allowance for doubtful debts
Other receivables
Prepayments and accrued income
Group
2018
£’000
2017
£’000
3,050
(178)
111
2,633
2,435
(24)
72
2,618
5,616
5,101
Company
2018
£’000
2017
£’000
-
-
4
5
9
-
-
3
3
6
At 31 March 2018, the average credit period taken on sales of recruitment services was 69 days (2017: 45
days) from the date of invoicing. An allowance of £178,000 (2017: £24,000) has been made for estimated
irrecoverable amounts. Due to the short-term nature of trade and other receivables, the Directors consider that
the carrying value approximates to their fair value.
Prepayments and accrued income principally comprise amounts to be billed for permanent placements with a
start date within three months from the start of the new financial year.
The Group does not provide against receivables solely on the basis of the age of the debt, as experience has
demonstrated that this is not a reliable indicator of recoverability. The Group provides fully against all
receivables where it has positive evidence that the amount is not recoverable.
The ageing of trade receivables at the reporting date was:
Gross trade
receivables
2018
£’000
Provisions
2018
£’000
Gross trade
receivables
2017
£’000
Provisions
2017
£’000
Not past due
Past due 0-30 days
Past due 30-90 days
Past due more than 90 days
620
564
721
1,152
3,057
41
25
22
90
178
1,598
657
166
14
2,435
15
2
-
7
24
52
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
13 Trade and other Receivables (continued)
Movement in allowance for doubtful debts:
1 April 2017
Impairment losses recognised
Amounts written off as uncollectable
Amounts paid by the client
Impairment losses reversed
31 March 2018
14 Financial Instruments
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Note
13
2018
£’000
24
178
(10)
(14)
-
178
2017
£’000
40
24
(31)
(6)
(3)
24
Group
Company
2018
£’000
2017
£’000
2018
£’000
2017
£’000
4,638
1,234
4,092
2,409
5,872
6,501
5
15
20
2
636
638
Cash is held either on current account or on short-term deposits at floating rates of interest determined by the
relevant bank's prevailing base rate.
Group
Company
Note
2018
£’000
2017
£’000
2018
£’000
2017
£’000
Financial liabilities and fair value
through profit and loss
Trade and other payables
15
614
438
614
438
1
1
1
1
During the year the Group changed from Barclays Bank Plc to HSBC Bank PLC and at the same time
established Confidential Invoice Discounting facilities with HSBC Invoice Finance (UK) Ltd.
There is no material difference between the book values of the Group's financial assets and liabilities and their
fair values.
The Group and the Company do not hold any derivative financial instruments.
53
PRIME PEOPLE PLC
Notes to the financial statements
For the year ended 31 March 2018
15 Trade and other Payables
Current
Trade payables
Other payables
Amount owed to subsidiary
undertakings
Taxation and social security
Accruals and deferred income
Group
Company
2018
£’000
307
307
-
845
1,220
2017
£’000
108
330
-
667
1,205
2,679
2,310
2018
£’000
2017
£’000
-
1
748
13
29
791
-
1
739
14
25
779
Due to the short-term nature of the trade and other payables, the Directors consider that the carrying value
approximates to their fair value. Trade payables are generally on 30–60 day terms. No payables are past their
due date.
16 Deferred Tax
Group (Liability)
At 1 April 2016
Credit to income
At 31 March 2017
Debit to income
At 31 March 2018
Group (Asset)
At 1 April 2016
Credit to income
At 1 April 2017
Credit to income
At 31 March 2018
Other timing
differences
£’000
Total
£’000
9
(9)
9
(9)
-
22
22
Share
Options
£’000
-
43
43
2
45
-
22
22
Total
£’000
-
43
43
2
45
54
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
17 Share Capital
2018
2017
Number
£’000
Number
£’000
ALLOTTED CALLED UP
Ordinary shares of 10p each
As at 1 April 2017 and 31 March 2018
12,290,199
1,229
12,290,199
1,229
Share capital includes unpaid shares of NIL (2017: 33,000).
The Company has one class of ordinary shares which carries no right to fixed income and which represents
100% of the total issued nominal value of all share capital.
Each share carries the right to one vote at general meetings of the Company. No person has any special rights
of control over the company’s share capital and all its issued shares are fully paid.
Pursuant to shareholder resolutions at the AGM of the Company on 24 July 2017, the Company has the
following authorities during the period up to the next AGM.
-
-
-
-
to issue new/additional ordinary shares to existing shareholders through a rights issue up to a maximum
nominal amount of £409,632, representing one third of the then issued share capital of the Company;
to issue new/additional ordinary shares to new shareholders up to a maximum nominal amount of
£409,632 representing one third of the issued shares capital of the Company
to allot equity securities for cash, without the application of pre-emption rights, up to a maximum nominal
amount of £61,451 representing 5% of the then issued share capital of the Company; and
to purchase through the market up to 10% of the Company’s issued share capital, subject to certain
restrictions on price.
Shareholders will be asked to renew these authorities at the AGM in 2018 on 19 July 2018.
Capital Risk Management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising
returns to shareholders through the optimisation of debt and equity balances. The capital structure of the
Group consists of cash and cash equivalents and equity attributable to equity holders of the parent comprising
issued capital reserves and earnings.
The Group manages the capital structure and makes adjustments to it in the light of changes to economic
conditions and risks. In order to manage capital, the Group has continued to consider and adjust the level of
dividends paid to shareholders and also made purchases of its own shares which are held as Treasury Shares.
As part of its strategy of seeking to optimise the Group’s debt and equity balance the Group also considers the
appropriate level of external borrowing and, as disclosed in Note 14, has taken the decision to change bankers
to HSBC in the year.
55
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
17 Share Capital (continued)
Employee Share Schemes
The Company operates two share options schemes with one of them, the Save as You Earn scheme, being
dormant.
Enterprise Management Incentive Share Option Scheme
At 31 March 2018 the following options had been granted and remained outstanding in respect of the
Company’s ordinary shares:
Year of
grant
Exercise
Price
Pence
Exercise
Period
2009/10
42.00
2013-2018
2011/12
68.00
2014-2019
2013/14
Nil
Nil
2016-2021
2019-2021
2014/15
10.00
10.00
2016-2021
2019-2021
2015/16
2016/17
10.00
10.00
58.00
58.00
50.00
50.00
90.00
90.00
2017-2022
2020-2022
2017-2022
2020-2022
2019-2024
2022-2027
2019-2024
2022-2027
Total 2018
Number of
options
31 March
2017
3,000
3,000
12,000
68,250
48,000
279,500
20,000
30,000
45,000
90,000
25,000
55,000
25,000
40,000
743,750
Weighted average exercise price
2018 (pence)
30.37p
Granted
Exercised
Forfeited Number of
Options
31 March
2018
-
(3,000)
-
3,000
-
(3,000)
12,000
65,250
(8,000)
(12,000)
35,000
267,500
-
-
-
(5,000)
(10,000)
(10,000)
(5,000)
(15,000)
20,000
30,000
40,000
85,000
15,000
45,000
20,000
25,000
-
-
-
-
(5,000)
-
-
-
(5,000)
-
-
-
-
-
(10,000)
(71,000)
662,750
34.00p
48.54p
28.37p
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total 2017
989,250
145,000
(132,500)
(258,000)
743,750
Weighted average exercise price
2017 (pence)
19.64p
67.93p
11.21p
0.24p
30.37p
There were no share options granted in the year.
56
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
There were 662,750 options outstanding at 31 March 2018 (2017: 743,750) which had a weighted average
price per share of 28.37p (2017: 30.37p) and a weighted average contractual life of 5.4 years. The options vest
over a period of two to five years conditional upon the option holders continued employment with the
Company.
The conditions applying to those options which are fully vested have been achieved. The number of
outstanding options that will vest is dependent on the achievement of a number of key performance measures
of the group, measured at a regional and consolidated level for the financial years 2017 and 2018. The fair
value of the employee services received in exchange for the grant of the share options is charged to the profit
and loss account over the vesting period of the share option, based on the number of options which are
expected to become exercisable.
Option pricing model used
Weighted average share price at grant date (in pence)
Exercise price (in pence)
Fair value of options granted during the year
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (years)
2018
Black-Scholes
-
-
-
-
-
-
2017
Black-Scholes
94.00, 96.30 & 91.55
50 & 90
41.12
20.0 & 24.0
4.25
2 & 5
Expected volatility was determined by reference to historical volatility of the Company’s share price.
The share-based payment expense recognised within the income statement during the period was £94,315
(2017: expense £88,632).
57
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
18 Reserves
Capital Redemption Reserve Fund
The capital redemption reserve relates to the cancellation of the Company’s own shares.
Treasury Shares
At 31 March 2018, the total number of ordinary shares of 10p held in Treasury and their values were as
follows:
2018
Number
£’000
Number
£’000
2017
As at 1 April
Shares purchased for treasury
Shares issued from treasury
Equity reclassification on disposal of
treasury shares
As at 31 March
Nominal value
Market value
18,276
497,400
(10,000)
-
505,676
21
408
(3)
(5)
421
51
397
21,276
129,500
(132,500)
-
18,276
21
111
(13)
(98)
21
2
16
The maximum number of shares held in treasury during the year was 505,676 shares representing 4.1% of the
called-up ordinary share capital of the Company (2017: 18,276 representing 0.15% of the called-up ordinary
share capital of the Company).
Merger Reserve
The merger reserve represents the fair value of the consideration given in excess of the nominal value of the
ordinary shares issued to acquire subsidiaries.
Share Option Reserve
The reserve represents the cumulative amounts charged to profit in respect of employee share option
arrangements where the scheme has not yet been settled by means of an award of shares to an individual.
Share Premium Account
The balance on the share premium account represents the amounts received in excess of the nominal value of
the ordinary shares.
58
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
18 Reserves (continued)
Translation Reserve
The foreign currency translation reserve comprises all presentation foreign exchange differences arising from
translation of the financial statements of foreign operations into the presentation currency of the Group
accounts.
Retained Earnings
The balance held on this reserve is the accumulated retained profits of the Group.
19 Operating Lease Commitments
As at 31 March 2018 the Group was committed to making the following total payments in respect of non-
cancellable operating leases:
Amounts payable:
Within one year
Within one to two years
Within two to five years
After five years
Land and
buildings
2018
£’000
Land
and
buildings
2017
£’000
571
471
1,200
-
545
294
696
169
2,242
1,704
The Group leases various offices under non-cancellable operating lease agreements. The leases have varying
terms as disclosed above.
59
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
20 Reconciliation of Profit before Tax to Net Cash Inflow from Operating Activities
Profit before taxation
Adjust for:
Depreciation
Share based payment expense
(Profit)/Loss on sale of tangible asset
Group
2018
£’000
Company
2017
£’000
2018
£’000
2017
£’000
1,193
1,904
(54)
48
123
94
-
158
(13)
1
-
-
-
-
-
-
Operating cash flow before changes in working capital
1,410
2,050
(54)
48
(Increase)/decrease in receivables
Increase/(decrease) in payables
(434)
344
(163)
94
(4)
15
9
(183)
Cash generated from / (used by) underlying operations
1,320
1,981
(43)
(126)
21 Analysis of Cash less overdrafts
Group
Cash at bank and in hand
Total cash
Company
Cash at bank and in hand
Total cash
At 1 April
Cash flow
At 31 March
2017
£’000
2,409
£’000
(1,175)
2018
£’000
1,234
2,409
(1,175)
1,234
At 1 April
2017
£’000
636
636
Cash flow
£’000
(621)
(621)
At 31 March
2018
£’000
15
15
60
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
22 Financial Risk Management
The Board of Directors has overall responsibility for the risk management policies that are applied by the
business to identify and control the risks faced by the Group.
The Group has exposure from its use of financial instruments to foreign currency risk, credit risk and liquidity
risk.
Foreign Currency
The Group publishes its consolidated financial statements in Sterling. The functional currencies of the
Group’s main operating subsidiaries are Sterling, the Singapore Dollar, the Hong Kong Dollar and the UAE
Dirham.
The Group’s international operations account for approximately 23.57% (2017: 23.37%) of revenue and
approximately 23.88% (2017: 19.70%) of the Group’s assets and consequently the Group has a degree of
translation exposure in accounting for overseas operations.
The Group exposure to foreign currency risk is as follows:
As at 31 March 2018
Cash at bank
Trade and other receivables
Trade and other payables
Net exposure
Euro
£'000
92
-
-
92
USD
£'000
215
-
-
215
HK$
£'000
278
690
(12)
956
S$
£'000
228
167
(4)
391
AED
£'000
203
436
(4)
635
Sensitivity analysis – currency risk
A 10% weakening of Sterling against
the above currencies at 31 March 2018 would have
increased/(decreased) equity and profit or loss by the amounts shown below. This analysis is applied currency
by currency in isolation, i.e. ignoring the impact of currency correlation, and assumes that all other variables,
in particular interest rates, remain constant. The amounts generated from the sensitivity analysis are forward-
looking estimates of market risk assuming certain adverse market conditions occur. Actual results in the
future may differ materially from those projected, due to developments in the global financial markets which
may cause fluctuations in interest and exchange rates to vary from the hypothetical amounts disclosed in the
table below, which therefore should not be considered a projection of likely future events and losses.
Euro
US Dollar
Hong Kong Dollar
Singapore Dollar
UAE Dirham
2018
equity
£'000
(8)
(20)
(87)
(36)
(58)
2018 PBT
£'000
(8)
(20)
(87)
(36)
(58)
A 10% strengthening of Sterling against the above currencies at 31 March 2018 would have had the equal but
opposite effect on the above currencies to the amounts shown above, on the basis that all other variables
remain constant.
61
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
22 Financial Risk Management (cont)
Currently the Group’s policy is not to hedge against this exposure but it does seek to minimise this exposure
by converting into sterling all cash balances in foreign currency that are not required for capital monetary
needs. The settlement of intercompany balances held with foreign operations is neither planned nor likely to
occur in the foreseeable future. Therefore, exchange differences arising from the translation of the net
investments are recognised in Other Comprehensive income.
Credit Risk
The Group’s principal financial assets are bank balances, trade and other receivables. The Group’s credit risk
is primarily in respect of trade receivables. Credit risk refers to the risk that a client will default on its
contractual obligations resulting in financial loss to the Group. The Group does not have any significant credit
risk exposure to any individual client. At the year end no customer represented more than 6.95% (2017:
9.07%) of the total balance of trade receivables.
In reviewing the appropriateness of the provisions in respect of recoverability of trade receivables,
consideration has been given to the ageing of the debt and the potential likelihood of default, taking into
account current economic conditions.
It is the Directors’ opinion that no further provision for doubtful debts is required.
Liquidity Risk
The Group manages it liquidity risk by maintaining adequate cash and or credit facilities to meet forecast cash
requirements of the Group. Management monitors its forecasted cash flow requirements at a Group level
based on monthly returns made by the Group’s operating units.
The Group has no financial liabilities other than short-term trade payables and accruals as disclosed in note
15, all due within one year of the year end.
The Group has net funds of £1.23m (2017: £2.40m) which the Board consider are more than adequate to meet
future working capital requirements and to take advantage of business opportunities.
62
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
23 Related Party Transactions
Prime People Plc provides various management services to its subsidiary undertakings. These services take
the form of centralised finance and operations support. The total amount charged by the Company to its
subsidiaries during the year is £215k (2017: £200k). The balance owed to the subsidiary undertakings at the
year end is £748k (2017: £739k).
The Company also provides corporate guarantees on the subsidiary bank accounts. At 31 March 2018
amounts overdrawn by subsidiary bank accounts were £nil (2017: £nil).
The Directors receive remuneration from the Group, which is disclosed in the Directors’ Remuneration
Report. As shareholders, the Directors also received dividends in the year from the Company amounting to
£355,249 (2017: £120,312).
24 Business combinations during the period
On 11 October 2017 the Group acquired 60% of the voting equity instruments of Command Recruitment
Group (H.K.) Limited, a company whose principal activity is that of a recruitment consultancy. The principal
reason for this acquisition was to expand geographical coverage.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are
as follows:
Property, plant and equipment
Receivables
Cash
Payables
Total net assets
Fair value of consideration paid
Cash
Working capital adjustment
Total consideration
Non-Controlling Interest
Goodwill
Goodwill on acquisition
63
Fair
value
£’000
24
483
101
(418)
190
£’000
962
(90)
872
£’000
76
£’000
758
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2018
24 Business combinations during the period (continued)
Consolidation
Non- controlling interest is measured initially at the proportionate share of the acquiree’s identifiable net
assets at the date of acquisition.
The goodwill arising on acquisition of the subsidiary is not deductible for tax purposes.
Acquisition costs of £102k arose as a result of the transaction. These have been recognised as part of
administrative expenses in the statement of comprehensive income.
The main factors leading to the recognition of goodwill are:
- The presence of certain intangible assets, such as the assembled workforce of the acquired entity,
which do not qualify for separate recognition; and
- The fact that a lower cost of capital is ascribed to the expected future cash flows of the entire
operation acquired than might be to individual assets.
The impact on Group Revenue and Group profit, since the acquisition date Command Recruitment Group
(H.K.) Limited was £840,319 to Group revenues and £2,577 to Group profit. If the acquisition had occurred
on 1 April 2017, Group revenue would have been £1,833,423 and Group profit for the period would have
been £5,623.
64
PRIME PEOPLE PLC
Directors and Advisers
Directors
Robert Macdonald
Peter Moore
Donka Zaneva-Todorinski
Chris Heayberd
John Lewis OBE
Simon Murphy
(Executive Chairman)
(Managing Director)
(Finance Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
Secretary and Registered Office
Donka Zaneva-Todorinski, 2 Harewood Place, London, W1S 1BX.
Registered Number
01729887
Stockbrokers & Nominated Advisers
Cenkos Securities Plc, 6.7.8 Tokenhouse Yard, London, EC2R 7AS
Solicitors
Charles Russell Speechlys LLP, 5 Fleet Place, London EC4M 7RD
Auditor
Crowe Clark Whitehill LLP, St Bride’s House, 10 Salisbury Square, London, EC4Y 8EH
Principal Bankers
HSBC Bank PLC, Oxford Circus, 196 Oxford Street, Fitzrovia, London W1D 1NT
Registrars
Neville Registrars Limited, Neville House, Laurel Lane, Halesowen, West Midlands, B63 3DA.
65
PRIME PEOPLE PLC
Board of Directors
Directors' Biographies
Robert Macdonald - Executive Chairman
Robert has held senior positions within the recruitment industry since 1973 when he founded Reuter Simkin
Limited, a recruitment business in both the legal and property sectors. Reuter Simkin had both Kleinwort
Benson Development Capital and Charterhouse Development Capital as investors. After the sale of Reuter
Simkin in 1989, he acquired shares in and was Chairman of two other recruitment companies one of which
acquired the legal business of Reuter Simkin in the West of England from PSD in 1992 and traded as
Macdonald & Company. In 1994, he established Macdonald & Company as a specialist property recruitment
consultancy in London. Lead by Robert and Peter Moore, Macdonald & Company Group Ltd completed the
reverse takeover of Prime People Plc in January 2006.
Peter Moore MRICS - Managing Director
Peter graduated from the Royal Agricultural University and then worked with Strutt & Parker from 1992 to
1995, qualifying as a Charted Surveyor in 1994. He joined Macdonald & Company in 1995 and was
appointed Managing Director in 1996. Under Peter’s management Macdonald & Company became the largest
and most respected real estate focused recruitment provider in the market and the RICS’s preferred
recruitment partner. Lead by Robert Macdonald and Peter Moore, Macdonald & Company Group Ltd
completed the reverse takeover of Prime People Plc in January 2006. Since then Peter has been instrumental
in developing Prime People into a global specialist recruitment business spanning real estate, energy &
environmental and insight & analytics.
Donka Zaneva-Todorinski ACCA – Finance Director
Donka qualified with a Business Administration and Finance Degree from St Paul’s College in 2007. She has
been a member of the Association of Chartered Certified Accountants since December 2013. Donka began her
professional career in 2003 and since has held accounting positions in the recruitment, media and publishing
industries. She joined Macdonald & Company in 2011 as a Management Accountant. In 2013 Donka was
promoted to be Financial Controller and was then appointed to the Board of Prime People as Finance Director
in October 2015. She is a member of the Finance & Management Faculty of ICAEW.
Chris Heayberd BA ACA – Non-executive Directors
Chris qualified as a Chartered Accountant in 1980 and after that date held a number of financial positions in a
broad range of industries. Since 1989 his main focus has been the business services sector. This included 4
years as Finance Director of PSD Group plc, during which time the company was admitted to trading on the
London Stock Exchange. Chris joined the Board of Prime People in June 1995 and for a period of five years
combined the role of Finance Director with other business interests. In May 2005 he took up a full-time role
as Finance Director of Prime People retiring from this post in 2015 but remaining on the Board in a non-
executive capacity.
John Lewis OBE LLB (Hons) - Non-executive Director
John is a solicitor (Non-practising) and a consultant to Eversheds LLP (solicitors). Previously he served as a
partner in Lewis Lewis & Co which became part of Eversheds after a series of mergers. John is currently
Chairman of Photo-Me International Plc and several private companies. He has served as Chairman of
Cliveden Plc and Principal Hotels Plc and as deputy Chairman of John D Wood & Co Plc, retiring in each
case when the Company was sold.
66
PRIME PEOPLE PLC
Board of Directors
Simon Murphy BSc ACA - Non-executive Director
Simon qualified as a Chartered Accountant with Coopers & Lybrand. He was previously a Managing Director
in the global investment banking division of HSBC. He was Chief Executive of Prime People from May 2005
until the acquisition of Macdonald & Company Group Ltd. He is Chief Executive Officer of Battersea Power
Station Development Company and a Director of a number of private companies including OPD Group
Limited an investment company with holdings in a number of
recruitment businesses.
67
68