Prime People Plc
Annual Report and Financial Statements
for the year ended 31 March 2019
2019
Contents
Chairman’s Statement
Strategic Report
Report of the Directors
Statement of Directors’ responsibilities
Corporate governance
Audit Committee Report
Remuneration report
Independent Auditor’s report
Consolidated statement of comprehesive income
Consolidated statement of changes in equity for the year ended 31 March 2018
Consolidated statement of changes in equity for the year ended 31 March 2019
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
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67
PRIME PEOPLE PLC
Chairman's Statement
Performance
legislative changes
Overall the Group delivered a strong performance
in the year ended 31 March 2019. In the UK
performance was broadly consistent with the prior
year, holding up against the backdrop of political
that
uncertainty and of
continued to affect self-employed candidates in
our contract division. Internationally the business
has made good progress with a strong performance
in Asia Pacific including a substantial contribution
from our majority
in Command
Recruitment Group (H.K.) Limited, and the Rest
of The World making a small positive contribution
this year.
investment
We closed the year with headline Revenue of
£24.66m and Net Fee Income (“NFI”) of £15.78m.
NFI comprises the total fees for permanent
candidates and the margin earned in the placement
of contract staff. The ratio of NFI derived from
contract as against permanent placements was
8:92.
Improved productivity per head of £114.40k,
helped headline operating profit reach £2.47m.
After adjusting for the 40% minority interest in
Command, the underlying operating profit for the
Group was £1.95m, helped by a positive effect
from the adoption of IFRS15 in respect of
administration costs.
The Group conversion rate, which compares
operating profit to NFI, was 15.65%, enhanced by
the winning of substantial business from an
extensive set of linked real estate infrastructure
projects in the Middle East. This business is
undertaken by Command and is reported under our
Asia Regional Performance below. The impact of
this demand for the company’s services greatly
enhanced the Group’s profitability in the year
being reported. The projects are of a long-term
nature and we expect that our involvement will
continue throughout the current financial year.
Cash Flow
The Group continues to maintain a strong net cash
position. At the start of the year the Group had
cash of £1.23m which had increased to £2.31m by
the year end. The increase is principally due to the
growth in the Asia Pacific business referred to
above and is after taking account of cash outflows
1
of £1.34m. Of this £0.74m was for the purchase of
assets (£0.10m was spent on a new Customer
Relationship Management system and £0.44m on
improving office facilities in our Hong Kong and
the
London offices) and £0.60m related
dividend payments to shareholders.
to
Dividend
During the year, a final dividend of 3.25p per
share was paid together with a slightly increased
interim dividend up from 1.75p to 1.80p per share.
The Board will be recommending a final dividend
this year of 3.40p per share. This will result in a
total dividend payment of 5.20p for the 2019
financial year against 5.00p the year before.
Subject to market conditions and cash, the Group
intends
to pay dividends on a
progressive basis.
to continue
Share Buy Back
During the year 34,000 shares were purchased at a
cost of £26,360 through the Group’s buyback
programme. In the second half of the year 300,000
ordinary shares were sold from Treasury to satisfy
obligations arising from the part paid share
incentive scheme for key personnel. At the year
end the Group held 195,676 shares in treasury.
The Board will be seeking shareholder approval
for renewal of the authority to repurchase up to
10% of the Group’s issued share capital at the
Annual General Meeting.
Board
The Board believes it has continued to operate
corporate governance standards appropriate to an
AIM quoted 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 re-appointment by shareholders at the
next AGM.
The Board members have a mix of skills,
experience, gender and backgrounds that are a
considerable support to the business.
The Group continues to focus on its core markets
to deliver organic revenue growth, to improve
productivity gains and to drive profit growth.
Despite the increasing political risks that reduce
business confidence in the UK and Europe, we are
confident about our abilities to generate good
returns and will continue to invest for the long
term.
Robert Macdonald
Executive Chairman
PRIME PEOPLE PLC
Chairman's Statement (continued)
People
The average number of staff (excluding temporary
contractors) increased from 136 last year to 138
this year.
The Group has a diverse cultural and ethnic profile
within its businesses and at the end of 2019 had a
global 52:48 male to female gender ratio.
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.
Current trading and outlook
in
In the 2019 financial year, we made significant
our working
technology,
investments
environments and talent, reflecting our belief that
success in the future will depend on our ability to
attract the most able people and equip them with
industry leading technology. We are confident that
these investments will provide returns through
increased productivity and staff retention.
Current trading is consistent with the prior year
and we expect the outlook for our sectors and
geographies to remain positive in the absence of
any negative economic or political events. Over
the last quarter our key performance indicators of
instructions from clients, interviews arranged and
committed business are comparable with the same
period last year and all our main markets continue
to experience shortages of available talent, driving
demand for our services.
We are mindful of both the political inertia in the
U.K. and the trade dispute between the United
States and China, both of which could affect our
largest markets. Consequently,
the Group
continues to explore new geographies and has
expanded its client base into mainland Europe and
Saudi Arabia.
We aim to optimise interaction between our brands
to fully deliver Group benefits by being positioned
to respond swiftly across all businesses to changes
impacting our activity, such as regulation and
candidate shortages.
2
PRIME PEOPLE PLC
Strategic Report
Overview
The Group provides permanent and contract
recruitment services to selected, niche industry
sectors. Our business model is built around our
people, all of whom are specialists in their industry
verticals. Our employees are vital to the continued
success of the Group 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 built environment continues to be the Group’s
largest market, served through its main subsidiary,
Macdonald & Company.
Operating as distinct brands, the sectors served by
Prime Insight, Prime Energy and Command are
technology, data and analytics; renewable energy
& sustainability; and infrastructure, construction
and design respectively.
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 Board is concerned to
provide a healthy corporate culture and in pursuit
of its objectives and strategy seeks regular input
through open meetings with its staff.
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), Frankfurt (established in January 2019),
and a franchise in South Africa (established in
2008).
Overall the UK permanent recruitment businesses
performed
built
satisfactorily with
environment teams delivering consistent results
while the contract business saw a reduction in NFI
our
3
as the changes to the tax landscape for contractors
working in the public sector continued to have an
effect. Looking forward, when these changes are
extended to the private sector, in April 2020, we
anticipate the temporary recruitment market may
shift further.
In Asia NFI rose substantially, aided by the
contribution in our first full year following the
acquisition of Command in October 2017. Hong
Kong with the combined businesses of Macdonald
and Command contributed the majority of the
region’s NFI. Macdonald recorded reduced NFI,
largely as a consequence of staff turnover in the
early part of the year, an issue which has now been
addressed.
Our Macdonald business in Dubai continues to
face challenging market conditions and we have
made changes to realign it to the expected
medium-term demand. Our Command business
operates across the Middle East and we are
optimistic as to the future performance of the
business in this region.
The Board remains committed in its pursuit of
sustainable NFI growth and cash generation.
Whilst costs have increased in aggregate in the
year, with the contribution from Command the
conversion rate has also increased. We continue to
the
focus on
business and realising cost reductions where
possible.
the profitability of
improving
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 political and macro-
economic 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
control of remuneration and expenditure, together
with a focus on improved productivity per head
and conversion rates, position the Group to
prosper.
PRIME PEOPLE PLC
Strategic Report (Continued)
Regional Performance
United Kingdom
Revenue
Net fee income (NFI)
Operating profit
Operating profit as % of NFI
Average number of employees
2019
£m
2018
£m
16.47
7.60
0.92
12.10%
17.52
7.75
0.91
11.74%
77
80
Revenue reduced by 5.99% to £16.47m (2018:
£17.52m) with NFI reducing by 1.93% to £7.60m
(2018: £7.75m).
Permanent NFI decreased by 0.83% in the year
and represents 85.11% (2018: 86.20%) of total UK
NFI in 2019.
investment sector provided
The UK Permanent teams serving the real estate
banking and
the
strongest NFI growth for the region in the year.
This was counterbalanced by performance of
teams serving other sectors. In September 2018,
we relocated fee earners to an office in Frankfurt,
to take advantage of opportunities that the German
staffing market offers in the long term.
Contract NFI reduced by 7.65% in the year
compared to a reduction of 17.05% in the previous
year and represents 14.55% (2018: 13.80%) of
total UK NFI in 2019. Contract NFI is not affected
by IFRS 15 and
the
comparative period was a consequence of lower
public sector client requirements resulting from
ITEPA Act 2003 legislative changes.
the reduction against
Our diversified business
sectors delivered
opportunities to diminish the effect of some
challenging markets and our extended spread of
operations helped to make the most of market
conditions.
4
2019
£m
7.77
7.77
1.52
19.56%
57
2018
£m
5.06
5.06
0.49
9.68%
47
set of linked real estate infrastructure projects in
the Middle East, which represent 22.26% of
reported Asia Pacific revenue. The projects are of
a long-term nature and we expect that Command’s
involvement will continue throughout the current
financial year.
With the good performance of Command, and the
Insight and
in establishing our
investment
Analytics team in the region last year, the business
is now well placed to expand its reach and growth.
2019
£m
0.42
0.42
0.02
4.76%
4
2018
£m
0.34
0.34
-0.20
-58.82%
5
PRIME PEOPLE PLC
Strategic Report (Continued)
Asia Pacific
Revenue
Net fee income (NFI)
Operating profit
Operating profit as % of NFI
Average number of employees
NFI grew by 53.55% to £7.77m (2018: £5.06m)
and includes contribution from Command of
£3.97m (2018: £0.84m). The region is covered by
our offices in Hong Kong and Singapore and
represents 49.24% of Group NFI (2018: 38.48%).
Command operating profit, unadjusted
for
minorities, was approximately 93% of the reported
operating profit in the region.
The 2018 investment in 60% of the equity of
Command
and
performance in the region particularly with its
winning of substantial business from an extensive
strengthened our presence
Rest of the World
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,
Australia and South Africa. The modest, but
improved performance reflects restructuring of the
Dubai business and cost
reductions which
delivered improvements in profitability and the
team is well positioned for a more positive 2020.
Peter Moore
Managing Director
5
PRIME PEOPLE PLC
Strategic Report (Continued)
Financial Review
Revenue
As referred in our H1 2019 Interim Report, the Financial Statements for 2019 reflect the Group’s adoption of
IFRS 15, which has required a change in the accounting policy for revenue recognition. We are now reporting
revenue based on invoices delivered as opposed to the previous treatment based on the value of contracts
formed. Further detail on the impact of the IFRS 15 is set out in Note 2 of the financial statements.
The Group delivered a 7.59% increase in reported revenue to £24.66m (2018: £22.92m).
The change in accounting policy did not have any impact on the reporting of NFI of our contract business or
that reported by Command.
Further detail on the impact of the IFRS 15 is set out in Note 2 of the financial statements
Net Fee Income (NFI)
Overall Group NFI increased by 20.00% to £15.78m (2018: £13.15m). The split of net fee income was 93%
from permanent sales (2018: 91.87%) and 7.00% from contract (2018: 8.13%). The contract margin
percentage was 11.09%, up from 10.92% in the prior year as we extended our contract business in higher
margin sectors, as well as strengthening our focus on maintaining sustainable direct client relationships.
The Group generated 51.90% of its net fee income from outside the UK (2018: 41.07%). There were
particularly strong results from Command with NFI of £3.97m (2018: £0.84m).
Administration Costs
Administration costs for the year increased by 11.46% to £13.32m (2018: £11.95m) reflecting the inclusion of
Command operating costs, further investment in a new Customer Relationship Management system,
improved information technology platforms, increased spend on staff training and higher property costs
associated with our Hong Kong office which we relocated in May 2018. The increased administrative costs,
we believe, will generate greater value in the long term. In the year commission, which is a constituent of
administration costs, reduced by approximately £0.20m as a result of the change to the Group accounting
policy on revenue recognition when adopting IFRS 15.
Profit before Taxation
Reported profit before taxation increased to £2.47m from £1.19m last year. After adjusting for the 40%
minority interest in Command, profit before tax increased to £1.95m (2018: £1.19m).
The table below presents year on year comparisons adjusted to remove the 40% of Command not owned by
the Group.
Revenue *
NFI *
Adjusted Profit Before Tax *
Conversion ratio * c/f table on next page
* 2019 net of 40% not owned, as indicated above
2019
£’000
23,071
14,198
1,907
13.43%
2018
£’000
22,580
12,811
1,192
9.31%
Taxation
The taxation charge is £0.30m on profit before taxation of £2.47m (from ordinary activities) which gives an
effective tax rate of 12.15% (2018: 14.29%). The reasons for the difference from the standard UK corporation
tax rate of 19% are detailed in note 7 of the accounts.
Earnings per Share
Basic earnings per share increased by 58.24% to 13.72p (2018: 8.67p). The diluted earnings per share, taking
into account existing share options, increased by 56.86% to 13.38p (2018: 8.53p).
6
PRIME PEOPLE PLC
Strategic Report (Continued)
Financial Review
Balance Sheet
Net assets at 31 March 2019 remained the same as last year at £15.00m (2018: £15.00m).
Trade receivables net of provision for doubtful debts at the year end, were up on last year at £3.54m (2018 :
£2.87m) which reflects the increased average credit period taken by clients to 131 days (2018: 69 days). The
increase in debtor days is explained by extended 120-day payment terms with certain Command clients in
Saudi Arabia.
Treasury Management and Currency Risk
Approximately 66.79% of the Group’s revenue in 2019 (2018: 76.44%) 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.
Cash Flow and Cash Position
At the start of the year the Group had cash of £1.23m. After net taxation payments of £0.11m (2018: £0.26m)
cash generated from operations was £2.04m (2018: £1.06m).
During the year the Group spent £0.10m (2018: £0.23m) on its Customer Relationship Management systems;
paid £0.30m for the relocation and office refit in Hong Kong; £0.22m for the purchase of treasury shares; and
paid dividends to shareholders of £0.60m (2018: £0.61m). As at 31 March 2019 the Group’s cash position
was £2.31m.
Operational highlights in 2019
Conversion ratio (Operating profit divided by NFI)
100 % for Command
Staff Productivity
(NFI divided by average headcount excluding contract
staff)
Fee earner to Support Headcount ratio
Percentage of NFI paid to Staff
Free Cashflow post tax
Principal Risks and Uncertainties
2019
2018
% change
15.65%
9.07%
72.55%
£114.40k
3.4
68.43%
£2.03m
£96.26k
3.2
71.47%
£1.06m
18.84%
6.25%
(4.25%)
91.50%
The Board has responsibility for establishing the Group’s approach to risk and the effective risk management.
The Group’s strategy is designed to allow the business to grow without increasing risk beyond an acceptable
limit. The risk fluctuates from time to time and will be assessed in line with delivering the business strategy of
the Group, to safeguard shareholders’ interests and improve the quality of decision making. 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:
Dependence on Key People
The sustainable success of the Group is dependent on recruiting and retaining of senior management and key
staff. The loss of the services of the senior management and other key people could impact trading and
profitability.
7
PRIME PEOPLE PLC
Strategic Report (Continued)
Financial Review
Dependence on Key People (continued)
To address this, the Group has put into 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 Board’s management equity incentives
present key management with equity ownership, tying them to the business for the long term.
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.
Macro-economic factors
Persistent slow growth in the global economy has effects that trigger reduced output, and with it, demand and
investment. There is strong correlation between the business performance and that of the economies in which the
Group operates. 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 revenue.
The Group is geographically diversified, spanning over different countries which reduces the reliance on the
success of any market.
Regulatory position
The increase in regulatory scrutiny and demands on compliance are influencing 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 timely and regular training and updates on changes in legal and compliance requirements.
Cyber Security and data protection
The risk of sensitive information being accessed without authorisation has grown in the wider business
environment. Any successful breach can lead to the loss of commercially sensitive data, candidate and clients’
data, damage our brand reputation and lead to business disruption. With increasing regulation on data protection
there is an ongoing risk of failing to comply with regulations leading to reputational damage.
In May 2018 General Data Protection legislation was introduced to promote data governance and accountability
amongst organisations. The Group has reviewed its processes considering this legislation and made all required
changes to ensure compliance. Policies to safeguard assets and data within the Group have been introduced.
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. Therefore, the systems and infrastructure are
regularly reviewed and upgraded to ensure appropriate provision of functionality and resilience to support the
business as it develops.
8
PRIME PEOPLE PLC
Strategic Report (Continued)
Financial Review
Foreign Exchange Risk
The Group’s international operations account for 33.20% of revenue (2018: 23.57%) and approximately
31.58% of the Group’s assets (2018: 27.33%). Consequently, the Group has a 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. The Group’s policy is not to hedge against this exposure, as there is a degree of natural
hedge from the Group geographical diversification. However, the Group seeks to minimise 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 be able to react if rates
move adversely
Treasury Policies, Liquidity and Financial Risk
Surplus funds are held to support short term working capital requirements. These funds are invested using 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 the counterparty will default on its contractual obligations resulting in financial
loss to the Group. The principal credit risks arise 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.
Donka Zaneva-Todorinski
Finance Director
9
PRIME PEOPLE PLC
Report of the Directors for the Year Ended 31 March 2019
The Directors submit their report and the audited Group financial statements of Prime People Plc for the year
ended 31 March 2019. 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
Sir John Lewis OBE
Simon Murphy
As permitted by legislation, the Group 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 20 June 2019, 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 Guidance and Transparency
Rules.
The mid-market quotation of the Company’s ordinary shares at close of business on 31 March 2019 was
79.50p. The highest and lowest mid-market quotations in the period from 1 April 2018 to 31 March 2019
were 88.82p and 74.00p.
Going concern
The Group has two revenue streams permanent and temporary recruiting. The Group has experienced a 7.61%
total revenue uplift in 2019 primarily as a result of an increase in permanent 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.
10
PRIME PEOPLE PLC
Report of the Directors for the Year Ended 31 March 2019
Political Donations
The Group made no political donations during the year (2018: 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 (2017: 3.25p) on 27 July 2018 to shareholders on
the register on 13 July 2018. The final dividend was approved by shareholders on 19 July 2018. An interim
dividend of 1.80p (2018: 1.75p) was paid on 7 December 2018 to shareholders on the register at close of
business on 30 November 2018. The interim dividend was approved by the Board on 15 November 2018.
As outlined in the Chairman’s statement, the Board propose a final dividend for 2019 of 3.40p per share
which will, subject to shareholder approval at the Annual General Meeting be paid on 2 August 2019 to
shareholders who are on the register on 19 July 2019, making a total dividend paid to shareholders for the
year of 5.20p per ordinary share. (2018: 5.00p).
Annual General Meeting (“AGM”)
The AGM will be held on Wednesday 24 July 2019 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 34,000 shares (2018: 497,400 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.
11
PRIME PEOPLE PLC
Report of the Directors for the Year Ended 31 March 2019
Auditor
Crowe U.K. 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
12
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 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 enough 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.
13
PRIME PEOPLE PLC
Corporate Governance
Statement by the Directors on Corporate Governance
The Board consider it important that appropriately high standards of corporate governance are maintained.
They have therefore put in place governance structures and provide information which would be expected for
a company quoted on the AIM Market of the London Stock Exchange. The Group has adopted the QCA
Governance Code (the “Code”) so this report is in compliance with all required disclosures.
A statement of the Directors’ responsibilities in respect of the financial statements is set out on page 13.
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 2019 and the
attendance record are summarised in the table below:
Directors
Board
Audit
Committee
Remuneration
Committee
Robert Macdonald – Executive Chairman
7/7 (Chair)
Peter Moore – Managing Director
Donka Zaneva-Todorinski – Finance Director
Chris Heayberd – Non-Executive Director
Sir John Lewis – Non-Executive Director
Simon Murphy – Non-Executive Director
7/7
7/7
5/7
7/7
7/7
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 20.
Biographical details for all the Directors are shown on pages 67 and 68.
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.
14
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 can 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.
Given the size of the Board, there is no separate Nomination Committee and appointments to the Board of
both Executive and Non-Executive Directors are considered and approved by the full Board.
The Board has considered the matter of the independence of its Non-Executive Directors all of whom 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, standing and skill levels derived from their other
directorships of its Non-Executive Directors, as set out in Biographical details for all the Directors on pages
67 and 68, it considers their level of independence to be adequate. Furthermore, no board performance
evaluation is undertaken for the same reasons.
The Senior Independent Director, Sir John Lewis OBE, is the main point of contact for shareholders if there
are any concerns that cannot be addressed through the Chairman or Executive Directors.
The Senior Independent Director provides advice and support to the Executive Directors, by holding monthly
meetings with the Chairman.
The Company Secretary is responsible for ensuring that Board procedures are followed, that the Company
complies with company law and the AIM Rules and that the Board receives the information it needs to fulfil
its duties effectively. All Directors have access to the Company Secretary and their appointment (or
termination of appointment) is a matter for decision by the full Board.
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 can put questions to the Board at the Company's Annual General Meeting.
15
PRIME PEOPLE PLC
Corporate Governance
Remuneration Committee
The Remuneration Committee comprises the three Non-Executive Directors of the Company and is chaired by
Sir John Lewis OBE.
The committee reviews the Group policy on the Executive Directors’ remuneration and terms of employment;
makes recommendations on this; and 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 20. 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 2018
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.
16
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
wrongdoing 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, in its entirety 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
17
PRIME PEOPLE PLC
Audit Committee Report
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
effectiveness and 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.
During 2019, the Committee’s primary activity involved meeting with the external auditors, considering
material issues and areas of judgement, and reviewing and approving the interim and year end results and
accounts. The Audit Committee:
• met with the external auditors to review and approve the annual audit plan and receive their findings
and report on the annual audit;
considered significant matters and areas of judgement with the potential to have a material impact on
the financial statements;
considered the integrity of the published financial information and whether the Annual Report and
Accounts taken are fair and balanced and provide the information necessary to assess the Group’s
performance, business model and strategy; and
reviewed and approved the interim and year end reports and accounts
•
•
•
External Audit
The Committee has primary responsibility for the relationship between the Group and its external auditor.
The independence of the auditor is kept under review and is reported on as part of the Audit Findings Report
presented to the Committee by the auditor.
To safeguard the objectivity and independence of the external auditor, the Committee monitors the external
auditor’s propose scope of work and the value of fees paid, to ensure that independence is not compromised.
The Committee concluded that Crowe UK LLP are delivering the necessary audit scrutiny and that the
taxation services provided did not pose a threat to their objectivity and independence.
The Committee recommended to the Board that Crowe UK LLP be re-appointed as the Group’s statutory
auditor for the next financial year.
Whistle blowing and anti-corruption Policy
There were no “whistleblowing”(public interest) disclosures during the year.
This report was approved by the Audit Committee and the Board on 20th June 2019 and was signed on its
behalf:
Simon Murphy
Chairman of the Audit Committee
18
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 Sir John Lewis OBE.
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.
19
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
£
£
£
2019
Total
£
2018
Total
£
Executive Chairman
Robert Macdonald
3
123,823
6,150
20,000
149,973
117,616
Executive Directors
Peter Moore
Donka Zaneva-
Todorinski
Non-Executive Directors
Sir John Lewis OBE
Simon Murphy
Chris Heayberd
1 & 3
198,816
7,851
24,361
231,028
200,887
85,486
1,788
806
88,080
108,262
25,835
25,835
41,452
-
-
-
-
-
-
25,835
25,000
25,835
25,000
41,452
30,900
501,247
15,790
45,168
562,204
507,665
Notes to the emoluments:
1. Peter Moore is the highest paid Director,
2. Benefits include subscriptions, medical and travel allowance,
3. Executive Directors’ Pension Contribution to two executive directors was approved by the Board on 19 March
2019. Pension includes the cash value of the Group contribution to defined contribution pension plans. Other
pension payments made to directors in the year relate to the minimum required employer contribution rate of 2%
set by the Pension Regulator.
20
PRIME PEOPLE PLC
Remuneration Report
Directors’ interests in shares
Directors’ beneficial interest in the shares of the Company at 31 March 2019 was as follows:
Ordinary
shares of 10p
each held at
31 March
2019
Percentage of
issued share
capital at
31 March
2019
Ordinary
shares of 10p
each held at
31 March
2018
Percentage of
issued share
capital at
31 March
2018
2,794,000
2,907,721
1,250
1,074,750
330,000
24,000
22.73%
23.66%
0.01%
8.74%
2.70%
0.20%
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%
Robert Macdonald
Peter Moore
Donka Zaneva-Todorinski
Sir John Lewis
Simon Murphy
Chris Heayberd
Share option schemes
As at 31 March 2019 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
Number of
options
31 March
2018
Granted
Cancelled Exercised
Number of
options
31 March 2019
Donka Zaneva-
Todorinski
2013/14
2014/15
2015/16
10.00p
10.00p
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.
Sir John Lewis OBE
Chairman of the Remuneration Committee
21
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 2019, which comprise:
•
•
•
•
•
the Group Statement of Comprehensive Income for the year ended 31 March 2019;
the Group and Parent Company Statements of Financial Position as at 31 March 2019;
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 2019 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.
22
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.
Our determination of materiality decreased from £170,000 for the year ending 31 March 2018 to £125,000 for
the year ending 31 March 2019. Our basis for materiality changed from 0.75% of Group revenue to 5% of the
Group’s profit before tax. The move to profit before tax reflects the increased focus on this metric by
stakeholder and it is considered to be the most significant determinant of the Group’s financial performance.
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 (2018: £5,000). 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 (2018: £10.5m)
at the year end. There is a risk that the carrying value
of goodwill may be higher than the recoverable
amount. Management has performed
full
impairment review for goodwill and no impairment
was recorded.
a
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
23
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.
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:
- We assessed the design and implementation of
key controls around all streams of revenue
recognised.
- We selected a sample of 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.
- We tested the accrued income associated with
work performed by contractors and temporary
workers before the year end, by comparing the
amounts to timesheets submitted after year end.
- We performed period-end cut off
testing
focusing on material items to check all revenue
recognition criteria had been met and revenue
had been recognised in the correct period.
- We considered whether the revenue and cost
recognition policies comply with Accounting
Standards, with specific reference to IFRS 15.
Revenue recognition
The group generates revenue from the provision of
recruitment consultancy services, which consists of
revenue from contractors and permanent placements.
In respect of revenue recognition, the accounting
policy is described on page 37.
The risk of material misstatement in relation to
revenue recognition concerns the recognition around
the year end, particularly in relation to contractor
placements. Revenue is recognised for contractor
placements when the service has been provided.
There is a significant judgement involved at the
period end as to the amount of accrued cost for these
contractors that the group are liable to and therefore
the amount of corresponding revenue that should be
recognised.
the
involved and
In view of
the
judgements
significance of this matter to the determination of
group revenue, we consider this to be an area giving
rise to significant risk of material misstatement in the
financial statements.
24
PRIME PEOPLE PLC
Independent Auditor’s Report (continued)
Key audit matter
Revenue recognition (continued)
How the scope of our audit addressed the key audit
matter
The year ended 31 March 2019 also represents the
first year in which the financial statements are
prepared under the provisions of IFRS 15 – revenue
from contracts with customers. We consider that the
judgements made by management in relation to the
completeness and accuracy of the financial impact
and disclosures on the transition from IAS 18
Revenue to IFRS 15 represent a risk of material
misstatement.
included
audit procedures
Our
comparing
management’s impact assessment of the adoption
of IFRS 15 and its supporting documentation with
the accounting standard and
its disclosure
requirements. We reviewed the disclosures made
in the financial statements against the impact
assessment and the provisions of the standard.
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.
25
PRIME PEOPLE PLC
Independent Auditor’s Report (continued)
Matters on which we are required to report by exception (continued)
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.
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 U.K. LLP
Statutory Auditor
London
20th June 2019
26
PRIME PEOPLE PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2019
Note
2, 3
2
4
7
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 profit/(loss) on translating
foreign operations
Other Comprehensive income
for the year, net of tax
Total comprehensive income for the
year
Profit attributable to:
Equity shareholders of the parent
Non-controlling interest
Total comprehensive income
attributable to:
Equity shareholders of the parent
Non-controlling interest
Earnings per share
Basic earnings per share
Diluted earnings per share
9
The above results relate to continuing operations.
27
2019
£’000
24,660
(8,873)
15,787
(13,316)
2018
£’000
22,916
(9,769)
13,147
(11,954)
2,471
1,193
2,471
(298)
1,193
(166)
2,173
1,027
106
(243)
106
(243)
2,279
784
1,660
513
1,766
513
13.72p
13.38p
1,022
5
779
5
8.67p
8.53p
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
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)
-
-
-
-
-
-
-
60
-
-
-
(5)
(243)
94
(408)
3
-
-
(612)
(612)
-
5
-
-
-
-
70
-
-
15,073
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
28
PRIME PEOPLE PLC
Consolidated Statement of Changes in Equity
For the year ended 31 March 2019
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 2018
1,229
9
(421)
5,371
173
314
490
7,764
14,929
75
15,004
IFRS 15 adjustment for
revenue recognition
Total comprehensive
income 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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(26)
246
40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23
-
-
-
-
-
-
106
-
-
-
-
-
(1,976)
(1,976)
-
(1,976)
1,659
1,659
513
2,172
-
-
-
5
106
23
(26)
246
45
(595)
(595)
-
-
-
-
-
-
106
23
(26)
246
45
(595)
At 31 March 2019
1,229
9
(161)
5,371
173
337
596
6,857
14,411
588
14,999
29
PRIME PEOPLE PLC
Consolidated Statement of Financial Position
As at 31 March 2019
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
2019
£’000
10,527
752
40
11,319
4,646
-
2,309
6,955
2018
£’000
10,527
242
45
10,814
5,616
41
1,234
6,891
18,274
17,705
3,080
173
3,253
22
3,275
2,679
-
2,679
22
2,701
14,999
15,004
Note
11
10
16
13
21
15
16
30
PRIME PEOPLE PLC
Consolidated Statement of Financial Position
As at 31 March 2019
Note
2019
£’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
(161)
5,371
173
337
596
6,857
14,411
588
14,999
2018
£’000
1,229
9
(421)
5,371
173
314
490
7,764
14,929
75
15,004
The financial statements on pages 27 to 65 were approved by the Board of Directors and authorised for issue
on 20th June 2019 and are signed on its behalf by:
R J G Macdonald
D Zaneva-Todorinski
31
PRIME PEOPLE PLC
Company Statement of Financial Position
As at 31 March 2019
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
2019
£’000
11,213
11,213
124
322
446
2018
£’000
11,190
11,190
9
15
24
11,659
11,214
1,125
1,125
791
791
10,534
10,423
1,229
9
(161)
5,371
173
337
3,576
1,229
9
(421)
5,371
173
314
3,748
Total equity
10,534
10,423
The Company’s retained earnings includes profit for the year of £458,173 (2018: £386,536).
The financial statements of Prime People Plc, Company Number 01729887 were approved by the Board and
authorised for issue on 20th June 2019 and are signed on its behalf by:
R J G Macdonald
D Zaneva-Todorinski
32
PRIME PEOPLE PLC
Company Statement of Changes in Equity
For the year ended 31 March 2019
Company
Called
up
share
capital
£’000
Capital
Redemp-
tion
reserve
£’000
At 1 April 2017
1,229
9
Treasury
shares
Share
premium
account
Merger
reserve
Share
option
reserve
Retained
earnings
Total
£’000
(21)
£’000
5,371
£’000
£’000
173
280
£’000
3,978
£’000
11,019
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
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
2019
-
-
-
-
-
-
-
-
-
-
-
-
-
(408)
3
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34
-
387
387
-
-
(5)
-
(408)
3
-
34
(612)
(612)
1,229
9
(421)
5,371
173
314
3,748
10,423
-
-
-
-
-
-
-
-
-
-
-
-
-
(26)
246
40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23
-
458
458
-
(26)
246
5
23
(35)
-
(595)
(595)
1,229
9
(161)
5,371
173
337
3,576
10,534
33
PRIME PEOPLE PLC
Group and Company Cash Flow Statement
For the year ended 31 March 2019
Group
2019
£’000
2018
£’000
Company
2019
£’000
2018
£’000
Note
Cash generated from (used in)
underlying operations
20
2,146
1,320
Income tax paid
(111)
(256)
241
(9)
(43)
(11)
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
2,035
1,064
232
(54)
(727)
-
-
(209)
(771)
-
-
-
-
-
450
450
(727)
(980)
450
450
-
260
-
(595)
-
-
(408)
(612)
-
246
(26)
(595)
-
3
(408)
(612)
(335)
(1,020)
(375)
(1,017)
Net (decrease)/ increase in cash and
cash equivalents
973
(936)
307
(621)
Cash and cash equivalents at
beginning of the year
Effect of foreign exchange rate
changes
1,234
2,409
102
(239)
15
-
636
-
Cash and cash equivalents at the
end of the year
21
2,309
1,234
322
15
34
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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 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 to include
any items at fair value, as required by accounting standards.
The consolidated financial statements for the year ended 31 March 2019 (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 2018, except for revenue
recognition which is covered in more detail in Note 2(a) and are described below.
a) The Group adopted IFRS 15 standard- Revenue from Contracts with Customers from 1st April 2018.
Under the standard, revenue is recognized at an amount that reflects the consideration to which an entity
expects to be entitled in exchange of transferring goods or services to a customer.
35
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Summary of Significant Accounting Policies (continued)
The Group has applied IFRS 15 using the cumulative effect method – i.e. by recognising the cumulative effect
of initially applying IFRS 15 as an adjustment to the opening balance of equity at 1 April 2018. Therefore, the
comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. The
following table summarise the impacts of adopting IFRS 15 on the Group’s consolidated report for the year
ending 31 March 2019.
Revenue
Accrued Income
Retained Earnings
Retained profit for basic and diluted
earnings per share
Basic earnings per share
Diluted earnings per share
Reported as at
31 March 2019
£’000
24,660
-
6,857
Adjustments
Under IFRS 15
£’000
(322)
1,654
1,654
Balance without
adopting IFRS 15
£’000
24,338
1,654
8,511
1,659
13.72p
13.38p
(322)
(2.73p)
(1.60p)
1,337
11.05p
10.78p
The resulting changes in the timing of revenue and cost recognition aligns the financial results more closely
with the timing of the delivery of services to our clients. The standard introduces a direct link between the
value provided to a client and the timing of revenue recognition, as revenue is recognised when a candidate
starts an assignment.
Permanent revenue is recognised from permanent placements based on a percentage of candidate’s
remuneration package. The impact of the transition to IFRS 15 resulted in revenue recognised at the point that
the candidate starts the job, as opposed to the previous policy which recognised permanent revenue at the date
an offer is made. A provision is made against cancellation of placements shortly after commencement of
employment. The transition to IFRS 15 on permanent revenue has been accounted for under the cumulative
effect method.
Contract revenue, which represents amounts billed for the services of temporary staff, including the salary
costs of these staff, is recognised when the service has been provided. This basis of revenue recognition is
consistent with IFRS 15 with no effect on revenue earned on temporary placements.
36
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Summary of Significant Accounting Policies (continued)
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. The effective dates below are for reporting periods beginning on
or after that point:
International Accounting Standards (IAS/IFRS) and Amendments adopted by the EU but not yet
effective
•
•
IFRIC 23 Uncertainty over Income Tax Treatments (Issued on 7 June 2017, effective 1 January 2019)
IFRS 16 Leases (issued on 13 January 2016, effective 1 January 2019)
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.
Consolidation
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are de-consolidated from the
date that control ceases.
Business combinations are accounted for using the acquisition method of accounting. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the cost of
acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as
goodwill.
Inter-company transactions and balances on transactions between Group companies are eliminated in
preparing the consolidated financial statements.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Going Concern
The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval
of the financial statements and have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the
going concern basis of accounting in preparing the financial statements.
37
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Summary of Significant Accounting Policies (continued)
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; and
- Revenue from permanent placements, which is based on a percentage of the candidate’s remuneration
package and is derived from both retained assignments (where income is recognised on completion of
defined stages of work) and non-retained assignments. The Group has changed its revenue-recognition
policy from April 2018 in accordance with IFRS 15, Revenue from Contracts with Customers. This
requires revenue to be recognised once value has been received by the customer and when the
performance obligations have been satisfied. Revenue from non-retained, permanent-placement
assignments is now recognised when a candidate commences employment, whereas previously
recognition was at the date an offer was accepted by a candidate and where a start date had been
determined. There has been no effect on either contract placements or retained, permanent-placement
assignments.
The change resulted in a deferral of revenue from the previous period to the current one and a reduction in the
retained earnings of the Group from the previous period of £2.0m.
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.
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.
38
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Summary of Significant Accounting Policies (continued)
(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.
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).
39
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Summary of Significant Accounting Policies (continued)
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 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 a lease is spread evenly over the lease term.
j) Pension Costs
The Group operates a defined contribution pension scheme. The Group adopts both the minimum legally
required employer contribution rate of 2% of qualifying earnings, and the maximum earning threshold for
automatic enrolment for 2018-19, 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 day of each month.
k) Segmental Reporting
IFRS8 requires operating segments to be identified based on 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.
40
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Summary of Significant Accounting Policies (continued)
m) Financial assets
The Group’s financial assets comprise cash and various other receivable balances that arise from its
operations. All of the Group’s financial assets are held within a business model whose objective is to collect
contractual cash flows which are solely payments of principals and interest and therefore classified as
subsequently measured at amortised cost.
With the exception of trade receivables that do not contain a significant financing component or for which the
Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus,
in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that
do not contain a significant financing component or for which the Group has applied the practical expedient
are measured at the transaction price determined under IFRS 15.
The Group assesses on a forward-looking basis the expected credit losses (“ECL”), defined as the difference
between the contractual cash flows and the cash flows that are expected to be received. For trade receivables
and contract assets, the Group applies a simplified approach in calculating ECLs and recognises a loss
allowance based on lifetime ECLs at each reporting date. For all other financial assets, the Group recognises
lifetime ECL when there has been a significant increase in credit risk since initial recognition. If the credit risk
on the financial instrument has not increased significantly since initial recognition, the Group measures the
loss allowance for that financial instrument at an amount equal to 12-month ECL.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
except for trade receivables, where the carrying amount is reduced using 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.
Cash and cash equivalents include cash in hand and bank deposits that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts are classified with
current liabilities in the statement of financial position.
n) Financial liabilities and equity
Financial liabilities and equity instruments are initially measured at fair value and are classified according to
the substance of the contractual arrangements entered. 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.
41
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Summary of Significant Accounting Policies (continued)
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.
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 commences employment.
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.
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, considering 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.
42
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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
2019
£’000
2018
£’000
Net fee income
2019
£’000
2018
£’000
16,472
17,515
7,599
7,746
7,770
5,060
7,770
5,060
418
341
418
341
24,660
22,916
15,787
13,147
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
2019
£’000
2018
£’000
Net fee income
2019
£’000
2018
£’000
6,501
7,770
418
6,551
5,060
341
6,493
7,770
418
6,548
5,060
341
9,971
10,964
1,106
1,198
24,660
22,916
15,787
13,147
43
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
3
Segment Reporting (continued)
c) Profit before Taxation by Geographical Region
UK
Asia
Rest of World
Operating Profit
Net finance income
2019
£’000
928
1,523
20
2,471
-
2018
£’000
906
489
(202)
1,193
-
Profit before taxation
2,471
1,193
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 £0.83m (2018: £0.72m) for the UK, and charges of £0.77m (2018: £0.63m) for Asia and £0.06m
(2018: £0.09m) 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
2019
£’000
2018
£’000
Total liabilities
2019
£’000
2018
£’000
12,502
12,896
2,036
1,382
5,375
3,562
1,159
397
1,247
80
950
369
18,274
17,705
3,275
2,701
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.
44
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
4 Profit on ordinary activities before taxation
Profit for the year is arrived at after charging:
Depreciation
Operating lease rentals
(Profit)/loss on disposal of fixed assets
Exchange rate loss
- owned assets
- land and buildings
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
2019
£’000
2018
£’000
220
586
(1)
3
23
36
59
123
740
-
(5)
25
35
60
2019
£’000
2018
£’000
562
508
562
508
231
201
Details of Directors’ emoluments and interests, which form part of these financial statements, are provided in
the Director’s Remuneration report on pages 20 to 21.
45
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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
2019
Number
2018
Number
106
32
37
104
32
43
175
179
2019
Number
2018
Number
The average monthly number of employees of the Company during the
year, including Directors, was as follows:
Management
5
6
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.
46
2019
£’000
8,360
709
84
57
2018
£’000
8,612
704
(14)
94
9,210
9,396
2019
£’000
1,139
115
33
49
2018
£’000
1,129
118
25
2
1,336
1,274
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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
2019
£’000
2018
£’000
173
129,107
-
302
-
(4)
134
12
-
146
22
(2)
Total charge on profit for the year
298
166
UK corporation tax is calculated at 19% (2018: 19%) 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% (2018: 19%) 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
Permanent timing differences
Share option charge/exercised
Overprovision in prior years
Group relief
Total current tax
Deferred Tax
Origination and reversal of temporary differences
Tax charge for the year
47
2019
£’000
2018
£’000
2,471
1,193
470
227
8
(26)
2
(125)
(34)
(2)
5
-
-
28
(20)
6
(11)
(20)
-
-
(64)
-
298
146
-
20
298
166
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
8 Dividends
Final dividend for 2018: 3.25p per share (2017: 3.25p per share)
Interim dividend for 2019: 1.80p per share (2018: 1.75p per share)
2019
£’000
383
212
2018
£’000
398
214
595
612
A final dividend of 3.25p (2017: 3.25p) was paid on 27 July 2018 to shareholders on the register on 20 July
2018.
An interim dividend of 1.80p (2018: 1.75p) was paid on 7 December 2018 to shareholders on the register at
the close of business on 30 November 2018. The interim dividend was approved by the Board on 15
November 2018.
A final dividend of 3.40p per share will, subject to shareholder approval at the Annual General Meeting, be
paid on 2 August 2019 to shareholders who are on the register on 19 July 2018, making a total dividend paid
to shareholders for the year of 5.20p per ordinary share. (2018: 5.00p)
48
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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
2019
£’000
1,660
2018
£’000
1,022
Number
Number
Weighted average number of shares used for basic earnings per share
Dilutive effect of share options
12,094,523
307,031
11,784,523
184,146
Diluted weighted average number of shares used for diluted earnings per
share
12,401,554
11,968,669
Basic earnings per share
Diluted earnings per share
Pence
13.72p
13.38p
Pence
8.67p
8.53p
49
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
10 Property, Plant and Equipment
Group
Cost
At 1 April 2017
Additions
Acquisition
Disposals
Exchange difference
At 1 April 2018
Additions
Acquisition
Disposals
Exchange difference
At 31 March 2019
Depreciation
At 1 April 2017
Provision for the year
Acquisition
Disposals
Exchange difference
At 1 April 2018
Provision for the year
Acquisition
Disposals
Exchange difference
At 31 March 2019
Net book value
At 31 March 2019
At 31 March 2018
At 31 March 2017
Fixtures,
fittings and
equipment
£’000
1,075
209
115
-
(31)
1,368
727
-
(133)
18
1,980
939
123
91
0
(27)
1,126
220
-
(133)
15
1,228
752
242
136
Total
£’000
1,075
209
115
-
(31)
1,368
727
-
(133)
18
1,980
939
123
91
0
(27)
1,126
220
-
(133)
15
1,228
752
242
136
50
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
11 Goodwill
Cost
At 1 April 2018
At 31 March 2019
£’000
10,527
10,527
The total carrying value of goodwill is £10.53m, which relates to the acquisition of the Macdonald &
Company Group 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 was that the Group would meet its budgeted growth in UK
net fee income of 14.42% in the year to 31 March 2020. For the year after the end of the period covered by the
budget a growth rate of 2.00% is applied. This is followed by an assumed growth rate of 2.00%, which is
deemed reasonable and represents the average rate of growth in the markets in which the Group operates. 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 £1.62m. 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 8.63% 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 £1.43m.
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 27%
and if the budgeted operating profit is underachieved by 50%. 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.
51
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
12
Investments
Company shares in subsidiary undertakings
Cost
At 1 April 18
Increase/ (decrease) in shares from subsidiary
from share option reserve
At 31 March 19
Non-Controlling Interest
2019
£’000
2018
£’000
11,190
11,156
23
34
11,213
11,190
The following table summarises the information relating to Command, that is a subsidiary with material non-
controlling interest (“NCI”), before any intra-group eliminations.
NCI percentage
Non-current assets
Current assets
Non-current liabilities
Net assets
Net assets attributable to NCI
Revenue
Operating profit
Other comprehensive income/(loss)
Total comprehensive income
Operating profit allocated to NCI
Other comprehensive income allocated to NCI
Cash flows from operating activities
Cash flows from investment activities
Cash flows from financing activities (dividends to NCI: nil)
Net increase (decrease) in cash and cash equivalents
2019
£’000
40%
110
2,237
-
2,347
939
3,972
907
20
1,414
566
8
2,585
-
-
2,585
2018
£’000
40%
17
855
-
872
349
840
3
-
843
1
-
222
-
-
222
The Group acquired 60% holding of Command on 11 October 2017, and it became a subsidiary from that
date. Accordingly, the comparative information for 2018 for Command is only for period 11 October 2017 to
31 March 2018.
52
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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
Recruitment
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
29th Floor
3 Lockhart Road
Wan Chai, Hong Kong
29th Floor
3 Lockhart Road
Wan Chai, 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
29th Floor
3 Lockhart Road
Wan Chai, 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.
53
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
13 Trade and other receivables
Current
Trade receivables
Allowance for doubtful debts
Other receivables
Prepayments and accrued income
Group
2019
£’000
2018
£’000
4,156
(621)
243
868
3,050
(178)
111
2,633
4,646
5,616
Company
2019
£’000
2018
£’000
-
-
119
5
124
-
-
4
5
9
At 31 March 2019, the average credit period taken on sales of recruitment services was 131 days (2018: 69
days) from the date of invoicing. An allowance of £621,000 (2018: £178,000) 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.
A Provision for impairment of trade receivables has been made. In reviewing the appropriateness of the
provision, consideration has been given to the ageing of the debt and the potential likelihood of default, taking
into account current economic conditions.
The ageing of trade receivables at the reporting date was:
Not past due 0 -30days
Past due 30-90 days
Past due more than 90 days
Gross trade
receivables
2019
£’000
Provisions
2019
£’000
Gross trade
receivables
2018
£’000
1,654
1,435
1,067
4,156
68
157
396
621
1,861
956
233
3,050
Provisions
2018
£’000
41
83
54
178
54
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
13 Trade and other Receivables (continued)
Movement in allowance for doubtful debts:
1 April 2018
Impairment losses recognised
Amounts written off as uncollectable
Amounts paid by the client
Impairment losses reversed
31 March 2019
14 Financial Instruments
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Note
13
2019
£’000
178
621
(117)
(61)
-
2018
£’000
24
178
(10)
(14)
-
621
178
Group
Company
2019
£’000
4,261
2,309
2018
£’000
4,638
1,234
6,570
5,872
2019
£’000
2018
£’000
124
322
446
5
15
20
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
2019
£’000
2018
£’000
2019
£’000
2018
£’000
Financial liabilities and fair value
through profit and loss
Trade and other payables
15
1,123
614
1,092
1,123
614
1,092
1
1
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.
55
PRIME PEOPLE PLC
Notes to the financial statements
For the year ended 31 March 2019
15 Trade and other Payables
Current
Trade payables
Other payables
Amount owed to subsidiary
undertakings
Taxation and social security
Accruals
Group
Company
2019
£’000
316
807
2018
£’000
307
307
-
730
1,227
-
845
1,220
2019
£’000
3
1
1,093
6
27
2018
£’000
-
1
748
13
29
3,080
2,679
1,130
791
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 2017
Credit to income
At 31 March 2018
Debit to income
At 31 March 2019
Group (Asset)
At 1 April 2017
Credit to income
At 31 March 2018
Debit to income
At 31 March 2019
Other
temporary
differences
£’000
Total
£’000
-
22
22
-
22
-
22
22
-
22
Share
Options
£’000
Total
£’000
43
2
45
(5)
40
43
2
45
-
45
56
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
17 Share Capital
2019
2018
Number
£’000
Number
£’000
ALLOTTED CALLED UP
Ordinary shares of 10p each
As at 1 April 2018 and 31 March 2019
12,290,199
1,229
12,290,199
1,229
Share capital includes unpaid shares of (2018: nil).
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 19 July 2018, 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 2019 on 24 July 2019.
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 adjusts 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 made purchases of its own shares which are held as Treasury Shares.
57
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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 2019 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
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
Number of
options
31 March
2018
3,000
12,000
65,250
35,000
267,500
20,000
30,000
40,000
85,000
15,000
45,000
20,000
25,000
Granted
Exercised
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,000)
(5,000)
-
(20,000)
-
-
-
-
-
-
-
-
Forfeited Number of
Options
31 March
2019
3,000
-
-
(20,000)
12,000
40,250
(10,000)
(38,000)
20,000
229,500
-
-
(15,000)
(25,000)
-
- -
-
-
30,000
25,000
60,000
15,000
45,000
20,000
25,000
(10,000)
80,000
2018/19
10.00
2020-2028
-
90,000
Total 2019
662,750
90,000
(30,000)
(118,000)
604,750
Weighted average exercise price
2019 (pence)
28.37p
Total 2018
743,750
Weighted average exercise price
2018 (pence)
30.37p
-
-
-
10.00p
10.00p
27.84p
(10,000)
(71,000)
662,750
34.00p
48.54p
28.37p
58
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
There were 604,750 options outstanding at 31 March 2019 (2018: 662,750) which had a weighted average
price per share of 28.37p (2018: 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 several key performance measures of
the group, measured at a regional and consolidated level for the financial years 2018 and 2019. 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)
2019
Black-Scholes
76.00 & 74.00
10.00
68.98
20.00
4.00
2 & 5
2018
Black-Scholes
-
-
-
-
-
-
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 £57,306
(2018: expense £94,315).
59
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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 2019, the total number of ordinary shares of 10p held in Treasury and their values were as
follows:
As at 1 April
Shares purchased for treasury
Shares issued from treasury
Equity reclassification on disposal of
treasury shares
Loss on treasury shares disposal
2019
Number
505,676
34,000
(344,000)
-
£’000
Number
£’000
2018
18,276
497,400
(10,000)
-
421
26
(246)
-
(40)
21
408
(3)
(5)
As at 31 March
195,676
161
505,676
421
Nominal value
Market value
20
156
51
397
The maximum number of shares held in treasury during the year was 509,676 shares representing 4.1% of the
called-up ordinary share capital of the Company (2018: 505,676 representing 4.1% 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.
60
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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 2019 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
2019
£’000
Land
and
buildings
2018
£’000
532
469
816
-
571
471
1,200
-
1,817
2,242
The Group leases various offices under non-cancellable operating lease agreements. The leases have varying
terms as disclosed above.
61
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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
2019
£’000
Company
2018
£’000
2019
£’000
2018
£’000
2,471
1,193
10
(54)
220
38
1
123
94
-
-
-
-
-
-
-
Operating cash flow before changes in working capital
2,730
1,410
10
(54)
IFRS 15 adjustment on reserves b/f
(Increase)/decrease in receivables
Increase/(decrease) in payables
(1,976)
976
416
(434)
344
(115)
346
(4)
15
Cash generated from / (used by) underlying operations
2,146
1,320
241
(43)
21 Analysis of Cash less overdrafts
Group
At 1 April
Cash flow
At 31 March
Cash at bank and in hand
Total cash
Company
Cash at bank and in hand
Total cash
2018
£’000
1,234
£’000
1,075
2019
£’000
2,309
1,234
1,075
2,309
At 1 April
2018
£’000
15
15
Cash flow
£’000
307
307
At 31 March
2019
£’000
322
322
62
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
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 31.53% (2018: 23.37%) of revenue and
approximately 29.64% (2018: 23.88%) 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 2019
Cash at bank
Trade and other receivables
Trade and other payables
Net exposure
As at 31 March 2018
Cash at bank
Trade and other receivables
Trade and other payables
Net exposure
Euro
£'000
78
-
-
78
Euro
£'000
92
-
-
92
USD
£'000
32
-
-
32
USD
£'000
215
-
-
215
HK$
£'000
645
648
(27)
1,266
HK$
£'000
278
690
(12)
956
S$
£'000
95
140
AED
£'000
805
1,389
(4)
231
-
2,194
S$
£'000
228
167
(4)
391
AED
£'000
203
436
(4)
635
63
PRIME PEOPLE PLC
Notes to the Financial Statements
For the year ended 31 March 2019
Financial Risk Management (continued)
Sensitivity analysis – currency risk
A 10% weakening of Sterling against
the above currencies at 31 March 2019 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,
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
2019
equity
£'000
(7)
(3)
(115)
(21)
2019 PTB
£'000
(7)
(3)
(115)
(21)
2018
equity
£'000
(8)
(20)
(87)
(36)
2018 PBT
£'000
(8)
(20)
(87)
(36)
(199)
(199)
(58)
(58)
A 10% strengthening of Sterling against the above currencies at 31 March 2019 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.
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 have significant credit risk
exposure to one single client in Saudi Arabia which represents 32.45% of the Group trade receivables balance.
Although there is no indication that the debts are uncollectable, the Directors are of the opinion that adequate
provision is in place to cover any potential default by this client. Apart from this exposure, at the year-end no
other customer represented more than 4.86%% (2018: 6.95%) 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, considering
current economic conditions.
It is the Directors’ opinion that no further provision for doubtful debts is required.
64
Notes to the Financial Statements
For the year ended 31 March 2019
Financial Risk Management (continued)
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 £2.31m (2018: £1.23m) which the Board consider are more than adequate to meet
future working capital requirements and to take advantage of business opportunities.
23 Related Party Transactions
Prime People Plc provides various management services to its subsidiary undertakings. These services take
the form of centralised finance and operations support. The total amount charged by the Company to its
subsidiaries during the year is £215k (2018: £215k). The balance owed to the subsidiary undertakings at the
year-end is £1.09m (2018: £0.75m).
The Company also provides corporate guarantees on the subsidiary bank accounts. At 31 March 2019
amounts overdrawn by subsidiary bank accounts were £nil (2018: £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
£359,697 (2018: £355,249).
65
PRIME PEOPLE PLC
Directors and Advisers
Directors
Robert Macdonald
Peter Moore
Donka Zaneva-Todorinski
Chris Heayberd
Sir 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
Nominated Adviser & Broker
Cenkos Securities Plc, 6.7.8 Tokenhouse Yard, London, EC2R 7AS
Solicitors
Charles Russell Speechlys LLP, 5 Fleet Place, London EC4M 7RD
Auditor
Crowe U.K. 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, Steelpark Road, Halesowen, West Midlands, B62 8HD
66
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 FCCA – 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 and was awarded
fellowship status in January 2019. 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 Group 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 few financial positions in a broad
range of industries. Since 1989 his 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 remained on the Board in a non-executive
capacity.
Sir John Lewis OBE LLB (Hons) - Non-executive Director
John is a solicitor (Non-practising) previously served as a partner in Lewis Lewis & Co which became part of
Eversheds (to which he was a Consultant until 2019) 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.
67
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 several private companies including OPD Group Limited an
investment company with holdings in several recruitment businesses.
68
Prime People Plc
2 Harewood Place Hanover Square
London W1S 1BX
T: +44 (0) 20 7318 1785
F: +44 (0) 870 442 1737
E: connect@prime-people.com
W: prime-people.co.uk