better people better decisions · 2019. 10. 16. · to make better commercial decisions based on...

Providing positive growth for clients

through realising the true value of their data.

Better People Better Decisions

Interim Report 2019

PARITY GROUP PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2019

20 September 2019

Parity Group plc ("Parity" or the "Group" or the “Company”), the data and technology

focussed professional services business, announces its half year results for the six months

ended 30 June 2019.

Headlines:

• Phase 1 of a comprehensive transformation programme, commenced in March under

new CEO, completed

• Annualised gross operating costs reduced by £2.08m, a higher than anticipated gross

cost saving, including a net headcount reduction of 35%

• After £0.93m investment in the transformation programme, net annualised cost savings

of £1.15m achieved

• Investment in the transformation program:

o Following the appointment of the new Head of Consultancy division, Antonio

Acuña MBE, a new Commercial Director, Christopher Jones, and Head of

Learning and Development, Dianne Martin, have been appointed

o The new Parity brand and associated marketing campaigns have been launched

since the half year end

o Commenced an evaluation of Artificial Intelligence and technological

advancement opportunities in the recruitment market

• Board anticipates making a modest level of adjusted pre-tax profit for the full year 2019

• Continuing difficult market conditions in the traditional UK recruitment market including

loss of major Scottish Government contract announced in March 2019 only partially

offset by recent wins in Consultancy business

o New initial consultancy retainer contract just signed with Compass Group plc

o Two new contract wins with the Department of Education

o New contract with BAT

• Continued positive cash flow from operating activities(3) of £0.08m despite £0.41m

outflow in relation to restructuring costs

• Period on period reduction in net debt(3) to £1.2m (30 June 2018: £1.9m, 31 December

2018: £1.1m)

• £10m credit facility with current provider extended on improved terms for a further two

years until May 2021.

Six months ended 30 June 2019

Six months to

30.06.19 (Unaudited)

£’000

Six months to 30.06.18

(Unaudited) £’000

Incr./

(Decr.) %

Revenue 44,514 43,220 3% Adjusted profit before tax(1) 203 847 (76%) (Loss)/profit before tax(2) (541) 847 - Net cash flow from operating activities(3) 77 (238) - Net debt(3) 1,174 1,891 (38%)

1. On a Continuing basis, before non-recurring items

2. On a Continuing basis

3. Pre the adoption of IFRS 16

John Conoley, Non-Executive Chairman of Parity Group plc, said:

“The period we are reporting on includes the first four months under our new Chief

Executive, Matthew Bayfield, who was appointed in February 2019. He and the senior

management team have moved quickly to restructure the business, executing the plan set

out earlier in the year.

“The Board is confident in reaching a modest level of adjusted profitability for the year,

which will be a significant achievement by the management team given the extent of the

transformation being undertaken and following the loss of the very large legacy contract

with the Scottish Govt in Q1. The precise year end achievement will depend on the timing

and mix of contracts closed in the remainder of the year.”

Matthew Bayfield, Chief Executive, said:

“Due to changing client demand we are moving Parity’s focus from a single line of business

dependent upon relatively low margin recruitment revenues into a multi-line business built

around consultancy, learning and development and strategic recruitment in the data world.

“The restructuring programme that we embarked upon earlier in the year has gone deeper

into the organisation and has had to be more comprehensive than we originally anticipated.

This more comprehensive transformation programme has had an expected impact on our

short term gross revenue, however we are seeing the first signs that the plan will deliver

higher margins and robust profitability in the medium term.

“A new senior team has been recruited which is focussed on higher margin opportunities

and new service lines. The second phase of our transformation plan is about taking the new

Parity business model to market with a renewed marketing and communications focus.

“Whilst we still have a long way to go, we have a clear vision, a good plan and the support

of our clients in what we are setting out to achieve, which is helping us develop a growing

pipeline of new revenue opportunities. In the last few months we have signed new contracts

with, amongst others, the Department of Education, BAT and The Crown Commercial Service

and are delighted to report today a new retainer consultancy relationship with Compass

Group.”

For further information, contact:

Matthew Bayfield CEO

Roger Antony GFD

Parity Group plc

020 8543 5353

David Beck

Donhead Consultants 07836 293383

Mike Coe

Chris Savidge

WH Ireland 01179 453470

This announcement contains certain statements that are or may be forward-looking with

respect to the financial condition, results or operations and business of Parity Group plc. By

their nature forward-looking statements involve risk and uncertainty because they relate to

events and depend on circumstances that will occur in the future. There are a number of

factors that could cause actual results and developments to differ materially from those

expressed or implied by such forward-looking statements. These factors include, but are not

limited to (i) adverse changes to the current outlook for the UK IT recruitment and solutions

market, (ii) adverse changes in tax laws and regulations, (iii) the risks associated with the

introduction of new products and services, (iv) pricing and product initiatives of competitors,

(v) changes in technology or consumer demand, (vi) the termination or delay of key

contracts and (vii) volatility in financial markets.

Overview:

Due to changing client demand we are moving Parity’s focus from a single line of business

dependent upon relatively low margin recruitment revenues into a multi-line business built

around consultancy, learning and development and strategic recruitment in the data world.

The restructuring programme that we embarked upon earlier in the year has gone deeper

into the organisation and has had to be more comprehensive than we originally anticipated.

This more comprehensive transformation programme has had an impact on our short term

profitability however we can see the first signs that the plan will deliver in the medium term.

A new senior team has been recruited who are focussed on higher margin opportunities and

new service lines. The second phase of our transformation plan is about taking the new

Parity business model to market with a renewed marketing and communications focus.

Whilst we still have a long way to go, we have a clear vision, a good plan and the support of

our clients in what we are setting out to achieve, which is helping us develop a growing

pipeline of new revenue opportunities. In the last few months we have signed new contracts

with amongst others the Department of Education, BAT and The Crown Commercial Service

and are delighted to report today a new retainer consultancy relationship with Compass

Group.

About us:

45 years of trusted relationships with our clients Parity provides expertise that delivers positive growth for our clients through realising the true value of their data. We are passionate about empowering business and government to make better commercial decisions based on reliable data. Specifically, we advise on data and we provide access to skills either as a managed service, through resourcing in the contract and permanent market, or as part of a learning and development programme. Our work comes from a mix of long-term contracts with public and private sector organisations as well as expanded projects with existing clients as a result of strong relationships and a track record of high client satisfaction. Around 60 staff work in our offices in Belfast, Edinburgh, London and Manchester and we had, during H1 2019, over 1,000 associates supporting clients around the UK and Ireland.

OUR STRATEGIC GOAL To equip clients with the talent, skills and advice necessary to make bold data-led business decisions confidently.

OUR FINANCIAL GOAL To grow margin and net profitability.

OUR OPERATING MODEL Applying an account management approach to ensure clients can choose the right mix of our support in consulting, resourcing, and learning and development.

OUR PURPOSE We are the trusted partner of data driven transformation.

OUR MISSION We provide expertise that delivers positive growth for clients through realising the true value of their data.

OUR VISION To build the world’s most dynamic community of data experts, enabling our clients to realise their vision.

Transformation to deliver growth New Operating Model Since the appointment of Matthew Bayfield as Chief Executive in February this year the Group has adopted a new and more client focused operating model. Clients are now offered a suite of integrated services through a single account management structure. Working with our clients we identify their needs and design a solution that can encompass consultancy, learning and development or strategic recruitment, or any combination of the three. We have put this client centric account management at the heart of our business to improve the quality of our client relationships and to ensure our clients are able to access the full range of services that Parity can offer them. The success of this new model will be judged on the depth of our client relationships and our ability to help our clients realise the value of their data and make better commercial decisions based on reliable data. When successfully in place the new model will also transform the profitability of Parity as we will have moved from low margin and increasingly commoditised recruitment into, data focused consultancy, learning and development and strategic recruitment for data people; service lines that attract significantly higher margins.

Investment in New Strategic Hires Critical to the success of our new model is the quality of our people and especially the leaders of each of our service lines. We have invested in new team members who will work together as part of a new executive operating board to oversee the implementation of our new model and complete the transformation of the business. We have recently completed this process with the appointment of a new Head of Learning and Development and a Commercial Director. Senior hires made in the last six months as part of the transformation programme have been as follows:

• Antonio Acuña MBE appointed as Head of Consulting in April

• Dianne Martin appointed as Head of Learning and Development in August

• Chris Jones appointed as Commercial Director in September

• Shaun O’Hara engaged as People Officer, focussed on Transformation Investment in Branding and New Website As we move to a new way of working and the transformation of our business it has been important to refresh and update the Parity brand which had not seen any significant investment for over ten years. In July we launched our new identity which reflects the new integrated offering. Our new website went live at the same time with a fresh look and modern feel, we have unified Parity’s web presence to reflect the integrated offering and increase both client and candidate interaction. The new brand is central to the second phase of our transformation as we initiate a new marketing strategy to support growth and generate leads via the website. Aligning our Cost Base A further critical element of our transformation plan has been to align our cost base to our new operating model, both reducing overall costs and moving costs into account management and

the three service lines that support the model. We have achieved a gross annualised saving of £2.08m (£1.15m net of investments) and a net reduction of 35% in our headcount. As part of the review of our cost base we have been able to move resources away from low margin commoditised recruitment to higher margin work, and redeployed resource to improve the consistency of our client relationships. Whilst the net 35% reduction in headcount relates predominately to a reduction in recruitment sales staff, the annualised savings figure also includes reductions in general and administration, IT and property costs. There were one off costs of the restructuring of £0.74m in the first half.

Financial Review Revenue Group revenues were up by 3% or £1.3m year on year. Lower margin recruitment revenues were up by 7% or £2.8m reflecting higher contractor volumes which averaged 1,021 in H1 2019 (H1 2018: 953 contractors). Whilst there was an increase in the year on year average, we saw a downward trajectory over H1 with the number of contractors on billing decreasing from 995 to 913 over the six months. The reduction was due in part to the expected run off of contractors under the Scottish Government framework which we announced in March 2019, and also as a result of challenging trading conditions in the UK recruitment market. Consultancy revenues were down by £1.55m or 30% due to the inclusion of revenues from the significant MoD contract in the comparative period. The MoD contract ran until August 2018 but was not renewed. Consultancy revenues in H1 2019 included £0.2m from new higher margin data consultancy work. Selling Contribution External contribution margin for recruitment was £3.9m at a margin of 9.6% (H1 2018: £3.8m at 10.1%) and for consultancy was £0.8m at a margin of 21% (H1 2018: £1.4m at 27%). Group selling contribution to overheads was £2.4m (H1 2018: £2.8m) down by 14% or £0.4m due to the sales mix between recruitment and consultancy. Result Before Tax The Group reported a loss before tax for the six months of £0.5m (H1 2018: profit of £0.8m) and an adjusted profit before tax (excluding non-recurring items) of £0.2m (H1 2018: £0.8m). Non-recurring items were £0.7m (H1 2018: £nil) and reflect the charge for specific restructuring costs. The restructuring costs primarily related to the headcount reduction, but also included onerous property lease costs in respect of office relocations. Cash and Net Debt Free cash flow from operating activities, pre the adoption of IFRS 16, was an inflow of £0.1m (H1 2018: outflow of £0.2m) and was after an outflow of £0.4m in respect of restructuring costs. We achieved a further improvement in debtor days to 16 days (H1 2018: 20 days). Net debt, pre the adoption of IFRS 16, at the end of June was £1.2m (30 June 2018: £1.9m; 31 December 2018: £1.1m). During the period we finalised renewal of our credit facility with PNC who have acted as the Company’s lenders since 2010. The £10m facility is subject to a minimum period of two years, expiring May 2021, with an improved discount rate of 2.00% + base (previously 2.35% + base).

Defined Benefit Pension The final salary pension scheme deficit was £1.1m at 30 June 2019 (30 June 2018: £0.9m; 31 December 2018 £1.9m). The deficit has reduced by £0.8m since the 2018 year end despite a fall in discount rates. The improvement was partly due to an increase in the value of scheme investments and partly as a result of actions taken by the Board and the Trustees to reduce scheme risk. The results of the triennial review as at 5 April 2018 were agreed during the period. As part of the agreement, minimum contributions to the scheme will remain at similar levels to contributions made in 2018 at £0.3m per year.

Outlook

Trading conditions in the UK recruitment market continue to be extremely challenging, which supports the Board’s view of the need to change the Parity business model. To that end we have implemented the first phase of a transformation programme that we believe will improve the medium-term profitability of the business. We are encouraged by the recently announced contract wins and renewals, and our growing pipeline in higher margin service lines, but recognise that it will take time for the benefits of our change programme to translate into improved financial returns. The Board anticipate making a modest level of adjusted pre-tax profit in the full year 2019. The precise year end achievement will depend on the timing and mix of contracts closed in the remainder of the year. We remain excited by the scale of opportunity in the data market. The second half will see further progress with the transformation plan as we take the new Parity offer to our clients with enhanced marketing and client communications. We look forward with increasing confidence to 2020 now that we have the right people and the right plan in place. The next phase of the investment programme will include an evaluation of technology opportunities for competitive advantage and operational efficiency.

Consolidated condensed income statement For the six months ended 30 June 2019

Six months to 30.06.19 (Unaudited)


(Unaudited)

Year to 31.12.18 (Audited)

Notes

Before non-recurring

items £’000

Non-recurring items (note 4)

£’000

After non-recurring

items £’000

£’000

Before non-recurring

items £’000

Non-recurring items (note 4)

£’000

After non-recurring

items £’000

Continuing operations

Revenue

2, 3 44,514 - 44,514

43,220

86,112

-

86,112

Employee benefit costs (2,906) (500) (3,406) (3,098) (5,976) (299) (6,275)

Depreciation, amortisation and impairment

(410) (174) (584) (112) (194) - (194)

All other operating expenses

(40,784) (70) (40,854) (38,984) (78,724) (196) (78,920)

Total operating expenses

(44,100) (744) (44,844) (42,194) (84,894) (495) (85,389)

Operating profit/(loss)

414 (744) (330) 1,026 1,218 (495) 723

Finance costs 5 (211) - (211) (179) (365) - (365)

Profit/(loss) before tax 203 (744) (541) 847 853 (495) 358

Tax (charge)/credit 7 (71) 135 64 (88) (16) 79 63

Profit/(loss) for the period from continuing operations 132 (609) (477)

759

837

(416)

421

Discontinued operations Loss from discontinued operations after tax 6 - - -

(388)

(381)

-

(381) Profit/(loss) for the period attributable to owners of the parent

132 (609) (477) 371

456

(416) 40

(Loss)/earnings per share – Continuing operations Basic (loss)/earnings per share Diluted (loss)/earnings per share

8 8

(0.47p) (0.47p)

0.74p 0.73p

0.41p 0.41p

(Loss)/earnings per share – Continuing and discontinued operations Basic (loss)/earnings per share Diluted (loss)/earnings per share

8 8

(0.47p) (0.47p)

0.36p 0.36p

0.04p 0.04p

Consolidated condensed statement of comprehensive income For the six months ended 30 June 2019





Year to 31.12.18

(Audited) £’000

(Loss)/profit for the period (477) 371 40 Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations - - (3) Items that will never be reclassified to profit or loss Remeasurement of defined benefit pension scheme 857 124 (1,005) Deferred taxation on remeasurement of defined benefit pension scheme (146) (21) 171

Other comprehensive income/(expense) for the period after tax 711 103 (837)

Total comprehensive income/(expense) for the period attributable to owners of the parent 234 474 (797)

Consolidated condensed statement of changes in equity For the six months ended 30 June 2019 Six months to 30 June 2019 (Unaudited)

Share capital

£'000

Share premium

reserve £'000

Capital redemption

reserve £’000

Other reserves

£'000

Retained earnings

£'000 Total £'000

At 31 December 2018 2,053 33,244 14,319 34,560 (77,612) 6,564 Adoption of IFRS 16 (note 1) - - - - 6 6

Revised at 1 January 2019 2,053 33,244 14,319 34,560 (77,606) 6,570 Share options – value of employee services - -

- - 116 116

Transactions with owners - - - - 116 116

Loss for the period - - - - (477) (477) Other comprehensive income for the period after tax - -

- - 711 711

At 30 June 2019 2,053 33,244 14,319 34,560 (77,256) 6,920

Six months to 30 June 2018 (Unaudited)

Share capital

£'000

Share premium

reserve £'000

Capital redemption

reserve £’000

Other reserves

£'000

Retained earnings

£'000 Total £'000

At 1 January 2018 2,043 33,211 14,319 44,160 (86,544) 7,189 Issue of new ordinary shares 10 33 - - - 43 Share options – value of employee services - -

- - 27 27

Transactions with owners 10 33 - - 27 70

Profit for the period - - - - 371 371 Other comprehensive income for the period after tax - -

- - 103 103

At 30 June 2018 2,053 33,244 14,319 44,160 (86,043) 7,733

Year to 31 December 2018 (Audited)

Share capital

£'000

Share premium

reserve £'000

Capital redemption

reserve £’000

Other reserves

£'000

Retained earnings

£'000 Total £'000

At 1 January 2018 2,043 33,211 14,319 44,160 (86,544) 7,189 Issue of new ordinary shares 10 33 - - - 43 Share options – value of employee services - -

- - 129 129

Transactions with owners 10 33 - - 129 172

Profit for the year - - - - 40 40 Other comprehensive expense for the year after tax - -

- - (837) (837)

Reallocation of impairment charge - - - (9,600) 9,600 -

At 31 December 2018 2,053 33,244 14,319 34,560 (77,612) 6,564

Consolidated condensed statement of financial position As at 30 June 2019

Notes

As at 30.06.19


As at 30.06.18


As at 31.12.18

(Audited) £’000

Assets Non-current assets

Goodwill 4,594 4,594 4,594 Other intangible assets 93 139 86 Property, plant and equipment 92 61 69 Right-of-use assets 1 710 - - Deferred tax assets 1,071 810 1,153

Total non-current assets 6,560 5,604 5,902

Current assets Trade and other receivables 11,063 13,279 12,018 Cash and cash equivalents 5,152 5,461 5,829

Total current assets 16,215 18,740 17,847

Total assets 22,775 24,344 23,749

Liabilities Current liabilities Loans and borrowings (6,326) (7,364) (6,919) Lease liabilities 1 (625) - - Trade and other payables (7,365) (8,324) (8,261) Provisions (168) - (43)

Total current liabilities (14,484) (15,688) (15,223)

Non-current liabilities Loans and borrowings - (2) - Lease liabilities 1 (256) - - Provisions (20) (19) (20) Retirement benefit liability 9 (1,095) (902) (1,942)

Total non-current liabilities (1,371) (923) (1,962)

Total liabilities (15,855) (16,611) (17,185)

Net assets 6,920 7,733 6,564

Shareholders’ equity Called up share capital 2,053 2,053 2,053 Share premium account 33,244 33,244 33,244 Capital redemption reserve 14,319 14,319 14,319 Other reserves 34,560 44,160 34,560 Retained earnings (77,256) (86,043) (77,612)

Total shareholders’ equity 6,920 7,733 6,564

Consolidated condensed statement of cash flows For the six months ended 30 June 2019

Notes





Year to 31.12.18

(Audited) £’000

Cash flows from operating activities (Loss)/profit for the period (477) 371 40 Adjustments for: Net finance expense 5 211 179 365 Share-based payment expense 116 27 129 Income tax credit 7 (64) (85) (236) Amortisation of intangible assets 35 99 165 Depreciation of property, plant and equipment 20 37 53 Depreciation and impairment of right-to-use assets 529 - - Loss on disposal of discontinued operation 6 - 312 306

370 940 822 Working capital movements Decrease/(increase) in trade and other receivables 955 (958) 204 Decrease in trade and other payables (896) (96) (141) Increase in provisions 125 1 45 Payments to retirement benefit plan 9 (103) (125) (326) Net cash flow from/(used in) operating activities 451 (238) 604

Investing activities Purchase of intangible assets (42) - (14) Purchase of property, plant and equipment (43) (11) (35) Net proceeds from disposal of subsidiary 6 - 14 114

Net cash flow (used in)/from investing activities (85) 3 65

Financing activities Issue of ordinary shares - 43 43 (Repayment)/drawdown of finance facility (585) 771 330 Principal repayment of lease liabilities 1 (374) - - Interest paid 5 (84) (86) (181)

Net cash (used in)/from financing activities (1,043) 728 192

Net (decrease)/increase in cash and cash equivalents (677) 493 861

Cash and cash equivalents at the beginning of the period 5,829 4,968 4,968 Cash and cash equivalents at the end of the period 5,152 5,461 5,829

Notes to the interim results 1 Accounting policies Basis of preparation The condensed interim financial statements comprise the unaudited results for the six months to 30 June 2019 and 30 June 2018 and the audited results for the year ended 31 December 2018. The financial information for the year ended 31 December 2018 herein does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for 2018 have been filed with the Registrar of Companies. The Independent Auditor’s Report on the Annual Report and Financial Statements for 2018 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The condensed financial statements for the period ended 30 June 2019 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union. The information in these condensed financial statements does not include all the information and disclosures made in the annual financial statements. The condensed financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU in a manner consistent with the accounting policies set out in the Group financial statements for the year ended 31 December 2018, with the exception of new standards, amendments and interpretations effective as of 1 January 2019 as detailed below. IFRS are subject to amendment and interpretation by the International Accounting Standards Board (IASB) and there is an ongoing process of review and endorsement by the European Commission. Any standards, amendments or interpretations that have been issued but not yet effective have not been adopted early by the Group. Going concern The directors are satisfied that the Group has sufficient resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these financial statements. Financial instruments Unless otherwise indicated, the carrying amounts of the Group’s financial assets and liabilities are a reasonable approximation of their fair values. Accounting policies: new standards, amendments and interpretations IFRS 16 ‘Leases’ The Group adopted IFRS 16 from 1 January 2019, replacing IAS 17 ‘Leases’ and related interpretations. This represents a change in accounting for lease arrangements in which the Group acts as lessee whereby operating leases previously treated solely through profit and loss are to be recorded in the statement of financial position in the form of a right-of-use asset and a lease liability, subject to exemptions for low value and short-term leases. The nature of the costs changes from operating expenses to predominantly depreciation with an interest expense on the lease liability. The Group has been impacted by IFRS 16 on its leases for property. In accordance with the transition provisions of IFRS 16, comparative information has not been restated, with the cumulative effect of initially applying the standard recognised as an adjustment to retained earnings at 1 January 2019. Lease liabilities previously assessed as operating leases have been measured on 1 January 2019 at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate at that date of 3.10%. Associated right-of-use assets have been measured at amounts equal to the lease liabilities, adjusted for any prepaid or accrued lease payments. The Group has applied practical expedients permitted by IFRS 16, including relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review and excluding initial direct costs for the measurement of right-of-use assets at 1 January 2019.

1 Accounting policies (continued) Application resulted in the recognition of total lease liabilities of £1,060,000 and right-of-use assets of £1,066,000, with an adjustment to retained earnings of £6,000. At 30 June 2019 the difference between the lease liabilities and right-of-use assets mainly relates to an impairment to the right-of-use assets. Depreciation on right-of-use assets for the six months to 30 June 2019 was £355,000. The amounts recognised in relation to right-of-use assets and lease liabilities at the interim balance sheet date are as follows:


Lease liabilities Operating lease commitments disclosed at 31 December 2018 1,132 Not recognised within the scope of IFRS 16 (39) Effect of discounting using incremental borrowing rate (33)

Recognised on application of IFRS 16 on 1 January 2019 1,060 Other finance leases at 1 January 2019 8 Additions 173 Interest expense 14 Principal repayment (374)

At 30 June 2019 881

Right-of-use assets Recognised on application of IFRS 16 on 1 January 2019 1,066 Additions 173 Depreciation (355) Impairment (note 4) (174)

At 30 June 2019 710

2 Segmental information During the period, the Group initiated a strategic reorganisation such that reporting of financial information to the Chief Operating Decision Maker (the Group Board) by operating segments changed. The Group currently has three operating segments, being Recruitment (previously Parity Professionals), Consultancy (previously Parity Consultancy Services) and, since 2019, Learning & Development. The three service lines are supported by a single sales, marketing and back office function. Accordingly, internal overheads are not allocated to service lines. In accordance with IFRS 8 ‘Operating Segments’, segmental information from prior periods has been restated.

Six months to 30 June 2019 (Unaudited)

Recruitment

Consultancy

Learning &

Development

Total Continuing operations £’000 £’000 £’000 £’000

Gross revenue from external customers 40,920 3,594 - 44,514 Contractor costs (36,973) - - (36,973)

Net revenue 3,947 3,594 - 7,541 Sub-contracted direct costs - (2,843) - (2,843)

External contribution 3,947 751 - 4,698 Internal sales and delivery costs (2,266)

Contribution 2,432 Group and shared service costs (1,492) Depreciation and amortisation (410) Share-based payment (116)

Operating profit before non-recurring items 414 Finance costs (211)

Adjusted profit before tax 203 Non-recurring items (744)

Loss before tax (541)

2 Segmental information (continued)

Six months to 30 June 2018 (Unaudited, Restated) Recruitment

Consultancy

Total

Continuing operations £’000 £’000 £’000

Gross revenue from external customers 38,078 5,142 43,220 Contractor costs (34,230) - (34,230)

Net revenue 3,848 5,142 8,990 Sub-contracted direct costs - (3,756) (3,756)

External contribution 3,848 1,386 5,234 Internal sales and delivery costs (2,448)


Operating profit before non-recurring items 1,026 Finance costs (179)

Adjusted profit before tax 847 Non-recurring items -

Profit before tax 847

Year to 31 December 2018 (Audited, Restated)

Recruitment

Consultancy

Total Continuing operations £’000 £’000 £’000

Gross revenue from external customers 77,616 8,496 86,112 Contractor costs (69,935) - (69,935)

Net revenue 7,681 8,496 16,177 Sub-contracted direct costs - (6,500) (6,500)

External contribution 7,681 1,996 9,677 Internal sales and delivery costs (5,034)


Operating profit before non-recurring items 1,218 Finance costs (365)

Adjusted profit before tax 853 Non-recurring items (495)

Profit before tax 358

All segment assets and liabilities are based in the UK. 3 Revenue The Group’s revenue from external customers disaggregated by pattern of revenue recognition is as follows:





Recruitment £’000

Consultancy £’000





Services transferred over time 40,602 3,594 37,712 5,142 76,978 8,496

Services transferred at a point in time 318 - 366 - 638 -

Revenue from external customers 40,920 3,594 38,078 5,142 77,616 8,496

3 Revenue (continued) The Group’s revenue from external customers disaggregated by primary geographical market is as follows:











UK 39,590 3,594 37,889 5,142 76,033 8,496

Rest of EU 1,330 - 189 - 1,583 -

Revenue from external customers 40,920 3,594 38,078 5,142 77,616 8,496

4 Non-recurring items






Year to 31.12.18

(Audited) £’000

Restructuring - Employee benefit costs 500 - 279 - Impairment of right-of-use assets 174 - - - Other operating costs 70 - 122 Legal costs - - 74 Past service cost for defined benefit pension scheme - - 20

744 - 495

Non-recurring items during 2019 included:

• Costs related to the restructuring of the Group, aligning the organisation to its refocused strategy. Costs include employee termination payments, impairments to right-of-use assets and provisions for costs from vacated property, and fees for related professional services

The impairment of right-of-use assets of £174,000 relates to the Group’s vacated office premises and is equal to the difference between the carrying value of the assets and the expected recoverable amount from subletting from the premises. Further onerous costs in respect of the premises are included within provisions. Non-recurring items during 2018 included:

• Costs related to restructuring of the Parity Consultancy Services division. Costs include employee termination payments, fees for professional services and costs of changes in management structure

• Legal costs for professional services fees in respect of one-off cases

• Past service cost for the Group’s defined benefit pension scheme in respect of GMP equalisation 5 Finance costs

Six months to

30.06.19 (Unaudited)

£’000



Year to 31.12.18

(Audited) £’000

Interest expense on lease liabilities 14 - - Interest expense on other financial liabilities 84 86 181 Net finance costs in respect of post-retirement benefits 113 93 184

Total finance costs 211 179 365

The interest expense on other financial liabilities represents interest paid on the Group’s asset-based financing facilities.

6 Discontinued operations In April 2018 the Group sold Inition Limited. As such, Inition Limited’s operating result for the comparative periods, as well as the loss on disposal of Inition Limited is presented as discontinued. 7 Taxation






Year to 31.12.18

(Audited) £’000

Recognised in the income statement Current tax charge - - - Deferred tax (credit)/charge (64) 88 (63)

Total tax (credit)/charge (64) 88 (63)

Recognised in other comprehensive income Deferred tax charge/(credit) 146 21 (171)

8 Earnings per ordinary share Basic earnings per share is calculated by dividing the basic earnings for the period by the weighted average number of fully paid ordinary shares in issue during the period. Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares.


Six months to 30.06.2018 (Unaudited, restated)


Loss £’000

Weighted average

number of shares

000’s

Loss per share

Pence

Earnings/

(loss) £’000

Weighted average

number of shares

000’s

Earnings/

(loss) per share

Pence

Earnings/ (loss) £’000

Weighted average

number of shares 000’s

Earnings/

(loss) per share

Pence

Continuing operations Basic (loss)/earnings per share (477) 102,624 (0.47) 759 102,302 0.74 421 102,464 0.41 Effect of dilutive options - - - - 1,412 - - 1,126 - Diluted (loss)/earnings per share (477) 102,624 (0.47) 759 103,714 0.73 421 103,590 0.41 Discontinued operations Basic loss per share - - - (388) 102,302 (0.38) (381) 102,464 (0.37) Effect of dilutive options - - - - - - - - - Diluted earnings per share - - - (388) 102,302 (0.38) (381) 102,464 (0.37) Continuing and discontinued operations Basic (loss)/earnings per share (477) 102,624 (0.47) 371 102,302 0.36 40 102,464 0.04 Effect of dilutive options - - - - 1,412 - - 1,126 - Diluted (loss)/earnings per share (477) 102,624 (0.47) 371 103,714 0.36 40 103,590 0.04

As at 30 June 2019 the number of ordinary shares in issue was 102,624,020 (30 June 2018 and 31 December 2018: 102,624,020).

9 Pension commitments The Group provides employee benefits under various arrangements, through defined benefit and defined contribution pension plans, the details of which are disclosed in the 2018 Annual Report and Accounts. At the interim balance sheet date, the major assumptions used in assessing the defined benefit pension scheme liability have been reviewed and updated based on a roll-forward of the last formal actuarial valuation, which was carried out as at 5 April 2018. The following changes in estimate have been applied to the IAS 19 valuation as at 30 June 2019:

30.06.19 30.06.18 31.12.18

Rate of increase in pensions in payment 3.7-3.9% 3.7-3.9% 3.7-4.0% Discount rate 2.3% 2.7% 2.8% Retail price inflation 3.3% 3.2% 3.4% Consumer price inflation 2.3% 2.2% 2.4%

The deficit has reduced by £0.8m since the 2018 year end despite a fall in discount rates. The improvement was partly due to an increase in the value of scheme investments and partly as a result of actions taken by the board and the Trustees to reduce scheme risk. 10 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are therefore not disclosed in this note. There were no other related party transactions during the period (2018: none). 11 Events after the reporting period There are no events after the reporting period not reflected in the interim financial statements.

Statement of Directors’ responsibilities The Directors confirm, to the best of their knowledge:

• The condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, as adopted by the European Union;

• The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year, and gives a true and fair view of the assets, liabilities, financial position and profit for the period of the Group; and

• The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority, being a disclosure of related party transactions and changes therein since the previous annual report.

By order of the Board

John Conoley Non-Executive Chairman 20 September 2019

London Dawson House 5 Jewry Street London EC3N 2EX

Belfast Innovation Centre Unit 5B Catalyst Queen’s Road BT3 9DT

Manchester 1st Floor No.1 Spinningfields Hardman Square Manchester M3 3EB

Edinburgh 9-10 St Andrew Square Edinburgh EH2 2AF

Farnborough The Hub Fowler Avenue Farnborough GU14 7JF

www.parity.net

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