TIDMPTY
RNS Number : 0960W
Parity Group PLC
21 April 2021
PARITY GROUP PLC
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2020
21 April 2021
Parity Group plc ("Parity" or the "Group" or the "Company"), the
data and technology focussed professional services business,
announces its full year results for the year ended 31 December
2020.
Business Highlights
-- Transformation begun in 2019 is complete and the business
returned to an Operating Profit in 2020 of GBP23k (2019: Operating
loss of GBP725k).
-- Removed GBP4.2m of operating costs, enabling GBP1.6m to be invested back into the business.
-- Significantly improved operational gearing with new operating model.
-- Reduction of staff numbers and headcount costs has enabled
investment in people who bring new skills.
-- Updated team's incentives to be geared towards profitable
growth, managing down reliance on revenues that delivered little or
no margin.
Post period end and outlook
-- Encouraging start to 2021, with new business wins including a
contract from the Scottish government representing a total
opportunity of up to GBP5m over the next three to six years, plus a
number of other public and private sector wins amounting to an
estimated GBP400,000 in External contribution during the financial
year.
-- Having significantly improved its working capital management
over the past two years the Group has secured a new debt facility
from Leumi ABL that will support its future growth ambitions.
-- Investment in technology has enabled greater efficiency,
stronger margins and supports the growth opportunity, with more
future plans in this area.
-- While the short-term economic impacts of the pandemic have
affected performance, in the longer term it has accelerated the
trends that underpin Parity's new strategy.
-- If the pandemic eases as expected, anticipate more growth in
H2 2021 as business confidence returns.
Financial Highlights
Year ended 31 December 2020 2019
Revenue 57.8 80.4
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External Contribution 5.6 8.1
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Operating profit before non-underlying
items 0.5 0.4
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Operating profit / (loss) 0.0 (0.7)
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Adjusted profit before tax 0.1 0.1
------ ------
Loss before tax (0.3) (1.1)
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Net cash excluding lease liabilities 0.2 1.4
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Commenting on the results, John Conoley, Non-Executive Chairman
of Parity Group plc, said:
" I am delighted to see the real progress made in 2020 and it is
especially pleasing to be able to report a second half profit in
2020. In 2019 the Board made a decision to change the strategic
direction of the business, to focus on the growing opportunity in
data and to position Parity as the partner of choice for clients
who want to realise the true potential of their data. Clearly
despite the challenges of the pandemic, the change in strategic
direction was the right decision and the growth in profitability
should continue. This is my last statement as Non-Executive
Chairman of Parity Group plc and I leave Parity in a strong
position."
Matthew Bayfield, Chief Executive, said:
"Despite the Covid-19 pandemic we have been able to deliver an
operating profit in 2020 and report a profit before tax in the
second half of 2020, which is testament to the viability of our new
strategy and to the dedication and skill of our people, who I would
like thank for their hard work during a very challenging time.
"Whilst the pandemic has made this year difficult for many
businesses, it has also underlined the need for strong data
management and data governance in businesses and government bodies.
This is exactly where Parity sits and where we see opportunity for
growth. We are now operating in a truly digital economy sooner than
we expected and Parity is extremely well placed to benefit from
this. We are more confident than ever in our ability to deliver
above average total shareholder returns in the coming years,
despite the lasting impacts of the pandemic."
Investor Presentation
Matthew Bayfield, CEO and Mike Johns, CFO will provide a live
presentation relating to the final results for 2020 via the
Investor Meet Company platform on 21st Apr 2021 at 1:00pm BST.
The presentation is open to all existing and potential
investors. Questions can be submitted pre-event via the Investor
Meet Company dashboard up until 9am the day before the meeting or
at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet Parity Group plc via:
https://www.investormeetcompany.com/parity-group-plc/register-investor
.
Investors who already follow Parity Group plc on the Investor
Meet Company platform will automatically be invited.
-S-
Contacts
Parity Group PLC www.parity.net
Matthew Bayfield, CEO + 44 (0) 208 543 5353
Mike Johns, CFO
finnCap Ltd https://www.finncap.com/
Jonny Franklin-Adams / Simon Hicks / Fergus
Sullivan
Tim Redfern / Charlotte Sutcliffe +44 (0) 20 7220 0500
Houston Parity@Houston.co.uk
Kate Hoare
Alexander Clelland +44 (0) 204 529 0549
Chairman's report
2020 - Progress in difficult times
We are delighted to be able to report real progress in 2020
despite the obvious challenges faced in a year that saw fundamental
changes to the way we all work. In 2019 the Board made a decision
to change the strategic direction of the business, to focus on the
growing opportunity in data and to position Parity as the partner
of choice for clients who want to realise the true potential of
their data. When this decision was taken we had of course not
foreseen the pandemic. However, the timing was fortuitous; while in
the short term the economic impacts of the pandemic have affected
our performance, in the longer term it has accelerated the trends
that underpin Parity's new strategy. As a result, Parity has come
through 2020 far more strongly than would otherwise have been the
case and it is pleasing to be able to report a second half profit
in 2020. This has been driven by the success of our transformation
programme, and we remain confident of further growth in
profitability in the current financial year.
Strategy
Data is an ever more valuable and important commodity in both
the private and public sector. Parity's strategy is simple: to
service the market for people who can help manage that valuable
data. The pandemic created its challenges, but it has also created
opportunity.
With more remote working, data security has become of paramount
importance for almost all businesses, increasing the demand for
support and skills around data which Parity provides. With even
more transactions moving online, retailers need to be able to
fulfil, track and analyse very large amounts of raw data. In the
public sector, the pandemic has generated a huge demand for
effective and efficient tracking of data by both the NHS and other
government entities. Furthermore, the demand for faster, more
reliable broadband has further fuelled the demand for skilled
people who can manage data in both the private and public sector. I
am pleased to say Parity is a partner for businesses all these
markets and more, and opportunities in others are growing.
Parity is also building its reputation in the growing data
analytics space. The ever increasing reliance on data for decision
making is resulting in more demand for highly skilled, experience
people who are capable of collecting, curating and analysing
complex data. These type of data analytics skills remain scarce,
which is why Parity can play a vital role, connecting real data
experts with organisations who need them.
Results
I am very pleased to report that the transformation programme
embarked upon in 2019 has delivered its key objectives and at an
operating level, the Group returned to a modest Operating Profit in
2020 of GBP23k (2019: Operating loss of GBP725k). This was despite
revenue across the Group being 28% lower at GBP57.8 million,
largely as a result of lower recruitment revenues as our large
contract with the Scottish Government, which was not renewed in
early 2019, continued to wind down. Adjusted profit before tax of
GBP122k was very similar to the year before. This is a significant
achievement in a challenging environment, reflecting the progress
we have made as an organisation, without the need to furlough
employees. The Group also continues to benefit from strong working
capital management and debtor days remain at an excellent average
of 14 days.
After non-underlying items of GBP447k before tax, all incurred
in the first half, we recorded a loss before tax for the year of
GBP325k (2019: loss before tax of GBP1.1m).
Board and people
As Parity has undergone its transformation to focus on the
opportunity in data, there have been several senior leadership
changes including appointments of individuals with strong
technology experience and who share our vision for the new
Parity.
In June, Roger Antony stepped down, having served as Group
Finance Director for the last four years. I would like to record
the Board's thanks to Roger for the many years of service he gave
the company and his professionalism throughout.
Mike Johns joined the Board as CFO in June and brings
significant experience to the Board having worked in tech and data
led businesses for more than 20 years. At board level Mike has led
organisations through change and development and has considerable
corporate finance experience having led successful fundraising,
acquisition and sales processes.
We continue to strengthen the board and in May 2020 welcomed
Gerry Brandon. Gerry is an active board member on multiple
AIM-listed companies and is CEO of AIM-listed DeepVerge plc.
The Board would like to record its thanks to all of the
employees who have risen to the considerable challenges of working
through the pandemic. We took a decision not to furlough employees
so that we could remain close to our customers and support them
through difficult times. I believe this was the right decision both
for the welfare of our people and in the longer term for the
business. We have been very encouraged by the loyalty of our
customers and the level of repeat business that we enjoy is
testament to the excellent service our people provide.
Financing and dividend
On 20 April 2021 the Group signed an agreement with Leumi ABL
for a new 3-year GBP9m asset-based lending facility replacing the
previous facility from PNC. The new facility increases the amount
that can be borrowed against billed and unbilled receivables giving
the Group greater flexibility and it is expected that the new terms
will reduce annual borrowing costs.
The Board is not proposing a dividend at this time but will keep
this policy under review.
Current trading and outlook
So far in 2021 we have been successful with opportunities in the
public and private sectors. We started 2021 with both new contracts
and non-competitive renewals that range from supporting the NHS at
a critical time, and supporting national technology infrastructure,
to enabling retailers to maximise the online opportunity.
If the pandemic eases as expected, we would anticipate more
growth in H2 2021 as business confidence returns. AI & Machine
Learning continue to create more unstructured data challenges
requiring digital and data specialists. As a consequence, we have
an encouraging pipeline of both public and private sector
opportunities to convert as we continue to leverage our investments
in people, marketing and technology.
Finally, this is my last statement as Non-Executive Chairman of
Parity Group plc and I leave Parity in a strong position. The
company has made great progress over the past few years. Having
completed its transformation into a data and technology focused
business, it is for the first time free from past legacy issues and
in 2020 has delivered an impressive performance despite the
challenges of the pandemic. Now is the right time for me to hand
over the reins as Chairman and I wish my successor every success in
his new position.
Chief Executive's statement
Progress in an exceptional year
2020 was a watershed year in so many ways for so many people and
businesses. It would be wrong not to start a review of the year
without acknowledging the sacrifices and suffering endured by so
many people, and to thank everyone for their support during what
has been a very difficult time for everybody. I would obviously
like to single out the people who work for Parity who, despite the
obvious challenges, worked as hard as ever. They have enabled us to
make real progress in the most exceptional circumstances.
Whilst the Covid-19 pandemic has made this a very difficult year
for many businesses, it has also underlined the need for strong
data management and data analytics in businesses and government
bodies. This is exactly where Parity sits and where we see
opportunity for growth - we exist to be a trusted partner of data
driven transformation, through providing people, skills and
consulting. Whether it be the critical nature of cyber security
with large numbers of people working remotely, or the growth in
online shopping that has increased demand for better data analysis
of consumer trends, the need for strong data skills has never been
clearer. We are now operating in a truly digital economy sooner
than we expected and Parity is extremely well placed to benefit
from this, having spent the last two years successfully positioning
the business as a specialist in the fast-growing data skills market
with the experience and credentials to back that up.
Continuing investment in technology
Investing in technology has played an important role in our
transformation, enabling us to create greater efficiency, stronger
margins and the ability to scale our business as we pursue our
growth agenda. In the year we made progress creating and
implementing new technology systems and platforms, with more
exciting developments planned in due course. Specifically, during
2020 we put in place a whole new management information system
covering CRM, marketing, HR and finance. Furthermore, we now have a
technology platform onto which we can build additional
customer-focussed technology solutions.
Transformation complete
Despite the Covid-19 pandemic we have been able to deliver an
operating profit in 2020 and report a profit before tax in the
second half of 2020, our first unadjusted profitable half year for
two years. This change has been driven by the transformation
programme we begun in 2019 to develop Parity into a data focussed
business, positioned to meet the growing demand for data skills
from both the public and private sector. I am pleased to report
that the transformation delivered everything and more than we set
out to achieve. We now have a radically different business:
-- We have a leadership team with strong data and technology
experience, who all share the vision for the new Parity
-- We have invested in technology that will support our growth
strategy and have more plans in this area
-- We have significantly improved operational gearing with our new operating model
-- We reassessed costs and removed GBP4.2m of annual operating
costs, enabling us to reinvest GBP1.6m back into the business
-- By reducing staff numbers and therefore headcount costs, we
have been able to invest in new people who have brought new skills
and dynamism to the business
-- Our marketing and new business efforts have been completely
overhauled and are now bearing fruit
-- We have completely changed our focus, and our team's
incentives, towards profitable growth; managing down our reliance
on revenues that delivered little or no margin and changing our
focus to higher margin work
Whilst there has been significant change, we have also
successfully preserved the core strengths of Parity that underpin
our brand and market position:
-- We continue to help our clients release the value of their
data by focusing on the market for data skills, a fast growing and
exciting market segment
-- We have maintained our excellent reputation in the public
sector as evidenced by recent new business wins
-- We have grown our community of data specialists; at a time
when there has been considerable flux in the market for people with
data skills we remain the specialist provider
New business wins
The start to 2021 has been encouraging. In January we won a new
three-year contract from the Scottish government as its Digital
Technology Resources partner to support the delivery of the
Reaching 100% (R100) superfast broadband infrastructure programme.
The award represents a total opportunity of up to GBP5.0m over the
next three to six years for Parity. We also renewed a contract
without competitive tender with one of our larger clients in the
retail sector and we won new consultancy work form a very large
multinational business.
Since then, we have also been appointed as a partner to help
connect a prominent retailer with the skilled data and digital
resources it requires to support its various brands' ambitious
transformation and growth plans across UK and Europe. We also have
partnerships with IFS (a global leader in Cloud ERP solutions) and
Cedar Bay (a partner in the IFS ecosystem) to supply skilled data
and digital resources, as well as the extension of engagement with
human resources platform specialist, Resilience Engine. In
addition, we have secured a contract within the public sector to
supply data talent for NHS Digital projects (the national provider
for the NHS in England of information, data and IT systems).
We continue to attract excellent talented people into the
business. At the beginning of the year, we recruited Kevin Gould, a
f ormer Commercial Lead for Accenture in UK and Ireland, who joins
the management team as Commercial Director. Kevin has already
helped us access new opportunities and convert tenders into new
business.
Conclusion
It is a little over two years since I became Chief Executive of
Parity and both the business and the environment in which it
operates have changed considerably. As a result, we are now in a
strong position for future growth. I have ambitious plans for this
business, there is a significant opportunity for us in the data
market and we want to grasp it quickly. We are more confident than
ever in our ability to deliver above average total shareholder
returns in the coming years, despite the lasting impacts of the
pandemic.
Parity is now more efficient, more focussed and clearer about
its objectives and purpose, as well as growing its margins and
profitability again. The market for data services is strong and our
reputation in that market as an excellent provider of experienced
people with much sought after data skills is very good, and
constantly improving. The people we employ at Parity continue to be
a major differentiator. I will end, as I started, by thanking them
for their hard work and our shareholders for their continued
support.
Operational and Financial Review
-- The Group's restructuring and cost reduction over the past
two years have enabled it to remain financially robust in a year
heavily impacted by the pandemic.
-- The Group returned to an operating profit despite the pandemic.
-- Having significantly improved its working capital management
over the past two years the Group has secured a new debt facility
from Leumi ABL that will support its future growth ambitions.
-- Investment in new technology during the year has included the
successful implementation of a new integrated financial system from
Access Group.
-- Net cash[ ] of GBP0.2m as at 31 December 2020 (2019: GBP1.4m).
Performance highlights for 2020 2019 Variance(2)
2020
Adjusted(1) Reported Adjusted(1) Reported
------------ --------- ------------ --------- ------------
Revenue (GBP million) 57.8 57.8 80.4 80.4 -28%
------------ --------- ------------ --------- ------------
External contribution (GBP
million) 5.6 5.6 8.1 8.1 -31%
------------ --------- ------------ --------- ------------
Operating profit (GBP million) 0.5 0.0 0.4 (0.7) 5%
------------ --------- ------------ --------- ------------
Operating profit %(3) 8.4% 0.4% 5.5% -8.9% 53%
------------ --------- ------------ --------- ------------
Finance costs (GBP million) (0.3) (0.3) (0.3) (0.3) 5%
------------ --------- ------------ --------- ------------
Profit/(loss) before Tax (GBP
million) 0.1 (0.3) 0.1 (1.1) 6%
------------ --------- ------------ --------- ------------
Basic earnings per share (pence) (0.02) (0.46) 0.09 (1.05) -126%
------------ --------- ------------ --------- ------------
Net cash (GBP million)(4) 0.2 0.2 1.4 1.4 -83%
------------ --------- ------------ --------- ------------
Notes
1 - Excludes from the Income Statement the impact of
non-underlying items of GBP0.4m in 2020 (2019: GBP1.2m)
2 - Variance compares 2020 adjusted against 2019 adjusted to
provide a consistent view of performance
3 - Operating profit % is calculated as operating profit as a %
of External contribution
4 - Net cash represents cash and cash equivalents less loans and
borrowings and excluding leases
Despite a difficult year in which the majority of businesses and
sectors have been affected by the pandemic, the Group has made
significant progress and ends the year in a strong financial
position. The transformation and restructuring of the business
commenced in 2019 has been successful, resulting in both improved
operational efficiency and reduced costs, and ultimately placing
Parity in a position of strength to be the partner of choice for
companies with complex data needs. This has enabled the Group to
absorb the impact of the pandemic and the known impact of the wind
down of the Scottish Government framework ("SG Framework")
terminated in 2019, without the need to furlough employees or to
make unplanned changes to the business.
As a result, the Group has been able to return to an Operating
Profit in 2020, a significant achievement in such a turbulent year.
Adjusted Profit before tax has been maintained at similar levels to
2019 and the Group delivered an unadjusted Profit before tax in the
second half of 2020, reflecting the progress we have made an
organisation with our transformation programme.
In addition to delivering a profitable operating model, the
Group continues to manage its working capital, efficiently reducing
its utilisation of debt facilities during the year.
Continuing investment in technology during the year, including
the implementation of new integrated financial systems, will enable
the Group to drive further operational efficiencies over coming
years.
Revenue
With the Group's operating structure now more closely aligned to
meeting client needs, the Board has focused reporting by client
type, split between Public and Private Sectors and this shift is
reflected in the segmental reporting of revenue.
The continued wind down in 2020 of the SG framework was
compounded by the impact of the pandemic on new business,
particularly in the private sector. As a result, total revenue for
2020 was lower at GBP57.8m (2019: GBP80.4m).
Segmental performance
Public sector
Despite the turmoil caused by the pandemic, the Group has
demonstrated its strength in the public sector with an increase in
revenue across a number of key clients. The Group has remained
close to its Public Sector clients, assisting several with the
transition to remote working and supporting changes they have made
to projects in light of the shift in priorities forced upon them by
Covid.
With many key digital transformation projects largely unaffected
by Covid during 2020 and some clients, including ONS, creating new
projects in response to the pandemic, non-SG framework revenues for
the year increased by GBP7m, partially offsetting the impact of the
wind down of the SG framework.
Overall public sector revenue for the year was GBP43.3m (2019:
GBP58.1m). External contribution as a % of revenue was 9.0% (2019:
9.8%), the slight decline by 0.8% principally a consequence of the
conclusion of the UK government FastStream managed service project
that contributed GBP0.5m in 2019.
Private sector
With the private sector impacted most by the pandemic, new
business activity dramatically slowed and projects were delayed as
private sector clients assessed the impact of the pandemic during
the first half of 2020. Overall revenues from the private sector
declined by GBP7.8m to GBP14.5m in 2020 (2019: GBP22.3m) due to a
combination of new business activity dramatically slowing as
clients dealt with the impact of the pandemic and an active move
away from a low margin partnerships arrangement with Avanade. With
the focus on higher margin activities, external contribution as a %
of revenue has increased to 11.7% (2019: 10.8%).
Encouragingly, the Group has seen increased activity from
private sector clients and prospects during the latter months of
2020 and the beginning of 2021 and expect the increase in new
business opportunities will provide a platform for growth in
2021.
Reconciliation of revenue to adjusted operating profit
GBP million 2020 2019
Revenue 57.8 80.4
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Contractor Costs (52.3) (72.3)
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External contribution 5.6 8.1
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Selling & administration expenses(1) (4.4) (6.7)
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Share-based payment charges (0.1) (0.2)
------- -------
Depreciation & amortisation (0.6) (0.8)
------- -------
Operating profit(1) 0.5 0.4
------- -------
1 - Excludes from the Income Statement the impact of
non-underlying items of GBP0.4m in 2020 (2019: GBP1.2m)
Selling & administrative costs
During the year, the Group completed the operational
transformation that it commenced in 2019, meeting its objective of
improving operational efficiency and reducing its cost base (both
fixed and variable costs). As a direct result of the transformation
programme, the Group has removed GBP4.2m of costs from the
business, enabling it to reinvest GBP1.6m in key new client focused
roles and a new integrated IT infrastructure. The net reduction in
costs of GBP2.6m from the transformation programme combined with
earlier committed cost reductions in 2018 and early 2019 bring the
total reduction in selling and administrative costs between 2018
and 2020 to GBP3.7m (a decrease of 46%).
Depreciation and amortisation
In accordance with IFRS 16, the 2020 results are presented with
lease assets and liabilities recognised in the Group's Statement of
Financial Position, where the Group is the lessee.
Non-underlying items
The Board measures the performance of the Group after excluding
costs (and income) that would not be incurred during the normal
operation of the business and classify these exceptional costs
under the category of non-underlying items. With the completion of
the restructuring during 2020 and no significant non-underlying
items being incurred in the second half of 2020 the total for the
year was GBP0.4m (2019: GBP1.2m) a significant reduction on the
prior year. A detailed analysis of the non-underlying items is
provided in note 5.
Taxation
The tax charge on the loss before tax was GBP0.15m (2019:
GBP0.03m), mainly representing a deferred tax adjustment in respect
of prior periods to claim capital allowances offset by a change in
the rate of corporation tax. The Group did not provide for
corporation tax payable in 2020 due to the utilisation of Group
relief and the availability of carried forward deductible timing
differences and tax losses.
Earnings per share and dividend
The basic loss per share from continuing operations was 0.46
pence (2019: loss of 1.05 pence per share). The Group's results for
both 2020 and 2019 were impacted by significant restructuring
costs.
The Board does not propose a dividend for 2020 (2019: nil) but
will keep the position under review.
Statement of financial position
Trade and other receivables
Despite the disruption caused by the pandemic and distraction
inevitably caused by the implementation of a new financial system,
the Group has maintained its excellent performance on trade
debtors. Group debtor days (calculated on billings on a countback
basis) at the end of the year were 14 days (2019: 12 days).
Overall Trade and other receivables decreased during the year to
GBP6.1m (2019: GBP6.7m). This was a direct result of the reduction
in contractor numbers during the year (contractors at the end of
December 2020 were 514 compared with 648 at the end of December
2019).
Trade and other payables
Trade and other payables decreased during the year by GBP1.4m to
GBP4.6m (2019: GBP6.0m). GBP0.7m of the decrease is directly
attributable to payments in 2020 for amounts owed to contractors at
the end of 2019 that were delayed due to the timing of public
holidays. A further GBP0.3m of the decrease is the payment in 2020
of non-underlying costs accrued in 2019. The other key movements in
the year were the reduction in contractor numbers accounting for a
decrease of circa GBP0.8m which was partially offset by an increase
in VAT accruals with the deferral under the government scheme of
GBP0.3m of VAT payments until 2021.
At the year end, creditor days were 23 days (2019: 24 days).
Loans and borrowings
Loans and borrowings represent the Group's debt under its
asset-based lending ("ABL") facility. This is a working capital
facility and linked to the same cycle as trade receivables. The
asset-based lending facility has been in place with PNC Business
Credit ("PNC") since 2010 in substantially the same form and was
last renewed in May 2019.
As a result of the significant improvements made in working
capital management over the last two years the Group has reduced
its utilisation of existing debt facilities. In 2020 the average
borrowings were GBP1.6m and the Group only borrowed more than GBP3
million for 29 days during the year.
With the latest two-year extension on the PNC facility due to
end in May 2021 the Board took the decision to explore new
financing options that could provide the Group with a more cost
effective and flexible debt facility that better meets its future
growth ambitions.
On 20 April 2021 the Group signed an agreement with Leumi ABL
for a new 3-year GBP9m ABL facility. The new facility increases the
amount that can be borrowed against billed and unbilled receivables
and crucially the Group will only pay fees on amounts it borrows
(under the expiring PNC facility the Group were charged a 1% fee
for any unutilised facility).
The new facility has a fixed rate for borrowing of 2% above base
for receivables and 2.9% above base for unbilled receivables
(expiring PNC facility has a rate of 2% above base for all
receivables and an additional 1% charge for unutilised funds). It
is expected that the new terms will reduce annual borrowing costs
and the increase in amounts that can be borrowed against billed and
unbilled receivables will give the group greater flexibility when
utilising the facility.
Cash flow and net debt
During the period the Group generated GBP0.4m of cash from
operating activities (excluding non-underlying items) and also
benefited from a deferral of GBP0.3m of VAT payments until 2021
under a government scheme. These cash inflows were offset by
GBP0.4m of cash outflows for finance costs for the Group and
GBP0.4m of payments for 2020 non-underlying items. In addition to
the normal course cash movements in 2020 the Group also made
payments totalling GBP1m that related to one-off events in 2019,
GBP0.7m being the payment to contractors of 2019 fees delayed due
to public holidays (as previously noted) and GBP0.3m of
non-underlying items accrued in 2019.
Defined benefit pension surplus
As a result of a strong investment performance during the year
increasing scheme assets, the Defined Benefit Pension has moved
from a net deficit of GBP0.9m at the beginning of the year to a net
surplus of GBP0.2m at the end of the year. The Group will commence
a triennial actuarial review of the pension in April 2021 and the
outcome of this review (expected in 2022) will guide any future
contributions the Group agrees to pay. During 2020 the Group paid
GBP0.3m contributions to the scheme.
Consolidated Income Statement for the year ended 31 December
2020
2019
(Restated(2)
2020 )
Notes GBP'000 GBP'000
------------------------------------------ ------- ---------- --------------
Revenue 3 57,827 80,409
Contractor costs 4 (52,266) (72,302)
------------------------------------------ ------- ---------- --------------
External contribution 5,561 8,107
------------------------------------------ ------- ---------- --------------
Operating costs before non-underlying
items 4 (5,091) (7,660)
------------------------------------------ ------- ---------- --------------
Operating profit before non-underlying
items 470 447
------------------------------------------ ------- ---------- --------------
Non-underlying items 5 (447) (1,172)
------------------------------------------ ------- ---------- --------------
Operating profit/(loss) 23 (725)
------------------------------------------ ------- ---------- --------------
Finance costs 7 (348) (332)
------------------------------------------ ------- ---------- --------------
Loss before tax (325) (1,057)
------------------------------------------ ------- ---------- --------------
Analysed as:
Adjusted profit before tax(1) 122 115
Non-underlying items 5 (447) (1,172)
------------------------------------------ ------- ---------- --------------
Tax charge 8 (145) (25)
------------------------------------------ ------- ---------- --------------
Loss for the year attributable to owners
of the parent (470) (1,082)
------------------------------------------ ------- ---------- --------------
Loss per share
Basic 9 (0.46p) (1.05p)
Diluted 9 (0.46p) (1.05p)
------------------------------------------ ------- ---------- --------------
(1) Adjusted profit before tax is a non-IFRS alternative
performance measure, defined as profit before tax and
non-underlying items.
(2) The income statement has been presented by function rather
than nature. Refer to Note 1 Accounting Policies under
'Presentation of income statement'
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2020
2020 2019
Notes GBP'000 GBP'000
------------------------------------------------- -------- --------- ---------
Loss for the year (470) (1,082)
Other comprehensive income
Items that will never be reclassified to profit
or loss
Remeasurement of defined benefit pension scheme 1,041 931
Deferred taxation on remeasurement of defined
pension scheme 11 (198) (158)
Other comprehensive income for the year after
tax 843 773
------------------------------------------------- -------- --------- ---------
Total comprehensive income/(expense) for the
year attributable to owners of the parent 373 (309)
------------------------------------------------- -------- --------- ---------
Consolidated Statement of Changes in Equity for the year ended
31 December 2020
Share Capital
Share premium redemption Other Retained
capital reserve reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
At 1 January 2020 2,053 33,244 14,319 34,560 (77,753) 6,423
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
Share options - value
of employee services - - - - 90 90
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
Transactions with owners - - - - 90 90
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
Loss for the year - - - - (470) (470)
Remeasurement of defined
benefit pension scheme - - - - 1,041 1,041
Deferred taxation on
remeasurement of defined
pension scheme taken
directly to equity - - - - (198) (198)
At 31 December 2020 2,053 33,244 14,319 34,560 (77,290) 6,886
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
Share Capital
Share premium redemption Other Retained
capital reserve reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
At 31 December 2018 2,053 33,244 14,319 34,560 (77,612) 6,564
Adoption of IFRS 16 - - - - 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 - - - - 162 162
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
Transactions with owners - - - - 162 162
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
Loss for the year - - - - (1,082) (1,082)
Remeasurement of defined
benefit pension scheme - - - - 931 931
Deferred taxation on
remeasurement of defined
pension scheme taken
directly to equity - - - - (158) (158)
--------------------------- --------- ---------- ------------ ---------- ---------- ---------
At 31 December 2019 2,053 33,244 14,319 34,560 (77,753) 6,423
Consolidated Statement of Financial Position as at 31 December
2020
2020 2019
Notes GBP'000 GBP'000
------------------------------- -------- --------- ---------
Assets
Non-current assets
Goodwill 10 4,594 4,594
Other intangible assets 6 32
Property, plant and equipment 23 43
Right-of-use assets 247 395
Trade and other receivables 87 -
Investments in subsidiaries - -
Deferred tax assets 11 627 970
Retirement benefit asset 208 -
Total non-current assets 5,792 6,034
------------------------------- -------- --------- ---------
Current assets
Trade and other receivables 6,062 6,739
Cash and cash equivalents 3,172 4,116
Total current assets 9,234 10,855
------------------------------- -------- --------- ---------
Total assets 15,026 16,889
------------------------------- -------- --------- ---------
Liabilities
Current liabilities
Loans and borrowings (2,941) (2,719)
Lease liabilities (321) (325)
Trade and other payables (4,610) (6,012)
Provisions (139) (324)
Total current liabilities (8,011) (9,380)
------------------------------- -------- --------- ---------
Non-current liabilities
Lease liabilities (87) (173)
Trade and other payables - -
Provisions (42) (21)
Retirement benefit liability - (892)
Total non-current liabilities (129) (1,086)
------------------------------- -------- ---------
Total liabilities (8,140) (10,466)
------------------------------- -------- --------- ---------
Net assets 6,886 6,423
------------------------------- -------- --------- ---------
Shareholders' equity
Called up share capital 2,053 2,053
Share premium reserve 33,244 33,244
Capital redemption reserve 14,319 14,319
Other reserves 34,560 34,560
Retained earnings (77,290) (77,753)
------------------------------- -------- ---------
Total shareholders' equity 6,886 6,423
------------------------------- -------- --------- ---------
Consolidated Statement of Cash Flows for the year ended 31
December 2020
2020 2019
Notes GBP'000 GBP'000
------------------------------------------------------ ------ --------- ----------
Operating activities
(Loss)/profit for the year (470) (1,082)
Adjustments for:
Net finance expense 7 348 332
Share-based payment expense 90 162
Income tax charge/(credit) 8 145 25
Amortisation of intangible assets 26 52
Depreciation of property, plant and equipment 20 56
Depreciation and impairment of right-of-use
assets 540 840
Loss on write down of assets - 16
Lease liability credit (21) -
678 401
Working capital movements
Decrease in trade and other receivables 764 5,233
(Decrease)/increase in trade and other payables (1,402) (2,249)
(Decrease)/increase in provisions (165) 282
Payments to retirement benefit plan (325) (249)
------------------------------------------------------ ------ --------- ----------
Net cash flows (used in)/from operating activities (450) 3,418
------------------------------------------------------ ------ --------- ----------
Investing activities
Purchase of property, plant and equipment - (44)
Net cash flows used in investing activities - (44)
------------------------------------------------------ ------ --------- ----------
Financing activities
Drawdown/(repayment) of finance facility 222 (4,192)
Principal repayment of lease liabilities (649) (764)
Net movements on intercompany funding - -
Interest paid 7 (67) (131)
------------------------------------------------------ ------ --------- ----------
Net cash flows (used in)/from financing activities (494) (5,087)
------------------------------------------------------ ------ --------- ----------
Net (decrease)/increase in cash and cash equivalents (944) (1,713)
------------------------------------------------------ ------ --------- ----------
Cash and cash equivalents at the beginning of
the year 4,116 5,829
------------------------------------------------------ ------ --------- ----------
Cash and cash equivalents at the end of the
year 3,172 4,116
------------------------------------------------------ ------ --------- ----------
Notes to the Audited Preliminary Results
1 Accounting policies
Basis of preparation
Parity Group plc (the "Company") is a company incorporated and
domiciled in the UK.
The financial information set out in this document does not
constitute the Group's statutory accounts for the year ended 31
December 2020 or 2019 but is derived from those accounts. Statutory
accounts for 2019 have been delivered to the registrar of
companies. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) contained an Emphasis of Matter
highlighting a material uncertainty related on going concern (iii)
did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006. Statutory accounts for 2020 will be delivered
to the registrar of companies in due course. The auditors have
reported on those accounts; their reports were (i) unqualified,
(ii) did not contain an Emphasis of Matter highlighting a
materiality uncertainly related to going concern and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The financial statements for the year ended 31 December 2020
(including the comparatives for the year ended 31 December 2019)
were approved and authorised for issue by the Board of Directors on
20 April 2021. This results announcement for the year ended 31
December 2020 was also approved by the Board on 20 April 2021.
The financial information set out in these audited preliminary
results has been prepared and approved by the Directors in
accordance with International Financial Reporting Standards (IFRS)
in conformity with the requirements of the Companies Act 2006. The
policies have been consistently applied to all the years presented
unless otherwise stated.
The Group meets its day to day working capital requirements
through an asset-based finance facility. The facility contains
certain financial covenants which have been met throughout the
period. On 20 April 2021, the Group signed an agreement with Leumi
ABL for a new 3-year GBP9m asset-based lending facility. The new
facility increases the amount that can be borrowed against billed
and unbilled receivables and it is expected that the new terms will
reduce annual borrowing costs. The increase in amounts that can be
borrowed will give the Group greater flexibility.
The financial statements have been prepared on a going concern
basis. The Directors have reviewed the Group's cash flow forecasts
for the period to 31 December 2022, taking account of reasonably
possible changes in trading performance, including potential
downsides from the ongoing impact of Covid-19. Downside
sensitivities have included reduced levels of new business and in
these scenarios, the Directors do not anticipate issues with the
Group's financing requirements. The Group also modelled available
headroom under the new facility and consider that the new facility
comfortably meets the Group's financing requirements.
Presentation of income statement
During the period, the Directors undertook a review of the financial statements
of the Group and this resulted in a change to the presentation of the income
statement. The revised presentation, which involves moving from a classification
of expenses by nature to a classification of expenses by function, was deemed
to be more appropriate and provides information that is more reliable and
relevant to users of the financial statements. In particular, presenting
external contribution gives a better understanding of the income generated
by services provided by the Group. External contribution is defined as revenue
less all external contractor and sub-contracted costs. In accordance with
IAS 1 'Presentation of Financial Statements', the Group has re-presented
the income statements for comparative periods. Other than re-presentation
of the income statement, no changes have been made to the comparative financial
statements.
Alternative performance measures
The Group uses certain alternative performance measures to report its results
as stated before non-underlying items. These are non-IFRS alternative performance
measures which the Directors consider can assist with an understanding of
the underlying performance of the Group and comparison of performance across
periods. They are not a substitute for and are not superior to any IFRS
measure.
Non-underlying items
The presentation of the alternative performance measure of adjusted profit
before tax and adjusted operating profit excludes non-underlying items.
The Directors consider that an underlying profit measure can assist with
an understanding of the underlying performance of the Group and comparison
of performance across periods. Items are classified as non-underlying by
nature of their magnitude, incidence or unpredictable nature and their separate
identification results in a calculation of an underlying profit measure
that is consistent with that reviewed by the Board in their monitoring of
the performance of the Group. Events which may give rise to the classification
of items as non-underlying include gains or losses on the disposal of a
business, restructuring of a business, transaction costs, litigation and
similar settlements, asset impairments and onerous contracts.
Adjusted profit before tax is defined as profit before tax and non-underlying
items.
Adjusted operating profit is defined as operating profit before non-underlying
items.
In previous periods, the Group's results separately presented non-recurring
items as a separate section of the income statement. The directors consider
that all items previously classified as non-recurring are non-underlying
and have reclassified these costs as such for all comparative periods in
accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates
and Errors'.
2 Segmental information
Factors that management used to identify the Group's reporting
segments
In accordance with IFRS 8 'Operating Segments' the Group's
management structure, and the reporting of financial information to
the Chief Operating Decision Maker (the Group Board), have been
used as the basis to define reporting segments.
Description of the types of services from which each reportable
segment derives its revenues
During the period, the Group changed the structure of its
organisation to be based around a combined operating model targeted
on finding the right solution or combination of solutions to each
clients' needs by way of a single account management function. As
such the previous reporting segments based on the service lines of
Recruitment and Consultancy are no longer the basis on which the
Group is managed and resources are allocated. The basis by which
the Group is now organised and its operating model is structured is
by customer sectors, being the public sector and the private
sector. The reporting of financial information presented to the
Chief Operating Decision Maker, being the Group board of directors,
is consistent with these reporting segments. As these reporting
segments are supported by a combined back office, there is no
allocation of overheads.
In accordance with IFRS 8 'Operating Segments', segmental
information from comparative periods has been restated.
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies.
Public sector Private Total
2020 sector 2020
2020
GBP'000 GBP'000 GBP'000
Revenue 43,283 14,544 57,827
Contractor costs (39,405) (12,861) (52,266)
----------------------- -------------- --------- ---------
External contribution 3,878 1,683 5,561
----------------------- -------------- --------- ---------
Public sector Private Total
sector
2019 2019 2019
(Restated) (Restated) (Restated)
GBP'000 GBP'000 GBP'000
Revenue 58,117 22,292 80,409
Contractor costs (52,426) (19,876) (72,302)
----------------------- -------------- ------------ ------------
External contribution 5,691 2,416 8,107
----------------------- -------------- ------------ ------------
All segment assets and liabilities are based in the UK.
3 Revenue
All of the Group's revenue derives from contracts with
customers. Trade receivables, amounts recoverable on contracts and
accrued income arise from contracts with customers.
The Group's revenue disaggregated by pattern of revenue
recognition is as follows:
2020 2019
GBP'000 GBP'000
------------------------------------------ --------- ---------
Services transferred over time 57,790 80,023
Services transferred at a point in time 37 386
------------------------------------------ --------- ---------
Revenue 57,827 80,409
------------------------------------------ --------- ---------
The Group's revenue disaggregated by primary geographical market
is as follows:
2020 2019
GBP'000 GBP'000
----------------- --------- ---------
United Kingdom 55,235 78,004
European Union 2,577 2,405
Other 15 -
----------------- --------- ---------
Revenue 57,827 80,409
----------------- --------- ---------
The largest single customer in the public sector contributed 25%
or GBP11.0m to public sector revenue (2019: 25% or GBP14.6m). The
largest single customer in the private sector contributed 46% or
GBP6.7m to private sector revenue (2019: 28% or GBP6.3m).
Revenue includes GBP134,000 (2019: GBP30,000) that was included
as a contract liability at the beginning of the period. This
balance was held within payments in advance in trade and other
payables. The Group does not currently have any contract assets as
it does not enter in to contracts where, once performance has
occurred, the Group's right to consideration is dependent upon
anything other than the passage of time.
4 Operating expenses
2020 2019
GBP'000 GBP'000
------------------------------------------- ---- ---- --------- ---------
Contractor costs 52,266 72,302
------------------------------------------------------- --------- ---------
Employee benefit costs
- wages and salaries 2,975 5,008
- social security costs 342 576
- other pension costs 102 159
------------------------------------------------------- --------- ---------
3,419 5,743
----------------------------------------------------- --------- ---------
Depreciation, amortisation and impairment
Amortisation of intangible assets -
software 26 52
Depreciation of leased property, plant
and equipment - 7
Depreciation of owned property, plant
and equipment 20 49
Depreciation of right-of-use assets 540 698
Impairment of right-of-use assets - 142
------------------------------------------------------- --------- ---------
586 948
----------------------------------------------------- --------- ---------
All other operating expenses
Occupancy costs 44 170
IT costs 464 317
Net exchange (gain)/loss (2) 13
Equity settled share-based payment
charge 90 162
Other operating costs 937 1,479
------------------------------------------------------- --------- ---------
1,533 2,141
----------------------------------------------------- --------- ---------
Total operating expenses 57,804 81,134
------------------------------------------------------- --------- ---------
During the year the Group obtained the following services from
the Group's auditors:
Grant Thornton
UK LLP
2020 2019
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Audit of the Group, Company and subsidiary financial
statements 73 65
Tax compliance 16 16
Total other services 16 16
------------------------------------------------------ --------- ---------
Total fees 89 81
------------------------------------------------------ --------- ---------
All other services have been performed in the UK.
5 Non-underlying items
2019 2019
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Restructuring
* Costs related to employees 370 940
* Costs related to premises (11) 230
* Other costs 88 68
Receipt from previously impaired receivable - (66)
447 1,172
--------------------------------------------- --------- ---------
Items are classified as non-underlying by nature of their
magnitude, incidence or unpredictable nature and their separate
identification results in a calculation of an underlying profit
measure that is consistent with that reviewed by the Board in their
monitoring of the performance of the Group. In previous periods,
the Group's results separately presented non-recurring items as a
separate section of the income statement. The directors consider
that all items classified as non-recurring in previous periods are
non-underlying and have reclassified these costs as such.
Non-underlying items during 2020 include costs related to the
ongoing restructuring of the Group, including employee termination
payments and fees for professional services.
6 Average staff numbers
The average number of staff employed by the Group during the
year was as follows:
2020 2019
Number Number
------- -------- --------
Group 44 76
-------- -------- --------
At 31 December 2020, the Group had 41 employees (2019: 57).
7 Finance costs
2020 2019
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Interest expense on financial liabilities 67 131
Interest expense on lease liabilities 19 24
Interest income on lease assets (4) -
Net finance costs in respect of post-retirement
benefits 266 177
--------------------------------------------------- --------- ---------
348 332
------------------------------------------------- --------- ---------
The interest expense on financial liabilities represents
interest paid on the Group's asset-based financing facilities. A 1%
increase in the base rate would have increased annual borrowing
costs by approximately GBP17,000 (2019: GBP26,000).
8 Taxation
2020 2019
GBP'000 GBP'000
--------------------------------------------- ---- ---- --------- ---------
Current tax
Current tax on profit for the year - -
Total current tax expense - -
--------------------------------------------- ---- ---- --------- ---------
Deferred tax
Accelerated capital allowances (4) (12)
Origination and reversal of other temporary
differences 2 (20)
Adjustments in respect of prior periods 230 57
Change in corporation tax rate (83) -
--------------------------------------------------------- --------- ---------
Total deferred tax charge 145 25
--------------------------------------------------------- --------- ---------
Tax charge 145 25
--------------------------------------------------------- --------- ---------
The adjustment in respect of prior periods of GBP230,000 (2019:
GBP57,000) largely relates to decisions to claim or disclaim
capital allowances.
There is no current tax payable by the Group for 2020 (2019:
GBPnil).
The Group's profits for this accounting period are subject to
tax at a rate of 19% (2019: 19%). The decision to reduce the rate
to 17% due to be effective 1 April 2020 that was substantively
enacted on 15 September 2016 was reversed during the year. The
decision to keep the rate at 19% was substantively enacted on 17
March 2020. As such the tax rate of 19% (2019: 17%) has been
applied in calculating the UK deferred tax position of the
Group.
The reasons for the difference between the actual tax credit for
the year and the standard rate of corporation tax in the UK applied
to profit for the year are as follows:
2020 2019
GBP'000 GBP'000
Loss before tax (325) (1,057)
------------------------------------------------------------ ------ --------
Expected tax credit based on the standard rate
of UK
corporation tax of 19% (2019: 19%) (62) (201)
Expenses not allowable for tax purposes (2) 69
Adjustments in respect of prior periods 230 57
Tax losses not recognised 85 91
Change in corporation tax rate (83) -
Other (23) 9
------------------------------------------------------------ ------ --------
Tax charge 145 25
------------------------------------------------------------ ------ --------
Tax on each component of other comprehensive income is as
follows:
2020 2019
Before After Before After
tax Tax tax tax Tax tax
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- ---------- --------- --------- ---------- ---------
Remeasurement of defined benefit
pension scheme 1,041 (198) 843 931 (158) 773
---------------------------------- --------- ---------- --------- --------- ---------- ---------
9 Earnings per ordinary share
Basic earnings per share is calculated by dividing the basic
earnings for the year by the weighted average number of fully paid
ordinary shares in issue during the year.
Diluted earnings per share is calculated on the same basis as
the basic earnings per share with a further adjustment to the
weighted average number of fully paid ordinary shares to reflect
the effect of all dilutive potential ordinary shares.
Weighted Weighted
average average
number number
of Loss of Loss
Loss shares per share Loss shares per share
2020 2020 2020 2019 2019 2019
GBP'000 '000 Pence GBP'000 '000 Pence
---------------------------- ---------- --------- ------------ ---------- --------- ------------
Basic (470) 102,624 (0.46) (1,082) 102,624 (1.05)
Effect of dilutive options - - - - - -
Diluted (470) 102,624 (0.46) (1,082) 102,624 (1.05)
As at 31 December 2020 the number of ordinary shares in issue
was 102,624,020 (2019: 102,624,020).
10 Goodwill
The carrying amount of goodwill is allocated to the Group's two
separate continuing cash generating units (CGUs), being Parity
Professionals Limited and Parity Consultancy Services Limited.
Carrying amounts are as follows:
Parity Consultancy
Parity Professionals Services
Limited Limited Total
GBP'000 GBP'000 GBP'000
------------------------------- ----------------------- ------------------- ----------
Carrying value
Balance at 1 January 2019 and
31 December 2019 2,642 1,952 4,594
------------------------------- ----------------------- ------------------- ----------
Balance at 1 January 2020 and
31 December 2020 2,642 1,952 4,594
------------------------------- ----------------------- ------------------- ----------
Goodwill was tested for impairment in accordance with IAS 36 at
the year end and no impairment charge was recognised. Impairment
calculations include the effect of changes following the
application of IFRS 16.
The recoverable amounts of the CGUs are based on value in use
calculations using the pre-tax cash flows based on budgets approved
by management for 2021. Years from 2022 to 2026 are based on the
budget for 2020 projected forward at expected growth rates, with no
growth assumed beyond these years. This approach is considered
prudent based on current expectations of the 2021 long-term growth
rate.
Major assumptions are as follows:
Parity Professionals Parity Consultancy
Limited Services Limited
% %
2020
Discount rate 11.3 11.3
Forecast revenue growth 12.2-13.3 10.0-15.9
Operating margin 2021 3.0 4.0
Operating margin 2022 onward 3.7-3.8 4.1-12.1
2019
Discount rate 13.0 12.5
Forecast revenue growth 2.0 10.0
Operating margin 2020 2.4 8.5
Operating margin 2021 onward 2.5-2.8 8.9-9.9
Discount rates are based on the Group's weighted average cost of
capital.
Forecast revenue growth rates are based on past experience and
future expectations of economic conditions. Growth for the CGUs is
assumed to be higher than the long-term growth rate for the UK
economy due to the following factors:
-- There is focused investment in growing new clients and
service lines, including areas that suffered as a result of the
Covid-19 pandemic;
-- The business has recruited new senior hires in sales
functions to focus on new business opportunities;
-- There is the expectation of further investment in and exploitation of technology; and
-- Recent new client wins and contract extensions help to underwrite the growth forecasts.
A 10% change in any of the underlying assumptions used in the
discounted cash flow forecasts would not lead to the carrying value
of goodwill being materially in excess of their recoverable
amounts.
11 Deferred taxation
2020 2019
GBP'000 GBP'000
------------------------------------------------- -------- --------
At 1 January 970 1,153
Recognised in other comprehensive income
Remeasurement of defined benefit pension scheme (198) (158)
Recognised in the income statement
Adjustments in relation to prior periods (230) (57)
Change in corporation tax rate 83 -
Capital allowances in excess of depreciation 4 12
Other short-term timing differences (2) 20
At 31 December 627 970
------------------------------------------------- -------- --------
The deferred tax asset of GBP627,000 (2019: GBP970,000)
comprises:
2019 2019
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Depreciation in excess of capital allowances 632 775
Other short-term timing differences 34 43
Retirement benefit (asset)/liability (39) 152
---------------------------------------------- --------- ---------
627 970
---------------------------------------------- --------- ---------
A deferred tax asset for deductible temporary differences is not
recognised unless it is more likely than not that there will be
taxable profits in the foreseeable future against which the
deferred tax asset can be utilised. At the balance sheet date, the
Directors assessed the probability of future taxable profits being
available against which Parity Consultancy Services Limited could
recognise a deferred tax asset for previously unrecognised
deductible temporary differences. The review concluded that it is
probable that future taxable profits will be available. As such,
the Directors have recognised a deferred tax asset for all
deductible temporary differences available to Parity Consultancy
Services Limited.
A deferred tax asset for unused tax losses carried forward is
normally recognised on the same basis as for deductible temporary
differences. However, the existence of the unused tax losses is
itself strong evidence that future taxable profit may not be
available. Therefore, when an entity has a history of recent
losses, the entity recognises a deferred tax asset arising from
unused tax losses only to the extent that there is convincing
evidence that sufficient taxable profit will be available against
which the unused tax losses can be utilised. At the balance sheet
date, the Directors considered recognising a deferred tax asset for
previously unrecognised unused tax losses carried forward by Parity
Consultancy Services Limited. The review concluded that given the
company's history of relatively recent tax losses and the
additional requirement of providing convincing evidence that
sufficient taxable profit will be available, a prudent approach
would be taken and deferred tax would remain unrecognised for tax
losses carried forward by the company.
The Directors believe that the deferred tax asset recognised is
recoverable based on the future earning potential of the Group and
the individual subsidiaries. The forecasts for Parity Professionals
Limited comfortably support the unwinding of the deferred tax asset
held by this company of GBP335,000 (2019: GBP378,000) and the
forecasts for Parity Consultancy Services Limited comfortably
support the unwinding of the deferred tax asset held by this
company of GBP292,000 (2019: GBP592,000).
The deferred tax asset at 31 December 2020 has been calculated
on the rate of 19% substantively enacted at the balance sheet date
(2019: 17%).
The movements in deferred tax assets during the period are shown
below:
(Charge)/credit Charge to
to other comprehensive
Asset income income
2020 statement 2020
GBP'000 2020 GBP'000
GBP'000
-------------------------------------- ---------- ------------------ ----------------------
Depreciation in excess of capital
allowances 632 (143) -
Other short-term timing differences 34 (9) -
Retirement benefit (asset)/liability (39) 7 (198)
-------------------------------------- ---------- ------------------ ----------------------
At 31 December 2020 627 (145) (198)
-------------------------------------- ---------- ------------------ ----------------------
Charge to
(Charge)/credit other comprehensive
Asset to income income
2019 statement 2019
GBP'000 2019 GBP'000
GBP'000
-------------------------------------- ---------- ------------------ ----------------------
Depreciation in excess of capital
allowances 775 (45) -
Other short-term timing differences 43 40 -
Retirement benefit liability 152 (20) (158)
At 31 December 2019 970 (25) (158)
-------------------------------------- ---------- ------------------ ----------------------
The Group has unrecognised carried forward tax losses of
GBP29,392,000 (2019: GBP30,599,000). The Group has unrecognised
capital losses carried forward of GBP282,441,000 (2019:
GBP282,441,000). These losses may be carried forward
indefinitely.
[ ] Net cash represents cash and cash equivalents less loans and
borrowings and excluding leases
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