NORMAN BROADBENT PLC
DISSEMINATION OF A REGULATORY ANNOUNCEMENT THAT CONTAINS INSIDE INFORMATION
ACCORDING TO REGULATION (EU) NO 596/2014 (MAR).
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT CONSTITUTE AN
OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR
OTHERWISE ACQUIRE ANY NEW ORDINARY SHARES OF NORMAN BROADBENT PLC IN ANY
JURISIDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. PLEASE
SEE THE IMPORTANT NOTICE LATER IN THIS ANNOUNCEMENT.
31 August 2016
Norman Broadbent plc
("Norman Broadbent" or the "Company")
Proposed subscription to raise approximately £2.3m
Norman Broadbent (AIM: NBB), a leading provider of senior and board executive
search, senior interim, mezzanine level recruitment solutions and leadership
consultancy & assessment services, announces its intention to conduct a
conditional subscription (the "Subscription") of new ordinary shares (the "
Subscription Shares") to raise a total of approximately £2.3 million (before
expenses). It is intended that the price at which the Subscription Shares are
to be subscribed for (the "Subscription Price") will be 9.5 pence per
Subscription Share.
It is intended that the Subscription will be conditional, inter alia, on the
approval of shareholders at a forthcoming general meeting of the Company ("
General Meeting") which will be convened to seek authority for the Directors to
issue and allot further new ordinary shares otherwise than on a non-pre-emptive
basis.
Certain of the Directors of the Company have indicated an intention to
participate in the Subscription. Certain of the Company's current significant
shareholders have also indicated their intention to participate in the
Subscription. Members of the public will not be entitled to participate in the
Subscription.
Further details regarding the Subscription and the background to and reasons
for the Subscription, proposed Board changes and other matters can be found
below. The above summary must be read in conjunction with the full text of
this announcement.
Market Abuse Regulation
The Market Abuse Regulation ("MAR") became effective from 3 July 2016. Market
soundings, as defined in MAR, were taken in respect of the Subscription with
the result that certain persons became aware of inside information, as
permitted by MAR. That inside information is set out in this announcement and
has been disclosed as soon as possible in accordance with paragraph 7 of
article 17 of MAR. Therefore, those persons that received inside information in
a market sounding are no longer in possession of inside information relating to
the Company and its securities.
For further information, please contact:
Norman Broadbent plc
Scanes Bentley/Mike Brennan/James Webber
020 7484 0000
Allenby Capital
Nick Naylor/Alex Brearley/Liz
Kirchner 020 3328 5656
For further information visit www.normanbroadbent.com
Proposed subscription to raise approximately £2.3m
Introduction
The Company intends to raise approximately £2.3 million (before expenses)
through the Subscription. It is intended that the Subscription Price will be
9.5 pence per Subscription Share.
Background to and reasons for the Subscription
Norman Broadbent is a provider of senior and board executive search, senior
interim, mezzanine level recruitment solutions and leadership consultancy &
assessment services. In recent years, the Company and its subsidiaries
(collectively the "Group") has undergone a period of strategic refocusing and
restructuring.
To date progress has included:
* the disposal of its interests in its European subsidiary and associates and
the termination of all other licences and agreements in Europe and North
Africa;
* the cessation of operations in Singapore and the USA;
* restructuring the UK-focused Norman Broadbent Leadership Consulting
business and further integrating it with the Group's executive search
division;
* a number of Board and senior management changes; and
* investment in new business lines within the Group, such as its AGP division
(Executive level recruitment solutions which is currently being rebranded
NB Solutions), Interim Management and Social Media Search.
During 2015 all of the businesses within the Group were reviewed and
restructured to varying degrees, in order to deliver what the Directors view to
be a more streamlined and focused Group, with predominantly domestic
operations.
This was reflected in the reduced Group losses for the year ended 31 December
2015, as compared to the previous year. The Board has continued the Group's
restructuring and turnaround strategy through 2016 and the appointment of Mike
Brennan as Group Chief Executive Officer has been a major milestone for the
business and particular catalyst for a more recent review and programme of
change.
This review has focused on defining the Group's core brands on a
sector-by-sector and function-by-function basis and has examined how the
Group's brands can develop complementary business practices, synergies and
cross selling opportunities.
Group headcount was reduced over the second quarter of 2016, with a focus on
retaining higher performing staff members and the Board continues to examine
other initiatives to help manage costs and improve efficiencies.
Opportunities for the Group
The Board believes there is currently an attractive opportunity for the Group
to invest in future growth and build shareholder value via:
* promoting innovation and broadening the Group's overall client offering,
including investing in the growth of the Group's Interim management
business and NB:Solutions;
* further scaling and strengthening the core Norman Broadbent Board and
Executive Search business;
* encouraging cross selling of services and introducing better account
management systems;
* the provision of research/market intelligence services
* improving margins; and
* building long-term contracted recurring revenue streams via Norman
Broadbent Interim.
The Group's client base currently includes many well-known 'blue chip' clients.
The Board believes that the Norman Broadbent Executive Search business, as well
as being the current primary profit generating component of the Group's
business, gives the Group strategic access to key recruitment decision makers,
which can be used to pursue cross selling opportunities, and has the potential
to capture a greater proportion of recruitment-related market share within key
clients.
In particular the Board considers that NB:Solutions and Norman Broadbent
Interim have the potential to leverage those key client relationships as part
of its growth strategy.
The Board also believes that, as a permanent recruitment business, the Group is
missing a high value interim executive offering of significant scale. Such an
offering would give clients flexibility during periods of economic uncertainty,
and could also be effectively cross sold by the Group. Accordingly, the Board
sees significant potential in building Norman Broadbent's Interim business,
which provides senior interim managers on daily rates of c.£1,000, typically
over six to seven month contracts (some as long as 18 months). The Directors
believe that this division can provide long term 'annuity'-type income streams,
and also has the potential to be the highest margin segment within the Group.
The Board views the Interim division's operating model as providing a lower
risk revenue stream in the future. Following the restructuring of the existing
interim business the Group has appointed a new Managing Director from a
well-regarded competitor to head up this division. The Board believes that the
Interim division has the potential to make a material contribution to the
Group's growth in the medium-term.
Whilst the Group has traditionally operated through independently managed and
separately branded businesses, the Board is of the view that the Group has not
to date effectively operated as a cohesive whole, and has therefore not
fulfilled its potential to leverage client relationships and its quality
brand. The Board is therefore seeking to enhance synergies within the Group's
businesses and to introduce and a more aggressive approach to cross-selling.
Growth strategy and growth assumptions
Since Mike Brennan joined as Group Chief Executive Officer, the Group has been
pursuing a near-term strategy of defensive consolidation, involving the
following:
* detailed review of each of the operating businesses as referred to above;
* conserving working capital;
* commencing the build-out of the Norman Broadbent Interim offering;
* introducing account management and referral bonus schemes to increase cross
selling;
* the issue of options to senior management across the divisions under the
Company's Enterprise Management Incentive Share Option Scheme with the aim
of enabling staff retention and attraction and to better align staff and
management with Shareholders;
* introduction of a performance management programme with the aim of
promoting a high performance culture;
* identifying areas of potential growth- particularly within the Executive
Search division - to help smooth out revenue peaks and troughs and scale
key sectors and areas of functional specialisation;
* seeking to grow repeat business and institutionalise client relationships
further; and
* continuing to review the Group's overall cost base and identify further
efficiencies.
The purpose of the Subscription is to provide the resources to enable the Group
to build on this consolidation phase and move on to a medium-term focused
growth strategy.
The Board's intention is that this will predominantly be an organic growth
strategy. Whilst the Board may consider smaller acquisition opportunities, at
this stage, large scale acquisitions are not considered to be a core element of
the Group's strategy.
The Board currently intends for the majority of the net proceeds of the
Subscription to be used for the hiring of additional fee earners across the
Norman Broadbent Executive Search, NB:Solutions and Norman Broadbent Interim
divisions over the next two years, with a view to having a Group headcount of
approximately 50 fee earning consultants by the end of the 2018. The Board
currently envisages that approximately half of the fee earning headcount growth
would be within the NB:Solutions business, with the remainder split equally
between the Norman Broadbent Executive Search and Norman Broadbent Interim
businesses.
In addition, an important element in the growth strategy will be the selective
introduction of The Norman Broadbent Partnership Program (see below). The aim
of this partnership program is to attract business builders and promote talent
acquisition across all of the Group's brands via their participation in
meaningful equity stakes in newly incorporated subsidiaries.
The Board also envisages that the Group will hire an appropriate number of
research and support staff to accompany the proposed increase in fee earning
headcount and also expects for variable costs (such as marketing and IT) to
increase in line with headcount.
The Board has recently reviewed the Group's ongoing property options and does
not expect the existing annual property overhead of approximately £800,000 to
change materially over the coming years, although the Group has a lease break
clause in April 2018. The Group plans to examine options for utilising its
offices in a more efficient manner. The Board also expects its non-exceptional
general public company overhead to remain in line with prior years.
If the strategies as laid out above can be successfully implemented, the Board
believes that the Group has the potential for the well regarded Norman
Broadbent premium brand to be strengthened further as a premium brand with its
business being strengthened via long-term contracted recurring revenue.
Having considered a number of assumptions the Board currently believes that,
through the growth strategy as outlined above, the Group has the potential to
generate gross revenues in excess of £20 million and net fee income of
approximately £13m by 2019, with this being comprised of a mix of 'annuity',
contract and permanent revenue. The Board further believes that there is the
potential to expand the Group's profit margin to industry norms of
approximately 10 to 15 per cent over the same time horizon, with a major
contributor to this profitability expected to be the Norman Broadbent Interim
division.
Given the initiatives that are already underway and those that are proposed
through the deployment of the net Subscription proceeds, the Board expects that
the Group should return to a more stable degree of profitability in the second
half of 2017.
The Norman Broadbent partnership program
The Board wishes to utilise a partnership model to attract and retain senior
consultants who are capable of building and leading sustainable businesses
within the Group, with a view to creating long-term Shareholder value for the
Company in a cash efficient manner. This partnership program would involve a
small number of partners being issued with meaningful minority stakes in newly
incorporated Group subsidiaries focussed on key strategic markets, sectors and
service offerings. It is intended that an appropriate investment in headcount
would follow based on an agreed subsidiary business plan.
Use of Proceeds
The Company intends that the net proceeds of the Subscription will be
predominantly used to:
* progress the hiring of additional staff across the Group (as described in
more detail above);
* repay secured loan notes which bear interest at 12 per cent. per annum; and
* for general working capital purposes.
Current trading and prospects
On 3 June 2016, the Company published its report and accounts for the year
ended 31 December 2015. During this period the Group made an operating loss of
£190,000 (2014: operating loss £823,000) on Group turnover from continued
operations of £8,644,000 (2014: £7,396,000). Operating expenses decreased by 8%
to £7,087,000 (2014: £7,707,000) and gross profit from continued operations
increased marginally to £6,897,000 (2014: £6,884,000).
The Group recorded a small profit in the first quarter of 2016. The Group's
interim results for the half year to 30 June 2016 will be published by the end
of September 2016 and the Board anticipates that due to further restructuring
in 2016 these results will show a loss before tax in line with the prior
period, and of not greater than £150,000.
Proposed Board Changes
The Company also announces the intention for Frank Carter to join its Board as
Non-Executive Chairman post the General Meeting.
Frank has been an adviser to the Company since June 2016. Frank is currently a
Senior Adviser to KPMG, following 18 years as a Senior Partner in the firm's
Corporate Finance business. Frank is a highly experienced corporate adviser
with over 25 years' experience advising at board level on a range of strategic
matters and transactions across a wide variety of sectors. He has worked in the
UK, Europe and the US with major corporates, listed and private companies,
financial sponsors and the public sector.
Further details regarding the Subscription
The Subscription will not be structured as a rights issue or open offer and the
Subscription Shares will not be offered generally to Company's existing
shareholders on a pre-emptive basis. Participation in the Subscription will be
limited to certain qualifying institutional investors who are invited, and who
choose, to participate. Certain of the Company's existing significant
shareholders have indicated their intention to participate in the Subscription.
The Subscription Shares are not being made available to the public and are not
being offered or sold in, into or from the United States of America, Canada,
the Republic of South Africa, Australia, Japan or any other jurisdiction where
it would be unlawful to do so.
The Company currently has limited authority to issue new ordinary shares for
cash on a non-pre-emptive basis.
It is intended that the issue of the Subscription Shares will be conditional
upon, inter alia, the passing of resolutions granting the Directors authority
to issue and allot new ordinary shares otherwise than on a non-pre-emptive
basis, which will be put to shareholders at a forthcoming General Meeting,
whereby such authority will be utilised by the Directors to enable completion
of the Subscription.
It is anticipated that Subscription participations will be secured by way of
Subscription letters. A further announcement in respect of the total number of
Subscription Shares to be issued, the aggregate proceeds to be raised through
the Subscription and the timing of the admission of the Subscription Shares to
trading on AIM will be made in due course, as soon as is practicable, once
these details have been finally determined. It is intended that investors who
participate in the Subscription will receive an allocation of Subscription
Shares at the discretion of Allenby Capital Limited and the Company. The
timing of the closing of the Subscription is at the discretion of Allenby
Capital Limited and the Company.
Following admission to trading on AIM, all Subscription Shares will be issued
credited as fully paid and will rank pari passu with the Company's existing
ordinary shares, including the right to receive all dividends and other
distributions declared, made or paid on or in respect of such shares after the
date of issue of the Subscription Shares.
Important notice
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
This announcement does not constitute, or form part of, a prospectus relating
to the Company, nor does it constitute or contain any invitation or offer to
any person, or any public offer, to subscribe for, purchase or otherwise
acquire any shares in the Company or advise persons to do so in any
jurisdiction, nor shall it, or any part of it form the basis of or be relied on
in connection with any contract or as an inducement to enter into any contract
or commitment with the Company.
The content of this announcement has not been approved by an authorised person
within the meaning of the Financial Services and Markets Act 2000 ("FSMA").
This announcement is not for publication or distribution, directly or
indirectly, in or into the United States of America. This announcement is not
an offer of securities for sale into the United States. The securities referred
to herein have not been and will not be registered under the U.S. Securities
Act of 1933, as amended (the "Securities Act"), and may not be offered or sold
in the United States, except pursuant to an applicable exemption from
registration. No public offering of securities is being made in the United
States. This announcement is not for release, publication or distribution,
directly or indirectly, in or into the United States, Australia, Canada, the
Republic of South Africa, Japan or any jurisdiction where to do so might
constitute a violation of local securities laws or regulations (a "Prohibited
Jurisdiction"). This announcement and the information contained herein are not
for release, publication or distribution, directly or indirectly, to persons in
a Prohibited Jurisdiction unless permitted pursuant to an exemption under the
relevant local law or regulation in any such jurisdiction. This announcement
has been issued by and is the sole responsibility of the Company.
Allenby Capital Limited is acting solely as nominated adviser and broker
exclusively for the Company and no one else in connection with the contents of
this announcement and will not regard any other person (whether or not a
recipient of this announcement) as its client in relation to the contents of
this announcement nor will it be responsible to anyone other than the Company
for providing the protections afforded to its clients or for providing advice
in relation to the contents of this announcement. Apart from the
responsibilities and liabilities, if any, which may be imposed on Allenby
Capital Limited by FSMA or the regulatory regime established thereunder,
Allenby Capital Limited accepts no responsibility whatsoever, and makes no
representation or warranty, express or implied, for the contents of this
announcement including its accuracy, completeness or verification or for any
other statement made or purported to be made by it, or on behalf of it, the
Company or any other person, in connection with the Company and the contents of
this announcement, whether as to the past or the future. Allenby Capital
Limited accordingly disclaims all and any liability whatsoever, whether arising
in tort, contract or otherwise (save as referred to above), which it might
otherwise have in respect of the contents of this announcement or any such
statement.
--ENDS--
NORMAN BROADBENT : Proposed subscription to raise approximately £2.3m
August 31, 2016 at 05:39 am EDT
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