Source - PRN



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

Proposed subscription to raise approximately £2.3m


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.


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