Final Results & Notice of AGM

22 June 2017

Prime People Plc

Results for the year ended 31 March 2017

Prime People Plc ("Prime People" or the "Group"), the global specialist recruitment business for professional and technical staff working in the Real Estate & Built Environment, Energy & Environmental and Insight & Analytics sectors, today announces its audited results for the year ended 31 March 2017.

Highlights:

\* Total Dividends in 2016 were 8.84p including a Special Dividend of 4p.

Peter Moore, Managing Director of Prime People, said:

"I am pleased to report a good set of results with Gross Fee Income up 16.67% and Net Fee Income up 6.68%.

Operating profit for the year was £1.90m, slightly down on £2.15m in 2016, reflecting increases in staff costs associated with conserving talent and investing to nurture future productivity across the Group. There were a number of good performances within UK property, in particular, Contract and Residential teams generated improved NFI. Our Asia business, particularly Singapore, continued to develop strongly.

We have maintained a strong cash position and propose a final dividend of 3.25p, which combined with the interim dividend of 1.75p per share, will result in a total dividend of 5.00p for the 2017 financial year. (2016: 8.84p - which included a special interim dividend of 4.00p and second interim dividend of 3.09p)

Current activity is encouraging across the group and we are confident the business is well positioned to exploit opportunities as they arise."

Annual General Meeting ("AGM")

The AGM will be held on Monday 24 July 2017 at 11.00am at 2 Harewood Place, London, W1S 1BX. All shareholders are encouraged to attend. The Notice of AGM will be posted to shareholders today and will be made available on the Company website: http://www.prime-people.co.uk/ .

-Ends-

For further information please contact:

Chairman's Statement

Performance

The year ended 31 March 2017 was overall an encouraging one with our clients continuing to compete for scarce talent. In the UK, the referendum to remain or leave the EU occurring at the end of our first quarter slowed activity both sides of 23 June 2016 but, with a good recovery in the second half we achieved a full year NFI broadly in line with 2016. NFI comprises the total placement fees of permanent candidates and the margin earned in the placement of contract staff. Our businesses in Asia performed particularly well with both NFI and profit contribution being well ahead of the prior year.

I am pleased to report we closed the year with Revenue of £24.21m (2016: £20.76m) and NFI of £13.10m. This is a 6.68% increase on last year (2016: £12.28m). NFI in the second half of the year of £6.77m was 7.00% higher than the first half of 2017, and it is encouraging to see a second half increase over the comparable period in 2016 of 11.55%.

There were a number of good performances within UK property. In particular, Contract and Residential teams generated improved NFI. Our Asia business, particularly Singapore, continued to develop strongly.

There was a reduction in operating profit for the year from £2.15m in 2016 to £1.90m in 2017. In the UK, our core business in property was particularly affected in quarters one and two by the considerable negative sentiment for the sector surrounding the uncertainties of the EU referendum. Our Prime Energy business, servicing the renewable market in the UK suffered difficulty following the change in government subsidy for the sector. The Group supported the team to refocus on expanding its reach in new territories. There were also costs associated with conserving talent and, whilst total headcount increase was limited, there was investment in staff to support future productivity across the Group.

The conversion rate, which compares operating profit to NFI, decreased from 17.50% to 14.54% which is in line with the costs mentioned above.

During the year NFI productivity per head rose to £102.33k (2016: £99.03k).

The ratio of NFI derived from contract as against permanent placements has slightly increased in the

year from 9:91 in 2016 to 10:90, as a result of increase in the contract team size.

Cash Flow

The Group continues to maintain a strong net cash position. At the start of the year the Group had cash of £0.95m which increased to £2.40m by the end of the year. The increase is primarily due to growth in the contract business and Asia's positive performance. Contract NFI grew by 28.32% to £1.45m (2016: £1.13m) and Asia NFI increased by 39.94% to £5.08m (2016: £3.63m).

Dividend

During the year, an interim dividend of 1.75p per share (2016: 1.75p) was paid to shareholders. The Board will be recommending a final dividend of 3.25p (2016: 0.00p) per share. This will result in a total dividend payment of 5.00p for the 2017 financial year (2016: 8.84p - which included a special interim dividend of 4.00p and a second interim dividend of 3.09p).

Share Buy Back

During the year 129,500 shares were purchased at a cost of £111,390 through the Group's buyback programme (2016: nil shares purchased). The Board will be seeking shareholder approval for renewal of the authority to repurchase up to 10% (2016: 10%) of the Group's issued share capital at the Annual General Meeting.

New Issue of Ordinary Shares

During the year the Company did not apply to issue new shares for admission on AIM (2016: 96,250).

Board

The Board believes it has continued to operate corporate governance standards appropriate to an AIM listed company of its size. There have been no changes to the Board during the year. Although not required to do so, the Directors have resolved that they will retire at least once every three years and seek reappointment by shareholder at the next AGM.

The Board members have a mix of skills, experience, gender and backgrounds that are considerable support to the business.

People

The average number of staff increased from 124 last year to 128 this year and we anticipate that headcount at the end of the current financial year will have increased further.

The Group has a diverse cultural and ethnic profile within the business and at the end of 2017 had a global 54:46 (2016: 52:48) male: female gender ratio.

The success of the Group is dependent on having competent and committed people and the Board would like to thank all the members of our staff for their hard work, commitment and contribution over the last year.

Current trading and outlook

Current activity is encouraging and we are confident the business is well positioned to exploit opportunities as they arise. We have continued to advance our overseas strategy by extending our reach in Asia. The Group has strong and well-established client relationships and committed talent ready to exploit current and new opportunities.

The Board is conscious of macro-economic uncertainties, such as the effects for us of the negotiations over the UK's departure from EU membership and possible turbulence in our overseas markets that may affect our clients' hiring plans. The Group continues to seek opportunities for expansion, reacting swiftly to market conditions as they affect individual revenue lines. The Group will continue to invest in people and the technology that allows us to grow shareholders returns by offering our clients innovative approaches to recruitment and globally connected service.

Robert Macdonald

Executive Chairman

Strategic Report

Overview

The Group provides permanent and contract recruitment services to selected, niche industry sectors. The built environment continues to be the Group's largest market, served through its main subsidiary, Macdonald & Company. As distinct brands, Prime Insight and Prime Energy serve the data analysis & customer insight and renewable energy & sustainability sectors respectively.

Our employees are vital to the continued success of the business and we invest heavily in them. As such, we take time to find and train the best talent that shares our ambition - to be the best, not simply the biggest.

The business is organised into teams of specialist consultants, each managed by a team leader who is responsible for performance within the operating framework approved by the Board. The Group operates a policy of open communication in the belief that its employees are well placed to suggest operational improvements and emergent strategies that will increase earnings.

The Group is committed to managing its talent on merit alone and provides equal opportunities for all current and future employees. It gives full and fair consideration to applications for employment from disabled persons, where a disabled person may adequately carry out the requirements of any position within the physical constraints of the Company's offices.

The Group has two locations in the UK, the London head office and Manchester, with offices in Hong Kong (established in 2007), Dubai (established in 2008), Singapore (established in 2012), and a franchise in South Africa (established in 2008).

Group Revenue and NFI improved in 2017. However, as referred to in the Chairman's Statement, set against this were the operational issues faced by some of our UK teams. As property sector sentiment was disturbed by the referendum in quarters one and two it was decided to hold on to staff and this together with expense associated with repositioning the Prime Energy team in the UK were major contributors to our delivering a reduced operating profit of £1.90m (2016: £2.15m). The recovery in the second half in property sector performance justified our decision in the first half of the year to maintain head-count.

The UK permanent recruitment market was adversely affected by the uncertainty in the UK property sector caused by the EU referendum. However, performance in the UK was supported by increased NFI from our Contract and Residential teams as well as a good performance from our recently established Real Estate Banking and Investment team.

From the twelve UK and Overseas teams, under which the Group operates, Hong Kong and Singapore, were the leading contributors to Group NFI, and made substantial contributions to overall Group profit.

Our Dubai business saw a decline in its revenue, as a result of general instability in the region.

As indicated above, our Asia businesses continued to mature and finished the year strongly, with the Prime Insight team there contributing materially to the growth of business in the region.

The Board remains committed in its pursuit of sustainable NFI growth and cash generation. It continues to maintain careful control on expenditure in the pursuit of profitability. Cultivating strong client relationships, investing in the best technology and employing the best people are the foundations of the Group's success. With uncertain global growth and a world economy increasingly exposed to risk it is important that we remain flexible, able to serve our clients wherever demand may be, and that we closely monitor individual NFI performance against costs. Tight management control of remuneration and expenditure, together with a focus on improved productivity per head and conversion ratios, position the Group to prosper.

Regional Performance

UK

UK revenue increased by 14.22% to £18.56m (2016: £16.25m) with a decrease in NFI of 4.25% to £7.44m (2016: £7.77m).

Contract represented 17.36% (2016: 14.52%) of total UK NFI in 2017 while permanent NFI declined by 9.84%

NFI for the region was flat largely as a consequence of the lack of performance in quarters one and two of our property business, affected by referendum uncertainty. As mentioned in the Chairman's Report, there were difficulties for the Prime Energy team as a result of the change in

government policy which gave rise to material costs involved in the refocusing of the team.

Additionally, we suffered staff turnover in our Manchester office causing revenue delay and profit impact.

Our Contract, Residential and Real Estate Banking & Investment teams delivered strong NFI growth during the year and performed in line with profit expectations.

Asia

NFI grew by 39.94% to £5.08m (2016: £3.63m).The region is covered by our offices in Hong Kong and Singapore and represents 38.78% of Group NFI (2016: 29.56 %).

Both Asia teams benefited from increased productivity and maturing business lines. In 2017, we expanded our Prime Insight team in Singapore which offers our clients broader service range and better ability to serve markets in mainland China and the region.

Rest of the World

The region is covered by our offices in Dubai and South Africa.

Whilst the regions covered made a small profit this year, with NFI declining and a conversion rate of 8.62%, the outlook for the regions in the new financial year looks stable and are expected to be profitable

Peter Moore

Managing Director

Financial Review

Revenue

The Group achieved a 16.62% increase in revenue to £24.21m (2016: £20.76m).

Net Fee Income (NFI)

Overall the Group delivered a 6.68% increase in total NFI to £13.10m (2016: £12.28m). NFI from permanent business increased by 5.92% to £11.81m (2016: £11.15m). Fees from our contract business, which represents 9.85% of total NFI (2016: 9.20%), increased to £1.29 million from £1.13m last year.

NFI from international placements, which is included in our permanent business, increased by 25.50% to £5.66m (2016: £4.51m). UK NFI of £7.44m reduced 4.26% (2016: £7.77m) affected by the referendum.

Administration Costs

Administration costs for the year increased by 10.46% to £11.19m (2016: £10.13m). The increase primarily related to higher staff costs.

Profit before Taxation

Profit before taxation decreased by 11.62% to £1.90m (2016: £2.15m).

Taxation

The taxation charge is £0.29m on profit before taxation of £1.90m (from ordinary activities) which gives an effective tax rate of 15.26% (2016: 21.40%). The reasons for the difference from the standard UK corporation tax rate of 20% are detailed in note 7 of the accounts.

Earnings per Share

Basic earnings per share decreased by 5.05 % to 13.14p (2016: 13.84p). The diluted earnings per share, taking into account existing share options, decreased by 4.07% to 12.97p (2016: 13.52p).

Dividend

An interim dividend of 1.75p (2016: 1.75p) was paid on 25 November 2016 to shareholders on the register at close of business on 18 November 2016.

The interim dividend was approved by the Board on 8 November 2016.

As outlined in the Chairman's statement, the Board propose a final dividend of 3.25p per share which will, subject to shareholder approval at the Annual General Meeting be paid on 28th July 2017 to shareholders who are on the register on 21st July 2017, making a total dividend paid to shareholders for the year of 5.00p per ordinary share. (2016: 8.84p - included a special dividend of 4.00p).

Balance Sheet

Net assets at 31 March 2017 have increased to £15.06m (2016: £13.42m).

Trade receivables at the year end, were down on last year at £2.44m (2016: £2.71m) which reflects the decreased credit period taken by clients to 45 days (2016: 55 days).

Treasury Management and Currency Risk

Approximately 76.66% of the Group's revenue in 2017 (2016: 78.27%) was denominated in Sterling. Consequently the Group has a degree of currency exposure in accounting for overseas operations.

Currently, the Group policy is not to hedge against this exposure but it does seek to minimise the effect by converting into Sterling all cash balances in foreign currency that are not required for local short term working capital needs.

The Group operates a centralised treasury function, with no borrowing facilities, and is confident the net cash within the Group is sufficient to meet current and foreseeable liabilities as they fall due.

Cash Flow and Cash Position

At the start of the year the Group had cash of £0.95m. After net taxation payments of £0.52m (2016: £0.41m) cash generated from operations was £1.46m (2016: £1.96m).

During the year the Group spent £0.05m (2016: £0.09m) on its Customer Relationship Management systems and paid dividends to shareholders of £0.21m (2016: £1.95m).

As at 31 March 2017 the Group cash was £2.40m.

• Conversion ratio (operating profit divided by NFI) decreased to 14.54% (2016: 17.50 %)

• Productivity (NFI divided by total average headcount) increased to £102.33k (2016: £99.03k)

• Ratio of billing headcount to support headcount slightly reduced to 3.2 (2016: 3.4)

• Percentage of NFI paid to staff increased to 66.26% (2016: 63.69%)

These key performance indicators form the basis for reviewing the progress of the business.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Strategic Report, the Directors' Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and applicable law.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose, with reasonable accuracy at any time, the financial position of the Company and its Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website; the work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The above results relate to continuing operations

Consolidated Statement of Changes in Equity

For the year ended 31 March 2017

Consolidated Statement of Financial Position

Consolidated Statement of Financial Position

As at 31 March 2017

The financial statements on pages 21 to 54 were approved by the Board of Directors and authorised for issue on 21 June 2017 and are signed on its behalf by:

R J G Macdonald D Zaneva-Todorinski

Company Statement of Financial Position

The Company's retained earnings includes profit for the year of £487,456 (2016: £890,249).

The financial statements of Prime People Plc, Company Number 1729887 were approved by the Board and authorised for issue on and are signed on its behalf by:

R J G Macdonald D Zaneva-Todorinski

Company Statement of Changes in Equity

Group and Company Cash Flow Statement

Notes to the Financial Statements

1 Nature of Operations

Prime People Plc ('the Company') and its subsidiaries (together 'the Group') is an international recruitment services organisation with offices in the United Kingdom, the Middle East and the Asia Pacific region from which it serves an international client base. The Group offers both permanent and contract specialist recruitment consultancy for large and medium sized organisations.

The Company is a public limited company which is quoted as an AIM Company and is incorporated and domiciled in the UK. The address of the registered office and the principal place of business is 2 Harewood Place, London W1S 1BX. The registered number of the Company is 1729887.

2 Summary of Significant Accounting Policies

Basis of Preparation

The financial statements of Prime People Plc consolidate the results of the Company and all its subsidiary undertakings. As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company has not been included as part of these financial statements. The amount of profit after tax and before dividends dealt within the financial statements of the parent is £487,456 (2016: £890,249). The financial statements have been prepared on a going concern basis.

The consolidated financial statements of Prime People Plc have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union and also comply with IFRIC interpretations and Company Law applicable to Companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention modified as necessary so as to include any items at fair value, as required by accounting standards.

The consolidated financial statements for the year ended 31 March 2017 (including comparatives) are presented in GBP '000.

The accounting polices applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2017 and are described below.

International Accounting Standards (IAS/IFRS) and Interpretations in issue but not yet EU approved

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective. These have not been adopted early by the Group and the initial assessment indicates that either they will not be relevant or will not have a material impact on the Group:

Standards

· FRS 14 Regulatory Deferral Accounts (Issued January 2014, effective date 1 January 2016)

· IFRS 16 Leases (Issued January 2016, effective date 1 January 2019)

Amendments (Effective date for all amendments is deferred indefinitely)

· Amendments to IFRS 10 and IAS 28: Sales or Contribution of Assets between an Investor and its Associate or Joint Venture (Issued on 11 September 2014)

2 Summary of Significant Accounting Policies (continued)

International Accounting Standards (IAS/IFRS) and Interpretations in issue but not yet EU approved

(continued)

Amendments (Effective date for all amendments listed is 1 January 2017)

· Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (Issued January 2016)

· Amendments to IAS 7: Disclosure Initiative (Issued January 2016)

Amendments (Effective date for all amendments listed is 1 January 2018)

· Clarifications to IFRS 15 Revenue from Contracts with Customers (issued on 12 April 2016)

· Clarifications to IFRS 15 Revenue from Contracts with Customers (Issued April 2016, effective date 1 January 2018)

· Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (issued on 20 June 2016)

· Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (issued on 12 September 2016)

· IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (issued on 8 December 2016)

· Amendments to IAS 40: Transfers of Investmenty Property (issued on 8 December 2016)

International Accounting Standards (IAS/IFRS) and Amendments (and EU adopted) but not yet effective

· IFRS 9 Financial Instruments (Issued on 24 July 2014, effective date 1 January 2018)

· IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014) including amendments to IFRS 15: Effective date of IFRS 15 (issued on 11 September 2015), effective date for both is 1 January 2018

The directors do not expect the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future periods, except for disclosure of IFRS 15 that may have an impact on revenue recognition and related disclosures. Beyond the information above it is not practicable to provide a reasonable estimate of the impact of IFRS 15 until a detailed review has been completed.

Consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

Inter-Company transactions and balances on transactions between Group companies are eliminated in preparing the consolidated financial statements.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Going Concern

The Directors have prepared cash flow forecasts for a period of at least 12 months from the date of approval of the financial statements and have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Revenue recognition

a) Revenue

Revenue, which excludes value added tax ("VAT"), constitutes the value of services undertaken by the Group from its principal activities, which are recruitment consultancy and other ancillary services. These consist of:

- Revenue from contract placements, which represents amounts billed for the services of contract staff, including the salary of these staff. This is recognised when the service has been provided;

- Revenue from permanent placements, which is based on a percentage of the candidate's remuneration package and is derived from both retained assignments (income recognised on completion of defined stages of work) and non-retained assignments (income recognised at the date an offer is accepted by a candidate, a start date has been agreed but employment has not yet commenced). The latter includes revenue anticipated but not invoiced at the balance sheet date, which is correspondingly accrued on the balance sheet within prepayments and accrued income. A provision is made against accrued income based on past historical experience for possible cancellations of placements prior to, or shortly after, the commencement of employment; and

- Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

b) Cost of Sales

Cost of sales consists of the salary cost of contract staff and costs incurred on behalf of clients, principally advertising costs.

c) Net Fee Income

Net fee income represents revenue less cost of sales and consists of the total placement fees of permanent candidates, the margin earned on the placement of contract candidates and the margin on advertising income.

d) Foreign Currency Translation

(i) Functional and Presentation Currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Sterling, which is the Company's functional and presentation currency.

(ii) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income.

(iii) Group Companies

On consolidation the results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· assets and liabilities for each year end presented are translated at the closing rate of that year end;

· income and expenses for each statement of comprehensive income are translated at average exchange rates; and

· all resulting exchange differences are recognised in other comprehensive income.

e) Intangible Assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'.

As permitted by the exception in IFRS1 'First time adoption of International Reporting Standards', the Group has elected not to apply IFRS3 'Business combinations' to goodwill arising on acquisition that occurred before the date of transition to IFRS.

Separately recognised goodwill is reviewed annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value.

(ii) Computer Software

Computer software acquired by the Group is stated at cost. These costs are amortised to write the cost off in equal annual instalments over three years.

f) Property, Plant and Equipment

All property, plant and equipment are stated at historical cost less accumulated depreciation less provisions for impairment. Depreciation is provided on all property, plant and equipment using the straight-line method at rates calculated to write off the cost less estimated residual values over their estimated useful lives, as follows:

· Leasehold improvements over the expected period of the lease.

· Furniture, fittings and computer equipment 25% - 33%

The gain or loss arising on disposal or retirement of an asset is determined by comparing the sales proceeds with the carrying amount of the asset and is recognised as income.

g) Impairment of Assets

Assets that have an indefinite useful economic life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

h) Taxation

The tax expense represents the sum of the current tax expense and deferred tax expense.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

i) Leased Assets and Obligations

All of the Group's leases are operating leases and the annual rentals are charged to profit and loss on a straight line basis over the lease term.

The benefit of rent free periods received for entering into a lease is spread evenly over the lease term.

j) Pension Costs

The Group operates defined contribution pension scheme. The Group adopts the minimum legally required employer contribution rate of 1% of qualifying earnings and up to the maximum earning threshold for automatic enrolment for 2016-17, as set by the Pension Regulator.

The assets of the scheme are held separately from those of the Group in independently administered workplace pension -NEST. The pension costs charged to the income statement represent the contributions payable by the Group to Nest during the year.

The Pension liabilities at the Balance Sheet date represent employer and employee pension contributions, that are payable to the pension provider by the 22nd date of each month.

k) Segmental Reporting

IFRS8 requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the Board of Directors to allocate resources to the segment and to assess their performance.

l) Financial instruments

Financial assets and liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provision of the instrument.

m) Financial assets

The Group's financial assets comprise cash and various other receivable balances that arise from its operations. Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially measured at fair value and subsequently at amortised cost using the effective interest rate method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Financial assets are assessed for impairment at each balance sheet date, and are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profit or loss account. If in a subsequent period the amount of the impairment loss decreases and the decreases can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit and loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Cash and cash equivalents includes cash in hand and bank deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts are classified with current liabilities in the statement of financial position.

n) Financial liabilities and equity

Financial liabilities and equity instruments are initially measured at fair value and are classified according to the substance of the contractual arrangements entered into. Financial liabilities are subsequently measured at

amortised cost. The Group's financial liabilities comprise trade payables, borrowings, bank overdrafts and other payable balances that arise from its operations. They are classified as 'financial liabilities measured at amortised cost'.

o) Share-Based Compensation

The Group operates equity-settled share-based compensation plans.

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). At the balance sheet date the number of outstanding options is adjusted to reflect those options that have been granted during the year or have lapsed in the year.

p) Dividend Distribution

A final dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividend distributions are recognised in the period in which they are approved and paid.

q) Critical Accounting Estimates and Judgements

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and judgements. It also requires management to exercise judgement in the process of applying the Company's accounting policies.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described below:

Revenue Recognition

Revenue from permanent placements is recognised when a candidate formally accepts an offer of employment, a start date has been agreed, but employment has not commenced. A 'fall-through' provision is made by management, based on historical experience, for the proportion of those placements where the offer of employment is not taken up. Management have reviewed the past assumptions made with respect to the 'fall-through' provisions and consider that they remain reasonable. The fall through provision is estimated at 18.90% of those offers where employment has yet to commence (2016: 20.02%). The Directors consider that a change in the range of possible outcomes, or sensitivity, would not have a material impact on the business.

Goodwill Impairment

The Group's determination of whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill is allocated. This requires estimation of future cash flows and the selection of a suitable discount rate details of which are disclosed in note 11.

q) Critical Accounting Estimates and Judgements (continued)

Trade Receivables

There is uncertainty regarding customers who may not be able to pay as their debts fall due.  In reviewing the appropriateness of the provisions in respect of recoverability of trade receivables, consideration has been given to the ageing of the debt and the potential likelihood of default, taking into account current economic conditions. Details of the total amount of receivables past due and the movement in allowance for doubtful debts are disclosed in note 13.

3 Segment Reporting

a) Revenue and Net Fee Income, by Geographical Region

All revenues disclosed by the Group are derived from external clients and are for the provision of recruitment services. The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 2. Segment profit before taxation represents the profit earned by each segment after allocations of central administration costs.

b) Revenue and Net Fee Income, by Classification

3 Segment Reporting (continued)

c) Profit before Taxation by Geographical Region

Operating profit is the measure of profitability regularly reviewed by the Board, which collectively acts as the Chief Operating Decision Maker. Consequently, no segmental analysis of interest or tax expenses is provided.

Segment operating profit is the profit earned by each operating unit and includes inter segment revenues totalling £0.76m (2016 £0.71m) for the UK, and charges of £0.68m (2016 £0.60m) for Asia and £0.08m (2016 £0.11m) for the rest of the world.

d) Segment Assets and Liabilities by Geographical Region

The analysis above is of the carrying amount of reportable segment assets, liabilities and non-current assets. Segment assets and liabilities include items directly attributable to a segment and include income tax assets and liabilities. Non-current asset include property, plant and equipment and computer software.

4 Profit on ordinary activities before taxation

5 Directors' emoluments

Details of Directors' emoluments and interests, which form part of these financial statements, are provided in the Director's Remuneration report on pages 16 to 18.

6 Employees