Financial Report for the six months ended 30 June 2017

Transcription

1 PARITY GROUP PLC Parity Group plc Interim Report Six Months Ended 30 June 2017

2 Financial Report for the six months ended 30 June 2017 Parity Group plc ( Parity, or the Group ), the UK information technology services group, announces its interim results for the six months ended 30 June Parity operates through two divisions, Parity Consultancy Services ( Consultancy Services ), which provides niche technology and data solutions and Parity Professionals, which specialises in the sourcing of professional staff ( Professionals ). Highlights: Strong growth in Consultancy Services drove increased profit and debt reduction, despite IR35 changes: Group revenues 1 of 42.92m (H1 2016: 46.22m) o Reflects growth in Consultancy Services partially mitigating the impact of IR35 changes on Professionals: Consultancy Services revenue up by 47.7% to 3.93m (H1 2016: 2.66m) Professionals revenue 2 down by 6.5% to 40.71m (H1 2016: 43.56m) Operating profit 1 before non-recurring costs 3 up 19% to 0.92m (H1 2016: 0.77m) o Improved operating margin to 2.1% (H1 2016: 1.7%) with increased proportion of higher margin Consultancy Services revenues and strong cost management Consultancy Services contribution 4 up by 17% to 0.55m (H1 2016: 0.47m); now represents 33% of Group contribution 4 (H1 2016: 29%) Professionals contribution 4 up by 1.8% to 1.13m (H1 2016: 1.11m) Profit before tax 1 increased by 143% to 0.68m (H1 2016: 0.28m) reflecting improved business mix and no non-recurring costs in H Basic earnings per share 0.62p (H1 2016: 0.23p) Strengthened balance sheet following improved cash flow performance: Net debt of 2.3m ( 4.4m at 31 December 2016, and 6.5m at 30 June 2016) Cash inflow from operations increased to 2.2m (H1 2016: 1.1m) with positive working capital swing Good progress with strategy to focus on Consultancy Services growth to better align both divisions: Driving opportunities in our chosen markets through: o A stronger salesforce focus on technology solutions to deliver business intelligence/analytics and cost modelling applications, supporting growth in our data management consultancy services o Investment in the sales capacity to sell our Group-wide proposition, by target market sectors with expertise across our skills verticals o Aligned sales and a centralised CRM across our multiple channels to market to enhance our understanding of our clients, the people and emerging technologies 1 On a Continuing Operations basis 2 Including inter-segment revenues 3 Non-recurring costs were nil (H1 2016: 0.3m) 4 Before group costs, depreciation and amortisation, and share based payments Parity Group plc 01

3 Financial Report for the six months ended 30 June 2017 continued Closer collaboration across the Group to deliver project solutions, managing the recruitment and deployment of IT teams, has generated revenues from new projects in H of 1.6m in addition to supporting the MCOCS MoD programme The Talent Management offering is refocused to develop leadership skills supporting business change The non-core Inition business is being marketed for sale and the Board is confident that the disposal will help the Group with its longer-term strategic objectives Board and advisory appointments: Industry experience of the Board of Directors further enhanced with the appointment of John Conoley as a Non-Executive Chairman Change of NOMAD and broker to WH Ireland Clear momentum in the business: Successfully secured new clients, in addition to positions on a number of frameworks and contract extensions during the first half: o Awarded places on the Digital Outcomes and Services 2, and G-Cloud 9 frameworks for consultancy and project delivery into the Public Sector o Framework wins including a number of Universities, the NHS and sole supply of permanent IT recruitment to Highways England o Over 50 new clients across the business, with the majority in the Private Sector o The benefit of collaboration with cross-sales of services embedding ourselves further with 7 clients o An extension of the long-standing service contract with BAT Since the half year end, we have also extended the MoD Business Intelligence Military Capability Output Costing System contract with the Consultancy division John Conoley, Chairman of Parity Group, said: The Company has delivered an encouraging first half performance. This reflects the management team s clear and deliberate focus on developing the higher margin Parity Consultancy Services division and on aligning our two core divisions more effectively to address our chosen markets. This has already delivered an improvement in profitability and cash generation as well as a reduction in debt. In addition, the new sales that have been generated through the period and into the second half further endorse our strategy, leaving us with stronger pipelines in both Divisions. Despite the continued impact of IR35 on contractor volumes, the Group continues to perform in line with our expectations for the full year with the second half expected to benefit further from our investment in sales and marketing to accelerate growth in our higher margin managed service and data consultancy offerings. We, therefore, look forward to making further progress with our focus on continuing to drive profitability, cash flow and shareholder value. On behalf of the Board, I would like to take this opportunity to thank all the Parity staff for their continued hard work. Parity Group plc 02

4 Half Yearly Financial Report for the six months ended 30 June 2017 Introduction Parity supports its clients by maximising the effectiveness of people, processes and systems through two aligned businesses Parity Consultancy Services and Parity Professionals. We are building upon the momentum generated to date, with increased traction in the technology solutions delivered through the Consultancy division complemented by the wider recruitment services provided by the Professionals business. Parity Consultancy Services supports our clients in the project management and delivery of their IT solutions, and in the rapidly growing data market as they need to manage vast amounts of complex data. Our services are helping the digital transformation of the Public sector, and provide competitive advantage in the private sector through improved efficiency and timely business decisions. Our success is dependent upon our in-depth knowledge coupled with the agility to scale and supplement projects that we are managing with the right skills at pace. Parity Professionals provides niche temporary and permanent recruitment of professional and technical staff both direct to our client base, and where required, to our Consultancy division where we are delivering technology solutions and managing projects. The closer alignment of the two businesses means we are ideally placed to provide clients with the people that they need and the technology that will enable them to drive change. The flexibility with which we are able to operate allows us to offer a truly customercentric approach, without the need for a higher fixed cost base. Results Further to our trading update announced on the 17th July, we are pleased to report that we are encouraged that Parity is maintaining strategic momentum by growing revenues in its Consultancy Services division which is, in turn, driving profit growth. Group Revenues for the period reduced by 7.2% to 42.9m, as a result of the impact of a reduction in the larger volume Professionals business which was in part countered by growth in the higher margin Consultancy Services. Group Operating Profit before non-recurring items from continuing operations for the first half has grown by 19% to 0.92m from 0.77m in the equivalent period last year. Continuing profit before tax was 0.7m (H1 2016: 0.3m) reflecting the improvement in business mix, and the absence of nonrecurring costs. Earnings per share for the period has improved to 0.62p versus 0.23p in H Cash generated from operations was 2.16m (H1 2016: 1.12m). The Professionals division experienced a reduction in working capital requirements resulting from the reduced contractor volumes, which was complemented by excellent cash collections. Debtor days as at 30 June 2017 were 21 days (31 December 2016: 29 days). The strong cash performance led to an improved net debt position at the period end of 2.3m (31 December 2016: 4.4m). The Group has a confirmed 15m finance facility with PNC, which is in place until 31 December The cash performance was also supported by the reduced contributions to the defined benefit pension scheme negotiated with the Trustees in The scheme deficit had decreased slightly to 1.75m at 30 June 2017 (31 December 2016: 1.85m). Dividend In order to ensure funds are available to provide further investment in Parity s growth, the Board is recommending that no dividend will be paid in relation to the first half of the current financial year. The Board intends to keep the policy under review. Parity Group plc 03

5 Half Yearly Financial Report for the six months ended 30 June 2017 continued Parity Consultancy Services Division 33% of Group contribution (H1 2016: 29%) Parity Consultancy Services develop, implement and support technology solutions for our clients. A combination of industry specialism and IT solution expertise provide our clients with assurance that we understand their needs and can provide the right systems to support them. We have the flexibility to manage and staff longer-term IT projects, provide strategic advice on the IT and systems architecture they need, or utilise our expertise to simply meet deadlines. Parity consultants work closely with the clients and have a methodology to provide a clear understanding of their needs to determine the best technology solution. For example, we have developed a strong understanding of the data solution market, delivering the architecture required and the master data management which provides the foundation for insightful analytics and reporting. Our consultants understand the business needs and are able to support this with the latest software developments to provide market leading solutions. Our strength in effective project management and the assurance we provide on successful delivery has also led to some long-standing client application support relationships and new managed projects. Our strategic relationships with Oracle and Microsoft ensure our consultants remain at the forefront of the latest developments and, as part of the wider Group services, we can access additional expertise when required through close alignment to Parity Professionals. This ability to leverage additional support within short timescales means we don t need to maintain a large bench of available staff, delivering cost savings which allow competitive pricing. Divisional revenues on continuing operations have grown by 47.7% to 3.93m (H1 2016: 2.66m) with an improvement in segmental contribution from 0.47m to 0.55m over the same period. Margins have been held back due to our deliberate push to build the consultancy division, with an increase in sales headcount and higher utilisation of external contractors on new projects. As scale builds in our core capabilities and we have more repeat work from the new clients to ensure high utilisation, we will be able to build our permanent capacity and improve margins. In the period, Parity Consultancy Services have been awarded frameworks for both Digital Outcomes and Services 2, and G- Cloud 9 in the public sector and have been successful in winning orders in the private sector. With strong client relationships, we continue to benefit from repeat business and have recently been awarded an extension to the British American Tobacco application support contract and secured additional funding on the Military Capability Output Costing System (MCOCS) Business Intelligence contract with the MoD. Parity Professionals Division 67% of Group contribution (H1 2016: 71%) Parity Professionals provides targeted recruitment of temporary and permanent professionals with the niche skills required to ensure our clients have both the capacity and the capability to deliver their projects. Our clients success depends on the efficiency and competency of their people and, over 45 years, Parity has developed a strong reputation for recruiting the best talent across many industry sectors and locations. Our core strengths are in high growth IT skills relating to Digital, Data and Information Security which also supports the Consultancy Services division, though we have broader capability in the provision of interim staff to deliver business change programmes. The recruitment industry was subject to a change in the way the taxation regulations are applied to workers in the Public Sector in April 2017 under IR35. The uncertainty leading to this and the change to income for the workers has impacted contractor volumes for Parity Professionals, and is largely responsible for a Parity Group plc 04

6 Half Yearly Financial Report for the six months ended 30 June 2017 continued reduction in Divisional revenues of 6.5% against the same period last year to 40.71m (H1 2016: 43.56m). Pleasingly however, segmental contribution has increased by 1.8% to 1.13m (H1 2016: 1.11m) as a result of managing the cost base and a change in the mix of revenues. We have increased the sales activity to the private sector which represented 57% of new clients that were opened in the half. We increasingly work with clients in the SME sector as well as the larger volume clients that provide longer-term visibility. Despite the uncertainty generated by IR35 and the resultant higher churn rate in the contractor base, our activity has driven an increase in the key sales KPIs of number of placements made, the deal turnover value and deal margin value compared to the first half of This would have typically resulted in growth in revenues from our contractor base were it not for the lower retention rates due to IR35. We are also encouraged by the 59.8% increase versus H in permanent fees generated of 315,000, albeit this remains a smaller part of our overall gross profit. In the period, we have made a modest investment to increase the sales headcount, improving our sales and delivery capability in targeted skills verticals. Importantly, Parity Professionals has worked closely with Parity Consultancy Services to provide interim staffing on their managed projects where they have needed to scale quickly, or where they need access to specific expertise to supplement their permanent capability. This has generated inter-segment revenues to 1.7m in the period (H1 2016: nil). People and Board On 23 March 2017 we were pleased to announce the appointment of John Conoley as Non-Executive Chairman. John Conoley brings over 30 years IT industry knowledge and significant executive and non-executive Board level experience of AIM listed technology software and services businesses. John joined the Board on 27 April Current Trading and Future Prospects We are pleased to report that there is clear evidence that we are maintaining momentum in our stated objective of growing the Consultancy Services division, which has generated significant growth in its revenues, and is running ahead of management expectations. The new sales that have been generated through the period and into the second half give us confidence that we are undertaking the right activities to drive growth. Within Parity Professionals, contractor volumes were impacted at the end of March with the change in the IR35 legislation, and whilst the extension ratios show signs of improvement, we are still experiencing a lower than usual extension rate on our contracts. Even though sales KPIs remain positive and client demand has held, the growth in our contractor volumes is slower than we would have expected. We have invested in the sales capacity and in training to support our sales and management internally to counter the impact whilst this churn rate recovers to normal levels. Despite the effect of the IR35 changes, the Group has delivered a strong profit performance in the first half, demonstrating the underlying strength of the wider Group and our strategy to focus on building our Consultancy Services division. This offers higher margins and longer-term revenue visibility. We have invested in building the sales capacity to target the growing data solutions market and to support our managed project teams. There will be further opportunity to increase permanent headcount in project delivery as repeat revenues build in our core services which will enhance margins. We have undertaken the steps necessary to restructure the business, rebalance the divisions and maximise the opportunities as we undergo change despite any change in Parity Group plc 05

7 Half Yearly Financial Report for the six months ended 30 June 2017 continued market conditions. Parity has built momentum in the Consultancy Services division with higher margins and improved visibility of longer-term project-based revenues which will support our progress to the next stage of growth. The improved financial results, with increased profitability and reducing debt, demonstrate that the Group has a strong and resilient base from which it can continue to build our Professionals division and invest in our exciting Consultancy Services division. Overall, the Group continues to perform in line with our expectations for the full year, with the second half expected to benefit further from our investment in sales and marketing to accelerate growth in our higher margin managed service and data consultancy offerings. We, therefore, look forward to making further progress with our focus on continuing to drive profitability, cash flow and shareholder value. Principal Risks and Uncertainties Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties. The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties detailed within the Group s 2016 Annual Report remain applicable for the final six months of this financial year. The Group s 2016 Annual Report is available from the Party website The Board has set up a Brexit Working Group to monitor and respond to any emerging risks as and when the implications of Brexit unfold. Parity Group plc 06

8 Consolidated condensed income statement For the six months ended 30 June 2017 Six months Six months Year to to to (Unaudited) (Unaudited & Restated) (Audited) Before Non- After Before Non- After non- recurring non- non- recurring nonrecurring items recurring recurring items recurring items (note 3) items items (note 3) items Note Continuing operations Revenue 42,915 46,221 46,221 91,764 91,764 Employee benefit costs (3,158) (3,259) (144) (3,403) (6,245) (260) (6,505) Depreciation, amortisation and impairment (143) (179) (179) (365) (115) (480) All other operating expenses (38,695) (42,011) (126) (42,137) (83,388) 20 (83,368) Total operating expenses (41,996) (45,449) (270) (45,719) (89,998) (355) (90,353) Operating profit/(loss) (270) 502 1,766 (355) 1,411 Finance costs 4 (235) (221) (221) (452) (452) Profit/(loss) before tax (270) 281 1,314 (355) 959 Tax (charge)/credit 5 (56) (99) 54 (45) (154) 79 (75) Profit/(loss) for the period from continuing operations (216) 236 1,160 (276) 884 Discontinued operations Loss for the period from discontinued operations 6 (430) (73) (73) (78) (78) Profit/(loss) for the period attributable to equity shareholders (216) 163 1,082 (276) 806 Basic earnings per share p 0.23p 0.87p Diluted earnings per share p 0.23p 0.83p Parity Group plc 07

9 Consolidated condensed statement of comprehensive income For the six months ended 30 June 2017 Six months to Six months to Year to (Unaudited) (Unaudited) (Audited) Profit for the period Other comprehensive income/(expense): Actuarial gain/(loss) on defined benefit pension scheme 137 (179) (413) Exchange differences on translation of foreign operations (33) (116) (13) Other comprehensive income/(expense) for the period, net of tax 104 (295) (426) Total comprehensive income/(expense) for the period 302 (132) 380 Consolidated condensed statement of changes in equity For the six months ended 30 June 2017 Share Share Deferred premium Other Retained capital Shares reserve reserves earnings Total Note At 1 January ,037 14,319 33,195 44,160 (87,251) 6,460 Profit for the period Other comprehensive income for the period, net of tax Issue of new ordinary shares Share options value of employee services Cancellation of deferred shares 9 (14,319) 14,319 At 30 June ,043 33,211 58,479 (86,897) 6,836 Share Share Deferred premium Other Retained capital Shares reserve reserves earnings Total At 1 January ,037 14,319 33,195 44,160 (87,689) 6,022 Profit for the period Other comprehensive expense for the period, net of tax (295) (295) Share options value of employee services (3) (3) At 30 June ,037 14,319 33,195 44,160 (87,824) 5,887 Parity Group plc 08

10 Consolidated condensed statement of financial position As at 30 June 2017 As at As at As at (Unaudited) (Unaudited) (Audited) Notes Non-current assets Goodwill and intangible assets 4,932 6,794 5,055 Property, plant and equipment Deferred tax assets ,411 7,439 5,536 Current assets Stocks 28 Trade and other receivables 12,656 17,098 14,373 Cash and cash equivalents 4,479 4,114 4,272 17,135 21,240 18,645 Assets classified as held for sale and included in disposal groups 2,168 2,389 Total assets 24,714 28,679 26,570 Current liabilities Loans and borrowings (6,805) (10,575) (8,636) Trade and other payables (8,943) (10,564) (9,104) (15,748) (21,139) (17,740) Non-current liabilities Loans and borrowings (18) (11) (22) Provisions (17) (38) (17) Retirement benefit liability 8 (1,751) (1,604) (1,848) (1,786) (1,653) (1,887) Liabilities associated with assets classified as held for sale and included in disposal groups (344) (483) Total liabilities (17,878) (22,792) (20,110) Net assets 6,836 5,887 6,460 Shareholders equity Called up share capital 9 2,043 16,356 16,356 Share premium account 33,211 33,195 33,195 Other reserves 9 58,479 44,160 44,160 Retained earnings (86,897) (87,824) (87,251) Total shareholders equity 6,836 5,887 6,460 Parity Group plc 09

11 Consolidated condensed statement of cash flows For the six months ended 30 June 2017 Six months to Six months to Year to (Unaudited) (Unaudited) (Audited) Cash flows from operating activities Profit for period Adjustments for: Finance costs Share-based payment expense/(credit) 52 (3) 58 Income tax (credit)/charge (8) Amortisation of intangible fixed assets Depreciation of property plant and equipment Loss on write down of intangible assets ,274 Working capital Decrease in stocks Decrease/(increase) in trade and other receivables 1,882 (1,488) 330 (Decrease)/increase in trade and other payables (349) 1, Increase in provisions Payments to retirement benefit plan (92) (130) (231) Net cash flow from operating activities 2,155 1,124 3,412 Investing activities Purchase of property, plant and equipment (50) (55) (22) Purchase of intangible assets (13) (129) Net cash used in investing activities (50) (68) (151) Financing activities Net cash from issue of ordinary shares 22 Net (repayment of)/proceeds from finance facility (1,817) 559 (1,360) Interest paid (103) (149) (277) Net cash (used in)/from financing activities (1,898) 410 (1,637) Net increase in cash and cash equivalents 207 1,466 1,624 Cash and cash equivalents at the beginning of the period 4,272 2,648 2,648 Cash and cash equivalents at the end of the period 4,479 4,114 4,272 Parity Group plc 10

12 Notes to the interim results 1 Basis of preparation The condensed financial statements comprise the unaudited results for the six months to 30 June 2017 and 30 June 2016 and the audited results for the twelve months ended 31 December The comparative results for the six months to 30 June 2016 have been restated to show the Inition business unit as discontinued operations in accordance with the Group s discontinued operations accounting policy. The financial information for the year ended 31 December 2016 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for 2016 have been filed with the Registrar of Companies. The Independent Auditor s Report on the Annual Report and Financial Statements for 2016 was unqualified, and did not contain a statement under 498(2) or 498(3) of the Companies Act The condensed financial statements for the period ended 30 June 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 Interim Financial Reporting as adopted by the European Union. The information in these condensed financial statements does not include all the information and disclosures made in the annual financial statements. Accounting policies The condensed financial statements have been prepared in a manner consistent with the accounting policies set out in the group financial statements for the twelve months ended 31 December 2016 and on the basis of the International Financial Reporting Standards (IFRS) as adopted for use in the EU that the Group expects to be applicable as at 31 December IFRS are subject to amendment and interpretation by the International Accounting Standards Board (IASB) and there is an ongoing process of review and endorsement by the European Commission. None of the new standard amendments or interpretations that have become effective in the period has had a material effect on the Group. The Group is reviewing the impact of on the financial statements of the relevant forthcoming standards, including IFRS 15: Revenue from Contracts with Customers (effective 1 January 2018), IFRS 16: Leases (effective 1 January 2019) and IFRS 9 Financial Instruments (effective 1 January 2018). Whilst substantially all the Group s revenue will be classed as revenue from contracts with customers under IFRS 15, the new standard is not expected to require material changes to the timing of revenue recognition. Under IFRS 16 the Group s operating leases will be accounted for as right of use assets, which will be largely offset by equivalent lease liabilities. The assets will be recognised as property, plant and equipment and the lease liability will increase net debt. The impact to profit before tax is not expected to be material. It is not anticipated that there will be a material impact in respect of IFRS 9, as the Group has minimal financial assets (except for trade debtors). Parity Group plc 11

13 Notes to the interim results continued 2 Segmental information Six months to 30 June 2017 (unaudited) Before Parity non- Non- Parity Consultancy recurring recurring Professionals Services items items Total Revenue from external customers 38,988 3,927 42,915 42,915 Inter-segment revenue 1,725 1,725 1,725 Segment revenue 40,713 3,927 44,640 44,640 Attributable costs (39,581) (3,381) (42,962) (42,962) Segmental contribution 1, ,678 1,678 Group costs (566) (566) Depreciation and amortisation (141) (141) Share based payment (52) (52) Operating profit Finance costs (235) (235) Profit before tax (continuing activities) Six months to 30 June 2016 (unaudited & restated) Before Parity non- Non- Parity Consultancy recurring recurring Professionals Services items items Total Revenue from external customers 43,561 2,660 46,221 46,221 Inter-segment revenue Segment revenue 43,561 2,660 46,221 46,221 Attributable costs (42,446) (2,194) (44,640) (44,640) Segmental contribution 1, ,581 1,581 Group costs (634) (634) Depreciation and amortisation (179) (179) Share based payment 4 4 Other non-recurring items (270) (270) Operating profit 772 (270) 502 Finance costs (221) (221) Profit before tax (continuing activities) 551 (270) 281 Parity Group plc 12

14 Notes to the interim results continued 2 Segmental information (continued) Year ended 31 December 2016 (audited) Before Parity non- Non- Parity Consultancy recurring recurring Professionals Services items items Total Revenue from external customers 86,419 5,345 91,764 91,764 Inter-segment revenue Segment revenue 86,900 5,345 92,245 92,245 Attributable costs (84,240) (4,435) (88,675) (88,675) Segmental contribution 2, ,570 3,570 Group costs (1,383) (1,383) Depreciation and amortisation (365) (115) (480) Share based payment (56) (56) Other non-recurring items (240) (240) Operating profit 1,766 (355) 1,411 Finance costs (452) (452) Profit before tax (continuing activities) 1,314 (355) Non-recurring items Six months to Six months to Year to (Unaudited) (Unaudited) (Audited) Continuing operations Restructuring Employee benefit costs Other operating costs Property costs Transaction costs Write down of GPSeer 267 Insolvency dividend (306) Total non-recurring items There were no non-recurring items in H The continuing operations non-recurring charge for 2016 included: The write down of assets in the GPSeer joint venture. GPSeer was an initiative under the previous digital strategy to develop a cutting-edge internet search engine. Since the change in strategy, no further development work had been performed by the Group. Restructuring costs including compensation payments incurred to downsize the Talent Management service offering in Northern Ireland, the cost of Board changes aligned to the Group s strategy, and residual expenses incurred to close the Golden Square service offering. Parity Group plc 13

15 Notes to the interim results continued 3 Non-recurring items (continued) Transaction costs relating to professional services incurred to implement the Board s strategy to focus on core business. Property provisions represent empty property costs incurred as a result of centralising the London office. The insolvency dividend related to a one-off payment received in 2016 from the administrators of a legacy overseas subsidiary. 4 Finance costs Six months to Six months to Year to (Unaudited) (Unaudited) (Audited) Bank interest payable Net finance costs in respect of post-retirement benefits Total finance costs Bank interest payable is in respect of the Group s invoice financing facilities. 5 Tax Six months to Six months to Year to (Unaudited) (Unaudited) (Audited) Current tax Deferred tax (8) Total tax (credit)/charge (8) Six months to Six months to Year to (Unaudited (Unaudited) and Restated) (Audited) Continuing operations Discontinued operations (64) (23) (31) Total tax (credit)/charge (8) Parity Group plc 14

16 Notes to the interim results continued 6 Discontinued operations Six months to Six months to Year to (Unaudited (Unaudited) and Restated) (Audited) Note Pre-tax loss from discontinued operations (494) (96) (109) Taxation credit Loss for the period (430) (73) (78) Basic loss per share p 0.07p 0.08p Diluted loss per share p 0.07p 0.07p The loss from discontinued operations relates to the Inition cash generating unit and expenses associated with its planned disposal. 7 Earnings per share The calculation of earnings per share is based on profit after tax from continuing operations of 628,000 (30 June 2016: 236,000, 31 December 2016: 884,000). The calculation of loss per share from discontinued operations is based on loss after tax from discontinued operations of 430,000 (30 June 2016: loss of 73,000, 31 December 2016: loss of 78,000). The weighted average number of shares used in the calculation of the basic and diluted earnings per share are as follows: Six months to Six months to Year to (Unaudited) (Unaudited) (Audited) Number Number Number Basic Weighted average number of fully paid ordinary shares in issue during the period 102,050, ,824, ,824,020 Dilutive Weighted average number of fully paid ordinary shares in issue during the period 102,050, ,824, ,824,020 Dilutive effect of potential ordinary shares 3,878,205 1,845,606 4,691,303 Diluted weighted average number of ordinary shares in issue during the period 105,928, ,669, ,515,323 Number of issued ordinary shares at the end of the period 102,124, ,824, ,824,020 Parity Group plc 15

17 Notes to the interim results continued 7 Earnings per share (continued) Basic earnings/(loss) per share is calculated by dividing the basic earnings/(loss) for the period by the weighted average number of fully paid ordinary shares in issue during the period. Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all potentially dilutive ordinary shares. 8 Post retirement benefits The Group provides employee benefits under various arrangements, including through defined benefit and defined contribution pension plans, the details of which are disclosed in the 2016 Annual Report and Accounts. At the interim balance sheet date, the major assumptions used in assessing the defined benefit pension scheme liability have been reviewed and updated based on a roll-forward of the last formal actuarial valuation, which was carried out as at 5 April The following changes in estimate have been applied to the IAS19 valuation as at 30 June 2017: % % % Rate of increase in pensions in payment Discount rate Retail price inflation Consumer price inflation Movement in share capital and other reserves In May 2017, a capital redemption reserve of 14,319,000 was created when the Directors resolved to cancel the deferred shares of Parity Group plc. Prior to the resolution, this amount was recognised as deferred share capital. The deferred shares were not listed on the London Stock Exchange, had no voting rights, no rights to dividends and the right only to a very limited return on capital in the event of liquidation. 10 Commitments and contingencies The Group leases various buildings which operate within all the segments. The leases are non-cancellable operating agreements with varying terms and renewal rights. The Group also has various other non-cancellable operating lease commitments and a small number of assets that are held under finance leases. The finance leases have varying terms and renewal rights. 11 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are therefore not disclosed in this note. There were no other related party transactions during the period (2016: none). 12 Post balance sheet events There are no post balance sheet events to report. Parity Group plc 16

18 Statement of directors responsibilities The directors confirm, to the best of their knowledge: The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union; The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules of the United Kingdom s Financial Services Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year, and gives a true and fair view of the assets, liabilities, financial position and loss for the period of the Group; and The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom s Financial Services Authority, being a disclosure of related party transactions and changes therein since the previous annual report. By order of the Board John Conoley Non-Executive Chairman 14 September 2017 Parity Group plc 17

19 Independent review report to the members of Parity Group plc for the six months ended 30 June 2017 Conclusion We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2017 which comprises the consolidated statement of comprehensive income, consolidated condensed statement of changes in equity, consolidated condensed statement of financial position, consolidated condensed statement of cash flows and the related explanatory notes. Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the AIM Rules. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Directors responsibilities The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review. Parity Group plc 18

20 Independent review report to the members of Parity Group plc continued for the six months ended 30 June 2017 The purpose of our review work and to whom we owe our responsibilities This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Kelly Dunn (Senior Statutory Auditor) for and on behalf of KPMG Audit LLP Chartered Accountants 15 Canada Square London E14 5GL 14 September 2017 Parity Group plc 19

21 Parity Group plc Dawson House, 5 Jewry Street, London, EC3N 2EX Tel: Perivan Financial Print