Norman Broadbent expects to emerge stronger from pandemic

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What it does

Executive search still accounts for the majority of sales but customers are increasingly using the other services Norman Broadbent Plc (LON:NBB) provides.

It started as a traditional executive search firm but under the current management has added a number of divisions including solutions, interim management and consulting.

 

How it’s doing

In January, Norman Broadbent reported it stayed profit in 2020 despite the adverse impact of the coronavirus pandemic.

The AIM-listed group said actions taken at the start of the pandemic had enabled it largely to offset a drop in group net fee income of 18% to £6.2mln in the year to end December 2020.

Gross margins increased to 79% (2019: 66%), with cost-cutting measures introduced at the start of the lockdowns in March meaning positive underlying profits [EBITDA] for the full year.

Debtors days had also improved boosting liquidity, said Broadbent, aided by a £250,000 six-year term Coronavirus Business Interruption Loan.

 

What the broker says

WH Ireland has highlighted that NBB is a leading specialist in its field of Human Capital Solutions.

“We view its service portfolio mix as innovative, effective and, perhaps, unique. The brand has been built over 40 years making NBB one of the best-recognised names amongst senior-level decision-makers,” it said a note on 23 February.

“The strong brand has facilitated the growth of complementary activities (via the brand ‘halo effect’) and helped drive high levels of cross-selling given the company’s array of relationships with these decision-makers.”

Elsewhere, providing skilled services – research & insight, interim management, leadership consulting and board advisory – has lifted the group’s earnings mix, protecting group’s margins, creating entry barriers, and enhancing cross-selling opportunities, says the broker.

The range of revenues from differing service lines also creates more balance and resilience as well as a hedge against market cycles.

As against traditional service line teams, NBB is now organised around sector or functional ‘Hubs’ meaning the client is better serviced, all service lines are represented, and opportunities for growth via cross-selling are increased.

“While we only have formal forecasts in place for the current year, and hence are not providing a fair value assessment, plausible scenarios clearly demonstrate good potential for fair value upside.

“We note that the company has been successful in obtaining CBILS loans and currently has little or no debt. Accumulated tax losses are an estimated £11.8mln.”

 

What the boss says: Mike Brennan, chief executive

“The strategy of building a broader portfolio of services stood us in good stead in the run-up to, and during, the pandemic.

“Notwithstanding the uncertain economic environment, our goal this year is to strive to grow NFI back towards 2019 levels whilst continuing to build upon our successes in 2020 in carefully managing our cost base.”

 

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