Norman Broadbent Plc (LON:NBB) Chief Executive Officer Michael Brennan caught up with DirectorsTalk for an exclusive interview to discuss his vision for the company when he first joined, the changes made, fuelling growth, financial changes, having a great shareholder register and recognition in the wider market.
Q1: Mike, just looking back, can you give me an overview of your vision for the company when you first joined? What did you think it should eventually look like?
A1: I had some very firm views about the business base don the fact that I’ve been working in this market as a professional and someone who has been driving and building businesses in this space for 25 years.
My vision really was to create something that was much more like a professional services business so move away from being a traditional albeit very high-level Executive Search firm and instead create something that was much more like a professional services business. So, that’s pulling together a range of very relevant value added services which clients can use when it comes to talent, obviously great talent drives great companies and great talent is in great demand.
What I wanted to do is move away from that very point and shoot transactional model that existed in the recruitment market at the time and instead to create something that was very very different, that would be very sticky, that our clients would want to come back and use again and again and again. That’s great for them, it’s great for our business and obviously, from an investor perspective, it’s great for investors as well.
Q2: How did that compare with what you actually found on day 1?
A2: So, when I came into the business, into Norman Broadbent, 79% of revenue came out of traditional Executive Search, now, traditional Executive Search, it’s a market that’s changing, it’s becoming increasing transactional and commoditised. Whilst there’ll always to be a place for it, clients can go down 6 or 7 different channels or routes to market to find talent before they have to necessarily pay for it with a firm like us.
What I wanted to do was create a business that was much more balanced and by balanced, what I mean is we had a balanced range of services but we also had a balanced of revenue so we weren’t too dependent on one single service line.
So that’s why we created the business that we have today which looks at search, it looks at other services lines as well which I’m happy to talk you through.
Q3: So, what did you do then?
A3: When I first came in, I met the investors, it was kind of like Dragon’s Den and they recognised a very strong iconic brand, it was a brand that opened doors, a trusted brand, it had fantastic history heritage and it had some super cases studies.
We had to change a lot of things in the business and we had to bring effectively 5 new service lines together so that was Executive Search, Interim, Consulting, Solutions and Insight and effectively we brought 3 new service lines into the business.
We had to change the culture within the organisation quite a lot so I was very keen to build something that was very innovative, very creative, very entrepreneurial. We’re dealing with very demanding clients, they’re very sophisticated, they’re very complex so their needs are very complex and we needed to bring quite innovative and creative solutions to help them meet some of these very very complex needs.
So, we had to change a lot of people and that doesn’t mean to say we had bad people in the business, it’s just that the business was having to move on and I needed to make sure that the team I had around me were fit for the future. So, we built almost an entire new management team, a new leadership team.
We brought in a new Head of Executive Search to head our Search and our Board practice, we created the role of Head of Research and Insight so we brought a very very talented experienced lady into the business to run that for us.
We bought in a new Head of Interim, again a lady, very talented, hugely experience to completely rebuild our proposition and put some big differentiators in place and our Head of Consulting has been with us a long time, he’s an excellent guy also he’s continued what he’s doing.
We also went and effectively shut down what was called AGP and we created something called Normal Broadbent Solutions and again, we’ve got a new Managing Director in charge of that.
So, we’ve built that leadership team, we started to put some new initiatives out in the market so rather than just talk about one thing we’re able to talk about five things. We changed the way we engage with clients so rather than walk in and try and sell them something, it’s much more consultative so we listen to their issues and we then craft a solution. Effectively, what we’re doing with our clients now is we’re helping them make the right choices when it comes to putting these solutions in place to meet some very very complex needs.
We had to rebrand so we didn’t change the name Norman Broadbent, that’s hugely powerful, but what we did is we had to freshen it up and we had to really go out and really educate our existing clients about what we were now doing. We had to educate an entire new market for who we are and what it stands for and what it does.
The market in the UK is worth about £1.6 billion a year and we’ve got about 1 and a bit percent of that so there’s a huge amount to go for, it’s a massively fragmented market. So, the growth opportunity for us in that market is quite significant and the numbers – we can talk through those later – bear out the fact that there is this market to go at and we’re building market share.
Q4: So, how does it look now?
A4: As I said earlier, we’ve got these five different service lines so if I go back to what I said earlier on, we had 79% of our revenue coming out of Executive Search and one of my objectives was to try and create more balance in the business in terms of the services that we offer to our clients and obviously that would drive the revenue mix across the business. So, we’ve pulled through the new service lines so our Solutions business, Research and Insight and Interim.
So, if you look at the business today, we gave a trading statement at the beginning of this year, that as of the end of last year, 46% of our business comes out of Executive Search, 10% of it comes out of Research and Insight, about 24% of it comes out of Interim and pretty much the rest of it comes out of Solutions with a few percent coming out of Consulting.
We’ve achieved a balance now in the business which I think is great for our clients and it’s great for the business because it makes it more robust, we’re able to withstand more shocks in the economy because we’ve got more things to talk about with clients s it gives a level of resilience.
Off the back of that, it means that hopefully the stock market is going to look at us differently and say ‘hey, this isn’t a traditional recruitment business anymore, this is a professional services business’ and therefore we need to rearrange it accordingly.
Q5: Have all of these changes helped to fuel growth do you think? You’ve just pointed out how big the market is, was there a gap in the market which you have filled or do you actually create that need?
A5: Well, yes, the changes have definitely helped fuel growth. If you look at a lot of our bigger competitors, you’ll see that they have actually done similar to us although not to the same degree that we have. We’re smaller than they are, we’re based in one place, we’re much more agile and flexible and we can price differently bring different things into an overall solution which we put back to clients.
So, we don’t just have to do one thing, we can build in a number of different services lines to help a client get the best solution to a problem they may have. We’re not feeding this giant machine that some of our competitors have built up so that flexibility and agility has really helped us.
If I look at the year-on-year growth since I’ve been in the business, I’ve been here now almost 3 years, 3 years in a couple of days, we’ve seen double digit growth at revenue year-on-year since I’ve been in the business.
If I look at the trading statement that came to market earlier this year where we advised on our 2018 trading, we saw a 40% year-on-year growth during 2018 which is quite significant and if you look at the bottom line, there was a 55% positive swing EBITDA last year as well.
So, these changes that we’ve made have definitely fuelled growth.
In terms of the market itself, was there a gap in the market or have we created something, I think it’s a bit of both actually. I do think that clients were looking for something different, the recruitment industry hasn’t really changed much whereas the clients it’s been servicing has so we really did need to bring something more relevant to our clients and I think we have been a breath of fresh air in the market.
So, if you look at those five things we do as a professional services business, as far as I’m aware there is no other firm of our size in the UK doing what we’re doing. There may be some firms out there that do bit of it but when they do bits of it, they tend to be quite siloed where we have no internal barriers to communication, we have no internal barriers to client referrals, we share a single CRM, we sit in one big office, we don’t break people down into individual service lines, everybody sits together.
So, there’s a huge amount of osmosis, if you like, across the business and that enables some great thinking and it enables some great cross-selling, if you look at the Norman Broadbent Solutions business, for example, half of its business comes off the back of internal referrals. When I came into the business 3 years ago, that business as it was then received virtually no referrals internally.So, you can see the fact that we bought these businesses together, that we’ve created these new service lines, it’s creating more opportunities. Our cost of new client acquisition is going down, our costs of new business acquisition is going down and it makes us much stickier in the market.
So, I think there was a gap and I think we’ve successfully filled it, I think we have created a level of need as well. So, some of the things we’re doing particularly Research and Insight, firms like ours just weren’t offering these services to clients before and suddenly clients are buying them because they see the relevance and the importance of it.
Q6: I think you’ve touched on the financial but how have they changed over the years?
A6: I guess the biggest thing for me was what I said earlier, it was the fact that we have seen this increase in revenue and we’ve seen this shift in mix, I think that’s the really big thing.
So, if you’re an investor looking at a business like ours, investors will value revenue in different ways so if you look at bog-standard recruitment businesses, they attract a fairly low multiple because they are transactions one-off fees. We’ve bought into our business now the Interim service so that is annuity revenue, it’s guaranteed, it’s month-on-month, these can be 6/9/12 month contracts anecdotally we gather that we’re probably the highest margin business in this space.
Just the fact that we’ve now got that in there, that shifts I think our investor proposition quite significantly because we’re a less riskier bet when people look at the revenue mix. If you look at our Research and Insight business, that actually drives and enables a huge amount of spin-off business as well so a client might buy a piece of research and then off the back of that it will inform them about a particular aspect of the market and off the back off that we’ll win more work for other parts of the business.
So, things have changed quite significantly financially, bottom line has shifted, I think that says it all.
Q7: Just talking about your investors, they must be pleased with the way things have turned out?
A7: I got some wonderful emails from a couple of our investors over the last few days, obviously because it was my 3rd anniversary, we’ve got a great shareholder register, I actually couldn’t ask for better supportive shareholders.
When I came in, the business had a market cap of £1.6 million as it stands today, the market cap is about £6 million. Now, we’ve raised some money during that period so that’s accounted for some that but nonetheless has been an uptick, we saw a bounce when we released our trading statement a few months ago, again, positive news coming into the market always helps.
Our shareholders are very long-term, they’re very patient. We’ve got people in there like Gervais Williams at Miton Group, Downing Capital, Judith Mackenzie, she’s a really really well-respected long-term investor and we’ve got the guys at Ennismore. We’ve got Jon Moulton in, so big city name, very successful, Jon’s in personally, and we’ve got a very famous and well-known entrepreneur from within our industry, Pierce Casey, who again is a very big shareholder.
So, we’ve got a super shareholder list and we enjoy very good relations with them.
Q8: I’ve heard on the grapevine that your efforts have been recognised in the wider market would you say?
A8: Yes, there’s going to be an announcement made I think in the next week or so.
There’s a very very well-read, very influential business magazine called CEO Today and I’ve been recognised as one of the Top 100 CEO’s in Europe for the work I’ve done at NBB. It’s hugely flattering, I didn’t even know I’d been nominated until I got the letter from the editor.
As I said to my team, my name is on the award but at the end of the day, this is about Norman Broadbent, I didn’t do this on my own. I think it says a lot about the people we’ve got and their resilience and their entrepreneurial flare and creativity that’s enabled this wonderful recognition
It’s not about recognising me, I’m the face of this award, but it’s about recognising the wider team. I’ve said to them ‘if you think this award is going to sit on my desk in my office, you can think again, I’m going to put it on the reception area’ because everybody needs to know that it’s as much theirs as it is mine.