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Norman Broadbent plc

Q&A with CEO Mike Brennan & CFO Will Gerrand at Norman Broadbent Plc (LON:NBB)

Norman Broadbent Plc (LON:NBB) Chief Executive Officer Michael Brennan and Chief Financial Officer Will Gerrand caught up with DirectorsTalk for an exclusive interview to discuss what has been achieved in the last 2 years, major shareholders, how the company is different, the latest results and their vision for the future.

 

Q1: Mike, can you tell us about Norman Broadbent and what has been achieved since you joined 2 years ago?

A1: A little bit of background if I may, the company itself if 40 years old, we’re traded on AIM here in London and we started out life as a very big and very significant traditional executive search business.

What’s happened is the world of work has changed, how we engage employees, how people hire them, how they retain them, all of things are changing in a very complex world that we live and work in now. So, we’ve really had to think about how we can transform ourselves so that we can become far more relevant to what our clients need today.

So, since I joined, just over 2 years ago, we’ve effectively transformed the company into more a professional services firm. So, instead of us focussing at the very top end of the market and only really offering one service line, which is high-end executive search, instead what we’ve gone and done is we’ve created some new service lines which are very complementary. They are designed to help our clients meet all of their talent acquisition needs and they’re also designed to help advise our clients as well when they’re making key strategic decisions around people.

So, the five service lines that we have in the business today, one is leadership search so that’s Board level executive search and it’s C-Suite Managing Director level executive search.

We then have a solutions business and they focus on up and coming, ‘the leaders of tomorrow’, high potentials, hard to find talent and when you think that the UK market is going to be about 500,000 managers short within the next few years, there’s a big talent gap there to fill. So, our team work in a very agile and flexible way with clients to help them resolve those needs.

We then have an interim management business, that’s really taken off in the last year. They tend to work at the more senior level of the market so often clients will have a specific need, but they won’t need to have a full-time employee for more than 6 months. What we do is we engage with professional consultants who can go in and they can drive a transformational programme, they can drive a regulatory change or the company itself could be in some kind of difficulty and they need a turnaround specialist. So, they’re the kind of people that we deal with there and we often operate under non-disclosure agreements with our clients so the kind of companies we work with, you will often read about in the financial press as either going through some kind of change or some kind of difficulty.

We’ve then got a fourth service line which is Norman Broadbent Consulting and they offer effectively assessment services so psychometric and assessment services to clients. They help clients select the right candidates using science and they also help identify development needs in their existing employees, so they can get more out of them.

The final piece of the jigsaw is research and insight and that’s a new service line, it started in the middle of last year. That’s all about bringing business intelligence, market intelligence, talent intelligence to clients and helping them make decisions, again which are more evidence based.

So, clients used to buy one thing off us, they’ve now got the opportunity to buy five and in addition to that, they don’t have to necessarily just buy one, they can buy them in a bundle. So, it could be a piece of research prior to setting out on a journey in terms of hiring people and then it could be the assessment piece after they’ve been hired to help with their development needs. So, that’s roughly how we’re bringing the group together.

 

Q2: Who are your major shareholders?

A2: We have a shareholder list to die for. I was at a recent QCA dinner with a group of CEO’s and they were aghast at the quality of our shareholder register.

So, just under 30% of our business is owned by Downing Capital, Downing Capital is a very successful investment fund, I think they’ve got about £1 billion under management. They tend to work with high-growth, small-cap type businesses in the public markets, they do some private market investments as well, off-market investments. So, they’re used to working very closely with their companies that they invest in, so they’ve got a very strong almost private equity ethos.

We’ve then got Ennismore which is a very successful investment fund, they own about 17%/18% of us. We’ve then got Gervais Williams from Miton, he came in last year and he owns about 6%.
We’ve also got the guys down at City Financial, they’ve got about 6% and we’ve got a very well-known investor, he’s got his family office in there, he’s done extremely well in our sector called Pierce Casey.

Finally, I think a name that you’ll be very familiar with is Jon Moulton, so Jon Moulton and his family have got a significant holding in us, I think they hold about 13% or 14%.
So, it’s a really strong shareholder register and all of our shareholders have been extremely helpful and have been very value-added as we’ve gone through this transformation.

 

Q3: So, what makes Norman Broadbent different and why do clients want to work with you?

A3: I think it’s the fact that we go into meet our clients and we have a very solutions-based approach so if our client has got a problem, we’ll try and find a way to solve it for them. So, rather than going in and just trying to sell them one thing, whether it fits or not, that’s just not our way.

We work quite creatively with clients to understand their problems and then we’ll craft a solution to help them meet the challenges that they’re facing. That could be around diversity so for example, I’m sure that you’ll have read and heard about some of the issues that we have at Board level around diversity where there is gender imbalance, there’s obviously some great initiatives now to get more females on board. We ask the question ‘where are you finding that talent’, ‘where is that talent going in your organisation’ and we’re now working with clients to fill a talent topper so to make sure that they’ve got at least 30% of their executive pipeline of talent is female. If they don’t have that pipeline, they’re never going to be able to meet the Board requirements of having at least a third of their Board female.

So, it’s things like that, they’re quite different, they’re quite creative, they’re very action orientated so we can make a difference for clients very quickly.

 

Q4: Will, as CFO, can you give a summary of your recent results?

A4: So, year-on-year, revenue was up 15% to just over £6.5 million, we are very pleased with that growth because it comes from a balance across our portfolio which leaves us less reliant on what was our traditional search business as a group. Our loss after tax from continuing operations increased slightly by £300,00 to £1.6 million but we still had some one-off costs of transformation in the year of around £750,000, compared with £300,000 in the previous year, contributing to that loss. I think that’s probably the highlights of our results.

For me (Mike Brennan), what leapt out for me was not just the increase in revenue, it was the fact that we actually got more revenue out of fewer people. I think Will’s right to call out the fact that we’ve got revenue coming from a range of different business lines now, that’s really important for us because it means we’re more resilient, it means if one part of the business suffers, we’ve got four other parts of the business that can help fill that gap, so we’ve got a good revenue mix.

We’ve also got very high quality annuity revenue in there as well which is coming in from the interim business, again that helps gives us more resilience which permanent recruitment businesses wouldn’t have.

If you look at the underlying numbers, where we see some really significant growth is in interim, so I think we hit 140% there, our solutions business was up I think on the previous year 120% so we’re seeing some really good strong levels of growth coming from the different divisions.

We’ve still got more work to do, it’s still working progress but if you look on our quarter-on-quarter growth, if you look at Q1 2018 we’re 25% plus above where we were at the same time in the previous year, in Q1 2017. Our Q4 2017 which was the best quarter of last year and Q1 2018, in terms of trading, we were above Board expectations, so a lot of hard work has gone into it, but I’d like to think that the trends are all quite positive.

 

Q5: Now, Mike, I know you want to grow, what is your vision for the future and how do you see Norman Broadbent developing?

A5: Our ambition is we don’t want to be the biggest in the world, we don’t want to be the biggest in the UK, we want to really build on what is still a very powerful brand. There are very few boardrooms in the UK where our name is not known so that gives us a powerful entry point in most businesses.

We want to build what really should become and should be regarded as a professional services businesses and it’s going to be staffed with very creative entrepreneurial individuals very professional and very solutions orientated. We want to craft working commercial solutions for our clients to help them meet their organisational needs and to help them meet their people needs.

So, I want our brand to continue to be synonymous with excellence, it’s always been regarded as that, but I also want it to be regarded as creative, entrepreneurial and quite cutting edge.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.