Norman Broadbent plc (NBB) Earnings Call Transcript & Summary

Good morning, and welcome to the Norman Broadbent plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish its response where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Kevin Davidson, CEO. Good morning, sir.

Thank you, Lily. Good morning, everyone. With you from Norman Broadbent, you have myself, Kevin Davidson. I've been the CEO since September 2021; and Mehr Malik, who joined as CFO in early 2023. We're delighted to be reporting to you on a very strong set of numbers and to update you on a successful turnaround of the business. We'll also share our views on the strategic direction of the company. With the turnaround now delivered, we're looking forward with real confidence, excited at the opportunity we have to materially scale our business. The key headlines from today are, 2025 was another record-breaking year across all key metrics. We hit our medium-term EBITDA target of GBP 1.25 million. In fact, a very strong close to the year meant we actually exceeded it, delivering GBP 1.3 million of EBITDA in 2025. Turnaround of the business is now complete. Whilst we will continue to evolve and improve wherever we can, Phase 2 is focused on more disciplined strategic investment to meaningfully scale the organization. This will create a substantially more profitable and cash-generative business over time. And we're doing this with solid foundations. The balance sheet has been strengthened markedly and with a much more robust cash position and a cleaner capital structure, we're in a much better place to drive our strategic growth plans. Finally, we started the current year with strategic momentum. We've made 4 key hires in line with our organic growth strategy, and we've complemented this with the acquisition of Society Limited. This is a transaction which we think represents excellent value for share [ for us. ] We'll cover this in more detail later in the presentation. So we'd like to start our IMC presentations with a quick summary on who we are and what we do. For those of you who are less aware of the brand, Norman Broadbent is the oldest U.K. headquartered executive search firm with over 45 years of rich [ heritage. ] We serve clients globally across 79 countries to date. In recent years, we have focused our efforts back on building the core of executive and nonexecutive Board search, whilst also still providing a broad range of related leadership advisory services. These cover interim management, leadership assessment, development and other research and insight services. It's also worth noting that we are the only U.K.-listed executive search firm. We believe that this provides us a unique and powerful platform to capitalize on the considerable consolidation opportunities, which exist across our market. Bringing Society into the fold is certainly a good example of this, and we continue to look for opportunities to strengthen our business through M&A where it makes strategic and financial sense to do so. And again, by way of an overview on the business, our 2 most material service lines are Executive Search and interim management. The key top line metric of our business is net fee income. And just to recap, net fee income is the total of search fees generated from placing permanent candidates plus the margin we earn from our interim placements. Our core business is in the delivery of retained executive search services. This market is valued at over $20 billion globally by the Association of Executive Search Consultants. It is highly consultative, which naturally is less disrupted by developments in AI than other more transactional recruitment and staffing solutions. All of our work is at the senior end of organizations and is retained with our fees being paid in 3 stages: a project instigation, delivery of shortlist and upon placement. Our interim management services are again highly consultative, supporting clients with critical gap management or strategic transformation programs. The turnaround time of these projects tends to be much quicker than search and fees are generally contingent on success. Payments can be on a margin day rate basis or a one-off upfront fee for a fixed term contract. Here is a snapshot of some of the clients we partner with across the industry sectors we focus on. You will see a lot of recognizable brands, many of which we have preferred supplier status with and deliver multiple projects for every year. In 2025, 67% of our revenue came from clients that we had previously worked with. This demonstrates a healthy repeat business platform whilst also underscoring our commitment to new business development. With the acquisition of Society, we also open up the charity and not-for-profit sectors, along with higher education and broader public sector markets. Before I hand over to Mehr, who will summarize our financial performance, it's worth providing some market context. These statistics are for the U.K. Following the post-COVID boom in recruitment, the labor market has been in a negative cycle since 2022. There have been deeper negative cycles over the past 30 years, notably the dot-com crash, global financial crisis and, of course, COVID, but none have been as enduring as this one. Uncertainty seems to be the new certainty with current geopolitical upheaval amplifying that point. That said, we have successfully navigated a very challenging and complex market over the past 4 years, and we're confident that we'll continue to do so. I will now pass over to Mehr to discuss the full year '25 financial performance in some more detail.

Thank you, Kevin. As has already been mentioned a couple of times, 2025 was a record-breaking year for us across the board, and I'm delighted with the progress we have made. NFI is a key item for Norman Broadbent as it represents the revenue that our fee earners have been able to generate for the year. For 2025, we achieved NFI of GBP 12.3 million, which is a 32% increase year-on-year. Maintaining a disciplined approach to cost management, we achieved underlying EBITDA of GBP 1.3 million, which equates to an 11% margin, a significant increase on last year. Profit before tax of GBP 0.6 million is a strong turnaround from the GBP 0.2 million pre-loss tax last year. And we ended the year with net cash of GBP 1.5 million, an increase of GBP 1.4 million compared with financial year 2024. This growth translated into earnings per share of 43.1p. Headcount is another key performance indicator for us. We increased key headcount by 4 in 2025, and our headcount growth has been disciplined and fairly linear. We are pleased with the quality of the people that we are able to bring into the business. It can take fee earners varying amounts of time to bed in and market dynamics can influence productivity. So NFI growth is not always immediate. However, we expect this to come through over the medium to long term. As our cohort of established fee earners continues to grow, so does our ability to generate NFI. Adding quality people that fit our culture continues to be a focus for us going into 2026. We are a services business and therefore, require little capital investment to grow. Additionally, we have positive working capital balance when we are growing as our executive search clients pay for 2/3 of our search services upfront, while a large proportion of our bonuses are paid following the year-end. This dynamic can be seen in our strong cash conversion with ratios of over 100% achievable. I would like to take a moment to talk you through our capital allocation priorities. As you will have heard from Kevin, our strategy is to invest in the business, both organically through hiring more quality people and also inorganically through opportunistic but disciplined M&A. Our first priority for the capital that we generate is to add profitable fee earners. The timing of this spend is dependent on when we are able to find the right people, and it is worth remembering that it takes circa 18 months for these individuals to get up to speed. Our second priority is to maintain a sustainable balance sheet, and this is something that we have worked on for the last few years. This process was completed in the first half of last year with the repayment of the CBILS loan, and we now have no debt outstanding. Having said that, our third priority is to use disciplined M&A to scale headcount, and we will use our balance sheet for that where appropriate. There are 2 final items I would like to raise. The first is our share consolidation and subdivision, which completed in May 2025. Every 70 ordinary shares were consolidated into 2 new ordinary shares. This reduced the number of shares in issue from over GBP 66 million to just over GBP 1.9 million and has created a simpler and more manageable capital structure. As part of this process, the nominal value of each share increased from 1p to 5p. This creates a healthier buffer between the share price and nominal value, giving the company greater flexibility for any future corporate activities. Finally, given our recent progress, we have proposed a capital reduction. This aims to further simplify our capital structure and create distributable reserves. This will give us flexibility in the future to more easily distribute profits to shareholders through dividends and/or buybacks. The capital reduction will not impact shareholders' existing holdings and does not change the number of ordinary shares in issue. We are a cash-generative business. And whilst our current priorities are organic and inorganic growth, we do expect to be in a position in the future to increase shareholder returns, and this move gives us the capability to do that. Thank you, and I will now hand back to Kevin.

Thank you, Mehr. Our NFI performance provides the greatest evidence of our strategic progress to date. This slide shows our net fee income quarter-by-quarter over the past 5 years. As you can see, whilst NFI does vary on a quarterly and annual basis, the directional trend since 2021 has been clearly positive. When we look at 2025, it is noticeable how consistently strong the year was in terms of quarterly NFI performance. Indeed, Q4 was our strongest quarter in over 10 years with NFI of $3.3 million. Whilst we're delighted with the success and consistency of 2025, we also need to remind investors that performance for this type of business can be nonlinear. Now to look into some more detail on what has underpinned our progress. We have used these strategic pillars as the foundation for driving our successful business turnaround. All of these foundations are essential in any successful executive search business and our focus on continual improvement across all of these will not falter in the years ahead. Firstly, our people and culture has and will continue to be at the heart of everything we do. This enables us to retain, attract and develop the best quality people. Having completely reset our culture around shared values at the end of 2021, we're delighted to have achieved outstanding accreditations for our workplace culture from best companies in both 2024 and 2025. In 2025, we ranked in a number of best categories, including the 31st Best Small Company to Work for in the U.K. We have grown overall headcount since the end of 2021 to the end of 2025 from 39 to 62. This includes significant upgrading and restructuring with only 15 of the pre-turnaround teams still here. In addition to headcount growth, we have considerably improved the productivity of the team with income per consultant growing 61% over that period. Our next strategic priority has been brand and market positioning. Like our culture, we have completely transformed the brand and the market positioning of the firm in the past 4 years. From our logo, website and all marketing collateral to our thought leadership activities and our social media presence, the image of the firm is much more modern, dynamic and positive than ever before. This, along with the quality of our team, has a direct impact on the seniority of the roles we are mandated to work on. Within 18 months of beginning the turnaround process, our average fees per search have doubled and remain at very healthy levels, reflective of our position back at the senior end of the market. Our international brand presence has also improved considerably with our non-U.K. net fee income rising from 28% to 43% of total between 2022 and 2025. The next strategic priority is research and delivery. This is critically important in any successful search firm. We've made significant investments in building the research team and all supporting systems, processes and technologies, some of which are highlighted here. These investments have delivered higher levels of productivity with each member of the team supporting more fee earners and support staff as a proportion of total going from 26% in 2021 to 15% in 2025. In 2025, we also rolled out our selected AI-enabled psychometric assessment tool as a standard in all executive search processes. Next has been financial stability and performance. As these results demonstrate, the business is on a fundamentally different financial footing now compared to the beginning of the turnaround period. Mehr has covered this previously. The highlights for me are that we more than doubled annual net fee income between 2021 and '25, that we've delivered positive EBITDA in every year from 2022 onwards. Thirdly, that the business is generating sustained profitability and positive cash flows over time. And finally, that we have strengthened the balance sheet, turning a net debt position of GBP 1.1 million at the end of 2022 to one of net cash of GBP 1.5 million at the end of 2025. This provides us the platform to invest in more significant growth. And our final strategic priority has been business focus. Executive search growth has been a key element of the turnaround phase, and we're delighted with the obvious progress we have made. We have also refocused our interim management business, aligning consultants with the executive search sector teams. This has enabled much more effective collaboration and the diversification of our client base. We have successfully reestablished a Board practice, which provides fuel for growth across all sectors as our credibility and influence within the nonexecutive community increases. And finally, internationalization of the business has significantly contributed to our balanced growth in recent years. We have done this largely from the U.K. to date, growing international NFI as a proportion of the total. To continue to grow international markets, we are delighted to have made our first international hires in 2025 with one based in the U.S. and one in the UAE. So far in 2026, we have added one more in the U.S., more in the UAE and one in Norway, supporting our global energy practice. Moving on from our strategic pillars and the success of our organic growth activities, we are delighted to report the acquisition of Society in February of this year. Whilst a small transaction in terms of monetary value, we believe Simon and his team will flourish as part of Norman Broadbent. And the transaction will create meaningful value for our business and, of course, its shareholders. Society is a very complementary fit for us. It strengthens our capability in the third sector, and it's a business with a strong track record in travel and hospitality. This will strengthen our consumer markets practice and also aligns well with our successful aerospace and aviation team. From a financial perspective, we have acquired Society on a cash and debt-free basis for a total consideration value of GBP 33,000. This was satisfied through the issue of new shares. The acquisition helps underpin current year earnings expectations and provides an additional platform for future organic growth, both in the U.K. and internationally. I'm delighted to say the integration has gone incredibly well. Both cultures are completely aligned around values and the Society team have fitted in perfectly. This acquisition also brings our M&A strategy to life. This is an important element of our ambitious plans to materially scale the business over the coming years. We are continuing to look at opportunities to bring high-quality people to the business, both through organic investment and more disciplined M&A. Now turning our attention to the future. Norman Broadbent is very much back as a respected brand, and we have entered 2026 with a very strong platform to scale from. We have started the year with strong strategic momentum, making a number of key new hires and announcing our first acquisition. The market remains very complex and challenging. However, we are confident in our ability to successfully navigate this as we have over the past 4 years. Growth will continue to be nonlinear and driven by organic investment supported by strategic M&A where it makes sense. So why invest in Norman Broadbent? Firstly, we have demonstrated that we can achieve in a very depressed market. This has been the longest negative cycle the recruitment sector has seen for 3 decades. Despite continued geopolitical and macroeconomic challenges, we do believe the balance of our business and of course, the quality of our team will enable us to scale and successfully grow in the years ahead. Secondly, we have a somewhat unique and powerful combination of heritage and modernity. Our brand remains one of the most recognizable in the executive search market. It is increasingly respected once again at the highest levels of our profession. This brand value helps enormously in both our pursuit of strategic accounts and in our recruitment of talent. It is something our competitors take decades to achieve. Coupled with this, the transformation journey we've been on has completely modernized the business, which is now a dynamic, agile and technology-enabled firm, very much fit for the future. Thirdly, our portfolio is well balanced across sectors, clients and geographies. We will continue to grow the international mix of our business in a considered way, which will include the U.S. and the Middle East. Despite current market uncertainty, the U.S. does represent over 50% of the global executive search sector and is a market rich in opportunity for us. The Middle East is clearly facing some considerable challenges and uncertainties at the moment. Our investment and current exposure to the market is small and manageable, but the long-term opportunity remains vast across all market verticals. In time, as we continue to internationalize, we will also look to establish a more significant physical footprint in the Asia Pacific region. And finally, our people. Our ever-expanding team is really what sets us apart. With third-party awards recognizing the culture we have created, it is the quality of our people and the way they work together as a team that gives us our biggest strategic advantage. Thank you all, and we're now happy to take any questions.

[Operator Instructions] I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q&A can be accessed by our investor dashboard. As you can see, we have received a number of questions throughout today's presentation. And if I may just start off with the first question here, which reads as follows. Well done on a strong close to 2025. What's your view on 2026? Obviously, it's difficult to look too far ahead given the events in the Middle East. But can you give us a sense of how you're thinking about the year?

Thank you, Lily, and good question. The situation in the Middle East is obviously front and center for a lot of people at the moment, understandably so. But we're looking at 2026 from the position of the business being in very good shape, the best shape it's been in for well over a decade. And we've entered it with a very high-caliber team. So the team that we've assembled over the last 4 years is still in place and highly motivated for the next stage of our journey. We've articulated an ambitious growth strategy to the market, which is going to be two-pronged, fundamentally driven by continued organic growth and investment in headcount, but also complemented by M&A where it makes sense to do so. And we're delighted to have announced the first acquisition that we've made in this journey with Society in February, which, as I mentioned during the presentation, has gone extremely well and that whole team embedded in very well.

That's great. The next question we have here reads, how exposed are you to the Middle East?

As I said in the presentation, the direct exposure is relatively limited. We do see great long-term potential in the region, and that hasn't changed. We are having to navigate the short-term uncertainty as everyone is. The primary concern is obviously for the safety of our staff. We did have a colleague with family there when the hostilities broke out and our primary concern was getting them back to the U.K. safely, which they did get back within about 4 or 5 days. So we're staying close to our clients and obviously, our team. So yes, it is obviously tricky conditions, but the conditions over the last 4 years have been tricky, and I think we've demonstrated how successfully the team can navigate those.

Is Society a good benchmark for the type of M&A you're looking to do, i.e., small size tuck-in rather than something transformational?

Again, good question. I don't think it's a rather than, it's an either/or. I think Society is a fantastic deal. They're very culturally aligned, and that is really a primary concern for us, having invested so heavily in our culture. We want to make sure whenever we look at individuals that we're bringing on or companies that we may look to acquire that we have got that cultural alignment and that is absolutely there. The new sector is great for us. It opens up the not-for-profit space, which is obviously enormous, along with higher education. The complement of the travel and hospitality to our existing consumer markets brand is also been very attractive. So I think in terms of the small tuck-in type deals, this one is a perfect example of what we can do, but it doesn't mean that we're not also looking at something more transformational. And again, if it made sense to do something more material at some point in the future, then we would explore that.

That's great. Just moving on here. NFI/employee increased to 207.9k versus 160.1k, a significant improvement in productivity. You mentioned that you wish to improve productivity further. How high do you believe you can take NFI/employee?

Again, another very good question. I'm not sure there's a cap on how far you can take it. We've obviously made great strides so far. This is also going to be nonlinear in terms of how we improve this because a lot of it is a function of the people that we employ, how quickly it takes them to become established. We've obviously got our more established fee earners are continuing to grow their own NFI performance. But again, individually, it's nonlinear. So I think we can continue to grow that over time as we do hire more people and they become more established and we continue to drive more productivity in the system through better working practices, adoption of new technologies, AI, et cetera. So there's probably not a cap on it, nonlinear journey, but we definitely can continue to improve that number.

What does the 2026 pipeline look like right now? And how does it compare to last year?

Again, as we stated in the presentation, we -- our growth is nonlinear. We are rebuilding our WIP after what was an exceptionally strong Q4, and we're very confident in delivering on the market forecast for 2026.

Staff remuneration increased 29.8% to GBP 6.9 million year-on-year, yet the number of employees rose by just 1. Yes, NI and other social security costs will have contributed to the uplift as was the increase in the share-based payments. But was the remainder as a result of higher productivity and bonuses?

Could I take this one, Kevin?

Yea you could Mehr.

I think the short answer is yes. And also that's average staff at the end of the year. We did end the year with a slightly higher number of employees than this time last year. So yes, I mean, we pay quite competitively, so bonuses will have an impact.

Why are you doing the capital reduction? Are you planning on paying dividends or doing a buyback?

Well, it's a good housekeeping thing to do. We haven't got any plans at the moment to do either of those things, but it gives us the flexibility to do so in the future.

That's great. Just moving on here. What would the cost of hiring the people from Society be if you were hiring them independently?

Well, we purchased Society for a consideration of GBP 33,000. And as part of that, we have 5 employees. Now if we would -- hiring 5 employees independently, that would cost us between 25% to 30% of their base salaries. So I think we've got a really great business, and we've got a good team at a good price.

If I may add, if we were hiring them independently, we wouldn't obviously have the database, the work in progress, the track record, et cetera, that has come with the corporate acquisition. So I think on all levels, it's been a fantastic deal.

That's great. Do you need to invest significantly in systems and technology? And how are you positioning the business for AI?

I don't think that we do. We don't have any sort of large investments planned, but we'll continue to, like we have done over these last few years, invest in technology selectively where we can have sort of productivity gains or there's delivery improvements.

Thank you. And the last question we've got here reads, how much operational leverage do you have within the business?

I guess there's some capacity. It takes us sort of between 6 to 8 weeks to place a search. Again, as things evolve, maybe we can do those placements quite faster. The quality sort of our mandates will hopefully continue to improve in addition to that.

That's great. Thank you for answering all those questions you have from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Kevin, could I please just ask you for a few closing comments?

Yes. Well, thank you, Lily. Thank you, Mehr. Thank you, everyone, for your attention today. It's been a very exciting journey over the last 4 years. The team have achieved a great deal, and we're very excited about what we can deliver over the medium to long term. So thanks again for your attention, and thanks for your support.

That's great. Thank you for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This is going to take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you all.