Specialist recruitment services provider Nakama Group (NAK: AIM) reported results for the year ending 31 March 2018 with revenue of £16.8 million, a decrease of 25.4% compared to £22.5 million last year.

Revenue in the full year was impacted by difficulty in the group’s Australian subsidiary, which entered into liquidation in July.

Nakama said the decrease in revenue and net fee income for the full year was a result of APAC revenue decreasing to £5.32 million from £8.82 million last year and UK revenues decreasing to £11.5 million from £13.6 million in FY 2017. The decrease in both markets was predominantly due to a slowdown in the contractor market. The US business is currently dormant.

The group’s Net Fee Income percentage increased to 31.6% (2017: 27.5%). The improvement in Net Fee Income percentage is due to a change in the revenue mix coming from higher permanent revenue which this year accounts for 19% of total revenue (2017:15%). This was mainly due to the loss of a high volume, but low margin contracting account in Australia.

The EBITDA loss of £845,000 for the year (2017: profit £25,000) was mainly as a result of a slowdown in the UK and APAC markets, where overheads didn't reduce in line with the decrease in revenue.

The group warned that it may incur exceptional costs in the current year due to office restructuring.

In May 2018, the group’s Australian subsidiary said it had difficulty in meeting an AUD 700,000 (€439,686) payment due in April to the Australian Tax Office. In July, the Australian subsidiary entered into liquidation. The liquidation of the Australian subsidiary will reduce the group's liabilities in respect of the amounts owed to the Australian Tax Office by approximately AUD 190,000 (USD 140,493).

“It has been decided to strip back the Australian operation to focus on areas of strength (customer experience/user experience, tech, service & product design) in order to stabilise the business and create a stronger platform for growth in the future. A new leader has also been identified from FY 2018/19 onwards,” the group stated.

During the year, Nakama Group also saw a number of personnel changes including the appointment of non-executive Director Andrea Williams as new CEO in January. Furthermore, CFO Angus Watson stepping down in May. In July, Nakama announced that Paul Goodship had resigned from his role as the Managing Director of the Nakama London business and a Board Director. 

Tim Sheffield, Chairman of the Nakama Group, commented, “The results over the past year have been extremely disappointing at a group level. The group experienced significant change through this financial year at executive management level as well as at all other levels. This impacted the group's ability to deliver any meaningful results.”

“Going forward, the group will be more disciplined in its financial management and more focused on expanding from its core strengths,” Sheffield said. “There are currently no new offices planned for the next financial year as the Board intends to concentrate on improving the performance of the current operations.”

Andrea Williams, CEO of Nakama Group Plc, also commented, "After ceasing to trade with a high-volume client in Australia that location has struggled to deliver meaningful results as replacing such a large contract for services has proven to be far more challenging than expected. This has reduced the revenues significantly.”

"We will embark on a journey to improve the development of our people as well as raise expectations around achieving better quality outputs, increasing levels of accountability in each unit,” Williams said.

Looking ahead, Sheffield commented, “Trading so far this year has been in line with expectations, however, exceptional costs will be incurred as we continue the restructuring of some local offices. Building a higher performance culture will take time to establish and therefore we remain cautious on achieving the long term operating profit margin set by the Board. Our objective is to focus on improving financial discipline and stabilizing revenues over the year ahead.”

As of last trade, Nakama Group traded at £0.796, down 3.52% on the day and 29.43% above the 52 week low of £0.615 set on 16 April 2018. Based on its current share price the company has a market value of £971,780.