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2016 REPORT & ACCOUNTS

PA Consulting Group Limited — 2016 Annual Report and Accounts

ABOUT PA CONSULTING GROUP

PA is a consulting, technology and innovation firm. We define success as achieving exceptional results that have a lasting impact on businesses, communities and individuals worldwide.

This principle has remained the cornerstone of our ethos since 1943 – and it continues to underpin everything we do.

Our clients choose us because we challenge convention to find the solutions that really work – in practice, not just on paper. Then we roll up our sleeves and get the job done.

At PA we don’t just believe in making a difference. We believe in making the difference.

To request additional copies of this document or to order PA’s Annual Review for 2016, please email: [email protected]

CONTENTS

Overview

Chairman’s statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Chief Executive Officer’s statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Case studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Our directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Strategic report

Who we are and what we do . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Our markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Our people . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Corporate social responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Principal risks and uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Corporate governance report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Our results

Independent auditor’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

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OVERVIEW

Chairman’s statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Chief Executive Officer’s statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Case studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Our directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

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O V E R V I E W

CHAIRMAN’S STATEMENT

“This is a defining time for businesses and governments alike … As a leading consulting, technology and innovation firm, it is our mission to guide our clients as they navigate these changes.”

MARCUS AGIUS, CHAIRMAN

Political, economic and technological developments have all contributed to making 2016 an extraordinary year for many organisations worldwide. While the implications of these developments are still yet to be fully understood, one thing is clear: this is a defining time for businesses and governments alike. And because of the resulting challenges and uncertainty, there is a huge amount of opportunity to improve and change how organisations interact with customers, consumers and citizens. As a leading consulting, technology and innovation firm, it is our mission to guide our clients as they navigate these changes.

With the majority of our business in the UK, our performance in 2016 was affected by uncertainty in the period leading up to the UK’s EU referendum and by the shock of its unexpected outcome afterwards. While this impacted revenues in the middle of the year, we responded well in the second half and ended by delivering a strong fourth quarter. We are well placed as we enter 2017.

There were many major changes to the world as we knew it

Major political shifts around the world have significantly changed the landscape for businesses and individuals, with as yet untold economic and social effects. Meanwhile, and perhaps more predictably, the development of new technology continues apace. The robots are now here, with intelligent chatbots already the norm; blockchain is revolutionising the financial services industry; and the Internet of Things is bringing everything from mousetraps to fridges online. At the same time, people everywhere are redefining how they want to interact with businesses and with public services. And Agile is no longer an IT fad but a whole new way for organisations to work.

But with change comes opportunity

Across industries, many organisations face a ‘fight or flight’ choice. And while there are no simple answers, we believe fortune favours the bold. Our experience from advising clients through previous downturns and periods of uncertainty shows that the highest-performing companies were those that acted fast, protected their core advantage and made bold and positive decisions. I can only think that the same will bear out again.

Our mission is to help our clients navigate their challenges

At every level of our organisation, our mantra is to make the difference. To help our clients with their most challenging problems – whether new or long-standing, foreseen or unexpected – and to deliver long-lasting, sustainable benefits.

As a firm, we continue to improve and to innovate so that we can support our clients and attract the very best talent. Our active partnership with The Carlyle Group underpins these aims, providing a strong platform and enabling us to fulfil our potential.

With over 70 years in the consulting business, and a unique combination of business consulting and technology leadership skills, we know what it takes for us – and more importantly, our clients – to succeed.

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O V E R V I E W

CHIEF EXECUTIVE OFFICER’S STATEMENT

“Our clients face exciting new choices about their future; the convergence in business and technology consulting that we see in the market plays to our strengths; and I continue to be impressed by the quality, knowledge, focus and enthusiasm of our team.”

ALAN MIDDLETON, CHIEF EXECUTIVE OFFICER

The events of 2016 highlighted just how important it is for organisations to innovate, and our experience and expertise have been in high demand throughout the year. We have helped our clients achieve their goals and overcome their challenges – whether that is creating new products, services and markets or transforming for a more agile and digital future.

In 2016 we recognised £391.2 million of fee income and £51.6 million of adjusted EBITDA, our key measure of performance. At the same time, we made significant investments in our firm and our people as part of our commitment to offering the highest-quality consulting expertise to our clients. We are well prepared for growth in 2017.

We have achieved exceptional results for our clients

We achieve exceptional results that have a lasting impact on businesses, communities and individuals worldwide. Innovation is at the heart of everything we do – from helping organisations and leaders create a culture of innovation to designing, developing and delivering the new products and services that create lasting value for consumers and citizens.

This year we are proud to have worked with hundreds of organisations worldwide, readying them for the future. This review offers a few highlights of our work, where we:

• helped improve customer experience and double revenue from online sales for John Lewis through our ongoing support to their digital transformation

• supported innovation in public health and care services for the Norwegian Directorate of eHealth

• enabled the Mexican Ministry of Economy to balance the need for long-term investment in the oil industry with the need to develop the country’s own economy

• worked closely with the United Nations to drive sustainable development by helping business leaders understand new technologies.

And our global technology and innovation teams have worked with many of the world’s leading brands in consumer, automotive and life sciences to help them revolutionise their businesses, products and offerings.

Our passion for innovation extends into our not-for-profit work

We are now in our third year of partnership with Land Rover Ben Ainslie Racing. In our role leading the Technical Innovation Group, we have helped the team harness the advanced expertise and technologies needed to achieve unprecedented levels of success in their bid to win the America’s Cup.

More broadly, we continue to support the development of young people. Through our annual Raspberry Pi competition, our partnership with Teach First and our work with Beanstalk, we are helping students from a variety of backgrounds develop their skills, prepare for the future and fulfil their true potential.

We have strengthened our firm to ensure that we have the very best people to support our clients

We continue to make strategic and operational investments in our firm to ensure we are, and remain, the consultancy of choice for our clients and our people. Well-being, diversity, opportunity and professional development underpin our commitment to our people. In 2016 we welcomed over 500 new people into the firm, from the sharpest young talent to seasoned industry experts.

Looking ahead, I am excited about the future. Our clients face exciting new choices about their future; the convergence in business and technology consulting that we see in the market plays to our strengths; and I continue to be impressed by the quality, knowledge, focus and enthusiasm of our team.

As always, my thanks to our people for always going the extra mile and to our clients for choosing to work with PA.

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O V E R V I E W

CASE STUDY

JOHN LEWIS

Retailers can’t stand still. Customers’ expectations for shopping in different ways are changing all the time.

We’ve helped John Lewis keep pace with what customers want. We started with one of the largest digital projects in the company’s history: delivering a new e-commerce platform that has handled unprecedented increases in website traffic and supported record-breaking sales. We’ve made it easier for customers to search and navigate the website, significantly reducing failed searches and generating an uplift in completed purchases. And we’ve implemented secure encryption services to improve data security.

To bring this success, we worked closely with John Lewis staff. We took on leadership roles to drive change and efficiency. And our specialist project managers carefully managed relationships between in-house teams and the external organisations involved in the projects.

Over the course of our relationship, we’ve provided expertise in digital transformation, security and regulation, Agile methodology, project and programme management, service management and mobile software development.

We’ve been at the heart of implementing John Lewis’s digital strategy and successful transformation. With our support, this leading high-street retailer doubled online sales in just four years – and significantly improved their customers’ shopping experience.

Improving customer experience and doubling revenue from online sales

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CASE STUDY

Balancing the need for foreign investment in the oil industry with the need to develop the country’s own economy

ME XICAN MINISTRY OF ECONOMY

The Mexican government wants to make sure the country gets the maximum benefit from its natural resources. So they need to specify the extent to which energy projects run by foreign investors should use Mexican goods and services, labour, technology, training and infrastructure.

If the requirements are too high, that would deter foreign investment – especially if there are fears Mexico wouldn’t have the capacity. If too low, Mexico would attract international investment, but at the expense of developing the national energy industry.

The Ministry of Economy asked us to help work out targets for ‘national content’ in 2025 for deepwater and ultra-deepwater projects in terms of goods and services. To establish a baseline, we looked at how Pemex, the largest national oil company, spent their money on

projects like this in 2014. Then, to work out what Mexico could aim for in terms of expanding its capacity, we analysed the situation in four countries that are pioneers in this field: Brazil, Nigeria, Norway and the USA.

We identified the main barriers that constrain expansion and the policies successful countries have used to overcome them. Using that information, we constructed a mathematical model that we then asked leading energy companies to validate.

The government now has a clear picture of the impact investment in various policies might have and how long they’d take to work. With that concrete evidence, they know the level of national capacity they can expect to achieve in years to come and what it’s realistic to stipulate foreign companies should use.

“PA has given us a methodology and the information we need to set targets for national content in deepwater andultra-deepwater projects. More than that, they’ve given us a tool to evaluate and measure how different policies will boost our industry, and how quickly.”

HECTOR MARQUEZ SOLISHEAD OF THE ENERGY UNITMEXICAN MINISTRY OF ECONOMY

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THE NORWEGIAN DIREC TOR ATE OF EHE ALTH

Telecare is becoming a more and more important part of health and care services. Connected devices such as cameras, personal alarms and patient monitors can help governments meet the challenge of providing care for a growing population of older people and those living with chronic conditions. Services built around telecare will become even more vital as the shortage of people working in health and care personnel is expected to grow.

The Norwegian Directorate of eHealth launched a national programme to help health and care authorities across the country develop innovative services incorporating telecare. We’ve been an adviser to the programme since 2014.

A key part of our role has been to develop an online tool for authorities to help them design new services and work through the implications of changing the way they

care for people in need. We’ve helped over 30 Norwegian local authorities use the tool to design and implement new services and manage the associated changes, including training and coaching for care personnel and service managers. We’ve also helped these pioneering authorities measure and document the financial and quality-of-care benefits of their telecare projects – vital to assessing project success. The new approach will bring major savings.

This work, by our local government, business design and implementation experts, has strengthened authorities’ ability to develop telecare projects and get them up and running. It has also established a valuable resource for Norway’s telecare programme. Health and care organisations across the country are now taking the experience from these initial projects and using it to inform their own service innovations.

Supporting innovation in public health and care services

CASE STUDY

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Driving sustainable development by helping business leaders understand new technologies

U NITED NATIONS

In 2016 the United Nations (UN) launched the Sustainable Development Goals (SDGs): 17 pledges to overcome some of the biggest challenges the world faces by 2030. Challenges like poverty, inequality and environmental degradation.

Business has the potential to drive progress in those areas. The UN Global Compact (UNGC), the UN’s global business network, has launched ‘Project Breakthrough’. They’re helping business leaders understand new technologies that will bring exciting commercial opportunities – and how those could affect progress towards the SDGs. Our expertise in technology and innovation, and ability to fuse this with practical business design know-how, is at the heart of the project.

The UNGC asked us to identify the technologies most likely to transform business in future. And to explore how those technologies could help businesses do business in a better way – minimising waste to protect

the environment or having a positive impact on society for example. Working closely with the UNGC, technical specialists from our network and 150 companies attending the UNGC’s ‘Breakthrough Innovation’ symposium, we agreed on 12 to focus on. These include unmanned aviation systems (drones), robots, the Internet of Things, digital agriculture and gene editing.

We’ve developed a clear, concise briefing for businesses on each. These briefings explain the technical features, point out the potential impact on business models and look at how those could bring the advances needed to meet the SDGs.

We’re now working with the UNGC to develop practical support for businesses so they can take advantage of the opportunities these technologies bring in a sustainable way. The ambition of these innovators – and this support – will be key to a better future for all.

CASE STUDY

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Alex Stirling INVESTOR DIRECTOR1

Alex is a Managing Director in the European Buyout team at The Carlyle Group, advising on business services and consumer sectors. Since joining Carlyle in 2007, Alex has been actively involved in Carlyle Europe’s investments in Applus, IDH, RAC, NBTY and Addison Lee. Prior to joining Carlyle, Alex worked for seven years as an investment director with Texas Pacific Group, Apax Partners and PPM Capital. He received an MBA from Harvard Business School and a BA from Cambridge University. Alex is a member of the board of directors of IDH, RAC, NBTY Europe and Addison Lee.

Marcus AgiusCHAIRMAN1, 2

Marcus has been Chairman of PA since January 2014. Marcus was chairman of Barclays for six years until October 2012. He was also the chairman of the British Bankers’ Association. He was the first non-executive director to be appointed to the BBC’s Executive Board, acting as its senior independent director until November 2012. Before then, Marcus was deputy chairman of Lazard Ltd, and chairman of Lazard in London. He also served as a non-executive director of BAA, becoming its chairman in 2002. He is Chairman of the Board of Trustees of the Royal Botanic Gardens, Kew, and Chairman of Reach South Multi-Academy Trust.

Alan Middleton CHIEF EXECUTIVE OFFICER1, 2

Alan joined PA in 1988 and was elected Chief Executive Officer in 2007. During his career, Alan has led a number of parts of the firm including PA’s IT, strategy and financial services businesses. Alan has extensive consulting experience, particularly in financial and professional services, and has worked with industry-leading clients around the world, ranging from start-ups to multinationals. Alan studied at Edinburgh and Stanford Universities. He has a degree in electronic and electrical engineering, is a Fellow of the Institution of Engineering and Technology and of the Chartered Management Institute, and a member of the Confederation of British Industry.

Nick Chaffey HEAD OF CONSULTING, SERVICES2

Nick is Head of Consulting, Services at PA, leading our client services globally. He has a background in business strategy, and transformation design and delivery, in the UK and USA. He joined PA in 1993 and became a key leader in our Project Management Practice before establishing the Defence and Security team, now one of our largest businesses, then leading our Strategy team. Nick holds a BEng Hons in electronic and optoelectronic engineering from University College London and an MBA from Imperial College London.

Andrew Burgess INVESTOR DIRECTOR1

Andrew is a Partner at The Carlyle Group and Managing Director advising on Carlyle Europe Partners, originating and leading buyouts for services and consumer businesses. Andrew joined Carlyle in 2005 and is based in London. Prior to joining Carlyle, Andrew was a director of Bridgepoint, the pan-European private equity fund manager, where he was responsible for deal origination, execution, portfolio management and realisations. Andrew received a BSc (Hons) in accountancy with law and economics and is a member of the Institute of Chartered Accounts in England and Wales. He currently serves on the boards of Talaris, the cash services solutions group, and RAC, the motor breakdown services company. He was formerly on the board of Britax, the market-leading child safety seat manufacturer.

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OUR DIRECTORS

Kully Janjuah GROUP COMPANY SECRETARY1, 2

Kully joined PA in 1997 and was appointed as PA’s Group Company Secretary in 2007. He has been instrumental in managing complex corporate transactions and shareholder reorganisations in that time, and is responsible for advising the board on legal compliance and governance matters. Before joining PA, Kully qualified as a chartered accountant with Coopers & Lybrand, and he holds an LLB Hons degree in law from King’s College London.

Andrew Hooke HEAD OF CONSULTING, SECTORS2

Andrew is Head of Consulting, Sectors at PA, covering our business across all sectors. Previously in PA he ran our global government, defence and security business. He has designed, led and delivered many of PA’s largest assignments, successfully delivering long-lasting outcomes on complex programmes that combine business, IT and people matters and where challenging stakeholder environments are the norm. Before he joined PA in 1996, Andrew held senior positions in Her Majesty’s Treasury and Marathon Oil. Andrew holds an MA in economics and an MBA.

Matthew Gordon CHIEF FINANCIAL OFFICER2

Matthew joined PA in 2012 as Chief Financial Officer with responsibility for the financial leadership and management of the business. He has held senior roles in major blue-chip organisations including Diageo and Orange as well as in private equity including Mapeley Limited, where he was finance director. Matthew qualified as a chartered accountant with Deloitte.

Hamish Maule HEAD OF OPERATIONS2

Hamish is PA’s Head of Operations. He is responsible for internal information technology, real estate and facilities, security and risk. Hamish joined PA in 2006 as PA’s Global Head of Group Systems. Prior to PA, he held a number of senior roles within IT at Willis, the global risk adviser and insurance brokerage.

Jo Scarlett CHIEF MARKETING OFFICER2

Jo joined PA in 2016. Before PA, Jo was chief digital and marketing officer of BT Global Services division, where she led the design of Global Services’ digital transformation; was chief sales officer; and chief marketing officer, leading the global marketing team to support BT’s business in more than 180 countries around the world. Prior to this, Jo was part of the Technology, Media and Telecommunications sector team at Ernst & Young and before that at Gemini Consulting.

1. Member of the PA Consulting Group Limited board of directors

2. Member of the PA Consulting Holdings Limited board of directors

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STRATEGIC REPORT

Strategic report

Who we are and what we do . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Our markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Our people . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Corporate social responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Principal risks and uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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S T R A T E G I C R E P O R T

STRATEGIC REPORT

The directors present their strategic report for PA Consulting Group Limited for the period ended 31 December 2016.

Who we are and what we do

We aim to be the premium global consultancy. We deliver complex and highly innovative assignments, have technology development capabilities that few consulting firms can match, possess deep expertise across key industries and government, and draw on a unique breadth of skills that span the initial generation of ideas and insights to the creation and implementation of change. Our clients choose us because we challenge convention to find the solutions that really work – in practice, not just on paper.

We create value for our clients, shareholders and other stakeholders by effectively deploying our resources to supply high-quality services and differentiated products that generate value for our clients, help us grow market share and deliver superior shareholder returns.

Our technology labs are unique and provide us with the resources to be creative, whatever the challenge – from inventing the cutting edge, like high-tech, wireless communications, to the simply critical, helping alleviate poverty and boost the economies of developing countries.

To succeed, organisations need to put innovation at the heart of their strategy, and drive continuous improvement in everything they do. We give our clients the tools they need to get more from that innovation – whether they’re developing a groundbreaking product, service or strategy, investing in technology, or moving to a brand new business model.

To position PA for continued growth, our strategic priorities include:

• delivering exceptional quality work to all our clients – to be the adviser of choice to both the public and private sector

• driving recruitment and retention of the best talent across our services and sectors

• continuing to invest in our international presence while ensuring PA’s offices collaborate to bring to bear the best of the firm’s full global capabilities

• driving operational improvements to deliver strong utilisation of consultants and to ensure PA has first-class IT and management information systems

• actively pursuing acquisition opportunities in complementary sectors and services to our existing capability.

In 2016 we continued to develop and grow our go-to-market model and we embarked upon significant programmes of investment in our people and the PA brand. We remain committed to:

• working with a broad client base that includes top-tier FTSE 100 and Fortune 500 companies

• bringing the best of our insight, knowledge and experience in industries and services

• creating groundbreaking solutions that deliver measurable benefits and make a tangible difference

• ensuring we attract and retain the best people and support their development so that they bring world-class sector experience and service insights to our clients.

Our markets

Operating from 26 offices across the globe, we combine our in-depth sector insight with world-class capabilities to have a lasting impact. We are experts in the consumer, defence and security, energy and utilities, financial services, government and public sector, healthcare, life sciences, manufacturing, and travel and logistics sectors, and we have capabilities in business design, business intelligence and analytics, digital, implementation, IT assurance and delivery, IT transformation, operational excellence, people and talent, strategy and technology innovation.

The consulting market in our three largest geographies by revenue – the UK and Ireland, the USA and Nordics – is forecast to continue to grow, driven by ongoing requirements for government and corporations to innovate in response to competitive and regulatory changes in their local and international markets. Both the public and private sector are increasingly seeking external expertise to support them in these areas.

PA competes with a broad range of management, strategy and operational/implementation consulting firms. We are unique in our focus on innovation, with our technology campus in Cambridge, UK, being a key differentiator.

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Financial review

These financial statements represent the first trading period of the new PA Consulting Group, which was formed on 11 December 2015 as a result of the new partnership with The Carlyle Group.

The Group was formed through the acquisition of the entire share capital of the former PA Group funded by The Carlyle Group and shareholders of the former PA Group through a mixture of debt and equity.

In the first period of operation, the Group delivered an adjusted EBITDA of £51.6 million, which we regard as a principal measure of underlying trading performance.

Principally due to the new capital structure and the amortisation of the significant intangible and goodwill assets created at the time of the acquisition, the net financial result was a loss for the period of £74.8 million. The key lines of the income statement and balance sheet are summarised on page 18. In order to more clearly represent the Group’s underlying performance, pro forma adjustments have been included to remove non-cash and accounting entries relating to the new capital structure and intangible assets. The adjusted result is a profit of £28.5 million.

Turnover for the period included £391.2 million of fee incomeTurnover for the period from 11 December 2015 to 31 December 2016 was £437.3 million, which comprised £391.2 million of fee income for our consulting services and £46.1 million for materials and third-party costs that are recharged to clients. Fee income is our primary measure of revenue performance.

The UK and Ireland is the largest region, generating 69% of turnover in the period. In the first quarter of 2016 we saw a strong performance in the UK across all sectors, although there was a softening during the spring and summer as UK political and economic uncertainty impacted on market conditions, particularly in the aftermath of the EU referendum. However, in the final quarter of the year there was a noticeable increase in activity again, with the region finishing the year stronger than it started.

The Americas, consisting of the USA and Mexico, accounted for 12% of our turnover. After a slow start to the first half of the year, there were many key sales made in the second half, which led to some growth. The Americas ended the year with a healthy stock of work to allow a strong start in 2017.

Scandinavia accounted for 11% of our turnover and performed consistently well throughout 2016, achieving growth in the year.

As a whole, the Group experienced a softening in performance in the middle of 2016, but strong sales ensured the year finished well with higher utilisation rates and a strong stock of work for 2017.

Adjusted EBITDA was £51.6 millionAdjusted EBITDA is the key measure of the Group’s trading performance. The metric reflects profit before finance costs, taxation, depreciation, amortisation and exceptional costs. Adjusted EBITDA of £51.6 million in the period was impacted by the softening in performance and also reflects the investment that PA made in the year in increasing both the number and quality of consultants.

Further details of adjusted EBITDA, including the reconciliation to Group operating loss, can be found in note 6 of these financial statements.

Group operating LossThe Group reported an operating loss of £21.7 million during the year. Adjusted EBITDA of £51.6 million was offset by exceptional costs of £24.0 million, amortisation and depreciation charges of £48.1 million, and £1.1 million of costs relating to our closed defined benefit pension schemes.

Exceptional costs of £24.0 million include a £10.6 million onerous lease provision required on the Group’s existing London headquarters as we move to new premises in 2017. In addition, there is a charge of £5.5 million relating to the change of ownership and £5.1 million of restructuring costs.

The amortisation charges of £43.3 million arise as a result of accounting for the intangible assets and goodwill recognised on the change in PA’s ownership and are non-cash in nature. Without the exceptional and amortisation charges, there was a pro forma operating profit of £45.7 million for the period.

17S T R A T E G I C R E P O R T


Net interest payable Net interest payable of £53.1 million includes £5.9 million in relation to the senior debt interest and amortisation of related issue fees and £46.5 million of interest and accrued dividends on shareholder loan notes and preference shares. Of the £46.5 million coming from shareholder financial liabilities, £35.9 million relates to amounts that will only be paid at the earlier of an exit and the long-stop repayment date of 11 December 2023.

Pro forma income statement (£’000) Reported Adjustment* Pro forma*

Fee income 391,223 - 391,223

Project costs recharged 46,058 - 46,058

Group turnover 437,281 - 437,281

Adjusted EBITDA 51,592 - 51,592Pension running costs (1,068) - (1,068)

Amortisation of goodwill and intangible assets (43,335) 43,335 -

Depreciation of tangible assets (4,806) - (4,806)

Exceptional costs (24,037) 24,037 -

Group operating (loss)/profit (21,654) 67,372 45,718Interest on investor loan notes and preference shares (35,902) 35,902 -

Interest on vendor loan notes (10,603) - (10,603)

Interest on senior debt (5,872) - (5,872)

Other net interest costs (760) - (760)

(Loss)/profit on ordinary activities before taxation (74,791) 103,274 28,483

* Unaudited

Cash flow The cash flow for the period is dominated by the financing activities for the transaction.

The net cash inflow from operating activities is £31.3 million (see note 23).

Statement of financial positionAt 31 December 2016 the Group had net liabilities of £63.1 million. This includes £317.8 million of shareholder loan notes and preference shares that are only payable at the earlier of an exit and the long-stop repayment date of 11 December 2023. If these shareholder instruments are removed from the balance sheet, the pro forma financial position of the Group demonstrates a net asset position of £254.7 million with a cash balance of £114.8 million.

Pro forma statement of financial position (£’000) Reported Adjustment* Pro forma*

Intangible assets 483,314 - 483,314

Tangible assets 21,894 - 21,894

Fixed assets 505,208 - 505,208

Cash 114,816 - 114,816

Other net current assets 5,124 - 5,124

Net current assets 119,940 - 119,940

Creditors: due after more than one year (654,407) 317,789 (336,618)

Provisions for liabilities (33,847) - (33,847)

Net assets (63,106) 317,789 254,683

* Unaudited



Bank borrowings, shareholder loan notes and preference sharesAt 31 December 2016 long-term creditors comprised:

Pro forma statement of borrowings (£’000) Reported Adjustment* Pro forma*

Senior debt (96,575) - (96,575)

Vendor loan notes (200,000) - (200,000)

Investor loan notes (166,202) 166,202 -

Preference shares classified as financial liabilities (151,587) 151,587 -

Total (614,364) 317,789 (296,575)

* Unaudited

TaxationThe Group has an open and positive working relationship with HMRC, the UK tax authorities, and is committed to prompt disclosure and transparency in tax matters. The Group has received a ‘low risk’ rating from HMRC, recognising its strong corporate governance, control process and attitude to compliance.

Capital structureFollowing the investment by The Carlyle Group, the entire issued share capital of the previous holding company of the group (now called PA Consulting Holdings Limited) was acquired by PA Consulting Management Services Limited, a subsidiary of the Company. The holding company structure for PA Consulting Holdings Limited (of which the Company is the ultimate parent) is financed by a combination of debt and equity. At completion of the acquisition on 11 December 2015, the financing comprised £7.3 million of ordinary equity (comprising A ordinary and B ordinary shares), £134.5 million of preference shares, £147.4 million of investor loan notes, £200.0 million of vendor loan notes and £100.0 million of senior debt financing.

Ordinary shares The A ordinary and B ordinary shares constitute a single class of share and carry the right to vote. In the event of a liquidation or return of capital they are of equal rank behind the preference shares and investor loan notes with regard to the Company’s residual assets. The A ordinary shares are ultimately controlled by CEP IV Participations Sarl SICAR, an entity controlled by funds that are affiliates of The Carlyle Group. The B ordinary shares are held by current and former employees of the Group.

Preference shares The £151.6 million of preference shares do not carry the right to vote and, in the event of a liquidation or return of capital, rank above other shares with regard to the Company’s residual assets. Dividends accrue at 12% and unpaid dividends are compounded annually. The preference shares are redeemable at issue price, plus any accrued and unpaid dividends. The preference shares rank pari passu to the investor loan notes. The preference shares are held by current and former employees.

Investor loan notes The investor loan notes comprise £166.2 million of issued debt and are repayable at the earlier of an exit and the long-stop repayment date of 11 December 2023. Interest accrues at 12%, is compounded annually and is repayable on redemption. The investor loan notes are redeemable at the principal amount of the loan note plus any accrued and unpaid interest. The investor loan notes rank pari passu to the preference shares. The investor loan notes are ultimately held by CEP IV Participations Sarl SICAR.

Vendor loan notes The vendor loan notes comprise £200.0 million of issued debt bearing interest at a fixed rate of 5.0% and are repayable at the earlier of an exit and the long-stop repayment date of 11 December 2023. The vendor loan notes are held by current and former employees.

Senior debtThe senior debt comprises a £96.6 million senior term loan. The loan bears interest at LIBOR + 3.50% and is a bullet repayment in December 2021. In addition, a revolving credit facility of £50.0 million is available, which remains undrawn. The revolving credit facility bears interest at LIBOR + 3.25% and is a bullet repayment in December 2021. The senior debt is subject to a net leverage covenant. The business hedges a portion of the loan for interest risk using an interest rate swap exchanging variable-rate interest for fixed-rate interest.



Our people

We know that a consulting firm is only as good as its people – so we recruit with that in mind. Our clients have ready access to our experts worldwide, and teams with the insight and experience that’s right for their industry and the challenges they face. On every assignment we work shoulder to shoulder with our clients and transfer our skills to help our clients’ organisations grow, even when our work is done.

Our aim is to maintain a high-performing organisation that can attract, develop and retain the next generation of leaders. We do this by being entrepreneurial and creating a culture and reality of employee ownership.

Our people plan and policies support the delivery of PA’s strategy through investment in our people. Our people strategy enables PA to attract, develop and retain premium talent in an environment where people can flourish, delivering a differentiated experience where people can accelerate their careers and achieve business success. We provide our people with an innovative, inclusive and aligned people offering.

Talent acquisitionOur talent life cycle starts with attracting the right people, with the right attributes, into the right roles. PA recruits in several ways: through the use of targeted advertising, PA careers’ website, LinkedIn, search and recruitment partners, and referrals.

Talent developmentAs people join PA, we ensure they are fully supported through developing their skills, knowledge and behaviours. The PA Academy, which was launched in January 2016, is part of our commitment to help each of us to become the very best and to underpin our growth ambitions.

The PA Academy harnesses new and innovative technologies and is structured around four business critical learning pillars: Professional Expertise, Consulting Skills, Business Development and Leadership. The content within these pillars is designed to support PA implement our strategy, achieve our ambitious growth targets and develop world-class consultants. The academy is a significant investment in our future and presents all PA employees with an opportunity to participate and access learning opportunities around the clock, wherever they are in the world. Our clients expect us to be at the forefront of consulting, innovation and technology, and the PA Academy helps us to do that.

Performance and rewardWe look at our people through the lens of both performance and potential. Our reward and share ownership structure ensures the interests of our people are aligned with the growth and success of our firm. We create a collaborative culture that is enabling of high-performance individuals and teams. Our culture is driven by an employee value proposition that fosters engagement and collaboration and encourages people to ‘be themselves’ through our emphasis on diversity and inclusion.

Diversity and inclusionPA operates in many different countries and seeks to employ people with different ideas, styles and skill sets, all of whom contribute in unique ways. Our willingness to think differently, develop bold new ideas and work in innovative ways is vital to our success. We are committed to recruiting, promoting and remunerating our people solely on the basis of their ability to contribute to PA’s objectives. We do this without regard to sex, race, disability, religion, national origin, ethnicity, sexual orientation, age or marital status.

As an equal-opportunity employer we are committed to recruiting from a diverse talent pool, and we invest care, time and effort to attract and hire our people and support them in reaching their maximum potential. In 2015 we established a Diversity and Inclusion Working Group tasked with improving diversity and inclusion at PA. This year we are launching a firm-wide educational initiative focused on inclusion, its definition for PA and how to actively be more inclusive by challenging behavioural habits.

We recognise and value the commitment our people make to PA and to our clients, and we are therefore supportive of flexible working where appropriate. We are cognisant that flexible working arrangements can support a greater work-life balance, and we recognise that by accommodating flexible working requests, we can make the best use of the intellectual input of a wider set of individuals.

The table below provides a breakdown of gender across various levels at PA as at 31 December 2016. We believe that a diverse senior leadership team is good for business. We remain committed to having a diverse team in terms of gender as well as diversity of experience, background, skills and knowledge, and we will continue our efforts to increase diversity at every level of our organisation.

Male Female

PA employees There were 2,657 permanent employees at PA as at 31 December 2016 of whom 1,784 were male and 873 were female

1,784 873

Senior leadership team Of all the Partners and Function Heads at PA as at 31 December 2016 (excluding any Company directors included above), 134 were male and 14 were female

134 14

Company directors Directors of PA Consulting Group Limited as at 31 December 2016

5 0



Corporate social responsibility

In our opinion, corporate social responsibility (CSR) comprises environmental, economic and social responsibility. PA’s approach to CSR is intrinsically linked to our core business values, and we believe that being a socially responsible business makes good business sense. Our core values and Code of Conduct embody the spirit of ethical sustainability and transparency. We define sustainability through our values, which give rise to our policies, our ethics and our corporate culture. They commit PA and every employee to environmental stewardship, safe work environments, and socially responsible behaviour in our workplaces and our communities, as well as in the consulting services we provide to our clients.

Human rightsAt PA we are committed to complying with all laws and regulations applicable to our business. We take steps to ensure that there is no human trafficking or slavery in our supply chain or within any part of our business; we are a UK Living Wage accredited employer; and we are a member of the United Nations Global Compact, a strategic policy initiative for business that aims to align members’ operations and strategies with the internationally accepted principles relating to human rights, labour, the environment and anti-corruption.

Our supplier diversity policy helps ensure that the contracts that PA places with suppliers provide not only value for money but that a diverse range of suppliers have fair opportunity to compete for and win new work. We encourage our suppliers to adopt best practices in terms of human rights and diversity and monitor this through our supplier pre-qualification questionnaire.

Giving back and volunteeringOur commitment to making the difference drives and focuses our work for clients. It is also at the heart of our ‘Giving Back and Volunteering’ (GBV) initiative. In addition to our central tenet of developing the leaders of tomorrow, the scheme helps PA people get involved in projects with the potential to develop future leaders and to transform the lives of individuals and communities around the world.

We have determined that the best way that we can support social causes is through the time and skills of our people. Our GBV initiative reflects a strong desire among many PA staff to take part, through PA, in activities or actions that contribute towards the needs of wider society. Each year PA allocates for Giving Back and Volunteering equivalent to 1% of budgeted Adjusted EBITDA. Those interested in committing time to a socially worthwhile cause can apply to spend up to three days a year working on an eligible project. PA also enables staff to contribute their own funds to charities via payroll giving.

Environmental matters PA’s direct impact on the environment is limited by the nature of our business, but we recognise our responsibility and the importance of minimising, as far as possible, the potential harmful impacts on the environment caused by our day-to-day activities and the services we provide to our clients.

We work hard to comply with all applicable legal and other requirements relevant to the environmental impacts of our operations. We have implemented a fully documented environmental management system (EMS) which includes the framework for setting our objectives and targets and ensuring that the international standard of ISO 14001 is met or exceeded. We are also committed to retaining our Carbon Trust Standard accreditation in the UK to ensure year-on-year reduction in our carbon emissions.

We continue to improve our green credentials, seek ways to minimise any negative effects of our operations and strive to achieve environmental best practice through:

• maintaining an effective and efficient EMS in line with the requirements of ISO 14001

• maintaining the Carbon Trust Standard and ISO 14001 accreditations

• complying with and, where possible, seeking to exceed statutory and regulatory requirements, as well as national and international standards and industry practices

• continuing to seek to reduce our carbon footprint, particularly in relation to our business travel, waste, real-estate consumption and printed material

• enhancing energy efficiency through prudent consumption, monitoring of energy use, and consideration of energy-efficient technology and renewable alternatives.



Risk management

The board of PA Consulting Group Limited has overall responsibility for ensuring that an appropriate risk management system is in place to identify and manage all significant risk exposures throughout the Group. The risks that it seeks to manage fall into four main categories:

The board has formulated a risk management policy and put in place a structure and process to identify, assess and manage risk. Risk mitigation strategies include the implementation of internal controls that, by their nature, are designed to manage and reduce, rather than eliminate, risk.

Market risk is managed by the Management Committee The Management Committee includes the leaders of PA’s market-facing business units and is chaired by the Chief Executive Officer. Market risk is under the direct control of the Management Committee, which manages the Group’s exposure to sector, competitor and geographic risk as well as reputational risk.

Operational and professional risk is managed by the Risk Management CommitteeThe Risk Management Committee comprises corporate and consulting staff and is chaired by the Chief Executive Officer. It is responsible for monitoring existing and emerging risks. It reviews the Group’s non-financial risk, including operational and professional risk. It ensures that all new and emerging risks are appropriately evaluated and that any necessary actions are identified and implemented. It maintains oversight of the mitigating actions to manage and reduce risks through keeping a central register of risks and mitigating actions and by approving actions and progress of its risk subcommittees. The Risk Management Committee also provides guidance to Partners and Functions and to those responsible for managing individual risks.

Financial risk is monitored by the Audit Committee The Audit Committee is responsible for overseeing financial control risks and reviews the effectiveness of systems for PA’s internal financial control environment.

Principal risks and uncertainties

In the course of our day-to-day operations, we face a number of risks and uncertainties. The board considers the matters described below to be principal risks that face the Group as it currently stands and that could affect the business, results of operations, turnover, profit, cash flow, assets and the delivery of our growth strategy.

The specific risks and uncertainties mentioned below are those we believe to be of most direct relevance and significance to the Group today. We do not include those risks that are likely to affect businesses generally or that are in the nature of our day-to-day operations.

Under each key risk we give a general description of its potential impact and our approach to mitigation.

Market riskEconomic uncertainties in many of the major markets that could have an adverse impact on client demand:

• In these uncertain times a number of market risks are heightened, such as a reduction in client demand leading to a loss of significant revenue streams, pressure on our billing rates or the collapse of a key client, exposing the Group to potential financial loss.

Market risk

Responsibility of the Management Committee

Operational risk

Responsibility of the Risk Management Committee

Professional risk

Responsibility of the Risk Management Committee

Financial control risk

Responsibility of the Audit Committee

Risk management

The board has overall responsibility for risk management



• We have in place an account management programme focusing particular attention on our top accounts to ensure stability, account growth and customer satisfaction are all achieved. Our commercial approach ensures that we position our offerings in a way that is commensurate with market conditions, yet at the same time reflects the value proposition provided to our clients.

Operational riskWe have strong business continuity and incident management plans that cover our global business and which are routinely tested.

Operational risks, particularly those associated with data security, have the potential to harm our reputation and lead to a loss of revenues. As with all professional service firms, we handle a range of client information as well as our own data. Ensuring that we manage such information securely is critical to compliance with data protection legislation and our reputation with clients, employees and governments:

• We have developed appropriate mitigation plans to minimise the risks associated with data security.

• We have obtained certification to the ISO 27001 standard, one of the few organisations in the UK that has achieved this standard for its global operations. We have achieved Cyber Essentials Plus, which demonstrates that our IT environment complies with UK government best practice.

• We have strong relationships throughout the security community and have invested in technical systems and controls that both detect and prevent cyber threats from affecting our systems. Our staff receive training to maintain their awareness of issues and threats and to educate them as to their role in countering such threats.

Professional riskRisks arising from our dependence on recruitment and retention of suitably qualified employees:

• Our ability to meet the demands of the market and compete effectively with other consultancy firms is, to a large extent, dependent on having the right amount of skilled, experienced and high-performing employees. The loss of key personnel or significant numbers of employees, or the failure to attract a sufficient number of suitably qualified and experienced personnel, could have a serious impact on our ability to service client contracts.

• Our most important asset is our people. To ensure that we recruit and retain the right people and always have the right people with the right mix of skills on an assignment team, we have strong recruitment policies and performance appraisal processes that establish objectives and accountabilities. We also have a training and development programme and take a case management approach to coaching top talent, guided by talent dashboards.

Risks arising from legal and regulatory changes and compliance with legislation:

• Our operations are subject to a broad spectrum of legal and regulatory requirements in relation to, for example,

environmental issues, employment, pensions and tax, and regulations governing the Group’s activities and services.

• We are aware of the importance of complying with all applicable legislation affecting our business activities and of the potential financial impact and damage to reputation that can result from a breach.

• Regulatory developments are actively monitored by the Risk Management Committee and by our Legal and Company Secretarial departments to ensure that new and existing laws and regulations are complied with and training needs are addressed.

Best practice governance processes are in place across the Group, and we have a comprehensive Code of Conduct and conflicts management programme that reinforces adherence to good working practices and protects us from regulatory breach.

Financial risk

Liquidity riskThe Group manages its cash and borrowing in order to meet its working capital requirements, maximise interest income and minimise interest expense as effectively as possible.

Interst rate riskThe Group is exposed to interest rate risk on some of its external debt, on which interest is charged at a variable rate. The Group uses SWAPs to manage its mix of fixed and variable rate debt so as to reduce its exposure to changes in interest rates.

Pension funding riskAn increase in deficit liability of the Group's defined benefit scheme could arise as a result of changes in life expectancy. As a result, we could be required to make further contributions towards the funding requirements of the scheme.

Foreign exchange riskExchange rate fluctuations could create earnings and balance sheet volatility. We operate in a number of different countries, and the Group’s overseas net asset values and overseas profits are, therefore, subject to currency fluctuations upon translation into sterling. The substantial majority of our assets are denominated in sterling and any material net asset exposures are hedged.

The directors consider the annual report and financial statements to comply with all aspects of the Guidelines for Disclosure and Transparency in Private Equity.

This strategic report was approved by the board on 30 March 2017 and signed on its behalf by:

Kully Janjuah

DirectorPA Consulting Group Limited Company number: 09761378



CORPORATE GOVERNANCE REPORT

Board responsibilitiesThe board of PA Consulting Group Limited approves the strategy and reviews the performance of the new PA Group. Execution of the Group strategy and responsibility for monitoring operational performance and managing risk in relation to the day-to-day activities of the Group falls to the board of PA Consulting Holdings Limited, a wholly owned subsidiary of the Company and the previous holding company for the Group.

Board compositionThe board of PA Consulting Group Limited is chaired by Marcus Agius and comprises five directors. The board of PA Consulting Holdings Limited is also chaired by Marcus Agius and comprises eight directors. The directors of both companies are shown on pages 12 and 13. Directors are appointed by the board of each company following consideration of the recommendations of the Succession and Compensation Committee.

Board committeesThe board of PA Consulting Group Limited delegates specific responsibilities to the Audit and the Succession and Compensation committees. The board of PA Consulting Holdings Limited delegates specific responsibilities to the Ethics and Risk Management committees. Each committee has its own terms of reference.

The Audit CommitteeThe Audit Committee is responsible for reviewing the financial statements of the Group, reviewing internal financial and operational controls, overseeing the internal audit function, monitoring the relationship with the external auditor and reviewing the Company’s share price calculation. The Audit Committee comprises the investor directors and the Chairman and met three times during the year.

The Succession and Compensation CommitteeThe Succession and Compensation Committee is responsible for approving the remuneration of the executive management and certain elements of the remuneration of the senior management. It also assists in identifying candidates for appointment to the boards of PA Consulting Group Limited and PA Consulting Holdings Limited and other key appointments within the Group, and in overseeing succession planning of senior management. The Succession and Compensation Committee comprises the investor directors and the Chairman and met five times during the year.

The Ethics CommitteeThe Ethics Committee is responsible for monitoring and ensuring compliance with the Group’s Code of Conduct. The Ethics Committee comprises the Chairman, Chief Executive Officer, Head of Human Resources and the Group Company Secretary. The Head of Internal Audit and the chairman of the Partner Ethics Committee attends meetings at the invitation of the Ethics Committee. The Ethics Committee met once during the year.

The Risk Management CommitteeThe Risk Management Committee is responsible for advising the boards on the management of operational and professional risk, and assists them with fostering a culture within the Group that emphasises and demonstrates the benefits of a risk-based approach to internal control and risk management. The Risk Management Committee comprises the Chief Executive Officer, Chief Financial Officer, the Group Company Secretary and the Partner responsible for Risk and Security. The Head of Group Legal, Head of Operational Risk and Head of Internal Audit attend meetings at the invitation of the Risk Management Committee. The Risk Management Committee met four times during the year.

24


C O R P O R A T E G O V E R N A N C E R E P O R T

DIRECTORS’ REPORT

The directors present their report for PA Consulting Group Limited for the period ended 31 December 2016.

Principal activities of the Group The principal activities of PA Consulting Group Limited and its subsidiaries are the provision of a range of consultancy services to governments and industry. The Company acts as a holding company for the PA group of companies. A fair review of the business of the Group during the financial period ended 31 December 2016, the position of the Group at the end of the period and a balanced and comprehensive analysis of the performance of the Group’s business during the period and future developments are included in the strategic report on pages 16 to 23.

DirectorsThe directors of the Company who were in office during the period from incorporation on 3 September 2015 and up to the date of signing of the financial statements were as follows:

Marcus Agius (appointed 11 December 2015)

Andrew Burgess (appointed 13 September 2016)

Kully Janjuah (appointed 11 December 2015)

Alan Middleton (appointed 11 December 2015)

Alex Stirling (appointed 3 September 2015)

Oliver Butler ( appointed 3 September 2015, resigned 12 December 2015)

Eric Kump ( appointed 3 September 2015, resigned 13 September 2016)

Directors’ indemnity and insurance In accordance with the articles of association, the Company has provided to all the directors an indemnity (to the extent permitted by the Companies Act 2006) in respect of liabilities incurred as a result of their office, and the Company has taken out an insurance policy in respect of those liabilities for which directors may not be indemnified. Neither the indemnity nor insurance provides cover in the event that the director is proved to have acted dishonestly or fraudulently.

DividendThe directors do not recommend the payment of a dividend in respect of the financial period ending 31 December 2016. Amounts accruing on preference shares are included in note 19 to the the financial statements.

Political and charitable donationsNo political donations were made during the period. During the period the Group made charitable donations of £74,073. These donations correspond to recommendations made by individual employees of the Group in 2016, in respect of which they individually waived an element of their discretionary annual bonus.

Employees

Employee involvementWe encourage people across PA to take active responsibility for improving our performance whether through enhancing working practices or drawing attention to behaviours or other issues that give them concern. To encourage feedback and suggestions, PA has introduced procedures and mechanisms to create a culture that allows people to speak up with confidence and in good faith in the expectation of being heard. PA regularly conducts employee surveys and provides all employees with access to a ‘Give PA your suggestions’ facility. Employees and third parties, including clients and suppliers, can also raise concerns through a confidential and anonymous whistle-blowing helpline that is operated externally.

Supporting colleagues with disabilitiesPA is committed to creating a work environment that supports and inspires all individuals, and we give full consideration to applications from people with disabilities. Arrangements are made for PA employees who have become disabled in their time at PA to be supported in their current roles or to be trained for other positions within our organisation. Disabled persons are provided with equal access to learning, career development and promotion that are available to all employees within the limitations of their aptitudes and abilities.

Post balance sheet eventsNo events have occurred since 31 December 2016 that require reporting or disclosing in the financial statements.

Going concernThe Group is financed by a combination of debt, equity and retained earnings. The Group reports under its banking covenants quarterly, and there is significant headroom within these facilities. The directors have reviewed the detailed financial budgets prepared for the forthcoming year, together with the five-year strategic plan, and believe that the Group has sufficient resources available to it. The directors therefore believe that it is appropriate to prepare the accounts on a going concern basis.

Financial instrumentsThe Group uses forward foreign currency contracts to reduce exposure to foreign exchange rates and interest rate swap contracts to reduce exposure to interest rate movements on the senior debt. Further information about the most significant financial risks faced by the Group and how these are managed can be found in the strategic report and in note 1 of these financial statements.

25


D I R E C T O R S ’ R E P O R T

Research and development PA is committed to new knowledge creation and innovation through the provision of research and development for clients and through investing in projects internally. The Group will continue its policy of investment in research and development in order to retain a competitive position in the market.

Disclosure of information to auditorsEach director has taken steps in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditors are unaware.

Directors’ responsibilities The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year.

Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

In preparing those financial statements, the directors are required to:

• select suitable accounting policies and apply them consistently

• make judgements and estimates that are reasonable and prudent

• state whether applicable United Kingdom accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The directors confirm that they have complied with the above requirements in preparing the financial statements.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ responsibility statement Each of the directors, who are listed on page 25, confirms that, to the best of his knowledge and belief:

• the financial statements for the period ended 31 December 2016, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and loss of the Group and the Company

• the strategic report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties they face.

This directors’ report was approved by the board on 30 March 2017 and signed on its behalf by:

Kully Janjuah

DirectorPA Consulting Group Limited Company number: 09761378

26


D I R E C T O R S ’ R E P O R T

OUR RESULTS

Independent auditor’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

27O U R R E S U L T S


We have audited the financial statements of PA Consulting Group Limited for the period ended 31 December 2016 which comprise the Group Income Statement, the Group Statement of Other Comprehensive Income, the Group Statement of Changes in Equity, the Group Statement of Financial Position, the Group Statement of Cash flows and the related notes 1 to 33. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibility Statement set out on page 26, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2016 and of the group’s loss for the period then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements are prepared is consistent with the financial statements;

• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified no material misstatements in the Strategic Report or Directors’ Report.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Nick Gomer (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Cambridge 31 March 2017

Independent auditor’s reportto the members of PA Consulting Group Limited

28 O U R R E S U L T S


1. The accompanying notes are an integral part of the financial statements.

Group income statementfor the period ended 31 December 2016

Note1

2016Total£’000

TurnoverFee income 391,223Project costs recharged 46,058Group turnover 2a, 2b 437,281 Personnel and direct costs (346,112)Gross profit 91,169 Goodwill amortisation 7, 12 (21,507)Other administrative expenses (70,196)Other operating income 5 2,917Exceptional costs 6 (24,037)Group operating loss 7, 23 (21,654)Add: Depreciation and amortisation 48,141Add: Exceptional costs 24,037Add: Defined benefit pension scheme running costs 1,068Adjusted EBITDA* 6 51,592Net interest payable and similar items 8 (53,107)Other finance costs 9 (30)Loss on ordinary activities before taxation (74,791) Taxation 10a 1,315Loss for the financial period 22 (73,476)* Adjusted EBITDA is operating profit before finance costs, taxation, depreciation, amortisation and exceptional costs. The directors also add back the running costs of the defined benefit pension scheme as they consider these to be a non-cash cost to the Group.

Group statement of other comprehensive incomefor the period ended 31 December 2016

Group Note2016

£’000Loss for the financial period 22 (73,476) Actuarial gain recognised on defined benefit pension arrangements 22, 24b 1,425Movement on deferred tax relating to actuarial gain on pensions 10b, 22, 24b (224)Exchange difference on retranslation of net assets and results of overseas subsidiaries 22 1,788Change in the fair value of the interest rate swap 22 (855)Total other comprehensive loss relating to the period (71,342)




Group statement of changes in equityfor the period ended 31 December 2016

Group

Note12016

£’000Loss for the financial period 22 (73,476)Actuarial gain recognised on defined benefit pension arrangements 22, 24b 1,425Movement on deferred tax relating to actuarial gain on pensions 10b, 22, 24b (224)Exchange difference on retranslation of net assets and results of overseas subsidiaries 22 1,788Change in the fair value of the interest rate swap 22 (855)Issue of ordinary shares 21a, 22 7,827Own shares held by employee trusts 22 (997)Reserve credit for equity-settled share-based payments 22 15Cash consideration received for disposal of shares 22 5,189Shares received on behalf of shareholders 22 6,212Amounts owed to shareholders 22 (10,010)Shareholders’ funds at 31 December 22 (63,106)

Company statement of changes in equityfor the period ended 31 December 2016

Company

Note12016

£’000

Loss for the financial period 11, 22 (17,138)Issue of ordinary shares 21a, 22 7,827Shareholders’ funds at 31 December 22 (9,311)




Group statement of financial positionat 31 December 2016

Note12016

£’000Fixed assetsIntangible assets 12 483,314Tangible assets 13 21,894

505,208Current assetsDebtors: amounts falling due within one year 15 95,398Debtors: amounts falling due after more than one year 16 3,152Current asset investments 17 494Cash at bank and in hand 114,322

213,366Creditors: amounts falling due within one year 18 (93,426)Net current assets 119,940Total assets less current liabilities 625,148Creditors: amounts falling due after more than one year 19 (654,407)Provisions for liabilities 20 (33,163)Net assets excluding net pension liabilities (62,422)Defined benefit pension arrangements 24b (684)Net assets (63,106)

Capital and reservesCalled-up share capital 21, 22 783Share premium 21a, 22 7,044Profit and loss reserve 22 (70,933)Shareholders’ funds 22 (63,106)

The financial statements were approved and authorised for issue by the board of directors on 30 March 2017.

Alan Middleton Chief Executive Officer PA Consulting Group LimitedRegistered number 09761378




Company statement of financial positionat 31 December 2016

Note12016

£’000Fixed assetsInvestments 14 15,633Current assetsDebtors: amounts falling due within one year 15 126,655Creditors: amounts falling due within one year 18 (12)Net current assets 126,643Total assets less current liabilities 142,276Creditors: amounts falling due after more than one year 19 (151,587)Net assets (9,311)

Capital and reservesCalled-up share capital 21, 22 783Share premium 21a, 22 7,044Profit and loss reserve 22 (17,138)Shareholders’ funds 22 (9,311)

The financial statements were approved and authorised for issue by the board of directors on 30 March 2017.

Alan Middleton Chief Executive Officer PA Consulting Group Limited Registered number 09761378




Group statement of cash flowsfor the period ended 31 December 2016

Note12016

£’000Net cash inflow from operating activities 23 31,263Taxation received 1,972Net cash generated from operating activities 33,235

Investing activitiesPayments to acquire tangible assets (2,749)Payments to acquire intangible assets (358)Purchase of subsidiary undertakings (net of cash acquired) 32b (429,354)Interest received 694Net cash used in investing activities (431,767)

Financing activitiesIssue of ordinary shares 7,827Issue of 5% loan notes 200,000Issue of 12% loan notes 147,425Issue of preference shares 134,461Senior debt 95,845Payment to defined benefit pension scheme (102,000)Interest paid (12,996)Cash-settled share options (4,306)Net receipt from sale of own shares 11,649Staff loans repaid 106,132Payment of employee related taxes due on the change in ownership (70,689)Net cash received from financing activities 513,348Net increase in cash and cash equivalents 114,816

Cash and cash equivalents at the end of the period 114,816

Cash and cash equivalents consist of:Cash at bank and in hand 114,322Short-term deposits (included in current asset investments) 494Cash and cash equivalents 114,816



Group reconciliation of movements of net cash flow to movement in net funds for the period ended 31 December 2016


Note12016

£’000Increase in cash in the period 23 114,816Cash inflow from increase in debt 23 (577,731)Movements in net funds resulting from cash flows (462,915)Other non-cash changes (730) Movement in net funds (463,645)Net funds at 31 December 23 (463,645)

Net funds include £9,763,427 (on acquisition: £1,403,938) held by employee benefit trusts that are not under the Group’s control.



Notes to the financial statements

Page Note

36 (1) Principal accounting policies

42 (2) Turnover and segmental analysis

43 (3) Employee information

44 (4) Directors’ remuneration

44 (5) Other operating income

45 (6) Adjusted EBITDA and exceptionals

46 (7) Group operating profit

46 (8) Net interest receivable/(payable) and similar items

46 (9) Other finance costs

47 (10) Tax

49 (11) Loss attributable to members of the parent company

49 (12) Intangible assets

50 (13) Tangible assets

51 (14) Fixed asset investments in subsidiaries

51 (15) Debtors: amounts falling due within one year

52 (16) Debtors: amounts falling due after more than one year

52 (17) Current asset investments

52 (18) Creditors: amounts falling due within one year

53 (19) Creditors: amounts falling due after more than one year

55 (20) Provisions for liabilities

56 (21) Allotted and issued share capital

57 (22) Reserves

58 (23) Reconciliation of operating loss to net cash flow from operating activities

59 (24) Retirement benefits

63 (25) Share-based payments

65 (26) Capital and other financial commitments

65 (27) Contingent liabilities

65 (28) Operating leases

66 (29) Derivatives and other financial instruments

67 (30) Subsidiary and branch undertakings

68 (31) Related party transactions

69 (32) Business combinations

70 (33) Controlling party




1 PRINCIPAL ACCOUNTING POLICIES

Statement of compliance

PA Consulting Group Limited is a limited liability company incorporated in England. The registered office is 123 Buckingham Palace Road, London, SW1W 9SR.

The Group’s and Company’s financial statements have been prepared in compliance with FRS 102 as it applies to the financial statements of the Group and Company for the period from incorporation on 3 September 2015 to 31 December 2016.

The principal accounting policies used in preparing these financial statements are set out below. These policies have been consistently applied to the period presented in dealing with items that are considered material in relation to the financial statements.

In preparing financial statements, management develops estimates and judgements that affect the reported amount of assets and liabilities, revenues and costs, and related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Basis of preparation

The financial statements have been prepared in accordance with the Companies Act 2006 and applicable United Kingdom accounting standards.

The financial statements have been prepared under the historical cost convention, except for share-based payments, pension assets and liabilities, freehold land and buildings that were restated using fair value on the Group’s acquisition, and hedging instruments used to mitigate the volatility of the interest charge on the senior debt.

The Group is financed by a combination of debt, equity and retained earnings. The Group reports under its banking covenants quarterly, and there is significant headroom within these facilities. The directors have reviewed the detailed financial budgets prepared for the forthcoming year, together with the five-year strategic plan, and believe that the Group has sufficient resources available to it. The directors therefore believe that it is appropriate to prepare the accounts on a going concern basis.

The financial statements are presented in pounds sterling, and unless otherwise indicated, values are rounded to the nearest thousand pounds (£’000).

Principles of consolidation

The Group financial statements include the results, financial position and cash flows of PA Consulting Group Limited (the ‘Company’) and all of its subsidiary undertakings (together, the ‘Group’). Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control arises when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. Businesses acquired or disposed during the period are accounted for using acquisition method principles from, or up to, the date control passed. Intra-Group transactions and balances are eliminated on consolidation. All subsidiaries use uniform accounting policies for like transactions and other events and similar circumstances.

As permitted by section 408 of the Companies Act 2006, no separate income statement is presented for the Company.

Employee benefit trusts

The Group’s trusts are separately administered discretionary trusts for the benefit of employees. The trusts are funded by loans from the Group, with their assets mainly comprising shares in the ultimate parent of the Group. The Group recognises the assets and liabilities of the trusts in its own accounts because, although they are administered by independent trustees and their assets are held separately from those of the Group, in practice the Group’s recommendations on how the assets are used for the benefit of employees are normally followed.

The carrying value of the Company’s shares held by the trusts is recorded as a deduction in arriving at shareholders’ funds until such time as the shares transfer to employees. Consideration received for the sale of such shares is also recognised in shareholders’ funds, with any difference between the proceeds from sale and the carrying value taken to the profit and loss reserve. No gain or loss is recognised on the purchase, sale or cancellation of equity shares.



Foreign currencies

a Functional and presentation currencyThe functional currency of each Group entity is the currency of the primary economic environment in which each entity operates. The consolidated financial statements are presented in sterling, which is the Company’s functional and presentation currency.

b Transactions and balancesForeign currency transactions are translated into the functional currency of each Group entity using the exchange rates prevailing at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at rates ruling at the statement of financial position date. Such exchange differences are included in the Group income statement under other administrative expenses. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

c ConsolidationFor the purpose of presenting consolidated financial statements, the results and financial position of all the Group entities (none of which have the currency of a hyperinflationary economy) that have a functional currency other than sterling are translated into sterling as follows:

• assets and liabilities within the statement of financial position are translated at the exchange rate at the balance sheet date

• income and expenses within the income statement are translated at the exchange rate ruling at the time of each period the transaction occurred

• all resulting exchange differences are taken directly to the profit and loss reserve via the Group statement of other comprehensive income.

Segment reporting

The Group is principally a consultancy business.

A business segment is a group of assets and operations engaged in providing services that are subject to risks and returns that are different from those of other business segments.

Turnover

Turnover represents the fair value of the consideration received or receivable for consulting services on each client assignment provided during the period, including expenses and disbursements but excluding discounts, value added tax and other similar sales taxes. Expenses and disbursements include mileage, accommodation, materials and subcontractor fees.

Turnover from time and materials contracts is recognised as the services are provided on the basis of time worked at an hourly or daily rate and as direct expenses are incurred.

Turnover from long-term contracts is recognised over the contract term using the percentage of completion method. The stage of completion of a long-term contract is measured as the proportion that costs incurred for work performed to date bear to the estimated total costs of the contract. Estimated total costs of the contract are reviewed regularly and, where necessary, revised.

Turnover in respect of contingent fee assignments (over and above any agreed minimum fee) is only recognised when the contingent event occurs and collectability of the fee is assured.

No turnover is recognised if there are significant uncertainties regarding recovery of the consideration due or associated costs. An expected loss on a contract is recognised immediately in the Group income statement.

The gross amount invoiced to clients but not yet received is separately disclosed within debtors as trade debtors. Unbilled turnover on individual client assignments is included as accrued income within debtors. Where billings exceed turnover on client assignments, the excess is classified as payments on account within creditors.




1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Employee benefits

a Pensions and other post-retirement benefitsThe Group operates three defined benefit pension schemes that require contributions to be made to separately administered funds.

The PA pension scheme in the UK was closed to new members in January 1998, from which time membership of a defined contribution plan is available.

The Prudential Platinum scheme in the UK was closed to new members in October 2015, from which time membership transferred to an alternative defined benefit scheme for which the Group is not responsible for ongoing funding.

The scheme in Germany is open to new members and has defined benefit characteristics whereby the overseas subsidiairy guarantees a 2% annual increase on pension payments both before and after retirement.

The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligations) and is based on actuarial advice. When a settlement or a curtailment occurs, the change in the present value of the scheme liabilities and the fair value of the plan assets reflects the gain or loss that is recognised in the income statement during the period in which it occurs.

The net interest element is determined by multiplying the net defined benefit liability by the discount rate at the start of the period, and taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.

Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability (excluding amounts included in net interest) are recognised immediately in other comprehensive income in the period in which they occur. Remeasurements are not reclassified to the income statement in subsequent periods.

The defined net benefit pension asset or liability in the statement of financial position comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high-quality corporate bonds) less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.

Contributions to defined contribution schemes are recognised in the income statement in the period in which they become payable.

PA Holdings Limited is the sponsoring employer of the United Kingdom defined benefit scheme as it has legal responsibility for the plan. There is no contractual agreement or stated policy for charging the defined benefit cost of the plan as a whole to individual Group entities, and therefore the Company has recognised the entire net defined benefit cost and relevant net defined benefit liability of the United Kingdom scheme in its individual financial statements.

b Share-based paymentsThe Group provides benefits to its employees in the form of equity-settled and cash-settled share-based payment transactions, whereby employees render services in exchange for shares, rights over shares or the value of those shares in cash terms.

For equity-settled share-based payments, the fair value of the employee services rendered is determined by reference to the fair value of the shares awarded or options granted, excluding the impact of any non-market vesting conditions. All share options are valued using the Black-Scholes option-pricing model. This fair value is charged as an employee benefit expense within personnel and direct costs in the income statement over the vesting period of the share-based payment arrangement, with the corresponding increase in shareholders’ funds.

For cash-settled share-based payments, the fair value of the employee services rendered is determined at each statement of financial position and the charge recognised through the income statement over the vesting period of the share-based payment plan, with the corresponding increase in creditors. The value of the charge is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting, with the corresponding adjustments made in creditors.

Where the Company grants rights to its equity instruments to employees of a subsidiary, and the share-based payment is accounted for as equity-settled in the Group financial statements, the subsidiary records an expense for the share-based payment, with a corresponding increase in shareholders’ funds as a capital contribution from the Company. Consequently, in the Company financial statements, fixed asset investments in subsidiaries are increased by the aggregate amount of these contributions with a corresponding increase in shareholders’ funds for the same amount.

c Termination benefitsTermination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts redundancy in exchange for these benefits. The Group recognises termination benefits as an expense when it is demonstrably committed to terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal.

d Bonus plansThe Group recognises a liability and an expense for bonuses based on a formula that takes into consideration the Group’s profit before tax after certain adjustments. The Group recognises bonus liabilities and expenses where there is a past practice that has created a constructive obligation or there is a contractual obligation.



e Short-term compensated absencesThe Group recognises the expected cost of accumulating compensated absences, primarily annual leave, when the employees render service that increases their entitlement to future compensated absences.

Research and development

Research expenditure is written off to the income statement in the period in which it is incurred. Development expenditure is written off in the same way unless the directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the period during which the Group is expected to benefit.

Operating lease income and expense

a Rental expenseOperating lease rentals are charged as other administrative expenses to the income statement in equal annual amounts over the lease term. Assets leased under operating leases are not recorded on the statement of financial position because the lessor retains a significant portion of the risks and rewards of ownership.

b Lease incentivesThe benefit of lease incentives such as rent-free periods or up-front cash payments are spread equally on a straight-line basis over the lease term.

c Rental incomeOperating lease income consists of rentals from subtenant agreements and are recognised on a straight-line basis over the lease term and classified as other operating income in the income statement.

Interest income and expense

Interest income and expense is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.

Tax

The tax charge comprises current tax payable and deferred tax.

a Current taxThe current tax charge represents an estimate of the amounts payable to tax authorities in respect of the Group’s taxable profits and is based on an interpretation of existing tax laws. Taxable profit differs from profit before tax as reported in the Group income statement as it excludes certain items of income and expense that are taxable or deductible in other years or are never taxable or deductible.

b Deferred taxDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date where transactions or events have occurred at that date which will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions:

• deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted

• provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries, associates and joint ventures only to the extent that, at the balance sheet date, dividends have been accrued as receivable.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Dividends

Dividend distributions to the Company’s shareholders are recognised as a liability in the period that the interim dividend is paid or a final decision is approved by the Company’s shareholders. Distributions are deducted from the profit and loss reserve within shareholders’ funds.

Goodwill

Goodwill arising on an acquisition of a business is the difference between the fair value of the consideration paid and the fair value of the assets and liabilities acquired. It is capitalised and amortised on a straight-line basis over its useful economic life up to a maximum of 10 years.

The carrying value of goodwill is reviewed for impairment at the end of the first financial year following acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable.




1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Intangible assets

Intangible assets include trade name, customer relationships, non-compete agreements and investment in new enterprise resource planning (ERP) software.

The trade name, customer relationships and non-compete agreements were acquired as part of the acquisition of the PA business and are classified separately from goodwill as the fair value can be measured reliably on initial recognition, subject to the constraint that unless the asset has a readily ascertainable market value, the fair value is limited to an amount that does not create or increase negative goodwill arising on the acquisition.

Intangible assets acquired separately from a business are capitalised at cost and amortised over the period during which the Group is expected to benefit.

The costs capitalised for investment in new ERP software represent costs of development by an external company and are amortised over a useful life of three years. Internal costs of development are expensed as incurred.

Intangible assets are amortised on a straight-line basis over their estimated useful lives of between 3 and 21 years. The carrying value of intangible assets is reviewed for impairment at the end of the first full year following acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be recoverable.

Tangible fixed assets

Tangible fixed assets are stated in the statement of financial position at cost less accumulated depreciation and impairment. Cost comprises purchase price after discounts and rebates plus all directly attributable costs of bringing the asset to working condition for its intended use. Finance costs are not capitalised and are expensed as incurred.

Depreciation is calculated so as to write off the cost of tangible fixed assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned. Depreciation is charged on assets from the date in which they are brought into use. The principal annual rates used for this purpose are:

Asset category Annual depreciation rate

Computer equipment on cost 20%-50%

Office furniture, equipment on cost 10%-33% and machinery

Freehold property on cost 2%-10%

Leasehold property Equal instalments over the remaining period of lease unless the economic life of the asset is determined to be less than that of the lease

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate that carrying values may not be recoverable.

Fixed asset investments

In the Company statement of financial position, investment in subsidiaries is stated at cost less provision for impairment in value.

Current asset investments

Investments held as current assets are stated at the lower of cost and net realisable value. Current asset investments include short-term deposits and other liquid investments where there is a notice period for withdrawal of more than 24 hours to avoid a penalty.

Cash

Cash includes cash in hand, deposits held with banks, other short-term deposits and other liquid investments accessible within 24 hours without penalty.

Financial instruments

Basic financial assets and liabilities are recorded at the present value of the future cash flows discounted at a rate of interest that the directors deem indicative of the Group’s cost of external borrowing.



Derivative instruments

The Group uses forward foreign currency contracts to reduce exposure to foreign exchange rates. The Group uses interest rate swap contracts to reduce exposure to interest rate movements on the senior debt. The interest payable or receivable on such swaps is accrued in the same way as interest arising on deposits or borrowings. Both types of derivative financial instruments are initially measured at fair value on the date on which the derivative contract is entered into and subsequently measured at fair value through other comprehensive income. The fair value of both types of derivative financial instruments are calculated by reference to current derivative contracts of both types with similar maturity profiles.

Provisions for liabilities

The Group recognises a provision for restructuring costs and legal claims when it has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the statement of financial position date.

Provision is made for onerous property lease commitments, after allowance for anticipated sublet rental income, and to restore premises to their original condition upon vacating them where such an obligation exists under the lease.

Interest-bearing loans and borrowings

All interest-bearing loans and borrowings are initially recognised at net proceeds. After initial recognition, debt is increased by the finance cost in respect of the reporting period and reduced by repayments made in the period.

Finance costs of debt are allocated over the term of the debt at a constant rate on the carrying amount.

Interest payable is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.

Share capital

Issued share capital is classified as equity instruments or financial liabilities according to the substance of the contractual arrangement entered into.

a Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded as the proceeds received net of direct issue costs, with the nominal value of the instrument credited to share capital and the excess to the share premium account.

In accordance with FRS 102, the Company’s preference shares are considered to be financial liabilities and presented separately within creditors.

All other classes of shares of the Company are considered to be equity instruments and are classified as share capital because they do not contain contractual obligations to deliver cash or other financial assets, or to exchange financial assets or liabilities with another party under conditions that are potentially unfavourable, or to deliver a variable number of the Company’s own equity instruments or a fixed amount of cash or other financial assets for a fixed number of the Company’s own equity instruments.

b Financial liabilitiesThe liability for the preference shares arises because their rights oblige the Company to pay accrued dividends (12%) and capital in certain events.

The financing charge arising on the liability is charged as interest in the income statement.

Adjusted EBITDA and exceptional items

The directors believe that adjusted EBITDA provides additional useful information for shareholders on the underlying performance of the business. This measure is consistent with how the underlying business performance is measured internally.

Items are disclosed as exceptional if by virtue of their size or nature they distort the underlying trading performance.




2 TURNOVER AND SEGMENTAL ANALYSIS

a Business segments

All turnover is derived from the provision of consulting services and relates to continuing operations:

Note2016

£’000Fee income 391,223Project costs recharged 46,058

Turnover 2b 437,281

Loss on ordinary activities before taxation (74,791)

Net assets (63,106)

b Geographical analysis

The Group manages its business segments on a global basis. The following table provides an analysis of Group turnover by geographical market, based on the billing location of the client:

2016 £’000

UK 301,143Americas 53,729Scandinavia 46,092Europe (excluding UK and Scandinavia) 24,915Asia Pacific 11,402Turnover 437,281

An analysis of profit before tax and net assets by geographic region is not provided because, in the directors’ opinion, there is no suitable basis of allocating profit before tax, assets and related liabilities to geographical segments as the Group’s resources are utilised flexibly over all geographical segments.



3 EMPLOYEE INFORMATION

a Employee numbers

The average monthly number of people, including executive directors, employed by the Group during the year was:

2016 Number

Consultants 2,154Support 683Total average number of employees 2,837

b Employee remuneration

The aggregate remuneration of these persons was:

Note2016

£’000Wages and salaries (186,335)Staff bonuses (33,422)Social security costs (21,375)Contributions to defined contribution pension arrangements (13,626)Current service cost for defined benefit pension arrangements 24b (22)

Running costs for defined benefit pension arrangements 24b (1,068)Equity-settled share-based payments 25c (15)Cash-settled share-based payments 25c (316)Other payroll costs (22,703)Total aggregate employee benefits (278,882)




4 DIREC TORS’ REMUNER ATION

a Aggregate remuneration

2016 £’000

Aggregate emoluments in respect of qualifying services (2,178)Company contributions to money purchase pension schemes (9)Non-executive directors’ fees (216)

(2,403)

2016 Number

Directors accruing benefits under defined benefit schemes 2Directors in the defined contribution scheme 2

No other directors were paid by the Company or Group.

For all executive directors 30% of the bonus included in these amounts will be withheld for up to five years and will only be paid contingent on certain criteria being met.

b Highest-paid director

2016 £’000

Total amount of emoluments and amounts receivable under long-term incentive schemes (1,749)Contributions to defined contribution pension arrangements (5)

(1,754)

5 OTHER OPER ATING INCOME2016

£’000Rental income from property subleases 2,917



6 ADJUSTED EBITDA AND E XCEPTIONAL S

Note2016

£’000Group operating loss 23 (21,654)Exceptional costs are made up of the following items:

Onerous lease provision 6a 10,603Costs arising from the investment by The Carlyle Group 6b 5,462Restructuring costs 6c 5,127Finance systems upgrade 6d 1,043

Business start-up costs 6e 636Other costs 6f 1,166Exceptional costs 24,037Amortisation of intangibles 21,828Amortisation of goodwill 21,507Depreciation of owned tangible assets 4,806Defined benefit pension scheme running costs 6g, 24b 1,068Adjusted EBITDA 51,592

During the period the Group incurred certain costs that the directors believe are of an exceptional nature and quantum and should be separately disclosed.

a These costs relate to the onerous lease provision required on the Group’s existing London office as the Group moves offices.

b These costs relate to the investment in 2015 by The Carlyle Group and consist of both the transactional fees and other distributions of proceeds to existing shareholders.

c These costs relate to various restructuring plans executed during the period.

d These costs relate to the ongoing upgrade of the Group financial systems.

e These costs relate to the investment in new businesses during the period.

f These costs relate to various costs that the directors believe are exceptional in nature.

g During the period the Group incurred pension running costs for the two UK defined benefit pension schemes. These schemes are in surplus and as such the running costs are a non-cash cost to the Group.




7 GROUP OPER ATING PROFIT

This is stated after charging/(crediting): Note2016

£’000Depreciation of tangible fixed assets 13, 23 4,800Loss on disposal of tangible fixed assets 23 6Total depreciation charge 4,806

Amortisation of intangible assets 12, 23 21,828Amortisation of goodwill 12, 23 21,507Operating lease rental charges – land and buildings 8,324Operating lease rental charges – plant and machinery 787Foreign currency differences (1,044)R&D expenditure credits (837)

Auditors’ remuneration 385

Auditors’ remuneration

2016 £’000

Audit of the Company and Group financial statements 320Fees payable to the Group’s auditor for other services:

Tax services 29Other assurance services 23All other services 13Total non-audit services 65

385

Included in audit of the financial statements is £12,000 relating to the Company. The auditor of PA Consulting Group Limited is Ernst & Young LLP.

8 NET INTEREST RECEIVABLE/(PAYABLE) AND SIMIL AR ITEMS

Note2016

£’000Interest receivable on cash and current asset investments 676Total interest receivable and similar income 676

Interest payable/paid on:

– preference shares (17,126)– investor loan notes (18,777)– vendor loan notes (10,602)– senior debt (5,142)Amortisation of debt issue costs 8a (730)Net discounting impact of long-term assets/liabilities (1,406)Total interest payable and similar charges (53,783)Net interest payable and similar items (53,107)

a Issue costs on the senior debt are amortised over a period of six years .

9 OTHER FINANCE COSTS

Note2016

£’000Interest on defined benefit pension arrangement liabilities 24b (22)Other interest (8)Total other finance costs (30)



10 TA X

a Tax on profit on ordinary activities

2016 £’000

Current taxUnited KingdomUK corporation tax at 20% -UK tax overprovided in previous years 54UK corporation tax 54Foreign taxCorporation taxes (230)Foreign tax overprovided in previous years 650Foreign tax 420 Total current tax credit 474

Deferred taxOrigination and reversal of timing differences 1,298Deferred tax adjustment relating to previous years (457)Total deferred tax 841

Total tax credit on loss on ordinary activities 1,315

b Tax included in Group statement of other comprehensive income

Note2016

£’000Deferred taxMovement on deferred tax relating to actuarial gain on defined benefit pension arrangements 22, 24b (224)Total tax (charge) (224)

c Factors affecting current tax credit

The Group incurred a UK current tax charge of £nil in 2016. This is mainly due to UK tax relief arising from three transactions:

i. the onerous lease provision on the Group's London office (see note 6a)

ii. further tax relief on a £102,000,000 payment made to the UK defined benefit pension scheme in 2015 (see note 24c)

iii. interest payments on senior debt and vendor loan notes (see note 8).

The overall Group tax credit is lower than the standard effective rate of corporation tax for the period ended 31 December 2016 of 20%. The differences are explained below:

2016 £’000

Loss on ordinary activities before taxation (74,791)Loss on ordinary activities multiplied by the standard corporation tax in the UK of 20% 14,958Effects of:

Expenses not deductible for tax purposes (excluding goodwill amortisation) (1,067)Non-deductible preference share interest (3,428)Goodwill amortisation (4,301)UK losses arising in the year not relievable against current tax (5,861)Overseas losses arising in the year not relievable against current tax (1,426)Use of tax losses which are relievable against current tax 56Tax overprovided in previous years 247Effect of change of tax rate on deferred tax asset 1,328Differential on overseas tax rates 809Total tax credit for the year 1,315




10 TA X (CONTINUED)

d Factors that may affect future tax charges

The Finance Act 2016 reduced the standard rate of UK corporation tax from 1 April 2020 from 18% to 17%.

The Group has net tax losses of £6.7 million that are available for offset against future taxable profits of those companies in which the tax losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group, and they have arisen in subsidiaries whose future taxable profits are uncertain.

e Deferred tax

i The deferred tax assets/(liabilities) included in the Group statement of financial position are as follows:

Note2016

£’000Included in debtors due after more than one year 16 3,152Included in provisions for liabilities 20 (20,502)

(17,350)

ii The components of deferred tax included in the Group statement of financial position are as follows:2016

£’000Bonuses 9,289Pension contributions 9,392Tax losses 17,417Intangible assets (52,219)Property provisions (92)Other (285)Accelerated capital allowances (852)

(17,350)

iii The movement in deferred tax in the Group statement of financial position during the period is as follows:

Note2016

£’000Acquired on subsidiary acquisition (18,702)Effect of movements in exchange rates 401Utilised in the period 333Effect of rate change 1,349Deferred tax charge in Group income statement (507)Amount credited to Group statement of other comprehensive income 24b (224)At 31 December 2016 including deferred tax on defined benefit pension net surplus (17,350)

The Group expects deferred tax assets of £4.7 million and deferred tax liabilities of £3.7 million to reverse in 2017.

f Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profits will be available against which the Group can utilise the benefits.

2016 £’000

Tax losses carried forward 6,7776,777



11 LOSS AT TRIBUTABLE TO MEMBERS OF THE PARENT COMPANY

The directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented an income statement for the Company alone. The Company’s loss for the period was £17,137,627.

1 2 INTANGIBLE ASSETS

Group

NoteSoftware

£’000Non-compete

£’000Trademarks

£’000

Customer relationships

£’000Goodwill

£’000Total

£’000

CostAcquired on subsidiary acquisition 2,596 5,489 118,649 196,190 203,367 526,291Additions 358 - - - - 358At 31 December 2016 2,954 5,489 118,649 196,190 203,367 526,649

Accumulated amortisationCharge for the year 7, 23 (1,412) (1,935) (6,274) (12,207) (21,507) (43,335)At 31 December 2016 (1,412) (1,935) (6,274) (12,207) (21,507) (43,335)

Net book amountAt 31 December 2016 1,542 3,554 112,375 183,983 181,860 483,314

The software intangible asset is the Group’s continued investment in a new enterprise resource planning system that is being developed by a combined internal and external team for the Group’s specific requirements. The asset will be amortised over a remaining useful life of three years.

Non-compete represents three-year non-solicitation agreements with key management personnel and are being amortised over the duration of the agreement. At 31 December 2016 the remaining amortisation period was two years.

Trademarks represent the value of the royalty streams associated with the PA brand and are being amortised evenly over the directors’ estimate of their useful economic life of 20 years. At 31 December 2016 the remaining amortisation period was 19 years.

Customer relationships represent the existing customer base that is expected to continue to support the business. These customer relationships are being amortised over their useful economic lives of 21 and 8 years depending on the sector in which the customer belongs. These useful economic lives represent the period over which 95% of the discounted post-tax excess earnings are collected. At 31 December 2016 the remaining amortisation periods were 20 and 7 years.

See note 32 for details of goodwill addition in the period. This is being amortised evenly over the directors’ estimate of its useful economic life of 10 years.

Company

The Company has no intangible fixed assets.




1 3 TANGIBLE ASSETS

Group

Note

Freehold land and buildings

£’000

Short leasehold

and property

£’000

Office furniture

equipment and

machinery £’000

Computer equipment

£’000Total £’000

CostAcquired on subsidiary acquisition 17,265 2,158 1,884 2,372 23,679Effect of movements in exchange rates - 36 123 161 320Additions at cost 180 269 941 1,359 2,749Disposals - - - (9) (9)At 31 December 2016 17,445 2,463 2,948 3,883 26,739

Accumulated depreciationEffect of movements in exchange rates - (5) (13) (30) (48)Charge for the year 7, 23 (871) (1,601) (621) (1,707) (4,800)Disposals - - - 3 3At 31 December 2016 (871) (1,606) (634) (1,734) (4,845)

Net book amountAt 31 December 2016 16,574 857 2,314 2,149 21,894

The Group increased the fair value of the freehold property in Melbourn in the United Kingdom by £2,100,000 on acquisition as valued by an independent valuer using market-based evidence for similar properties in the local area. The property is being depreciated from the valuation date.

2016 £’000

Historical cost equivalent 15,165Revaluation 2,100Net book value 17,265

Company

The Company has no tangible fixed assets.



14 FIXED ASSET INVESTMENTS IN SUBSIDIARIES

Company

Group2016

£’000

Company 2016£’000

CostAdditions at cost - 15,633

At 31 December 2016 - 15,633

1 5 DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YE AR

Note

Group 2016

£’000

Company 2016

£’000Trade debtors 15a 59,757 -Amounts owed by Group undertakings - 126,655Other debtors 3,054 -Loans to staff 224 -Prepayments 7,792 -Withholding tax debtor 889 -Taxation 3,330 -Accrued income 20,352 -

95,398 126,655

a Trade debtors

Trade debtors are stated after provisions for impairment of £1,168,871.




16 DEBTORS: AMOUNTS FALLING DUE AF TER MORE THAN ONE YE AR

Note

Group 2016

£’000Deferred tax 10e 3,152

3,152

Company

The Company has no debtors falling due after more than one year at 31 December 2016.

17 CURRENT ASSET INVESTMENTS

Note

Group 2016

£’000Short-term deposits 494

23 494

Current asset investments include money market deposits and other liquid investments where there is a notice period for withdrawal of more than 24 hours to avoid a penalty.

Company

The Company has no current asset investments at 31 December 2016.

18 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YE AR

Note

Group 2016

£’000

Company 2016

£’000Payments on account (15,489) -Trade creditors (1,806) -Other taxes and social security payable (17,192) -Other creditors (22,562) (12)Cash-settled share-based payments liability 25c (469) -Bonuses 19e (35,908) -

(93,426) (12)



19 CREDITORS: AMOUNTS FALLING DUE AF TER MORE THAN ONE YE AR

Note

Group 2016

£’000

Company 2016

£’000Senior debt 19a (96,575) -Unsecured transferable 5% vendor loan notes 19b (200,000) -Unsecured transferable 12% investor loan notes 19c (166,202) -Preference shares classified as financial liabilities 19d (151,587) (151,587)Other creditors (5,902) -Bonuses 19e (34,141) -

(654,407) (151,587)

a Senior debt

On 11 December 2015 the Group received a bank loan of £100,000,000 that is repayable on 11 December 2021. Interest of 3.5% plus LIBOR is payable on the loan. The loan is shown net of issue costs. Issue costs at inception totalled £4,155,000 and are amortised over the 6-year term of the loan. Amortisation in the period totalled £730,000. The senior debt is secured by a charge over the banking group whose parent is Garden Midco 2 Limited.

Amounts payable

Group 2016

£’000

Company 2016

£’000In two to five years (100,000) -Less issue costs 3,425 -

(96,575) -

b Unsecured transferable 5% vendor loan notes

On 11 December 2015, £200,000,000 unsecured transferable 5% vendor loan notes were issued. The loan notes are repayable on 11 December 2023. The loan notes accrue interest at a rate of 5% payable annually on 30 September.

Amounts payable

Group 2016

£’000

Company 2016

£’000In more than five years (200,000) -

c Unsecured transferable 12% investor loan notes

On 11 December 2015, £147,425,000 unsecured transferable 12% investor loan notes were issued. The loan notes are repayable on 11 December 2023. The loan notes accrue interest, compounded each year, at a rate of 12%.

Amounts payable

Group 2016

£’000

Company 2016

£’000In more than five years (166,202) -




19 CREDITORS: AMOUNTS FALLING DUE AF TER MORE THAN ONE YE AR (CONTINUED)

d Preference shares classified as financial liabilities

On 11 December 2015 the group issued 134,461,347 £0.01 redeemable preference shares at £1 each. Dividends accrue at the rate of 12% per annum, compounded each year.

Amounts payable

Group 2016

£’000

Company 2016

£’000In more than five years (151,587) (151,587)

e Bonuses

The total bonuses payable at 31 December 2016 are shown below. Bonuses due in more than one year relate to the deferral of bonus awards for certain employees from three to five years after they have been awarded.

Bonuses payable Note

Group 2016

£’000

Company 2016

£’000Due in less than one year 18 (35,908) -Due in more than one year 19 (34,141) -

(70,049) -



20 PROVISIONS FOR LIABILITIES

Group

Deferred tax £’000

Property £’000

Restructuring£’000

Other £’000

Total £’000

Acquired on subsidiary acquisition (43,691) (1,201) - (3,341) (48,233)Effect of movements in exchange rates 238 - - - 238Charged to the income statement - (10,741) (5,127) - (15,868)Released to the income statement 6,743 - - - 6,743Geographical reclassification from assets to liabilities 16,208 - - - 16,208Utilised in the period - 168 4,581 3,000 7,749At 31 December 2016 (20,502) (11,774) (546) (341) (33,163)

a Deferred tax provisions

Deferred tax provisions are analysed in note 10e.

b Property provisions

Property provisions relate to the difference between rents payable and rents receivable in all vacant and sublet space and dilapidations obligations on leasehold properties over the term of the lease.

c Restructuring provisions

Restructuring provisions relate to specific actions taken by senior management to close unprofitable locations and implement cost-saving initiatives. These actions were announced before 31 December 2016 and will be settled early in 2017.

d Other provisions

Other provisions include a number of provisions mostly in respect of legal actions or claims against PA Consulting Group Limited or its subsidiary companies. In the opinion of the directors, the provisions made represent sufficient and adequate provision to cover the likely result of any action or claim. They are also of the opinion that further detailed disclosure of the nature or extent of these actions or claims would be seriously prejudicial to the Group’s defence of these actions and claims.

Company

The Company has no provisions for liabilities.




21 ALLOT TED AND ISSUED SHARE CAPITAL

Group and Company

Allotted, called up and fully paid Note2016

Number2016

£’000Ordinary A shares of £0.01 each 38,250,000 383Ordinary B shares at £0.01 each 34,886,530 349Ordinary C shares at £0.01 each 5,135,220 51

22 78,271,750 783

a Ordinary shares

Allotment of ordinary share capitalOn 3 September 2015, 1 ordinary A £1 share was issued for £10 resulting in a share premium of £9. The allotment of shares is fully paid up.

On 11 December 2015, the 1 ordinary A £1 share was subdivided into 100 ordinary A £0.01 shares.

On 11 December 2015, 38,249,900 ordinary A £0.01 shares were issued at £0.10 each for the total consideration of £3,824,990 resulting in a share premium of £3,442,491. The allotment of shares is fully paid up.

On 11 December 2015, 34,886,530 ordinary B £0.01 shares were issued at £0.10 each for the total consideration of £3,488,653 resulting in a share premium of £3,139,788. The allotment of shares is fully paid up.

On 11 May 2016, 5,135,220 ordinary C £0.01 shares were issued at £0.10 each for the total consideration of £513,522 resulting in a share premium of £462,170. The allotment of shares is fully paid up.

The total consideration for shares issued in the period was £7,827,175 comprising nominal value of share capital £782,717 and share premium of £7,044,458.

b Class rights

Share class Voting rights Dividend rights

Ordinary A shares Full voting rights The right to all dividends

Ordinary B shares Full voting rights The right to all dividends

Ordinary C shares No voting rights The right to all dividends

c Priority on a return of capital or sale

Share class Amount

Ordinary shares (A, B and C) Entitled to a share of the surplus assets in proportion to the amount paid up



22 RESERVES

Group

Note

Share capital

£’000

Share premium

£’000

Profit and loss reserve

£’000Total £’000

Loss for the financial period - - (73,476) (73,476)Issue of ordinary shares 21a 783 7,044 - 7,827Actuarial gain recognised on defined benefit pension arrangements 24b - - 1,425 1,425Movement on deferred tax relating to actuarial gain on pensions 10b, 24b - - (224) (224)Exchange difference on retranslation of net assets and results of overseas subsidiaries - - 1,788 1,788Change in the fair value of the interest rate swap - - (855) (855)Own shares held by employee trusts - - (997) (997)Reserve credit for equity-settled share-based payments - - 15 15Cash consideration received for disposal of shares - - 5,189 5,189Shares received on behalf of shareholders - - 6,212 6,212Amounts owed to shareholders - - (10,010) (10,010)Net change in shareholders’ funds 783 7,044 (70,933) (63,106)Shareholders’ funds at 31 December 2016 783 7,044 (70,933) (63,106)

Included in the profit and loss reserve are the following amounts:

Own shares held elimination

£’000

Own shares held by employee trust (997)

At 31 December 2016 (997)




22 RESERVES (CONTINUED)

Shares held by employee trust

At the end of the period the PA 2004 ESOP held 225,853 ordinary shares in the Company at £893,068 and vendor loan notes totalling £103,650 - combined total £996,718. PA Rosetta Limited, a wholly owned subsidiary of the PA 2004 ESOP, held no shares in the Company at nil value.

The purpose of the PA 2004 ESOP and PA Rosetta Limited is to facilitate and encourage the ownership of shares by employees by holding shares for subsequent sale or grant. As required by FRS 102 Section 9, own shares held are treated as a deduction from shareholders’ funds.

Company

Note

Share capital

£’000

Share premium

£’000

Profit and loss reserve

£’000Total £’000

Loss for the financial period 11 - - (17,138) (17,138)Issue of ordinary shares 21a 783 7,044 - 7,827Net change in shareholders’ funds 783 7,044 (17,138) (9,311)Shareholders’ funds at 31 December 2016 783 7,044 (17,138) (9,311)

23 RECONCILIATION OF OPER ATING LOSS TO NET CASH FLOW FROM OPER ATING AC TIVITIES

Note2016

£’000Group operating loss 7 (21,654)Amortisation of intangible assets 7, 12 43,335Depreciation of fixed tangible assets 7, 13 4,800Loss on disposal of tangible fixed assets 7 6Decrease in debtors 25,109Decrease in creditors and provisions (20,911)Net foreign exchange gain (1,071)Difference between pension charge and cash contributions 1,318Share-based payments charge 25c 331Net cash inflow from operating activities 31,263

Analysis of changes in net debt

Cash flows

Other non-cash changes

At 31 Dec 2016

Cash at bank and in hand 114,322 - 114,322Short-term deposits 494 - 494

114,816 - 114,816

Senior debt less issue costs falling due after one year (95,845) (730) (96,575)5% loan notes (200,000) - (200,000)12% loan notes (147,425) - (147,425)Preference shares classed as debt (134,461) - (134,461)

(577,731) (730) (578,461)Net debt (462,915) (730) (463,645)



24 RETIREMENT BENEFITS

Group

The Group operates a number of pension arrangements throughout the world, the forms and benefits of which vary with conditions and practices in the countries concerned. The largest arrangements are self-administered and their assets are held independently of the Group’s finances in either separate trustee-administered funds or insurance-based schemes. The principal arrangement is in the United Kingdom and comprises both defined contribution and defined benefit sections.

a Defined contribution pension arrangements

The total pension costs for the Group relating to employer contributions to defined contribution pension arrangements was £13.6 million. At 31 December 2016 there were outstanding unpaid contributions of £1.3 million.

b Defined benefit pension arrangements

i Analysis of defined benefit pension arrangement net assets and liabilities included in the Group statement of financial position

As at 31 December 2016 NoteUK closed

£’000UK active

£’000

Germany active £’000

Total £’000

Defined benefit pension arrangements with net assets/(liabilities)Defined benefit pension arrangements with gross assets/(liabilities) 149,228 153 (684) 148,697Restriction to apply on recognition of surplus (149,228) (153) - (149,381)Deferred tax 10e - - - -Total net pension liabilities included in the Group statement of financial position - - (684) (684)

ii Analysis of amounts recognised in the Group income statement


£’000UK active

£’000


Total £’000

Current service cost 3b - - (22) (22)Running costs 3b (1,043) (25) - (1,068)Loss on settlement - (345) - (345)Recognised in arriving at operating profit (1,043) (370) (22) (1,435)Interest cost - - (22) (22)Other finance costs - - (22) (22)Total recognised in the Group income statement (1,043) (370) (44) (1,457)




24 RETIREMENT BENEFITS (CONTINUED)iii Analysis of amounts recognised in the Group statement of other comprehensive income


£’000UK active

£’000


Total £’000

Actual return on assets less interest 153,400 951 18 154,369Actuarial loss on liability (152,888) (1,477) - (154,365)Restriction to apply on recognition of surplus 550 871 - 1,421Actuarial gain recognised on defined benefit pension arrangements 22 1,062 345 18 1,425Deferred taxation 10b, 22 (166) (58) - (224)Total recognised in the Group statement of other comprehensive income 896 287 18 1,201

c UK defined benefit pension section

The UK defined benefit pension section has been closed to new entrants with effect from 1 January 1998 and new employees are invited to join the defined contribution section or a stakeholder arrangement.

From 1 April 2007 all active members of the defined benefit section became members of the defined contribution section. From 1 April 2007 to 31 March 2012 (or date of leaving if earlier) all active members with accrued benefits received a salary link through to 31 March 2012, and enhanced statutory revaluation rates thereafter plus an additional 1.5%. From 1 April 2007 the Group has agreed to pay 8% of contributory pay in respect of defined contribution members plus an additional 0.5% of contributory pay for administrative expenses.

The Group is required under the trust deed to make contributions necessary to keep the scheme fully funded. The Group made a one-off funding payment of £102,000,000 in December 2015 as agreed with the trustee to approve the investment from The Carlyle Group and a further £68,000 contributions were made in the period. The agreed payment for the year ending 31 December 2017 will be £nil.

Contributions to the defined benefit section of the PA pension scheme are based on advice from independent actuaries using actuarial methods, the objective of which is to provide adequate funds to meet pension obligations as they fall due. A full actuarial valuation was carried out at 31 March 2014 and showed a deficit of £71.1 million on a minimum funding-level basis.

i Principal assumptionsThe most recent actuarial funding valuation has been updated by Lane Clark & Peacock LLP in order to assess the liabilities of the defined benefit section at 31 December 2016 for the purposes of FRS 102 ‘Employee Benefits’. Section assets are stated at their market value at 31 December 2016. The principal assumptions used in this valuation by the actuaries were:

2016 %

Rate of increase in pensionable salaries 5.0Rate of increase in pensions in payment and deferred pensions 2.6Discount rate applied to section liabilities 2.6Rate of inflation 3.5

The post-retirement mortality assumptions used were as follows:

2016 %

Longevity at 60 for current pensioners

• Men 29.4• Women 30.5Longevity at 60 for future pensioners

• Men 30.5• Women 32.1




ii Section assets and liabilities

Note2016

£’000Equities 19,673Bonds 875,622Real estate 20,115Infrastructure 22,778Fund of hedge funds 1,776Cash 2,363Total fair value of assets 942,327Present value of section liabilities (793,099)Surplus in the section 24b 149,228Amount not recognised due to asset limit 24b (149,228)Related deferred tax asset 24b -Net pension deficit 24b -

The section assets are valued at bid market value for quoted securities, plus cash balances held in the trustee’s bank account. Infrastructure assets relate to specific sectors, including roads, bridges and tunnels; airports, ports and rail; water supply and wastewater treatment; gas transportation, storage and distribution; power generation and electric transmission; and utility services for residential, commercial and industrial customers.

The pension section has not invested in any of the Group’s own financial instruments nor in properties or other assets used by the Group.

The major categories of section assets as a percentage of the total section assets are as follows:

2016 %

Equities 2.1Bonds 92.9Real estate 2.1Infrastructure 2.5Fund of hedge funds 0.2Cash 0.2

100.00

iii Reconciliation of fair value of defined benefit section assets2016

£’000Acquired on subsidiary acquisition 787,291Interest on assets 28,646Contributions paid by the employer 68Benefits paid (26,733)Running costs (1,043)Actual return plan assets less interest 154,098At 31 December 942,327

The actual return on section assets was £182.7 million.




24 RETIREMENT BENEFITS (CONTINUED)iv Reconciliation of present value of defined benefit section liabilities

Note2016

£’000Acquired on subsidiary acquisition (642,447)Interest on obligation (23,273)Benefits paid 26,733Actuarial gains/(losses) due to:

Experience gain 10,083Changes in financial assumptions (loss) (164,195)At 31 December (793,099)

v CompanyThe Company has no employees (the members of the Group’s defined benefit pension arrangements are or were employed by subsidiaries of PA Consulting Group Limited) and, consequently, no defined benefit arrangement disclosures are given for the Company.

d Other defined benefit arrangements

At December 2016 the Group had an active defined benefit scheme in the UK with net assets of £nil and an active defined benefit scheme in Germany with a net liability of £0.7 million. The full disclosures required by FRS 102 are not provided because, in the directors’ opinion, these arrangements are immaterial to the net assets of the Group.



25 SHARE-BASED PAYMENTS

The total charge for share-based payments for the year was £331,000.

a Equity-settled share-based payments

The Group operates the following equity-settled share-based payments arrangements: the 2015 New Joiner and Promotion Option Plan (NJPOP) and the Two Pence Option Plan (TPOP).

NJPOPThe NJPOP plan is for awarding options over shares in the Company to employees in the UK and the rest of the world who were new joiners or promotes in 2015 but were not awarded options in October 2015 as a result of the Carlyle investment being in progress at that time. The options are granted at a price equal to the market price of the shares at the date of the grant.

The options will vest if the employees remain in service and are not under notice when the share market is run in April 2018.

There is no employer-run savings plan to accompany the options.

TPOPThe business environment in the Nordic region necessitated establishing a TPOP plan for shareholders in the Nordic region on the Carlyle investment. The options were granted in January 2016 at a nominal price of £0.02. The options replace the gift of shares by the PA 2004 ESOP to non-Nordic shareholders in December 2015.

The options vested immediately and are exercisable in April 2016, 2017 and 2018.

b Cash-settled share-based payments

The Group operates a cash-settled share-based payment scheme called ‘shadow shares’.

Shadow sharesThe Group issues shadow shares to employees based in countries where it was undesirable for them to participate in the Company’s option plans. Following the Carlyle investment, existing shadow shares were converted into new shadow units based on the proportion of vendor loan notes, preference shares and ordinary shares granted to holders of actual shares. These are share appreciation rights under which the employee is entitled to receive the increase in share value from the date of grant to the end of the entitlement period, so long as the employee remains in employment within the Group.

c Analysis of amounts recognised in the financial statements

i Analysis of amounts recognised in the Group income statement

Note2016

£’000Equity-settled share-based payments 3b, 22 (15)

Cash-settled share-based payments 3b (316)Recognised in personnel and direct costs in operating profit (331)Total share-based payments charge recognised in operating profit (331)

ii Analysis of amounts recognised directly in Group shareholders’ funds in the year

Note2016

£’000Reserve credit for equity-settled share-based payments 22 15

iii Analysis of amounts included as liabilities in the Group statement of financial position

Note2016

£’000Cash-settled share-based payments 18 (469)

iv Analysis of cumulative amounts included in the Group profit and loss reserve

Note2016

£’000Cumulative reserve credit for equity share-based payments 22 15



25 SHARE-BASED PAYMENTS (CONTINUED)

d Reconciliation of movements in equity-settled and cash-settled share-based payments in the year

i Equity-settled share-based payments

SchemeAward date

(year)

Exercise price at

grant date (£)

Exercise price at 31 December

2016 (£)

Fair value (£)

Granted during

the year (number)

Exercised during

the year (number)

Lapsed during

the year (number)

Awards outstanding

at 31 December

2016 (number)

Vesting period (years)

NJPOP 2016 3.95 3.95 0.09 580,162 - - 580,162 2

TPOP 2016 0.02 0.02 3.95 659,681 (536,203) (1,277) 122,201 -

Total equity-settled share-based payments 1,239,843 (536,203) (1,277) 702,363

Weighted average exercise price 1.86 0.02 0.02 3.26

ii Cash-settled share-based payments

PlanAward date

(year)

Exercise price at

grant date (£)

Exercise price at 31 December

2016 (£)

Awards outstanding

on acquisition

(number)

Granted during

the year (number)

Exercised during

the year (number)

Lapsed during

the year (number)

Awardsoutstanding

at 31December

2016(number)

Vesting period (years)

Shadow shares 2016 3.95 3.95 32,762 50,760 (28,631) (5,687) 49,204 5

Total cash-settled share-based payments 32,762 50,760 (28,631) (5,687) 49,204

e Principal assumptions

During the year share-based payments’ awards were granted.

In 2016 the Black-Scholes option-pricing model was used to value the awards under the NJPOP scheme. No performance conditions were included in the fair value calculations. The expected volatility used for the options issued has been based on the Company’s own share price volatility. The expected life is the expected period from option to exercise. The risk-free rate of return is an average yield on the zero-coupon UK government bonds in issue at the date the share options were issued with a similar life to the options.

The following assumptions were used in the model for the year ended 31 December 2016:

Grant date April 2016

Share price at grant date £3.95

Exercise price £3.95

Fair value per option £0.09

Vesting periods (years)

– NJPOP 2

Option life (years) 2

Expected volatility 3.43%

Risk-free interest rate 0.4%

Expected dividends expressed as a dividend yield -




26 CAPITAL AND OTHER FINANCIAL COMMITMENTS

There were capital commitments of £0.7 million contracted for but not provided in the financial statements at 31 December 2016.

The Group has guaranteed bid, performance and rent bonds issued by its banks on its behalf in the ordinary course of business totalling £2.0 million as at 31 December 2016. These are not expected to result in any material financial loss.

27 CONTINGENT LIABILITIES

In common with comparable consultancy organisations, the Group maintains a variety of insurance policies, including professional indemnity insurance. If a claim is raised, the directors assess each claim and provide for legal and settlement costs where, on the basis of the advice received, it is considered a liability may exist.

The Group is currently, and may be from time to time, involved in a number of legal proceedings. While the outcomes of current outstanding actions and claims remain uncertain, it is expected that they will be resolved without a material impact on the Group’s financial position.

28 OPER ATING LE ASES

a Leases as lessee

At 31 December 2016 the Group has lease agreements in respect of property and equipment for which payments extend over a number of years. The Group enters into these arrangements as these are a cost-efficient way of obtaining the short-term benefits of these assets. The Group lease rental charges are disclosed in note 7. There are no other material off-balance-sheet arrangements. The Company has no operating lease commitments.

The Group’s commitment for future minimum lease payments under non-cancellable operating leases is as follows:

Land and buildings

Plant and machinery

2016 £’000

2016 £’000

Within one year 8,638 418Between two and five years 22,280 444Over five years 46,824 -

77,742 862

b Leases as lessor

The Group subleases out certain properties under operating leases. The Company has no subleases.

The Group’s lease income is disclosed in note 5. The minimum rent receivable under non-cancellable operating leases is as follows:

2016 £’000

Within one year 2,899Between two and five years 2,621

5,520




29 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

Interest rate swap

The Group has entered into an interest rate swap to receive interest at LIBOR and pay interest at a fixed rate of 0.889%. The swap is based on a principal amount of £95,000,000, 95% of the Group’s sterling senior loan facility, and matures in 2019.

The instrument is used to hedge the Group’s exposure to interest rate movements on the senior loan facility. The hedging arrangement fixes the total interest payable on the senior loan facility at 4.389%. The fair value of the interest rate swap is a loss of £855,000.

Cash flows on both the loan and the interest rate swap are paid quarterly until 2019. During 2016 a loss of £855,000 was recognised in the Group statement of other comprehensive income for the change in the fair value of the swap.

Forward contracts

The Group uses forward contracts to buy foreign currency to hedge its deferred bonus commitment. In addition, the Group has operational foreign currency trades. During the year an exchange gain of £132,000 was realised on such contracts and booked to the Group income statement.

At 31 December 2016 there were a number of contracts outstanding as set out below, which if realised at 31 December would have resulted in a loss of £225,000.

Foreign currency (FC) amount

Contract value (GBP)

Fair value at balance sheet date (GBP)

Buy/(sell) 2016 FC ’000

Buy/(sell) 2016 £’000

Buy/(sell) 2016 £’000

Maturing within one yearUS dollar (1,838) 967 1,505Euro (589) 547 507Danish krone 4,350 (519) (499)Norwegian krone (4,675) 368 509Swedish krona 704 (66) (62)United Arab Emirates dirham 292 (61) (64)

1,236 1,896

Maturing in more than one yearUS dollar 2,315 (1,474) (1,822)Euro 467 (394) (405)Danish krone 15,045 (1,711) (1,758)Norwegian krone 4,667 (437) (430)Swedish krona 1,302 (123) (116)United Arab Emirates dirham 915 (155) (198)

(4,294) (4,729)(3,058) (2,833)



30 SUBSIDIARY AND BR ANCH UNDERTAKINGS

The subsidiary and branch undertakings as at 31 December 2016 are shown below. All are included in the Group financial statements and are wholly owned either directly or indirectly by the Company unless otherwise stated. All subsidiaries prepare accounts up to 31 December each year except for PA Consulting Services (India) Private Limited, which prepares accounts up to 31 March.

Subsidiary undertakings

Name Nature of business Place of incorporationPA Consulting Services Limited Consultancy United KingdomPA Middle East Limited Consultancy United KingdomPA Applied Solutions Limited Consultancy United KingdomPA Knowledge Limited Consultancy United KingdomPA Consulting Group A/S Consultancy DenmarkPA Consulting Services BV Consultancy NetherlandsPA Consulting Group AS Consultancy NorwayPA Consulting Group AB Consultancy SwedenPA Consulting Group GmbH**** Consultancy GermanyPA Consulting Group Limited Consultancy Hong KongPA Consulting Services (India) Private Limited Consultancy IndiaPA Consulting Group Inc Consultancy USAPA Defense Inc Consultancy USAPA Consulting Group Limited Consultancy New ZealandPA Consulting Group (Qatar) LLC* Consultancy QatarPA Consulting Group Sdn Bhd Consultancy MalaysiaPA Consulting Group, S. de R.L. de C.V. Consultancy MexicoPA Consulting Group Pte Limited Consultancy SingaporePA Technology Solutions Limited Consultancy United Kingdom7Safe Limited Consultancy United KingdomExacsys Limited Consultancy United KingdomPA Perfect Cost Grid Limited Consultancy United KingdomGarden Midco 1 Limited** Holding company United Kingdom Garden Finance Limited Holding company United KingdomGarden Midco 2 Limited Holding company United KingdomPA Consulting Management Services Limited Holding company United KingdomPA Consulting Holdings Limited Holding company United KingdomPA Holdings Limited Holding company United KingdomPA International Limited*** Holding company BermudaPA Venture Investments Limited*** Holding company BermudaPA Consulting Holdings ApS Holding company DenmarkPA Holdings BV Holding company NetherlandsPA Consulting Group BV Holding company NetherlandsPA Consulting Group Holdings SA Holding company SwitzerlandPA US Holdings Inc Holding company USAPACG2 Limited Holding company United KingdomPA International Consulting Group Limited Holding company United KingdomPA Overseas Holdings Limited Holding company United KingdomPA International Holdings BV Holding company NetherlandsPA Netherlands Treasury Limited Treasury services company Netherlands PA Group Treasury Services Limited Treasury services company United KingdomPA Group Treasury Services (US) Limited Treasury services company United KingdomPA Finance Limited Investment holding company United KingdomPA Employment Benefit Trustees Limited Dormant United KingdomPA Pension Trust Limited Dormant United KingdomPA Trust Corporation Limited Dormant United Kingdom

* 49% holding in accordance with Qatar Commercial Companies Law.

** Investment held directly by PA Consulting Group Limited. All other investments are held by intermediate holding companies.

*** Dissolved 6 March 2017.

**** The company has exercised its right of exemption under section 364(3) German Handelsgesetzbuch (HGB).




30 SUBSIDIARY AND BR ANCH UNDERTAKINGS (CONTINUED)

Branches

Branch of Name of branch Location

PA Consulting Services Limited PA Consulting Services Limited (Swiss Branch)

Switzerland

PA Consulting Services Limited (Irish Branch)

Ireland

PA Consulting Services Limited (Dubai Branch)

Dubai

PA Consulting Services Limited (Spanish Branch)

Spain

PA Perfect Cost Grid Limited PA Perfect Cost Grid Limited (German Branch)

Germany

PA Middle East Limited PA Middle East Limited (Abu Dhabi Branch)

Abu Dhabi

PA Venture Investments Limited PA Venture Investments Limited United Kingdom

PA Consulting Group Limited* PA Consulting Group Limited (Philippine Branch) Philippines

* PA Consulting Group Limited (Philippine Branch) is a branch of PA Consulting Group Limited, New Zealand.

31 REL ATED PART Y TR ANSAC TIONS

The Group and the Company have respectively taken advantage of the exemptions available under FRS 102 Section 33.1A from disclosing intra-Group transactions and balances that have been eliminated on consolidation or transactions and balances with wholly owned subsidiaries.

The following related party transactions took place during the period:

(i) CIM Global, LLC, an affiliate of The Carlyle Group, charged the Group a £1,000,000 transaction fee following the acquisition of PA Consulting Holdings Limited and this was settled during the period. The transaction fee is directly attributable to the acquisition and has been capitalised in accordance with FRS 102.

(ii) CIM Global, LLC, an affiliate of The Carlyle Group, charged the Group a monitoring fee of £100,428 for the period 11 December 2015 to 30 September 2016 and this was settled during the period. A further charge of £31,250 for monitoring fees has been accrued for the period 1 October 2016 to 31 December 2016.

During the normal course of business the Group performed consulting services for other entities within the Carlyle investment portfolio. All such work is subject to standard client procurement policies. The directors therefore consider that all such transactions are arms-length. In addition, during the period the Group received certain services from other entities in the Carlyle investment portfolio. These were also procured on standard arms-length terms.



32 BUSINESS COMBINATIONS

Group

On 11 December 2015 the Group acquired control of PA Consulting Holdings Limited (formerly PA Consulting Group Limited) through the purchase of 100% of the share capital for total consideration of £608,357,083, comprising payments to shareholders totalling £596,275,890 and directly attributable costs of acquisition totalling £12,081,193. PA Consulting Holdings Limited and its subsidiaries provide expert consulting services in Consumer, Defence and Security, Energy and Utilities, Financial Services, Government, Healthcare, Life Sciences, Manufacturing, Transport Travel and Logistics, operating globally from offices across the Americas, Europe, Scandinavia, the Gulf and Asia Pacific.

Management have estimated the useful life of the goodwill to be 10 years, in line with FRS 102 guidance.

The following table summarises the fair value of assets acquired and liabilities assumed at the acquisition date.

a Recognised amounts of identifiable assets acquired and liabilities assumed

Note

Book value acquired

£’000

Fair value adjust-ments £’000

Total value

£’000Fixed assets

Intangible fixed assets a 2,596 320,328 322,924Tangible fixed assets b 21,579 2,100 23,679

24,175 322,428 346,603Current assets

Debtors: amounts falling due within one year c 227,125 1,135 228,260Debtors: amounts falling due after more than one year 24,989 - 24,989Current asset investments 142,822 - 142,822Cash at bank and in hand 35,497 - 35,497

430,433 1,135 431,568Creditors: amounts falling due within one year d (288,921) (300) (289,221)Net current assets 141,512 835 142,347Total assets less current liabilities 165,687 323,263 488,950Creditors: amounts falling due after more than one year (35,167) - (35,167)Provisions for liabilities e, f, g (5,962) (42,273) (48,235)Net assets excluding net pension liabilities 124,558 280,990 405,548Defined benefit pension arrangements with net liabilities h - (558) (558)Total identifiable net assets 124,558 280,432 404,990

Goodwill 203,367Total consideration 608,357

The adjustments arising on acquisition were in respect of the following:

a The recognition of intangible assets in respect of the Group’s customer relationships, trade name and non-compete agreements.

b The uplift in tangible fixed assets to a third-party valuation of property on acquisition.

c Reversal of bad debt provision as related customer receivables subsequently collected.

d Additional accrual for holiday pay.

e Includes deferred tax adjustment of £40,929,584 arising as a result of the acquisition adjustments.

f Includes provision of £1,000,000 in settlement of claim against the Group.

g Includes provision of £342,642 for contingent liability in respect of claim.

h Defined benefit obligation in respect of subsidiary pension scheme.

All revenue and profit for PA Consulting Group Limited is attributable to the acquired Group.



32 BUSINESS COMBINATIONS (CONTINUED)

b Consideration at 11 December 2015

£’000

Cash 258,326

5% vendor loan notes 200,000

12% preference shares (134.5m shares) 134,461

Ordinary shares (34.9m shares) 3,489

Directly attributable costs 12,081

Total consideration 608,357Net of current asset investments and cash acquired on acquisition (178,319)

Net of acquisition fees accrued (684)

Purchase of subsidiary undertakings (net of cash acquired) 429,354

33 CONTROLLING PART Y

The controlling shareholder of PA Consulting Group Limited is CEP IV Garden S.a.r.l. and the ultimate controlling entity is Carlyle Europe Partners IV, L.P.




2016

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37

Corporate headquarters

123 Buckingham Palace Road London SW1W 9SR United Kingdom +44 20 7730 9000

paconsulting.com

This document has been prepared by PA. The contents of this document do not constitute any form of commitment or recommendation on the part of PA at the date of their preparation.

© PA Knowledge Limited 2017. All rights reserved.

No part of this documentation may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise without the written permission of PA Consulting Group.

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