TIDMARC
RNS Number : 0207Z
Arcontech Group PLC
12 September 2022
ARCONTECH GROUP PLC
("Arcontech", the "Company" or the "Group")
Final Results for the year ended 30 June 2022
Arcontech (AIM: ARC), the provider of products and services for
real-time financial market data processing and trading, is pleased
to announce its final audited results for the year ended 30 June
2022.
Financial Highlights:
-- Turnover was GBP2,757,795 (2021: GBP2,988,842)
-- Profit before tax was GBP758,573 (2021: GBP1,036,314)
-- Cash balances up 11.7% to GBP6,026,468 as at 30 June 2022 (30 June 2021: GBP5,395,457)
-- Fully diluted earnings per share of 4.56p (2021: 7.79p)
-- Final dividend increased 18.2% to 3.25 pence per share (2021: 2.75 pence per share)
Operational Highlights:
-- Turnover and profit impacted by earlier announced contract losses
-- Continued investment in sales and new product development
-- Greater level of engagement from both existing customers and new prospects
-- Sales team has built a strong pipeline of near and mid-term prospects
-- Continued cash generation and robust balance sheet and high
proportion of recurring revenue
Commenting on the results, Geoff Wicks, Chairman and
Non-Executive Director of Arcontech said:
"Several years of inactivity at many of our clients and
prospects has created pent up demand which is demonstrated by our
robust pipeline. Although conditions remain uncertain, as economies
globally face well documented challenges, we are confident that we
can convert some of the current interest to orders and start to
build back the revenue we lost during the pandemic".
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of MAR.
Enquiries:
Arcontech Group plc 020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
finnCap Ltd (Nomad & Broker) 020 7220 0500
Carl Holmes/Tim Harper
Harriet Ward - ECM
To access more information on the Group please visit:
www.arcontech.com
Chairman's Statement
The market for our products continued to experience challenges
through 2021/2022. Customers generally were streamlining operations
to manage costs and we have done well to maintain most of our
customer base. As previously reported we lost two customers and
this impacted the second half of the year and will have an impact
on our results for 2022/2023 as well. However, we have closed some
new sales towards the end of last year and we are well placed to
make up some of the lost revenue during the current year.
Turnover was GBP2,757,795 (2021: GBP2,988,842) down by
GBP231,047 on last year as a result of the customer losses. Profit
before taxation was GBP758,573 (2021: GBP1,036,314) reflecting the
lower second half revenue. Over 90% of our revenue is recurring and
average contract periods have increased over the last year so while
revenue has reduced, it has increased in resilience and quality.
Statutory earnings per share for the year to 30 June 2022 were
4.57p (2021: 7.88p).
Through the pandemic it was difficult to visit our customer base
in the UK and internationally with many of our usual contacts
working from home. Budgets were tightly controlled across the board
with new projects put on hold and some consolidation taking place.
While this has impacted our business we remain in good shape, with
a strong balance sheet, and able to take advantage of opportunities
as the market improves.
We have used this period to strengthen our sales and marketing
team and have worked hard to maintain a high level of customer
support. Our product line has been upgraded and work is continuing
on additions to products with some early-stage work on extensions
to our product range for new areas of the market.
Our recurring revenue base enables us to have confidence to
continue with our strategy to grow our core business and to expand
into new market areas. We have made good progress with a number of
prospective customers over the year but recognise that lead times
are longer than before the pandemic. In recent months we have seen
signs of improvement in the market with new projects being
discussed with existing customers and prospective new
customers.
Financing
Cash balances were GBP6,026,469 (2021: GBP5,395,457) at the
period end, an increase of 11.7%. This strong balance sheet allows
the Company to invest in both organic growth and to identify
complementary acquisitions.
Dividend
I am pleased to announce that subject to approval at the Annual
General Meeting we intend to pay a dividend of 3.25p per share for
the year ended 30 June 2022 (2021: 2.75 pence) an increase of
18.2%, to those shareholders on the register as at the close of
business on 30 September 2022 with a dividend payment date of 24
October 2022.
Employees
Through the difficult period of the pandemic, we have retained
most of our staff and where necessary we have been able to replace
leavers with candidates of a high calibre. Staff are back in the
office for most of the week but we continue to operate a hybrid
working environment to allow greater flexibility.
Outlook
Several years of inactivity at many of our clients and prospects
has created pent up demand which is demonstrated by our robust
pipeline. Although conditions remain uncertain, as economies
globally face well documented challenges, we are confident that we
can convert some of the current interest to orders and start to
build back the revenue we lost during the pandemic.
Geoff Wicks
Chairman and Non-Executive Director
Chief Executive's Review
The 2021/22 financial year was challenging reflecting the impact
Covid had on our customer landscape and we performed well to
deliver revenues and profit before tax in line with market
expectations.
Our pipeline is growing and prospects along with existing
clients are beginning to engage. We have also managed to extend the
length of contracts with some of our larger clients to multi-year
terms, reflecting their confidence and satisfaction in our products
and service.
The year has further seen us continue to improve and build out
our software solutions to meet client needs and to differentiate us
from the competition. Our tick history server, which is a
development of our desktop product, is close to being ready for
alpha testing as is our permissioning system. The tick history
server which stores pricing data so that it can be used for other
purposes, will allow us to address new markets, currently occupied
by two dominant providers, whilst our permissioning system which
ensures users only receive data they are licensed for allows us to
replace incumbent platforms wholesale whilst targeting a wider
range of prospects.
At the request of a client we have also built additional feed
handlers to enable direct delivery of data by content creators, in
this instance, for two of the largest inter-dealer brokers. These
are currently in User Acceptance Testing at the client and add to
the direct feeds we will be able to integrate to all clients. This
is a good example of how closely we work with our clients and
highlights the bespoke service we are able to provide.
The website and marketing materials have also been refreshed to
better reflect what we do. This is a work in progress and we have
more improvements planned.
We continue to grow our cash resources which enables us to
proactively look for suitable acquisitions. At the same time we are
researching alternative products linked to the services we already
provide to create additional paths for organic growth. We are in
very early-stage discussions with several clients in this
regard.
Our staff are a key asset to the Company and have continued to
provide exemplary service and support to our clients. I would like
to express my thanks for their continued commitment.
During the year we made changes to our sales personnel which has
enabled us to focus on new markets. We are also adding to our
support team to provide desktop support along with the technical
support we have provided to date.
With clients returning to the office and travel restrictions
largely over we are seeing encouraging signs from existing clients
and prospects alike. As a result we are cautiously optimistic for
the year ahead and beyond.
Matthew Jeffs
Chief Executive
Strategic Report
The Directors present the group strategic report for Arcontech
Group plc and its subsidiaries for the year ended 30 June 2022.
Principal activities
The principal activities of the Company and its subsidiaries
during the year were the development and sale of proprietary
software and provision of computer consultancy services.
Review of the business and prospects
A full review of the operations, financial position and
prospects of the Group is given in the Chairman's Statement and
Chief Executive's Review on pages 2 to 3.
Key performance indicators (KPIs)
The Directors monitor the business using management reports and
information, reviewed and discussed at monthly Board meetings.
Financial and non-financial KPIs used in this report include:
Financial KPIs :
Revenue GBP2,757,795 (2021: GBP2,988,842; 2020: GBP2,955,314) Measurement:
Revenue from sales made to all customers (excluding intra-group
sales which eliminate on consolidation)
Performance:
Loss of two customers during the year impacted sales in the
second half of the year
Adjusted profit GBP601,566 (2021: GBP959,110; 2020:
GBP1,131,203) Measurement:
Profit after tax and before release of accruals for
administrative costs in respect of prior years . This is an
alternative, non-IFRS performance measure, that is considered
relevant as it provides a more accurate reflection of trading
performance than net profit after tax. The adjusted profit is Net
profit after tax less the amount of accruals for administrative
costs released as disclosed in the footnote to the Income
Statement
Performance:
Decrease reflects the loss of two customers. However costs
continued to be controlled tightly
Cash GBP6,026,469 (2021: GBP5,395,457; 2020: GBP5,006,969) Measurement:
Cash and cash equivalents held at the end of the year
Performance:
The Group continues to maintain healthy cash balances
subject to any exceptional circumstances or acquisition
opportunities
Earnings per share (basic) 4.57p (2021: 7.88; 2020: 9.22p) Measurement:
Earnings after tax divided by the weighted average number of
shares
Performance:
Decrease due to the loss of two customers during the year
Earnings per share (diluted) 4.56p (2021: 7.79p; 2020: 9.03p) Measurement:
Earnings after tax divided by the fully diluted number of
shares
Performance:
Decrease due to the loss of two customers during the year
Strategic Report (continued)
Non-financial KPIs :
Staff retention rate (net) 87% (2021: 93%; 2020: 91%) Measurement:
Net retention after adjusting for joiners and leavers during the
year
Performance:
Staff morale from our dedicated employees remains strong,
reflected in the stable retention rate
Principal risks and uncertainties
The Group's performance is affected by a number of risks and
uncertainties, which the Board monitor on an ongoing basis in order
to identify, manage and minimise their possible impact. General
risks and uncertainties include changes in economic conditions,
interest rate fluctuations and the impact of competition. The
Group's principal risk areas and the action taken to mitigate their
outcome are shown below:
Risk area Nature Mitigation
Loss of business due to existing competition Ongoing investment in research and
Competition development
Or new entrants into the market Responding to the changing needs of clients
to remain competitive
Inability to execute business plan due to the
Loss of key personnel risk of losing key personnel Employee share option scheme in place
Inability to execute business plan due to
staff absence. Difficulty in winning new The Directors and employees returned to the
business office on a hybrid basis, but maintain strict
due to potential customers being hard to health and safety protocols in order to
Covid-19 pandemic engage with due to remote working protect staff.
At present the Company believes that there
should be no significant material disruption
to
its work
Business made difficult due to increased Arcontech is a global company and as such
regulations between the UK and Europe caused seeks growth across a geographically diverse
by Brexit customer
Brexit base
Relations with shareholders
Section 172(1) Statement - Promotion of the Company for the
benefit of the members as a whole
The Directors believe they have acted in the way most likely to
promote the success of the Group for the benefit of its members as
a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
-- Consider the likely consequences of any decision in the long term;
-- Act fairly between the members of the Company;
-- Maintain a reputation for high standards of business conduct;
-- Consider the interests of the Company's employees;
-- Foster the Company's relationships with suppliers, customers and others;
-- The desirability of the Company maintaining a reputation for
high standards of business conduct; and
-- Consider the impact of the Company's operations on the community and the environment.
Section 172(1) Companies Act 2006
The Board takes decisions with the long term in mind, and
collectively and individually aims to uphold the highest standards
of conduct. Similarly, the Board understands that the Company can
only prosper over the long term if it understands and respects the
views and needs of its customers, distributors, employees,
suppliers and the wider community in which it operates.
A firm understanding of investor needs is also vital to the
Company's success. The Directors are fully aware of their
responsibilities to promote the success of the Company in
accordance with Section 172(1) of the Companies Act 2006. The text
of Section 172(1) of the Companies Act 2006 has been sent out to
each main Board Director.
Strategic Report (continued)
The Board ensures that the requirements are met, and the
interests of stakeholders are considered as referred to elsewhere
in this report and through a combination of the following:
-- A rolling agenda of matters to be considered by the Board
through the year, which includes an annual strategy review meeting,
where the strategic options for the following year are
developed;
-- At each board meeting, to receive and discuss a will report
on customers, employees and other colleagues, and investors;
-- Standing agenda points and papers;
-- A review of certain of these topics through the Audit
Committee and the Remuneration Committee agenda items referred to
in this report; and
-- Detailed consideration is given to of any of these factors
where they are relevant to any major decisions taken by the Board
during the year.
The Group's operation is the development and sale of proprietary
software and provision of computer consultancy services. The Board
has identified its key stakeholders as its customers, shareholders,
employees and suppliers. The Board keeps itself appraised of its
key stakeholders' interests through a combination of both direct
and indirect engagement, and the Board has regard to these
interests when discharging its duties.
The application of the s172 requirements can be demonstrated in
relation to some of the key decisions made during the year to 30
June 2022:
-- Allocation of the Group's capital in a way which offers
significant returns to shareholders in line with the Company's
dividend policy, while also ensuring that the Group retains
flexibility to continue to deploy capital towards profitable
growth;
-- Implementing a new hybrid location working format for staff
as working environments continue to evolve post Covid-19, while
ensuring that the Group continued to deliver both the high level of
service and security that our customers depend on without
compromising the health and safety of employees.
During the year to 30 June 2022, the Board assessed its current
activities between the Board and its stakeholders, which
demonstrated that the Board actively engages with its stakeholders
and takes their various objectives into consideration when making
decisions. Specifically, actions the Board has taken to engage with
its stakeholders over the last twelve months include:
-- All Directors attended the 2021 AGM to answer questions and
receive additional feedback from investors;
-- The outcome of the AGM is published on the Company's corporate website;
-- The Board receives regular updates on the views of
shareholders through briefings and reports from the executive
directors, and the Company's brokers;
-- Arranged meetings with certain stakeholders to provide them
with updates on the Company's operational activities and other
general corporate updates;
-- We discussed feedback from investors' and analysts' meetings
following the release of our annual and half-year announcements. We
have an investor relations programme of meetings with existing and
potential shareholders;
-- Monitored company culture and engaged with employees on
efforts to continuously improve company culture and morale; and
-- A range of corporate information (including all Company
announcements) is also available to shareholders, investors and the
public on the Company's corporate website: www.arcontech.com.
The Board believes that appropriate steps and considerations
have been taken during the year so that each Director has an
understanding of the various key stakeholders of the Company. The
Board recognises its responsibility to contemplate all such
stakeholder needs and concerns as part of its discussions,
decision-making, and in the course of taking actions, and will
continue to make stakeholder engagement a top priority in the
coming years.
Approved on behalf of the board on 9 September 2022 by:
Matthew Jeffs
Chief Executive
Group Income Statement and Statement of Comprehensive Income
For the year ended 30 June 2022
Note 2022 2021
GBP GBP
Revenue 3 2,757,795 2,988,842
Administrative costs (1,999,523) (1,945,481)
Operating profit 4 758,272 1,043,361
Net finance income / (expense) 5 301 (7,047)
Profit before taxation 758,573 1,036,314
Taxation 9 (148,007) 10,796
Profit for the year after tax 610,566 1,047,110
------------------------------------------- ----- ------------ ------------
Total comprehensive income for the year 610,566 1,047,110
------------------------------------------- ----- ------------ ------------
Earnings per share (basic) 10 4.57p 7.88p
------------------------------------------- ----- ------------ ------------
Adjusted* Earnings per share (basic) 10 4.50p 7.22p
------------------------------------------- ----- ------------ ------------
Earnings per share (diluted) 10 4.56p 7.79p
------------------------------------------- ----- ------------ ------------
Adjusted* Earnings per share (diluted) 10 4.49p 7.14p
---------------------------------------- --- ------ ------
*Adjusted to exclude the release of accruals for administrative
costs of GBP9,000 (2021: GBP88,000) in respect of prior years. This
is a non-IFRS alternative performance measure that the Board
considers to be a more accurate indicator of underlying trading
performance. This measure has been adopted as a KPI and is
disclosed in the Strategic Report on page 4.
All of the results relate to continuing operations.
There was no Other Comprehensive Income other than Profit for
the year after tax for the year under review.
The notes on pages 32 to 56 form part of these financial
statements
Statement of Changes in Equity
For the year ended 30 June 2022
Group:
Share Share Retained Total
capital premium Share option reserve earnings equity
GBP GBP GBP GBP GBP
Balance at 30 June 2020 1,651,314 56,381 188,639 3,806,514 5,702,848
Profit for the year - - - 1,047,110 1,047,110
----------------------------------------- ---------- --------- --------------------- ---------- ----------
Total comprehensive income for the year - - - 1,047,110 1,047,110
Dividend paid - - - (333,594) (333,594)
Exercise of options 14,663 35,979 - - 50,642
Share-based payments - - 115,866 - 115,866
Transfer between reserves - - (33,298) 33,298 -
----------------------------------------- ---------- --------- --------------------- ---------- ----------
Balance at 30 June 2021 1,665,977 92,360 271,207 4,553,329 6,582,873
Profit for the year - - - 610,566 610,566
----------------------------------------- ---------- --------- --------------------- ---------- ----------
Total comprehensive income for the year - - - 610,566 610,566
Dividend paid - - - (367,752) (367,752)
Exercise of options 5,624 23,401 - - 29,025
Share-based payments - - 116,612 - 116,612
Transfer between reserves - - (116,994) 116,994 -
----------------------------------------- ---------- --------- --------------------- ---------- ----------
Balance at 30 June 2022 1,671,601 115,761 270,825 4,913,137 6,971,324
----------------------------------------- ---------- --------- --------------------- ---------- ----------
Company:
Share Share Retained Total
capital premium Share option reserve earnings equity
GBP GBP GBP GBP GBP
Balance at 30 June 2020 1,651,314 56,381 188,639 4,450,302 6,346,636
Profit for the year - - - 181,744 181,744
------------------------------------------ ---------- --------- --------------------- ---------- -----------
Total comprehensive expense for the year - - - 181,744 181,744
Dividend paid - - - (333,594) (333,594)
Exercise of options 14,663 35,979 - - 50,642
Share-based payments - - 115,866 - 115,866
Transfer between reserves - - (33,298) 33,298 -
------------------------------------------ ---------- --------- --------------------- ---------- -----------
Balance at 30 June 2021 1,665,977 92,360 271,207 4,331,751 6,361,295
Profit for the year - - - 273,286 273,286
------------------------------------------ ---------- --------- --------------------- ---------- -----------
Total comprehensive income for the year - - - 273,286 273,286
Dividend paid - - - (367,752) (367,752)
Exercise of options 5,624 23,401 - - 29,025
Share-based payments - - 116,612 - 116,612
Transfer between reserves - - (116,994) 116,994 -
------------------------------------------ ---------- --------- --------------------- ---------- -----------
Balance as at 30 June 2022 1,671,601 115,761 270,825 4,354,279 6,412,466
------------------------------------------ ---------- --------- --------------------- ---------- -----------
The notes on pages 32 to 56 form part of these financial
statements.
Statements of Financial Position
Registered number: 04062416
As at 30 June 2022
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
Note
Non-current assets
Goodwill 11 1,715,153 1,715,153 - -
Property, plant and
equipment 12 6,545 11,147 - -
Right of use asset 17 219,455 365,758 - -
Investments in subsidiaries 13 - - 2,017,471 2,017,471
Deferred tax asset 18 318,000 471,000 56,000 55,000
Trade and other receivables 14 141,750 141,750 - -
------------------------------- ----- ------------ ------------- ------------ -----------
Total non-current assets 2,400,903 2,704,809 2,073,471 2,072,471
------------------------------- ----- ------------ ------------- ------------ -----------
Current assets
Trade and other receivables 14 348,686 470,317 3,322,737 3,263,467
Cash and cash equivalents 15 6,026,468 5,395,457 1,074,294 1,077,741
------------------------------- ----- ------------ ------------- ------------ -----------
Total current assets 6,375,154 5,865,774 4,397,031 4,341,208
------------------------------- ----- ------------ ------------- ------------ -----------
Current liabilities
Trade and other payables 16 (1,608,880) (1,643,407) (58,036) (52,384)
Lease liabilities 17 (148,450) (148,450) - -
------------------------------- ----- ------------ ------------- ------------ -----------
Total current liabilities (1,757,330) (1,791,857) (58,036) (52,384)
------------------------------- ----- ------------ ------------- ------------ -----------
Non-current liabilities
Lease liabilities 17 (47,403) (195,853) - -
------------------------------- ----- ------------ ------------- ------------ -----------
Total Non-current liabilities (47,403) (195,853) - -
Net current assets 4,617,824 4,073,917 4,338,995 4,288,824
------------------------------- ----- ------------ ------------- ------------ -----------
Net assets 6,971,324 6,582,873 6,412,466 6,361,295
------------------------------- ----- ------------ ------------- ------------ -----------
Equity
Called up share capital 19 1,671,601 1,665,977 1,671,601 1,665,977
Share premium account 20 115,761 92,360 115,760 92,360
Share option reserve 20 270,825 271,207 270,825 271,207
Retained earnings 20 4,913,137 4,553,329 4,354,279 4,331,751
------------------------------- ----- ------------ ------------- ------------ -----------
6,971,324 6,582,873 6,412,466 6,361,295
------------------------------- ----- ------------ ------------- ------------ -----------
As permitted by s408 of the Companies Act 2006, the Company has
not presented its own income statement. The parent Company profit
for the year was GBP273,286 (2021: GBP181,744).
Approved on behalf of the board on 9 September by:
Matthew Jeffs
Chief Executive
The notes on pages 32 to 56 form part of these financial
statements.
Group Statement of Cash Flows
For the year ended 30 June 2022
Note 2022 2021
GBP GBP
Cash generated from operations 21 1,109,608 809,559
Tax paid (2,642) (8,204)
Net cash generated from operating activities 1,106,966 801,355
------------------------------------------------ ----- ---------- ----------
Investing activities
Interest received 13,911 13,260
Purchases of plant and equipment (2,688) (1,482)
Net cash generated from investing activities 11,223 11,778
------------------------------------------------ ----- ---------- ----------
Financing activities
Proceeds from the issue of shares 29,025 50,642
Dividend paid (367,752) (333,594)
Payment of lease liabilities (148,450) (141,693)
Net cash used in financing activities (487,177) (424,645)
------------------------------------------------ ----- ---------- ----------
Net increase in cash and cash equivalents 631,012 388,488
Cash and cash equivalents at beginning of year 5,395,457 5,006,969
------------------------------------------------ ----- ---------- ----------
Cash and cash equivalents at end of year 15 6,026,469 5,395,457
------------------------------------------------ ----- ---------- ----------
For the year to 30 June 2022, the Group had no debt, and there
were no material non-cash transactions.
The notes on pages 32 to 56 form part of these financial
statements.
Company Statement of Cash Flows
For the year ended 30 June 2022
Note 2022 2021
GBP GBP
Net cash generated by operating activities 21 330,075 210,920
Tax paid (1,221) (3,319)
Net cash generated from operating activities 328,854 207,601
--------------------------------------------------- ----- ---------- ----------
Investing activities
Interest received 6,426 6,392
--------------------------------------------------- ----- ---------- ----------
Net cash generated from investing activities 6,426 6,392
--------------------------------------------------- ----- ---------- ----------
Financing activities
Proceeds from the issue of shares 29,025 50,642
Dividend paid (367,752) (333,594)
Net cash used in financing activities (338,727) (282,952)
--------------------------------------------------- ----- ---------- ----------
Net decrease in cash and cash equivalents (3,447) (68,959)
Cash and cash equivalents at beginning of year 1,077,741 1,146,700
--------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at end of year 15 1,074,294 1,077,741
--------------------------------------------------- ----- ---------- ----------
The notes on pages 32 to 56 form part of these financial
statements.
Notes to the Financial Statements
For the year ended 30 June 2022
1. Accounting policies
T h e pri n c i p al accoun t i ng pol i c i es are s umm a r i
s ed belo w. T hey h a ve a ll been app li ed con s i s t en t ly t
hroughout t he pe r i od co v ered by t he se f i n anci al s t a t
e m en t s except where changes have been noted below.
Reporting entity
Arcontech Group plc ("the Company") is a company incorporated in
England and Wales with a registered address at 1(st) floor, 11-21
Paul Street, London, EC2A 4JU. The consolidated financial
statements incorporate the financial statements of the Company and
its subsidiaries (together referred to as "the Group").
Principal Activity
The principal activities of the Company and its subsidiaries
during the year were the development and sale of proprietary
software and provision of computer consultancy services.
Bas i s of p re p arati on
These financial statements have been prepared in accordance with
UK-adopted international accounting standards and with the
requirements of the Companies Act 2006.
On the basis of current projections, confidence of future
profitability and cash balances held, the Directors have adopted
the going concern basis in the preparation of the f i nanci al s t
a t e m en ts.
T h e f i nanci al s t a t e m en ts h a ve been prepared under
t he h i s t orical co st co n v e n t i on. As at 30 June 2022 all
assets and liabilities are recorded at amortised cost, and there
were no assets or liabilities recorded at fair value.
Going Concern
On the basis of current projections and having regard to the
Group's existing cash reserves, the Directors consider that the
Group has adequate resources to continue in operational existence
for the foreseeable future. In reaching this conclusion the
Directors have projected cash flow out twelve months from the date
of signing this report. Revenue projection has been based on
recurring revenue streams from existing customers and a forecast
for new revenue from additional sales that the Directors feel is
achievable, and in line with average new business generation
pre-Covid-19. The Group has a highly stable cost base which has
been reviewed to incorporate the impact of additional costs for
revenue generation activities such as industry trade shows. The
Directors have stress tested the cash flow projections assuming no
new revenue generation and an increase in costs of up to 15%, given
the current inflationary environment. Under this scenario given
expected cash generation from operations and existing cash
balances, the Group will have sufficient resources to continue
trading for well in excess of the next twelve months. Accordingly,
the Directors have adopted the going concern basis in the
preparation of the financial statements.
Changes in accounting policies and disclosures
a) New and amended Standards and Interpretations adopted by the Group and Company
The International Accounting Standards Board (IASB) issued
various amendments and revisions to International Financial
Reporting Standards and IFRIC interpretations. The amendments and
revisions were applicable for the period year 30 June 2022 but did
not result in any material changes to the financial statements of
the Group.
b) New and amended Standards and Interpretations issued but not
effective for the financial year beginning 1 July 2022
Standard Impact on initial application Effective
date
--------------------- ----------------------------------------- ----------
IAS 1 (Amendments) Classification of Liabilities as Current TBC
or Non-Current
IAS 1 (Amendments) Disclosure of Accounting Policies TBC
IAS 1 (Amendments) Definition of Accounting Estimates TBC
IFRS 17 (Amendments) Initial Application of IFRS 17 and
IFRS 9 - Comparative Information TBC
--------------------- ----------------------------------------- ----------
The new and amended Standards and Interpretations which are in
issue but not yet mandatorily effective is not expected to be
material.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Bas i s of c on s o l id ation
The Group financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) prepared to 30 June 2022. Subsidiaries are
entities controlled by the Group. Control is achieved when the
Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those
returns through its power over the investee. Specifically, the
Group controls an investee if, and only if, the Group has:
-- Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee).
-- Exposure, or rights, to variable returns from its involvement with the investee
-- The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee.
-- Rights arising from other contractual arrangements.
-- The Group's voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the subsidiary.
The acquisition method is used to account for the acquisition of
subsidiaries.
All i n tra-group tran s act i on s, ba l ance s, i nco me and e
x pen s es are e l imi na t ed on con s o li da t i on.
B u s in es s c o m b in atio ns a nd g o o d w i ll
O n acqu i s i t i on, t he a ss e ts and li ab i li t i es and
con t i ngent li a b i l i t i es of s ub s i d i ari es are m ea s
ured at t he ir f a ir v a l ue at t he da te of acqu i s i t i on.
Any e xce ss of co st of acqu i s i t i on o v er t he f a ir v a l
ues of t he i den t i f i ab le net ass e ts acqu ired is recogn i
s ed as goodwill. Any de f i c i ency of the cost of acqu i s i t i
on be l ow the fair v a l ues of t he i den t i f i a b le net a
sse ts acq u ired (i . e. d i scount on acq u i s i t i on) is
credited to the income statement in t he peri od of acqu i s i t i
on. G ood w i ll a r i s i ng on c on s o li da t i on is recogn i
s ed as an ass et and re v i e w ed f or i m pai r m ent at l ea st
annua lly. Any i m pa i rment is recogn i s ed imm e d i a t e ly
in the income statement and is not s u b s equen t ly revers
ed.
Revenue recognition
Revenue is recognised in accordance with the transfer of
promised services to customers (i.e. when the customer gains
control of the service) and is measured as the consideration which
the group expects to be entitled to in exchange for those services.
Consideration is typically fixed on the agreement of a contract
except for quarterly flexible license contracts. Payment terms are
agreed on a contract by contract basis.
A service is distinct if the customer can benefit from the
service on its own or together with other resources that are
readily available to the customer and the entity's promise to
transfer the service to the customer is separately identifiable
from other promises in the contract.
Contracts with customers do not contain a financing
component.
Under IFRS 15, revenue earned from contracts with customers is
recognised based on a five-step model which requires the
transaction price for each identified contract to be apportioned to
separate performance obligations arising under the contract and
recognised either when the performance obligation in the contract
has been performed (point in time recognition) or over time as
control of the performance obligation is transferred to the
customer.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Revenue recognition (continued)
The group recognises revenue when it satisfies a performance
obligation by transferring a promised service to the customer as
follows:
-- Revenue from recurring license fees and other license fees is
recognised on an over time basis via a straight line across the
period the services are provided. In reaching this conclusion the
group has assessed that ongoing contractual obligations are not
separately identifiable from other promises in the contract and are
not distinct from the licence, and hence are accounted for as a
single performance obligation. As the license is not distinct the
combined performance obligation is recognised over time.
In assessing whether a licence is distinct the Group considered
the continuing requirement to:-
- optimise functionality;
- optimise performance; and
- provide enhancements to ensure user regulatory compliance.
-- Revenue from flexible license contracts that include variable
consideration are quarterly contracts assessed at the end of each
calendar quarter and revenue is recognised based on actual usage
confirmed for that quarter at the point of customer acceptance,
-- Revenue from project work is recognised on satisfactory
completion of each project, as this is considered to be the point
in time the customer gains control over the results of the project
work.
T axa t i o n
The tax charge/(credit) represents the sum of the tax
payable/(receivable) and any deferred tax.
Research and development tax credits are recognised when
received.
The tax payable/(receivable) is based on the taxable result for
the year. The taxable result differs from the net result as
reported in t h e i nco me s t a t ement becau se it e x c l udes i
t e ms of i nco me or e x pen se t hat are t a x a b le or deduct i
b le in o t her years and it f urt her e x c l udes i t e ms t hat
are n e v er t a x ab le or deduct i b l e. T he C ompany's li abil
i ty f or current t ax is ca lcu l a t ed u s i ng t ax ra t es t
hat h a ve been enact ed or s u b s tantively enact ed by t he ba l
ance s heet da t e.
De f e rred t ax is t he t ax e x pe c t ed to be payab le or re
c o v erab le on d i f f erences be t w e en t he carryi ng a m oun
ts of a sse ts a nd li abi l i t i es in t he f i nanci al s t a t
e m e n ts and t he corre s pond i ng t ax b a s es u s ed in t he
co m pu t a t i on of t a x a b le pro f i t and is accoun t ed f
or u s i ng t he ba l ance s heet li abil i ty m e t hod. D e f e
rred t ax l i a b i l i t i es are genera lly recogn i s ed f or a
ll t a x a b le t e m porary d i ff erences and d e f e rred t ax a
ss e ts are recogn ised to t he e x t ent t h at it is probab le t
hat t a x ab le pro f i ts w ill be a v a i l ab le aga i n st w h
ich deduct i b le t e m porary d i ff erences can be u t ili s ed.
Such ass e ts and li abi l i t i es are not recogn i s ed if the t
e m porary di ff erence ari s es from good w i ll or from t he i ni
t i al recogn i t i on (o t her t han in a bu s i ness co m b i na
t i on) of o t her a ss e ts a nd li a b i li t i es in a tran s
act i on t hat a f f e c ts ne i t her t he t a x a b le pro f it
nor t he accoun t i ng pro f i t.
De f e rred t ax l i abil i t i es are recogn i s ed f or t a x
a b le t e m porary d i f f erences ari s i ng on i n v e s t m e n
ts in s u b s i d i ari e s, e xcept w here t he Group is ab le to
con trol t he re v ers al of t he t e m porary di ff erence and it
is probab le t hat t he t e m porary d i f f erence w ill not re v
erse in t he f ore s eeab le f u t ure.
T h e carryi ng a m ount of d e f erred t ax a ss e ts is re v i
e w ed at each ba l ance s heet da te.
De f e rred t ax is ca lcu l a t ed at t he t ax ra t es t hat
are e x pect ed to app ly in t he peri od w h en t he li a b i l i
ty is s e tt l ed, or t he ass et rea li s ed. De f erred t ax is
charged or cred i t ed to the income statement, e xcept w hen it re
l a t es to i t e ms charged or cred i t ed d ire c t ly to equi
ty, in w h ich ca se t he de f erred t ax is a l so dea lt w i th
in equ i ty.
De f e rred t ax a ss e ts a nd li abi l i t i es are o ff s et
w hen t he re is a l ega lly en f orcea b le ri ght to s et o ff
current t ax a ss e ts aga i n st current t ax l i abil i t i es
and when t hey re l a te to i nco me t a x es l e v ied by t he s a
me t a x a t i on au t ho r i ty and t he Group i n t ends to s e
tt le i ts current ass e ts and li abi l i t i es on a net ba s i
s.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Sh are-b ased p ayme nts
T h e co st of s hare-b ased e m p l oyee co m pen s a t i on
arrange m en t s, w h ereby e m p l oyees recei ve re m unera t i
on in t he f o rm of s hares or s ha re op t i on s, is recogn i s
ed as an e m p l oyee ben e f it e x pen se in t he i nco me s t a
t e m en t.
T h e t o t al e x pen se to be a pport i oned o v er t he v e s
t i ng peri od of t he bene f it is de t ermi ned by re f erence to
t he f a ir v a l ue (e x c l ud i ng t he e f f ect of non m arke
t-ba s ed v e s t i ng cond i t i on s) at t he da te of gran t. F
a ir v a l ue is m ea s ured by t he u se of the Black-Scholes m
odel. T he e x pect ed li fe u s ed in t he m odel has been ad j u
s t ed, b a s ed on m anage m en t 's b e st e s t ima t e, f or t
he e f f e c ts of the non-transferability, e x erc i se re s trict
i ons and beh a v i oural con s i dera t i on s. A cancellation of
a share award by the Group or an employee is treated consistently,
resulting in an acceleration of the remaining charge within the
consolidated income statement in the year of cancellation.
Impairment of tangible and intangible assets
The carrying amounts of the Group's and Company's tangible and
intangible assets are reviewed at each year end date to determine
whether there is any indication of impairment. If any such
indication exists, the asset's recoverable amount is estimated.
Expenses incurred on Research & Development are currently
expensed through the income statement as the expenditure is
incurred on the maintenance and enhancement of existing products.
The applicability of this treatment is reviewed regularly by the
Company.
For goodwill, the recoverable amount is estimated at each year
end date, based on value in use. The recoverable amount of other
assets is the greater of their net selling price and value in
use.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash
generating unit to which the asset belongs.
An impairment loss is recognised in the income statement
whenever the carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount. Impairment losses recognised
in respect of cash-generating units are allocated first to reduce
the carrying amount of any goodwill allocated to cash-generating
units and then to reduce the carrying amount of the other assets in
the unit on a pro rata basis.
A cash generating unit is the smallest identifiable group of
assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
Property, pl a nt a nd e q u i p me nt
Property, pl ant and equ i p m ent are s t a t ed at co st l e
ss accu m u l a t ed depreci a t i on and any recogn i s ed i m pa
i r m e nt l o ss.
Dep reci a t i on is charged so as to wri te o ff t he co st of
ass e t s, o v er t he ir e s t i m a t ed u s e f ul l i v e s, on
t he f ol l o w i ng b a s e s:
Leasehold property - over the period of the lease
Computer equipment - 33% - 40% on cost
O ff i ce furniture and equ i
p m ent - 20% - 25% on cost or reducing balance
In ves tme nts in s u b s i d i ar i es
I n v e s t m en t s in s ub s i d i ari es are s t a t ed at co
st l e ss any pro v i s i on f or i m p a i r m en t.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Financial instruments
Financial assets and financial liabilities are recognised in the
statement of financial position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets
The Group does not hold any investments other than investments
in subsidiaries.
Trade receivables are held in order to collect the contractual
cash flows and are initially measured at the transaction price as
defined in IFRS 15, as the contracts of the Group do not contain
significant financing components. Impairment losses are recognised
based on lifetime expected credit losses in profit or loss.
Other receivables are held in order to collect the contractual
cash flows and accordingly are measured at initial recognition at
fair value, which ordinarily equates to cost and are subsequently
measured at cost less impairment due to their short-term nature. A
provision for impairment is established based on 12-month expected
credit losses unless there has been a significant increase in
credit risk when lifetime expected credit losses are recognised.
The amount of any provision is recognised in the income
statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits with an original maturity of three months
or less.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group
are classified in accordance with the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. Equity instruments
issued by the company are recorded at the proceeds received, net of
direct issue costs.
Effective interest rate method
The effective interest rate method is a method of calculating
the amortised cost of a financial asset or liability and allocating
interest income or expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash flows through the expected life of the financial asset or
liability, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
(a) Classification
The Group classifies its financial assets in the following
measurement categories:
-- those to be measured subsequently at fair value (either
through OCI or through profit or loss); and
-- those to be measured at amortised cost.
The classification depends on the Group's business model for
managing the financial assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains and losses will be
recorded either in profit or loss or in OCI. For investments in
equity instruments that are not held for trading, this will depend
on whether the Group has made an irrevocable election at the time
of initial recognition to account for the equity investment at fair
value through other comprehensive income (FVOCI). See Note 16 for
further details.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Financial instruments (continued)
(b) Recognition
Purchases and sales of financial assets are recognised on trade
date (that is, the date on which the Group commits to purchase or
sell the asset). Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or
have been transferred and the Group has transferred substantially
all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed
in profit or loss.
Debt instruments
Amortised cost; Assets that are held for collection of
contractual cash flows, where those cash flows represent solely
payments of principal and interest, are measured at amortised cost.
Interest income from these financial assets is included in finance
income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly
in profit or loss and presented in other gains/(losses) together
with foreign exchange gains and losses. Impairment losses are
presented as a separate line item in the statement of profit or
loss.
(d) Impairment
The Group assesses, on a forward-looking basis, the expected
credit losses associated with its debt instruments carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
Leases
Leases are recognised as a right-of-use asset and a
corresponding lease liability at the date at which the leased asset
is available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- Fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- Variable lease payment that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- Amounts expected to be payable by the Group under residual value guarantees;
-- The exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- Payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Leases (continued)
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease
period.
Right-of-use assets are measured at cost which comprises the
following:
-- The amount of the initial measurement of the lease liability;
-- Any lease payments made at or before the commencement date
less any lease incentives received;
-- Any initial direct costs; and
-- Restoration costs.
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Payments associated with short-term leases (term less than 12
months) and all leases of low-value assets (generally less than
GBP4k) are recognised on a straight-line basis as an expense in
profit or loss.
Provisions
Provisions are recognised when the Group has a present
obligation, legal or constructive, resulting from past events and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the obligation.
Research and development
Research costs are charged to the income statement in the year
incurred. Development expenditure is capitalised to the extent that
it meets all of the criteria required by IAS 38, otherwise it is
charged to the income statement in the year incurred. In order for
development expenditure to meet the capitalisation criteria of IAS
38, it must be both technically feasible to complete the work, and
there must be the intention to either use or sell the asset
created.
Pension costs and other post-retirement benefits
The Group makes payments to occupational and employees' personal
pension schemes. Contributions payable for the year are charged in
the income statement.
Foreign currencies
Transactions denominated in foreign currencies are translated
into sterling at the exchange rate ruling when the transaction was
entered into. Where consideration is received in advance of revenue
being recognised the date of the transaction reflects the date the
consideration is received. Foreign currency monetary assets and
liabilities are translated into sterling at the exchange rate
ruling at the balance sheet date. Exchange gains or losses are
included in operating profit.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
as required by IFRS 8 "Operating Segments". The chief operating
decision-maker responsible for allocating resources and assessing
performance of the operating segments has been identified as the
Board of Directors. The accounting policies of the reportable
segments are consistent with the accounting policies of the group
as a whole. Segment profit/(loss) represents the profit/(loss)
earned by each segment without allocation of foreign exchange gains
or losses, investment income, interest payable and tax. This is the
measure of profit that is reported to the Board of Directors for
the purpose of resource allocation and the assessment of segment
performance. When assessing segment performance and considering the
allocation of resources, the Board of Directors review information
about segment assets and liabilities. For this purpose, all assets
and liabilities are allocated to reportable segments with the
exception of cash and cash equivalents and current and deferred tax
assets and liabilities.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
2. Critical accounting judgments and key sources of estimation uncertainty
T h e prepara t i on of f i nanci al s t a t e m en ts in co n f
ormi ty w i th general ly accep t ed accoun t i ng pract ice requ
ires m anage m ent to make e s t i m a t es and j udge m e n ts t
hat a ff ect t he report ed a m oun ts of a ss e ts and li abil i t
i es as w e ll as t he d i sclo s ure of con t i ngent ass e ts and
li abil i t i es at t he ba l ance s h eet d a te and t he report
ed a m oun ts of re v enues and e x pen s es duri ng t he report i
ng pe r i od.
Estimates and judgements are continually evaluated and are based
on historic experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances.
Judgements
Determination of performance obligations and satisfaction
thereof
For the purposes of recognising revenue, the Directors are
required to identify distinct services in contracts and allocate
the transaction price to the performance obligations. Details of
determining performance obligations, passing of control and amounts
recognised as costs incurred to obtain or fulfil a contract are
given in Note 1 - Revenue recognition. There has been no change in
the Group's business model from the previous year and the Directors
are satisfied that the revenue recognition policy remains correct
for the year under review.
Capitalisation of development costs
As described in Note 1, the Group capitalises development costs
when certain criteria are met including the probability of relevant
future economic benefits. The key variable in making judgement of
the correct treatment of development costs is new product
development versus modification and maintenance of existing
products. The development work undertaken has been to existing
products, and having assessed the likelihood of future economic
benefit, the Directors have judged it appropriate to not capitalise
any development costs (2021 - GBPNil).
Estimates
I m pa i r m e n t of non-current assets
De t e rmi n i ng w he t her non-current assets are i m p a ired
requ ires an e s t i m a t i on of t he v a l ue in u se of t he ca
sh genera t i ng un i ts to w h ich non-current assets have been a
ll oca t ed. T he v a l ue in u se ca lcu l a t i on requ ires t he
Group to e s t i m a te t he f u t ure c a sh f l ows e x pect ed
to ari se from t he ca s h-g enera t i ng un it and a suitable d i
scount ra te in order to ca lcu l a te t he pre s ent v a l ue. The
key variables used in cash flow projections are: a timeline of
fourteen years (the "time period"); the forecast for the next year
which is used as the base for future years; revenue and cost
projections for the time period using the average rate of increase
/ (decrease) achieved over the preceding ten years, No pro v i s i
on f or impa i r m e nt w as m ade in t he year to t he carryi ng v
a l ue of goodwill (see note 11) or investments in subsidiaries
(see note 13).
Recognition of deferred tax assets
As described in Note 1, the Group recognises deferred tax assets
arising from unused tax losses when certain criteria are met
including the probability that future relevant taxable profits will
be available. The directors have assessed the likelihood of future
taxable profits being available and have judged it appropriate to
recognise deferred tax assets for unused losses. The key variables
used in the calculation of deferred tax assets are: a timeline of
three years out from reporting date; revenue and cost projections
on the same basis as used in the assessment of impairment of
goodwill; a cost of capital of 8.44%. At the year-end a deferred
tax asset of GBP318,000 (2021 - GBP471,000) was recognised.
Share based payment transactions
The Company has made awards of options and over its unissued
share capital to certain Directors and employees as part of their
remuneration package.
The valuation of these options involves making a number of
critical estimates relating to price volatility, future dividend
yields, expected life of the options and forfeiture rates. These
assumptions have been described in more detail in Note 19.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
3. Revenue
An analysis of the Group's revenue is as follows:
2022 2021
GBP GBP
Software development, licence fees and project work 2,757,795 2,988,842
------------------------------------------------------ ---------- ----------
All of the Group's revenue relates to continuing activities.
4. Operating profit for the year is stated after charging/(crediting):
2022 2021
GBP GBP
Depreciation of plant and equipment (see note 12) 7,291 9,651
Depreciation of leased assets (see note 17) 146,303 146,303
Interest on leased assets (see note 17) 13,550 20,307
Staff costs (see note 8) 1,491,348 1,491,063
Research and development 409,618 506,893
Release of accruals for administrative costs in respect of prior years (9,000) (88,000)
------------------------------------------------------------------------------- ---------- -------------
5. Finance income and Finance costs:
2022 2021
GBP GBP
Finance income
Income on cash and cash equivalents 13,911 13,260
Finance costs
Lease interest expense (13,550) (20,307)
Other interest expense (60) -
------------------------------------- --------- ---------
Net finance income / (expense) 301 (7,047)
------------------------------------- --------- ---------
6. Auditor's remuneration:
2022 2021
GBP GBP
Fees payable to the Group's auditor for the audit of the Group's annual accounts 31,500 29,750
Fees payable to the Group's auditor for other services:
- audit of the Company's subsidiaries 7,000 6,000
----------------------------------------------------------------------------------- ------- -------
38,500 35,750
---------------------------------------------------------------------------------- ------- -------
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
7. Operating segments:
The G r o up r e p o r ts internally to the Chief Operating
Decision Maker (CODM), who is considered to be the Board.
Intersegment license fees and management charges are not included
in the reports reviewed by the CODM during the year but are
calculated for statutory reporting purposes and therefore are
excluded from the following revenue and operating profit
disclosures.
2022 2021
GBP GBP
Revenue by segment
Software development and licence fees 2,757,795 2,988,842
-------------------------------------------------------------------- -------------- --------------
External segment revenue 2,757,795 2,988,842
-------------------------------------------------------------------- -------------- --------------
Operating profit by segment
Software development and licence fees 1,193,637 1,468,132
Unallocated overheads (448,975) (445,078)
-------------------------------------------------------------------- -------------- --------------
Total operating profit 744,662 1,023,054
Finance income 13,911 13,260
Total profit before tax as reported in the Group income statement 758,573 1,036,314
-------------------------------------------------------------------- -------------- --------------
2022 2021
GBP GBP
Segment total of assets
Software development and licence fees 7,541,527 7,337,340
Unallocated assets 4,545,031 4,492,208
---------------------------------------- ------------- -------------
12,086,558 11,829,548
Less intercompany debtors (3,310,501) (3,258,968)
Total assets 8,776,057 8,570,580
---------------------------------------- ------------- -------------
2022 2021
GBP GBP
Segment total of liabilities
Software development and licence fees 5,056,787 5,193,528
Unallocated liabilities 58,447 53,150
---------------------------------------- ------------ ------------
5,115,234 5,246,678
Less intercompany creditors (3,310,501) (3,258,968)
---------------------------------------- ------------ ------------
Total liabilities 1,804,733 1,987,710
---------------------------------------- ------------ ------------
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
7. Operating segments (continued):
2022 2021
GBP GBP
Additions of property, plant and equipment assets by segment
Software development and licence fees 2,688 1,482
------------------------------------------------------------------------------------------- ------ ------
Total additions 2,688 1,482
------------------------------------------------------------------------------------------- ------ ------
2022 2021
GBP GBP
Depreciation of property, plant and equipment assets recognised in the period by segment
Software development and licence fees 7,291 9,651
Total depreciation 7,291 9,651
------------------------------------------------------------------------------------------- ------ ------
Non-current assets by country 2022 2021
GBP GBP
UK 2,400,903 2,704,809
-------------------------------- ---------- ----------
Total non-current assets 2,400,903 2,704,809
-------------------------------- ---------- ----------
Geographical information - External revenue 2022 2021
GBP GBP
UK 2,013,140 2,065,903
Europe (excluding UK) 581,981 771,541
Africa 40,000 42,500
North America 89,447 83,637
Australia 12,603 11,838
Asia Pacific 20,624 13,423
---------------------------------------------- ---------- ----------
2,757,795 2,988,842
--------------------------------------------- ---------- ----------
During the year there were 4 customers (2021: 3) who accounted
for more than 10% of the Group's revenues as follows:
2022 2021
----------------------- -------------------------
Value of % of Total Value of % of Total
sales sales
GBP GBP
Customer 1 716,386 28% 668,122 22%
Customer 2 520,990 21% 522,149 17%
Customer 3 353,975 14% 375,168 13%
Customer 4 241,556 10% - -
-------------------------- ---------- ----------- ----------- -----------
1,832,907 73% 1,565,439 52%
-------------------------- ---------- ----------- ----------- -----------
These revenues are attributable to the software development and
licence fees segment.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
8. Staff costs:
2022 2021
GBP GBP
a) Aggregate staff costs, including Directors' remuneration
Wages and salaries 1,197,220 1,206,748
Social security costs 153,261 144,131
Pension contributions 24,255 24,318
Share-based payments 116,612 115,866
1,491,348 1,491,063
------------------------------------------------------------- ---------- ----------
b) The average number of employees (including Directors) was:
Sales and administration 7 6
Development and support 7 11
---------------------------------------------------------------- --- ---
14 17
--------------------------------------------------------------- --- ---
GBP GBP
c) Directors' emoluments
Short-term employee benefits 231,714 232,352
Pension contributions 5,250 5,250
Share-based payments 57,200 63,030
294,164 300,632
Social security costs 30,843 49,351
------------------------------------- -------- --------
Total Director compensation 325,007 349,983
------------------------------------- -------- --------
Directors' emoluments represent the staff costs of the parent
company.
The average number of employees of the parent company is 3
(2021: 3)
The highest paid Director received remuneration of GBP183,464
(2021: GBP186,178).
The number of Directors that are members of a defined
contribution pension scheme is 1 (2021: 1). Pension contributions
paid to a defined contribution scheme in respect of the highest
paid Director amounted to GBP5,250 (2021: GBP5,250).
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
9. Taxation
2022 2021
GBP GBP
Current tax 4,993 (8,204)
Deferred tax (153,000) 19,000
----------------------------------------- ---------- ---------
Total tax charge (credit) for the year 148,007 (10,796)
----------------------------------------- ---------- ---------
The difference between the total tax credit shown above and the
amount calculated by applying the standard rate of UK corporation
tax to the profit before tax is as follows:
2022 2021
GBP GBP
Profit on ordinary activities before tax 758,573 1,036,314
---------------------------------------------------------------------------------------- ---------- ----------
Profit on ordinary activities multiplied by the standard rate of corporation tax in the
UK
of 19 % (2021: 19%) 144,128 196,900
Effects of:
Disallowed expenses 288 97
Temporary differences on deferred tax 796 1,457
Income taxes paid - 8,204
Research and development tax credits (4,993) -
Deferred tax asset movement 153,000 (19,000)
Brought forward losses utilised (145,212) (198,454)
Total tax / (credit) for the year 148,007 (10,796)
---------------------------------------------------------------------------------------- ---------- ----------
Factors which may affect future tax charges
At 30 June 2022 the Group has tax losses of approximately
GBP8,300,000 (2021: GBP8,500,000) to offset against future trading
profits.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
10. Earnings per share
2022 2021
GBP GBP
Earnings
Earnings for the purpose of basic and diluted earnings per share being net profit
attributable
to equity shareholders 610,566 1,047,110
610,566 1,047,110
----------------------------------------------------------------------------------------- -------- ----------
No. No.
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per
share 13,364,195 13,290,672
Number of dilutive shares under option 25,145 143,168
-------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for the purposes of dilutive earnings per
share 13,389,340 13,433,840
-------------------------------------------------------------------------------------- ----------- -----------
T h e c a lcu l a t i on of d il u t ed e a r n i n gs per sh a
re assu m es c on v e rsi on of a ll po t e n t i a lly d i l u t
ive o r d i na ry shares, all of w h i ch a r ise f r om sh a re op
t i on s. A ca lcu l a t i on is d o ne to d e t e rm i ne t he nu
m ber of s ha r es t h at c ou ld h ave b e en acq u i r ed at f a
ir va l u e, b a s ed u p on t he m o n e t a ry va l ue of t he su
bscr i p t i on r i gh ts a t t ach ed to o u tst a n d i ng s ha
re o p t i o ns.
11. Goodwill
2022 2021
GBP GBP
Co s t a nd n et book a m ount
A t 1 July 2 021 and at 30 June 2022 1,715,153 1,715,153
--------------------------------------- ---------- ----------
G oodwill acqui r ed in a busi ness combi nat i on is al located
at acquisi t i on, to the cash generat i ng uni ts ( C G Us) that
are expected to bene f it f rom t hat business combi nat i on. The
carryi ng amount of goodwill has been allocat ed as follows:
2022 2021
GBP GBP
Arcontech Limited 1,715,153 1,715,153
1,715,153 1,715,153
------------------- ---------- ----------
The CGU used in these calculations is Arcontech Limited. T he g
r o up t e s ts g o o d will a n n ua lly f or i m p a i rm en t or
m o re f r eq u e n t ly if t h e re a re i n d ica t i o ns t hat
g o o d will m i ght be i m pa i r ed. T he r e c o v e r ab le a m
ou n ts of t he C G Us a re de t e rm i ned f r om va l ue in u se
ca lcu l a t i o ns. T he key assu m p t i o ns f or t he va l ue
in u se ca lcu l a t i o ns are those r ega r d i ng t he d isc o u
nt r a t es, g r o w th r a t es a nd exp ect ed ch a n ges to se
lli ng p r ices a nd d i r ect c osts du r i ng t he pe r i od. The
di scou nt rate is estimated usi ng pre- t ax r a t es t h at r e f
l e ct cu r r ent m a rket ass essm e n ts of t he t i me va l ue
of m o ney a nd t he r isks s peci f ic to t he C G Us. Long-term
gr o w th r a t es a re ba s ed on i n d ust ry g r o w th f o r
eca s ts. C h a n ges in se lli ng p r ices a re b ased on p ast p
r act ices a nd exp ect a t i ons of f u t u re ch a n g es in t he
m a rke t. Changes in direct costs are based on expected cost of
inflation of 8.9% and 1.8% after year 5.
Cashflow forecasts are based on the latest financial budgets and
extrapolate the cashf l o ws f or t he next f i ve y ea rs ba s ed
on an e s t i m a t ed g r o w th in revenue representing an
average rate of 4% (2021: 5%) per annum, after which the UK l o
ng-t e rm g r o w th r a te of 1.8% is applied. The Directors
consider that this rate is appropriate, given the current sales
pipeline. Fluctuation in revenue is the most sensitive of
assumptions. Should revenue fall by more than an average of 5% per
annum then this could result in the value of goodwill being
impaired.
As the Group does not have any borrowings, the rate used to
discount all the forecast cash flows is 8.8% (2021: 8.8%), which
represents the Group's cost of capital.
G o o d wil l on t he pu r c ha se of Arcontech L i m i t ed is
a tt r i bu t ab le to t he ope r a t i ng sy ne r g i es that have
arisen as a r e s u lt of t he co m b i n a t i o n.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
12. Property, plant and equipment - Group
Office
Leasehold furniture &
Property equipment Total
Cost GBP GBP GBP
At 1 July 2020 26,199 142,218 168,417
Additions - 1,482 1,482
At 1 July 2021 26,199 143,700 169,899
Additions - 2,688 2,688
Disposals - (40,447) (40,447)
At 30 June 2022 26,199 105,941 132,140
------------------------------------ ---------- ------------- ---------
Depreciation
At 1 July 2020 20,597 128,504 149,101
Charge for the year 1,461 8,190 9,651
At 1 July 2021 22,058 136,694 158,752
Charge for the year 1,462 5,829 7,291
Disposals - (40,447) (40,447)
At 30 June 2022 23,520 102,076 125,596
------------------------------------ ---------- ------------- ---------
Net book amount at 30 June 2022 2,679 3,865 6,544
------------------------------------ ---------- ------------- ---------
Net book amount at 30 June 2021 4,141 7,008 11,147
------------------------------------ ---------- ------------- ---------
13. Investment in subsidiaries
2022 2021
Carrying amount GBP GBP
At 1 July 2021 2,017,471 2,017,471
At 30 June 2022 2,017,471 2,017,471
------------------ ---------- ----------
D e t a il s of t he i n v est m e n ts in w h ich t he G r o up
a nd t he C o m p any h o l ds 2 0% or m o re of t he n o m i nal v
a l ue of any cl ass of s ha re c a p i t al a re listed below. The
Goodwill recognised in Note 11 is in connection with investments
made in subsidiaries:
Country of Address Nature of business Ordinary
Incorporation shares
held
11-21 Paul Street, London
Arcontech Solutions Limited England EC2A 4JU Dormant 100%
11-21 Paul Street, London
Cognita Technologies Limited England EC2A 4JU Software development 100%
11-21 Paul Street, London Software development and
Arcontech Limited England EC2A 4JU consultancy 100%
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
14. Trade and other receivables
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
Due within one year:
Trade and other receivables 196,541 330,740 - -
Amounts owed by group undertakings - - 3,310,401 3,258,868
Prepayments and accrued income 152,145 139,577 12,336 4,599
348,686 470,317 3,322,737 3,263,467
------------------------------------ -------- -------- ---------- ----------
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
Due after more than one year:
Other receivables 141,750 141,750 - -
141,750 141,750 - -
------------------------------- -------- -------- -------- --------
Trade receivables, which are the only financial assets at
amortised cost, are non-interest bearing and generally have a 30-90
day term. Due to their short maturities, the carrying amount of
trade and other receivables is a reasonable approximation of their
fair value. A provision for impairment of trade receivables is
established using an expected loss model. Expected loss is
calculated from a provision based on the expected lifetime default
rates and estimates of loss on default.
A s at 30 June 2022, t r a de r ece i v ab l es of GBPNil w e re
i m p a i r ed (2021: GBPNil) and during the year an impairment
charge relating to trade receivables of GBPNil (2021: GBPNil) was
recognised. As at 30 June 2022 t r a de r e c e iva b l es of
GBPnil (2021: GBP 100,469 ) w e re p ast d ue but n ot i m p a i r
e d. T he a g e i ng a na lysis of t h e se t r a de r ece i v ab l
es is as f o ll o ws:
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
Up to 3 months past due - 100,469 - -
3 to 6 months past due - - - -
- 100,469 - -
------------------------ ------ -------- -------- --------
15. Cash and cash equivalents
Ca s h and cash equ i v a l en ts co m p r i se ca sh he ld by t
he Group a nd s hort-t erm bank dep o s i ts w i th an ori g i nal
m a t u r i ty of t hree m o n t hs or l e ss. The Directors
consider that the carrying amount of cash and cash equivalents
approximates to their fair value.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
16. Trade and other payables
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
Trade payables 77,772 52,881 3,849 4,155
Amounts owed to group undertakings - - 100 100
Other tax and social security payable 62,148 113,083 7,843 8,844
Other payables and accruals* 490,724 388,137 46,244 39,285
Deferred income 978,236 1,089,306 - -
1,608,880 1,643,407 58,036 52,384
--------------------------------------------- ---------- ---------- -------- --------
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
T r ad e payables and other payables and accruals con s t i t u
te t he f i n anci al liabilities wi t h in t he c a t e g o ry
"Financial liabilities at amortised cost" with a total value of
GBP568,496 (2021: GBP441,018).
*Other payables and Accruals includes a provision for
dilapidations for the Office premises of GBP50,000 (2021:
GBP50,000). Refer to note 1 for the Accounting Policy for
Provisions.
17. Leases
Under IFRS 16, the Group recognises right-of-use assets and
lease liabilities for all leases on its balance sheet. The only
lease applicable under IFRS 16 is the Group's office.
The key impacts on the Statement of Comprehensive Income and the
Statement of Financial Position are as follows:
As at 30 June 2022 Lease liability Right of Income
GBP use asset statement
GBP GBP
Carrying value at
30 June 2021 (344,303) 365,758 -
Depreciation - (146,303) (146,303)
Interest (13,550) - (13,550)
Lease payments 162,000 - -
---------------- ----------- -----------
Carrying value at
30 June 2022 (195,853) 219,455 (159,853)
---------------- ----------- -----------
Reconciliation of lease Operating Financing Non-cash Total
liabilities cash flow cash flow
GBP GBP GBP GBP
------------------------- ----------- ----------- --------- ----------
As at 1 July 2021 - - - 344,303
Cash flows:
Interest paid (13,550) - - (13,550)
Liability reduction - (148,450) - (148,450)
Non-cash changes:
Interest expense - - 13,550 13,550
------------------------- ----------- ----------- --------- ----------
As at 30 June 2022 (13,550) (148,450) 13,550 (195,853)
------------------------- ----------- ----------- --------- ----------
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
17. Leases (continued)
As at 30 June 2021 Lease Right Income
liability of use statement
GBP asset GBP
GBP
Carrying value at 30
June 2020 (485,996) 512,061 -
Depreciation - (146,303) (146,303)
Interest (20,307) - (20,307)
Lease payments 162,000 - -
----------- ---------- -----------
Carrying value at
30 June 2021 (344,303) 365,758 (166,610)
----------- ---------- -----------
Reconciliation of lease Operating Financing Non-cash Total
liabilities cash flow cash flow
GBP GBP GBP GBP
------------------------- ----------- ----------- --------- ----------
As at 1 July 2020 - - - 485,996
Cash flows:
Interest paid (20,307) - - (20,307)
Liability reduction - (141,693) - (141,693)
Non-cash changes:
Interest expense - - 20,307 20,307
------------------------- ----------- ----------- --------- ----------
As at 30 June 2021 (20,307) (141,693) 20,307 (344,303)
------------------------- ----------- ----------- --------- ----------
Contractual maturity analysis of lease liabilities as at 30
June 2022
Less than 3 - 12 1 - 5 Longer
3 months Months Year than Total
GBP GBP GBP 5 years GBP
GBP
Lease liabilities 40,500 121,500 40,500 - 202,500
------------------- ---------- -------- ------- --------- --------
18. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using the tax rate of 17% which came
into effect from 1 April 2020. The movement on the deferred tax
account is as shown below:
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
At 1 July 471,000 452,000 55,000 151,000
Tax credit (de-recognised)/ recognised in group income
statement (153,000) 19,000 1,000 (96,000)
At 30 June 318,000 471,000 56,000 55,000
------------------------------------------------------------------- ---------- -------- -------- ---------
The deferred tax asset has been recognised in relation to
forecast taxable profits which are considered probable.
Losses to offset against future trading profits at 30 June 2022
amounted to approximately GBP8,300,000 (2021: GBP8,500,000).
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
19. Share capital
Company Shares Share Capital Share Premium
Allotted and fully paid: of 12.5p each GBP GBP
----------------------------------------------- --------------- -------------- -------------
As at 1 July 2021 13,327,811 1,665,976 92,360
September 2021 - Exercise of options at 64.5p 45,000 5,625 23,401
As at 30 June 2022 13,372,811 1,671,601 115,761
------------------------------------------------ --------------- -------------- -------------
Share options
Under the Company's approved 2002 Share Option Scheme, certain
Directors and employees held options at 30 June 2022 for unissued
Ordinary Shares of 12.5 pence each as follows:
Normal
At 1 July At 30 June exercise
Share options 2021 Granted Exercised Lapsed 2022 Exercise price period
25 Apr 20 - 24
Employees: 125,000 - (25,000) - 100,000 64.50 pence Apr 27
30 Jun 21 - 29
50,000 - - - 50,000 110.00 pence Jun 28
30- Jun 22 -
55,000 - - (23,000) 32,000 196.00 pence 27 Sep 29
30 Jun 23 - 2
75,000 - - - 75,000 164.50 pence Oct 30
30 Jun 24 - 11
- 73,500 - - 73,500 130.50 pence Oct 31
Directors:
25 Apr 20 - 24
Richard Last 24,762 - - (24,762) - 64.50 pence Apr 27
30 Jun 23 - 2
Geoff Wicks 30,000 - - - 30,000 164.50 pence Oct 30
1 Sep 17 - 31
Louise Barton 40,000 - - (40,000) - 23.75 pence Aug 21
25 Apr 20 - 24
20,000 - (20,000) - - 64.50 pence Apr 27
30 Jun 21 - 29
Matthew Jeffs 100,000 - - - 100,000 110.00 pence Jun 28
30- Jun 22 -
50,000 - - (50,000) - 196.00 pence 27 Sep 29
30 Jun 23 - 2
50,000 - - - 50,000 164.50 pence Oct 30
30 Jun 24 - 11
- 50,000 - - 50,000 130.50 pence Oct 31
Total 619,762 123,500 (45,000) (137,762) 560,500
--------------- ------------ ------------ ----------- ------------ ------------
Weighted
average
exercise
price 120.2 pence 130.5 pence 64.5 pence 122.3 pence 126.4 pence
--------------- ------------ ------------ ----------- ------------ ------------
The number of options exercisable at 30 June 2022 was 282,000
(at 30 June 2021: 359,762), these had a weighted average exercise
price of 103.6 pence (2021: 78.9 pence).
The weighted average share price as at the exercise date of the
shares exercised in the year was 64.5 pence (2021: 43.2 pence) and
of the shares were forfeited in the year was 122.3 pence (2021:
196.0).
Options granted under the Company's approved 2002 Share Option
Scheme are forfeited when the Optionholder ceases to be a Director
or employee of a Participating Company. The Directors may before
the expiry of 3 months following cessation of employment permit an
Optionholder to exercise their Option within a period ending no
later than 12 months from the cessation of employment.
The highest price of the Company's shares during the year was
175.0 pence, the lowest price was 72.0 pence and the price at the
year-end was 73.5 pence.
The weighted average remaining contractual life of share options
outstanding at 30 June 2022 was 7 years (2021: 7 years).
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
19. Share capital (continued)
Share-based payments
The Group operates an approved Share Option Scheme for the
benefit of Directors and employees. Options are granted to acquire
shares at a specified exercise price at any time following but no
later than 10 years after the grant date. There are no performance
conditions on the exercise of the options granted prior to 1 July
2018. The performance conditions of those granted after 1 July 2018
which apply to executive directors and certain key staff, are set
out below.
The options issued in November 2018, September 2019**, October
2020 and in October 2021 will be exercisable from 30 June 2021, 30
June 2022, 30 June 2023 and 30 June 2024 respectively, dependent on
the Company's compound annual rate of growth in fully diluted
earnings* for the three financial years ending 30 June 2022, 2023,
and 2024, respectively.
Options issued date Exercisable from Dependent on the Company's
compound annual rate
of growth in fully diluted
earnings* for the three
financial years ending
-------------------- ----------------- ----------------------------
November 2018 30 June 2021 30 June 2021
October 2020 30 June 2023 30 June 2023
October 2021 30 June 2024 30 June 2024
The Options will vest subject to performance criteria as
follows:
- compound annual earnings growth of 10% or more - fully vested
(100%);
- compound annual earnings growth between 5%-10% - partial
vesting between 0% and 100% on a sliding scale; and
- compound annual earnings growth of 5% and below - nil.
Any Ordinary Shares arising from the vesting of Options must be
held for a period of two years after vesting.
* Fully diluted earnings will be based on: (a) the Company's
pre-tax profit excluding exceptional items and the share option
charge and (b) the current UK corporation tax rate of 19%, such
that the fully diluted earnings calculation takes no account
of R&D and deferred tax credits. For the purposes of the
fully diluted earnings calculation, the applied rate of corporation
tax
will remain constant at 19% irrespective of any current or
future changes to corporation tax.
** 70,000 options issued in September 2019 lapsed on 30 June
2022 as compound annual earnings growth targets for the financial
years ended 30 June 2020, 2021 and 2022 were not achieved.
The fair value of options is valued using the Black-Scholes
pricing model. An expense of GBP116,612 (2021: GBP115,866) has been
recognised in the period in respect of share options granted. The
cumulative share option
reserve at 30 June 2022 is GBP270,805 (2021: GBP271,207).
The inputs into the Black-Scholes pricing model are as
follows:
Directors & Employees
Grant date 25 Apr 2017 29 Nov 2018 27 Sep 2019 2 Oct 2020 11 Oct 2021
Exercise price 64.5 pence 110.0 pence 196.0 pence 164.5 pence 130.5 pence
Expected life 10 years 10 years 10 years 10 years 10 years
Expected volatility 50% 50% 50% 49% 45%
Risk free rate of interest 0.5% 0.75% 0.75% 0.00% 0.60%
Dividend yield Nil Nil Nil 0.01% 0.01%
Fair value of option 36.7 pence 57.0 pence 115.0 pence 91.92 pence 70.03 pence
Volatility has been estimated based on the historic volatility
over a period equal to the expected term from the grant date.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
20. Reserves
Details of the movements in reserves are set out in the
Statement of Changes in Equity. A description of each reserve is
set out below.
Share capital reserve
This is used to record the aggregate nominal amount of the
Company's shares on issue.
Share premium account
This is used to record the aggregate amount or value of premiums
paid when the Company's shares are issued at a premium, net of
issue costs, less amounts cancelled by court order.
Share option reserve
This relates to the fair value of options granted which has been
charged to the income statement over the vesting period of the
options, less amounts transferred to retained earnings.
Retained earnings
This relates to accumulated profits and losses together with
distributable reserves arising from capital reductions, less
amounts distributed to shareholders.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
21. Net cash generated from operations - Group
2022 2021
GBP GBP
Operating profit 758,272 1,043,361
Depreciation charge 153,594 155,954
Non cash share option charges 116,612 115,867
Lease interest paid (13,550) (20,307)
Other interest paid (60) -
Decrease/(increase) in trade and other receivables 126,624 (277,686)
Decrease in trade and other payables (31,884) (207,630)
Cash generated from operations 1,109,608 809,559
Net cash generated from operations - Company
2022 2021
GBP GBP
Operating profit 265,860 274,671
Non cash share option charges 116,612 115,867
Increase in trade and other receivables (59,270) (82,057)
Increase/(decrease) in trade and other payables 6,873 (97,561)
Cash generated from operations 330,075 210,920
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
22. Related party transactions
Group
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are
disclosed in this part of the note.
Key management compensation
Ke y m a n a ge m e nt a re t h ose p e rso ns h avi ng au t ho
r i ty a nd r e s p o nsi b ili ty f or p l a n n i n g, co n t r o
lli ng a nd d i r e c t i ng t he act ivi t i es of the Group. In t
he op i n i on of t he B oa r d, t he G r o up 's key m a n a g e m
e nt a re t he D i r ect o rs of Arcontech Group PLC. I n f o rm a
t i on r e g a r d i ng t he ir co m p e nsa t i on is g iven in
notes 8 and 19 f or e ach of the ca t e go r i es sp eci f i ed in
I AS 24 R e l a t ed P a r ty Discl osu r e s . All emoluments
given in notes 8 and 19 relate to short-term employee benefits and
there are no post-employment or other long-term benefits.
The financial statements include the following amounts in
respect of services provided to the Group:
Company
Transactions between the Parent Company and its subsidiaries
during the year were as follows:
Management charges payable by subsidiaries GBP536,216 (2021:
GBP534,094).
The amounts due from/to subsidiaries at the balance sheet date
were as follows:
2022 2021
GBP GBP
Amount due from subsidiaries 7,098,581 7,223,539
Less: Provision for impairment (3,788,180) (3,964,671)
Amount due from subsidiaries - net 3,310,401 3,258,868
------------------------------------------------ ------------ ------------
During the year a provision of GBP176,491 was released (2021:
GBP185,654) in respect of balances due from subsidiaries.
2022 2021
GBP GBP
Amount due to subsidiaries 536,216 534,094
536,216 534,094
---------------------------- -------- --------
23. Dividends
A final dividend of 3.25 pence will be proposed at the Annual
General Meeting but has not been recognised as it requires approval
(2021: 2.75 pence).
24. Material non-cash transactions
There were no material non-cash transactions during the
period.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
25. Financial instruments
The Group's financial instruments comprise cash and cash
equivalents, and items such as trade payables and trade
receivables, which arise directly from its operations. The main
purpose of these financial instruments is to provide finance for
the Group's operations.
The Group's operations expose it to a variety of financial risks
including credit risk, liquidity risk and interest rate risk. Given
the size of the Group, the Directors have not delegated the
responsibility of monitoring financial risk management to a
sub-committee of the Board. The policies set by the Board of
Directors are implemented by the Company's finance department.
C r ed i t r isk
The Group's credit risk is primarily attributable to its trade
receivables. The Group has implemented policies that require
appropriate credit checks on potential customers before sales are
made. The amount of exposure to any individual counterparty is
subject to a limit, which is reassessed annually by the Board.
Trade receivables are considered in default and subject to
additional credit control procedures when they are more than 30
days past due in line with industry practice. Trade receivables are
only written off when there is no reasonable expectation of
recovery due to insolvency of the debtor.
T h e c a rryi ng a m o u nt of f i n a nci al asse ts r e p r e
s en ts t he m axi m um cr ed it exp osu r e. T he m axi m um exp
osu re to cr e d it r isk at t he r e p o r t i ng da te w as:
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
Trade receivables 196,541 330,740 - -
Cash and cash equivalents 6,026,468 5,395,457 1,074,294 1,077,741
Amounts owed by group undertakings - - 3,310,401 3,258,868
6,223,009 5,726,197 4,384,695 4,336,609
------------------------------------ ---------- ---------- ---------- ----------
In t e r e st r a te r isk
T h e G r o up h as i n t e r est b e a r i ng asse ts and no i
n t e r est-b ea r i ng li ab ili t i es. I n t e r est b e a r i
ng asse ts co m p r ise o n ly ca sh a nd c ash e q u iva l e n ts,
w h ich ea rn i n t e r e st at a va r i a b le r a t e.
T h e G r o up h as n ot en t e r ed i n to a ny d e r iva t ive
t r a nsact i ons d u r i ng t he p e r i od u n der r evi e w.
The Group does not have any borrowings.
T h e G r o u p 's ca sh a nd ca sh e qu i v a l e n ts e a r n
ed i n t e r e st at v a r i ab le r a tes, between 1.20% below
bank base rate and 0.2% below bank base rate and at fixed/variable
rates of between 0.06% below (2021: 0.15% below bank base rate and
0.5% above bank base rate and at fixed/variable rates of between
0.25% and 1.50%).
L i q u i d i t y r isk
T h e G r o up has no sh o r t - t e rm d e bt f i n a nce. T he
G r o up m on i t o rs i ts l eve ls of w o rki ng cap i t al to e
nsu re t h at it c an m e et i ts liabilities as t hey f a ll d u
e.
T h e G r o up 's only f i n a nci al li ab ili t i es comprise
trade payables and other payables and accruals, excluding deferred
income, with a carrying value equal to the gross cash flows payable
of GBP568,496 (2021: GBP441,018) all of which are payable within 6
months.
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
25. Financial instruments (continued)
Market risk and sensitivity analysis
Equity price r i sk
The Directors do not consider themselves exposed to material
equity price risk due to the nature of the Group's operations.
Foreign currency exchange r i sk
The Directors do not consider themselves exposed to material
foreign currency risk due to the nature of the Group's operations.
All invoices are raised in sterling.
I n t e r e st r a te r isk
T h e G r o up is exp osed to i n t e r est r a te r isk as a r
esu lt of posi t i ve c a sh ba l a nces, d e no m i na t ed in st
e r li ng, w h i ch ea rn i n t e r est at va r i a b le and fixed
r a t es. As at 30 June 2022, if bank base rate h ad i ncr e ased
by 0 . 5% wi th a ll o t her v a r i ab l es he ld co nst a n t, po
s t - t ax profit would have been GBP30,132 (2021: GBP26,977)
higher a nd eq u i ty w o u ld ha ve b e en GBP30,132 (2021: GBP
26,977) h i g h e r. C on v e rse ly, if bank base rate h ad f a ll
en 0 . 5% wi th a ll o t h er va r i ab l es h e ld const a n t, po
st-t ax profit would have been GBP 30,132 (2021: GBP 26,977 ) lower
a nd e q u i ty w ou ld h ave be en GBP 30,132 (2021: GBP 26,977) l
o w e r.
26. C a p i t a l ri sk m a n a g e m e nt
T h e G r o up 's ob j ect ives w h en m a n a g i ng ca p i t
al a re to sa f e g u a rd t he G r o u p 's ab ili ty to c o n t i
n ue as a g o i ng c on c e rn in o r der to p r ovi de returns f
or sha r e ho l de rs a nd m a i n t a in an o p t i m al c ap i t
al st r uct u re.
T h e G r o up de f i n es c ap i t al as be i ng s ha re ca p i
t al p l us r e s e rve s. T he B oa rd of Di r ect o rs
continually m on i t o rs t he l e v el of ca p i t al.
T h e G r o up is n ot s ub j e ct to any ext e r n a lly i m po
s ed ca p i t al r e q u i r e m e n ts.
27. Ultimate controlling party
There is no ultimate controlling party.
28. Copies of these statements
Copies of this statement are available from the Company
Secretary at the Company's registered office at 1(st) Floor, 11-21
Paul Street, London, EC2A 4JU or from the Company's website at
www.arcontech.com .
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END
FR BKDBNCBKDKCD
(END) Dow Jones Newswires
September 12, 2022 02:01 ET (06:01 GMT)
Arcontech (LSE:ARC)
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