TIDMDRUM
The information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
21 May 2021
Drumz plc
(the "Company" or the "Group")
Final results for the year ended 31 December 2020
Drumz plc (AIM: DRUM) the investing company focused on building value in
technology, is pleased to announce its final results for the year ended 31
December 2020.
Highlights
* In the year the Company changed its investing policy to focus on the
technology sector.
* First technology investment made in Acuity Risk Management Limited
("Acuity"), an award winning cybersecurity software company.
* Despite COVID, Acuity announces new business wins and significant growth in
forward contracted revenues.
Angus Forrest, Chief Executive commented on the results:
"We have made progress in the past six months and are increasingly confident
that the promise shown by Acuity and its improved SaaS business model which is
beginning to show with growth in new business should accelerate from
here. Drumz has reviewed many new investment opportunities, and we are
determined to focus on the opportunities which offer Drumz and its shareholders
the best returns. We look forward to the future with optimism."
Annual General Meeting
In view of the current prevailing guidance from the British Government in
relation to the COVID-19 pandemic and specifically the restrictions on large
gatherings, the 2021 AGM which will be held on 18 June will be convened with
the minimum quorum of shareholders (which will comprise the Company's
directors) in order to conduct the business of the meeting.
This year, we are requesting that any relevant questions on the Annual Accounts
or other business to be transacted at the meeting are submitted by shareholders
in advance. Shareholders can do so by sending questions in writing to the
Registered Office or by emailing info@drumzplc.com no later than 14 June (at
least 4 days before the AGM). Prior to the meeting, answers to questions will
be provided on the Investor Section of the Company's website at
www.drumzplc.com.
For further information please
contact:
Drumz Plc www.drumzplc.com
Angus Forrest +44 (0) 20 3582 0566
WH Ireland (NOMAD & Broker) www.whirelandcb.com
Mike Coe / Chris Savidge 020 7220 1666
Peterhouse Capital Limited (Joint
broker)
Lucy Williams / Duncan Vasey 020 7469 0936
Chairman's Statement
I am pleased to present the results of Drumz plc ("Drumz" or "Company" or
"Group") for the year ended 31 December 2020.
On 30 June 2020 shareholders approved changes to the Company's strategic
direction from a company, which had principally invested in real estate to one
focused on the technology sector. Simultaneously there were a number of Board
changes with Angus Forrest, John Wakefield and I being appointed and Stephen
Wicks and John Depasquale stepping down. I would like to thank Stephen and John
for their stewardship and collective contributions to the Company over the past
few years.
Results and performance
The Group's results for the year ended 31 December 2020 showed revenues of £
12,000 (2019: £2,000) and an operating loss of £149,000 (2019: profit £43,000).
At 30 June the principal asset of the Group was its legacy holding in KCR
Residential REIT plc ('KCR'), which owns property in the private rented
residential sector, in particular blocks of studio, one and two bedroom
apartments which are rented to private tenants in the UK.
The share price performance of KCR has been disappointing over the year and the
value of the KCR holding has declined from £1,181,000 to £573,000, equating to
an unrealised loss of £608,000. I am also disappointed to report that the KCR
share price has fallen further since the year end.
During the period under review Drumz made its first investment in Acuity Risk
Management Limited ("Acuity"), an award winning business, specialising in risk
management for cybersecurity. Acuity's proprietary software platform STREAMT
provides its blue chip customer base on a SaaS basis, with a comprehensive view
of risk and compliance on an enterprise wide basis. Drumz has invested £500,000
in cash for an initial 20 per cent. shareholding in Acuity and has an option to
acquire an additional 5 per cent. shareholding for a further £125,000. Further
details on the progress achieved by Acuity is in the CEO report and Investment
report.
Therefore, the overall results of the Group for the year ended 31 December 2020
show a loss before taxation of £757,000 (2019: loss of £72,000), of which £
608,000 (2019: £134,000) was due to the fall in value of the Group's investment
in KCR. The shareholders' funds have increased to £1,518,000 (2019: £
1,204,000), principally as a result of the two separate fund raisings
undertaken by the Company in July and October 2020.
New investment Policy
The Company's new investment policy is to invest principally, but not
exclusively in the technology sector in Europe. The Directors consider that
there are opportunities to invest in and acquire established technology
businesses which own their own intellectual property and improve them through a
combination of the management skills and expertise available from Drumz and
further investment capital as required.
Whilst it is not possible to be entirely prescriptive, it is likely that the
opportunities would generally have some or all of the following
characteristics, namely:
* Established business
* Software is proven and a key tool for users
* SaaS ("Software as a Service") business model
* Significant B2B market opportunity
Macroeconomic impacts
During the current period there have been two major macroeconomic factors which
have impacted the economy, namely:
* Brexit - as regulations change with Britain's withdrawal from the EU, the
software industry, particularly those selling on a SaaS basis, appear at
present to be relatively unaffected by this new environment and
* COVID-19 - this global pandemic has had a major impact on the world economy
and the ways in which people work. On the positive side, the software
industry lends itself well to employees working effectively from remote
locations, but the broader impact of the pandemic on global demand remains
uncertain. At Acuity, there was a decline in new business sales in the
second quarter of its financial year, after the first lockdown announced by
the UK Government, but since then new business has picked up strongly.
Outlook
The first phase of the planned change programme at Acuity, with a complete
overhaul of its commercial infrastructure and strengthening of the sales and
marketing operations has now been completed. The Board believe that the
benefits of the actions already taken will be seen over the coming months. We
are now considering several new investment opportunities. I would like to
welcome all new shareholders and thank all shareholders for their continuing
support. I should also like to thank my colleagues and our advisors for their
respective contributions and look forward to further progress in the current
financial year.
Simon Bennett
Chairman
21 May 2021
Chief Executive's Report
Since the 2020 AGM, when shareholders approved changes to the business to focus
on the technology sector was one of change as your Company transitioned and
made its first technology investment. In that time changes have been made to
the Board of directors, a pipeline of technology investment opportunities has
been generated and a new corporate name has been adopted.
Our strategy
Drumz's strategy is to invest, predominantly but not exclusively in the
technology sector, to achieve capital growth in the medium term, three to five
years. We invest in operating companies whose activities include the sale of
software or the use of software. The Board seeks to make investments where the
associated risks are acceptable given the expertise available to the Company.
Our business model
Our business model is to identify established software companies with
potential, that we can acquire or invest in and which would benefit from our
expertise in order to exploit their market opportunity and thereby transform
value. The skills and experience we inject, mainly relate to commercial, sales
and marketing activities. Our objective is to transform the value of our
investments by increasing growth rates and scale. Having achieved these goals
the Company will determine whether the investee companies should be retained or
whether it would be better to realise value by way of a trade sale or Initial
Public Offering ("IPO").
By acquiring established businesses whose software is valuable to its
customers, Drumz is investing in businesses with a validated product / service
so should be able to accelerate growth and value faster than for earlier stage
companies, whilst being better able to identify and manage the associated
risks.
Our business model is designed to allow all parties to benefit. It is achieved
by investing in opportunities where the Board sees growth and if necessary, can
provide expertise and assistance to management to accelerate growth and drive
scale, two of the principal drivers of value for potential buyers.
In a typical scenario:
Year 1: Initial review with key changes identified, and actions taken to set
the foundations (business model, pricing, marketing, sales channels, partners);
Year 2: Build on the initial changes with any necessary refinements and
implementation of business drivers; and
Year 3: Continue to accelerate growth (by this stage the business will be
bigger and is likely to be growing at a far faster rate than previously)
Investments and Portfolio update
Acuity Risk Management
This 15 year old company has developed a software platform which is used for
risk management mainly for cybersecurity, but which also has the flexibility to
be adapted for management of other risks including supplier management or
health and safety. Acuity has won awards for its principal product STREAMT
which has a 5-star rating in Gartner's 2021 Peer Insights review of recent
software buyers and has won a five star rating for five consecutive years from
leading security trade journal, SC MEDIA. The product is in use by Acuity's
customers in the UK, Europe and the United States.
There has been considerable progress at Acuity in the time Drumz has been
involved and some of the resulting contract wins have been announced on the
Stock Exchange's Reach News Service. All sales are now made on a SaaS basis
with improved commercial terms and new pricing structures, which has
substantially improved the company's recurring revenues and average order
values. A new digital marketing agency is generating increased and better
quality sales leads which are fed into the sales team, which has been grown
over the past year to increase sales capacity. These measures are beginning to
show benefits through faster rates of growth in both the numbers and value of
orders and we look forward to continuing to work with Acuity to build on these
foundations.
The biggest impact of COVID-19 on Acuity was felt in the quarter July to
September 2020, when the Company found it difficult to get new customers to
commit to new orders. However, since then, demand has recovered and continued
to build in subsequent quarters. The increasing likelihood and impact of cyber
attacks and consequently the relative importance of cyber security give the
Board confidence to believe that the demand for Acuity's services will continue
to grow.
KCR Residential REIT
KCR is a legacy investment which owns a portfolio, mostly properties, which
comprise residential and retirement flats. Whilst Savills reported the UK
housing market performed strongly in 2020 and Nationwide reported growth in
transaction numbers (13%) and annual price growth of 7.3 per cent, it is
disappointing that the share price has declined over the second six months of
2020 and subsequently, such that it is now at a level which represents a
discount of 50% to net asset value.
Summary and Outlook
In 2020 we achieved the requisite changes at Drumz and began the process of
making the transformation necessary to drive value enhancement at Acuity, which
is now attracting considerable interest. This demonstrates that our strategy
is working and we continue to review a number of other possible investment
opportunities.
Angus Forrest
Chief Executive
21 May 2021
Group statement of comprehensive income
for the year ended 31 December 2020
Notes 2020 2019
£'000 £'000
Continuing operations
Revenue 12 2
Cost of sales - -
Gross profit 12 2
Reversal of accrued remuneration for former - 117
director
Administrative expenses (161) (76)
Operating profit/(loss) 2 (149) 43
Loss on investments 4 (608) (134)
Recovery of bad debt written off in previous _ 19
periods
Loss before taxation (757) (72)
Taxation - - -
Loss for the year attributable to shareholders of (757) (72)
the parent company
Total comprehensive income for the year (757) (72)
attributable to shareholders of the parent
company
Earnings per share
Basic and diluted earnings per share from total (0.36)p (0.06)p
and continuing operations
Group statement of financial position
as at 31 December 2020
2020 2019
Notes £'000 £'000
ASSETS
Non-current assets
Investments at fair value through profit or loss 4 1,073 1,181
1,073 1,181
Current assets
Trade and other receivables 14 5
Cash and cash equivalents 491 96
505 101
Total assets 1,578 1,282
LIABILITIES
Current liabilities
Trade and other payables 60 78
Total liabilities 60 78
Net assets 1,518 1,204
EQUITY
Share capital 5 2,613 2,392
Share premium 8,039 7,189
Convertible loan 88 88
Merger reserve 1,012 1,012
Retained earnings (10,234) (9,477)
Total equity 1,518 1,204
Group statement of changes in equity
for the year ended 31 December 2020
Share Share Convertible Merger Retained Total
capital premium loan reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2019 2,392 7,189 88 1,012 (9,405) 1,276
Total comprehensive income - - - - (72) (72)
Balance at 31 December 2,392 7,189 88 1,012 (9,477) 1,204
2019
Balance at 1 January 2020 2,392 7,189 88 1,012 (9,477) 1,204
Transactions with owners
in their capacity as
owners:
Issue of shares (net of 221 850 - - - 1,071
costs)
221 850 - - - 1,071
Total comprehensive income - - - - (757) (757)
Balance at 31 December 2,613 8,039 88 1,012 (10,234) 1,518
2020
Group statement of cash flows
for the year ended 31 December 2020
2020 2019
£'000 £'000
Cash flows from operating activities
Loss before taxation (757) (72)
Adjustments for:
Fair value adjustment for listed 608 134
investments
Interest income - -
(Increase) / decrease in trade and other (2) 3
receivables
(Decrease) / increase in trade and other (25) (146)
payables
Net cash used in operating activities (176) (81)
Cash flows from investing activities
Purchase of investments (500) -
Cash flows from financing activities
Cash raised through issue of shares (net of transaction 1,071 -
costs)
Net decrease in cash and cash equivalents (395) (81)
Cash and cash equivalents at beginning of financial year 96 177
Cash and cash equivalents at end of financial year 491 96
Notes to the financial Statements
General information
Drumz plc is a company incorporated and domiciled in the United Kingdom. The
Company is a public limited company, which is listed on AIM of the London Stock
Exchange, incorporated and domiciled in England and Wales. The address of the
registered office is Burnham Yard, London End, Beaconsfield, HP9 2JH.
The principal accounting policies adopted in the preparation of the Group and
Company financial statements are set out below.
Basis of accounting
Basis of preparation
The Group and Company financial statements have been prepared under the
historical cost convention, except as modified for financial assets at fair
value through profit or loss.
The Group and Company financial statements have been prepared in accordance
with the accounting policies set out below and international accounting
standards in conformity with the Companies Act 2006.
The accounting policies have been applied consistently throughout the Group and
the Company for the purposes of the preparation of these financial statements
and the same accounting policies, presentations and methods of computation are
followed in this set of financial statements as were applied in the previous
set of audited financial statements.
Going concern
The financial statements have been prepared on the going concern basis.
The Directors have a reasonable expectation that the Company and Group has
adequate resources to continue operating for the foreseeable future. For this
reason, they continue to adopt the going concern basis in preparing the
Company's and Group's financial statements. This has been assessed using
detailed cash flow analysis so that the Board can conclude that the Company and
Group has sufficient capital resources for at least 12 months without any
additional working capital financing requirement.
1. Income and segmental analysis
The Group generates income by charging investee companies fees and for profits
or losses on investments. These operating segments are monitored by the
Executive Directors and strategic decisions are made on the basis of segment
operating results. The segmental analysis of operations is as follows:
Segmental analysis by activity
2020 2019
£'000 £'000
Segment result
Operating income 12 -
Investment activities:
Reversal of accrued remuneration for former - 117
director
Administrative expenses (161) (76)
(149) (41)
Rental activities:
Net rental income - 2
- 2
Operating loss/profit (149) 43
Loss in value of quoted investment (608) (134)
Recovery of bad debt written off in previous - 19
periods
Loss before tax (757) (72)
2020 2019
£'000 £'000
Segment assets
Investment activities:
Non-current assets - investment 1,073 1,181
Other 505 101
Total assets 1,578 1,282
2020 2019
£'000 £'000
Segment liabilities
Investment activities:
Current liabilities 60 78
Total liabilities 60 78
Total assets less total liabilities 1,518 1,204
The activity of investments arose wholly in the United Kingdom.
2. Operating profit / loss
Operating profit / loss is stated after charging:
2020 2019
£'000 £'000
Auditor's remuneration for:
Audit services
- audit of the Group's and Company's annual 12 7
accounts
- audit of subsidiaries pursuant to legislation 3 3
Share based payment (options) 1 -
3. Earnings per ordinary share
The earnings per ordinary share is based on the weighted average number of
ordinary shares in issue during the year of 210,083,568 ordinary shares of 0.1p
(2019: 123,912,957 ordinary shares of 0.1p) and the following figures:
2020 2019
Loss attributable to equity shareholders (£'000) (757) (72)
Loss per ordinary share (0.36)p (0.06)p
Diluted earnings per share is taken as equal to basic earnings per share as the
Group's average share price during the period is lower than the exercise price
of the share options and therefore the effect of including share options is
anti-dilutive.
4. Investments
Investment
£'000
Cost
At 1 January 2020 1,705
Additions 500
At 31 December 2020 2,205
Fair value movements
At 1 January 2020 (524)
Fair value adjustment (608)
At 31 December 2020 (1,132)
Fair value
At 31 December 2020 1,073
At 31 December 2019 1,181
Drumz plc acquired shares in KCR Residential REIT plc at a price of £0.70 per
share in 2018. The investment was classed as fair value through profit and loss
in accordance with IFRS 9. The investment was valued downwards at the year-end
in accordance with IFRS 13. The closing value at 31 December 2020 was £573,000.
Drumz plc acquired shares in Acuity Risk Management Limited in September
2020. The value of this investment is shown at cost, £500,000. As part of the
investment, the agreement also contained an option to invest a further £125,000
for 5%. The directors consider the value of this option to be immaterial.
Fair value hierarchy
In accordance with IFRS 7, financial instruments are measured by level of the
following fair value measurement hierarchy:
* Level 1: quoted prices in an active market for identical assets or
liabilities. The fair value of financial instruments traded in active
markets is based on quoted market prices at the balance sheet date. A
market is regarded as active if quoted prices are readily and regularly
available and those prices represent actual and regularly occurring market
transactions on an arm's-length basis. The quoted market price used for
financial assets held by the Group is the closing price on the last day of
the financial year of the Group. These instruments are included in level 1
and comprise FTSE and AIM-listed investments classified as held at fair
value through profit or loss.
* Level 2: the fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available
and rely as little as possible on entity-specific estimates. If all
significant inputs required to fair value an instrument are observable, the
instrument is included in level 2.
* Level 3: the fair value of financial instruments that are not traded in an
active market (for example, investments in unquoted companies)
is determined by using valuation techniques such as earnings multiples. If
one or more of the significant inputs is not based on observable market
data, the instrument is included in level 3.
There have been no transfers between these classifications in the period (2019:
none). The change in fair value for the current and previous years is
recognised through profit or loss.
All assets held at fair value through profit or loss were designated as such
upon initial recognition.
Movements in investments held at fair value through profit or loss are
summarised as follows:
Level 3 Level 1 Total
Equity Equity investments
investments investments £'000
£'000 £'000
Cost
At 1 January 2020 - 1,705 1,705
Additions 500 -
At 31 December 2020 500 1,705 2,205
Fair value losses
At 1 January 2020 - (524) (524)
Fair value adjustment - (608) (608)
At 31 December 2020 - (1,132) (1,132)
Fair value
At 31 December 2020 500 573 1,073
At 31 December 2019 - 1,181 1,181
Investment in the subsidiaries of the parent company are carried at £nil (2019:
£nil). See note 12 for details of subsidiary undertakings.
5. Share capital
2020 2019
£'000 £'000
Allotted, called up and fully paid
344,821,957 (2019: 123,912,957) ordinary shares 345 124
of 0.1p each
2,268,113,165 (2019: 2,268,113,165) deferred 2,268 2,268
shares of 0.1p each
2,613 2,392
2020 2020 2019 2019
Number £'000 Number £'000
Ordinary shares
At 1 January 2020 123,912,957 124 123,912,957 124
Additions 220,909,091 221 - -
At 31 December 2020 344,822,048 345 123,912,957 124
On 1 July the Company issued 130,000,000 new Ordinary shares of 0.1p at 0.5p
per share to raise approximately £650,000 before expenses; and on 1 October it
issued a further 90,909,091 new Ordinary shares at 0.55p to raise a further £
500,000 before expenses.
Deferred shares
The deferred shares have:
* no right to any dividend;
* the right to receive notice of any general meeting and to attend such
meeting but no right to vote thereat; and
* the right on a winding up or other return of capital (after payment of the
debts and liabilities of the Company and an amount equal to the amounts
paid up, or credited as paid up, including any premium on the ordinary
shares of the Company, together with any unpaid arrears of dividend
declared on such shares) to an amount equal to the amounts paid up or
credited as paid up on such deferred shares.
Share option scheme
The Group operates an unapproved share option scheme. Awards under each scheme
are made periodically to employees. The share options in this scheme vest three
years after the date of grant and have an exercise period of seven years. The
options may only be exercised by option holders while they are still employees
of the Group. If death in service occurs the options can be exercised (to the
extent that they have vested) by the option holder's personal representatives
within 12 months from the date of death. If an option holder ceases to be
employed and the Directors deem the option holder to be a 'Good Leaver' the
options can be exercised (to the extent that they have vested) within six
months from the date of cessation of employment.
A reconciliation of option movements over the year ended 31 December 2020 is
shown below:
Number Exercise
price
Outstanding at 31 December 2019 6,100,000
Lapsed during the year (6,100,000) 2.00p
Granted on 15 July 2020 11,000,000 0.65p
Granted on 25 November 2020 4,000,000 0.55p
Outstanding at 31 December 2020 15,000,000
At 31 December 2020 outstanding options granted over ordinary shares were as
follows:
Share option scheme Exercise price Number Dates exercisable
Company unapproved 0.65p 11,000,000 15 July 2020 to
14 July 2030
Company unapproved 0.55p 4,000,000 25 Nov 2020 to
24 Nov 2030
The weighted average exercise price for the Group's options are as follows:
Options issued during the year: 0.62p
Options forfeited/lapsed during the year: 2.0p
Options outstanding at 31 December 2020: 0.62p
Options exercisable at 31 December 2020: nil
The weighted average remaining contractual life of the share options
outstanding at the end of the year is 9 years (2019: 4 years).
The Group has used the Black-Scholes formula to calculate the fair value of
outstanding share options. The assumptions applied to the Black-Scholes formula
for share options issued and the fair value per option are detailed in the
table below for options issued in the year. The charge calculated up to 31
December 2020 is immaterial and has not been recognised as an expense (2019: £
nil). Volatility was calculated using historical share price information for
the six months prior to the date of grant.
Unapproved
share
options
2020 grant
Date of grant 15 July
2020
Expected life of options based on options exercised 3 years
to date
Volatility of share price 87%
Dividend yield 0%
Risk free interest rate 0.01%
Share price at date of grant 0.65p
Exercise price 0.65p
Fair value per option £0.46
Date of grant 25 Nov
2020
Expected life of options based on options exercised to 3 years
date
Volatility of share price 10%
Dividend yield 0%
Risk free interest rate 0.01%
Share price at date of grant 0.48p
Exercise price 0.35p
Fair value per option £0.00
END
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