TIDMBKS
RNS Number : 2621O
Beeks Financial Cloud Group PLC
02 October 2023
Beeks Financial Cloud Group plc
("Beeks" or the "Company")
Final Results for the year ended 30 June 2023
2 October 2023 - Beeks Financial Cloud Group plc (AIM: BKS), a
cloud computing and connectivity provider for financial markets, is
pleased to announce its final results for the year ended 30 June
2023.
Financial highlights
-- Revenues(1) increased 22% to GBP22.36m (2022: GBP18.29m)
-- Annualised Committed Monthly Recurring Revenue (ACMRR) up 23%
to GBP23.8m (2022: GBP19.3m) increasing further to GBP25.0m by the
end of August 2023 following a strong start to the new financial
year
-- Gross profit up 15% to GBP9.12m (2022: GBP7.94m)
-- Underlying(2) EBITDA increased 33% to GBP8.42m (2022: GBP6.31m)
-- Underlying profit before tax(3) increased 13% to GBP2.33m (2022: GBP2.06m)
-- Underlying diluted EPS(4) 3.96p (2022: 4.19p)
-- Net cash(5) as at 30 June 2023 of GBP4.41m (30 June 2022: GBP7.86m)
(1) Revenue referenced throughout the accounts excludes grant
income and rental income
(2) Underlying EBITDA is defined as profit for the year before
amortisation, depreciation, finance costs, taxation, acquisition
costs, share based payments, exchange rate gains/losses on
statement of financial position translation and exceptional
non-recurring costs
(3) Underlying profit before tax is defined as profit before tax
excluding amortisation on acquired intangibles, acquisition costs,
share based payments, exchange rate gains/losses on statement of
financial position translation and exceptional non-recurring
costs
(4) Underlying diluted EPS is defined as profit for the year
excluding amortisation on acquired intangibles, acquisition costs,
share based payments, exchange rate gains/losses on statement of
financial position translation and exceptional non-recurring costs
divided by the number of shares including any dilutive share
options
(5) Net cash is defined as closing cash less closing asset
financing loans and bank loans.
Statutory Equivalents
The above highlights are based on underlying results.
Reconciliations between underlying and statutory results are
contained within these financial statements. The statutory
equivalents of the above results are as follows:
-- Loss before tax was GBP0.65m (2022: Profit before tax GBP0.07m)
-- Basic (LPS)/EPS was (0.14p) (2022: EPS 1.43p)
Operational highlights
-- Continued customer base expansion and growing pipeline:
-- Continued customer base expansion and growing pipeline.
Johannesburg Stock Exchange (JSE) - the largest stock exchange in
Africa, signed a multi-year contract for Exchange Cloud. The
contract went live during September 2023 with capacity now sold to
JSE customers and follow on opportunities advancing The Exchange
Cloud pipeline continues to build with advanced discussions taking
place with major Exchanges across the globe, including additional
proof of concept implementations.
-- Continued product innovation:
-- Major user interface refresh of the Beeks infrastructure
automation portal, allowing clients to tailor the user experience
for their own users.
-- Re-architecture of the underlying server hosting platform to
improve the efficiency of the Group, driving long-term cost
benefits.
-- Investment in enhanced security:
-- Completed stage 1 of industry-leading SOC 2 security
accreditation with a view to being SOC 2 compliant by calendar year
end.
-- Launch of Beeks Security Operations, providing end to end
security detection and response capabilities for our customers,
through partnership with cybersecurity service provider
BlueVoyant.
-- Investment in inventory, team and sales and marketing, to
deliver on the growth opportunity:
-- Investment into inventory, ensuring the Group is capable of
delivering against all contracts either signed or in the immediate
pipeline.
-- Implementation of new inventory management system to
streamline stock management and audit compliance.
-- Increased average headcount to 103 (2022: 89) to support the product development roadmap.
-- Increased brand awareness through attendance at international
industry conferences in Bangkok, Chicago, Boca Raton and Paris.
Outlook
-- The Company continues to be supported by underlying market
trends, with the ongoing shift of the financial services sector to
cloud computing.
-- Well positioned moving forward, with an established
reputation and a track record of sustained growth.
-- Core focus on converting the record pipeline of opportunities
across the Group's product offerings, in particular the Exchange
Cloud offering with a number of contracts at an advanced stage.
-- Exchange Cloud remains a potentially transformational
opportunity for Beeks, with significant traction with both existing
and new customers, including additional proof of concept
implementations, albeit contracts of this size take time to
convert.
-- The Board is confident in achieving growth acceleration and
results for FY24 in line with its expectations. Confidence
underpinned by high levels of contracted, recurring revenue, a
unique proposition and growing international profile.
Gordon McArthur, CEO of Beeks, commented: "With an established
reputation and a track record of sustained growth, we are
well-positioned to capitalise on the shift of the financial
services sector to cloud computing and continue on our growth
trajectory. The deals signed to date and our exit ACMRR mean the
Board is confident in achieving results for FY24 in line with its
expectations.
We remain focused on converting our record pipeline of
opportunities across our product offerings, and in particular the
recently launched Exchange Cloud offering. The advanced nature of
several of these discussions, including additional proof of concept
implementations, provides confidence in our ability to provide
growth acceleration in FY24.
With high levels of contracted, recurring revenue, a unique
proposition and growing international profile, we look to the
future with continued confidence."
For further information please contact:
Beeks Financial Cloud Group plc
Gordon McArthur, CEO via Alma PR
Fraser McDonald, CFO
+44 (0)20 7523
Canaccord Genuity 8000
Adam James / Gordon Hamilton
Alma PR +44(0)20 3405 0205
Caroline Forde / Hilary Buchanan / Joe Pederzolli
About Beeks Financial Cloud
Beeks is a leading managed cloud computing, connectivity and
analytics provider for Capital Markets and financial services. Our
vision is simple: Build. Connect. Analyse.
With a growing international network of data centres, Beeks
provides end to end outsourcing of compute environments by
delivering low-latency compute, connectivity and analytics,
on-demand. Our cloud-based Infrastructure-as-a-Service (IaaS) model
allows financial organisations the flexibility and agility to
deploy and connect to exchanges, trading venues and cloud service
providers at a fraction of the cost of building their own networks
and infrastructure.
ISO 27001 certified, Beeks supports its global customers at
scale exclusively within global capital markets and leading
financial centres.
beeksgroup.com
Chairman's Statement
It has been a year of further progress for Beeks, with the Group
growing the sales pipeline for its transformational Exchange Cloud
offering, while continuing to deliver services across the globe.
Revenues increased by 22% to GBP22.4m, and underlying EBITDA by 33%
to GBP8.4m. The Group delivered an exit ACMRR of GBP23.8m, up 23%
in the year, providing a strong basis for continued growth in
FY24.
The growth potential of the business is significant, typified by
the scale of the first two customers now secured for Exchange
Cloud, the largest stock exchange in Africa as well as a division
of Intercontinental Exchange, the world's largest exchange group
and owner of the New York Stock Exchange. We remain in discussions
with a number of further major global exchanges, including
additional proof of concept implementations, with the market
opportunity remaining transformational. However, that said, as
previously flagged, deals of this magnitude with organisations such
as these will take longer to progress through to signed contracts
than Private and Proximity Cloud deals, which continue to provide a
growing foundation for the business.
The funds raised early in 2022 have provided the ability to
invest into resources, ensuring the business is appropriately
configured to address the significant market opportunity. During
the period strong progress has been made in the development of the
Beeks offering, the expansion of the team and the purchase of
inventory to deliver against all contracts either signed or in the
immediate pipeline. With these investments having been made, and no
immediate requirements to expand either the team or stock held, the
potential to expand the profit margins of the Group upon delivery
of further contracts is considerable.
While the macroenvironment has continued to present challenges
to all businesses, particularly surrounding supply chain issues and
general inflationary pressures, the Group has continued to trade
resiliently amidst the challenging backdrop, these aspects have
been well managed within Beeks, as reflected by the businesses'
continued healthy operating margins.
On behalf of the Board, I would like to express my gratitude to
our staff for their commitment and work ethic. They have created
offerings unique in the market while delivering excellent customer
service. We are fortunate to have such a talented team and I have
every confidence in their ability to capitalise on the opportunity
ahead.
With a unique compelling proposition and a growing list of high
profile customers, the Group is ideally positioned to benefit from
long-term trends towards cloud-computing within the Financial
Services sector. The Group's strong financial fundamentals:
increasing Annualised Contracted Monthly Recurring Revenue,
sufficient cash reserves for medium term organic growth, low levels
of debt, a highly scalable business model and a record sales
pipeline, provide for high levels of optimism within the business
moving forward. The team is keenly focused on the conversion of the
sales pipeline, and the achievement of greater operational leverage
as these deals flow through into revenues and profits.
Mark Cubitt
Chairman
29 September 2023
Strategic Report
Market Overview
"Organisations today view cloud as a highly strategic platform
for digital transformation."
Sid Nag, research vice president at Gartner
Growth in Cloud Adoption
We operate in a considerable, and growing, market. Cloud
computing is driving the next phase of digital business, as
organisations pursue disruption through emerging technologies like
generative artificial intelligence (AI) and Web3.
The global cloud computing market size was valued at USD 337.76
billion in 2022. It is projected to reach USD 1412.39 billion by
2031, growing at a CAGR of 17.23% during the forecast period
(2023-2031)(1) . Infrastructure-as-a-service (IaaS) is forecast to
experience the highest end-user spending growth in 2023 at 30.9%(2)
.
The finance industry has been increasingly adopting cloud
solutions due to their scalability, cost-efficiency, and
flexibility. Managed cloud providers have been a key enabler of
this trend, as we offer expertise in managing complex financial
systems on cloud infrastructure.
The finance sector faces strict regulatory requirements and
Beeks has spent over 12 years developing solutions and services
tailored to meet these requirements, which makes us attractive to
financial institutions seeking to maintain compliance while
leveraging the cloud. Data security and privacy are paramount in
finance. Beeks has invested heavily in security measures and
technologies to protect financial data. As financial institutions
continue to migrate sensitive operations to the cloud, the demand
for secure managed cloud services is expected to grow.
Cost management remains a critical concern for finance companies
and Beeks offer tools and services to help organisations optimise
their cloud spending, which is especially important as cloud costs
can quickly spiral if not managed effectively.
Beeks has developed industry-specific solutions for finance,
including trading platforms, asset management systems, and
regulatory reporting tools and these specialised offerings are
expected to drive demand in the financial sector.
Many financial organisations are adopting hybrid and multi-cloud
strategies to balance the benefits of the public cloud with the
need for on-premises infrastructure. Beeks primary Proximity Cloud
and Exchange Cloud products were built to facilitate the management
and integration of these complex environments. As financial
institutions expand their global footprint, they require cloud
solutions that can support operations in multiple regions. With our
global presence and pre-built rack solutions that can be deployed
anywhere in the world, Beeks are well positioned to capture this
market.
Selecting the right capital markets and financial services
managed cloud provider involves careful consideration of an
organisation's specific requirements, including trading strategies,
regulatory obligations, and data management needs. Beeks continues
to play a crucial role in enabling financial organisations to
leverage the benefits of cloud technology while navigating the
complex landscape of the financial industry.
Our addressable market is extensive with up to 21,000 banks and
hundreds of global Exchanges, a large percentage of which maintain
their own IT infrastructure and are yet to move to the Cloud
computing model.
Cloud's scale, resiliency and continuous innovation mean it will
likely form a critical part of every future business and technology
roadmap. The Independent Software Vendors (ISVs) market has
witnessed significant growth due to the adoption of cloud computing
in addition to the surge in automation and visualisation for
business process.
With further predicted annual growth of 13.6%(3) and a faster
lead to sale timescale, the financial ISV space is another area of
focus for the sales team in the next financial year.
Our innovations, enhanced product range, growing number of Tier
1 customers, breadth of asset classes and a clear focus in the
rapidly growing Independent Software Vendor space, position us well
to benefit from the increased appetite in the market for automated
trading and the evolution of Cloud adoption by financial services
organisations.
(1) Source: Straits Research (August 2023)
(2) Source: Gartner (April 2023)
(3) Source: Market Research Future (September 2020)
Business Model
#PoweredbyBeeks
For over twelve years Beeks has honed its infrastructure
provision and cloud compute approach in direct response to its
customers' needs and requirements.
Beeks' mission is to deliver cloud-based low-latency compute
power; ensure maximum security; and optimise performance in the
exceedingly fast-moving capital markets and finance sector. Beeks
provide cloud deployment for capital markets and financial
enterprises within our global backbone of key financial data
centres as well as on-premise, helping them formulate a cloud
strategy and replicate that in different regions.
The Group's on-demand offering continues to operate successfully
in an ambitious, time-sensitive industry and is uniquely positioned
to take advantage of the rapid acceleration of Cloud deployment in
the finance sector as well as the growing need for analytics around
those infrastructure environments. These latency-sensitive
environments need to be built, connected, and analysed, and Beeks
is one of the few companies in the world that can fulfil those
requirements.
Our latest iteration of Proximity Cloud, a fully configured and
pre-installed physical trading environment was derived from an
identified demand from global exchanges for a secure, multi-client
private cloud environment.
Explicitly designed for global financial exchanges and
electronic communication networks (ECNs), Exchange Cloud is a
multi-home version of Proximity Cloud. While Proximity Cloud makes
it easier to quickly deploy on premise, Exchange Cloud takes it one
step further by introducing multi-home capabilities, essentially
enabling Exchanges and ECNs to become the cloud.
Building on the successful launch of Exchange Cloud, further
improvements have been made to the offering in the areas of network
automation, reporting and reduced installation times, further
increasing Beeks' lead over other providers in offering an
integrated infrastructure solution for capital markets.
The continued development of our trading analytics division
complements our product offering to include the required analytics
around those cloud infrastructure environments. Two major releases
of the Beeks Analytics product provide significant benefits to our
clients including a new flexible dashboard user experience with the
introduction of Grafana as our graphical user interface (GUI) of
choice. These releases also enabled easier integration points for
clients to use the power of Beeks Analytics within their own
applications.
The setup experience for Beeks Analytics has been reimagined
from the ground up, allowing the product to reach new users who
don't have the time or resources for more complicated configuration
tasks.
Beeks provides:
-- Dedicated bare metal and virtual servers that host Capital
Markets and financial services organisations in key financial data
centres around the world
-- Ultra-low latency connectivity between customers and key financial venues and exchanges
-- Colocation for customers to position their own computing
power in our space, benefitting from our proximity to financial
hubs
-- In-house security software to protect client infrastructure from cyber attacks
-- The management of hybrid cloud deployments for customers
wishing to combine the Beeks IaaS with the public cloud
hyperscalers
-- Our model focuses on efficiency and flexibility, offering our
customers the ability to scale up and scale down as needed. Due to
market fluctuations and the inherent risk involved in algorithmic
trading, this makes our services highly desirable
-- Beeks has a unique self-service customer portal that
facilitates the same-day deployment of a host of services allowing
customers to manage their own servers
-- Beeks analytics offers comprehensive monitoring and
performance analysis to allow users to independently track and
analyse real-time performance of every single price, quote or trade
traversing business critical processes.
Strategy
Our purpose is to provide a global rapid deployment service
using secure and scalable environments, both public and private,
which are easy to consume for small, medium and large financial
enterprises.
Our vision is to empower our clients to work with speed and
agility.
Our main strategic priority is to continue to grow our customer
base both for public, private and secure cloud deployment as well
as complementary analytics solutions.
To satisfy existing demand and attract new customers, we will
continue along our product development roadmap to develop and
improve innovative new products such as Proximity and Exchange
Cloud. We also continue to plan to selectively expand into new
asset classes and geographies, encouraged by the significant
opportunities we have identified.
Chief Executive's Review
FY23 was another year of progress, in which we secured landmark
customers across our Exchange and Private Cloud offerings while
raising our profile across the global financial services industry.
While the timing of contract signatures and delivery means the
financial performance was at the lower end of our original
expectations, we are continuing to grow at pace, reporting
significantly increased metrics against the prior period. The size
of deals within our sales pipelines and our position as sole vendor
within these negotiations places us in a position of strength.
Following the launches of Proximity and Exchange Cloud, we have now
an expanded product set, serving a wider pool of potential
customers, including the world's largest exchanges. Exchange Cloud,
launched in June 2022, is explicitly designed for global financial
exchanges and electronic communication networks. The response by
the market has been extremely positive and we believe it has the
potential to be transformative for Beeks, with no comparable
offering on the market.
We have received notable early endorsements of Exchange Cloud,
securing our first two customers, ICE Global Network, a division of
Intercontinental Exchange, the world's largest exchange group, and
Johannesburg Stock Exchange (JSE), the largest stock exchange in
Africa. We were delighted to take the JSE live in September 2023,
and highlighting the speed with which these significant
implementations can launch once contracts are signed, underpinning
our FY24 performance. Feedback received from Exchange Cloud
customers has been extremely positive, and both contracts signed to
date have the ability for considerable expansion moving
forwards.
We remain in talks with a number of major exchanges globally,
including additional proof of concept implementations, and while
the lead times on deals can take time, as previously disclosed, we
remain confident in our ability to convert them. The prior
investments we have made into fixed inventory means we have the
capability to deliver deals rapidly, once secured.
We similarly have a strong pipeline across our Proximity Cloud
offering, launched in August 2021. We secured notable private and
exchange cloud wins and this has continued post period end into
FY24. Our Proximity Cloud and Exchange Cloud pipeline are at record
levels and there are multiple contracts in final stages of
negotiations. We are encouraged by a building number of leads and
are providing confidence in securing further deals in FY24.
Confidence levels are high moving into FY24, with the size of
deals within our sales pipelines as well as our position as a sole
vendor within negotiations underpinning optimism and placing us in
a position of strength during the current period, such that the
Board is confident in achieving results for FY24 in line with its
expectations.
Financial performance
Revenue in the period grew by 22% to GBP22.4m (2022: GBP18.3m),
resulting in an increase in underlying EBITDA of 33% to GBP8.4m
(2022: GBP6.3m). Beeks continues to have a strong recurring revenue
profile, with 91% of revenue in the year recurring (2022: 76%) and
customer retention remained within target. Our percentage of
recurring revenue can change year on year depending on the mix of
private/public and proximity/exchange cloud sales, given the
upfront revenue recognition associated with proximity and exchange
cloud contracts. Our ACMRR grew 23% to GBP23.8m at 30 June 2023
(2022: GBP19.3m).
Revenue growth in FY23 was largely due to continued momentum
across our Private Cloud offering. Whilst we have not recognised
any new revenue from Exchange Cloud during the year, the recently
deployed JSE contract has given us a strong start into FY24, which
we expect to be further enhanced by our strong proximity and
exchange cloud pipeline. Operating margins have reduced in the year
due to prior year investment but these are expected to increase as
we move into FY24 and convert the considerable pipeline of
opportunities ahead.
Operational Expansion
We invested in the expansion of our team during the year, in
order to capitalise on the considerable market opportunity ahead.
The main priority when expanding the team was to build out the
software development team division, to support the roll out and
evolution of Exchange Cloud. Investment in this area was largely
complete in H1, with the average headcount during the year
increasing to 103 from 89 as at 30 June 2023.
Investment made into inventory during FY23 ensures we are
appropriately configured to deliver against all contracts,
including those which are signed already and those which are in the
immediate pipeline. It is pleasing to have the capability to
deliver deals quickly once secured, with significant investment
into inventory serving as a sign of confidence in the conversion of
our pipeline. The implementation of a new inventory management
system to streamline our stock management and audit compliance was
introduced in FY23, driving internal efficiencies.
In May, we were delighted that OneChronos, a U.S. equities
Alternative Trading System (ATS), selected Beeks to power high
performance compute and private environment of their new ATS,
standing out as the strongest provider over Beeks' direct
competitors. The collaboration is an endorsement of Beeks' value in
delivering global, rapid deployment solutions using secure and
scalable environments, with the flexibility of no long-term
contracts or commitments. Off the back of a volatile year for
equities in 2022, OneChronos have seen substantial success on their
value proposition delivery since selecting Beeks to enhance their
Smart Market Technology, in particular by meeting the ever-growing
need for on-demand compute. Adjustments to Beeks' infrastructure
automation portal have been made in FY23, which will drive improved
efficiencies across the Group as a result of long-term cost
benefits. The changes have been well-received, with the major user
interface refresh allowing Proximity and Exchange Cloud customers
to tailor the user experience for their own users.
The business has continued to show resilience in the face of
inflationary pressures and supply chain disruption during the year.
Appropriate price increases have been passed on to customers and we
are pleased to see an improving picture with regards to supply
chain disruption.
We have continued to increase our data centre presence in the
year with a focus on existing locations. We will continue with our
approach of expanding into areas where we already have customer
demand. The Beeks brand continues to grow its presence globally,
and we were pleased to attend international industry conferences in
Bangkok, Chicago, Boca Raton and Paris during the year, showcasing
the value of our offering to new audiences.
Product roadmap
We have continued to streamline our products and enhance them
including a focus on the investment into the security of our
products during the year.
Throughout the year we focused on security automation where
possible, this included the deployment of vulnerability scanning,
patch management, malware protection and secure configuration
technology. The enhancements have strengthened the security of our
Proximity/ Exchange Cloud offering to provide customers with the
confidence and assurance that their infrastructure is secure.
Furthermore, the investments we continue to make show the
commitment to align our products to industry leading information
security certifications and standards including (but not limited
to) GDPR, ISO/IEC 27001, NIST CSF, and CIS.
We have a fully funded product roadmap that extends out for the
next few years and see significant opportunity through investing
resources in our two major product lines: our Private Cloud and our
Proximity/Exchange Cloud offerings.
We have continued to streamline our products and enhance them,
with a focus on the investment into the security of our products
during the year. The most significant being a new strategic
partnership with 'BlueVoyant', a Managed Security Services Provider
(MSSP). BlueVoyant provide Beeks with Managed Extended Detection
& Response (MXDR) services underpinned by their 24x7 Security
Operations Centre (SOC) based in New York. The MXDR service has
been fully integrated into our Proximity/ Exchange Cloud offering
which provides end to end security detection and response
capabilities for our customers.
Sales and Marketing
Our central marketing strategy continues to revolve around
inbound marketing, with our ongoing efforts to expand global brand
awareness serving as a driving force behind our sales and marketing
initiatives this year.
After the pandemic, our emphasis shifted towards in-person
events and investing in prominent industry event booths,
specifically targeting the global institutional market at JSE Trade
Connect, FIA Boca and TradeTech Paris, as well as the retail market
at iFX Expo Bangkok.
Furthermore, senior managers and representatives from our sales
team participated in key industry events, including AWS Re-Invent,
Security Traders Association Chicago, FIA London Tech and FIA IDX
London.
We extended our STAC membership and successfully secured
professional memberships with both the FIA and FISD, bolstering our
industry presence and reputation. STAC plays a crucial role in
supporting our product team by facilitating a deeper comprehension
of customer preferences, competitive landscape, collaborative
opportunities, and the assessment of our company's offerings.
FIA stands as the foremost global trade organization for
futures, options, and centrally cleared derivatives markets, with a
significant focus on the Americas market. Meanwhile, FISD serves as
the preferred global forum for essential stakeholders in the value
chain, encompassing consumer firms, third-party entities, and data
providers.
Our professional memberships serve as a valuable platform for
Beeks to engage and establish connections with industry experts.
These connections can potentially result in business opportunities,
partnerships, and collaborations as well as offer access to
valuable competitor insights. Furthermore, they set us apart from
large-scale cloud service providers.
Customers
We are witnessing substantial growth in the range of customers
we serve, as Beeks now provides support to a diverse clientele,
including banks, brokers, hedge funds, cryptocurrency traders and
exchanges as well as insurance companies, financial technology
firms, payment providers, and Independent Software Vendors
(ISVs)
Significant new customers secured in the year include:
-- Two Exchange Cloud customers, described above (JSE and ICE),
both with further expansion potential.
-- The JSE contract went live in September 2023, with all units
pre-sold to JSE customers with contract extension discussions
underway.
-- Two multi-year Private Cloud contracts with global Asset
Management firms, worth $2 million in aggregate over three years,
for deployments across US, APAC and EMEA.
Post year end we have seen further momentum, securing Private
Cloud contracts in July with a total contract value of over $4
million, including a significant win via a partner with one of the
UK's largest banks.
Future Growth and Outlook
With an established reputation and a track record of sustained
growth, we are well-positioned to capitalise on the shift of the
financial services sector to cloud computing and continue on our
growth trajectory.
The deals signed to date and our exit ACMRR mean the Board is
confident in achieving results for FY24 in line with its
expectations.
We remain focused on converting the pipeline of opportunities
across all of our product offerings, and in particular the recently
launched Exchange Cloud offering. The advanced nature of several of
these discussions provides confidence in our ability to would
provide growth acceleration in FY24.
With high levels of contracted, recurring revenue, a unique
proposition and growing international profile, we look to the
future with continued confidence.
Gordon McArthur
CEO
29 September 2023
Financial Review
Key Performance Indicator Review
FY23 FY22 Growth
Revenue(1) (GBPm) 22.36 18.29 22%
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ACMRR (GBPm) 23.80 19.30 23%
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Gross Profit (GBPm) 9.12 7.94 15%
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Gross Profit margin(2) 40.8% 43.4% (2.6%)
------- ------- ---------
Underlying EBITDA(3) (GBPm) 8.42 6.31 33%
------- ------- ---------
Underlying EBITDA margin(4) 37.7% 34.5% 9.3%
------- ------- ---------
Underlying Profit before tax(5) (GBPm) 2.32 2.06 13%
------- ------- ---------
Underlying Profit before tax margin(6) 10.4% 11.3% (0.9%)
------- ------- ---------
(Loss)/Profit before tax (GBPm) (0.65) 0.07 (1,029%)
------- ------- ---------
Underlying EPS(7) (pence) 4.31 4.49 (4%)
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(1) Revenue excludes grant income and rental income
(2) Gross profit margin is statutory gross profit divided by
Revenue
(3) Underlying EBITDA is defined as profit for the year
excluding amortisation, depreciation, finance costs, taxation,
acquisition costs, share based payments, exchange rate gains/losses
on statement of financial position translation and exceptional
non-recurring costs
(4) Underlying EBITDA margin is defined as Underlying EBITDA
divided by Revenue
(5) Underlying profit before tax is defined as profit before tax
excluding amortisation on acquired intangibles, acquisition costs,
share based payments, exchange rate gains/losses on statement of
financial position translation and exceptional non-recurring
costs
(6) Underlying profit before tax margin is defined as Underlying
profit before tax divided by Revenue
(7) Underlying EPS is defined as profit for the year excluding
amortisation on acquired intangibles, acquisition costs, share
based payments, exchange rate gains/losses on statement of
financial position translation and exceptional non-recurring costs
divided by the number of shares
Revenue
FY23 was another good year in terms of revenue growth. Group
revenues grew by 22% to GBP22.36m (2021: GBP18.29m) driven mainly
by our core Private Cloud offering across both existing and new
customers. Refer to note 3 for a further breakdown of the Group's
revenues. 91% of revenues (2022: 76%) were recurring with Tier 1
customers now representing 45% of delivered revenue (2022: 35%).
Historically we have always had high percentage levels of recurring
revenue. The different revenue recognition principles of Proximity
and Exchange Cloud, where a significant proportion is recognised
upfront, will mean more fluctuations in our percentage of recurring
revenue each year depending on the mix of Private/Public/Proximity
and Exchange Cloud sales. It is pleasing to see another good year
of growth in contracted recurring revenue as represented by our
ACMRR growth of 23% to GBP23.8m which increased further to GBP25.0m
by the end of August following a strong start to the year.
Gross Profit
Statutory gross profit earned increased 15% to GBP9.12m (2022:
GBP7.94m), with gross margin reduced due to increased depreciation
and amortisation charges following the investment made during FY23
into both Exchange Cloud and across our global asset base. The
investment in both Proximity Cloud and Exchange Cloud including
Analytics during the year has incurred internal gross capitalised
development costs of GBP2.87m (2022: GBP2.59m) in line with the
additions to the software development team made during the
year.
With a strong pipeline of Proximity and Exchange Cloud deals and
with investment expected to be at a lower quantum when compared to
sales growth, we anticipate gross margins to increase as these
deals are converted.
Underlying Administrative Expenses
Underlying administrative expenses, which are defined as
administrative expenses less share based payments and non-recurring
costs, have increased by GBP1.08m from GBP5.94m to GBP7.02m
primarily as a result of headcount increases within our software
development and engineering functions. We had an average headcount
of 103 throughout the year (2022: 89) therefore gross staff costs
have increased by 23%, from GBP5.64m to GBP6.91m. Given a high
proportion of recruitment has been to support our Proximity and
Exchange Cloud development some of these costs are capitalised. Net
staff costs, which is defined as total staff costs less capitalised
development costs, has increased by 33%. Most of our headcount
increase has been to support future product and sales growth with a
relatively small increase in support staff given our automation and
self-service strategy. We have largely completed our recruitment
drive and anticipate incremental headcount increases moving forward
as deals are converted and we look to deliver better operating
margins.
Underlying EBITDA
Earnings before interest, tax, depreciation, amortisation and
exceptional non-recurring costs ("Underlying EBITDA") increased by
33% to GBP8.42m (2022: GBP6.31m). The growth in Underlying EBITDA
has been driven by continued organic revenue growth.
Underlying EBITDA, underlying profit before tax and underlying
earnings per share are alternative performance measures, considered
by the Board to be a better reflection of true business performance
than statutory measures only. The key adjusting items are share
based payments, amortisation, grant income and unrealised exchange
rate gains and losses.
Underlying Profit before tax increased to GBP2.32m (2021:
GBP2.06m) as a result of the changes in the key financial metrics
discussed above.
Statutory Profit before tax decreased to a loss of GBP0.65m
(2022: Profit of GBP0.07m). The other reconciling differences are
shown on the table below:
Year ended Year ended
30 June 30 June
2023 2022
GBP'000 GBP'000
------------------ ---------------------
Statutory (Loss) / Profit Before Tax (650) 66
------------------ ---------------------
Add back:
------------------ ---------------------
Share Based Payments 2,291 1,661
------------------ ---------------------
Other Non-recurring costs* 136 28
------------------ ---------------------
Amortisation of acquired intangibles 489 802
------------------ ---------------------
Exchange rate losses on intercompany 325 -
translation and unrealised currencies
------------------ ---------------------
Deduct:
------------------ ---------------------
Grant Income (267) (419)
------------------ ---------------------
Exchange rate gains on intercompany translation - (81)
------------------ ---------------------
Underlying Profit before tax for the
year 2,324 2,057
------------------ ---------------------
Year ended Year ended
30 June 30 June
2023 2022
GBP'000 GBP'000
----------- ---------------
EBITDA(**) 8,362 6,811
----------- ---------------
Deduct:
----------- ---------------
Grant Income (267) (419)
----------- ---------------
Exchange rate losses/(gains) on intercompany
translation 325 (81)
----------- ---------------
Underlying EBITDA 8,420 6,311
----------- ---------------
*Other non-recurring costs in the year relates exceptional costs
in relation to one off staff termination payments, and other one
off property costs. Prior year non-recurring costs were incurred
due to refinancing, acquisition transition costs and Covid-19
related expenditure. All of these costs are not expected to recur
and are therefore disclosed separately to trading results.
**EBITDA is defined as earnings before depreciation,
amortisation, acquisition costs, share based payments and
non-recurring costs
Taxation
The effective tax rate ('ETR') for the period was (73.46%),
(2022: -1,151.51%).
The overall effective tax rate has benefitted from the UK
Super-deduction on plant and machinery assets, deferred tax on
share options and prior year adjustments for R&D claims.
See tax notes 9 and 12 for further details.
Earnings per Share
Underlying earnings per share decreased 4.00% to 4.31p (2022:
4.49p). Underlying diluted earnings per share decreased to 3.96p
(2022: 4.19p). The decrease in underlying EPS is largely as a
result of the increased group share capital following the equity
raise in April-22 given the increased underlying profitability and
higher tax credit in FY23. See note 24 for further details.
Basic loss per share decreased to 0.14p (2022: earnings per
share of 1.43p). The decrease in basic EPS is as a result of the
statutory loss in the period as well as the additional share
capital in FY23 following last year's equity raise. Diluted loss
per share has also decreased to 0.13p (2022: earnings per share
1.35p).
Statement of Financial Position and Cash flows
The statement of financial position shows an increase in total
assets to GBP47.44m (2022: GBP44.75m) with operating cash flows
during the year increased by 34% to GBP9.01m (2022: GBP6.70m). The
equity raise in FY22 provided us with the ability to further
enhance our core products, most notably in Proximity and Exchange
Cloud whilst also funding additional working capital including
advanced purchases of IT rack capacity, computer servers and other
associated hardware. Our strategy is always to have sufficient
infrastructure capacity both across our global data centre network
and to hold a sufficient level of IT inventory at our Glasgow Head
Office. As such, a proportion of our capital spend during the year
is to satisfy the growing pipeline demand for the year ahead.
Investment in property, plant and equipment, hardware and
infrastructure was again significant with GBP4.1m (2022: GBP5.2m)
of additions (excluding Property and new leases in accordance with
IFRS 16) throughout our expanding global network and supporting the
client and revenue growth made during the year. We hold a stock
supply of almost GBP2m in IT infrastructure which will cover a
significant amount of FY24 sales pipeline. As global supply chain
issues ease, we will not require these levels of stock which should
assist working capital requirements going forward.
During the year we took on additional borrowings via asset
finance of GBP2.0m in order to preserve cash. We repaid debt of
GBP0.5m against our borrowing facilities. Our net cash at the end
of the year is GBP4.4m (30 June 2022: net cash GBP7.9m) and gross
borrowings at GBP3.4m remain at 0.4x Underlying EBITDA of GBP8.4m
which we believe is a very comfortable level of debt to carry given
the recurring revenue business model and strong cash generation. We
note the increases to the cost of borrowing and will look to
maintain or reduce our interest rate cover as we move forward.
At 30 June 2023 net assets were GBP32.8m compared to net assets
of GBP30.8m at 30 June 2022.
Fraser McDonald
Chief Financial Officer
29 September 2023
Consolidated Statement of Comprehensive Income
2023 2022
Note GBP000 GBP000
----- --------- -------------
Revenue 3 22,357 18,289
----- --------- -------------
Other Income 3 361 512
----- --------- -------------
Cost of sales (13,602) (10,862)
----- --------- -------------
Gross profit 9,116 7,939
----- --------- -------------
Administrative expenses (9,447) (7,554)
----- --------- -------------
Operating (loss) / profit 4 (331) 385
----- --------- -------------
Analysed as
----- --------- -------------
Earnings before depreciation, amortisation,
acquisition costs, share based payments
and non-recurring costs: 8,362 6,811
----- --------- -------------
Depreciation 11 (4,550) (3,213)
----- --------- -------------
Amortisation - acquired intangible assets 10 (489) (802)
----- --------- -------------
Amortisation - other intangible assets 10 (1,227) (726)
----- --------- -------------
Share based payments 21 (2,291) (1,661)
----- --------- -------------
Other non-recurring costs 4 (136) (24)
----- --------- -------------
Operating (loss) / profit (331) 385
----- --------- -------------
Finance income 6 101 21
----- --------- -------------
Finance costs 5 (420) (340)
----- --------- -------------
(Loss) / Profit before taxation (650) 66
----- --------- -------------
Taxation 9 561 760
----- --------- -------------
(Loss)/Profit after taxation for the
year attributable to the owners of Beeks
Financial Cloud Group PLC (89) 826
----- --------- -------------
Other comprehensive income
----- --------- -------------
Amounts which may be reclassified to
profit and loss
----- --------- -------------
Currency translation differences 77 5
----- --------- -------------
Total comprehensive income for the year
attributable to the owners of Beeks Financial
Cloud Group PLC (12) 831
----- --------- -------------
Pence Pence
As Restated
----- --------- -------------
Basic (loss)/earnings per share 24 (0.14) 1.43
----- --------- -------------
Diluted (loss)/earnings per share 24 (0.13) 1.35
----- --------- -------------
The above income statement should be read in conjunction with
the accompanying notes.
Consolidated Statement of Financial Position
2023 2022
Note GBP000 GBP000
----- ------- -------
Non-current assets
----- ------- -------
Intangible assets 10 8,106 6,698
----- ------- -------
Property, plant and equipment 11 17,952 16,270
----- ------- -------
Deferred tax 12 5,398 4,201
----- ------- -------
31,456 27,169
----- ------- -------
Current assets
----- ------- -------
Trade and other receivables 14 6,391 5,600
----- ------- -------
Inventories 13 1,767 1,818
----- ------- -------
Cash and cash equivalents 15 7,829 10,160
----- ------- -------
15,987 17,578
----- ------- -------
Total assets 47,443 44,747
----- ------- -------
Liabilities
----- ------- -------
Non-current liabilities
----- ------- -------
Borrowings 17 - 1,320
----- ------- -------
Lease liabilities 17 2,047 2,303
----- ------- -------
Deferred tax 12 3,884 2,968
----- ------- -------
Total non-current liabilities 5,931 6,591
----- ------- -------
Current liabilities
----- ------- -------
Trade and other payables 18 4,952 5,139
----- ------- -------
Lease liabilities 18 1,960 1,280
----- ------- -------
Borrowings 17 1,814 978
----- ------- -------
Total current liabilities 8,726 7,397
----- ------- -------
Total liabilities 14,657 13,988
----- ------- -------
Net assets 32,786 30,759
----- ------- -------
Equity
----- ------- -------
Issued capital 20 82 82
----- ------- -------
Share premium 22 23,775 23,775
----- ------- -------
Reserves 22 4,879 2,657
----- ------- -------
Retained earnings 4,050 4,245
----- ------- -------
Total equity 32,786 30,759
----- ------- -------
These financial statements were approved by the Board of
Directors on 29th September 2023 and were signed on its behalf
by:
Gordon McArthur, Chief Executive Officer,
Beeks Financial Cloud Group Plc,
Company number: SC521839
The above statement of financial position should be read in
conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
Issued Foreign Merger Other Share Share Retained Total
capital currency reserve reserve based premium earnings equity
reserve payments
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Balance at 1 July
2021 70 (12) 705 (315) 883 9,452 2,982 13,765
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Profit after income
tax expense for
the year - - - - - - 826 826
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Currency translation
difference - 5 - - - - - 5
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Total comprehensive
income - 5 - - - - 826 831
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Deferred tax - - - - - - 167 167
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Issue of share
capital 12 - - - - 14,323 - 14,335
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Share based payments - - - - 1,661 - - 1,661
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Exercise of share
options - - - - (270) - 270 -
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Total transaction
with owners 12 - - - 1,391 14,323 437 16,163
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Balance at 30
June 2022 82 (7) 705 (315) 2,274 23,775 4,245 30,759
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Loss after income
tax expense for
the year - - - - - - (89) (89)
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Currency translation
difference - 77 - - - - - 77
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Total comprehensive
income - 77 - - - - (89) (12)
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Deferred tax - - - - - - (252) (252)
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Share based payments - - - - 2,291 - - 2,291
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Exercise of share
options - - - - (146) - 146 -
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Total transaction
with owners - - - - 2,145 - (106) 2,039
--------- ---------- --------- --------- ---------- --------- ---------- ----------
Balance at 30
June 2023 82 70 705 (315) 4,419 23,775 4,050 32,786
--------- ---------- --------- --------- ---------- --------- ---------- ----------
The above statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated Cash Flow Statement
2023 2022
Note GBP'000 GBP'000
------ --------------------------------------------------------------------- -----------------------
Cash flows from
operating
activities
------ --------------------------------------------------------------------- -----------------------
(Loss)/Profit for
the year
before tax (650) 66
------ --------------------------------------------------------------------- -----------------------
Adjustments for:
------ --------------------------------------------------------------------- -----------------------
Depreciation and
amortisation 10/11 6,435 4,741
------ --------------------------------------------------------------------- -----------------------
Foreign exchange - (61)
------ --------------------------------------------------------------------- -----------------------
Gain on disposal of
property,
plant and equipment - (24)
------ --------------------------------------------------------------------- -----------------------
Loan interest 5 140 129
------ --------------------------------------------------------------------- -----------------------
Lease liability
interest 5 165 115
------ --------------------------------------------------------------------- -----------------------
Share options 7 2,291 1,661
------ --------------------------------------------------------------------- -----------------------
Proceeds from grant 609 -
income
------ --------------------------------------------------------------------- -----------------------
Operating cash flows 8,990 6,617
------ --------------------------------------------------------------------- -----------------------
Increase in
receivables 14 (1,667) (3,014)
------ --------------------------------------------------------------------- -----------------------
Increase/(Decrease)
in inventory 13 311 (988)
------ --------------------------------------------------------------------- -----------------------
(Decrease)/Increase
in payables (696) 1,765
------ --------------------------------------------------------------------- -----------------------
Operational cash
flows after
movement in working
capital 6,938 4,380
------ --------------------------------------------------------------------- -----------------------
Corporation tax
received (6) 44
------ --------------------------------------------------------------------- -----------------------
Net cash generated
from operating
activities 6,944 4,424
------ --------------------------------------------------------------------- -----------------------
Cash flows from
investing
activities
------ --------------------------------------------------------------------- -----------------------
Purchase of
property, plant
and equipment 11 (4,329) (9,562)
------ --------------------------------------------------------------------- -----------------------
Proceeds from
disposal of
property, plant and
equipment - 60
------ --------------------------------------------------------------------- -----------------------
Capitalised
development costs 10 (2,822) (2,590)
------ --------------------------------------------------------------------- -----------------------
Net cash used in
investing
activities (7,151) (12,092)
------ --------------------------------------------------------------------- -----------------------
Cash flows from
financing
activities
------ --------------------------------------------------------------------- -----------------------
Repayment of
existing loan
borrowings (618) (2,900)
------ --------------------------------------------------------------------- -----------------------
Repayment of lease
liabilities (1,267) (936)
------ --------------------------------------------------------------------- -----------------------
Interest on lease
liabilities 19 (165) (131)
------ --------------------------------------------------------------------- -----------------------
Issue of loans 17 - 3,670
------ --------------------------------------------------------------------- -----------------------
Interest payable on
bank loans 5 (140) (242)
------ --------------------------------------------------------------------- -----------------------
Proceeds from the
issue of
new share capital - 14,989
------ --------------------------------------------------------------------- -----------------------
Net cash generated
from financing
activities (2,190) 14,450
------ --------------------------------------------------------------------- -----------------------
Net (decrease) /
increase
in cash and cash
equivalents (2,409) 6,782
------ --------------------------------------------------------------------- -----------------------
Effects on exchange
rates
on cash and cash
equivalents 78 5
------ --------------------------------------------------------------------- -----------------------
Cash and cash
equivalents
at beginning of
year 10,160 3,372
------ --------------------------------------------------------------------- -----------------------
Cash and cash
equivalents
at end of year 15 7,829 10,160
------ --------------------------------------------------------------------- -----------------------
The above cash flow statement should be read in conjunction with
the accompanying notes.
Notes to the Consolidated Financial Statements
1. Summary of significant accounting policies
Corporate information
Beeks Financial Cloud Group PLC is a public limited company
which is listed on the AIM Market of the London Stock Exchange and
is incorporated in Scotland. The address of its registered office
is Riverside Building, 2 Kings Inch Way, Renfrew, Renfrewshire, PA4
8YU. The principal activity of the Group is the provision of
information technology services. The registered number of the
Company is SC521839. The financial statements are prepared in
pounds sterling and rounded to the nearest thousand. In certain
cases, amounts in the report have been rounded to the nearest
pound.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006.
The financial statements have been prepared on the historical
cost basis except for the valuation of certain financial
instruments that are measured at fair values at each reporting
period, as explained in the accounting policies below.
The measurement bases and principal accounting policies of the
group are set out below and are consistently applied to all years
presented unless otherwise stated.
International Financial Reporting Standards and Interpretations
issued but not yet effective
New and revised IFRSs in issue but not yet effective and have
not been adopted by the Group.
At the date of authorisation of these financial statements, the
following standards, interpretations, and amendments have been
issued but are not yet effective and have no material impact on the
Group's financial statements:
-- IFRS 17 (including the June 2020 Amendments to IFRS 17) - Insurance Contracts
-- Amendments to IAS 1 - Classification of Liabilities as Current or Non-current
-- Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies
-- Amendments to IAS 8 - Definition of Accounting Estimates
-- IFRS16 - Lease Liability in a Sale and Leaseback transaction
-- IFRS 4 - Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9
-- Amendments to IAS 12 - Deferred Tax related to Assets and
Liabilities arising from a single transaction
None of these have been adopted early and the Directors do not
expect that the adoption of the Standards listed above will have a
material impact on the financial statements of the Group in future
periods.
Adoption of new and revised Standards - amendments to IFRS that
are mandatorily effective for the current year
There are no new accounting policies applied in the year ended
30 June 2023 which have had a material effect on these accounts. In
addition, the Directors do not consider that the adoption of new
and revised standards and interpretations issued by the IASB in
2021 has had any material impact on the financial statements of the
Group.
Going concern
The Directors have assessed the current financial position of
Beeks Financial Cloud Group PLC, taking account of its business
activities, together with the factors likely to affect its future
development, performance and position as set out in the Strategic
Report on pages 7 to 22.
The key factors considered by the Directors were:
-- Historic and current trading and profitability of the Group
-- The rate of growth in sales both historically and forecast
-- The competitive environment in which the group operates
-- The current level of cash reserves
-- Current level of debt obligations
-- Ability to comply with existing covenants
-- The finance facilities available to the Group, including the
availability of any short term funding required through the use of
the Revolving Credit Facility
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Chief
Financial Officer's Report on pages 13 to 16.
We take great comfort from the resilience of our business model.
The level of customer churn across our business has remained low
and cash collection has been in line with our typical profile. We
do however remain vigilant to the economic impact the ongoing
macro-economic environment may create, particularly on the SME
segment of the market. Note 16 to the financial statements includes
the Group's objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to
credit risk and liquidity risk.
The directors are of the opinion that the Group can operate
within their current debt facilities and comply with its banking
covenants. At the end of the financial year, the Group had net cash
of GBP4.41m (2022: Net cash GBP7.86m) a level which the Board is
comfortable with given the strong cash generation of the Group and
low level of debt to EBITDA ratio. The Group has a diverse
portfolio of customers with relatively low customer concentration
which are split across different geographic areas. As a
consequence, the directors believe that the Group is well placed to
manage its business risks.
The directors have considered the Group budgets and the cash
flow forecasts to December 2024, and associated risks, including
the potential impact of the current economic climate. We have run
appropriate scenarios applying reasonable downside sensitivities
and are confident we have the resources to meet our liabilities as
they fall due including the base case assumption of our existing
loan facilities not being made available at the end of current
terms (December 2024). The budgets and cash flow forecasts have
assumed all loan facilities being repaid in full. We have also run
reverse stress test scenarios in order to identify circumstances
where cash reserves would be depleted. The circumstances that would
lead into such scenarios (such as moving from revenue growth to
revenue attrition) are not considered plausible given the historic
track record and trading prospects of the group.
After making enquiries, the directors have a reasonable
expectation that the Group will be able to meet its financial
obligations and has adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue
to adopt the going concern basis in preparing the financial
statements.
Accordingly, the Directors have adopted the going concern basis
in preparing the Report for the year ending 30th June 2023.
Principles of consolidation
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the
subsidiary and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases. The Group applies
the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary or a
business is the fair values of the assets transferred, the
liabilities incurred to former owners of the acquiree and the
equity interests issued to the Group.
The consideration transferred includes the fair values of any
asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values on the acquisition
date.
Acquisition related costs are expensed as incurred. As each of
the subsidiaries are 100% wholly owned the Group has full control
over each of its investees. Intercompany transactions, unrealised
gains and losses on intragroup transactions and balances between
group companies are eliminated on consolidation.
Foreign currency transactions
Foreign currency transactions are translated into pound sterling
using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
financial year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss. Foreign exchange gains and losses resulting from
the retranslation of inter-company balances are recognised in
profit or loss. Non-monetary assets are translated at the
historical rate.
Foreign operations
The assets and liabilities of foreign operations are translated
into pound sterling using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into
Pound sterling using the average exchange rates, which approximate
the rates at the dates of the transactions, for the period. All
resulting foreign exchange differences are recognised in other
comprehensive income through the foreign currency reserve in
equity.
Business Combinations
Acquisitions of subsidiaries are accounted for using the
acquisition method. The acquisition method involves the recognition
at fair value of all identifiable assets and liabilities, including
contingent liabilities of the subsidiary, at the acquisition date,
regardless of whether or not they were recorded in the financial
statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are
included in the statement of financial position at their fair
values, which are also used as the bases for subsequent measurement
in accordance with the Group accounting policies.
Where the Group's assessment of the net fair value of a
subsidiary's identifiable assets acquired and liabilities assumed
is less than the fair value of the consideration including
contingent consideration of the business combination then the
excess is treated as goodwill. Where the Group's assessment of the
net fair value of a subsidiary's net assets and liabilities exceeds
the fair value of the consideration including contingent
consideration of the business combination then the excess is
recognised through profit or loss immediately.
Where an acquisition involves a potential payment of contingent
consideration the estimate of any such payment is based on its fair
value. To estimate the fair value an assessment is made as to the
amount of contingent consideration which is likely to be paid
having regard to the criteria on which any sum due will be
calculated and is probability based to reflect the likelihood of
different amounts being paid. Where a change is made to the fair
value of contingent consideration within the initial measurement
period as a result of additional information obtained on facts and
circumstances that existed at the acquisition date then this is
accounted for as a change in goodwill. Where changes are made to
the fair value of contingent consideration as a result of events
that occurred after the acquisition date then the adjustment is
accounted for as a charge or credit to profit or loss.
Revenue recognition
Revenue arises from the provision of Cloud-based localisation.
To determine whether to recognise revenue, the group follows a
5-step process as follows:
o Identifying the contract with a customer
o Identifying the performance conditions
o Determining the transaction price
o Allocating the transaction price to the performance
conditions
o Recognising revenue when/as performance obligation(s) are
satisfied.
Revenue is measured at transaction price, stated net of VAT and
other sales related taxes, if applicable.
Infrastructure services
The group's core business provides managed Cloud computing
infrastructure and connectivity. The Group considers the
performance obligation to be the provision of access and use of
servers to our clients. As the client receives and consumes the
benefit of this use and access over time, the related revenue is
recognised evenly over the life of the contract.
Monitoring software and maintenance services
The group also provides software products that analyse and
monitor IT infrastructure. Revenue from the provision of software
licences is split between the delivery of the software licence and
the ongoing services associated with the support and maintenance.
The supply of the software licence is recognised on a point in time
basis when control of the goods has transferred, being the delivery
of the item to the customer, whilst the ongoing support and
maintenance service is recognised evenly over the period of the
service being rendered on an over time basis. The group applies
judgement to determine the percentage of split between the licence
and maintenance portions, which includes an assessment of the
pricing model and comparison to industry standards.
Where an agreement includes a royalty fee as a result of future
sales by a customer to third parties and there is a minimum amount
guaranteed, this is recognised at point in time when the delivery
of the item is complete. Where such contracts include a financing
component, the group also adjusts the transaction price to reflect
the time value of money. Finance income is recognised as other
income in the statement of the comprehensive income
Set up fees
Set up fees charged on contracts are reviewed to consider the
material rights of the set-up fee. When a set-up fee is arranged,
Beeks will consider the material rights of the set-up fee, if in
substance it constitutes a payment in advance, the set-up fee will
be deemed to be a material right. The accounting treatment for both
material rights and non-material rights set-up fees is as
follows:
-- Any set up fees that are material rights are spread over the group's average contract term
-- Set up fees that are not material rights are recognised over
the enforceable right period, i.e. 1 to 3 months depending on the
termination period
Revenue in respect of installation or training, as part of the
set-up, is recognised when delivery and installation of the
equipment is completed on a point in time basis.
Hardware and software sales
Revenue from the supply of hardware is recognised when control
of the goods has transferred. For hardware, this occurs upon
delivery of the item to the customer. For software, control is
deemed to pass on provision of the licence key to the customer
being the point in time the customer has the right to use the
software.
The Group has concluded it acts as a principal in each sales
transaction vs an agent. This has been determined by giving
consideration to whether the Group holds inventory risk, has
control over the pricing over a particular service, takes the
credit risk, and whether responsibility ultimately sits within the
Group to service the promise of the agreements. Refer to note 2 for
more detail on these considerations.
Professional and consultancy services
Revenue from professional and consultancy services are
recognised as these services are rendered and the performance
obligation satisfied. Any unearned portion of revenue (i.e. amounts
invoiced in advance of the service being provided) is included in
payables as a contract liability.
Proximity and Exchange Cloud Services
Proximity and Exchange Cloud are a fully-managed and
configurable compute, storage and analytics racks built with
industry-leading low latency hardware that allow capital markets
and financial services customers to run compute, storage and
analytics on-premise.
Revenue from the sale of proximity and exchange cloud contracts
has been assessed under IFRS 15 and using the five step process,
the following performance obligations have been identified:
-- Delivery and installation of the hardware, and provision of the software licence
-- Delivery of maintenance and technical support over the contract
-- Delivery of unspecified upgrades and future software releases
The delivery and installation of the hardware, and provision of
the software licence are highly interrelated and considered to be
one performance obligation. This is recognised on a point in time
basis when the control of the goods have been transferred, being
when delivery of the item is completed and the right to use the
software is granted.
The maintenance and technical support over the contract, as well
as the delivery of the unspecified upgrades and future software
releases are recognised evenly on an over time basis over the
period of the contract. The performance obligation for both is
considered to be that of standing ready to provide technical
product support and unspecified updates, optional upgrades and
enhancements on a when-and-if-available basis over the period of
service being rendered.
These contracts include multiple deliverables. The group applies
judgement to determine the transaction price to be allocated
between a) the delivery and installation of the hardware and
provision of the software licence, recognised on a point in time
basis and b) the stand ready services (support, maintenance,
unspecified upgrades) recognised over time. The Group applies the
expected cost plus margin approach to the stand ready services and
the delivery and installation of the hardware and provision of
software licence is estimated using the residual approach, given
this is a new product to market and standalone selling prices are
not directly observable. Further detail is provided within key
judgement and estimations on page 84.
Where such contracts include a financing component, the group
also adjusts the transaction price to reflect the time value of
money. Finance income is recognised as other income in the
statement of the comprehensive income.
Revenue recognised over time and at a point in time is disclosed
at note 3 of the notes to the financial statements.
Government grant income
Grants from Government agencies are recognised where there is
reasonable assurance that the grant will be received, and all
attached conditions will be complied with. When the grant relates
to an expense item, it is recognised as income on a systematic
basis over the periods that the related costs, for which it is
intended to compensate, are expensed. When the grant relates to an
asset, it is deducted from carrying amount of the intangible asset
over the expected useful life of the related asset. Note 3 Revenue
provides further information on Government grants.
Rental Income
Rental income from the head office property leased out under
operating leases is recognised in the statement of the
comprehensive income as other income as these services are
rendered, as the tenant occupies the space.
Cost of sales
Costs considered to be directly related to revenue are accounted
for as cost of sales. All direct production costs and overheads,
including indirect overheads that can reasonably be allocated, have
been classified as cost of sales.
Interest
Interest revenue is recognised as part of the financing
component within some Proximity Cloud and Software Licencing
contracts. Interest accrues using the effective interest method.
This is a method of calculating the amortised cost of a financial
asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly
discounts estimated future cash flows through the expected life of
the financial asset to the net carrying amount of the financial
asset.
Other non-recurring costs
The Group defines other non-recurring costs as costs incurred by
the Group which relate to material non-recurring costs. These are
disclosed separately where it is considered it provides additional
useful information to the users of the financial statements.
Taxation and deferred taxation
The income tax expense or income for the period is the tax
payable on the current period's taxable income. This is based on
the national income tax rate enacted or substantively enacted for
each jurisdiction with any adjustment relating to tax payable in
previous years and changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of
assets and liabilities and their carrying amounts in financial
statements.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to be applicable when the
asset or liability crystallises based on current tax rates and laws
that have been enacted or substantively enacted by the reporting
date. The relevant tax rates are applied to the cumulative amounts
of deductible and taxable temporary differences to measure the
deferred tax asset or liability.
A deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it
can be regarded as more likely than not that there will be suitable
taxable profits against which to recover carried forward tax losses
and from which the future reversal of temporary differences can be
deducted. The carrying amount of deferred tax assets are reviewed
at each reporting date.
Current and non-current classification
Assets and liabilities are presented in the statement of
financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to
be realised or intended to be sold or consumed in the Group's
normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless
restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets are
classified as non-current.
A liability is classified as current when: it is either expected
to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled
within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at
least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as
non-current.
Cash and cash equivalents
Cash at bank, overnight and longer term deposits which are held
for the purpose of meeting short term cash commitments are
disclosed within cash and cash equivalents.
Financial instruments
A financial instrument is any contract that gives rise to a
financial asset in one entity and a financial liability or equity
instrument in another and is recognised when the Group becomes
party to the contractual provisions of the instrument.
Financial assets and liabilities are recognised initially at
fair value, and subsequently measured at amortised cost, with any
directly attributable transaction costs adjusted against fair value
at initial recognition and recognised immediately in the
Consolidated income statement as a profit or loss.
Financial assets
Trade and other receivables
Trade and other receivables are initially recognised at
transaction price, less allowances for impairment. These are
subsequently measured at amortised costs using the effective
interest method. An allowance for impairment of trade and other
receivables is established when there is evidence that Beeks
Financial Cloud Group PLC will not be able to collect all amounts
due according to the original terms of the receivables. Significant
financial difficulties of the debtors, probability that the debtor
will enter bankruptcy or financial reorganisation, and default or
delinquency in payments (more than 90 days overdue) are considered
indicators that the trade and other receivables may be impaired.
The amount of the allowance is the difference between the asset's
carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. The
carrying amount of the asset is reduced through the use of an
allowance account, and the amount of the loss is recognised in
profit or loss within 'administrative expenses'. When a trade or
other receivable is uncollectible, it is written off against the
allowance account for trade and other receivables. Subsequent
recoveries of amounts previously written off are credited against
'administrative expenses' in the Consolidated statement of
comprehensive income.
IFRS 9 requires an expected credit loss ("ECL") model which
requires the Group to account for expected credit losses and
changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition of the
financial assets. The main financial asset that is subject to the
expected credit loss model is trade receivables, which consist of
billed receivables arising from contracts.
The Group has applied the simplified approach to providing for
expected credit losses ("ECL") prescribed by IFRS 9, which permits
the use of lifetime expected loss provision for all trade
receivables.
The ECL model reflects a probability weighted amount derived
from a range of possible outcomes. To measure the ECL, trade
receivables and contract assets have been grouped based on shared
credit risk characteristics and the days past due. The Group has
established a provision matrix based on the payment profiles of
historic and current sales and the corresponding credit losses
experienced. The historical loss rates are adjusted to reflect
current and forward-looking information that might affect the
ability of customers to settle the receivables, including
macroeconomic factors as relevant.
Provision against trade and other receivables is made when there
is evidence that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those
receivables. The amount of the write-down is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows. An assessment for impairment
is undertaken at least at each reporting date.
Where a financing component is applicable, the Group has chosen
to measure any loss allowance at an amount equal to lifetime
expected credit losses.
Financial liabilities
Trade and other payables
Trade and other payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest method. These amounts represent liabilities for goods and
services provided to Beeks Financial Cloud Group plc prior to the
end of the financial period which are unpaid as well as any
outstanding tax liabilities.
Borrowings
Loans and borrowings are initially recognised at the fair value
of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective
interest method.
Defined contribution schemes
The defined contribution scheme provides benefits based on the
value of contributions made. Contributions to the defined
contribution superannuation plans are expensed in the period in
which they are incurred.
Fair value measurement
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes
that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For
non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in
the circumstances and for which sufficient data are available to
measure fair value, are used, maximising the use of relevant
observable inputs, and minimising the use of unobservable
inputs.
Share based payments
The Group operates equity-settled share based remuneration plans
for its employees. Options are measured at fair value at grant date
using the Black Scholes model. Where options are redistributed,
options are measured at fair value at the redistribution date using
the Black Scholes Model. The fair value is expensed on a straight
line basis over the vesting period, based on an estimate of the
number of options that will eventually vest.
Under the Group's share option scheme, share options are granted
to directors and selected employees. The options are expensed in
the period over which the share based payment vests. A
corresponding increase to the share based payment reserve in equity
is recognised.
When share options are exercised, the company issues new shares.
The nominal share value from the proceeds received are credited to
share capital and proceeds received above nominal value, net of
attributable transaction costs, are credited to the share premium
when the options are exercised. When share options are forfeited,
cancelled, or expire, the corresponding fair value is transferred
to the retained earnings reserve. Amounts held in the share based
payments reserve are transferred to Retained Earnings on exercise
of the related options.
The Group has no legal or constructive obligation to repurchase
or settle the options in cash.
Where the Group entity incurs a share based payment charge
relating to subsidiary employees, the charge is treated as a
capital contribution in the subsidiary and an increase in
investment in the Group entity.
Property, plant and equipment (PPE)
PPE is stated at historical cost less accumulated depreciation.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items. Subsequent costs are included in
the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits
associated with the item will flow to Beeks Financial Cloud Group
PLC and the cost of the item can be measured reliably. All other
repairs and maintenance are charged to profit or loss during the
financial period in which they are incurred.
Depreciation on IT infrastructure and fixtures and fittings is
calculated using the straight line method to allocate their cost or
revalued amounts, net of their residual values, over their
estimated useful lives, as follows:
-- Leasehold property and improvements over the lease period
-- Freehold property over 50 years
-- Computer Equipment over 5 years and over the length of lease
-- Office equipment and fixtures and fittings over 5-20 years
The residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements and plant and equipment under lease are
depreciated over the unexpired period of the lease or the estimated
useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon
disposal or when there is no future economic benefit to the Group.
Gains and losses between the carrying amount and the disposal
proceeds are taken to profit or loss. Any revaluation surplus
reserve relating to the item disposed of is transferred directly to
retained profits.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost includes all expenses directly attributable to bringing
the asset to its current condition. Costs of ordinarily
interchangeable items are assigned using the first in, first out
cost formula. Net realisable value is the estimated selling price
in the ordinary course of business less any directly attributable
selling expenses.
At each reporting date, an assessment is made for impairment.
Any excess of the carrying amount of inventories over its estimated
selling prices less costs to complete and sell is recognised as an
impairment loss in the income statement. Reversals of impairment
losses are also recognised in profit or loss.
Leases
A lease is defined as a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration. To apply this
definition the Group assesses whether the contract meets three key
evaluations which are whether the contract contains an identified
asset, which is either explicitly identified in the contract or
implicitly specified by being identified at the time the asset is
made available to the Group; the Group has the right to obtain
substantially all of the economic benefits from use of the
identified asset throughout the period of use, considering its
rights within the defined scope of the contract; and the Group has
the right to direct the use of the identified asset throughout the
period of use.
At the lease commencement date, the Group recognises a
right-of-use asset and a corresponding lease liability on the
Consolidated statement of financial position. The right-of-use
asset is measured at cost, which is made up of the initial
measurement of the lease liability measured at the present value of
future lease payments, any initial direct costs incurred by the
Group. The Group depreciates the right-of-use assets on a
straight-line basis from the lease commencement date to the earlier
of the end of the useful life of the right-of-use asset or the end
of the lease term. The Group assesses the right-of-use asset for
impairment under IAS 36 'Impairment of Assets' where such
indicators exist.
Lease liabilities are presented on two separate lines in the
Consolidated statement of financial position for amounts due within
one year and amounts due after more than one year. The lease
liability is initially measured at the present value of lease
payments that are not paid at the commencement date, discounted
using the rate implicit in the lease. If this rate cannot readily
be determined, the Group applies an incremental borrowing rate. The
lease liability is subsequently measured by increasing the carrying
amount to reflect interest on the lease liability and by reducing
the liability by payments made. The Group re-measures the lease
liability (and adjusts the related right-of-use asset) whenever the
lease term has changed, or a lease contract is modified, and the
modification is not accounted for as a separate lease.
Lease payments included in the measurement of the lease
liability can be made up of fixed payments and an element of
variable charges depending on the estimated future price increases,
whether these are contractual or based on management's estimate of
potential increases. Subsequent to initial measurement, the
liability will be reduced for payments made and increased for
interest. It is re-measured to reflect any reassessment or
modification, or if there are changes in fixed payments. When the
lease liability is re-measured, the corresponding adjustment is
reflected in the right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to
zero. Where non-contractual payment discounts are subsequently
received from suppliers, these are treated as a discharge of the
lease liability with a credit recognised in the profit or loss
statement.
The Group has elected to account for short-term leases and
leases of low-value assets using the practical expedients available
under IFRS 16. Instead of recognising a right-of-use asset and
lease liability, the payments in relation to these are recognised
as an expense in profit or loss on a straight line basis over the
lease term.
Under IFRS 16, the Group recognises depreciation of the
right-of-use asset and interest on lease liabilities in the
Consolidated statement of comprehensive income over the period of
the lease. On the Consolidated statement of financial position,
right-of-use assets have been included in right of use assets and
lease liabilities have been included in lease liabilities due
within one year and after more than one year.
Intangible assets and amortisation
Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the assets and liabilities assumed at the
date of acquisition. Goodwill acquired in business combinations is
not amortised. Instead, goodwill is tested for impairment annually
or more frequently if events or changes in circumstances indicate
that it might be impaired, and is carried at cost less accumulated
impairment losses. Intangible assets carried forward from prior
years are re-valued at the exchange rate in the current financial
year. Impairment testing is carried out by assessing the
recoverable amount of the cash generating unit to which the
goodwill relates. A bargain purchase is immediately released to the
Consolidated statement of comprehensive income in the year of
acquisition.
Customer relationships
Included within the value of intangible assets are customer
relationships. These represent the purchase price of customer lists
and contractual relationships purchased on the acquisition of the
business and assets of Gallant VPS Inc. and Commercial Network
Services as well as the purchase of Velocimetrics Ltd. These
relationships are carried at cost less accumulated amortisation or
impairment losses where applicable. Amortisation is calculated
using the straight line method over periods of between five and ten
years and is charged to cost of sales.
Development costs
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred.
Development costs incurred are capitalised when all the
following conditions are satisfied:
-- Completion of the intangible asset is technically feasible so
that it will be available for use or sale;
-- The Group intends to complete the intangible asset and use or sell it;
-- The Group has the ability to use or sell the intangible asset;
-- The intangible asset will generate probable future economic benefits;
-- There are adequate technical, financial, and other resources
to complete the development and to use or sell the intangible
asset, and
-- The expenditure attributable to the intangible asset during
its development can be measured reliably.
Development costs not meeting the criteria for capitalisation
are expensed as incurred. The costs which do meet the criteria
range from new product development to the enhancement of existing
services. The scope of the development team's work continues to
evolve as the Group continues to deliver business critical
solutions to a growing customer base. Development costs capitalised
are amortised on a straight-line basis over the estimated useful
life of the asset. The estimated useful life is deemed to be five
years for all developments capitalised. Amortisation is charged at
the point of a major product release or upgrade in which that asset
is made available for sale or release to the customer. Charges are
recognised through cost of sales in the Consolidated statement of
comprehensive income in the period in which they are incurred.
Impairment
Goodwill and assets with an indefinite useful life are tested
annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. Other
non-financial assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable or where the asset is still in development and is
not yet being amortised as it is not available for use. An
impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less
costs of disposal and value-in-use. The value-in-use is the present
value of the estimated future cash flows relating to the asset
using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not
have independent cash flows are grouped together to form a
cash-generating unit.
A previously recognised impairment loss is reversed only if
there is an indication that an impairment loss recognised in prior
periods for an asset or cash-generating unit may no longer exist or
may have decreased. If that is the case, the carrying amount of the
asset is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would be determined, net of
depreciation, had no impairment loss been recognised for the asset
or cost-generating unit in prior years. Such a reversal is
recognised in profit or loss unless the asset is carried at a
revalued amount, in which case the reversal is treated as a
revaluation increase.
Equity
Ordinary shares are classified as equity. An equity instrument
is any contract that evidences a residual interest in the assets of
Beeks Financial Cloud Group plc after deducting all of its
liabilities. Equity instruments issued by Beeks Financial Cloud
Group plc are recorded at the proceeds received net of direct issue
costs.
The share capital account represents the amount subscribed for
shares at nominal value. Details on this can be found at note
22.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of Beeks Financial Cloud Group PLC,
excluding any costs of servicing equity other than ordinary shares,
by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary
shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary
shares.
Value-added tax ('VAT') and other similar taxes
Revenues, expenses, and assets are recognised net of the amount
of associated VAT, unless the VAT incurred is not recoverable from
the tax authority. In this case it is recognised as part of the
cost of the acquisition of the asset or as part of the expense.
Trade receivables and trade payables are stated inclusive of the
amount of VAT receivable or payable. The net amount of VAT
recoverable from, or payable to, the tax authority is included in
other receivables or other payables in the statement of financial
position.
Cash flows are presented on a net basis. The VAT components of
cash flows arising from investing or financing activities which are
recoverable from, or payable to the tax authority, are presented as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of
VAT recoverable from, or payable to, the tax authority.
Alternative performance measures
In addition to measuring financial performance of the Group
based on statutory profit measures, the Group also measures
performance based on underlying EBITDA, underlying profit before
tax and underlying diluted earnings per share.
The alternative performance measures provide management's view
of the Group's financial performance and are not necessarily
comparable with other entities. These alternative measures exclude
significant costs (such as Share Based Payments) and as such,
should not be regarded as a complete picture of the Group's
financial performance. These measures should not be viewed in
isolation, but as supplementary information to the rest of the
financial statements.
Underlying EBITDA
Underlying EBITDA is defined as earnings before amortisation,
depreciation, finance costs, taxation, acquisition costs, share
based payments and exceptional non-recurring costs.
Underlying EBITDA is a common measure used by investors and
analysts to evaluate the operating financial performance of
companies, particularly in the sector that the Group operates.
The Group considers underlying EBITDA to be a useful measure of
operating performance because it approximates the underlying
operating cash flow by eliminating the charges mentioned above. It
is not a direct measure of liquidity, which is shown in the
Consolidated statement of cash flows, and needs to be considered in
the context of the Group's financial commitments. Reference is also
made to the right of use asset implication on depreciation in the
year as a result of the Group taking additional space in data
centres.
Underlying profit before tax
Underlying profit before tax is defined as profit before tax
adjusted for the following:
-- Amortisation charges on acquired intangible assets;
-- Exchange variances on statement of final position gains and losses;
-- Share-based payment charges;
-- M&A activity including:
o Professional fees;
o Any non-recurring integration costs; Any gain or loss on the
revaluation of contingent consideration where it is material;
and
o Any material non-recurring costs where their removal is
necessary for the proper understanding of the underlying profit for
the period.
The Group considers underlying profit before tax to be a useful
measure of performance because it eliminates the impact of certain
non-recurring items including those associated with acquisitions
and other charges commonly excluded from profit before tax by
investors and analysts for valuation purposes.
Underlying diluted earnings per share
Underlying diluted earnings per share is calculated by taking
the adjusted profit before tax as described after deducting an
appropriate taxation charge and dividing by the total weighted
average number of ordinary shares in issue during the year and
adjusting for the dilutive potential ordinary shares relating to
share options.
The Group considers adjusted diluted earnings per share to be a
useful measure of performance for the same reasons as underlying
profit before tax. In addition, it is used as the basis for
consideration to the level of dividend payments.
Net cash/Net Debt
Net cash/net debt is a financial liquidity metric that measures
the ability of a business to pay all its debts if they were to be
called immediately. This is defined as current and non-current
borrowing liabilities (debt and asset finance but excluding lease
liabilities)- cash and cash equivalents.
Operational costs
Operational costs are defined as operating expenses less
exceptional costs, share based payments and non-recurring costs.
These costs are adjusted to reflect the true business operational
trading costs.
Profit after Tax
Management believes that profitability measures after tax are
not measures that would specifically require alternative
performance measures as they do not constitute trading results. Tax
legislation is out with the control of the Group. Whilst the group
currently benefits from some tax relief such as R&D tax
credits, the group does not rely on these in terms of trading
results or provide consideration of the tax impact of adjusted
items for alternative performance measures. Further information on
tax impact on profitability can be found on Note 9.
Annualised Committed Monthly Recurring Revenue
Annualised Committed Monthly Recurring Revenue (ACMRR) is
committed recurring revenue. Management believes that ACMRR is a
key measure as it provides investors with the total contracted
committed revenue of the Group.
2. Segment Information
Operating segments are reporting in a manner consistent with the
internal reporting provided to the chief operating decision
makers.
The chief operating decision makers, who are responsible for
allocating resources and assessing performance of operating
segments, have been identified as the executive directors.
In the current year there is one customer that account for more
than 10% of Group revenue. The total revenue for this customer
amounts to GBP7.10m (2022 - GBP4.58m). GBP0.3m of this revenue has
occurred within the Proximity Cloud operating segment, with the
other GBP6.80m of revenue included within public/private cloud
revenue.
Performance is assessed by a focus on the change in revenue
across public/private cloud and new sales relating to Proximity
Cloud/Exchange Cloud. Cost is reviewed at a cost category level but
not split by segment. Assets are used across all segments and are
therefore not split between segments so management review
profitability at a group level.
Revenues by Operating segment, further disaggregated are as
follows:
Year ended 30/06/23 (GBP'000) Year ended 30/06/22 (GBP'000)
Public/Private Proximity/Exchange Total Public/Private Proximity Total
Cloud Cloud Cloud /Exchange
Cloud
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Over time
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Infrastructure/software
as a service 19,162 - 19,162 13,057 - 13,057
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Maintenance 537 - 537 518 518
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Proximity/Exchange
Cloud - 454 454 57 57
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Professional services 273 - 273 234 - 234
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Over time total 19,972 454 20,426 13,809 57 13,866
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Point in time
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Proximity/Exchange
Cloud - - - - 2,222 2,222
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Hardware/Software
resale 529 - 529 1,601 - 1,601
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Software licences 1,267 - 1,267 520 - 520
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Set up fees 135 - 135 80 - 80
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Point in time
total 1,931 - 1,931 2,201 2,222 4,423
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Total revenue 21,903 454 22,357 16,010 2,279 18,289
--------------- ------------------- ------- ------------------ --------------------------- -------------------
Revenues by operating segment, further disaggregated are as
follows:
2023 2022
GBP'000 GBP'000
-------- --------
Revenues by geographic location are as
follows:
-------- --------
United Kingdom 5,660 5,849
-------- --------
Europe 3,119 2,508
-------- --------
US 9,193 5,556
-------- --------
Rest of World 4,385 4,376
---------------------------------------- -------- --------
Total 22,357 18,289
======================================== ======== ========
During the year GBP267k (2022: GBP419k) was recognised in other
income for grant income received from Scottish Enterprise and
GBP94k (2022: GBP93k) was recognised as rental income.
2023 2022
GBP'000 GBP'000
-------- --------
Non-Current Assets by geographic location
are as follows:
-------- --------
United Kingdom - Property, plant and
equipment 9,235 8,132
-------- --------
Europe - Property, plant and equipment 1,610 1,717
-------- --------
Rest of World - Intangible assets 6,738 5,330
-------- --------
Rest of World - Goodwill 1,368 1,368
-------- --------
Rest of World - Property, plant and equipment 2,750 2,509
-------- --------
US - Property, plant and equipment 4,357 3,912
----------------------------------------------- -------- --------
Total Non-Current Assets 26,058 22,968
=============================================== ======== ========
Intangible assets have been classified as "Rest of World" due to
the fact they represent products that are available to customers
throughout the World as well as the US intangible assets referred
to in note 10.
The Group has taken advantage of the practical expedient
permitted by IFRS 15 and has therefore not disclosed the amount of
the transaction price allocated to unsatisfied performance
obligations or when it expects to recognise that revenue. Longer
term contracts continue to be paid on a monthly basis.
3. Operating (Loss)/Profit
Operating (Loss)/Profit is stated after charging:
2023 2022
GBP000 GBP000
------- -------
Staff costs (note 7) 6,909 5,637
------- -------
Depreciation on owned assets (note 11) 3,140 2,189
------- -------
Depreciation right-of-use assets (note
11) 1,410 1,024
------- -------
Amortisation of acquired intangibles
(note 10) 489 802
------- -------
Amortisation of other intangibles (note
10) 1,227 726
------- -------
Other cost of sales and admin* 7,191 6,452
------- -------
Foreign exchange losses / (gains) 256 (98)
------- -------
Share based payments (note 21) 2,291 1,661
------- -------
Other non-recurring costs 136 24
------- -------
*Included within other cost of sales and admin are the remainder
of direct costs associated with the business including data centre
connectivity, software licences, security, and other direct support
costs.
Auditor's remuneration
2023 2022
GBP000 GBP000
------- -------
Audit
------- -------
Fees payable for the audit
of the consolidation and
the parent company accounts 83 63
------- -------
Fees payable for the audit
of the subsidiaries 75 59
------- -------
Non Audit
------- -------
Fees payable for the interim
review of the group 5 4
------- -------
Assurance related services 20 -
------- -------
183 126
------- -------
4. Finance Costs
2023 2022
GBP000 GBP000
------- -------
Bank charges 115 95
------- -------
Interest on loan liabilities 140 129
------- -------
Interest on lease liabilities 165 115
------- -------
Total finance costs 420 340
------- -------
5. Finance Income
2023 2022
GBP000 GBP000
------- -------
Financing charge on Proximity Cloud contracts 101 21
------- -------
Total finance income 101 21
------- -------
6. Average number of employees and employee benefits expense
Including directors, the average number of employees (at their
full time equivalent) during the year was as follows:
2023 2022
GBP000 GBP000
------- -------------
Management and administration 22 21
------- -------------
Support and development staff 81 68
------- -------------
Average numbers of employees 103 89
------- -------------
The employee benefits expense during the year was as
follows:
2023 2022
GBP000 GBP000
------- ------------
Wages and salaries 5,969 4,925
------- ------------
Social security costs 669 591
------- ------------
Other pension costs 271 121
------- ------------
Total employee benefits expense 6,909 5,637
------- ------------
Share based payments (note 21) 2,291 1,661
------- ------------
Wages and salary costs directly attributable to the development
of products are capitalised in intangible assets (note 10). The
total additions capitalised in intangible assets relates to payroll
costs and external third party costs.
7. Directors' emoluments
2023 2022
GBP000 GBP000
------- -------
Aggregate remuneration in respect of
qualifying services 292 239
------- -------
Aggregate amounts of contributions to
pension schemes in respect of qualifying
services 14 4
------- -------
Other benefits in kind 2 2
------- -------
Gain on exercise of options - 133
------- -------
Total Directors' emoluments 308 378
------- -------
Highest paid director - aggregate remuneration
(excluding share based payments) 126 109
------- -------
There are two directors (2022: two) who are accruing retirement
benefits in respect of qualifying services.
8. Taxation expense
2023 2022
GBP000 GBP000
------- -------
Current
------- -------
Foreign tax on overseas companies 65 33
------- -------
R&D tax credit received (95) -
------- -------
Total current tax (30) 33
------- -------
Origination and reversal of temporary
differences (531) (435)
------- -------
Prior year deferred tax adjustments - (358)
------- -------
Total deferred tax (531) (793)
------- -------
Tax on (loss)/profit on ordinary activities (561) (760)
------- -------
The differences between the total tax credit above and the
amount calculated by applying the standard rate of UK corporation
tax to the profit before tax, together with the impact of the
effective tax rate, are as follows:
2023 % ETR 2022 % ETR
GBP000 movement GBP000 movement
------- --------- ------- ------------
(Loss)/profit before tax (650) 66
------- --------- ------- ------------
(Loss)/profit on ordinary activities
multiplied by the standard rate
of corporation tax in the UK
of 19% (2022: 19%) (124) 21% 13 19%
------- --------- ------- ------------
Effects of:
------- --------- ------- ------------
Impact of super deduction (215) 33.18% (170) (257.81%)
------- --------- ------- ------------
Expenses not deductible for
tax purposes 481 (74.23%) 243 368.13%
------- --------- ------- ------------
R&D tax credits relief (89) 13.73% (140) (212.12%)
------- --------- ------- ------------
Share option deduction (404) 62.35% (173) (262.12%)
------- --------- ------- ------------
Prior year deferred tax adjustments (88) 13.58% (358) (542.42%)
------- --------- ------- ------------
Adjustment for tax rate differences (37) 4.01% (175) (265.15%)
------- --------- ------- ------------
Foreign tax suffered 40 0.32% - -
------- --------- ------- ------------
R&D tax credit received (125) - - -
------- --------- ------- ------------
Total tax charge (561) 86.31% (760) (1,151.51%)
------- --------- ------- ------------
The effective tax rate (ETR) for the year was 86.31% (2022:
-1,151.51%).
9. Intangible assets
Acquired Development Trade Goodwill Total
customer costs name
relationships
GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------------- ---------------- ----------------------- ------------
Cost
--------------- ------------------- ---------------- ----------------------- ------------
As at 30 June 2021 2,383 3,990 137 2,336 8,846
--------------- ------------------- ---------------- ----------------------- ------------
Charge for year
--------------- ------------------- ---------------- ----------------------- ------------
Additions - 2,590 - - 2,590
--------------- ------------------- ---------------- ----------------------- ------------
Grant funding received - (432) - - (432)
--------------- ------------------- ---------------- ----------------------- ------------
Foreign exchange
movements 147 - - - 147
--------------- ------------------- ---------------- ----------------------- ------------
As at 1 July 2022 2,530 6,148 137 2,336 11,151
--------------- ------------------- ---------------- ----------------------- ------------
Additions - 2,868 - - 2,868
--------------- ------------------- ---------------- ----------------------- ------------
Grant Funding received - (147) - - (147)
--------------- ------------------- ---------------- ----------------------- ------------
Foreign exchange
movements (29) - - - (29)
--------------- ------------------- ---------------- ----------------------- ------------
As at 30 June 2023 2,501 8,869 137 2,336 13,843
--------------- ------------------- ---------------- ----------------------- ------------
Accumulated
Amortisation
--------------- ------------------- ---------------- ----------------------- ------------
As at 30 June 2021 (773) (1,064) (34) (968) (2,839)
--------------- ------------------- ---------------- ----------------------- ------------
Charge for the year (287) (1,214) (27) - (1,528)
--------------- ------------------- ---------------- ----------------------- ------------
Foreign exchange
movements (86) - - - (86)
--------------- ------------------- ---------------- ----------------------- ------------
As at 1 July 2022 (1,146) (2,278) (61) (968) (4,45 3)
--------------- ------------------- ---------------- ----------------------- ------------
Charge for the year (345) (1,343) (27) - (1,715)
--------------- ------------------- ---------------- ----------------------- ------------
Foreign exchange
movements 17 - - - 17
--------------- ------------------- ---------------- ----------------------- ------------
Grant income release - 414 - - 414
--------------- ------------------- ---------------- ----------------------- ------------
As at 30 June 2023 (1,474) (3,207) (88) (968) (5,737)
--------------- ------------------- ---------------- ----------------------- ------------
NBV as at 1st July
2022 1,384 3,870 76 1,368 6,698
--------------- ------------------- ---------------- ----------------------- ------------
NBV as at 30th June
2023 1,027 5,662 49 1,368 8,106
--------------- ------------------- ---------------- ----------------------- ------------
Development costs have been recognised in accordance with IAS 38
in relation to the network automation project and development of
the Proximity and Exchange Cloud products, including analytics and
its integration into this product. Development costs in relation to
Proximity and Exchange Cloud have a useful life of 5 years.
Brought forward development costs consist of GBP2.5m which was
originally capitalised in July 2021. These assets now have a
carrying value of GBP1.5m and a remaining useful life of 3
years.
During the year, a total of GBP2.9m of development costs
relating to the development of Proximity Cloud/Exchange Cloud were
capitalised. Included within this was the release of Exchange Cloud
which launched in July 2022. GBP1.7m was capitalised in relation to
this which now has a carrying value of GBP1.4m at June 2023. The
remaining amortisation period on this asset is 4 years. In
addition, GBP1.7m was capitalised in relation to further releases
of the product. This has also been amortised over a useful life of
5 years. All costs incurred during the preliminary stages of
development projects are charged to profit or loss.
Impairment test for goodwill
For this review, goodwill was allocated to individual cash
generating units (CGU) on the basis of the Group's operations as
disclosed in the segmental analysis. As the Board reviews results
on a segmental level, the Group monitors goodwill and annually
assesses it on the same basis for impairment.
The carrying value of goodwill by each CGU is as follows:
2023
GBP'000
--------
Private/public cloud 1,368
--------
Proximity/Exchange Cloud -
-------------------------- --------
Total goodwill 1,368
========================== ========
Goodwill has been allocated to the public/private segment and
management have reviewed and confirmed that there is no indication
of impairment. Within the Proximity/Exchange Cloud segment in the
current year, an impairment review was carried out solely on the
projects within development costs for which amortisation is yet to
begin.
The recoverable amount of all CGUs has been determined by using
value-in-use calculations, estimating future cash inflows and
outflows from the use of the assets and applying an appropriate
discount rates to those cash flows to ensure that the carrying
value of each individual asset is still appropriate.
In performing these reviews, under the requirements of IAS 36
"Impairment of Assets" management prepare forecasts for future
trading over a useful life period of up to five years.
These cash flow projections are based on financial budgets and
market forecasts approved by management using a number of
assumptions including;
-- Historic and current trading
-- Weighted sales pipeline
-- Potential changes to cost base (including staff to support the CGU)
-- External factors including competitive landscape and market growth potential
-- Forecasts that go beyond the approved budgets are based on
long term growth rates on a macro-economic level.
Management performed a full impairment assessment on the
goodwill allocated to Public/Private Cloud. This included including
modelling projected cash flows based on the current weighted sales
pipeline, a discount rate based on the calculated pre-tax weighted
average cost of capital (15%) and cost base assumptions that
included contingency and investment to deliver against the weighted
sales pipeline. Conservative mid-term rates of 20% and terminal
growth rates of 2% were estimated, which were significantly less
than both the Group's internal business plan and external market
mid-term forecasts.
An impairment review was carried out on the two development
projects, for which amortisation is yet to begin, in line with the
testing on impairment of intangible assets as referenced within the
Group's accounting policies in note 1. For Exchange Cloud, the
existing weighted sales pipeline was used as a typical pipeline
profile for current and future years. Discount rates and cost base
assumptions were consistent to what has been detailed above in
regards to the impairment testing on goodwill. For Open
Integration, cost comparisons of the two platform were compared
based on current pricing with discount rates again consistent with
the impairment testing on goodwill.
Based on an analysis of the impairment calculation's
sensitivities to changes in key parameters (growth rate, discount
rate and pre-tax cash flow projections) there was no reasonably
possible scenario where these recoverable amounts would fall below
their carrying amounts therefore as at 30 June 2023, no change to
the impairment provision against the carrying value of intangibles
was required. The revaluation of these from prior year represents
exchange adjustment only.
10. Non-current assets - Property, plant and equipment
Computer Office Right of Use Freehold Total
Equipment equipment property
and fixtures
and fittings
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ------------- ------------------ -------------------
As at 30 June
2021 12,311 71 3,908 - 16,290
----------- -------------- ------------- ------------------ -------------------
Additions 5,055 163 1,997 3,034 10,249
----------- -------------- ------------- ------------------ -------------------
Stock transfers (830) - - - (830)
----------- -------------- ------------- ------------------ -------------------
Disposals - (54) (485) - (539)
----------- -------------- ------------- ------------------ -------------------
Exchange adjustments 7 - - - 7
----------- -------------- ------------- ------------------ -------------------
As at 1 July
2022 16,543 180 5,420 3,034 25,177
----------- -------------- ------------- ------------------ -------------------
Additions 3,950 146 2,149 5 6,250
----------- -------------- ------------- ------------------ -------------------
Exchange adjustments (3) - 172 - 169
----------- -------------- ------------- ------------------ -------------------
As at 30 June
2023 20,490 326 7,741 3,039 31,596
----------- -------------- ------------- ------------------ -------------------
Depreciation
----------- -------------- ------------- ------------------ -------------------
As at 30 June
2021 (4,647) (38) (1,215) - (5,900)
----------- -------------- ------------- ------------------ -------------------
Charge for the
year (2,134) (28) (1,024) (27) (3,213)
----------- -------------- ------------- ------------------ -------------------
Exchange adjustments 3 - - - 3
----------- -------------- ------------- ------------------ -------------------
Depreciation on
disposals - 18 185 - 203
----------- -------------- ------------- ------------------ -------------------
As at 1 July
2022 (6,778) (48) (2,054) (27) (8,907)
----------- -------------- ------------- ------------------ -------------------
Charge for the
year (3,020) (49) (1,410) (71) (4,550)
----------- -------------- ------------- ------------------ -------------------
Exchange adjustments (30) - (157) - (187)
----------- -------------- ------------- ------------------ -------------------
As at 30 June
2023 (9,828) (97) (3,621) (98) (13,644)
----------- -------------- ------------- ------------------ -------------------
NBV as at 30
June 2022 9,765 132 3,366 3,007 16,270
----------- -------------- ------------- ------------------ -------------------
NBV as at 30
June 2023 10,662 229 4,120 2,941 17,952
----------- -------------- ------------- ------------------ -------------------
Of the total additions in the year of GBP6.2m, GBP2.1m relates
to right-of-use assets held under IFRS16 (2022 - GBP2.0m).
All revenue generating depreciation charges are included within
cost of sales. Non-revenue generating depreciation charges are
included with administrative expenses.
The Group recognises rental income for the rental of units at
their Head Office property in Renfrew. This asset is disclosed as
Freehold Property. Units are leased to tenants under operating
leases with rentals payable quarterly. Full details on operating
leases as a lessor can be found on note 19.
11. Non-current assets - Deferred tax
Deferred tax is recognised at the standard UK corporation tax of
25% for fixed assets in the UK (2022: 25%). Deferred tax in the US
is recognised at an average rate of 21% for 2022 (2022: 21%). The
deferred tax asset relates to the difference between the
amortisation period of the US acquisitions for tax and reporting
purposes as well as the impact of the share options exercised
during the year and tax losses carried forward in both UK and
overseas companies. Deferred tax assets and liabilities on
statement of financial position prepared after the substantive
enactment of the new tax rate are calculated using a tax rate of
25% to the extent that the temporary differences will reverse after
2023.
2023 2022
GBP000 GBP000
-------- --------
The split of the deferred tax asset and
liabilities are summarised as follows:
-------- --------
Deferred tax (liabilities) (3,884) (2,968)
-------- --------
Deferred tax asset 5,398 4,201
-------- --------
Total deferred tax 1,514 1,233
-------- --------
Movements
-------- --------
Opening balance 1,232 279
-------- --------
Charge to profit or loss (note 9) 531 793
-------- --------
Charged to goodwill / equity (252) 167
-------- --------
Other movement 3 (6)
-------- --------
Closing balance 1,514 1,233
-------- --------
The movement in deferred tax assets and liabilities during the
year is as follows:
Share options Tax losses Accelerated Total deferred Total deferred
c/fwd tax depreciation tax asset tax (liability)
and other carried carried forward
movement forward
GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ----------- ------------------ --------------- -----------------
At 1 July 2021 223 630 43 896 (617)
-------------- ----------- ------------------ --------------- -----------------
Charge to income 281 2,747 110 3,138 (2,351)
-------------- ----------- ------------------ --------------- -----------------
Charge to equity 167 - - 167 -
-------------- ----------- ------------------ --------------- -----------------
As at 30 June
2022 671 3,377 153 4,201 (2,968)
-------------- ----------- ------------------ --------------- -----------------
Charge to income 387 1,036 24 1,447 (916)
-------------- ----------- ------------------ --------------- -----------------
Charge to equity (251) - - (251) -
-------------- ----------- ------------------ --------------- -----------------
As at 30 June
2023 807 4,413 177 5,397 (3,884)
-------------- ----------- ------------------ --------------- -----------------
12. Current assets - Inventories
2023 2022
GBP000 GBP000
------- -------------
Materials 1,315 1,566
------- -------------
Consumables 452 252
------- -------------
1,767 1,818
------- -------------
With the launch of Proximity Cloud in the previous year, the
Group holds hardware which can be used in the sale of Proximity or
Exchange Cloud contracts. Subsequent to the year end, if they are
not used as part of a Proximity or Exchange Cloud sale, they will
be reclassified as PPE at the point in which they are delivered
into one of the Group's data centres.
During the period, GBPnil (2022 - GBP0.99m) of inventories were
recognised as an expense in the period.
13. Current assets - Trade and other receivables
2023 2022
GBP000 GBP000
------- -------
Trade receivables 2,186 1,036
------- -------
Less: allowance for impairment of receivables (47) (80)
------- -------
2,139 956
------- -------
Prepayments 1,040 2,083
------- -------
Contract asset 2,717 2,329
------- -------
Other taxation 111 107
------- -------
Other receivables 384 125
------- -------
6,391 5, 600
------- -------
The contract assets primarily relate to our rights to a
consideration for goods or services delivered but not invoiced at
the reporting date. The contract assets are transferred to
receivables when invoiced. Contract liabilities relate to deferred
revenue. At the end of each reporting period, these positions are
netted on a contract basis and presented as either an asset or a
liability in the Consolidated Statement of Financial Position.
Consequently, a contract balance can change between periods from a
net contract asset balance to a net contract liability balance in
the statement of financial position.
Significant changes in the contract assets and the contract
liability balances during the period are as follows:
Contract Contract
assets liabilities
GBP000 GBP000
--------- -------------
Balance at 1 July 2022 2,329 961
--------- -------------
Transferred to receivables from contract (901) -
assets from the beginning of the period
--------- -------------
Revenues recognised during the period 1,289 -
to be invoiced
--------- -------------
Revenue recognition that was included
in the contract liability balance at
the beginning of the period - (817)
--------- -------------
Remaining performance obligations for
which considerations have been received - 1,009
--------- -------------
Balance at 30 June 2023 2,717 1,153
--------- -------------
The credit risk relating to trade receivables is analysed as
follows:
2023 2022
GBP000 GBP000
------- -------
Trade receivables 2,186 1,036
------- -------
Less: allowance for impairment of receivables (47) (80)
------- -------
2,139 956
------- -------
Movements in the allowance for expected credit losses are as
follows:
2023 2022
GBP000 GBP000
------- -------
Opening balance 80 19
------- -------
Movement in allowances (24) 91
------- -------
Receivables written off during the year
as uncollectable (9) (30)
------- -------
Closing balance 47 80
------- -------
The Directors consider that the carrying amount of trade and
other receivables is approximately equal to their fair value. The
group has applied the simplified approach to providing for expected
credit losses prescribed by IFRS 9, which permits the use of
lifetime expected loss allowance for all trade receivables. The
expected credit loss allowance under IFRS 9 as at 30 June 2023 is
GBP25k (2022 - GBP74k). The decrease in expected credit loss
allowance is in line with the change in the lower risk profile of
trade receivables during the year.
The following table details the risk profile of trade
receivables based on the Group's provision matrix. As the Group's
historical credit loss experience does not show significantly
different loss patterns for different customer segments, the
provision for loss allowance based on past due status is not
further distinguished between the Group's different customer
segments.
2023 ECL rate 2023 ECL 2022 ECL rate 2022 ECL allowance
allowance
--------- -------------------
Risk profiling GBP'000 % GBP'000 GBP'000 % GBP'000
category (ageing)
-------- --------- ----------- -------- --------- -------------------
Current 959 -0.10% -1 923 -1.5% -14
-------- --------- ----------- -------- --------- -------------------
0-30 days 988 -1.00% -10 20 -2% -0
-------- --------- ----------- -------- --------- -------------------
30-60 days 94 -2.00% -2 8 -15% -1
-------- --------- ----------- -------- --------- -------------------
60-90 days 12 -5.00% -1 40 -45% -18
-------- --------- ----------- -------- --------- -------------------
Over 90 days 88 -15.00% -11 45 -90% -41
-------- --------- ----------- -------- --------- -------------------
Total -25 -74
-------- --------- ----------- -------- --------- -------------------
The ECL rate in the current year has been reduced in line with
the risk profile of trade receivables, historic trade losses and
continued tight credit control procedures.
Trade receivables consist of a large number of customers across
various geographical areas. The aging below shows that almost all
are less than three months old and historic performance indicates a
high probability of payment for debts in this aging. Those over
three months relate to customers without history of default for
which there is a reasonable expectation of recovery.
Past due but not impaired
The Group did not consider a credit risk on the aggregate
balances after reviewing the credit terms of the customers based on
recent collection practices.
The aging of trade receivables at the reporting date is as
follows:
2023 2022
GBP000 GBP000
------- -------
Not yet due 965 923
------- -------
Due 1 to 3 months 1,115 68
------- -------
Due 3 to 6 months 30 45
------- -------
More than 6 months due 76 -
------- -------
2,186 1,036
------- -------
14. Current assets - Cash and cash equivalents
2023 2022
GBP000 GBP000
------- -------
Cash and bank balances 7,829 10,160
------- -------
7,829 10,160
------- -------
The credit risk on cash and cash equivalents is considered to be
negligible because over 99% of the balance is with counter parties
that are UK and US banking institutions.
15. Current assets - Financial instruments and risk
management
Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and
cash equivalents, short term deposits and bank and other
borrowings.
The carrying amount of all financial assets presented in the
statement of financial position are measured at amortised cost.
The carrying amount of all financial liabilities presented in
the statement of financial position are measured at amortised
cost.
There have been no changes to valuation techniques, or any
amounts recognised through 'Other Comprehensive Income'.
The main purpose of these financial instruments is to finance
the Group's operations. The Group has other financial instruments
which mainly comprise trade receivables and trade payables which
arise directly from its operations.
Risk management is carried out by the finance department under
policies approved by the Board of Directors. The Group finance
department identifies, evaluates, and manages financial risks. The
Board provides guidance on overall risk management including
foreign exchange risk, interest rate risk, credit risk, and
investment of excess liquidity.
The impact of the risks required to be discussed under IFRS 7
are detailed below:
Market risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions
or recognised assets or liabilities are denominated in a currency
that is not the functional currency of the operations. The Group
had potential exchange rate exposure within USD trade payable
balances of GBP1,255,542 at 30 June 2023 (GBP1,512,444 at 30 June
2022) and potential exchange rate exposure within EUR trade
payables balances of GBP59,768 (GBP26,500 at 30 June 2022). The
Group had potential exchange rate exposure within USD trade
receivables of GBP1,179,455 (GBP403,700 at 30 June 2022) and
potential exchange rate exposure within EUR trade receivables of
GBP37,262 (GBP9,300 at 30 June 2022). The Group had potential
exchange rate exposure within USD intercompany balances of
GBP5,807,729 (GBP1,157,893 as at 30 June 2022) and within JPY
intercompany balances of GBP189,028 (GBP236,780 as at 30 June
2022). The Group also has potential exchange rate exposure within
USD bank balances of GBP3,644,955 (GBP159,534 as at 30 June 2022)
and GBP607,023 within EUR bank balances (GBP164,421 as at 30 June
2022).
Cash flow and interest rate risk
The Group has relatively limited exposure to interest rate risk
in respect of cash balances and long-term borrowings held with
banks and other highly rated counterparties. Loans are at variable
rates of interest based on the Bank of England's base rate
therefore the Group is subject to changes in interest rates. Given
the relatively low level of debt the Board do not consider this to
be a significant risk. At a total debt level of GBP3.4m, with
GBP1.8m contracted on a variable rate and is the remainder under a
fixed interest rate, 1% increase in interest rates would give rise
to an additional annual interest rate charg e of GBP18,140.
Credit risk
The Group's maximum exposure to credit risk is limited to the
carrying amount of financial assets recognised at the reporting
date, as summarised below:
2023 2022
GBP000 GBP000
------- -------
Cash and cash equivalents 7,829 10,160
------- -------
Trade receivables 2,186 1,036
------- -------
Contract asset 2,717 2,329
------- -------
Other receivables 384 125
------- -------
13,116 13,650
------- -------
Credit risk is managed on a Group basis. Credit risks arise from
cash and cash equivalents and deposits with banks and financial
institutions, as well as credit exposures to customers, including
outstanding receivables and committed transactions. Credit risk
refers to the risk that a counterparty will default on its
contractual obligations resulting in financial losses to the Group.
The Group p rovides standard credit terms (normally 30 days) to all
of its customers which has resulted in trade receivables of
GBP2,139,000 (2022: GBP956,000) which are stated net of applicable
allowances, and which represent the total amount exposed to credit
risk.
The Group's credit risk is primarily attributable to its trade
receivables and contract assets. The Group present the amounts in
the statement of financial position net of allowances for doubtful
receivables, estimated by the Group's management based on prior
experience and the current economic environment. The Group reviews
the reliability of its customers on a regular basis, such a review
takes into account the nature of the Group's trading history with
the customer, along with management's view of expected future
events and market conditions.
The credit risk on liquid funds is limited because the majority
of funds are held with two banks with high credit-ratings assigned
by international credit-rating agencies. Management does not expect
any losses from non-performance of these counterparties.
None of the Group's financial assets are secured by collateral
or other credit enhancements.
Liquidity risk
The Group closely monitors its access to bank and other credit
facilities in comparison to its outstanding commitments on a
regular basis to ensure that it has sufficient funds to meet
obligations of the Group as they fall due. The Group monitors its
current debt facilities and complies both with its gross borrowings
to adjusted EBITDA, minimum adjusted cash banking and LTV
covenants. Judgement is required in assessing what items are
allowable for the adjusted components.
The Board receives regular debt management forecasts which
estimate the cash inflows and outflows over the next twelve months,
so that management can ensure that sufficient financing is in place
as it is required.
As at 30 June 2023, the Group's financial liabilities (excluding
leases disclosed in Note 17) have contractual maturities (including
interest payments where applicable) as summarised below:
Current Non-current
------------------------------------------------
Within 1-3 3-12 1-5 After
-------- -------- -------- -------- --------
1 month months months years 5 years
-------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- --------
Trade and other payables 3,483 1,052 417 - -
-------- -------- -------- -------- --------
Borrowings - 1,445 369 - -
-------- -------- -------- -------- --------
The above amounts reflect the contractual undiscounted cash
flows, which may differ from the carrying values of the liabilities
at the reporting date.
Trade and other payables includes trade payables, accruals,
contract liabilities, other taxation and social security and other
payables.
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets to reduce debts.
2023 2022
GBP000 GBP000
------- -------
Total equity 32,786 30,759
------- -------
Cash and cash equivalents 7,829 10,160
------- -------
Capital 40,615 40,919
------- -------
Total equity 32,786 30,759
------- -------
Other loans 1,814 2,297
------- -------
Lease liabilities 4,006 3,583
------- -------
Overall financing 38,606 36,639
------- -------
Capital-to-overall financing ratio 1.05 1.12
------- -------
Other risks
Rental income from the head office property leased out under
operating leases is recognised in the statement of the
comprehensive income as other income as these services are
rendered, as the tenant occupies the space. Any associated risk of
the underlying asset used to generate this rental income is
believed to be minimal given the building is utilised as the head
office and the majority of staff are based there.
16. Non-current liabilities - Borrowings and other financial
liabilities
2023 2022
GBP000 GBP000
------- -------
Other loans - 1,320
------- -------
Lease liabilities 2,047 2,303
------- -------
2,047 3,623
------- -------
Other loans
------- -------
Under one year 1,814 978
------- -------
Between one to five years - 1,320
------- -------
1,814 2,298
------- -------
The bank loan derives from a GBP1.8m term loan facility taken
out from Barclays Bank in December 2020 and a GBP1.47m property
loan facility taken out from Barclays Bank in December 2021. The
term loan was renewed during the financial year leaving 6 quarterly
instalments of GBP0.125m due from March 2023. The property loan is
repayable in 8 quarterly instalments of GBP0.03m which commenced in
December 2021 along with a bullet balance which was repaid at
Maturity in September 2023. This, along with the Group's revolving
credit facility available of GBP3.5m, is used to fund the Group's
working capital requirements when required. The available revolving
credit facility balance of GBP3.5m was unutilised as at 30 June
2023.
Barclays have been given security for the facility of the UK
assets of the Group and an unlimited guarantee is afforded to
Barclays.
Costs of GBP21,500 have been amortised over the life of the term
loan and aged in line with the capital repayments.
During the year, the Group entered into two new asset financing
arrangements. These asset financing agreements have been disclosed
under lease liabilities (note 19).
Changes in liabilities arising from financing activities:
Lease Loans Total
liabilities
GBP000 GBP000 GBP000
-------------- ----------- -----------
Balance at 1 July 2022 3,327 2,297 5,624
-------------- ----------- -----------
Lease liabilities additions IFRS
16 149 - 149
-------------- ----------- -----------
Proceeds from new leases under
asset financing 1,963 - 1,963
-------------- ----------- -----------
Loan repayments - (483) (483)
-------------- ----------- -----------
Lease repayments (1,432) - (1,432)
-------------- ----------- -----------
Balance at 30 June 2023 4,007 1,814 5,821
-------------- ----------- -----------
Included within the lease liabilities balance of GBP4.01m is
GBP1.61m of asset finance lease liabilities.
17. Current liabilities - Trade and other payables
2023 2022
GBP000 GBP000
------- -------
Trade payables 2,937 3,378
------- -------
Other loans 1,814 978
------- -------
Lease liability 1,960 1,280
------- -------
Accruals 375 575
------- -------
Contract liabilities 1,153 961
------- -------
Other taxation and social security 373 192
------- -------
Other payables 114 33
------- -------
8,726 7,397
------- -------
18. Leases
The Group leases assets including the space in data centres in
order to provide infrastructure services to its customers and also
hardware for data centres. Information about leases for which the
Group is a lessee is presented below:
Right-of-use assets
Leasehold Property
and improvement
GBP000
-------------------
Balance at 1 July 2022 3,366
-------------------
Additions 2,101
-------------------
Depreciation (1,410)
-------------------
Foreign exchange 16
-------------------
Balance at 30 June 2023 4,073
-------------------
The right-of-use assets are disclosed as non-current assets and
are disclosed as property, plant and equipment (note 11).
Right-of-use lease liabilities
2023 2022
GBP000 GBP000
-------- --------
Maturity analysis:
-------- --------
Within one year (2,068) (1,407)
-------- --------
Within two years (1,574) (1,639)
-------- --------
Within three years (461) (769)
-------- --------
Within four years (12) -
-------- --------
Add: unearned interest 108 232
-------- --------
Total lease liabilities (4,007) (3,583)
-------- --------
Analysed as:
-------- --------
Non-current (Note 18) (2,047) (2,303)
-------- --------
Current (Note 19) (1,960) (1,280)
-------- --------
(4,007) (3,583)
-------- --------
The Group does not face a significant liquidity risk with regard
to its lease liabilities. The interest expense on lease liabilities
amounted to GBP165k for the year ended 30 June 2023 (2022:
GBP131k). Lease liabilities are calculated at the present value of
the lease payments that are not paid at the commencement date.
The Group has elected not to recognise a lease liability for
short-term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. Payments made under such
leases are expensed on a straight line basis. During the year ended
30 June 2023, in relation to leases under IFRS 16, the Group
recognised the following amounts in the Consolidated statement of
comprehensive income:
2023 2022
GBP000 GBP000
------- -------
Depreciation charge 1,410 1,024
------- -------
Interest expense 165 131
------- -------
Payments for short-term lease expenses in relation to data
centre space have not been disclosed below and are instead
reflected within other cost of sales under note 4.
Amounts recognised in the Consolidated statement of cash
flows:
2023 2022
GBP000 GBP000
------- -------
Amounts payable under leases:
------- -------
Short-term and low value lease expense 10 25
------- -------
Repayment of lease liabilities within
cash flows from financing activities 1,432 1,067
------- -------
The Group recognises rental income for the rental of units at
their Head Office property in Renfrew. Units are leased to tenants
under operating leases with rentals payable quarterly. Lease income
from operating leases where the group is a lessor is recognised on
a straight-line basis over the lease term. The total recognised in
profit or loss during the period is as follows:
2023 2022
GBP000 GBP000
------- -------
Rental income from operating leases 94 93
------- -------
As part of this, The Group receives rental payments on a
quarterly basis. The amounts due to be received over the next 5
years are as follows:
2023 2022
GBP000 GBP000
------- -------
Within 1 year 96 94
------- -------
Between 1 and 2 years 96 94
------- -------
Between 2 and 3 years 96 94
------- -------
19. Equity - issued capital
2023 2022 2023 2022
shares shares GBP000 GBP000
---------------------------------------- ----------- ------------ ----------- -------
Ordinary shares
- fully paid 65,571,434 65,406,764 82 82
----------- ------------ ----------- -------
Movements in ordinary
share capital
----------- ------------ ----------- -------
Details Date Shares Issue GBP000
price
---------------- ----------- ------------ ----------- -------
Balance 30 June 2018 50,043,100 62
---------------- ----------- ------------ ----------- -------
EMI Share options
exercised 31 August 2018 677,700 GBP0.00125 1
---------------- ----------- ------------ ----------- -------
EMI Share options 24 October 32,200 GBP0.00125 -
exercised 2018
---------------- ----------- ------------ ----------- -------
EMI Share options
exercised 20 June 2019 111,800 GBP0.00125 1
---------------- ----------- ------------ ----------- -------
New share issue 14 April 2020 363,458 GBP0.00125 -
---------------- ----------- ------------ ----------- -------
EMI Share options 9 November 44,118 GBP0.00125 -
exercised 2020
---------------- ----------- ------------ ----------- -------
15 December
New share issue 2020 430,946 GBP0.00125 1
---------------- ----------- ------------ ----------- -------
New share issue 26 April 2021 4,347,827 GBP0.00125 5
---------------- ----------- ------------ ----------- -------
EMI Share options 15 November 264,705 GBP0.00125 -
exercised 2021
---------------- ----------- ------------ ----------- -------
New share issue 25 April 2022 9,090,910 GBP0.00125 12
---------------- ----------- ------------ ----------- -------
Balance 30 June 2022 65,406,764 82
---------------- ----------- ------------ ----------- -------
EMI Share options 16 January 21,946 GBP0.00125 -
exercised 2023
---------------- ----------- ------------ ----------- -------
EMI Share options 5 April 2023 106,796 GBP0.00125 -
exercised
---------------- ----------- ------------ ----------- -------
EMI Share options 31 May 2023 35,928 GBP0.00125 -
exercised
---------------- ----------- ------------ ----------- -------
Balance 30 June 2023 65,571,434 82
---------------- ----------- ------------ ----------- -------
Ordinary shares
During the year, 164,670 share options were exercised.
20. Share based payments
The movements in the share options during the year, were as
follows:
2023 2022
Number Weighted Average Number Weighted Average
of share Fair Value of share Fair Value price
options price per share options per share (GBP)
(GBP)
---------- ----------------- ---------- ------------------
Outstanding at the beginning
of the year 4,925,668 1.20 2,916,973 0.89
---------- ----------------- ---------- ------------------
Exercised during the
year (164,670) 1.24 (264,705) 1.02
---------- ----------------- ---------- ------------------
Issued during the year 1,549,000 0.83 2,273,400 1.58
---------- ----------------- ---------- ------------------
Forfeited during the
year (76,955) 1.43 - -
---------- ----------------- ---------- ------------------
Outstanding at the end
of the year 6,233,043 1.35 4,925,668 1.20
---------- ----------------- ---------- ------------------
Exercisable at the end
of the year 1,410,180 0.83 - -
---------- ----------------- ---------- ------------------
The Group granted a total of 1,549,000 share options to members
of its management team on 2(nd) December 2022.
During the year 1,574,850 shares from Grant 2 vested, with
164,670 shares being exercised in the year. The remaining balance
remain as exercisable at the end of the year.
Shares were forfeited during the year where employees left the
business, with their share options not being fully redistributed
within the Group.
These share options outstanding at the end of the year have the
following expiry dates and exercise prices:
Grant Grant Grant Grant Grant Grant Grant Total
3 4A 4B 4C 5A 5B 5C
Shares 1,042,063 1,022,500 597,150 632,150 604,000 462,500 462,500 4,822,863
------------ ----------- ----------- ------------ ------------ ------------ ------------ ----------
Date of 9th October 26th 26th 26th 2nd 2nd 2nd
grant 2020 November November November December December December
2021 2021 2021 2022 2022 2022
------------ ----------- ----------- ------------ ------------ ------------ ------------ ----------
Exercise GBP0.00125 GBP0.00125 GBP0.00125 GBP0.00125
price GBP0.00125 GBP0.00125 GBP0.00125
------------ ----------- ----------- ------------ ------------ ------------ ------------ ----------
Vesting 9th October 26th 26th 26th 2nd 2nd 2nd
date 2023 November November November December December December
2024 2024 2023 2025 2025 2024
------------ ----------- ----------- ------------ ------------ ------------ ------------ ----------
These share options vest under challenging performance
conditions based on underlying profitability growth during the
periods.
The Black Scholes model was used to calculate the fair value of
these options, the resulting fair value is expensed over the
vesting period. The following table lists the range of assumptions
used in the model:
Grant Grant Grant Grant Grant
1 2 3 4A 4B
Shares 264,706 1,574,850 1,042,063 1,022,500 597,150
-------- ---------- ---------- ---------- --------
Share price (GBP) 1.02 0.84 0.945 1.575 1.575
-------- ---------- ---------- ---------- --------
Volatility 5% 5% 5% 5% 5%
-------- ---------- ---------- ---------- --------
Annual risk free
rate 4% 4% 4% 4% 4%
-------- ---------- ---------- ---------- --------
Exercise strike
price (GBP) 0.00125 0.00125 0.00125 0.00125 0.00125
-------- ---------- ---------- ---------- --------
Time to maturity
(yrs) 3 3 3 3 3
-------- ---------- ---------- ---------- --------
Grant Grant Grant Grant Total
4C 5A 5B 5C
Shares 632,150 604,000 462,500 462,500 6,662,419
-------- -------- -------- -------- ----------
Share price (GBP) 1.575 1.43 1.43 1.43
-------- -------- -------- -------- ----------
Volatility 5% 5% 5% 5%
-------- -------- -------- -------- ----------
Annual risk free
rate 4% 4% 4% 4%
-------- -------- -------- -------- ----------
Exercise strike
price (GBP) 0.00125 0.00125 0.00125 0.00125
-------- -------- -------- -------- ----------
Time to maturity
(yrs) 2 3 3 2
-------- -------- -------- -------- ----------
The total expense recognised from share based payments
transactions on the Group's profit for the year was GBP2,291,120
(2022 : GBP1,661,273).
Expected volatility was determined at the date of grant from
historic volatility, adjusted for events that were not considered
to be reflective of the volatility of the share price going
forward.
These share options vest on the achievement of challenging
growth targets. It is management's intention that the Group will
meet these challenging growth targets therefore, based on
management's expectations, the share options are included in the
calculation of underlying diluted EPS in note 24.
21. Equity - Reserves
The foreign currency retranslation reserve represents exchange
gains and losses on retranslation of foreign operations. Included
in this is revaluation of opening balances from prior years.
The merger reserve initially arose on the share for share
exchange reflecting the difference between the nominal value of the
share capital in Beeks Financial Cloud Group PLC and the value of
the Group being acquired, Beeks Financial Cloud Limited. The merger
reserve then increased upon acquisition of Velocimetrics Ltd in FY
2018, reflecting the difference between the nominal value of the
share capital issued from Beeks Financial Cloud Group PLC and the
value of the shares issued to the owners of Velocimetrics Ltd.
Share premium represents the excess over nominal value of the
fair value of consideration received for equity shares, net of
expenses of the share issue. Any transaction costs associated with
the issuing of shares are deducted from share premium, net of any
related income tax benefits.
Retained earnings represents retained profits and losses.
The other reserve arose on the share for share exchange and
reflects the difference between the value of Beeks Financial Cloud
Group Limited and the share capital of the Group being acquired
through the share for share exchange. Also included in the other
reserve is the fair value of the warrants issued on the acquisition
of VDIWare LLC.
22. Related party transactions
Parent entity
Beeks Financial Cloud Group PLC is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 25.
Transactions with related parties
The following transactions occurred with related parties:
2023 2022
GBP000 GBP000
------- -------
Withdrawals from the director, Gordon
McArthur 53 41
------- -------
During the financial year, Beeks Financial Cloud Limited
received services in the normal course of its business and at arm's
length from A&B Property and Rental Services Scotland Limited,
a company owned by Gordon McArthur. During the year, Beeks
Financial Cloud Limited paid for services of GBP17,700 (2022:
GBPnil) to A&B Property and Rental Services Scotland Limited
and the amounts due at the year end was GBPnil (2022: GBPnil).
The Group recognise that the total withdrawals from the director
exceeded the limit as defined in the Companies Act 2006 requiring
shareholder approval. In order to rectify this, the amounts due by
the director will be repaid subsequent to the financial year
end.
Key management personnel
Compensation paid to key management (which comprises the
executive and non-executive PLC Board members) during the year was
as follows:
2023 2022
GBP000 GBP000
------- -------
Wages and salaries 292 239
------- -------
Social security costs 37 27
------- -------
Other pension costs 14 4
------- -------
Other benefits in kind 2 2
------- -------
Share based payments 188 316
------- -------
23. Earnings per share
2023 Restated
2022
GBP000 GBP000
----------- -----------
(Loss)/Profit after income tax attributable to
the owners of Beeks Financial Cloud Group PLC (89) 826
----------- -----------
Pence Pence
----------- -----------
Basic (loss)/earnings per share (0.14) 1.43
----------- -----------
Diluted (loss)/earnings per share (0.13) 1.42
----------- -----------
Number Number
----------- -----------
Weighted average number of ordinary shares used
in calculating basic earnings per share 65,446,755 57,885,241
----------- -----------
Adjustments for calculation of diluted earnings
per share:
----------- -----------
Dilutive impact of share options 4,736,830 3,325,122
----------- -----------
Options over ordinary shares 125,611 96,454
----------- -----------
Weighted average number of ordinary shares used
in calculating diluted earnings per share 70,309,196 61,306,817
----------- -----------
2023 Restated
2022
GBP000 GBP000
----------- -----------
(Loss)/Profit before tax for the year (650) 66
----------- -----------
Share Based payments 2,291 1,661
----------- -----------
Amortisation on acquired intangibles 489 802
----------- -----------
Exceptional non-recurring costs 136 28
----------- -----------
Exchange rate losses/(gains) on intercompany translation
and unrealised currencies 325 (81)
----------- -----------
Grant income (267) (419)
----------- -----------
Tax effect 494 542
----------- -----------
Underlying profit for the year 2,818 2,599
----------- -----------
Weighted average number of shares in issue - basic 65,446,755 57,885,241
----------- -----------
Weighted average number of shares in issue - diluted 71,143,541 61,985,547
----------- -----------
Underlying earnings per share - basic 4.31 4.49
----------- -----------
Underlying earnings per share - diluted 3.96 4.19
----------- -----------
Included in the weighted average number of shares for the
calculation of underlying diluted EPS are share options outstanding
but not exercisable. It is management's intention that the Group
will meet the challenging growth targets therefore, based on
management expectations, the share options are included in the
calculation of underlying diluted EPS.
24. Subsidiaries
The Consolidated financial statements incorporate the assets,
liabilities and results of the following subsidiaries held by the
company in accordance with the accounting policy described in note
1.
The subsidiary undertakings are all 100% owned, with 100% voting
rights.
Company name Country of incorporation Principal place Activity
of business/registered
office
Beeks Financial Cloud Japan FARO 1F, 2-15-5, Non-trading
Co Ltd Minamiaoyama,
Minato-Ku, Tokyo,
Japan.
------------------------- ------------------------ ------------------
Beeks FX VPS USA Inc. Delaware, USA 874 Walker Road, Non-trading
Suite C, Dover, Year end 31(st)
Kent, Delaware, December
19904, USA.
------------------------- ------------------------ ------------------
Beeks Financial Cloud Scotland Riverside Building, Cloud Computing
Limited 2 Kings Inch Services
Way, Renfrew,
Renfrewshire,
PA4 8YU
------------------------- ------------------------ ------------------
Velocimetrics Limited England Birchin Court, Software Services
230 Park Avenue
20 Birchin Lane,
Suite 300 West,
London, England,
EC3V 9DU
------------------------- ------------------------ ------------------
Velocimetrics Inc. New York, USA 230 Park Avenue, Software Services
10(th) Floor,
New York 10169,
USA.
------------------------- ------------------------ ------------------
In accordance with S479A of the Companies Act 2006,
Velocimetrics Limited (06943398) have not prepared audited
accounts. Beeks Financial Cloud Group plc guarantees all
outstanding liabilities in this company at the year ended 30 June
2023, until they are satisfied in full.
25. Prior Period Adjustment
During the year, it was identified that share options which
contained conditions relating to future years' performance targets
were not included in the diluted EPS figure, despite the options
having already achieved their performance conditions related to
EBITDA in the current period.
IAS 33 'Earnings per share' considers the conditions at the
period end as if these were the conditions at the end of the
contingent period (i.e the future performance period) and as such,
these options should then be included in the diluted EPS figure
even though the vesting date and associated future profit metric
has not yet been achieved.
The error has been corrected. The number of shares included in
the diluted earnings per share calculation has increased to include
options of 3.33m that meet the above conditions taking the total
number of shares within the diluted earnings per share calculation
from 57.98m to 61.31m. As a result, the diluted earnings per share
has been restated from 1.42p to 1.35p as disclosed in note 24.
26. Ultimate controlling party
The Directors have assessed that there is no ultimate
controlling party.
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END
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October 02, 2023 02:00 ET (06:00 GMT)
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