TIDMDRS
RNS Number : 2306W
DRS Data & Research Services PLC
25 April 2016
DRS Data and Research Services plc ('the Group')
Annual Results Announcement 2015
Key points
-- Turnover at GBP12,477,000 (2014: GBP13,684,000)
-- Profit before tax and exceptional items GBP59,000 (2014: loss
before tax and exceptional items GBP1,138,000)
-- Loss before tax GBP2,711,000 (2014: loss before tax GBP1,951,000)
-- Loss after tax GBP1,921,000 (2014: loss after tax GBP1,556,000)
-- Summer 2015 represented largest volume processed in the UK at 5 million scripts
-- Preparations are on track for delivery of the 2016 London elections
-- First pilot project for e-Marker(R)2 successfully completed
-- Order received for a new customer in the Indian education sector
Chairman's Statement
Principal Activities
During 2015 the operational performance of the business was in
line with expectations. Group revenue for the year was
GBP12,477,000 (2014: GBP13,684,000). The Group reported a loss
before tax of GBP2,711,000 for the year after incurring a charge of
GBP2,770,000 related to the write-off of certain capitalised
software developments (2014: GBP1,951,000 loss before tax after
providing for GBP813,000 of impairment charges on the Linford Wood
property). Excluding the charge, operating profit before tax was
GBP59,000 (2014: loss before tax GBP1,138.000).
The basic loss per share was 6.05p (2014: basic loss per share
4.90p). Excluding the charge, basic profit per share was 1.55p
(2014: basic loss per share 2.34p). Cash holdings at the end of
2015 were GBP1,923,000 (2014: GBP3,612,000). The Board recommends
that no final dividend be paid (2014: nil).
As expected the UK examination marking market broadly stabilised
in 2015, as there have been no further structural changes in UK
qualifications of the type seen in 2014. Economic conditions in
overseas markets, notably in Africa, have continued to be
challenging, driving further reductions in the Group's traditional
markets for scanners and print. Cost saving measures introduced as
a response to the reduced activity levels were sufficient to
stabilise the business and underpin the Group's operational
performance.
In the Education market, revenue amounted to GBP12,287,000
(2014: GBP13,027,000), a decline of 5.7%. Within that total amount,
the revenue attributable to e-Marker(R) in the UK and overseas was
stable at GBP9,344,000 (2014: GBP9,301,000).
In Non-Education markets no revenue for large-scale elections
and census projects was recognised during 2015. Non-education
revenue for the year totalled GBP190,000 (2014: GBP657,000).
In January 2016, the Group reported a change in the treatment of
capitalised development expenditure relating to the new e-Marker(R)
examination software product. Historically, development expenditure
relating to the new e-Marker(R) examination software product has
been capitalised on the balance sheet in accordance with the
requirements of IAS 38 'Intangible Assets'. A year-end review led
the Group to conclude that under IAS 38 and IAS 36, the previously
capitalised expenditure of GBP2,770,000 built up since May 2012
should be expensed to the Income Statement as the criteria for
capitalisation was no longer met. The need to develop a broader set
of features to meet market needs, combined with increasingly
challenging international market conditions, resulted in the
deferral of projected annual revenue expectations which are used to
support the carrying value of the asset, hence this resultant
change in accounting treatment. This change will result in future
expenditure on development of the new e-Marker(R) product being
charged to the Income Statement as it is incurred.
The Group remains committed to its strategy of being a leading
provider of examination processing data capture and marking
software and services and to the ongoing maintenance and
development of its e-Marker(R) examination software products.
Outlook
Going forward the Group remains committed to its strategy of
being a leading provider of examination processing data capture and
marking software and services and the Photoscribe(R) PS1000
scanners.
In the coming year the UK examination marking market is expected
to remain stable, while conditions in the overseas markets are
expected to continue to be challenging for the foreseeable future.
With cost saving measures continuing to be a focus, the outlook for
the financial year is expected to be broadly in line with the prior
year.
Chief Executive's Statement
Overview of the year
Operationally the Group performed in line with expectations in
2015, with Group revenue totalling GBP12,477,000 (2014:
GBP13,684,000).
Although the multi-year reform of GCSE and A-level examinations
in the UK continues, as expected the volume of examination marking
broadly stabilised in 2015 and there were no further structural
changes in UK examinations of the kind experienced in 2014.
At the same time local economic conditions in overseas markets,
in particular in Africa, have remained challenging and the Group
has continued to see reduced demand for its traditional scanner and
print business. As a result of the combination of these conditions,
Education revenue overall amounted to GBP12,287,000 (2014:
GBP13,027,000), a decline of 5.7%. Overall revenue from e-Marker(R)
in the UK and overseas was stable at GBP9,344,000 (2014:
GBP9,301,000).
In Non-Education markets no revenue for large-scale elections
and census projects was recognisable during 2015. Non-education
revenue for the year totalled GBP190,000 (2014: GBP657,000)
Financial Performance
Elections and
Education Commercial Census Total
GBP000's 2015 2014 2015 2014 2015 2014 2015 2014
UK Sales 9,740 9,872 15 19 20 1 9,775 9,892
International
Sales 2,547 3,155 47 53 108 584 2,702 3,792
Total 12,287 13,027 62 72 128 585 12,477 13,684
UK Sales
Overall UK sales in 2015 were in line with expectations, with
revenue of GBP9,775,000, a reduction of 1.2% (2014:
GBP9,892,000).
In the UK Education market we continue to provide electronic
marking services for a number of awarding bodies, including AQA
Education. These encompass the provision of service bureau
operations for the scanning and imaging of scripts and for the
delivery of DRS's online marking software as a service. In addition
to these solutions the business also has a small legacy of print
and engineering services business.
An important milestone was achieved in the summer of 2015 as it
represented the largest volume of scripts ever processed by DRS in
a summer series with 5 million scripts processed. It was the second
year that we processed the summer series in a cloud infrastructure
environment, which provides a scaleable, efficient and more robust
environment for such services.
Full year UK education revenue in 2015 from the combination of
these software and services offerings amounted to GBP9,740,000
(2014: GBP9,872,000), a small decline arising from a reduction in
the legacy print and engineering services business.
International Sales
As expected during 2015, DRS saw lower revenue from overseas
markets as a result of a combination of the absence of any
large-scale elections and census projects and weak demand in the
Group's traditional scanner and print business in Africa which
arose from the local economic conditions.
As a result international sales overall were further reduced,
with total revenue of GBP2,702,000 (2014: GBP3,792,000).
During 2015 we demonstrated e-Marker(R) 2 to a number of
customers and carried out a non-live pilot with an existing client
in Africa. The feedback we are receiving demonstrates that there is
increasing acceptance of electronic marking in overseas markets and
therefore a likelihood of a growing market opportunity. It is also
clear that this progress has gone hand-in-hand with a growing
sophistication in the user community, which is leading to increased
demands for a broader set of features to meet these international
market needs.
While progress in signing new business in India has been slower
than expected, towards the end of the year we achieved an important
milestone when we received an order for a pilot project from a new
client in the Indian higher education sector.
Dividend Policy
The Board follows a dividend policy which provides a return to
Shareholders whilst retaining sufficient cash to continue to fund
the development of the Group's products.
As a consequence of trading conditions in 2015, the Directors do
not propose the payment of a final dividend (2014: nil).
Research and Development
Research and development continues to be a fundamental part of
DRS's strategy. A structured programme of work to generate new
products for our education business and the PhotoScribe(R) scanners
has continued at a similar level of expenditure. A breakdown of the
investment over 2014 and 2015 is set out in the tables below:
Balance Customer
2015 Income Sheet Expenditure Projects
Statement Capitalised In
Expense GBP'000 Progress Total
GBP'000 GBP'000 GBP'000
Software Research and Development 703 695 - 1,398
Hardware Research and Development 570 - 619* 1,189
------------ ------------------- ---------- ----------
Total cash spend 1,273 695 619* 2,587
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Amortisation 264 - - 264
------------ ------------------- ---------- ----------
Total Research and Development
cost (including amortisation) 1,537 695 619* 2,851
------------ ------------------- ---------- ----------
Balance Customer
2014 Income Sheet Expenditure Projects
Statement Capitalised In
Expense GBP'000 Progress Total
GBP'000 GBP'000 GBP'000
Software Research and Development 1,192 981 - 2,173
Hardware Research and Development 491 - 302* 793
------------ ------------------- ---------- ----------
Total cash spend 1,683 981 302* 2,966
Amortisation 135 - - 135
------------ ------------------- ---------- ----------
Total Research and Development
cost (including amortisation) 1,818 981 302* 3,101
------------ ------------------- ---------- ----------
* These amount are included within Trade and other
receivables
The balance sheet expenditure capitalised shown in the tables
above relates to the internally generated software development
expenditure that has been impaired in accordance with IAS 36 (see
Note 7 Exceptional Items).
e-Marker(R)
DRS's largest development programme continues to be investment
in its examination marking software solution, e-Marker(R)2. 2014
saw the release of Whole Script Marking that will provide benefits
to customers in the UK and internationally over the next few years.
This is the foundation of a continuing development programme for
DRS's examination product suite, which will be sold alongside the
current e-Marker(R)2 product that already provides Item Level
Marking.
In 2016 further functional enhancements to the new e-Marker(R)2
platform will be developed based on the new platform.
PhotoScribe(R)
Development work to produce a new platform for the next
generation of PhotoScribe(R) scanning machines to support a range
of machines that can handle larger documents than the current PS900
range has been completed by the end of 2015. The new model, the
PS1000, demonstrates faster scanning throughput with greater paper
handling tolerances and produces higher definition images.
Assembly of the first new PhotoScribe(R) PS1000 scanners
commenced in the last quarter of 2015 and continued into 2016 to
produce a number of machines for use at the Mayor of London and
London Assembly elections in May.
Work is currently in progress to prepare the PS1000 scanners for
the general market in the second half of the year.
Liquidity and Treasury Management
The Group held GBP1,923,000 in cash at the end of 2015 (2014:
GBP3,612,000). The GBP1,689,000 fall in cash holding was primarily
used to fund the increase in inventory. Assembly of the new PS1000
PhotoScribe(R) scanning machines to be used in the Mayor of London
and London Assembly elections in May 2016 commenced in the last
quarter of the year. The increase in inventory is due to the cost
of materials required to build these new machines which will be
enhanced for the general market and sold after the election and the
cash outflow is expected to be recovered.
The Group continues to maintain its cash holding at such levels
in order to have the funds available to support its working capital
requirements and to be able to fund product development and deliver
large election and census contracts.
The Group's policy continues to be to take a cautious approach
to Treasury Management with a view to minimising its exposure to
risk. Only short-term investments that do not put the capital at
risk are considered and the Group's cash holding policy is to split
between three banks to minimise exposure to potential risk
associated with a bank failure.
The Group's principal bank through which normal business
activity is transacted continues to be Barclays Bank plc. DRS Data
Services Limited has a GBP250,000 overdraft facility and a
GBP180,000 credit line to cover operational performance bonds
required in the general line of business. However, the overdraft
was temporarily increased to GBP850,000 from April 2016 to 31 May
2016 to fund the working capital requirements for the delivery of
the Mayor of London and London Assembly elections in May 2016. In
January 2013 the Group extended its mortgage facility with Barclays
Bank plc to 2018. The balance on this mortgage at the end of 2015
was GBP1,280,000 (2014: GBP1,506,000).
In view of these arrangements the Directors believe the access
to cash resources is adequate to meet liabilities as they fall due
over the next 12 months.
Key performance indicators (KPIs)
The Company uses a number of performance indicators throughout
the business to monitor the Group's performance. The seven KPIs
presented below are considered to be the main measures which
monitor that performance is in line with the Group's strategy
covering 2011 to 2015.
2015 2014 2013 2012 2011
Financial
Total revenue (GBP000) 12,477 13,684 18,095 20,071 15,980
International education revenue
(GBP000) 2,547 3,155 4,880 4,039 2,778
Research and Development
expenditure 2,587 2,966 2,484 1,738 1,286
Operating return on sales(#1) 0.5% (8.3%) 7.0% 6.5% 6.8%
(Loss)/Earnings per share (6.05) (4.90) 4.38 3.50 2.66
Non-financial
Employees average length
of service(#2) 8.65 8.11 7.19 7.48 6.25
Total energy consumed(#3) 1.44 1.50 1.81 1.79 1.55
#1 ratio of profit before income tax adjusted for discontinued
operations and exceptional items expressed as a percentage of total
revenue
#2 average length of service in years of permanent employees in the Group
#3 reflects the total usage of electricity and gas consumed by the Group in gigawatt hours (GWh)
1 Total Revenue
Revenue performance tracks the level of activity of the
business. Monitoring revenue provides a means of measuring growth
in the business. Elections and census projects tend to be
large-scale, infrequent and non-recurring and this leads to
significant fluctuations in the Group's revenue. The focus on
examinations and assessment within education provides the
opportunity to build a stable base of consistent recurring
revenue.
In 2015 there was a year-on-year decline of 8.8% in total
revenue. UK revenue declined by 1.2% and international revenue
declined by 28.7%. The UK education market was more settled in 2015
with marking volumes remaining relatively constant year on year.
International markets once again proved more challenging with DRS
experiencing reduced activity in all its international markets
primarily due to the lack of a census contract and local economic
conditions in Africa. A more detailed year-on-year analysis of
revenue is provided in Note 3 Segment Information.
2 International Education Revenue
International education revenue was seen as a principal area for
the Group to generate sustainable sales growth. However,
challenging trading conditions in all its international markets led
to a 19.3% decline in international education revenue. In Africa
where economies are dependent on oil and minerals, access to
foreign currency slowed trading activity leading to reduced levels
of legacy and print business. The lack of a census contract
explains the lower level of revenue in the rest of the world.
3 Research and Development expenditure (cash expenditure excluding amortisation)
The Group bases its business approach on delivering a high level
of technical excellence and by forging long-term relationships with
its customers. Investment in software and hardware products to
maintain a competitive advantage is very important. Research and
Development expenditure is recorded on a monthly basis to monitor
the level of expenditure and ensure investment in comparison to the
level of recognised revenue provides a balance between spend and
profitability.
Continuing on from 2014, there are two main product development
activities. Firstly, there is a new version of the e-Marker(R)
examination marking product under development enabling DRS to offer
a broader range of examination marking solutions. Secondly, a new
version of DRS's PhotoScribe(R) scanner, PS1000, has been developed
and is now in production. The level of investment is being reduced
following completion of the design of the PS1000 PhotoScribe(R)
scanner.
4 Operating return on sales
The operating return on sales is based on loss/profit before
income tax adjusted for exceptional items expressed as a percentage
of total revenue. The strategy and business model of the Group
covers different market sectors and the solutions delivered into
these markets often involve an element of tailoring to meet
customers' needs. Monitoring the direct cost of project delivery
and ensuring adequate controls are in place to ensure they are
delivered within budgeted project costs is an important part of the
internal controls within the business.
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2015 saw the full annualised benefits from the cost saving
measures implemented during 2014. A further 8.8% year on year
reduction in revenue in 2015 led to additional cost saving measures
being required to generate a small pre-exceptional operating
profit.
The loss before income tax figure for 2014 is adjusted by
GBP813,000 relating to the impairment charge against the carrying
value of the Linford Wood property.
The loss before income tax figures for 2015 is adjusted by
GBP2,770,000 relating to the impairment charge against the carrying
value of the capitalised software development expenditure.
5 Earnings per Share
Earnings per share is a principal measure used by the Board to
measure the overall profitability of the Group and it provides a
standard by which shareholder returns are assessed.
The IAS 38 capitalised software development expenditure
impairment produced a 7.60p fall in earnings per share. The profit
per share before impairment is 1.55p (2014: loss per share
2.34p).
6 Employees' average length of service
Retaining staff and ensuring the right mix of skills is
maintained is particularly important to DRS as the work undertaken
requires highly trained staff to deliver large complex solutions to
plan. The purpose of monitoring the average length of service of
our employees is to check that we are retaining the experience
required to maintain our competitive edge. The average length of
service calculation is based on the permanent monthly
workforce.
In 2015 the Group employed an average of 218 full time
equivalent employees (2014: 238) of which 158 (2014: 185) were
permanent monthly paid and 60 (2014: 53) were weekly paid temporary
workers that cover the peaks of operational activity.
The number of permanent monthly paid full time equivalent
employees declined slightly throughout the year with 164 in January
2015 falling to 149 in December 2015.
7 Total energy consumed
The Board is conscious of its social responsibility to use
energy more efficiently and is continually seeking ways to reduce
unnecessary consumption. The overall energy usage in 2015 decreased
by 4% compared to 2014. Print activity, a major driver of energy
usage in the business, fell by 6%.
Principal Risks and uncertainties
This section sets out the principal risks and uncertainties
facing the Group, but is not exhaustive. These risks have the
potential to impact our business, revenue, profits, assets,
liquidity or capital resources.
The Board has overall responsibility for managing risks
affecting the Group. A risk management framework has been developed
and adopted across the organisation. The Board regularly reviews
either directly, or through the Audit Committee, the effectiveness
of our risk management framework and internal controls. The risk
management framework provides reasonable assurance that significant
risks are identified and addressed but there may be risks that are
unknown or presently judged to not be significant, that later prove
to be significant.
The principal risks currently facing the Group are set out below
but are not arranged in order of relative impact or
probability.
Risk Impact Mitigation
PRODUCT There is a risk that The approach to product
Products meet the Group fails to develop development is to prepare
market requirements its products on a timely details of the functional
basis to meet customer requirements of the product
and market expectation. being developed prior to
In respect of software, preparing an analysis of
this could materially the work for the current
impact the objective release which is broken
of rolling out the new down into milestones that
examination marking are measurable. These details
software which could are monitored by dedicated
subsequently reduce project managers and reviewed
future revenue opportunities. regularly by the executives
In respect of hardware, as part of a critical delivery
this could result in process.
the new PhotoScribe(R) In respect of software
scanners not meeting products, the business
the performance requirements looks to undertake pilots
expected of them in with prospective customers
the commercial market to evaluate its performance.
place and failing to In respect of hardware,
provide a commercial rigorous testing of prototypes
return on their investment. and pre-production machines
is undertaken prior to
full production.
The Group's Board regularly
challenges the executives
on the delivery process
and status of these critical
projects.
MARKET Changes to national DRS seeks to work closely
Political and and political policies with its customers and
geographical or uncertainties over regulatory authorities
uncertainties environmental and economic to which they are accountable
stability could lead to understand the environments
to changes in the size in which they operate and
of the market or delays the changes they encounter
in implementation of in order for DRS to anticipate
solutions or settlement the impact on the business
of outstanding debts. when preparing commercial
bids and being aware of
the necessary action required
when changes affect existing
business arrangements.
MARKET A number of countries To reflect the increased
Procurement in Africa are encountering risk to revenue and cash
delays by key a downturn in their flow, DRS has amended its
customers in economic position reducing business plan to reflect
Africa due their access to foreign reduced activity from these
to reduced currency which they markets and identified
access to foreign use to procure imports. possible cost savings that
currency These circumstances could be implemented if
delay the procurement required.
by key customers in
Africa of products and
services from DRS which
may lead to the loss
of repeat business.
This could also result
in delayed payment for
those products and services
from key customers.
STRATEGIC DRS may not have sufficient DRS has adjusted its cost
Appropriate resources and resilience base and organisational
resource and to be able to realign structure in line with
resilience the business to address the current outlook. Product
to meet market changing market and development, scope and
and customer customer requirements, investment is focused on
requirements or to respond to the delivering customer requirements
failure to deliver a and where necessary will
major software or hardware be required to be realigned
development project with these requirements.
in light of the economic DRS continues to focus
contraction in its African on key opportunities that
markets. will enable it to support
its strategic objectives.
STRATEGIC There is a risk that DRS places a very high
Over reliance the Group's business priority on maintaining
on key customers model of focussing on long-term working relationships
large-scale, technically with its principal customers,
complex projects places especially AQA. It is the
over-reliance on a small Group's practice to commence
number of key customers' contract renewal negotiations
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tying up the Group's as soon as practicable.
working capital. This However, in the event of
could result in revenue AQA's long-term relationship
and profit volatility. not being renewed, the
In the case of AQA, Group would be required
they represent 64% of to restructure its operations
the Group's revenue and cost base to reflect
in 2015. Renewal of a reduced level of operational
this contract, which activity and income.
expires in March 2018,
will be a significant
event requiring careful
management to avoid
sudden adverse changes
in both the operational
and financial stability
of the Group.
STRATEGIC In 2016, the project A dedicated and fully trained
Completion for the provision of project team supported
of the Mayor hardware, software and by appropriate specialist
of London and services to the GLA hardware and software support
London Assembly for the Mayor of London teams have been put in
election and the London Assembly place throughout the preparation
elections will reach and delivery of the election
a critical milestone project to control the
on the day of the count delivery process and ensure
on Friday, 6 May 2016 all stakeholders are fully
that requires DRS to trained in the execution
produce election results of the count process.
within a short finite The election delivery plan
deadline in a public involves extensive testing
environment that affords of hardware and software
little room for any applications, and using
delays or errors. the equipment in User Acceptance
Tests with GLA to ensure
the count process to be
used on the day of the
election meets the requirements.
STRATEGIC The risks associated The Group's strategic approach
Effect of complexity with providing one off takes into account the
of customer large-scale time critical, need to plan ahead to ensure
environments technically complex adequate capacity and access
on working solutions place abnormal to finance are available
capital and demands on the Group's along with investing in
other resources operational personnel the development of its
and its working capital people, products and services,
requirements which can and where appropriate recognising
require resources to the need to identify and
be diverted from other work with specific third-parties
key activities. In 2016, that provide expertise
the Group is a party and complementary skills
to a significant contract to enable delivery of the
to provide the technology contractual requirements.
and expertise for the Where project costs exceed
electronic counting original expectations and
of ballots in London result in the Group having
for the Mayor of London to provide additional resources,
and London Assembly it may be necessary to
elections which has extend financial facilities
required significant temporarily.
working capital investment Further development work
to produce a large number is planned on the PS1000
of PS1000 PhotoScribe(R) scanners following the
scanners to support London elections to prepare
the count. This has these machines for commercial
meant that working capital use to enable the inventory
is tied up in stock to be converted back to
at a higher level than cash as soon as possible.
usual.
OPERATIONAL Handling large volumes The business has engaged
Data security of sensitive data is in an ongoing improvement
a fundamental part of programme to ensure the
the business and there use of up-to-date business
is a possibility that practice and appropriate
this information could hardware, infrastructure
be accessed by unauthorised and software allow security
people and its integrity measures to be applied,
compromised, resulting maintained and controlled
in loss of revenue and at a suitable level to
a potential negative meet the needs of both
impact on reputation. customer and corporate
obligations. The Company
continues to mitigate information
security risk through certification
to BS ISO/IEC 27001.
OPERATIONAL Any substantial business Certification of compliance
Infrastructure disruption, whatever to Business Continuity
and process the cause, could significantly Management has been in
resilience impede our ability to place since February 2012
operate as usual. This (Standard ISO 22301). The
could be as a consequence Standard the Company adheres
of the lack of availability to requires ongoing review
or denied access to of the risks, processes
premises, equipment and controls supporting
or data used in our business continuity and
normal operations. Significant incident management. The
outages of this nature system provides a series
could result in missed of mitigating and contingency
service level arrangements, measures that provide assurance
reputational damage of process and data resilience
and loss of revenue should the unexpected happen.
and profit. Due diligence processes
are also in place to ensure
similar assurance of our
key supply chain.
OPERATIONAL The business model requires Recruitment, retention
Employee recruitment the design, development and development of key
and retention and implementation of staff is important for
of appropriately technically complex DRS and a priority is placed
skilled staff solutions that makes on identifying and supporting
the business very dependent key personnel throughout
on the skill of a small the business whilst the
number of key personnel. necessary skills are developed
to meet future requirements.
Employees
We respect and value the individuality and diversity that each
of our employees brings to the business. We are committed to equal
opportunities and the development of our people to realise their
potential, in line with best practice and in accordance with our
Investors In People accreditation. As at 31 December 2015, 90 of
our employees out of a total of 156 were male and 66 were female.
Of these 13 were senior managers, 9 of whom were male and 4 were
female. In terms of the Company's Board of Directors there were 5
Directors, 3 male and 2 female.
Board Changes
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Sir David Brown and John Linwood retired from the Board on
completion of their full terms of office at the conclusion of the
AGM on 18 May 2015. Alison Reed acted as Chairman on an interim
basis from 18 May 2015 and resumed her role as Senior Independent
Director on 1 July 2015 on Keith Bogg's appointment as
Chairman.
Cautionary statement
Certain statements made in this announcement are forward-looking
statements. Such statements are made by the Directors in good faith
based on the information available to them up to the time of their
preparation of this report and such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
Unless otherwise required by applicable laws, regulations or
accounting standards, DRS Data and Research Services plc does not
undertake any obligation to update or revise any forward-looking
statements, whether as a result of new information, future
developments or otherwise.
Current Trading
In the first half of 2016 the Group will be focussing on two
principal operational areas.
Preparation for the Mayor of London and London Assembly
elections will be a major priority leading up to the day of the
count on 6(th) May 2016. Manufacturing of the required number of
new DRS Photoscribe(R) PS1000 scanners, which will be used in
combination with the stock of existing PS900 series machines to
deliver the project, has now completed and all other preparations
are on track.
In parallel the business will be focused on the preparation for,
and delivery of, the peak examination series in the UK in the
summer. Live examination marking will commence immediately after
the completion of the London election count.
Going forward the Group remains committed to examination
processing, developing its electronic marking software and services
and hardware. DRS has adjusted its cost base and organisational
structure in line with the current outlook and with limited
resources the roadmap for e-Marker(R) 2 software development
currently prioritises features to support new business
opportunities. Work is currently in progress to prepare the PS1000
scanners for the general market in the second half of the year. DRS
primary focus is the education market and currently there are no
new census or election opportunities in the pipeline.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Strategic
Report, the Annual Report, the Remuneration Report and the
Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit
or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements; and
-- prepare the financial statements on a going concern basis
unless it is inappropriate to assume that the Company will continue
in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and the Remuneration Report comply with
the Companies Act 2006 and Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors confirm that:
-- in so far as each Director is aware there is no relevant
audit information of which the Company's auditor is unaware;
and
-- the Directors have taken all steps that they ought to have
taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditor is
aware of that information.
The Directors are responsible for preparing this Annual Report
in accordance with applicable law and regulations. Having taken
advice from the Audit Committee, the Directors consider the Annual
Report and Financial Statements, taken as a whole is fair, balanced
and understandable and provide the information necessary for
Shareholders to assess the Company's performance, business model
and strategy.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
To the best of our knowledge:
-- the Group Financial Statements, prepared in accordance with
the IFRSs as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
-- this Annual Report, including the Strategic Report and the
Financial Statements includes a fair view of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the prinicipal risks and
uncertainties that they face.
BY ORDER OF THE BOARD
S J Gowers A M Tebbutt
Chief Executive Officer Finance Director
25 April 2016 25 April 2016
Consolidated Income Statement
For the years ended 31 December
Notes 2015 2014
GBP000 GBP000
-------- ---------
Revenue 6 12,477 13,684
Cost of sales (8,075) (9,810)
-------- ---------
Gross profit 4,402 3,874
-------- ---------
Other operating income 8 8 13
Selling and marketing costs (617) (1,097)
Administrative expenses (6,436) (4,660)
Finance costs 11 (68) (81)
Loss before income tax (2,711) (1,951)
Analysed as:
Profit/(loss) before income tax and
exceptional items 59 (1,138)
Exceptional items - impairment adjustments 10 (2,770) (813)
Loss before income tax (2,711) (1,951)
-------------------------------------------- ------ -------- ---------
Tax Credit 12 790 395
Loss for the period attributable to
owners of the parent (1,921) (1,556)
Earnings per share
Basic loss per share 25 (6.05p) (4.90p)
Diluted loss per share 25 (6.05p) (4.90p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
2015 2014
For the year ended 31 December GBP000 GBP000
Loss for the period (1,921) (1,556)
Other comprehensive income - -
Total comprehensive loss for the
period attributable to owners
of the parent (1,921) (1,556)
-------- ---------
Consolidated statement of financial position
Notes 31 December 31 December
2015 2014
GBP000 GBP000
------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 13 2,157 2,152
Intangible assets 14 33 2,423
2,190 4,575
------------ ------------
Current assets
Inventories 15 2,364 629
Trade and other receivables 16 2,593 1,452
Current tax assets 12 438 522
Cash and cash equivalents 17 1,923 3,612
------------ ------------
7,318 6,215
------------ ------------
Total assets 9,508 10,790
------------ ------------
EQUITY
Capital and reserves attributable to
the Company's equity holders
Share capital 18 1,731 1,731
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Share premium account 19 5,377 5,377
Capital redemption reserve 19 115 115
Treasury shares 18 (1,166) (1,166)
Own shares reserve 19 (298) (298)
Retained earnings (629) 1,292
------------ ------------
Total equity 5,130 7,051
------------ ------------
LIABILITIES
Non-current liabilities
Borrowings 20 1,054 1,280
Deferred income tax liabilities 21 52 409
Provisions 22 132 104
1,238 1,793
------------ ------------
Current liabilities
Borrowings 20 226 226
Trade and other payables 23 2,914 1,720
3,140 1,946
------------ ------------
Total liabilities 4,378 3,739
------------ ------------
Total equity and liabilities 9,508 10,790
------------ ------------
The financial statements were approved by the Board of Directors
on 25 April 2016 and signed on its behalf by:
S J Gowers A M Tebbutt
Chief Executive Officer Finance Director
DRS Data and Research Services plc
Registered Company Number: 0959401
Consolidated statement of changes in equity
Share Capital Own
Share premium redemption Treasury shares Retained
capital account reserve shares reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2014 1,731 5,377 115 (1,166) (306) 2,996 8,747
Dividend paid to Shareholders - - - - - (127) (127)
Employee share-based
compensation - - - - - (13) (13)
Own shares vesting - - - - 8 (8) -
Transactions with owners - - - - 8 (148) (140)
Loss for the period and
total comprehensive income
for the period - - - - - (1,556) (1,556)
At 31 December 2014 1,731 5,377 115 (1,166) (298) 1,292 7,051
------------------------------ -------- -------- ----------- -------- -------- --------- -------
At 1 January 2015 1,731 5,377 115 (1,166) (298) 1,292 7,051
Loss for the period and
total comprehensive income
for the period - - - - - (1,921) (1,921)
At 31 December 2015 1,731 5,377 115 (1,166) (298) (629) 5,130
------------------------------ -------- -------- ----------- -------- -------- --------- -------
Consolidated statement of cash flows
For the years ended 31 December
Notes 2015 2014
GBP000 GBP000
-------- --------
Cash flow from operating activities
Loss after taxation (1,921) (1,556)
Adjustments for:
Tax credit (790) (395)
Depreciation of property, plant and equipment 286 315
Impairment of property, plant and equipment - 813
Amortisation of intangible assets 327 268
Impairment of intangible assets 2,770 -
IFRS 2 credit in respect of LTIP shares - (13)
(Profit)/loss on sale of property, plant
& equipment and intangibles (6) 25
Exchange losses recognised in the Income
Statement 7 3
Operating income (5) (13)
Interest expense 61 72
(Increase)/decrease in inventories (1,735) 345
(Increase)/decrease in trade and other receivables (1,141) 2,604
Increase/(Decrease) in trade and other payables 1,194 (1,277)
Increase in long-term provisions 28 15
Cash (used in)/generated from operations (925) 1,206
-------- --------
Interest paid (61) (72)
Research and Development tax credit 517 434
-------- --------
Net cash generated from operating activities 456 362
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment
(PPE) (291) (372)
Proceeds from sale of PPE 6 66
Payment for intangible assets (707) (987)
Interest received 5 13
-------- --------
Net cash used in investing activities (987) (1,280)
-------- --------
Cash flows from financing activities
Dividends paid to Shareholders - (127)
Repayment of loan (226) (226)
-------- --------
Net cash used in financing activities (226) (353)
-------- --------
Net decrease in cash and cash equivalents (1,682) (65)
Cash and cash equivalents at beginning of
period 3,612 3,680
Exchange decrease on cash (7) (3)
Cash and cash equivalents at end of period 27 1,923 3,612
-------- --------
Notes to the financial statements
for the year ended 31 December 2015
1 Summary of significant accounting policies
1.1 Basis of preparation
These financial statements are for the year ended 31 December
2015 and are presented in Pounds Sterling rounded to the nearest
thousand. They are prepared on a going concern basis. In
considering going concern, the Directors have reviewed the Group's
future cash requirements and earnings projections for a period of
12 months from the anticipated signing date. The Directors believe
these forecasts have been prepared on a prudent basis and have also
considered the impact of a range of potential changes to trading
performance. The Directors have concluded that the Group should be
able to operate within its current facilities and comply with its
banking covenants for the foreseeable future and therefore believe
it is appropriate to prepare the financial statements of the Group
on a going concern basis. This is supported by the Group's
liquidity position at the year-end.
The principal accounting policies of the Group are set out below
and have been consistently applied to all years presented in these
financial statements.
The principal accounting policies have remained unchanged from
the previous year.
1.2 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary made up to 31 December
each year. The parent controls a subsidiary if it is exposed, 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 subsidiary. All entities within the Group have a
reporting date of 31 December.
The 2015 consolidated financial statements incorporate the
financial statements of the Company, and its subsidiary, DRS Data
Services Limited (together referred to as the 'Group'). DRS Data
and Research Services plc is the holding company and ultimate
controlling entity.
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On acquisition, the assets and liabilities and contingent
liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the consideration
transferred over the fair values of the identifiable net assets
acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets
acquired (i.e. discount on acquisition) is credited to profit and
loss in the period of acquisition.
Where necessary, adjustments are made to the financial
statements of the subsidiary to bring the accounting policies used
into line with those used by the Group.
All transactions and balances between Group companies are
eliminated on consolidation including unrealised gains and losses
on transactions between Group companies. Where unrealised losses on
intra-group asset sales are reversed on consolidation, the
underlying asset is also tested for impairment from a group
perspective. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Composition of the Group
Name of Country of Principal activity Proportion of interest
subsidiary incorporation held by the Group
and principal
place of business
-------------- -------------------- ---------------------- --------------------------
31 December 31 December
2015 2014
-------------- -------------------- ---------------------- ------------ ------------
Specialist provider
of automated data
DRS Data capture technology
Services and solutions in
Limited UK the UK and overseas 100% 100%
-------------- -------------------- ---------------------- ------------ ------------
Seckloe
279 Limited UK None - Dormant 100% 100%
-------------- -------------------- ---------------------- ------------ ------------
1.3 Revenue recognition
Revenue is the fair value of consideration received or
receivable by the Group for goods supplied and services provided
net of VAT and trade discounts.
The Group often enters into sales transactions involving a range
of the Group's products and services relating to software products,
professional services, scanning machines and printed forms. The
Group provides tailored solutions to meet specific customer
requirements. It is necessary to consider the nature of the
contract with the end user, the combination of deliverables and how
transfer of responsibility of supply is deemed to take place. Each
element of supply follows the revenue recognition criteria set out
below for each separately identifiable component of the sales
transaction.
For election contracts in which DRS is a principal contractor,
revenue is recognised when the election has been successfully
completed.
For examination marking contracts, where DRS is undertaking part
of the marking process, revenue is normally recognised when the
marks of the examination series have been agreed with the Awarding
Body. However for large contracts (such as AQA), delivery of the
series is split into two parts. One element relates to providing
and maintaining the marking environment and support services for
which a fixed monthly sum is recognised. The second element relates
to the actual marking activity which is based on a price per script
determined by the volume of examinations processed and is
recognised when the marks of the examination series have been
agreed with the Awarding Body.
Examination marking software is supplied to customers and a
license fee is charged retrospectively for use based on the number
of examination scripts marked using the software product, often
supplied in conjunction with the sale of services as explained in
the paragraph on examination marking contracts above. The license
fee for Multiple Choice Questions (MCQ) software is a fixed fee
which is charged up-front for use of the software and recognised in
the Income Statement when the customer confirms acceptance of the
software.
For census contracts, DRS usually provides the data capture
solution to the in-country census authority who are responsible for
conducting the actual census. DRS normally agrees to a number of
specific deliverables relating to discrete delivery times and
locations in respect of the products and services outlined below.
The revenue of these discrete items is recognised when the goods
and services have been delivered and accepted by the end user.
The consideration is allocated to each component according to
its fair value, being the amount for which each component could be
sold separately.
Specialist software products have been created for each market
sector. For elections there is e-Counting, for education there is
e-Marker(R) and Multiple Choice Questions (MCQ), and census has its
own customised software. Revenue in respect of software for
elections and census is recognised as a single charge based on the
size and complexity of the count.
Sales of services are recognised in the accounting period in
which the work on the services is performed and the obligations
have been satisfied in accordance with the customers' agreed
requirements.
Sales of scanning machines and associated equipment are
recognised when the products have been delivered to the customer
and it is probable that economic benefits associated with the
transaction will flow to the Group.
Large print contracts are recognised on a stage of completion
basis. Print revenue is recognised in accordance with hours and
costs incurred on the contract as a proportion to the total time
and cost estimated for the contract.
Rental income is recognised on a straight-line basis over the
period of the lease.
In the case of long-term maintenance service contracts, revenue
is recognised on a time apportionment basis in accordance with the
contract, and all costs are released to the Income Statement based
on percentage of completion. Revenue is recognised on a
straight-line time apportionment basis over the length of the
underlying contract. The calculated profit on a contract is
recognised in proportion to the recognised revenue.
Deferred income arises in two circumstances:
-- where stage payments are provided to fund the working capital
impact of the work in progress and are not made in accordance with
the delivery schedule resulting in timing differences; and
-- up-front payments on service contracts.
1.4 Exceptional items
Exceptional items are non-recurring material items which are
outside the normal scope of the Group's ordinary activities. Such
items are separately disclosed by virtue of their nature or
incidence to enable a full understanding of the Group's financial
performance. Details of these items are provided in the relevant
notes.
1.5 Operating leases
(a) The Group is the lessee
Leases where the lessor retains substantially all the risks and
rewards of ownership are classified as operating leases. Payments
made under operating leases are charged to profit or loss on a
straight-line basis over the period of the lease.
(b) The Group is the lessor
Scanning equipment leased to third parties under operating
leases is included in property, plant and equipment in the balance
sheet. It is depreciated over its expected useful life. Rental
income is recognised on a straight-line basis over the lease
term.
1.6 Dividends
Under IFRSs proposed dividends do not meet the definition of a
liability until such time as they have been approved by
Shareholders at the AGM. Therefore, the Group does not recognise a
liability in any period for dividends that have been proposed but
will not be approved until after the balance sheet date.
1.7 Segment reporting
Segmental information is provided for each operating segment
whose results are regularly reviewed by the Chief Executive Officer
to make decisions concerning the assessment of performance or
allocation of resources and where there is discrete financial
information available.
1.8 Joint arrangements
Where a group company enters into a contractual agreement to
share control of an arrangement, under which each party has rights
to assets and obligations for liabilities relating to the joint
arrangement, it is treated as a joint operation. Such arrangements
are accounted for by recognising the company's share of assets,
liabilities, revenues and expenses according to that company's
share under the contractual arrangement.
The Group's only joint arrangement is DRS Data Services
Limited's work with Electoral Reform Services Limited (ERS) and
IntElect(R) to deliver the 2016 London Mayor and Assembly
elections. Its principal place of business is in the UK. DRS Data
Services Limited is entitled to a share of assets, liabilities,
revenues and expenses in accordance with which of the two entities
has agreed to supply the various deliverables of the contract. The
agreement itemises revenue across the deliverables and it is this
basis which is used to apportion revenue and each company will be
responsible for the related costs of delivery against their
specific responsibilities. No revenue or expenses have been
recognised in the current or preceding year.
1.9 Foreign currency translation
Functional and presentational currency
The consolidated financial statements are presented in Sterling
which is also the Group's functional currency.
Transactions and services
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Foreign currency transactions and balances are translated into
Pounds Sterling, using the exchange rates prevailing at the dates
of the transactions (spot exchange rate). Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the re-measurement of monetary items at year-end exchange
rates are recognised in profit or loss within Finance Income and
Finance Costs.
1.10 Property, plant and equipment
Land and buildings relate to the Group's head office at Linford
Wood, Milton Keynes. All property, plant and equipment is shown at
cost less depreciation, except for land which is shown at cost.
Cost includes expenditure that is directly attributable to the
acquisition of the item.
Depreciation is provided on a straight-line basis to allocate
the cost of each asset less its estimated residual value over its
estimated useful life, as follows:
Freehold buildings 25 years
Computer equipment 3 years
Fixtures and fittings 3 - 5 years
Plant and machinery 3 - 10 years
Rental machines 3 years
Motor vehicles 5 years
Items of property, plant and equipment are subject to review for
impairment where indications of impairment exist. Any impairment is
charged to the Income Statement as it arises.
1.11 Intangible assets
(a) Computer software
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and to bring into use the specific
software. These costs are amortised over three years, being the
estimated useful life of the software.
Costs associated with maintaining computer software programs are
recognised as an expense as incurred. Costs that are directly
associated with the production of identifiable and unique software
products controlled by the Group, and that will probably generate
economic benefits exceeding costs beyond one year, are recognised
as intangible assets.
Computer software that has been capitalised is amortised on a
straight-line basis over three years from the date it is put to
operational use.
(b) Research and development
Research expenditure is recognised as an expense as incurred.
Costs incurred on development projects (relating to the design and
testing of new or improved products) are recognised as intangible
assets when it is probable that the project will be a success,
considering its commercial and technological feasibility, costs can
be measured reliably and the Group has the resources available to
complete the development. Development costs that have been
capitalised are amortised from the commencement of their use on a
straight-line basis over the period of their expected benefit, not
exceeding five years.
1.12 Inventories
Inventories are valued at the lower of cost and net realisable
value. Cost is determined using the first-in, first-out method. The
cost of finished goods and work-in-progress comprises raw
materials, direct labour, other direct costs and, where
appropriate, a proportion of attributable production overheads. Net
realisable value is the estimated selling price in the ordinary
course of business reduced by the costs to complete and applicable
selling expenses.
1.13 Trade and other receivables
Trade and other receivables are initially recognised at fair
value plus transaction costs and subsequently carried at amortised
cost. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of the receivables. The amount of the provision is the
difference between the asset's carrying amount and the present
value of estimated future cash flows. Movements in the provision
are recognised in profit or loss.
1.14 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks and other short-term, highly liquid investments
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value with
maturities of three months or less from inception.
1.15 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made as to the amount of
the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
1.16 Share capital and equity
Share capital comprises Ordinary shares with a nominal value of
5p each.
Where the Company purchases Treasury shares or where shares are
held in a restricted share scheme trust, the consideration paid,
including any directly attributable incremental costs (net of
income taxes) is deducted from equity attributable to the Company's
equity holders until the shares are cancelled, re-issued or
disposed of. Where such shares are subsequently sold or re-issued
any consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects is
included in equity attributable to the Company's equity
holders.
1.17 Accounting for income taxes
The tax expense recognised in profit or loss comprises the sum
of deferred tax and current tax not recognised in other
comprehensive income or equity.
The tax payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the Income Statement
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group's and subsidiaries'
liability for current tax is calculated by using tax rates and laws
that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
liability method. Deferred tax is not provided on the initial
recognition of goodwill, nor on the initial recognition of an asset
or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the assets to be recovered.
Deferred tax is calculated at the tax rates and laws that have
been enacted or substantively enacted and that are expected to
apply to the period when the asset is realised or the liability is
settled. Changes in deferred tax assets or liabilities are
recognised as a component of tax income or expense in profit or
loss, except where they relate to items that are recognised in
other comprehensive income or directly in equity, in which case the
related deferred tax is also recognised in other comprehensive
income or equity, respectively.
R&D tax credit claims are recognised following formal
confirmation of acceptance by HMRC or where previous precedence is
established and are reflected in the tax credit line of the Income
Statement.
1.18 Employee Benefits
(a) Pension obligations
The Parent Company operates defined contribution pension schemes
in which employees of the UK based subsidiaries may participate.
The Group has no legal or constructive obligations to pay further
contributions after payment of the fixed contribution. The
contributions to the pension schemes are charged to profit or loss
as they accrue, thereby matching the cost of the Group's pension
obligations to the period of employment to which they relate.
(b) Bonus plans and profit sharing
The Group recognises a liability and expense for bonuses and
profit sharing. Managers may be entitled to a bonus based on a
formula that takes into consideration revenue, EPS, residual income
in relation to the employee's responsibilities and an assessment of
the individual's performance which includes non-financial criteria.
Employees who do not participate in the bonus scheme are entitled
to participate in a profit sharing scheme based on the
profitability of the subsidiary. The cost of providing these
schemes is accrued against profits in the period in which the bonus
is earned.
(c) Share-based employee remuneration
All employee services received in exchange for the grant of any
share-based remuneration are measured at their fair values. These
are indirectly determined by reference to the fair value of the
share options or shares awarded. Their value is appraised at the
grant date and excludes the impact of any non-market vesting
conditions (for example, profitability and sales growth
targets).
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All share-based remuneration is ultimately recognised as an
expense in the Income Statement with a corresponding credit to
Shareholders' funds. If vesting periods or other vesting conditions
apply, the expense is allocated over the vesting period, based on
the best available estimate of the number of share options or
shares expected to vest. Non-market vesting conditions are included
in assumptions about the number of options that are expected to
become exercisable. Estimates are subsequently revised if there is
any indication that the number of share options expected to vest
differs from previous estimates.
Upon exercise of share options fulfilled by the issue of new
shares, the proceeds received, net of any directly attributable
transaction costs up to the nominal value of the shares issued are
allocated to share capital with any excess being recorded as share
premium. Options or share grants fulfilled from shares held by
employee share trusts are credited to the own share reserve.
1.19 Financial Assets
Financial assets are recognised when the Group becomes a party
to the contractual provisions of the financial instruments and are
initially measured at fair value adjusted by transactions cost,
except for those carried at fair value through profit and loss
(FVTPL) which are measured initially at fair value with transaction
costs expensed in the Income Statement. The fair values of
financial assets held at fair value through profit or loss are
determined by reference to active market transactions or using a
valuation technique where no active market exists.
For the purpose of subsequent measurement, financial assets are
classified into the following categories upon initial
recognition:
-- Loans and Receivables
All financial assets are subject to review for impairment at
least at each reporting date to identify whether there is any
objective evidence that a financial asset or a group of financial
assets is impaired. All income and expenses relating to financial
assets are recognised in profit or loss.
Financial assets are derecognised when the contractual rights to
the cash flows from the financial assets expire, or when the
financial assets and all substantial risks and rewards are
transferred.
The Group's financial assets fall within the loans and
receivables category. Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are
measured at amortised cost using the effective interest method,
less provision for impairment. Discounting is omitted where the
effect of discounting is immaterial. The Group's cash and cash
equivalents, trade and most other receivables fall into this
category of financial instrument.
Individually significant receivables are considered for
impairment when they are past due or when other objective evidence
is received that a specific counterparty will default.
1.20 Financial Liabilities and Equity
Financial liabilities include borrowings and trade and other
payables.
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all
of its financial liabilities.
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument. All financial
liabilities are recorded at fair value, net of direct issue
costs.
A financial liability is derecognised only when the obligation
is extinguished, that is, when the obligation is discharged or
cancelled or expires.
Where the contractual terms of share capital do not have any
terms meeting the definition of a financial liability then this is
classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
1.21 Impairment testing of intangible assets and property, plant and equipment
For impairment assessment purposes, assets are grouped at the
lowest levels for which there are largely independent cash inflows
(cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Individual assets or cash-generating units are tested
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount, which is the higher of fair value less costs of
disposal and value-in-use. To determine the value-in-use,
management estimates expected future cash flows from each
cash-generating unit and determines a suitable interest rate in
order to calculate the present value of those cash flows. The data
used for impairment testing procedures are directly linked to the
Group's latest approved budget, adjusted as necessary to exclude
the effects of future reorganisations and asset enhancements.
Discount factors are determined individually for each
cash-generating unit and reflect management's assessment of
respective risk profiles, such as market and asset-specific risks
factors.
Impairment losses for cash-generating units are charged pro rata
to the assets in the cash-generating unit. All assets are
subsequently reassessed for indications that an impairment loss
previously recognised may no longer exist. An impairment loss is
reversed if the asset's or cash-generating unit's recoverable
amount exceeds its carrying amount.
2 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are
described in Note 1, the Directors of the Company considered
judgements and estimates impacting the carrying value of assets and
liabilities that are not readily apparent from other sources. The
estimates are based on management's best knowledge of current
events and actions. Actual results may differ from those
estimates.
2.1 Critical judgements that the Directors have made:
Research and development expenditure
-- An impairment adjustment was made for GBP2,770,000 for the
full value of the internally generated software development
expenditure that has been capitalised at the 31 December 2015
year-end. The judgement is
whether the IAS 38 criteria is not being met. See Note 7(a).
Revenue recognition
-- Determining when to recognise revenues from services requires
an understanding of both the nature and timing of the services
provided and the customers' pattern of consumption of those
services, based on historical experience and knowledge of the
market. Recognition of services revenue requires significant
judgement in determining actual work performed. On contracts which
incorporate multiple products and services such as scanning
machines, software, printed forms and professional services it is
necessary to consider the nature of the contract with the end user,
the combination of deliverables and how transfer of responsibility
of supply is deemed to take place. The judgement is when
performance conditions are satisfied for the respective elements of
the solution to become recognised as revenue.
Tax credits
-- research and development tax credits are included within the
tax charge/credit in the Income Statement. The judgement is whether
to treat this credit as a reduction in corporation tax or as other
income if it is considered to be a source of funding. Management do
not consider the research and development tax credits to be a
source of funding and have therefore made a judgement to include
this within the tax charge/credit within the Income Statement.
Inventory valuation
-- PS1000 PhotoScribe(R) scanners are valued at cost in
inventory and PS900 PhotoScribe(R) scanners are held at nil net
book value. The judgement is that the PS1000 machines realisable
value is in excess of their cost valuation in inventory and that
the PS900 machines have minimal realisable value given their
obsolescent components together with the uncertainties of
marketability and support.
2.2 Areas considered to involve significant estimates:
Inventory provisions
-- Inventory provisions reflect future sales over the useful
life of the product. In the case of the high value PS900
PhotoScribe(R) scanning machines it is necessary to estimate the
expected useful life of the product and to estimate the volume of
expected machine sales over the remaining useful life. Where there
are insufficient machines held in stock to meet expected demand,
machines are released from the inventory provision based on this
estimate. The carrying value of the total inventory provision at
the year end is GBP993,000 (2014: GBP993,000). See Note 12.
Dilapidations provision
-- There are six property leases relating to eight business
units occupied by operations. All the leases require the tenant to
address the cost of leasehold dilapidations at the end of the
lease. In order to apportion the dilapidation cost over the life of
the lease, a provision is created to reflect an estimate of the
projected dilapidation cost accruing over the life of the leases.
At the year end GBP132,000 (2014: GBP104,000) is provided. See Note
19.
Useful economic lives of depreciable assets
-- Management reviews its estimate of the useful economic lives
at each reporting date, based on the expected utility of the
assets. Uncertainties in these estimates relate to the conditions
of the property assets and technological obsolescence that may
change the utility of certain software and IT equipment. See Notes
10 and 11.
Carrying value of the Linford Wood property
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-- The carrying value of the Linford Wood property is based on
fair value less costs to sell. As a result of this the Group
recognised an impairment loss on the property of GBP813,000 during
2014 in accordance with IAS 36. Details of the estimates used are
in Note 7(b). The carrying value as at 31 December 2015 was
GBP1,528,000 (2014: GBP1,576,000). See Note 10.
3 Segment information
The principal activities of the Group are the provision of
software, data capture services, the manufacture, sale and support
of optical and image scanning equipment, design and printing of
documentation used for data capture and bureau services. The Group
is organised functionally, with each function of the business
specialising in its own area of expertise. Project managers look to
the functional areas to provide the appropriate tailored mix of
products and services to fulfil each specific contract. In turn the
functional areas are supported by indirect cost centre departments
such as Research and Development and Information Systems.
Management consider that there is only one operating segment, as
this is the lowest level at which discrete financial information is
available and is reflected by a single set of management accounts
that are used throughout the Group. However, it reviews revenue
according to various segments and regions and the revenue split is
disclosed below.
The delivery of market focussed solutions results in a
'many-to-many' relationship between department costs and revenue
streams. The individual standard costs of each type of supply are
carefully controlled, but due to the effect sales mix has on
recovery rates, reporting the relative profitability of the revenue
streams would not be consistent with management processes within
the Group.
The revenue analysis generated from external customers for the
year ended 31 December 2015 is as follows:
Education revenue Non-education revenue
Examination Elections
& Assessment Other Commercial & Census Total
GBP000 GBP000 GBP000 GBP000 GBP000
-------------- -------- ------------ ---------- --------
Region
UK 9,416 324 15 20 9,775
Africa 2,485 1 1 - 2,487
Rest of world 52 9 46 108 215
Total 11,953 334 62 128 12,477
-------------- -------- ------------ ---------- --------
Revenue arising from specific products and
related services thereon:
e--Marker(R) 9,344
e-Counting 128
-------------- -------- ------------ ---------- --------
All of the Group's revenue from continuing operations of
GBP12,477,000 was generated from UK operations.
Elections and Census revenue is aggregated on the basis that the
operating segments share similar economic characteristics.
DRS's largest customer generated revenue of GBP8,021,000 in 2015
(2014: GBP8,112,000) and is shown under UK examinations and
assessment. There were no other customers that accounted for more
than 10% of revenue in 2015.
The contract to count the 2016 London Mayor and Assembly
elections electronically was won by IntElect(R), a joint
arrangement between DRS Data Services Limited and ERS (Electoral
Reform Services Limited). The Group did not recognise any revenue
in the year in respect of this contract.
The revenue analysis generated from external customers for the
year ended 31 December 2014 is as follows:
Education revenue Non-education revenue
Examination Elections
& Assessment Other Commercial & Census Total
GBP000 GBP000 GBP000 GBP000 GBP000
-------------- -------- ------------ ---------- --------
Region
UK 9,408 464 19 1 9,892
Africa 2,906 30 2 - 2,938
Rest of world 200 19 51 584 854
Total 12,514 513 72 585 13,684
-------------- -------- ------------ ---------- --------
Revenue arising from specific products and
related services thereon:
e--Marker(R) 9,301
e-Counting 14
-------------- -------- ------------ ---------- --------
4 Revenue and loss before tax
The significant categories of revenue recognised during the
period are:
2015 2014
GBP000 GBP000
Sale of goods 2,491 2,885
Rendering of services 9,950 10,826
Operating lease income 36 153
12,477 13,864
-------- --------
Loss on ordinary activities before taxation is stated after:
2015 2014
GBP000 GBP000
Auditor's remuneration:
Fees payable to the company's auditor for
the audit of the company's annual accounts 15 7
Fees payable to the company's auditor for
other services 69 40
Depreciation 286 315
Amortisation 327 268
Hire of plant and machinery 61 61
R&D expense 1,273 1,683
Impairments 2,770 813
Share-based payment credit - (13)
Fees payable to the company's auditor for other services
comprises:
2015 2014
GBP000 GBP000
* audit of subsidiary of the company 42 26
* audit related assurance services 24 14
3 -
* other non-audit services
69 40
-------- --------
5 Other operating income
2015 2014
GBP000 GBP000
Interest income
- bank interest 5 13
- Peladon deferred consideration 3 -
8 13
-------- --------
The Peladon deferred consideration arises from the sale of
Peladon Software Inc. to The Software Construction Company Inc.,
Texas during September 2010. The initial consideration was $1
followed by additional consideration to DRS over the course of the
five year period following completion, based on the future gross
revenues of Peladon Software Inc. and its subsidiaries that are
generated by the sales of licences for all DocXP(TM) software. The
percentage of such gross revenues that the Group was entitled to
ranged from 5% to 10% in each of the five years following
completion. Such additional consideration is capped at a maximum
amount of US $500,000. The last payment under the arrangement was
for the year ended 30 September 2015 and was received in November
2015.
6 Directors and employee benefit expense
Staff costs during the year were:
2015 2014
GBP000 GBP000
Wages and salaries 6,808 7,794
Social security costs 724 838
Share options granted to Directors and employees - (13)
Pension costs - defined contribution plans 711 817
8,243 9,436
-------- --------
The average number of full time equivalents of the Group during
the year was:
2015 2014
Print and bureau services 96 98
Hardware and software services 84 94
Sales and marketing 10 14
Administration 28 32
218 238
----- -----
Remuneration in respect of Directors was as follows:
2015 2014
GBP000 GBP000
Emoluments 441 465
Pension contributions to money purchase pension
schemes 28 57
469 522
-------- --------
Key management remuneration:
2015 2014
GBP000 GBP000
Short-term
employee benefits 487 518
Post-employment benefits 28 57
Share-based payments - (13)
515 562
-------- --------
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All of the Board Directors of the Company are considered to be
the key management personnel of the Group.
7 Exceptional Items
2015 2014
GBP000 GBP000
Profit / (loss) before exceptional
item and tax 59 (1,138)
Exceptional item - impairment charge
on capitalised software development
expenditure (2,770) -
Exceptional item - impairment charge
carrying value of Linford Wood property - (813)
Loss before tax (2,711) (1,951)
Tax credit before exceptional item 433 395
Tax credit on exceptional item 357 -
Tax credit 790 395
-------- --------
Loss for the period (1,921) (1,556)
-------- --------
7(a) IAS 36 Impairment - capitalised software development expenditure
For internally generated software development expenditure to be
capitalised, expected future economic benefits attributable to the
asset need to be greater than the carrying value of the asset on
the balance sheet.
During 2015 identifiable future economic benefits reduced as a
consequence of:
-- Increased regulatory requirements leading to greater
functional requirements in examination marking software generally
increasing the work requirement on the original e-Marker(R) product
and increasing the specification of the new product similarly.
-- Development delays were encountered as a result of a higher
than expected level of staff turnover impacting the continuity of
coding work.
-- Markets becoming more sophisticated in light of higher
expectations and are more sensitive to taking on new products to
process larger volumes of scripts without the qualitative marking
functionality being available within the software.
The lower revenue expectation over the next six years, being the
period over which the expected return on investment is calculated
resulting in an impairment adjustment under IAS 36 for
GBP2,770,000, the full value of the balance sheet carrying value.
See Note 11 Intangible Assets for further details. The recoverable
amount of the asset is its value in use which has been calculated
using a discount rate of 10%.
The expected rate of return is based on a period of six years
being the period over which it is expected that the product is
substantially re-written to keep the product up to date with market
requriements.
The asset belongs to the one operating segment of the
business.
7(b) IAS 36 Impairment - carrying value of the Linford Wood
property
Relates to an impairment charge against the carrying value of
the Linford Wood property. The acquisition of the Linford Wood
property was justified on the savings gained against the rental
cost of leasing. The use and justification remain the same.
DRS Data Services Limited holds a mortgage on the property,
through Barclays Bank plc, who arranged for Berrys, an independent
valuer, to conduct a commercial valuation of the property based on
tenanted occupancy. The commercial valuation is based on a
calculation derived from tenancy yields in the immediate vicinity
of the Linford Wood property in August 2014. This valuation
calculated the current market value at GBP1,600,000 which is the
same value as the previous valuation undertaken in November 2012 by
the same agent and on the same basis. The decline in the commercial
valuation reflects the general fall in the value of commercial
property within the locality. The market value at August 2014 is
considered to be representative of the value as at 31 December
2015.
The fall in the Group's profitability led to a review being
undertaken at the half year to consider whether the property should
be impaired in accordance with IAS 36. The recoverable amount (i.e.
higher of value in use and fair value less costs of disposal) of
the business unit is determined on the basis of the fair value less
costs to sell. The fair value of the property has been estimated
using the market approach by reference to comparable sales price
per square foot and condition of the building and are categorised
within Level 2 of the fair value hierarchy. The costs to sell are
not considered to be material.
The fair value is therefore deemed to be the current market
value. Accordingly, this did not justify continuing to hold the
Linford Wood property at a carrying value above the current market
value of GBP1,600,000. Consequently, an impairment adjustment of
GBP813,000 was made reducing the carrying value to GBP1,600,000 at
30 June 2014. The impairment charge is recognised in administration
expenses in the Income Statement. As at 31 December 2015 the
carrying value of the property is GBP1,528,000 (2014: GBP1,576,000)
after charging depreciation. See Note 10 Property, Plant and
Equipment for further details.
The assets belong to the one operating segment of the
business.
8 Finance costs
2015 2014
GBP000 GBP000
Interest expense:
- bank borrowings (61) (72)
- Peladon deferred consideration - (6)
- loss on foreign exchange (realised
and unrealised) (7) (3)
-------- --------
(68) (81)
-------- --------
The loss on foreign exchange relates to exchange rate
differences on US Dollar and Euro transactions and the restatement
of monetary assets at the year-end.
For details of the Peladon deferred consideration see Note
5.
9 Income tax
2015 2014
GBP000 GBP000
Current tax - domestic (438) (522)
Foreign taxation 15 26
Adjustment in respect of previous
period (10) (196)
-------- --------
Total current tax (433) (692)
Deferred tax current year (Note 18) (357) 132
Deferred tax prior year (Note 18) - 165
-------- --------
(790) (395)
-------- --------
Domestic income tax is calculated at the domestic effective tax
rate of 20.25% (2014: 21.5%) of the estimated assessable loss for
the year.
Development expenditure has been identified in the current year
as qualifying expenditure for research and development repayable
tax credits thereby creating the GBP438,000 credit in the current
income tax credit. Details of this expenditure are provided within
the section on Research and Development in the Strategic
Report.
The credit for the year can be reconciled to the loss per the
Income Statement as follows:
2015 2014
GBP000 GBP000
Loss before tax (2,711) (1,951)
-------- --------
Tax at domestic income tax rate of 20.25% (2014:
21.5%) (549) (420)
Tax effect of expenses that are not deductible
in determining taxable profit 16 147
Income not taxable for tax purposes - (2)
Other permanent differences (3) -
Additional deduction for R&D expenditure (557) (458)
Surrender of tax losses for R&D tax credit 174 302
Chargeable gains - 3
Foreign tax credits 15 26
Effect of change in tax rates 17 -
Deferred tax not recognised 107 37
Adjustment in respect of previous periods (10) (30)
-------- --------
Tax credit (790) (395)
-------- --------
10 Property, plant and equipment
Freehold
land Computer Fixtures Plant Rental Motor
Total & buildings equipment & fittings & machinery machines vehicles
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2014
Cost 10,237 2,900 1,185 2,473 3,226 447 6
Accumulated depreciation (7,329) (454) (1,071) (2,325) (3,026) (447) (6)
-------- ------------- ----------- ------------ ------------- ---------- -----------
Net book amount 2,908 2,446 114 148 200 - -
-------- ------------- ----------- ------------ ------------- ---------- -----------
For the year ended
31 December 2014
Opening net amount
at
1 January 2014 2,908 2,446 114 148 200 - -
Additions 372 - 81 205 86 - -
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Disposals - - - - - - -
Depreciation charge (315) (57) (97) (78) (83) - -
Impairment Charge
(see Note 7(b)) (813) (813) - - - - -
-------- ------------- ----------- ------------ ------------- ---------- -----------
Closing net book amount
at
31 December 2014 2,152 1,576 98 275 203 - -
-------- ------------- ----------- ------------ ------------- ---------- -----------
At 31 December 2014
Cost 10,530 2,900 1,257 2,671 3,255 441 6
Accumulated depreciation (8,378) (1,324) (1,159) (2,396) (3,052) (441) (6)
-------- ------------- ----------- ------------ ------------- ---------- -----------
Net book amount 2,152 1,576 98 275 203 - -
-------- ------------- ----------- ------------ ------------- ---------- -----------
For the year ended
31 December 2015
Opening net amount
at
1 January 2015 2,152 1,576 98 275 203 - -
Additions 291 - 13 20 255 - 3
Disposals - - - - - - -
Depreciation charge (286) (48) (56) (93) (88) - (1)
Closing net book amount
at
31 December 2015 2,157 1,528 55 202 370 - 2
-------- ------------- ----------- ------------ ------------- ---------- -----------
At 31 December 2015
Cost 9,868 2,087 1,238 2,686 3,415 433 9
Accumulated depreciation
and impairment (7,711) (559) (1,183) (2,484) (3,045) (433) (7)
-------- ------------- ----------- ------------ ------------- ---------- -----------
Net book amount 2,157 1,528 55 202 370 - 2
-------- ------------- ----------- ------------ ------------- ---------- -----------
An impairment review was undertaken in June 2014 that resulted
in an impairment of the Linford Wood property in the amount of
GBP813,000, see Note 7(b) for details. At the 30 June 2014, the
useful economic life of the building was estimated to be 25 instead
of 30 years based on the condition of the building and the planned
expenditure in light of the Group's cost saving programme. As a
consequence of these two actions taken in 2014, depreciation has
reduced from GBP67,000 per annum to GBP47,500 per annum.
Bank borrowings at 31 December 2015 are secured on the Linford
Wood land and buildings to the value of GBP1,280,000 (2014:
GBP1,506,000). See Note 17.
The fall in year on year cost of assets is the result of
disposals made during the year with nil net book value.
11 Intangible assets
Computer Development
Total software expenditure
GBP000 GBP000 GBP000
At 1 January 2014
Cost 6,481 1,381 5,100
Accumulated amortisation (4,687) (1,171) (3,516)
-------- ---------- -------------
Net book amount 1,794 210 1,584
-------- ---------- -------------
For the year ended 31 December 2014
Opening net amount at 1 January
2014 1,794 210 1,584
Additions 987 6 981
Disposals (90) - (90)
Amortisation charge (268) (133) (135)
-------- ---------- -------------
Closing net book amount at 31
December 2014 2,423 83 2,340
-------- ---------- -------------
At 31 December 2014
Cost 7,378 1,387 5,991
Accumulated amortisation and
impairment (4,955) (1,304) (3,651)
-------- ---------- -------------
Net book amount 2,423 83 2,340
-------- ---------- -------------
For the year ended 31 December 2015
Opening net amount at 1 January
2015 2,423 83 2,340
Additions 707 12 695
Disposals - - -
Amortisation (327) (62) (265)
Impairment charge (see Note 7(a)) (2,770) - (2,770)
-------- ---------- -------------
Closing net book amount at 31
December 2015 33 33 -
-------- ---------- -------------
At 31 December 2015
Cost 5,315 1,399 3,916
Accumulated amortisation and
impairment (5,282) (1,366) (3,916)
-------- ---------- -------------
Net book amount 33 33 -
-------- ---------- -------------
Computer software relates to the third party software licences
purchased by the Group to be used in the normal course of its
business and is amortised over three years from the time of
purchase. A check is carried out at the end of each year to ensure
that all the software is still in use within the business.
The capitalised development expenditure covers the cost of
developing the first release of a completely new version of
e-Marker(R) software plus additional new features which enhance the
original core e-Marker(R) software used to mark examination scripts
electronically within the education marketplace.
An impairment review was undertaken at the 2015 year-end that
resulted in an impairment of the internally generated software
development expenditure amount to GBP2,770,000 (see Note 7 for
details).
The assets making up the closing net book value will be
amortised as follows based on management's assessment of when the
asset will be brought into use:
Computer Development
Total software expenditure
GBP000 GBP000 GBP000
Future amortisation of assets
by year
* 2016 25 25 -
* 2017 5 5 -
* 2018 3 3 -
Net book amount at 31 December
2015 33 33 -
-------- ---------- -------------
All intangible amortisation is charged to cost of sales within
the Income Statement.
12 Inventories
31 December 31 December
2015 2014
GBP000 GBP000
Raw materials 1,668 585
Work in progress 670 11
Finished goods 26 33
------------ ------------
2,364 629
------------ ------------
31 December Movement 31 December Movement 31 December
2015 during year 2014 during year 2013
GBP000 GBP000 GBP000 GBP000 GBP000
Inventory provision
PS900 scanners 962 68 894 200 694
Other scanners 25 (61) 86 (12) 98
Print 6 (7) 13 2 11
------------ ------------- ------------ ------------- ------------
Total 993 - 993 190 803
------------ ------------- ------------ ------------- ------------
31 December 31 December 31 December
2015 2014 2013
GBP000 GBP000 GBP000
Related carrying value
PS900 / PS1000 scanners 2,132 420 780
Other scanners - 4 12
------------ ------------ ------------
Manufacturing inventory 2,132 424 792
Print inventory 232 205 182
------------ ------------ ------------
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Total 2,364 629 974
------------ ------------ ------------
Inventory provisions are created to reflect future sales
estimates over the useful life of the product. Reductions in the
level of provision arise from inventory being written off and
disposed of. In 2015 the value of fully provided inventory that was
written off amounted to GBP38,000 (2014: GBP12,000).
The cost of inventories recognised as an expense and included in
cost of sales amounted to GBP1,187,000 (2014: GBP1,480,000),
comprising of GBP1,119,000 of materials (2014: GBP1,278,000) and
GBP68,000 of inventory provision increases (2014: GBP202,000) as a
result of the estimated sales of the PS900 scanners.
13 Trade and other receivables
31 December 31 December
2015 2014
GBP000 GBP000
Loans and receivables
Trade receivables 1,003 517
Less provision for impairment of
receivables (167) (6)
------------ ------------
Trade receivables - net 836 511
Amounts recoverable on contracts 254 151
Prepayments and accrued income 1,503 790
2,593 1,452
------------ ------------
There is no material difference between the fair value and the
carrying value of these assets.
The maximum credit risk exposure at the balance sheet date
equates to the fair value of trade receivables.
Standard payment terms on credit sales are 30 days net.
The trade receivables ageing analysis is as follows:
Past due
Total trade 0 - 31 - 61 - 91 - 120+
receivables Current 30 days 60 days 90 days 120 days days
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
31 December
2015 836 293 450 47 2 14 30
31 December
2014 511 348 45 86 10 9 13
The Group recognised an increase in its impairment of its trade
receivables during the year of GBP189,000 (2014: decrease
GBP16,000). The trade receivables provision movement, representing
those items past due and impaired, is included in 'administrative
expenses' in the Income Statement and a breakdown is as
follows:
2015 2014
GBP000 GBP000
Opening amount at 1 January 6 22
Increase/(decrease) in provision to
Income Statement 161 (16)
-------- --------
Closing amount at 31 December 167 6
-------- --------
14 Cash and cash equivalents
31 December 31 December
2015 2014
GBP000 GBP000
Cash at bank and in hand 42 85
Short-term bank deposits 1,881 3,527
------------ ------------
1,923 3,612
------------ ------------
The effective interest rate on short-term bank deposits was
0.23% (2014: 0.23%). These deposits have a maturity of one day
(2014: one day).
The tables below show the extent to which the Group has monetary
assets in currencies other than Sterling.
31 December 31 December 31 December 31 December
2015 2015 2014 2014
US Dollars Euro US Dollars Euro
GBP000 GBP000 GBP000 GBP000
Sterling equivalent 26 3 21 47
------------ ------------ ------------ ------------
15 Share capital
Number Ordinary Treasury
of shares shares shares Total
At 1 January 2014 34,621,600 34,621,600 (1,930,000) 32,691,600
----------- ------------ -------------- -------------
Balance at 31 December
2014 34,621,600 34,621,600 (1,930,000) 32,691,600
----------- ------------ -------------- -------------
Balance at 31 December
2015 34,621,600 34,621,600 (1,930,000) 32,691,600
----------- ------------ -------------- -------------
Ordinary shares of 5p each
at 31 December 2015 and
2014
Number GBP000
Allotted, issued, called up and
fully paid 34,621,600 1,731
The Company acquired 1,930,000 of its own shares through
purchase between 3 June and 15 July 2004. The price of these shares
ranged between 59p and 60p. The total amount paid to acquire these
shares, net of income tax, was GBP1,166,000 and has been deducted
from Shareholders' equity. The shares are held as Treasury shares.
The Company has the right to re-issue these shares at a later date.
All issued shares are fully paid.
16 Other reserves
Share Capital Own share Total
premium redemption reserve Group
GBP000 GBP000 GBP000 GBP000
As at 1 January 2014 5,377 115 (306) 5,186
Own shares vesting - - 8 8
--------- ------------ ---------- --------
Balance as at 31 December 2014 5,377 115 (298) 5,194
Balance at 31 December 2015 5,377 115 (298) 5,194
--------- ------------ ---------- --------
The Share Premium represents proceeds received in addition to
the nominal value of shares issued less registration and other
regulatory fees and net of related tax benefits.
The Capital Redemption Reserve represents shares which are
redeemed or purchased wholly out of the Company's profits and is
the amount by which the Company's share capital is diminished on
cancellation of these shares.
The Own Share Reserve represents the cost of shares purchased
under the Restricted Share Scheme, less those unconditionally
vested in employees. At 31 December 2015, 920,529 (2014: 920,529)
shares with a market value of GBP110,463 (2014: GBP124,271) were
held. The Scheme authorises the Trustees to purchase up to 5% of
the issued share capital, funded by loans from the Company. Shares
so acquired are conditionally gifted to employees and used to
fulfil performance related options to Directors and senior managers
at the discretion of the Board.
17 Borrowings
31 December 31 December
2015 2014
GBP000 GBP000
Current
Bank borrowings - secured loan 226 226
Non-current
Bank borrowings - secured loan 1,054 1,280
------------ ------------
Total borrowings 1,280 1,506
------------ ------------
In January 2013 the mortgage facility was extended to 7 January
2018 and increased to GBP1,900,000. The balance outstanding at 31
December 2015 was GBP1,280,000 (2014: GBP1,506,000). The facility
from Barclays Bank plc is secured by a fixed charge against the
freehold land and buildings to 7 January 2018. The interest rate on
the five year extension is 4.0% over base rate. Repayment of the
principal shall be in 19 instalments of GBP56,400 payable quarterly
commencing 31 March 2013, followed by a final bullet payment of
GBP828,400 on 7 January 2018. The extension included a reallocation
of the mortgage to the subsidiary Company, DRS Data Services
Limited, as tenant of the property.
The normal overdraft facility for DRS Data Services Limited is
GBP250,000 although it was temporarily increased to GBP850,000 from
April 2016 to 31 May 2016 to fund the working capital on the Mayor
of London and London Assembly elections project, following which it
will reduce back to GBP250,000. It remains secured against work in
progress and debtors. Interest is charged at a variable rate of 4%
over base rate.
18 Deferred income tax
31 December 31 December
2015 2014
GBP000 GBP000
Analysis for financial reporting purposes
Deferred tax liabilities 52 409
Deferred tax assets - -
52 409
------------ ------------
(MORE TO FOLLOW) Dow Jones Newswires
April 25, 2016 07:44 ET (11:44 GMT)
The movement in the year in the Group's net deferred tax
position was as follows:
31 December 31 December
2015 2014
GBP000 GBP000
At 1 January 409 112
(Credit)/charge to income for the
current year (357) 132
Charge to income for the prior year - 165
At 31 December 52 409
------------ ------------
The following are the major deferred tax liabilities and assets
recognised by the Group and the movements thereon during the
period:
Capital allowances
GBP000
At 1 January 2014 409
Credit to income for the
year (357)
At 31 December 2015 52
-------------------
A deferred tax asset in respect of unrelieved tax losses and
fixed asset timing has not been recognised due to the uncertainty
of the Group generating sufficient profit against which these
losses can be utilised. The amount unprovided at 31 December 2015
was GBP142,000 (2014: GBP34,000), using the rate of corporation tax
applicable for future years (18%).
Both the 18% and 19% reduced tax rates have been substantively
inacted in October 2015 for deferred tax purposes. At the balance
sheet date, the Group believed that the main corporation tax rate
for deferred tax purposes should be 18% and therefore this rate is
reflected in the calculation of the Group's deferred tax assets and
liabilities.
19 Provisions
31 December 31 December
2015 2014
GBP000 GBP000
Leasehold dilapidations provision
As at 1 January 104 89
Additonal provision 28 28
Amounts utilised - -
Reversals - (13)
------------ ------------
Carrying amount at 31 December 132 104
------------ ------------
The provision is based on previous negotiations to terminate
these lease arrangements and reflects the Group's liability for
dilapidation charges payable on the expiry of all six property
leases relating to the eight business units occupied by operations
in Milton Keynes. See Note 24 for further details about the
property leases. The whole amount is included within non-current
liabilities.
20 Trade and other payables
31 December 31 December
2015 2014
GBP000 GBP000
Financial liabilities measured at
amortised cost
* Trade payables 468 386
Deferred income 1,435 359
Social security and other taxes 169 343
Accrued expenses 842 632
2,914 1,720
Borrowings (see Note 17) 226 226
3,140 1,946
------------ ------------
Trade payables are contractually due within 30 days and are
financial liabilities at amortised cost.
21 Loss per share
The calculation of basic loss per share is based on the earnings
attributable to ordinary Shareholders divided by the weighted
average number of shares in issue during the year. Shares held in
the Restricted Share Scheme (see Note 16) are treated as cancelled
for the purposes of this calculation.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the post-tax effect of dividends and/or interest, on the
assumed conversion of all dilutive options and other dilutive
potential Ordinary shares.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below:
Basic loss per share
2015 2014
GBP000 GBP000
Earnings attributable to Ordinary
Shareholders being loss for the
period (1,921) (1,556)
----------- -----------
Number Number
Weighted average number of shares 31,767,482 31,767,482
Basic loss per Ordinary share (6.05p) (4.90p)
----------- -----------
Diluted loss per share
2015 2014
GBP000 GBP000
Earnings attributable to Ordinary
Shareholders being loss for the
period (1,921) (1,556)
----------- -----------
Number Number
Weighted average number of shares
Basic 31,767,482 31,767,482
Dilutive effect of:
- -
* options under the Enterprise Management Incentive
Scheme
- -
* options under LTIP option scheme
----------- -----------
Diluted 31,767,482 31,767,482
----------- -----------
Diluted loss per Ordinary share (6.05p) (4.90p)
22 Dividends per share
The Company did not pay any dividends during 2014 and 2015.
The Directors do not recommend a final dividend for the year
ended 31 December 2015.
23 Reconciliation of movements in cash and cash equivalents
1 January Cash 31 December
2015 flow 2015
GBP000 GBP000 GBP000
Cash at bank and in hand 85 (43) 42
Term deposits 3,527 (1,646) 1,881
---------- -------- ------------
3,612 (1,689) 1,923
---------- -------- ------------
24 Commitments
Operating lease commitments
The Company has the following future minimum lease
commitments:
Lease of land & buildings Other leases
31 December 31 December 31 December 31 December
2015 2014 2015 2014
GBP000 GBP000 GBP000 GBP000
Within one year 184 210 60 68
Within two to five
years 169 651 55 105
353 861 115 173
------------- ------------- ------------ ------------
The Group held six property leases relating to eight business
units occupied by operations in Milton Keynes at 31 December 2015.
All of these leases run concurrently to 30 November 2021 with
options for a break in the lease at 30 November 2017 and 30
November 2019. Rent is payable quarterly in advance.
The classification of other leases relates to company vehicles
that are held under three or four year contracts, plus the company
telephones and two photocopiers which are held under five year
contracts. The company vehicle leases have an up-front payment of
three months in advance followed by a monthly payment, the
telephone contract payments are monthly in advance and the office
equipment leases are payable quarterly in advance.
Operating lease expense for the year ended 31 December 2015
amounted to GBP282,000 (2014: GBP282,000).
Financial information
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2015
or 2014 but is derived from the 2015 accounts. Statutory accounts
for 2014 have been delivered to the Registrar of Companies and
those for 2015 will be delivered in due course. The auditor has
reported on those accounts; its report was (i) unqualified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report and
(iii) did not contain a statement under section 498(2) or section
498(3) of the Companies Act 2006.
The accounting policies set out in the most recently published
full Annual Financial Report have been followed.
The full Annual Financial Report will be found on the Group
website (www.drs.co.uk) from 25 April 2016.
- End -
25 April 2016
Enquiries to:
John Richardson
Company Secretary
Tel: 01908 666088
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BBGDSRDDBGLU
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