TIDMGRA
RNS Number : 6744G
Grafenia plc
28 July 2021
28 July 2021
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the UK Market Abuse Regulation.
With the publication of this announcement, this information is now
considered to be in the public domain.
Grafenia plc
("Grafenia", "the Group" or "the Company")
Preliminary Results for the period ended 31 March 2021
Grafenia plc (AIM: GRA) announces its full year audited results
for the year ended 31 March 2021.
Operational Highlights
- Subscription and Licence income steady, despite pandemic
- Continued investment in development of software platform, new launches imminent
- Gross margin increased to 57.2% (2020: 51.1%)
- EBITDA around breakeven for second half
- Loss significantly reduced to GBP2.1m (2020: GBP3.4m)
- Operations generated GBP0.2m cash (2020: utilised GBP1.1m)
Financial Overview
Year ended 31 Year ended 31
March 2021 March 2020
GBP'000 GBP'000
Total revenue 9,748 15,604
Gross Profit 5,575 7,977
Earnings before interest, tax, depreciation
and amortisation (160) (1,289)
Operating loss (1,865) (3,314)
Net finance expense (461) (317)
Tax income 241 258
Loss for the year (2,085) (3,373)
Cash inflow / (outflow) from operating
activities 211 (1,093)
EPS - Continuing Operations (1.83)p (3.27)p
Development expenditure GBP0.68m GBP0.67m
Net debt GBP(4.34m) GBP(3.28m)
For further information:
Grafenia plc
Peter Gunning (CEO) 07973 191 632
Allenby Capital Limited (Nominated Adviser and Broker) 0203 328 5656
David Hart / Liz Kirchner (Corporate Finance)
Matt Butlin (Sales & Corporate Broking)
Chairman's Statement
I'd like to start this year's Chairman's Statement by thanking
everyone at Grafenia for their hard work during the year. During
several lock-downs and re-openings we brought Covid-19 protection
equipment to market quickly, helped small businesses build their
on-line presence and engaged in our communities. It was a
challenging year but we are emerging as a more focussed and
competitive business. Thank you to everyone who helped achieve
this.
On to our scorecard of the 2020/21 fiscal year:
Operational Performance
In the recent fiscal year, our turnover decreased by 37.5% to
GBP9.75m (2020: GBP15.60m) and gross profit decreased by 30.1% to
GBP5.58m (2020: GBP7.98m). However, the gross profit margin has
increased from 51.1% to 57.2% thanks to cost management efforts and
a shift in product mix toward the more profitable licence and
subscription fees. The year showed a reduction in EBITDA loss,
which is earnings before interest, tax, depreciation and
amortisation, to GBP0.16m (2020: loss GBP1.29m). Our loss for the
year came in at GBP2.09m versus GBP3.37m last year. We finished the
year with a cash position of GBP2.74m (2020: GBP1.10m) and net debt
(including deferred consideration and lease liabilities arising due
to IFRS 16) of GBP4.34m (2020: GBP3.28m). We invested GBP0.18m on
capex (2020: GBP0.43m), and capitalised GBP0.68m in development
expenditure (2020: GBP0.67m).
Importantly, these results include several cost items that are
either one-time in nature, or constitute up-front costs, rather
than ongoing operating costs. Such costs went down in the fiscal
year in comparison to the prior year.
Some firms back-out many costs from their profit and loss
statement to arrive at some 'adjusted' figure. I find that a
slippery slope. It opens the door to mark every cost as
'extraordinary' or 'non-recurring'. Such accounting doesn't help
with internal cost discipline. Communicating what ends up being a
'profit before cost' doesn't help external readers either.
It would be an easy way out to disregard the Covid-19 impact on
our business as extraordinary and to not analyse last year's
figures in much detail. Clearly, the pandemic was an extraordinary
event and skewed everything - right?
I beg to disagree and find a few aspects in our financial
performance absolutely noteworthy and insightful:
Firstly, we managed to significantly reduce our losses, although
our sales contracted substantially. In particular, the largest
driver has been an intense focus on reducing operating cost in the
business, making processes more efficient and reducing team sizes.
When we model out our cost base from last year it gives us
confidence that, with modest increases in revenue, profitability
will continue to improve. That should bring us closer to reaching
the mid-term objective of 10-15% EBITDA we believe this business
can achieve in future years, once activity fully recovers
post-Covid.
Secondly, our subscription and licence fees have proven to be
incredibly resilient and stable. Most of our subscriptions and
licence agreements are billed monthly and provide an essential and
"infrastructure-like" service to partners and end-clients. In
particular, the pandemic has shown why it makes great sense to be a
Nettl partner. Nettl partners benefit from our community, our agile
tools, access to new product categories like protective equipment
and our inspiration for selling tactics add real value - in
particular during times of crisis. Increasingly, I believe that the
major sources of value in our business are the products we sell on
a recurring and "software-like" basis. The great resilience of that
part of the business motivates our increased focus on building the
business around software. A fantastic example is our "Works Makers"
initiative, allowing third party suppliers to easily list and sell
their products within our platform. We once believed that we had to
make most products ourselves. In fact, we spent a lot of time
evaluating the roadmap to a UK-wide sign hub network. While we
still - strongly - believe signage is a very complementary product
category for our partners, Covid-19 has shown that we are much
better at opening up to third party suppliers than we previously
thought. That every partner can now sell signage to their clients
doesn't necessarily mean that we have to be the largest sign maker
ourselves.
People at Grafenia & Priorities in the last year
Our average number of employees went down to 159 in the year
from 203 in the prior year. We are a leaner organisation now - but
parting with long-term team members is never easy. Nevertheless,
our actions were necessary to make it through the pandemic and I'd
like to thank every manager at Grafenia for your empathy and
patience in driving change. The Board is fully aware of the effects
our decisions had on families and communities. On behalf of the
Board, I would like to sincerely thank every team member of
Grafenia - current and former - for their contributions. Last year
wasn't easy. But as Peter says: "choose your hard" - and Grafenia
decided to pick the road of getting leaner and more agile to emerge
from Covid as a better company.
In past Chairman's statements, I wrote that there were three
areas where my fellow non-executive directors and I can impact the
Grafenia organisation. Firstly, get governance right. Secondly, set
the right incentives. Thirdly, make rational capital allocation
decisions.
We were rather quiet on the capital allocation and M&A front
in the last fiscal year. With the exception of adding two smaller
(but very nice indeed!) sign firms, we didn't find valuations
particularly attractive. Certainly, we expected to see more
opportunities during the crisis. It is not that we haven't looked
at any deals - we couldn't get close enough in terms of valuation
or business quality or culture (or all of the above!)
As discussed earlier, we have grown increasingly sceptical as to
whether adding manufacturing capacity is the right strategic
choice. We can offer our partners all kinds of capabilities by
leveraging our software and systems. We are currently evaluating
our way forward but opening up our system to dozens of signage
firms seems like a really interesting option, whereas buying dozens
of signage firms may be less promising than we originally
thought.
In the end, we believe Nettl will be the leading neighbourhood
design studio. That requires offering breadth of products and great
capabilities. I strongly view adding signage to the offering as the
right strategic choice and we clearly benefited from that last
year. Nonetheless, we set out to make the group substantially
larger by acquiring signage firms in a financially accretive way.
The latter hasn't materialised which drove us to reconsider our
strategy.
Outlook and Current Priorities
We provided a strategy update on 16 April 2021 and set out how
we will think about, and report on, the business going forward. We
will provide a more comprehensive update in due course but felt it
was the right thing to share our thinking early.
Most importantly, we now think about the business in two groups:
Works Manchester and Nettl Systems. Very broadly, that splits the
business into "everything production" and "everything software and
licence".
The core reason we've made that change in reporting is to create
visibility and transparency on where revenue is earned and costs
are incurred. Historically, Grafenia has been very much integrated.
The problem with that has been that certain parts of the business
(mainly in production) have been essentially cost centres helping
customer facing parts (like Nettl) do business. There are clearly
virtues in integrating functions but what gets lost is
accountability and profit focus for each part of the value chain.
For example, we have in the past declined production work because
it had nothing to do with our partner business and strategy. If you
thought about Works Manchester as a stand-alone profit centre
within a larger group, additional production work might be quite
welcome indeed, regardless of whether it has anything to do with
other business of the group!
Once more, that change in perspective was motivated by our
experiences during the pandemic. Our systems proved capable of
opening up and adding third party supply in ways we'd not explored
before. That traction inspired the insight to think about the
business in a less integrated fashion.
We strongly believe that additional transparency will empower
both groups and release entrepreneurial energy in our teams.
In the strategy update we also announced we'll look for
complementary software acquisitions that help us broaden our
offering in Nettl Systems. Today, we are already the operating
system for several hundred design studios across the world and are
keen to keep adding to our systems and capabilities.
We will keep you updated how our thinking evolves and how we
develop both businesses going forward.
Last year we held a closed meeting. This year's AGM will be an
'in person' meeting. However, we can't be certain that travel will
be allowed, so we strongly discourage any shareholders from seeking
to attend the AGM in person this year. Please submit your votes by
way of proxy. We received good feedback on our virtual post AGM
presentation last year and will repeat that format this year. We
are quite keen to resume our usual 'in person' AGM again when it's
practical: did anyone not miss the saxophone after all?
The AGM will take place at 10am on Wednesday 15 September 2021
and we'd be very happy to have you join our on-line presentation
afterwards where we'll answer your questions.
Jan-Hendrik Mohr
Chairman
Chief Executive's Statement
Dear Shareholders,
What for the love of
I mean, really. Another annual report and we're still banging on
about some novel virus. Well, the novelty has well and truly worn
off.
Our production hub and HQ is based in Manchester. Now, of
course, Manchester is famous for doing things differently. Like
being under local lockdown restrictions for longer than any other
part of the country. It's taken its toll.
Early on in this letter, I'd like to commend our teams on your
behalf. They've worked solidly throughout the pandemic. Adapting to
relentless change. In times of anxiety, they've kept going. We've
remained open the whole time. Maybe not 'there', but always there.
It's not been easy and we recognise and appreciate the efforts of
each and every team member. Thank you.
The canary in the coronamine
We're like a business barometer. A metronome of markets. A trade
thermometer, taking the temperature from the throat of business
sentiment.
We sell to clients of different shapes and sizes. From different
sectors. In different parts of the country. Some are doing
exceptionally well, despite the pandemic. And not just those in a
Government minister's Whatsapp group. Others have kept going,
pushing on. Reacting to an endlessly changing environment.
Exhausted. And weary. And some poor souls still haven't been able
to re-open. They're hurting.
It's been well over a year since events were banned. Exhibitions
prohibited. Parties outlawed. Gatherings forbidden. Weddings
cancelled. Stores shuttered.
That's our business. These are our clients, our friends, our
families. We all know people affected. We're in hundreds of
neighbourhoods and our relationships transcend transactions.
Our business relies on healthy business clients. When they're
hurting, we hurt too. When doors reopen and punters return, we'll
be there to help. As restrictions tightened, product sales slowed.
As the taps of the economy turned on, orders flowed. Taps off, back
to trickles.
But that's it. We're not going to use the c-word from here on
in.
Build, buy and license
Our strategy is pretty simple. It's worth repeating. Those three
words. We build performance in our company-owned Nettl locations.
We buy businesses to extend our capability and resilience. And we
license our know-how and systems to others. I'll go into more
detail on each of the sections in turn.
Nettl company stores
We have five company-owned Nettl locations. In these stores, we
sell to local businesses. The kind of things a business would want
to promote themselves online and offline. That's websites,
ecommerce shops, online booking systems, social media, SEO,
printing, displays, exhibition and signage. We mostly sell to SME
clients, who often don't have their own in-house marketing
department.
Our stores are in Manchester, Birmingham, Exeter, Liverpool and
Dublin.
Sales in our company stores were GBP1.83m (2020: GBP2.81m). In
this revenue segment, we count all invoiced sales to end clients of
our company stores, whether they be print, display, design,
websites or search engine optimisation. Essentially, everything we
ring through the till in our own stores.
Except those tills stood silent for many months this past year.
Lights remained off. Unwashed mugs recorded vacant days. But our
studios worked remotely. Helping clients who were still trading, or
preparing to re-open.
In the hazy warm days of summer 2020, we rolled a Nettl partner
and small sign business into the Dublin store. That brought us sign
installation capability in Ireland and we've serviced new and
existing clients.
Buying businesses
We've talked about our acquisition strategy in our recent update
on 16 April 2021. We made two small roll-in deals last year. While
we're happy with how they integrated, they didn't really move the
needle. Revenues are included in the Company Stores segment, but
bear in mind that they were affected by the lockdown like the
rest.
You'll recall we acquired Image Group back in 2017. That's in
the revenue segment, "Works sign businesses". Sales were GBP2.80m
(2020: GBP4.62m). In the summer last year we were able to sell and
produce floor graphics, protective screens and other pandemic
paraphernalia. However, for the rest of the year, sales were
impacted by the cancellation of events and exhibitions. Those make
up the biggest part of Image Group's work and so that sucked.
As Jan mentioned in the Chairman's Statement, we spoke with a
lot of other sign businesses last year. We just didn't find enough
of the right deals at the right price. However, we learned a lot
about the systems and processes these businesses were using. And it
made us re-evaluate whether we could achieve our objective of
national graphics installation, without buying more sign
businesses. I'll come back to that.
We also discussed a change to our acquisition strategy. Take a
look at www.grafenia.com/acquisition to see the full detail. We're
refocusing our search on software businesses to complement the
Nettl offering.
License our systems
The system we use in our company stores is called w3p
Flyerlink.
If you're a long-time reader, you might recall we started public
life as printing.com. We developed a system to connect the central
production hub with our local studio 'spokes'. And then those
studios with their clients.
In the olden days, when it was all just fields, we had one
objective: to make sure the right design was printed on the right
rectangle of paper, the right way up, packed into the right box,
delivered to the right address, by the right date. Our software and
systems made it more likely. Over the years, we improved and
tweaked and licensed that software to third parties. To make their
print businesses more efficient and iron out their creases.
Now think back to 2014. The Hunger Games was a movie, not a
reality TV show. Pharrell Williams was Happy. One balmy autumn day
we opened our first Nettl store.
We'd taken our software platform, geared for print. And we'd
extended it to manage web projects too. Automating the little
things that have to happen for every site launch. Hiding a load of
complex stuff behind a little simple 'go live' button.
It meant that printers and folk with a graphic design skill-set
could build and deploy websites. Nettl studios could do more for
their clients, in less time, with the same people.
As people get more expensive, a few minutes trimmed here, a
couple of hours saved there, soon start to matter. And now they
matter a lot. The Nettl system helps a studio to scale, without
having to recruit a load more people.
We sometimes describe Nettl as a tool-kit. A Swiss army knife of
modules to write proposals, manage recurring payments, set up
subscriptions and get wee stones out of horse's hooves.
Now I'm going to ask you to think of a three-legged stool. And
now your brain just said stool-kit and I can't help that.
As you're sat on your Nettl stool, look down at the legs. One of
them is the systems. It's got software written on it. Another says
training. And, without straining your neck, good, yes that last one
says marketing.
We licence Nettl and our software to other folks. Sometimes
under white label, sometimes in conjunction with a brand.
A little context, if you'll allow the meander.
The longer lockdown went on, the more people got used to online
shopping. It takes twenty one repetitions for a habit to form.
Twenty one times of repeating something, before it becomes
instinctive. A lot of folk had been buying online, pre-pandemic.
But the vast majority had not. Yet, the more days that 'normal'
retail was closed, the more people tried online shopping for the
first time. And they liked it. Oh boy, did they like it. You've
seen the stats. Once behaviours have formed, there's no going
back.
Now, of course, a lot of printers had transactional websites
before the pandemic. But for many, their website was somewhere to
put pictures of their presses and their plant list and.... oh sorry
I nodded off were you saying something?
A better way to shop
As part of our platform, there's a core ecommerce shopping cart.
That's the bit that shows products and pricing, with checkout and
payment gateway. It powers Marqetspace, printing.com, nettl.com and
hundreds of public and private web2print websites. We call it
w3shop by Nettl.
There's lots of ways an entrepreneur could start selling online.
But a lot of people underestimate just how much effort there is in
merchandising a product range for sale. If all you do is sell
Spanish brandy or strawberry shortcake vapes or oven chips, then
sure, you could be set up in a few days. But to merchandise the
range of signage, display, print and promo items that businesses
want. Well that's going to take, like, forever. If we were at a BBQ
and your cousin started talking about that as an idea for a
startup, we'd have to stage an intervention. Friends don't let
friends start down that path.
Instead, our w3shop-keepers get an instant product range. In
their own brand, on their own domain. Sure, they can still set
their own pricing, add other products and connect their bank
account. But in a few days they can be selling. Not blowing on
throbbing digits, weary from typing in prices. Monthly
subscriptions start at GBP99 and up. We've added more than 25 new
w3shop subscribers during the pandemic.
Selling online has turned from nice-to-have into
must-have-to-survive.
It's a huge thing. But it's not the whole thing.
The other thing
For many, an online shop is a gateway to the digital world.
Clients want to do more than just buy online. They've got their own
agendas. Their own problems to solve. Things they're trying to do.
Some, time-consuming. Some, technically challenging.
And so the Nettl system helps SME clients to do things online.
Like add QR codes to menus, for speedy table service. Or make
reservations. Or fill out quote requests. Or buy online. Or all the
things you do every day. And the things you want to do, but tut
when you can't and have to speak to someone.
One thing is certain. The thing that made a local print store
successful a decade ago, is long gone. Those that can adapt, that
can learn. They'll be the survivors.
Got a first class ticket to Zoom
When someone becomes a Nettl, it's a commitment to learning. As
a time-poor business owner, doing these things is hard. Even for
the tech-savvy, figuring out how to do something the first time is
always a leap into the unknown. Learning is never complete.
By necessity we've moved all of our training online. Not going
to lie, we always wanted to do that. Travel bans forced it. And
it's never going back to the way it was. It's so much better to
stick in your earpods and join a group from your desk, than join a
queue at Euston and stick your armpit in a stranger's face. It
makes refreshing knowledge easier. Courses can be shorter. And if
someone gets lost in the trainer's blue steel, then they can always
watch again on catch-up.
Front of mind
That third leg of the stool was marketing. Our partners use
content and promotional material, such as e-shots, website landing
pages, catalogues, brochures, direct mail, point-of-sale and
product samples that we create. They use that to keep in touch with
existing clients and attract new ones. It helps them sell print,
websites and signs. We release beautifully crafted fresh content
multiple times a month, to stay in clients' front-of-mind.
Partners pay us a subscription fee, depending on the size of
their exclusive territory, ranging from GBP300 to GBP1,000 per
month. To grant them geographical exclusivity, they pay an initial
licence fee of around GBP2,000. Our standard licence agreement is
three or five years, sometimes with an option to break at 18 or 24
months.
It's been a tough time for the print industry. Litho print has
been hit in particular and hit hard. We've supported our partners
through this. Not with mutual sobbing and singing songs around a
fading camp-fire. But by relentlessly marching forward with new
products. Working with them to bring new services to sell. And
investing in our platform and new technology to improve their
productivity.
We've come out of the pandemic with a similar number of Nettl
partners than we went into it with. We lost some. Some new faces
joined. A few after completing a scholarship. We cheer those that
made the brave choice to change. And we salute the fallen.
As lockdown has eased, and people feel more confident about the
future, we're seeing a shortening of the gestation period. For,
becoming a Nettl is a commitment. Jan mentioned "Choose your hard"
in his statement. That message is simple. Nothing is easy in life.
There are no easy answers. Entrepreneurs can plough their own
track. Or they can ride the rails, as part of a proven system. Both
options are valid. But we ask, doesn't it make sense to take the
path that leads to the greater chance of success? If you fancy a
distraction, have a read
https://www.nettl.com/uk/chooseyourhard/
Our Nettl partner network now stands at 232 locations around the
world (2020: 239). At the date of our last trading update, we had
174 active Nettl partners in the UK and Ireland, 20 in Benelux, 12
in France, 20 in the USA, 4 in New Zealand and 2 in Australia. We
also currently have 46 printing.com locations (2020: 59). Upgrading
from printing.com to Nettl is a path well trodden and we anticipate
further partners will diversify their businesses away from simply
selling print.
Subscription and Licence Fees held firm at GBP2.08m (2020:
GBP2.08m). In this segment, we count initial licence fees, monthly
subscriptions, website deployment royalties, the wholesale price of
hosting, domain names, digital stock photography and search engine
optimisation sold via our brand partners.
As well as licence fees, Nettl and printing.com partners are
able to buy printing, exhibition kit, displays and signs from our
Works Manchester hub. They pay a wholesale price and resell to end
clients. With events mothballed and locations closed, it's not
surprising that sales of product to Brand Partners was GBP1.92m
(2020: GBP3.41m).
Plans for plans
No, you're thinking of an eighties pop band. Over the past two
years we've been building a whole new part of our platform. We call
it "Plans". And it's the central component which allowed us to
migrate from the software system which Image Group was using.
The first iteration of our platform was for print. The second,
web and digital services. This new layer is to enhance the whole
process of quoting and managing sign and display projects.
We're big believers in self-service. Sure, people like personal
service and a helping hand from a human. Being able to complete a
complex task yourself, whenever you like, is the key to eternal
happiness. And it's at the heart of our continuous reinvention.
With Plans, team members can build multi-part sign, display and
print projects in a simple interface. Customising options and
materials. As well as an instant price, a production route is
automatically built. They'll add to a proposal, share online with
the client and once the client has accepted, graphic files are
checked and fixed automatically.
Great people are hard to find. We're grateful for the individual
efforts our teams have made. And particularly where they are
multiplied. Where the systems they've built enable hundreds of
people to do tasks faster or even not at all.
We're rolling out Plans in stages, with upgrades available to
our Nettl network in the autumn 2021.
Marqetspace.com and online channels
We sell print and signs to professional buyers through
Marqetspace.com and a few other online channels. This space remains
super-competitive. Marqetspace is important to us for a number of
reasons. It's often where our relationships start. We get to know
printers, graphic designers and sign companies with a simple
trading relationship. Then we build trust. Then we figure out if
any of our software tools or systems can help them achieve their
own objectives. And so Marqetspace is a fertile ground for
cultivating Nettl partners.
Of all our channels, Marqetspace typically had the biggest
percentage of litho print to resellers. Unsurprisingly, it was
hardest hit and sales were GBP1.12m (2020: GBP2.68m).
Nettl of America
Since the US travel ban in February 2020 we haven't been able to
set foot on American soil. We've had to adapt how we acquire,
launch and support our American friends. It's gone more slowly than
we would have liked, but we've continued to add new Nettl
locations. It's now a common path to start as a Nettl System user,
get to know the software, and then start the process of becoming a
Nettl Franchise. We now have franchisees and partners in the states
of Florida, Georgia, Ohio, New Jersey and Illinois.
Brexit
We mentioned in our most recent update that since leaving the
customs union, we'd experienced disruption in shipping to mainland
Europe. Things haven't improved. Consignments are routinely delayed
and customs charges incorrectly applied. We're now making the
significant majority of products sold in mainland Europe with Works
Makers on the mainland. We don't see that volume returning to the
UK any time soon.
For materials we import, we're constantly having to work around
supply issues. Items which were previously available in a few days
can be out of stock for weeks or months. That's a combination of
Brexit, the pandemic and a boat having a snooze in the Suez.
Outlook
We made significant steps reducing our overheads last year.
Despite spending more of the second half of the year locked down
than unlocked, we almost achieved EBITDA breakeven.
Our new financial year started in April. Trading has improved
and the first quarter finished ahead of last year. July started
well and should be our best month since September 2020. The roads
are busier. With our new cost base, modest increases in revenue
will improve profitability. And that gives us confidence of getting
closer to reaching our mid-term objective of 10-15% EBITDA on a
monthly run-rate during the current financial year.
But then. Will 2021 bring an alien invasion or solar flare or
isn't there supposed to be an asteroid due about now or
something?
See you for the presentation after the AGM*
Peter Gunning
Chief Executive
*providing Godzilla doesn't go rogue again
Financial Review
Revenue
Group revenue this year finished at GBP9.75m, down from
GBP15.60m in 2020, a 38% fall year-on-year. This reflects the
significant impact caused by various degrees of lockdown put in
place since March 2020. Sales of products have been most severely
impacted, with exhibitions and events cancelled and demand for
traditional print reduced with customers unable to open or
operating at reduced capacity themselves.
As highlighted in our segmental disclosure (note 2) the sales of
physical products have reduced across all channels. Our Company
Stores saw a fall in revenue to GBP1.83m (2020: GBP2.81m) despite
the addition of Eggshell Solutions Limited during the year, which
contributed GBP0.11m since it was acquired in September 2020. Sales
of print and other products through our Brand Partner Network fell
to GBP1.92m (2020: GBP3.41m), Online and Trade sales fell to
GBP1.12m (2020: GBP2.68m) and Works Signs Businesses fell to
GBP2.80m (2020: GBP4.62m). Despite the overall fall, Licence Fee
revenue has remained consistent year-on-year at GBP2.08m (2020:
GBP2.08m) with further demand for our subscription services
compensating for reduced licence fee income from our Partners, as
they too felt the full impact of the pandemic. At 94% (2020: 95%),
the majority of our business remains in the UK & Ireland.
Gross profit
Gross Profit, defined as revenue less direct materials
(including the cost of distribution when made direct to customers)
fell to GBP5.58m (2020: GBP7.98m).
The improved gross margin percentage of 57.2% (2020: 51.1%)
reflects a shift in the proportion of our revenue to higher margin
Licence and Subscription income. Margins continue to be pressed in
traditional print and signage, with the pandemic and other global
supply chain issues causing scarcity of materials and increased
costs of shipping.
Other operating costs
Staff costs reduced by 35% to GBP3.70m (2020: GBP5.69m). This
has been achieved through a combination of permanent redundancies
enacted in the prior year, GBP0.79m claimed during the year from
the Coronavirus Job Retention Scheme and further permanent
redundancy measures taken in September 2020. The average number of
persons employed fell to 159 (2020: 203), a reduction that would
have been greater if not for the government support received.
Other operating charges have been reduced to GBP2.04m (2020:
GBP3.58m) with non-essential spending curtailed and travel not
possible. This includes restructuring costs totalling GBP0.10m
(2020: GBP0.20m).
Our bad debt charge has reduced to GBP0.20m in the year (2020:
GBP0.60m) with improvements in internal credit control processes
and a significant impairment in the prior year, when the impact of
the pandemic on our customers first became apparent. We continue to
work with our customers and Partners to come through the current
difficulties together, however we have to accept that some of those
debts may never be paid.
Profitability
As a combination of the factors discussed above, our pre-tax
loss has reduced to GBP2.33m (2020: GBP3.63m) leading to a reduced
loss per share of 1.83p (2020: 3.27p). Our earnings before
interest, tax, depreciation and amortisation (EBITDA) loss reduced
to GBP0.16m (2020: GBP1.29m). The parent company result for the
year was a loss of GBP0.33m (2020: GBP3.11m). The prior year
included an impairment charge of GBP2.95m on subsidiary investments
which has not repeated.
Operating Cash Flow
This has led to the Group generating GBP0.21m of cash through
operating activities (2020: utilised GBP1.09m), reflecting the
EBITDA in the respective years.
Investment activity
The current year has seen reduced investment in plant and
equipment of GBP0.18m (2020: GBP0.43m), following the completion of
our factory merger in the prior year. We have also continued our
investment in the Group's software platforms, totalling GBP0.68m
(2020: GBP0.67m), with continued enhancements and new features to
the Groups SaaS platforms.
In September 2020, the Group acquired Eggshell Solutions
Limited, net of cash received, for GBP0.08m and merged its
operations with our Birmingham Store. This was followed with the
purchase of the trade and assets of Sign Right, a small sign
business in Dublin for GBP0.03m in November 2020.
Financing activity
On 15 July 2020 we announced the creation of a GBP50.00m
perpetual bond facility and the issue of GBP3.00m of the bearer
bonds, at nominal value, to investors, raising approximately
GBP2.01m before expenses.
We also secured an additional term loan for GBP1.00m through the
Coronavirus Business Interruption Loan Scheme (CBILS) and
refinanced our primary hire purchase facility through CBILS,
reducing our cash repayments for 12 months.
KPIs
Management monitors a number of KPIs, which underpin the
performance of the business. The number of Nettl Network Partners
has been broadly flat, as discussed by Peter earlier. The average
product revenue per partner reduced, reflecting the impact of the
pandemic. Website deployments and hosting fees per month have
continued to increase, along with the number and value of SEO
subscriptions.
Outlook
The future developments of the business are included in the
Chairman's statement and Chief Executive's statement. The future
trading environment remains uncertain. We can only guess the pace
at which the economy at large, and by extension the printing and
promotional world, will recover from the COVID-19 pandemic. We have
factored the potential return of restrictions over the next winter
period into our forecasting, however, with the restructuring
activity undertaken in this financial year and existing cash
reserves, we believe the financial future of the business is secure
and we have the resources to execute our expansion plans.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the annual report and financial statements.
Principal Risks and Uncertainties
The following are the principal risks relating to the Group's
operations:
-- uncertainty in the general economic environment that may
impact upon revenues and profitability;
-- markets in which the Group operates are extremely competitive
posing a threat to profitability;
-- technological advances in manufacturing and/or software may
impact on operational effectiveness and earnings potential;
-- the Group and its clients depend on the W3P SaaS platform and
all reasonable operational contingency is embedded for resilience
in the event of a catastrophe;
-- the ability to retain and recruit key people, across a
multitude of disciplines, is essential in maintaining and growing
the business;
-- Group SaaS platforms are developed in-house but use third
party components, the necessary rights exist but there is no
certainty that these rights will be retained indefinitely.
Treasury Policies
Surplus funds are intended to support the Group's short-term
working capital requirements and fund future acquisitions. These
funds are invested through the use of short-term deposits and the
policy is to maximise returns as well as provide the flexibility
required to fund ongoing operations. The Board has developed a
model to establish a fair value for the Company's shares and will
only purchase shares when the offer price is materially below that
value and funds are available. It is not the Group's policy to
enter into financial derivatives for speculative or trading
purposes.
Iain Brown
Group Finance Director
Consolidated statement of comprehensive income
FOR THE YEARED 31 MARCH 2021 Note 2021 2020
GBP000 GBP000
---------------------------------------------- ------- --------- ---------
Revenue 2 9,748 15,604
Raw materials and consumables used (4,173) (7,627)
---------------------------------------------- ------- --------- ---------
Gross profit 5,575 7,977
Staff costs (3,700) (5,686)
Other operating charges (2,035) (3,580)
---------------------------------------------- ------- --------- ---------
Earnings before interest, tax, depreciation
and amortisation (160) (1,289)
---------------------------------------------- ------- --------- ---------
Depreciation and amortisation 5 & 6 (1,705) (2,025)
---------------------------------------------- ------- --------- ---------
Operating loss (1,865) (3,314)
---------------------------------------------- ------- --------- ---------
Financial income 16 25
Financial expenses (477) (342)
---------------------------------------------- ------- --------- ---------
Net financing expense (461) (317)
---------------------------------------------- ------- --------- ---------
Loss before tax (2,326) (3,631)
---------------------------------------------- ------- --------- ---------
Tax income 3 241 258
---------------------------------------------- ------- --------- ---------
Loss for the year (2,085) (3,373)
Other comprehensive income - -
---------------------------------------------- ------- --------- ---------
Total comprehensive income for the year (2,085) (3,373)
---------------------------------------------- ------- --------- ---------
Loss per share attributable to the ordinary
equity shareholders of Grafenia plc Basic
and diluted, pence per share 4 (1.83)p (3.27)p
---------------------------------------------- ------- --------- ---------
Consolidated statement of financial position
AT 31 MARCH 2021 Note 2021 2020
GBP000 GBP000
-------------------------------------------- ---- ------- -------
Non-current assets
Property, plant and equipment 5 5,065 5,483
Intangible assets 6 3,510 3,858
-------------------------------------------- ---- ------- -------
Total non-current assets 8,575 9,341
-------------------------------------------- ---- ------- -------
Current assets
Inventories 444 346
Trade and other receivables 7 1,545 2,150
Prepayments 278 447
Cash and cash equivalents 2,740 1,104
-------------------------------------------- ---- ------- -------
Total current assets 5,007 4,047
-------------------------------------------- ---- ------- -------
Total assets 13,582 13,388
-------------------------------------------- ---- ------- -------
Current liabilities
Other interest-bearing loans and borrowings 9 931 753
Deferred consideration 9 - 147
Trade and other payables 8 1,799 2,160
Deferred income 8 60 143
-------------------------------------------- ---- ------- -------
Total current liabilities 2,790 3,203
-------------------------------------------- ---- ------- -------
Non-current liabilities
Other interest-bearing loans and borrowings 9 6,149 3,483
Deferred tax liabilities 389 448
-------------------------------------------- ---- ------- -------
Total non-current liabilities 6,538 3,931
-------------------------------------------- ---- ------- -------
Total liabilities 9,328 7,134
-------------------------------------------- ---- ------- -------
Net assets 4,254 6,254
-------------------------------------------- ---- ------- -------
Equity attributable to equity holders of
the parent
Share capital 11 1,145 1,135
Merger reserve 838 838
Share premium 7,866 7,801
Share based payment reserve 84 74
Retained earnings (5,679) (3,594)
-------------------------------------------- ---- ------- -------
Total equity 4,254 6,254
-------------------------------------------- ---- ------- -------
Consolidated statement of changes in shareholders' equity
YEARED 31 MARCH 2020
Share Based
Share Merger Share Payment Retained
Capital reserve Premium Reserve Earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ------- -------- ------- ----------- ---------- -------
Balance at 31 March 2019 847 838 4,125 47 (221) 5,636
Loss and total comprehensive
income for the year - - - - (3,373) (3,373)
Shares issued in the period 288 - 3,738 - - 4,026
Costs associated with share
issue - - (62) - - (62)
Share option reserve - - - 27 - 27
----------------------------- ------- -------- ------- ----------- ---------- -------
Total movement in equity 288 - 3,676 27 (3,373) 618
----------------------------- ------- -------- ------- ----------- ---------- -------
Balance at 31 March 2020 1,135 838 7,801 74 (3,594) 6,254
----------------------------- ------- -------- ------- ----------- ---------- -------
YEARED 31 MARCH 2021
Loss and total comprehensive
income for the year - - - - (2,085) (2,085)
Shares issued in the period 10 - 65 - - 75
Share option reserve - - - 10 - 10
----------------------------- ------- -------- ------- ----------- ---------- -------
Total movement in equity 10 - 65 10 (2,085) (2,000)
----------------------------- ------- -------- ------- ----------- ---------- -------
Balance at 31 March 2021 1,145 838 7,866 84 (5,679) 4,254
----------------------------- ------- -------- ------- ----------- ---------- -------
Consolidated statement of cash flows
FOR YEARED 31 MARCH 2021 Note 2021 2020
GBP000 GBP000
----------------------------------------------- ---- ------- -------
Cash flows from operating activities
Loss for the year (2,085) (3,373)
Adjustments for:
Depreciation, amortisation and impairment 1,705 2,025
Loss / (profit) on sale of plant and equipment 5 (99)
Reduction in deferred consideration - (220)
Release of deferred profit on sale of plant
and equipment (14) (12)
Share based payments 10 27
Net finance expense 461 317
Bad debt expense 169 588
Tax income (241) (258)
----------------------------------------------- ---- ------- -------
Operating cash flow before changes in working
capital and provisions 10 (1,005)
Change in trade and other receivables 465 444
Change in inventories (96) 109
Change in trade and other payables (338) (708)
----------------------------------------------- ---- ------- -------
Cash generated from / (utilised by) operations 41 (1,160)
Interest paid (9) -
Interest received 7 -
R&D tax income received 172 67
----------------------------------------------- ---- ------- -------
Net cash inflow / (outflow) from operating
activities 211 (1,093)
----------------------------------------------- ---- ------- -------
Cash flows from investing activities
Proceeds from sale of plant and equipment 10 265
Acquisition of plant and equipment (90) (383)
Capitalised development expenditure 6 (419) (373)
Acquisition of other intangible assets 6 (259) (305)
Acquisition of Subsidiary net of cash (group) (84) -
----------------------------------------------- ---- ------- -------
Net cash used in investing activities (842) (796)
----------------------------------------------- ---- ------- -------
Cash flows from financing activities
Proceeds / (repayment) of funding from invoice
finance 81 (947)
Proceeds from loans 9 3,010 -
Repayment of loans (81) (211)
Capital payment of lease liabilities (411) (622)
Interest payment of lease liabilities (260) (317)
Payment of deferred consideration (147) (228)
Issue of shares (net of costs) 75 3,964
----------------------------------------------- ---- ------- -------
Net cash generated from financing activities 2,267 1,639
----------------------------------------------- ---- ------- -------
Net increase / (decrease) in cash and cash
equivalents 1,636 (250)
Cash and cash equivalents at start of year 1,104 1,354
----------------------------------------------- ---- ------- -------
Cash and cash equivalents at 31 March 2020 2,740 1,104
----------------------------------------------- ---- ------- -------
Notes to the financial statements
1. BASIS OF PREPARATION
GENERAL INFORMATION
Grafenia plc (the "Company") is a public limited company
incorporated and domiciled in the UK. The company's registered
office is Third Avenue, The Village, Trafford Park, Manchester M17
1FG.
This financial information does not include all information
required for full annual financial statements and therefore does
not constitute statutory accounts within the meaning of section
435(1) and (2) of the Companies Act 2006 or contain sufficient
information to comply with the disclosure requirements of
International Financial Reporting Standards. These should be read
in conjunction with the Financial Statements of the Group as at and
for the year ended 31 March 2020.
The comparative figures for the year ended 31 March 2020 are
also not the Company's statutory accounts for that financial year.
Those accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The preliminary financial information was approved by the Board
of Directors on 27 July 2021.
GOING CONCERN
As part of the consideration of the appropriateness of adopting
the going concern basis of accounting, the Directors have prepared
a forecast and applied reasonable sensitivities, covering the cash
flow impact associated with a further year of COVID-19 disruption.
The primary cash flow impact identified in the sensitivity analysis
is a significant reduction in cash collections driven by lower
customer demand. The Directors also considered the potential levers
at their discretion to improve the cash position, including a
number of further reductions in operating expenditure across the
group, primarily related to workforce cost reductions. Having
considered these scenarios, the Group continues to have sufficient
cash headroom.
Based on the above the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future and is well
placed to manage its business risks successfully despite the
continued uncertain economic outlook caused by Covid-19.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the annual report and financial statements.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that affect the
application of the accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
Significant areas of estimation uncertainty and critical
judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the financial
statements are described below:
INTANGIBLES - CAPITALISATION AND VALUATION OF SOFTWARE AND
DEVELOPMENT COSTS AND ACQUIRED INTANGIBLES
The Board consider that the Group's key differentiators stem
from its proprietary software, operationally w3p, developed to
support Brand Partners Nettl and printing.com, Marqetspace and
online initiatives. It is essential to continue investing in these
assets. Projects are agreed with user forums to improve
functionality for Partners. Separate projects are defined for
international expansion and for new initiatives as they are
identified. Development costs are capitalised where a project has
been defined, tested and expected to realise future economic
benefits. Programming is carried out by third parties working to a
detailed specification and schedule. The Board exercises judgement
in determining the costs to be capitalised and determine the useful
economic life to be applied typically 3 years or whilst the asset
in question remains in use. Acquired intangibles have been
identified as the customer base and brand, the valuation is based
upon future discounted cash flows and expectations for the
business. Further, the Board will use estimates of future
incremental cash flows to periodically assess the carrying value of
intangible assets.
IMPAIRMENT OF INTANGIBLE ASSETS AND INVESTMENT IN
SUBSIDIARIES.
In assessing impairment, Management estimates the recoverable
amount of cash generating units based on expected future cash flows
and uses the weighted average cost of capital to discount them. At
the end of each reporting period the Management reviews a four year
forward looking financial projection including a terminal value for
the Group. The Management has further evaluated the terminal growth
expectations and the applied discount rate applicable to derive a
Net Present Valuation (NPV) of the Group. If the NPV of the Group
shows a lower valuation than the net assets or the company cost of
investment in subsidiaries plus intercompany balances due, an
impairment will be made. Based on this evaluation, including
management estimates and assumptions, no impairment was made during
the reporting period. Estimation uncertainty relates to assumptions
about future operating results in particular sales volumes and the
determination of a suitable discount rate.
ESTIMATION OF THE EXPECTED CREDIT LOSSES ON TRADE
RECEIVABLES
In assessing the expected credit losses, in respect of the trade
receivables under IFRS 9, the Group considers the past performance
of the receivable book along with future factors that may affect
the credit worthiness of the entire trade receivables. Estimations
have therefore been made within these assumptions which could
affect the carrying value of the trade receivables.
BEARER BONDS
The bearer bonds issued by the Company have no fixed maturity.
In order to establish an effective interest rate, management is
required to determine the expected life of the bonds and has
estimated this to be 20 years from the date of issue. In assessing
the fair value of the embedded derivative relating to the exclusive
one way call option, judgement is required in order to assess the
likelihood of the business exercising this option.
2. REVENUE AND SEGMENTAL INFORMATION
The Group's operating and reporting segments are geographic
being UK & Ireland, Europe and others. The segmental analysis
by nature of service includes Licence Fees, Company owned Studio
revenue, Brand Partner print and Online sales plus Trade print.
This disclosure correlates with the information which is presented
to the Board, which reviews revenue (which is considered to be the
primary growth indicator) by segment. The Group's costs, finance
income, tax charges, non-current liabilities, net assets and
capital expenditure are only reviewed by the CEO at a consolidated
level and therefore have not been allocated between segments in the
analysis below.
ANALYSIS BY LOCATION OF UK & Ireland Europe Other Total
SALES
GBP000 GBP000 GBP000 GBP000
--------------------------- ------------ ------ ------ --------
Year ended 31 March 2021 9,117 242 389 9,748
--------------------------- ------------ ------ ------ --------
Year ended 31 March 2020 14,791 384 429 15,604
--------------------------- ------------ ------ ------ --------
Revenue generated outside the UK is attributable to partners in
Australia, Belgium, France, New Zealand, The Netherlands and the
USA.
No single customer provided the Group with over 6% of its
revenue.
DISAGGREGATION OF REVENUE
The disaggregation of revenue from contracts with customers is
as follows:
Nettl Systems Works Manchester Total
Licence Company Brand Total Nettl Works Sign Online Total Works
Fees Stores Partner Systems Businesses & Manchester
Print Trade
----------------
GBP000 GBP000 GBP000 GBP'000 GBP000 GBP000 GBP'000 GBP000
---------------- ------- ------- -------- ----------- ----------- ------- ----------- --------
Year ended 31
March 2021 2,077 1,832 1,916 5,825 2,804 1,119 3,923 9,748
---------------- ------- ------- -------- ----------- ----------- ------- ----------- --------
Year ended 31
March 2020 2,083 2,806 3,414 8,303 4,624 2,677 7,301 15,604
---------------- ------- ------- -------- ----------- ----------- ------- ----------- --------
Of the Group's non-current assets (excluding deferred tax) of
GBP8,575,000, GBP8,545,000 are located in the UK. Non-current
assets located outside the UK are in France GBP5,000 (2020:
GBP6,000) and Ireland GBP25,000 (2020: nil).
3. TAXATION
Recognised in the income statement 2021 2020
GBP000 GBP000
-------------------------------------------------- ------ ------
Current tax expense
Current year (166) (146)
Adjustments for prior years (1) 6
-------------------------------------------------- ------ ------
(167) (140)
Deferred tax expense
Origination and reversal of temporary differences (74) (128)
Adjustment in respect of prior year - 10
-------------------------------------------------- ------ ------
Total tax in income statement (241) (258)
-------------------------------------------------- ------ ------
RECONCILIATION OF EFFECTIVE TAX RATE
Factors affecting the tax charge for the current period:
The current tax charge for the period is lower (2020: lower)
than the standard rate of corporation tax in the UK of 19% (2020:
19%).
The differences are explained below:
2021 2020
GBP000 GBP000
--------------------------------------------------- --------- ---------
Loss before tax (2,326) (3,631)
--------------------------------------------------- --------- ---------
Tax using the UK corporation tax rate of 19%
(2020:19%) (442) (690)
Effects of:
Other tax adjustments, reliefs and transfers (99) (40)
Adjustments in respect of prior periods - current
tax (1) 6
Adjustments in respect of prior periods - deferred
tax - 10
Deferred tax not recognised 248 403
Research and Development losses surrendered 223 227
Research and Development super deduction (170) (174)
--------------------------------------------------- --------- ---------
Total tax credit (241) (258)
--------------------------------------------------- --------- ---------
The Group tax debtor amounts to GBP163,000 (2020 Debtor:
GBP354,000). The deferred tax liabilities as at 31 March 2021 have
been calculated using the tax rate of 19% which was substantively
enacted at the balance sheet date.
At Budget 2020, the government announced that the Corporation
Tax main rate (for all profits except ring fence profits) for the
years starting 1 April 2020 and 2021 would remain at 19%.
4. EARNINGS PER SHARE
The calculations of earnings per share are based on the
following profits and numbers of shares:
2021 2020
GBP000 GBP000
-------------------------------------------------- ------------------- ------------------
Loss after taxation for the financial year from
continuing operations (2,085) (3,373)
-------------------------------------------------- ------------------- ------------------
Weighted average Weighted average
number of Shares number of Shares
-------------------------------------------------- ------------------- ------------------
For basic earnings per ordinary share 113,831,139 102,993,216
Exercise of share options - -
For diluted earnings per ordinary share 113,831,139 102,993,216
-------------------------------------------------- ------------------- ------------------
Basic and diluted loss per share (1.83)p (3.27)p
-------------------------------------------------- ------------------- ------------------
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
The holders of deferred shares shall not be entitled to any
participation in the profits or the assets of the Company and the
deferred shares do not carry any voting rights.
5. PROPERTY, PLANT AND EQUIPMENT
Land and Plant and Assets Motor Fixtures Total
buildings equipment held Vehicles and
for resale Fittings
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ---------- ---------- ----------- --------- --------- -------
Cost
Balance at 31 March 2019 576 5,383 265 83 1,324 7,631
Right-of-use assets recognised
on IFRS 16 adoption 1,999 37 - 56 - 2,092
Additions - 173 - - 259 432
Disposals - (2) (265) - - (267)
------------------------------- ---------- ---------- ----------- --------- --------- -------
Balance at 31 March 2020 2,575 5,591 - 139 1,583 9,888
------------------------------- ---------- ---------- ----------- --------- --------- -------
Additions - 168 - 8 4 180
Acquisition of subsidiary - 1 - - - 1
Disposals - (523) - (28) - (551)
------------------------------- ---------- ---------- ----------- --------- --------- -------
Balance at 31 March 2021 2,575 5,237 - 119 1,587 9,518
------------------------------- ---------- ---------- ----------- --------- --------- -------
Depreciation and impairment
Balance at 31 March 2019 576 2,116 - 69 810 3,571
Depreciation charge for
the year 260 378 - 32 164 834
------------------------------- ---------- ---------- ----------- --------- --------- -------
Balance at 31 March 2020 836 2,494 - 101 974 4,405
------------------------------- ---------- ---------- ----------- --------- --------- -------
Depreciation charge for
the year 260 140 - 27 157 584
Disposals - (508) - (28) - (536)
------------------------------- ---------- ---------- ----------- --------- --------- -------
Balance at 31 March 2021 1,096 2,126 - 100 1,131 4,453
------------------------------- ---------- ---------- ----------- --------- --------- -------
Net book value
At 31 March 2019 - 3,267 265 14 514 4,060
------------------------------- ---------- ---------- ----------- --------- --------- -------
At 31 March 2020 1,739 3,097 - 38 609 5,483
------------------------------- ---------- ---------- ----------- --------- --------- -------
At 31 March 2021 1,479 3,111 - 19 456 5,065
------------------------------- ---------- ---------- ----------- --------- --------- -------
Depreciation is charged in the statement of comprehensive income
to other operating charges.
Right-of-use assets are included within the same asset
categories as they would have been if they were owned. As of 31
March 2021 the Group has right-of-use assets with a carrying value
of GBP3,806,000 (2020: GBP4,116,000). A table showing the net book
value of right-of-use assets within property, plant and equipment
at 31 March 2021 and 31 March 2020, split by category, is disclosed
in note 10.
6. INTANGIBLE ASSETS
Domains Software Development Customer Goodwill Other Total
& brand costs Lists
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Cost
Balance at 31 March
2019 912 3,965 3,686 3,165 141 157 12,026
Additions - internally
developed - - 373 - - - 373
Additions - purchased - 300 - - - 5 305
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Balance at 31 March
2020 912 4,265 4,059 3,165 141 162 12,704
Additions - internally
developed - - 419 - - - 419
Additions - purchased - 259 - - - - 259
Acquisition of subsidiary - - - 80 15 - 95
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Balance at 31 March
2021 912 4,524 4,478 3,245 156 162 13,477
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Amortisation and
impairment
Balance at 31 March
2019 366 3,493 2,872 804 12 108 7,655
Amortisation for
the year 46 312 426 401 - 6 1,191
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Balance at 31 March
2020 412 3,805 3,298 1,205 12 114 8,846
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Amortisation for
the year 30 297 389 399 - 6 1,121
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Balance at 31 March
2021 442 4,102 3,687 1,604 12 120 9,967
-------------------------- -------- -------- ----------- -------- -------- ------ --------
Net book value
At 31 March 2019 546 472 814 2,361 129 49 4,371
-------------------------- -------- -------- ----------- -------- -------- ------ --------
At 31 March 2020 500 460 761 1,960 129 48 3,858
-------------------------- -------- -------- ----------- -------- -------- ------ --------
At 31 March 2021 470 422 791 1,641 144 42 3,510
-------------------------- -------- -------- ----------- -------- -------- ------ --------
IMPAIRMENT TESTING
The recoverable amount of goodwill and intangible assets is
determined from value in use calculations.
The Group prepares cash flow forecasts derived from budgets and
five-year business plans. For the purposes of impairment testing
inflationary growth of 0% is assumed beyond this period. The sales
growth relates to all key revenue streams of the business.
Rates have been determined based on the experience to date of
operating these sales channels and previous experience of launching
websites. A pre-tax discount factor of 7.4% (2020: 6.8%) was
applied.
Other intangible assets have also been considered for impairment
due to indicators of impairment being present in the form of losses
and wider economic conditions. These assets are not considered to
be impaired.
Increasing the pre-tax discount factor to 8.0% would result in
an impairment charge against intangible assets of GBP169,000.
Amortisation and impairment charge
The amortisation charge of GBP1,121,000 (2020: GBP1,191,000) is
recognised in profit and loss within depreciation and amortisation
expenses. An impairment charge of nil (2020: GBPnil) was recognised
during the year.
7. TRADE AND OTHER RECEIVABLES
At 31 March 2021 trade receivables are shown net of an
impairment allowance of GBP1,090,000 (2020: GBP1,000,000).
Trade and other receivables denominated in currencies other than
sterling comprise GBP136,000 (2020: GBP112,000) of trade
receivables.
2021 2020
--------------------------------------------------
GBP000 GBP000
-------------------------------------------------- ------- -------
Trade receivables 2,408 2,743
Less provision for trade receivables (1,090) (1,000)
-------------------------------------------------- ------- -------
Trade receivables net 1,318 1,743
-------------------------------------------------- ------- -------
Total financial assets other than cash and cash
equivalents classified at amortised cost 1,318 1,743
Corporation tax 163 354
Other receivables 64 53
-------------------------------------------------- ------- -------
Total Other receivables 227 407
-------------------------------------------------- ------- -------
Total trade and other receivables 1,545 2,150
-------------------------------------------------- ------- -------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
Under 6 months Over 6 months Total
------------------------
GBP000 GBP000 GBP000
------------------------ -------------- ------------- -------
Gross carrying amount 966 1,442 2,408
Loss provision (90) (1,000) (1,090)
------------------------ -------------- ------------- -------
Net carrying amount 876 442 1,318
------------------------ -------------- ------------- -------
Trade and other receivables represent financial assets and are
considered for impairment on an expected credit loss model. The
Group continues to trade with the same customers and in the same
marketplace and therefore the future expected credit losses have
been considered in line with the past performance of the customers
in the recovery of their receivables.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables. The expected loss rates are based
on the Group's historical credit losses experienced over the
three-year period prior to the period end. The historical loss
rates are then adjusted for current and forward-looking information
on factors affecting the Group's customers including the area of
operations of those debtors and the market for the Group's
products. The assessment of the expected credit risk for the year
has not increased, when looking at the factors affecting the risk
noted above. There are no trade receivables outside of credit terms
without an impairment provision.
Movements in the impairment allowance for trade
receivables are as follows:
Impairment
As at As at
31 March 2021 31 March 2020
GBP000 GBP000
-------------------------------------------------------- --------------- ---------------
Balance at 1 April 1,000 412
Receivable written off during the year as uncollectible (70) -
Increase in impairment allowance 160 588
-------------------------------------------------------- --------------- ---------------
Balance at 31 March 1,090 1,000
-------------------------------------------------------- --------------- ---------------
Of the total impairment provision GBP79,000 (2020: GBP72,000)
relates to Partners that have ceased trading.
There is no material difference between the net book value and
the fair values of trade and other receivables due to their
short-term nature.
Other classes of financial assets included within trade and
other receivables do not contain impaired assets.
Of the net trade receivables GBP209,000 (2020: GBP128,000) was
pledged as security for the invoice discounting facility. The Group
is committed to underwrite any of the debts transferred and
therefore continues to recognise the debts sold within trade
receivables until the debtors repay or default. Since the trade
receivables continue to be recognised, the business model of the
Group is not affected. The proceeds from transferring the debts are
included in other financial liabilities until the debts are
collected or the Group makes good any losses incurred by the
service provider.
8. TRADE AND OTHER PAYABLES
Current Liabilities
2021 2020
GBP000 GBP000
------------------------------------------------------- ------- -------
Trade payables 689 1,326
Accruals 358 472
Other liabilities 752 362
------------------------------------------------------- ------- -------
Total financial liabilities, excluding 'non-current'
loans and borrows classified as financial liabilities
measured at amortised cost 1,799 2,160
Deferred income 60 143
------------------------------------------------------- ------- -------
Total trade and other payables 1,859 2,303
------------------------------------------------------- ------- -------
Trade payables denominated in currencies other than Sterling
comprise GBP43,000 (2020: GBP28,000) denominated in Euro.
There is no material difference between the net book value and
the fair values of current trade and other payables due to their
short-term nature.
9. BORROWINGS
Current Liabilities
2021 2020
GBP000 GBP000
-------------------------- ------ ------
Invoice Financing 209 128
Lease liabilities 602 625
Loans 120 -
-------------------------- ------ ------
931 753
-------------------------- ------ ------
Deferred consideration - 147
-------------------------- ------ ------
Non-Current Liabilities
-------------------------- ------ ------
Lease liabilities 3,185 3,483
-------------------------- ------ ------
Loans 854 -
-------------------------- ------ ------
Bearer Bonds 2,110 -
-------------------------- ------ ------
6,149 3,483
-------------------------- ------ ------
In July 2020 the Company issued bonds with a nominal value of
GBP3,000,000, raising a net GBP2,010,000. The bonds are
interest-free for three years and thereafter pay 6% of the nominal
value, annually in arrears, until the company exercises its call
option. The bond has initially been measured at fair value, which
is considered to be the transaction price. Subsequently the
liability is measured at amortised cost based on the expected cash
flows over the expected life of the instrument.
In August 2020 an additional term loan for GBP1,000,000,
repayable over six years, was secured through the Coronavirus
Business Interruption Loan Scheme at an effective annual interest
rate of 8.6%. At 31 March 2021 the liability was GBP974,000.
10. LEASES
All leases where the Group is a lessee are accounted for by
recognising a right of use asset and a lease liability except
for:
-- Leases of low value assets
-- Leases with a term of 12 months or less.
IFRS 16 'Leases' was adopted on 1 April 2019 without restatement
of comparative figures.
AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Land and Plant and Motor Total
buildings equipment Vehicles
RIGHT OF USE ASSETS GBP000 GBP000 GBP000 GBP000
--------------------------------- ---------- ---------- --------- ------
Balance at 1 April 2019 1,999 2,503 56 4,558
Additions to right of use assets - 49 - 49
Depreciation (260) (204) (27) (491)
---------------------------------- ---------- ---------- --------- ------
Balance at 31 March 2020 1,739 2,348 29 4,116
Additions to right of use assets - 95 - 95
Depreciation (260) (122) (23) (405)
---------------------------------- ---------- ---------- --------- ------
Balance at 31 March 2021 1,479 2,321 6 3,806
---------------------------------- ---------- ---------- --------- ------
Land and Plant and Motor Total
buildings equipment Vehicles
LEASE LIABILITIES GBP000 GBP000 GBP000 GBP000
------------------------------- ---------- ---------- --------- ------
Balance at 1 April 2019 1,999 2,621 61 4,681
Additions to lease liabilities - 49 - 49
Interest expense 120 193 4 317
Lease payments (317) (589) (33) (939)
-------------------------------- ---------- ---------- --------- ------
Balance at 31 March 2020 1,802 2,274 32 4,108
-------------------------------- ---------- ---------- --------- ------
additions to lease liabilities - 90 - 90
Interest expense 107 152 1 260
Lease payments (340) (304) (27) (671)
-------------------------------- ---------- ---------- --------- ------
Balance at 31 March 2021 1,569 2,212 6 3,787
-------------------------------- ---------- ---------- --------- ------
AMOUNTS RECOGNISED IN THE CONSOLIDATED INCOME STATEMENT
2021 2020
Land and Plant Motor Total Land and Plant Motor Total
buildings and Vehicles buildings and Vehicles
equipment equipment
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ---------- ---------- --------- ------ ---------- ---------- --------- ------
Depreciation charge
on right of use assets 260 122 23 405 260 204 27 491
Interest on lease
liabilities 107 152 1 260 120 193 4 317
Expenses related to
low value and short-term
leases 20 3 - 23 45 5 - 50
-------------------------- ---------- ---------- --------- ------ ---------- ---------- --------- ------
387 277 24 688 425 402 31 858
-------------------------- ---------- ---------- --------- ------ ---------- ---------- --------- ------
LEASE LIABILITIES - MATURITY ANALYSIS OF CONTRACTUAL
UNDISCOUNTED CASH FLOWS
Carrying Contractual 6 months 6-12 1-2 years 2-5 years More than
amount cash flows or less months 5 years
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ------------- ---------- -------- ----------- ----------- -----------
31 March 2021 3,787 4,643 390 441 865 2,216 731
31 March 2020 4,108 5,532 441 447 865 2,410 1,369
-------------- ---------- ------------- ---------- -------- ----------- ----------- -----------
11. SHARE CAPITAL
Ordinary Ordinary shares
In thousands of shares shares 2020
2021
---------------------------------------------------- -------- ---------------
In issue at 1 April 113,525 84,685
Issued by the Company 966 28,840
---------------------------------------------------- -------- ---------------
Shares on the market at 31 March - fully paid 114,491 113,525
---------------------------------------------------- -------- ---------------
Allotted, called up and fully paid GBP000 GBP000
---------------------------------------------------- -------- ---------------
114,490,828 (2020: 113,525,346) ordinary shares of
GBP0.01 each 1,145 1,135
63 deferred shares of GBP0.10 each - -
---------------------------------------------------- -------- ---------------
1,145 1,135
---------------------------------------------------- -------- ---------------
On 3 September 2020 the company announced the exercise of 46,450
options over ordinary shares of GBP0.01 each at an issue price of
GBP0.0775. The difference between the issue price and the nominal
value being taken into the share premium account.
On 14 December 2020 the company announced that employees who had
elected to forgo a proportion of their remuneration in favour of
the equivalent value in shares, based on a purchase price of
GBP0.0775 each, were issued 919,032 ordinary shares of GBP0.01.
Dividends
During the year and prior year no dividends were proposed or
paid. After the balance sheet date, the Board proposed no final
dividend would be made (2020: GBPnil).
12. RELATED PARTIES
The Company provides cross company guarantees in respect of the
invoice discounting for GBP0.21m. In the year ended 31 March 2021
no dividends were received (2020: nil).
Transactions with key management personnel
At the year end the Directors of the Company controlled 3.10 per
cent of the voting shares of the Group.
On 28 April 2020 the Company announced the launch of the Share
Stake Scheme (the "Scheme") which allowed team members to elect to
forgo a proportion of their remuneration receivable from the
Company, in return for the receipt of new ordinary shares of one
penny each in the Company ("New Ordinary Shares") to be issued at a
price of 7.75p.
All of the Executive Directors elected to receive between 20%
and 30% of their monthly net remuneration in New Ordinary Shares
from 1 April 2020 for a period of seven months. Non Executive
Directors elected to receive 100% of their fees in New Ordinary
Shares for the same period. On 14 December 2020 the Company issued
the following number of New Ordinary Shares to the Directors
pursuant to the Scheme:
New Ordinary Resulting shareholding % holding upon
Shares issued Admission
Conrad Bona Non-Executive Director 83,580 1,170,007 1.02%
Simon Barrell Non-Executive Director 85,356 85,356 0.07%
Peter Gunning Chief Executive Officer 231,352 1,965,352 1.71%
Iain Brown Group Finance Director 84,208 84,208 0.07%
Gavin Cockerill Chief Operating Officer 87,644 92,518 0.08%
Director & Company
Richard Lightfoot Secretary 77,156 152,156 0.13%
On 15 July 2020 the Company put in place a facility (the
"Perpetual Bond Facility") to issue up to GBP50 million of
perpetual bonds (the "Bearer bonds") and issued GBP3.0 million of
the Bearer bonds, at nominal value, to investors, raising
approximately GBP2.01 million before expenses. TGV Truffle Fund, an
investment fund managed by Investmentaktiengesellschaft für
langfristige Investoren TGV ("Langfrist"), subscribed for Bearer
bonds to the value of GBP2.8 million at nominal value (the "Related
Party Transaction"). The TGV Truffle Fund is a related party of the
Company for the purposes of the AIM Rules as Langfrist holds more
than 10 per cent. of the ordinary shares of the Company.
The compensation of the Directors, who are the key management
personnel, is disclosed in the full Annual Report, see note 13.
13. ANNUAL REPORT
The Annual Report and Notice of AGM will be sent to shareholders
on or around 18 August 2021 and will be available on the Company's
website www.grafenia.com from that date.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR KDLFLFDLLBBK
(END) Dow Jones Newswires
July 28, 2021 02:00 ET (06:00 GMT)
Grafenia (LSE:GRA)
Historical Stock Chart
From Feb 2024 to Mar 2024
Grafenia (LSE:GRA)
Historical Stock Chart
From Mar 2023 to Mar 2024