TIDMGRC
RNS Number : 9078K
GRC International Group PLC
07 September 2021
7 September 2021
GRC International Group plc
("GRC" or the "Group")
Preliminary results for the year ended 31 March 2021
Strong Covid-19 recovery with momentum building through H2
EBITDA(2) positive Q4 signals an optimistic outlook
GRC International Group plc, a leading supplier of cyber
security, risk management and compliance products and services, is
pleased to report its unaudited results for the 12 months ended 31
March 2021.
The full Annual Report and Accounts together with a notice of
the Company's annual general meeting (the "AGM") will be
distributed to shareholders on 29 September 2021 and will also be
made available on the Company's website at www.grci.group.
The AGM will be held at 11.00 on Tuesday 21 October 2021 at GRC
International Group plc, Unit 3, Clive Court, Bartholomew's Walk,
Ely, Cambridgeshire, CB7 4EA.
Financial highlights
-- Revenue down 16% to GBP11.8m (FY20: GBP14.1m) due to the pandemic.
-- H2 revenue up 19% on H1 (H2: GBP6.4m vs H1: GBP5.4m).
-- Calendar year H1 2021 billings up 26% on calendar year H2
2020 (H1 2021: GBP7.3m vs H2 2020: GBP5.8m).
-- Substantial 21% reduction in overhead expenses to GBP8.9m
(FY20: GBP11.2m) as a result of restructuring work in FY20 and
management's close attention to cost control through FY21.
-- EBITDA 2 loss reduced by 42% to GBP1.1m (FY20: GBP1.9m loss)
notwithstanding the pandemic related reduction in revenue.
-- Return to EBITDA positive trading in Q4 and for the quarter as a whole.
-- Substantial 22% reduction in loss before tax of GBP2.8m (FY20; GBP3.7m).
-- Basic loss per share reduced by 45% to 2.58p (FY20: Basic loss per share: 4.67p)
-- Net cash at period end of GBP0.2m (FY20: GBP0.2m). Borrowings
(excluding both bank overdraft and lease obligations) at period end
were GBP1.3m (FY20 GBP1.8m).
-- Net current liabilities have increased by GBP2.5m to GBP5.2m
(FY20 GBP2.7m). The Group's full financial position including cash,
borrowings, unused facilities and deferred payments to HMRC is
disclosed in the Going Concern section of the Financial Review.
-- Recurring revenue services generated 54% (FY20: 29%) of the
monthly billings 1 in the financial year.
-- H2 Recuring revenue billings 1 up 20% on H1 (H2: GBP3.6m vs H1: GBP3.0m).
-- H2 Cyber security billings 1 up 25% on H1 (GBPH2: GBP4.5m vs H1: GBP3.6m).
Operational Highlights
-- The Group's subsidiary IT Governance Ltd's pipeline increased
by 3% in value from GBP3.1m at the end of FY20 to GBP3.2m at the
end of FY21.
-- Customers continue to turn to our website for advice
throughout the pandemic. Website visits up by 3% to 3.7m (FY20:
3.6m).
-- Successful switch to remote and online delivery model for all Group products and services.
-- Permanent relocation of many staff to home working allowing
savings on property costs from H2 FY21 and beyond.
-- Increase in productivity and efficiency, with revenue per
employee improving through the year.
1 Billings equate to the total value (net of VAT) of invoices
raised and cash sales through the Group's websites. This figure
does not take account of accrued or deferred income adjustments
that are required to comply with UK-adopted International Financial
Reporting Standards ("IFRS") but is considered to provide useful
information to the users of the Group's financial information.
Billings is considered by the Board to be a key metric for managing
the business due to its direct relationship with cashflow. Cash
receipts are driven by billings achieved each month rather than by
revenue recognised in accordance with IFRS.
(2) EBITDA is defined in the Financial Review contained within
this announcement.
Outlook
-- Q1 FY22 continued the positive momentum and performance improvements seen through Q4 FY21.
-- EBITDA 2 for Q1 FY22 was positive in each of the 3 months.
-- Management is confident about the outlook for H2 FY22 and beyond.
Commenting on the results, Alan Calder, Chief Executive Officer,
said:
Although we pivoted in March 2020 to delivering 98% of our
services online, the pandemic meant that our billings and revenues
dipped significantly in April 2020 before starting to recover in
May and June. Encouragingly, from the end of November 2020 the
Group has seen steady month-on-month increases in billings and a
return to EBITDA-positive monthly trading in Q4. The March 2021
total monthly billings figure was the strongest achieved by the
Group in the two years since March 2019. 45% of transactions in Q4
were from new customers, with the balance from returning existing
customers.
This improving trend has continued strongly through Q1 of the
new financial year.
Cost and cash management remained key areas for the management
team throughout the year, during which we reduced Group overhead by
GBP2.3 million (21%) from GBP11.2 million in FY20 to GBP8.9 million
in FY21. GBP1.8 million (78%) of this saving was in staff costs
and, although we drew to a limited extent on the UK Government
furlough scheme (with a peak of less than 10% of our staff on
furlough in May 2020) we finished the year with 148 staff (on a
Full Time Equivalent basis), which is where we started FY20.
In a year of Brexit, COVID-19 and macro-economic uncertainty,
the Group's focus on delivering value for its clients saw a 8%
increase in cyber security as a percentage of total revenue,
increasing from FY20 65% to FY21 73%; ongoing investment in product
development, automation and software supported by a steady
improvement in gross margin. 15 months after launching the first
Group subscription service, there were a cumulative 3,600
subscribers to recurring revenue lines of business in Vigilant
Software, GRC e-Learning, IASME Cyber Essentials, ITGP Toolkits,
and GRCI Law, with a combined rolling annual churn rate of only
2.2%.
Our expertise, and how we deliver peace of mind to our
customers, is made possible by our people and our commitment to
retaining our experienced core staff throughout the pandemic, and
to continue investing in automation and customer-facing software
solutions, were two key factors that enabled us to handle the
trading upturn in H2.
Our continued progress through FY21 is testament to GRCI's
inherent nimbleness in developing new products and solutions
swiftly to service our customers' cyber security and data
protection needs. Utilising the skill and deep industry knowledge
of our management team to identify emerging trends in the market
and consequent client needs, it is one of our key competitive
advantages. Furthermore, the Board believes that GRCI continues to
be the only organisation in the market that can deploy a full suite
of services to help clients respond to proliferating cyber security
and privacy threats.
For all these reasons, the Board and I look forward to FY22 with
enthusiasm.
Enquiries:
GRC International Group plc +44 (0) 330 999 0222
Alan Calder, Chief Executive Officer
Christopher Hartshorne, Finance Director
Grant Thornton UK LLP (Nominated Adviser) +44 (0) 20 7383 5100
Philip Secrett
Lukas Girzadas
Dowgate Capital Limited (Broker) +44 (0) 20 3903 7715
James Serjeant
Russell Cook
Nicholas Chambers
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
About GRC International Group plc
GRC International Group plc was admitted to trading on the
London Stock Exchange's AIM market in March 2018.
GRC International provides a comprehensive suite of products and
services to address the cyber security, risk management and
compliance requirements of organisations seeking to address a wide
range of data protection and cyber security regulation. The Group
provides a range of services and products spanning training,
consultancy, publishing and distribution, and software
offerings.
The Group has a diversified and international customer base
which is expected to grow as GRC International expands its
geographical footprint. Since listing, the Group has expanded
internationally with operations now established in Ireland, the US
and mainland Europe.
Chairman's Statement
Overview
I am delighted to contribute to GRC International's Annual
Report for the year ended 31 March 2021, the Group's fourth Annual
Report since admission to the London Stock Exchange's AIM market in
March 2018.
GRC International strives to provide a "one-stop shop" for cyber
security and data compliance products and services delivered via a
variety of channels. Whilst the Group is UK-Headquartered, its
clients are global, and its strategic ambition is to become an
international "one-stop shop", expanding its geographic footprint
with overseas revenues exceeding domestic sales.
Developments over the last year have reinforced the Group's
belief that cyber security, business continuity and privacy
compliance issues are critical for the sustainability of ongoing
business operations.
Your Board is confident that the Group is well positioned to
deliver the products and services its clients will require to
address these issues.
Performance
FY20 was a challenging year for the Group following the marked
decline in GDPR activity, and the implementation of the necessary
reductions in staff. FY21 was of course even more challenging,
given the global impact of COVID-19. Management reacted swiftly to
the restrictions posed by COVID-19, and driven by the need to
protect our employees, was able to establish a working-from-home
model in short order. Importantly, the Group put in place a
pandemic response plan embracing the mitigating actions to respond
to a significant drop in revenues and cash receipts, utilising
government help and implementing exceptionally tight cost
controls.
As a result, although revenues declined by 16% to GBP11.8
million, the loss for the year was reduced from GBP3.2 million to
GBP2.6 million due to the annualised effect of FY20 cost reductions
and restructuring and due to management's close attention to cost
control in FY21. Within these numbers, I am pleased to note that
the H2 performance was excellent with positive EBITDA in Q4
following a small EBITDA loss in Q3. The improvement in results
began in November 2020 and has continued to the end of Q1 and into
Q2 FY22.
People
In February 2021 Neil Acworth, the Group Chief Information
Officer, left the Board. Since the year end, in May 2021 Steve
Watkins, an Executive Director, also left the Board. Steve will
continue thereafter as a special Board advisor, providing ongoing
insight into developments in international standards.
The Board thanks Neil and Steve for all their hard work and
considerable contribution over many years.
Their responsibilities have been assumed by our experienced
management team.
The extraordinary impact of the pandemic on the global economy
has placed significant pressures upon our staff, who have performed
exceptionally well in largely unfamiliar circumstances. GRC is
essentially a people business and depends upon the skills, passion
and commitment of the entire workforce to provide the quality of
service our clients demand. On behalf of the Board, I would like to
place on record our thanks for rising to all the challenges they
encountered.
Outlook
Whilst the Group continues to be unable to provide financial
guidance for FY22, the results for Q1 of FY22 are encouraging and
in line with management's expectations. We are managing our cash
position within agreed parameters and look forward to a post
pandemic business environment confident that our global markets
will grow significantly over the medium to long term.
Andrew Brode
Chairman
Market Overview
A global market driven by the growing volume and scale of cyber
security threats
The market for cyber security solutions and services is driven
predominantly by the rising number of cyber-attacks globally, which
are becoming increasingly sophisticated, coupled with increased
regulatory pressure for data security and privacy and a growing
demand for data processing transparency.
Although data protection complaints received by the Information
Commissioner's Office in the UK decreased marginally from 38,514 in
2019/20 to 36,607 in 2020/21, the FBI's IC3 2020 Internet Crime
Report shows 791,790 suspected internet crime reports (an increase
of 300,000, around 60%, on the prior year) costing, globally, more
than US$4.2 billion.
The COVID-19 pandemic accelerated corporate
technology-enablement and digitalisation as organisations were
forced to rely heavily on digitally-stored information, shared in
vast quantities both internally and externally. This increases the
opportunity for data to fall victim to a cyber-attack, resulting in
potentially devastating impacts to an organisation's bottom line
and reputation.
Although businesses around the world are recognising the
criticality of taking action, the pandemic created conflicting
priorities in which cyber security activity sometimes took a back
seat. 81% of executives said that the pandemic forced them to
bypass cybersecurity processes (Ernst & Young 2018-19 Global
Information Security Survey ("GISS")) . Cyber security,
nevertheless, is still a 'high priority' for 77% of company senior
managements (UK Government Cyber Security Breaches Survey 2021).
Many organisations are currently outsourcing cyber security
functions, including functions of their security operations
centres.
Ernst & Young also reported that 77% of organisations had
seen a clear increase in cyberattacks in comparison with the
previous year, while threat actors have hit a new level of maturity
and went on to say: "Attackers are targeting a growing surface area
and their tactics are increasingly unpredictable. Just one in three
respondents is confident in their ability to make the supply chain
suitably robust or water-tight".
End-to-end compliance across the supply chain with legal and
regulatory obligations further increasing demand for our products
and services
Organisations have legal and regulatory obligations to have in
place data protection and cyber security systems and procedures.
These laws and regulations (for example, EU GDPR and, since Brexit,
UK GDPR as well as a patchwork of state-level laws in the USA)
often have international reach outside of the countries in which
they are enacted.
The Board continues to believe that the most prominent legal,
regulatory and commercial standards relating to these areas will
continue to be adopted more widely across the globe. Organisations
will need to implement procedures and practices that will enable
them to demonstrate their compliance with the standards. In order
to achieve this, organisations will require a supplier that is able
to successfully meet all their cyber security governance needs and
GRC International believes there are significant opportunities for
upselling and cross-selling services to its existing customers.
In addition to laws and regulations, companies are increasingly
required to provide assurance to their customers, regulators and
stakeholders that their data protection and cyber security systems
are adequate for the current risk environment.
Businesses, therefore, require evidence of adequate security
from all the entities in their supply chains. For example, the
payment card brands, through their acquiring banks, require
businesses (and their suppliers) that process payment cards to meet
the Payment Card Industry Data Security Standard ("PCI DSS") and
the UK Government already requires that organisations supplying it
directly or indirectly should comply with Cyber Essentials (its own
standard).
We operate in a growing and global market
Due to the "one stop shop" nature of GRC International's
business, it is difficult to confirm the exact size of the global
market for the Group's products and services. However, there are a
number of research reports that indicate the size and growth rate
of this market:
-- The global cyber security market is predicted to be worth
US$243.6 billion by 2025, equating to a CAGR of 11.7% between 2020
and 2025 (VynZ Research).
-- Cyber security Ventures predicted cybercrime will continue
rising and would cost businesses globally more than US$5.2 trillion
over the next five years.
-- Average total to identify and contain a breach in 2019: 280
days (Accenture-Ponemon Institute Cost of Cybercrime Study
2020).
-- Average total cost of a cyber breach in 2019: US$3.86 million
(Accenture-Ponemon Institute Cost of Cybercrime Study 2020).
-- Where cyber security skills were concerned, 82% of employers
report a shortage of cyber security skills and 61% of companies
thought their cyber security applicants were not adequately
qualified.
GRC International offers a unique proposition to the market
In response to market trends in cyber security, there is a
rising number of consultancies, including the six major accountancy
firms, who now offer cyber security services. However, the Board
maintains that there are no other companies offering the wide range
of products and services that GRC International provides, either in
the UK or elsewhere.
Furthermore, the Board believes that no other company is able to
offer a bespoke solution for clients seeking to address their IT
governance, risk management and compliance requirements.
Chief Executive Officer's Review
A year of two halves
After the Coronavirus-induced economic uncertainty and
commercial retraction that heavily impacted H1 FY21, the Group saw
significant improvements in performance across all areas of its
business in H2, culminating with strong Q4 revenue that generated
positive EBITDA and positive cash flow for the quarter.
The performance improvement started at the end of November 2020,
continued through Q4 and into the new financial year and is
reflected in all our key performance indicators:
H1 FY21 H2 FY21 Change
Total billings GBP5.6m GBP6.7m +20%
Total billings per FTE GBP39k GBP46k +18%
Cyber security billings GBP3.6m GBP4.5m +25%
Recurring & contracted billings GBP3.0m GBP3.6m
+20%
Website billings GBP1.5m GBP2.5m +67%
Website visits 1.7m 1.9m +12%
Note: The 'Cyber security', 'Recuring and contracted' and
'Website' categories in the table above are non-exclusive. An
invoice or web sale can feature in more than one category.
-- The March 2021 total monthly billings figure was the
strongest achieved by the Group in the two years since March
2019.
-- 45% of transactions in Q4 were from new customers, with the
balance from returning existing customers.
-- 15 months after launching the first Group subscription
service, there were a cumulative 3,600 subscribers to recurring
revenue lines of Business in Vigilant Software, GRC e-Learning,
IASME Cyber Essentials, ITGP Toolkits, and GRCI Law, with a
combined rolling annual churn rate of only 2.2%.
Cost management across the year
Although we pivoted in March 2020 to delivering 98% of our
services online, the COVD -19 induced recession meant that our
billings and revenues dipped significantly in April 2020 before
turning up again in May and June.
Cost and cash management therefore remained key areas for the
management team throughout the year, during which we reduced Group
overhead by GBP2.3 million (21%) from GBP11.2 million in FY20 to
GBP8.9 million in FY21. GBP1.4 million (61%) of this saving was in
staff costs and, although we drew to a limited extent on the UK
Government furlough scheme, receiving a total of GBP0.1 million in
payments, (with a peak of less than 10% of our staff on furlough in
May 2021) we finished the year with 148 FTEs (Full Time
Equivalents), which is where we started FY20. Cash management was
aided by the deferral of certain HMRC liabilities, as is fully
explained in the Financial Review.
Our expertise, and how we deliver peace of mind to our
customers, is made possible by our people and our commitment to
retaining our experienced core staff throughout the pandemic, and
to continue investing in automation and customer-facing software
solutions, were two key factors in enabling us to manage the
trading upturn in H2.
Divisional overview
The Group has three operating divisions: e-Commerce, Software as
a Service (SaaS) and Professional Services.
e-Commerce division (21% of Group billings - (35)% YoY
change)
The Group operates multiple business-to-business (B2B)
e-commerce websites, which provide market-leading information
across the broad range of cyber security and privacy issues that
concern today's organisations, and which also provide a route to
market for the majority of products and services. The IT
Governance-branded One Stop Shop is, for a growing number of
organisations, their single source for information, products and
services that help them survive today's cyber threats, comply with
a growing range of privacy regulations and building thriving,
successful businesses.
The key products sold through our IT Governance e-commerce
websites are:
o Instructor-led Professional training and qualifications (58%
of Division billings)
o Self-paced (distance) learning courses and qualifications (13%
of Division billings)
o e-Books, audio books and international standards (29% of
Division billings)
SaaS division (19% of Group billings - (12)% YoY change)
The SaaS division contains our high volume, high margin
software-enabled or software as a service platforms. While the
gross margin achieved on our IASME Cyber Essentials certification
service is relatively low, the gross margin on the other lines of
business is in excess of 90%.
The SaaS division consists of:
o Vigilant Software's CyberComply Risk and Compliance management
platform (14% of Division billings)
o The IASME Cyber Essentials certification service (43% of
Division billings)
o The GRC e-Learning Staff Awareness platform (43% of Division
billings)
Professional Services division (60% of Group billings - (1)% YoY
change)
Our professional services division delivers high value
consultancy services that help clients tackle their cybersecurity
and privacy governance and compliance challenges.
The professional services division consists of:
-- IT Governance consulting services for (48% of Division billings)
o ISO27001 and information security management systems
o Cyber security consultancy
o Penetration testing
o PCI DSS consultancy
-- DQM GRC consulting services for (33% of Division billings)
o Privacy and GDPR
o Data quality management
o Data compliance and licence management
-- GRCI Law's (13% of Division billings)
o Privacy as a Service
o Legal and contract services
o EU and UK Rep services
o Data breach response services
Repeat and contracted billings, across the Group, totalled
GBP6.6 million, 54% of total billings; this is an increase of 4% on
FY20 and reflects our ongoing investment in improving the
visibility and resilience of our revenues.
Our businesses in the EU and the USA both made steady progress
through the year. Whilst both are still small businesses and do not
yet offer the full range of products and services that are
available through our UK websites, encouragingly they both won new
clients, and both made positive EBITDA contributions to the
Group.
Carbon footprint
Our pivot, shifting the majority of our staff to permanent home
working contracts, and delivering the majority of our services
online, has enabled us to complete the shift to a virtually
paper-free operation, as well as almost eliminating the more
substantial areas in our carbon footprint. Our offices, and travel
for work, were both important carbon contributors and we have
largely eliminated travel for work while also reducing our ongoing
office space by approximately 40%.
These three changes - paperless office, travel reduction and
office space reduction take us as an organisation to having a very
low carbon footprint.
Summary
Our continued progress through FY21 is testament to GRC
International's inherent nimbleness in developing new products and
solutions swiftly to service all clients' cyber security and data
protection needs. Utilising the skill and deep industry knowledge
of our management team to identify emerging trends in the market
and consequent client needs, it is one of our key competitive
advantages. Furthermore, we continue to be the only organisation in
the market that can deploy a full suite of services to help clients
respond to proliferating cyber security and privacy threats.
Product and service development remains at the heart of what we
do and is fundamental to our business model. The market we operate
in changes very quickly and we are agile in launching new products
and services on a regular basis.
The cyber security market continues to be driven by a mounting
pressure on companies to have in place data protection, privacy and
cyber security systems and procedures. It is this fundamental trend
- one that we see globally - that is driving the performance of our
cyber security-related products and services across all three of
our divisions.
The trajectory of the recovery from the pandemic remains
unclear; we nevertheless believe we are well-placed to serve the
growing, and global, cyber security market. In FY22, we intend to
scale up our business to better service clients and enable us to
grow margin-accretive, recurring revenues. The fundamentals of our
strategy remain unchanged, with investment in our product and
service offerings, across both new and existing jurisdictions,
coupled with continued growth in cyber security demand, driving
profitable growth for our shareholders.
Alan Calder
Chief Executive Officer
Financial Review
Following a year of restructuring and rebuilding in FY20 the
Board were looking forward to a year of profitable growth in FY21
and were encouraged by the EBITDA positive Group performance in Q4
of FY20. Unfortunately, the onset of the global COVID-19 pandemic
in the first quarter of calendar 2020 and its unprecedented impact
on daily life and the economy meant that plans and expectations
needed to be substantially revised. Never-the-less, I am delighted
to report that the Group has not only navigated the pandemic but
has built strong momentum in FY21 H2, returning to EBITDA positive
performance in Q4.
The Group's H1 performance very much followed the mood of the
nation. The national lockdown imposed at the end of March 2020
closed significant parts of the economy, and those businesses that
were operational focused on short term survival. This led to an
immediate reduction in monthly billings as customers delayed
projects and cut back on spend not deemed to be immediately
business critical. The Group initially saw a strong V-shaped
recovery followed by a summer of mixed results as the economy
struggled to keep up with regularly changing restrictions and
government guidance, along with the realisation that the pandemic
was set to last longer than most had initially expected.
However, from the end of November the Group evidenced that
customers had begun to have improved confidence in the roadmap back
to economic recovery and/or had simply accepted that they had to
get on with doing business in an uncertain environment, recognising
that dealing with their cyber risks was a key part of that. The
Group built strong positive momentum through the remainder of the
year, delivering consistently EBITDA positive results through the
final months of FY21 and continuing into FY22.
Revenue
Overall revenue in FY21 was down 16% to GBP11.8 million (FY20:
GBP14.1 million).
Revenue was significantly impacted by the pandemic in H1, with
revenue down 24% compared to H1 FY20 at GBP5.4 million (H1 FY19:
GBP7.1 million).
H2 revenue of GBP6.4 million (FY20 H2: GBP7.0 million) showed
somewhat of a return towards normalised trading. Significantly,
revenue of GBP3.5 million in Q4 (up 21%) compared to GBP2.9 million
in Q3 demonstrates the momentum as the year ended. Additionally,
February and March 2021 saw a significantly higher value of
invoices raised for future delivered work than had typically been
seen in the year. Although these invoices did not aid the FY21
revenue result, as work is completed for customers they will be
released as revenue in H1 FY22, a further sign of business and
economic recovery.
The Group has four key revenue streams:
- Consultancy and similar services
- Publishing and Distribution
- Software
- Training
As shown in the tables below, whilst all revenue streams were
impacted by the pandemic, it was the training revenue that declined
most significantly, being the typical type of non-contracted, short
term 'discretional' spend that customers delayed. The continually
improving levels of recuring revenue and longer term contract
revenue in other revenue streams ensured that the overall decline
was not as severe as it otherwise could have been. The training
business has seen solid improvement through H2 and into FY22.
Publishing
GBP'000 Consultancy and and Distribution Software Training Total
similar services
============= ================== ================== ========== ========== ========
FY17 2,898 1,042 410 2,483 6,833
FY18 5,274 1,649 399 8,366 15,688
FY19 7,228 1,337 1,513 5,771 15,849
FY20 8,635 977 1,356 3,178 14,146
FY21 8,106 750 1,147 1,757 11,760
============= ================== ================== ========== ========== ========
Year on Year
% Publishing
Consultancy and and Distribution Software Training Total
similar services
============= ================== ================== ========== ========== ========
FY18 82% 58% (3)% 237% 130%
FY19 37% (19)% 279% (31)% 1%
FY20 19% (27)% (10)% (45)% (11)%
FY21 (6)% (23)% (15)% (45)% (16)%
============= ================== ================== ========== ========== ========
GBP'000 UK Non-UK Non-UK
%
============= ================== ================== ========== ========== ========
FY17 5,525 1,308 19%
FY18 12,666 3,022 19%
FY19 12,886 2,962 19%
FY20 11,680 2,466 17%
FY21 9,667 2,093 18%
============= ================== ================== ========== ========== ========
Gross profit
Gross profit was down 25% to GBP6.1 million (FY20: GBP8.1
million) compared with the prior year. Gross profit as a percentage
of sales was down 500 basis points on the prior year at 52% (FY20:
57%). The majority of the Group's direct cost base relates to
headcount costs for consultants and client delivery staff. The
sudden and dramatic revenue drop in the early part of the year
meant that sales revenue was temporarily out of alignment with the
Group's costs. Where possible, the Group took advantage of
government furlough schemes to reduce of impact of reduced staff
underutilisation to a manageable level, whist also retaining and
supporting the staff resource it needed as the extraordinary
trading circumstances experienced through H1 began to normalise and
revenue returned towards pre COVID-19 levels. The Group received a
total of GBP0.1 million in government furlough scheme payments
during the period.
Whilst gross margin for the year as a whole was lower than
usual, the margins achieved in Q4 were much more in line with
management expectations at above 60% and improving month on month
through the quarter.
Operating expenses
Other operating expenses (excluding share-based payment expenses
and exceptional costs) decreased by GBP2.3 million to GBP8.9
million, down 21% (FY20: GBP11.2 million).
The Group worked hard in FY20 to restructure and reduce overhead
spend. The cost reduction in H1 FY21 was the result of action taken
in FY20 combined with management retaining a strong focus on cost
reduction into FY21. Whilst management held back on discretional
spend through the pandemic, the significant reduction in costs in
the main is not a reaction to the COVID-19 trading environment but
is much more a pre-planned part of the FY21 finance strategy.
By the end of FY21 overheads were running at an annualised run
rate a further GBP0.5 million lower than the full year FY21
figure.
EBITDA
Although EBITDA (Earnings before interest, tax, depreciation and
amortisation) is not a statutory measure, it is considered by the
Board to be an important Key Performance Indicator that is helpful
to investors. This is considered to be a more accurate measure of
underlying business performance as it removes the impact of
non-cash accounting adjustments.
Notwithstanding the COVID-19 pandemic related 16% reduction in
revenue, EBITDA loss reduced by 42% to GBP1.1 million (FY20: GBP1.9
million loss).
Notably the EBITDA loss for the period was significantly smaller
than the reduction in revenue. Since the reduction in revenue was
caused by unusual trading circumstances and much of the Group's
costs are fixed, the Board believes that a positive EBITDA would
have been expected for the year on a normalised level of revenue.
This belief is supported by the Q4 performance where the Group
delivered EBITDA positive results for February and March and was
EBITDA positive for the quarter as a whole.
GBP'000 Unaudited Unaudited
HY1 FY21 HY2 FY21 FY21 FY20
Operating loss (1,427) (1,161) (2,588) (3,425)
Depreciation 157 193 350 386
Amortisation 502 605 1,107 1,180
EBITDA (768) (363) (1,131) (1,859)
Finance expense
The net finance expense of GBP247k (FY20: GBP222k) relates
mainly to interest on the Group's borrowings (GBP187k) and IFRS 16
treatment of leases (GBP60k).
Loss before tax
Loss before tax was GBP2.8 million (FY20: GBP3.7 million).
Normalised loss before tax (defined as loss before tax excluding
share-based payment expenses and exceptional costs) was GBP2.8
million (FY20: GBP3.3 million).
Taxation
A tax credit of GBP264k has been recognised in the period (FY20:
GBP445k credit). The tax credit recognised relates primarily to the
unwinding of deferred tax on the acquisition of DQM and a Research
and Development tax credit. The Group has derecognised a deferred
tax asset of GBP138k in IT Governance Europe Ltd to bring the
accounting treatment in line with the rest of the Group. The Group
has GBP1.3 million of deferred tax assets that are not recognised
due to lack of certainty over the timing of future profits. As
clarity on the timing of future profits crystallises the Group will
look to recognise those assets and will utilise them as part of its
overall tax planning approach.
Earnings per share
Loss per share was 2.58 pence (FY20: loss per share 4.67
pence).
Statement of financial position
Net assets were GBP6.9 million (31 March 2020: GBP9.4
million).
Net current liabilities at year end were up by GBP2.5 million
from the prior year to GBP5.2 million (31 March 2020: GBP2.7
million).
The main factors in the overall increase in net current
liabilities are the reduction in trade and other receivables of
GBP0.6 million and the increase in trade and other payables of
GBP2.6 million. The other payables increase arose mainly from the
deferral of HMRC liabilities through the pandemic, as explained in
the Going Concern section below.
Included within current liabilities balance of GBP7.2 million
(31 March 2020: GBP5.4 million) is a deferred income balance of
GBP1.1 million (31 March 2020: GBP0.9 million), relating to
training and consultancy projects due to be delivered after the
statement of financial position date.
The Board continues to pay close attention to the working
capital management of debtors and creditors.
Intangible assets
The Group's accounting policy is that only directly attributable
staff costs of the technical teams developing the assets are
capitalised.
No management time is capitalised, and neither is any proportion
of overheads.
Additions of GBP1.2 million largely relate to software
development of GBP0.9 million and consultancy and courseware
products GBP0.2 million.
Cash flow and cash/debt
The Group's closing cash position was GBP0.2 million (FY20:
GBP0.2 million).
The significant reduction in operating cash outflows before
changes in working capital (FY21: GBP1.1 million, FY20: GBP1.9
million) is a reflection of the improvement in trading result
during the period. The increase in trade and other payables during
the year of GBP2.6 million largely relates to loans and payment
deferrals associated with government support through the COVID-19
pandemic.
The Group has banking facilities to provide adequate headroom
for unforeseen working capital requirements by way of an invoice
discounting facility that was inherited as part of the acquisition
of DQM. In addition, the unsecured loan facility provided to the
Company by Andrew Brode for the amount of GBP700k at an interest
rate of 5% above the Bank of England base rate to provide
additional working capital is available to the Company until at
least 31 December 2022 and shall automatically renew for a further
12 months unless terminated by either party. At the year end the
loan facility was 50% drawn (31 March 2020: 100% drawn).
Borrowings (excluding both bank overdraft and lease obligations)
at period end were GBP1.4 million (31 March 2020: GBP1.8 million) a
decrease on the previous period as loans to support the working
capital requirements during the restructuring in FY20 are paid
down. A full schedule of Borrowings and terms are disclosed in note
9.
Going concern
The Group has recorded a loss for the year of GBP2.6 million
(2020: GBP3.2 million) and at 31 March 2021 its current liabilities
exceeded its current assets by GBP5.2 million (2020: GBP2.7
million). Notwithstanding this, the Directors consider it
appropriate to prepare the financial statements on a going concern
basis. The key considerations relating to this judgement are
described below.
As set out above, the Group went through a transitional year of
restructuring in FY20 and was looking forward to a strong FY21,
continuing its H2 FY20 momentum and anticipating profitable results
for the year. However, the global COVID-19 pandemic led to an
immediate reduction in monthly billings as customers delayed
projects, reduced spend seen as not immediately critical to
day-to-day operations and focussed on establishing new business
processes and procedures to survive the short term. This
unprecedented trading environment resulted in a reduction in
revenues for April and May 2021, followed initially by a strong
V-shaped recovery, but then a period of mixed results through the
summer as the economy stuttered in an environment of ever-changing
regulations and guidance. From late in Q3 the Group saw genuine
performance improvements with momentum building through the rest of
the year, and performance back to consistently positive monthly
EBITDA before the year end and into the new financial year.
In response to the pandemic the Board revisited its FY21 and
FY22 forecasts, increased the regularity of its short and medium
term cash flow planning, implemented a number of key cost reduction
measures and took advantage of government initiatives that have
been introduced in the geographies that the Group operates in order
to preserve liquidity, supplemented by deferring the payment of
certain liabilities to HMRC which amounted to approximately GBP1.6
million. Additionally, in March 2021 certain subsidiaries of the
group joined the HMRC VAT deferral scheme to defer repayment of VAT
liabilities totalling GBP0.4m falling due in FY21 until FY22.
Notwithstanding some easing of trading conditions and subsequent
improvement in performance since the outbreak of the global
pandemic reached the United Kingdom (which represents around 82% of
the Group's revenue in FY21), the Directors acknowledge that
trading conditions will remain uncertain for the foreseeable
future. Those uncertainties include:
- The possibility of further local or national restrictions.
- The lack of visibility over future levels of revenue in the
context of weakened demand for the Group's products and
services.
- Should the Group need to further reduce its scalable cost
base, its ability to make those adjustments and realise the
benefits from doing that on a timely basis.
- The continued availability of existing financing, including
HMRC arrangements (see below), existing borrowings and flexibility
allowed by suppliers.
- The ability to access new financing, including further
government support in its various forms, sufficient to fund any
further cash requirement over the foreseeable future.
To assess going concern the Directors prepared an integrated
profit and loss, balance sheet and cash flow forecast by month to
31 March 2023. The Group's base case forecast identifies that
through the going concern review period the Group is able to meet
its liabilities as they fall due and make settlement of the
outstanding HMRC liabilities through FY22 in equal monthly
instalments. The majority of the deferred payroll tax liabilities
owed are now covered by formal 'time to pay' repayment plans agreed
with HMRC. The repayment plans differ across the trading entities
within the Group, but all split the deferred balance into equal
monthly instalments, with the full balance being repaid by
September 2022, and the balance owing as at the date of this report
being GBP1.0 million. The directors are in discussions with HMRC to
agree the repayment plan for the remainder of the balance not yet
covered by formal 'time to pay' arrangements and expect this to be
formalised imminently.
Additionally, the Directors prepared a sensitised forecast to
the base case forecast where the COVID-19 pandemic was more
prolonged than envisaged by the Directors at the time (the 'worst
case forecast'). This worst-case forecast assumes that revenues
between August 2021 and March 2023 are 40% below the base case
(marginally below those actually achieved in FY21) and that cost
reduction measures, to reflect the reduced level of billings, have
been effected. The worst-case forecast does not identify a
potential cash flow shortfall in any month and includes the same
assumptions for settlement of the outstanding HMRC liabilities as
in the base case forecast.
The Directors are monitoring actual business performance and
cash flow against the base case forecast and the worst-case
forecast. Encouragingly, the Group has traded ahead of the revenue,
EBITDA and cashflow expectations set out in the base case and the
worst-case forecast. Furthermore, in the view of the Directors any
temporary cash flow shortfall can be mitigated through the
deferment or removal of selected planned marketing, capital
expenditure and other scheduled cash outflows.
Based on the forecasts and the medium and longer term planning
in place, the Directors have identified that they have a reasonable
expectation of being able to reduce costs sufficiently in the
required timeframe should revenue levels cause this to be
necessary, and that the Group will remain within its currently
available facility levels, none of which has any financial covenant
compliance requirements. Central to those facilities is the
GBP700,000 unsecured loan facility provided by Andrew Brode which
is at present 50% utilised, and which remains in place until at
least 31 December 2022, although the Group does also have access to
additional liquidity through its invoice discounting facility,
which is not currently utilised.
The Directors have reviewed the Group's forecasts and
projections to 31 March 2023 which, taking account of reasonably
possible changes in trading performance, show that the Group is
able to generate sufficient liquidity to continue in operational
existence for the foreseeable future. On this basis, the Directors
believe that the Group will be able to generate sufficient cash
through its normal business trading to enable it to continue its
operations, and continue to meet, as and when they fall due, its
planned and committed liabilities for at least the next twelve
months from the date of this report. For this reason, the Directors
continue to adopt the going concern basis in the preparation of its
financial statements.
However, should the Group not be able to generate cash inflows
sufficient to meet its current operational obligations and legacy
deferred obligations as they fall due, it would need to secure
additional funding with no guarantee such funding would be secured.
These circumstances indicate the existence of a material
uncertainty which may cast significant doubt over the Group's
ability to continue as a going concern.
As in FY20 statutory accounts, the Board expects that the
Independent Auditor's Report will contain a material uncertainty
related to going concern.
The financial statements do not include the adjustments that
would be required should the going concern basis of preparation no
longer be appropriate.
Capital structure
The issued share capital at 31 March 2021 was 99,931,509
ordinary shares of GBP0.001 each (31 March 2020: 99,577,589). There
were no share options granted in the period to 31 March 2021, and
the total number of unexercised share options at 31 March 2021 was
426,760 (31 March 2020: 780,680).
Risks and uncertainties
The Board continuously assesses and monitors the key risks of
the business. The key risks that could affect the Group's
performance, and the factors which mitigate these risks, are as set
out in the Annual Report 2021. The one exception is an additional
point regarding liquidity risk and the Group's recognition of the
need to regularly review and monitor the Group's financing. Further
information is provided above under "Cash flow and cash/debt".
Chris Hartshorne
Finance Director
Consolidated Income Statement
For the year ended 31 March
2021 2020
Notes GBP'000 GBP'000
=========================================== ======= ================ ================
Revenue 4 11,760 14,146
Cost of sales (5,614) (6,082)
=========================================== ======= ================ ================
Gross profit 6,146 8,064
Administrative expenses:
=========================================== ======= ================ ================
- Other administrative expenses (8,882) (11,230)
- Exceptional administrative expenses - (358)
=========================================== ======= ================ ================
Total administrative expenses (8,882) (11,588)
Other operating income 148 99
=========================================== ======= ================ ================
Operating loss (2,588) (3,425)
Net finance costs (247) (222)
Share of post-tax loss of equity accounted
joint ventures - (4)
=========================================== ======= ================ ================
Loss before taxation (2,835) (3,651)
Taxation 264 445
=========================================== ======= ================ ================
Loss for the financial year (2,571) (3,206)
=========================================== ======= ================ ================
Loss for the financial year attributable
to:
Equity shareholders of the parent (2,571) (3,206)
=========================================== ======= ================ ================
Basic loss per share (pence) 10 (2.58) (4.67)
=========================================== ======= ================ ================
Diluted loss per share (pence) 10 (2.58) (4.67)
=========================================== ======= ================ ================
Consolidated Statement of Comprehensive Income
For the year ended 31 March
2021 2020
GBP'000 GBP'000
==================================================== ======== ===============
Loss for the year (2,571) (3,206)
Other comprehensive profit/(loss) - items that may subsequently
be reclassified to profit/loss:
Exchange differences on translation of foreign
operations 4 (6)
==================================================== ======== ===============
Other comprehensive profit/(loss) for the financial
year, net of tax 4 (6)
==================================================== ======== ===============
Total comprehensive loss for the financial year (2,567) (3,212)
==================================================== ======== ===============
Total comprehensive loss to equity shareholders
of the parent (2,567) (3,212)
==================================================== ======== ===============
Consolidated Balance Sheet as at 31 March
2021 2020
Notes GBP'000 GBP'000
Assets
Non-current assets
Goodwill 5 6,804 6,804
Intangible assets 6 5,765 5,706
Property, plant and equipment 426 783
Investments in equity-accounted
joint ventures 7 7
Deferred tax asset - 144
-------------------------------- ------- --------- ---------
13,002 13,444
-------------------------------- ------- --------- ---------
Current assets
Inventories 33 61
Trade and other receivables 7 1,694 2,247
Cash at bank 233 245
Current tax - 76
-------------------------------- ------- --------- ---------
1,960 2,629
-------------------------------- ------- --------- ---------
Current liabilities
Trade and other payables 8 (5,986) (3,629)
Borrowings 9 (863) (1,446)
Contingent consideration - (100)
Lease liabilities (197) (201)
Current tax (127) -
-------------------------------- ------- --------- ---------
(7,173) (5,376)
================================ ======= ========= =========
Net current liabilities (5,213) (2,747)
-------------------------------- ------- --------- ---------
Non-current liabilities
Borrowings 9 (460) (401)
Lease liabilities (83) (286)
Deferred tax liability (340) (582)
-------------------------------- ------- --------- ---------
(883) (1,269)
================================ ======= ========= =========
Net assets 6,906 9,428
================================ ======= ========= =========
Equity
Share capital 100 100
Share premium 13,227 13,182
Merger reserve 4,276 4,276
Share-based payment reserve 126 171
Translation reserve (8) (12)
Accumulated deficit (10,815) (8,289)
-------------------------------- ------- --------- ---------
Total equity 6,906 9,428
================================ ======= ========= =========
Consolidated Statement of Changes in Equity
For the year ended 31 March 2021
Share-based
Share Share Merger payment Retained Translation
capital premium reserve reserve earnings reserve Total
GBP GBP GBP GBP GBP GBP GBP
---------------------------- -------- -------- -------- ----------- --------- ----------- -------
Balance at 1 April 2020 100 13,182 4,276 171 (8,289) (12) 9,428
Loss for the year - - - - (2,571) - (2,571)
Foreign exchange difference
on consolidation - - - - - 4 4
============================ ======== ======== ======== =========== ========= =========== =======
Total comprehensive loss
for the year - - - - (2,571) 4 (2,567)
Shares issued - 45 - (45) 45 - 45
Deferred tax on share-based - - - - - - -
payments
Transactions with owners - 45 - (45) 45 - 45
============================ ======== ======== ======== =========== ========= =========== =======
At 31 March 2021 100 13,227 4,276 126 (10,815) (8) 6,906
============================ ======== ======== ======== =========== ========= =========== =======
For the year ended 31 March 2020
Share-based
Share Share Merger payment Retained Translation
capital premium reserve reserve earnings reserve Total
GBP GBP GBP GBP GBP GBP GBP
---------------------------- -------- -------- -------- ----------- --------- ----------- -------
Balance at 1 April 2019 64 9,588 2,353 441 (5,083) (6) 7,356
Loss for the year - - - - (3,206) - (3,206)
Foreign exchange difference
on consolidation - - - - - (6) (6)
============================ ======== ======== ======== =========== ========= =========== =======
Total comprehensive loss
for the year - - - - (3,206) (6) (3,212)
Deferred tax on share-based
payments - - - (269) - - (269)
Shares issued 36 3,725 1,923 - - - 6,684
Cost of share issue - (131) - - - - (131)
============================ ======== ======== ======== =========== ========= =========== =======
Transactions with owners 36 3,594 1,923 (269) - - 5,284
============================ ======== ======== ======== =========== ========= =========== =======
At 31 March 2020 100 13,182 4,276 171 (8,289) (12) 9,428
============================ ======== ======== ======== =========== ========= =========== =======
Consolidated Statement of Cash Flows
FOR THE YEARED 31 MARCH
2021 2020
Notes GBP'000 GBP'000
================================================ ======== ======== ========
Cash flows from operating activities
Loss before tax (2,835) (3,651)
Depreciation 350 386
Amortisation 1,107 1,180
Loss on disposal of fixed assets 4 -
Foreign exchange gains (22) (22)
Share of post-tax profits of equity accounted
joint ventures - 4
Finance costs 247 222
========================================================== ======== ========
Operating cash flows before changes in working
capital (1,149) (1,881)
Net cash from operations
Taxation refund 187 -
Decrease in inventories 28 3
Decrease in trade and other receivables 588 625
Increase/(decrease) in trade and other payables 2,560 (815)
========================================================== ======== ========
Net cash Inflow/(outflow) from operating
activities 2,214 (2,068)
Cash flows from investing activities
Settlement of contingent consideration - (1,626)
Purchase of intangible assets (1,168) (1,124)
Purchase of plant and equipment (35) (11)
Net cash outflow from investing activities (1,203) (2,761)
Net cash flows from financing activities
Proceeds from issue of shares - 3,750
Costs of share issue - (130)
Repayment of acquired contingent consideration
liability (100) (100)
Proceeds from borrowings 710 2,356
Repayment of borrowings (1,249) (568)
Interest paid (186) (134)
Interest on lease liability on right of
use asset (43) (60)
Payments of lease liabilities on right of
use asset (168) (181)
Capital element of finance lease payments - (6)
========================================================== ======== ========
Net cash (outflow)/inflow from financing
activities (1,036) 4,927
Net increase in cash and cash equivalents (25) 98
Cash and cash equivalents at beginning of
financial year 245 147
Effects of exchange rate changes on cash
and cash equivalents 13 -
========================================================== ======== ========
Cash and cash equivalents at end of financial
year 233 245
========================================================== ======== ========
Comprising
Cash at bank 233 245
Cash at bank 233 245
========================================================== ======== ========
Nature of Operations and General Information
1. Nature of Operations and General Information
GRC International Group plc (GRC International Group or 'the
Company') is a public limited company limited by shares,
incorporated and domiciled in England and Wales. The registered
company number is 11036180 and the registered office is Unit 3
Clive Court, Bartholemew's Walk, Cambridgeshire Business Park, Ely,
Cambridgeshire, CB7 4EA.
The principal activities of GRC International Group plc and its
subsidiary companies (together, the "Group") are those of a
one-stop shop for IT Governance including books, tools, learning
and consultancy services.
The financial information for the year ended 31 March 2021 and
the year ended 31 March 2020 does not constitute the company's
statutory accounts for those years.
Statutory accounts for the year ended 31 March 2020 have been
delivered to the Registrar of Companies.
The auditor's reports on these accounts was unqualified but did
draw attention to a material uncertainty related to going
concern.
The auditor's report and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
The financial information for the year ended March 2021 is
preliminary. The statutory accounts for that year will be delivered
to the Registrar of Companies in due course. The audit report will
draw attention to the material uncertainty related to going concern
which is explained below.
2. Principal Accounting Policies
Basis of preparation
The consolidated financial statements of GRC International Group
plc and entities controlled by the Company (its subsidiaries) for
the years presented has been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006
Basis of consolidation
The results for the year ended 31 March 2021 and 31 March 2020
include the results of GRC International Group plc and its
subsidiaries.
A subsidiary is a company controlled directly by the Group.
Control is achieved where the Group has the power over the
investee, rights
to variable returns and the ability to use the power to affect
the investee's returns.
Income and expenses of subsidiaries acquired during the year are
included in the Consolidated Income Statement from the effective
date of control. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting
policies into line with those used by the Group.
All intra-Group transactions, balances, income and expenses are
eliminated in full on consolidation.
The principal accounting policies adopted are set out below.
These accounting policies comply with each IFRS that is
mandatory for accounting periods ending on 31 March 2021.
3. Segmental reporting
Operating segments
For the purposes of segmental reporting, the Group's Chief
Operating Decision Maker (CODM) is considered to be the Executive
Board of Directors. The Board identifies its operating segments
based on the Group's service lines, which represent the main
product and services provided by the Group. In the opinion of the
Board, therefore the Group operates as a single operating
segment.
Revenue by geographic destination
Revenue across all operating segments is generated from the UK
but includes overseas sales:
2021 2020
GBP'000 GBP'000
======= ======== ========
UK 9,666 11,680
Non-UK 2,094 2,466
======= ======== ========
11,760 14,146
======= ======== ========
Information about major customers
No customers contributed 10% or more to the Group's revenue in
any period presented.
4. Revenue
Revenue is all derived from continuing operations.
Notwithstanding that the Group's revenues are often
interdependent, the Group has disaggregated revenue into various
categories in the following tables which is intended to depict how
the nature, amount, timing and uncertainty of revenue and cash
flows are affected by economic date:
2021 2020
GBP'000 GBP'000
================================= ======== ========
Consultancy and similar services 8,106 8,635
Publishing and Distribution 750 977
Software 1,147 1,356
Training 1,757 3,178
================================= ======== ========
Total revenue 11,760 14,146
================================= ======== ========
5. Goodwill
Cost and NBV 2021 2020
Total Total
GBP'000 GBP'000
=============================== ========= =========
At 1 April 6,804 6,693
Measurement period adjustments - 111
=============================== ========= =========
At 31 March 6,804 6,804
=============================== ========= =========
Goodwill arising from business combinations has been allocated
to the Group's DQM cash generating unit ("CGU"). Goodwill is tested
at least annually for impairment and whenever there are indications
that goodwill might be impaired.
For the DQM CGU, the carrying amount of Goodwill has been
assessed for impairment by comparing the carrying amount of the CGU
in which it is included to the recoverable amount based on value in
use of the CGU. The value in use calculation for the Cash
generating unit uses estimated future cash flows, for which the key
assumptions are forecast revenue over the next five years, based on
management's estimates; the terminal growth rate for revenues
beyond that period, which reflects a cautious approach for the
purpose of measuring a value in use and a pre-tax discount rate,
which is based on management's assessment of risk inherent in the
estimated future cash flows.
The pre-tax cash flows for the forecast period are derived from
the most recent financial budget for the year ending 31 March 2022
approved by the Board. The extrapolation for the period 2023 to
2026 is based on management estimates with an assumption of no
growth.
The impairment model is built to take into account performance
over a number of years. If FY22 were to be further impacted by
COVID-19 into the second half of the year, and revenue dramatically
reduced as a result, we would realistically expect a recovery to
more normal levels in FY23 and then growth in the future. Therefore
the approach taken in terms of using the FY22 budget for each year
in the model, without any growth, is significantly more cautious in
terms of an impairment model than using a very poor current year, a
return to normal in FY23 and then growth going forwards.
As of 31 March 2021, the value in use of the cash generating
unit was greater by GBP591k than the CGU's carrying amount. The key
assumptions used were the forecasts as explained above, the
terminal growth rate of 2%, and the pre-tax discount rate of
6.49%.
There are reasonably possible changes in key assumptions that
would give rise to a material impairment loss.
a) The discount rate would have to increase by 0.3% to give rise to an impairment
b) Administrative expenses would have to rise by 8% to give rise
to an impairment, this assumes that revenue levels remain
constant.
c) If Revenue was to fall by 4% (assuming margins remained the
same) this would give rise to an impairment.
6. Intangible assets
Consultancy Software
Marketing Publishing products and Trademarks Customer Total
tools products and website GBP'000 relationships GBP'000
GBP'000 GBP'000 courseware costs GBP'000
GBP'000 GBP'000
============= =========== ============= =========== ============== ============ ================= =============
Cost
At 1 April
2019 63 287 698 4,340 464 1,843 7,695
Additions - 46 182 894 2 - 1,124
Foreign
exchange
movement - - 1 - - - 1
============= =========== ============= =========== ============== ============ ================= =============
At 31 March
2020 63 333 881 5,234 466 1,843 8,820
Additions - 67 158 943 - - 1,168
Foreign
exchange
movement - - (3) - - - (3)
============= =========== ============= =========== ============== ============ ================= =============
At 31 March
2021 63 400 1,036 6,177 466 1,843 9,985
============= =========== ============= =========== ============== ============ ================= =============
Accumulated
depreciation
At 1 April
2019 55 203 253 1,420 4 - 1,935
Charge for
year 6 31 73 854 50 166 1,180
Foreign
exchange
movement - - (1) - - - (1)
============= =========== ============= =========== ============== ============ ================= =============
At 31 March
2020 61 234 325 2,274 54 166 3,114
Charge for
year 2 32 90 783 46 154 1,107
Foreign
exchange
movement - - (1) - - - (1)
============= =========== ============= =========== ============== ============ ================= =============
At 31 March
2021 63 266 414 3,057 100 320 4,220
============= =========== ============= =========== ============== ============ ================= =============
Net book
value
At 31 March
2021 - 134 622 3,120 366 1,523 5,765
============= =========== ============= =========== ============== ============ ================= =============
At 31 March
2020 2 99 556 2,960 412 1,677 5,706
============= =========== ============= =========== ============== ============ ================= =============
At 1 April
2019 8 84 445 2,920 460 1,843 5,760
============= =========== ============= =========== ============== ============ ================= =============
Amortisation is included within administrative expenses.
Intangible assets includes capitalised related party costs
incurred.
All intangible assets have been developed internally with the
exception of those arising on the business acquisition in 2019. The
recoverable amounts of the CGUs for the purpose of monitoring
impairment are determined from value-in-use calculations.
A review of the carrying amounts of the Group's non-current
assets to determine whether there is an indication that these
assets have suffered an impairment loss was carried out at the
year-end.
Having identified indicators of impairment, management conducted
an impairment test to determine recoverable amount of the cash
generating unit, and conducted that no impairment of internally
generated intangible had arisen as at 31 March 2021.
7. Trade and other receivables
2020 2020
GBP'000 GBP'000
======================================== ======== ================
Trade receivables 1,186 1,543
Less: provision for impairment of trade
receivables - (15)
======================================== ======== ================
Net trade receivables 1,186 1,528
Other receivables 78 129
Prepayments 430 590
======================================== ======== ================
1,694 2,247
======================================== ======== ================
None of the Company's trade and other receivables are secured by
collateral or credit enhancements.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses on a collective basis. To measure expected
credit losses on a collective basis, trade receivables and contract
assets are grouped based on a similar credit risk and ageing.
The Group's policy for monitoring default risk over receivables
is based on the ongoing evaluation of the collectability and ageing
analysis of trade and other receivables. Considerable judgement is
required in assessing the ultimate realisation of these
receivables, including reviewing the potential likelihood of
default, the past collection history of each customer and the
current economic conditions.
The Group uses a third party credit scoring system to assess the
creditworthiness of potential new customers before accepting them.
Credit limits are defined by customer based on this information.
All customer accounts are subject to review on a regular basis by
senior management and actions are taken to address debt ageing
issues.
The Directors consider that the carrying amount of trade and
other receivables approximates to the fair value. Included in the
Group's trade receivable balance as at the year end were customer
balances with a carrying amount of GBP356,000 (2019: GBP1,350,000)
which are past due at the reporting date for which the Group has
not recorded a provision as the Directors believe the amounts to be
recoverable in full, with an immaterial remaining exposure for
amounts remaining uncollected.
The expected loss rates are based on the Group's historical
credit losses experienced over a two-year period prior to the
period end. The historical loss rates are then adjusted for current
and forward-looking information on macroeconomic factors affecting
the Group's customers. The Group has identified gross domestic
product growth rates, employment rates and inflation rates as the
key macroeconomic factors in the countries in which the Group
operates. The calculated expected credit loss allowance for the
current and prior reporting periods has not been included as an
impairment provision as the Directors consider it to be
immaterial.
The maturity profile of trade and other receivables is set out
in the table below:
2021 2020
GBP'000 GBP'000
================================== ======== ===============
In one year or less, or on demand 1,694 2,247
================================== ======== ===============
The analysis of trade and other receivables by foreign currency
is set out in the table below:
2021 2020
GBP'000 GBP'000
========== ======== ===============
UK pound 1,581 2,158
US dollar 67 11
Euro 46 78
========== ======== ===============
1,694 2,247
========== ======== ===============
The Group's foreign currency receivables are denominated in the
functional currency of the subsidiaries in which they arise. There
is no impact on the loss for the year from foreign exchange rate
movements on such financial instruments.
8. Trade and other payables
Amounts falling due within one year:
2021 2020
GBP'000 GBP'000
=================================== ======== ================
Trade payables 1,223 1,220
Other taxation and social security 2,737 1,043
Other payables 451 204
Deferred income 1,114 855
Accruals 461 307
=================================== ======== ================
5,986 3,629
=================================== ======== ================
9. Borrowings
2021 2020
Current Non-current Total Current Non-current Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ========= ============ ========= ========= ============ =========
Secured
Bank loans (i) 266 - 266 523 5 528
Total secured borrowings 266 - 266 523 5 528
=========================== ========= ============ ========= ========= ============ =========
Unsecured
Bank Loans 229 460 689 195 396 591
Loans from related parties 368 - 368 728 - 728
=========================== ========= ============ ========= ========= ============ =========
Total unsecured borrowings 597 460 1,057 923 396 1,391
=========================== ========= ============ ========= ========= ============ =========
Total borrowings 863 460 1,323 1,446 401 1,847
=========================== ========= ============ ========= ========= ============ =========
.
(i) Secured liabilities and assets pledged as security
Of the Bank loans, GBP260,000 (2020: GBP426,000) is secured
against future receivables. The remaining secured bank loans and
overdrafts are secured against assets of the business.
Lease liabilities are secured as the rights to the leased assets
recognised in the financial statements revert to the lessor in the
event of default.
Cash proceeds Repayments Repayments Foreign As at 31
As at 1 from borrowings of capital of interest Interest exchange March
April 2020 GBP'000 GBP'000 GBP'000 accruing GBP"000 2021
GBP'000 GBP'000 GBP'000
==================== ============ ================= ============ ============= ========== ========== ==========
Secured bank loans 528 392 (654) (71) 71 - 266
Unsecured bank loans 591 318 (217) (70) 70 (3) 689
Loans from related
parties 728 - (378) - 18 - 368
Total 1,847 710 (1,249) (141) 159 (3) 1,323
==================== ============ ================= ============ ============= ========== ========== ==========
Cash proceeds Repayments Repayments
As at 1 from borrowings of capital of interest Interest As at 31
April 2019 GBP'000 GBP'000 GBP'000 accruing March
GBP'000 GBP'000 2020
GBP'000
=========================== ============ ================ =========== ============ ========== ==========
Secured bank loans - 889 (361) (22) 22 528
Unsecured bank loans 31 767 (207) (88) 88 591
Loans from related parties - 700 - - 28 728
Total 31 2,356 (568) (110) 138 1,847
=========================== ============ ================ =========== ============ ========== ==========
The Group has a number of loans in the period presented, and are
summarised as follows:
Effective
Security pledged Term Expiry/Maturity Interest
Date rate
--------------------------- -------------------- ------------------------ ------------------ -----------
Directors' pension scheme
loan Unsecured 60 Months April 2020 9.5%
Paypal Secured against 12 Months February 2022 4.26% -
future receivables 10.49%
Parent company
Wesleyan guarantee 60 Months September 2024 14.32%
Secured against
Wesleyan assets of business 36 Months February 2022 22%
Bute Capital Secured against 14-16 Months February 2021 6.65% -
assets of business 10.36%
Director's
Federal Capital Guarantee 12 Months October 2020 29%
Secured against
You Lend future receivables 12 Months November 2021 16.67%
Director's
LDF Finance No. 3 Ltd Guarantee 36 Months August 2023 10.16%
Director's
Portman Asset Finance Guarantee 24 Months December 2021 29.28%
Director's
Portman Asset Finance Guarantee 60 Months December 2025 8.8%
Unsecured loan facility Unsecured Available to the December 2021 5.0% above
provided by Andrew Brode. Group until at the Bank
least of England
31 December 2022 base rate
and will automatically
renew for a further
12 months unless
terminated by
either party.
Lloyds Bank - CBILS
Loan Unsecured 72 Months October 2021 2.45%
USA Coronavirus government
loan Unsecured 12 Months March 2022 0.00%
In addition, the Group has access to Invoicing discounting
facility acquired within the DQM acquisition.
10. Earnings per share
Basic earnings per share is based on the (loss)/profit after tax
for the year and the weighted average number of shares in issue
during each year.
2021 2020
'000 '000
=========================================== ========== ==========
Loss attributable to equity holders of
the Group (GBP) (2,571) (3,206)
Weighted average number of shares in issue 99,754,064 68,689,792
=========================================== ========== ==========
Basic loss per share (pence) (2.58) (4.67)
=========================================== ========== ==========
Diluted earnings per share is calculated by adjusting the
average number of shares in issue during the year to assume
conversion of all dilutive potential ordinary shares.
Taking the Group's share options into consideration in respect
of the Group's weighted average number of ordinary shares for the
purposes of diluted earnings per share, is as follows:
2021 2020
Number of shares 99,754,064 68,689,792
---------------------------------------------------------- --------------- ---------------
Dilutive (potential dilutive) effect of share options - -
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 99,754,064 68,689,792
---------------------------------------------------------- --------------- ---------------
Diluted loss per share (pence) (2.58) (4.67)
========================================================== =============== ===============
Due to the losses incurred during the year, a diluted loss per
share has not been calculated as this would serve to reduce the
basic loss per share. There were 426,760 (2020: 1,680,680) share
incentives outstanding at the end of the year that could
potentially dilute basic earnings per share in the future.
End.
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END
FR KQLFBFKLEBBE
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