OTAQ Plc: Final Results for 9 months to 31 December 2022
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OTAQ Plc (OTAQ)
19 May 2023
OTAQ plc ("OTAQ", or the "Company")
Final Results for 9 months to 31 December 2022
OTAQ plc (OTAQ.AQ), the innovative technology company targeting the aquaculture, geotracking and offshore markets, announces its audited results for the 9 month period to 31 December 2022.
Financial Highlights
Strategic and Operational Highlights
*Adjusted EBITDA is earnings before income, tax, depreciation, exceptional costs, impairment, share option charges and amortisation
Commenting, Phil Newby, Chief Executive at OTAQ, said:
“OTAQ has ended the financial period with a strong balance sheet following the November 2022 share issue and renewed optimism that the Group will be successful. OTAQ is continuing to enhance its portfolio of products in all divisions and is looking to penetrate new markets through additional sales resource over the coming year.
“Completing the commercialisation of our new products and continuing the growth seen in the Offshore divisions gives the directors confidence that the Group will return to profitable growth.”
Contacts:
About OTAQ:
OTAQ is a highly innovative technology company targeting the aquaculture, geotracking and offshore markets. It already has a number of established products in its portfolio and is focused on further developing its presence, customer base and cross selling opportunities within core markets both organically and via acquisition.
OTAQ’s aquaculture products, which include a sonar device (developed for Minnowtech LLC) to scan shrimp in ponds and water quality monitoring, are focused on maximising welfare and production yields. Additionally, the Company is developing a potentially game changing live plankton analysis product for finfish and shellfish farmers. It also continues to target opportunities in the acoustic deterrent devices market via its Sealfence product, which is used by salmon farmers, with global opportunities in Chile, Australia, Canada and Norway.
The Company is also developing high accuracy location trackers for specialist applications. Having already added clients within safety and multiple participant sport/racing applications, the Company is investigating wider market potential - including opportunities in the seafood industry.
OTAQ’s offshore product range includes OceanSense subsea leak detection, Eagle IP camera systems, Lander seabed survey devices and Subsea electrical connectors and penetrators. It is targeting a number of growth opportunities in new territories and has a strong client base including Expro, Amphenol and National Oilwell Varco. The Company is also focused on the development of new products through this division, with the aim of increased cross-deployment of skills and technologies into the aquaculture arena.
CHAIRMAN’S STATEMENT FOR THE NINE-MONTH PERIOD ENDED 31 DECEMBER 2022
I’m pleased to present my first Chairman’s Statement for the nine-month period ended 31 December 2022.
The Group has spent the past nine-months working hard to develop and expand its product portfolio in each of its core markets, being Offshore, Aquaculture and Geotracking. Initial sales of some of these new products have been made in this or the prior financial period and the Group is now working hard to develop new markets and commercial opportunities for these products. Where development of key strategic products is not yet complete, efforts are being made in the new year to complete this development where credible market conditions prevail.
I am hopeful that 2023 will yield the benefit of our expanded product portfolio and I will be able to present improved revenue and profit performance for the year to 31 December 2023.
Strategy The strategy of the business is to use the Group’s customer base in the Offshore and Aquaculture industries to allow it to sell our new products developed by the Group’s product development team. Over time, the Group intends to have a full suite of complementary and sophisticated products for use in the Aquaculture industry, be that salmon or shrimp, as well as target niche markets in the Offshore sector where the Group can continue to enjoy the success historically seen. The Geotracking division will also make use of the products developed for this division to target specific sectors that the Group believe will benefit significantly from this technology.
Offshore The Offshore division, comprised of the previously separately reported Connectors and Offshore divisions, has continued to perform well and is expected to continue do so in 2023. The Group now sees additional opportunities for this division in new territories such as North America and other global markets. Sales and marketing resource is being invested to help develop the potential in this division and accelerate revenue growth.
Aquaculture The Group has developed exciting new products for use in the Aquaculture industry. As revenue from the company’s historically core product, Sealfence, has reduced, product development has been pursued in collaboration with key strategic partners to permit entry into the shrimp market, water quality monitoring sectors and plankton analysis. Whilst not all of these products are yet fully commercialised, the Group continues to believe in these technologies and the huge market potential that is possible.
Geotracking The Geotracking technology developed since 2020 has enjoyed some commercial success. In the year to 31 March 2022, the Group benefitted from a large contract award. Variants of the Geotracking device remain in development consisting of tracking devices for use in the railway industry and other similar sectors. Trials with partners in the railway industry are ongoing with orders placed and deliveries made. The potential for significant orders within this division in 2023 exists and the Group is working hard to achieve this.
Our Team Despite the challenges the Group has faced over the past year, I have been impressed since I joined with the passion and enthusiasm that exists within the business. I am delighted to welcome Giles Clifford to the Board and thank Malcolm Pye for his contribution now he has left. I am confident the team will work diligently to deliver the performance that the Board expects over the next twelve months.
Adam Reynolds Non-Executive Chairman
CHIEF EXECUTIVE’S REPORT FOR THE NINE-MONTH PERIOD ENDED 31 DECEMBER 2022
Review of the period Despite the declining Revenue and increasing losses in the period, the Group has taken steps to reposition itself during the year to ensure the business can return to growth and profitability without relying on its historically core product in the Aquaculture division. The Offshore division has performed well in the nine-month period with the Geotracking division not achieving Revenue of significance but continuing to develop new markets and products.
Development of the phytoplankton analysis product is continuing with commercial launch being worked towards in 2023. Trial sites with potential customers have been deployed and this has been fruitful in enabling us to learn about this strategically important market as well as allow Blue Lion Labs Ltd, in which we own 10% of equity, to develop the software required as part of the product.
Development of the shrimp sonar product in collaboration with Minnowtech LLC, our 15% investment since February 2021, has continued during the period. No sales of significance were made but Minnowtech are continuing to finalise their end product and they have now, post year-end, placed a one hundred unit quantity order.
The Group achieved Revenue of £2.56m in the nine-month period (2021/22: £4.29m) with this delivered by £1.62m in the Offshore division (2021/22: £2.09m), £0.06m (2021/22: £0.76m) in the Geotracking division and revenue of £0.88m (2021/22: £1.45m) in the Aquaculture division. The Geotracking division in 2021/22 benefitted from the fulfilment of a significant sports tracking contract as well as sonar sales to Minnowtech. Sonar sales in future will be recorded as Aquaculture sales.
Sales to non-UK territories have increased from 46% of total revenue in 2021/22 to 50% in 2022 as the Offshore division continues to expand and become a more significant part of the Group.
Revenue Group revenue for the nine-month period ended 31 December 2022 was £2.56 million from £4.29 million in the twelve months to 31 March 2022. This revenue change is all organic.
With the changing mix of sales from Aquaculture to Offshore, the Group sales mix is changing with UK revenue now representing only 50% of total revenue (2021/22: 54%). Chile represents 5% (2021/22: 8%) of total revenue with other European countries accounting for 14% (2021/22: 13%) of total revenue and the rest of the world for 31% (2021/22: 25%) of total revenue.
Profit The statutory loss for the year of £2.30m (2021/22: £1.90m) was impacted by the period being nine-months with Revenue being £1.73m lower than the twelve-month prior period and Gross profit being £1.23m lower accordingly. Gross profit of 31% (2021/22: 47%) was impacted by the high fixed costs in Cost of sales. Administrative expenses changed to £3.10m (2021: £4.14) in line with the nine-month period.
The £3.10m of administrative expenses was impacted by the large exceptional charges and certain one-offs including a £0.06m (2021/22: £0.31ml) impairment charge for the write-down of Sealfence units returned from customers and a £0.33m (2021/22: £0.57m) intangibles amortisation charge which included an additional £0.15m impairment charge relating to development costs not commercially viable.
The Group’s exceptional charges in the year totalled £1.23m (2021/22: £0.26m). These included costs regarding the end of the Scottish Acoustic Deterrent Device market and costs that were associated with legal fees for the new shares issued and listing on the Aquis Stock Exchange in November 2022.
Dividends The Board is not recommending a final dividend (2021/22: £nil).
Trading environment The North Sea and wider oil market in which the Offshore division operates, and which impacts on demand for the Offshore division, has remained buoyant during the period. Demand in this division is expected to continue to be favourable in 2023 and will be supported by additional sales resources and dedicated product development support. The market for ADDs in Scotland is no longer an area of focus although Scotland remains a key market for the Group’s new live plankton analysis system (LPAS) and water quality monitoring product. The Chilean market has been subdued in the year but progress is being made with the Chilean authorities around the approval required to use ADDs and it is hoped when this is concluded it will enable the Chilean market to grow.
Innovation The Group has continued to invest in the development of new products and improvement to existing products. Investment in research and development, capitalised as development costs, amounted to £0.36 million in the period to 31 December 2022 (2021/22: £0.59 million), equivalent to 14% of Group revenue (2021/22: 14%). The aim of the Group’s research and development team is to deliver key projects such as LPAS, water quality monitoring and Geotracking devices.
Current trading and prospects There is cautious optimism that in the coming financial year the Group can return to profitable growth due to the performance of the Offshore division and the expected launch of the Group’s strategic new products such as LPAS. However, management and the Board will continue to exercise firm controls on costs and cash whilst the Group returns to profitability.
Phil Newby Chief Executive
CHIEF FINANCIAL OFFICER’S REPORT FOR THE NINE-MONTH PERIOD ENDED 31 DECEMBER 2022
The strategy of the Group is to build a business of significance within the aquaculture and offshore industries with the key financing requirements being to ensure there is sufficient resource to fund new product development and working capital as the Group returns to growth.
The Group's Key Performance Indicators are aligned to revenue, profits and ensuring sufficient cash flow to deliver future growth. These three measures were below targets in the period to 31 December 2022 due to the withdrawal of Sealfence units from the Scottish market. However, cash flow has been supplemented by the issue of shares in November 2022 which aided cash balances by an amount net of all relevant costs of £3.22m. In addition, the Group carefully monitors loss time incidents and employee absenteeism and turnover. Loss time incidents were zero (2021/22: zero) for the year and employee absenteeism was in line with historic levels although employee turnover increased.
Revenue Group revenue changed to £2.56m from £4.29 million with pro-rata growth in the Offshore division against decline in Aquaculture and Geotracking.
Profits The preferred measure of assessing profits for the Group is explained below:
* Earnings before income, tax, depreciation, share option charges, impairment, exceptional costs and amortisation.
Adjusted EBITDA declined to a loss of £0.26m from £0.05 million in 2021/22 with the corresponding EBITDA operating margin declining from 1% EBITDA operating loss in the prior year to a 10% EBITDA operating loss. This decline was driven by the decrease in Gross profit in the period to £0.79m from £2.03m in the prior year. The EBITDA decline also resulted from a decline in the gross profit percentage from 47.2% to 31.0% due to the changing revenue mix away from Sealfence rentals.
Operating losses increased to £2.31m from £2.11m with the total comprehensive expense for the year increasing to £2.30million (2021/22: £1.91 million). The statutory loss before tax increased to £2.51 million compared to £2.16 million in 2021/22.
Adjusted EBITDA Adjusting items relate to expenditure which does not relate directly to the core activities of the Group and is considered to be one-off in nature or in relation to investing, restructuring or financing activities. The total pre-tax adjusting items recorded in the nine-month period to 31 December 2022 were £1.23m. These relate to £0.23m of fees relating to the November 2022 issue of equity, £0.12m relating to the write-off of amounts loaned to the employee benefit trust due to the decline in the company’s share price, £0.34m of costs in association with Sealfence inventory purchased in the period immediately written down, £0.49m write-down of Aquaculture inventory associated with the Scottish Sealfence rental market and £0.05m of sundry costs considered to be one-off.
In addition to this, there were depreciation charges of £0.30 million (2021/22: £0.74m), intangible amortisation charges of £0.33m (2021/22: £0.57m) and right-of-use depreciation charges of £0.13m (2021/22: £0.16m). There was also an impairment charge of £0.06m (2021/22: £0.31m) relating to Sealfence units returned from customers following the end of rental agreements.
Other operating income The grant income received in 2021/22 of £0.13m related to the HMRC CBILs scheme. . Finance costs Net finance costs totalled £0.20m (2021/22: £0.17m) and related to the interest charge relating to deferred acquisition payments made in the year associated with the terms of the acquisition of Marine Sense Limited in 2018, Right of use asset interest charges and predominantly interest costs relating to the CBILs loan.
Taxation As the Group remains in a statutory loss-making position, there is no overall Group tax charge. The Group continues to benefit from research and development tax credits which, along with a decrease in deferred tax of £0.08m, accounts for the £0.22m (2021/22: £0.25m) tax credit in the year.
Earnings and losses per share Statutory basic losses per share were 5.0p (2021/22: loss 5.9p) and statutory diluted losses per share totalled 5.0p (2021/22: loss 5.9p). These are calculated using the weighted average number of shares in existence during the year.
Return on Capital The Group intends to report on capital returns once sustained profitability has been achieved. Whilst capital returns are monitored currently, it is not a key performance or key results measure given the Group’s high revenue growth and current statutory loss-making position.
Dividends No dividends have been paid in the year (2021/22: £nil) and no dividend is recommended. It is expected that all cash resources will be retained by the Group.
Headcount The Group’s number of employees for 2022 stood at 43 (2021/22: 45). The change in staff numbers during the year was due to efficiency measures undertaken.
Share capital and share options The Group's issued share capital at 31 December 2022 totalled 127,824,881 Ordinary shares (2021/1: 37,716,250). During the year, no share options were exercised with 108,631 (2021/22: 95,854) shares issued as part of the employee Share Incentive Plan. 90,000,000 new shares were issued at a price of 4p as part of a funding round held in November 2022. 6,272,729 new shares were issued at a price of 22p as part of a funding round held in January 2022.
No share options were issued in the year (2021/22: 800,000) with 23,930,878 (2021/22: 2,130,900) share options and warrants in issue at 31 December 2022. 700,000 (2021/22: 229,592) share options lapsed in the year due to performance criteria not being met. Warrants totalling 22,499,978 were issued in November 2022 with 22,819,978, included in the above figures, outstanding on 31 December 2022 (2021/22: 320,000).
Cashflow and net debt This year's cash generated from operations totalled an outflow of £0.88 million (2021/22: £1.77 million). Total capital expenditure amounted to £0.61 million (2021/22: £1.23 million). Year-end cash balances totalled £2.34 million compared to £1.01 million in 2021/22. The Group finished 2022 with net cash of £0.76 million compared to £1.27 million of net debt at the end of 2021/22 as reconciled below:
The directors consider the income tax credit to be part of net debt as the asset will be converted into cash and is not part of normal working capital requirements as with other current assets.
Assets and liabilities Total current assets at 31 December 2022 were £4.24m compared to total current assets of £4.11m at 31 March 2022. The key change during the year relates to the increase in cash balances following the November 2022 fund raising to £2.34m from £1.01m and the decrease in trade and other receivables to £0.69m (2021/22: £1.77m) due to the timing of prior year revenue being weighted towards the last quarter of 2021/22. Inventories have decreased to £0.94m from £1.18m with trade and other payables decreasing to £0.50m from £1.24m with deferred income reducing by £0.43m.
Total liabilities have decreased from £3.77m at 31 March 2022 to £2.36m at 31 December 2022 with this decrease driven by the repayments due under the CBILs loan, reducing deferred income balances and a reduction in deferred payments for acquisition. Right-of-use lease liabilities at the end of the period amount to a total liability of £0.35m (2021/22: £0.42m).
Despite the difficulties of the period, the Group's financial position is improved over previous years due to the November 2022 fund raising. Nonetheless, the Group remains focussed on tight cost control and cash management whilst revenue and EBITDA growth is delivered to enable the Group to become cash flow positive.
Summary The Group begins the new financial year with a strong balance sheet, but where management and the Board will continue to exercise firm controls on costs and cash. The Group’s Offshore division is trading well and there is optimism that this division and new product launches can return the Group to an EBITDA-positive position and improve the Group’s cash performance.
Matt Enright Chief Financial Officer
consolidated Statement of comprehensive incomeFOR the NINE-MONTH PERIOD ended 31 DECEMBER 2022
As per note 9, the loss for the year arises from the Group’s continuing operations. Losses Per Share were 5.0p (2021/22: loss 5.9p) and Diluted Losses Per Share were 5.0p (2021/22: loss 5.9p).
The accompanying notes on pages 36 to 66 form an integral part of these consolidated financial statements.
CONSOLIDATED Statement of financial positionas at 31 DECEMBER 2022
The accompanying notes on pages 36 to 66 form an integral part of these consolidated financial statements. The financial statements were approved by the board of directors and authorised for issue on 18th May 2023. The results of the parent company are included on pages 67 to 71.
Signed on its behalf by M J Enright Company number: 11429299
............................. consolidated Statement of changes in equityFOR THE NINE-MONTH PERIOD ended 31 DECEMBER 2022
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE-MONTH PERIOD ENDED 31 DECEMBER 2022
OTAQ plc (“the Company’’) and its subsidiaries (together, “the Group’’) develop, provide and support the technology for use in the aquaculture industry and offshore oil & gas industries. The principal activity of the Company is that of a holding company for the Group as well as performing all administrative, corporate finance, strategic and governance functions of the Group. The Company is a public limited company, which is listed on the Aquis Stock Exchange and domiciled in England and incorporated and registered in England and Wales. The address of its registered office is 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England, LA1 4XF. The registered number of the Company is 11429299.
The principal accounting policies adopted by the Group and Company are set out in note 2.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied unless otherwise stated.
The consolidated financial statements of OTAQ plc have been prepared in accordance with International Financial Reporting Standards in conformity with the requirements UK-adopted International Accounting Standards applicable to companies reporting under IFRS and the Companies Act 2006. The consolidated financial statements have been prepared under the historical cost convention, as modified for any financial assets which are stated at fair value through profit or loss. The consolidated financial statements of OTAQ plc are presented in pounds sterling, which is the presentation currency for the consolidated financial statements. The functional currency of each of the group entities is Sterling apart from OTAQ Chile SpA which is the Chilean Peso. Figures have been rounded to the nearest thousand.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement and complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.
The Group has taken advantage of the audit exemption for one of its subsidiaries, OTAQ Aquaculture Limited (company number SC498922) by virtue of s479A of the Companies Act 2006. The Group has provided a parent guarantee to this subsidiary which has taken advantage of the exemption from audit. The parent company has applied FRS101 in its entity statements.
The Group’s financial statements consolidate the financial information of OTAQ plc and the entities it controls (its subsidiaries) drawn up to 31 December each year. In years prior to 31 December 2022, the financial statements were drawn up to 31 March each year. The year end date was amended on 16 December 2022 in order to algin with investor expectations. All business combinations (except for the Hertsford Capital plc reverse takeover on 31 March 2020 which used the merger accounting method) are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.
The Group measures goodwill at the acquisition date as:
Transaction costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
All subsidiaries are entities in which the Group owns sufficient share capital and has sufficient voting rights in order to govern the financial and operating policies. The percentage holdings of the Company in its subsidiaries is set out in note 14. The subsidiaries have been fully consolidated from the date control passed. All intra–group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. The accounting policies of subsidiaries are amended where necessary to ensure consistency with the policies adopted by the Group.
Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the Consolidated statement of comprehensive income.
The Group is developing new products for its core markets in Offshore and Aquaculture as well as the new Geotracking division. The Group has invested heavily in the development and procurement of these products and has achieved this through use of its cash reserves as well as the funds received following the share issue in November 2022. As at 31 December 2022, the Group had cash and cash equivalents of £2,337,000. The directors have prepared and reviewed the Group’s funding requirements over the next two years and are confident the Group has sufficient financial resources to meet its financial commitments and strategic objectives.
The forecasts generated by the Group, which cover the period to June 2024 and have been modelled for reductions in anticipated revenue, demonstrate sufficient ongoing demand to satisfy liabilities as they fall due. For these reasons the directors continue to adopt the going concern basis in preparing Group’s financial statements
The financial statements are presented in pounds sterling, which is the Group’s functional and presentation currency. All financial information presented has been rounded to the nearest thousand.
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segmental information is set out in note 4.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of sales related taxes.
Revenue related to sales of stock is recognised when goods are dispatched and the title and control over a product have passed to the customer, in accordance with agreed delivery terms.
Revenue under service contracts is recognised over the period in which the performance obligation relating to the agreed contract are satisfied. For rentals of the Group’s assets, revenue is recognised on a monthly basis based on the agreed rate and number of days for which the asset is on hire to the customer. Some contractual revenue is invoiced in advance and gives rise to a contract liability which is recognised as deferred income.
Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment. Government grants of a revenue nature are deducted from administrative expenses in the consolidated statement of comprehensive income in line with the terms of the underlying grant agreement. Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset. Government grants relating specifically to Covid-19 support measures have been disclosed as “other operating income”.
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
The lease liability is presented as a separate line in the statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the statement of financial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in ‘Administrative expenses’ in profit or loss.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.
Finance expense comprises interest expense on borrowings. All borrowing costs are recognised using the effective interest method.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:
Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantively enacted by the date and which are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future is uncertain.
Amounts due under the HMRC Research and Development tax credit scheme are accounted for based on the amount of qualifying expenditure in the year and assuming 14.5% of the claim is paid in cash once applicable losses and future profitability have been reviewed.
Property, plant and equipment assets are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises both the aggregate amount paid and the fair value of any other consideration given to acquire the asset, and includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component. The following bases and rates are used to depreciate classes of assets:
Systems for rental - straight line over 4 years Plant and equipment - straight line over 2 to 5 years Motor vehicles - straight line over 3 years
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.
All property, plant and equipment items are de-recognised on disposal, or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset is included in the Consolidated statement of comprehensive income in the period of de-recognition.
Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill, provided they are separable and their fair value can be measured reliably. This includes the costs associated with acquiring and registering patents in respect of intellectual property rights. Trademarks are assessed on recognising fair value of assets acquired by calculating the future net book value of expected cash flows.
Development costs are also charged to the statement of comprehensive income in the year of expenditure, except when individual projects satisfy the following criteria:
Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight-line basis over those lives. Development costs are amortised once the project to which they relate is viewed to be completed and capable of generating revenue. Once a project is completed, any further costs are charged to the statement of comprehensive income. The nature of those intangibles recognised and their estimated useful lives are as follows:
Intellectual property licence - straight line over 4 years Development costs - straight line over 6 years Trademarks - straight line over 8 years
Goodwill is recognised when the purchase price of a business exceeds the fair value of the assets acquired. Goodwill is subject to annual impairment reviews.
At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an assessment of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the Consolidated statement of comprehensive income in those expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Consolidated statement of comprehensive income unless the asset is carried at re-valued amount, in which case the reversal is treated as a valuation increase.
After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving or obsolete items if they are deemed to be no longer usable or sellable.
A financial asset or financial liability is initially measured at fair value. For an item not at fair value, adjustments to fair value are made through profit and loss (FVTPL) including transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at fair value and subsequently measured at amortised cost.
Financial assets On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
The Group has only financial assets measured at amortised cost. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
Financial assets – Business model assessment The Group makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:
Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:
Financial assets at amortised cost are subsequently measured fair value. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in the income statement. Any gain or loss on derecognition is recognised in the income statement.
Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into. Financial liabilities, including trade and other payables and bank loans are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial liabilities Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less from the date of acquisition. Foreign balances are revalued with any gain or loss adjusted.
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the consolidated statement of comprehensive income, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain.
Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Proceeds on issue of shares are included in shareholders’ equity, net of transaction costs. The carrying amount is not re-measured in subsequent years. The proceeds of the issue of shares up to the nominal ordinary share value of 15p are included in share capital with the balance of the proceeds, net of relevant transaction costs, included in the share premium
The cost of issuing share options is calculated using the Black-Scholes method and are included in the share option reserve until the share options are exercised, lapsed or cancelled.
Unlisted investments are stated at fair value with adjustments made following annualised fair value reviews through impairment charges.
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period.
The following new accounting standards, interpretations and amendments to existing standards have been published and are mandatory for the accounting period beginning on 1 April 2022. • Amendments to IAS 16: Property, Plant and Equipment: Proceeds before intended use. • Amendments to IFRS 3: Reference to the Conceptual Framework. • Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract. • Annual Improvements to IFRS Standards 2018 – 2020: Including amendments to IFRS 9 Financial Instruments and IFRS 16 Lease.
The new and amended standards adopted by the Group in the year have not resulted in any impact in the current financial statements.
Standards which are in issue but not yet effective At the date of authorisation of these financial statements, the following standards and interpretations, which have not yet been applied in these financial statements, were in issue but not yet effective: • Amendments to IAS 1: Presentation of Financial Statements (Effective 1 January 2024) and Disclosure of Accounting Policies (Effective 1 January 2023). • Amendments to IAS 8: Definition of Accounting Estimates (Effective 1 January 2023). • Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Effective 1 January 2023). • Amendments to IFRS 16: Lease Liability in a Sale and Leaseback (Effective 1 January 2024).
The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statements.
The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual amounts could differ from those estimates. Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements. The key sources of judgement and estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
Taxation Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised deferred tax asset for tax losses and other timing differences at 31 December 2022 was £995,000 (2021/22: £595,000). The value of the deferred tax liability at the period-end is nil (2021/22: £105,000. Further information is included in notes 8 and 23.
Useful Economic Life of assets and impairment Judgements are required as to the useful economic life of systems for rental assets. Further information on all useful economic lives of assets is included in notes 2 and 10.
Development costs Management judgement is required to determine the appropriate value of an asset as well as when an asset should be recognised. The value of the recognised asset is written off over the useful economic life of the asset. These judgements are based upon the likely timing and level of future revenues. Development costs are periodically and at least annually assessed for impairment and costs are written-off if the project to which they relate is no longer considered to be commercially viable. The value of the development costs capitalised at 31 December 2022 was £1,538,000 (2021/22: £1,411,000). Further information is included in note 12.
Goodwill impairment Judgements are required as to the useful economic life of goodwill. These judgements are based upon the likely future benefits that will be derived from the recognised goodwill. Further information on all useful economic lives of assets is included in notes 2 and 12.
The directors review segmental information at a revenue, gross margin, salary and operating cost level but do not review the balance sheet by segments.
A segment is a distinguishable component of the Group’s activities from which it may earn revenue and incur expenses, whose operating results are regularly reviewed by the Group’s chief operational decision makers to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available. In identifying its operating segments, management generally follows the Group’s service line which represent the main products and services provided by the Group.
The directors believe that the Group operates in three primary segments being the sale and supply of rental systems to the Aquaculture industry, the manufacture, rental and sale of underwater measurement devices, leak detection devices and underwater communication devices in the Offshore market and the manufacture and sale of Geotracking devices (GeoTracking).
All of the Group’s revenue have been generated from continuing operations, are from external customers and relates to point-in-time revenue recognised when the product or service is delivered.
There are no material customers included within revenue (2021/22, one: £725,000).
The Group operates in six main geographic areas, although all are managed in the UK. The Group’s revenue per geographical segment based on the customer’s location is as follows:
The Group’s assets are located in the UK and Chile and although some of its tangible assets, in the form of systems for rental, are located in Chile, all are owned by the company or its subsidiaries.
Operating loss is stated after charging/(crediting):
The average monthly number of employees (including executive directors) for the continuing operations was:
Staff costs for the Group during the year including executive directors:
Directors’ remuneration
Full details of the directors’ remuneration, for current directors, is provided in the Directors’ Remuneration Report on pages 21 to 23.
The highest paid director received remuneration of £132,382 (2021/22: £390,219)
The Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in independently administered funds. Retirement benefits are accruing to 3 directors (2021/22: 2).
The charge to the statement of comprehensive income in respect of defined contribution schemes was £37,000 (2021/22: £56,000). Contributions totalling £9,000 (2021/22: £8,000) were payable to the fund at the year-end and are included in creditors.
The tax credit is made up as follows:
The tax charge differs from the standard rate of corporation tax in the UK of 19% for the nine-month period ended 31 December 2022 (19% for the year ended 31 March 2022). The differences are explained below:
The Group has accumulated losses available to carry forward against future trading profits. The estimated value of the deferred tax asset measured at a standard rate of 19% (2021/22: 19%) is £995,000 (2021: £595,000), of which £nil (2021: £nil) has been recognised, as it is not certain that future taxable profits will be available against which the unused tax losses can be utilised.
The Group has not recognised a deferred tax liability in the year as it is covered by accumulated losses (2021/22: £80,000).
From 1 April 2023 the corporation tax rate will increase to 25%. This was substantively enacted on 24 May 2021. The deferred tax balance at 31 December 2022 has been calculated based on the rate as at the balance sheet date of 25%.
Basic earnings or losses per share are calculated by dividing the loss or profit after tax attributable to the equity holders of the Group by the weighted average number of shares in issue during the year.
Diluted earnings or losses per share are calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potential dilutive shares, namely share options. The calculation of earnings or losses per share is based on the following losses and number of shares.
A reconciliation is set out below.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has share options that are dilutive potential ordinary shares.
*These shares are not considered dilutive because they decrease the loss per share.
Depreciation charges in relation to Systems for rental are included in Costs of sale. All other depreciation is included in administrative expenses.
Impairment charges for the year relate to Sealfence rental systems returned from customers. The impairment review performed has been carried out on an individual asset basis, being the smallest group of assets contributing to future economic benefits.
The Group leases several assets including buildings and facilities as well as motor vehicles acquired during the year. The average lease term by asset is 3.5 years (2021/22: 2.8 years). This term, excluding Motor Vehicles, include some extension rights, which the Group is may or may not exercise.
The total cash outflow for leases amount to £123,000 (2021/22: £181,000).
Lease liabilities
Maturity analysis A maturity analysis of lease liabilities based on undiscounted gross cash flows is reported in the table below:
The Group does not face a significant liquidity risk with regard to its lease liabilities. All lease obligations are denominated in pounds sterling.
Goodwill relates to the acquisition of MarineSense Limited (now part of the Offshore cash generating unit) of £611,000 and the acquisition of Link Subsea Limited (now part of the Offshore cash generating unit) of £420,000. Impairment calculations are reviewed bi-annually to ensure goodwill is valued fairly.
Discounted cash flow modelling is undertaken based on forecast future revenues and costs and the values compared to the value of goodwill recognised with any required adjustments made accordingly. The discounted cash flow modelling shows significant headroom in the forecast future values of the business units relating to Goodwill compared to the carrying values of Goodwill. Forecast future values were assessed over five years with recoverable amounts determined by considering value in use, no growth rates were assumed and 8% was used as the modelling discount rates. For these reasons, it is not considered reasonable that a reasonably possible change in the key assumptions would result in the recoverable amounts being less than the carrying amount of Goodwill.
IP license costs mostly pertain to the intellectual property acquired as a part the acquisition of assets and liabilities of ROS Technology Limited, which took place in November 2020. The Group elected to apply the optional concentration test, which resulted in a conclusion that the acquisition is not a business combination on the basis that substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable assets. Therefore, this acquisition was accounted as an asset acquisition (i.e. outside the scope of IFRS 3). The remaining useful life of this asset is 2.9 years (2021/22: 3.6 years).
Development costs primarily relate to the development of the Group’s new products which involve the utilisation internal salary costs and purchase of external materials for the development of prototypes.
Unlisted equity securities pertain to 15% of ordinary share capital of Minnowtech LLC and 10% of ordinary share capital of Blue Lions Labs Ltd which are both held directly by OTAQ Group Limited.
The directors consider that the carrying amount of unlisted equity securities approximates to their fair value based on level 2 inputs for both investments which include indicative third-party valuations of the investments and internal valuation models provided by the investments themselves based on forecasts. Based on this information, no impairment is required at the reporting date.
The principal subsidiaries of the Group at 31 December 2022 and 31 March 2022 are as follows:
OTAQ Group UK Limited and OTAQ UK Limited were formally dissolved on 27 July 2021.
*OTAQ Chile SpA has a year end date of 31 December in order to comply with the requirements of the Chilean authorities.
1 Registered office address: 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England, LA1 4XF 2 Registered office address: Crombie Lodge, Aberdeen Innovation Park, Campus 2, Aberdeen, Scotland, AB22 8GU 3 Registered office address: Pacheco Altamarino 2875, Puerto Montt, Chile 4 Registered office address: 12 Belar Avenue, Terrigal, New South Wales 2260, Australia
Trade receivables are non-interest bearing and are generally due and paid within 30 to 60 days. As trade receivables are short-term, the simplified approach under IFRS 9 applies as the credit risk exposure period is unlikely to have a significant change in economic conditions. Trade and other receivables represent financial assets and are considered for impairment on an expected credit loss mode based on historic credit notes issued. Therefore, there is a provision for impairment at the statement of financial position date of £9,000 (2021/22: £28,000).
The age of net trade receivables is all within one year (2021/22: one year except for £23,000 which is less than two years) and the average gross debtor days calculated on a count back basis were 52 days (2021/22: 78 days).
The value of inventory provided for as at 31 December 2022 is £558,000 (2021/22: £64,000). £967,000 of stock was expensed in the year through cost of sales (2021/22: £1,010,000).
Cash at banks earns interest at floating rates based on daily bank deposit rates. An analysis of cash and cash equivalents by denominated currency is given in note 28.
The called-up and fully paid share capital of the Company is as follows:
Movements in ordinary shares:
During the year 108,631 (2021/22: 95,854) ordinary shares were issued at price ranges between 5p and 21p per share as part of the all UK employee Share Incentive Plan.
On 9 November 2022, 90,000,000 ordinary shares were issued following a General Meeting of the Company held on 7 November 2022 at a price of 4p per share. Contemporaneously, the existing ordinary share capital consisting of 37,758,052 ordinary shares of nominal value £0.15 each were sub-divided and each replaced with one new ordinary share of £0.01 each and one deferred share of £0.14. The new ordinary shares have the same rights as the ordinary shares they replaced. The new deferred shares have no economic rights.
On 11 January 2022, 6,272,729 ordinary shares were issued at a price of 22p per share following a General Meeting of the Company held on 10 January 2022.
Share option reserve The share option reserve arises from the requirement to value share options in existence at the year end at fair value. Further details of share options are included at note 25.
Share premium The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value less applicable costs and is non-distributable.
Deferred shares The deferred shares account represents the amount received on the cancellation of 15p ordinary shares by the Company and the creation of 1p ordinary shares and 14p deferred shares and is non-distributable.
Merger relief reserve The merger relief reserve arose on the Company’s reverse acquisition of OTAQ Group Limited on 31 March 2020 and relates to the share premium on the 21,539,904 shares issued to acquire OTAQ Group Limited.
Reverse acquisition reserve The reverse acquisition reserve was created in accordance with IFRS 3 ‘Business Combinations’. The reserve arises due to the elimination of the Company’s investment in OTAQ Group Limited. Since the shareholders of OTAQ Group Limited became the majority shareholders of the enlarged group, the acquisition is accounted for as though there is a continuation of the legal subsidiary’s financial statements. In reverse acquisition accounting, the business combination’s costs are deemed to have been incurred by the legal subsidiary.
Other reserve Other reserve represents the value of the exercised or lapsed share options which were exercised and the foreign exchange in relation to the translation of subsidiaries reporting in foreign currencies.
Revenue reserve The revenue reserve accumulates the losses attributable to the equity holders of the parent company.
Trade and other payables comprise amounts outstanding for trade purchases and on-going costs. Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period on purchases is 30 days (2021/22: 30 days). No interest is paid on trade payables over 30 days.
The directors consider that the carrying amount of trade payables approximates to their fair value.
From 1 April 2023 the corporation tax rate will increase to 25%. This was substantively enacted on 24 May 2021. The deferred tax balance at 31 December 2022 has been calculated based on the rate as at the balance sheet date of 25%.
Analysis of loans and borrowings
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
The terms and conditions of outstanding loans are as follows:
Liabilities arising from financing activities
*This balance includes £60,000 (2021/22: £76,000) of new leases entered to in the year. The leases liabilities relate to capital amounts only.
On 19 August 2021, the Company granted 550,000 of share options to various key management personnel under the Enterprise Management Incentive ("EMI") Share options. On 16 December 2021, the Company granted 250,000 of share options to a new key management employee under the Enterprise Management Incentive ("EMI") Share options. Vesting conditions are detailed in the Remuneration Committee report.
On 7 November 2022, the Company granted 22,499,978 warrants to shareholders who participated in the new share issue of the same date. The warrants entitle the holder to be issued with one share for every warrant held at a price of 12p per share.
An option-holder has no voting or dividend rights in the Company before the exercise of a share option.
Set out below are summaries of options granted under the plan:
260,900 share options are vested (2021/22: 260,900) and can be exercised
Set out below are summaries of warrants granted:
The remaining weighted average contractual life of the share options and warrants at 31 December 2022 is 2.43 years 1.82 years respectively with the weighted average exercise price being £0.14 (2021/22: £0.52). The weighted average share price on the date of exercise of share options exercised during the year to 31 March 2022 was £0.36 and no options were exercised in the period to 31 December 2022.
Fair value of options and warrants granted
The estimated average fair value of 22,499,978 (2021/22: 800,000 options) warrants granted during the year was £nil (2021/22: £0.08). The fair value at grant date is determined using an adjusted form of the Black-Scholes model which includes a Monte Carlo simulation model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, based on OTAQ plc historical share price history, and the risk-free interest rate for the term of the option.
The model inputs were:
The total reserve and share-based payment expense recognised in the statement of comprehensive income for the period ended 31 December 2022 in respect of these options granted was £nil (2021/22: £20,000).
Capital commitments The Group is committed to the following capital expenditure contracted in the current financial year:
The prior year capital commitment related to a purchase order placed for Sealfence systems.
Contingencies There were no contingent liabilities at 31 December 2022 and 31 March 2022.
The maturity gap analysis on the Group's financial assets and liabilities is as follows:
The Group’s activities expose it to a variety of financial risks: interest rate risk, liquidity risk, market risk, currency risk and credit risk. Risk management is carried out by the board of directors. The Group uses financial instruments to provide flexibility regarding its working capital requirements and to enable it to manage specific financial risks to which it is exposed.
The Group finances its operations through a mixture of equity finance, cash, loans and liquid resources and various items such as trade debtors and trade creditors which arise directly from the Group's operations.
Interest rate risk is the risk that the fair value of future cash flows associated with the instrument will fluctuate due to changes in market interest rates.
Interest bearing assets including cash and cash equivalents are considered to be short-term liquid assets. It is the Group’s policy to settle trade payables within the credit terms allowed and the Group does therefore not incur interest on overdue balances.
The Group has external borrowings linked to SONIA but capped until SONIA exceeds 2%; the Group is now therefore exposed to interest rate risk with SONIA at 3.69% at 31 December 2022. The Group is able to place surplus cash reserves on short-term deposit to help offset the SONIA increase risk. The principal impact to the Group is the result of interest-bearing loans and cash including cash equivalent balances held as set out below:
Liquidity risk is the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities. Liquidity risk arises from the repayment demands of the Group's lenders.
The Group manages all of its external bank relations centrally. Any material change to the Group’s principal banking facility requires approval by the board. The cash requirements of the Group are forecasted by the board annually. The Group is dependent on any external borrowings through it’s CBILs facility.
At the reporting date the Group was cash positive.
The following tables set out the maturity profile of the Group's non-derivative financial liabilities, based on undiscounted contractual cash outflows, as at the following dates:
The Group reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. It is the current strategy of the Group to finance its activities from existing equity and reserves as well as additional financing where appropriate and by the issue of new equity as required.
The capital structure of the Group consists of equity attributable to equity holders, comprising issued share capital, share premium, other reserves and retained earnings as disclosed in notes 19 to 20 and the statement of changes in equity. Total equity attributable to the equity holders of the parent company was £6,270,000 at 31 December 2022 (31 March 2022: £5,180,000). The Group is not subject to externally imposed capital requirements.
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group and the risk that any debtors of the Group may default on amounts due to the Group. The Group’s principal financial assets are trade receivables, other debtors and cash equivalents. The Group has a policy of only dealing with credit worthy counterparties which is assessed through credit checks and trade references. The Group had £377,000 of trade receivables at the period end (2021/22: £1,439,000). The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer or counterparty. However, management also considers the factors that may influence the credit risk of its customer or counterparty base, including the default risk associated with the industry and country in which the customer or counterparty operates. Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. All trade receivables are ultimately overseen by the director responsible for finance and are managed on a day-to-day basis by the finance team. Credit limits are set as deemed appropriate for the customer. The maximum exposure to credit risk in relation to cash and cash equivalents is the carrying value at the statement of financial position date.
The Group has limited exposure to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group. The risk is in respect of United States Dollars, Euros and Chilean Pesos. Transactions outside these currencies are limited.
The Group may use forward exchange contracts as an economic hedge against currency risk, where cash flow can be judged with reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing of the receipt is less certain. There were no open forward contracts as at 31 December 2022 or at 31 March 2022 and the Group did not enter into any such contracts during 2022 nor 2021.
The summary quantitative data about the Group’s exposure to currency risk is as follows:
Given the immaterial asset balances in foreign currency, the exposure to a change in exchange rate is negligible.
The Group has not presented any of its financial assets and financial liabilities on a net basis and no master netting arrangements are in place.
Transactions with directors and companies controlled by directors The following transactions with directors and companies controlled by directors of the Company were recorded, including VAT, during the year:
There were no outstanding balances between the Group and related parties at 31 December 2022 or 31 March 2022.
Balances and transactions between the Company and its subsidiaries are eliminated on consolidation and are not disclosed in this Note. There are no differences between directors and the key management personnel as they are considered to be the same.
Dissemination of a Regulatory Announcement that contains inside information in accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. |
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| ISIN: | GB00BK6JQ137 |
| Category Code: | FR |
| TIDM: | OTAQ |
| LEI Code: | 213800CZGMYB5XTUXJ52 |
| OAM Categories: | 1.1. Annual financial and audit reports |
| Sequence No.: | 244812 |
| EQS News ID: | 1636639 |
| End of Announcement | EQS News Service |
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