Final Results

RNS Number : 9656Y

Beeks Financial Cloud Group PLC

15 September 2020

Beeks Financial Cloud Group plc

("Beeks" or the "Company")

Final Results for the year ended 30 June 2020

15 September 2020 - Beeks Financial Cloud Group plc (AIM: BKS), a cloud computing and connectivity provider for financial markets, is pleased to announce its final results for the year ended 30 June 2020.

Financial highlights

· Revenues increased 27% to £9.36m (2019: £7.35m)

· Annualised Committed Monthly Recurring Revenue (ACMRR) up 23% to £11.2m (2019: £9.1m)

· Underlying Gross profit^ up 30% to £4.75m (2019: £3.65m)

· Underlying Gross profit margin 51% (2019: 50%)

· Underlying* EBITDA increased 34% to £3.33m (2019: £2.48m), including IFRS 16 adjustment of £0.52m (an increase of 14% excluding IFRS 16)

· Underlying profit before tax** increased 8% to £1.43m (2019: £1.32m)

· Underlying EPS** 2.52p (2019: 2.58p)

· Net debt as at 30 June 2020 of £0.75m (30 June 2019: Net cash £1.02m)

· Proposed final dividend of 0.15p per share equating to full year dividend payment of 0.35p (2019: 0.35p)

^ Underlying gross profit is statutory gross profit excluding other income and acquired amortisation costs

* Underlying EBITDA is defined as earnings before amortisation, depreciation, finance costs, taxation, acquisition costs, share based payments and exceptional non-recurring costs

** Underlying profit before tax and underlying EPS excludes amortisation on acquired intangibles, acquisition costs, share based payments and exceptional non-recurring costs

Operational Highlights

· Signing of two Tier 1 clients in the year, bringing the total number of Tier 1 clients to five with further Tier 1 customers acquired as part of the Velocimetrics acquisition

· Acquisition of Velocimetrics, a UK-based network monitoring and trade analytics software company, broadening Beeks' offering and expanding the total addressable market

· Further expansion with the opening of seven new Datacentres: Singapore SG1, London LD8 and LD4.2, Paris PA1, Sydney, Australia and NY2 and NY5 in New York, bringing the international network to 18 Datacentres; all new Datacentres are now revenue generating

· Launch of Back Up as a Service in first quarter with client uptake in line with expectations

· Award of a grant of up to £2m from Scottish Enterprise to support the Network Automation Project facilitating growth and expansion and enabling a broader product offering

· Obtaining ISO 27001 certification (gained post year end on 21 August 2020)

· Average entry monthly recurring value for a new institutional customer contract increased to £2,400 (FY 2019: £2,200)

Outlook

· Positive market environment and considerably increased sales pipeline

· Confident in securing additional Tier 1 customers in the year ahead

Statutory Equivalents

The above highlights are based on underlying results. Reconciliations between underlying and statutory results are contained within the financial information. The statutory equivalents of the above results are as follows:

· Profit before tax was £0.68m (2019: £1.04m)

· Basic EPS was 1.13p (2019: 2.10p)

Gordon McArthur, CEO of Beeks Financial Cloud commented:

"I am pleased to report on a year of considerable progress, in which the Group has delivered against its strategic objectives; increasing the number of Tier 1 customers, expanding its geographic presence and offering and completing the strategic acquisition of Velocimetrics.

While the ongoing Covid-19 pandemic may continue to cause a delay in corporate decision making, and in spite of the wider economic uncertainties, we are confident the long-term growth drivers in our market remain intact - with financial services organisations increasingly looking to take advantage of the benefits of Cloud infrastructure.

We anticipate continued growth of our existing Tier 1 accounts, as they expand the use of our offering into new geographies, and we believe the launch of our analytics offering has the potential to layer on new SaaS product revenues. We are confident in our ability to convert our growing sales pipeline, and therefore continue to be excited about the future for the Group."

Beeks Financial Cloud Group plc
Gordon McArthur, CEO	via Alma PR
Fraser McDonald, CFO
Canaccord Genuity	+44 (0)20 7523 8000
Adam James / Angelos Vlatakis
Alma PR	+44(0)20 3405 0212
Caroline Forde / Helena Bogle / Josh Royston

ABOUT BEEKS FINANCIAL CLOUD

Beeks Financial Cloud is a leading cloud computing, connectivity and analytics provider for financial services. Our cloud-based Infrastructure-as-a-Service (IaaS) model allows financial organisations the flexibility and agility to deploy and connect to a variety of exchanges, trading venues and cloud service providers at a fraction of the cost of building their own networks and infrastructure. Based in the UK with an international network of 18 datacentres, Beeks supports its global customers at scale in the leading financial centres.

For more information, visit: www.beeksfinancialcloud.com

Chairman's statement

I am pleased to report on a year of considerable progress, in which the Group has delivered against its strategic objectives; increasing the number of Tier 1 customers, expanding its geographic presence and offering and completing the strategic acquisition of Velocimetrics. Beeks continues to benefit from its IaaS based business model, which through continued good levels of customer retention, new customer acquisition and the increasing size of average customer contracts has seen revenues grow by 27% and underlying EBITDA by 14% (excluding the impact of the IFRS 16 adjustment). The Group exited the year with £11.2m of Annualised Committed Monthly Recurring Revenue (ACMRR), an increase of 23%, which provides us with strong foundations for growth going forward.

It is evident to me that the Group has taken considerable strides forward during the year in increasing the attractiveness of its offering to the Tier 1 segment of the financial services market, investing in an expanded offering and sales and marketing capabilities. With five Tier 1 customers now engaged, we have growing proof points of our ability to deliver the infrastructure, resilience, capabilities and support required by Tier 1 customers, and a growing ability to capture market share in this lucrative segment of the financial services market.

Naturally, Covid-19 presented some challenges but we were quick to implement measures to ensure minimal disruption to the running of the business. Whilst some new customer implementations have become protracted in the second half of the year and sales cycles have extended, the Group's 94% recurring revenues, strong balance sheet and resilient business model ensured we delivered a positive overall trading result.

We were pleased to complete the acquisition of Velocimetrics during the year - a UK-based network monitoring and trade analytics software company, which has broadened our offering, with our first SaaS based analytics offering to be launched in the next twelve months. Whilst the Group is focused on organic growth, we will continue to assess strategic acquisitions that fit our criteria and complement our business model.

The Board has taken the decision to pay a final dividend to shareholders as a result of the recurring revenue nature of the Group, the level of operating cash which we now deliver and the low level of indebtedness within the Group. Should the impact of Covid-19 increase in the year ahead, the Board will keep the level of future dividend payment under review. However, it should be noted the Group has not, to date, utilised any of the government furlough schemes and therefore believes that there is no impediment in this respect to paying a dividend to shareholders.

During the period, Christopher Livesey, Non-Executive Director, notified the Board of his resignation. I would like to thank Chris for his valuable input since the Company's IPO and wish him all the best for the future. We will continue to assess the Board composition on an ongoing basis and look to appoint an additional Non-Executive Director at the appropriate juncture

I would like to thank all our employees for their continued hard work, especially during these challenging times. We are in a strong position to deliver on growth and I am confident of continued success in this coming year.

Mark Cubitt

Chairman

14 September 2020

Strategic overview

Market Overview

The Group continues to operate successfully in a demanding, time-sensitive industry and is uniquely positioned to take advantage of the rapid acceleration of Cloud deployment in financial services and the growing need for analytics around those infrastructure environments. These latency sensitive environments need to be built, connected and analysed and Beeks is one of the few companies in the world that can provide this.

The complex nature of building and managing a latency sensitive infrastructure means financial enterprises are moving away from on premise datacentres to third party facilities. We believe the decreased latency, increased flexibility and cost-benefits of Cloud computing that we facilitate will see a gradual long-term shift to this model. As Cloud adoption in financial services evolves, companies are finding that the benefits are not just about cost efficiencies but also to do with resilience, agility and innovation which brings additional opportunities for by-products such as analytics and scalable global connectivity.

Our addressable market is extensive with up to 20,000 financial institutions, a large percentage of which maintain their own IT infrastructure and are yet to move to the Cloud computing model.

A 2019 survey by Refinitiv found:

- 48% of financial services' IT budget will be invested in public Cloud in 2020 up from 34% in 2018.

- 64% of firms believe that the Cloud will be significant, or transformational, for their sector over the next five to 10 years.

- 76% of firms say that their public Cloud projects performed better than expected when it came to delivering an immediate cost reduction.

The flexibility of Cloud computing will allow financial institutions to accelerate new product development, generate new sources of income and test new geographies and markets, while moving costs from a capital expenditure to an operational expenditure model. A lack of human resource or expertise is one of the main barriers to moving to a Cloud environment leading to a greater demand for third party solutions provided by Beeks.

Our innovations, enhanced product range position, breadth of asset classes and growing number of Tier 1 customers, positions us well to benefit from the growth in the market for automated trading, the continued adoption of Cloud computing by financial services organisations and the opportunity for accelerated growth through corporate acquisitions in a fragmented market place.

Business Model

Build. Connect. Analyse. Our global backbone of 18 datacentres provide Cloud deployment for financial services customers, helping them to formulate a Cloud strategy and replicate that in different regions. The acquisition of Velocimetrics expanded our product offering to include the required analytics around those infrastructure environments.

Beeks provides:

· Dedicated and virtual servers that host traders and brokers in 18 datacentres around the world

· Ultra-low latency connectivity between customers and key financial venues and exchanges

· Co-location for customers to position their own computing power in our space, benefitting from our proximity to financial hubs.

· In-house security software in order to protect client infrastructure from cyber attacks

· The management of hybrid Cloud deployments for customers wishing to combine the Beeks IaaS with the public Cloud

· Our model focuses on efficiency and flexibility, offering our customers the ability to scale up and scale down as needed. Due to market fluctuations and the inherent risk involved in algorithmic trading, this makes our services highly attractive to customers.

· Beeks has a unique self-service customer portal that facilitates the same-day deployment of a host of services and allows our customers to configure and order their own servers.

· Beeks analytics: Comprehensive monitoring and performance analysis allows the user to independently track and analyse real-time performance of every single price, quote or trade traversing business critical processes.

Strategy

Our strategy is to design and deliver a range of secure cloud solutions, both public and private, which are easy to consume for small, medium and large financial enterprises.

Our main strategic priority is to grow our institutional customer base both for public, private and secure Cloud deployment in addition to our core low latency offering together and complementary analytics solutions. In order to satisfy existing demand, and attract new customers, we will continue expanding into new asset classes and geographies, furthering our offering, encouraged by the significant opportunities we have identified.

Our retail trader offering continues to grow, providing the business with a strong, profitable foundation. We will maintain our investment into this part of the business to make sure we continue to provide a market leading offering while we focus our strategic initiatives on the growth of our institutional offering.

While our focus is on organic growth, we will continue to assess further strategic acquisition opportunities that will accelerate growth and complement our business model. The acquisition of CNS and Velocimetrics added both scale and cost-synergies to Beeks' core offering and we will look to acquire other businesses that are profitable and will add additional complementary resources.

Strategic Report - Chief Executive's Review

Our vision is simple: Build. Connect. Analyse. Providing end to end outsourcing of financial services compute environments.

FY20 was a year of considerable development, as we continued to make headway in new geographies and segments of the financial services markets. The impact of Covid-19 delayed the acceleration of our growth in the second half of the year, however the investments we have made in the business and the successful Tier 1 customer implementations to date, mean we are more confident than ever in our ability to take advantage of the rapid acceleration of Cloud deployment in financial services and the growing need for analytics around those infrastructure environments.

The economic uncertainty caused by the Covid-19 pandemic initially protracted some of our customers' decision making processes and the lockdown delayed a small number of our customer implementations, however trading across our existing customer base remained robust and contract discussions with prospective Tier 1 clients are in advanced form. We are encouraged by our growing sales pipeline - the depth, breadth and quality of which is far greater than we have ever experienced before.

The scale of the opportunity ahead of us, provides us with the confidence to invest in the business, to ensure we have the capacity to support our customers in their expansion strategies. We invested in all areas of the business during the year and will continue to do so in the year ahead, while maintaining our robust financial position.

Financial performance

I am pleased to report another year of solid growth for the Company. Revenue increased by 27% year on year with further growth in institutional sales. Beeks has retained strong recurring revenue of 94% and customer retention remained within target. Our ACMRR reached £11.2m at 30 June 2020, increasing 23% from £9.10m at 30 June 2019.

Institutional customer numbers using the platform grew from 220 at 30 June 2019 to 242 at 30 June 2020 and the average entry level new institutional customer contract has increased to £2.4k per month from £2.2k per month when compared to the same period last year. Institutional revenue, which continues to be our focus, increased during the second half of the year as we recognised a greater proportion of revenue from the secured Tier 1 customers, and now represents 85% of total revenue. We anticipate this figure increasing further in the current financial year, as we add to our institutional client base.

Operational Expansion

This year was a period of significant investment, across our platforms, teams, offering and operations.

We continued our expansion into new geographies, with the opening of seven datacentres in the year: in Singapore, London and Paris and two in New York, bringing the total number of datacentre locations to 18. These new sites, which are all revenue generating, have increased Beeks' capacity by 45% over the past year, providing us with the ability to support a significant increase in customer demand.

Headcount has increased to 65 (including 12 from Velocimetrics Ltd), with further key hires in the sales team who will be responsible of targeting Tier 1s, including a new Head of Sales in New York to follow. We also recruited a Chief Information Security Officer in order to further strengthen our Cyber Security vision, strategy and program, to ensure a world class level of protection for customer assets and technologies.

As well as people, we have invested in additional services to provide another revenue stream for the Group. The Bare Metal Automated Backup Service, launched in September in response to the growing compliance and regulatory pressures for backup and storage being experience by its customers, has been well received This 'Back up as a Service' platform is currently available in both London and New York, and is designed to further increase the security options available to our clients in order to best protect their data.

In April we took a significant step forward in building out our offering for Tier 1 organisations, through the acquisition of Velocimetrics, for a base consideration of £1.3 million in cash and equity, plus contingent earn-out. Velocimetrics provides real time network monitoring and trade analytics software to a global client list of financial services businesses, including Tier 1 banks, exchanges, brokers, hedge funds and payments providers. Operating in a specialist field with few direct competitors, the addition of the Velocimetrics analytics products to our offering enables us for the first time to offer value-add services in network monitoring and trade analytics, increasing the functionality within the Beeks Portal and providing another point of differentiation from generic Cloud hosting and infrastructure providers. We will be launching a SaaS version of the Velocimetrics products in Q2, which will expand the total addressable market for these offerings and making them more attractive to the existing Beeks' customer base.

Commercial Network Services (CNS), which we acquired in the prior year, continues to perform in line with expectations.

Our partnership with IPC systems has resulted in a global deployment of a private Cloud solution for IPC's Connexus Unigy product. Connexus Unigy is a state-of-the-art (SOA) based platform for trading communications and applications offering ground-breaking, unified, integrated platform for both trading communications and compliance. IPC systems is a leading global provider for the financial markets community, delivering secure, compliant communications and network solutions.

The Network Automation project aims to facilitate growth and enable product expansion by making a wider variety of Beeks products available via a self-service portal. The biggest commercial opportunities lie within the Private Cloud product offering and the cornerstone of our Private Cloud offering is to automate the network. This changing focus to build our Private Cloud offering has accelerated the Network Automation project and we'll launch a Private Cloud product on an automated platform within the next 12 months.

The private portal offered to Beeks customers will be updated to enable customers to more easily consume Beeks services with a point and click capability. Particular focus will be given to improving the user interface for a better end-user experience as well as increase cross-sell opportunities.

New Tier 1 customers

In December 2019 we were delighted to announce two further tier 1 customers, bringing our total organic tier 1 customers to five. The acquisition of Velocimetrics brought an additional four to increase our total tier 1 portfolio to nine. Each of these contracts has the ability to significantly expand as the customers transition a greater proportion of their infrastructure or product offering to the Cloud. They are typically multi-year contracts, adding to our underlying revenue visibility.

The first of the two signed in the year is a three-year contract worth a combined £1.1m with a Cloud-based payments solution provider to design and supply a private network and fully managed infrastructure environment, enabling the Payments Provider to expand its secure and resilient end-to-end Payments-as-a-Service solution for financial institutions and regulated Fintech organisations. This is our first win in the growing Open Banking and Payments sector, demonstrating the security of the Beeks' offering and applicability to this new segment of the financial markets. The core infrastructure has now been deployed and network configuration is underway with the client.

The second is with a global financial markets technology provider and represents our first $1m annualised contract. We are providing them with a global deployment of private Cloud infrastructure, complementing their existing secure, high-performance data and voice communications solutions delivered to the global financial markets. The SaaS-based contract commenced in January 2020 and is committed to grow to a run rate of $1 million annually, with the potential for further expansion thereafter. The private Cloud infrastructure is now deployed on the Beeks network, with the first end customers successfully live on the platform and further deployments planned.

Future Growth and Outlook

Our main strategic priority continues to be to grow our institutional customer base both for public, private and secure Cloud deployment and our core low latency offering together with complementary analytics solutions. In order to satisfy existing client demand, and attract new customers, we will continue expanding into new asset classes and geographies, furthering our offering, and we are encouraged by the significant opportunities we have identified so far.

We have entered the current financial year with a significantly expanded business, increased customer base, expanded product offering and increasing number of Tier 1 reference points. While the ongoing Covid-19 pandemic may continue to cause a delay in corporate decision making, and in spite of the wider economic uncertainties, we are confident the long-term growth drivers in our market remain intact - with financial services organisations increasingly looking to take advantage of the benefits of Cloud infrastructure.

We anticipate continued growth of our existing Tier 1 accounts, as they expand the use of our offering into new geographies and we believe the launch of our analytics offering has the potential to layer on new SaaS product revenues. We are confident in our ability to convert our growing sales pipeline, and therefore continue to be excited about the future for the Group.

Gordon McArthur

Chief Executive Officer

14 September 2020

Strategic Report - Financial Review

KEY PERFORMANCE INDICATOR REVIEW

	2020	2019	Growth

Revenue	£9.36m	£7.35m	27%
ACMRR	£11.2m	£9.10m	23%
Underlying Gross margin	50.8%	50.4%
Underlying EBITDA*	£3.33m	£2.48m	35%
Underlying EBITDA margin*	35.6%	33.7%
Underlying profit before tax**	£1.43m	£1.32m	8%
Underlying EPS (note 23) **	2.52p	2.58p	(2%)
Dividend per share	0.35p	0.35p	0%

^ Underlying gross margin is statutory gross margin excluding other income and acquired amortisation costs

* Underlying EBITDA is defined as earnings before amortisation, depreciation, finance costs, acquisition costs, share based payments, taxation and exceptional costs. Underlying EBIDTA increased as a result of IFRS 16 adjustment by £0.52m, excluding IFRS 16 adjustment EBITDA would be £2.82m, representing a 14% increase and 30% EBITDA margin.

** Underlying profit before tax and underlying EPS excludes amortisation on acquired intangibles, acquisition costs, share based payments and exceptional non-recurring costs. IFRS 16 reduced underlying PBT in the year by £0.15m.

Revenue

FY20 was a good year in terms of revenue growth. Group revenues grew by 27% to £9.36m (2019: £7.35m), through the combination of continued organic growth and the full year impact of last year's acquisition of CNS. The Velocimetrics acquisition contributed £0.29m revenue in the final two months of the year. Of the Group's revenues, 94% were recurring. Annualised Committed Monthly Recurring Revenues (ACMRR) increased by 23% to £11.2m (2019: £9.1m) with Velocimetrics representing £0.8m of this increase.

We continue to have a healthy level of customer concentration with no single customer accounting for more than 7% of ACMRR. We have increased the number of institutional customers to 242 from 220 as at 30 June 2020 and our top 10 customers accounted for 36% of recognised revenue in the year (2019: 32%).

Gross Profit

Underlying gross profit earned increased 30% to £4.75m (2019: £3.65m), with gross margins similar to last year. We have made further expansion across our Datacentre footprint with the opening of seven new Datacentres: Singapore SG1, London LD8 and LD4.2, Paris PA1, Sydney and NY2 and NY5 in New York. These have all been driven by customer demand. The new Datacentres are revenue generating but not are not all yet at breakeven levels which is typically achieved 12 months from go-live. The Group has continued to invest in capacity to support our increased revenues and customer growth. In relation to sales growth, fixed asset investment and therefore depreciation has increased at a higher rate, partly due to the timing of sales order to revenue recognition and the longer sales cycle we have seen in the Tier 1 space. The Group has continued to invest in developing innovative technology solutions such as the customer portal and the network automation project, and has incurred internal capitalised development costs to date of £1.3m (2019: £0.8m).

Other Operating Expenses

Operational costs, which are defined as operating expenses less exceptional costs, share based payments and non-recurring costs, have increased by £0.8m as we support both a growing and more mature customer base and to gear up for future growth plans. Overall, they increased by 35% to £3.0m (2019: £2.2m). Within this, staff costs have increased by £0.7m as we have recruited in a number of key areas including sales, software development and engineering. Most of our recruitment has been to support future product and sales growth with a relatively small increase in support staff given our automation and self-service strategy.

Finance Costs

Finance costs have increased compared with last year. Finance lease interest costs have reduced as a result of some historic finance leases coming to the end of life but this has been offset by higher loan interest due to the £1m debt facility taken to finance the CNS acquisition and latterly in the year, a £1.5m debt facility taken to help support the Velocimetrics acquisition. The impact of the transition to IFRS 16 also resulted in additional finance costs of £0.01m.

Earnings before interest, tax, depreciation, amortisation and exceptional non-recurring costs ("Underlying EBITDA") increased by 34% to £3.33m (2019: £2.48m). The impact of IFRS 16 which reclassifies previous operating lease rentals to a depreciation and interest charge, has had a benefit of £0.52m in the year to the underlying EBITDA metric therefore the pre-IFRS16 increase was 14%. The growth in Underlying EBITDA has been driven by the combination of continued organic growth and the full year impact of last year's acquisition of CNS.

Underlying EBITDA, underlying profit before tax and underlying earnings per share are alternative performance measures, considered by the Board to be a better reflection of true business performance than statutory measures only.

PROFIT BEFORE TAX

	Year ended 30 June 2020	Year ended 30 June 2019
	£'000	£'000
Profit before tax for the year	678	1,043
Add back:
Acquisition costs	205	127
Share Based payments	312	63
Exceptional Non-recurring costs	61	21
Amortisation of acquired intangibles	237	62
Deduct:
Grant income	(59)	-
Underlying profit for the period	1,434	1,316

Underlying Profit before tax increased to £1.43m (2019: £1.32m). The impact of IFRS 16 had a detrimental impact on underlying PBT in the year by £0.15m as a result of the difference in operating lease payment profiles when amortised over the lease periods. These are purely timing differences and will reverse in future periods.

Taxation

The effective tax rate ('ETR') for the period was 15.2%, (2019: (1.9%)).

The ETR has increased from the prior year which benefitted from a significant share option deduction giving rise to a tax credit in the year. The overall effective tax rate has still benefitted from R&D tax credit claims but is more in line with what would be anticipated given the company's profitability and tax status.

Further tax has become payable in the US which has been provided for at a US tax rate estimate of 21%.

Earnings per Share and Dividends

Underlying earnings per share reduced 2% to 2.52p (2019: 2.58p). Underlying diluted earnings per share reduced to 2.45p (2019: 2.55p). The key driver was the difference in tax charges between the two years (refer to Note 8).

Basic earnings per share decreased to 1.13p (2019: 2.10p). Basic EPS has shown a decrease due to the difference in statutory profit after tax with a higher amount of exceptional costs in the current year as well as a higher tax charge. Diluted earnings per share was also impacted by this and reduced to 1.13p (2019: 2.09p).

The Board proposes a full year dividend of 0.35p (2019:0.35p). Subject to shareholder approval at the forthcoming Annual General Meeting, the final dividend is expected to be paid on 30 October 2020 to shareholders on the register at 2 October 2020.

Acquisition

On 14 April 2020, Beeks acquired the full share capital of Velocimetrics Ltd for an initial consideration of £1.05m on a cash free debt free basis, with a further consideration of £0.3m due after satisfactory completion of warranties. The initial payment was funded via a term loan from the Company's bank. The contingent consideration will be based on achievement of certain revenue targets in June 2020 and June 2021. Based on estimates of the probabilities of revenue growth, we expect the amount to be paid in respect of the final contingent consideration due will be £2.45m (note 9). The business purchase agreement saw the transfer of 12 customers, of which a number are Tier 1, and a small number of staff based in London.

Statement of Financial Position and Cash flows

The statement of financial position shows an increase in non-current assets to £13.9m (2019: £4.8m). This is as a result of the £4.1m acquisition of Velocimetrics, investment in property, plant and equipment of over £2.8m (2019: £1.2m) and further investment in our customer self-service portal and network automation project of £0.7m (2019: £0.4m), offset by depreciation and amortisation. Non-current assets have also been increased as a result of the Right-of-use asset addition of £2.9m due to the transition to IFRS 16. Trade and other receivables have increased proportionately with revenue growth and because of the Velocimetrics acquisition.

During the year the Group repaid £0.6m of loan and lease finance (excluding the IFRS 16 adjustment) and drew down £1.5m of loan finance to fund the initial consideration and expected year 1 earn-out payment of Velocimetrics.

At 30 June 2020 net assets were £6.7m compared to net assets of £5.6m at 30 June 2019.

The Group ended the period with net debt of £0.75m (30 June 2019: net cash £1.02m), primarily as a result of the drawdown of additional debt facilities to help finance the acquisition of Velocimetrics.

Fraser McDonald

Chief Financial Officer

14 September 2020

Beeks Financial Cloud Group PLC

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2020

		2020	2019
	Note	£000	£000

Revenue	3	9,360	7,352
Other Income	3	59	-
Cost of sales		(4,845)	(3,707)

Gross profit		4,574	3,645

Administrative expenses		(3,619)	(2,457)

Operating profit	4	955	1,188

Analysed as
Earnings before depreciation, amortisation, acquisition costs, share based payments and non-recurring costs:		3,394	2,479
Depreciation	11	1,474	898
Amortisation	10	387	182
Acquisition costs	9	205	127
Share based payments	19	312	63
Non-recurring costs	4	61	21
Operating profit		955	1,188

Finance income		2	7
Finance costs	5	(279)	(152)

Profit before taxation		678	1,043

Taxation	8	(103)	20

Profit after taxation for the year attributable to the owners of Beeks Financial Cloud Group PLC		575	1,063


Other comprehensive income
Amounts which may be reclassified to profit and loss
Currency translation differences		43	18

Total comprehensive income for the year attributable to the owners of Beeks Financial Cloud Group PLC		618	1,081
		Pence	Pence
Basic earnings per share	23	1.13	2.10
Diluted earnings per share	23	1.13	2.09

The above income statement should be read in conjunction with the accompanying notes.

Beeks Financial Cloud Group PLC

Consolidated Statement of Financial Position

As at 30 June 2020

		2020	2019
	Note	£000	£000

Non-current assets
Intangible assets	10	6,741	2,229
Property, plant and equipment	11	6,755	2,440
Deferred tax	12	380	136
		13,876	4,805
Current assets
Trade and other receivables	13	1,525	1,104
Cash and cash equivalents	14	1,433	2,338
		2,958	3,442

Total assets		16,834	8,247

Liabilities
Non-current liabilities
Borrowings and other financial liabilities	16	3,452	699
Contingent consideration due on acquisitions	9	1,957	-
Deferred tax	12	531	48
Total non-current liabilities		5,940	747

Current liabilities
Trade and other payables	17	4,178	1,868
Total current liabilities		4,178	1,868

Total liabilities		10,118	2,615

Net assets		6,716	5,632

Equity
Issued capital	18	64	64
Reserves	20	5,218	4,531
Retained earnings		1,434	1,037
Total equity		6,716	5,632

The financial information was approved by the Board of Directors on 14 September 2020 and was signed on its behalf by:

Gordon McArthur, Chief Executive Officer,

Beeks Financial Cloud Group Plc,

Company number: SC521839

The above statement of financial position should be read in conjunction with the accompanying notes.

Beeks Financial Cloud Group PLC

Consolidated Statement of Changes in Equity

As at 30 June 2020

		Foreign			Share	Share
	Issued	currency	Merger	Other	based	premium	Retained	Total
	capital	reserve	reserve	reserve	payments	reserve	earnings	equity
	£000	£000	£000	£000	£000	£000	£000	£000

As at 1 July 2018	62	84	372	(315)	-	4,309	332	4,844
Profit after income tax expense for the year	-	-	-	-	-	-	1,063	1,063
Currency translation difference	-	18						18
Total comprehensive income	-	18	-	-	-	-	1,063	1,081

Deferred tax	-	-	-	-	-	-	(104)	(104)
Issue of share capital	2							2
Share based payments					63			63
Dividends paid							(254)	(254)
Total transaction with owners	2	-	-	-	63	-	(358)	(293)

Balance at 30 June 2019	64	102	372	(315)	63	4,309	1,037	5,632

Profit after income tax expense for the year	-	-	-	-	-	-	575	575
Currency translation difference	-	43						43
Total comprehensive income	-	43	-	-	-	-	575	618

Deferred tax	-	-	-	-	-	-	-	-
Issue of share capital	-	-	333	-	-	-	-	333
Share based payments	-	-	-	-	311	-	-	311
Dividends paid	-	-	-	-	-	-	(178)	(178)
Total transaction with owners	-	-	333	-	311	-	(178)	466

Balance at 30 June 2020	64	145	705	(315)	374	4,309	1,434	6,716

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Beeks Financial Cloud Group PLC

Consolidated Cash Flow Statement

For the year ended 30 June 2020

		2020	2019
	Note	£000	£000

Cash flows from operating activities
Profit before taxation for the year		678	1,043
Adjustments for:
Depreciation and amortisation		1,861	1,080
Share options		312	63
Impairment		-	21
Foreign exchange		17	(16)
Interest received		(2)	(7)
Finance fees and interest Grant income received		192 (59)	152
Operating cash flows		2,999	2,336

(Increase) in receivables		(419)	(440)
Increase/ (decrease) in payables		678	229
Operational cash flows after movement in working capital		3,258	2,125

Corporation tax paid		(23)	(26)
Net cash inflow from operating activities		3,235	2,099

Cash flows from investing activities
Capitalised development costs	10	(720)	(437)
Acquisition of trading assets of business		-	(1,112)
Payments for property, plant and equipment	11	(2,819)	(1,222)
Payments for current period acquisition	9	(750)	-
Net cash (outflow)/ inflow from investing activities		(4,289)	(2,771)

Cash flows from financing activities
Repayment of existing loan borrowings		(324)	(34)
Dividends paid		(178)	(254)
Right of use repayments		- (517)	-
Issue of loans		1,485	990
Finance lease repayments		(301)	(435)
Finance fees and interest	5	(192)	(152)
Interest received		2	7
Proceeds from the issue of share capital Proceeds from grant income		174	1
Net cash outflow from financing activities		149	123

Net (decrease) / increase in cash and cash equivalents		(905)	(549)

Cash and cash equivalents at beginning of year		2,338	2,887

Cash and cash equivalents at end of year	14	1,433	2,338

The above cash flow statement should be read in conjunction with the accompanying notes.

Beeks Financial Cloud Group PLC

Notes to the Consolidated Financial Information

For the year ended 30 June 2020

1. Summary of significant accounting policies

CORPORATE INFORMATION

Beeks Financial Cloud Group PLC is a public limited company which is listed on the AIM Market of the London Stock Exchange and is incorporated in Scotland. The address of its registered office is Lumina Building, 40 Ainslie Road, Ground Floor, Hillington Park, Glasgow, UK, G52 4RU. The principal activity of the Group is the provision of information technology services. The registered number of the Company is SC521839.

The financial information is prepared in pounds sterling.

The principal accounting policies adopted in the preparation of the financial information is set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

BASIS OF PREPARATION

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 30 June 2020 and 30 June 2019 within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 30 June 2019 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The financial information for the year ended 30 June 2020 is derived from the statutory accounts for that year which were approved by the directors on 14 September 2020. The statutory accounts for the year ended 30 June 2020 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The financial information has been prepared under the historical cost convention.

International Financial Reporting Standards and Interpretations issued but not yet effective

New and revised IFRSs in issue but not yet effective and have not been adopted by the Group at the date of authorisation of the financial information, the following standards, interpretations and amendments have been issued but are not yet effective and have no material impact on the Group's financial information:

• IFRS 17 - Insurance Contracts;

• IFRS 10 and IAS 28 (amendments) - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture;

• Amendments to IFRS 3 - Definition of a business;

• Amendments to IAS 1 and IAS 8 - Definition of material; and

• Conceptual Framework Amendments to References to the Conceptual Framework in IFRS Standards.

Adoption of new and revised Standards - amendments to IFRS that are mandatorily effective for the current year

· IFRIC 23 Uncertainty over Income Tax Treatments;

· IFRS 16 Leases

IFRIC 23 - Uncertainty over Income Tax Treatments

The Group has adopted IFRIC 23 for the first time in the current year which had no material impact on the amounts reported, and disclosures included, in the financial information. IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. The Interpretation requires the Group to:

• Determine whether uncertain tax positions are assessed separately or as a group; and

• Assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings:

• If yes, the Group should determine its accounting tax position consistently with the tax treatment used or planned to be used in its income tax filings; and

• If no, the Group should reflect the effect of uncertainty in determining its accounting tax position using either the most likely amount or the expected value method.

IFRS 16 - Leases

In the current year, the Group, for the first time, has applied IFRS 16 Leases (as issued by the IASB in January 2016).

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to the lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a lease liability at the lease commencement for all leases, except for short-term leases and leases of low value assets.

The impact of the adoption of IFRS 16 on the Group's consolidated financial information is described below.

The date of initial application of IFRS 16 for the Group is 1 July 2019.

The Group has applied IFRS 16 using the modified retrospective adoption method, with no restatement of prior year comparatives, and has recognised leases on balance sheet as at 1 July 2019. From 1 July 2019, the Group recognises a right-of-use asset and corresponding lease liability on the balance sheet with respect of all lease arrangements in which it is a lessee, except for short-term leases and low value leases. At this date, the Group has elected to measure the right-of-use assets to an amount equal to the lease liability.

For contracts in place at the date of transition, the Group has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as leases under IAS 17 and IFRIC 4.

Impact of the new definition of a lease;

The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration.

Impact on Lessee Accounting;

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off-balance sheet.

IFRS 16 has impacted the Group's head office lease and the space within the Datacentres in which it operates throughout its global locations.

Applying IFRS 16, for all leases (except as noted below), the Group:

a) recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of future lease payments;

b) recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss; and

c) separates the total amount of cash paid into a principal portion and interest in the consolidated statement of cash flows

Lease incentives (e.g. free rent period) are recognised as part of the measurement of the right-of-use assets and lease liabilities. Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets.

For short‑term leases (lease term of 12 months or less) and leases of low-value assets, the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16.

The Group assesses whether a contract is or contains a lease, at inception of a contract.

The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements 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. For these leases, the Company 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 asset are consumed.

The lease liability is initially measured at the present value of the lease payments over the remaining term of the lease 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 Company uses its incremental borrowing rate, which is based on its current bank loans and debt terms and amended for leases outside of the UK based upon the differences in the base rates.

Financial impact of initial application of IFRS 16;

The table below show the amount of adjustment for each financial statement line item affected by the application of IFRS 16 for the period ended 30 June 2020.

		£'000

Impact on profit for the period ended 30 June 2020

Increase in depreciation and amortisation expense		583
Increase in finance costs		87
(Decrease) in other expenses		(517)
Decrease in profit for the year		153

The impact on EBITDA for the period to 30 June 2020 was an increase of £0.52m.

		£'000

Impact on balance sheet for the period ended 30 June 2020

Right of use assets on transition on 1 July 2020 Right of use assets acquired during the period		775 2,165
		2,940
Depreciation and amortisation expense		(583)
Net book value of right of use assets at 30 June 2020		2,357

Lease liabilities arising on transition and acquired		(2,940)
Finance costs (effective interest)		(87)
Payments towards lease liabilities		818
Lease liabilities at 30 June 2020		(2,535)

The following is a reconciliation of total operating lease commitments at 30 June 2020 to the lease liabilities recognised at 1 July 2019:		£'000

Reconciliation to operating lease commitments

Total operating lease commitments at 30 June 2019 Discounted using the lessee's incremental borrowing rate at the date of initial application Relief option for short term leases and low value assets Other movement		1,594 (108) (579) (132)
Lease liabilities at 1 July 2019		775

On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 4.5%.

IAS 17 - Leases (comparative period)

In the comparative period, a distinction was made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits.

Finance leases were capitalised. A lease asset and liability was established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments were allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.

Leased assets acquired under a finance lease were depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.

Operating lease payments, net of any incentives received from the lessor, were charged to profit or loss on a straight-line basis over the term of the lease.

Change in accounting estimates

The Group previously calculated depreciation on computer equipment using the straight line method to allocate its cost or revalued amount, net of residual value, over its estimated useful life of 3-4 years or over the length of the lease.

On 1 July 2019, the Group carried out a full review of the appropriateness of the useful life of its computer equipment. Following this review, the Group considers the estimated useful life of its computer equipment to be 5 years. The Group believes that this provides more reliable and relevant information to the users of its financial information with regards to the length of time economic benefits are consumed over. Changes in estimates are applied prospectively.

The group depreciation charge for the period (£1.47m) is calculated based on the carrying value of these assets at the 1 July 2019 and the remaining amount of the revised estimated useful life. If computer equipment had been measured under the previous estimated useful life, the group depreciation charge for the period would have been £1.67m and the carrying value of Property, Plant and Equipment would have been £6.95m at the period end. The group has also reviewed the amounts recognised in relation to the acquisition of CNS in the period to 30 June 2020 and has made no subsequent changes to the valuation of intangible assets.

GOING CONCERN

The Directors have assessed the current financial position of Beeks Financial Cloud Group PLC, taking account of its business activities, together with the factors likely to affect its future development, performance and position as set out in the Strategic Report on pages 4 to 11.

The key factors considered by the Directors were:

· historic and current trading and profitability of the Group,

· the rate of growth in sales both historically and forecast,

· the competitive environment in which the group operates,

· the current level of cash reserves,

· current level of debt obligations

· Ability to comply with existing covenants

· Potential Impact of Covid-19

· the finance facilities available to the Group, including the availability of any short term funding required.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 4 to 11 including the potential impact of Covid-19. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Financial Officer's Report on pages 9 to 11.

In the five months since the response to the Covid-19 pandemic was initiated in the UK, there has been a very limited impact on Beeks' trading from Covid-19. We take great comfort from the resilience of our business model and are fortunate that we are not significantly exposed to the industries that are suffering the worst effects. The level of customer churn across our business has remained low and cash collection has been in line with our typical profile. We do however remain vigilant to the economic impact the ongoing situation may create, particularly on the SME segment of the market. Note 1 to the financial information includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The directors are of the opinion that the Group can operate within their current debt facilities and comply with its banking covenants. At the end of the financial year, the Group had net debt of £0.75m (2019: Net cash £1.02m) a level which the Board is comfortable with given the strong cash generation of the Group and low level of debt to EBITDA ratio. The Group has a diverse portfolio of customers with relatively low customer concentration across the 242 which are split across different geographic areas. As a consequence, the directors believe that the Group is well placed to manage its business risks.

The directors have considered the Group budgets and the cash flow forecasts for the next two financial years, and associated risks, including the potential impact of Covid-19, and the availability of bank and leasing facilities. We have run appropriate scenario and stress tests applying reasonable downside sensitivities and are confident we have the resources to meet our liabilities as they fall due. After making enquiries, the directors have a reasonable expectation that the Group will be able to meet its financial obligations and has adequate resources to continue in operational existence for the foreseeable future.

Accordingly, the Directors have adopted the going concern basis in preparing the Report for the year ending 30 June 2020.

PRINCIPLES OF CONSOLIDATION

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary or a business is the fair values of the assets transferred, the liabilities incurred to former owners of the acquiree and the equity interests issued to the Group. The consideration transferred includes the fair values of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date. Acquisition related costs are expensed as incurred. As each of the subsidiaries are 100% wholly owned, the Group has full control over each of its investees. Intercompany transactions, unrealised gains and losses on intragroup transactions and balances between group companies are eliminated on consolidation.

Foreign currency transactions

Foreign currency transactions are translated into pound sterling using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign operations

The assets and liabilities of foreign operations are translated into pound sterling using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Pound sterling using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.

Business Combinations

Acquisitions of subsidiaries are accounted for using the acquisition method. The acquisition method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial information of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the statement of financial position at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies.

Where the Group's assessment of the net fair value of a subsidiary's identifiable assets acquired and liabilities assumed is less than the fair value of the consideration including contingent consideration of the business combination then the excess is treated as goodwill. Where the Group's assessment of the net fair value of a subsidiary's net assets and liabilities exceeds the fair value of the consideration including contingent consideration of the business combination then the excess is recognised through profit or loss immediately.

Where an acquisition involves a potential payment of contingent consideration the estimate of any such payment is based on its fair value. To estimate the fair value an assessment is made as to the amount of contingent consideration which is likely to be paid having regard to the criteria on which any sum due will be calculated and is probability based to reflect the likelihood of different amounts being paid. Where a change is made to the fair value of contingent consideration within the initial measurement period as a result of additional information obtained on facts and circumstances that existed at the acquisition date then this is accounted for as a change in goodwill. Where changes are made to the fair value of contingent consideration as a result of events that occurred after the acquisition date then the adjustment is accounted for as a charge or credit to profit or loss.

When the consideration transferred by the Group in a business combination includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts

and circumstances that existed at the acquisition date.

Deferred consideration is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the deferred consideration, which is deemed to be an asset or liability, are recognised either in the profit and loss account or in other comprehensive income.

REVENUE RECOGNITION

Revenue arises from the provision of Cloud-based localisation. To determine whether to recognise revenue, the group follows a 5-step process as follows:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied.

Revenue is measured at transaction price, stated net of VAT and other sales related taxes, if applicable.

Beeks core services

The group's core business provides managed Cloud computing infrastructure and connectivity. The Group considers the performance condition to be the provision of access and use of servers to our clients. As the client receives and consumes the benefit of this use and access over time, the related revenue is recognised evenly over the life of the contract. Revenue from the supply of hardware or software is recognised when delivery of the item is completed on a point in time basis.

The Group has concluded it acts as a principal in each sales transaction vs an agent. This has been determined by giving consideration to whether the Group holds inventory risk, has control over the pricing over a particular service, takes the credit risk, and whether responsibility ultimately sits within the Group to service the promise of the agreements.

Revenue from Consultancy services are recognised as these services are rendered and the performance obligation satisfied. Any unearned portion of revenue is included in payables as deferred revenue.

Set up fees charged on contracts are reviewed to consider the material rights of the set-up fee. When a set-up fee is arranged, Beeks will consider the material rights of the set-up fee, if in substance it constitutes a payment in advance, the set-up fee will be deemed to be a material right. The accounting treatment for both material rights and non-material rights set-up fees is as follows:

• Any set up fees that are material rights are spread over the group's average contract term

• Set up fees that are not material rights are recognised over the enforceable right period, i.e. 1 to 3 months depending on the termination period

Monitoring software and services

Following the acquisition of Velocimetrics, the group also provides software products that analyse and monitor IT infrastructure. Revenue from the provision of software licences is split between the delivery of the software licence and the ongoing services associated with the support and maintenance. The supply of the software licence is recognised on a point in time basis when the delivery of the item is complete, whilst the ongoing support and maintenance service is recognised evenly over the period of the service on an over time basis. The group applies judgement to determine the percentage of split between the licence and maintenance portions, which includes an assessment of the pricing model and comparison to industry standards

Revenue from the supply of hardware or software, and the provision of services in respect of installation or training, is recognised when delivery and installation of the equipment is completed on a point in time basis. Revenue from Consultancy services are recognised as these services are rendered and the performance obligation satisfied. Any unearned portion of revenue is included in payables as deferred revenue.

Revenue recognised over time and at a point in time is as follows:

	Year to 30/06/20			Year to 30/06/19
	Revenue recognised over time £'000	Revenue recognised at point in time £'000	Total £'000	Revenue recognised over time £'000	Revenue recognised at point in time £'000	Total £'000
Beeks core services	8,492	577	9,069	7,259	93	7,352
Monitoring software services	158	134	291	-	-	-
Total	8,649	711	9,360	7,259	93	7,352

Revenue is generally recognised over time as the group satisfies performance obligations by transferring the promised services to its customers.

Government Grant Income

Grants from Government agencies are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is deducted from carrying amount of the intangible asset over the expected useful life of the related asset. Note 3 Revenue provides further information on Government grants.

Cost of Sales

Costs considered to be directly related to revenue are accounted for as cost of sales. All direct production costs and overheads, including indirect overheads that can reasonably be allocated, have been classified as cost of sales.

Interest

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Exceptional costs

The Group defines exceptional items as costs incurred by the Group which relate to material non-recurring costs. These are disclosed separately where it is considered it provides additional useful information to the users of the financial information.

TAXATION AND DEFERRED TAXATION

The income tax expense or income for the period is the tax payable on the current period's taxable income. This is based on the national income tax rate enacted or substantively enacted for each jurisdiction with any adjustment relating to tax payable in previous years and changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial information.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applicable when the asset or liability crystallises based on current tax rates and laws that have been enacted or substantively enacted by the reporting date. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.

A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of temporary differences can be deducted. The carrying amount of deferred tax assets are reviewed at each reporting date.

CURRENT AND NON-CURRENT CLASSIFICATION

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

CASH AND CASH EQUIVALENTS

Cash at bank, overnight and longer term deposits which are held for the purpose of meeting short term cash commitments are disclosed within cash and cash equivalents.

FINANCIAL INSTRUMENTS

IFRS 9 requires an expected credit loss ("ECL") model which requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. The main financial asset that is subject to the new expected credit loss model is trade receivables, which consist of billed receivables arising from contracts.

The Group has applied the simplified approach to providing for expected credit losses ("ECL") prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables.

The ECL model reflects a probability weighted amount derived from a range of possible outcomes. To measure the ECL, trade receivables and accrued income have been grouped based on shared credit risk characteristics and the days past due. The Group has established a provision matrix based on the payment profiles of historic and current sales and the corresponding credit losses experienced. The historical loss rates are adjusted to reflect current and forward-looking information that might affect the ability of customers to settle the receivables, including macroeconomic factors as relevant.

Provision against trade and other receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows. An assessment for impairment is undertaken at least at each reporting date.

TRADE AND OTHER RECEIVABLES

Trade and other receivables are recognised at fair value, less provision for impairment. These are subsequently measured at amortised costs using effective interest method. A provision for impairment of trade and other receivables is established when there is objective evidence that Beeks Financial Cloud Group PLC will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade and other receivables may be impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit or loss within 'administrative expenses'. When a trade or other receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against 'cost of sales' in the profit or loss.

SHARE BASED PAYMENTS

Options are measured at fair value at grant date using the Black Scholes model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.

Under the group's share option scheme, share options are granted to directors and selected employees. The options are expensed in the period over which the share based payment vests. A corresponding increase to the share option reserve under shareholder's funds is recognised.

When share options are exercised, the company issues new shares. The nominal share value from the proceeds received are credited to share capital and proceeds received above nominal value, net of attributable transaction costs, are credited to the share premium when the options are exercised. When share options are forfeited, cancelled or expire, the corresponding fair value is transferred to the accumulated losses reserve.

The group has no legal or constructive obligation to repurchase or settle the options in cash.

PROPERTY, PLANT AND EQUIPMENT (PPE)

PPE is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Beeks Financial Cloud Group PLC and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation on plant and machinery and fixtures and fittings is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

- Leasehold improvements over the lease period

- Computer Equipment 5 years and over the length of lease

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter.

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.

INTANGIBLE ASSETS AND AMORTISATION

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the assets and liabilities assumed at the date of acquisition. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Intangible assets carried forward from prior years are re-valued at the exchange rate in the current financial year. Impairment testing is carried out by assessing the recoverable amount of the cash generating unit to which the goodwill relates. Negative goodwill is immediately released to the Income Statement in the year of acquisition.

Customer relationships

Included within the value of intangible assets are customer relationships. These represent the purchase price of customer lists and contractual relationships purchased on the acquisition of the business and assets of Gallant VPS Inc., and Commercial Network Services. These relationships are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method over periods of between five and ten years.

Development costs

Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.

Development costs incurred are capitalised when all the following conditions are satisfied:

• completion of the intangible asset is technically feasible so that it will be available for use or sale;

• the Group intends to complete the intangible asset and use or sell it;

• the Group has the ability to use or sell the intangible asset;

• the intangible asset will generate probable future economic benefits;

• there are adequate technical, financial and other resources to complete the development and to use or sell the intangible

asset, and

• the expenditure attributable to the intangible asset during its development can be measured reliably.

Development costs not meeting the criteria for capitalisation are expensed as incurred. The costs which do meet the criteria range from new product development to the enhancement of existing services such as mail platforms. The scope of the development team's work continues to evolve as the Group continues to deliver business critical solutions to a growing customer base. Development costs capitalised are amortised on a straight-line basis over the estimated useful life of the asset. The estimated useful life is deemed to be five years for all developments capitalised. Amortisation charges are recognised through profit or loss in the period in which they are incurred.

IMPAIRMENT

Goodwill and assets that are subject to amortisation are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

TRADE AND OTHER PAYABLES

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to Beeks Financial Cloud Group plc prior to the end of the financial period which are unpaid as well as any outstanding tax liabilities.

BORROWINGS

Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.

DEFINED CONTRIBUTION SCHEMES

The defined contribution scheme provide benefits based on the value of contributions made. Contributions to the defined contribution superannuation plans are expensed in the period in which they are incurred.

FAIR VALUE MEASUREMENT

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

EQUITY

Ordinary shares are classified as equity. An equity instrument is any contract that evidences a residual interest in the assets of Beeks Financial Cloud Group plc after deducting all of its liabilities. Equity instruments issued by Beeks Financial Cloud Group plc are recorded at the proceeds received net of direct issue costs.

The share capital account represents the amount subscribed for shares at nominal value.

The accounting policies set out above have, unless otherwise stated, been applied consistently by the Group to all periods presented.

EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of Beeks Financial Cloud Group PLC, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

VALUE-ADDED TAX ('VAT') AND OTHER SIMILAR TAXES

Revenues, expenses and assets are recognised net of the amount of associated VAT, unless the VAT incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of VAT receivable or payable. The net amount of VAT recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

Cash flows are presented on a gross basis. The VAT components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

Commitments and contingencies are disclosed net of the amount of VAT recoverable from, or payable to, the tax authority.

ROUNDING OF AMOUNTS

Amounts in this report have been rounded off to the nearest thousand pounds, or in certain cases, the nearest pound.

2. Critical accounting judgements and key sources of estimation uncertainty

The Group do not consider that there are any critical accounting judgements in the preparation of the financial information. The key assumptions concerning the future, and other key sources of estimation uncertainty at the year end, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Estimation of useful lives of assets

The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. During the period, the group applied a change in estimate of it's useful life of computer equipment as noted on p 20.

Goodwill and other indefinite life intangible assets

The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Sensitivity analysis is also performed to reduce growth assumptions and increase discount rates and there is still sufficient headroom in the asset, see note 10.

Valuation of intangible assets and fair value adjustments on acquisition

As the Group continues to implement its acquisition strategy there is a requirement to fair value the assets and liabilities of any business acquired during the year. The Group is required to make an assessment as to what intangible assets exist within the acquired business at the time of the acquisition and what fair value adjustments are required. When reviewing the existence of intangible assets, consideration has been given to potential intangible assets such as customer relationships. The estimation of the valuation of customer relationships is based on the value in use calculation which requires estimates of the future cash flows expected to arise from the existing customer relationships over their useful life and to select a suitable discount rate in order to calculate the present value. Full details of the assumptions used in the calculation of intangible assets and fair value adjustments on the acquisitions that have occurred during the current year are disclosed in note 9.

Development costs

The Group reviews half yearly whether the recognition criteria for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each review period. In addition, all internal activities related to the development of new products are continuously monitored by the Directors. See note 10 for further information.

Taxation

The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Recovery of deferred tax assets

The Group has tax losses available to offset future taxable profits. In estimating the amount of deferred tax to be recognised as an asset the Group estimates the future profitability of the relevant business unit. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Within the deferred tax provisions are deferred tax assets that have been recognised in the US due to the difference between the amortisation period. The group has elected to amortise the US assets over a period of 15 years in line with US tax authorities. This gives rise to a deferred tax asset as the Group is using a five year useful life for financial reporting purposes. The deferred tax asset has been calculated at an average US tax rate of 21%. This is shown in Note 12.

Share based payments

The Group operates equity-settled share based remuneration plans for its employees. All goods and services received in exchange for the grant of any share based payment are measured at their fair values. Where employees are rewarded using share based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant.

All share based remuneration plans are ultimately recognised as an expense through profit or loss with a corresponding credit to 'retained earnings'.

If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share based incentives expected to vest differs from previous estimates. The two main vesting conditions that apply to share options relate to the achievement of annual objectives and continuous employment. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share based incentives ultimately exercised are different to that estimated on vesting.

Upon exercise of share based incentives the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium.

Contingent consideration

Where an acquisition involves a potential payment of contingent consideration the Group is required to make an assessment as to whether any contingent consideration payment is likely. If it is, then an estimate of any such payment is based on its fair value. To estimate the fair value an assessment is made as to the amount of contingent consideration which is likely to be paid having regard to future forecasts, the criteria on which any sum due will be calculated and is probability based to reflect the likelihood of different amounts being paid. At 30 June 2020, contingent consideration relates to Velocimetrics Ltd (note 9).

Revenue

The group applies judgment for elements of revenue recognition. The key areas of assessment include whether the group acts as a principal vs an Agent for the sale of hardware and the percentage of split between licence and maintenance for the sale of software licences. Full details of the Group's revenue recognition policy and these judgements can be found on p 22.

Alternative performance measures

In addition to measuring financial performance of the Group based on statutory profit measures, the Group also measures performance based on adjusted EBITDA, adjusted profit before tax and adjusted diluted earnings per share.

Adjusted EBITDA

Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortisation (EBITDA) before share-based payment charges, acquisition costs and any gains or losses on revaluation of contingent consideration. Adjusted EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies, particularly in the sector that the Group operates.

The Group considers adjusted EBITDA to be a useful measure of operating performance because it approximates the underlying operating cash flow by eliminating the charges mentioned above. It is not a direct measure of liquidity, which is shown in the consolidated statement of cash flows, and needs to be considered in the context of the Group's financial commitments.

Adjusted profit before tax

Adjusted profit before tax is defined as profit before tax adjusted for the following:

· amortisation charges on acquired intangible assets;

· share-based payment charges;

· M&A activity including:

o Professional fees;

o Any non-recurring integration costs;

o Any gain or loss on the revaluation of contingent consideration where it is material; and

o Any material non-recurring costs where their removal is necessary for the proper understanding of the underlying profit for the period.

The Group considers adjusted profit before tax to be a useful measure of performance because it eliminates the impact of certain non-recurring items including those associated with acquisitions and other charges commonly excluded from profit before tax by investors and analysts for valuation purposes.

Adjusted diluted earnings per share

Adjusted diluted earnings per share is calculated by taking the adjusted profit before tax as described after deducting an appropriate taxation charge and dividing by the total weighted average number of ordinary shares in issue during the year and adjusting for the dilutive potential ordinary shares relating to share options.

The Group considers adjusted diluted earnings per share to be a useful measure of performance for the same reasons as adjusted profit before tax. In addition, it is used as the basis for consideration to the level of dividend payments.

3. Segment Information

Operating segments are reporting in a manner consistent with the internal reporting provided to the chief operating decision makers.

The chief operating decision makers, who are responsible for allocating resources and assessing performance of operating segments, have been identified as the PLC Board.

During the year ended 30 June 2020, the Group was organised into two main business segments for revenue purposes, institutional and private customers. Customers acquired as part of the recent Velocimetrics acquisition are all institutional. The group does not place reliance on any specific customer and has no individual customer that generates 7% or more of its total group revenue. Performance is assessed by a focus on the change in revenue across both institutional and retail revenue. Cost is reviewed at a cost category level but not split by segment. Assets are used across all segments and are therefore not split between segments so management review profitability at a group level.

	2020	2019
	£000	£000
Revenues by business segment are as follows:

Institutional	7,995	6,437
Retail	1,365	915
Total	9,360	7,352

Revenues by geographic location are as follows:
United Kingdom	2,720	1,525
Europe	1,180	863
United States	1,906	1,589
Rest of World	3,554	3,375
Total	9,360	7,352

Non-Current Assets by geographic location are as follows:
United Kingdom - Property, plant and equipment	3,514	1,369
Europe - Property, plant and equipment	566	30
Rest of World - Intangible assets	4,458	1,701
Rest of World - Goodwill	2,283	528
Rest of World - Property, plant and equipment	2,675	1,041
Total Non-Current Assets	13,496	4,669

Intangible assets have been classified as "Rest of World" due to the fact they represent products that are available to customers throughout the World as well as the US intangible assets referred to in note 10.

The Group has taken advantage of the practical expedient permitted by IFRS 15 and has therefore not disclosed the amount of the transaction price allocated to unsatisfied performance obligations or when it expects to recognise that revenue, as contracts have an expected duration of less than one year.

During the year, £59,000 was recognised in other income for grant income received from Scottish Enterprise.

4. Operating Profit

Operating Profit is stated after charging:

	2020	2019
	£000	£000

Staff costs (note 6)	2,526	1,839
Depreciation (note 11)	891	898
Depreciation right-of-use assets (note 11)	583	-
Amortisation of intangibles (note 10)	387	182
Foreign exchange losses	17	36
Acquisition costs (note 9)	205	127
Share based payments (note 19)	312	63
Non recurring costs - Head office relocation costs	13	-
Non recurring costs - Restructuring costs	33	-
Other non-recurring costs	15	21



Auditors remuneration	2020	2019
	£000	£000
Audit
Auditors services
Fees payable for the audit of the consolidation and the parent company accounts including the audit of the acquisition	34	24
Fees payable for the audit of the subsidiaries	27	15

Non Audit
Fees payable for the interim review of the group	10	9
	71	48

5. Finance costs

	2020	2019
	£000	£000

Bank charges	89	61
Loans and leasing	190	91
Total finance costs	279	152

6. Average number of employees and employee benefits expense

	2020	2019
	£000	£000

Excluding directors, the average number of employees (at their full time equivalent) during the year was as follows:
Management and administration	12	11
Support and development staff	29	18
Average numbers of employees	41	29


The employee benefits expense during the year was as follows:
Wages and salaries	2,214	1,612
Social security costs	265	201
Other pension costs	46	26
Total employee benefits expense	2,526	1,839

Share based payments (note 19)	312	63

7. Directors remuneration

	2020	2019
	£000	£000

Aggregate remuneration in respect of qualifying services	258	256
Aggregate amounts of contributions to pension schemes in respect of qualifying services Share based payments	5 115	3 24
Highest paid director - aggregate remuneration	96	78

There are two directors (2019: two) who are accruing retirement benefits in respect of qualifying services.

8. Taxation expense

2020

2019

£000

Current tax

UK tax

(16)

Foreign tax on overseas companies

Total current tax

Origination and reversal of temporary differences

(45)

Total deferred tax

(45)

Tax on profit on ordinary activities

103

(20)

The differences between the total tax charge above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax, together with the impact of the effective tax rate, are as follows:

	2020	% ETR	2019	% ETR
	£000	movement	£000	movement
Profit before tax	678		1,043
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19% (2018: 19%)	129	19%	198	19%
Effects of:
Expenses not deductible for tax purposes	33	4.87%	42	4.03%
R&D tax credits relief	(72)	(10.62%)	(86)	(8.25%)
Share option deduction	59	8.70%	(128)	(12.27%)
Prior year deferred tax adjustments	(49)	(7.23%)	(44)	(4.22%)
Foreign tax suffered	2	0.29%	(3)	(0.29%)
Other	1	0.15%	1	0.10%
Total tax charge	103	15.19%	(20)	(1.92%)

The effective tax rate ('ETR') for the period was 15.2%, (2019: (1.9%)).

	UK unrelieved trading losses	Foreign unrelieved trading losses	Total unrelieved trading losses	Tax effect
	£000	£000	£000	£000
As at 1 July 2019	184	-	184	35
Recognised during the year	363	-	363	69
As at 30 June 2020	547	-	547	104

9. Acquisitions

On 14 April 2020, the Group acquired the entire issued share capital of Velocimetrics Limited

("VMX"), a UK-based network monitoring and trade analytics software company for a base consideration of £1.3 million in cash and equity, plus contingent earn-out.

Total cash paid on acquisition, net of cash acquired, in the year ended 30 June 2020 was £0.75m. Velocimetrics provides real time network monitoring and trade analytics software to a global client list of financial services businesses, including Tier 1 banks, exchanges, brokers, hedge funds and payments providers. The Acquisition expands the Beeks' product offering into network automation and trading analytics, increasing the Group's competitive differentiation from generic Cloud hosting and infrastructure providers and provides additional cross-sale opportunities across the expanded customer base. The Company funded the initial payment via a new debt facility with The Royal Bank of Scotland plc totalling £1.5 million to fund both the acquisition and provide additional growth capital for the enlarged Group.

During the current period the Group incurred £0.17m of third party acquisition related costs in respect of this acquisition and another £0.03m for the integration of the CNS business acquired in the previous financial year. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income for the year ended 30 June 2020.

The following table summarises the consideration to acquire VMX, and the amounts of identified assets acquired and liabilities assumed at the acquisition date, which are provisional


	Book	Fair Value
	value	Adjustments	Final Fair Value
	£000	£000	£000
Cash and cash equivalents	368	-	368
Trade and other receivables	307	-	307
Property plant and equipment	6	-	6
Intangible Assets	1,101	1,386	2,487
Trade and other payables	(785)	-	(785)
Deferred tax liability	(1)	(145)	(146)

Identifiable net assets	996	1,241	2,237
Goodwill	-		1,846
Total consideration			4,083

Satisfied by:

Cash - paid on acquisition			750
Equity - paid on acquisition			333
Deferred consideration			552
Contingent consideration - payable			2,448
Total consideration transferred			4,083

Under the terms of the Transaction, £1.05m was due on completion (the "Initial Consideration") with £0.3m held as retention subject to satisfactory completion of warranties and a net working capital adjustment to follow as the deal was done on a cash free, debt free, normalised working capital basis. Further consideration payable based on achievement of revenue targets for the financial years to Jun-20 and Jun-21. (the "Contingent Consideration").

The potential undiscounted amount of the Deferred Payment that the Company could be required to pay is between £nil and £2,800,000. The amount of contingent consideration payable, which was recognised as of the acquisition date, was £2,448,000. The level of revenue was estimated by considering the current level of the MRR, historic performance, known and agreed changes to the current level, and forecasts based on the sales pipeline.

The goodwill arising on the acquisition of VMX is attributable to the premium payable for a pre-existing, well positioned business and the specialised, industry specific knowledge of its staff, together with the benefits to the Group in merging the business with its existing infrastructure and the anticipated future operating synergies from the combination.

The fair value included in respect of the acquired customer relationships, software and Velocimetrics trade name intangible asset is £2.59m. To estimate the fair value of the trade name and software, a discounted cash flow method, specifically the income approach (relief from royalty), was used. The income approach (excess earnings) was used to value the customer contracts and relationships with reference to the directors' best estimates of the level of revenue, which will be generated from them. These estimates were consistent with those used to determine the contingent consideration and considered a range of possible sales pipeline forecasts. A post-tax discount rate of 29.5% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 10 years and software intangibles and trade names are being amortised over 5 years.

Velocimetrics earned revenue of £0.3m and generated loss, before allocation of group overheads and tax of £22,000 in the period since acquisition.

Pro-forma full year information

The following summary presents the Group as if the businesses acquired during the year had been acquired on 1 July 2019. The amounts include the results of the acquired business excluding any possible synergies. The information is provided for illustrative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of the future results of combined companies.

Pro-forma for the year ended 30 June 2020

£000

Revenue 1,625

Profit before tax for the year 215

10. Intangible assets


	Acquired Customer	Development
	lists	Costs	Trade name	Goodwill	Total
	£000	£000		£000	£000
Cost
Balance at 1 July 2018	406	384		400	1,190
Acquisition of trading assets	993	-		119	1,112
Additions	-	437		-	437
Currency translation differences	(16)	-		-	(16)
Balance at 30 June 2019	1,383	821		519	2,723

Acquisition of subsidiary	1,097	1,253	137	1,846	4,333
Additions	-	720		-	720
Grant funding received		(221)			(221)
Currency translation differences	53	-		-	53
As at 30 June 2020	2,533	2,573	137	2,365	7,608

Accumulated Depreciation
Balance at 1 July 2018	(297)	(18)		(7)	(323)
Charge for the year	(99)	(83)		-	(182)
Foreign exchange movements	(6)	-		16	10
Balance at 30 June 2019	(402)	(101)		9	(494)

Charge for the year	(150)	(230)	(7)	-	(387)
Foreign exchange movements	-	-		14	14
As at 30 June 2020	(552)	(331)	(7)	23	(867)

N.B.V. 30 June 2019	981	720	-	528	2,229

N.B.V. 30 June 2020	1,981	2,242	130	2,388	6,741

Included within Customer list are the following significant items; customer relationships in relation to the acquisitions of CNS of £1.0m with a useful life of 10 years as well as the current year additions of the VMX business of £1.1m with a useful life of 10 years.

Development costs have been recognised in accordance with IAS 38 in relation to the creation of the company's self-service portal, website and cyber-attack prevention software (DDoS). As at 30 June 2020 the remaining useful lives of these assets are 2 years and 7 months, 2 years and 6 months and 2 years and 5 months respectively. Development costs also include £1.3m of acquired VMX software which is being amortised over a useful life of five years as well as £0.4m of costs relating to the network automation project which has yet to be amortised.

Included within goodwill is:-

· The historic goodwill relating to CNS with a value of £0.1m,

· The historic goodwill relating to VDIWare LLC with a value of £0.4m.

· Goodwill relating to the recent acquisition of Velocimetrics with a value of £1.8m

The goodwill relating to VMX has been recently valued and will be assessed for impairment on an annual basis.

Goodwill arising from the acquisition of the businesses and assets which have been capitalised are assessed on an annual basis for impairment. The revaluation represents exchange adjustment only. Impairment reviews are carried out on an annual basis to ensure that the carrying value of each individual asset is still appropriate. In performing these reviews, under the requirements of IAS 36 "Impairment of Assets" management prepared forecasts for future trading in which assumptions over sales growth, gross margins and costs were applied over a useful life period of up to ten years. For VDIWare and CNS, a post-tax discount discount rate, that reflects current market assessments of the time value of money and the risks specific to the asset, of 12% and 14.5% was used. Based on an analysis of the impairment calculation's sensitivities to changes in key parameters (growth rate, discount rate and post-tax cash flow projections) there was no reasonably possible scenario where these recoverable amounts would fall below their carrying amounts therefore as at 30 June 2020, no change to the impairment provision against the carrying value of intangibles was required.

11. Non-current assets - Property, plant and equipment

	Computer	Office	Leasehold Property and
	equipment	equipment	improvement	Total
	£000	£000	£000	£000
Cost
Balance at 1 July 2018	3,619	21	30	3,670
Additions	1,220	2	-	1,222
Disposals	-	-	(30)	(30)
Balance at 30 June 2019	4,839	23	-	4,862

Acquisition of subsidiaries	6	-	-	6
Additions	2,784	35	2,993	5,811
Disposals	(39)	-	-	(39)
As at 30 June 2020	7,590	58	2,993	10,641

Depreciation
Balance at 1 July 2018	(1,519)	(5)	(9)	(1,533)
Charge for the year	(892)	(6)	-	(898)
Disposals	-	-	9	9
Balance at 30 June 2019	(2,411)	(11)	-	(2,422)

Charge for the year	(873)	(18)	(583)	(1,474)
Eliminated on Disposal	10	-	-	10
As at 30 June 2020	(3,274)	(29)	(583)	(3,886)

N.B.V. 31 June 2019	2,428	12	-	2,440

N.B.V. 31 June 2020	4,316	29	2,410	6,755

Of the total additions in the year of £5,811,000, £775,000, relates to right-of-use assets brought on the balance at 1 July 2019 on transition to IFRS 16 (Note 1) with further right-of-use additions during the year of £2,165,000 and £53,000 of leasehold improvements relating to the new head office.

As disclosed in Note 1, on 1 July 2019, the Group adopted IFRS 16 and recognised a right-of-use asset of £0.83m. At 30 June 2020, a total of £2.94m is recognised within additions to leasehold property and improvements in relation to the initial recognition and additions during the year along with a corresponding depreciation charge of £0.58m.

All depreciation charges are included within cost of sales.

12. Non-current assets - Deferred tax

Deferred tax is recognised at the standard UK corporation tax of 19% for fixed assets in the UK (2019: 19%). Deferred tax in the US is recognised at an average rate of 21% for 2020 (2019: 25%). The deferred tax asset relates to the difference between the amortisation period of the US acquisitions for tax and reporting purposes as well as the impact of the share options exercised during the year and tax losses carried forward in both UK and overseas companies.

	2020	2019
	£000	£000
The split of fixed and intangible asset are summarised as follows:
Deferred tax liabilities	(531)	(48)
Deferred tax asset	380	136
Total deferred tax	(151)	88

Movements
Opening balance	88	147
Charged to profit or loss (note 8)	(94)	45
Charged to goodwill/equity	(145)	(104)
Closing balance	(151)	88

The movement in deferred income tax assets and liabilities during the year is as follows:

		Tax		Total	Total
	Share	losses	Accelerated	deferred	deferred
	based	carried	tax	tax	tax
	payments	forward	depreciation	asset	liability
	£000	£000	£000	£000	£000
At July 2018	104	110	41	255	(108)
Charge to income	-	(75)	60	(15)	60
Charge to equity	(104)	-	-	(104)	-
As at 30 June 2019	-	35	101	136	(48)
Charge to income	-	152	(46)	106	(200)
Charge to equity	-	-	-		-
Deferred tax on acquired assets		138		138	(283)
As at 30 June 2020	-	325	55	380	(531)

13. Current assets - Trade and other receivables

	2020	2019
	£000	£000

Trade receivable	791	679
Less: provision for impairment of receivables	(20)	(63)
	771	616
Prepayments and accrued income	721	388
Other taxation	0	40
Other receivables	33	60
	1,525	1,104

The credit risk relating to trade receivables is analysed as follows:
Trade receivables	791	679
Less: provision for impairment of receivables	(20)	(63)
	771	616

Movements in the allowance for expected credit losses are as follows:
Opening balance	63	82
Additional provisions recognised	20	63
Receivables written off during the year as uncollectable	(65)	(82)
Unused amounts reversed	2	-
Closing balance	20	63

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. The group has applied the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit loss provision under IFRS 9 as at 30 June 2020 is £13k.

Trade receivables consist of a large number of customers across various geographical areas. The aging below shows that almost all are less than three months old and historic performance indicates a high probability of payment for debts in this aging. Those over three months relate to customers without history of default for which there is a reasonable expectation of recovery.

Past due but not impaired
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of the customers based on recent collection practices.

The aging of trade receivables at the reporting date is as follows:
Not yet due	505	365
Past due 1 to 3 months	275	152
Past due 3 to 6 months	0	23
More than 6 months past due	11	139
	791	679

14. Current assets - Cash and cash equivalents

The credit risk on cash and cash equivalents is considered to be negligible because over 99% of the balance is with counter parties that are UK and US banking institutions.

15. Current assets - Financial instruments and risk management

Financial risk management objectives and policies

The Group's principal financial instruments comprise cash and cash equivalents, short term deposits and bank and other borrowings.

The carrying amount of all financial assets presented in the statement of financial position are measured at amortised cost.

The carrying amount of all financial liabilities presented in the statement of financial position are measured at amortised costs with the exception of contingent consideration with is measured at Fair Value through profit or loss.

The Group's financial liabilities per the fair value hierarchy classifications under IFRS 13 'Financial Instruments: Disclosures' are described below:

Category of financial liability

Fair value at 30 June 2020

£'000

Level in hierarchy

Description of valuation technique

Inputs used for valuation model

Total recognised in profit or loss

Contingent consideration due on acquisitions

(2,445)

Based on level of future revenue and probability that vendors will comply with obligations under sale and purchase agreement.

Management estimate on probability and time scale of vendors meeting revenue targets and complying with obligations.

Total fair value

(2,445)

Total net gain/loss

There have been no changes to valuation techniques or any amounts recognised through 'Other Comprehensive Income'. The main purpose of these financial instruments is to finance the Group's operations. The Group has other financial instruments which mainly comprise trade receivables and trade payables which arise directly from its operations.

Risk management is carried out by the finance department under policies approved by the Board of Directors. The Group finance department identifies, evaluates and manages financial risks. The Board provides guidance on overall risk management including foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity.

The impact of the risks required to be discussed under IFRS 7 are detailed below:

Market risk

Foreign exchange risk

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the functional currency of the operations. The Group has minimal exposure to foreign exchange risk as a result of natural hedges arising between sales and cost transactions. A 10% movement in the USD rate would have an impact on the Group's profit and equity by approximately £4,000. The Group had potential exchange rate exposure within USD trade payable balances of £77,617 as at 30 June 2020 (£91,842, at 30 June 2019).

Cash flow and interest rate risk

The Group has limited exposure to interest rate risk in respect of cash balances and long-term borrowings held with banks and other highly rated counterparties. All loans and leases are at fixed rates of interest therefore the group does not have exposure to interest rate risk.

Credit risk

The Group's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below:

	2020	2019
	£000	£000

Cash and cash equivalents	1,433	2,338
Trade receivables	791	679
Accrued income	223	234
Other receivables	28	60
VAT	0	40
	2,475	3,351

Credit risk is managed on a Group basis. Credit risks arise from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial losses to the Group. The Group provides standard credit terms (normally 30 days) to all of its customers which has resulted in trade receivables of £751,000 (2019: £616,000) which are stated net of applicable provisions and which represent the total amount exposed to credit risk.

The Group's credit risk is primarily attributable to its trade receivables. It is the policy of the Group to present the amounts in the balance sheet net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and the current economic environment. The Group reviews the reliability of its customers on a regular basis, such a review takes into account the nature of the Group's trading history with the customer.

The credit risk on liquid funds is limited because the majority of funds are held with two banks with high credit-ratings assigned by international credit-rating agencies. Management does not expect any losses from non-performance of these counterparties.

None of the Group's financial assets are secured by collateral or other credit enhancements.

Liquidity risk

The Group closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments on a regular basis to ensure that it has sufficient funds to meet obligations of the Group as they fall due.

The Board receives regular debt management forecasts which estimate the cash inflows and outflows over the next twelve months, so that management can ensure that sufficient financing is in place as it is required. Surplus cash within the Group is put on deposit in accordance with limits and counterparties agreed by the Board, the objective being to maximise return on funds whilst ensuring that the short-term cash flow requirements of the Group are met.

As at 30 June 2020, the Group's financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

	Current			Non-current
	Within	1-3	3-12	1-5	After
	1 month	months	months	years	5 years
	£	£	£	£	£

Trade payables	608	61	30	-	-
Other payables	16	-	-	-	-
Other loans	-	196	600	1,578	-

The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of the liabilities at the reporting date.

Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.

	2020	2019
	£000	£000

Total equity	6,716	5,632
Cash and cash equivalents	1,433	2,338
Capital	8,149	7,970
Total equity	6,716	5,632
Other loans	2,158	997
Lease liabilities	2,535	326
Overall financing	11,409	6,955

Capital-to-overall financing ratio	0.71	1.15

16. Non-current liabilities - Borrowings and other financial liabilities

	2020	2019
	£000	£000

Other loans	1,461	672
Lease liabilities	1,991	27
	3,452	699

Other loans
Under one year	697	325
Between one to five years	1,461	672
	2,158	997

Lease liabilities
Under one year	544	299
Between one to five years	1,991	27
	2,535	326

Finance leases

The maturity analysis of undiscounted lease liabilities are shown in the table below:

Under one year	560	348
Between one to five years	2,211	33
Total gross payments	2,771	381

Reconciliation of net debt:	Lease liabilities
		Loans	Total
Balance at 1 July 2019	326	997	1,323
Lease liabilities on transition to IFRS 16	2,940	-	2,940
Impact of effective interest rate	87	-	87
Proceeds from new loans	-	1,485	1,485
Loan and lease repayments	(818)	(324)	(1,142)
Balance at 30 June 2020	2,535	2,158	4,693

During the year a loan of £1.5m was taken out to fund the acquisition of Velocimetrics.

17. Current liabilities - Trade and other payables

	2020	2019
	£000	£000

Trade payables	699	629
Other loans	697	325
Finance leases	544	299
Accruals and deferred income	1,019	364
Other taxation and social security	96	28
Other payables	16	223
VAT	67	-
Deferred consideration	552	-
Contingent consideration	488	-
	4,178	1,868

18. Equity - issued capital

		2020	2019	2020	2019
		shares	shares	£000	£000
Ordinary shares - fully paid		51,228,258	50,864,800	64	64

Movements in ordinary share capital
Details		Date	Shares	Issue price	£000

Balance	30 June 2018		50,043,100		62
EMI Share options exercised	31 August 2018		677,700	£.00125	1
EMI Share options exercised	24 October 2018		32,200	£.00125	-
EMI Share options exercised	20 June 2019		111,800	£.00125	1
	30 June 2019		50,864,800		64
New share issue	14 April 2020		363,458	£0.00125	-
Balance	30 June 2020		51,228,258		64

Ordinary shares

During the year 363,458 shares were issued as part of the consideration for the acquisition of Velocimetrics Ltd. No share options were exercised during the year.

19. Share based payments

The movements in the share options during the year, were as follows:-

	2020	2019

Outstanding at the beginning of the year	308,824	821,700
Exercised during the year	-	(821,700)
Issued during the year	1,580,838	308,824

Outstanding at the end of the year	1,889,662	308,824
Exercisable at the end of the year	-	-

The Group granted a total of 1,580,838 share options to members of its management team on 17^th October 2019. These share options outstanding at the end of the year have the following expiry dates and exercise prices:

	Grant 1	Grant 2	Grant 3	Total
Shares	264,706	44,118	1,580,838	1,889,662
Date of grant	6^th September 2018	6^th September 2018	17^th October 2019
Exercise price	£0.00125	£0.00125	£0.00125
Vesting date	6^th September 2021	6^th September 2020	17^th October 2022

These share options vest under challenging performance conditions based on underlying profitability growth during the three year period.

The Black Scholes model was used to calculate the fair value of these options, the resulting fair value is expensed over the vesting period. The following table lists the range of assumptions used in the model:

	Grant 1	Grant 2	Grant 3	Total
Shares	264,706	44,118	1,580,838	1,889,662
Share price	1.02	1.02	0.84
Volatility	5%	5%	5%
Annual risk free rate	4%	4%	4%
Exercise strike price	0.00125	0.00125	0.00125
Time to maturity (yrs)	1.1667	0.1667	2.3333

The total expense recognised from share based payments transactions on the group's profit for the year was £311,713 (2019: £62,647).

These share options vest on the achievement of challenging growth targets. It is management's intention that the Company will meet these challenging growth targets therefore, based on management's expectations, the share options are included in the calculation of underlying diluted EPS in note 23.

20. Equity - Reserves

The foreign currency retranslation reserve represents exchange gains and losses on retranslation of foreign operations. Included in this is revaluation of opening balances from prior years.

The merger relief reserve arose on the share for share exchange reflecting the difference between the nominal value of the share capital in Beeks Financial Cloud Group Limited and the value of the Group being acquired, Beeks Financial Cloud Limited.

During the year £333,000 was recognised within the merger reserve, which arose on the share for share exchange reflecting the difference between the nominal value of the share capital issued from Beeks Financial Group plc and the value of the shares issued to the owners of Velocimetrics Ltd at the date of acquisition.

Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

Retained earnings represents retained profits.

The other reserve arose on the share for share exchange and reflects the difference between the value of Beeks Financial Cloud Group Limited and the share capital of the Group being acquired through the share for share exchange. Also included in the other reserve is the fair value of the warrants issued on the acquisition of VDIWare LLC.

Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

21. Capital and other commitments

Excluding the contingent liabilities associated with the contingent consideration (Note 1), there are no contingent assets or contingent liabilities as at 30 June 2020 (2019: nil).

22. Related party transactions

Parent entity

Beeks Financial Cloud Group PLC is the parent entity.

Subsidiaries

Interests in subsidiaries are set out in note 24.

Transactions with related parties

The following transactions occurred with related parties:

	2020	2019
	£000	£000

Withdrawals from the director, Gordon McArthur	11	33

The loan account owed by the director; Gordon McArthur was repaid in full before the year end. Beeks Financial Cloud Limited provided services in the normal course of its business and at arm's length to Ofelia Algos Limited, a company owned by Gordon McArthur. During the financial year Beeks Financial Cloud Limited made sales of £120,540 (2019: £117,600) to Ofelia Algos Limited and the amounts due to Beeks Financial Cloud Limited at the year-end were £35,090 (2019: £53,600).

Key management personnel
Compensation paid to key management (which comprises the executive and non-executive PLC Board members) during the year was as follows:
	2020	2019
	£000	£000

Wages and salaries including social security costs	258	256
Other pension costs	5	3
Other benefits in kind	-	11
Share based payments	115	24

23. Earnings per share

	2020	2019
	£000	£000
Profit after income tax attributable to the owners of Beeks Financial Cloud Group PLC	575	1,063

	Pence	Pence
Basic earnings per share	1.13	2.10
Diluted earnings per share	1.13	2.09

	Number	Number
Weighted average number of ordinary shares used in calculating basic earnings per share	50,942,258	50,632,965
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares	48,132	231,835
Weighted average number of ordinary shares used in calculating diluted earnings per share	50,990,391	50,864,800
Included in the weighted average number of shares for the calculation of statutory diluted EPS are the shares that will be issued to the owners of Velocimetrics in relation to the first earn out period ending 30 June 2020. The target earn out amount has been agreed following the statutory audit therefore these shares are included in the calculation of underlying diluted EPS.
	2020	2019
	£000	£000
Underlying earnings per share
Profit for the year	575	1,043
Acquisition costs	205	127
Share Based payments	312	63
Amortisation on acquired intangibles	236	62
Exceptional non-recurring costs	61	21
Grant income	(59)	-
Tax effect	(45)	(12)
Underlying profit for the year	1,285	1,304

Weighted average number of shares in issue - basic	50,942,258	50,632,965
Weighted average number of shares in issue - diluted	52,409,256	51,116,936

Underlying earnings per share - basic	2.52	2.58
Underlying earnings per share - diluted	2.45	2.55

Included in the weighted average number of shares for the calculation of underlying diluted EPS are share options outstanding but not exercisable. It is management's intention that the Company will meet the challenging growth targets therefore, based on management expectations, the share options are included in the calculation of underlying diluted EPS.

Also included in the weighted average number of shares for the calculation of underlying diluted EPS are the shares that will be issued to the owners of Velocimetrics in relation to the first earn out period ending 30 June 2020. The target earn out amount has been agreed following the statutory audit therefore these shares are included in the calculation of underlying diluted EPS.

24. Subsidiaries

The consolidated financial information incorporate the assets, liabilities and results of the following subsidiaries held by the company in accordance with the accounting policy described in note 1.

The subsidiary undertakings are all 100% owned, with 100% voting rights.

	Country of	Principal place of business/
Company name	incorporation	Registered office

Beeks Financial Cloud Co Ltd	Japan	FARO 1F, 2-15-5, Minamiaoyama, Minato-Ku, Tokyo, Japan.
Beeks FX VPS USA Inc.	Delaware, USA	874 Walker Road, Suite C, Dover, Kent, Delaware, 19904, USA.
Beeks Financial Cloud Limited	Scotland	Lumina Building, 40 Ainslie Road, Ground Floor, Hillington Park, Glasgow, UK, G52 4RU
Velocimetrics Limited	England	Birchin Court, 230 Park Avenue 20 Birchin Lane, Suite 300 West, London, England, EC3V 9DU
Velocimetrics Inc	New York, USA	230 Park Avenue, 10^th Floor, New York 10169, USA.

25. Events after the reporting period

No matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.

26. Ultimate controlling party

The Group is ultimately controlled by Gordon McArthur by virtue of his majority shareholding.

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