FINAL RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2020
30 March 2021
ACCESS INTELLIGENCE PLC
("Access Intelligence", the "Company" or the "Group")
FINAL RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2020
Access Intelligence Plc (AIM: ACC), the technology innovator delivering Software-as-a-Service ("SaaS") solutions for the PR, communications and marketing industries, announces its final results for the year ended 30 November 2020.
Highlights
· 2020 proved to be an exceptional year for Access Intelligence in terms of new client wins. These included Amazon, Aegon, Astra-Zeneca, Boots, Chanel, Dow Jones, Hulu, Levi Strauss, LinkedIn, Lotus, Nintendo, Publicis, Saatchi & Saatchi, The International Monetary Fund, Unicredit, Twitter, Veolia and WWF. These clients demonstrate the increasing appeal of the Group's portfolio across a diverse range of sectors and territories.
· Annual Contract Value ("ACV") base increased by 21.0% to £21.9 million (2019: £18.1 million). The Company's growth rate more than doubled in the second half of the year with strong new business and renewal rates underpinning excellent growth in ACV of £2.8m in the period. This compares to ACV growth of £1.1m in the first six months which were- impacted by COVID-19, with all sub-brands seeing growth acceleration in the second half.
· Revenue increased by 42% year-on-year to £19.1 million. Excluding Pulsar, revenue increased by 10.0% to £13.9 million.
· Adjusted EBITDA profit for the year of £0.7 million (2019: profit of £0.8 million).
· At 30 November 2020, cash balance was £1.4 million (2019: £2.0 million).
· In a fund raise announced in December 2020, the Group raised £10.0 million (before expenses) through a new equity issue and secured a £2.0 million three-year facility under the Coronavirus Business Interruption Loan Scheme (CBILS) to enhance its technology and platform of products, for further geographic expansion, to continue to explore suitable acquisition opportunities and to further strengthen its Balance Sheet.
Christopher Satterthwaite, Non-Executive Chairman of Access Intelligence, commented:
"It is outstanding to see growth of 42% in revenue and 21% ACV during such a challenging year.
"The whole team has performed to the highest standards which is reflected by the roster of international blue-chip businesses brought on as clients.
"The Group is now focusing on its next stage of expansion, supported by the £10m December fund raise. Access Intelligence is in a strong position to capitalise on the opportunities that the easing of global lockdown restrictions will bring in 2021 and beyond."
For further information:
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Access Intelligence Plc |
020 3426 4024 |
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Joanna Arnold (CEO) Mark Fautley (CFO) |
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finnCap Limited (Nominated Adviser and Broker) |
020 7220 0500 |
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Corporate Finance: Marc Milmo / Kate Bannatyne |
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Corporate Broking: Alice Lane / Sunila de Silva |
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Forward looking statements
This announcement contains forward-looking statements.
These statements appear in a number of places in this announcement and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, revenue, financial condition, liquidity, prospects, growth, strategies, new products, the level of product launches and the markets in which we operate.
Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors.
These factors include any adverse change in regulations, unforeseen operational or technical problems, the nature of the competition that we will encounter, wider economic conditions including economic downturns and changes in financial and equity markets. We undertake no obligation publicly to update or revise any forward-looking statements, except as may be required by law.
This announcement contains an extract from the Access Intelligence Plc Annual Report 2020.
Chairman's Statement
It has been a year of intense volatility in business, politics and the media. The COVID-19 pandemic has changed how every organisation operates.
The reliance upon, and speed of, communication through digital platforms is changing the fundamentals of marketing and communications. Brands, organisations and civil society are all reappraising the channels, content and audiences that are important for building awareness and reputation, developing trust, delivering action or growth.
Organisations that once underpinned the fabric of society have been subject to multiple forces of change. The spread of disinformation has accelerated, and the role of politics, platforms and traditional media in countering this is the subject of global debate and regulation.
Tastemakers and influential voices appear seemingly from nowhere, on digital platforms that were on very few marketers' radar until recently. These influencers can make products sell out, rally communities, upend financial markets or start political movements.
Navigating the pandemic
We made strong progress in 2020, developing our products and messaging to serve our clients' rapidly evolving needs. Real-time insight, through our popular #NewNormal initiative, informed the wider market on the changing habits and choices of the public throughout lockdown and coronavirus restrictions.
Throughout the pandemic, our priority has been to protect the safety and wellbeing of our people, and we adopted working from home across the business.
We also took significant steps to protect the business financially.
Given the circumstances created by COVID-19, the year saw the board take a number of cost saving initiatives, including furloughing approximately 15% of staff, salary and fee reductions for the board and employees for three months, and the curtailment of discretionary spending. The overall impact of the measures introduced resulted in a cost saving of £1.1 million.
Thank you to our investors for their continued confidence in the future of our business.
Thank you also to our people, whose relentless energy and focus has ensured we have emerged a better business with a strong global outlook.
People and performance
Despite disruption to normal office operations, we have continued to deliver product innovation and high levels of service to our customers, with our colleagues working remotely.
I feel a great sense of appreciation for what the Group has achieved this year in delivering the objectives we set out. Without exception, everyone has taken positive action to ensure that we are an agile, fast-growing business, with satisfied customers and a robust balance sheet. Importantly, we now have the vision, technologies and capabilities we need to achieve our long-term global ambitions for growth.
Access Intelligence is a software as a service (SaaS) business, which remains a secure and highly sustainable model with a growing recurring revenue base of subscriptions, typically on annual or multi-year contracts.
This model, and our expansion into global markets, means the Group is resilient to financial downturn with operations underpinned by long term visibility of contracted revenue and minimal customer concentration. It allows us to develop opportunities within a changing market while operating in a highly efficient cost structure.
Notwithstanding the challenges created by COVID-19, 2020 proved to be an exceptional year for Access Intelligence in terms of new client wins. These included Amazon, Aegon, Astra-Zeneca, Boots, Chanel, Dow Jones, Hulu, Levi Strauss, LinkedIn, Lotus, Nintendo, Publicis, Saatchi & Saatchi, The International Monetary Fund, Unicredit, Twitter, Veolia and WWF. These clients demonstrate the increasing appeal of our portfolio across a diverse range of sectors and territories.
Innovation, acquisition and expansion
Our strategy is to sustain growth through a combination of product innovation, acquisition and growth in international markets.
Pulsar's market leading technology has been successfully integrated into the Group and has strengthened our data, AI and research capabilities. By combining conversational and behavioural signals from leading global digital channels, Pulsar enables our clients to understand and draw insight from online conversations across a fast-evolving set of global social media platforms, traditional media and data sources.
Integrating Pulsar has demonstrated our ability to work quickly to identify and capitalise on technology and client synergies that open new revenue, global markets and development opportunities.
We will continue to invest in our technology and sustain product development, within an overarching framework of delivering exceptional user experience through integrating platforms.
In 2020 we made improvements and delivered new solutions for clients including enriching our media, social media content and data. We have integrated new data sources, such as the high-growth mobile app TikTok and mitigated supply-chain risk.
As social media becomes more visual, we have launched next generation Artificial Intelligence modules for image recognition, providing the most advanced suite of artificial intelligence tools on the market for image analysis at scale.
Current trading
The Group has maintained strong growth in the first quarter of 2021, with new client wins including Atom, Eli Lilly, Euromonitor, Mastercard, McLaren, Moonpig, Red Bull Racing, Sainsburys, Securitas, Shelter, Size?, Stagecoach, Unicef and UK Research and Innovation.
In a fund raising announced in December 2020, we raised £10,000,000 (before expenses) to enhance the Group's technology and platform of products, for further geographic expansion, to continue to explore suitable acquisition opportunities and to further strengthen our Balance Sheet. During the first quarter, we have appointed both a new Chief Operating Officer based in the UK and a Vice President of Sales - Americas. With the US market being a key strategic opportunity, we are continuing to build out our expanded US sales team.
Future focus
In an uncertain business environment, we are an agile, innovative, data-driven business focused on sustainable growth.
The results we've seen demonstrate the ongoing commitment and dedication of our team. I would like to thank each one of them for their support.
I look forward to working with you into the future and updating you as we continue our journey to transform the market and deliver on our vision of powering open and effective communication.
After this strong set of results, I want to take this opportunity to thank our customers, partners, investors and my colleagues for their resolve during the most turbulent of times.
The outstanding response from everyone in the Group has ensured that we have come through the year stronger together. Our people, talent, expertise and energy is what drives our success.
C Satterthwaite
Chairman
Strategic Report (extract)
Results
During the 2020 financial year, the Group has focused on the integration of Pulsar and the acceleration of organic growth. By combining conversational and behavioural signals from leading global digital channels, Pulsar enables organisations to understand and draw insight from online conversations across a fast-evolving set of global social media platforms, traditional media and data sources.
One of the key financial metrics monitored by the board is the change in the customer Annual Contract Value ('ACV') base year-on-year. The change in ACV base reflects the annual value of new business won, plus upsells into our existing customer base, less any customer losses. It is an important metric for the Group as it is a leading indicator of future revenue. During 2020, the Group's ACV base grew organically by £3.9 million (21%) to £21.9 million. In the prior year, the Group had delivered organic growth of £1.3 million (10.4%) and had a year-end ACV base of £18.1 million.
The Company's growth rate more than doubled in the second half of the year with strong new business and renewal rates underpinning excellent growth in ACV in the period of £2.8m. This compares to ACV growth of £1.1m in the first six months which were impacted by COVID-19, with all sub-brands seeing growth acceleration in the second half.
Revenue increased by 42% year-on-year to £19,070,000 (2019: £13,429,000). Excluding Pulsar, revenue increased by 10% year-on-year to £13,852,000 (2019: £12,616,000). Pulsar revenue for the year was £5,218,000. (2019: £813,000).
Recurring revenue comprised 94% of the total (2019: 97%), with sales teams incentivised to focus on high contribution SaaS products.
The Group delivered adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) for the year of £686,000 (2019: £805,000). Excluding Pulsar, the Group's Adjusted EBITDA for the year was £2,702,000 (2019: £1,119,000).
The Directors believe that the disclosure of Adjusted EBITDA provides additional useful information on the core operational performance of the Group to shareholders, and review the results of the Group on an adjusted basis internally. The term 'adjusted' is not a defined term under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. It is not intended to be a substitute for, or superior to, IFRS measurements of profit. Adjustments are made in respect of the Group's:
· Non-recurring administrative expenses;
· Share of profit or loss of associates; and
· Share-based payment charges.
Adjusted EBITDA excludes non-recurring administrative expenses of £2,479,000 (2019: £1,777,000), a share of loss of associate of £160,000 (2019: £201,000), and a share-based payments charge of £107,000 (2019: £63,000). Non-recurring administrative costs include expenses related to: the evaluation of potential acquisitions of £1,269,000 (2019: £160,000); migration and integration of Pulsar and ResponseSource of £756,000 (2019: £1,204,000); compensation and notice payments to staff arising from post-acquisition restructuring of £445,000 (2019: £25,000); and other non-recurring items of £9,000 (2019: £388,000).
The Group's earnings before interest, tax, depreciation and amortisation (EBITDA) loss for the year was £2,060,000 (2019: loss of £1,236,000). Excluding Pulsar, the Group's EBITDA loss for the year was £33,000 (2019: loss of £762,000).
Loss before taxation was £5,746,000 (2019: £2,894,000). In arriving at the loss before taxation, the Group has incurred £371,000 of net financial expense (2019: £93,000) and charged £3,315,000 in depreciation and amortisation (2019: £1,863,000). £1,280,000 of this charge related to the amortisation of intangible assets arising on acquisition (2019: £941,000).
The Group did not have any discontinued operations during the year (2019: None). 2021 will see continued focus on growth in revenue and gross margin as the Group looks to expand its offerings globally.
Loss per share
The basic loss per share was 7.06p (2019: 3.44p).
Cash
Cash at the year-end stood at £1,403,000 (2019: £2,001,000) whilst net cash, calculated as cash held less loan notes and other loans, was £1,403,000 (2019: net cash of £1,978,000). The total decrease in cash and cash equivalents during the year was £598,000 (2019: £3,299,000).
The net cash inflow from operations during the year was £2,258,000 (2019: outflow of £3,626,000), which included £1,600,000 received during 2020 relating to the Pulsar acquisition, where shares were deemed to have been issued in respect of the cash due from the vendors relating to net working capital (Note 7).
The net cash outflow from investing activities for the year was £2,253,000 (2019: outflow of £3,292,000), reflecting continued investment in the Group's products and, in the prior year, fit-out of the Group's new head office.
The net cash outflow from financing activities for the year was £603,000 (2019: inflow of £3,619,000), reflecting interest and lease liability repayments in respect of the Group's head office. In the prior year £4,661,000 had been raised through the issue of shares and share options, and £1,042,000 had been paid out in respect of loan note and interest repayments.
On 9 December 2020, the company announced the placing of 12,500,000 new shares at a price of 80p per share to raise gross proceeds of £10,000,000. Net proceeds received were £9,630,000.
Also, on 9 December 2020, the Company announced that it had secured a £2,000,000, three-year facility under the Coronavirus Business Interruption Loan Scheme (CBILS). The facility was drawn down during December 2020, has a 12-month interest-free period following drawdown and an interest rate of 2.03% plus LIBOR or replacement benchmark rate per annum on the drawn down amount thereafter. The funds are repayable in equal monthly instalments over 36 months and there will be no penalty for making early repayment of the facility.
At 23 March 2021, the Group's cash balance was £11,297,000.
Dividend
As a result of the significant investment the Company has made in the strategic product innovation and sales development, the directors do not propose to pay a dividend for 2020 (2019: £Nil).
Key performance indicators
Management accounts are prepared on a monthly basis and provide performance indicators covering revenue, gross margins, EBITDA, result before tax, result after tax, cash balances and recurring revenue.
The key performance indicators for the year are:
|
£'m
|
2020 |
2019 |
|
Annual Contract Value base |
21.9 |
18.1 |
|
Revenue |
19.1 |
13.4 |
|
Gross margin (%) |
72% |
75% |
|
Adjusted EBITDA - profit |
0.7 |
0.8 |
|
EBITDA - loss |
(2.1) |
(1.2) |
|
Loss before taxation |
(5.7) |
(2.9) |
|
Loss after taxation |
(5.1) |
(2.2) |
|
Cash balances |
1.4 |
2.0 |
|
Recurring revenue |
18.0 |
13.0 |
These performance indicators are measured against both an approved budget and the previous year's actual results. Further analysis of the Group's performance is provided earlier in this Strategic Report.
Each month the Board assesses the performance of the Group based on key performance indicators. These are used in conjunction with the controls described in the corporate governance statement and relate to a wide variety of aspects of the business, including: new business and renewal sales performance; marketing, development and research activity; year to date financial performance, profitability forecasting and cash flow forecasting.
Changes in accounting policies
The Group has adopted IFRS 16 from 1 December 2019. Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases for which it is the lessee, except for short-term leases and leases of low value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. On transition the Group has applied the modified retrospective approach, with the right-of-use asset measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. Comparative periods have not been restated. An incremental borrowing rate of 9% per annum has been used.
The impact of IFRS16 on the financial statements for the year ended 30 November 2020 is as follows:
· Initial recognition of a right-of-use asset of £2,974,000 and a lease liability of £3,213,000.
· 'Depreciation of tangible fixed assets' expense decreased by £68,000 and 'Depreciation of right-of-use assets' expense increased by £645,000 because of the depreciation of additional right-of-use assets recognised.
· Rent expense included within 'Recurring administrative expenses' relating to previous operating leases, decreased by £787,000.
· 'Financial expense' increased by £342,000 relating to the interest expense on additional lease liabilities recognised.
· Cash inflows from operating activities increased by £504,000 and cash outflows from financing activities increased by the same amount, relating to decrease in operating lease payments and increases in principal and interest payments of lease liabilities.
Consolidated Statement of Comprehensive Income
Year ended 30 November 2020
|
|
Note |
2020 |
2019 |
|
Revenue |
4 |
19,070 |
13,429 |
|
Cost of sales |
|
(5,314) |
(3,395) |
|
Gross profit |
|
13,756 |
10,034 |
|
Recurring administrative expenses |
|
(13,070) |
(9,229) |
|
Adjusted EBITDA |
|
686 |
805 |
|
Non-recurring administrative expenses |
6 |
(2,479) |
(1,777) |
|
Share of loss of associate |
14 |
(160) |
(201) |
|
Share-based payments |
25 |
(107) |
(63) |
|
EBITDA |
|
(2,060) |
(1,236) |
|
Depreciation of tangible fixed assets |
15 |
(228) |
(169) |
|
Depreciation of right-of-use assets |
19 |
(645) |
- |
|
Amortisation of intangible assets - internally generated |
13 |
(1,162) |
(753) |
|
Amortisation of intangible assets - acquisition related |
13 |
(1,280) |
(941) |
|
Operating loss |
6 |
(5,375) |
(3,099) |
|
Gain arising on acquisition |
7 |
- |
298 |
|
Financial Income |
|
6 |
2 |
|
Financial expense |
9 |
(377) |
(95) |
|
Loss before taxation |
|
(5,746) |
(2,894) |
|
Taxation credit |
10 |
660 |
734 |
|
Loss for the year |
|
(5,086) |
(2,160) |
|
Other comprehensive income |
|
(8) |
- |
|
Total comprehensive income for the period attributable to the owners of the Parent Company |
|
(5,094) |
(2,160) |
|
|
|
|
|
|
Earnings per share |
|
2020 |
2019 |
|
Basic loss per share |
12 |
(7.06)p |
(3.44)p |
|
Diluted loss per share |
12 |
(7.06)p |
(3.44)p |
|
|
|
|
|
Consolidated Statement of Financial Position
At 30 November 2020
| Note | 2020 | 2019 |
Non-current assets |
|
|
|
Intangible assets | 13 | 15,732 | 16,143 |
Investment in associate | 14 | 57 | 117 |
Right-of-use assets | 19 | 2,329 | - |
Property, plant and equipment | 15 | 496 | 884 |
Deferred tax assets | 23 | 18 | 21 |
Total non-current assets |
| 18,632 | 17,165 |
Current assets |
|
|
|
Trade and other receivables | 16 | 5,976 | 7,737 |
Current tax receivables |
| 548 | 995 |
Cash and cash equivalents | 26 | 1,403 | 2,001 |
Total current assets |
| 7,927 | 10,733 |
Total assets |
| 26,559 | 27,898 |
Current liabilities |
|
|
|
Trade and other payables | 18 | 4,412 | 3,807 |
Accruals |
| 1,209 | 1,206 |
Contract assets | 20 | 8,122 | 7,935 |
Lease liabilities | 19 | 558 | - |
Interest bearing loans and borrowings | 17 | - | 23 |
Total current liabilities |
| 14,301 | 12,971 |
Non-current liabilities |
|
|
|
Provisions | 27 | 213 | 213 |
Lease liabilities | 19 | 2,441 | - |
Deferred tax liabilities | 23 | 520 | 643 |
Total non-current liabilities |
| 3,174 | 856 |
Total liabilities |
| 17,475 | 13,827 |
Net assets |
| 9,084 | 14,071 |
Equity |
|
|
|
Share capital | 24 | 3,757 | 3,961 |
Treasury shares |
| (148) | (148) |
Share premium account |
| 17,242 | 17,242 |
Capital redemption reserve |
| 395 | 191 |
Share option reserve |
| 518 | 411 |
Other reserve |
| 502 | 502 |
Retained earnings |
| (13,182) | (8,088) |
Total equity attributable to the equity holders of the Parent Company |
| 9,084 | 14,071 |
Consolidated Statement of Changes in Equity
Year ended 30 November 2020
| Share capital | Treasury shares £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Share option reserve £'000 | Other Reserve £'000
| Retained earnings £'000 | Total £'000 |
Group |
|
|
|
|
|
|
|
|
At 1 December 2018 | 3,189 | (148) | 13,075 | 191 | 348 | - | (5,928) | 10,727 |
Total comprehensive loss for the year | - | - | - | - | - | - | (2,160) | (2,160) |
Issue of share capital | 772 | - | 4,167 | - | - | - | - | 4,939 |
Arising on acquisition | - | - | - | - | - | 502 | - | 502 |
Share-based payments | - | - | - | - | 63 | - | - | 63 |
At 1 December 2019 | 3,961 | (148) | 17,242 | 191 | 411 | 502 | (8,088) | 14,071 |
Total comprehensive loss for the year | - | - | - | - | - | - | (5,094) | (5,094) |
Repurchase of share capital | (204) | - | - | 204 | - | - | - | - |
Share-based payments | - | - | - | - | 107 | - | - | 107 |
At 30 November 2020 | 3,757 | (148) | 17,242 | 395 | 518 | 502 | (13,182) | 9,084 |
Share capital and share premium account
When shares are issued, the nominal value of the shares is credited to the share capital reserve. Any premium paid above the nominal value is taken to the share premium account. Access Intelligence plc shares have a nominal value of 5p per share. Directly attributable transaction costs associated with the issue of equity investments are accounted for as a reduction from the share premium account.
Treasury shares
The returned shares are held in treasury and attract no voting rights. The return of shares has been accounted for in accordance with IAS 32 'Financial instruments: Presentation' such that the instruments have been deducted from equity with no gain or loss recognised in profit or loss. The balance on this reserve represents the cost to the group of the treasury shares held.
Share option reserve
This reserve arises as a result of amounts being recognised in the income statement relating to share-based payment transactions granted under the Group's share option scheme. The reserve will fall as share options vest and are exercised over the life of the options.
Capital redemption reserve
This reserve arises as a result of keeping with the doctrine of capital maintenance when the Company purchases and redeems its own shares. The amounts transferred into/out from this reserve from a purchase/redemption is equal to the amount by which share capital has been reduced/increased, when the purchase/redemption has been financed wholly out of distributable profits, and is the amount by which the nominal value exceeds the proceeds of any new issue of share capital, when the purchase/redemption has been financed partly out of distributable profits.
Other reserve
This reserve arises as a result of the difference between the fair value and the nominal value of consideration shares issued on acquisition for which merger relief is taken under S612 of the Companies Act 2006.
Retained earnings
The retained earnings reserve records the accumulated profits and losses of the Group since inception of the business. Where subsidiary undertakings are acquired, only profits and losses arising from the date of acquisition are included.
Consolidated Statement of Cash Flow
Year ended 30 November 2020
| Note | 2020 | 2019 |
Loss for the year |
| (5,094) | (2,160) |
Adjusted for: |
|
|
|
Taxation | 10 | (660) | (734) |
Financial expense | 9 | 377 | 95 |
Financial income |
| (6) | (2) |
Gain arising on acquisition |
| - | (298) |
Depreciation and amortisation | 13, 15, 19 | 3,315 | 1,863 |
Share-based payments |
| 107 | 63 |
Share of loss of associate |
| 160 | 201 |
Operating cash outflow before changes in working capital |
| (1,801) | (972) |
Decrease/(Increase) in trade and other receivables |
| 1,764 | (1,790) |
Increase/(decrease) in trade and other payables |
| 1,308 | (864) |
Net cash inflow/(outflow) from operations before taxation |
| 1,271 | (3,626) |
Taxation paid |
| 987 | - |
Net cash inflow/(outflow) from operations |
| 2,258 | (3,626) |
Cash flows from investing |
|
|
|
Interest received |
| 6 | - |
Acquisition of property, plant and equipment | 15 | (128) | (856) |
Acquisition of software licenses and other intangible assets | 13 | (58) | (56) |
Cost of software development | 13 | (1,973) | (2,337) |
Loan to associate | 14 | (100) | - |
Acquisition of Pulsar | 7 | - | (43) |
Net cash outflow from investing |
| (2,253) | (3,292) |
Cash flows from financing |
|
|
|
Interest paid |
| (377) | (124) |
Repayment of loan notes and other loans | 17 | (23) | (918) |
Lease liabilities paid |
| (203) |
|
Issue of shares (net of expenses) | 24 | - | 4,521 |
Exercise of share options | 24 | - | 140 |
Net cash (outflow)/inflow from financing |
| (603) | 3,619 |
Net decrease in cash and cash equivalents | 26 | (598) | (3,299) |
Opening cash and cash equivalents | 26 | 2,001 | 5,300 |
Closing cash and cash equivalents | 26 | 1,403 | 2,001 |
Notes to the Consolidated Financial Statements
1. General Information
Access Intelligence Plc ('the Company') and its subsidiaries (together the 'Group') provides advanced tools and human insight to give brands, agencies and organisations the power to anticipate, react and adapt. The Company is a public limited company under the Companies Act 2006 and is listed on the AIM market of the London Stock Exchange and is incorporated and domiciled in the UK. The address of the Company's registered office is provided in the Directors and Advisers page of the Annual Report.
2. Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been applied consistently to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The consolidated financial statements have been prepared under the historical cost convention and on a going concern basis.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.
Going concern
The Strategic Report and opening pages to the annual report discuss Access Intelligence's business activities and headline results, together with the financial statements and notes which detail the results for the year, net current liability position and cash flows for the year ended 30 November 2020. The Board has further considered 12-month cash flow forecasts from the date of signing the accounts which contained assumptions around new business and upsell being reduced by 5% from prior performance and renewal rates also decreasing by 5%. The Board considers the assumptions used therein to be reasonable and reflective of the long-term 'software as a service' contracts and contracted recurring revenue.
The Group meets its day to day working capital requirements through its cash balance. It did not have a bank loan or overdraft at the year-end although has put in place a £2,000,000 CBILS loan post year-end. In addition, the Group raised £9,630,000 net of expenses post year-end to enhance the Group's technology and platform of products, for further geographic expansion, to continue to explore suitable acquisition opportunities in line with its strategy and to further strengthen its Balance Sheet.
As at the date of this report, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Significant judgements in applying the Group's accounting policies
The areas where the Board has made critical judgements in applying the Group's accounting policies (apart from those involving estimations which are dealt with separately below) are:
(a) Going concern
Management applies judgement when determining to apply the going concern basis for preparation of the financial statements, through evaluation of financial performance and forecasts. See 'Going concern' section within note 2 for further detail.
(b) Recognition of deferred tax assets
Judgement is applied in the assessment of deferred tax assets in relation to losses to be recognised in the financial statements. As the Group has not been generating taxable profits for the last few years, the Board has judged that deferred tax assets should only be recognised to the extent that they offset a deferred tax liability. At 30 November 2020, the Group recognised a deferred tax asset of £18,000 and a deferred tax liability of £520,000. See note 23 for further detail.
(c) Capitalisation of development costs
Management applies judgement when determining the value of development costs to be capitalised as an intangible asset in respect of its product development programme. Judgements include the technical feasibility, intention and availability of resources to complete the intangible asset so that the asset will be available for use or sale and assessment of likely future economic benefits. During the year, the Group capitalised £1,973,000 of development costs. See note 13 for further detail.
(d) Accounting for acquisitions
Management applies judgement in accounting for acquisitions, including identifying assets arising from the application of IFRS 3 Business combinations, undertaking Purchase Price Allocation exercises to allocate value between assets acquired, including the allocation between intangible assets and goodwill. See note 7 for further detail.
(e) Identification of cash generating units for goodwill impairment testing
Judgement is applied in the identification of cash-generating units ("CGUs"). Given the speed of integration of acquisitions, the Directors have judged that the primary CGUs used for impairment testing should be: Vuelio, comprising AIMediaData Limited, Access Intelligence Media and Communications Limited, ResponseSource Ltd and Vuelio Australia Pty Limited; and Pulsar, comprising Fenix Media Limited and Face US Inc. See note 13 for further detail.
(f) Non-recurring administrative expenses
Due to the Group's significant acquisition-related activity in recent years, there are a number of items which require judgement to be applied in determining whether they are non-recurring in nature. In the current year these relate largely to: migration and integration costs in respect of the Pulsar acquisition of £756,000; restructuring costs as a result of the Pulsar acquisition, including compensation payments of £445,000, and costs related to the evaluation of potential acquisition activities of £1,269,000. See note 6 for further detail.
Significant estimates in applying the Group's accounting policies
The areas where the Board has made significant estimates and assumptions in applying the Group's accounting policies are:
(a) Valuation of acquired intangible assets
Acquisitions may result in the recognition of intangible assets, such as brand value, customer relationships, databases and software platforms. These assets are valued using a discounted cash flow model or a relief from royalty method. In applying these valuation methods, a number of key assumptions are made in respect of discount rates, growth rates, royalty rates and the estimated life of intangibles. During the prior year, such estimates were made in respect of the Pulsar acquisition. See note 7 for further detail.
(b) Carrying value of goodwill
The Group uses forecast cash flow information and estimates of future growth to assess whether goodwill is impaired. Key assumptions include the EBITDA margin allocated to each CGU, the growth rate to perpetuity and the discount rate. If the results of an operation in future years are adverse to the estimates used for impairment testing, impairment may be triggered at that point. Further details, including sensitivity testing, are included within note 13.
(c) Bad debt allowances
Under the IFRS 9 simplified approach, a bad debt allowance is calculated by segmenting debtors into categories and estimating a credit loss risk percentage for each category. Using this approach, a bad debt allowance of £185,000 was estimated at 30 November 2020. See note 16 for further detail.
(d) Share-based payment charges
Under IFRS 2, a share-based payments charge must be recognised in respect of share options issued in the current and prior year. Estimates included within the calculation of the share-based payments charge include those around volatility, risk free rates, dividend yields, staff turnover and early exercise behaviour. See note 25 for further detail.
New standards and interpretations
The adoption of the following mentioned amendments in the current year have had a material impact on the Group's/Company's financial statements. Further detail on this impact is provided within Note 3.
• IFRS 16 Leases
The adoption of the following mentioned amendments in the current year have not had a material impact on the Group's/Company's financial statements.
• Amendments to IAS 28 Investments in Associates and Joint Ventures: Long-term interests in Associates and Joint Ventures
• Amendments to IFRS 9 Financial Instruments: Prepayment features with negative compensation
• IFRIC 23 Uncertainty over Income Tax Treatments
New standards, amendments and interpretations issued but not yet effective
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.
• Amendments to References to Conceptual Framework in IFRS Standards
• Definition of a Business (Amendments to IFRS 3)
• Definition of Material (Amendments to IAS 1 and IAS 8)
• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
• COVID-19-Related Rent Concessions (Amendment to IFRS 16)
Basis of consolidation
The Group financial statements comprise the financial statements of the Company and all of its subsidiary undertakings made up to the financial year-end. Subsidiaries are entities that are controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The results of subsidiary undertakings acquired or disposed of in the year are included in the Group statement of comprehensive income from the effective date of acquisition or to the effective date of disposal. Accounting policies are consistently applied throughout the Group. Inter-company balances and transactions have been eliminated. Material profits from inter-company sales, to the extent that they are not yet realised outside the Group, have also been eliminated.
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Under the equity method of accounting, the Group's investments in associates are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the Group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.
When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.
Foreign currency translation
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). The functional currency of Face US Inc. is US Dollars, the functional currency of Vuelio Australia Pty Limited is Australian Dollars, and the functional currency of all other Group companies is Sterling.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions.
At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
On consolidation, the results and financial position of each Group company are expressed in Sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are charged to the consolidated income statement.
Business combinations
In accordance with IFRS 3 "Business Combinations", the fair value of consideration paid for a business combination is measured as the aggregate of the fair values at the date of exchange of assets given and liabilities incurred or assumed in exchange for control.
The assets, liabilities and contingent liabilities of the acquired entity are measured at fair value as at the acquisition date. When the initial accounting for a business combination is determined, it is done so on a provisional basis with any adjustments to these provisional values made within 12 months of the acquisition date and are effective as at the acquisition date.
To the extent that deferred consideration is payable as part of the acquisition cost and is payable after one year from the acquisition date, the deferred consideration is discounted at an appropriate interest rate and, accordingly, carried at net present value in the consolidated balance sheet. The discount component is then unwound as an interest charge in the consolidated income statement over the life of the obligation.
Where a business combination agreement provides for an adjustment to the cost of a business acquired contingent on future events, the Group accrues the fair value of the additional consideration payable as a liability at acquisition date. This amount is reassessed at each subsequent reporting date with any adjustments recognised in the consolidated income statement.
If the business combination is achieved in stages, the fair value of the acquirer's previously held equity interest in the acquiree is re measured at the acquisition date through the consolidated income statement. Transaction costs are expensed to the consolidated income statement as incurred.
Acquisition related expenses include contingent consideration payments agreed as part of the acquisition and contractually linked to ongoing employment as well as business performance (Acquisition-related employment costs). Acquisition related employment costs are accrued over the period in which the related services are received and are recorded as exceptional costs.
Revenue
Revenue represents the amounts derived from the provision of goods and services, stated net of Value Added Tax. The methodology applied to income recognition is dependent upon the goods or services being supplied.
In respect of income relating to annual or multi-year service contracts and/or hosted services which are invoiced in advance, it is the Group's policy to recognise revenue on a straight-line basis over the period of the contract. The full value of each sale is credited to deferred revenue when invoiced to be released to the statement of comprehensive income in equal instalments over the contract period.
During the course of a customer's relationship with the Group, their system may be upgraded. These upgrades can be separated into two distinct types:
- Specific upgrades, i.e. moving from an old legacy system to one of the Group's latest products. This would require the migration of the customer's data from the old system and the set-up of their new system; and
- Non-specific upgrades, i.e. enhancements to customers' systems as a result of internal development effort to improve the stability or functionality of the platform for all customers.
Customers do not have a contractual right to nonspecific upgrades and therefore, the provision of these non-specific upgrades are accounted for as part of the related service contract as explained above.
For specific upgrades, customers are required to purchase these separately through signing a new contract which sets out the one-off professional service fee for the upgrade to cover migration costs and any increase in their annual subscription fee. The provision of this specific upgrade is therefore, accounted for as a separate service contract as explained above.
The Group does not have any further obligations that it would have to provide for under the subscription arrangements.
In respect of income derived from the provision of research and insights projects, which are based on fixed price contracts with specified performance obligations and for which customers are invoiced based on a payment schedule over the term of the contract, it is the Group's policy to recognise revenue over time to reflect the benefit received by the customer. The proportion of revenue recognised is based on milestones completed as appropriate to the contract, such as the delivery of insight reports to a customer. Estimates of the extent of progress towards completion are revised if circumstances change with changes to estimated revenues being recognised in the period in which the circumstances which give rise to revision become known to management.
The Group does not have any further obligations that it would have to provide for under its arrangements for provision of research and insights projects.
Cost of sales
Cost of Sales comprises third party costs directly related to the provision of services to customers.
Government Grants
Government grants are recognised in line with IAS 20, which allows the grant to be shown as a deduction in reporting the related expense. As the grant relates to the Governments furlough scheme, the grants have been shown as a deduction from employee expenses.
Leases
All leases are now considered under IFRS. A right of use asset and lease liability are recognised in the Company Statement of Financial Position. The right of use asset is depreciated on a straight-line basis to the statement of profit or loss. The lease liability is unwound as payments are made using an appropriate interest rate of 9% per annum. The interest expense is recognised in the statement of profit or loss.
Finance income and finance expenses
Finance income and finance expenses are recognised in profit or loss as they accrue, using the effective interest method. Finance income relates to interest income on the Group's bank account balances.
Interest payable comprises interest payable or finance charges on loans classified as liabilities.
Dividend distributions
Dividend distributions are recognised as transactions with owners on payment when liability to pay is established.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of fixtures, fittings and equipment taking into account any estimated residual value. The estimated useful lives are as follows:
Fixtures, fittings and equipment - 3 - 5 years
Leasehold improvements - over the lease term
Intangible assets - Goodwill
Goodwill represents amounts arising on acquisition of subsidiaries. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets and contingent liabilities acquired. Identifiable intangible assets are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.
If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is allocated to cash generating units and is not amortised, but is tested annually for impairment.
Intangible assets - Research and development expenditure
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
- the technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- its intention to complete and its ability and intention to use or sell the asset;
- how the asset will generate future economic benefits;
- the availability of resources to complete the asset; and
- the ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins from the date development is complete and the asset is available for use, which may be before first sale. It is amortised over the period of expected future benefit. Amortisation is charged to the income statement. During the period of development, the asset is tested for impairment annually.
In 2020 there were seven (2019: five) capitalised development projects. The projects undertaken in the current and prior year relate to the development of new functionality within the Vuelio and Pulsar platforms. The directors assessed the capitalisation criteria of its internally generated material intangible assets through a review of the output of the work performed, the specific costs proposed for capitalisation, the likely completion of the work and the likely future benefits to be generated from the work. The directors assess the useful life of the completed capitalised development projects to be five years from the date of the first sale or when benefits begin to be realised and amortisation will begin at that time.
Intangible assets - Database
On acquisition of businesses in prior years, a fair value was calculated in respect of the PR and media contacts databases acquired. Subsequent expenditure on maintaining this database is expensed as incurred. Amortisation is calculated on a straight-line basis over the estimated useful economic life of the database. It is the directors' view that this useful economic life is three years based on the level of ongoing investment required to maintain the quality of data in the database.
Intangible assets - Customer relationships
On acquisition of businesses in prior years, a fair value was calculated in respect of the customer relationships acquired. Amortisation is calculated on a straight-line basis over the estimated useful economic life of the customer relationships. It is the directors' view that this useful economic life is up to nine years, based on known and forecast customer retention rates.
Intangible assets - Brand value
Acquired brands, which are controlled through custody or legal rights and could be sold separately from the rest of the Group's businesses, are capitalised where fair value can be reliably measured. The Group applies a 20-year straight-line amortisation policy on all brand values. The conclusion is that a realistic life for the brand equity would be a 'generation' or 20 years. Where there is an indication of impairment, the directors will perform an impairment review by analysing the future discounted cash flows over the remaining life of the brand asset to determine whether impairment is required.
Software licences
Software licences include software that is not integral to a related item of hardware. These items are stated at cost less accumulated amortisation and any impairment. Amortisation is calculated on a straight-line basis over the estimated useful economic life. Although perpetual licences are maintained under support and maintenance agreements, a useful economic life of five years has been determined.
Impairment of non-financial assets
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit or loss within non-recurring admin expenses.
Impairment losses recognised in respect of cash generating units are allocated first to the carrying amount of the goodwill allocated to that cash generating unit and then to the carrying amount of the other assets in the unit on a pro rata basis, applied in priority to non-current assets ahead of more liquid items. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Reversals of impairment
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Financial instruments
Financial assets
Financial assets are measured at amortised cost, fair value through other comprehensive income (FVTOCI) or fair value through profit or loss (FVTPL). The measurement basis is determined by reference to both the business model for managing the financial asset and the contractual cash flow characteristics of the financial asset. The group's financial assets comprise of trade and other receivables and cash and cash equivalents.
Trade receivables
Trade receivables are measured at amortised cost and carried at the original invoice amount less allowances for expected credit losses.
Expected credit losses are calculated in accordance with the simplified approach permitted by IFRS 9, using a provision matrix applying lifetime historical credit loss experience to the trade receivables. The expected credit loss rate varies depending on whether, and the extent to which, settlement of the trade receivables is overdue and it is also adjusted as appropriate to reflect current economic conditions and estimates of future conditions. For the purpose of determining credit loss rates, customers are classified into groupings that have similar loss patterns. The key drivers of the loss rate are the aging of the debtor, the geographic location and the company sector (public vs private). When a trade receivable is determined to have no reasonable expectation of recovery it is written off, firstly against any expected credit loss allowance available and then to the income statement.
Subsequent recoveries of amounts previously provided for or written off are credited to the income statement. Long-term receivables are discounted where the effect is material.
Cash and cash equivalents
Cash held in deposit accounts is measured at amortised cost.
Financial liabilities
The Group's financial liabilities consist of trade payables, loans and borrowings, and other financial liabilities. Trade payables are non-interest bearing. Trade payables initially recognised at their fair value and subsequently measured at amortized cost. Loans and borrowings and other financial liabilities, which include the liability component of convertible redeemable loan notes, are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using the effective interest rate method. Interest expense is measured on an effective interest rate basis and recognised in the income statement over the relevant period.
Provisions
Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that the obligation will be required to be settled, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Provisions are discounted when the time value of money is material.
Deferred and accrued income
The Group's customer contracts include a diverse range of payment schedules dependent upon the nature and type of services being provided. The Group often agrees payment schedules at the inception of long-term contracts under which it receives payments throughout the term of contracts. These payment schedules may include progress payments as well as regular monthly or quarterly payments for ongoing service delivery. Payments for transactional services may be at delivery date, in arrears or in advance.
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract. The Group's contract liability relates only to Contract Assets and the aggregate amount is disclosed in Note 20.
Where payments made are less than the revenue recognised at the period end date, the Group recognises an accrued income contract asset for this difference. At each reporting date, the Group assesses whether there is any indication that accrued income assets may be impaired by considering whether the revenue remains highly probable and that no revenue reversal will occur. Where an indicator of impairment exists, the Group makes a formal estimate of the asset's recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and is written down to its recoverable amount.
Current and deferred income tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future, against which the reversal of temporary differences can be deducted. Recognition, therefore, involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised. Historical differences between forecast and actual taxable profits have not resulted in material adjustments to the recognition of deferred tax assets.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. These equity-settled share-based payments are measured at fair-value at the date of the grant. Where material, the fair value as determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of the Black-Scholes method or the Monte Carlo method. The charges to profit or loss are recognised in the subsidiary employing the individual concerned.
Employee benefits
Individual subsidiaries of the Group operate defined contribution pension schemes for their employees. The assets of the schemes are not managed by the Group and are held separately from those of the Group. The annual contributions payable are charged to the income statement when they fall due for payment.
3. Changes in accounting policies and disclosures
The Group has adopted IFRS 16 from 1 December 2019. Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases for which it is the lessee, except for short-term leases and leases of low value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
On transition the Group has applied the modified retrospective approach, with the right-of-use asset measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. Comparative periods have not been restated. An incremental borrowing rate of 9% per annum has been used.
The impact of IFRS16 on the financial statements for the year ended 31 December 2020 is as follows:
• Initial recognition of a right-of-use asset of £2,974,000 and a lease liability of £3,213,000.
• 'Depreciation of tangible fixed assets' expense decreased by £68,000 and 'Depreciation of right-of-use assets' expense increased by £645,000 because of the depreciation of additional right-of-use assets recognised.
• Rent expense included within 'Recurring administrative expenses' relating to previous operating leases, decreased by £787,000.
• 'Financial expense' increased by £342,000 relating to the interest expense on additional lease
liabilities recognised.
• Cash inflows from operating activities increased by £504,000 and cash outflows from financing activities increased by the same amount, relating to decrease in operating lease payments and increases in principal and interest payments of lease liabilities.
4. Revenue
The Group's revenue is primarily derived from the rendering of services.
The Group's revenue was generated from the following territories:
|
|
|
United Kingdom | 16,168 | 12,577 |
North America | 1,481 | 196 |
Europe excluding UK | 836 | 316 |
Rest of the world | 585 | 340 |
| 19,070 | 13,429 |
5. Segment reporting
Segment information is presented in respect of the Group's operating segments which are based upon the Group's management and internal business reporting. Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly head office expenses. Segment non-current asset additions show the amounts relating to property, plant and equipment and intangible assets including goodwill. All non-current assets are located in the UK.
No single customer generates more than 10% of the Group's revenue.
Operating segments
The Group operating segments have been decided upon according to their revenue model and product or service offering being the information provided to the Chief Executive Officer and the Board.
The Reputation segment comprises the Vuelio and ResponseSource businesses and derives its revenues from software subscription sales and support and training revenues.
The Audience Insights segment comprises the Pulsar business and derives its revenues from software subscription sales and consultancy services. The segments are:
· Reputation
· Audience Insights
· Discontinued - Disposals & Held for Sale
· Head Office
2020
The segment information for the year ended 30 November 2020, is as follows:
| Reputation £'000 | Audience Insights £'000 | Head office £'000 | Consolidation adjustment £'000 | Total £'000 |
External revenue | 13,852 | 5,241 | - | (23) | 19,070 |
Adjusted EBITDA | 320 | (1,993) | 1,594 | 765 | 686 |
Non-recurring administration expenses | (1,280) | - | (1,199) | - | (2,479) |
Share of loss of associate | - | - | - | (160) | (160) |
Share-based payments | (35) | (9) | (63) | - | (107) |
Depreciation and amortisation | (1,543) | (572) | (205) | (995) | (3,315) |
Financial Income | - | - | 6 | - | 6 |
Financial expense | - | - | (34) | (343) | (377) |
Taxation | 334 | 139 | - | 187 | 660 |
(Loss)/Profit after taxation | (2,204) | (2,435) | 99 | (546) | (5,086) |
Reportable segment assets | 8,663 | 3,204 | 13,771 | 921 | 26,559 |
Reportable segment liabilities | (8,468) | (2,691) | (3,478) | (2,838) | (17,475) |
Other Information: Additions to property, plant and equipment | 82 | 13 | 33 | - | 128 |
2019
The segment information for the year ended 30 November 2019, is as follows:
| Reputation
£'000 | Audience Insights £000 | Head office £'000 | Consolidation adjustment £'000 | Total
£'000 |
External revenue | 12,714 | 817 | - | (102) | 13,429 |
Adjusted EBITDA | 555 | (309) | 661 | (102) | 805 |
Non-recurring administrative expenses | (1,226) | - | (391) | (160) | (1,777) |
Share of loss of associate | - | - | - | (201) | (201) |
Share-based payments | (63) | - | - | - | (63) |
Depreciation and amortisation | (1,479) | (83) | (12) | (289) | (1,863) |
Gain arising on acquisition | - | - | - | 298 | 298 |
Financial Income |
| - | 2 | - | 2 |
Financial expense | - | - | (95) | - | (95) |
Taxation | 713 | (20) | (37) | 78 | 734 |
(Loss)/Profit after taxation | (1,500) | (412) | 128 | (376) | (2,160) |
Reportable segment assets | 1,539 | 3,127 | 21,940 | 1,292 | 27,898 |
Reportable segment liabilities | (8,590) | (2,891) | (1,566)
| (780) | (13,827) |
Other Information: Additions to property, plant and equipment | 78 | - | 778 | - | 856 |
6. Operating Loss
Operating loss is stated after charging:
| 2020 | 2019 |
Depreciation of property, plant and equipment | 228 | 169 |
Depreciation of right-of-use assets | 645 | - |
Amortisation of development costs | 1,100 | 698 |
Amortisation of acquired software platforms | 845 | 426 |
Amortisation of brand values | 100 | 79 |
Amortisation of software licences | 87 | 105 |
Amortisation of database | 90 | 161 |
Amortisation of customer list | 220 | 225 |
Loss on foreign currency translation | 1 | 4 |
Non-recurring items (see below) | 2,479 | 1,777 |
Operating lease charges - land and buildings | - | 592 |
Auditor's remuneration (see below) | 128 | 151 |
Research and development and other technical expenditure (income statement) (a further £1,973,000 (2019: £2,337,000) was capitalised) | 1,357 | 415 |
Increase in provision for receivables | 310 | 105 |
The non-recurring costs are made up of the following:
| 2020 | 2019 |
Non-recurring transitional hosting, migration and integration costs | 756 | 1,204 |
Office relocation costs | 9 | 341 |
Acquisition and due diligence related costs | 1,269 | 160 |
Compensation and notice payments - all staff | 445 | 25 |
Non-recurring legal costs | - | 47 |
| 2,479 | 1,777 |
Auditor's remuneration is further analysed as:
| 2020 | 2019 |
Fees payable to the Company's auditor for the audit of the Company's annual accounts | 66 | 48 |
The audit of the Company's subsidiaries, pursuant to legislation | 62 | 57 |
Tax services | - | 16 |
Non-audit fees related to acquisitions | - | 30 |
| 128 | 151 |
7. Acquisition of business
Pulsar
In the prior year, on 2 October 2019, the Group entered into a share purchase agreement to acquire the entire issued share capital of Fenix Media Limited and Face US Inc. (collectively "Pulsar"). The consideration for the acquisition was payable by the allotment and issue of 8,653,846 Ordinary Shares of 5p each and, under the terms of the Share Purchase Agreement, a cash payment of £1,600,000 was due to the Group by the vendors in respect of net working capital after the agreement of an appropriate completion Balance Sheet. This payment was received in February 2020.
As a result of a post-completion review of pre-acquisition accounting within Pulsar, an agreement was reached with the vendors on 5 February 2020 that 4,076,238 of the consideration shares would be sold back to the Group for £1, subject to Access Intelligence shareholder approval.
The fair value of shares issued as consideration is considered to be 52 pence per share. Of the 8,653,846 shares issued to the vendors, 3,076,923 shares are deemed to have been issued in respect of the cash due from the vendors of £1,600,000. Of the remaining 5,576,923 shares issued to the vendor, 4,076,238 shares were subject to the buyback and 1,500,685 shares remain as consideration paid to the vendors. The fair value of the consideration shares paid to the vendors is therefore assessed as £780,000.
The Board believe that the acquisition enhances Access Intelligence's capabilities in social media analysis, audience segmentation and social media marketing evaluation. It provides the Group with the opportunity to increase its market share and gain a leading product in the social media market, and also to increase the capabilities and customer reach of the Company's Vuelio platform. In the seven-week period that Pulsar was owned by the Group in the prior year, it contributed revenue of £813,000 and a loss of £416,000. Had Pulsar been included within the Group's results since 1 December 2018, total Group revenue for 2019 would have been £18,011,000, adjusted EBITDA loss would have been £959,000, and total Group loss after tax would have been £4,541,000.
Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
| £'000 |
Consideration Shares (1,500,685 @52p) | 780 |
Total consideration | 780 |
Acquisition related costs
The Group incurred acquisition related costs of £1,269,000 (2019: £160,000) on legal fees, due diligence costs and stamp duty as it evaluated potential acquisition activities. These costs have been included in 'non-recurring administrative expenses'.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
The intangible assets identified primarily comprise the fair values estimated for the software platform and brand acquired.
| £'000 |
Property, plant and equipment | 43 |
Intangible assets | 1,391 |
Trade debtors | 962 |
Other Debtors and Prepayments | 1,067 |
Cash and cash equivalents | 153 |
Trade creditors | (250) |
Social Security and Other taxes | (207) |
Deferred tax | (93) |
Deferred income | (1,662) |
Accruals | (326) |
Total identifiable net assets acquired | 1,078 |
Goodwill | (298) |
Total consideration | 780 |
A cost-based approach was used to value the software platform, determining the likely cost of building an equivalent software platform from new. The useful life of the software platform has been estimated at 5 years.
The brand was valued by using a relief from royalty approach, based on a royalty rate of 0.75% and using a discount factor of 16%. This discount factor is in line with value-in-use calculations performed for intangibles testing (see Note 13). The useful life of the brand has been estimated at 20 years.
Trade and other receivables include gross contractual amounts due of £962,000, of which £Nil was expected to be uncollectable at the date of acquisition .
Accruals and deferred income include an amount of £1,671,000 which relates to the fair value of Contract Assets acquired. The fair value has been estimated based on the value of deferred revenue relating to contracts transferred, discounted in accordance with IFRS.
Goodwill
Goodwill recognised on this acquisition represents the difference between the consideration paid and the fair value of the net assets acquired.
The goodwill arising has been recognised as follows and has been released through the income statement as a gain arising on acquisition:
| £'000 |
Consideration transferred | 780 |
Fair value of identifiable net assets | 1,078 |
Goodwill | (298) |
8. Particulars of employees
| 2020 | 2019 |
The average number of persons (including directors) employed by the Group during the year was: |
|
|
Technical and support | 89 | 77 |
Commercial | 89 | 97 |
Finance and administration | 26 | 15 |
| 204 | 189 |
Costs incurred in respect of these employees were:
| 2020 | 2019 |
Wages and salaries costs | 10,693 | 7,982 |
Social security costs | 1,229 | 905 |
Pension costs | 411 | 236 |
Health insurance | 82 | 21 |
Employee benefits | 9 | 14 |
Compensation for loss of office | 123 | - |
| 12,547 | 9,158 |
The compensation for loss of office charge of £123,000 (2019: £Nil) relates to 10 employees (2019: Nil employees) who were made redundant during the year.
In the year, The Company received Government grants relating to furloughed employees for £316,493 (2019: £Nil).
The reportable key management personnel are considered to be comprised of the Company directors, the remuneration for whose services during the year is detailed in the table below.
Directors' remuneration
| Salaries | Fees | 2020 | 2019 |
Executive Directors |
|
|
|
|
J Arnold | 259,655 | - | 259,655 | 270,000 |
M Fautley | 165,000 | - | 165,000 | 169,000 |
Non-Executive Directors |
|
|
|
|
C Satterthwaite | - | 66,667 | 66,667 | 80,000 |
M Jackson | - | 33,333 | 33,333 | 40,000 |
C Pilling | - | 25,000 | 25,000 | 30,000 |
J Hamer | - | 25,000 | 25,000 | 30,000 |
| 424,655 | 150,000 | 574,655 | 619,000 |
J Arnold received health insurance benefits during the year of £345 (2019: £Nil). J Arnold received payments into a personal retirement money purchase pension scheme during the year of £21,000 (2019: £9,000).
M Fautley received health insurance benefits during the year of £463 (2019: £Nil). M Fautley received payments into a personal retirement money purchase pension scheme during the year of £14,000 (2019: £6,500).
No other directors received any other benefits other than those detailed above.
The number of directors at 30 November 2020 accruing retirement benefits under money purchase schemes was two (2019: two).
The interests of the directors in share options are detailed in the Directors' Report in the annual report. J Arnold exercised 300,000 share options and J Hamer exercised 150,000 share options.
During the prior year, J Arnold was granted options over 1,600,000 shares with an exercise price of 56.0p per share and M Fautley was granted options over 400,000 shares with an exercise price of 56.0p per share. The share-based payments charge during the year relating to directors was £42,777 (2019: £33,310).
9. Financial expense
| 2020 | 2019 |
Interest charge in respect of lease liabilities | 366 | - |
Interest charged on non-convertible loan notes | - | 94 |
Other interest | 11 | 1 |
Total financial expense | 377 | 95 |
10. Taxation
| 2020 | 2019 |
Current income tax: |
|
|
UK corporation tax credit for the year | (548) | (661) |
Adjustment in respect of prior year | 8 | (2) |
Total current income tax credit | (540) | (663) |
Deferred tax (note 23) | ||
Origination and reversal of temporary differences | (120) | (71) |
Total deferred tax | (120) | (71) |
Total tax credit | (660) | (734) |
As shown below the tax assessed on the loss on ordinary activities for the year is higher than (2019: lower than) the standard rate of corporation tax in the UK of 19% (2019: 19%).
The differences are explained as follows:
Factors affecting tax credit | 2020 | 2019 |
Loss on ordinary activities before tax | (5,746) | (2,894) |
Loss on ordinary activities multiplied by effective rate of tax | (1,092) | (550) |
Items not deductible for tax purposes | 235 | 105 |
Items not taxable for tax purposes | - | (12) |
Adjustment in respect of prior years | (8) | (2) |
Additional R&D claim CTA 2009 | (236) | (330) |
Deferred tax not recognised | 441 | 55 |
Total tax credit | 660 | (734) |
Factors that may affect future tax expenses
The corporation tax rate for the year ended 30 November 2020 was 19%. The corporation tax rate of 19% was enacted with effect from 1 April 2017 and the Finance Act 2016 legislated the UK corporation tax rate to decrease to 17% from 1 April 2020. However, on 17 March 2020, using the Provisional Collection of Taxes Act 1968, the UK Government cancelled the proposed drop in corporation tax rate to 17%.
11. Dividend
Due to the significant and ongoing investment in developing our products, the directors do not propose a dividend in respect of the year ended 30 November 2020 (2019: £Nil)
12. Earnings per share
The 4,076,238 shares subject to a buyback agreement in respect of the Pulsar acquisition have been excluded from the weighted average number of ordinary shares in issue during the year.
In 2020 and 2019 potential ordinary shares from the share option schemes have an anti-dilutive effect due to the Group being in a loss-making position. As a result, dilutive loss per share is disclosed as the same value as basic loss per share.
This has been computed as follows:
| Total | Total |
Numerator | 2020 | 2019 |
(Loss)/profit for the year and earnings used in basic EPS | (5,094) | (2,160) |
Earnings used in diluted EPS | (5,094) | (2,160) |
Denominator |
|
|
Weighted average number of shares used in basic EPS ('000) | 72,180 | 62,740 |
Dilutive effect of options | N/A | N/A |
Dilutive effect of loan note conversion | N/A | N/A |
Weighted average number of shares used in diluted EPS ('000) | 72,180 | 62,740 |
Basic (Loss)/earnings per share (pence) | (7.06) | (3.44) |
Diluted loss per share for the year (pence) | (7.06) | (3.44) |
The total number of options or warrants granted at 30 November 2020 of 7,205,715 (2019: 5,787,776), would generate £3,807,316 (2019: £2,822,423) in cash if exercised. At 30 November 2020, no options (2019: 4,357,944) were priced above the mid-market closing price of 89p per share (2019: 53.5p per share) and 7,205,715 (2019: 1,429,832) were below.
Of the 7,205,715 options and warrants at 30 November 2020, 5,775,883 (2019: 4,357,944) staff options were eligible for exercising at an average price of 59.1p (2019: 55.7p). Also eligible for exercising were the 1,429,832 (2019: 1,429,832) warrants priced at 27.5p per share held by Elderstreet VCT plc and other individuals consequent to an initial investment in the Company in October 2008.
13. Intangible fixed assets
| Brand Value | Goodwill | Development Costs and Acquired Software Platforms | Software Licences | Database | Customer relationships | Total |
Cost | |||||||
At 1 December 2018 | 1,675 | 7,740 | 4,187 | 312 | 1,270 | 1,952 | 17,136 |
Capitalised during the year | - | - | 2,337 | 56 | 20 | - | 2,413 |
On Acquisition | 483 | - | 908 | - | - | - | 1,391 |
At 30 November 2019 | 2,158 | 7,740 | 7,432 | 368 | 1,290 | 1,952 | 20,940 |
Capitalised during the year | - | - | 1,973 | 58 | - | - | 2,031 |
At 30 November 2020 | 2,158 | 7,740 | 9,405 | 426 | 1,290 | 1,952 | 22,971 |
Amortisation and impairment | |||||||
At 1 December 2018 | 650 | - | 713 | 154 | 943 | 643 | 3,103 |
Charge for the year | 79 | - | 1,124 | 105 | 161 | 225 | 1,694 |
At 30 November 2019 | 729 | - | 1,837 | 259 | 1,104 | 868 | 4,797 |
Charge for the year | 100 | - | 1,945 | 87 | 90 | 220 | 2,442 |
At 30 November 2020 | 829 | - | 3,782 | 346 | 1,194 | 1,088 | 7,239 |
Net Book Value | |||||||
At 30 November 2020 | 1,329 | 7,740 | 5,623 | 80 | 96 | 864 | 15,732 |
At 30 November 2019 | 1,429 | 7,740 | 5,595 | 109 | 186 | 1,084 | 16,143 |
The carrying value and remaining amortisation period of individually material intangible assets are as follows:
| Carrying amount | Remaining amortisation period | ||
| 2020 | 2019 | 2020 | 2019 |
Brand | ||||
Access Intelligence Media and Communications | 600 | 660 | 10 | 11 |
ResponseSource | 274 | 289 | 18 | 19 |
Pulsar | 455 | 480 | 19 | 20 |
Development Costs and Acquired Software Platforms | ||||
Access Intelligence Media and Communications - Vuelio Platform Development | 3 | 27 | 1 | 2 |
AIMediaData - Vuelio Platform Development | 3,565 | 3,311 | 5 | 5 |
ResponseSource - Platform Development | 989 | 1,327 | 3 | 4 |
Pulsar - Platform Development | 1,066 | 930 | 5 | 3 |
Database | ||||
ResponseSource - PR & Media Contacts Database | 96 | 186 | 1 | 2 |
Customer Relationships | ||||
AIMediaData - Acquired Customer Relationships | - | 97 | - | 1 |
ResponseSource - Acquired Customer Relationships | 864 | 987 | 7 | 8 |
For the purpose of impairment testing, goodwill is allocated to the Group's CGUs which are the lowest level within the Group at which the goodwill is monitored.
The carrying value of goodwill allocated to each CGU is:
2020 | Goodwill |
Vuelio | 7,740 |
2019 | Goodwill |
Vuelio | 7,740 |
At the reporting date, impairment tests were undertaken by comparing the carrying values of CGUs with their recoverable amounts. The recoverable amounts of the CGUs are based on value-in-use calculations.
These calculations use pre-tax cash flow projections covering a five-year period based on approved budgets and forecasts in the first three years, followed by applying specific growth rates for which the key assumptions in respect of annual revenue growth rates range between 0% and 7.5% from year 4 onwards, with a terminal value after year five.
The key assumptions used for value-in-use calculations are those regarding revenue growth rates and discount rates over the forecast period. Growth rates are based on past experience, the anticipated impact of the CGUs significant investment in research and development, and expectations of future changes in the market.
The discount rate used for all CGUs was 16%, based on an assessment of the Group's cost of capital and on comparison with other listed technology companies. The terminal growth rate used for the purposes of goodwill impairment assessments was 2.5%. The Board considered that no impairment to goodwill is necessary based on the value-in-use reviews of Vuelio or Pulsar as the value-in-use calculations exceeded the carrying values of goodwill relating to those companies.
Sensitivity analysis has been performed on reasonably possible changes in assumptions upon which recoverable amounts have been estimated. Based on the sensitivity analysis, a reduction of 44% in EBITDA delivered by Vuelio would result in the carrying value of its goodwill and intangible assets being equal to the recoverable amount. For Pulsar, a 73% reduction in EBITDA would result in the carrying value of its intangible assets being equal to the recoverable amount.
For Vuelio, a 13% percentage point increase in the discount rate would result in the carrying value of goodwill and intangible assets being equal to the recoverable amount. For Pulsar, a 31% percentage point increase in the discount rate would result in the carrying value of goodwill and intangible assets being equal to the recoverable amount.
Other impairments
Other intangible assets are tested for impairment if indicators of an impairment exist. Such indicators include performance falling short of expectation.
In 2020, no development costs (2019: £Nil) were impaired as a result of projects that did not perform as expected.
The directors considered that there were no indicators of impairment relating to the remaining intangible fixed assets at 30 November 2020.
14. Investment in associate
| Investment in associate |
Cost | |
At 30 November 2018 | 885 |
Additions | - |
At 30 November 2019 | 885 |
Additions | 100 |
At 30 November 2020 | 985 |
Share of loss of associate and impairment | |
At 30 November 2018 | 567 |
Share of loss of associate | 201 |
At 30 November 2019 | 768 |
Share of loss of associate | 160 |
At 30 November 2020 | 928 |
Net Book Value | |
At 30 November 2020 | 57 |
At 30 November 2019 | 117 |
As part of the consideration for the disposal of AITrackRecord Limited, the Group received a 20% shareholding in TrackRecord Holdings Limited, a company registered in England and Wales. The fair value of this shareholding based on the funding raised by TrackRecord Holdings Limited was £625,000.
The shareholding in TrackRecord Holdings Limited is treated as an investment in associate as the Group is not able to exercise control over the company, but is able to exercise significant influence over the company by way of its 20% shareholding and through J Arnold being the Group's representative on the board of TrackRecord Holdings Limited.
During the year ended 30 November 2018, the Group invested a further £260,000 in Track Record Holdings Limited, representing its 20% share of a £1,300,000 fundraising round.
During the year, the Group's share of the loss of TrackRecord Holdings Limited was £160,000 (2019: £201,000). As the Group applies the equity method of accounting for its investment in TrackRecord Holdings Limited, the carrying value of investments in associates is reduced by this share of loss at the year-end.
During the prior year, the Group made available a loan facility of £100,000 to Track Record Holdings Limited on an unsecured basis. The final repayment date of the facility is November 2029 and interest is payable at a rate of 10% on any amount drawn down from the facility. The full £100,000 of this loan facility was drawn down during the current year. The loan has been treated as an addition to the Group's investment in TrackRecord Holdings Limited.
As part of the agreement, Track Record Holdings Limited paid the Group a commitment fee of £2,000 in November 2019. The total value drawn down by Track Record Holdings Limited at 30 November 2020 was £100,000 (2019: £Nil).
Summarised financial information for associate
The tables below provide summarised financial information for TrackRecord Holdings Limited, an associate which is considered material to the Group. The information disclosed reflects the amounts presented in the financial statements of TrackRecord Holdings Limited and not Access Intelligence Plc's share of those amounts.
| Track Record Holdings Limited | Track Record Holdings Limited |
Total current assets | 927 | 604 |
Total non-current assets | 772 | 778 |
Total current liabilities | (1,911) | (798) |
Net (liabilities)/assets | (212) | 584 |
Access Intelligence Plc share of net assets (20%) | (42) | 117 |
Reconciliation to carrying amounts | Track Record Holdings Limited | Track Record Holdings Limited |
Opening net assets 1 December | 584 | 1,587 |
Loss for the period | (796) | (1,003) |
Net (liabilities)/assets | (212) | 584 |
Summarised statement of comprehensive income | Track Record Holdings Limited | Track Record Holdings Limited |
Revenue | 1,780 | 943 |
Loss for the period from continuing operations | (796) | (1003) |
Other comprehensive income | - | - |
Total comprehensive income | (796) | (1,003) |
15. Property, plant & equipment
| Fixtures, fitting and equipment | Leasehold improvements | Total |
Cost | |||
At 1 December 2018 | 551 | 281 | 832 |
Additions | 272 | 584 | 856 |
Disposals | (271) | - | (271) |
On acquisition of business | 43 | - | 43 |
At 30 November 2019 | 595 | 865 | 1,460 |
Additions | 116 | 12 | 128 |
Disposals | (9) | - | (9) |
On adoption of IFRS 16 | - | (289) | (289) |
At 30 November 2020 | 702 | 588 | 1,290 |
Depreciation | |||
At 1 December 2018 | 467 | 198 | 665 |
Charge for the year | 68 | 101 | 169 |
Disposals | (258) | - | (258) |
At 30 November 2019 | 277 | 299 | 576 |
Charge for the year | 158 | 70 | 228 |
Disposals | (2) | - | (2) |
On adoption of IFRS 16 | - | (8) | (8) |
At 30 November 2020 | 433 | 361 | 794 |
Net Book Value | |||
At 30 November 2020 | 269 | 227 | 496 |
At 30 November 2019 | 318 | 566 | 884 |
|
|
|
|
16. Trade and other receivables
| 2020 | 2019 |
Current assets | ||
Trade receivables | 3,725 | 3,579 |
Less: provision for impairment of trade receivables | (185) | (100) |
| 3,540 | 3,479 |
Prepayments and other receivables | 2,436 | 4,258 |
| 5,976 | 7,737 |
All trade receivables are reviewed by management and are considered collectible. The ageing of trade receivables which are past due and not impaired is as follows:
| 2020 | 2019 |
Days outstanding | ||
31-60 days | 487 | 364 |
61-90 days | 209 | 123 |
91-180 days | 581 | 508 |
| 1,277 | 995 |
Movements on the Group provision for impairment of trade receivables are as follows:
| 2020 | 2019 |
At 1 December | 100 | 182 |
Increase in provision | 310 | 105 |
On acquisition of business | - | 7 |
Written off in year | (225) | (194) |
At 30 November | 185 | 100 |
As in the prior year, the Group has adopted an approach under IFRS 9 to determine the appropriate level of bad debt allowance for the year to reflect the risk of default on trade receivables. Default is defined as a situation in which a customer does not pay amounts that it owes to the Group and may occur due to a number of reasons, including the financial health of the customer or where the customer disputes the amount owed and it is not considered to be economical to recover the amount through a legal process. To calculate the credit loss provision, trade receivables have been split into different categories along three lines: region, aging and public/private sector. An expected credit loss percentage based on historic performance is then applied to each category to calculate the required credit loss provision at the year-end.
The creation and release of a provision for impaired receivables has been included in 'administrative expenses' in the income statement. Amounts charged to the allowance account are generally written off, where there is no expectation of recovering additional cash.
The other asset classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above together with our cash deposits totalling £1,403,000 (2019: £2,001,000). The Group does not hold any collateral as security.
As disclosed in note 22, credit risk is a judgement made by management based on sector and necessary allowances are made when needed by assessing changes in our customers' credit profiles and credit ratings.
17. Interest bearing loans and borrowings
| 2020 | 2019 |
Current | ||
Convertible loan notes | - | - |
Non-convertible loan notes | - | - |
Other | - | 23 |
| - | 23 |
On 22 June 2015 the Company issued £1,818,000 of non-convertible loan notes which carried an interest rate of 10% for one year rising to 12% thereafter.
Interest was payable quarterly in arrears and the loans notes were fully repayable in five years. £900,000 of these loan notes were repaid on 22 April 2016 and the remaining £918,000 were repaid on 7 November 2019.
| 2020 | 2019 |
Opening loan liability | - | 948 |
Interest charged for the year | - | 94 |
Repayment of non-convertible loan notes | - | (918) |
Interest paid in the year | - | (124) |
Liability component at 30 November | - | - |
Post year-end, on 9 December 2020, the Company secured a £2,000,000, three-year facility under the Coronavirus Business Interruption Loan Scheme (CBILS). The facility was drawn down during December 2020, has a 12-month interest-free period following drawdown and an interest rate of 2.03% plus LIBOR or replacement benchmark rate per annum on the drawn down amount thereafter.
The funds are repayable in equal monthly instalments over 36 months and there will be no penalty for making early repayment of the facility. All material companies in the Group are guarantors to the loan and the availability of the loan is subject to certain covenants.
18. Trade and other payables
Due within one year | 2020 | 2019 |
Trade and other payables | 2,638 | 3,121 |
Other taxes and social security costs | 551 | 495 |
VAT payable | 1,223 | 191 |
| 4,412 | 3,807 |
19. Leases
Group as a lessee
The Group has lease contracts for leasehold property. The Group's obligations under its leases are secured by the lessor's title to the leased assets. The term for the leasehold property is for 10 years with a 5 year no penalty break clause. The Group is restricted from subleasing the leased asset.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
| Leasehold property £'000 |
As at 1 December 2019 | - |
On adoption of IFRS 16 | 2,974 |
Additions | - |
Depreciation expense | (645) |
As at 30 November 2020 | 2,329 |
Set out below are the carrying amounts of lease liabilities (included under interest-bearing loans and borrowings) and the movements during the period:
| 2020 £'000 | 2019 £'000 |
As at 1 December 2019 | - | - |
On adoption of IFRS 16 | 3,213 | - |
Accretion of interest | 366 | - |
Payments | (580) | - |
At 30 November | 2,999 | - |
Current | 558 | - |
Non-current | 2,441 | - |
Lease liability maturity analysis | 2020 £'000 | 2019 £'000 |
Less than one year | 880 | - |
Between one and five years | 2,823 | - |
More than five years | - | - |
The following are the amounts to be recognised in profit or loss:
| 2020 £'000 | 2019 £'000 |
Depreciation expense of right-of-use assets | 645 | - |
Interest expense on lease liabilities | 366 | - |
Total amount recognised in profit or loss | 1,011 | - |
The Group had total cash outflows for leases of £504,000 in 2020 (2019: £Nil). The Group also had non-cash additions to right-of-use assets of £2,974,000 (2019: £Nil) and lease liabilities of £3,213,000 in 2020 (2019: £Nil). There are no leases that have not yet commenced to be disclosed. There were no short-term leases or low value leases taken out in the year.
20. Contract assets
| 2020 | 2019 |
At 1 December | 7,935 | 6,354 |
Invoiced during the year | 19,257 | 13,349 |
Revenue recognised during the year | (19,070) | (13,429) |
On acquisition of business | - | 1,661 |
At 30 November | 8,122 | 7,935 |
All contract assets are expected to be recognised within one year.
21. Financial instruments
The Group's treasury activities are designed to provide suitable, flexible funding arrangements to satisfy the Group's requirements. The Group uses financial instruments comprising borrowings, cash, liquid resources and items such as trade receivables and payables that arise directly from its operations. The main risks arising from the Group financial instruments relate to the maintaining of liquidity across the seven group entities and debt collection. The Board reviews policies for managing each of these risks and they are summarised below.
The Group finances its operations through a combination of cash resources, loan notes and equity. Short term flexibility is provided by moving resources between the individual subsidiaries. Exposure to interest rate fluctuations is minimal as all borrowings are at fixed rates of interest. The Group also has deposit facilities on which 0.04% interest was being earned throughout 2020 (2019: 0.25%) and will be optimising the use of these accounts going forward. The Group's exposure to interest rate risk is not significant and therefore no sensitivity analysis has been performed.
Small amounts of foreign currency risk exist in six subsidiaries which invoice in currencies other than sterling. Due to the relative size of the currency risks concerned no hedging takes place in Australian dollars, Euros or US dollars. At the year-end there were no open contracts, however the Group was holding a US dollar deposit of $501,672 (2019: $99,090) which in 2020 was translated at the rate of £1:$1.3346 for inclusion in the consolidated statement of financial position. This amounted to £375,897 (2019: £80,421). There are no hedges against this balance.
The Group did not hold any other significant assets or liabilities in foreign denominated currencies at the reporting date. The directors do not consider that there is a significant exposure to foreign exchange risk and therefore no sensitivity analysis has been performed.
At 30 November 2020 the Group had no borrowings (2019: a loan of £23,000).
There is no material difference between the fair values and book values of the Group's financial instruments. Short term trade receivables and payables have been excluded from the above disclosures.
The objectives of the Group's treasury activities are to manage financial risk, secure cost-effective funding where necessary and minimise the adverse effects of fluctuations in the financial markets on the value of the Group's financial assets and liabilities, on reported profitability and on the cash flow of the Group. Interest income is sought wherever possible and in 2020 produced £6,000 (2019: £2,000) of income.
The credit risk is discussed in Note 16.
The Group's principal financial instruments for fundraising are through share issues.
2020 | Loans, receivables and other payables | Total |
Assets per the balance sheet | ||
Trade and other receivables excluding prepayments | 4,066 | 4,066 |
Cash and cash equivalents | 1,403 | 1,403 |
| 5,469 | 5,469 |
Liabilities per the balance sheet | ||
Trade and other payables excluding accruals | 4,412 | 4,591 |
Interest bearing loans and borrowings | 2,999 | 2,999 |
| 7,411 | 7,590 |
Undiscounted contractual maturity of financial liabilities | ||
Amounts due within one year |
| 5,292 |
Amounts due between one and five years |
| 2,823 |
|
| 8,115 |
Less: future interest charges |
| (704) |
Financial liabilities carrying value |
| 7,411 |
The above analysis excludes corporation tax receivable.
2019 | Loans, receivables and other payables | Total |
Assets per the balance sheet | ||
Trade and other receivables excluding prepayments | 5,961 | 5,961 |
Cash and cash equivalents | 2,001 | 2,001 |
| 7,962 | 7,962 |
Liabilities per the balance sheet | ||
Trade and other payables excluding accruals | 3,807 | 3,807 |
Interest bearing loans and borrowings | 23 | 23 |
| 3,830 | 3,830 |
Undiscounted contractual maturity of financial liabilities | ||
Amounts due within one year |
| 3,830 |
Amounts due between one and five years |
| - |
|
| 3,830 |
Less: future interest charges |
| - |
Financial liabilities carrying value |
| 3,830 |
The liquidity risk relating to the contractual liabilities listed above is managed on a local basis through their day to day cash management. The Group is liquid with £1,403,000 (2019: £2,001,000) available cash resources against a liability payable within the next 12 months of £5,292,000 (2019: £3,509,000). Management monitor cash balances weekly. However, should any subsidiary, or the Company, find that it does not have the liquidity to pay a debt as it becomes due an inter-company cash transfer will be made available by another member of the Group.
22. Financial and operational risk management
The Group's activities expose it to a variety of financial risks which are managed by the Group and subsidiary management teams as part of their day-to-day responsibilities. The Group's overall risk management policy concentrates on those areas of exposure most relevant to its operations. These fall into five categories:
· Competitive risk - that our products are no longer competitive or relevant to our customers;
· Cash flow and liquidity risk - that we run out of the cash required to run the business;
· Credit risk - that our customers do not pay;
· Key personnel risk - that we cannot attract and retain talented people; and
· Capital risk - that we do not have an optimal structure to allow for future acquisition and growth.
23. Deferred tax assets and liabilities
The following are the major deferred tax assets and liabilities recognised by the Group and the movements thereon during the current year and the prior year:
| Tax losses | Accelerated tax on assets | Fair value of intangible assets | Total |
| ||||
At 1 December 2018 | 12 | (12) | (572) | (572) |
| ||||
Charge to profit or loss | 9 | (14) | 76 | 71 |
| ||||
On acquisition | - | - | (121) | (121) |
| ||||
At 30 November 2019 | 21 | (26) | (617) | (622) |
| ||||
Charge to profit or loss | (21) | 44 | 97 | 120 | |||||
At 30 November 2020 | - | 18 | (520) | (502) | |||||
At the reporting date the Group had unused tax losses of approximately £9,500,000 (2019: £6,500,000) available for offset against future profits. The tax losses do not have any expiry date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax assets totalling £1,805,000 (2019: £1,105,000) arising in respect of losses have not been included in the statement of financial position due to uncertainties in regard to their recoverability. The following is the aggregate amounts of deferred tax balances in each group entity, after allowable offset, for financial reporting purposes:
| 2020 | 2019 |
Deferred tax assets | 18 | 21 |
Deferred tax liabilities | (520) | (643) |
Total | (502) | (622) |
24. Share capital
Equity: Ordinary shares of 5p each | 2020 | 2019 |
Allotted, issued and fully paid 75,146,515 ordinary shares of 5p each (2019: 79,222,753 ordinary shares of 0.5p each) | 3,757 | 3,961 |
| 2020 | 2019 |
Number of shares at 1 December | 79,222,753 | 63,722,754 |
Shares repurchased and cancelled in year | (4,076,238) | - |
New shares issued in year (post-share consolidation) | - | 14,999,999 |
Share options exercised (post-share consolidation) | - | 450,000 |
Number of shares at 30 November | 75,146,515 | 79,222,753 |
During the prior year, 100,000 share options were exercised at 27.5p, 100,000 share options were exercised at 25.0p, 100,000 share options were exercised at 22.0p and 150,000 share options were exercised at 43.75p.
In October 2019, 6,345,153 shares were issued in a placing at 52.0p per share and 8,653,846 shares were issued as consideration for the acquisition of Pulsar. 3,076,923 of the Pulsar acquisition shares were deemed to have been issued for £1,600,000 cash and 4,076,238 shares were subject to a buyback agreement.
During 2020, the 4,076,238 shares subject to the buyback agreement were repurchased for a total consideration of £1. These shares were subsequently cancelled.
On 21 September 2011 29,666,667 ordinary shares of 0.5 pence, and with a total nominal value of £148,333 were returned to the Company. After a one for ten share consolidation, this equates to 2,966,666 5p shares held in treasury at the year-end. The shares held in treasury have no voting rights, or rights to dividends and so the total issued share capital for voting and dividend purposes at the year-end was 72,179,849 (2019: 76,256,087).
Transaction costs associated with share issues in the year amounted to £Nil (2019: £379,000). Transaction costs are accounted for as a reduction from the share premium account.
Post year-end on 9 December 2020, the company announced the placing of 12,500,000 new shares at a price of 80p per share to raise gross proceeds of £10,000,000. 7,922,280 shares were allotted on 15 December 2020 and the remaining 4,577,720 shares were allotted on 5 January 2021. Net proceeds arising on the allotment of shares were £9,630,000.
After the allotment of the shares in January 2021, the Company's total share capital was 87,646,515 and the total issued share capital for voting and dividend purposes, excluding shares held in treasury, was 84,679,849.
25. Equity-settled share-based payments
The Company has a share option scheme for employees of the Group.
Ordinary share options and warrants granted and subsisting at 30 November 2020 were as follows:
Date of grant | Exercise price | No of shares | Exercisable between |
23 October 2008 | 27.5p | 1,429,832 | No time limit |
18 February 2019 | 56.0p | 3,352,000 | Feb 2022-Feb 2029 |
24 October 2019 | 54.5p | 366,972 | Oct 2022-Oct 2029 |
31 July 2020 | 65.0p | 2,056,911 | Jul 2023-Jul 2030 |
|
| 7,205,715 |
|
Details of the movements in the weighted average exercise price ("WAEP") and number of share options during the current and prior year are as follows:
| At start of year | Granted | Exercised | Forfeited | At end of year |
WAEP 2019 (p) | 29.1 | 55.7 | 31.1 | 43.8 | 48.8 |
WAEP 2020 (p) | 48.8 | 65.0 | - | 55.1 | 52.8 |
Options 2019 | 1,951,832 | 4,335,944 | (450,000) | (50,000) | 5,787,776 |
Options 2020 | 5,787,776 | 2,056,911 | - | (638,972) | 7,205,715 |
The range of prices at which options and warrants can be exercised is 27.5p to 65.0p.
During 2020, options were granted over 2,056,911 shares with an exercise price of 65.0p per share.
The options were valued using the Monte Carlo method with assumptions relating to: volatility of 30%, based on the historical daily share price movements of the Company and peer companies; a risk free rate of 0.09%, based on the yield on a ten-year zero coupon UK government security at the grant date; a dividend yield of 0% and a staff turnover of 12.5% per annum.
The total charge arising on issue of the options was £239,000, with the 2020 charge being £17,000.
638,972 options were cancelled in the year (2019: 50,000).
There were no options exercised during the year. The weighted average price of shares on the date of exercise during the prior year was 31.1 pence.
The option movements detailed above resulted in a share-based payment charge for the Group of £107,000 (2019: £63,000).
Further details of share options exercisable at the year-end are provided in note 12.
There are no market, non-market or service conditions as part of the share option scheme. The only condition existing is that employees must still be in employment with the Company at the point they exercise the options.
26. Cash and cash equivalents
The Group monitors its exposure to liquidity risk based on the net cash flows that are available. The following provides an analysis of the changes in net funds:
| As at 30 November 2019 | Cash inflow | As at 30 November 2020 |
Cash and cash equivalents | 2,001 | (598) | 1,403 |
| As at 30 November 2018 | Cash outflow | As at 30 November 2019 |
Cash and cash equivalents | 5,300 | (3,299) | 2,001 |
27. Commitments
Capital commitments
The Group had no capital commitments at the end of the financial year or prior year.
Provisions and contingent liabilities
| Leasehold dilapidations £'000 |
At 1 December 2019 | 213 |
Released in the year in respect of exiting leasehold properties | - |
Additions | - |
At 30 November 2020 | 213 |
|
|
Due within one year | - |
Due after more than one year | 213 |
Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the lease in accordance with the lease terms. The main uncertainty relates to estimating the cost that will be incurred at the end of the lease. The earliest point at which it is considered that this amount may become payable is July 2024 for the Group's leasehold property.
28. Related party transactions
Two (2019: two) of the directors have received a proportion of their remuneration through their individual service companies during the year. The payments represent short term employee benefits. The amounts involved are as follows and relate to activities within their responsibilities as directors:
In all cases the directors are responsible for their own taxation and national insurance liabilities.
| 2020 | 2019 |
C Pilling (via The Personal Web Company Limited) | 13,750 | 30,000 |
J Hamer (via Fin Dec Limited) | 10,000 | 30,000 |
There were no other lease commitments.
During the year, the Group procured technical and product development services for an amount of £161,150 (2019: £Nil) from The Personal Web Company Limited, a company of which C Pilling is a director. The amount owed by the Group to The Personal Web Company Limited at the year-end was £38,400 (2019: £Nil).
During the year interest on non-convertible loans of £Nil (2019: £40,438) was paid to Eldersteet VCT plc, a company of which M Jackson is a director.
At the year-end, an amount of £2,040 (2019: £2,040) was due from M Jackson. During the year, the Group recognised a share-based payment charge of £42,777 (2019: £33,310) in respect of key management personnel.
During the prior year, the Group made available a loan facility of £100,000 to Track Record Holdings Limited on an unsecured basis. The final repayment date of the facility is November 2029 and interest is payable at a rate of 10% on any amount drawn down from the facility. A non-utilisation fee of 1% of any amount of the facility not drawn down is also payable.
29. Pension commitments
Individual subsidiaries of the Group operate defined contribution pension schemes for their employees. The assets of the schemes are held separately from those of the Group. The annual contributions payable are charged to the income statement when they fall due for payment.
During the year £411,000 (2019: £229,000) was contributed by the Group to individual pension schemes. At 30 November 2020 no pension contributions were outstanding (2019: £Nil).
30. Events after the reporting date
On 9 December 2020, the company announced the placing of 12,500,000 new shares at a price of 80p per share to raise gross proceeds of £10,000,000. 7,922,280 shares were allotted on 15 December 2020 and the remaining 4,577,720 shares were allotted on 5 January 2021.
After the allotment of the shares in January 2021, the Company's total share capital was 87,646,515 and the total issued share capital for voting and dividend purposes. excluding shares held in treasury, was 84,679,849.
Also, on 9 December 2020, the Company announced that it had secured a £2,000,000, three-year facility under the Coronavirus Business Interruption Loan Scheme (CBILS). The facility was drawn down during December 2020, has a 12-month interest-free period following drawdown and an interest rate of 2.03% plus LIBOR or replacement benchmark rate per annum on the drawn down amount thereafter. The funds are repayable in equal monthly instalments over 36 months and there will be no penalty for making early repayment of the facility. All material companies in the Group are guarantors to the loan and the availability of the loan is subject to certain covenants.
31. Availability of Annual Report
Copies of the Report and Accounts will be posted to shareholders where requested and the document will be available from the Company's website (www.accessintelligence.com) later today.
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