Final results for the year ended 31 December 2021

RNS Number : 8631K

Skillcast Group PLC

10 May 2022

 

The information contained within this announcement is deemed by the Company to constitute inside information pursuant to Article 7 of EU Regulation 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended.

10 May 2022

Skillcast Group PLC

("Skillcast", the "Group" or the "Company")

Results for the year ended 31 December 2021

Skillcast Group (AIM: SKL), the provider of content and technology for digital compliance transformation, is pleased to announce its audited results for the year ended 31 December 2021.

 Financial and operating highlights

	2021 £ million	2020 £ million
Revenue	8.4	7.3
Revenue growth	15%	8%
Gross Margin	71%	69%
Annualised recurring revenue*	5.8	4.5
Adjusted EBITDA*	1.1	1.1
Cash in bank	7.9	3.8

· Revenue growth of 15% (2020: 8%) driven by increased subscription revenue

o  Second half recovery also in professional services revenues

· H1 2021 total revenue 4% higher than H1 2020

· H2 2021 total revenue 27% higher than H2 2020

· Cash in bank of £7.9 million (31 December 2020: £3.8 million) due to £3.5 million placing, higher revenues and improved debt collections

· Proposed final dividend of 0.279p per share to give total dividend for year of £400k or 0.447p per share, based upon the number of shares currently in issue, in line with previous year

Total revenue growth driven by recurring revenues from subscriptions

· 62% of total revenues were recurring (2020: 56%)

· Recurring revenues from subscriptions grew by 28% to £5.2 million (2020: £4.1 million)

· Non-recurring revenues from professional services steady at £3.2 million (2020: £3.2 million)

Current trading and outlook

· Strong start with first quarter client acquisitions higher than first quarter of 2021

· Continued growth expected in recurring revenues from subscriptions, while professional services remains steady

Vivek Dodd, Chief Executive Officer of Skillcast, said:

"We are pleased with how the increase in our subscription revenue helped accelerate total revenue growth from 8% in 2020 to 15% in 2021. We help our clients build more ethical, inclusive and resilient workplaces in an increasingly hybrid and fluid work environment. Companies face increasing regulations and societal demands which, along with cost pressures, are causing them to rethink and transform their staff compliance. Skillcast is helping them to educate employees, and record, monitor, analyse and evidence their activities for legal, regulatory and standards compliance with our e-learning content and compliance technology.

"Over the next two years we intend to use the funds we raised in December to build on our leadership position through investments in our technology and content IP and through promoting our solutions to a wider market. The cost of these investments will impact profit margins in the short term but is designed to drive future growth. Our focus is on building ARR to enhance the sustainable recurring nature of our business.

"Trading in the early part of the year has started well, in line with our expectations, with continued year on year growth in subscription related revenue. We have made material progress on hiring the new talent needed to achieve our technology development plans and our new business development team has gained early successes with new client acquisitions in the first quarter up on the same period last year.

"With a strong balance sheet, an excellent set of products and an enthusiastic and well-motivated team, we believe we are well placed to deliver on the growth plans we have set out to build a substantial and sustainable digital compliance transformation business."

*Further details on the calculation of adjusted EBITDA and ARR are set out in the Financial Review below

Enquiries:

Skillcast Group plc	[phone]
Richard Amos, Chairman Vivek Dodd, Chief Executive Officer
Chris Backhouse, Chief Financial Officer
Allenby Capital Limited (Nominated Adviser & Broker)	[phone]
James Reeve, Piers Shimwell (Corporate Finance)
Tony Quirke (Sales and broking)

Chairman's Statement

I would like to take this opportunity to thank shareholders who supported our flotation in December and the associated fund-raise that we undertook at the same time. That process was the culmination of several years of preparation by the executive team and marks a pivotal moment in the growth aspirations of the business. We are very excited to be entering this new investment phase for the Company.

Results and Dividend

Financial results for the year ended 31 December 2021 were encouraging. Revenue of £8.4 million was some 15% up on the prior year overall (2020: £7.3 million) and within that the strategically important software-as-a-service ("SaaS") subscription revenue was up 28%.  Annual recurring revenue ("ARR"), our key performance indicator to measure subscription sales progress, grew by 29% to £5.8 million in December 2021. As anticipated, consistent with the investment we are making, despite the growth in revenue, adjusted EBITDA of £1.1 million was similar to the prior year (2020: £1.1 million). This profit performance reflected the start of the investment programme which is supported by the recent fund raise. Our stated plan is to expand our sales and marketing capability and to enhance our technology. The cost of both of these will impact profit margins in the short term but is designed to drive future growth.

With a business that is backed by recurring revenues that provide strong cash generation, the Board is committed to paying dividends. At the AGM on 22 June, the Board will propose a final dividend of 0.279p per ordinary share. Taken in combination with an interim dividend of 0.188p per share that was paid in November 2021, this takes the full year dividend to £400,000 (2020: £400,000) or an equivalent of 0.447p per share based upon the number of shares currently in issue. It is the Board's stated policy to maintain the full year dividend at least at this level for the foreseeable future.

S tr a t egy

Skillcast exists to enable companies of all sizes and markets to address in a digital format their need to ensure that their workforces are compliant with an ever-increasing range of regulatory requirements. To do this we provide an easy to integrate to RegTech platform which incorporates engaging, company-specific, tailored e-learning based training content, policy attestation hubs, registers for recording activities like continuing professional development ("CPD") undertaken or gifts and hospitality received and the tools to monitor and administer all of the above.

With the growing burden of compliance that all companies are experiencing we believe that this is a key moment in the development of the digital compliance transformation market to help companies deal with this challenge.  With Skillcast's history in producing engaging customisable e-learning content and by harnessing that with our internally developed Regtech platform, we believe we are uniquely placed to offer companies an easy to adopt, low-cost solution to something that is currently causing considerable challenges and concern.

Our strategy is to grow our recurring subscription-based revenues through a focus on supporting existing clients and acquiring similar new customers. Naturally we will primarily target new clients in regulated industries where the burden of compliance is at its highest although our services are equally applicable to all companies that have a need for efficient workplace compliance solutions. Whilst we are equally able to support companies of all sizes, our 'sweet spot' is medium sized enterprises for whom compliance requirements are increasingly complex but who are not large enough to warrant full bespoke solutions.

The recent fund-raise that we completed will allow us to invest in accelerating planned enhancements to our technology platform to make it more scalable and easier for customers to access and integrate with. It is also allowing us to expand our sales and marketing capability which in turn will allow us to build market share more rapidly as the market which we serve grows.

P eople and Board

I would like to thank and congratulate Vivek and the entire Skillcast team for all that they have achieved over the last twelve months. Their achievements in continuing to develop and grow the business despite the considerable distraction of the flotation process is something for which they should be rightly proud.

I also want to recognise my fellow Non-Executive Directors, Sally Tilleray who chairs the Audit Committee and Isabel Napper who chairs the Remuneration Committee. I've enjoyed working alongside them as we have helped the executive team to transition Skillcast to life as a public Company and develop the governance structures that are now required.

And I would also like to welcome the eighteen new members of the team who have joined us since the flotation. As we embark on our new growth journey their contribution will be vital and I look forward to working with them all.

Current Trading and Outlook

We believe that Skillcast faces a timely opportunity in a digital compliance transformation market that offers potential for significant growth with targeted and appropriate investment. That is why we undertook the fund- raise in December.  Investment in the technology enhancements and marketing expansion, which that cash allows us to undertake, will impact profits in the short term, as we explained at the time of the fund-raise, but will ultimately allow the business to accelerate top-line growth and capture share as the market develops.

Trading in the early part of the year has started well, in line with our expectations, with continued year on year growth in subscription related revenue. We have made material progress on hiring the new talent needed to achieve our technology development plans and our new business development team has gained early successes with new client acquisitions in the first quarter up on the same period last year.

With a strong balance sheet, an excellent set of products and an enthusiastic and well-motivated team, we believe we are well placed to deliver on the growth plans we have set out to build a substantial and sustainable digital compliance transformation business.

Richard Amos

Non-Executive Chairman

Chief Executive Officer's Review

Skillcast's off-the-shelf ("OTS") e-learning courses, technology, and award-winning customer service help our customers achieve their compliance objectives.

Our courses are organised into libraries, which we provide to customers on annual subscriptions. This model simplifies their procurement process and enables them to deliver high- quality training on key compliance topics at short notice and with minimal effort. They can readily customise our OTS courses, or take advantage of our customisation service if they don't have the resource, or otherwise wish to delegate the task.

Key Products

Courses are delivered via our technology platform, which comprises the following products, also available on annual subscriptions:

· Learning management system ("LMS") - for managing and recording compliance and other mandatory training initiatives

·     Policy Hub - for authoring policies and obtaining employee attestations

· Anonymous surveys - for obtaining honest and unreserved employee feedback on critical environmental, social and governance ("ESG") topics

· Staff declarations - for collecting disclosures and self-assessments from employees

·   Compliance registers - for recording activities that impact individual and corporate compliance, such as gifts, hospitality, personal account dealing, whistleblowing

· Training 360 - for recording in-person training, mentoring and consultations

· Events management - for managing live training events

·   SMCR 360 - to help financial firms manage all aspects of compliance with the Senior Managers and Certification Regime ("SM&CR")

· Data integration options with customers' Human Resource or Enterprise Resource Planning ("ERP") systems

The combination of the customisable content and the functionality of the integrated platform allows our customers to manage their staff compliance burden efficiently and helps them to reduce significantly their cost per employee and regulatory compliance risk, when compared to traditional methods.

All Skillcast subscriptions are backed by highly responsive customer service. We designate a dedicated Customer Success Manager ("CSM") for each customer. The CSMs are organised into small groups led by a team leader to ensure quality and continuity of service. In 2021, we received the Feefo Platinum Trusted Service Award and e-learning Industry's Customer and User Experience awards. We are proud of these since they are based on verified ratings and reviews by current customers.

In addition to subscriptions, we provide a bespoke e-learning development service. This work builds domain expertise and brand and complements our content and technology subscriptions.

Market Opportunity

Skillcast operates in a $10 billion market for governance, risk and compliance software. A structural shift is underway to digital compliance transformation as companies increasingly use cloud-based platforms for staff training and compliance processes. With this helpful backdrop, we are investing in our people, content, technology, and processes to stay ahead of the competition.

Our admission to trading on AIM is helping us to attract talent, win customers and strengthen our leadership in the field of digital compliance transformation.

Organic Growth

Our recurring content and technology (SaaS) subscriptions give us consistent, compounding revenues and high- quality earnings. We recognise annual recurring revenue ("ARR") as the key driver of long-term shareholder value. The ARR grew entirely organically at 29% per annum from £4.5 million in December 2020 to £5.8 million in December 2021.

Additional sales to existing customers during the year ("upsells"), more than offset any contracts that were not renewed ("churn"), or which were renewed at a lower level ("downsells"). The upsells were driven by our customers increasing their user numbers and by demand for our policy management system, hybrid DSE self-assessment and SMCR 360 toolkit. We acquired over 200 new customers during the year, which lifted our ARR further.

The revenue from professional services, mainly from bespoke e-learning development for customers and customisation of OTS courses, was steady at £3.2 million (2020: £3.2 million). We reiterate our aim to hold this revenue stream at this level as we focus our resources on growing ARR. The total revenue was up 15% at £8.4 million (2020: £7.3 million), and adjusted EBITDA was £1.1 million (2020: £1.1 million). The adjusted EBITDA is expected to lag revenue growth as we have accelerated hiring to achieve faster growth in future periods.

Our SaaS model gives us high revenue visibility, which together with the funds raised upon admission to AIM, adds to our confidence in making this investment. It also gives us positive cash flows as we typically contract with clients annually and invoice the subscription cost upfront. Our operating cash flow was up at £1.5 million (2020: £1.4 million) despite the substantial payments to cover the IPO costs.

In 2021, we launched our new Training 360 product on the Skillcast Portal that enables customers to record all types of training, mentoring and consultancy and measure their progress against CPD targets. We also unveiled a new modern scrolling presentation for our e-learning courses and additional gamification features. Other notable improvements included automated assignments for annual refreshers and contingent training, a new, visual reporting dashboard with interactive drill-down, and several third-party integrations.

We will add more third-party integrations and the ability for customers to self-manage their portals, and scale up our IT infrastructure with MS Azure to support our ARR growth in 2022. We have enhanced the policy attestation product on the Skillcast Portal to support policy update/approval workflow this year and plan to make improvements to other products in addition.

COVID Disruption

The impact of COVID-19 related disruption in 2021 was less severe than the previous year. Our teams showed flexibility and resilience when asked to return to the office and later, when asked to go back to full-time working from home, when the restrictions returned. We are immensely proud and grateful for how our colleagues managed to keep up productivity, innovation and customer service through these disruptions. Our teams have now settled into a hybrid model of working from office and home.

As in previous years, we did not draw upon any government support in the UK, Malta, or any other jurisdiction.

Environmental Performance

Environmental Social and Governance (ESG) is the purpose at the core of what we offer and what we stand for. Our content and technology are designed to support the ESG goals of our customers. We help them build a culture of respect, inclusivity, integrity and compliance with laws, regulations and standards. We also help them reduce energy consumption and CO2 emissions by digitising many activities that previously required travel.

We have substantially reduced our carbon footprint due to travel, by moving to a hybrid working model and switching in-person events to webinars. We are aiming to be climate neutral by the end of 2022.

Vivek Dodd

Chief Executive Officer

 

Financial Review

Revenues for the year ended 31 December 2021 increased by 15% to £8.4 million (2020: £7.3 million) which resulted in an adjusted EBITDA* of £1.1 million (2020: £1.1 million) and after exceptional items of £0.9 million, a profit after tax of £0.4 million (2020: £1.0 million).

Software-as-a-service (SaaS) subscription revenue continued to grow during the year, up 28% to £5.2 million (2020: £4.1 million), whilst Professional Services revenue closed at a similar level to last year at £3.2 million (2020: £3.2 million).

Gross Margin grew to 71% (2020: 69%), with SaaS revenue, which typically commands a higher gross margin, making up 62% of total revenues (2020: 56%).

Overheads, before depreciation, interest, and the exceptional costs relating to the admission of the Company to AIM, increased from £3.7 million to £4.7 million (up 25%) as the business accelerated its investment in its sales and technology teams, with a view to sustaining and accelerating the Company's growth. Headcount increased by nineteen to 86, as new employees were welcomed. Staff costs comprised 79% of these overheads (2020: 76%) and 66% of total costs (2020:62%), with payroll costs (of both direct and indirect staff) up £1.0m on the prior year.

Alternative Performance Measures

*Adjusted EBITDA

During the year the Group incurred certain administrative expenses in anticipation of the placing and admission of the business to AIM, so as to deliver the anticipated growth in the business post-admission. Had the decision to undertake the placing and admission not been taken by the Group, then such expenditure would not have been incurred.

The Group also incurred leasehold costs on the rental of office space which under IFRS 16 is reflected by way of the capitalisation of the lease and a related depreciation charge.

The Directors consider Adjusted EBITDA to be a more appropriate measure of profitability than EBITDA (Earnings before interest, tax depreciation and amortisation) being defined as EBITDA, less the additional administrative expenses incurred in anticipation of the placing and admission, share-based payments and after adding back leasehold depreciation and reinstating the related rental charge (thereby reversing the IFRS16 leasehold property treatment).

	2021	2020
	£'000	£'000
EBITDA from continuing operations	361	1,253
Costs incurred in progressing the Company's admission to AIM	876	25
Reversal of IFRS treatment of depreciation on treatment of property lease	(198)	(209)
Share-based payment	17	-
Adjusted EBITDA for the year from continuing operations	1,056	1,069

Annual Recurring Revenue (ARR)

ARR is also used to assess the performance and the trend of subscription revenue. ARR is calculated by multiplying the Monthly Recurring Revenue ("MRR") by twelve. MRR is defined as the subscription revenue that was recognised in a month, excluding any retrospective upward adjustments that arise at the end of the contract where there have been more subscribers than a client originally contracted for, less any contract losses (Churn), or downward adjustments arising on contract renewal. The Directors consider that the ARR, derived from software-as-a-service (SaaS) sales is a key measure of the performance of the business. The ARR increased 29% to £5.8 million by December 2021.

Key Performance Indicators ('KPIs')

The following KPIs are used to track the trading performance and position of the business.

KPIs

	2021	2020
	£'000	£'000
Revenue	8,408	7,293
Software-as-a-service revenue (SaaS revenue)	5,227	4,088
Gross Margin	71%	69%
Adjusted EBITDA	1,057	1,069
Annualised recurring revenue (ARR) as at 31 December	5,775	4,468
Churn (as a percentage of ARR)	7%	11%
Number of employees at 31 December	86	67

Revenue

As noted above, the main driver for growth is the development of the Group's SaaS revenues. These increased by 28% in the year, whilst Professional Services revenues remained steady, as summarised below.

Revenue by Service	2021 £'000	2020 £'000
Software-as-a-Service (SaaS)	5,227	4,088
Professional Services	3,181	3,205
Total	8,408	7,293

Gross Profit

The gross profit generated in the period was £5.9 million (2020: £5.0 million), with gross margin increasing to 70.5% (2020: 68.9%) on the back of higher SaaS revenues and despite increasing staff costs.

Overheads

Overheads were £5.8 million (2020: £4.0 million) increasing by £1.8m, including c.£0.9 million of costs relating to the Company's admission to AIM in December 2021 and as summarised below.

In June 2021 the business relocated its London offices to Leadenhall Street under a five-year lease dated 25 May 2021 that expires in June 2026. The capitalised value of this lease is £517,284. The Company spent £124,447 on leasehold improvements (2020: £ Nil).

	2021 £'000	2020 £'000
Staff costs	3,738	2,823
Professional fees	229	259
Advertising and Marketing	84	240
Office accommodation	158	73
Depreciation and amortisation	283	220
Other expenses	452	337
Total Overheads before exceptional costs	4,944	3,952
Costs relating to the Company's admission to AIM	876	25
Share-based payments	17	0
Foreign exchange losses	1	7
Interest	16	11
Total Overhead costs	5,854	3,995

Adjusted Operating Profit before Tax

Adjusted operating profit from operations before tax, exceptional costs and share-based payments, but including depreciation and interest amounted to £1.0 million (2020: £1.0 million).

Taxation

As a result of research and development tax credits, the Company is not liable for any UK corporation tax for 2021 and as a result the Group had unutilised tax losses carried forward of approximately £0.7 million (2020: £0.6 million) as at 31 December 2021. Given the varying degrees of uncertainty as to the timescale of utilisation of these losses, the Group has not recognised the potential deferred tax assets associated with these losses.

In Malta, a withholding tax rebate of £487,149, due to Inmarkets Group Ltd with regards to dividends declared by Inmarket International Ltd for 2019 and 2020, is netted against a total income tax expense of £177,963 to leave a credit of £309,188 (2020: Liability of £118,630). The rebate is based upon dividends declared by the Inmarkets International Ltd and paid to Inmarkets Group Ltd during 2021 and its recognition is dependent upon all necessary tax returns having been filed and accepted by the relevant authorities.

A rebate of £355,178 was paid to Inmarkets Group Ltd during 2021 in relation to dividends declared by Inmarkets International Ltd in 2014, 2015 and 2016. The balance due to the Inmarkets Group Ltd as at the year-end, of £825,213, includes £338,062 in respect of the year ended 31 December 2018.

Cash and working capital

The Group cash and cash equivalents at 31 December 2021 were £7.9 million (2020: £3.8 million), boosted by a net £3.5 million of proceeds from the Company's admission to AIM in December 2021, making the net cash increase for the year, after dividend payments of £0.6 million, £4.1 million (2020: £0.4 million).

Cash generated from operations was £1.5 million (2020: £1.4 million).

Working capital, excluding cash balances (current assets less current liabilities before corporate taxes and capitalised lease premises) reduced by £1.1 million and by £0.4 million, if the growth in deferred revenues is also excluded.

Despite an increase in revenues of 15%, this reduction in working capital was assisted by the close control of debtor balances, which remained in line with 2020 at £2.5 million as debtor days were reduced.

Deferred revenue

Deferred revenue increased by 30% from £2.3 million as at 31 December 2020 to £3.0 million at 31 December 2021. This was as a result of continuing SaaS client acquisitions and professional service projects in progress over the year end.

Dividends

The Board has become aware of a breach of procedure concerning compliance with the Companies Act 2006 in relation to the payment of the interim dividend of £150,000 for 2021 financial year of the Company that was paid in October 2021.

This dividend was paid to Shareholders when the Company had sufficient reserves. However, the Company's relevant accounts for the purposes of the Companies Act 2006 in relation to namely those filed for the year ended 31 December 2020, did not show sufficient distributable reserves and no interim accounts had been filed at Companies House to confirm the adequacy of reserves at the time of the declaration and as required by the Act.

To satisfy the steps required to rectify this breach of procedure, a resolution will be proposed at the Company's forthcoming Annual General Meeting ('AGM'). The Company has put in place the necessary controls and processes to ensure that a similar issue will not recur.

The Board is proposing a final dividend of 0.279p per share. In combination with the interim dividend, if confirmed by the shareholders at the AGM, this will represent a total dividend for the year of £400,000 (2020: £400,000) or 0.447p per share based upon the number of shares currently in issue. If further approved by shareholders at the AGM on 22 June 2022, the final dividend will be paid on 21 July 2022 to shareholders on the register at the close of business on 1 July 2022.

Skillcast Group PLC

Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December

				Note	2021		2020
					£		£
Revenue				4	8,408,056		7,292,685
Cost of sales					(2,476,708)		(2,264,608)
Gross  profit					5,931,348		5,028,077
Administrative expenses					(5,853,792)		(3,995,031)
Operating profit					77,556		1,033,046
EBITDA				3	360,345		1,253,425
Adjustment items				3	695,472		(184,397)
Adjusted EBITDA				3	1,055,817		1,069,028
Other Income					1,650		-
Finance income					393		392
Finance expense					(18,953)		(10,690)
Profit before tax				5	60,646		1,022,748
Income tax expense				6	316,984		(118,630)
Profit after tax and total comprehensive income					377,630		904,118
Earnings per share:
Basic				11	0.467p		1.130p
Diluted				11	0.465p		1.130p

Skillcast Group PLC

Consolidated statement of financial position

As at 31 December

		Note	2021		2020
			£		£
Assets
Non-current assets
Property, plant and equipment			276,697		118,753
Right-of-use assets			582,517		263,353
Deferred tax assets			4,745		5,112
			863,959		387,218
Current assets
Trade and other receivables		7	3,798,823		3,474,349
Cash and cash equivalents			7,856,126		3,799,804
			11,654,949		7,274,153
TOTAL ASSETS			12,518,908		7,661,371
Issued capital and reserves attributable to owners
Share capital		10	89,459		2,000
Share Premium			3,490,541		-
Share Option Reserve			17,000		-
Retained earnings			3,624,369		3,874,738
Total equity			7,221,369		3,876,738
Liabilities
Trade and other payables		8	1,440,550		728,178
Contract liability		9	3,037,184		2,292,947
Current lease liabilities			182,366		123,620
Income tax payable			176,134		504,114
			4,836,234		3,648,859
Non-current liabilities
Long-term lease liabilities			461,305		135,774
			461,305		135,774
Total liabilities			5,297,539		3,784,633
TOTAL EQUITY AND LIABILITIES			12,518,908		7,661,371

Skillcast Group PLC

Consolidated statement of changes in equity

For period ended 31 December 2021

		Share capital		Share Premium Paid		Share Option Reserve		Retained earnings		Total equity
		£		£		£		£		£
01 January 2020		2,000		-		-		2,970,620		2,972,620
Comprehensive Income for the period
Profit		-		-		-		904,118		904,118
Total comprehensive Income for the period		-		-		-		904,118		904,118
31 December 2020		2,000		-		-		3,874,738		3,876,738
01 January 2021		2,000		-		-		3,874,738		3,876,738
Comprehensive Income for the period
Profit		-		-		-		377,630		377,630
Total comprehensive Income for the period		-		-		-		377,630		377,630
Total contributions by and distributions to owners
Capitalisation of Profit and Loss		78,000		-		-		(78,000)		-
Shares issued on admission to AIM		9,459		3,490,541		-		-		3,500,000
Share Option Reserve		-		-		17,000		-		17,000
Dividends		-		-		-		(550,000)		(550,000)
Total contributions by and distributions to owners		87,459		3,490,541		17,000		(628,000)		2,967,000
31 December 2021		89,459		3,490,541		17,000		3,624,369		7,221,369

Skillcast Group PLC

Consolidated statement of cash flows

For the year ended 31 December

					2021		2020
					£		£
Cash flows from operating activities
Profit before tax					60,646		1,022,748
Adjustments for:
Depreciation of property, plant and equipment					84,668		48,039
Amortisation of right-of-use assets					198,121		172,340
Finance income					(393)		(392)
Share based payment					17,000		-
Finance expense					18,953		10,690
Income tax expense					-		-
					377,345		1,253,425
Increase in trade and other receivables					(324,474)		(688,628)
Increase in trade and other payables, including contract liabilities					1,456,609		876,365
Cash generated from operations					1,509,480		1,441,162
Income taxes paid					(10,629)		(323,542)
Net cash flows from operating activities					1,498,851		1,117,620
Investing activities
Purchases of property, plant and equipment					(242,612)		(75,307)
Interest received					393		392
Net cash used in investing activities					(240,569)		(74,915)
Financing activities
Principal paid on lease liabilities					(133,007)		(190,413)
Dividends paid					(550,000)		(400,000)
Share Issued					3,500,000		-
Interest paid on lease liabilities					(18,953)		(10,690)
Net cash from/(used) in financing activities					2,798,040		(601,103)
Net increase in cash and cash equivalents					4,056,322		441,602
Cash and cash equivalents at beginning of period					3,799,804		3,358,202
Cash and cash equivalents at end of period					7,856,126		3,799,804

Skillcast Group PLC - Notes to the consolidated financial statements   

1  General Information  

Skillcast Group PLC ('Company') is registered in the United Kingdom with registration number 12305914 and is limited by shares. Its registered office is at 80 Leadenhall Street, London, England, EC3A 3DH. The Company is the ultimate parent of Inmarkets Ltd, Inmarkets Group Ltd and Inmarkets International Ltd.

This report and financial statements reflect the consolidated activities and transactions of the Company and other group companies ('Group').  

Up to the 28 July 2021 the Company was a private limited Company. On the 28 July 2021 the Company re-registered as a public Company as Skillcast Group PLC. The Company did this in preparation of admission to the AIM market of the London Stock Exchange.  On 1 December 2021 the Company's ordinary shares were admitted to trading on AIM.

The Company is primarily involved in providing management services to other entities in the group. The Group provides software and content subscriptions and related professional services to enable companies to transform their staff compliance. Operating from its two bases, in London and Malta, the Group helps companies across a broad spectrum of industry sectors in the UK, EU and in the rest of the world, to train their staff and demonstrate compliance with various laws, regulations, and standards that are relevant for their business.   

2.1  Basis of preparation and statement of compliance  

The Financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2021 or 2020 but is derived from the 2021 accounts.

A copy of the statutory accounts for the year to 31 December 2020 has been delivered to the Registrar of Companies and is also available on the Company's website.  Statutory accounts for 2021 will be delivered in due course.  The auditors have reported on those accounts, their report was (i) Unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2019 nor 2020.

Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") and applicable law, this announcement does not itself contain sufficient information to comply with IFRS.  The Annual Report, containing full financial statements that comply with IFRS, will be sent to shareholders later in May 2022.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.  Therefore, in the preparation of the 2021 financial statements they continue to adopt the going concern basis.

2.2  Summary of significant accounting policies  

  Revenue recognition

  Software as a Service (SaaS) subscriptions  

The Group provides right of access of content to clients for subscription periods ranging from six to twelve months.  

Revenue is recognised evenly over the contractual period of the subscription as the client simultaneously receives and consumes the benefits of the Group's services. 

The balance of the revenue which has not been recognised at the reporting date is deferred as a contract liability in current liabilities, until it is due to be recognised as revenue. 

Where a contract includes multiple performance obligations, the transaction price is allocated to each performance obligation based on the stand-alone selling prices.

  Professional services 

The Group provides customised and standard content to its clients provided under fixed-price contracts which is generally non-recurring revenue. 

Fixed price contracts are recognised on the percentage of completion method unless the outcome of the contract cannot be reliably determined, in which case contract revenue is only recognised to the extent of contract costs incurred that are recoverable. This is because either the Group is creating an asset with no alternative use to it and the contract contains the right to payment for work completed to date, or the client is simultaneously receiving and consuming the benefits of the Group's services as it performs.    

Business development costs incurred as part of a bid or tender process are expensed as incurred. There are no material costs incurred during the period between the contract being awarded and service delivery commencing. 

For fixed-price contracts, the client pays the fixed amount based on a payment schedule. If the services rendered by the Group exceed the payment, an amount recoverable on contracts asset is recognised. Conversely, if the payments exceed the services rendered, a liability is recognised.   

Amounts recoverable on contracts are included in current assets and represent revenue recognised on account. 

  Segmentation 

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision-maker (which takes the form of the Board of Directors of the Group), in order to allocate resources to the segment and to assess its performance. The Directors of the Group consider the Group is organised as one business unit and all assets, liabilities, revenues and expenditure are retained and recorded as such. However, the Group does segment revenue by type of revenue, namely SaaS subscriptions and Professional Services, and on a geographic basis .  

  Taxes 

Current and deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the current and deferred tax is also dealt with in other comprehensive income or in equity, as appropriate. 

Current tax is based on the taxable result for the period. The taxable result for the period differs from the result as reported in profit or loss because it excludes items which are non-assessable or disallowed and it further excludes items that are taxable or deductible in other periods. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. 

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.   

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. 

Current tax assets and liabilities are offset when the Group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to set off its current tax assets and liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.   

In Malta, Inmarkets Group Ltd is able to reclaim a proportion of the corporation tax paid by its subsidiary, Inmarkets International Ltd, as long as it meets certain criteria laid down by the Maltese tax authorities. The criteria include that the relevant corporation tax has been paid by Inmarkets International Ltd and that dividends to Inmarkets Group Ltd have been declared by Inmarkets International and are payable to non-Maltese tax resident shareholders. It is Group policy to reclaim Maltese corporation tax to the fullest extent permissible and to recognise this income in Inmarkets Group Ltd based upon dividends declared, or that will be declared once tax returns are completed, for the financial year. The reclaimed corporation tax is presented as netted off with the income tax expense and in other receivables.    

3  EBITDA and adjusted EBITDA  

EBITDA is not defined or recognised under IAS. EBITDA is defined by the Group as 'earnings before interest, tax, depreciation and amortisation'. EBITDA is presented below as 'operating profit' plus all depreciation added back. 

The Group also presents 'adjusted EBITDA' as the directors believe it presents a more meaningful measure of performance. The Group incurred leasehold depreciation in 2020 and 2021. In calculating 'adjusted EBITDA' an amount equivalent to the rent of the leased items has been deducted from EBITDA in 2020 and 2021. The Group incurred administrative expenses in anticipation of the Placing and Admission so as to deliver the anticipated growth in the business post-Admission. Had the decision to undertake the Placing and Admission not been taken by the Group, then such expenditure would not have been incurred. In calculating 'adjusted EBITDA' such 'non-recurring expenditure' has been added back to EBITDA.  Upon Admission to AIM the Company adopted a Share Option Plan which incurred share-based payments.  Had the decision to undertake the Placing and Admission not been taken by the Group, then such expenditure would not have been incurred.  In calculating 'adjusted EBITDA' such 'share based payments' has been added back to EBITDA.     

					2021		2020
					£		£
Operating profit					77,556		1,033,046
Depreciation					282,789		220,379
EBITDA					360,345		1,253,425
Rent equivalent					-  198,005		-  208,897
Non-recurring expenditure					876,477		24,500
Share Based Payments					17,000		-
Adjusted EBITDA					1,055,817		1,069,028

Due to nature of calculation of EBITDA and adjusted EBITDA the reported figures may not be comparable to other companies with similar measures.

4  Revenue   

		2021		2020
	Major product lines
	Software as a Service (SaaS) subscriptions (i)	5,227,229		4,091,819
	Professional services (ii)	3,180,827		3,200,866
		8,408,056		7,292,685

(i)  SaaS subscriptions - The Group provides right of access of content to the customer over time for the subscription period ranging from 6 to 12 months.  The revenue recognition is deferred for the remaining period of subscription. This revenue includes subscriptions to: (a) Skillcast Portal - the Group's integrated compliance management application that comes with a broad range of tools, namely SELMS, Policy Hub, Compliance Declarations, Surveys, Compliance Registers, Training 360, Events Management and SMCR 360; and (b) the Skillcast OTS course libraries, namely Essentials, FCA Compliance, Insurance Compliance and Risk. 

(ii)  Professional services - The Group provides customised and standard content to its clients under fixed-price contracts. This non-recurring revenue includes: (a) bespoke e-learning development projects for large corporates; (b) translations of those bespoke courses; (c) customisation of OTS courses for subscription clients; and (d) other content and technology consultancy.  

			2021		2020
Geographic split
UK			5,716,503		5,454,295
Europe			1,693,379		1,272,366
Rest of world			998,176		565,280
			8,408,057		7,291,941
Non-current assets in which they are based are shown below:
Property, plant and equipment
UK			205,003		58,565
Malta			71,694		60,189
			276,697		118,753
Right of use assets
UK			465,188		93,602
Malta			117,329		169,751
			582,517		263,353

5  Profit before taxation    

The profit before taxation is stated after charging the following amounts:   

			2021		2020
			£		£
Staff cost (CoS)			1,536,011		1,346,602
Subcontracted services (CoS)			865,251		875,157
Staff costs (Admin)			3,173,390		2,361,136
Directors' compensation			565,345		462,000
Professional fees			228,735		259,377
Depreciation and amortisation expense			282,789		220,379
Fees payable to the Company's auditor for the audit of Parent and Subsidiaries			87,483		33,152
Expenses related to the Admission into AIM			830,620		24,500

Included in the expenses related to the admission into AIM was payments made to Crowe UK LLP, who are engaged as the Company's auditors, totalling £110,000 (2020: £0.00). 

6  Income tax expense

			2021		2020
			£		£
Current tax on profits for the year			169,798		132,433
Deferred tax expense			367		-  13,803
Withholding taxes on intercompany dividends			-  487,149		-
			-  316,984		118,630

A reconciliation of the current income tax expense applicable to the profit before taxation at the statutory rate to the current income tax expensed at the effective tax rate of the Company is as follows: 

			2021		2020
			£		£
Profit before taxation			60,646		1,022,748
Tax calculated at applicable UK statutory tax rate of 19%			11,523		194,322
Tax effects of:
-Expenses not deductible for tax purposes			195,150		35,348
-Taxable losses carried forward			234,361		49,267
-Withholding tax on intercompany dividends			(487,149)		-
-Research and Development Credits			(112,691)		(103,059)
-Differing rax rates due to trade in different jurisdictions			(125,230)		(52,492)
-Other adjustments			(32,948)		(4,755)
Current income tax			(316,984)		118,630

The Company provides for income taxes on the basis of its income for financial reporting purposes, adjusted for items that are not assessable or deductible for income tax purposes in accordance with the regulation of domestic tax authorities. 

The effective rate of tax for the year ended 31 December 2021 was -549% (2020: 11.6%).  This effective tax rate is a combination of the following items:   

*  the tax rates and tax regimes in the UK and Malta in which the businesses of the Company operate;   

*  the diverse tax treatments of deferred consideration amounts applied in each jurisdiction;   

*  the tax loss carry forward regulations in different jurisdictions. 

The tax rates applicable in the jurisdictions are: 

*  UK:  The applicable statutory tax rate for 2021/20 is 19% 

*  Malta:  Income taxes are due at 35% of taxable income. 

In 2021 a withholding tax rebate of £487,149 (2020: £0) is netted against the income tax expense.  The rebate is the withholding taxes on dividends declared by Inmarkets International Limited to the Inmarkets Group Limited.   

As of the end of the period the Post 1 April 2017 loss carry forward was £639,719, and the Pre 1 April 2017 loss carry forward was £69,877 for the Company.        

                 

7  Current assets - trade and other receivables

			2021		2020
			£		£
Trade receivables			2,569,083		2,511,043
Less: Allowance for expected credit losses			-  125,286		-  67,800
			2,443,797		2,443,243
Prepayments and contract assets			415,073		242,664
Maltese withholding tax			825,213		693,240
Other receivables			114,740		95,202
			1,355,026		1,031,106

As of 31 December 2021, trade receivables totalled £2,569,083 (2020: £2,511,043) of which £739,745 were over 90 days (2020: £321,174).  These primarily relate to customers for whom there is considered a low risk of default.  An allowance of £125,286 (2020: £67,800) have been set up to offset credit risks.

During the year withholding tax rebates of £355,178 (2020: £0.00) were received by the Company.  

8  Current liabilities - trade and other payables     

			2021		2020
			£		£
Trade payables			180,452		165,130
Accruals			444,141		92,188
Amount due to shareholders			450		-  7,562
Sales and payroll taxes			815,507		478,422
			1,440,550		728,178

9  Current liabilities - Contract liability      

			2021		2020
			£		£
Deferred revenue			3,037,184		2,292,947

Contract liabilities represent subscription revenue that has not been recognised at the reporting date, as performance obligations remain.  Revenue is recognised over the subscription period, which is generally 12 months.

10  Equity - issued capital

			2021		2020
			£		£
Number			89,459,460		20,000,000
Par value per share			0.10p		0.01p
Total			89,459		2,000

All the shares in the Company are fully paid up. On 28 July 2021 the Company re-registered as a public company. Prior to re-registration the company's shares were reclassified as Ordinary Shares, and the company capitalised £78,000 of retained profit in order to meet the minimum capital value for these shares required of a public company. The shares were also consolidated into 1 share for every 10 in issue.  On 1 December 2021 9,459,460 additional shares were issued upon the Company's admission to the Alternative Investment Market.

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of, and amounts paid, on the shares held. On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll, each share shall have one vote .

11  Earnings per share  

Earnings per share (EPS) is calculated on the basis of profit attributable to equity shareholders divided by the weighted average number of shares in issue for the year. 

Diluted earnings per share have been calculated on the same basis as above, except that the weighted average number of ordinary shares that would be issued on the conversion of the dilutive potential ordinary shares as calculated using the treasury stock method (arising from the Company's share option scheme and warrants) into ordinary shares has been added to the denominator.   

			2021		2020
			£		£
Profit before tax			60,646		1,022,748
Tax			316,984		-118,630
Profit after tax			377,630		904,118
Non-recurring expenditure			876,477		24,500
Share based payments			17,000		-
Rent equivalent			-198,005		-208,897
Adjusted earnings			1,073,102		719,721
Weighted average number of ordinary shares
Basic			80,788,288		80,000,000
Effect of dilutive potential ordinary shares			402,500		-
Diluted average number of shares			81,190,788		80,000,000
Earnings per share:
Basic			0.467p		1.130p
Diluted			0.465p		1.130p
Adjusted earnings - Basic			1.328p		0.900p
Adjusted earnings - Diluted			1.322p		0.900p

*For comparative purposes the earnings per share for 2020 as stated above has been calculated after taking into account the capitalisation of the reserves as set out in note 10.

Basic and diluted earnings per share of 0.467p (2020: 1.130p) has been impacted by interest, tax, depreciation, amortisation, non-core operating expenses.  Tax on adjusted earnings is the same figure as that shown on the consolidated statement of comprehensive income given that the majority of the adjusting items in the earnings per share calculation above are also adjusted for when calculating the Company's tax expense.

12  Dividends

			2021		2020
		Pence per	£	Pence per	£
		share		share
Dividend declared - Final 2020		0.500p	400,000	0.00p	-
Dividend declared - Interim 2021		0.188p	150,000	0.00p	-
Dividend declared - Final 2019				0.500p	400,000

During the period under review, the Group generated a profit before tax of £60,644.  A dividend of £400,000 (0.500p) was declared and paid with regards to the year ended 2020 and £150,000 (0.188p) interim dividend was declared and paid with regards to the year ended 2021.  A final dividend of £400,000 in relation to 2019 was settled in 2020. The Group's policy is to at least maintain dividend payments.

The Board has become aware of a breach of procedure concerning compliance with the Companies Act 2006 ('Act') in relation to the payment of the interim dividend of £150,000 for 2021 financial year of the Company that was paid in October 2021.  This dividend was paid to Shareholders when the Company had sufficient reserves.  However, the Company's relevant accounts for the purposes of the Act, namely those filed for the year ended 31 December 2020, did not show sufficient distributable reserves and no interim accounts had been filed at Companies House to confirm the adequacy of reserves at the time of the declaration and as required by the Act. 

To satisfy the steps required to rectify this breach of procedure, a resolution will be proposed at the Company's forthcoming Annual General Meeting ('AGM').  The Company has put in place the necessary controls and processes to ensure that a similar issue will not recur.

The Board is proposing a final dividend of 0.279p per share, totalling £250,000.  In combination with the interim dividend, if confirmed by the shareholders at the AGM, this will represent a total dividend for the year of £400,000 or 0.447p per share based upon the number of shares currently in issue.  If further approved by shareholders at the AGM on 22 June 2022, the final dividend will be paid on 21 July 2022 to shareholders on the register at the close of business on 1 July 2022.  

13  Financing cash flows

  A reconciliation of the financing cash flow is set out below:

		2021		2020
Lease liability		£		£
At 1 January		259,394		484,802
Additions		517,284		-
Interest expense		18,953		10,690
Lease payments		-151,960		-201,103
Disposal		-		-34,995
At 31 December		643,671		259,394
Dividend liability
At 1 January		-		400,000
Dividends declared		550,000		-
Dividend payments		-550,000		-400,000
At 31 December		0		0
Admission into AIM
Capital Raised		3,500,000		-
Share Option Reserve		17,000		-
At 31 December		3,517,000		0
Net financing payments		2,815,040		-601,103
Financing per statement of cash flows		2,798,040		-601,103

A dividend of £400,000 was declared and paid in 2021 with regard to the year ended 2020 and a £150,000 interim dividend was also declared and paid for the year ended 2021.     

 

END

 

 

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