Half-year Report

16 September 2022

Drumz plc 

('Drumz' or the 'Company')

Interim Results to 30 June 2022

CHAIRMAN’S STATEMENT

I am pleased to present the Company’s Interim Results for Drumz, which is focused on investment in the technology sector, for the six months ended 30 June 2022. 

Results and performance

The Group’s results for the six months ended 30 June 2022 showed revenue of £30,000 (2021: £18,000) and an operating loss of £184,000 (2021: loss of £261,000).

At 30 June 2022 the two principal assets of the Group continue to be its holding in Acuity Risk Management Limited (“Acuity”), an award-winning business specialising in risk management and cybersecurity; and its legacy holding in KCR Residential REIT plc (“KCR”), a company listed on AIM, which owns property in the private rented residential sector. 

Acuity’s principal product is STREAM™, which is used by private and public sector clients to manage their cyber security and other enterprise risks. Acuity is in a sector where customer demand is exceptionally strong, as more businesses seek to protect their data for financial, reputational and regulatory reasons. Acuity continues to perform well and showed a 26 per cent increase in turnover for the year ended 31 March 2022. 

In line with current accounting practice, Drumz’s investment in Acuity is shown at cost and therefore does not reflect the improvement in valuation that its growing turnover would suggest. Demand for Acuity’s proprietary software continues to grow and further details of the progress achieved by the company are set out in the Chief Executive’s Report. 

The share price performance of KCR, our legacy investment, in the six months ended 30 June 2022 continued to be disappointing. The value of Drumz’s holding in KCR at 30 June 2022 was £317,000 (31 December 2021: £390,000), which represents a further book loss on this investment of £73,000 (2021: loss of £183,000). I am however, pleased to report that in recent weeks the KCR share price has improved somewhat and at the date of this announcement, the book loss suffered in the first half has been reduced by approximately £50,000. 

The Group’s loss before and after taxation amounted to £184,000 (2021: £261,000). The basic and diluted loss per share amounted to 0.04p (2020: loss 0.08p). No dividend has been declared. 

At 30 June 2022 the Group had cash resources of £413,000 (2021: £380,000) and shareholders’ funds of £1,374,000 (2021: £1,276,000). 

Board

In June 2022 we welcomed Nick Clark to the Board as a non-executive Director. Nick is a significant shareholder in Drumz and a successful smaller companies investor. His skill set is in buying and investing in technology companies and he has already made a significant contribution in identifying possible acquisition targets. 

Outlook

We continue to be pleased with the progress at the award-winning Acuity. The improvement in the number and the quality of the sales leads Acuity is now generating is a growing testament to the progress that has been made and bodes well for the future. We continue to look for new investment opportunities and I would like to take this opportunity to thank my colleagues and our shareholders for their continued support.

Simon Bennett

Chairman

16 September 2022

Chief Executive’s Report

Existing portfolio

Acuity Risk Management Limited (“Acuity”)

As outlined in the annual results, the commercial team at Acuity was strengthened in 2021 and revenue growth accelerated in the second half of the year. I am encouraged to report that revenues in the year to 31 March 2022 showed an increase of 26 per cent at £1.55 million (2021: £1.23 million). This growth has continued into the current year. 

New appointments to the management team continue and I look forward to reporting on progress made in Acuity’s existing markets in the coming months. Other important developments at Acuity include: 

(a) Gartner identifying Acuity’s product STREAM and Gartner’s peer insights identifying STREAM as one of the top four cyber risk products in the world; and further 

(b) G2.com the world’s largest and most trusted tech marketplace for software, named Acuity (1) a Leader in ‘IT Risk Management Software’, (2) High Performer in ‘Audit Management Software’ and (3) number two for Quality of Support; and 

(c) the expansion of distribution channels by the recruitment of well-connected VARs in the UK and North America.

We believe that these and other developments will enable substantial advances to be made in the coming months. 

KCR Residential REIT plc (“KCR”)

The management of KCR has taken steps to improve cash flow, but the share price continues to disappoint. We continue to look for opportunities to realise this non-core asset.

New opportunities

We have identified several interesting target businesses during the period and made a number of proposals to acquire them, which would have turned Drumz from an investment company to a trading company. To date we have not been able to agree terms, but the Board considers that in the current economic climate that there will be opportunities which offer good value for Drumz and its shareholders. 

Outlook

We are pleased with developments at Acuity where the contributions Drumz has made to the business has helped to grow its value. There remain major opportunities to grow shareholder value and achieve returns at Acuity and I look forward to reporting on further progress this year.

Angus Forrest

Chief Executive

For further information please contact:
Drumz Plc	www.drumzplc.com
Angus Forrest	[phone]
WH Ireland (NOMAD & Broker)	www.whirelandcb.com
Mike Coe / Sarah Mather	[phone]
Peterhouse Capital Limited (Joint broker)
Lucy Williams / Duncan Vasey	[phone]

Condensed consolidated statement of comprehensive income

		Unaudited 6 months to 30 June 2022	Unaudited 6 months to 30 June 2021	Audited year to 31 December 2021
	Note	£000	£000	£000
Continuing operations
Revenue		30	18	44
Cost of sales		—	—	—
Gross profit		30	18	44
Administrative expenses		(141)	(133)	(283)
Operating loss	5	(111)	(115)	(239)
Loss on investments		(73)	(146)	(183)
Loss before and after taxation	5	(184)	(261)	(422)
Loss for the period attributable to shareholders of the company		(184)	(261)	(422)
Total comprehensive income attributable to shareholders of the company		(184)	(261)	(422)
Earnings per share
Basic and diluted earnings per share from total and continuing operations	4	(0.04)p	(0.08)p	(0.12)p

Diluted earnings per share is taken as equal to basic earnings per share as the Company is loss making and the average share price during the period is lower than the exercise price and therefore the effect of including share options is anti-dilutive.

Condensed consolidated statement of financial position

		Unaudited as at 30 June 2022	Unaudited as at 30 June 2021	Audited as at 31 December 2021
	Note	£000	£000	£000
ASSETS
Non-current assets
Investments at fair value through profit or loss	6	942	927	1,015
		942	927	1,015
Current assets
Trade and other receivables		34	20	23
Cash and cash equivalents		413	380	561
		447	400	584
Total assets		1,389	1,327	1,599
LIABILITIES
Current liabilities
Trade and other payables		15	51	52
Total liabilities		15	51	52
Net assets		1,374	1,276	1,547
EQUITY
Share capital		2,688	2,613	2,688
Share premium account		8,385	8,039	8,385
Share option reserve		41	19	30
Convertible loan		-	88	-
Merger reserve		1,012	1,012	1,012
Retained earnings		(10,752)	(10,495)	(10,568)
Total equity attributable to shareholders of the company		1,374	1,276	1,547

Condensed consolidated statement of changes in equity

		Share	Share
	Share	premium	option	Convertible	Merger	Retained	Total
	capital	account	Reserve	loan	reserve	earnings	equity
	£000	£000	£000	£000	£000	£000	£000
Balance at 1 January 2021	2,613	8,039	__	88	1,012	(10,234)	1,518
Total comprehensive profit	—	—	__	—	—	(261)	(261)
Share option reserve	__	__	19	__	__	__	19
Balance at 30 June 2021	2,613	8,039	19	88	1,012	(10,495)	1,276
Total comprehensive loss	—	—	__—	(88)	—	(73)	(161)
Issue of shares net of costs	75	346					421
Share option reserve	__	__	11	__	__	__	11
Balance at 31 December 2021	2,688	8,385	30	__	1,012	(10,568)	1,547
Total comprehensive loss	—	—	—	—	—	(184)	(184)
Share option reserve	__	__	11	__	__	__	11
Balance at 30 June 2022	2,688	8,385	41	__	1,012	(10,752)	1,374

Condensed consolidated statement of cash flows

	Unaudited 6 months to 30 June 2022	Unaudited 6 months to 30 June 2021	Audited year to 31 December 2021
	£000	£000	£000
Cash flows from operating activities
(Loss)/profit before taxation	(184)	(261)	(422)
Adjustments for:
Fair value adjustment for listed investments	73	146	183
Share option reserve	11	19	30
Changes in working capital:
- (Increase)/decrease in trade and other receivables	(11)	(6)	(9)
- (Decrease)/increase in trade and other payables	(37)	(9)	(8)
Net cash used in operating activities	(148)	(111)	(226)
Cash flows from investing activities Purchase of investments Cash flows from financing activities Cash raised through issue of shares (net of transaction costs)			(125) 421
Net increase (decrease) in cash and cash equivalents	(148)	(111)	70
Cash and cash equivalents at beginning of period	561	491	491
Cash and cash equivalents at end of period	413	380	561

1. Nature of operations and general information

The principal activity of the Company is investing in technology companies, which offer value creation opportunities over the short and medium term. 

The Company is incorporated and domiciled in the United Kingdom. The address of Drumz plc’s registered office is Burnham Yard, London End, Beaconsfield, Buckinghamshire, HP9 2JH.

Drumz plc’s shares are listed on AIM, a market operated by the London Stock Exchange. The condensed consolidated interim financial report was approved for issue by the Board of Directors on 16 September 2022.

The financial information set out in this interim financial report does not constitute statutory accounts as defined in Sections 434(3) and 435(3) of the Companies Act 2006. The Company’s statutory financial statements for the year ended 31 December 2021 have been filed with the Registrar of Companies and are available at www.drumzplc.com. The auditor’s report on those financial statements was unqualified and did not contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

2. Basis of preparation

The condensed consolidated interim financial report has been prepared in accordance with the requirements of the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 “Interim Financial Statements” in preparing this interim financial information. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2021. The interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom which have not differed from the previously EU-endorsed IFRS, and hence the previously reported accounting policies still apply.

The Directors believe that whilst the impact of COVID-19 appears to be reducing there is still significant uncertainty as to what foreseen or unforeseen action or actions the Company may be required to take in order to respond to any circumstances that may arise in the future. They have considered the possible impact of COVID-19 on Drumz and its business activities, which are now increasingly focussed on software businesses, many businesses in the software sector can be operated remotely in a virtual environment which should reduce the impact of COVID-19 on their activities.

Going concern

The Directors, having made appropriate enquiries, consider that adequate resources exist for the Company and Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the condensed consolidated interim financial statements for the period ended 30 June 2022.

Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group’s medium-term performance and the factors that mitigate those risks have not substantially changed from those set out in the Company’s 2021 Annual Report and Financial Statements, a copy of which is available on the Company’s website: www.drumzplc.com. 

Critical accounting estimates

The preparation of condensed consolidated interim financial report requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in the Company’s 2021 Annual Report and Financial Statements. The nature and amounts of such estimates have not changed significantly during the interim period.

3. Accounting policies

Except as described below, the same accounting policies, presentation and methods of computation have been followed in these condensed consolidated interim financial statements as were applied in the preparation of the Group’s annual financial statements for the year ended 31 December 2021.

3.1 Changes in accounting policy and disclosures

(a) Accounting developments during 2022

The International Accounting Standards Board (IASB) issued various amendments and revisions to International Financial Reporting Standards and IFRIC interpretations. The amendments and revisions were applicable for the period ended 30 June 2022 but did not result in any material changes to the financial statements of the Group or Company.

(b)  New standards, amendments and interpretations in issue but not yet effective or not yet endorsed and not early adopted

Standard	Impact on initial application	Effective date
IAS 8	Accounting estimates	1 January 2023
IAS 1	Classification of Liabilities as Current or Non-Current.	1 January 2023
IAS 1	Disclosure of Accounting Policies	1 January 2023

The Group is evaluating the impact of the new and amended standards above which are not expected to have a material impact on the Group’s results or shareholders’ funds.

4. Loss per ordinary share

The loss per ordinary share is based on the weighted average number of ordinary shares in issue during the period of 419,822,048 ordinary shares of 0.1p (2021: 351,072,048 ordinary shares of 0.1p) and the following figures:

	Unaudited 6 months to 30 June 2022	Unaudited 6 months to 30 June 2021	Audited year to 31 December 2021
Loss attributable to equity shareholders £000	(184)	(261)	(422)
Loss per ordinary share	(0.04)p	(0.08)p	(0.12)p

Diluted loss per share is taken as equal to basic earnings per share as the Company’s average share price during the period is lower than the exercise price and therefore the effect of including share options is anti-dilutive.

5. Income and segmental analysis

There is one operating segment.

The activity of both the investments is based mainly in the United Kingdom. 

6. Investments

The Company made investments as follows during the years ended 31 December:

2018 It acquired 2,435,710 shares in KCR Residential REIT PLC, an AIM listed real estate investment trust specialising in the acquisition and management of rented residential portfolios in the UK. 

In 2020 it invested £500,000 for a 20% holding in Acuity Risk Management Limited. In September 2021 Drumz exercised its option and invested a further £125,000 in Acuity Risk Management Limited, increasing the holding to 25%.

Investments 

	£000
Cost
At 1 January 2022	2,330
At 30 June 2022	2,330
Fair value losses
At 1 January 2022	(1,315)
Change in fair value recognised in profit and loss	(73)
At 30 June 2022	(1,388)
Fair Value
At 30 June 2022	942
At 31 December 2021	1,015

Fair value hierarchy 

In accordance with IFRS 7, financial instruments are measured by level of the following fair value measurement hierarchy:

Level 1: quoted prices in an active market for identical assets or liabilities. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. The quoted market price used for financial assets held by the Group is the closing price on the last day of the financial year of the Group. These instruments are included in level 1 and comprise FTSE and AIM-listed investments classified as held at fair value through profit or loss.

Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. 

Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in unquoted companies) is determined by using valuation techniques such as earnings multiples. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

There have been no transfers between these classifications in the period (2021: none). The change in fair value for the current and previous years is recognised through profit or loss.

All assets held at fair value through profit or loss were designated as such upon initial recognition. 

7. Post balance sheet events

There are none.