TIDMBKS
RNS Number : 9656Y
Beeks Financial Cloud Group PLC
15 September 2020
Beeks Financial Cloud Group plc
("Beeks" or the "Company")
Final Results for the year ended 30 June 2020
15 September 2020 - Beeks Financial Cloud Group plc (AIM: BKS),
a cloud computing and connectivity provider for financial markets,
is pleased to announce its final results for the year ended 30 June
2020.
Financial highlights
-- Revenues increased 27% to GBP9.36m (2019: GBP7.35m)
-- Annualised Committed Monthly Recurring Revenue (ACMRR) up 23% to GBP11.2m (2019: GBP9.1m)
-- Underlying Gross profit^ up 30% to GBP4.75m (2019: GBP3.65m)
-- Underlying Gross profit margin 51% (2019: 50%)
-- Underlying* EBITDA increased 34% to GBP3.33m (2019:
GBP2.48m), including IFRS 16 adjustment of GBP0.52m (an increase of
14% excluding IFRS 16)
-- Underlying profit before tax** increased 8% to GBP1.43m (2019: GBP1.32m)
-- Underlying EPS** 2.52p (2019: 2.58p)
-- Net debt as at 30 June 2020 of GBP0.75m (30 June 2019: Net cash GBP1.02m)
-- Proposed final dividend of 0.15p per share equating to full
year dividend payment of 0.35p (2019: 0.35p)
^ Underlying gross profit is statutory gross profit excluding
other income and acquired amortisation costs
* Underlying EBITDA is defined as earnings before amortisation,
depreciation, finance costs, taxation, acquisition costs, share
based payments and exceptional non-recurring costs
** Underlying profit before tax and underlying EPS excludes
amortisation on acquired intangibles, acquisition costs, share
based payments and exceptional non-recurring costs
Operational Highlights
-- Signing of two Tier 1 clients in the year, bringing the total
number of Tier 1 clients to five with further Tier 1 customers
acquired as part of the Velocimetrics acquisition
-- Acquisition of Velocimetrics, a UK-based network monitoring
and trade analytics software company, broadening Beeks' offering
and expanding the total addressable market
-- Further expansion with the opening of seven new Datacentres:
Singapore SG1, London LD8 and LD4.2, Paris PA1, Sydney, Australia
and NY2 and NY5 in New York, bringing the international network to
18 Datacentres; all new Datacentres are now revenue generating
-- Launch of Back Up as a Service in first quarter with client
uptake in line with expectations
-- Award of a grant of up to GBP2m from Scottish Enterprise to
support the Network Automation Project facilitating growth and
expansion and enabling a broader product offering
-- Obtaining ISO 27001 certification (gained post year end on 21 August 2020)
-- Average entry monthly recurring value for a new institutional
customer contract increased to GBP2,400 (FY 2019: GBP2,200)
Outlook
-- Positive market environment and considerably increased sales pipeline
-- Confident in securing additional Tier 1 customers in the year ahead
Statutory Equivalents
The above highlights are based on underlying results.
Reconciliations between underlying and statutory results are
contained within the financial information. The statutory
equivalents of the above results are as follows:
-- Profit before tax was GBP0.68m (2019: GBP1.04m)
-- Basic EPS was 1.13p (2019: 2.10p)
Gordon McArthur, CEO of Beeks Financial Cloud commented:
"I am pleased to report on a year of considerable progress, in
which the Group has delivered against its strategic objectives;
increasing the number of Tier 1 customers, expanding its geographic
presence and offering and completing the strategic acquisition of
Velocimetrics.
While the ongoing Covid-19 pandemic may continue to cause a
delay in corporate decision making, and in spite of the wider
economic uncertainties, we are confident the long-term growth
drivers in our market remain intact - with financial services
organisations increasingly looking to take advantage of the
benefits of Cloud infrastructure.
We anticipate continued growth of our existing Tier 1 accounts,
as they expand the use of our offering into new geographies, and we
believe the launch of our analytics offering has the potential to
layer on new SaaS product revenues. We are confident in our ability
to convert our growing sales pipeline, and therefore continue to be
excited about the future for the Group."
Beeks Financial Cloud Group
plc
Gordon McArthur, CEO via Alma PR
Fraser McDonald, CFO
+44 (0)20 7523
Canaccord Genuity 8000
Adam James / Angelos Vlatakis
Alma PR +44(0)20 3405 0212
Caroline Forde / Helena
Bogle / Josh Royston
ABOUT BEEKS FINANCIAL CLOUD
Beeks Financial Cloud is a leading cloud computing, connectivity
and analytics provider for financial services. Our cloud-based
Infrastructure-as-a-Service (IaaS) model allows financial
organisations the flexibility and agility to deploy and connect to
a variety of exchanges, trading venues and cloud service providers
at a fraction of the cost of building their own networks and
infrastructure. Based in the UK with an international network of 18
datacentres, Beeks supports its global customers at scale in the
leading financial centres.
For more information, visit: www.beeksfinancialcloud.com
Chairman's statement
I am pleased to report on a year of considerable progress, in
which the Group has delivered against its strategic objectives;
increasing the number of Tier 1 customers, expanding its geographic
presence and offering and completing the strategic acquisition of
Velocimetrics. Beeks continues to benefit from its IaaS based
business model, which through continued good levels of customer
retention, new customer acquisition and the increasing size of
average customer contracts has seen revenues grow by 27% and
underlying EBITDA by 14% (excluding the impact of the IFRS 16
adjustment). The Group exited the year with GBP11.2m of Annualised
Committed Monthly Recurring Revenue (ACMRR), an increase of 23%,
which provides us with strong foundations for growth going
forward.
It is evident to me that the Group has taken considerable
strides forward during the year in increasing the attractiveness of
its offering to the Tier 1 segment of the financial services
market, investing in an expanded offering and sales and marketing
capabilities. With five Tier 1 customers now engaged, we have
growing proof points of our ability to deliver the infrastructure,
resilience, capabilities and support required by Tier 1 customers,
and a growing ability to capture market share in this lucrative
segment of the financial services market.
Naturally, Covid-19 presented some challenges but we were quick
to implement measures to ensure minimal disruption to the running
of the business. Whilst some new customer implementations have
become protracted in the second half of the year and sales cycles
have extended, the Group's 94% recurring revenues, strong balance
sheet and resilient business model ensured we delivered a positive
overall trading result.
We were pleased to complete the acquisition of Velocimetrics
during the year - a UK-based network monitoring and trade analytics
software company, which has broadened our offering, with our first
SaaS based analytics offering to be launched in the next twelve
months. Whilst the Group is focused on organic growth, we will
continue to assess strategic acquisitions that fit our criteria and
complement our business model.
The Board has taken the decision to pay a final dividend to
shareholders as a result of the recurring revenue nature of the
Group, the level of operating cash which we now deliver and the low
level of indebtedness within the Group. Should the impact of
Covid-19 increase in the year ahead, the Board will keep the level
of future dividend payment under review. However, it should be
noted the Group has not, to date, utilised any of the government
furlough schemes and therefore believes that there is no impediment
in this respect to paying a dividend to shareholders.
During the period, Christopher Livesey, Non-Executive Director,
notified the Board of his resignation. I would like to thank Chris
for his valuable input since the Company's IPO and wish him all the
best for the future. We will continue to assess the Board
composition on an ongoing basis and look to appoint an additional
Non-Executive Director at the appropriate juncture
I would like to thank all our employees for their continued hard
work, especially during these challenging times. We are in a strong
position to deliver on growth and I am confident of continued
success in this coming year.
Mark Cubitt
Chairman
14 September 2020
Strategic overview
Market Overview
The Group continues to operate successfully in a demanding,
time-sensitive industry and is uniquely positioned to take
advantage of the rapid acceleration of Cloud deployment in
financial services and the growing need for analytics around those
infrastructure environments. These latency sensitive environments
need to be built, connected and analysed and Beeks is one of the
few companies in the world that can provide this.
The complex nature of building and managing a latency sensitive
infrastructure means financial enterprises are moving away from on
premise datacentres to third party facilities. We believe the
decreased latency, increased flexibility and cost-benefits of Cloud
computing that we facilitate will see a gradual long-term shift to
this model. As Cloud adoption in financial services evolves,
companies are finding that the benefits are not just about cost
efficiencies but also to do with resilience, agility and innovation
which brings additional opportunities for by-products such as
analytics and scalable global connectivity.
Our addressable market is extensive with up to 20,000 financial
institutions, a large percentage of which maintain their own IT
infrastructure and are yet to move to the Cloud computing
model.
A 2019 survey by Refinitiv found:
- 48% of financial services' IT budget will be invested in
public Cloud in 2020 up from 34% in 2018.
- 64% of firms believe that the Cloud will be significant, or
transformational, for their sector over the next five to 10
years.
- 76% of firms say that their public Cloud projects performed
better than expected when it came to delivering an immediate cost
reduction.
The flexibility of Cloud computing will allow financial
institutions to accelerate new product development, generate new
sources of income and test new geographies and markets, while
moving costs from a capital expenditure to an operational
expenditure model. A lack of human resource or expertise is one of
the main barriers to moving to a Cloud environment leading to a
greater demand for third party solutions provided by Beeks.
Our innovations, enhanced product range position, breadth of
asset classes and growing number of Tier 1 customers, positions us
well to benefit from the growth in the market for automated
trading, the continued adoption of Cloud computing by financial
services organisations and the opportunity for accelerated growth
through corporate acquisitions in a fragmented market place.
Business Model
Build. Connect. Analyse. Our global backbone of 18 datacentres
provide Cloud deployment for financial services customers, helping
them to formulate a Cloud strategy and replicate that in different
regions. The acquisition of Velocimetrics expanded our product
offering to include the required analytics around those
infrastructure environments.
Beeks provides:
-- Dedicated and virtual servers that host traders and brokers
in 18 datacentres around the world
-- Ultra-low latency connectivity between customers and key financial venues and exchanges
-- Co-location for customers to position their own computing
power in our space, benefitting from our proximity to financial
hubs.
-- In-house security software in order to protect client infrastructure from cyber attacks
-- The management of hybrid Cloud deployments for customers
wishing to combine the Beeks IaaS with the public Cloud
-- Our model focuses on efficiency and flexibility, offering our
customers the ability to scale up and scale down as needed. Due to
market fluctuations and the inherent risk involved in algorithmic
trading, this makes our services highly attractive to
customers.
-- Beeks has a unique self-service customer portal that
facilitates the same-day deployment of a host of services and
allows our customers to configure and order their own servers.
-- Beeks analytics: Comprehensive monitoring and performance
analysis allows the user to independently track and analyse
real-time performance of every single price, quote or trade
traversing business critical processes.
Strategy
Our strategy is to design and deliver a range of secure cloud
solutions, both public and private, which are easy to consume for
small, medium and large financial enterprises.
Our main strategic priority is to grow our institutional
customer base both for public, private and secure Cloud deployment
in addition to our core low latency offering together and
complementary analytics solutions. In order to satisfy existing
demand, and attract new customers, we will continue expanding into
new asset classes and geographies, furthering our offering,
encouraged by the significant opportunities we have identified.
Our retail trader offering continues to grow, providing the
business with a strong, profitable foundation. We will maintain our
investment into this part of the business to make sure we continue
to provide a market leading offering while we focus our strategic
initiatives on the growth of our institutional offering.
While our focus is on organic growth, we will continue to assess
further strategic acquisition opportunities that will accelerate
growth and complement our business model. The acquisition of CNS
and Velocimetrics added both scale and cost-synergies to Beeks'
core offering and we will look to acquire other businesses that are
profitable and will add additional complementary resources.
Strategic Report - Chief Executive's Review
Our vision is simple: Build. Connect. Analyse. Providing end to
end outsourcing of financial services compute environments.
FY20 was a year of considerable development, as we continued to
make headway in new geographies and segments of the financial
services markets. The impact of Covid-19 delayed the acceleration
of our growth in the second half of the year, however the
investments we have made in the business and the successful Tier 1
customer implementations to date, mean we are more confident than
ever in our ability to take advantage of the rapid acceleration of
Cloud deployment in financial services and the growing need for
analytics around those infrastructure environments.
The economic uncertainty caused by the Covid-19 pandemic
initially protracted some of our customers' decision making
processes and the lockdown delayed a small number of our customer
implementations, however trading across our existing customer base
remained robust and contract discussions with prospective Tier 1
clients are in advanced form. We are encouraged by our growing
sales pipeline - the depth, breadth and quality of which is far
greater than we have ever experienced before.
The scale of the opportunity ahead of us, provides us with the
confidence to invest in the business, to ensure we have the
capacity to support our customers in their expansion strategies. We
invested in all areas of the business during the year and will
continue to do so in the year ahead, while maintaining our robust
financial position.
Financial performance
I am pleased to report another year of solid growth for the
Company. Revenue increased by 27% year on year with further growth
in institutional sales. Beeks has retained strong recurring revenue
of 94% and customer retention remained within target. Our ACMRR
reached GBP11.2m at 30 June 2020, increasing 23% from GBP9.10m at
30 June 2019.
Institutional customer numbers using the platform grew from 220
at 30 June 2019 to 242 at 30 June 2020 and the average entry level
new institutional customer contract has increased to GBP2.4k per
month from GBP2.2k per month when compared to the same period last
year. Institutional revenue, which continues to be our focus,
increased during the second half of the year as we recognised a
greater proportion of revenue from the secured Tier 1 customers,
and now represents 85% of total revenue. We anticipate this figure
increasing further in the current financial year, as we add to our
institutional client base.
Operational Expansion
This year was a period of significant investment, across our
platforms, teams, offering and operations.
We continued our expansion into new geographies, with the
opening of seven datacentres in the year: in Singapore, London and
Paris and two in New York, bringing the total number of datacentre
locations to 18. These new sites, which are all revenue generating,
have increased Beeks' capacity by 45% over the past year, providing
us with the ability to support a significant increase in customer
demand.
Headcount has increased to 65 (including 12 from Velocimetrics
Ltd), with further key hires in the sales team who will be
responsible of targeting Tier 1s, including a new Head of Sales in
New York to follow. We also recruited a Chief Information Security
Officer in order to further strengthen our Cyber Security vision,
strategy and program, to ensure a world class level of protection
for customer assets and technologies.
As well as people, we have invested in additional services to
provide another revenue stream for the Group. The Bare Metal
Automated Backup Service, launched in September in response to the
growing compliance and regulatory pressures for backup and storage
being experience by its customers, has been well received This
'Back up as a Service' platform is currently available in both
London and New York, and is designed to further increase the
security options available to our clients in order to best protect
their data.
In April we took a significant step forward in building out our
offering for Tier 1 organisations, through the acquisition of
Velocimetrics, for a base consideration of GBP1.3 million in cash
and equity, plus contingent earn-out. Velocimetrics provides real
time network monitoring and trade analytics software to a global
client list of financial services businesses, including Tier 1
banks, exchanges, brokers, hedge funds and payments providers.
Operating in a specialist field with few direct competitors, the
addition of the Velocimetrics analytics products to our offering
enables us for the first time to offer value-add services in
network monitoring and trade analytics, increasing the
functionality within the Beeks Portal and providing another point
of differentiation from generic Cloud hosting and infrastructure
providers. We will be launching a SaaS version of the Velocimetrics
products in Q2, which will expand the total addressable market for
these offerings and making them more attractive to the existing
Beeks' customer base.
Commercial Network Services (CNS), which we acquired in the
prior year, continues to perform in line with expectations.
Our partnership with IPC systems has resulted in a global
deployment of a private Cloud solution for IPC's Connexus Unigy
product. Connexus Unigy is a state-of-the-art (SOA) based platform
for trading communications and applications offering
ground-breaking, unified, integrated platform for both trading
communications and compliance. IPC systems is a leading global
provider for the financial markets community, delivering secure,
compliant communications and network solutions.
The Network Automation project aims to facilitate growth and
enable product expansion by making a wider variety of Beeks
products available via a self-service portal. The biggest
commercial opportunities lie within the Private Cloud product
offering and the cornerstone of our Private Cloud offering is to
automate the network. This changing focus to build our Private
Cloud offering has accelerated the Network Automation project and
we'll launch a Private Cloud product on an automated platform
within the next 12 months.
The private portal offered to Beeks customers will be updated to
enable customers to more easily consume Beeks services with a point
and click capability. Particular focus will be given to improving
the user interface for a better end-user experience as well as
increase cross-sell opportunities.
New Tier 1 customers
In December 2019 we were delighted to announce two further tier
1 customers, bringing our total organic tier 1 customers to five.
The acquisition of Velocimetrics brought an additional four to
increase our total tier 1 portfolio to nine. Each of these
contracts has the ability to significantly expand as the customers
transition a greater proportion of their infrastructure or product
offering to the Cloud. They are typically multi-year contracts,
adding to our underlying revenue visibility.
The first of the two signed in the year is a three-year contract
worth a combined GBP1.1m with a Cloud-based payments solution
provider to design and supply a private network and fully managed
infrastructure environment, enabling the Payments Provider to
expand its secure and resilient end-to-end Payments-as-a-Service
solution for financial institutions and regulated Fintech
organisations. This is our first win in the growing Open Banking
and Payments sector, demonstrating the security of the Beeks'
offering and applicability to this new segment of the financial
markets. The core infrastructure has now been deployed and network
configuration is underway with the client.
The second is with a global financial markets technology
provider and represents our first $1m annualised contract. We are
providing them with a global deployment of private Cloud
infrastructure, complementing their existing secure,
high-performance data and voice communications solutions delivered
to the global financial markets. The SaaS-based contract commenced
in January 2020 and is committed to grow to a run rate of $1
million annually, with the potential for further expansion
thereafter. The private Cloud infrastructure is now deployed on the
Beeks network, with the first end customers successfully live on
the platform and further deployments planned.
Future Growth and Outlook
Our main strategic priority continues to be to grow our
institutional customer base both for public, private and secure
Cloud deployment and our core low latency offering together with
complementary analytics solutions. In order to satisfy existing
client demand, and attract new customers, we will continue
expanding into new asset classes and geographies, furthering our
offering, and we are encouraged by the significant opportunities we
have identified so far.
We have entered the current financial year with a significantly
expanded business, increased customer base, expanded product
offering and increasing number of Tier 1 reference points. While
the ongoing Covid-19 pandemic may continue to cause a delay in
corporate decision making, and in spite of the wider economic
uncertainties, we are confident the long-term growth drivers in our
market remain intact - with financial services organisations
increasingly looking to take advantage of the benefits of Cloud
infrastructure.
We anticipate continued growth of our existing Tier 1 accounts,
as they expand the use of our offering into new geographies and we
believe the launch of our analytics offering has the potential to
layer on new SaaS product revenues. We are confident in our ability
to convert our growing sales pipeline, and therefore continue to be
excited about the future for the Group.
Gordon McArthur
Chief Executive Officer
14 September 2020
Strategic Report - Financial Review
KEY PERFORMANCE INDICATOR REVIEW
2020 2019 Growth
Revenue GBP9.36m GBP7.35m 27%
--------- --------- -------
ACMRR GBP11.2m GBP9.10m 23%
--------- --------- -------
Underlying Gross margin 50.8% 50.4%
--------- --------- -------
Underlying EBITDA* GBP3.33m GBP2.48m 35%
--------- --------- -------
Underlying EBITDA margin* 35.6% 33.7%
--------- --------- -------
Underlying profit before tax** GBP1.43m GBP1.32m 8%
--------- --------- -------
Underlying EPS (note 23) ** 2.52p 2.58p (2%)
--------- --------- -------
Dividend per share 0.35p 0.35p 0%
--------- --------- -------
^ Underlying gross margin is statutory gross margin excluding
other income and acquired amortisation costs
* Underlying EBITDA is defined as earnings before amortisation,
depreciation, finance costs, acquisition costs, share based
payments, taxation and exceptional costs. Underlying EBIDTA
increased as a result of IFRS 16 adjustment by GBP0.52m, excluding
IFRS 16 adjustment EBITDA would be GBP2.82m, representing a 14%
increase and 30% EBITDA margin.
** Underlying profit before tax and underlying EPS excludes
amortisation on acquired intangibles, acquisition costs, share
based payments and exceptional non-recurring costs. IFRS 16 reduced
underlying PBT in the year by GBP0.15m.
Revenue
FY20 was a good year in terms of revenue growth. Group revenues
grew by 27% to GBP9.36m (2019: GBP7.35m), through the combination
of continued organic growth and the full year impact of last year's
acquisition of CNS. The Velocimetrics acquisition contributed
GBP0.29m revenue in the final two months of the year. Of the
Group's revenues, 94% were recurring. Annualised Committed Monthly
Recurring Revenues (ACMRR) increased by 23% to GBP11.2m (2019:
GBP9.1m) with Velocimetrics representing GBP0.8m of this
increase.
We continue to have a healthy level of customer concentration
with no single customer accounting for more than 7% of ACMRR. We
have increased the number of institutional customers to 242 from
220 as at 30 June 2020 and our top 10 customers accounted for 36%
of recognised revenue in the year (2019: 32%).
Gross Profit
Underlying gross profit earned increased 30% to GBP4.75m (2019:
GBP3.65m), with gross margins similar to last year. We have made
further expansion across our Datacentre footprint with the opening
of seven new Datacentres: Singapore SG1, London LD8 and LD4.2,
Paris PA1, Sydney and NY2 and NY5 in New York. These have all been
driven by customer demand. The new Datacentres are revenue
generating but not are not all yet at breakeven levels which is
typically achieved 12 months from go-live. The Group has continued
to invest in capacity to support our increased revenues and
customer growth. In relation to sales growth, fixed asset
investment and therefore depreciation has increased at a higher
rate, partly due to the timing of sales order to revenue
recognition and the longer sales cycle we have seen in the Tier 1
space. The Group has continued to invest in developing innovative
technology solutions such as the customer portal and the network
automation project, and has incurred internal capitalised
development costs to date of GBP1.3m (2019: GBP0.8m).
Other Operating Expenses
Operational costs, which are defined as operating expenses less
exceptional costs, share based payments and non-recurring costs,
have increased by GBP0.8m as we support both a growing and more
mature customer base and to gear up for future growth plans.
Overall, they increased by 35% to GBP3.0m (2019: GBP2.2m). Within
this, staff costs have increased by GBP0.7m as we have recruited in
a number of key areas including sales, software development and
engineering. Most of our recruitment has been to support future
product and sales growth with a relatively small increase in
support staff given our automation and self-service strategy.
Finance Costs
Finance costs have increased compared with last year. Finance
lease interest costs have reduced as a result of some historic
finance leases coming to the end of life but this has been offset
by higher loan interest due to the GBP1m debt facility taken to
finance the CNS acquisition and latterly in the year, a GBP1.5m
debt facility taken to help support the Velocimetrics acquisition.
The impact of the transition to IFRS 16 also resulted in additional
finance costs of GBP0.01m.
Earnings before interest, tax, depreciation, amortisation and
exceptional non-recurring costs ("Underlying EBITDA") increased by
34% to GBP3.33m (2019: GBP2.48m). The impact of IFRS 16 which
reclassifies previous operating lease rentals to a depreciation and
interest charge, has had a benefit of GBP0.52m in the year to the
underlying EBITDA metric therefore the pre-IFRS16 increase was 14%.
The growth in Underlying EBITDA has been driven by the combination
of continued organic growth and the full year impact of last year's
acquisition of CNS.
Underlying EBITDA, underlying profit before tax and underlying
earnings per share are alternative performance measures, considered
by the Board to be a better reflection of true business performance
than statutory measures only.
PROFIT BEFORE TAX
Year ended Year ended
30 June 2020 30 June 2019
GBP'000 GBP'000
Profit before tax for the year 678 1,043
Add back:
Acquisition costs 205 127
Share Based payments 312 63
Exceptional Non-recurring costs 61 21
Amortisation of acquired intangibles 237 62
Deduct:
Grant income (59) -
Underlying profit for the period 1,434 1,316
Underlying Profit before tax increased to GBP1.43m (2019:
GBP1.32m). The impact of IFRS 16 had a detrimental impact on
underlying PBT in the year by GBP0.15m as a result of the
difference in operating lease payment profiles when amortised over
the lease periods. These are purely timing differences and will
reverse in future periods.
Taxation
The effective tax rate ('ETR') for the period was 15.2%, (2019:
(1.9%)).
The ETR has increased from the prior year which benefitted from
a significant share option deduction giving rise to a tax credit in
the year. The overall effective tax rate has still benefitted from
R&D tax credit claims but is more in line with what would be
anticipated given the company's profitability and tax status.
Further tax has become payable in the US which has been provided
for at a US tax rate estimate of 21%.
Earnings per Share and Dividends
Underlying earnings per share reduced 2% to 2.52p (2019: 2.58p).
Underlying diluted earnings per share reduced to 2.45p (2019:
2.55p). The key driver was the difference in tax charges between
the two years (refer to Note 8).
Basic earnings per share decreased to 1.13p (2019: 2.10p). Basic
EPS has shown a decrease due to the difference in statutory profit
after tax with a higher amount of exceptional costs in the current
year as well as a higher tax charge. Diluted earnings per share was
also impacted by this and reduced to 1.13p (2019: 2.09p).
The Board proposes a full year dividend of 0.35p (2019:0.35p).
Subject to shareholder approval at the forthcoming Annual General
Meeting, the final dividend is expected to be paid on 30 October
2020 to shareholders on the register at 2 October 2020.
Acquisition
On 14 April 2020, Beeks acquired the full share capital of
Velocimetrics Ltd for an initial consideration of GBP1.05m on a
cash free debt free basis, with a further consideration of GBP0.3m
due after satisfactory completion of warranties. The initial
payment was funded via a term loan from the Company's bank. The
contingent consideration will be based on achievement of certain
revenue targets in June 2020 and June 2021. Based on estimates of
the probabilities of revenue growth, we expect the amount to be
paid in respect of the final contingent consideration due will be
GBP2.45m (note 9). The business purchase agreement saw the transfer
of 12 customers, of which a number are Tier 1, and a small number
of staff based in London.
Statement of Financial Position and Cash flows
The statement of financial position shows an increase in
non-current assets to GBP13.9m (2019: GBP4.8m). This is as a result
of the GBP4.1m acquisition of Velocimetrics, investment in
property, plant and equipment of over GBP2.8m (2019: GBP1.2m) and
further investment in our customer self-service portal and network
automation project of GBP0.7m (2019: GBP0.4m), offset by
depreciation and amortisation. Non-current assets have also been
increased as a result of the Right-of-use asset addition of GBP2.9m
due to the transition to IFRS 16. Trade and other receivables have
increased proportionately with revenue growth and because of the
Velocimetrics acquisition.
During the year the Group repaid GBP0.6m of loan and lease
finance (excluding the IFRS 16 adjustment) and drew down GBP1.5m of
loan finance to fund the initial consideration and expected year 1
earn-out payment of Velocimetrics.
At 30 June 2020 net assets were GBP6.7m compared to net assets
of GBP5.6m at 30 June 2019.
The Group ended the period with net debt of GBP0.75m (30 June
2019: net cash GBP1.02m), primarily as a result of the drawdown of
additional debt facilities to help finance the acquisition of
Velocimetrics.
Fraser McDonald
Chief Financial Officer
14 September 2020
Beeks Financial Cloud Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2020
2020 2019
Note GBP000 GBP000
----------- ---------
Revenue 3 9,360 7,352
Other Income 3 59 -
Cost of sales (4,845) (3,707)
Gross profit 4,574 3,645
Administrative expenses (3,619) (2,457)
Operating profit 4 955 1,188
Analysed as
Earnings before depreciation, amortisation,
acquisition costs, share based payments
and non-recurring costs: 3,394 2,479
Depreciation 11 1,474 898
Amortisation 10 387 182
Acquisition costs 9 205 127
Share based payments 19 312 63
Non-recurring costs 4 61 21
----------- ---------
Operating profit 955 1,188
------------------------------------------------- ----- ----------- ---------
Finance income 2 7
Finance costs 5 (279) (152)
Profit before taxation 678 1,043
Taxation 8 (103) 20
Profit after taxation for the year attributable
to the owners of Beeks Financial Cloud
Group PLC 575 1,063
----------- ---------
Other comprehensive income
Amounts which may be reclassified to profit
and loss
Currency translation differences 43 18
Total comprehensive income for the year
attributable to the owners of Beeks Financial
Cloud Group PLC 618 1,081
----------- ---------
Pence Pence
Basic earnings per share 23 1.13 2.10
Diluted earnings per share 23 1.13 2.09
The above income statement should be read in conjunction with
the accompanying notes.
Beeks Financial Cloud Group PLC
Consolidated Statement of Financial Position
As at 30 June 2020
2020 2019
Note GBP000 GBP000
Non-current assets
Intangible assets 10 6,741 2,229
Property, plant and equipment 11 6,755 2,440
Deferred tax 12 380 136
--------------- -------
13,876 4,805
Current assets
Trade and other receivables 13 1,525 1,104
Cash and cash equivalents 14 1,433 2,338
--------------- -------
2,95 8 3,442
Total assets 16,834 8,247
Liabilities
Non-current liabilities
Borrowings and other financial liabilities 16 3,452 699
Contingent consideration due on acquisitions 9 1,957 -
Deferred tax 12 531 48
Total non-current liabilities 5,940 747
C urrent liabilities
Trade and other payables 17 4,178 1,868
Total current liabilities 4,178 1,868
Total liabilities 10,118 2,615
Net assets 6,716 5,632
Equity
Issued capital 18 64 64
Reserves 20 5,218 4,531
Retained earnings 1,434 1,037
--------------- -------
Total equity 6,716 5,632
--------------- -------
The financial information was approved by the Board of Directors
on 14 September 2020 and was signed on its behalf by:
Gordon McArthur, Chief Executive Officer ,
Beeks Financial Cloud Group Plc,
Company number: SC521839
The above statement of financial position should be read in
conjunction with the accompanying notes.
Beeks Financial Cloud Group PLC
Consolidated Statement of Changes in Equity
As at 30 June 2020
Foreign Share Share
Issued currency Merger Other based premium Retained Total
capital reserve reserve reserve payments reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1 July 2018 62 84 372 (315) - 4,309 332 4,844
Profit after income
tax expense for
the year - - - - - - 1,063 1,063
Currency translation
difference - 18 18
-------- --------- -------- -------- --------- -------- --------- --------
Total comprehensive
income - 18 - - - - 1,063 1,081
-------- --------- -------- -------- --------- -------- --------- --------
Deferred tax - - - - - - (104) (104)
Issue of share
capital 2 2
Share based payments 63 63
Dividends paid (254) (254)
-------- --------- -------- -------- --------- -------- --------- --------
Total transaction
with owners 2 - - - 63 - (358) (293)
-------- --------- -------- -------- --------- -------- --------- --------
Balance at 30 June
2019 64 102 372 (315) 63 4,309 1,037 5,632
-------- --------- -------- -------- --------- -------- --------- --------
Profit after income
tax expense for
the year - - - - - - 575 575
Currency translation
difference - 43 43
-------- --------- -------- -------- --------- -------- --------- --------
Total comprehensive
income - 43 - - - - 575 618
-------- --------- -------- -------- --------- -------- --------- --------
Deferred tax - - - - - - - -
Issue of share
capital - - 333 - - - - 333
Share based payments - - - - 311 - - 311
Dividends paid - - - - - - (178) (178)
-------- --------- -------- -------- --------- -------- --------- --------
Total transaction
with owners - - 333 - 311 - (178) 466
-------- --------- -------- -------- --------- -------- --------- --------
Balance at 30 June
2020 64 145 705 (315) 374 4,309 1,434 6,716
The above statement of changes in equity should be read in
conjunction with the accompanying notes.
Beeks Financial Cloud Group PLC
Consolidated Cash Flow Statement
For the year ended 30 June 2020
2020 2019
Note GBP000 GBP000
------- -------
Cash flows from operating activities
Profit before taxation for the year 678 1,043
Adjustments for:
Depreciation and amortisation 1,861 1,080
Share options 312 63
Impairment - 21
Foreign exchange 17 (16)
Interest received (2) (7)
Finance fees and interest 192 152
Grant income received (59)
------- -------
Operating cash flows 2,999 2,336
(Increase) in receivables (419) (440)
Increase/ (decrease) in payables 678 229
------- -------
Operational cash flows after movement in working capital 3,258 2,125
Corporation tax paid (23) (26)
------- -------
Net cash inflow from operating activities 3,235 2,099
Cash flows from investing activities
Capitalised development costs 10 (720) (437)
Acquisition of trading assets of business - (1,112)
Payments for property, plant and equipment 11 (2,819) (1,222)
Payments for current period acquisition 9 (750) -
------- -------
Net cash (outflow)/ inflow from investing activities (4,289) (2,771)
Cash flows from financing activities
Repayment of existing loan borrowings (324) (34)
Dividends paid (178) (254)
-
Right of use repayments (517) -
Issue of loans 1,485 990
Finance lease repayments (301) (435)
Finance fees and interest 5 (192) (152)
Interest received 2 7
Proceeds from the issue of share capital
Proceeds from grant income 174 1
-------
Net cash outflow from financing activities 149 123
Net (decrease) / increase in cash and cash equivalents (905) (549)
Cash and cash equivalents at beginning of year 2,338 2,887
Cash and cash equivalents at end of year 14 1,433 2,338
------- -------
The above cash flow statement should be read in conjunction with
the accompanying notes.
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Information
For the year ended 30 June 2020
1. Summary of significant accounting policies
CORPORATE INFORMATION
Beeks Financial Cloud Group PLC is a public limited company
which is listed on the AIM Market of the London Stock Exchange and
is incorporated in Scotland. The address of its registered office
is Lumina Building, 40 Ainslie Road, Ground Floor, Hillington Park,
Glasgow, UK, G52 4RU. The principal activity of the Group is the
provision of information technology services. The registered number
of the Company is SC521839.
The financial information is prepared in pounds sterling.
The principal accounting policies adopted in the preparation of
the financial information is set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
BASIS OF PREPARATION
The financial information set out in the announcement does not
constitute the Group's statutory accounts for the years ended 30
June 2020 and 30 June 2019 within the meaning of section 434 of the
Companies Act 2006. The financial information for the year ended 30
June 2019 is derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies. The
financial information for the year ended 30 June 2020 is derived
from the statutory accounts for that year which were approved by
the directors on 14 September 2020. The statutory accounts for the
year ended 30 June 2020 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The
auditors reported on those accounts; their report was unqualified
and did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
The financial information has been prepared under the historical
cost convention.
International Financial Reporting Standards and Interpretations
issued but not yet effective
New and revised IFRSs in issue but not yet effective and have
not been adopted by the Group at the date of authorisation of the
financial information , the following standards, interpretations
and amendments have been issued but are not yet effective and have
no material impact on the Group's financial information:
-- IFRS 17 - Insurance Contracts;
-- IFRS 10 and IAS 28 (amendments) - Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture;
-- Amendments to IFRS 3 - Definition of a business;
-- Amendments to IAS 1 and IAS 8 - Definition of material;
and
-- Conceptual Framework Amendments to References to the
Conceptual Framework in IFRS Standards.
Adoption of new and revised Standards - amendments to IFRS that
are mandatorily effective for the current year
-- IFRIC 23 Uncertainty over Income Tax Treatments;
-- IFRS 16 Leases
IFRIC 23 - Uncertainty over Income Tax Treatments
The Group has adopted IFRIC 23 for the first time in the current
year which had no material impact on the amounts reported, and
disclosures included, in the financial information. IFRIC 23 sets
out how to determine the accounting tax position when there is
uncertainty over income tax treatments. The Interpretation requires
the Group to:
-- Determine whether uncertain tax positions are assessed
separately or as a group; and
-- Assess whether it is probable that a tax authority will
accept an uncertain tax treatment used, or proposed to be used, by
an entity in its income tax filings:
-- If yes, the Group should determine its accounting tax
position consistently with the tax treatment used or planned to be
used in its income tax filings; and
-- If no, the Group should reflect the effect of uncertainty in
determining its accounting tax position using either the most
likely amount or the expected value method.
IFRS 16 - Leases
In the current year, the Group, for the first time, has applied
IFRS 16 Leases (as issued by the IASB in January 2016).
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to the lessee
accounting by removing the distinction between operating and
finance leases and requiring the recognition of a right-of-use
asset and a lease liability at the lease commencement for all
leases, except for short-term leases and leases of low value
assets.
The impact of the adoption of IFRS 16 on the Group's
consolidated financial information is described below.
The date of initial application of IFRS 16 for the Group is 1
July 2019.
The Group has applied IFRS 16 using the modified retrospective
adoption method, with no restatement of prior year comparatives,
and has recognised leases on balance sheet as at 1 July 2019. From
1 July 2019, the Group recognises a right-of-use asset and
corresponding lease liability on the balance sheet with respect of
all lease arrangements in which it is a lessee, except for
short-term leases and low value leases. At this date, the Group has
elected to measure the right-of-use assets to an amount equal to
the lease liability.
For contracts in place at the date of transition, the Group has
elected to apply the definition of a lease from IAS 17 and IFRIC 4
and has not applied IFRS 16 to arrangements that were previously
not identified as leases under IAS 17 and IFRIC 4.
Impact of the new definition of a lease;
The Group has made use of the practical expedient available on
transition to IFRS 16 not to reassess whether a contract is or
contains a lease. The change in definition of a lease mainly
relates to the concept of control. IFRS 16 determines whether a
contract contains a lease on the basis of whether the customer has
the right to control the use of an identified asset for a period of
time in exchange for consideration.
Impact on Lessee Accounting;
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were off-balance
sheet.
IFRS 16 has impacted the Group's head office lease and the space
within the Datacentres in which it operates throughout its global
locations.
Applying IFRS 16, for all leases (except as noted below), the
Group:
a) recognises right-of-use assets and lease liabilities in the
consolidated statement of financial position, initially measured at
the present value of future lease payments;
b) recognises depreciation of right-of-use assets and interest
on lease liabilities in the consolidated statement of profit or
loss; and
c) separates the total amount of cash paid into a principal
portion and interest in the consolidated statement of cash
flows
Lease incentives (e.g. free rent period) are recognised as part
of the measurement of the right-of-use assets and lease
liabilities. Under IFRS 16, right-of-use assets are tested for
impairment in accordance with IAS 36 Impairment of Assets.
For short -- term leases (lease term of 12 months or less) and
leases of low-value assets, the Group has opted to recognise a
lease expense on a straight-line basis as permitted by IFRS 16.
The Group assesses whether a contract is or contains a lease, at
inception of a contract.
The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease agreements in which it is
the lessee, except for short-term leases (defined as leases with a
lease term of 12 months or less) and leases of low value assets.
For these leases, the Company recognises the lease payments as an
operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased asset are
consumed.
The lease liability is initially measured at the present value
of the lease payments over the remaining term of the lease that are
not paid at the commencement date, discounted by using the rate
implicit in the lease. If this rate cannot be readily determined,
the Company uses its incremental borrowing rate, which is based on
its current bank loans and debt terms and amended for leases
outside of the UK based upon the differences in the base rates.
Financial impact of initial application of IFRS 16;
The table below show the amount of adjustment for each financial
statement line item affected by the application of IFRS 16 for the
period ended 30 June 2020.
GBP'000
Impact on profit for the period ended 30 June 2020
Increase in depreciation and amortisation expense 583
Increase in finance costs 87
(Decrease) in other expenses (517)
Decrease in profit for the year 153
The impact on EBITDA for the period to 30 June 2020 was an
increase of GBP0.52m.
GBP'000
Impact on balance sheet for the period ended 30
June 2020
Right of use assets on transition on 1 July 2020 775
Right of use assets acquired during the period 2,165
--------
2,940
Depreciation and amortisation expense (583)
--------
Net book value of right of use assets at 30 June
2020 2,357
--------
Lease liabilities arising on transition and acquired (2,940)
Finance costs (effective interest) (87)
Payments towards lease liabilities 818
--------
Lease liabilities at 30 June 2020 (2,535)
--------
The following is a reconciliation of total operating
lease commitments at 30 June 2020 to the lease
liabilities recognised at 1 July 2019:
GBP'000
Reconciliation to operating lease commitments
Total operating lease commitments at 30 June 2019 1,594
Discounted using the lessee's incremental borrowing
rate at the date of initial application (108)
Relief option for short term leases and low value
assets
Other movement (579)
(132)
----------
Lease liabilities at 1 July 2019 775
----------
On transition to IFRS 16 the weighted average incremental
borrowing rate applied to lease liabilities recognised under IFRS
16 was 4.5%.
IAS 17 - Leases (comparative period)
In the comparative period, a distinction was made between
finance leases, which effectively transfer from the lessor to the
lessee substantially all the risks and benefits incidental to the
ownership of leased assets, and operating leases, under which the
lessor effectively retains substantially all such risks and
benefits.
Finance leases were capitalised. A lease asset and liability was
established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments were
allocated between the principal component of the lease liability
and the finance costs, so as to achieve a constant rate of interest
on the remaining balance of the liability.
Leased assets acquired under a finance lease were depreciated
over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty
that the Group will obtain ownership at the end of the lease
term.
Operating lease payments, net of any incentives received from
the lessor, were charged to profit or loss on a straight-line basis
over the term of the lease.
Change in accounting estimates
The Group previously calculated depreciation on computer
equipment using the straight line method to allocate its cost or
revalued amount, net of residual value, over its estimated useful
life of 3-4 years or over the length of the lease.
On 1 July 2019, the Group carried out a full review of the
appropriateness of the useful life of its computer equipment.
Following this review, the Group considers the estimated useful
life of its computer equipment to be 5 years. The Group believes
that this provides more reliable and relevant information to the
users of its financial information with regards to the length of
time economic benefits are consumed over. Changes in estimates are
applied prospectively.
The group depreciation charge for the period (GBP1.47m) is
calculated based on the carrying value of these assets at the 1
July 2019 and the remaining amount of the revised estimated useful
life. If computer equipment had been measured under the previous
estimated useful life, the group depreciation charge for the period
would have been GBP1.67m and the carrying value of Property, Plant
and Equipment would have been GBP6.95m at the period end. The group
has also reviewed the amounts recognised in relation to the
acquisition of CNS in the period to 30 June 2020 and has made no
subsequent changes to the valuation of intangible assets.
GOING CONCERN
The Directors have assessed the current financial position of
Beeks Financial Cloud Group PLC, taking account of its business
activities, together with the factors likely to affect its future
development, performance and position as set out in the Strategic
Report on pages 4 to 11.
The key factors considered by the Directors were:
-- historic and current trading and profitability of the Group,
-- the rate of growth in sales both historically and forecast,
-- the competitive environment in which the group operates,
-- the current level of cash reserves,
-- current level of debt obligations
-- Ability to comply with existing covenants
-- Potential Impact of Covid-19
-- the finance facilities available to the Group, including the
availability of any short term funding required.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report on pages 4 to 11 including the
potential impact of Covid-19. The financial position of the Group,
its cash flows, liquidity position and borrowing facilities are
described in the Chief Financial Officer's Report on pages 9 to
11.
In the five months since the response to the Covid-19 pandemic
was initiated in the UK, there has been a very limited impact on
Beeks' trading from Covid-19. We take great comfort from the
resilience of our business model and are fortunate that we are not
significantly exposed to the industries that are suffering the
worst effects. The level of customer churn across our business has
remained low and cash collection has been in line with our typical
profile. We do however remain vigilant to the economic impact the
ongoing situation may create, particularly on the SME segment of
the market. Note 1 to the financial information includes the
Group's objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to
credit risk and liquidity risk.
The directors are of the opinion that the Group can operate
within their current debt facilities and comply with its banking
covenants. At the end of the financial year, the Group had net debt
of GBP0.75m (2019: Net cash GBP1.02m) a level which the Board is
comfortable with given the strong cash generation of the Group and
low level of debt to EBITDA ratio. The Group has a diverse
portfolio of customers with relatively low customer concentration
across the 242 which are split across different geographic areas.
As a consequence, the directors believe that the Group is well
placed to manage its business risks.
The directors have considered the Group budgets and the cash
flow forecasts for the next two financial years, and associated
risks, including the potential impact of Covid-19, and the
availability of bank and leasing facilities. We have run
appropriate scenario and stress tests applying reasonable downside
sensitivities and are confident we have the resources to meet our
liabilities as they fall due. After making enquiries, the directors
have a reasonable expectation that the Group will be able to meet
its financial obligations and has adequate resources to continue in
operational existence for the foreseeable future.
Accordingly, the Directors have adopted the going concern basis
in preparing the Report for the year ending 30 June 2020.
PRINCIPLES OF CONSOLIDATION
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the
subsidiary and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases. The Group applies
the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary or a
business is the fair values of the assets transferred, the
liabilities incurred to former owners of the acquiree and the
equity interests issued to the Group. The consideration transferred
includes the fair values of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values on the
acquisition date. Acquisition related costs are expensed as
incurred. As each of the subsidiaries are 100% wholly owned, the
Group has full control over each of its investees. Intercompany
transactions, unrealised gains and losses on intragroup
transactions and balances between group companies are eliminated on
consolidation.
Foreign currency transactions
Foreign currency transactions are translated into pound sterling
using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
financial year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated
into pound sterling using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into
Pound sterling using the average exchange rates, which approximate
the rates at the dates of the transactions, for the period. All
resulting foreign exchange differences are recognised in other
comprehensive income through the foreign currency reserve in
equity.
Business Combinations
Acquisitions of subsidiaries are accounted for using the
acquisition method. The acquisition method involves the recognition
at fair value of all identifiable assets and liabilities, including
contingent liabilities of the subsidiary, at the acquisition date,
regardless of whether or not they were recorded in the financial
information of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are
included in the statement of financial position at their fair
values, which are also used as the bases for subsequent measurement
in accordance with the Group accounting policies.
Where the Group's assessment of the net fair value of a
subsidiary's identifiable assets acquired and liabilities assumed
is less than the fair value of the consideration including
contingent consideration of the business combination then the
excess is treated as goodwill. Where the Group's assessment of the
net fair value of a subsidiary's net assets and liabilities exceeds
the fair value of the consideration including contingent
consideration of the business combination then the excess is
recognised through profit or loss immediately.
Where an acquisition involves a potential payment of contingent
consideration the estimate of any such payment is based on its fair
value. To estimate the fair value an assessment is made as to the
amount of contingent consideration which is likely to be paid
having regard to the criteria on which any sum due will be
calculated and is probability based to reflect the likelihood of
different amounts being paid. Where a change is made to the fair
value of contingent consideration within the initial measurement
period as a result of additional information obtained on facts and
circumstances that existed at the acquisition date then this is
accounted for as a change in goodwill. Where changes are made to
the fair value of contingent consideration as a result of events
that occurred after the acquisition date then the adjustment is
accounted for as a charge or credit to profit or loss.
When the consideration transferred by the Group in a business
combination includes a contingent consideration arrangement, the
contingent consideration is measured at its acquisition-date fair
value and included as part of the consideration transferred in a
business combination. Changes in fair value of the contingent
consideration that qualify as measurement period adjustments are
adjusted retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments that arise
from additional information obtained during the 'measurement
period' (which cannot exceed one year from the acquisition date)
about facts
and circumstances that existed at the acquisition date.
Deferred consideration is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the
deferred consideration, which is deemed to be an asset or
liability, are recognised either in the profit and loss account or
in other comprehensive income.
REVENUE RECOGNITION
Revenue arises from the provision of Cloud-based localisation.
To determine whether to recognise revenue, the group follows a
5-step process as follows:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance
obligations
5. Recognising revenue when/as performance obligation(s) are
satisfied.
Revenue is measured at transaction price, stated net of VAT and
other sales related taxes, if applicable.
Beeks core services
The group's core business provides managed Cloud computing
infrastructure and connectivity. The Group considers the
performance condition to be the provision of access and use of
servers to our clients. As the client receives and consumes the
benefit of this use and access over time, the related revenue is
recognised evenly over the life of the contract. Revenue from the
supply of hardware or software is recognised when delivery of the
item is completed on a point in time basis.
The Group has concluded it acts as a principal in each sales
transaction vs an agent. This has been determined by giving
consideration to whether the Group holds inventory risk, has
control over the pricing over a particular service, takes the
credit risk, and whether responsibility ultimately sits within the
Group to service the promise of the agreements.
Revenue from Consultancy services are recognised as these
services are rendered and the performance obligation satisfied. Any
unearned portion of revenue is included in payables as deferred
revenue.
Set up fees charged on contracts are reviewed to consider the
material rights of the set-up fee. When a set-up fee is arranged,
Beeks will consider the material rights of the set-up fee, if in
substance it constitutes a payment in advance, the set-up fee will
be deemed to be a material right. The accounting treatment for both
material rights and non-material rights set-up fees is as
follows:
-- Any set up fees that are material rights are spread over the
group's average contract term
-- Set up fees that are not material rights are recognised over
the enforceable right period, i.e. 1 to 3 months depending on the
termination period
Monitoring software and services
Following the acquisition of Velocimetrics, the group also
provides software products that analyse and monitor IT
infrastructure. Revenue from the provision of software licences is
split between the delivery of the software licence and the ongoing
services associated with the support and maintenance. The supply of
the software licence is recognised on a point in time basis when
the delivery of the item is complete, whilst the ongoing support
and maintenance service is recognised evenly over the period of the
service on an over time basis. The group applies judgement to
determine the percentage of split between the licence and
maintenance portions, which includes an assessment of the pricing
model and comparison to industry standards
Revenue from the supply of hardware or software, and the
provision of services in respect of installation or training, is
recognised when delivery and installation of the equipment is
completed on a point in time basis. Revenue from Consultancy
services are recognised as these services are rendered and the
performance obligation satisfied. Any unearned portion of revenue
is included in payables as deferred revenue.
Revenue recognised over time and at a point in time is as
follows:
Year to 30/06/20 Year to 30/06/19
------------
Revenue Revenue Total Revenue Revenue Total
recognised recognised recognised recognised
over time at point over time at point
in time in time
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ --------- ------------ ------------ ---------
Beeks core
services 8,492 577 9,069 7,259 93 7,352
------------ ------------ --------- ------------ ------------ ---------
Monitoring
software
services 158 134 291 - - -
------------ ------------ --------- ------------ ------------ ---------
Total 8,649 711 9,360 7,259 93 7,352
------------ ------------ --------- ------------ ------------ ---------
Revenue is generally recognised over time as the group satisfies
performance obligations by transferring the promised services to
its customers.
Government Grant Income
Grants from Government agencies are recognised where there is
reasonable assurance that the grant will be received, and all
attached conditions will be complied with. When the grant relates
to an expense item, it is recognised as income on a systematic
basis over the periods that the related costs, for which it is
intended to compensate, are expensed. When the grant relates to an
asset, it is deducted from carrying amount of the intangible asset
over the expected useful life of the related asset. Note 3 Revenue
provides further information on Government grants.
Cost of Sales
Costs considered to be directly related to revenue are accounted
for as cost of sales. All direct production costs and overheads,
including indirect overheads that can reasonably be allocated, have
been classified as cost of sales.
Interest
Interest revenue is recognised as interest accrues using the
effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest
income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Exceptional costs
The Group defines exceptional items as costs incurred by the
Group which relate to material non-recurring costs. These are
disclosed separately where it is considered it provides additional
useful information to the users of the financial information.
TAXATION AND DEFERRED TAXATION
The income tax expense or income for the period is the tax
payable on the current period's taxable income. This is based on
the national income tax rate enacted or substantively enacted for
each jurisdiction with any adjustment relating to tax payable in
previous years and changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of
assets and liabilities and their carrying amounts in the financial
information.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to be applicable when the
asset or liability crystallises based on current tax rates and laws
that have been enacted or substantively enacted by the reporting
date. The relevant tax rates are applied to the cumulative amounts
of deductible and taxable temporary differences to measure the
deferred tax asset or liability.
A deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it
can be regarded as more likely than not that there will be suitable
taxable profits against which to recover carried forward tax losses
and from which the future reversal of temporary differences can be
deducted. The carrying amount of deferred tax assets are reviewed
at each reporting date.
CURRENT AND NON-CURRENT CLASSIFICATION
Assets and liabilities are presented in the statement of
financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to
be realised or intended to be sold or consumed in the Group's
normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless
restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets are
classified as non-current.
A liability is classified as current when: it is either expected
to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled
within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at
least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as
non-current.
CASH AND CASH EQUIVALENTS
Cash at bank, overnight and longer term deposits which are held
for the purpose of meeting short term cash commitments are
disclosed within cash and cash equivalents.
FINANCIAL INSTRUMENTS
IFRS 9 requires an expected credit loss ("ECL") model which
requires the Group to account for expected credit losses and
changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition of the
financial assets. The main financial asset that is subject to the
new expected credit loss model is trade receivables, which consist
of billed receivables arising from contracts.
The Group has applied the simplified approach to providing for
expected credit losses ("ECL") prescribed by IFRS 9, which permits
the use of lifetime expected loss provision for all trade
receivables.
The ECL model reflects a probability weighted amount derived
from a range of possible outcomes. To measure the ECL, trade
receivables and accrued income have been grouped based on shared
credit risk characteristics and the days past due. The Group has
established a provision matrix based on the payment profiles of
historic and current sales and the corresponding credit losses
experienced. The historical loss rates are adjusted to reflect
current and forward-looking information that might affect the
ability of customers to settle the receivables, including
macroeconomic factors as relevant.
Provision against trade and other receivables is made when there
is objective evidence that the Group will not be able to collect
all amounts due to it in accordance with the original terms of
those receivables. The amount of the write-down is determined as
the difference between the asset's carrying amount and the present
value of estimated future cash flows. An assessment for impairment
is undertaken at least at each reporting date.
TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised at fair value, less
provision for impairment. These are subsequently measured at
amortised costs using effective interest method. A provision for
impairment of trade and other receivables is established when there
is objective evidence that Beeks Financial Cloud Group PLC will not
be able to collect all amounts due according to the original terms
of the receivables. Significant financial difficulties of the
debtors, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payments
(more than 90 days overdue) are considered indicators that the
trade and other receivables may be impaired. The amount of the
provision is the difference between the asset's carrying amount and
the present value of estimated future cash flows, discounted at the
original effective interest rate. The carrying amount of the asset
is reduced through the use of an allowance account, and the amount
of the loss is recognised in the profit or loss within
'administrative expenses'. When a trade or other receivable is
uncollectible, it is written off against the allowance account for
trade and other receivables. Subsequent recoveries of amounts
previously written off are credited against 'cost of sales' in the
profit or loss.
SHARE BASED PAYMENTS
Options are measured at fair value at grant date using the Black
Scholes model. The fair value is expensed on a straight line basis
over the vesting period, based on an estimate of the number of
options that will eventually vest.
Under the group's share option scheme, share options are granted
to directors and selected employees. The options are expensed in
the period over which the share based payment vests. A
corresponding increase to the share option reserve under
shareholder's funds is recognised.
When share options are exercised, the company issues new shares.
The nominal share value from the proceeds received are credited to
share capital and proceeds received above nominal value, net of
attributable transaction costs, are credited to the share premium
when the options are exercised. When share options are forfeited,
cancelled or expire, the corresponding fair value is transferred to
the accumulated losses reserve.
The group has no legal or constructive obligation to repurchase
or settle the options in cash.
PROPERTY, PLANT AND EQUIPMENT (PPE)
PPE is stated at historical cost less accumulated depreciation.
Historical cost includes expenditure that is directly attributable
to the acquisition of the items. Subsequent costs are included in
the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits
associated with the item will flow to Beeks Financial Cloud Group
PLC and the cost of the item can be measured reliably. All other
repairs and maintenance are charged to profit or loss during the
financial period in which they are incurred.
Depreciation on plant and machinery and fixtures and fittings is
calculated using the straight line method to allocate their cost or
revalued amounts, net of their residual values, over their
estimated useful lives, as follows:
- Leasehold improvements over the lease period
- Computer Equipment 5 years and over the length of lease
The residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements and plant and equipment under lease are
depreciated over the unexpired period of the lease or the estimated
useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon
disposal or when there is no future economic benefit to the Group.
Gains and losses between the carrying amount and the disposal
proceeds are taken to profit or loss. Any revaluation surplus
reserve relating to the item disposed of is transferred directly to
retained profits.
INTANGIBLE ASSETS AND AMORTISATION
Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the assets and liabilities assumed at the
date of acquisition. Goodwill acquired in business combinations is
not amortised. Instead, goodwill is tested for impairment annually
or more frequently if events or changes in circumstances indicate
that it might be impaired, and is carried at cost less accumulated
impairment losses. Intangible assets carried forward from prior
years are re-valued at the exchange rate in the current financial
year. Impairment testing is carried out by assessing the
recoverable amount of the cash generating unit to which the
goodwill relates. Negative goodwill is immediately released to the
Income Statement in the year of acquisition.
Customer relationships
Included within the value of intangible assets are customer
relationships. These represent the purchase price of customer lists
and contractual relationships purchased on the acquisition of the
business and assets of Gallant VPS Inc., and Commercial Network
Services. These relationships are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight line
method over periods of between five and ten years.
Development costs
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred.
Development costs incurred are capitalised when all the
following conditions are satisfied:
-- completion of the intangible asset is technically feasible so
that it will be available for use or sale;
-- the Group intends to complete the intangible asset and use or
sell it;
-- the Group has the ability to use or sell the intangible
asset;
-- the intangible asset will generate probable future economic
benefits;
-- there are adequate technical, financial and other resources
to complete the development and to use or sell the intangible
asset, and
-- the expenditure attributable to the intangible asset during
its development can be measured reliably.
Development costs not meeting the criteria for capitalisation
are expensed as incurred. The costs which do meet the criteria
range from new product development to the enhancement of existing
services such as mail platforms. The scope of the development
team's work continues to evolve as the Group continues to deliver
business critical solutions to a growing customer base. Development
costs capitalised are amortised on a straight-line basis over the
estimated useful life of the asset. The estimated useful life is
deemed to be five years for all developments capitalised.
Amortisation charges are recognised through profit or loss in the
period in which they are incurred.
IMPAIRMENT
Goodwill and assets that are subject to amortisation are tested
annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. Other
non-financial assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable
amount.
Recoverable amount is the higher of an asset's fair value less
costs of disposal and value-in-use. The value-in-use is the present
value of the estimated future cash flows relating to the asset
using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not
have independent cash flows are grouped together to form a
cash-generating unit.
TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest method. These amounts represent liabilities for goods and
services provided to Beeks Financial Cloud Group plc prior to the
end of the financial period which are unpaid as well as any
outstanding tax liabilities.
BORROWINGS
Loans and borrowings are initially recognised at the fair value
of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective
interest method.
DEFINED CONTRIBUTION SCHEMES
The defined contribution scheme provide benefits based on the
value of contributions made. Contributions to the defined
contribution superannuation plans are expensed in the period in
which they are incurred.
FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes
that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For
non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in
the circumstances and for which sufficient data are available to
measure fair value, are used, maximising the use of relevant
observable inputs and minimising the use of unobservable
inputs.
EQUITY
Ordinary shares are classified as equity. An equity instrument
is any contract that evidences a residual interest in the assets of
Beeks Financial Cloud Group plc after deducting all of its
liabilities. Equity instruments issued by Beeks Financial Cloud
Group plc are recorded at the proceeds received net of direct issue
costs.
The share capital account represents the amount subscribed for
shares at nominal value.
The accounting policies set out above have, unless otherwise
stated, been applied consistently by the Group to all periods
presented.
EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of Beeks Financial Cloud Group PLC,
excluding any costs of servicing equity other than ordinary shares,
by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary
shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary
shares.
VALUE-ADDED TAX ('VAT') AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the amount
of associated VAT, unless the VAT incurred is not recoverable from
the tax authority. In this case it is recognised as part of the
cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of
VAT receivable or payable. The net amount of VAT recoverable from,
or payable to, the tax authority is included in other receivables
or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The VAT components of
cash flows arising from investing or financing activities which are
recoverable from, or payable to the tax authority, are presented as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of
VAT recoverable from, or payable to, the tax authority.
ROUNDING OF AMOUNTS
Amounts in this report have been rounded off to the nearest
thousand pounds, or in certain cases, the nearest pound.
2. Critical accounting judgements and key sources of estimation
uncertainty
The Group do not consider that there are any critical accounting
judgements in the preparation of the financial information. The key
assumptions concerning the future, and other key sources of
estimation uncertainty at the year end, that have a significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are
discussed below.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related
depreciation and amortisation charges for its property, plant and
equipment and finite life intangible assets. The useful lives could
change significantly as a result of technical innovations or some
other event. The depreciation and amortisation charge will increase
where the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down. During the
period, the group applied a change in estimate of it's useful life
of computer equipment as noted on p 20.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or
changes in circumstances indicate impairment, whether goodwill and
other indefinite life intangible assets have suffered any
impairment, in accordance with the accounting policy stated in note
1. The recoverable amounts of cash-generating units have been
determined based on value-in-use calculations. These calculations
require the use of assumptions, including estimated discount rates
based on the current cost of capital and growth rates of the
estimated future cash flows. Sensitivity analysis is also performed
to reduce growth assumptions and increase discount rates and there
is still sufficient headroom in the asset, see note 10.
Valuation of intangible assets and fair value adjustments on
acquisition
As the Group continues to implement its acquisition strategy
there is a requirement to fair value the assets and liabilities of
any business acquired during the year. The Group is required to
make an assessment as to what intangible assets exist within the
acquired business at the time of the acquisition and what fair
value adjustments are required. When reviewing the existence of
intangible assets, consideration has been given to potential
intangible assets such as customer relationships. The estimation of
the valuation of customer relationships is based on the value in
use calculation which requires estimates of the future cash flows
expected to arise from the existing customer relationships over
their useful life and to select a suitable discount rate in order
to calculate the present value. Full details of the assumptions
used in the calculation of intangible assets and fair value
adjustments on the acquisitions that have occurred during the
current year are disclosed in note 9.
Development costs
The Group reviews half yearly whether the recognition criteria
for development costs have been met. This is necessary as the
economic success of any product development is uncertain and may be
subject to future technical problems at the time of recognition.
Judgements are based on the information available at each review
period. In addition, all internal activities related to the
development of new products are continuously monitored by the
Directors. See note 10 for further information.
Taxation
The Group is subject to income taxes in the jurisdictions in
which it operates. Significant judgement is required in determining
the provision for income tax. There are many transactions and
calculations undertaken during the ordinary course of business for
which the ultimate tax determination is uncertain. Where the final
tax outcome of these matters is different from the carrying
amounts, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
Recovery of deferred tax assets
The Group has tax losses available to offset future taxable
profits. In estimating the amount of deferred tax to be recognised
as an asset the Group estimates the future profitability of the
relevant business unit. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. Deferred tax assets are recognised to the
extent that it is probable that the underlying deductible temporary
differences will be able to be offset against future taxable
income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date. Within the
deferred tax provisions are deferred tax assets that have been
recognised in the US due to the difference between the amortisation
period. The group has elected to amortise the US assets over a
period of 15 years in line with US tax authorities. This gives rise
to a deferred tax asset as the Group is using a five year useful
life for financial reporting purposes. The deferred tax asset has
been calculated at an average US tax rate of 21%. This is shown in
Note 12.
Share based payments
The Group operates equity-settled share based remuneration plans
for its employees. All goods and services received in exchange for
the grant of any share based payment are measured at their fair
values. Where employees are rewarded using share based payments,
the fair values of employees' services are determined indirectly by
reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant.
All share based remuneration plans are ultimately recognised as
an expense through profit or loss with a corresponding credit to
'retained earnings'.
If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Estimates are subsequently revised if there is any indication that
the number of share based incentives expected to vest differs from
previous estimates. The two main vesting conditions that apply to
share options relate to the achievement of annual objectives and
continuous employment. Any cumulative adjustment prior to vesting
is recognised in the current period. No adjustment is made to any
expense recognised in prior periods if share based incentives
ultimately exercised are different to that estimated on
vesting.
Upon exercise of share based incentives the proceeds received
net of attributable transaction costs are credited to share
capital, and where appropriate share premium.
Contingent consideration
Where an acquisition involves a potential payment of contingent
consideration the Group is required to make an assessment as to
whether any contingent consideration payment is likely. If it is,
then an estimate of any such payment is based on its fair value. To
estimate the fair value an assessment is made as to the amount of
contingent consideration which is likely to be paid having regard
to future forecasts, the criteria on which any sum due will be
calculated and is probability based to reflect the likelihood of
different amounts being paid. At 30 June 2020, contingent
consideration relates to Velocimetrics Ltd (note 9).
Revenue
The group applies judgment for elements of revenue recognition.
The key areas of assessment include whether the group acts as a
principal vs an Agent for the sale of hardware and the percentage
of split between licence and maintenance for the sale of software
licences. Full details of the Group's revenue recognition policy
and these judgements can be found on p 22.
Alternative performance measures
In addition to measuring financial performance of the Group
based on statutory profit measures, the Group also measures
performance based on adjusted EBITDA, adjusted profit before tax
and adjusted diluted earnings per share.
Adjusted EBITDA
Adjusted EBITDA is defined as earnings before interest, tax,
depreciation and amortisation (EBITDA) before share-based payment
charges, acquisition costs and any gains or losses on revaluation
of contingent consideration. Adjusted EBITDA is a common measure
used by investors and analysts to evaluate the operating financial
performance of companies, particularly in the sector that the Group
operates.
The Group considers adjusted EBITDA to be a useful measure of
operating performance because it approximates the underlying
operating cash flow by eliminating the charges mentioned above. It
is not a direct measure of liquidity, which is shown in the
consolidated statement of cash flows, and needs to be considered in
the context of the Group's financial commitments.
Adjusted profit before tax
Adjusted profit before tax is defined as profit before tax
adjusted for the following:
-- amortisation charges on acquired intangible assets;
-- share-based payment charges;
-- M&A activity including:
o Professional fees;
o Any non-recurring integration costs;
o Any gain or loss on the revaluation of contingent
consideration where it is material; and
o Any material non-recurring costs where their removal is
necessary for the proper understanding of the underlying profit for
the period.
The Group considers adjusted profit before tax to be a useful
measure of performance because it eliminates the impact of certain
non-recurring items including those associated with acquisitions
and other charges commonly excluded from profit before tax by
investors and analysts for valuation purposes.
Adjusted diluted earnings per share
Adjusted diluted earnings per share is calculated by taking the
adjusted profit before tax as described after deducting an
appropriate taxation charge and dividing by the total weighted
average number of ordinary shares in issue during the year and
adjusting for the dilutive potential ordinary shares relating to
share options.
The Group considers adjusted diluted earnings per share to be a
useful measure of performance for the same reasons as adjusted
profit before tax. In addition, it is used as the basis for
consideration to the level of dividend payments.
3. Segment Information
Operating segments are reporting in a manner consistent with the
internal reporting provided to the chief operating decision
makers.
The chief operating decision makers, who are responsible for
allocating resources and assessing performance of operating
segments, have been identified as the PLC Board.
During the year ended 30 June 2020, the Group was organised into
two main business segments for revenue purposes, institutional and
private customers. Customers acquired as part of the recent
Velocimetrics acquisition are all institutional. The group does not
place reliance on any specific customer and has no individual
customer that generates 7% or more of its total group revenue.
Performance is assessed by a focus on the change in revenue across
both institutional and retail revenue. Cost is reviewed at a cost
category level but not split by segment. Assets are used across all
segments and are therefore not split between segments so management
review profitability at a group level.
2020 2019
GBP000 GBP000
------- -------
Revenues by business segment are as follows:
Institutional 7,995 6,437
Retail 1,365 915
------- -------
Total 9,360 7,352
------- -------
Revenues by geographic location are as follows:
United Kingdom 2,720 1,525
Europe 1,180 863
United States 1,906 1,589
Rest of World 3,554 3,375
------- -------
Total 9,360 7,352
------- -------
Non-Current Assets by geographic location are
as follows:
United Kingdom - Property, plant and equipment 3,514 1,369
Europe - Property, plant and equipment 566 30
Rest of World - Intangible assets 4,458 1,701
Rest of World - Goodwill 2,283 528
Rest of World - Property, plant and equipment 2,675 1,041
------- -------
Total Non-Current Assets 13,496 4,669
------- -------
Intangible assets have been classified as "Rest of World" due to
the fact they represent products that are available to customers
throughout the World as well as the US intangible assets referred
to in note 10.
The Group has taken advantage of the practical expedient
permitted by IFRS 15 and has therefore not disclosed the amount of
the transaction price allocated to unsatisfied performance
obligations or when it expects to recognise that revenue, as
contracts have an expected duration of less than one year.
During the year, GBP59,000 was recognised in other income for
grant income received from Scottish Enterprise.
4. Operating Profit
Operating Profit is stated after charging:
2020 2019
GBP000 GBP000
------- -------
Staff costs (note 6) 2,526 1,839
Depreciation (note 11) 891 898
Depreciation right-of-use assets (note 11) 583 -
Amortisation of intangibles (note 10) 387 182
Foreign exchange losses 17 36
Acquisition costs (note 9) 205 127
Share based payments (note 19) 312 63
Non recurring costs - Head office relocation 13 -
costs
Non recurring costs - Restructuring costs 33 -
Other non-recurring costs 15 21
Auditors remuneration 2020 2019
GBP000 GBP000
Audit
Auditors services
Fees payable for the audit of the consolidation
and the parent company accounts including the
audit of the acquisition 34 24
Fees payable for the audit of the subsidiaries 27 15
Non Audit
Fees payable for the interim review of the
group 10 9
71 48
5. Finance costs
2020 2019
GBP000 GBP000
------- -------
Bank charges 89 61
Loans and leasing 190 91
Total finance costs 279 152
6. Average number of employees and employee benefits expense
2020 2019
GBP000 GBP000
-------------- -------
Excluding directors, the average number of employees
(at their full time equivalent) during the year
was as follows:
Management and administration 12 11
Support and development staff 29 18
-------------- -------
Average numbers of employees 41 29
The employee benefits expense during the year
was as follows:
Wages and salaries 2,214 1,612
Social security costs 265 201
Other pension costs 46 26
-------------- -------
Total employee benefits expense 2,526 1,839
Share based payments (note 19) 312 63
7. Directors remuneration
20 20 201 9
GBP000 GBP000
------- -------
Aggregate remuneration in respect of qualifying
services 258 2 56
Aggregate amounts of contributions to pension 5 3
schemes in respect of qualifying services
Share based payments 115 24
Highest paid director - aggregate remuneration 96 78
There are two directors (2019: two) who are accruing retirement
benefits in respect of qualifying services.
8. Taxation expense
2020 2019
GBP000 GBP000
--------- --------
Current tax
UK tax (16) -
Foreign tax on overseas companies 25 25
--------- --------
Total current tax 9 25
Origination and reversal of temporary differences 94 (45)
Total deferred tax 94 (45)
Tax on profit on ordinary activities 103 (20)
--------- --------
The differences between the total tax charge above and the amount
calculated by applying the standard rate of UK corporation tax to
the profit before tax, together with the impact of the effective
tax rate, are as follows:
2020 % ETR 2019 % ETR
GBP000 movement GBP000 movement
------- --------- ------- ---------
Profit before tax 678 1,043
------- --------- ------- ---------
Profit on ordinary activities
multiplied by the standard rate
of corporation tax in the UK
of 19% (2018: 19%) 129 19% 198 19%
------- --------- ------- ---------
Effects of:
------- --------- ------- ---------
Expenses not deductible for
tax purposes 33 4.87% 42 4.03%
------- --------- ------- ---------
R&D tax credits relief (72) (10.62%) (86) (8.25%)
------- --------- ------- ---------
Share option deduction 59 8.70% (128) (12.27%)
------- --------- ------- ---------
Prior year deferred tax adjustments (49) (7.23%) (44) (4.22%)
------- --------- ------- ---------
Foreign tax suffered 2 0.29% (3) (0.29%)
------- --------- ------- ---------
Other 1 0.15% 1 0.10%
------- --------- ------- ---------
Total tax charge 103 15.19% (20) (1.92%)
------- --------- ------- ---------
The effective tax rate ('ETR') for the period was 15.2%, (2019:
(1.9%)).
UK unrelieved Foreign Total Tax effect
trading unrelieved unrelieved
losses trading trading
losses losses
GBP000 GBP000 GBP000 GBP000
-------------- ------------ ------------ -----------
As at 1 July 2019 184 - 184 35
-------------- ------------ ------------ -----------
Recognised during the year 363 - 363 69
-------------- ------------ ------------ -----------
As at 30 June 2020 547 - 547 104
-------------- ------------ ------------ -----------
9. Acquisitions
On 14 April 2020, the Group acquired the entire issued share
capital of Velocimetrics Limited
("VMX"), a UK-based network monitoring and trade analytics
software company for a base consideration of GBP1.3 million in cash
and equity, plus contingent earn-out.
Total cash paid on acquisition, net of cash acquired, in the
year ended 30 June 2020 was GBP0.75m. Velocimetrics provides real
time network monitoring and trade analytics software to a global
client list of financial services businesses, including Tier 1
banks, exchanges, brokers, hedge funds and payments providers. The
Acquisition expands the Beeks' product offering into network
automation and trading analytics, increasing the Group's
competitive differentiation from generic Cloud hosting and
infrastructure providers and provides additional cross-sale
opportunities across the expanded customer base. The Company funded
the initial payment via a new debt facility with The Royal Bank of
Scotland plc totalling GBP1.5 million to fund both the acquisition
and provide additional growth capital for the enlarged Group.
During the current period the Group incurred GBP0.17m of third
party acquisition related costs in respect of this acquisition and
another GBP0.03m for the integration of the CNS business acquired
in the previous financial year. These expenses are included in
administrative expenses in the Group's consolidated statement of
comprehensive income for the year ended 30 June 2020.
The following table summarises the consideration to acquire VMX,
and the amounts of identified assets acquired and liabilities
assumed at the acquisition date, which are provisional
Book Fair Value
Adjustments Final Fair
value Value
GBP000 GBP000 GBP000
Cash and cash equivalents 368 - 368
Trade and other receivables 307 - 307
Property plant and equipment 6 - 6
Intangible Assets 1,101 1,386 2,487
Trade and other payables (785) - (785)
Deferred tax liability (1) (145) (146)
Identifiable net assets 996 1,241 2,237
Goodwill - 1,846
Total consideration 4,083
Satisfied by:
Cash - paid on acquisition 750
Equity - paid on acquisition 333
Deferred consideration 552
Contingent consideration
- payable 2,448
Total consideration transferred 4,083
Under the terms of the Transaction, GBP1.05m was due on
completion (the "Initial Consideration") with GBP0.3m held as
retention subject to satisfactory completion of warranties and a
net working capital adjustment to follow as the deal was done on a
cash free, debt free, normalised working capital basis. Further
consideration payable based on achievement of revenue targets for
the financial years to Jun-20 and Jun-21. (the "Contingent
Consideration").
The potential undiscounted amount of the Deferred Payment that
the Company could be required to pay is between GBPnil and
GBP2,800,000. The amount of contingent consideration payable, which
was recognised as of the acquisition date, was GBP2,448,000. The
level of revenue was estimated by considering the current level of
the MRR, historic performance, known and agreed changes to the
current level, and forecasts based on the sales pipeline.
The goodwill arising on the acquisition of VMX is attributable
to the premium payable for a pre-existing, well positioned business
and the specialised, industry specific knowledge of its staff,
together with the benefits to the Group in merging the business
with its existing infrastructure and the anticipated future
operating synergies from the combination.
The fair value included in respect of the acquired customer
relationships, software and Velocimetrics trade name intangible
asset is GBP2.59m. To estimate the fair value of the trade name and
software, a discounted cash flow method, specifically the income
approach (relief from royalty), was used. The income approach
(excess earnings) was used to value the customer contracts and
relationships with reference to the directors' best estimates of
the level of revenue, which will be generated from them. These
estimates were consistent with those used to determine the
contingent consideration and considered a range of possible sales
pipeline forecasts. A post-tax discount rate of 29.5% was used for
the valuation. Customer relationships are being amortised over an
estimated useful life of 10 years and software intangibles and
trade names are being amortised over 5 years.
Velocimetrics earned revenue of GBP0.3m and generated loss,
before allocation of group overheads and tax of GBP22,000 in the
period since acquisition.
Pro-forma full year information
The following summary presents the Group as if the businesses
acquired during the year had been acquired on 1 July 2019. The
amounts include the results of the acquired business excluding any
possible synergies. The information is provided for illustrative
purposes only and does not necessarily reflect the actual results
that would have occurred, nor is it necessarily indicative of the
future results of combined companies.
Pro-forma for the year ended 30 June 2020
GBP000
Revenue 1,625
Profit before tax for the year 215
10. Intangible assets
Acquired Development
Customer
Costs Trade
lists name Goodwill Total
GBP000 GBP000 GBP000 GBP000
Cost
Balance at 1 July
2018 406 384 400 1,190
Acquisition of trading
assets 993 - 119 1,112
Additions - 437 - 437
Currency translation
differences (16) - - (16)
Balance at 30 June
2019 1,383 821 519 2,723
Acquisition of subsidiary 1,097 1,253 137 1,846 4,333
Additions - 720 - 720
Grant funding received (221) (221)
Currency translation
differences 53 - - 53
------------- ------------ ------ -------------- -------
As at 30 June 2020 2,533 2,573 137 2,365 7,608
Accumulated Depreciation
Balance at 1 July
2018 (297) (18) (7) (323)
Charge for the year (99) (83) - (182)
Foreign exchange
movements (6) - 16 10
------------- ------------ ------ -------------- -------
Balance at 30 June
2019 (402) (101) 9 (494)
Charge for the year (150) (230) (7) - (387)
Foreign exchange
movements - - 14 14
------------- ------------ ------ -------------- -------
As at 30 June 2020 (552) (331) (7) 23 (867)
N.B.V. 30 June 2019 981 720 - 528 2,229
============= ============ ====== ============== =======
N.B.V. 30 June 2020 1,981 2,242 130 2,388 6,741
============= ============ ====== ============== =======
Included within Customer list are the following significant
items; customer relationships in relation to the acquisitions of
CNS of GBP1.0m with a useful life of 10 years as well as the
current year additions of the VMX business of GBP1.1m with a useful
life of 10 years.
Development costs have been recognised in accordance with IAS 38
in relation to the creation of the company's self-service portal,
website and cyber-attack prevention software (DDoS). As at 30 June
2020 the remaining useful lives of these assets are 2 years and 7
months, 2 years and 6 months and 2 years and 5 months respectively.
Development costs also include GBP1.3m of acquired VMX software
which is being amortised over a useful life of five years as well
as GBP0.4m of costs relating to the network automation project
which has yet to be amortised.
Included within goodwill is:-
-- The historic goodwill relating to CNS with a value of GBP0.1m,
-- The historic goodwill relating to VDIWare LLC with a value of GBP0.4m.
-- Goodwill relating to the recent acquisition of Velocimetrics
with a value of GBP1.8m
The goodwill relating to VMX has been recently valued and will
be assessed for impairment on an annual basis.
Goodwill arising from the acquisition of the businesses and
assets which have been capitalised are assessed on an annual basis
for impairment. The revaluation represents exchange adjustment
only. Impairment reviews are carried out on an annual basis to
ensure that the carrying value of each individual asset is still
appropriate. In performing these reviews, under the requirements of
IAS 36 "Impairment of Assets" management prepared forecasts for
future trading in which assumptions over sales growth, gross
margins and costs were applied over a useful life period of up to
ten years. For VDIWare and CNS, a post-tax discount discount rate,
that reflects current market assessments of the time value of money
and the risks specific to the asset, of 12% and 14.5% was used.
Based on an analysis of the impairment calculation's sensitivities
to changes in key parameters (growth rate, discount rate and
post-tax cash flow projections) there was no reasonably possible
scenario where these recoverable amounts would fall below their
carrying amounts therefore as at 30 June 2020, no change to the
impairment provision against the carrying value of intangibles was
required.
11. Non-current assets - Property, plant and equipment
Computer Office Leasehold Property
and
equipment equipment improvement Total
GBP000 GBP000 GBP000 GBP000
Cost
Balance at 1 July
2018 3,619 21 30 3,670
Additions 1,220 2 - 1,222
Disposals - - (30) (30)
---------- ---------- ------------------- --------
Balance at 30 June
2019 4,839 23 - 4,862
Acquisition of subsidiaries 6 - - 6
Additions 2,784 35 2,993 5,811
Disposals (39) - - (39)
As at 30 June 2020 7,590 58 2,993 10,641
Depreciation
Balance at 1 July
2018 (1,519) (5) (9) (1,533)
Charge for the year (892) (6) - (898)
Disposals - - 9 9
Balance at 30 June
2019 (2,411) (11) - (2,422)
Charge for the year (873) (18) (583) (1,474)
Eliminated on Disposal 10 - - 10
---------- ---------- ------------------- --------
As at 30 June 2020 (3,274) (29) (583) (3,886)
N.B.V. 31 June 2019 2,428 12 - 2,440
========== ========== =================== ========
N.B.V. 31 June 2020 4,316 29 2,410 6,755
========== ========== =================== ========
Of the total additions in the year of GBP5,811,000, GBP775,000,
relates to right-of-use assets brought on the balance at 1 July
2019 on transition to IFRS 16 (Note 1) with further right-of-use
additions during the year of GBP2,165,000 and GBP53,000 of leasehold
improvements relating to the new head office.
As disclosed in Note 1, on 1 July 2019, the Group adopted IFRS 16
and recognised a right-of-use asset of GBP0.83m. At 30 June 2020,
a total of GBP2.94m is recognised within additions to leasehold
property and improvements in relation to the initial recognition
and additions during the year along with a corresponding depreciation
charge of GBP0.58m.
All depreciation charges are included within cost of sales.
12. Non-current assets - Deferred tax
Deferred tax is recognised at the standard UK corporation tax of
19% for fixed assets in the UK (2019: 19%). Deferred tax in the US
is recognised at an average rate of 21% for 2020 (2019: 25%). The
deferred tax asset relates to the difference between the
amortisation period of the US acquisitions for tax and reporting
purposes as well as the impact of the share options exercised
during the year and tax losses carried forward in both UK and
overseas companies.
2020 2019
GBP000 GBP000
------- -------
The split of fixed and intangible asset are
summarised as follows:
Deferred tax liabilities (531) (48)
Deferred tax asset 380 136
Total deferred tax (151) 88
Movements
Opening balance 88 147
Charged to profit or loss (note 8) (94) 45
Charged to goodwill/equity (145) (104)
Closing balance (151) 88
The movement in deferred income tax assets and liabilities
during the year is as follows:
Tax Total Total
Share losses Accelerated deferred deferred
based carried tax tax tax
payments forward depreciation asset liability
GBP000 GBP000 GBP000 GBP000 GBP000
At July 2018 104 110 41 255 (108)
Charge to income - (75) 60 (15) 60
Charge to equity (104) - - (104) -
As at 30 June
2019 - 35 101 136 (48)
Charge to income - 152 (46) 106 (200)
Charge to equity - - - -
Deferred tax
on acquired
assets 138 138 (283)
--------- ------------ -------------------- ------------- ----------
As at 30 June
2020 - 325 55 380 (531)
13. Current assets - Trade and other receivables
2020 2019
GBP000 GBP000
------- -------
Trade receivable 791 679
Less: provision for impairment of receivables (20) (63)
------- -------
771 616
Prepayments and accrued income 721 388
Other taxation 0 40
Other receivables 33 60
------- -------
1,52
5 1,104
The credit risk relating to trade receivables is analysed as follows:
Trade receivables 791 679
Less: provision for impairment of receivables (20) (63)
------ ------
771 616
Movements in the allowance for expected credit
losses are as follows:
Opening balance 63 82
Additional provisions recognised 20 63
Receivables written off during the year as
uncollectable (65) (82)
Unused amounts reversed 2 -
------ ------
Closing balance 20 63
The Directors consider that the carrying amount of trade and
other receivables is approximately equal to their fair value. The
group has applied the simplified approach to providing for expected
credit losses prescribed by IFRS 9, which permits the use of
lifetime expected loss provision for all trade receivables. The
expected credit loss provision under IFRS 9 as at 30 June 2020 is
GBP13k.
Trade receivables consist of a large number of customers across
various geographical areas. The aging below shows that almost all
are less than three months old and historic performance indicates a
high probability of payment for debts in this aging. Those over
three months relate to customers without history of default for
which there is a reasonable expectation of recovery.
Past due but not impaired
The Group did not consider a credit risk on the aggregate balances
after reviewing the credit terms of the customers based on recent
collection practices.
The aging of trade receivables at the reporting
date is as follows:
Not yet due 505 365
Past due 1 to 3 months 275 152
Past due 3 to 6 months 0 23
More than 6 months past due 11 139
----- ----
791 679
14. Current assets - Cash and cash equivalents
The credit risk on cash and cash equivalents is considered to be
negligible because over 99% of the balance is with counter parties
that are UK and US banking institutions.
15. Current assets - Financial instruments and risk managemen t
Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and
cash equivalents, short term deposits and bank and other
borrowings.
The carrying amount of all financial assets presented in the
statement of financial position are measured at amortised cost.
The carrying amount of all financial liabilities presented in
the statement of financial position are measured at amortised costs
with the exception of contingent consideration with is measured at
Fair Value through profit or loss.
The Group's financial liabilities per the fair value hierarchy
classifications under IFRS 13 'Financial Instruments: Disclosures'
are described below:
Category Fair value Level Description of Inputs used Total recognised
of financial at 30 in hierarchy valuation technique for valuation in profit
liability June 2020 model or loss
GBP'000
Based on level Management estimate
of future revenue on probability
and probability and time scale
that vendors will of vendors meeting
Contingent comply with obligations revenue targets
consideration under sale and and complying
due on acquisitions (2,445) 3 purchase agreement. with obligations. -
---------------------- ----------- -------------- ------------------------ -------------------- -----------------
Total fair (2,445) Total net gain/loss -
value
---------------------- ----------- -------------- ------------------------ -------------------- -----------------
There have been no changes to valuation techniques or any
amounts recognised through 'Other Comprehensive Income'. The main
purpose of these financial instruments is to finance the Group's
operations. The Group has other financial instruments which mainly
comprise trade receivables and trade payables which arise directly
from its operations.
Risk management is carried out by the finance department under
policies approved by the Board of Directors. The Group finance
department identifies, evaluates and manages financial risks. The
Board provides guidance on overall risk management including
foreign exchange risk, interest rate risk, credit risk, and
investment of excess liquidity.
The impact of the risks required to be discussed under IFRS 7
are detailed below:
Market risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions
or recognised assets or liabilities are denominated in a currency
that is not the functional currency of the operations. The Group
has minimal exposure to foreign exchange risk as a result of
natural hedges arising between sales and cost transactions. A 10%
movement in the USD rate would have an impact on the Group's profit
and equity by approximately GBP4,000. The Group had potential
exchange rate exposure within USD trade payable balances of
GBP77,617 as at 30 June 2020 (GBP91,842, at 30 June 2019).
Cash flow and interest rate risk
The Group has limited exposure to interest rate risk in respect
of cash balances and long-term borrowings held with banks and other
highly rated counterparties. All loans and leases are at fixed
rates of interest therefore the group does not have exposure to
interest rate risk.
Credit risk
The Group's maximum exposure to credit risk is limited to the
carrying amount of financial assets recognised at the reporting
date, as summarised below:
2020 2019
GBP000 GBP000
------- -------
Cash and cash equivalents 1,433 2,338
Trade receivables 791 679
Accrued income 223 234
Other receivables 28 60
VAT 0 40
------- -------
2,475 3,351
Credit risk is managed on a Group basis. Credit risks arise from
cash and cash equivalents and deposits with banks and financial
institutions, as well as credit exposures to customers, including
outstanding receivables and committed transactions. Credit risk
refers to the risk that a counterparty will default on its
contractual obligations resulting in financial losses to the Group.
The Group provides standard credit terms (normally 30 days) to all
of its customers which has resulted in trade receivables of
GBP751,000 (2019: GBP616,000) which are stated net of applicable
provisions and which represent the total amount exposed to credit
risk.
The Group's credit risk is primarily attributable to its trade
receivables. It is the policy of the Group to present the amounts
in the balance sheet net of allowances for doubtful receivables,
estimated by the Group's management based on prior experience and
the current economic environment. The Group reviews the reliability
of its customers on a regular basis, such a review takes into
account the nature of the Group's trading history with the
customer.
The credit risk on liquid funds is limited because the majority
of funds are held with two banks with high credit-ratings assigned
by international credit-rating agencies. Management does not expect
any losses from non-performance of these counterparties.
None of the Group's financial assets are secured by collateral
or other credit enhancements.
Liquidity risk
The Group closely monitors its access to bank and other credit
facilities in comparison to its outstanding commitments on a
regular basis to ensure that it has sufficient funds to meet
obligations of the Group as they fall due.
The Board receives regular debt management forecasts which
estimate the cash inflows and outflows over the next twelve months,
so that management can ensure that sufficient financing is in place
as it is required. Surplus cash within the Group is put on deposit
in accordance with limits and counterparties agreed by the Board,
the objective being to maximise return on funds whilst ensuring
that the short-term cash flow requirements of the Group are
met.
As at 30 June 2020, the Group's financial liabilities have
contractual maturities (including interest payments where
applicable) as summarised below:
Current Non-current
Within 1-3 3-12 1-5 After
1 month months months years 5 years
GBP GBP GBP GBP GBP
-------- ------- ------- ----------------- --------
Trade payables 608 61 30 - -
Other payables 16 - - - -
Other loans - 196 600 1,578 -
The above amounts reflect the contractual undiscounted cash
flows, which may differ from the carrying values of the liabilities
at the reporting date.
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or
sell assets to reduce debts.
2020 2019
GBP000 GBP000
Total equity 6,716 5,632
Cash and cash equivalents 1,433 2,338
Capital 8,149 7,970
Total equity 6,716 5,632
Other loans 2,158 997
Lease liabilities 2,535 326
Overall financing 11,409 6,955
Capital-to-overall financing ratio 0.71 1.15
16. Non-current liabilities - Borrowings and other financial liabilities
2020 2019
GBP000 GBP000
------- -------
Other loans 1,461 672
Lease liabilities 1,991 27
3,452 699
------- -------
Other loans
Under one year 697 325
Between one to five years 1,461 672
2,158 997
------ ----
Lease liabilities
Under one year 544 299
Between one to five years 1,991 27
2,535 326
------ ----
Finance leases
The maturity analysis of undiscounted lease liabilities are
shown in the table below:
Under one year 560 348
Between one to five years 2,211 33
Total gross payments 2,771 381
------ ------
Reconciliation of net debt: Lease liabilities
Loans Total
------------------ ------ --------
Balance at 1 July 2019 326 997 1,323
Lease liabilities on transition to IFRS
16 2,940 - 2,940
Impact of effective interest rate 87 - 87
Proceeds from new loans - 1,485 1,485
Loan and lease repayments (818) (324) (1,142)
Balance at 30 June 2020 2,535 2,158 4,693
During the year a loan of GBP1.5m was taken out to fund the
acquisition of Velocimetrics.
17. Current liabilities - Trade and other payables
2020 2019
GBP000 GBP000
------- -------
Trade payables 699 629
Other loans 697 325
Finance leases 544 299
Accruals and deferred income 1,019 364
Other taxation and social security 96 28
Other payables 16 223
VAT 67 -
Deferred consideration 552 -
Contingent consideration 488 -
4,178 1,868
------- -------
18. Equity - issued capital
2020 2019 2020 2019
shares shares GBP000 GBP000
Ordinary shares - fully paid 51,228,258 50,864,800 64 64
--------------------- ----------- ----------- -------
Movements in ordinary share capital
Details Date Shares Issue GBP000
price
Balance 30 June 2018 50,043,100 62
EMI Share options exercised 31 August 2018 677 ,700 GBP.00125 1
EMI Share options exercised 24 October 2018 32 ,200 GBP.00125 -
EMI Share options exercised 20 June 2019 111 ,800 GBP.00125 1
30 June 2019 50,864,800 64
New share issue 14 April 2020 363,458 GBP0.00125 -
Balance 30 June 2020 51,228,258 64
Ordinary shares
During the year 363,458 shares were issued as part of the
consideration for the acquisition of Velocimetrics Ltd. No share
options were exercised during the year.
19. Share based payments
The movements in the share options during the year, were as
follows:-
2020 2019
Outstanding at the beginning of the year 308,824 821,700
Exercised during the year - (821,700)
Issued during the year 1,580,838 308,824
Outstanding at the end of the year 1,889,662 308,824
Exercisable at the end of the year - -
The Group granted a total of 1,580,838 share options to members
of its management team on 17(th) October 2019. These share options
outstanding at the end of the year have the following expiry dates
and exercise prices:
Grant 1 Grant 2 Grant 3 Total
Shares 264,706 44,118 1,580,838 1,889,662
---------------- ---------------- --------------- ----------
Date of 6(th) September 6(th) September 17(th) October
grant 2018 2018 2019
---------------- ---------------- --------------- ----------
Exercise GBP0.00125 GBP0.00125 GBP0.00125
price
---------------- ---------------- --------------- ----------
Vesting 6(th) September 6(th) September 17(th) October
date 2021 2020 2022
---------------- ---------------- --------------- ----------
These share options vest under challenging performance
conditions based on underlying profitability growth during the
three year period.
The Black Scholes model was used to calculate the fair value of
these options, the resulting fair value is expensed over the
vesting period. The following table lists the range of assumptions
used in the model:
Grant 1 Grant 2 Grant 3 Total
Shares 264,706 44,118 1,580,838 1,889,662
-------- -------- ---------- ----------
Share price 1.02 1.02 0.84
-------- -------- ---------- ----------
Volatility 5% 5% 5%
-------- -------- ---------- ----------
Annual risk free
rate 4% 4% 4%
-------- -------- ---------- ----------
Exercise strike price 0.00125 0.00125 0.00125
-------- -------- ---------- ----------
Time to maturity
(yrs) 1.1667 0.1667 2.3333
-------- -------- ---------- ----------
The total expense recognised from share based payments
transactions on the group's profit for the year was GBP311,713
(2019: GBP62,647).
These share options vest on the achievement of challenging
growth targets. It is management's intention that the Company will
meet these challenging growth targets therefore, based on
management's expectations, the share options are included in the
calculation of underlying diluted EPS in note 23.
20. Equity - Reserves
The foreign currency retranslation reserve represents exchange
gains and losses on retranslation of foreign operations. Included
in this is revaluation of opening balances from prior years.
The merger relief reserve arose on the share for share exchange
reflecting the difference between the nominal value of the share
capital in Beeks Financial Cloud Group Limited and the value of the
Group being acquired, Beeks Financial Cloud Limited.
During the year GBP333,000 was recognised within the merger
reserve, which arose on the share for share exchange reflecting the
difference between the nominal value of the share capital issued
from Beeks Financial Group pl c and the value of the shares issued
to the owners of Velocimetrics Ltd at the date of acquisition.
Share premium represents the excess over nominal value of the
fair value of consideration received for equity shares, net of
expenses of the share issue.
Retained earnings represents retained profits.
The other reserve arose on the share for share exchange and
reflects the difference between the value of Beeks Financial Cloud
Group Limited and the share capital of the Group being acquired
through the share for share exchange. Also included in the other
reserve is the fair value of the warrants issued on the acquisition
of VDIWare LLC.
Any transaction costs associated with the issuing of shares are
deducted from share premium, net of any related income tax
benefits.
21. Capital and other commitments
Excluding the contingent liabilities associated with the
contingent consideration (Note 1), there are no contingent assets
or contingent liabilities as at 30 June 2020 (2019: nil).
22. Related party transactions
Parent entity
Beeks Financial Cloud Group PLC is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 24.
Transactions with related parties
The following transactions occurred with related parties:
2020 2019
GBP000 GBP000
-------- --------
Withdrawals from the director, Gordon McArthur 11 33
The loan account owed by the director; Gordon McArthur was repaid
in full before the year end.
Beeks Financial Cloud Limited provided services in the normal
course of its business and at arm's length to Ofelia Algos Limited,
a company owned by Gordon McArthur. During the financial year
Beeks Financial Cloud Limited made sales of GBP120,540 (2019:
GBP117,600) to Ofelia Algos Limited and the amounts due to Beeks
Financial Cloud Limited at the year-end were GBP35,090 (2019:
GBP53,600).
Key management personnel
Compensation paid to key management (which comprises the executive
and non-executive PLC Board members) during the year was as follows:
2020 2019
GBP000 GBP000
Wages and salaries including social security
costs 258 256
Other pension costs 5 3
Other benefits in kind - 11
Share based payments 115 24
23. Earnings per share
2020 2019
GBP000 GBP000
Profit after income tax attributable
to the owners of Beeks Financial Cloud
Group PLC 575 1,063
Pence Pence
Basic earnings per share 1.13 2.10
Diluted earnings per share 1.13 2.09
Number Number
Weighted average number of ordinary
shares used in calculating basic earnings
per share 50,942,258 50,632,965
Adjustments for calculation of diluted
earnings per share:
Options over ordinary shares 48,132 231,835
------------ -----------
Weighted average number of ordinary
shares used in calculating diluted earnings
per share 50,990,391 50,864,800
Included in the weighted average number of shares for the calculation
of statutory diluted EPS are the shares that will be issued to
the owners of Velocimetrics in relation to the first earn out
period ending 30 June 2020. The target earn out amount has been
agreed following the statutory audit therefore these shares are
included in the calculation of underlying diluted EPS.
2020 2019
GBP000 GBP000
Underlying earnings per share
Profit for the year 575 1,043
Acquisition costs 205 127
Share Based payments 312 63
Amortisation on acquired intangibles 236 62
Exceptional non-recurring costs 61 21
Grant income (59) -
------------ -----------
Tax effect (45) (12)
------------ -----------
Underlying profit for the year 1,285 1,304
Weighted average number of shares in
issue - basic 50,942,258 50,632,965
Weighted average number of shares in
issue - diluted 52,409,256 51,116,936
Underlying earnings per share - basic 2.52 2.58
Underlying earnings per share - diluted 2.45 2.55
Included in the weighted average number of shares for the
calculation of underlying diluted EPS are share options outstanding
but not exercisable. It is management's intention that the Company
will meet the challenging growth targets therefore, based on
management expectations, the share options are included in the
calculation of underlying diluted EPS.
Also included in the weighted average number of shares for the
calculation of underlying diluted EPS are the shares that will be
issued to the owners of Velocimetrics in relation to the first earn
out period ending 30 June 2020. The target earn out amount has been
agreed following the statutory audit therefore these shares are
included in the calculation of underlying diluted EPS.
24. Subsidiaries
The consolidated financial information incorporate the assets,
liabilities and results of the following subsidiaries held by the
company in accordance with the accounting policy described in note
1.
The subsidiary undertakings are all 100% owned, with 100% voting rights.
Country of Principal place of business/
Company name incorporation Registered office
Beeks Financial Cloud Japan FARO 1F, 2-15-5, Minamiaoyama,
Co Ltd Minato-Ku, Tokyo, Japan.
Beeks FX VPS USA Inc. Delaware, 874 Walker Road, Suite C,
USA Dover, Kent, Delaware, 19904,
USA.
Beeks Financial Cloud Scotland Lumina Building, 40 Ainslie
Limited Road, Ground Floor, Hillington
Park, Glasgow, UK, G52 4RU
Velocimetrics Limited England Birchin Court, 230 Park Avenue
20 Birchin Lane, Suite 300
West, London, England, EC3V
9DU
Velocimetrics Inc New York, 230 Park Avenue, 10(th) Floor,
USA New York 10169, USA.
25. Events after the reporting period
No matter or circumstance has arisen since 30 June 2020 that has
significantly affected, or may significantly affect the Group's
operations, the results of those operations, or the Group's state
of affairs in future financial years.
26. Ultimate controlling party
The Group is ultimately controlled by Gordon McArthur by virtue
of his majority shareholding.
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END
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September 15, 2020 02:00 ET (06:00 GMT)
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