TIDMESYS
RNS Number : 8554B
essensys PLC
13 October 2020
13 October 2020
essensys plc
("essensys" or the "Group")
Full Year Results
Resilient performance in line with expectations
essensys plc (AIM:ESYS), the leading global provider of mission
critical software-as-a-service (SaaS) platforms and on-demand cloud
services to the flexible workspace industry, announces audited
results for the year ended 31 July 2020.
Financial summary:
GBPm unless otherwise stated 2020 2019 Change
Revenue 22.5 20.6 +9%
Recurring revenue 19.4 16.3 +19%
Run Rate Annual Recurring Revenue 19.7 17.3 +14%
Statutory profit / (loss) before
tax 0.3 (1.4)
Adjusted EBITDA 4.2 4.2 +0%
Adjusted EBITDA margin 19.1% 20.4%
Profit / (loss) per share (pence) 0.3p (3.7p)
Proposed Final Dividend per share Nil Nil
(pence)
Net Cash 8.5 2.7
Strengthened platform for long-term growth
-- US remains major growth driver - US recurring revenue +45%
-- Acceleration of flexible workspace opportunity as a result of Covid-19
o Traditional landlords and corporate real estate operators
increasingly seeking flexible workspace solutions
-- Investment in long-term organic growth to capture market opportunity
o Product and software development capability now comprises 42%
of total headcount
o Product development to meet demand for flexible security
solutions
o Continued international expansion
-- Demand from existing and new customers continues to underpin future growth
o 419 Connect live sites at year end, up 17% (2019: 358)
o 35 new Connect sites during the second half demonstrates
resilience of business since Covid-19
o 31 new customer wins
Resilient performance in line with expectations
-- Continued revenue growth, an increase of 9%
-- Recurring revenue up 19%, representing 86% of Group revenue (2019: 79%)
-- US business supporting high growth levels
-- Operate revenue grew 36% to GBP1.9m and revenue per site increased by 56% year on year
-- Adjusted EBITDA maintained at FY19 levels, reflecting
investment for long-term growth and a temporary reduction in
activity following the outbreak of Covid-19
-- Successful GBP7m fundraising in April 2020
o Further strengthens our balance sheet liquidity and
flexibility
o Funding to support organic growth, investment and acquisitions
as circumstances allow
Current trading and outlook
-- Robust visibility - contracted commitments from customers for a further 47 Connect sites
-- Increase in enquiry levels since August, adding 74 potential
Connect sites to our weighted sales pipeline
-- Recovery in new business activity to approximately 75% of H1 FY20 levels
-- Sales pipeline from new and existing customers underpins
confidence for continued progress in 2021
Mark Furness, CEO of essensys, said:
"essensys delivered a very strong performance in FY20, in line
with expectations, with strong organic and recurring revenue
growth. This is particularly impressive given the disruption caused
by the Covid-19 pandemic and is a testament to the commitment of
our people, and our strategic progress. To capture the long-term
growth opportunity in the flexible workspace market, we have
expanded the UK based development team and US sales team and
launched new products in response to demand for flexible
security.
We remain committed to our growth strategy and believe the
pandemic has accelerated the shift towards flexible workspace,
particularly from traditional landlords and commercial real estate
operators. This, combined with robust visibility and sales
pipeline, and improving new business activity, give us confidence
of further progress in the year ahead, notwithstanding uncertainty
relating to Covid-19."
For further information, please contact:
+44 (0)20 3102
essensys plc 5252
Mark Furness, Chief Executive Officer
Alan Pepper, Chief Financial Officer
+44 (0)20 7496
N+1 Singer (Nominated Adviser and Broker) 3000
Peter Steel / Harry Gooden / George Tzimas
/ Kailey Aliyar
FTI Consulting
Jamie Ricketts / Eve Kirmatzis / Debbie +44 (0)20 3727
Oluwaseyi Sonaike / Talia Jessener 1000
About essensys plc
essensys is the leading global provider of mission-critical SaaS
platforms and on-demand cloud services to the high growth flexible
workspace industry. essensys' software is specifically designed and
developed to help solve the complex operational challenges faced by
multi-site flexible workspace operators as they grow and scale
their operations. The Group's technology allows operators to
deliver a range of differentiated, flexible and customer-specific
services to a broad base of tenants across multiple locations and
helps operators to manage the cost, operational and technological
challenges they typically encounter.
essensys' two SaaS platforms, Connect and Operate, address these
complex operational challenges, and reduce costs by simplifying the
day-to-day management of flexible workspaces and the provision of
on-demand IT, technology and infrastructure services to tenants.
essensys' platforms automate key tasks and processes and help
flexible workspace providers deliver highly efficient,
customer-centric workspace solutions and member experiences with
enterprise class services.
Chairman's Statement
I am pleased to report good progress towards our strategic
objectives and delivering a financial outcome which is in line with
market expectations. The Board is very pleased with this outcome in
the context of Covid-19.
The momentum that we saw at the end of the last financial year
continued through the first half of this year. During that period,
the Group saw increased activity globally including from the
broader corporate real estate market, accelerating entry into the
flexible workspace market. The second half was, however, inevitably
focussed around reacting to and mitigating the impact of the
Covid-19 pandemic.
The impact of Covid-19 on the Group has been varied. Inevitably
we saw delays to customer site "go-lives" and some customers
requested financial support both in terms of cost reductions and
payment deferrals. The Group provided support where feasible,
balancing specific requests against our commitments to the entire
customer base, staff and shareholders. We also provided support in
the form of additional product capability. Business development
activity was curtailed initially and expansion planning activities
in Europe and APAC have been delayed. A positive impact, however,
has been landlords and commercial real estate operators thinking
more strategically about how to operate in the flexible workspace
market as demand for traditional long leases reduces. This has
helped us engage with them about our solutions for this
segment.
The Group took the decision early on in the pandemic to raise
additional capital to ensure that it had sufficient liquidity as
the Covid-19 situation unfolded and, of more long-term importance,
that it had the financial capability to accelerate its global
expansion plans when the pandemic subsides. To that end, the Group
raised GBP7m by way of a share placing from existing shareholders
in April 2020 and at year end it maintains a healthy cash balance
and remains debt-free.
We also made a conscious decision not to curtail any product and
software development activities during the year and have
significantly expanded the Group's UK based development capability.
This has already resulted in a number of new product and service
launches with more expected through FY21.
We are pleased with the overall financial performance, with
continued growth in revenue and profits in line with market
expectations. Group revenue was up 9% to GBP22.5m, and Adjusted
EBITDA (excluding share-based payment expense) was in line with
expectations and last year at GBP4.2m; this being a year of
continued investment to support growth. The Group generated a
profit before tax of GBP0.3m (2019: loss of GBP1.4m).
We continue to see growth in essensys' core customer segment of
flexible workspace operators. In addition, the Group has seen
accelerated growth from opportunities with traditional landlords
and the broader real estate sector entering the flexible workspace
industry. We have created propositions and launched new product
offerings to support this and anticipate that this will be an
important factor in the Group's business in FY21.
During the year the Group made two new independent Non-Executive
Director appointments, in line with the intentions stated at the
time of the IPO. I am delighted that we have been joined by Alex
Notay and Elizabeth Sandler who both bring extensive real estate
experience and complement the Board's other skills well.
The Group remains well placed to take advantage of expected
increasing demand for flexible workspace, in spite of the
uncertainty relating to Covid-19. New product launches have been
well received and already had some early success. The Group's
further geographic expansion is being planned and will be rolled
out when market conditions are ready. We have a supportive investor
base and a clear strategy focussed on the broadening flexible
workspace market. Notwithstanding the current uncertainty in the
wider environment the Group remains optimistic for FY21 and
beyond.
Finally, I would like to pay a particular tribute to our staff
who, in the face of very challenging circumstances, have enabled us
to continue to deliver on our commitments to customers worldwide
and make progress on our broader objectives. Their positive
attitude, commitment and support are what drives our success.
Jon Lee
Non-Executive Chairman
12 October 2020
CEO Report
Resilient performance in line with expectations
In our 2020 financial year we performed in line with market
expectations, and continued to grow, during the greatest global
crisis in decades. The expansion of our US business continued, with
recurring revenues up 45%. Whilst we have inevitably been impacted
by Covid-19 (as set out below) we have continued to make good
progress against our longer-term strategic objectives. We have seen
a recovery in new business activity, are seeing an expansion of our
market opportunity and are well positioned to expand the business
both within our current geographies and more globally. This is a
testament to the resilience of our business model, demand for our
technology, and commitment and innovation of our staff. Our people
adapted quickly to working from home, delivering excellent support
for customers and the business and they continue to deliver for our
customers globally. I am grateful for, and proud of, the commitment
and dedication our staff have shown over what has been a
challenging period for all.
Our GBP7m fundraising in April 2020 has further strengthened our
balance sheet, given us added liquidity and flexibility in the
context of Covid-19 together with the funding to take advantage of
longer-term opportunities in our market when circumstances
allow.
Growth in recurring revenues driven by customer expansion
In line with 2019, continued overall growth in Connect site
numbers and Operate pricing drove revenue growth; with total
recurring revenue for the year of GBP19.4m, up 19% from GBP16.3 in
FY19. Run rate Annual Recurring Revenue (ARR), an indication of the
continued growth of the business, grew to GBP19.7m in July 2020
from GBP17.3m in July 2019, an increase of 14%.
The expansion in the customer base that we have seen over the
last few years - and in particular in FY19 - continued in FY20 with
the addition of 31 new customers to the business. Our customer base
continues to diversify both in terms of type and location with new
customers in new regions and an increasing number of more
traditional landlords and commercial real estate operators becoming
customers.
Continued growth in Connect sites
We saw a net increase in Connect sites of 17% in the year to 419
at year end. Our ongoing customer growth and continued existing
customer expansion resulted in the addition of 84 new sites in the
year. Inevitably this was weighted to the first half of the year
but, notwithstanding Covid-19, we delivered 35 new Connect sites in
the second half.
Having continued to sign new customer sites during the Covid-19
pandemic and with a broadening customer base we now have contracted
commitments from customers for a further 47 Connect sites. This
includes a number of sites utilising the Group's new landlord
focussed STEP proposition and our new Smart Access solution (see
below for more details). Contracted visibility has inevitably
shortened from FY19 given Covid-19 but, having seen an increase in
enquiry levels since the end of the financial year we currently
have potential site weighted pipeline amounting to 74 Connect
sites.
Continued progress with Operate
We continue to expand our Operate business, with a broader
customer base, increased capability and increased pricing. Operate
revenue grew 36% to GBP1.9m and revenue per site grew by 56% year
on year. The improvement in our revenue per site reflected the
conclusion of our drive to proactively engage, and where necessary
part ways, with legacy low value customers in the second half of
the year. This led to a reduction in Operate sites, by 14% to 435
driven primarily by the loss of one relatively low value
contract.
Acceleration of flexible real estate market opportunity and
expanded go-to-market strategy
essensys has built a platform to capture the flexible workspace
opportunity. Traditional landlords and major commercial real estate
companies entering the flexible workspace market, whilst already
active, have increased their engagement with us since the outbreak
of Covid-19. We have seen landlords shift from a passive to a
proactive approach to flexible workspaces, which is driving demand
for flexible workspace products. This is a global trend, and we
expect the widening of the flexible real estate market to present
new growth opportunities for essensys' technology.
Our product development in recent years has positioned us well
for this opportunity and to take further advantage of this we have
further expanded our "go-to-market" capability in North America
increasing sales headcount by 75% in the past yearand are in the
process of expanding our UK sales capability. In addition, we have
appointed an experienced senior member of the Group's sales team to
lead our expansion into continental Europe, which will be a key
focus for FY21.
Product development
We have made major progress in our product and software
development activities in recent months and continued to invest in
this area during Covid-19. Having established our outsourced
offshore development capability prior to our IPO in May 2019, the
increased scale and visibility of the Group as a consequence of our
listed status has allowed us to re-balance our development activity
and increase the capability in our UK HQ. Our combined product and
software development capability now numbers some 52 personnel, with
32 based in the UK. That continued focus allowed us to undertake
some focussed capability enhancements to support our customers
through the initial pandemic period.
This year we started to see the benefits of our accelerated
product and software development activities since IPO. In February
2020, we broadened our Connect platform to include Smart Access -
our touchless access control solution. Powered by our software and
underpinned by our private network and cloud infrastructure, Smart
Access not only delivers traditional card or smartphone based door
access control, but also creates a broader contactless member
experience, such as to desks, rooms, printers and amenities, in due
course allowing members to book, pay and access resources with a
single tap of their smartphone.
In June 2020, we launched essensysSTEP. This product increases
our reach into the traditional landlord and commercial real estate
markets and equips landlords and asset owners with the software and
technology needed to efficiently transition to a more flexible real
estate model as occupier demand for that increases. Additionally,
STEP helps bridge the gap between landlords and flexible workspace
operators, allowing both to work together more easily to create
seamless and comprehensive space-as-a-service solutions which are
compelling for companies of all sizes.
That software development activity continues and we anticipate
launching additional modules to our software throughout FY21 whilst
at the same time furthering our integration of our platforms with
the aim of launching our combined 'Flex Services Platform' in
2021.
Covid-19 impact and response
As reported at the half year, management also took early and
decisive steps to both protect the Group's staff and the business
in March as the Covid-19 pandemic impacted. The Group utilised the
UK's Coronavirus Job Retention Scheme, placing a number of staff on
furlough leave, and also employed the US Government's Payment
Protection Program. All employees agreed to reduced working hours
and pay and the Group's senior management team and Board members
agreed to substantial pay reductions for a period. As would be
expected, we eliminated all non-essential capital and operating
expenditure and paused recruitment. We made a conscious decision,
however, to maintain our product and software development activity
levels throughout the period and this led to a number of capability
launches through the period, as reported above. The vast majority
of personnel had all returned to full time working, and pay, by the
end of the financial year.
We took the decision early on in the pandemic to further
strengthen our balance sheet to ensure that we had the resources to
take advantage of increasingly evident expansion opportunities both
in the broader commercial real estate market, and geographically.
To that end the Group raised GBP7m by way of a share placing on 9
April 2020 (see below for further details) and I am grateful for
the support our shareholders have shown us in their participation
in that fundraising.
Following the full impact of government imposed movement
restrictions we saw some requests for support from a number of
customers and assessed those on a case by case basis. Primarily the
Group gave financial support in the form of deferred payment terms
and some short term cost reductions, or where a customer site had
just opened or was opening during the initial pandemic period. As
would be expected, we saw a reduction in Marketplace services
utilisation and revenue from the implementation of the main
restrictions in March through to year end albeit we have seen an
improvement post year end.
Inevitably we saw the delay to some new contracted site openings
that had been planned for the second half of the year, some of
which moved into FY21. Pleasingly, however, we saw a relatively
small number of cancellations. Equally inevitably we saw sales
cycles lengthening, albeit we continued to sign new business
through the period. By year end, however, new business activity had
returned to approximately 75% of the average for the first half of
the year.
Current trading and outlook
essensys remains mission critical to our customers and our
business remains underpinned by a high proportion of contracted,
recurring, revenue. We provide flexible workspace providers with
operational efficiencies and cost savings whilst removing
complexity from their businesses. In addition to established
flexible workspace operators, these attributes are particularly
attractive to new landlord and CRE entrants into the market where
we can de-risk their establishment and delivery to their,
increasingly corporate, customers.
We remain confident that the structural shift to flexible
working will continue and, if anything, accelerate due to Covid-19;
notwithstanding the ongoing challenges and uncertainty this
presents and the additional risks to the UK economy resulting from
Brexit. This is evidenced by traditional landlords and major
commercial real estate companies looking to increase their flexible
workspace footprint since the outbreak of the pandemic. We expect
this trend to continue globally. The acceleration of our product
development, go-to-market strategy, and international expansion in
FY20 have given us a strong platform to capture the opportunities
we see in the flexible workspace market. We expect to establish
regional operations in mainland Europe and Asia-Pacific during
FY21.
The start of FY21 has seen an improvement in new sales activity
and an increase in our broader global pipeline. Our software
development plans are well advanced and we remain ambitious for the
business and the future. Our existing customers continue to grow
and we are winning new customers across our existing, and new,
geographies. Our substantial cash reserves, growing sales pipeline
and positive long-term market dynamic support our confidence of
further progress in the year ahead.
Mark Furness
Chief Executive Officer
12 October 2020
Financial Review
This is the second set of full year results issued by essensys
plc following its Admission to trading on AIM on 29 May 2019 (the
"IPO") and represents the first full financial year of the Group
being listed.
Scope of financial results, original incorporation & pre-IPO
reorganisation
The financial results included in this announcement cover the
Group's combined activities for the 12 months ended 31 July 2020.
The comparatives for the previous 12 months were for the Group's
combined activities for the 12 months ended 31 July 2019, prepared
on a merger accounting basis (including period pre and post
IPO).
The Company was incorporated as essensys Group Limited on 22
January 2019 as a private limited company. On 16 May 2019, the
Company acquired all the issued share capital of essensys (UK)
Limited (formerly essensys Limited), the Group's main trading
company, by way of a share for share exchange with the shareholders
of essensys (UK) Limited at that time. On 17 May 2019 the Company
changed its name to essensys Limited and immediately re-registered
as a public limited company in the name of essensys plc. This was
undertaken in anticipation of the IPO.
Financial Key Performance Indicators
GBP'm unless otherwise stated 2020 2019 Change
Group Total Revenue 22.5 20.6 +9%
UK 12.2 12.8 -5%
USA 10.3 7.8 +32%
Recurring Revenue [1] 19.4 16.3 +19%
UK 11.3 10.7 +6%
USA 8.1 5.6 +45%
Recurring Revenue %age of Total 86% 79%
Run Rate Annual Recurring Revenue
(4) 19.7 17.3 +14%
Non-recurring revenue 3.1 4.3 -28%
Product Revenue
Connect 20.6 19.2 +7%
Operate 1.9 1.4 +36%
Gross Profit 14.3 12.6 +13%
Gross Profit percentage 64% 61%
Recurring Revenue margin %age 69% 70%
Statutory profit / (loss) before
tax 0.3 (1.4)
Adjusted EBITDA 2 4.2 4.2 +0%
Adjusted EBITDA margin 19% 20%
Net Cash 8.5 2.7
See below and the CEO report above together with the financial
statements for explanation of significant movements in the above
Financial Key Performance Indicators.
1 See Revenue section below for explanation
2 See explanation below
Revenue
Group total revenue grew by 9% to GBP22.5m in the year driven
primarily by an increase in Connect revenue within the Group's US
business where total live Connect sites grew to 223 at the year-end
from 164 (as at 31 July 2019). Operate revenue grew by 36% in the
full year to GBP1.9m (2019: GBP1.4m).
Recurring revenue comprises income invoiced for services that
are repeatable and consumed and delivered monthly over the term of
a customer contract. Run Rate Annual Recurring Revenue (Run Rate
ARR) is an annualisation of the recurring revenue for the month
identified (July 2020 and 2019, as appropriate), is an indication
of the annual value of the recurring revenue for that month and is
used by management to monitor long term revenue growth of the
business.
Recurring revenue grew by 19% in the year driven by the increase
in number of Connect sites and continued pricing increases within
the Operate business. Run Rate ARR grew 14% to GBP19.7m (from 17.3m
in 2019) again driven primarily by the net increase in Group
Connect sites by 17% to 419 at year end (2019: 358).
Gross margins
Gross margins grew in the year to 64% (2019: 61%) as recurring
revenue was a higher proportion of the Group's total revenue - 86%
in FY20 (2019: 79%). Recurring revenue margins were in line with
2019 as the Group saw continued margin improvements in its UK
business which was offset by a higher proportion of the Group's
recurring revenue being derived from its, currently, lower margin
US business.
Administrative expenses
Excluding depreciation charges, administrative expenses grew by
GBP1.8m in the year, a 22% increase year on year, in line with our
strategic investment plan. This was driven by increases in staff
costs from the full year effect of increases in overall headcount
2019 (offset by no staff bonus payments for the current year);
increases in provisions for estimated credit losses as a result of
the Covid-19 pandemic and increases in professional fees as a
consequence of being a listed business.
Other operating income: Covid-19 support payments
During the year the Group took advantage of government support
schemes related to the Covid-19 pandemic both in the UK and the US.
In the UK the Group received GBP145,000 under the Coronavirus Job
Retention Scheme. The Group's US business received a loan under the
Small Business Administration's Paycheck Protection Programme of
$307,000 (GBP241,000) which is anticipated to be fully forgiven.
These amounts are included within Other Operating Income in the
year.
Statutory profit / (loss) for the year
The Group made a profit before tax for the year of GBP0.3m
(2019: loss of GBP1.4m). The year on year change is primarily as a
result of the non-recurrence of the costs incurred in 2019 in
achieving the IPO and a lower overall share based payment expense,
analysed as follows:
GBP'm 2020 2019
UK (including Group central costs
in 2019) 1.7 0.6
North America (US & Canada) 2.1 0.5
Group central costs (included (3.0) -
in UK in 2019)
Profit / (loss) before tax (pre-exceptionals) 0.8 1.1
Pre-IPO Share based payment expense - (0.9)
Post-IPO Share based payment
expense (0.5) (0.1)
IPO Costs - (1.5)
Profit / (loss) for the year 0.3 (1.4)
====== ======
The Pre-IPO Share based payment expense relates to share options
in essensys (UK) Limited that were in existence prior to the IPO
which vested and were exercised immediately prior to the IPO.
Adjusted EBITDA
Adjusted results are prepared to provide a more comparable
indication of the Group's core business performance by removing the
impact of certain items including exceptional items (material and
non-recurring), and other, non-trading, items that are reported
separately. Adjusted results exclude adjusting items as set out in
the statement of consolidated loss and below, with further details
given in Notes 7, 14, 15, 16 and 27 of the financial statements. In
addition, the Group also measures and presents performance in
relation to various other non-GAAP measures, such as recurring
revenue, run-rate annual recurring revenue and revenue growth.
Adjusted results are not intended to replace statutory results.
These have been presented to provide users with additional
information and analysis of the Group's performance, consistent
with how the Board monitors results.
Adjusted EBITDA (being EBITDA prior to exceptional costs) is
calculated as follows:
GBP'm 2020 2019
Operating profit / (loss) 0.5 (1.0)
Add back:
Forex translation adjustments 0.1 -
Depreciation & Amortisation 3.1 2.7
EBITDA 3.7 1.7
Add back:
Share based payment expense 0.5 1.0
IPO related costs - 1.5
Adjusted EBITDA 4.2 4.2
===== ======
The share based payment expense is excluded from Adjusted EBITDA
as it is a non-cash charge and not considered relevant for
assessment of underlying profitability.
Taxation
The Group benefited from a tax credit of GBP158,000 in the year
due to a refund of s455 tax previously paid on directors loans
which were repaid at IPO. The Group also incurred a non-cash
deferred tax charge of GBP334,000 in the year related to timing
differences on the taxation related to capitalised development
costs.
April 2020 Share Placing
On 9 April 2020 the Company issued 4,635,762 new ordinary shares
of 0.25 pence each at a price of 151 pence per share by way of a
share placing (the "Share Placing"). Gross funds raised were
approximately GBP7m and the Company's issued ordinary share capital
increased to 52,743,329 shares. The funds were raised to provide
additional liquidity to support the business during the Covid-19
pandemic and fund the Group's geographical expansion.
Net proceeds of the Share Placing were GBP6.7m after costs of
GBP0.3m which were all charged to the share premium account.
Cash
Net cash at year end was GBP8.5m (2019: GBP2.7m) following the
receipt of the proceeds of the Share Placing. The Group's current
cash reserves provide sufficient capital for the foreseeable future
and will enable it to fund current planned geographic expansion,
continued product and software development, and additional working
capital as the business continues to grow.
Capital Expenditure
During the year the Group continued to expand its geographical
presence in North America with additional essensysCloud
infrastructure whilst at the same time expanding and upgrading the
capacity of its UK & European infrastructure.
Capitalised Software Development Costs
The Group continues to invest in software development resulting
in ongoing enhancements to its two software platforms, Connect and
Operate, and the integration of those platforms. During 2019 the
Group established an outsourced offshore development centre with an
external provider in Hanoi, Vietnam to accelerate this work whilst
during 2020 the Group has rebalanced that capability with greater
UK based development resource. Where such work is expected to
result in future revenue, costs incurred that meet the definition
of software development in accordance with IAS38, Intangible
Assets, are capitalised in the statement of financial position.
During the year the Group capitalised GBP2.3m in respect of
software development (2019: GBP0.8m).
In implementing its accelerated product development strategy the
Group anticipates capitalising software costs at a similar rate to
2020 in the next few years.
Dividend policy
It remains the Group's intention in the short to medium term to
invest in order to deliver capital growth for shareholders. The
Board has not recommended a dividend in respect of the year ended
31 July 2020 and does not anticipate recommending a dividend within
the next year but may do so in future years.
Alan Pepper
Chief Financial Officer
12 October 2020
essensys plc
Consolidated Statement of Comprehensive Loss
for the year ended 31 July 2020
Notes 2020 2019
GBP000 GBP000
Turnover 6 22,499 20,633
Cost of sales (8,117) (7,986)
_________ _________
Gross profit 14,382 12,647
Administrative expenses (13,778) (11,233)
Other operating income 386 51
Share based payment expense (514) (979)
IPO related costs - (1,508)
_________ _________
Operating profit / (loss) 7 476 (1,022)
Interest receivable and similar income 10 2 82
Interest payable and similar charges 11 (132) (494)
_________ _________
Profit / (loss) before taxation 346 (1,434)
Taxation 12 (191) (45)
_________ _________
Profit / (loss) for the year from continuing
operations 155 (1,479)
_________ _________
Other comprehensive (loss) / income
Items that may be reclassified to profit
or loss:
Currency translation differences (272) 27
_________ _________
Other comprehensive (loss) / income
for the year (272) 27
_________ _________
Total comprehensive loss for the year (117) (1,452)
_________ _________
Basic and Diluted profit / (loss) per
share 13 0.3p (3.7p)
essensys plc
Registered Number: 11780413
Consolidated Statement of Financial Position
as at 31 July 2020
Notes 2020 2019
GBP000 GBP000
ASSETS
Non-current assets
Intangible assets 14 5,013 3,732
Property, plant and equipment 15 1,695 1,376
Right of use assets 16 2,055 3,119
_________ _________
8,763 8,227
Current assets
Inventories 18 323 292
Trade and other receivables 19 5,186 5,727
Cash at bank and in hand 8,496 2,688
_________ _________
14,005 8,707
_________ _________
TOTAL ASSETS 22,768 16,934
_________ _________
EQUITY AND LIABILITIES
EQUITY
Shareholders' equity
Called up share capital 20 132 120
Share premium 21 19,881 13,184
Share based payment reserve 1,490 979
Merger reserve 28 28
Retained earnings (5,435) (5,318)
_________ _________
TOTAL EQUITY 16,096 8,993
LIABILITIES
Non-current liabilities
Lease liabilities 23 796 1,637
Deferred tax 24 409 67
_________ _________
1,205 1,704
Current liabilities
Trade and other payables 22 3,561 3,382
Contract liabilities 6E 550 1,044
Lease liabilities 23 1,346 1,811
Current taxes 10 -
_________ _________
5,467 6,237
_________ _________
TOTAL LIABILITIES 6,672 7,941
_________ _________
TOTAL EQUITY AND LIABILITIES 22,768 16,934
_________ _________
The financial statements were approved by the Board of Directors
and authorised for issue on 12 October 2020.
Alan Pepper
Director
.
essensys plc
Consolidated Statement of Changes in Equity
for the Year Ended 31 July 2020
Share
based
Share Share payment Merger Retained Total
capital premium Reserve Reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
1 August 2019 120 13,184 979 28 (5,318) 8,993
Comprehensive profit for
the year
Profit for the year - - - - 155 155
Currency translation differences - - (3) - (272) (275)
_______ _______ _______ _______ _______ _______
Total comprehensive loss
for the year - - (3) - (117) (120)
_______ _______ _______ _______ _______ _______
Transactions with shareholders
New shares issued 12 6,988 - - - 7,000
Cost incurred in issuing
new shares - (291) - - - (291)
Share based payment charge - - 514 - - 514
_______ _______ _______ _______ _______ _______
31 July 2020 132 19,881 1,490 28 (5,435) 16,096
_______ _______ _______ _______ _______ _______
Consolidated Statement of Changes in Equity
For the Year Ended 31 July 2019
Share
based
Share Share payment Merger Retained Total
capital premium Reserve Reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
1 August 2018 97 - - 28 2,898 3,023
Comprehensive loss for
the year
Loss for the year - - - - (1,479) (1,479)
Currency translation differences - - - - 27 27
_______ _______ _______ _______ _______ _______
Total comprehensive loss
for the year - - - - (1,452) (1,452)
_______ _______ _______ _______ _______ _______
Transactions with shareholders
essensys (UK) Limited
Share buy back (see note
28) - - - - (2,315) (2,315)
essensys (UK) Limited
Dividends paid (see note
28) - - - - (4,449) (4,449)
New shares issued 23 13,977 - - - 14,000
Cost incurred in issuing
new shares - (793) - - - (793)
Share based payment charge - - 979 - - 979
_______ _______ _______ _______ _______ _______
31 July 2019 120 13,184 979 28 (5,318) 8,993
_______ _______ _______ _______ _______ _______
essensys plc
Consolidated Statement of Cash Flows
for the Year Ended 31 July 2020
Notes 2020 2019
GBP000 GBP000
Cash from operations 31 A 4,026 2,026
Corporation tax received / (paid) 185 (131)
Foreign exchange (140) 38
_________ _________
Net cash generated from operating
activities 4,071 1,933
_________ _________
Cash flows from investing activities
Purchases of intangible assets 14 (2,290) (800)
Purchases of property plant and equipment 15 (992) (722)
Interest received 2 82
_________ _________
Net cash used in investing activities (3,280) (1,440)
_________ _________
Cash flows from financing activities
Proceeds from the issuance of new
shares 7,000 14,000
Costs of issuing new shares (291) (2,301)
Receipts from government grants 386 -
Dividends paid - (915)
Buy back of shares - (2,315)
Proceeds from bank loans - 10,000
Repayment of bank loans - (14,644)
Repayment lease liabilities 23 (1,926) (2,020)
Interest paid on lease liabilities 23 (132) (198)
Bank and other interest paid - (299)
_________ _________
Net cash generated from financing
activities 5,037 1,308
_________ _________
Net increase in cash and cash equivalents 5,828 1,801
Cash and cash equivalents at beginning
of year 2,688 882
Effects of foreign exchange rate changes (20) 5
_________ _________
Cash and cash equivalents at end of
year 8,496 2,688
_________ _________
Cash and cash equivalents comprise:
Cash at bank and in hand 8,496 2,688
_________ _________
.
1 General information
essensys plc (the "Company") is a public limited company,
incorporated in the United Kingdom under the Companies Act 2006
(registration number 11780413). The Company is domiciled in the
United Kingdom and its registered address is Aldgate Tower 7(th)
Floor, 2 Leman Street, London, E1 8FA. The Company's ordinary
shares are traded on the Alternate Investment Market (AIM) of the
London Stock Exchange.
The Group's principal activities are the provision of software
and technology platforms that manage the critical infrastructure
and business processes, primarily of operators in the flexible
workspace industry. These activities are carried out by the Group's
wholly owned subsidiaries.
The Company's principal activity is to provide management
services to its subsidiaries.
2 Authorisation of financial statements and statement
of compliance with IFRS
The financial statements for the year ended 31 July 2020 were
authorised for issue by the Board of Directors and the Statements
of Financial Position were signed on the Board's behalf by Mark
Furness and Alan Pepper on 12 October 2020.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
and the Financial Reporting Interpretations Committee (IFRIC)
interpretations as endorsed by the European Union and bearing in
mind those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
The financial statements of the Company have been prepared in
manner consistent with those of the Group.
3 Basis of Preparation
These financial statements have been prepared under the
historical cost basis and are presented in Sterling and all values
are rounded to the nearest thousand pounds (GBP000) except when
otherwise indicated.
Publication of non-statutory accounts
In accordance with section 435 of the Companies Act 2006, the
Directors advise that the financial information set out in this
announcement for the years ended 31 July 2020 and 31 July 2019 do
not constitute the Group's statutory financial statements for those
years but is derived from those financial statements.
The statutory financial statements for the year ended 31 July
2019 have been audited and filed with the Registrar of Companies.
The statutory financial statements for the year ended 31 July 2020
have been audited and will be delivered to the Registrar of
Companies in due course.
The Independent Auditor's Reports on the Group's financial
statements for the years ended 31 July 2020 and 31 July 2019 were
unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under 498(2) or 498(3) of
the Companies Act 2006.
Going concern
The Group's consolidated financial statements have been prepared
on a going concern basis.
As at 31 July 2020 the Group had net assets of GBP16.1m (2019:
GBP9m), including cash of GBP8.5m (2019: GBP2.7m) as set out in the
Consolidated Statement of Financial Position, with no drawn debt
and an undrawn debt facility of GBP1m. In the year ended 31 July
2020 the Group generated a profit before tax of GBP0.3m (2019: loss
of GBP1.4m due to IPO costs of GBP1.5m). The group generated net
cash before financing in the year of GBP0.8m (2019: GBP0.5m).
During the year the performance of the Group continued to
improve with revenue increasing by 9% and recurring revenue by 19%
with the Group generating an operating profit of GBP0.5m (2019:
loss of GBP1m). The Group has long term contracts with a number of
customers and suppliers across different geographical areas and
industries.
The Directors have prepared a detailed budget and forecast of
the Group's expected performance over a period covering at least
the next twelve months from the date of the approval of these
financial statements. As well as modelling the realisation of the
sales pipeline, these forecasts also cover a number of scenarios
and sensitivities in order for the Board to satisfy itself that the
Group remains within its current cash facilities.
Whilst the Directors are confident in the Group's ability to
grow revenue, the Board's sensitivity modelling (which considered
the impact of Brexit and Covid--19) shows that the Group can remain
within its cash facilities in the event that revenue growth is
delayed (i.e. new sales bookings are not achieved) for a period in
excess of twelve months. The Directors' financial forecasts and
operational planning and modelling also include the actions, under
the control of the Group, that they could take to further
significantly reduce the cash outflow expected as the Group expands
geographically. On the basis of this financial and operational
modelling, the Directors believe that the Group has the capability
and the operational agility to react quickly, cut further costs
from the business and ensure that the cost base of the business is
aligned with its revenue and funding scale.
As a consequence, the Directors have a reasonable expectation
that the Group can continue to operate and to operate within its
existing facilities and be able to meet its commitments and
discharge its liabilities in the normal course of business for a
period of not less than twelve months from the date of approval of
these financial statements. Accordingly, they continue to adopt the
going concern basis in preparing the Group financial
statements.
Basis of consolidation
The consolidated financial statements incorporate the results of
essensys plc and all of its subsidiary undertakings.
essensys plc was incorporated on 22 January 2019, and on 16 May
2019 it acquired the issued share capital of essensys (UK) Ltd,
previously essensys Limited, by way of a share for share exchange.
The latter had four wholly owned subsidiaries:
* essensys, Inc
* Hubcreate Limited
* TVOC Limited
* Spacebuddi Limited
The consideration for the acquisition was satisfied by the issue
of 38,836,044 ordinary shares in essensys plc to the shareholders
of essensys (UK) Limited.
The accounting treatment for the year to 31 July 2019 in
relation to the addition of essensys plc as a new UK holding
company of the group falls outside the scope of IFRS 3 'Business
Combinations'. The share scheme arrangement constituted a
combination of entities under common control due to all
shareholders of essensys (UK) Ltd being issued shares in the same
proportion, and the continuity of ultimate controlling parties. The
reconstructed group was consolidated using merger accounting
principles which treated the reconstructed group as if it had
always been in existence. Any difference between the nominal value
of shares issued in the share exchange and the book value of the
shares obtained were recognised in a merger reserve.
The company applied the statutory relief as prescribed by
Companies Act 2006 in respect of the share for share exchange as
the issuing company has secured more than 90% equity in the other
entity. The carrying value of the investment is carried at the
nominal value of the shares issued.
4 Summary of significant accounting policies
Revenue
The Group generates revenue in the UK and the United States of
America (USA). Turnover represents services provided in the normal
course of business; net of value added tax. Services provided to
clients during the year, including any amounts which at the
reporting date have not yet been billed to the clients, have been
recognised as revenue.
(a) Contract
Set up and installation costs are partially invoiced once the
customer contract is signed with the remaining balance invoiced
when the service goes live. Fixed monthly costs are invoiced one
month in advance and revenue is recognised in the month the service
is provided. Deferred revenue is recognised for the Group's
obligation to transfer services to customers for which they have
already received consideration (or an amount of consideration is
due) from the customer. Variable monthly costs (including internet
usage and telephone call charges) are invoiced monthly in arrears
and accrued revenue is recognised in the month that the services
were consumed.
(b) Contractual obligation
The majority of customer contracts have two main services that
the Group provides to the customer:
* Set up / installation
* Ongoing monthly software, services and support
Where a contract is modified and the remaining services are
distinct from the services transferred on or before the date of the
contract modification, then the Group accounts for the contract
modifications as if it were a termination of the existing contract
and the creation of a new contract.
The amount of consideration allocated to the remaining
performance obligations is the sum of the consideration promised by
the customer and the consideration promised as part of the contract
modification.
(c) Determining the transaction price
The transaction price is determined as the fair value of the
consideration the Group expects to receive over the course of the
contract. There are no incentives given to customers that would
have a material effect on the financial statements.
(d) Allocate the transaction price to the performance
obligations in the contract
The allocation of the transaction price to the performance
obligations in the contract is non-complex for the Group. There is
a fixed unit price for each product sold. Therefore, there is
limited judgement involved in allocating the contract price to each
unit ordered.
Revenue (continued)
(e) Recognise revenue when or as the entity satisfies its
performance obligations
The contracts may cover multiple sites, but the overarching
terms are consistent in each contract. The set up/installation is
seen as a distinct performance obligation and revenue is recognised
at a point in time, when the installation is completed, and any
hardware is provided to the client for their use. The customer can
benefit from the set up / installation such as new internet
connectivity or new hardware provided, and therefore revenue is
recognised in full when these services are provided.
The second performance obligation is the provision of software,
infrastructure and on-demand services over the term of the
contract, and the Group recognises the revenue each month as it
provides these services for the duration of the contract, i.e. over
time.
(f) Costs to obtain and fulfil a contract
Set up and installation costs are partially invoiced once the
customer contract is signed. The value of the invoiced amount is
held as a contract liability until the performance obligation is
satisfied.
The company incurs Incremental costs in obtaining a contract in
the form of sales commissions. The Company recognises the sales
commissions as an asset in relation to costs to obtain a contract.
The company believes that the costs are recoverable as the proceeds
from the customer over the contract period exceed the costs to
obtain the contract. The asset is amortised over the contract life
on a systematic basis.
Contract assets arise from the group's revenue contracts, where
work is performed in advance of invoicing customers, and contract
liabilities arise where revenue is received in advance of work
performed. Cumulatively, payments received from customers at each
balance sheet date do not necessarily equal the amount of revenue
recognised on the contracts. Commission costs capitalised on
contracts represents internal sales commission costs incurred on
signing of customer contracts and, in line with the requirements of
IFRS15, spread over the life of the customer contract.
Finance income
Finance income comprises interest receivable on funds invested
and loans to related parties. Interest income is recognised in
profit or loss as it accrues using the effective interest
method.
Finance costs
Finance costs comprise interest on bank loans and lease
liabilities. Interest on bank loans and lease liabilities is
charged to the consolidated statement of comprehensive income over
the term of the debt using the effective interest rate method so
that the amount charged is at a constant rate on the carrying
amount. Issue costs are initially recognised as a reduction in the
proceeds of the associated capital instrument.
Intangible assets
(a) Internal software development
Research expenditure is written of in the year in which it is
incurred.
Expenditure on internally developed products is capitalised if
it can be demonstrated that:
* it is technically and commercially feasible to
develop the asset for future economic benefit;
* adequate resources are available to maintain and
complete the development;
* there is the intention to complete and develop the
asset for future economic benefit;
* the company is able to use the asset;
* use of the asset will generate future economic
benefit; and
* expenditure on the development of the asset can be
measured reliably.
Where the costs are capitalised, they are written off over their
economic life which is considered by the directors to be 5 to 7
years.
(b) Goodwill
Goodwill arising on the acquisition of a business represents the
excess of the fair value of the consideration and the fair value of
the Group's share of the identifiable assets and liabilities
acquired. The identifiable assets and liabilities acquired are
incorporated into the consolidated financial statements at their
fair value to the Group.
Subsequent to initial recognition, goodwill is measured at cost
less accumulated impairment losses. Goodwill is tested for
impairment annually. Any impairment is recognised immediately in
the Consolidated Statement of Comprehensive Income and is not
subsequently reversed. On disposal of a business, the attributable
amount of goodwill is included in the determination of the profit
or loss on disposal.
Intangible assets ( continued )
(c) Other intangible assets
Other intangible assets are initially recognised at cost or, if
recognised as part of a business combination, at fair value. After
recognition, intangible assets are measured at cost or fair value
less any accumulated amortisation and any accumulated impairment
losses. Amortisation is calculated to write off the cost or fair
value of intangible assets in equal annual instalments over their
estimated useful lives and is included within administrative
expenses.
The estimated useful lives for other intangible fixed assets
range as follows:
Customer relationships - 6.3 years
Website - 1 year
Acquired software - 5 years
Property, plant and equipment
Property, plant and equipment is carried at historical cost less
accumulated depreciation and any accumulated impairment losses.
Historical cost comprises the aggregate amount paid to acquire
assets and includes costs directly attributable to making the asset
capable of operating as intended.
At each reporting date the Group assesses whether there is an
indication of impairment. If such indication exists, the
recoverable amount of the asset is determined which is the higher
of its fair value less costs to sell and its value in use. An
impairment loss is recognised where the carrying value exceeds the
recoverable amount.
Depreciation is charged so as to allocate the cost of assets
less their residual value over their estimated useful lives or, if
held under a finance lease, over the shorter of the lease term and
the estimated useful life, using the straight line method.
Depreciation is provided at the following annual rates:
Leasehold improvements - 20%
Fixtures and fittings - 25%
Computer equipment - 10% - 25%
The assets' residual values, useful lives and depreciation
methods are reviewed, and adjusted prospectively if appropriate, if
there is an indication of a significant change since the last
reporting date.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within 'other
operating income or losses' in the statement of comprehensive
income.
Leasehold improvements include security equipment purchased.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial information of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional
currency"). The consolidated financial information is presented in
'sterling', which is essensys plc's functional and the Group's
presentation currency.
On consolidation, the results of overseas operations are
translated into sterling at rates approximating to those ruling
when the transactions took place. All assets and liabilities of
overseas operations are translated at the rate ruling at the
reporting date, including any goodwill in relation to that entity.
Exchange differences arising on translating the opening net assets
at opening rate and the results of overseas operations at actual
rate are recognised in other comprehensive income.
(b) Transactions and balances
Foreign currency transactions are translated into essensys plc's
functional currency 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 year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss.
Foreign exchange gains and losses that relate to borrowings and
cash and cash equivalents are presented in profit or loss within
'finance income or costs. All other foreign exchange gains and
losses are presented in the statement of comprehensive income
within 'other operating income or expense'.
Inventories
Inventories are valued at the lower of cost and net realisable
value. Inventories consist exclusively of work in progress, which
are items that have been purchased and allocated to satisfy
specific customer contracts. As the items have yet to be installed
at the customer location, and where title has not yet passed, they
remain on the statement of financial position until title has
passed.
4 Summary of significant accounting policies (continued)
Trade and other receivables
Trade receivables, which are generally received by the end of
the month following terms, are recognised and carried at the lower
of their original invoiced value less provision for expected credit
losses.
Cash and cash equivalents
All cash and short-term investments with original maturities of
three months or less are considered cash and cash equivalents,
since they are readily convertible to cash. These short-term
investments are stated at cost, which approximates fair value.
Trade and other payables
Trade payables are obligations to pay for goods and services
that have been acquired in the ordinary course of business from
suppliers. Trade and other payables are recognised at original
cost.
Exceptional items
Exceptional items are those that, in the Directors' view, are
required to be separately disclosed by virtue of the size or
incidence to enable a full understanding of the Group's financial
performance.
Taxation
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the consolidated statement of
comprehensive income, except that a charge attributable to an item
of income or expense recognised as other comprehensive income or to
an item recognised directly in equity is also recognised in other
comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax
rates and laws that have been enacted or substantively enacted by
the reporting date in the countries where essensys plc's
subsidiaries operate and generate taxable income.
Deferred tax balances are recognised in respect of all timing
differences that have originated but not reversed by the statement
of financial position date, except:
* The recognition of deferred tax assets is limited to
the extent that it is probable that they will be
recovered against the reversal of deferred tax
liabilities or other future taxable profits;
* Any deferred tax balances are reversed if and when
all conditions for retaining associated tax
allowances have been met; and
* Where timing differences relate to interests in
subsidiaries, associates, branches and joint ventures
and the Group can control their reversal and such
reversal is not considered probable in the
foreseeable future.
Deferred tax balances are not recognised in respect of permanent
differences except in respect of business combinations, when
deferred tax is recognised on the differences between the fair
values of assets acquired and the future tax deductions available
for them and the differences between the fair values of liabilities
acquired and the amount that will be assessed for tax. Deferred
income tax is determined using tax rates and laws that have been
enacted or substantively enacted by the reporting date.
Share capital
Ordinary shares are classified as equity. There is one class of
ordinary share in issue, as detailed in note 20.
Reserves
The Group and Company's reserves are as follows:
* Called up share capital reserve represents the
nominal value of the shares issued;
* The share premium account includes the premium on
issue of equity shares, net of any issue costs;
* Share based payment reserve represents the total
value expensed at the balance sheet date in relation
to the fair value of the share options at their grant
date expensed over the vesting period under the
relevant share option schemes;
* Merger reserve arose on the business combination that
was accounted for as a merger in accordance with FRS
102;
* Retained earnings represents cumulative profits or
losses, net of dividends paid and other adjustments.
Financial assets
The Group classifies all of its financial assets at amortised
cost. Financial assets do not comprise prepayments, or contract
assets, although contract assets are in scope of IFRS 9's
impairment requirements as discussed below. Management determines
the classification of its financial assets at initial
recognition.
Financial assets (continued)
The Group's financial assets held at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. These assets are
non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They arise principally
through the provision of goods and services to customers (e.g.
trade receivables), but also incorporate other types of financial
assets where the objective is to hold their assets in order to
collect contractual cash flows and the contractual cash flows are
solely payments of the principal and interest. They are initially
recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net;
such provisions are recorded in a separate provision account with
the loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation
that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated
provision.
The expected loss rates are based on the Group's historical
credit losses experienced over the last three periods prior to the
period end. The historical loss rates are then adjusted for current
and forward-looking information on macroeconomic factors affecting
the Group's customers. The Group has identified the gross domestic
product (GDP), unemployment rates and inflation rate as the key
macroeconomic factors in the countries that the Group operates.
Impairment provisions for other receivables are recognised based
on the general impairment model within IFRS 9. Under the General
approach, at each reporting date, the Group determines whether
there has been a significant increase in credit risk (SICR) since
initial recognition and whether the loan is credit impaired. This
determines whether the loan is in Stage 1, Stage 2 or Stage 3,
which in turn determines both the amount of ECL to be recognised
i.e. 12-month ECL or Lifetime ECL.
Financial liabilities
The Group classifies its financial liabilities in the category
of financial liabilities at amortised cost. All financial
liabilities are recognised in the statement of financial position
when the Group becomes a party to the contractual provision of the
instrument.
Financial liabilities measured at amortised cost include:
* Trade payables and other short-dated monetary
liabilities, which are initially recognised at fair
value and subsequently carried at amortised cost
using the effective interest rate method.
* Bank and other borrowings are initially recognised at
fair value net of any transaction costs directly
attributable to the issue of the instrument. Such
interest-bearing liabilities are subsequently
measured at amortised cost using the effective
interest rate method, which ensures that any interest
expense over the period to repayment is at a constant
rate on the balance of the liability carried in the
consolidated statement of financial position. For the
purposes of each financial liability, interest
expense includes initial transaction costs and any
premium payable on redemption, as well as any
interest or coupon payable while the liability is
outstanding.
Unless otherwise indicated, the carrying values of the Group's
financial liabilities measured at amortised cost represents a
reasonable approximation of their fair values.
Impairment of assets
Assets that are subject to depreciation or amortisation are
assessed at each reporting date to determine whether there is any
indication that the assets are impaired. For the purposes of
assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating
units or CGUs).
Where there is any indication that an asset may be impaired, the
carrying value of the asset (or CGUs to which the asset has been
allocated) is tested for impairment. An impairment loss is
recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's (or CGU's) fair value less costs to sell and
value in use. Non-financial assets that have been previously
impaired are reviewed at each reporting date to assess whether
there is any indication that the impairment losses recognised in
prior periods may no longer exist or may have decreased. Goodwill
is reviewed for impairment on an annual basis, with any impairment
to goodwill not reversed at a later period.
Business combinations
The acquisition method of accounting is used to account for all
business combinations, regardless of whether equity instruments or
other assets are acquired.
The consideration transferred for the acquisition of a
subsidiary comprises the:
* fair values of the assets transferred
* liabilities incurred to the former owners of the
acquired business
* equity interests issued by the essensys Group
* fair value of any asset or liability resulting from a
contingent consideration arrangement, and
* fair value of any pre-existing equity interest in the
subsidiary
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. Acquisition related costs are expensed as
incurred.
The excess of the consideration transferred and acquisition-date
fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is
recorded as goodwill.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity's incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value with changes in fair
value recognised in profit or loss.
Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of the
number of equity instruments that will eventually vest. At each
reporting date, the Group revises its estimate on the number of
equity investments expected to vest. The impact of the revision of
the original estimates, if any, is recognised in the Statement of
Comprehensive Income over the remaining vesting period, with a
corresponding adjustment to the Share Based Payment Reserve.
Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for leases of low value assets; and
leases with a duration of twelve months or less, in line with the
requirements of IFRS 16.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the Group's incremental borrowing rate
on commencement of the lease is used. Variable lease payments are
only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement
of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments
are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
* Amounts expected to be payable under any residual
value guarantee;
* The exercise price of any purchase option granted in
favour of the Group if it is reasonably certain to
assess that option;
* Any penalties payable for terminating the lease, if
the term of the lease has been estimated on the basis
of termination option being exercised.
Right-of-use assets ("ROUA") are initially measured at the
amount of the lease liability, reduced for any lease incentives
received, and increased for:
* Lease payments made at or before commencement of the
lease;
* Initial direct costs incurred; and
* The amount of any provision recognised where the
Group is contractually required to dismantle, remove
or restore the leased asset.
Leases (continued)
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the same
discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is
revised. In both cases an equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying
amount being amortised over the remaining (revised) lease term.
When the Group renegotiates the contractual terms of a lease
with the lessor, the accounting depends on the nature of the
modification:
* If the renegotiation results in one or more
additional assets being leased for an amount
commensurate with the standalone price for the
additional rights-of-use obtained, the modification
is accounted for as a separate lease in accordance
with the above policy;
* In all other cases where the renegotiated increases
the scope of the lease (whether that is an extension
to the lease term, or one or more additional assets
being leased), the lease liability is remeasured
using the discount rate applicable on the
modification date, with the right-of-use asset being
adjusted by the same amount;
* If the renegotiation results in a decrease in the
scope of the lease, both the carrying amount of the
lease liability and right-of-use asset are reduced by
the same proportion to reflect the partial or full
termination of the lease with any difference
recognised in profit or loss. The lease liability is
then further adjusted to ensure its carrying amount
reflects the amount of the renegotiated payments over
the renegotiated term, with the modified lease
payments discounted at the rate applicable on the
modification date. The right-of-use asset is adjusted
by the same amount.
For contracts that both convey a right to The Group to use an
identified asset and require services to be provided to The Group
by the lessor, The Group has elected to account for the entire
contract as a lease, i.e. it does allocate any amount of the
contractual payments to, and account separately for, any services
provided by the supplier as part of the contract.
Retirement benefits
The Group operates a number of defined contribution plans. A
defined contribution plan is a pension plan under which the
employer pays fixed contributions into a separate entity.
Contributions payable to the plan are charged to the income
statement in the period in which they relate. The Group has no
legal or constructive obligations to pay further contributions if
the fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior
periods.
Holiday pay accrual
All employees accrue holiday pay during the calendar year, the
Board encourages all employees to use their full entitlement
throughout the year. A liability is recognised to the extent of any
unused holiday pay entitlement which has accrued at the statement
of financial position date and carried forward to future periods.
This is measured at the undiscounted salary cost of the future
holiday entitlement so accrued at the balance sheet date.
Standards adopted in the year
No new standards have been adopted in the reporting period as
all were adopted previously.
Standards, amendments and interpretations not yet effective
There are no standards issued not yet effective that will have a
material effect on the Group's financial statements. The Group has
not early adopted any standards, interpretations or amendments that
have been issued but are not yet effective.
5 Significant accounting judgements, estimates and assumptions
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectation
of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and judgements that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are detailed below.
Capitalisation of development costs
Costs are capitalised in relation to the development of the
underlying software utilised within the Group. The most critical
judgement is establishing whether the costs capitalised meet the
criteria set out within IAS 38. Further, the most critical estimate
is how the intangible asset can generate future economic benefit.
Projects that are maintenance in nature are expensed as incurred
whereas development that generates benefits to the group are
capitalised. After capitalisation management monitors whether the
recognition requirements continue to be met and whether there are
any indicators that the capitalised costs are required to be
impaired. See note 14 for details of amounts capitalised.
Measurement and impairment of goodwill and intangible assets
As set out in note 4 above the carrying value of goodwill is
reviewed for impairment at least annually and for other intangible
assets when an indication of impairment is identified. In
determining whether goodwill or intangible assets are impaired, an
estimation of the value in use of the Group is required. This
calculation of value in use requires estimates to be made relating
to the timing and amount of future cash flows expected and suitable
discount rates based on the Group's weighted average cost of
capital, in addition to the estimation involved in preparing the
initial projected cash flows for the next 5 years.
These estimates have been used to conclude that no impairment is
required to either goodwill or intangible assets but are
judgemental in nature. See note 14 for details of the key
assumptions made.
Valuation of Share Options
During the year the Group incurred a share-based payment charge
of GBP514,000 which related entirely to share options issued post
IPO. In the year ended 31 July 2019 the Group incurred a share
based payment charge of GBP979,000, of which GBP897,000 was in
relation to share options in existence in essensys (UK) Limited
issued prior to the IPO which were exercised shortly before the
IPO. The balance of GBP82,000 comprised the amount chargeable to
the year ended 31 July 2019 in respect of options in the Company
issued on 28 May 2019, immediately prior to the IPO.
The charge in respect of the pre-IPO options in essensys (UK)
Limited was based on valuations undertaken at the time of grants of
options using a discounted cash flow valuation of that business.
That valuation took into account recent financial performance at
that time together with management's estimate then of future
financial performance, that company's cost of capital and expected
long term growth rate. As the pre-IPO option scheme was an 'exit
only' scheme, the entire charge relating to that option scheme was
expensed during the year ended 31 July 2019 as all outstanding
options vested and were exercised shortly prior to the IPO.
The charge related to options in the Company at IPO and during
the year ended 31 July 2020 are based on valuations undertaken
using a Black Scholes or Monte Carlo Simulation option pricing
models, depending on the type of option. In assessing the valuation
judgements were made over share price volatility, the expected life
of the options issued, the proportion that would be exercised, the
risk-free rate applicable and the likely achievement of performance
targets where applicable. The valuation of those options issued
after IPO is spread over the vesting period and there will,
therefore, be further share based payment expenses in future years
in relation to those options. See note 27 for details.
6 Segmental Reporting
The Group generates revenue largely in the UK and the USA. The
majority of the Group's customers provide flexible office
facilities together with ancillary services (e.g. meeting rooms and
virtual services) including technology connectivity.
The Group generates revenue from the following activities:
-- Establishing services at customer sites (e.g. providing and
managing installations, equipment and training on software);
-- Recurring monthly fees for using the Group's software
platforms;
-- Revenue from usage of on demand services such as internet and
telephone usage and other, on demand, variable services; and
-- Other ad-hoc services.
The Group has one single business segment which is the provision
of software and technology platforms that manage the critical
infrastructure and business processes, primarily to the flexible
workspace industry. The Group has two revenue segments and two
geographical segments, as detailed in the tables below.
6A Revenue analysis by geographic area
The Group operates in two main geographic areas, the United
Kingdom and the United States of America. The whole of the
turnover is attributed to the principal activity. The Group's
revenue per geographical segment is as follows:
2020 2019
GBP000 GBP000
Analysis of turnover by country of destination:
United Kingdom 12,193 12,853
United States of America 10,306 7,780
_________ _________
Total Income 22,499 20,633
_________ _________
6B Revenue analysis by revenue streams
The Group has two main revenue streams, Operate and Connect.
The Group's revenue per revenue stream is as follows:
2020 2019
GBP000 GBP000
Connect 20,552 19,188
Operate 1,947 1,445
_________ _________
Total Income 22,499 20,633
_________ _________
Connect revenue includes all revenue generated in relation to
the Group's Connect product. It includes revenue recognised at a
point in time as well as recognised over a period of time.
Operate revenue includes all revenue generated in relation to
Group's Operate product. The revenue is recognised over a period of
time.
6C Revenue disaggregated by 'point in time'
and 'over time'
The Group revenue disaggregated between revenue recognised
'at a point in time' and 'over time' is as follows:
2020 2019
GBP000 GBP000
Revenue recognised at a point in time 3,138 4,291
Revenue recognised over time 19,361 16,342
_________ _________
Total Income 22,499 20,633
_________ _________
6D Revenue from customers greater than 10%
Revenue from customers greater than 10% in each reporting
period is as follows:
2020 2019
GBP000 GBP000
Customer 1 3,377 2,952
Customer 2 2,787 2,864
Customer 3 - 2,623
_________ _________
6E Contract assets and liabilities
Contract asset movements were as follows:
2020 2019
GBP000 GBP000
At 1 August 475 327
Transfers in the period from contract
assets to trade receivables (271) (327)
Excess of revenue recognised over cash
(or rights to cash) being recognised
during the period 164 271
Capitalised commission cost released (159) -
as contract obligations fulfilled
Commission costs capitalised on contracts 211 204
_________ _________
At 31 July 420 475
_________ _________
Contract liability movements were as follows:
2020 2019
GBP000 GBP000
At 1 August 1,044 1,156
Amounts included in contract liabilities
that were recognised as revenue during
the period (1,044) (880)
Cash received and receivables in advance
of performance and not recognised as
revenue during the period 550 768
_________ _________
At 31 July 550 1,044
_________ _________
Contract assets are included within 'trade and other
receivables' and contract liabilities is shown respectively on the
face of the statement of financial position. Contract assets arise
from the group's revenue contracts, where work is performed in
advance of invoicing customers, and contract liabilities arise
where revenue is received in advance of work performed.
Cumulatively, payments received from customers at each balance
sheet date do not necessarily equal the amount of revenue
recognised on the contracts. Commission costs capitalised on
contracts represents internal sales commission costs incurred on
signing of customer contracts and, in line with the requirements of
IFRS15, spread over the life of the customer contract.
7 Operating profit / (loss)
2020 2019
GBP000 GBP000
This is arrived at after charging/(crediting):
Depreciation of tangible fixed assets 587 425
Amortisation of intangible assets 1,009 742
Depreciation of right of use assets 1,424 1,586
Loss on disposal of right of use asset - 61
Fees payable to the Group's auditor (see
below) 130 494
Amortisation of loan arrangement fee 66 45
Write off loan arrangement fees - 18
Exchange differences 140 (38)
Research & Development expense 363 88
Staff costs (note 8) 8,149 6,606
Share based payment charges 514 979
IPO costs - 1,508
Expected credit loss provision 470 56
_______ _______
Analysis of fees paid to the Group's
auditor:
Annual financial statements - parent
company 19 8
Annual financial statements - subsidiary
companies 81 66
_________ _________
Audit Fee 100 74
_________ _________
Tax services - -
Assurance services 30 24
Corporate finance services - 396
_________ _________
Non audit services 30 420
_________ _________
Total fee 130 494
_______ _______
8 Employees
Staff costs (including directors) consist
of:
2020 2019
GBP000 GBP000
Wages and salaries 6,186 5,655
Social security costs 794 623
Cost of defined contribution scheme 213 145
Other 956 183
_________ _________
8,149 6,606
_________ _________
The average number of employees (including directors)
during the year was as follows:
2020 2019
No. No.
Executive 5 7
Sales & Marketing 18 9
Finance & Administration 12 8
Support 29 29
Development 20 15
Provisioning 8 6
_________ _________
92 74
_________ _________
9 Key management remuneration
Key management personnel include all the directors of the
Company and the senior management and directors of essensys
(UK) Limited, the Group's principal trading subsidiary,
who together have authority and responsibility for planning,
directing, and controlling the activities of the Group.
2020 2019
GBP000 GBP000
Salaries and fees 1,838 1,597
Social security costs 243 161
Short term non-monetary benefits 15 25
Company contributions to money purchase
pension schemes 108 47
Share based payment expense 317 562
_________ _________
2,521 2,392
_________ _________
10 Interest receivable and similar income
2020 2019
GBP000 GBP000
Interest receivable from related parties 2 82
_________ _________
2 82
_________ _________
11 Interest payable and similar charges
2020 2019
GBP000 GBP000
Bank loans and overdrafts - 299
Lease liabilities 132 195
_________ _________
132 494
_________ _________
12 Taxation on profit / (loss) on ordinary activities
2020 2019
GBP000 GBP000
Current tax
UK corporation tax - 3
Irrecoverable tax on loans to participators - 20
Recovery of irrecoverable tax on loans (159) -
to participators
Adjustment in respect of previous periods (4) (74)
Foreign tax on income for the year 12 6
_________ _________
Total current tax (151) (45)
_________ _________
Deferred tax
Origination and reversal of timing differences 334 90
Adjustments in respect of prior periods 8 -
_________ _________
Total deferred tax 342 90
_________ _________
Taxation on profit on ordinary activities 191 45
_________ _________
The tax assessed for the year is higher than the standard rate
of corporation tax in the UK applied to profit before tax. The
differences are explained below:
2020 2019
GBP000 GBP000
Profit / (loss) on ordinary activities
before tax 346 (1,434)
_________ _________
Tax using the Group's domestic tax rates
(19%) 66 (272)
Effects of:
Fixed asset differences 110 143
Expenses not deductible for tax purposes 102 494
Adjustments to tax charge in respect
of previous periods 11 (127)
Irrecoverable tax on loans to participators (159) 20
Adjustment in respect of prior periods (4) (74)
Adjustment to losses (225) -
Deduction for R&D expenditure (123) (22)
Other permanent differences - (2)
Other tax adjustments, reliefs and transfers - 10
Foreign tax on income for the year 18 35
Current tax (other) 63 -
Adjust closing deferred tax to average
rate 7 (1)
Adjust opening deferred tax to average
rate (18) (5)
Timing differences not recognised 228 (57)
Deferred tax not recognised 115 (97)
_________ _________
Total tax charge for period 191 45
_________ _________
13 Earnings per share
2020 2019
Basic weighted average number of shares 49,652,821 40,381,298
_________ _________
Fully diluted weighted average number of
shares 49,794,049 40,381,298
_________ _________
2020 2019
GBP000 GBP000
Profit / (loss) for the year attributable
to owners of the group 155 (1,479)
_________ _________
Basic and diluted profit / (loss) per share
(pence) 0.3p (3.7p)
_________ _________
The profit / (loss) per share has been calculated using the
profit / (loss) for the year and the weighted average number of
ordinary shares outstanding during the period.
14 Intangible assets
Customer Internal
software
Group relationships development Software Goodwill Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 July 2019 335 4,461 280 1,263 6,339
Additions - 2,290 - - 2,290
_________ _________ _________ _________ _________
At 31 July 2020 335 6,751 280 1,263 8,629
_________ _________ _________ _________ _________
Amortisation
At 1 July 2019 217 2,162 228 - 2,607
Charge for year 76 881 52 - 1,009
_________ _________ _________ _________ _________
At 31 July 2020 293 3,043 280 - 3,616
_________ _________ _________ _________ _________
Net book value
At 31 July 2020 42 3,708 - 1,263 5,013
_________ _________ _________ _________ _________
At 31 July 2019 118 2,299 52 1,263 3,732
_________ _________ _________ _________ _________
The goodwill relates to the acquisition of Hubcreate Limited on
18 February 2016 and has not been impaired since acquisition. The
goodwill all relates to the one cash generating unit (CGU).
The Group estimates the recoverable amount of the CGU using a
value in use model by projecting pre-tax cash flows for the next 5
years together with a terminal value using the long-term growth
rate. The key assumptions underpinning the recoverable amount of
the CGU are forecast revenue and forecast EBITDA percentage. The
forecast revenues in the model are based on management's past
experience and future expectations of performance. The pre-tax
discount rate used in all periods is 12% derived from a WACC
calculation and benchmarked against similar organisations within
the sector. The long-term growth rate used is 2% in all periods
which is the underlying growth rate of the economy. Using a
discount rate of 15% and a long-term growth rate of 1% as
sensitised assumptions also does not result in any impairment. The
total recoverable amount in respect of goodwill as assessed by
management using the above assumptions is greater than the carrying
amount and therefore no impairment charge has been booked in each
period.
14 Intangible assets
Customer Internal
software
Group relationships development Software Goodwill Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 July 2018 335 3,661 280 1,263 5,539
Additions - 800 - - 800
_________ _________ _________ _________ _________
At 31 July 2019 335 4,461 280 1,263 6,339
_________ _________ _________ _________ _________
Amortisation
At 1 July 2018 154 1,547 164 - 1,865
Charge for year 63 615 64 - 742
_________ _________ _________ _________ _________
At 31 July 2019 217 2,162 228 - 2,607
_________ _________ _________ _________ _________
Net book value
At 31 July 2019 118 2,299 52 1,263 3,732
_________ _________ _________ _________ _________
At 31 July 2018 181 2,114 116 1,263 3,674
_________ _________ _________ _________ _________
15 Property, plant and equipment
Fixtures Computer Leasehold
and
Group fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 July 2019 186 4,763 133 5,082
Additions 73 917 2 992
Transfers - 1,305 - 1,305
Exchange adjustments (12) (384) (3) (399)
_________ _________ _________ _________
At 31 July 2020 247 6,601 132 6,980
_________ _________ _________ _________
Depreciation
At 1 July 2019 120 3,513 73 3,706
Charge for year 41 531 15 587
Transfers - 1,136 - 1,136
Exchange adjustments (7) (127) (10) (144)
_________ _________ _________ _________
At 31 July 2020 154 5,053 78 5,285
_________ _________ _________ _________
Net book value
At 31 July 2020 93 1,548 54 1,695
_________ _________ _________ _________
At 31 July 2019 66 1,250 60 1,376
_________ _________ _________ _________
Fixtures Computer Leasehold
and
fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 July 2018 111 3,872 155 4,138
Additions 42 665 15 722
Exchange adjustments 33 226 (37) 222
_________ _________ _________ _________
At 31 July 2019 186 4,763 133 5,082
_________ _________ _________ _________
Depreciation
At 1 July 2018 68 3,070 57 3,195
Charge for year 36 376 14 426
Exchange adjustments 16 67 2 85
_________ _________ _________ _________
At 31 July 2019 120 3,513 73 3,706
_________ _________ _________ _________
Net book value
At 31 July 2019 66 1,250 60 1,376
_________ _________ _________ _________
At 31 July 2018 43 802 98 943
_________ _________ _________ _________
16 Right of use
assets
Leasehold Fixtures Computer Leasehold
and
Group property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 July 2019 4,362 142 2,815 584 7,903
Lease remeasurement (37) - 64 - 27
Transfers - - (1,305) - (1,305)
Exchange adjustments (121) - (47) - (168)
_________ _________ _________ _________ _________
At 31 July 2020 4,204 142 1,527 584 6,457
_________ _________ _________ _________ _________
Depreciation
At 1 July 2019 2,260 99 2,265 160 4,784
Charge for year 985 35 345 59 1,424
Lease remeasurement (596) - - - (596)
Transfers - - (1,138) - (1,138)
Exchange adjustments (40) - (32) - (72)
_________ _________ _________ _________ _________
At 31 July 2020 2,609 134 1,440 219 4,402
_________ _________ _________ ______ _________
Net book value
At 31 July 2020 1,595 8 87 365 2,055
_________ _________ _________ _________ _________
At 31 July 2019 2,102 43 550 424 3,119
_________ _________ _________ _________ _________
Leasehold Fixtures Computer Leasehold
and
Property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 July 2018 3,393 167 2,716 584 6,869
Additions 959 - - - 959
Disposals (99) - - - (99)
Exchange adjustments 109 (25) 99 - 183
_________ _________ _________ _________ _________
At 31 July 2019 4,362 142 2,815 584 7,903
_________ _________ _________ _________ _________
Depreciation
At 1 July 2018 1,290 75 1,642 102 3,190
Charge for year 928 35 565 58 1,586
Disposals (38) - - - (38)
Exchange adjustments 80 (11) 58 - 127
_________ _________ _________ _________ _________
At 31 July 2019 2,260 99 2,265 160 4,784
_________ _________ _________ _________ _________
Net book value
At 31 July 2019 2,102 43 550 424 3,119
_________ _________ _________ _________ _________
At 31 July 2018 2,103 92 1,074 482 3,751
_________ _________ _________ _________ _________
17 Subsidiaries
Subsidiary undertakings, associated undertakings and other
investments
The following were subsidiary undertakings of the company:
Proportion of
Country of voting rights
incorporation and ordinary
Name or registration share capital Status Nature of business
held
essensys United Kingdom 100% Trading Provider of software
(UK) Ltd and technology
platforms to the
flexible workspace
industry
essensys, United States 100% Trading Provider of software
Inc of America and technology
platforms to the
flexible workspace
industry
Hubcreate United Kingdom 100% Non-trading Provider of workspace
Limited management software
TVOC Limited United Kingdom 100% Non-trading Virtual office
provider
Spacebuddi United Kingdom 95% Dormant -
Limited
The registered office of Essensys Inc is Nelson Tower, 450 7(th)
Avenue, New York, NY 10123. The registered offices of Hubcreate
Limited, TVOC Limited and Spacebuddi Limited are as per the
Company.
18 Inventories
2020 2019
GBP000 GBP000
Work in progress 323 292
_________ _________
323 292
_________ _________
Work in progress are items and third party services purchased to
satisfy specific customer contracts, where title has not yet
passed.
19 Trade and other receivables
2020 2019
GBP000 GBP000
Trade receivables (net) 3,116 3,019
Other receivables 491 910
Taxes and other social security - 63
Corporation tax - 40
Prepayments 1,159 1,220
Contract asset 420 475
_________ _________
5,186 5,727
_________ _________
Analysis of trade receivables based on age of invoices
Total
< 30 31 - 60 61 -90 > 90 Total Gross ECL Net
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- -------- -------- -------- -------- ----------- -------- --------
2020 1,922 280 254 1,195 3,696 (535) 3,116
2019 1,722 40 419 903 3,084 (65) 3,019
----- -------- -------- -------- -------- ----------- -------- --------
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. They are
generally due for settlement within 30 days and therefore are all
classified as current. The majority of trade and other receivables
are non-interest bearing. Where the effect is material, trade and
other receivables are discounted using discount rates which reflect
the relevant costs of financing. The carrying amount of trade and
other receivables approximates fair value.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses (ECL) which uses a lifetime expected loss
allowance for all trade receivables. The ECL balance has been
determined based on historical data available to management in
addition to forward looking information utilising management
knowledge.
At 31 July 2020 the lifetime expected loss provision for trade
receivables and contract assets is as follows:
31 July 2020
Less than
30 31 to 60 61 to 90 91 or more
days past days past days past days past Total
due due due due
GBP000 GBP000 GBP000 GBP000 GBP000
Expected loss
rate 0% 5.7% 10.6% 39.6%
Gross carrying
amount 2,294 280 254 1,243 4,071
ECL - 16 27 492 535
31 July 2019
Less than
30 31 to 60 61 to 90 91 or more
days past days past days past days past Total
due due due due
GBP000 GBP000 GBP000 GBP000 GBP000
Expected loss
rate 0% 0% 0% 7.20%
Gross carrying
amount 2,197 40 419 903 3,559
ECL - - - 65 65
Movements in the ECL are as follows:
2020 2019
GBP000 GBP000
Opening ECL at 1 August 65 9
Increase during the year 656 56
Receivables written off as uncollectable (186) -
_______ _______
ECL charge for the year 470 56
_______ _______
At 31 July 535 65
_______ _______
20 Share capital
2020 2019
GBP000 GBP000
Allotted, called up and fully paid
52,743,329 (2019 - 48,107,567) ordinary
shares of 0.25p each (2019 - 0.25p) 132 120
_______ _______
On 9 April 2020 the Company issued 4,635,762 new ordinary shares
of 0.25 pence each at a price of 151 pence per share by way of a
share placing.
On 15 May 2019 essensys (UK) Limited underwent a corporate
reorganisation during which all outstanding share options were
exercised, the company undertook a bonus share issue followed by a
share split to result in essensys (UK) Limited having 38,836,044
shares of GBP0.0025p in issue. On 16 May 2019 the Company acquired
the issued share capital of essensys (UK) Ltd, by way of a share
for share exchange and on 29 May 2019 the Company was admitted to
trading on AIM via an initial public offering (IPO), which
generated gross proceeds of GBP14,000,000 (net proceeds of
GBP11,699,000) from the issue of 9,271,523 new ordinary shares at
151p per share.
21 Share premium
2020 2019
GBP000 GBP000
Share premium at start of period 13,184 -
Issue of new shares 6,988 13,977
Cost of issuing new shares recognised
in equity (291) (793)
_______ _______
19,881 13,184
_______ _______
22 Trade and other payables
2020 2019
GBP000 GBP000
Amounts falling due within one year
Trade payables 1,912 1,678
Other taxes and social security 456 319
Other creditors 404 117
Accruals 789 1,268
_________ _________
3,561 3,382
_________ _________
23 Lease liabilities
Nature of leasing activities
The Group leases a number of assets in the jurisdictions from
which it operates in with all lease payments fixed over the lease
term.
2020 2019
GBP000 GBP000
Number of active leases 15 27
_________ _________
The Group sometimes negotiates break clauses in its leases. On a
case-by-case basis, the Group will consider whether the absence of
a break clause would expose the Group to excessive risk. Typically,
factors considered in deciding to negotiate a break clause
include:
-- The length of the lease term;
-- The economic stability of the environment in which the property is located; and
-- Whether the location represents a new area of operations for the Group.
At both 31 July 2020 and 2019 the carrying amounts of lease
liabilities are not reduced by the amount of payments that would be
avoided from exercising break clauses because on both dates it was
considered reasonably certain that the Group would not exercise its
right to exercise any right to break the lease. Where extensions to
leases are permitted the Group has chosen to assume that the
extensions will be taken and liabilities reflect this position.
Leasehold Fixtures Computer Leasehold
and
property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 August 2019 2,444 86 620 298 3,448
Additions 586 - - - 586
Interest expense 78 6 25 23 132
Lease payments (1,204) (35) (543) (144) (1,926)
Foreign exchange
movements (84) - (14) - (98)
_________ _________ _________ _________ _________
At 31 July 2020 1,820 57 88 177 2,142
_________ _________ _________ _________ _________
Leasehold Fixtures Computer Leasehold
and
property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 August 2018 2,491 112 1,263 406 4,272
Additions 959 - - - 959
Interest expense 75 9 76 35 195
Effect of modification
to lease terms (60) - - - (60)
Lease payments (1,098) (35) (744) (143) (2,020)
Foreign exchange
movements 77 - 25 - 102
_________ _________ _________ _________ _________
At 31 July 2019 2,444 86 620 298 3,448
_________ _________ _________ _________ _________
Lease maturity
Leasehold Fixtures Computer Leasehold
and
property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
2020 2020 2020 2020 2020
Up to 3 months - - - - -
3 to 12 months 706 - 34 - 740
1-2 years 126 57 54 177 414
2-5 years 510 - - - 510
More than 5 years 478 - - - 478
_________ _________ _________ _________ _________
1,820 57 88 177 2,142
_________ _________ _________ _________ _________
Leasehold Fixtures Computer Leasehold
and
property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
2019 2019 2019 2019 2019
Up to 3 months 252 - 180 - 432
3 to 12 months 1,029 - 350 - 1,379
1-2 years 609 86 90 298 1,083
2-5 years 554 - - - 554
More than 5 years - - - - -
_________ _________ _________ _________ _________
2,444 86 620 298 3,448
_________ _________ _________ _________ _________
Analysis by current and non-current
Leasehold Fixtures Computer Leasehold
and
property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
2020 2020 2020 2020 2020
Due within a year 1,113 31 71 131 1,346
Due in more than
one year 707 26 17 46 796
_________ _________ _________ _________ _________
1,820 57 88 177 2,142
_________ _________ _________ _________ _________
Analysis by current and non-current
(continued)
Leasehold Fixtures Computer Leasehold
and
property fittings equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
2019 2019 2019 2019 2019
Due within a year 1,281 - 530 - 1,811
Due in more than
one year 1,163 86 90 298 1,637
_________ _________ _________ _________ _________
2,444 86 620 298 3,448
_________ _________ _________ _________ _________
24 Deferred taxation
2020 2019
GBP000 GBP000
Brought forward 67 (4)
Charged/(credited) to the income statement 342 71
_________ _________
Carried forward 409 67
_________ _________
The provision for deferred taxation is
made up as follows:
2020 2019
GBP000 GBP000
Fixed asset timing
differences 409 138
Other timing differences - (71)
_________ _________
409 67
_________ _________
Factors that may affect future tax charges
Changes to the UK corporation tax rates were substantively
enacted as part of Finance Bill 2015 (on 26 October 2015) and
Finance Bill 2016 (on 7 September 2016). These included reductions
to the main rate to reduce the rate to 19 per cent. from 1 April
2017 and to 17 per cent. from 1 April 2020. However, on 17 March
2020 the rate reduction due to come in effect on 1 April 2020 was
substantively reversed so that the main rate of taxation will
remain at 19 per cent, and this has been reflected in these
financial statements.
25 Financial instruments
The Group is exposed through its operations to the following
financial risks:
* Credit risk
* Foreign exchange risk
* Liquidity risk
In common with all other business, the Group is exposed to risks
that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect to these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
procedures for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises are as follows:
-- Trade receivables
-- Cash and cash equivalents
-- Trade and other payables
-- Bank overdrafts
-- Bank loan
It is Group policy that no trading in financial instruments
should be undertaken.
Financial instruments by category
2020 2019
GBP000 GBP000
Financial assets at amortised cost
Cash and cash equivalents 8,496 2,688
Trade and other receivables 3,771 4,488
_________ _________
Total financial assets at amortised cost 12,267 7,716
_________ _________
Financial liabilities
Trade and other payables 3,105 3,063
Bank Loan - -
Lease liabilities 2,142 3,448
_________ _________
Total financial liabilities 5,247 6,511
_________ _________
Financial instruments not measured at fair value
These include cash and cash equivalents, trade and other
receivables, trade and other payables, and loans and borrowings.
Due to their short-term nature, the carrying value of cash and cash
equivalents, trade and other receivables and trade and other
payables approximates their fair value.
The Group's activities expose it to a variety of financial
risks:
* Market risk (including foreign exchange risk, price
risk and interest rate risk)
* Credit risk
* Liquidity risk
The financial risks relate to the following financial
instruments:
* Cash and cash equivalents
* Trade and other receivables
* Trade and other payables
* Loans and borrowings
The accounting policies with respect to these financial
instruments are described above.
Risk management is carried out by the key management personnel.
Key management personnel include all the directors of the Company
and the senior management and directors of essensys (UK) Limited,
the Group's principal trading subsidiary, who together have
authority and responsibility for planning, directing, and
controlling the activities of the Group. The key management
personnel identify and evaluate financial risks and provide
principals for overall risk management.
(a) Credit Risk
Credit risk is the risk of financial loss to the Group if a
customer fails to meet its contractual obligations. The Group is
mainly exposed to credit risk from credit sales. It is Group
policy, implemented locally, to assess the credit risk of new
customers before entering contracts.
(b) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises because the Group operates in the
United Kingdom and the United States of America, whose functional
currency is not the same as the presentational currency of the
Group. Foreign exchange risk also arises when individual companies
within the group enter into transactions denominated in currencies
other than their functional currency. Such transactions are kept to
a minimum either through the choice of suppliers or presenting
sales invoices in the functional currency.
Certain assets of the group companies are denominated in foreign
currencies. Similarly, the Group has financial liabilities
denominated in those same currencies. In general, the Group seeks
to maintain the financial assets and financial liabilities in each
of the foreign currencies at a reasonably comparable level, thus
providing a natural hedge against foreign exchange risk and
reducing foreign exchange exposure to a minimal level.
2020 2019
GBP000 GBP000
Financial assets 9,027 5,833
Financial liabilities 1,640 1,836
_________ _________
The table below represents financial instruments that
are denominated in currencies other than the functional
currencies of the group entities:
2020 2019
$000 $000
Financial assets 4,212 2,944
Financial liabilities 1,916 1,422
_________ _________
A 10 per cent weakening of the Group's reporting currency
against the United States Dollar would have the following impacts
on the groups reporting currency on the financial assets and
liabilities listed above in United States Dollar:
2020 2019
$000 $000
Financial assets (323) (242)
Financial liabilities (145) (117)
_________ _________
(ii) Interest rate risk
The Group's interest rate exposure arises mainly from the
interest-bearing borrowings as disclosed in note 23. All the
Group's facilities were floating rates excluding interest from
leases, which exposed the group to cash flow risk. As at 31 July
2020 there are no loans outstanding, (2019 - GBPnil) and the
overdraft facility is available but not in use. Therefore, there is
no material exposure to interest rate risk.
(c) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient
cash flows for operations. The Group manages its risk to shortage
of funds by monitoring forecast and actual cash flows. The Group
monitors its risk to a shortage of funds using a recurring
liquidity planning tool. This tool considers the majority of both
its borrowings and payables.
A maturity analysis of the Group's borrowings is shown
below:
2020 2019
GBP000 GBP000
Less than one year - -
One to two years - -
Two to five years - -
_________ _________
- -
_________ _________
(c) Liquidity Risk (continued)
A maturity analysis of the Group's trade and other payables is
shown below:
2020 2019
GBP000 GBP000
Less than one year 3,561 3,382
One to two years - -
Two to five years - -
_________ _________
3,561 3,382
_________ _________
26 Pension commitments
The group operates defined contributions pension schemes. The
assets of the schemes are held separately from those of the group
in an independently administered fund. The pension cost charge
represents contributions payable by the group to the funds.
2020 2019
GBP000 GBP000
Pension charge 213 145
_______ _______
Pension liability 35 30
_______ _______
27 Share based payments
The Company operates five equity-settled share-based
remuneration schemes for employees; two United Kingdom tax
authority approved schemes (one EMI and one CSOP), an unapproved
Performance Share Plan scheme, a share option plan for non-United
Kingdom employees and an unapproved Non-Executive Director Plan.
The UK plans includes employees from the Company and its main UK
trading subsidiary essensys (UK) Ltd.
Weighted Weighted
average average
exercise exercise
price price
(pence) Number (pence) Number
2020 2020 2019 2019
Outstanding at the
beginning of the year GBP0.95 2,694,954 GBP4.97 2,778
Granted during the
year GBP1.60 467,818 GBP0.95 2,695,330
Forfeited during the
year GBP1.52 (196,531) GBP21.94 (131)
Exercised during the
year - - GBP3.61 (3,023)
_________ _________
Outstanding at the
end of the year GBP1.02 2,966,241 GBP0.95 2,694,954
_________ _________
The weighted average exercise price of options outstanding at
the end of the year was 101.67p (2019: 95.25p) and their weighted
average contractual life was 8.9 years (2019: 9.8 years).
Of the total number of options outstanding at the end of the
year, no options had vested and were exercisable.
The options exercised during 2019 were options that existed in
essensys (UK) Limited and which were exercised in advance of the
IPO.
Market Value Options were valued using the Black Scholes option
pricing model. Performance Share options were valued using a Monte
Carlo Simulation option pricing model. Expected dividends are not
incorporated into the fair value calculations. The assumptions used
in the calculations are as follows:
2020 2019
0.23% -
Risk free investment 0.54% 1.01%
Expected life 3 .5 years 4.4 years
Expected volatility 50% 40%
The volatility used for the share option grants during the
current year was that actually experienced during the period from
the IPO. Given a lack of historic volatility information related to
the Company's shares in 2019, the volatility used was based on that
of a comparative group of companies trading on AIM. The expected
life was based initially on the minimum vesting period with an
assumption that more senior personnel would not exercise
immediately. The risk-free rate was based on the yield on UK
government 10-year gilts at the time of the grant.
The Group recognised a total Share based payment expense of
GBP514,000 in the year, all of which related to options in the
Company issued immediately prior to the IPO or subsequent thereto.
In 2019 the Group recognised a total Share based payment expense of
GBP979,000, comprising GBP897,000 related to the vesting and
exercise of options in essensys (UK) Limited immediately prior to
the corporate reorganisation in anticipation of the Company's IPO
and a further GBP82,000 related to options issued immediately prior
to Admission.
The essensys (UK) Limited option scheme was an 'exit only'
scheme where options only vested in the event of a corporate
transaction, in this case, the IPO. All essensys (UK) Limited
options vested at IPO resulting in the accelerated catch up charge
of GBP897,000 recognised in the previous year and that scheme is
now closed. All options in the Company vest three years from the
date of grant. Performance shares vest only on the achievement of
certain performance conditions, the details of which are set out in
the Remuneration Committee Report.
28 Related party transactions
The Group has taken advantage of the exemption available under
IAS 24 Related Party Disclosures not to disclose transactions
between Group Undertakings which are eliminated on
consolidation.
Key management personnel
Key management personnel include all the directors of the
Company and the senior management and directors of essensys (UK)
Limited, the Group's principal trading subsidiary, who together
have authority and responsibility for planning, directing, and
controlling the activities of the Group. Details of key management
compensation is shown in note 9.
Pre-IPO share buy-back by essensys (UK) Limited
In the prior reporting period, on 15 February 2019 essensys (UK)
Limited (then Essensys Limited) bought back 3,250 ordinary shares
for a total consideration of GBP2,315,000 from a former director
and employee of essensys (UK) Limited. The shares repurchased were
cancelled on 15 February 2019.
Pre-IPO Dividend to shareholders of essensys (UK) Limited
In the prior reporting period, on 16 May 2019 the Company's
subsidiary essensys (UK) Limited declared a dividend of GBP180.58
per original essensys (UK) Limited share to its shareholders at the
time, the majority of whom were directors of that company. The
total dividend amounted to GBP4,449,034 and was declared in advance
of essensys (UK) Limited's acquisition by the Company by way of the
share for share exchange in anticipation of the IPO. GBP3,533,513
of the dividend was used to settle outstanding directors' loans as
set out below. The remainder of the dividend was paid as cash. At
the time the dividend was declared essensys (UK) Limited had
sufficient distributable reserves and continues to have positive
distributable reserves.
Directors Loans
The following advances and credits to the directors and key
management personnel subsisting during the years ended 31 July 2020
and 31 July 2019. All advances incurred interest at a rate of 3.25%
per annum. All amounts were repaid before 31 July 2019 therefore no
balances exist on the statement of financial position at 31 July
2020 and 31 July 2019.
2020 2019
GBP000 GBP000
Mark Furness
Balance outstanding at start of year - 3,103
Amounts advanced - 351
Amounts repaid - (3,534)
Interest charged - 80
_________ _________
- -
_________ _________
All amounts outstanding were repaid during the prior year. The
maximum loan balance subsisting during the year was GBPnil (2019 -
GBP3,533,513)
2020 2019
GBP000 GBP000
Michael Guest
Balance outstanding at start of year - 124
Amounts advanced - 11
Amounts repaid - (137)
Interest charged - 2
_________ _________
- -
_________ _________
All amounts outstanding were repaid during the prior year. The
maximum loan balance subsisting during the year was GBPnil (2019 -
GBP137,687)
29 Capital commitments and contingent liabilities
The Group had no capital commitments or contingent liabilities
at 31 July 2020 (2019: GBPNIL)
30 Events after the reporting date
There are no events of any materiality after the reporting date
to report.
31 Notes supporting statement of cash flows
31 A Cash from operations
2020 2019
GBP000 GBP000
Cash flows from operating activities
Profit / (loss) for the financial
year before taxation 346 (1,434)
Adjustments for non-cash/non-operating
items:
Amortisation of intangible assets 1,009 742
Depreciation of property plant and
equipment 587 425
(Profit)/ loss on disposal of right
of use asset - 61
Write off of loan arrangement fee - 18
Amortisation of loan arrangement fee 66 45
Depreciation of right of use assets 1,424 1,586
IPO related costs - 1,508
Share based payment expense 514 979
Gains and losses on foreign exchange
transactions 140 (38)
Finance income (2) (82)
Finance expense 132 494
Receipts from government grants treated (386) -
as operating income
_________ _________
3,830 4,304
Changes in working capital:
(Increase) /decrease in inventories (31) (292)
Decrease / (increase) in trade and
other debtors 541 (2,488)
Decrease / (increase) in trade and
other creditors (314) 502
_________ _________
Cash from operations 4,026 2,026
_________ _________
31 Movement in net debt
B
Cash and
cash equivalents Leases Borrowings Total
GBP000 GBP000 GBP000 GBP000
As at 1 August 2018 877 (4,272) (4,644) (8,039)
Cashflow 1,806 1,121 4,943 7,666
Interest charges - (195) (299) (494)
Exchange movements 5 (102) - 107
_________ _________ _________ _________
As at 31 July 2019 2,688 (3,448) - (760)
Lease additions - (586) (586)
Cashflow 5,828 1,926 - 7,754
Interest charge - (132) - (132)
Exchange movements (20) 98 - 78
_________ _________ _________ _________
As at 31 July 2020 8,496 (2,142) - 6,354
_________ _________ _________ _________
Cash and
cash equivalents Leases Borrowings Total
GBP000 GBP000 GBP000 GBP000
Balances as at 31 July 2020
Current assets 8,496 - - 8,496
Current liabilities - (1,346) - (1,346)
Non-current liabilities - (796) - (796)
_________ _________ _________ _________
8,496 (2,142) - 6,354
_________ _________ _________ _________
Cash and
cash equivalents Leases Borrowings Total
GBP000 GBP000 GBP000 GBP000
Balances as at 31 July 2019
Current assets 2,688 - 2,688
Current liabilities - (1,811) - (1,811)
Non-current liabilities - (1,637) - (1,637)
_________ _________ _________ _________
2,688 (3,448) - (760)
_________ _________ _________ _________
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END
FR FFFFVIVLFLII
(END) Dow Jones Newswires
October 13, 2020 02:00 ET (06:00 GMT)
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