TIDMESYS

RNS Number : 1054T

essensys PLC

23 March 2021

23 March 2021

essensys plc

("essensys" or the "Group")

Half year results for the six months ended 31 January 2021

Performance in line with management expectations - strong US momentum; UK resilient

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 unaudited results for the half year ended 31 January 2021. All information relates to this period, unless otherwise specified.

Current trading and outlook:

 
 
        *    Trading since the period end has continued in line 
             with our expectations, with increased visibility of 
             longer term pipeline of business: 
 
 
       o The Group has 51 Connect sites contracted for delivery post 
       half year end 
       o Sales activity levels and bookings are increasing month 
       on month 
       o Early signs of improved activity levels within existing 
       customer base however timing of implementation remains uncertain 
       due to the ongoing, albeit reducing, impact of Covid-19 
 
        *    Underlying office occupancy has started to recover 
             noticeably following the very recent announcements 
             regarding the route out of lockdown in the UK which 
             is expected to lead to a recovery in Marketplace 
             revenues in due course 
 
 
 
        *    Business development activity is accelerating, 
             particularly in the broader real estate sector where 
             the Group is now engaged with three of the world's 
             largest real estate firms creating a significant long 
             term growth opportunity. Engagement with landlords 
             and real estate investors, including those with 
             global portfolios, is increasing and a number of our 
             existing flexible workspace operator customers are 
             re-starting their expansion programmes. 
 
 
        *    The existing contracted pipeline, increased sales 
             bookings and improved customer activity levels means 
             that the Board continues to expect results for the 
             current year to be in line with market expectations. 
             The Group's performance during Covid-19 has 
             demonstrated the resilience of the business, and the 
             Board believes the pandemic has accelerated the long 
             term opportunity due to the structural shift to more 
             flexible working arrangements. 
 

Strategic highlights:

 
 
                    *    Resilient performance against a challenging market 
                         backdrop and in line with management expectations: 
 
 
                   o Continued expansion of customer base; 18 new customers added 
                   o Momentum building: 431 Connect sites live, up 8% year on 
                   year 
 
                    *    Strong momentum in North America as market 
                         opportunity continues to accelerate: 
 
 
                   o US recurring revenue up 23%; US expansion continues and 
                   accelerating; 
                   o Appointment of CEO for North America to drive continued 
                   expansion 
 
                    *    Continued investment to capture market growth via 
                         land and expand strategy: 
 
 
                   o New strategic customer wins provide significant expansion 
                   opportunities 
                   o Launch of Flex Services Platform to support push into broader 
                   corporate real estate market 
                   o Growth of North American sales and marketing team 
                   o Launch of European go-to-market capability; making good 
                   early progress 
                   o Further expansion of UK based R&D capability 
 

Financial highlights:

 
 
        *    Revenue and underlying profits in line with 
             management expectations 
 
 
       o Recurring revenue marginally increased (at constant currency) 
       compared to last year representing 91% of total revenue (H1 
       2020: 85%) 
       o Group Annual Recurring Revenue ("ARR") gross margin of 70% 
       (H1 2020: 70%) 
 
        *    US recurring revenues up 23% in US Dollar terms; UK 
             recurring revenues down 18% primarily due to reduced 
             Marketplace revenue and net reduction in customer 
             sites due to the impact of Covid-19 
 
 
 
        *    As expected, Adjusted EBITDA was lower due to the: 
 
 
       o Full period effect of continued investment in sales and 
       marketing, product development and expansion of the Group's 
       North American operations together with a reduction in non-recurring 
       revenue in the period 
       o Impact of the strengthening of the pound against the US 
       Dollar 
 
        *    Strong balance sheet with cash position of GBP5.9m at 
             period end; no debt 
 

Mark Furness, CEO of essensys, said:

"essensys has delivered results in the period in line with management expectations, in a year of a global pandemic. The resilience and strength of our performance reflects excellent momentum in the US, 91% recurring revenues, and robust retention rates.

Despite the short-term impact of Covid-19 on market conditions, we expect the pandemic to accelerate the adoption of flexible workspace solutions for companies of all sizes. We continue to see traditional landlords and commercial real estate companies accelerate the development of their own flexible workspace products and services, which we believe will be a key driver of our future growth. This has supported our investment in long-term growth with the launch of our Flex Services Platform, and expansion of our teams in the UK, continental Europe and North America.

essensys' resilient trading, contracted new Connect sites, healthy pipeline and plans to increase new product development underlines our simple and clear strategy to capture the large and attractive market opportunity in the global flexible workspace market. This provides us with confidence of continuing to meet market expectations for the full year."

Financial summary:

 
 GBPm unless otherwise stated               Six months    Six months    Change 
                                             to January    to January 
                                                2021          2020 
 
 Revenue                                       10.6          11.4       -7.0% 
    Recurring revenue(1)                        9.6           9.7       -1.0% 
    Run Rate Annual Recurring Revenue(1, 
     2)                                        19.9          19.7       +1.0% 
 
 Revenue at constant currency(2)               10.8          11.4       -5.3% 
    Recurring revenue at constant 
     currency(1)                                9.8           9.7       +1.0% 
 
 Statutory (loss) before tax                   (1.7)         (0.1) 
 
 Adjusted EBITDA(3)                             0.7           1.9        -63% 
    Adjusted EBITDA margin                     6.6%          16.7% 
 
 (Loss)/profit before tax (prior 
  to share based payment expenses)(3)          (1.4)          0.2 
 
 Loss per share (pence)                       (3.27)p       (0.2)p 
 
 
 Cash                                           5.9           1.7 
 

Notes

1. See CFO Review below for description and breakdown

2. Current period revenue and/or costs translated into GBP using the average exchange rate for the comparative prior period

3. Adjusted for share option charges and exceptional costs where applicable

For further information, please contact:

 
                                                  +44 (0)20 3102 
 essensys plc                                               5252 
 Mark Furness, Chief Executive Officer 
                                                 --------------- 
 Alan Pepper, Chief Financial Officer & Chief 
  Operating Officer 
                                                 --------------- 
 
 N+1 Singer (Nominated Adviser and Joint          +44 (0)20 7496 
  Broker)                                                   3000 
                                                 --------------- 
 Peter Steel / Harry Gooden / George Tzimas 
                                                 --------------- 
 
                                                  +44 (0)20 3207 
 Berenberg (Joint Broker)                                   7800 
                                                 --------------- 
 Richard Kauffer / Tejas Padalkar / Alix 
  Mecklenburg-Solodkoff 
                                                 --------------- 
 
 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 landlords and 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' Flex Services Platform addresses these significant operational pain points head on and reduces costs by simplifying the day-to-day management of flexible workspaces and the provision of on-demand technology and infrastructure services to tenants. essensys technology delivers secure digital infrastructure, effective space setup, seamless operations, and mobile-first occupier interactions. It automates key tasks and processes and helps flexible workspace providers deliver highly efficient, customer-centric workspace solutions and in-building experiences with enterprise class services.

Chef Executive Officer's Report

Underlying growth

Despite the continued challenging trading environment, I am pleased to report continued growth in our underlying business with further new customers added, an increased number of customer sites, expanded geographical coverage, new product launches and accelerating expansion of our market opportunity. Whilst the last year has been the most challenging the business has faced, the medium to long term outlook for the business is very positive.

Overall Group revenue in the period was impacted primarily by fewer Connect sites commissioning compared to the pre-Covid period last year and by reduced Marketplace revenue driven by fewer occupants in offices (particularly in the UK). We have nevertheless maintained overall recurring revenue levels in line with the prior period and seen a slight increase in ARR run rate to GBP19.9m (at constant currency).

Market overview and outlook

We are now seeing a considerable acceleration of the trend towards more traditional real estate providers entering the flexible workspace environment. This ranges from smaller landlords being more open to management arrangements with major global property operators to the mid and larger sized, more operationally capable, landlords looking to establish their own branded and differentiated products. Where we are dealing with international property owner-operators they are approaching this fundamental market shift strategically with the aim of establishing and scaling a specific offering across their portfolio globally.

Recent industry commentary supports this expectation of a significant expansion of the provision of flexible workspace after the pandemic. This includes a forecast that, in the US "the number of flexible workspace locations double or triple over the next five years - despite a temporary setback from the Covid-19 pandemic"(1) . Another report predicts a global increase in supply of 21% in 2021(2) . A recent survey from CBRE indicates that 86% of global occupiers see flexible office space as a critical component of their future real estate strategy(3) .

The real estate industry has continued to invest in the flexible workspace market. There have been two recent significant examples of the traditional real estate industry investing in established, specialist operators - CBRE's acquisition of 40% of Industrious, and the integration of their Hana business into it; together with Newmark Knight Frank's recent acquisition of Knotel.

Whilst this recent activity has been concentrated in the US we are seeing this extend into our UK and newly established European businesses. In both territories we are seeing large landlords and real estate investors investigating how to enter the market and starting to run pilot sites. At the same time the existing flexible workspace operators are re-commencing their expansion activities.

There remains uncertainty about the short-term recovery timing from the Covid-19 pandemic. There is no doubt, however, that these market developments and expanding market opportunities will benefit the Group in the medium to longer term, given our positioning as a leading global provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry.

Expanding opportunity

We continue to expand our customer base, across all geographies, with a further 18 new customers added in the period. Among these new customers are large property companies and commercial real estate operators who are at the early stages of establishing their flexible workspace operations with the aim of

(1) Flex Forward - The Flexible Workspace Report 2020, Colliers US, November 2020

(2) 2021 CRE Predictions, The Instant Group, December 2020

(3) The End of the Beginning, North America Flex Office Market in 2020, CBRE, December 2020

growing extensively across their portfolios. These types of strategic customers provide the Group with significant long term expansion opportunities.

Our active Connect sites continued to grow in the period - to 431 at January 2021 (January 2020: 400) and following the repositioning of Operate, we continued to see pricing improvements and increases in site numbers in the period.

Whilst there remains uncertainty around the timing of the short term recovery from the Covid-19 pandemic, we have contracted commitments for a further 51 Connect sites for delivery post 31 January 2021.

Continued growth in the US

Our US business continued to grow in the first half with a 21% increase in Connect sites over the prior period to 240 (H1 FY20: 199) leading to a 23% increase in US recurring revenue (in USD) in the period. This growth in the US market is accelerating as the Covid-19 restrictions are reduced and the structural shift towards landlords providing flexible solutions for their occupiers takes hold.

At the same time, the larger, well-funded, existing flexible workspace operators have restarted their growth plans which, whilst not evident in H1 FY21, are expected to benefit us towards the end of FY21 and more significantly into FY22. Increasingly we are engaging with mid and large tier landlords across North America and whilst initial business is expected to be relatively modest, this provides a significant long term opportunity for the Group.

Our recent investment in additional go-to-market capability in the US is delivering results with initial sites contracted with a number of larger owners and operators due to go live in the balance of FY21.

Resilience of underlying business

We are pleased with the resilience shown by the business during the pandemic. Overall Connect site numbers increased to 431 at January 2021 (January 2020: 400) driven by strong momentum in the US. Site churn has remained very low and mostly in the UK where operators have taken the opportunity to rationalise estates as existing site contracts have come to natural end.

As previously reported, we saw a reduction in Marketplace revenues during the period as service utilisation reduced in line with lower underlying occupancy levels, particularly in the UK where sites are more mature and Marketplace revenues higher. Whilst initial expectations were for a recovery in underlying occupancy in the first six months of the year, this was limited by continued government restrictions, but we are now seeing a recovery. Following the setting out of the UK government's roadmap for exiting lockdown and improvements in the Covid-19 situation in both the UK and the US we have seen a 34% increase in underlying customer site occupancy in the UK since the end of January and at the same time an 11% increase the US.

Product development

I am pleased to report that, following substantial investment in software and product development since just before our IPO in May 2019, we launched our new Flex Services Platform on 16 March 2021. The Flex Services Platform will provide workspace providers, whether specialist operators or more traditional landlords, with a single software and digital infrastructure platform to operate and scale up their flexible workspaces.

Built on our private network and cloud infrastructure, the platform supports the four key components that determine the quality of occupier experience: secure digital infrastructure, effective space setup, flexible operations management, and easy-to-use mobile-first occupier interactions.

The launch of Flex Services Platform is the first element of our longer-term vision to deliver all the technology needed for next-generation flexible workspace experiences across commercial real estate. Already incorporating the recently launched Smart Access capability, the roadmap that we have set out at launch incorporates further new capabilities to create seamless experiences across Digital Infrastructure, Space Management, Flexible Operations and Occupier Experience, with a longer-term plan to deliver visitor management, space visualisation and integrated support for environmental & occupancy sensors along with other Internet of Things devices.

In addition to this recent, significant, development we are already seeing the benefit of previous product releases. Over 50% of activity across our network now routes directly to the major cloud service providers (including Amazon, Apple, Dropbox and Salesforce). This is of considerable benefit to our customers as they are able to attract and retain high-value enterprise clients because they can, via our platforms, deliver the secure, private, high performance 'on-net' solutions that many enterprises now demand.

To help us address the expanding market opportunity and meet customer requirements for ever more integrated property technology solutions we have established a specific function within our development capability (essensysLabs) to research the application of new technologies to our customer base and to develop products that complement our software platform and deliver value to our expanding customer base.

We continue to increase our investment in UK based development capability with our UK based team increasing by approximately one third over the period. This has allowed us to continue the ongoing reduction in our offshore based development capability. We anticipate continuing to invest in UK based development capability as the business continues to grow.

Geographical & 'go-to-market' expansion

Our expansion in North America is expected to accelerate as we see the US market expand. Following the appointment of our new CEO North America, Jeremy Bernard, we have improved the go-to-market capability, and expect to make additional business development appointments in the coming months. The investment we made previously in this area is already bearing fruit and we see significant benefit in more proactive senior engagement across the broader real estate market in North America.

Our geographical expansion strategy continues to be executed with additional go-to-market capability coming on stream in Canada and, more recently, France with the establishment of our European business. We have appointed personnel with deep knowledge of their local real estate markets, who are already showing encouraging engagements with multi-site, multi-jurisdiction landlords, and in the case of France, with a number of established flexible workspace operators. Sales cycles for multi-site, multi-jurisdictional landlords are expected to be longer as landlords enter this market for the first time. However, our engagement with existing operators in Europe is expected to provide earlier revenue opportunities. We continue with our ongoing expansion plans in Europe.

Inevitably the establishment of our Asia Pacific business has been delayed by the continued impact of the Covid-19 pandemic. Whilst we have undertaken all our preparatory work for market entry locally, we have been unable to undertake any in-country work or identify appropriate personnel as yet. We continue to have existing customer engagement for Asia Pacific locations and expect our first Connect site to be live in region in Q1 FY22.

As part of this business expansion, we continue to invest in broader marketing capability to support this business development activity and product marketing.

Current trading and outlook

Trading since the period end has continued in line with our expectations with continued increase in sales pipeline activity, sales bookings and engagement with large property groups referred to previously. We are starting to see improvements in the general trading environment in our core markets with a steady increase in underlying occupancy of customer locations and existing customers adding additional sites. There still remains a risk of delays to new site deliveries however any such delays are becoming shorter.

The recent launch of our Flex Services Platform has been well received by existing customers and prospects alike and our increasing engagement with the broader corporate real estate market is already delivering business. It remains clear to us that the structural shift to more flexible working arrangements has been accelerated by the Covid-19 pandemic and we are increasingly optimistic for the future opportunity for essensys.

In the shorter-term activity levels in our US business are accelerating and we will be increasing our investment there over the coming months. Whilst there remains uncertainty over the exact timing of the recovery from Covid-19 our current activity levels mean that we continue to expect results for the full year to be in line with market expectations.

Mark Furness

Chief Executive Officer

22 March 2021

Chief Financial Officer's Report

This is the second interim report issued by essensys since its Admission to AIM on May 2019 and covers the six months to 31 January 2021. The prior comparative period ended 31 January 2020 was the period immediately prior to the impact of the Covid-19 pandemic.

Financial Key Performance Indicators

 
 GBP'm unless otherwise stated         Six months    Six months    Change 
                                        to January    to January 
                                           2021          2020 
 
 Group Total Revenue                      10.6          11.4       -7.0% 
    UK                                     5.4           6.6        -18% 
    USA                                    5.2           4.8       +8.3% 
 
 Recurring Revenue(1)                      9.6           9.7       -1.0% 
    UK                                     5.2           5.9        -12% 
    USA                                    4.4           3.8        +16% 
    Recurring Revenue %age of Total        91%           85% 
 
 Run Rate Annual Recurring Revenue 
  (1)                                     19.9          19.7       +1.0% 
 
 Recurring Revenue at constant 
  currency                                 9.8           9.7       +1.0% 
    UK                                     5.2           5.9        -12% 
    USA                                    4.6           3.8        +21% 
 
 Non-recurring revenue                     1.0           1.7        -41% 
 
 Product Revenue 
    Connect                                9.6          10.5       -8.6% 
    Operate                                1.0           0.9        +11% 
 
 Gross Profit                              7.1           7.2       -1.4% 
    Gross Profit percentage                67%           63% 
    Recurring Revenue margin %age          70%           70% 
 
 Statutory (loss) before tax              (1.7)         (0.1) 
 
 Adjusted EBITDA(2)                        0.7           1.9        -63% 
    Adjusted EBITDA margin                6.6%           17% 
 
 (Loss)/profit before tax (prior 
  to share based payments)                (1.4)          0.2 
 
 Cash                                      5.9           1.7 
 

Revenue

Group Total Revenue fell to GBP10.6m in H1 FY21 (H1 FY20 GBP11.4) due to a combination of lower non-recurring revenue from a smaller number of new Connect sites commissioned in the period and lower recurring revenue in the UK, primarily from reduced occupancy based Marketplace revenue. Reported revenue was also negatively impacted by the strengthening of pound sterling in the period (see further commentary below). Total Revenue from the Group's US business grew 8% compared to H1 FY20.

Recurring revenue comprises income invoiced for services that are repeatable and consumed and delivered on a monthly basis 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 (January 2021); this is used by

(1) See Revenue section for explanation

(2) See Adjusted EBITDA explanation below

management as an indication of the annual value of the recurring revenue for that month and to monitor long term revenue growth of the business.

As noted above reported revenue had been impacted by the strengthening of the pound against the US Dollar. Excluding this impact Run Rate ARR grew slightly compared to the prior period as reduced revenue from the impact of Covid-19 primarily in reduced marketplace revenue was offset by the 8% overall increase in Connect sites to 431 at 31 January 2021 (January 2020: 400).

In constant currency terms recurring revenue increased slightly compared to H1 FY20. Following the previously reported repositioning of the Operate business, a combination of the continued increase in revenue per site and a 6% increase in site numbers resulted in an increase of 10% in Operate recurring revenue in the period. US Connect recurring revenue grew 23% in US Dollar terms following an increase in site numbers to 240 (from 199 at 31 January 2020). UK recurring revenue was negatively impacted by a combination of the ending of non-cash deferred income release related to a pre-IPO recontract, reduced occupancy based Marketplace revenue and, a net reduction in customer sites as a result of the impact of the Covid-19 pandemic.

Gross margins

Overall gross margins increased year on year from a combination of an increased proportion of recurring revenue and an increase in recurring revenue margins in the US. UK recurring revenue margins have been maintained at a consistent level despite the reduction in marketplace revenue as a result of cost efficiencies. Operate margins continue to increase driven by increased numbers of sites and higher revenue per site.

Administrative expenses

Excluding depreciation charges, administrative expenses grew by GBP1.1m compared to the prior period in line with the Group's strategic plans and management expectations. This was primarily driven by increases in staff costs resulting from increases in business development personnel in the US and Europe and the appointment of the new US CEO. Marketing expenditure in the period was greater in H1 FY21 in support of the group's expanding 'go to market' capability. The Group incurred increased professional fees as it continues to grow, including establishing its Canadian and European businesses and made additional provision for estimated credit losses following the Covid-19 pandemic.

Statutory loss for the half year

The Group incurred a GBP1.7m statutory loss for the half year to January 2021 (H1 FY20: loss of GBP0.1m), analysed as follows:

 
 GBP'm                               H1 FY21   H1 FY20 
 
 UK (including non-capitalised 
  R&D)                                 0.0       1.2 
 US                                    0.4       0.4 
 Canada                               (0.1)       - 
 Europe                               (0.1)       - 
 Central costs                        (1.6)     (1.4) 
 (Loss)/Profit before tax (before 
  share based payment expenses)        (1.4)      0.2 
 
 Share based payment expense          (0.3)     (0.3) 
 
 Loss before tax for the period       (1.7)     (0.1) 
                                    ========  ======== 
 

The UK continues to bear the cost of the Group's product and software development teams to the extent that these are not capitalised.

Adjusted EBITDA

As previously reported, adjusted results are prepared to provide a more comparable indication of the Group's core business performance by removing the impact of share based payment expenses, exceptional costs (where 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 income and below, with further details given in the notes to the unaudited interim financial information below, where applicable. 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 share based payment expenses and exceptional items) is calculated as follows:

 
 GBP'm                          H1 FY21   H1 FY20 
 
 Operating (loss)/profit         (1.3)      0.0 
 Add back: 
 Depreciation & Amortisation      1.7       1.6 
 EBITDA                           0.4       1.6 
 Add back: 
 
 Share Option Charge              0.3       0.3 
 
 Adjusted EBITDA                  0.7       1.9 
                               ========  ======== 
 

Adjusted EBITDA for the half year was down from H1 FY20 by GBP1.2m due to the full period effect of continued investment in sales and marketing, product development and expansion of the Group's North American operations together with a reduction in non-recurring revenue in the period and the impact of the strengthening of the pound against the US Dollar.

Currency impact

During the period the Group experienced a 5% increase in the value of the Pound Sterling against the US Dollar. As approaching 50% of the Group's revenues are denominated in USD this strengthening of the pound has impacted the reporting of the Group's revenues compared to the comparative period last year. Whilst the impact in the period was not overly significant (GBP255,000 negative impact on revenue and limited at EBITDA) the pound has continued to strengthen into the second half of the year. The Group does not currently expect that that the pound will weaken against the dollar whilst the proportion of the Group's revenues denominated in USD is expected to increase. It is expected therefore that there will be greater impact on reported revenues and profitability from changes in the pound to US dollar exchange rate in the second half of the year and in future years.

Taxation

The tax charge incurred by the Group in the period is in relation to deferred tax in the UK.

Cash

Following our equity fundraise in April 2020, net cash at the half year end was GBP5.9m, in line with management expectations. The Group continues to maintain sufficient cash reserves to fund its working capital requirements, planned product and software development together with any expected short-term geographic expansion.

In light of the current, Covid-19 situation the Board has considered a number of different scenarios regarding trading and financial performance over the balance of this financial year and into FY22 and is confident that it maintains sufficient cash resources in the event of a significant, long term, impact on the Group.

Capitalised Software Development Costs

As previously reported, the Group continues to invest heavily in product development. Increasingly these cost are borne in the UK following a decision to increase the UK based development team and reduce the size of the Group's outsourced offshore development centre in Hanoi, Vietnam. 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 half year the Group capitalised GBP1.0m in respect of software development (H1 FY20: GBP1.0m).

Capital Expenditure

In addition to the capitalisation of software development costs noted above, the Group continues to invest in expanding the capacity and capability of its private network. Capital investment in the period was GBP0.5m (H1 FY20 GBP0.6m).

Alan Pepper

Chief Financial Officer

22 March 2021

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated statement of comprehensive income

 
                                                      Six months    Six months 
                                                           ended         ended 
                                                      31 January    31 January 
                                                            2021          2020 
                                                         GBP'000       GBP'000 
                                              Note   (unaudited)   (unaudited) 
                                                    ------------  ------------ 
 
 
Revenue                                        3          10,596        11,407 
Cost of sales                                            (3,519)       (4,195) 
                                                    ------------  ------------ 
Gross profit                                               7,077         7,212 
 
Administrative expenses                                  (8,424)       (7,216) 
Other operating income                                        34            11 
                                                    ------------  ------------ 
Operating (loss)/profit                                  (1,313)             7 
 
Operating (loss)/profit analysed by: 
Operating (loss)/profit before share 
 based payments                                          (1,038)           259 
Share based payment expenses                               (275)         (252) 
 
Finance income                                                 -             2 
Finance expense                                            (339)          (90) 
 
Loss before taxation                                     (1,652)          (81) 
Taxation                                                    (70)          (12) 
                                                    ------------  ------------ 
Loss for the period                                      (1,722)          (93) 
Other comprehensive loss 
Exchange differences arising on translation 
 of foreign operations                                     (154)         (184) 
                                                    ------------  ------------ 
Total comprehensive loss for the period                  (1,876)         (277) 
                                                    ============  ============ 
 

Loss per share

 
Basic and diluted loss per share   4(3.265p)  (0.193p) 
 
 

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated statement of financial position

 
                                                               As at       As at 
                                                          31 January     31 July 
                                                                2021        2020 
                                                             GBP'000     GBP'000 
                                                  Note   (unaudited)   (audited) 
                                                        ------------  ---------- 
 
ASSETS 
Non-current assets 
Intangible assets                          5                   5,472       5,013 
Property, plant and equipment              6                   1,671       1,695 
Right of use assets                        7                   1,644       2,055 
                                                        ------------  ---------- 
                                                               8,787       8,763 
                                                        ============  ========== 
 
Current assets 
Inventories                                                      160         323 
Trade and other receivables               10                   5,139       5,186 
Cash at bank and in hand                  10                   5,937       8,496 
                                                        ------------  ---------- 
                                                              11,236      14,005 
                                                        ============  ========== 
 
TOTAL ASSETS                                                  20,023      22,768 
                                                        ============  ========== 
 
EQUITY AND LIABILITIES 
Equity 
 
Shareholders' equity 
Called up share capital                    8                     132         132 
Share premium                                                 19,881      19,881 
Share based payment reserve                                    1,763       1,490 
Merger reserve                                                    28          28 
Retained earnings                                            (7,311)     (5,435) 
                                                        ------------  ---------- 
Total equity                                                  14,493      16,096 
                                                        ============  ========== 
 
Non-current liabilities 
Lease liabilities                          9                     566         796 
Deferred tax                                                     497         409 
Total non- current liabilities                                 1,063       1,205 
                                                        ============  ========== 
 
Current liabilities 
Trade and other payables                                       2,799       3,561 
Contract liabilities                       3                     631         550 
Lease liabilities                          9                   1,037       1,346 
Current taxes                                                      -          10 
                                                        ------------  ---------- 
                                                               4,467       5,467 
                                                        ============  ========== 
 
TOTAL LIABILITIES                                              5,530       6,672 
                                                        ============  ========== 
 
TOTAL EQUITY AND LIABILITIES                                  20,023      22,768 
                                                        ============  ========== 
 

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated statement of changes in equity

 
                                                      Share 
                                                      based 
                                 Share     Share    payment     Merger   Retained 
                               capital   premium    reserve    Reserve   earnings     Total 
                               GBP'000   GBP'000    GBP'000    GBP'000    GBP'000   GBP'000 
                              --------  --------  ---------  ---------  ---------  -------- 
 
Balance at 1 August 2020 
 (audited)                         132    19,881      1,490         28    (5,435)    16,096 
 
Comprehensive Income 
Loss for the period                  -         -          -          -    (1,722)   (1,722) 
Currency translation 
 differences                         -         -          -          -      (154)     (154) 
Total comprehensive loss             -         -          -          -    (1,876)   (1,876) 
                              --------  --------  ---------  ---------  ---------  -------- 
 
Transactions with owners 
Currency translation 
 differences                         -         -        (2)          -          -       (2) 
Share based payment expense          -         -        275          -          -       275 
Balance at 31 January 
 2021                              132    19,881      1,763         28    (7,311)    14,493 
 (unaudited) 
                              ========  ========  =========  =========  =========  ======== 
 
Balance at 1 August 2019           120    13,184        979         28    (5,318)     8,993 
 (audited) 
 
Comprehensive Income 
Loss for the period                  -         -          -          -       (93)      (93) 
Currency translation 
 differences                         -         -          -          -      (184)     (184) 
                              --------  --------  ---------  ---------  ---------  -------- 
Total comprehensive loss             -         -                     -      (277)     (277) 
                              --------  --------  ---------  ---------  ---------  -------- 
 
Transactions with owners 
Share based payment expense          -         -        252          -          -       252 
Balance at 31 January 
 2020                              120    13,184      1,231         28    (5,595)     8,968 
 (unaudited) 
                              ========  ========  =========  =========  =========  ======== 
 
 

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Consolidated cash flow statements

 
                                                   Six months    Six months 
                                                        ended         ended 
                                                   31 January    31 January 
                                                         2021          2020 
                                                      GBP'000       GBP'000 
                                                  (unaudited)   (unaudited) 
                                                 ------------  ------------ 
Cash flows from operating activities 
Loss before taxation                                  (1,652)          (93) 
Adjustments for non-cash/non-operating 
 items: 
Amortisation of intangible assets                         588           464 
Depreciation of property, plant and equipment             525           299 
Amortisation of right-of-use assets                       596           839 
Share based payment expense                               275           252 
Finance income                                              -           (2) 
Finance expense                                           339            90 
Receipts from government grants treated 
 as income                                               (34)             - 
                                                 ------------  ------------ 
                                                          637         1,849 
Changes in working capital: 
Decrease/(increase) in inventory                          163         (206) 
Decrease/(increase) in trade and other 
 receivables                                               47         (794) 
(Decrease)/increase in trade and other 
 payables                                               (681)           826 
                                                 ------------  ------------ 
Cash from operations                                      166         1,675 
 
Taxation received                                           8            31 
Net cash from operating activities                        174         1,706 
 
Cash flows from investing activities 
Purchase of intangible assets                         (1,047)         (950) 
Purchase of property, plant and equipment               (539)         (591) 
Interest received                                           -             2 
Net cash used in investing activities                 (1,586)       (1,539) 
                                                 ------------  ------------ 
 
Cash flows from financing activities 
Receipts from government grants                            34             - 
Payment at termination of loan                           (63)             - 
Repayment of lease liabilities                        (1,008)       (1,057) 
Interest on lease liabilities                            (86)          (90) 
Net cash used in financing activities                 (1,123)       (1,147) 
                                                 ------------  ------------ 
 
Net decrease in cash and cash equivalents             (2,535)         (980) 
 
Cash and cash equivalents beginning of 
 period                                                 8,496         2,688 
 
Effects of foreign exchange rate changes                 (24)            12 
                                                 ------------  ------------ 
Cash and cash equivalents at end of period              5,937         1,720 
                                                 ============  ============ 
 
 

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Notes to the unaudited interim financial information

   1.   Basis of preparation 

The unaudited condensed interim financial information presents the consolidated financial results of essensys plc and its wholly owned subsidiaries (together, "essensys plc Group" or "the Group") for the six-month period to 31 January 2021. This financial information has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards and International Accounting Standards Board (IASB) and interpretations (collectively "IFRS"). This financial information does not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 31 July 2020 Annual Report. The financial information for the half year ended 31 January 2021 does not constitute statutory accounts within the meaning of Section 434 (3) of the Companies Act 2006 and both periods are unaudited.

The comparative financial information presented herein for the year ended 31 July 2020 does not constitute full statutory accounts for that period. The statutory Annual Report and Financial Statements for the year ended 31 July 2020 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 July 2020 was 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.

The Group has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2020 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2020 and will be adopted in the 2021 financial statements. There were no new standards impacting the Group that will be adopted in the annual financial statements for the year ended 31 July 2021.

essensys plc is the Group's ultimate parent company. It is a public listed company and is domiciled in the United Kingdom. The address of its registered office and principal place of business is Aldgate Tower 7th Floor, 2 Leman Street, London E1 8FA. essensys plc's shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

   2.   Going Concern 

The consolidated financial statements have been prepared on a going concern basis. In reaching their assessment, the directors have considered a period extending at least twelve months from the date of approval of this half yearly financial report.

The directors continue to monitor developments with, and potential impact of, Covid-19 in the short and medium term and is in particular focussed on the key risks of: delays by customers in activation of existing contracted sites; near term delays in customer contracting decisions in respect of new sites; potential reduction in marketplace service utilisation; and the impact of the current situation on the financial stability of customers.

The directors have prepared cash flow forecasts covering a period of at least 12 months from the date of releasing these interim financial statements. This assessment has included consideration of the forecast performance of the business for the foreseeable future, the cash and financing facilities available to the Group and the mitigating actions undertaken to reduce the impact of Covid-19. In preparing these forecasts, the directors have considered a number of sensitivities, including stress testing based on the loss of a major customer, loss of future growth market opportunities and the continued impact of Covid-19. At 31 January 2021 the Group had cash reserves of GBP5.9m and no debt.

Based on the sensitised cash flow forecasts prepared, the directors are confident that any funding needs required by the business will be sufficiently covered by the existing cash reserves.

Notes to the unaudited interim financial information

   3.   Segmental reporting 

The Group has one single business reportable segment and generates revenue largely in the UK and the US. 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 provides mission critical software-as-a-service ("SaaS") and Cloud services to the flexible workspace industry. The Group's software is designed specifically to serve the specific requirements of flexible workspace providers, removing operational complexity and enabling them to operate more efficient, tech-driven spaces and businesses.

The Connect software-enabled-services platform allows flexible workspace operators to provision, manage and monitor, in real-time, all of the critical infrastructure, IT and tech services that they provide to their customers. As part of providing this service, the Group also provides the technology infrastructure that supports these services.

The Group's Operate software platform is a comprehensive ERP platform for flexible workspace providers, allowing operators to more effectively and efficiently run their businesses day-to-day.

The Group generates revenue from the following activities:

 
 
        *    Establishing services at customer sites (e.g. 
             providing and managing installation services, 
             equipment and providing training on software and 
             services) 
 
 
        *    Recurring monthly fees for using the Group's 
             platforms 
 
 
        *    Revenue from usage of on demand services such as 
             internet and telephone usage and other, on demand, 
             variable services. 
 
 
        *    Other ad-hoc services 
 

The Group has one single business reportable segment which is the provision of software and technology platforms that manage their critical infrastructure and business processes, primarily to the flexible workspace industry.

The Group has two main revenue streams, Operate and Connect. Given that support for both revenue streams is provided in such a way as to make cost and therefore operating performance impractical, the two revenue streams are combined into a single reportable segment. The essensys plc Group's revenue per revenue stream is as follows:

 
                                             Six months   Six months 
                                                  ended        ended 
                                             31 January   31 January 
                                                   2021         2020 
                                                GBP'000      GBP'000 
                                            -----------  ----------- 
 
Operate - workspace management software           1,021          943 
Connect - software enabled infrastructure 
 platform                                         9,575       10,464 
                                                 10,596       11,407 
                                            ===========  =========== 
 

Notes to the unaudited interim financial information

   3.   Segmental reporting (continued) 

Revenue from customers greater than 10% in each reporting period is as follows:

 
              Six months   Six months 
                   ended        ended 
              31 January   31 January 
                    2021         2020 
                 GBP'000      GBP'000 
             -----------  ----------- 
 
Customer 1         1,780        1,717 
Customer 2         1,177        1,542 
Customer 3             -        1,200 
             ===========  =========== 
 

The Group operates in two main geographic areas, the United Kingdom and the United States of America. The Group's revenue per geographical area is as follows:

 
                            Six months   Six months 
                                 ended        ended 
                            31 January   31 January 
                                  2021         2020 
                               GBP'000      GBP'000 
                           -----------  ----------- 
 
United Kingdom                   5,427        6,621 
United States of America         5,169        4,786 
                                10,596       11,407 
                           ===========  =========== 
 

Group revenue disaggregated between revenue recognised 'at a point in time' and 'over time' is as follows:

 
                                         Six months   Six months 
                                              ended        ended 
                                         31 January   31 January 
                                               2021         2020 
                                            GBP'000      GBP'000 
                                        -----------  ----------- 
 
Revenue recognised at a point in time         1,018        1,686 
Revenue recognised over time                  9,578        9,721 
                                             10,596       11,407 
                                        ===========  =========== 
 

Notes to the unaudited interim financial information

   3.   Segmental reporting (continued) 

Contract assets and liabilities

Contract asset movements were as follows:

 
                                                      GBP000 
                                                     ------- 
 
 At 1 August 2020                                        420 
 Transfers in the period from contract assets to 
  trade receivables                                    (160) 
 Excess of revenue recognised over cash (or rights 
  to cash) being recognised during the period            396 
 Capitalised commission cost released as contract 
  obligations fulfilled                                (147) 
 Commission costs capitalised on contracts                95 
                                                     ------- 
 At 31 January 2021                                      604 
                                                     ======= 
 
                                                      GBP000 
 
 At 1 August 2019                                        475 
 Transfers in the period from contract assets to 
  trade receivables                                    (271) 
 Excess of revenue recognised over cash (or rights 
  to cash) being recognised during the period            164 
 Capitalised commission cost released as contract 
  obligations fulfilled                                (159) 
 Commission costs capitalised on contracts               211 
                                                     ------- 
 At 31 July 2020                                         420 
                                                     ======= 
 
 

Contract liability movements were as follows:

 
                                                             GBP000 
                                                           -------- 
 
 At 1 August 2020                                               550 
 Amounts included in contract liabilities that 
  were recognised as revenue during the period                (517) 
 Cash received and receivables in advance of performance 
  and not recognised as revenue during the period               598 
 At 31 January 2021                                             631 
                                                           ======== 
 
                                                             GBP000 
 
 At 1 August 2019                                             1,044 
 Amounts included in contract liabilities that 
  were recognised as revenue during the period              (1,044) 
 Cash received and receivables in advance of performance 
  and not recognised as revenue during the period               550 
 At 31 July 2020                                                550 
                                                           ======== 
 
 

Contract assets are included within 'trade and other receivables' and contract liabilities are 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. 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.

   4.   Loss per share 

The loss per share has been calculated using the loss for the period and the weighted average number of ordinary shares outstanding during the period, as follows:

 
                                              Six months   Six months 
                                                   ended        ended 
                                              31 January   31 January 
                                                    2021         2020 
                                                 GBP'000      GBP'000 
                                             -----------  ----------- 
 
Loss for the period attributable to equity 
 holders of Essensys Group                       (1,722)         (93) 
                                             -----------  ----------- 
Weighted average number of ordinary shares    52,743,329   48,107,567 
                                             -----------  ----------- 
Loss per share                                  (3.265p)     (0.193p) 
                                             ===========  =========== 
 

As the Group is loss making in both periods presented, the share options over ordinary shares have an anti-dilutive effect and therefore no dilutive loss per share is disclosed.

Notes to the unaudited interim financial information

   5.   Intangible assets 
 
                                           Internal 
                             Customer      software 
                        relationships   development   Software   Goodwill    Total 
                               GBP000        GBP000     GBP000     GBP000   GBP000 
                       --------------  ------------  ---------  ---------  ------- 
 
  Cost 
  At 1 August 2020                335         6,751        280      1,263    8,629 
  Additions                         -         1,047          -          -    1,047 
                       --------------  ------------  ---------  ---------  ------- 
  At 31 January 2021              335         7,798        280      1,263    9,676 
                       ==============  ============  =========  =========  ======= 
 
  Amortisation 
  At 1 August 2020                293         3,043        280          -    3,616 
  Charge for year                  18           570          -          -      588 
  At 31 January 2021              311         3,613        280          -    4,204 
                       ==============  ============  =========  =========  ======= 
 
  Net book value 
  At 31 January 2021               24         4,185          -      1,263    5,472 
 
  At 31 July 2020                  42         3,708          -      1,263    5,013 
                       ==============  ============  =========  =========  ======= 
 
 
 
                                         Internal 
                           Customer      software 
                      relationships   development   Software   Goodwill    Total 
                             GBP000        GBP000     GBP000     GBP000   GBP000 
                     --------------  ------------  ---------  ---------  ------- 
  Cost 
 
  At 1 August 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 August 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 
                     ==============  ============  =========  =========  ======= 
 
 

Notes to the unaudited interim financial information

   6.   Property, plant and equipment 
 
                          Fixtures    Computer      Leasehold 
                               and 
                          fittings   equipment   improvements    Total 
                            GBP000      GBP000         GBP000   GBP000 
                         ---------  ----------  -------------  ------- 
 
  Cost 
  At 1 August 2020             247       6,601            132    6,980 
  Additions                      -         539              -      539 
  Exchange adjustments         (8)       (142)            (2)    (152) 
  At 31 January 2021           239       6,998            130    7,367 
                         =========  ==========  =============  ======= 
 
  Depreciation 
  At 1 August 2020             154       5,053             78    5,285 
  Charge for year               18         501              6      525 
  Exchange adjustments         (5)       (107)            (2)    (114) 
  At 31 January 2021           167       5,447             82    5,696 
 
  Net book value 
  At 31 January 2021            72       1,551             48    1,671 
 
  At 31 July 2020               93       1,548             54    1,695 
                         =========  ==========  =============  ======= 
 
 
 
                          Fixtures    Computer      Leasehold 
                               and 
                          fittings   equipment   improvements    Total 
                            GBP000      GBP000         GBP000   GBP000 
                         ---------  ----------  -------------  ------- 
  Cost 
  At 1 August 2019             186       4,763            113    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 August 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 
                         =========  ==========  =============  ======= 
 
 

Notes to the unaudited interim financial information

   7.   Right of use assets 
 
                          Leasehold   Fixtures    Computer      Leasehold 
                                           and 
                           property   fittings   equipment   improvements    Total 
                             GBP000     GBP000      GBP000         GBP000   GBP000 
                         ----------  ---------  ----------  -------------  ------- 
 
  Cost 
  At 1 August 2020            4,204        142       1,527            584    6,457 
  Additions                       -          -           -              -        - 
  Lease remeasurement           227          -           -              -      227 
  Disposals                       -          -           -              -        - 
  Exchange adjustments         (65)          -           -              -     (65) 
  At 31 January 
   2021                       4,366        142       1,527            584    6,619 
 
  Depreciation 
  At 1 August 2020            2,609        134       1,440            219    4,402 
  Charge for year               544          7          16             29      596 
  Disposals                       -          -           -              -        - 
  Exchange adjustments         (23)          -           -              -     (23) 
  At 31 January 
   2021                       3,130        141       1,456            248    4,975 
 
  Net book value 
  At 31 January 
   2021                       1,236          1          71            336    1,644 
 
  At 31 July 2020             1,595          8          87            365    2,055 
 
 
 
                          Leasehold   Fixtures    Computer      Leasehold 
                                           and 
                           property   fittings   equipment   improvements     Total 
                             GBP000     GBP000      GBP000         GBP000    GBP000 
                         ----------  ---------  ----------  -------------  -------- 
 
  Cost 
  At 1 August 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 August 2019            2,260         99       2,265            160     4,784 
  Lease remeasurement             -          -           -              -         - 
  Charge for year               985         35         345             59     1,424 
  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 
                         ==========  =========  ==========  =============  ======== 
 
 

Notes to the unaudited interim financial information

   8.   Called up share capital 
 
                                           As at       As at 
                                      31 January     31 July 
                                            2021        2020 
                                             No.         No. 
                                     -----------  ---------- 
Allotted, called up and fully paid 
0.25p ordinary shares                 52,743,329  52,743,329 
                                     ===========  ========== 
 
                                      31 January     31 July 
                                            2021        2020 
                                         GBP'000     GBP'000 
                                     -----------  ---------- 
Allotted, called up and fully paid 
0.25p ordinary shares                        132         132 
                                     ===========  ========== 
 
   9.   Lease liabilities 
 
                            Leasehold   Fixtures    Computer      Leasehold 
                                             and 
                             property   fittings   equipment   improvements     Total 
                               GBP000     GBP000      GBP000         GBP000    GBP000 
                           ----------  ---------  ----------  -------------  -------- 
 
  At 1 August 2020              1,820         57          88            177     2,142 
  Additions                         -          -           -              -         - 
  Interest expense                 36          2          41              7        86 
  Effect of modification 
   to lease terms                 236          -         193              -       429 
  Lease payments                (683)       (18)       (237)           (70)   (1,008) 
  Foreign exchange 
   movements                     (45)          -         (1)              -      (46) 
  At 31 January 
   2021                         1,364         41          84            114     1,603 
                           ==========  =========  ==========  =============  ======== 
 
 
 
  Analysis by current and non-current: 
 
                       Leasehold   Fixtures    Computer      Leasehold 
                                        and 
                        property   fittings   equipment   improvements    Total 
                          GBP000     GBP000      GBP000         GBP000   GBP000 
                      ----------  ---------  ----------  -------------  ------- 
 
  Due within a year          798         41          84            114    1,037 
  Due in more than 
   one year                  566          -           -              -      566 
                           1,364         41          84            114    1,603 
                      ==========  =========  ==========  =============  ======= 
 
 

Notes to the unaudited interim financial information

   9.   Lease liabilities (continued) 
 
                      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 
                     ==========  =========  ==========  =============  ======== 
 
 
 
  Analysis by current and non-current: 
 
                       Leasehold   Fixtures    Computer      Leasehold 
                                        and 
                        property   fittings   equipment   improvements    Total 
                          GBP000     GBP000      GBP000         GBP000   GBP000 
                      ----------  ---------  ----------  -------------  ------- 
 
  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 
                      ==========  =========  ==========  =============  ======= 
 
 
   10.    Financial instruments 

Financial assets

Financial assets measured at amortised cost comprise trade receivables, other receivables, accrued income and cash, as follows:

 
                                  As at      As at 
                             31 January    31 July 
                                   2021       2020 
                                GBP'000    GBP'000 
                           ------------  --------- 
Trade receivables                 3,107      3,116 
Other receivables                   915        655 
Cash at bank and in hand          5,937      8,496 
                           ------------  --------- 
                                  9,959     12,267 
                           ============  ========= 
 

Financial liabilities

Financial liabilities measured at amortised cost comprise trade payables, accruals, other payables and lease liabilities, as follows:

 
                          As at     As at 
                     31 January   31 July 
                           2021      2020 
                        GBP'000   GBP'000 
                    -----------  -------- 
Trade payables            1,047     1,912 
Other payables              897       404 
Accruals                    855       789 
Lease liabilities         1,603     2,142 
                          4,400     5,247 
                    ===========  ======== 
 

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 
 

Risk management is carried out by the directors. The directors 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.

Notes to the unaudited interim financial information

10. Financial instruments (continued)

(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.

(ii) Interest rate risk

The Group's interest rate exposure arises mainly from the interest-bearing borrowings. All the Group's facilities were floating rates excluding interest from leases, which exposed the group to cash flow risk. As at 31 January 2021 there are no loans outstanding. 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.

11. Post balance sheet events

There have been no post balance sheet events of any significance.

Since the end of the period the Group has continued to enter into new contracts with both existing and new customers and has continued to see an increase in underlying occupancy of customer sites.

As at 31 January 2021 the Group had cash reserves of GBP5.9m. Given the mission-critical nature of the Group's software and services, the commitments that its customers have in terms of their own site delivery plans and the recurring and contracted nature of the majority of the Group's revenue, management continues to expect its customers to meet their financial commitments to the Group.

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

INDEPENDENT REVIEW REPORT TO ESSENSYS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2021 which comprises the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity and the consolidated cash flow statement.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2021 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

UNAUDITED INTERIM FINANCIAL INFORMATION OF ESSENSYS PLC GROUP

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability

BDO LLP

Chartered Accountants

London

22 March 2021

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

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END

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(END) Dow Jones Newswires

March 23, 2021 03:00 ET (07:00 GMT)

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