TIDMINX
RNS Number : 1974H
i-nexus Global PLC
02 December 2020
02 December 2020
i-nexus Global plc
("i-nexus", the "Company" or the "Group")
Final Results
i-nexus Global plc (AIM: INX), a leading provider of cloud-based
Strategy Execution software solutions designed for the Global 5000,
today provides its audited results for the year ended 30 September
2020.
Financial Highlights
-- Group revenue GBP4.08m (FY19: GBP4.76m)
o Recurring revenue GBP3.74m (FY19: GBP4.03m)
o Services revenue GBP0.34m (FY19: GBP0.73m)
-- Loss before tax reduced to GBP2.38m (FY19: GBP4.33m)
-- Significant cost reduction measures implemented through the
year, reducing the monthly cost base by GBP400k by the year end to
GBP370k
-- Cash at year end of GBP0.12m, supplemented post year end by a
fundraise of GBP1.235m, net of expenses
-- Exit Monthly Recurring Revenue ("MRR") GBP305k (FY19: GBP340k)
Operational Highlights
-- Continued expansion within existing customer accounts, adding
GBP40k of MRR (FY19: GBP35k), but new business generation severely
impacted by the Covid-19 pandemic
-- Secured a new customer during lock-down, a US based global food corporation
-- Launch of a major platform upgrade in July, i-nexus Summer
2020, including enhanced analytics, reporting and a mobile
application
-- 95% of customers have transitioned onto the new platform,
providing a pathway for future growth
Post Period End Highlights & Outlook
-- Financial position of the business secure for the near-term, following the fundraise
-- Signed a 3 year contract extension worth $1.24m,
incorporating an upsell across the 3 years of $500k
-- Secured first customer win via a Consulting Partner, a
European based multi-national white goods manufacturer
-- Contracts secured in the new year have led to MRR increasing
to GBP317k at the date of this report
Simon Crowther, Chief Executive, of i-nexus Global plc,
commented: "Our sales pipeline continues to develop with solid new
opportunities being created monthly, however conversion on a timely
basis is an ongoing challenge with Covid-19 still a factor. We have
seen some initial success in recent months; closing a deal via a
channel partner and a major contract extension with an existing
customer. Our strategic focus for 2021 is to achieve repeatable,
incremental sales, while operating within our financial means. All
departments are focussed on projects to deliver this goal.
"The investments we have made in our Strategy Execution platform
have considerably enhanced the usability of our platform, its
stickiness, our ability to convert new business and generate
upsells with our existing accounts. We believe our platform is
capable of meeting the stringent requirements of the world's
largest organisations and, while conscious of the continuing
challenges ahead, we have entered the new year in a strengthened
financial position and with cautious optimism."
For further information please contact:
i-nexus Global plc Via: Alma PR
Simon Crowther, CEO
Alyson Levett, CFO
N+1 Singer (Nominated Adviser and Broker) Tel: +44 (0)207 496 3000
Sandy Fraser (Corporate Finance)
Tom Salvesen (Corporate Broking)
Alma PR Tel: +44 (0) 203 405
Caroline Forde / Robyn Fisher 0205
About i-nexus Group plc
i-nexus supports some of the largest global companies in
running, improving and changing their businesses through the
provision of a scalable, enterprise-grade, cloud-based Continuous
Improvement ("CI") and Strategy Execution ("SE") software platform.
The platform is in use at global blue-chip businesses,
predominantly based across the US and Europe, helping customers
execute key strategic goals throughout all levels and divisions of
their organisations.
The Group's software supports Hoshin Kanri, a strategy
development methodology first introduced in the 1960s in Japan and
born out of lean, six sigma and operational improvement theory.
Hoshin Kanri (directly translated as "direction execution") is a
systematic planning, implementation and review methodology which,
when implemented, aims to ensure that the strategic goals of a
company are properly communicated to all employees and that they
drive progress and action at every level of the business.
i-nexus is headquartered in Coventry, UK.
Chairman's Statement
Without doubt 2019/20 has been an unprecedented year for
everyone. No one predicted that by March 2020 the entire country
would be locked down, businesses where possible all working from
home and economies throughout the world experiencing the most
turbulent environment since the second world war. The practical
challenges posed by the impact of the Covid-19 pandemic and the
subsequent economic turmoil that unfolded asked many questions of
the i-nexus business, its management team and the Board and I must
express my gratitude and admiration for those employees, customers
and shareholders who have continued to back the business during
these tumultuous times.
We started the year acknowledging that our previous attempt to
build a first class sales machine had failed and that we would
regroup and focus on ensuring we had a leading product for our
customers, while preserving our cash resources to ensure that we
would not require additional capital until such time as we could
demonstrate repeatable commercial success. We reduced our costs but
maintained our product development momentum and retained sufficient
commercial capacity to achieve our more modest ambitions.
The arrival of Covid-19 and the lockdown in March 2020 had a
severe impact on our business. Following a fantastic effort from
many in the business we moved quickly to a fully distributed,
work-from-home model. As many of our existing and prospective
customers did the same, our pipeline of prospects ground to a halt
and many customer finance departments found it increasingly
difficult to process payments. We experienced a significant cash
squeeze. The UK Government's furlough scheme allowed us to reduce
our costs by some 40% and HMRC provided additional short-term cash
support. Unfortunately, we found ourselves ineligible for the
broader Government support packages for public or private
companies. The Board, as identified in previous Company
announcements, sought alternative funding options, but we reached
the end of the financial year having failed to secure new
investment.
Despite the challenges the business faced, we managed to win a
new US customer, bring to market a considerably enhanced release of
our platform, and demonstrate the ability to implement our new
product, Workbench, remotely. However, we still faced an ongoing
working capital challenge, exacerbated by the late payment of
invoices. Having exhausted discussions with potential new and
existing investors, it was decided in October to raise in excess of
GBP1m in the form of a Convertible Note, issued to Herald
Investment Management Ltd, the Company's long-standing core
investor, myself and a number of other long-standing investors,
raising GBP1.235m in total, net of expenses. The note was issued
with a conversion price approximately twice the share price at the
time, underlining the confidence which investors have in the
business. We expect to continue to generate modest monthly losses
in the short term, but the purpose of the funds raised is primarily
to help manage working capital, not to fund ongoing losses.
Without extraordinary efforts and sacrifices from all our staff,
the business would have faced a very uncertain future. Sadly, we
have seen a number of valued colleagues leave the business and I
wish them well in their future endeavours. At the beginning of
lock-down, all staff agreed to take a 15% cut in remuneration for 6
months. It is vital that we retain and appropriately remunerate our
remaining talent. As such the recent funding has allowed us to
return staff pay to its correct level and to agree option grants,
which will vest on the achievement of performance targets, ensuring
staff and shareholders are aligned in sharing in the future success
of the business. I would like to thank all our remaining staff for
all that they have done over the last 12 months, as well as those
investors who supported the recent fundraising.
We end the year with a radically updated product, new customers,
a reduced but workable cost base and funding to secure the business
in the near term. While there will still be challenges ahead, we
can now face 2021 with determination and cautious optimism.
CEO Report
As outlined by the Chairman, this was a challenging year, in
which much has been asked of our teams and, while revenue has
declined, much has been done to improve our product and our
operations. In the face of the escalation of financial pressure on
the business caused by Covid-19, we reduced our cost base,
conserving our cash resources, and post period end secured
GBP1.235m (net of expenses) in additional funding by way of a
Convertible Note, securing the near-term financial future of the
business. We are grateful for the support of our investors, our
teams and our customers, and while conscious of the challenges that
still lie ahead, are passionate about delivering on our growth
strategy in the coming year.
Covid-19
We were swift to respond to the pressures of Covid-19, moving to
a remote working basis ahead of UK lockdown, reducing our headcount
and stabilising our core teams.
However, new business discussions simply fell away, as the
blue-chip enterprises with whom we were engaged themselves adjusted
to the new environment. While we have seen some organisations seek
to accelerate their adoption of digital strategy execution
solutions, many put those plans on hold; cash conservation took
precedence over investing in new technology for many prospects.
Within our existing customer base we have limited exposure to the
worst impacted sectors, such as aerospace and automotive and while
we anticipate some shrinkage to our renewal base, we believe it to
be largely stable.
Despite the challenges Covid-19 threw at us, we managed to win a
major new US customer during lockdown and a major European one
since year end, via our partner channel. These customers were won
despite not having ever met the customers face to face. More
positively, we are having a growing number of positive discussions
with businesses for whom the pandemic demonstrated their lack of
visibility on their strategy execution, highlighting the risk this
posed to their businesses and this has allowed us to rebuild our
sales pipeline. The issue now is consistently being able to close
new deals on a timely basis.
Business structure
The business now comprises a workforce of 37 people in four core
teams: Go to Market, (Sales & Marketing), Product (Development,
Product & Cloud Ops), Success, (all the customer facing &
delivery teams) and Business Support (Finance, HR & Admin).
Each team has clearly laid out performance metrics and KPIs, to be
delivered against quarterly.
Innovation
Launch of i-nexus Summer 2020
One of the notable successes of the year was the launch of
i-nexus Summer 2020, the significant upgrade to our existing
cloud-based Strategy Execution Management platform. This was the
culmination of a two year program of activity incorporating our
internal expertise, client base, user experience experts and other
specialist consultancies. The suite incorporates several new
offerings and now encompasses i-nexus Workbench, Pulse, Advisor and
i-nexus Data Warehouse ("IDW"). The software will enable customers
to execute and sustain greater process improvements, and track and
optimise their project mix. Importantly, the inclusion of remote
working solutions will enable customers to log on and see all of
the projects and programs in one place, linked to their key
measurements. Customers can remain fully informed and ready to act
immediately, on a remote basis.
Hosted on Amazon Web Services, the platform is an
enterprise-ready Strategy Execution Management solution, scalable
to thousands of users, and meeting the stringent demands of
corporate IT organisations.
By the date of this report, 95% of customers are live on the new
platform, providing a streamlined ability to execute on our Land
& Expand strategy, facilitating easier roll-out of the service
across multiple divisions and subsidiaries.
i-nexus Data Warehouse
The platform processes significant strategic and operational
customer data. FY20 saw the release of IDW, a new service giving
customers direct access to their data ready for analysis. Our
investment in data will make it easier for customers to analyse and
visualise their data through new dashboards, views and reports
within our Workbench and Advisor products. IDW will be further
enhanced in FY21 and, together with our broader data roadmap, will
unlock new customer insight into strategic planning and strategy
execution performance.
Partners
We continue to develop relationships with potential channel
partners, to extend our market reach. Our consulting partners have
also been badly affected by Covid-19, seeing their own pipelines
slow down and facing substantial uncertainty. They also recognise
that innovation and new approaches will be key to emerging from the
lockdown successfully and we are working with them on various
initiatives accordingly. In one encouraging development, subsequent
to the year end, we signed our first new customer through a
consulting partner introduction, a European based white goods
manufacturer.
People
It is hard to put into words how grateful we are for the
fortitude and commitment shown by our team. Not only have they had
to deal with the emotional and practical impacts of colleagues
departing the business, but this has been done against the personal
challenges Covid-19 has brought to all of us. And yet throughout
this period, service levels to our customers never dropped, our
pace of innovation remained high and sales opportunities were
sought with continued vigour. I, and the Board, are immensely
grateful and we were pleased to be able to return all staff to full
pay as a result of the fundraise.
Market opportunity
While Covid-19 is likely to continue to have a negative impact
on corporate decision-making for some time to come, we are
confident the long-term opportunity has not diminished. We continue
to believe that the market opportunity for enterprise level
strategy execution software is significant, and for the growing
area of Hoshin Kanri based tools in particular. The breadth of our
platform and its proven ability to run complex strategy programmes
at depth and scale, across thousands of employees in multiple
geographies, puts us in a strong position to benefit from this
evolving market once the initial impacts of Covid-19 have reduced.
The cloud and mobile abilities of our products mean they can be
used remotely and our platform has increased relevance at a time
when organisations are having to make significant strategy
adjustments, to course correct for the impacts of Covid-19 on their
businesses.
Current Trading and Outlook
We exited the year with a monthly cost base more than 50% lower
than at the start, at approximately GBP370k, against a Monthly
Recurring Revenue exit rate of GBP305k. Wins secured in the new
year have led to MRR increasing to GBP317k. Our sales pipeline
continues to develop with solid new opportunities being created
monthly, however conversion on a timely basis is an ongoing
challenge with Covid-19 still a factor. We have seen some initial
success in recent months; closing a deal via a channel partner and
a major contract extension with an existing customer. Our strategic
focus for 2021 is to achieve repeatable, incremental sales and
operate within our financial means. All departments are focussed on
projects to deliver this goal.
CFO's Report
Reported revenue
Revenue reduced to GBP4.1m (FY19: GBP4.8m) as the Covid-19
pandemic and other internal factors adversely affected our rate of
new deal conversion and services change order billing. The Group
signed two new customers (FY19: eight), both under recurring
contracts of more than one year in length, paid in advance. Upsells
and cross sells in our existing accounts showed an improvement on
last year, adding GBP40k Monthly Recurring Revenue in the year
(FY19: GBP35k). This growth was, however, offset by some high
customer churn, some of which was a direct result of Covid 19, and
we exited FY20 with closing MRR of GBP305k (FY19 exit MRR:
GBP340k).
Revenue from recurring contracted software subscriptions was
GBP3.74m (FY19: GBP4.03m) and from associated professional services
was GBP0.34m (FY19: GBP0.73m). We had a strong end to the year with
respect to services billing, but this could not be converted into
recognised revenue until after the year end.
Gross Margin
Gross margin in the year was GBP2.99m, or 73% (FY19: GBP3.55m,
or 74%) after accounting for commission payable to the Group's
business partners. Reported gross margin is the combined gross
margin over both recurring software subscriptions and professional
services.
Overheads
Overheads (de ned as the aggregate of staff costs and other
operating expenses, but excluding those costs included in cost of
sales, depreciation of tangible assets and amortisation of
intangible assets, and share based payment charges) reduced in the
year from GBP7.82m to GBP5.31m. This reduction was the result of a
program of rightsizing all costs including redundancies, a
temporary 15% salary reduction scheme for all employees including
Executive and Non-Executive Directors to help secure the business
in the short-term. At the same time, we took advantage of the
Government Furlough scheme, with 25 employees involved in the
scheme. Included in overheads was GBP0.2m of non-recurring
administrative expenses as a result of the redundancies. As
reported elsewhere our monthly run rate of total costs, both cost
of sales and overheads dropped by approximately GBP400k in the year
to end at approximately GBP370k. Interest expense at GBP54k is down
on the previous year as debt continues to be paid down.
Capitalised development costs amounted to GBP0.6m in the year
(FY19: GBP0.6m). Our development capacity is contributing to the
marketability of the Group's products and the product launch in
August is strategically important to us and our current customers
and prospects.
Group loss before taxation reduced from GBP4.33m in FY19 to
GBP2.38m, a result that reflects the cost reductions made, with
most of the impact on our second half year. There are minimal plans
to increase the cost base in the coming year, restricted to well
targeted investments in lead generation, projects designed to
improve conversion rates and in marketing initiatives with our
partners.
Cash Flow
The Group has cash & cash equivalents at the period end of
GBP0.12m (FY19: GBP1.53m). The Group's cash position was
significantly enhanced shortly after year end with the successful
conclusion of a fund raise to secure GBP1.235m net of expenses as a
result of the issue of Fixed Rate Unsecured Convertible Redeemable
Loan Notes.
Gross debt at 30 September 2020 was GBP0.24m, of which GBP0.18m
was payable within one year.
The Group experienced a net out ow of funds from operating
activities of GBP2.2m (FY19 GBP4.2m). The Group had a cash out ow
of GBP0.2m (FY19 GBP0.4m) from the servicing of its debt nance.
As reported above the Group successfully secured funding after
the Balance Sheet date in the form of Fixed Rate Unsecured
Convertible Redeemable Loan Notes to the value of GBP1.235m net of
expenses. These funds provide much needed additional working
capital to facilitate the continued implementation of the Company's
growth plan and will be applied entirely towards meeting the
Company's ongoing working capital requirements.
Careful cash management will continue to be a priority focus for
management and the Board for the foreseeable future. The Group
continues to apply treasury and foreign currency exposure
management policies to minimise both the cost of nance and our
exposure to foreign currency exchange rate uctuations.
The Group prepares budgets, cashflow forecasts and undertakes
scenario planning to ensure that the Group can meet its liabilities
as they fall due. The uncertainty as to the ongoing impact on the
Group of Covid-19 has been considered as part of the Group's
adoption of the going concern basis. In particular, the ongoing
impact of Covid-19 continues to cause sales cycles to extend and
make it difficult to forecast future sales.
The Board's assessment in relation to going concern is included
in Note 2 of the financial information. The Group's principal risks
and uncertainties are set out in Note 9 of the financial
information.
Capital expenditure
The Group operates an asset light strategy and has low capital
expenditure requirements, therefore expenditure on tangible xed
assets is low at 1% of revenue (FY19: 5%). The main area of
capitalisation is the development of the Group's product
software.
Primary statements
Year ended Year ended
30 September 30 September
2020 2019
Notes GBP GBP
Revenue 3 4,080,582 4,759,072
Cost of sales (1,094,342) (1,212,175)
Gross profit 2,986,240 3,546,897
Administrative expenses (5,310,671) (7,817,865)
Operating loss (2,324,431) (4,270,968)
Adjusted EBITDA 4 (1,816,412) (4,050,691)
--------------- ---------------
Depreciation and profit/loss on disposal (331,924) (105,977)
Share based payment expense - -
Non-underlying items (176,095) (114,300)
Finance income 1,007 6,904
Finance costs (54,299) (66,838)
Loss before taxation (2,377,723) (4,330,902)
Tax expense 361,490 401,164
Loss for the year (2,016,233) (3,929,738)
Other comprehensive income:
Exchange differences arising on translation
of foreign operations 8,068 (14,030)
Loss on net investment hedge (26,307) (92,158)
Total comprehensive loss for the year (2,034,472) (4,035,926)
--------------- ---------------
Attributable to equity holders of
company (2,034,472) (4,035,926)
--------------- ---------------
GBP GBP
--------------- ---------------
Basic and diluted loss per share 5 (0.07) (0.14)
--------------- ---------------
Notes 30 September 30 September
2020 2019
GBP GBP
Non-current assets
Intangible assets 1,136,808 618,609
Property, plant and equipment 245,963 339,131
-------------- --------------
Total non-current assets 1,382,771 957,740
-------------- --------------
Current assets
Trade and other receivables 832,507 1,418,293
Current tax receivable 300,000 400,000
Cash and cash equivalents 120,011 1,533,323
-------------- --------------
Total current assets 1,252,518 3,351,616
-------------- --------------
Total assets 2,635,289 4,309,356
-------------- --------------
LIABILITIES
Current liabilities
Borrowings 6 179,098 159,730
Trade and other payables 1,239,609 942,210
Deferred income 1,723,661 1,541,109
-------------- --------------
Total current liabilities 3,142,368 2,643,049
-------------- --------------
Non-current liabilities
Borrowings 6 64,402 243,500
Lease liability 37,467 -
Provisions 80,702 80,702
-------------- --------------
Total non-current liabilities 182,571 324,202
-------------- --------------
Total liabilities 3,324,939 2,967,251
-------------- --------------
Net (liabilities)/assets (689,650) 1,342,105
============== ==============
Equity
Share capital 7 2,957,161 2,957,161
Share premium 7,256,188 7,256,188
Share based payment reserve - -
Foreign exchange reserve (15,470) (23,538)
Merger reserve 10,653,881 10,653,881
Accumulated losses (21,541,410) (19,501,587)
-------------- --------------
Total equity (689,650) 1,342,105
============== ==============
Issued Share Foreign Merger Accumulated Total
capital premium exchange reserve losses equity
GBP GBP reserve GBP GBP GBP
GBP
At 1 October
2018 2,957,161 7,256,188 (9,508) 10,653,881 (15,479,691) 5,378,031
Loss for
period - - - - (3,929,738) (3,929,738)
Exchange
differences
on foreign
operations - - (14,030) - - (14,030)
Loss on net
investment
hedge - - - - (92,158) (92,158)
At 30
September
2019 2,957,161 7,256,188 (23,538) 10,653,881 (19,501,587) 1,342,105
Loss for the
year - - - - (2,016,233) (2,016,233)
Transition
to IFRS 16 - - - - 2,717 2,717
Exchange
differences
on foreign
operations - - 8,068 - - 8,068
Loss on net
investment
hedge - - - - (26,307) (26,307)
At 30
September
2020 2,957,161 7,256,188 (15,470) 10,653,881 (21,541,410) (689,650)
========== ========== ========= ============= ============= ============
Group Group
Year ended Year ended
Notes 30 September 30 September
2020 2019
GBP GBP
Cash flows from operating
activities
Loss before taxation (2,377,723) (4,330,902)
Adjustments for non-cash/non-operating
items:
Depreciation and
profit on disposals 331,924 105,977
Share based payments - -
Finance income (1,007) (6,904)
Finance charges 54,299 66,838
------------- --------------
(1,992,507) (4,164,991)
------------- --------------
Changes in working
capital:
Decrease in trade and other
receivables 690,536 333,663
Increase/(decrease) in
trade and other payables 489,077 (577,802)
Taxation 361,490 184,326
Net cash from operating
activities (451,404) (4,224,804)
------------- --------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (39,744) (247,040)
Proceeds from sale
of property, plant
and equipment - 1,154
Purchase of development
costs (628,210) (563,598)
Interest received 1,007 6,904
Net cash flow from investing
activities (666,947) (802,580)
------------- --------------
Cash flows from financing
activities
Principle elements of lease (89,000) -
payments
Proceeds from borrowings - -
Repayment of borrowings (159,730) (298,998)
Interest paid (54,299) (66,838)
Net cash flow from financing
activities (303,029) (365,836)
------------- --------------
Net increase/(decrease)
in cash and cash equivalents (1,426,131) (5,393,220)
Cash and cash equivalents
beginning of period 1,533,323 6,940,573
Effect of foreign
exchange rate changes 8,068 (14,030)
------------- --------------
Cash and cash equivalents
at the end of the period 120,011 1,533,323
============= ==============
Notes to accounts
1. General information
i-nexus Global PLC is a public company limited by shares
incorporated in England and Wales (registration number 11321642).
The registered office and principal place of business is i-nexus,
i-nexus Suite, George House, Herald Avenue, Coventry Business Park,
Coventry, CV5 6UB.
The principal activity of i-nexus Global plc and its
subsidiaries (the Group) is that of development and sale of
Enterprise cloud-based software on a software-as-a-service (SaaS)
basis and associated maintenance, support, software customisation
and professional consultancy services.
2. Significant accounting policies
The following principal accounting policies have been used
consistently in the preparation of consolidated financial
statements.
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union, in accordance with the IFRS Interpretations
Committee ("IFRIC") interpretations, and with those parts of the
Companies Act 2006 as applicable to companies reporting under IFRS.
The financial statements comply with IFRS as issued by the
International Accounting Standards Board (IASB).
The financial statements are prepared in sterling, which is the
presentational currency of the company. Monetary amounts in these
financial statements are rounded to the nearest GBP1.
Historical cost convention
The financial statements have been prepared under the historical
cost convention except for the following:
-- The business combination of i-Solutions Global Limited by
i-nexus Global plc is accounted for under the merger method
-- The use of fair value for financial instruments measured at fair value
Basis of consolidation
The financial statements incorporate the results of i-nexus
Global plc and all of its subsidiary undertakings as at 30
September 2020.
The accounting treatment in relation to the addition of i-nexus
Global plc as a new UK holding company of the Group fell outside
the scope of IFRS 3 'Business Combinations'. The share scheme
arrangement constituted a common control combination of the
entities. This was as a result of all the shareholders of i-nexus
Global plc being issued shares in the same proportion, and the
continuity of ultimate controlling parties. The Directors believe
that this approach presents fairly the financial performance,
financial position and cash flows of the Group.
Going concern
This historical financial information relating to i-nexus Global
plc has been prepared on the going concern basis.
The Group prepares regular business forecasts and monitors its
projected cash flows, which are reviewed by the Board. Forecasts
are adjusted for reasonable sensitivities that address the
principal risks and uncertainties to which the Group is exposed,
thus creating a number of different scenarios for the Board to
challenge including a "stress" case scenario of a worsening of
total billing across recurring and services revenue of GBP700k,
nearly a 50% reduction in new billing compared to the base case
budgeted for the current financial year. In those cases, where
scenarios deplete the Group's cash resources too rapidly,
consideration is given to the potential actions available to
management to mitigate the impact of one or more of these
sensitivities, in particular the discretionary nature of costs
incurred by the Group, in order to ensure the continued
availability of funds. The Board have also taken into account that
the Group does not have access to bank debt.
Based on current trading, the stress test scenario is considered
very unlikely. However, it is difficult to predict the overall
impact and outcome of Covid-19 at this stage, as the second wave
hits different geographies and sectors in different ways.
Nevertheless, after making enquiries, and considering the
uncertainties described above and after receiving the convertible
debt funds of GBP1.235m net, the directors have a reasonable
expectation that the company has adequate resources to continue in
operational existence for the foreseeable future, being a period of
at least twelve months from the balance sheet date. For these
reasons, they continue to adopt the going concern basis in
preparing the annual report and accounts.
Abridged financial information
This preliminary announcement has been prepared in accordance
with the accounting policies under IFRS as adopted by the EU.
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS. This preliminary announcement constitutes a
dissemination announcement in accordance with Section 6.3 of the
Disclosures and Transparency Rules (DTR).
3. Revenue and segmental reporting
The Group has one single business segment and therefore all
revenue is derived from the rendering of services as stated in the
principal activity. The group operates four geographical segments,
as set out below. This is consistent with the internal reporting
provided to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and
assessing performance, has been identified as the management team
comprising the executive directors who make strategic
decisions.
Year ended Year ended
30 September 30 September
2020 2019
GBP GBP
United Kingdom 808,412 928,733
Rest of Europe 1,823,246 1,624,195
United States 1,259,360 2,029,839
Rest of the World 189,564 176,305
--------------- ---------------
4,080,582 4,759,072
=============== ===============
The Group has two main revenue streams in each of the years
presented, as detailed below:
Year ended Year ended
30 September 30 September
2020 2019
GBP GBP
Licence 3,699,779 4,027,129
Services 342,650 731,943
Other Income 38,153 -
4,080,582 4,759,072
=============== ===============
4. Adjusted EBITDA
Year ended Year ended
30 September 30 September
2020 2019
GBP GBP
Operating loss (2,324,431) (4,270,968)
Add back:
Depreciation and profit/loss on disposal 331,924 105,977
Share based payment expense - -
Non-underlying items 176,095 114,300
-------------- --------------
Adjusted EBITDA (1,816,412) (4,050,691)
============== ==============
5. Loss per share
The loss per share has been calculated using the loss for the
year and the weighted average number
of ordinary shares outstanding during the year, as follows:
Year ended Year ended
30 September 30 September
2020 2019
GBP GBP
Loss for the period attributable to equity
holders of the company (2,034,472) (4,035,926)
-------------- --------------
Weighted average number of ordinary shares 29,571,605 29,571,605
-------------- --------------
Loss per share (0.07) (0.14)
============== ==============
6. Borrowings
Group
At 30 September At 30 September
2020 2019
GBP GBP
Current
Venture debt 179,098 159,730
179,098 159,730
---------------- ----------------
Non-current 64,402 243,500
Venture debt
64,402 243,500
---------------- ----------------
Total borrowings 243,500 403,230
================ ================
Venture debt
The venture debt is secured by way of a fixed and floating
charges over the title of all assets held by i-Solutions Global
Limited. The venture debt has a fixed interest rate of the higher
of 11.5 per cent. per annum or LIBOR plus 8 per cent. per
annum.
The Group borrowings are repayable as follows:
At 30 September As restated
2020 At 30 September
GBP 2019
GBP
Within 1 year 179,098 159,730
Between 1 year and 2 years 64,402 179,098
Between 2 years and 5 years - 64,402
243,500 403,230
================ =================
The directors consider the value of all financial liabilities to
be equivalent to their fair value.
7. Share capital
Group
At At
30 September 30 September
2020 2019
GBP GBP
Authorised, allotted, called
up and fully paid
29,571,605 Ordinary shares
of GBP0.10 each 2,957,161 2,957,161
2,957,161 2,957,161
============== ==============
Fully paid shares, which have a par value of GBP0.10, carry one
vote per share and carry rights to a dividend.
Reconciliation of movement in shares during the year
Group
Ordinary
number
GBP0.10 shares
At 1 October 2019 29,571,605
Subdivision of shares -
Exercise of options -
Conversion of loan notes -
IPO share issue -
At 30 September 2020 29,571,605
===============
Company
At 30 September At 30 September
2020 2019
GBP GBP
Authorised, allotted, called up and
fully paid
29,571,605 Ordinary shares of GBP0.10
each 2,957,161 2,957,161
2,957,161 2,957,161
--------------------------------- ================
Fully paid shares, which have a par value of GBP0.10, carry one
vote per share and carry rights to a dividend.
We should refer to the post-balance sheet issue of convertible
notes here and disclose the number of new shares that would be
issued on conversion.
8. Events after the reporting period
On October 19th the company announced that it was proposing to
raise in aggregate GBP1.325 million (before expenses) by way of the
issue Fixed Rate Unsecured Convertible Redeemable Loan Notes with a
Conversion price of 10p and a Coupon of 8%. On November 4th a
General Meeting was held that approved this transaction.
Subsequently GBP1.325m was received from participating
Shareholders.
9. Principle risks and uncertainties
Although the directors seek to minimise the impact of risk
factors, the Group is subject to a number, of those most relevant
are as follows:
1. Working capital
Whilst the Directors believe that the recent injection of funds,
as a result of the convertible bond issue on 4(th) November 2020,
will provide the necessary flexibility to satisfy the Company's
near-term funding requirements, there can be no guarantee as to the
Company's medium to longer term working capital requirements and,
therefore, the Group may need to seek additional capital over and
above that raised from the issue of the Convertible Loan Notes,
whether from further equity issues, the issue of further debt
instruments or additional bank borrowings to finance its
investments or for other business purposes in the longer term. No
assurance can be given as to the availability of such additional
capital at any future time or, the terms upon which such additional
capital would be available.
The Directors emphasise however that their central case
financial projections assume a modest increase in monthly recurring
revenues during the remainder of the FY21 financial year, more than
reversing the trend experienced since the onset of the COVID-19
Pandemic and that, whilst the proceeds of the Convertible Bond
issue will provide the necessary flexibility in the event that the
expected growth in revenues does not materialise in the near term,
the Company's continuing viability in the longer term remains
critically dependent on its ability to secure new sales to existing
and potential customers. In addition, given the nature of the
COVID-19 Pandemic it is not possible to know the potential impact
of the ongoing crisis on the activities of the Group for the
current financial year and beyond and, in particular, it is
possible that as a direct or indirect result the Company will
continue to experience a slower and/or lower sales conversion rate
than the Directors have modelled within their central case
financial projections. This could in turn have a material adverse
effect on the Group's business, results of operations, financial
condition and prospects.
2. COVID-19 Pandemic
The COVID-19 Pandemic has affected the performance of the
business of the Group. The restrictions being imposed in the UK, as
well as similar lockdown measures introduced internationally
(particularly in the US which is the Group's largest market) have
created uncertainty around when normal business will resume. As at
the date of this document, given the nature of the crisis, the
Group is not aware of the full extent of the effects of the
COVID-19 Pandemic for the current financial year or beyond.
The global economic slowdown resulting from the COVID-19
Pandemic requires a number of businesses worldwide to make
adjustments to their operating models. In addressing the impact of
the COVID-19 Pandemic on its markets and its customers, the Group
has taken swift and decisive action to reduce its operating cost
base in cash terms since the start of the crisis. Staffing expense
reductions have been implemented and this has been combined with
reduced discretionary spending. This has reduced the Group's
monthly operating cost significantly to approximately
GBP370,000.
Whilst the Group continues to monitor the situation on a regular
basis and may be able to introduce further cost saving measures if
needed, it is possible that in the longer term the COVID-19
Pandemic will have a material adverse effect on the Group's
business, results of operations, financial condition and prospects.
Also, there is no assurance that the implementation of the
Company's strategic and operational changes introduced to date will
be successful under current or future market conditions.
Furthermore, if there were to be further outbreaks of the COVID-19
Pandemic either globally or in the Group's markets this could
materially adversely affect the Group's business, results,
financial condition and prospects.
3. Reliance on counterparties
There is a risk that parties with whom the Group trades or has
other business relationships may be unable to pay the Group in a
timely manner, or at all. Some of the Group's customers may seek to
renegotiate their pricing and/or payment terms with the Group.
Furthermore, as a result of the COVID-19 Pandemic and global
economic slowdown some of the Group's customers may enter into
bankruptcy or insolvency proceedings and be in a position whereby
they are unable to pay the Group all or some of the payments to
which the Group is owed. If any of these risks arise, this could
have an adverse impact on the Group's business, revenue, financial
condition, profitability, prospects and results of operations
4. Dependence on key executives and personnel
The Group is managed by a limited number of key personnel,
including the Directors and senior management, who have significant
experience within the Group and the sectors it operates within.
Whilst executive remuneration plans, incorporating long-term
incentives, have been implemented to mitigate this risk, there is
no certainty that key personnel will not leave. If members of the
Group's key senior team depart, the Group may not be able to find
effective replacements in a timely manner, or at all and its
business may be disrupted or damaged.
5. The Group relies on third parties to deliver services which
are integral to the Group's business and its ability to generate
revenue
The Group contracts with third parties to perform functions or
operations that are integral to the Group's products and services,
including third party suppliers for integration software, and cloud
hosting. The Group is at risk as to the availability, price and
quality offered by such third party suppliers. Any significant
changes in these factors could adversely affect profit margins and
have a material adverse effect on the Group's business, results of
operations and financial condition. Further, the Group's third
party suppliers may not be responsive to the Group's needs or may
experience problems with their own operations beyond the Group's
control. The Group's reliance on third party suppliers increases
the risk of disruption to its operations. If the Group is unable to
effectively utilise its third party suppliers, or if such third
party service providers experience business difficulties or are
unable to provide business services as anticipated, the Group may
not be able to provide its services and may need to seek
alternative service providers or resume providing these business
processes internally, which could be costly and time-consuming and
have a material adverse effect on the Group's business, results of
operations and financial condition.
6. Exchange rate
A significant proportion of the Group's revenues are denominated
in foreign currency, principally US dollars. Since the Group
reports its financial results in sterling, fluctuations in rates of
exchange between sterling and non-sterling currencies, particularly
US dollars, may have a material adverse impact on the Group's
financial results.
7. Forward-looking Statements
This document contains forward-looking statements that involve
risks and uncertainties. All statements, other than those of
historical fact, contained in this document are forward-looking
statements. The Group's actual results could differ materially from
those anticipated in the forward-looking statements as a result of
many factors. Investors are urged to read this entire document
carefully before making an investment decision. The forward-looking
statements in this document are based on the relevant Directors'
beliefs and assumptions and information only as of the date of this
document, and the forward-looking events discussed in this document
might not occur. Therefore, Investors should not place any reliance
on any forward-looking statements. Except as required by law or
regulation, the Directors undertake no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future earnings or otherwise.
It should be noted that the risk factors listed above are not
intended to be exhaustive and do not necessarily comprise all of
the risks to which the Group is or may be exposed or all those
associated with an investment in the Group. In particular, the
Group's performance is likely to be affected by changes in market
and/or economic conditions, political, judicial, and administrative
factors and in legal, accounting, regulatory and tax requirements
in the areas in which it operates and holds its major assets. There
may be additional risks and uncertainties that the Directors do not
currently consider to be material or of which they are currently
unaware, which may also have an adverse effect upon the Group.
10. Availability of Report and Accounts
The audited report and accounts for the year ended 30 September
2020 will be published and posted to shareholders in due course.
Following publication a soft copy of the report and accounts will
also be available to download from the Company's website,
www.i-nexus.com .
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END
FR UAARRRVUURUA
(END) Dow Jones Newswires
December 02, 2020 02:00 ET (07:00 GMT)
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