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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