S247 Smarttech247 Group Plc

NOTES TO THE FINANCIAL INFORMATION

For the year ended 31 July 2024

 

1.          GENERAL INFORMATION

Smarttech247 Group plc ("Smarttech247") is a public limited company incorporated and registered in England and Wales with its registered office at 165 Fleet Street, London, EC4A 2DY. The Company's registered number is 14385467. The Company has four 100% owned subsidiaries, Zefone Limited incorporated and registered in Ireland, Smart Systems Security Limited, incorporated and registered in England and Wales, Smarttech 247 Cyber Security Sarl incorporated and registered in Romania and Smartech Sp z.o.o. incorporated and registered in Poland (together "the Group").

The Group's principal activities consist of providing managed detection and response capabilities to global organisations, and associated services including penetration testing, governance risk and compliance and cyber consultancy.

The consolidated Financial Statements were approved for issue by the Board of Directors on 22 January 2025.

2          ACCOUNTING POLICIES

IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users, that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.

2.1        Basis of preparation

The financial statements for the year ended 31 July 2024 have been prepared in accordance with UK-adopted International Financial Reporting Standards ("IFRS") with the principal accounting policies applied in the preparation of the Financial Statements are set out below. These policies have been consistently applied to the period presented, unless otherwise stated.

On 18 November 2022, Smarttech247 Group plc which had never traded, acquired 100% of Zefone Limited.  The Group has used merger accounting to account for this acquisition as there was no change in the shareholders or holdings, and therefore it is accounted for with no change in the book values of assets and liabilities and no fair value accounting applied. Consequently, the prior year incorporated the full year results for Zefone Limited and its subsidiaries as well as the trading of the Company from incorporation on 29 September 2022 to 31 July 2023, prepared under IFRS. See Note 2.6 for further information. 

The financial statements have been prepared under the historical cost convention as modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

The preparation of financial statements in conformity with UK IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The areas involving a higher degree of judgement or complexity, or areas where assumptions or estimates are significant to the financial statements, are disclosed in Note 2.24.

The principal accounting policies are set out below and have, unless otherwise stated, been applied consistently in the financial statements.

The consolidated financial statements are presented in Euros (€) unless otherwise stated, which is the Company's functional currency and the Group and Company's presentational currency and presented to the nearest €'000.

2.2        New standards, amendments and interpretations

The Group and Company have adopted all of the new and amended standards and interpretations issued by the International Accounting Standards Board that are relevant to its operations and effective for accounting periods commencing on or after 1 August 2023.

No standards or Interpretations that came into effect for the first time for the financial year beginning 1 August 2023 have had an impact on the Group or Company.

  

2.3        New standards and interpretations not yet adopted

Standards and amendments to standards that have been issued that are applicable for the Group but are not effective for 2024 and have not been early adopted are:

Standard	Impact on initial application	Effective date
Amendments to IAS 1	Classification of liabilities as Current or Non-current, effective from 1 January 2024        or Non-current	1 January 2024
Amendments to IFRS 16 Leases	Lease Liability in a Sale and Leasebacks	1 January 2024
Amendments to IAS 1 Presentation of Financial Statements	Non-current Liabilities with Covenants	1 January 2024
Amendments to IAS21	Lack of exchangeability	1 January 2025
Amendments IFRS 9 and IFRS 7 - Financial instruments	Classification and measurement of financial instruments	1 January 2026
IFRS 18 - Presentation and Disclosure in Financial Statements	Presentation and Disclosure of financial Statements	1 January 2027

 

The effect of these new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be material.

The directors are evaluating the impact that these standards may have on the financial statements of Group. 

2.4        Going concern

Management has prepared the financial statements on a going concern basis. The directors are satisfied that adequate resources are available to the Group, taking into consideration the funds generated from the successful AIM listing and associated fundraise during the prior year.  Furthermore, the Group is expected to generate positive cash flow from its operating business going forward.  Consequently, they have no reason to believe that any material uncertainty exists that would cast a doubt about the ability of the Group and Company to continue as a going concern.

In making this judgement management considered the Group's budgets and cash flow forecasts for a period of at least twelve months from the date of approval of the financial information and the level of existing cash resources which demonstrates that the Group will be in a position to meet its liabilities as they fall due.

The Group has therefore adopted the going concern basis in preparing the financial statements.

2.5        Basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control.  The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated.

The Group has applied the acquisition method to account for certain business combinations within the Group. With this method, the consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

The Group has also used merger accounting as described in more detail below in Note 2.6 for the combination of Smarttech247 Group plc and Zefone Limited, its principal trading subsidiary.

2.6        Merger accounting

The Company was incorporated on 29 September 2022 with one £0.01 ordinary share and on 18 November 2022, became the parent company of the Group when it issued 87,499,999 £0.01 ordinary shares in exchange for 100% of the ordinary shares in Zefone Limited as part of a share for share exchange.

This transaction was not considered to be a business combination within the scope of IFRS3 as the transaction was between entities under common control. This is a key judgement, and as a transaction where there was no change in the shareholders or holdings, is accordingly accounted for using merger accounting with no change in the book values of assets and liabilities and no fair value accounting applied.

Further information on the transaction is included in Note 22.

2.7        Foreign currency translation

(i)       Functional and presentation currency

Items included in the financial information for each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial information is presented in €, which is the Company's presentation and functional currency. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency). IAS 21 The Effects of Changes in Foreign Exchange Rates requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period). The foreign exchange differences on translation are recognised in other comprehensive income/(loss).

(ii)      Transactions and balances

Transactions denominated in a foreign currency are translated into the functional currency at the exchange rate at the date of the transaction. Assets and liabilities in foreign currencies are translated to the functional currency at rates of exchange ruling at statement of financial position date. Gains or losses arising from settlement of transactions and from translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income for the period.

(iii)     Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

-     assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position;

-     income and expenses for each statement of comprehensive income are translated at the average exchange rate; and

-     all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders' equity. When a foreign operation is partially disposed or sold, exchange differences that were recorded in equity are recognised in the statement of comprehensive income as part of the gain or loss on sale.

2.8        Segment reporting

Operating segments are reported in a manner 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 of the operating segments, has been identified as the executive Board of Directors.

2.9        Impairment of non-financial assets

Non-financial assets and intangible assets not subject to amortisation are tested annually for impairment at each reporting date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment review is based on discounted future cash flows. If the expected discounted future cash flow from the use of the assets and their eventual disposal is less than the carrying amount of the assets, an impairment loss is recognised in profit or loss and not subsequently reversed.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (cash generating units or "CGUs").

 

2.10      Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, and demand deposits with banks and other financial institutions and bank overdrafts.

2.11      Fair value measurement

Fair value measurement IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. Further information is set out at Note 2.12 (c).

IFRS 13 mainly impacts the disclosures of the Company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.

2.12      Financial instruments

IFRS 9 requires an entity to address the classification, measurement and recognition of financial assets and liabilities.

a)  Classification

The Group classifies its financial assets in the following measurement categories:

-     those to be measured at amortised cost;

-     At fair value through profit or loss.

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.

The Group classifies financial assets as at amortised cost only if both of the following criteria are met:

-     the asset is held within a business model whose objective is to collect contractual cash flows; and

-     the contractual terms give rise to cash flows that are solely payment of principal and interest.

b)  Recognition

Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

 

c)  Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss ("FVPL"), transaction costs that are directly attributable to the acquisition of the financial asset.

Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Debt instruments

Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of comprehensive income.

Financial investments

Listed investments are valued at closing bid price on 31 July of each year. Unlisted investments that are not publicly traded and whose fair value cannot be measured reliably, are measured at fair value through profit and loss, less impairment. For details of the key assumptions used and the impact of changes to these assumptions, see Note 15.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

-     In the principal market for the asset or liability; or

-     In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

-     Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

-     Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

-     Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.

d)  Impairment

The Group assesses, on a forward-looking basis, the expected credit losses associated with any debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk, with the Group performing the following procedures to reduce the risk of credit losses: 

-     Performing credit checks on existing, new or prospective customers

-     Maintaining regular dialogue with senior staff of existing customers to discuss payments of invoices

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group's most significant clients are public or regulated industry entities which generally have high credit ratings or are of a high credit quality due to the nature of the client. These customers are not considered to have been significantly impacted by Covid.

Expected credit losses are assessed on an individual customer basis, based on the historical payment profiles of the customers, the current and historic relationship with the customer, and the industry in which the customer operates. There have been no impairments of trade receivables in the periods.

2.13      Leases

Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

-     Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

-     Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

-     Amounts expected to be payable by the Group under residual value guarantees;

-     The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

-     Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. In all instances the leases were discounted using the incremental borrowing rate.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period. Right-of-use assets are measured at cost which comprises the following:

-     The amount of the initial measurement of the lease liability;

-     Any lease payments made at or before the commencement date less any lease incentives received;

-     Any initial direct costs; and

-     Restoration costs.

Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.

Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets (generally less than €20K) are recognised on a straight-line basis as an expense in profit or loss.

2.14      Equity

Share capital is determined using the nominal value of shares that have been issued.

Share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the Share premium account, net of any related income tax benefits.

Retained losses includes all current and prior period results as disclosed in the statement of comprehensive income.

2.15      Share based payments

The Group has made awards of warrants and options on its unissued share capital to certain parties in return for services provided to the Group. Under IFRS 2, these share-based payments are either valued at the value of the services provided or where this data is not available a fair value should be calculated using the Black Scholes Option Pricing model and/or the Monte Carlo valuation model which is how they have been valued in this case.  The valuation of these warrants and options involves making several critical estimates relating to price volatility, future dividend yields, expected life of the options and interest rates. These assumptions have been integrated into the Black Scholes Option Pricing model and the Monte Carlo valuation model to derive a value for these share-based payments. These assumptions are described in more detail in Note 21.  

2.16      Revenue

Under IFRS 15, Revenue from Contracts with Customers, five key points to recognise revenue have been assessed:

Step 1: Identify the contract(s) with a customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

Step 5: Recognise revenue when (or as) a Group entity satisfies a performance obligation.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group, and specific criteria have been met for each of the Group's activities, as described below.

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.

The Group bases its estimates on all available information including historical results and experience taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Where the Group makes sales relating to a future financial period, these are deferred and recognised under 'accrued expenses and deferred income' in the Statement of Financial Position.

The Group derives revenue from the provision of managed detection and response and other cyber security services, whereby revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:

-     the amount of revenue can be measured reliably;

-     it is probable that the Company will receive the consideration due under the contract;

-     the stage of completion of the contract at the end of the reporting period can be measured reliably; and

-     the costs incurred and the costs to complete the contract can be measured reliably.

Revenue from the sale of products is recognised when the customer has received the products, which is when it is considered that the performance obligations have been met.

In arrangements where fees are invoiced ahead of revenue being recognised, deferred income is recorded.

2.17      Government grants

Capital grants received and receivable are treated as deferred income and amortised to the Income Statement annually over the useful economic life of the asset to which it relates. Revenue grants are credited to the Income Statement when received.

2.18      Taxation

The taxation expense for the year comprises current and deferred tax and is recognised in the statement of comprehensive income except to the extent that it relates to items recognised in other comprehensive income, or directly in equity, in which case the tax expense is also recognised in other comprehensive income or directly in equity.

Current tax represents the amount expected to be paid or recovered in respect of taxable profits for the financial year and is calculated using the tax rates and laws that have been enacted or substantially enacted at the Statement of Financial Position date.

Deferred tax arises from timing differences that are differences between the taxable profits and total comprehensive income as stated in the financial statements. The timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is proved in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statement. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised of the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probably that future taxable profits will be available against which temporary differences can be utilised. Current or deferred taxation assets and liabilities are not discounted.

2.19      Research and development tax credits and grants

Tax credits and grants in connection with the amounts spent by the Group on research and development are received from Enterprise Ireland and the Irish Government.  The relevant tax credit is recognised on an accruals basis, however the application process can take a significant period of time and the outcome can be uncertain.  Consequently, this income is only accounted for in the period when approval is received.

2.20      Property, plant and equipment

Property, plant and equipment are recorded at historical cost or deemed cost, less accumulated depreciation and impairment losses. Costs includes prime cost, overheads and interest incurred in financing the construction of property, plant and equipment. Capitalisation of interest ceases when the asset is brought into use.

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their estimated useful lives as follows:

Plant and machinery      -           12.5% straight line

Fixtures and fittings       -           12.5% straight line

The Group's policy is to review the remaining useful economic lives and residual values of property, plant and equipment on an on-going basis and to adjust the depreciation charge to reflect the remaining estimated useful economic useful life and residual value.

Fully depreciated property, plant and equipment are retained in the cost of property, plant and equipment and related accumulated depreciation until they are removed from service. In the case of disposals, assets and related depreciation are removed from the financial statements and the net amounts, less proceeds from disposal, is charges or credited to the income statement.

2.21      Intangible assets

Costs incurred on developments projects (relating to the development and testing of new or improved products) are recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use. Intangible asset impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The method and useful lives of finite life intangible assets are reviewed annually.  Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.  The carrying value of the Group's intangible assets have been reviewed against the net present value of the future cashflows discounted at the rate of 10% that are expected to be generated from those assets.

Research and development expenditure

Development expenditure is written off in the same period unless the Board is satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is capitalised and amortised over the period from which the Group is expected to benefit.

Amortisation is provided on all intangible assets so as to write off the cost of an asset over its estimated useful life as follows:

Development costs                   -           20-33.3% straight line

Software license

Software licenses are valued at costs less accumulated amortisation

Website and software licenses   -           33.3% straight line or over the term of the licence

2.22      Convertible loan notes, borrowings and borrowing costs

Convertible loan notes classified as financial liabilities and borrowings are recognised initially at fair value, net of transaction costs. After initial recognition, loans are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are capitalised as a prepayment for liquidity services and amortised over the period of the loan to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability or at least 12 months after the end of the reporting period.

2.23      Employee benefits

Short-term benefits

Short-term benefits, including holiday pay and other similar non-monetary benefits are recognised as an expense in the period in which the employee's entitlement to the benefit accrues.

Defined contribution pension plan

The Company operates a defined contribution plan. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate fund. Under defined contribution plans, the Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee services in the current and prior periods.

For defined contribution plans, the Company pays contributions to privately administered pension plans on a contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in the future payments is available.

2.24      Critical accounting judgements and key sources of estimation uncertainty

The preparation of these financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

Judgements and estimates are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Basis of acquisition accounting

The Group has applied the merger accounting method to account for certain business combinations within the Group. Merger accounting has been applied as the entities were commonly controlled at the point of acquisition. The assets and liabilities have been recognised at their book values. The choice of the accounting policy is a key judgement.

Establishing useful economic lives for depreciation purposes of property, plant and equipment

Long-lived assets, consisting primarily of property, plant and equipment, comprise a significant portion of the total assets. The annual depreciation charge depends primarily on the estimated useful economic lives of each type of asset and estimates of residual values. The directors regularly review these asset useful economic lives and change them as necessary to reflect current thinking on remaining lives in light of prospective economic utilisation and physical condition of the assets concerned. Changes in asset useful lives can have a significant impact on depreciation and amortisation charges for the period. Detail of the useful economic lives is included in the accounting policies.

Providing for doubtful debts

The Group makes an estimate of the recoverable value of trade and other receivables. The Group uses estimates based on historical experience in determining the level of debts, which the company believes, will not be collected. These estimates include such factors as the current credit rating of the debtor, the ageing profile of receivables and historical experience. Any significant reduction in the level of customers that default on payments or other significant improvements that resulted in a reduction in the level of bad debt provision would have a positive impact on the operating results. The level of provision required is reviewed on an ongoing basis.

Amortisation of Intangible Assets (Note 13)

The annual amortisation of intangible assets depends primarily on the estimated useful lives of assets and estimates of residual value. The directors regular review these assets useful lives and change them as necessary to reflect current thinking on remining lives in light of prospective economic utilisation. Changes in asset useful lives can have a significant impact on amortisation charges for the period. Detail of the useful life is included in the accounting policy.

Carrying Value of Intangible Assets (Note 13)

Determining whether there are indicators of impairment of the company's intangible assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset and where it is a component of a larger cash-generating unit, the viability and expected future performance of that unit. The directors are satisfied that the carrying value of the Group's intangible assets are at least equal to their recoverable amounts.

Valuation of unlisted investments (Note 15)

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. For details of the key assumptions used and the impact of changes to these assumptions, see Note 15.

Share based payments (Note 21)

The Group issues options and warrants to its employees, directors, investors and advisors.  These are valued in accordance with IFRS 2 "Share-based payments".  In calculating the related charge on issuing shares and warrants the Group will use a variety of estimates and judgements in respect of inputs used including share price volatility, risk free rate, and expected life.  Changes to these inputs may impact the related charge. In the period the Group did not perform any new valuations but released expenses to the statement of other comprehensive income from valuations in prior periods.

 

3.         SEGMENT REPORTING

The following information is given about the Group's reportable segments:

The Chief Operating Decision Maker is the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance of the Group. Management has determined the operating segment based on the reports reviewed by the Board.

The Board considers that during the years ended 31 July 2023 and 31 July 2024 the Group operated in the single business segment of managed detection and response capabilities to global organisations.

 

4.         REVENUE

		2024 €'000	2023 €'000
Ireland		5,986	5,971
Europe		335	79
Rest of the world		6,854	6,130
		13,174	12,180

The vast majority of the Group's revenue is derived from the principal activity of providing managed detection and response capabilities to global organisations, and associated services including penetration testing, governance risk and compliance and cyber consultancy. The geographical classification is based on the nationality of the entity invoiced and not on the nationality of the parent company in the group.

In 2024, the Group had two customers that represented 35% of total revenue.  In 2023, the Group had two customers that represented 37% of total revenue.

Where revenue is included as deferred income at the year end, all of this balance is expected to be received during the course of the following year.

		2024 €'000	2023 €'000
Revenue recognised at a point in time		6,162	5,720
Revenue recognised over time		7,012	6,460
		13,174	12,180

5.         COST OF SALES

		2024 €'000	2023 Restated €'000
Cost sales - purchases		5,460	5,374
Cost sales - direct costs		2,737	1,655
		8,197	7,029

 

During 2023, certain costs, principally wages and salaries, that were incurred in Poland and Romania were included under general administration expenses.  However, management have reviewed these costs and believe they should be treated as cost of sales as they relate to the costs of providing MDR services and so have been included in cost of sales in 2024.  For the two periods to be properly comparable, the prior year has therefore been restated.  This is purely a reclassification between cost of sales and administration expenses with no net change to the results of the prior period. The reclassification is believed to give a more accurate position of gross margins within the financial statements.

The impact of the reclassification adjustment to the cost of sales and administrative expenses is set out below:

 

		2023 €'000	Reclass adjustment €'000	2023 Restated €'000
Cost sales - purchases		5,374	-	5,374
Cost sales - direct costs		-	1,655	1,655
		5,374	1,655	7,029

 

Within the restated figures for 2023, cost of sales - purchases have reduced slightly and certain of the prior year's costs included in administration expenses, principally wages and salaries have been moved to cost of sales - direct costs resulting in a net increase of €1,655,000.

		2023 €'000	Reclass adjustment €'000	2023 Restated €'000
Administrative expenses		6,981	(1,655)	5,326
		6,981	(1,655)	5,326

Within the restated figures for 2023, administration costs have reduced by €1,655,000, equivalent to the movement in total cost of sales.

 

6.         ADMINISTRATIVE EXPENSES

		2024 €'000	2023 Restated €'000
Wages and salaries (including directors)		2,842	1,900
Consultancy and professional fees		513	338
Administrative expenses		779	701
Amortisation of intangible fixed assets		432	428
Depreciation of right-of-use assets		66	63
Depreciation of tangible fixed assets		70	56
IPO related costs		-	977
CLN settlement costs		-	315
Share based payments		554	554
Other expenses		(24)	(6)
		5,232	5,326

 

The restatement adjustment for 2023 as described above is principally going through wages and salaries costs but also across other categories as costs within this category have been reclassified as direct costs attributable to cost of sales. Included above within Administrative Expenses are certain one-off costs that principally relate to IPO costs, issue of share options and CLN settlement costs.

		2024 €'000	2023 €'000
IPO related costs		-	977
Share based payments		554	554
CLN settlement costs		-	315
Total one-off costs		554	1,846
Operating profit		228	303
Adjusted operating profit		782	2,149
Add back depreciation and amortisation		568	549
Adjusted EBITDA		1,350	2,698

 

 

The following auditors' fees are included in Administrative Expenses:

		2024 €'000	2023 €'000
Audit of Group and Company		70	50
For audit work in relation to subsidiary companies		25	25
For audit related services		-	33
For non-audit services		-	85
		95	193

7.         OTHER OPERATING INCOME

		2024 €'000	2023 €'000
Other		26	63
R&D grant		-	415
R&D tax credit		457	-
		483	478

During the year, the Group received:

 

(i)         Research and Development grant of €nil from Enterprise Ireland (2023: €415K).

(ii)         Research and Development tax credit of €457K (2023: €nil).

(iii)        Other includes €13K fair value gain on investments (2023: €1K) with balance of €13K from Enterprise Ireland (2023: €62K)

 

8.         EMPLOYEES

Staff costs (inclusive of director's salaries) comprise:

		2024 €'000	2023 €'000
Wages and salaries		6,923	5,099
Pension costs		55	28
Share based payments		554	554
Other costs and taxes		505	368
Total employee costs		8,037	6,048

 

Employee costs have been accounted for as follows:
Employee costs capitalised		2,573	2,277
Employee costs included in cost of sales		2,068	1,317
Employee cost include in administration expenses		2,842	1,900
Share based payments		554	554
Total		8,037	6,048

 

Staff costs include the total cost to the Group of its employees irrespective of whether the cost is included within the profit and loss account under costs of sales, administration costs or capitalised and carried as an intangible asset in the case of certain wages and salaries that relate to research and development.

 

The average monthly number of employees, including the Directors, during the year was 162 (2023: 135).

 

9.         DIRECTORS' REMUNERATION

		2024 €'000	2023 €'000
Directors' remuneration		430	313
Pension contributions		23	18
Share based payments		265	296
Other costs and taxes		-	11
		718	638

 

During the year, retirement benefits accruing to Directors of €nil (2023: €nil) in respect of defined contribution pension schemes.

The highest paid Director received remuneration of €183K (2023: €157k).

The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest paid Director amounted to €13K (2023: €14K).

 

10.        FINANCE COSTS

		2024 €'000	2023 €'000
Interest		11	71
Lease liability finance charges (Note 19)		32	29
		43	100

  

11.        TAXATION

		2024 €'000	2023 €'000
The charge for year is made up as follows:
Corporation tax
Corporation taxation on the results for the year		52	371
		52	371
Deferred tax
Deferred tax		-	-
		-	-
Taxation charge on profits on ordinary activities on profits on ordinary activities		52	371

 

The headline rate of UK corporation tax for the year ended 31 July 2023 was 25%, previously 19% for periods to 31 March 2023. Additionally, the UK's Marginal Relief rules applied from 1 April 2023. With regard to Marginal Relief, the main rate of 25% applies broadly where a company has augmented profits in excess of £250K. Between £50K to £250K, a marginal rate of relief will apply proportionately between 19% and 25%, with 19% applying to profits below £50K.

Factors affecting tax change for the year

		2024 €'000	2023 €'000
Profit on ordinary activities before tax		185	204
Tax calculated at domestic tax rates applicable to profits in respective countries.		35	37
Effects of:
Expenses not deductible for tax purposes		85	365
Group relief surrendered / (claimed)		-	(3)
Foreign tax - other		5	3
Remeasurement of deferred tax for changes in tax rate		-	(2)
Adjustments in respect of prior year		-	30
Difference in overseas tax rates		(52)	(109)
Other movements		(21)	50
Taxation charge on profits on ordinary activities		52	371

 

The weighted average applicable tax rate was 19% (2023: 18%). The increase is caused by the change in main rate of tax in the UK to 25% (2023: 19%), affecting the overall group average.

 

12.        EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is calculated by dividing the profit or loss for the year by the weighted average number of ordinary shares in issue during the year.

Basic Earnings Per Share	2024	2023
Profit / (loss) for the year from continuing operations - €	133,000	(167,000)
Weighted number of ordinary shares in issue	124,078,982	100,500,026
Basic earnings per share from continuing operations - € cents	0.107	(0.166)

 

Diluted Earnings Per Share	2024	2023
Profit/(loss) for the year from continuing operations - €	133,000	(167,000)
Weighted number of ordinary shares in issue	124,078,982	100,500,026
Weighted number of dilutive securities in issue	8,006,891	n/a
	132,085,873	n/a
Diluted earnings per share from continuing operations - € cents	0.101	n/a

 

The weighted average number of ordinary shares in issue for the prior year has been used as the total number of shares swapped for the purchase of Zefone Limited as if those shares were in issue during the prior year. Diluted earnings per share was not calculated in 2023 as it is assumed that there were no dilutive instruments given the Group incurred a loss for the period.

 

13.        INTANGIBLE ASSETS

 

Group	Website & software licenses €'000	Development costs €'000		Total         €'000
Cost
At 1 August 2022	1,227	1,533		2,760
Additions	-	2,625		2,625
At 31 July 2023	1,227	4,158		5,385
Additions	85	3,323		3,408
At 31 July 2024	1,312	7,481		8,793
Amortisation
At 31 July 2022	912	109		1,021
Charge for the year	241	189		430
At 31 July 2023	1,153	298		1,451
Charge for the year	58	374		432
At 31 July 2024	1,211	672		1,883
Net book value
31 July 2023	74	3,860		3,934
31 July 2024	101	6,809		6,910

 

The Directors have considered the carrying value of these balances in order to determine whether any impairment of the Group's intangible assets is required. This has included considering the economic viability and expected future financial performance of the products relating to these assets by modelling the expected net future cash flows expected to be generated. All development expenditure is capitalised and not recognised as an expense during the period.

A model has been prepared for the Cash Generating Unit ("CGU") in order to calculate the likely level of cash that can be generated by that CGU.  The model has been prepared on a detailed basis from the sales pipeline for the first two years and then the cashflow in year two is grown at the rate of 10% per annum for years three and four.  The resulting cash flows are then discounted back to a net present value ("NPV") using a 10% discount rate.  The NPV is then compared to the carrying value of the intangible asset for that CGU. In terms of sensitivities, the Directors have considered the impact of a reduction in revenue on the NPV calculated and are satisfied that any resulting reduction in NPV is offset by the prudent approach of not ascribing any value to the cash generated after year four. 

The Board considers the net present values calculated to be prudent, particularly as the value of cash generated in perpetuity has not been included. and is satisfied that the carrying value of the Group's intangible assets are at least equal to their recoverable amounts.
 

14.        PROPERTY, PLANT AND EQUIPMENT

 

Group	Plant & machinery  €'000	Fixtures & fittings        €'000		Total €'000
Cost
At 1 August 2022	35	194		229
Additions	20	92		112
At 31 July 2023	55	286		341
Additions	94	-		94
At 31 July 2024	149	286		435
Depreciation
At 1 August 2022	26	106		132
Charge for the year	11	45		56
At 31 July 2023	37	151		188
Charge for the year	27	43		70
At 31 July 2024	64	194		258
Net book value
At 31 July 2023	18	135		153
At 31 July 2024	85	92		177

 

 

15.        FINANCIAL FIXED ASSETS

Group		Level 3- Unlisted investments     €'000	Level 1- Listed investments       €'000		Total €'000
Investment
Cost of valuation
At 1 August 2022		1,039	122		1,161
Revaluations		-	1		1
At 31 July 2023		1,039	123		1,162
Additions		-	13		13
At 31 July 2024		1,039	136		1,175
Carrying amount
At 31 July 2023		1,039	123		1,162
At 31 July 2024		1,039	136		1,175

 

IFRS 13 valuation hierarchy:

Level 1              represents those assets, which are measured using unadjusted quoted prices for identical assets.

Level 2              applies inputs other than quoted prices that are observable for the assets either directly (as prices) or indirectly (derived from prices).

Level 3              applies inputs, which are not based on observable market data.

Unlisted investments comprise the investment in Visibility Blockchain Limited of 35,940 B Preference Shares. These shares do not give rights to receive notice of any general meeting of Visibility Blockchain Limited, or to attend thereat or vote on any resolution at a general meeting. Unlisted investments are valued using level 3 inputs under the IFRS 13 Fair Value Hierarchy. The valuation of this investment is based on using level 3 inputs identified above.  These include the value at which the most recent funding round involving third party investors took place where over €10 million in new equity was raised, management's view of the likely proceeds from the sale of this company based on indications received to date and growth in revenue. As a result of the above analysis, the revaluation during the year is €nil (2023: €nil).  

Listed investments relate to a portfolio investment comprising of various equities, bonds and alternative financial instruments.  These are valued using the share price at each reporting date, which is a level 1 input under the IFRS 13 Fair Value Hierarchy.

 

16.        INVESTMENTS

Company		2024 €000	2023 €000
Investment in Zefone Limited		1,405	1,116
		1,405	1,116

 

Company subsidiary undertakings

The Group owned interests in the following subsidiary undertakings, which are included in the consolidated financial statements:

Name	Business Activity	Country of Incorporation	Registered Address	Percentage Holding
Zefone Limited	Provision of cybersecurity products and services	Ireland	Unit 17A, Building 4700 Cork Airport Business Park, Cork	100%
Smart Systems Security Limited	Provision of cybersecurity products and services	England and Wales	85 Great Portland Street, London W1W 7LT	100%
Smartech 247 sp. z.o.o.	Provision of cybersecurity products and services	Poland	Krakovie Przy ul., Podole 60, 30-394 Krakov	100%
Smartech247 Cyber Security SRL	Provision of cybersecurity products and services	Romania	Bd Iancu de Hunedoara 54 B, Etaj 2, Bucuresti - Sectorul 1	100%

   

17.        TRADE AND OTHER RECEIVABLES

 

Group		2024 €'000	2023 €'000
Trade receivables		4,066	5,194
Accrued revenue		387	53
Other receivables		898	278
Director's current account		65	57
Prepayments		512	841
		5,928	6,423

 

Company		2024 €'000	2023 €'000
Other receivables		159	167
Prepayments		27	17
		186	184

 

Other receivables principally comprise the sales tax element of purchases made and other tax recoverable. The majority of the amounts receivable are in Euros and USD, and are current in terms of age profile with the majority of the balance having now been received post year end.

		2024 €'000	2023 €'000
Due in less than 30 days		2,779	2,103
Due between 30 and 60		832	2,333
Due between 60 and 90 days		230	341
Over 90 days		226	417
		4,066	5,194

 

		2024 €'000	2023 €'000
Currency of receivables
Euro		1,525	1,726
USD		2,424	3,340
GBP		118	128
		4,066	5,194

 

18.        CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and short-term deposits held with banks with a A-1+ rating. The carrying value of these approximates to their fair value. Cash and cash equivalents included in the cash flow statement comprise the following statement of financial position amounts.

Group		2024 €'000	2023 €'000
Cash and cash equivalents		3,344	6,062
		3,344	6,062

 

Company		2024 €'000	2023 €'000
Cash and cash equivalents		2,626	2,949
		2,626	2,949

 

The table below shows the currency profiles of cash and cash equivalents:

 

Group		2024 €'000	2023 €'000
Euro		396	289
USD		154	2,714
GBP		2,712	3,002
Polish Zloty		63	49
Romanian Leu		19	8
		3,344	6,062

 

Company		2024 €'000	2023 €'000
GBP		2,626	2,949
		2,626	2,949

 

19.        LEASES

The Group had the following lease assets and liabilities:

Group		2024 €'000	2023 €'000
Right-of-use assets
Properties		265	331
		265	331
Lease liabilities
Current		28	91
Non-current		241	260
		269	351
		2024 €'000		2023 €'000
Maturity on the lease liabilities are as follows:
Current		28		91
Due between 1-2 years		31		68
Due between 2-5 years		72		105
Due beyond 5 years		138		87
		269		351

 

Right of use assets

A reconciliation of the carrying amount of the right-of-use asset is as follows:

		2024 €'000	2023 €'000
Properties
Opening balance		331	64
Additions		-	330
Depreciation		(66)	(63)
		265	331

 

Lease liabilities

A reconciliation of the carrying amount of the lease liabilities is as follows:

		2024 €'000	2023 €'000
Opening balance		351	68
Additions		-	330
Payment made		(114)	(76)
Finance charge (Note 10)		32	29
		269	351

 

The Group leases captured under IFRS 16 relate predominantly to the office premises in both Ireland and Romania, with an office lease in Poland coming to an end in 2023, which was extended on a short-term basis and thus falling outside the scope of IFRS16 in 2024.

 

20.        SHARE CAPITAL

		Number of £0.01 shares	Share    Capital	Share premium
			€'000	€'000
One £0.01 share issued on incorporation		1	-	-
Shares issued on exchange for Zefone Limited shares 1		87,499,999	1,012	-
Shares issued on conversion of convertible loan note at £0.1732 2		13,646,441	158	2,577
Shares subscribed for by EBT 3		10,546,713	122	-
Placing shares issued at £0.2966		12,385,828	144	4,108
Share issue costs		-	-	(320)
At 31 July 2023		124,078,982	1,436	6,365
At 31 July 2024		124,078,982	1,436	6,365

 

¹ The issue of shares with a nominal value of €1,012,000 (£875,000) in exchange for the 2 £1 shares in Zefone Limited with a nominal value of £2 results on elimination of the difference in a credit to a merger reserve (within other reserves) of €1,012,000 (£875,000) in accordance with the merger accounting principles as set out in Note 2.

² The issue price for the issue of shares to convert the convertible loan notes was based on the conversion terms which specified a particular valuation at which the conversion should take place.  The liability to be settled amounted to €2,683,562 and the number of shares issued amounted to 13,646,441 which therefore gave an effective issue price of £0.1732.

³ During the prior period, the Company established a Employee Benefit Trust ("EBT") and issued 10,546,713 shares to the EBT at nominal value.  The subscription of these shares was funded through a loan provided by the Group to the EBT.

During the prior period, certain costs associated with the IPO amounting to €868K were also settled by the issue of new shares, of which €260K was included in share issue costs. There were no such costs incurred in the current period.

The number of new shares currently authorised to be issued, as approved at the Company's most recent AGM, was 31 million.

 

21.        SHARE BASED PAYMENT RESERVE

		2024 €'000	2023 €'000
Advisor warrants issued 1		107	107
Employee options issued 2, 3		1,001	447
		1,108	554

 

¹ On 30 November 2022, 863,115 warrants were issued to advisors and have been fair valued in accordance with IFRS 2 at the fair value of the services received. The warrants have an exercise price of £0.2966 and a time to expiry of 4 years from grant.

² On 30 November 2022, 4,541,290 employee options were granted under the Group's LTIP. These options have different vesting conditions based on performance milestones that can be viewed below.

³ On 28 April 2023 and 23 May 2023 2,451,728 and 177,195 employee options were granted under the Group's LTIP. These options have different vesting conditions based on performance milestones that can be viewed below.

Share based payments valuation

The following tables summarise the valuation techniques and inputs used to calculate the values of share-based payments in the period:

Warrants

On 30 November 2022, 863,115 warrants were issued to advisors and have been fair valued in accordance with IFRS 2 at the fair value of the services received. The warrants have an exercise price of £0.2966 and a time to expiry of 4 years from grant.

Grant date	Number	Share price  £	Exercise price  £	Volatility  %	RF Rate  %	Technique
30 Nov 2022	863,115	0.2966	0.2966	41.0	3.00	Black Scholes

 

The charge during the year for warrants was €nil (2023: €107K).

 

Options

On 30 June 2022, 28 April 2023 and 23 May 2023 4,541,290, 1,446,737 and 147,589 employee options were granted under the Groups LTIP respectively. The option vesting details are listed below:

Vesting Event	Trigger for Vesting	Number of options vested on date of vesting
1	-     First anniversary date of the date of Admission	50%
2	-     Second anniversary date of date of Admission; and -     The date if any on which the placing price has increased by 200%	25%
3	-     Third anniversary date of date of Admission; and -     The date if any on which the placing price has increased by 200%	25%

 

On 28 April 2023 and 23 May 2023 968,189 and 39,969 employee options were granted under the Group's LTI respectively. The option vesting details are listed below:

Vesting Event	Trigger for Vesting	Number of options vested on date of vesting
1	-     First anniversary date of the date of Admission	50%
2	-     Second anniversary date of date of Admission; and -     The date if any on which the placing price has increased by 200%	50%

 

All of the options issued subject to vesting condition 1 were valued using the Black Scholes methodology, whilst the options issued subject to vesting conditions 2 and 3 were value using the Monte Carlo technique. Additionally, a non-marketable discount rate of 7.94% has been applied across all of the employee warrants when calculating their value.

Vesting Condition 1

Grant date	Number	Share price  £	Exercise price  £	Volatility  %	RF Rate  %	Technique
30 Nov 2022	2,270,645	0.2966	0.2966	48.5	3.24	Black Scholes
28 Apr 2023	1,207,464	0.3600	0.2966	48.6	3.72	Black Scholes
23 May 2023	88,597	0.3600	0.2966	48.6	4.38	Black Scholes

 

Vesting Condition 2

Grant date	Number	Share price  £	Exercise price  £	Volatility  %	RF Rate  %	Technique
30 Nov 2022	1,135,323	0.2966	0.2966	48.5	3.24	Monte Carlo
28 Apr 2023	850,962	0.3600	0.2966	48.6	3.72	Monte Carlo
23 May 2023	51,700	0.3600	0.2966	48.6	4.38	Monte Carlo

 

Vesting Condition 3

Grant date	Number	Share price  £	Exercise price  £	Volatility  %	RF Rate  %	Technique
30 Nov 2022	1,135,323	0.2966	0.2966	48.5	3.24	Monte Carlo
28 Apr 2023	361,684	0.3600	0.2966	48.6	3.80	Monte Carlo
23 May 2023	36,897	0.3600	0.2966	48.6	4.38	Monte Carlo

The number and average exercise price of share options and warrants as follows:

	2024			2023
	Weighted average exercise price	Number of options / warrants		Weighted average exercise price	Number of options / warrants
Opening balance	£0.2966	8,006,891		-	-
Granted during the year (warrants)	-	-		£0.2966	863,115
Granted during the year (options)	-	-		£0.2966	7,143,776
Cancelled during the year (options)	£0.2966	(223,207)		-	-
Outstanding at the end of the year	£0.2966	7,783,684		£0.2966	8,006,891
Exercisable at the end of the year	£0.2966	4,211,797		£0.2966	863,115

 

Share options and warrants outstanding at 31 July 2024 had a weighted average exercise price of £0.2966 (2023: £0.2966) and a weighted average contractual life of 1.36 years (2023: 3.48 years). To date no share options and warrants have been exercised.

The charge during the year for employee options was €554K (2023: €554K), which has taken into account approximately 15% employees who left during the year. In accordance with IFRS 2 whereby a 'true up' of the impact on the share-based payment charge of €28K for these leavers relating to the prior year being captured in the current year.

There are no market based vesting conditions attaching to any of the warrants.

 

22.        OTHER RESERVES

		2024 €'000	2023 €'000
Merger reserve		(1,215)	(1,215)
		(1,215)	(1,215)

As referred to in Note 2 above, on 18 November 2022, the Company became the parent company of the Group when it issued 87,499,999 £0.01 ordinary shares in exchange for 100% of the ordinary shares in Zefone Limited. Zefone Limited has been shown as the continuing entity and its comparative financial information shown for 2022. Intercompany transactions and balances between Group companies are therefore eliminated in full. The equity presented is that of Smarttech247 Group plc with the difference on elimination of Zefone Limited's capital of €1,012,000 (£875,000) being shown as a merger reserve.

In the prior year, Zefone acquired Smart Systems Security Limited for €1,190 (£1,000) with the total identifiable net liabilities acquired being €225,000, resulting in the €226,000 being recorded to other reserve.

In 2022, Zefone acquired Smarttech247 SP. Z O.O. for €2,112 (10,000 Polish Zloty) with the total identifiable net assets acquire being €26,000, resulting in the €23,000 being recorded to other reserve.

 

23.        RESERVES

Foreign exchange reserve

Foreign exchange differences arising on translating into the reporting currency.

Share based payment reserve

Cumulative charge recognised under IFRS 2 in respect of share-based payment awards.

Retained earnings

Retained earnings represents cumulative profits and losses net of dividends and other adjustments.

 

24.        TRADE AND OTHER PAYABLES

Group		2024 €'000	2023 €'000
Trade creditors		2,477	3,183
Corporation tax		-	220
Other taxation and social security		609	753
Accruals		339	56
Deferred income		1,623	1,869
Other payables		215	150
		5,263	6,231

Of the deferred income balance at the period end, none is expected to be received beyond one year after the period end.

 

Company		2024 €'000	2023 €'000
Trade creditors		25	7
Other taxation and social security		11	5
Accruals		68	10
Intercompany payable		96	32
		200	54

 

The table below sets out the maturity profile of the financial liabilities at 31 July 2024, namely trade and other payables, corporation tax, deferred income and lease liabilities:

		2024 €'000	2023 €'000
Due in less than 30 days		2,005	2,201
Due in between 30 and 60 days		362	772
Due in more than 60 days		111	210
		2,477	3,183

 

The table below sets out the maturity profile of the deferred income balance at 31 July 2024:

		2024 €'000	2023 €'000
Due within 1 year		1,504	1,449
Due after 1 year		119	420
		1,623	1,869

 

25.        FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Capital Risk Management

The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. The overall strategy of the Company and the Group is to minimise costs and liquidity risk.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, foreign exchange reserves and retained earnings as disclosed in the Consolidated Statement of Changes of Equity.

The Group is exposed to a number of risks through its normal operations, the most significant of which are interest, credit, foreign exchange, and liquidity risks. The management of these risks is vested to the Board of Directors.

Credit Risk

Credit risk arises on financial instruments such as trade receivables, short-term bank deposits.

Policies and procedures exist to ensure that customers have an appropriate credit history. The Group's most significant clients are public or regulated industry entities which generally have high credit ratings or are of a high credit quality due to the nature of the client.

Counterparty exposure positions are monitored regularly so that credit exposures to any one counterparty are within acceptable limits.

At the balance sheet date there were no significant concentrations of credit risk.

Trade and other receivables and contract assets included in the balance sheet are stated net of expected credit loss (ECL) provisions which have been estimated on a customer-by-customer basis, based on the relationship with the customer and its historical payment profile. There are no provisions held against trade receivables at the balance sheet date.

The Group's maximum exposure to credit by class of individual financial instrument is shown in the table below:

	2024 Carrying Value	2024 Maximum Exposure	2023 Carrying Value	2023 Maximum Exposure
	€'000	€'000	€'000	€'000
Cash and cash equivalents	3,344	3,344	6,062	6,062
Trade receivables	4,066	4,066	5,194	5,194
	7,410	7,410	11,256	11,256

Currency Risk

The Group operates in a global market with income and costs possibly arising in a number of currencies and is exposed to foreign currency risk primarily in respect of entities within the Group entering into commercial transactions arising from sales or purchases in currencies other than the Companies' functional currency. Currency exposures are reviewed regularly.

The Group has a limited level of exposure to foreign exchange risk through their foreign currency denominated cash balances and a portion of the Group's costs being incurred in Euro, Polish Zloty and Romanian Leu. Accordingly, movements in the Euro exchange rate against these currencies could have a detrimental effect on the Group's results and financial condition. Such changes are not considered likely to have a material effect on the Group's financial position at 31 July 2024.

Currency risk is managed by maintaining some cash deposits in currencies other than Sterling. The table below shows the currency profiles of cash and cash equivalents:

		2024 €'000	2023 €'000
Cash and cash equivalents
Euro		396	289
USD		154	2,714
GBP		2,712	3,002
Polish Zloty		63	49
Romanian Leu		19	8
		3,344	6,062

  

Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group seeks to manage liquidity risk by regularly reviewing cash flow budgets and forecasts to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group deems there is sufficient liquidity for the foreseeable future.

The Group had cash and cash equivalents at year end as below:

		2024 €'000	2023 €'000
Cash and cash equivalents		3,344	6,062
		3,344	6,062

 

Interest Rate Risk

The Group is exposed to interest rate risk whereby the risk can be a reduction of interest received on cash surpluses held and an increase in interest on borrowings the Group may have. The maximum exposure to interest rate risk at the reporting date by class of financial asset was:

		2024 €'000	2023 €'000
Bank balances		3,344	6,062
		3,344	6,062

 

26.        FINANCIAL ASSETS AND FINANCIAL LIABILITIES

 

Group 2024			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / liabilities			€'000	€'000	€'000
Trade and other receivables 1			5,416	-	5,416
Cash and cash equivalents			3,344	-	3,344
Trade and other payables 2			-	(4,924)	(4,924)
Lease liabilities (current and non-current)			-	(269)	(269)
			8,760	(5,193)	3,567

 

¹ Trade and other receivables excludes prepayments.

² Trade and other payables excludes accruals.

 

 

Group 2023			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / liabilities			€'000	€'000	€'000
Trade and other receivables 1			5,582	-	5,582
Cash and cash equivalents			6,062	-	6,062
Trade and other payables 2			-	(6,175)	(6,175)
Lease liabilities (current and non-current)			-	(351)	(351)
			11,644	(6,526)	5,118

 

¹ Trade and other receivables excludes prepayments.

² Trade and other payables excludes accruals.

 

 

Company 2024			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / liabilities			€'000	€'000	€'000
Trade and other receivables 1			159	-	159
Cash and cash equivalents			2,626	-	2,626
Trade and other payables 2			-	(36)	(36)
			2,785	(36)	2,749

 

¹ Trade and other receivables excludes prepayments.

² Trade and other payables excludes accruals and intercompany payables.

 

  

Company 2023			Financial assets at amortised cost	Financial liabilities at amortised cost	Total
Financial assets / liabilities			€'000	€'000	€'000
Trade and other receivables 1			167	-	167
Cash and cash equivalents			2,949	-	2,949
Trade and other payables 2			-	(8)	(8)
			3,116	(8)	3,108

 

¹ Trade and other receivables excludes prepayments.

² Trade and other payables excludes accruals and intercompany payables.

 

27.        RECONCILIATION OF MOVEMENT IN NET DEBT

 

2024	At 1 August 2023	Non-cash changes	Cashflow	At 31 July 2023
	€'000	€'000	€'000	€'000
Cash at bank	6,062	(7)	(2,711)	3,344
Lease liabilities - current & non-current	(351)	(32)	114	(269)
Net Debt	5,711	(39)	(2,597)	3,075

 

2023	At 1 August 2022	Non-cash changes	Cashflow	At 31 July 2023
	€'000	€'000	€'000	€'000
Cash at bank	2,358	(4)	3,708	6,062
Borrowings - non-current	(2,342)	2,342	-	-
Lease liabilities - current & non-current	(68)	(359)	76	(351)
Net Debt	(52)	1,979	3,784	5,711

 

*Non-cash movements in cash related to the foreign exchange impact on non € denominated cash balances, whilst on the lease liabilities relates to the finance charges incurred on the lease liabilities plus additional leases executed during the year.

The non-cash movements on borrowings relate to interest accrued and reclassifications between current and non-current portions of the borrowings.

 

28.        MERGER ACQUISITIONS

Smart Systems Security Limited

On 18 November 2022, Zefone acquired Smart Systems Security Limited for €1,190 (£1,000). The initial estimate of the fair value of the assets acquired and liabilities assumed of Smarttech Systems Security Limited at the date of acquisition based upon the balance sheet at 30 November 2022 were as follows:

			€'000
Cash			1
Total consideration			1
Recognised amounts of assets and liabilities acquired:
Trade and other receivables			5
Cash			8
Trade and other liabilities			(239)
Total identifiable net assets			(226)
Net difference taken to merger reserve			(225)

 

Zefone Limited

On 18 November 2022, through the Share Exchange Agreement, Smarttech247 Group plc acquired 100% of the shares of Zefone Limited.

On 18 November 2022, the convertible loan notes described in Note 23 were novated up to Smarttech247 Group plc under the Deed of Novation, conditional on the share for share exchange noted above and admission to the AIM market.

For more detail, please refer to Note 22 and Note 2.6 for information on the presentation of the Financial Statements.

 

29.        RELATED PARTY TRANSACTIONS

The Group's investments in subsidiaries have been disclosed in Note 16 and details of directors' emoluments are set out in the Directors' Remuneration report beginning on page 21.

Ronan Murphy, who is a director of the Group, is also a director of and has a significant indirect interest in Visibility Blockchain Limited of 21.4%. Consequently, Visibility Blockchain Limited is regarded as a related party by virtue of Ronan Murphy's ability to exert significant influence over Visibility Blockchain Limited.

The following amounts are receivable at the financial year end:

		2024 €'000	2023 €'000
Visibility Blockchain Limited		70	89
		70	89

The following amounts are due to related parties:

		2024 €'000	2023 €'000
Visibility Blockchain Limited`		347	441
		347	441

Net balance with related parties:

		2024 €'000	2023 €'000
Visibility Blockchain Limited		(277)	(352)
		(277)	(352)

  

Certain revenue is recognised between Zefone Limited and Visibility Blockchain Limited under a reseller agreement. During the year the total amount of services charged under a reseller agreement by Visibility Blockchain Limited to Zefone Limited amounted to €307K (2023: €447K).

Certain operating expenses are incurred by the Group and then recharged to Visibility Blockchain Limited. During the year the total amount of expenses allocated to Visibility Blockchain Limited by Zefone Limited amounted to €206K (2023: €365K). In the opinion of the directors these amounts arise in the ordinary course of business and the terms of the amounts due are in accordance with the terms ordinarily offered by the Group.

On 18 November 2022, Amplified Technologies Limited ("Amplified"), which is 100% owned by Ronan Murphy, a director of the Company, sold its 100% shareholding in Zefone Limited to the Company in return for new shares in the Company, effectively exchanging 100% ownership of Zefone Limited for 100% ownership of the Company as a precursor to the IPO of the Company. As at the period end, Amplified owed €18K to the Group in connection with a liability settle by the Group on behalf of Amplified (2023: €0K).

Ronan Murphy has a loan outstanding with the Group amounting to €65K (2023: €57K). This loan is unsecured, interest free and is repayable on demand.

 

30.        PENSION COMMITMENTS

The Group operates a defined contribution scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to €134K (2022: €75K). €25K (2022: €10K) was payable to the fund at the statement of financial position date and is included with creditors.

 

31.        CAPITAL COMMITMENTS

There were no capital commitments as at 31 July 2024 or 31 July 2023.

 

32.        CONTINGENT LIABILITIES

There were no contingent liabilities at 31 July 2024 or 31 July 2023.

 

33.        EVENTS SUBSEQUENT TO PERIOD END

There have been no further events subsequent to period end.

 

34.        CONTROL

In the opinion of the Directors as at the year end and the date of the financial statements, Ronan Murphy is the ultimate controlling party.