TIDMSYS1
RNS Number : 5676S
System1 Group PLC
07 November 2019
Press Release 7 November 2019
System1 Group PLC (AIM: SYS1)
("System1" or "the Group" or "the Company")
Unaudited interim results for the six months ended 30 September
2019
System1, the marketing services group, today announces its
results for the six-month period ended 30 September 2019
("H1").
6 months ended 30 September
Unaudited
2019 2018
------- ---------------------------------------------
GBPm Restated for IFRS 16* Previously reported*
------------------------------ ------- ---------------------- ---------------------
Revenue 13.73 13.18 13.18
------- ---------------------- ---------------------
Gross Profit 11.59 10.80 10.80
------- ---------------------- ---------------------
Underlying Overheads (9.19) (8.90) (8.88)
------------------------------ ------- ---------------------- ---------------------
Normalised Profit Before Tax 2.40 1.90 1.92
------- ---------------------- ---------------------
Ad Ratings operating costs (1.10) (1.09) (1.09)
------- ---------------------- ---------------------
Share Based Payments 0.10 - -
------- ---------------------- ---------------------
Exceptional Credit - 0.25 0.25
------------------------------ ------- ---------------------- ---------------------
Profit Before Tax 1.40 1.06 1.08
------------------------------ ------- ---------------------- ---------------------
Highlights
o 4% growth in Revenue to GBP13.73m (2018/19: GBP13.18m),
2% in constant currency
o 7% growth in Gross Profit to GBP11.59m (2018/19: GBP10.80m),
4% in constant currency
o 26% growth in Normalised Profit Before Tax (excluding Ad
Ratings costs) to GBP2.40m (2018/19: GBP1.90m*)
o 33% growth in Profit Before Tax (including Ad Ratings costs)
to GBP1.40m (2018/19: GBP1.06m*)
o 34% growth in Profit After Tax (including Ad Ratings costs)
to GBP0.89m (2018/19: GBP0.67m*)
o 33% growth in diluted Earnings Per Share to 6.9p (2018/19:
5.2p*)
o GBP1.17m investment in Ad Ratings, of which GBP0.23m has
been capitalised and GBP0.94m expensed (the GBP1.10m of
Operating Expenditure in the table above includes GBP0.16m
of amortisation)
o GBP4.10m Cash at 30 September 2019 and no debt (31 March
2019: GBP4.32m and no debt)
o Maintaining interim dividend at 1.1 pence (2018/19: 1.1
pence)
* The Company has implemented IFRS 16 (leases) and as a result
restated its prior year results.
Commenting on the Company's results, John Kearon, CEO of
System1, said:
"We continue to build out our new world class Agency by
leveraging our unique, Advertising Effectiveness IP, data and
services. At a time of much change sales, profits and industry
profile are growing steadily."
The Company can be found at www.system1group.com.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
For further information, please contact:
System1 Group PLC +44 20 7043 1000
John Kearon, Chief Executive
Officer
James Geddes, Chief Financial
Officer
investorrelations@system1group.com
Canaccord Genuity Limited +44 20 7523 8000
Simon Bridges/Andrew Potts
INTERIM STATEMENT
Introduction
Gross Profit, our main top-line measure, grew by 7% in H1 (4% in
constant currency) to GBP11.59m, building on the 4% growth in H2 of
last year. Operating profit margins have also increased. Normalised
Profit Before Tax (excluding AdRatings and Share Based Payments)
has grown by 26% and Profit Before Tax (after AdRatings and Share
Based Payments) by 34%. Note that the Company has implemented IFRS
16 and as a result, restated its results for the comparative period
(six months ended 30 September 2019), but the impact on the P&L
is small. The Company's balance sheet is strong, with cash at
half-year end of GBP4.10m and no indebtedness (other than office
leases).
Importantly for future growth, the Company has continued to
invest significant amounts in its AdRatings database and services,
in its IT infrastructure, and in senior management talent.
Longer Term Context
We operate in most of the world's largest market research
geographies and have very large global multinationals as clients.
Our market share in those sectors of the market in which the
Company competes is small, and we have only a small percentage of
the spend of our large, global clients. We therefore have a large
untapped addressable market.
The Company is acknowledged as being among the intellectual
leaders in our field: measuring the commercial quality of
advertising through our market research techniques. Our mission, as
'THE Effectiveness Agency' is to empower marketeers to create world
class advertising and prove its value to their business. Our goal
is to turn System1's intellectual leadership into commercial
leadership, and create a much larger business.
We have spent the last 12-18 months building the world's most
predictive advertising effectiveness database of short and
long-term profitability (AdRatings), substantially upgrading our IT
infrastructure and digitising our products as a foundation to
better scaling the business. We have also strengthened the
management team's ability to deliver and run a significantly larger
business. The Company has made progress in H1.
We have continued to develop AdRatings, which provides ratings
of the creative quality, together with the media spend, of all TV
adverts in the UK and the US since 2017, in the main industries in
which our clients operate. We have four interconnected goals, and
taking each in turn:
1. Build the World's largest, and most predictive and validated
database of short and long-term advertising effectiveness and use
our data to prove the multiplier effect of creativity on business's
investment in advertising. We have further enlarged the number of
adverts in the database and it now contains the ratings of 42,646
adverts, and is increasing every day as new adverts are aired.
There are other sources of advert ratings available, but none to
our knowledge where the ratings correlate with long-term
profitability, in the way ours does. From analyses within our
AdRatings database, Orlando Wood, our Chief Innovation Officer,
wrote a book - "Lemon" - which was recently published by the IPA
(viewed by many as the world's foremost independent authority on
advertising effectiveness).
Lemon is the IPA's centrepiece at its 2019 UK Ad Effectiveness
week. We are unaware of any other competing Agency who has such
high profile thought leadership in our field of Advertising and
Brand effectiveness. Lemon sets out why advertising effectiveness
has been in decline over the last few decades and what it will take
to reverse the decline at a profound level - and it has received
wide industry endorsement. For example, Rory Sutherland, Vice
Chairman of Ogilvy said of it: "Any book which finds evidence
everywhere from Hans Holbein to the Honey Monster is good by me.
But this is an extraordinary and wonderful book, with implications
that go far beyond advertising and research".
2. Brand the database and publish our next-day data on any UK or
US advert being discussed in the industry press, to drive System1's
'Fame', together with positive feelings towards us, and associate
the Company with advertising effectiveness. We believe that this
brand-building work derived from our database sets us apart from
our competitors. We are increasing the functionality of AdRatings
continuously, and currently developing a free mobile App (Hi-5) to
make our Creative ratings more widely accessible.
3. Win new clients in our core business. AdRatings has already
been a factor in our 18% H1 Comms growth, as well as in our gaining
much greater access to marketing leaders in large multinationals,
some of whom are exploring the potential benefits to their business
of the AdRatings service together with related System1 AdTesting
products.
4. Sell subscription revenue. We have a small number of
subscribers to date. We have been focussed primarily on building
the asset and its branding value and believe that subscriptions
will follow.
Across the business as a whole, we are investing ever more in
Talent. During H1 we recruited 2 new members to our management
team: Karen Wolfe (formerly Vice President Customer Success at
Nielsen), as Chief Commercial Officer, and Jon Evans, (formerly UK
Marketing Director at Lucozade Ribena Suntory) as Chief Marketing
Officer. They follow Stefan Barden (Board Adviser - previously CEO
of Wiggle) and Mark Beard (Chief Information Officer - formerly
Group Head of IT at Wiggle) who joined during the course of last
year.
Over H1 we have continued to build our IT capability and now
have a highly skilled IT team of 14, significantly larger and more
experienced than was the case 2 years ago. More generally, we have
taken early steps to establish a Data and Data Science capability
more widely within the business.
Financial Performance
H1 sales growth is not yet on the trajectory we are aspiring to,
but we believe we are on the right path. Importantly, Gross Profit
from Communications, our core product area, grew 18%.
Gross Profit 2018/19 2019/20
GBPm Q1 Q2 H1 Q1 Q2 H1 Growth
-------------- ----- ----- ------ ----- ----- ------ -------
Comms 1.55 1.51 3.06 1.56 2.05 3.61 18%
----- ----- ------ ----- ----- ------ -------
Brand 0.81 0.92 1.73 0.74 0.89 1.63 -6%
----- ----- ------ ----- ----- ------ -------
Innovation 2.53 2.78 5.31 2.84 2.29 5.13 -3%
----- ----- ------ ----- ----- ------ -------
Other 0.25 0.34 0.59 0.57 0.50 1.07 81%
----- ----- ------ ----- ----- ------ -------
Agency 0.08 0.03 0.11 0.01 0.12 0.13 18%
----- ----- ------ ----- ----- ------ -------
AdRatings - - - 0.01 0.01 0.02 NM
----- ----- ------ ----- ----- ------ -------
5.22 5.58 10.80 5.73 5.86 11.59 7%
----- ----- ------ ----- ----- ------ -------
The Company has reclassified certain product offerings from
'Other' to 'Innovation' in the current period. The comparative
figures have been restated accordingly.
Underlying Overhead Costs (excluding AdRatings) were up 3%. Of
that we have invested approximately GBP0.29m in the upgrading of
our IT infrastructure, digitisation of our products and
strengthening of the management team. Notwithstanding this
investment, productivity improvements have enabled increased profit
margins: Normalised Profit Before Tax as a percentage of Revenue
was 17% in H1 (up from 14% in H1 of the prior year).
GBPm Growth
------------------------------- ------- -------
Gross Profit 11.59 7%
------- -------
Overhead Costs (9.19) 3%
------- -------
Normalised Profit Before Tax* 2.40 26%
------- -------
AdRatings Operating Costs (1.10)
------- -------
Share Based Payments 0.10
------- -------
Profit Before Tax 1.40 32%
------- -------
* Normalised Profit Before Tax represents Profit Before Tax
prior to AdRatings expenditure and share based payments.
We invested a total of GBP1.17m in AdRatings in H1, of which
GBP0.94m is classified as Operating Cost and GBP0.23m Capex (the
GBP1.08m of Operating Expenditure in the table above includes
GBP0.16m of depreciation). We anticipate investing a similar amount
in H2. We plan to continue to manage discretionary spend
dynamically - be it Capex or Opex, and whether in AdRatings or in
other areas of the business - mindful of our high-growth objective
and our cash resources. The business can accommodate around
GBP2.0-2.5m of growth investment (including investment in
AdRatings) from its operating cash flows at the current run-rate,
and we view this as a guide to the cash resources at our disposal
for discretionary spend.
Dividends
In line with our dividend policy we are maintaining the interim
dividend at the same 1.1 pence per share we paid last year, which
in aggregate amounts to GBP0.14m. We are keeping this policy under
review.
Tax
The Company's effective tax rate is 37% of Profit Before Tax -
similar to the prior year. This is high in the context of the
corporation tax rate of 19% in the UK and the Federal corporation
tax rate of 21% in the US (the Company's two largest markets). It
is due to the high levels of AdRatings cost incurred in the UK
(where tax rates are low) without, as yet, associated UK
revenue.
Earnings per Share
The Company's share base has not changed over the period, so
earnings per share has grown in line with Profit After Tax. Fully
diluted earnings per share has grown 33% and basic earnings per
share 34%.
The Company has significant stock options which could dilute
basic earnings per share in the future. However vested options
represent a relatively modest 3% of the Company's voting shares.
Unvested options (and conditional share awards) are more
significant at 12%. These have been awarded under the Company's
long-term incentive plan for its senior team, and only vest in the
event of significant growth over the next five years. Minimum
vesting (one third of the options) vest when Gross Profit exceeds
GBP39.5m and maximum vesting when Gross Profit exceeds GBP77.1m.
There is no vesting at Gross Profit levels below GBP39.5m (full
details are set out in the Company's 2018/19 Annual Report). Given
these performance targets, the dilution suffered by shareholders on
vesting will be offset many times over by the value created.
The performance targets are also illustrative of the ambitions
of the management team and the growth strategy being pursued.
Cash
We generated Operating Cash Flow pre-financing (and pre
AdRatings) of GBP1.67m. This represents 99% of Normalised Profit
After Tax (pre-AdRatings and Share Based Payments), which is in
line with our normal high cash conversion percentage. After the
investment of GBP1.17m in AdRatings, and payment of GBP0.8m in
dividends, our cash balance reduced from GBP4.32m on 31 March 2019
to GBP4.10m on 30 September 2019. A summary of our cash flow is
below:
GBPm
------------------------------------------------------------------ -------
Profit Before Tax (before AdRatings) 2.49
-------
Tax paid (0.17)
-------
Movement in payables (0.98)
-------
Movement in receivables 0.37
-------
Other working capital movements, Capex, and non-cash adjustments (0.04)
-------
Operating Cash Flow pre-financing (pre AdRatings) * 1.67
-------
AdRatings (1.17)
-------
Operating Cash Flow pre-financing (post AdRatings) * 0.50
-------
Dividends (0.80)
-------
Cash flow (0.30)
-------
* Operating Cash Flow pre-financing is our key cash flow
performance indicator, and we include office lease costs in
calculating this. However, under IFRS 16, office lease costs are
treated as a financing activity, and therefore shown as such in our
Consolidated Cash Flow Statement.
Balance Sheet
We do not usually have much movement on our balance sheet, with
no borrowings, relatively small amounts of fixed assets, no
goodwill and stable working capital. However, implementation of the
new accounting standard, IFRS 16, means that Property, Plant and
Equipment and Non-Current Liabilities have increased significantly
to reflect the new accounting treatment for office leases.
Nonetheless, it makes little difference to the Income Statement,
and there is no economic impact.
Outlook
We continue to have limited short-term revenue visibility, so,
as always, it is difficult to predict how the year will unfold.
Nevertheless, we continue to believe that the business is making
progress and in the longer term has high upside potential driven by
its AdRatings asset and the more general digitisation of the
business.
John Kearon James Geddes
Chief Executive Officer Chief Financial Officer
5 YEAR SUMMARY - HALF YEAR
(GBP000s unless specified otherwise)
Unaudited 6 months to 30 Sep 6 months to 30 Jun
---------------------------------------------- -------------------------
2019/20 2018/19 2017/18 2016 2015 2014
----------------- ----------------- -------- ------- ------- -------
Ex AR* Inc AR* Ex AR* Inc AR*
------- -------- ------- -------- -------- ------- ------- -------
Financial KPIs
------- -------- ------- -------- -------- ------- ------- -------
Revenue 13,704 13,725 13,182 13,182 13,822 13,043 11,610 11,197
------- -------- ------- -------- -------- ------- ------- -------
growth 4% 4% -5% -5% -10% 12% 4% 4%
------- -------- ------- -------- -------- ------- ------- -------
Gross Profit 11,568 11,589 10,802 10,802 11,394 10,685 9,254 8,719
------- -------- ------- -------- -------- ------- ------- -------
growth 7% 7% -5% -5% -9% 15% 6% 3%
------- -------- ------- -------- -------- ------- ------- -------
Administrative Costs 9,023 10,125 8,584 9,674 10,554 9,018 8,080 7,183
------- -------- ------- -------- -------- ------- ------- -------
growth 5% 5% -19% -8% 8% 12% 12% -%
------- -------- ------- -------- -------- ------- ------- -------
Profit Before Tax 2,485 1,404 2,147 1,057 846 1,650 1,139 1,520
------- -------- ------- -------- -------- ------- ------- -------
growth 16% 33% 154% 25% -70% 45% -25% 17%
------- -------- ------- -------- -------- ------- ------- -------
Profit After Tax 890 666 542 1,054 763 1,018
------- -------- ------- -------- -------- ------- ------- -------
growth 34% 23% -70% 38% -25% 17%
------- -------- ------- -------- -------- ------- ------- -------
EPS - diluted 6.9p 5.2p 4.2p 7.9p 5.6p 7.5p
------- -------- ------- -------- -------- ------- ------- -------
growth 33% 24% -69% 41% -25% 12%
------- -------- ------- -------- -------- ------- ------- -------
Operating Cash Flow ** 498 (1,378) (604) 810 565 (147)
------- -------- ------- -------- -------- ------- ------- -------
Cash balance 4,104 3,552 3,495 5,183 5,286 2,528
------- -------- ------- -------- -------- ------- ------- -------
Dividend (interim) 1.1p 1.1p 1.1p 1.1p 1.0p 1.0p
------- -------- ------- -------- -------- ------- ------- -------
growth - - - 10% - 11%
------- -------- ------- -------- -------- ------- ------- -------
Special dividend - - 26.1p - - 12.0p
------- -------- ------- -------- -------- ------- ------- -------
Share buy-backs - - - 1,768 - 1,531
------- -------- ------- -------- -------- ------- ------- -------
Non-financial KPIs
------- -------- ------- -------- -------- ------- ------- -------
Number of clients 246 230 229 232 244 225
------- -------- ------- -------- -------- ------- ------- -------
growth 7% - -1% -5% 8% 6%
------- -------- ------- -------- -------- ------- ------- -------
Gross profit per project 16.6 17.1 18.2 18.3 20.7 18.3
------- -------- ------- -------- -------- ------- ------- -------
growth -3% -6% -15% -12% 13% -12%
------- -------- ------- -------- -------- ------- ------- -------
Average headcount 145 140 172 155 160 145
------- -------- ------- -------- -------- ------- ------- -------
growth 4% -19% 12% -3% 10% 6%
------- -------- ------- -------- -------- ------- ------- -------
Gross profit per head 80 77 66 69 58 60
------- -------- ------- -------- -------- ------- ------- -------
growth 4% 17% -1% 19% -3% -3%
-------------------------- ------- -------- ------- -------- -------- ------- ------- -------
* Ex AR means: excluding AdRatings. Inc AR means: including
AdRatings.
** Operating Cash Flow means: before dividends and share
buy-backs but inclusive of property lease payments
5 YEAR SUMMARY - ANNUAL
GBP000s unless specified otherwise
12 months to 31 Mar 12 months to 31 Dec
-------------------------------------------- ------------------------------
2018/19 2017/18 2016/17 2016 2015 2014
---------------------- -------- ---------- ---------- -------- --------
Ex AR* Inc AR*
------------------- ---------- ---------- -------- ---------- ---------- -------- --------
Unaudited Unaudited Audited Unaudited Unaudited Audited Audited
------------------- ---------- ---------- -------- ---------- ---------- -------- --------
Financial KPIs
---------- ---------- -------- ---------- ---------- -------- --------
Revenue 26,896 26,899 26,939 32,801 31,236 25,184 24,645
---------- ---------- -------- ---------- ---------- -------- --------
growth -% -% -18% 27% 24% 2% 1%
---------- ---------- -------- ---------- ---------- -------- --------
Gross profit 22,047 22,050 22,231 26,984 25,643 20,250 19,410
---------- ---------- -------- ---------- ---------- -------- --------
growth -1% -1% -18% 29% 27% 4% 2%
---------- ---------- -------- ---------- ---------- -------- --------
Administrative
costs 17,833 20,050 20,246 20,676 19,414 15,704 15,109
---------- ---------- -------- ---------- ---------- -------- --------
growth -11% 1% -2% 30% 24% 4% -3%
---------- ---------- -------- ---------- ---------- -------- --------
Profit Before
Tax 4,079 1,865 1,992 6,279 6,200 4,501 4,286
---------- ---------- -------- ---------- ---------- -------- --------
growth 105% -6% -68% 25% 38% 5% 21%
---------- ---------- -------- ---------- ---------- -------- --------
Profit After
Tax 1,212 1,213 4,029 3,968 3,032 2,897
---------- ---------- -------- ---------- ---------- -------- --------
growth -% -70% 19% 31% 5% 19%
---------- ---------- -------- ---------- ---------- -------- --------
EPS - diluted 9.4p 9.5p 31.1p 30.3p 22.7p 21.3p
---------- ---------- -------- ---------- ---------- -------- --------
growth -1% -69% 22% 33% 7% 14%
---------- ---------- -------- ---------- ---------- -------- --------
Operating Cash
Flow** (421) 1,838 6,603 6,337 2,696 3,157
---------- ---------- -------- ---------- ---------- -------- --------
Cash balance 4,315 5,784 8,266 7,754 6,365 5,347
---------- ---------- -------- ---------- ---------- -------- --------
Dividend (interim
& final) 7.5p 7.5p 7.5p 7.5p 4.5p 4.3p
---------- ---------- -------- ---------- ---------- -------- --------
growth -% -% 67% 67% 5% 10%
---------- ---------- -------- ---------- ---------- -------- --------
Special dividend - 26.1p 12.0p 12.0p - 12.0p
---------- ---------- -------- ---------- ---------- -------- --------
Share buy-backs (3) 1 3,141 3,195 948 1,938
---------- ---------- -------- ---------- ---------- -------- --------
Non-financial
KPIs
---------- ---------- -------- ---------- ---------- -------- --------
Number of clients 251 204 224 223 243 235
---------- ---------- -------- ---------- ---------- -------- --------
growth 23% -9% -4% -8% 3% 5%
---------- ---------- -------- ---------- ---------- -------- --------
Gross profit
per project 16.5 20.0 23.0 22.6 19.6 20.0
---------- ---------- -------- ---------- ---------- -------- --------
growth -18% -13% 19% 15% -2% -%
---------- ---------- -------- ---------- ---------- -------- --------
Average headcount 145 165 161 157 158 152
---------- ---------- -------- ---------- ---------- -------- --------
growth -12% 2% 3% -1% 4% 10%
---------- ---------- -------- ---------- ---------- -------- --------
Gross profit
per head 152 135 168 163 128 128
---------- ---------- -------- ---------- ---------- -------- --------
growth 13% -20% 25% 27% -% -7%
------------------- ---------- ---------- -------- ---------- ---------- -------- --------
* Ex AR means: excluding AdRatings. Inc AR means: including
AdRatings.
** Operating Cash Flow means: before dividends and share
buy-backs but inclusive of property lease payments
CONDENSED CONSOLIDATED INCOME STATEMENT
for the 6 months ended 30 September 2019
Note 6 months to
---------------------------------------------------------------
30 Sep 30 Sep
2019 2018
*Restated for IFRS16
Unaudited Unaudited
------------------------------- ------------------------------
Consultancy Ad Consultancy Ad Total
Ratings Total Ratings
----------- -------- -------- ----------- -------- -------
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- -------- -------- ----------- -------- -------
Revenue 4 13,704 21 13,725 13,182 - 13,182
----------- -------- -------- ----------- -------- -------
Cost of sales (2,136) - (2,136) (2,380) - (2,380)
----------- -------- -------- ----------- -------- -------
Gross profit 4 11,568 21 11,589 10,802 - 10,802
----------- -------- -------- ----------- -------- -------
Administrative
expenses (9,023) (1,102) (10,125) (8,584) (1,090) (9,674)
----------- -------- -------- ----------- -------- -------
Operating profit/(loss) 2,545 (1,081) 1,464 2,218 (1,090) 1,128
----------- -------- -------- ----------- -------- -------
Finance expense (60) - (60) (71) - (71)
----------- -------- -------- ----------- -------- -------
Profit/(loss)
before taxation 4 2,485 (1,081) 1,404 2,147 (1,090) 1,057
----------- -------- -------- ----------- -------- -------
Income tax (expense)/credit (719) 205 (514) (598) 207 (391)
----------- -------- -------- ----------- -------- -------
Profit/(loss)
for the financial
period 1,766 (876) 890 1,549 (883) 666
----------- -------- -------- ----------- -------- -------
Attributable to
equity holders
of the Company 1,766 (876) 890 1,549 (883) 666
----------- -------- -------- ----------- -------- -------
*Prior period comparatives have been restated for the transition
to IFRS 16
Earnings per share attributable to equity
holders of the Company
Basic earnings
per share 57.1p 5.3p
---- ----
Diluted earnings
per share 56.9p 5.2p
---- ----
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 6 months ended 30 September 2019
6 months to 6 months to
30 Sep 2019 30 Sep 2018
*Restated for IFRS 16
Unaudited Unaudited
------------ ----------------------
GBP000 GBP000
------------ ----------------------
Profit for the financial period 890 666
------------ ----------------------
Other comprehensive income:
------------ ----------------------
Items that may be subsequently reclassified to profit or loss
------------ ----------------------
Exchange differences on translating foreign operations 171 63
------------ ----------------------
Other comprehensive income for the period, net of tax 171 63
------------ ----------------------
Total comprehensive income attributable to equity holders 1,061 729
------------ ----------------------
*Prior period comparatives have been restated for the transition
to IFRS 16
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 September 2019
Note 30 Sep 2019 31 Mar 2019
*Restated for
Unaudited IFRS 16
Unaudited
------------------------------------- ---- ----------- --------------
GBP000 GBP000
---- ----------- --------------
ASSETS
---- ----------- --------------
Non-current assets
---- ----------- --------------
Property, plant and equipment 8 2,630 2,847
---- ----------- --------------
Intangible assets 9 916 814
---- ----------- --------------
Deferred tax asset 277 299
---- ----------- --------------
3,823 3,960
---- ----------- --------------
Current assets
---- ----------- --------------
Contract costs 180 208
---- ----------- --------------
Trade and other receivables 6,539 6,907
---- ----------- --------------
Income tax recoverable 90 431
---- ----------- --------------
Cash and cash equivalents 4,104 4,315
---- ----------- --------------
10,913 11,861
---- ----------- --------------
Total assets 14,736 15,821
---- ----------- --------------
EQUITY
---- ----------- --------------
Capital and reserves attributable to
equity holders of the Company
---- ----------- --------------
Share capital 10 132 132
---- ----------- --------------
Share premium account 1,601 1,601
---- ----------- --------------
Merger reserve 477 477
---- ----------- --------------
Foreign currency translation reserve 405 234
---- ----------- --------------
Retained earnings 4,554 4,580
---- ----------- --------------
Total equity 7,169 7,024
---- ----------- --------------
LIABILITIES
---- ----------- --------------
Non-current liabilities
---- ----------- --------------
Provisions 600 610
---- ----------- --------------
Finance lease payable 1,851 2,412
---- ----------- --------------
2,451 3,022
---- ----------- --------------
Current liabilities
---- ----------- --------------
Provisions 314 225
---- ----------- --------------
Finance lease payable 846 510
---- ----------- --------------
Trade and other payables 3,504 4,506
---- ----------- --------------
Contract liabilities 452 534
---- ----------- --------------
5,116 5,775
---- ----------- --------------
Total liabilities 7,567 8,797
---- ----------- --------------
Total equity and liabilities 14,736 15,821
---- ----------- --------------
*Prior period comparatives have been restated for the transition
to IFRS 16
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2019
Note 6 months to 6 months to
30 Sep 2019 30 Sep 2018
*Restated for IFRS 16
Unaudited Unaudited
---- ------------ ----------------------
GBP000 GBP000
---- ------------ ----------------------
Net cash generated from / (used by) operations 7 1,550 (244)
---- ------------ ----------------------
Tax paid (171) (304)
---- ------------ ----------------------
Net cash generated from / (used by) operating activities 1,379 (548)
---- ------------ ----------------------
Cash flows from investing activities
---- ------------ ----------------------
Purchase of property, plant and equipment (36) (22)
---- ------------ ----------------------
Purchase of intangible assets (263) (246)
---- ------------ ----------------------
Net cash used by investing activities (299) (268)
---- ------------ ----------------------
Net cash flow before financing activities * 1,080 (816)
---- ------------ ----------------------
Cash flows from financing activities
---- ------------ ----------------------
Interest received - 1
---- ------------ ----------------------
Finance lease payments (23) (23)
---- ------------ ----------------------
Inception of new property leases 229 202
---- ------------ ----------------------
Interest paid on office leases (60) (72)
---- ------------ ----------------------
Property lease payments * (728) (670)
---- ------------ ----------------------
Dividends (804) (802)
---- ------------ ----------------------
Net cash used by financing activities (1,386) (1,364)
---- ------------ ----------------------
Net decrease in cash and cash equivalents (306) (2,180)
---- ------------ ----------------------
Cash and cash equivalents at beginning of period 4,315 5,784
---- ------------ ----------------------
Exchange losses on cash and cash equivalents 95 (52)
---- ------------ ----------------------
Cash and cash equivalents at end of period 4,104 3,552
---- ------------ ----------------------
* Prior period comparatives have been restated for the
transition to IFRS 16. Under IFRS 16 office lease costs are now
treated as a "financing activity" (rather than as an operating
activity, as was the case previously). Office lease costs are
therefore not now included within "Net cash flow before financing
activities" (the Company's key cash flow performance indicator).
"Net cash flow before financing activities", adjusted for office
leases, known by the Company as "Operating Cash Flow" is shown
below:
6 months to 6 months to
30 Sep 2019 30 Sep 2018
Unaudited Unaudited
------------ ------------
GBP000 GBP000
------------ ------------
Net cash flow before financing activities 1,080 (815)
------------ ------------
Net cash outflow for property and finance leases (582) (563)
------------ ------------
Operating Cash Flow 498 (1,378)
------------ ------------
A summary of cash flow before financing activities, separating
out AdRatings is presented below.
6 months to 6 months to
30 Sep 2019 30 Sep 2018
Unaudited Unaudited
------------ ------------
GBP000 GBP000
------------ ------------
Net cash generated from operating activities 2,321 543
------------ ------------
Net cash used by investing activities (67) (22)
------------ ------------
Net cash flow before financing activities (before AdRatings) 2,254 521
------------ ------------
Net cash outflow for property and finance leases (582) (563)
------------ ------------
Operating Cash Flow (before AdRatings) 1,672 (42)
------------ ------------
Net cash flow used by AdRatings (1,174) (1,336)
------------ ------------
Operating Cash Flow (after AdRatings) 498 (1,378)
------------ ------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 30 September 2019
Share Share premium account Merger Foreign currency Retained earnings Total
capital reserve translation reserve
-------- --------------------- -------- -------------------- ----------------- -------
Unaudited and restated GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
for IFRS 16
-------- --------------------- -------- -------------------- ----------------- -------
At 1 April 2019 132 1,601 477 234 4,580 7,024
----------------------- -------- --------------------- -------- -------------------- ----------------- -------
Profit for the
financial period - - - - 890 890
----------------------- -------- --------------------- -------- -------------------- ----------------- -------
Other comprehensive
income:
---------------------- -------- --------------------- -------- -------------------- ----------------- -------
- currency translation
differences - - - 171 - 171
----------------------- -------- --------------------- -------- -------------------- ----------------- -------
Total comprehensive
income - - - 171 890 1,061
----------------------- -------- --------------------- -------- -------------------- ----------------- -------
Transactions with
owners:
---------------------- -------- --------------------- -------- -------------------- ----------------- -------
Employee share options
scheme:
---------------------- -------- --------------------- -------- -------------------- ----------------- -------
- value of employee
services - - - - (86) (86)
----------------------- -------- --------------------- -------- -------------------- ----------------- -------
- deferred tax debited
to equity - - - - (25) (25)
----------------------- -------- --------------------- -------- -------------------- ----------------- -------
Dividends paid to
owners - - - - (805) (805)
----------------------- -------- --------------------- -------- -------------------- ----------------- -------
- - - - (916) (916)
---------------------- -------- --------------------- -------- -------------------- ----------------- -------
At 30 September 2019 132 1,601 477 405 4,554 7,169
-------- --------------------- -------- -------------------- ----------------- -------
6 months ended 30 September 2018
At 1 April 2018 132 1,601 477 221 4,578 7,009
---- ------ --- --- ----- -----
Transition to IFRS 16 - - - - (96) (96)
---- ------ --- --- ----- -----
At 1 April 2018 132 1,601 477 221 4,482 6,913
---- ------ --- --- ----- -----
Profit for the financial period - - - - 666 666
---- ------ --- --- ----- -----
Other comprehensive income:
---- ------ --- --- ----- -----
- currency translation differences - - - 63 - 63
---- ------ --- --- ----- -----
Total comprehensive income - - - 63 666 729
---- ------ --- --- ----- -----
Transactions with owners:
---- ------ --- --- ----- -----
Employee share options scheme:
---- ------ --- --- ----- -----
- value of employee services - - - - 41 41
---- ------ --- --- ----- -----
- current tax credited to equity - - - - 18 18
---- ------ --- --- ----- -----
- deferred tax debited to equity - - - - (100) (100)
---- ------ --- --- ----- -----
Dividends paid to owners - - - - (802) (802)
---- ------ --- --- ----- -----
- - - - (843) (843)
---- ------ --- --- ----- -----
At 30 September 2018 132 1,601 477 284 4,305 6,799
---- ------ --- --- ----- -----
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the 6 months ended 30 September 2019
1. General information
System1 Group PLC ("the Company") is United Kingdom resident,
and its subsidiaries (together "the Group") provide marketing and
market research consultancy services. The Company's shares are
listed on the Alternative Investment Market of the London Stock
Exchange ("AIM"). The address of the Company's registered office is
Russell Square House, 10-12 Russell Square, London WC1B 5EH.
The Board of Directors approved this condensed consolidated
interim financial information for issue on 7 November 2019.
The financial information set out in this interim report does
not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006 and is unaudited. The Group's latest statutory
financial statements were for the 12-month period ended 31 March
2019 and these have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and
did not contain any statement under Section 498 of the Companies
Act 2006.
2. Basis of preparation
This condensed consolidated interim financial information has
been prepared in accordance with IAS 34, 'Interim financial
reporting' as adopted by the European Union and on the going
concern basis. This financial information should be read in
conjunction with the financial statements for the 12-month period
ended 31 March 2019, which have been prepared in accordance with
IFRSs as adopted by the European Union.
3. Principal accounting policies
The principal accounting policies adopted are consistent with
those of the financial statements for the 12-month period ended 31
March 2019, except for the first-time adoption of IFRS 16, 'Leases'
which was adopted on 1 April 2019.
IFRS 16 replaced the existing guidance in IAS 17. Under IAS 17,
lessees were required to make a distinction between a finance lease
(on balance sheet) and an operating lease (off balance sheet). IFRS
16 now requires lessees to recognise a lease liability reflecting
future lease payments and a 'right-of-use asset' for virtually all
lease contracts. Under IFRS 16, a contract is, or contains, a lease
if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. The lease liability is initially measured at the
present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the
lease. If this rate cannot be readily determined, the Group uses
its incremental borrowing rate. The weighted average incremental
borrowing rate applied to lease liabilities is 4.30%.
3. Principal accounting policies (continued)
A reconciliation of operating lease commitments as at 31 March
2019 to the lease liability is as follows:
GBP000
-------
Operating lease commitments disclosed at 31 March 2019 5,505
-------
Adjustment for forecast exercise of break clause (2,211)
-------
Effect of discounting (443)
-------
Lease liability recognised at 1 April 2019 2,851
-------
Existing finance lease payables at 1 April 2019 71
-------
Total finance lease payables at 1 April 2019 2,922
-------
The Group has elected to apply the full retrospective approach
to the transition to IFRS 16. The full retrospective approach
requires the transition to be implemented with restatement of the
prior year results as if IFRS 16 had always been applied. Adoption
of the IFRS 16 has resulted in the recognition of Right of use
assets and lease liabilities with a corresponding increase in
depreciation charges and finance costs offset by a reduction in
operating lease costs in the income statement. The implementation
of IFRS 16 has made an insignificant impact on the net assets and
profit before tax of the Group, as set out in note 12.
4. Segment information
The financial performance of the Group's geographic operating
units ("Reportable Segments") is set out below. The Group defines
its Consultancy business as Research and Advertising Agency.
6 months to 30 Sep 2019 6 months to 30 Sep 2018*
-------------------------------- --------------------------------
Revenue Gross Operating Revenue Gross Operating
profit profit/(loss) profit profit/(loss)
------------------- ------- ------- -------------- ------- ------- --------------
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------- ------- -------------- ------- ------- --------------
Research
------- ------- -------------- ------- ------- --------------
Americas 7,168 6,147 3,659 5,562 4,637 2,127
------- ------- -------------- ------- ------- --------------
United Kingdom 2,605 2,201 743 2,753 2,277 807
------- ------- -------------- ------- ------- --------------
Continental Europe 3,048 2,450 1,201 3,653 2,916 1,684
------- ------- -------------- ------- ------- --------------
APAC 742 641 259 1,015 862 524
------- ------- -------------- ------- ------- --------------
13,563 11,439 5,862 12,983 10,692 5,142
------- ------- -------------- ------- ------- --------------
Advertising Agency
------- ------- -------------- ------- ------- --------------
United Kingdom 141 129 16 199 110 (302)
------- ------- -------------- ------- ------- --------------
Total Consultancy
business 13,704 11,568 5,878 13,182 10,802 4,480
------- ------- -------------- ------- ------- --------------
AdRatings
------- ------- -------------- ------- ------- --------------
United Kingdom 12 12 (1,081) - - (1,090)
------- ------- -------------- ------- ------- --------------
Americas 9 9 - - - -
------- ------- -------------- ------- ------- --------------
21 21 (1,081) - - (1,090)
------- ------- -------------- ------- ------- --------------
13,725 11,589 4,797 13,182 10,802 3,750
------- ------- -------------- ------- ------- --------------
*In the Annual Report for the year ended 31 March 2019, central
delivery costs of GBP892k were allocated to central overheads in
the segmental reporting. The comparable central delivery costs are
included within the operating profit for reportable segments above
for both periods presented.
4. Segment information (continued)
Segmental revenue is revenue generated from external customers
and so excludes intercompany revenue and is attributable to
geographical areas based upon the location in which the service is
delivered. Segmental operating profit excludes allocation of
central overheads relating to the Group's Operations, IT,
Marketing, HR, Legal and Finance teams and Board of Directors.
All revenues are recognised when the research results are
delivered to the client.
The split of business by research solution is set out below.
6 months to 30 Sep 2019 6 months to 30 Sep 2018
------------------------- -------------------------
Revenue Gross Profit Revenue Gross Profit
----------------------- --------- -------------- --------- --------------
GBP000 GBP000 GBP000 GBP000
--------- -------------- --------- --------------
Research
--------- -------------- --------- --------------
Communications (Ad
Testing) 4,047 3,608 3,606 3,059
--------- -------------- --------- --------------
Brand (Brand Tracking) 2,311 1,628 2,363 1,726
--------- -------------- --------- --------------
Innovation* 5,824 5,135 6,166 5,316
--------- -------------- --------- --------------
Other services 1,381 1,068 848 591
--------- -------------- --------- --------------
13,563 11,439 12,983 10,692
--------- -------------- --------- --------------
Advertising Agency 141 129 199 110
--------- -------------- --------- --------------
Total Consultancy
business 13,704 11,568 13,182 10,802
--------- -------------- --------- --------------
AdRatings 21 21 - -
--------- -------------- --------- --------------
13,725 11,589 13,182 10,802
--------- -------------- --------- --------------
* The Group has reclassified certain product offerings from
'Other services' to Innovation in the current period, and the
comparative period analysis has been restated accordingly.
A reconciliation of total operating profit for Reportable
Segments to total profit before income tax is set out below.
Six months ended 30
Sep
---------------------
2019 2018
Restated
------------------------------------------- --------- ----------
GBP000 GBP000
--------- ----------
Operating profit for Consultancy (Research
and Agency) 5,878 4,840
--------- ----------
Operating profit for AdRatings (1,081) (1,090)
--------- ----------
Operating profit for Reportable Segments 4,797 3,750
--------- ----------
Central overheads (3,432) (2,831)
--------- ----------
Exceptional credit - 250
--------- ----------
Share based payments* 99 (41)
--------- ----------
Operating profit 1,464 1,128
--------- ----------
Finance expense (60) (71)
--------- ----------
Profit before income tax 1,404 1,057
--------- ----------
*Inclusive of associated social security
5. Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing profit
attributable to equity holders of the Company by the weighted
average number of Ordinary Shares in issue during the period:
Six months ended 30
Sep
----------------------
2019 2018
Restated
------------------------------------------- ---------- ----------
Profit attributable to equity holders of
the Company (GBP000) 890 666
---------- ----------
Weighted average number of Ordinary Shares
in issue 12,576,617 12,520,502
---------- ----------
Basic earnings per share 7.1p 5.3p
------------------------------------------- ---------- ----------
(b) Diluted earnings per share
Diluted earnings per share is calculated by adjusting the
weighted average number of shares outstanding assuming conversion
of all dilutive share options to Ordinary Shares:
Six months ended 30
Sep
----------------------
2019 2018
Restated
------------------------------------------- ---------- ----------
Profit attributable to equity holders of
the Company (GBP000) 890 666
---------- ----------
Weighted average number of Ordinary Shares
in issue 12,576,617 12,520,502
---------- ----------
Share options 327,988 335,227
---------- ----------
Weighted average number of Ordinary Shares
for diluted earnings per share 12,904,605 12,855,729
---------- ----------
Diluted earnings per share 6.9p 5.2p
------------------------------------------- ---------- ----------
6. Dividends
On 2nd August 2019 the Company paid a final dividend of 6.4
pence per share, amounting to GBP0.80m in respect of the 12-month
period ended 31 March 2019. In December 2019, the Company will pay
an interim dividend of 1.1 pence per share, amounting to GBP0.14m,
in respect of the year ending 31 March 2020. This interim dividend
is not recorded in these interim accounts.
7. Net cash generated from/(used by) operations
Six months ended 30
Sep
---------------------
2019 2018
Restated
--------------------------------------------- -------- -----------
GBP000 GBP000
-------- -----------
Profit before taxation 1,404 1,057
-------- -----------
Depreciation 608 571
-------- -----------
Amortisation 160 15
-------- -----------
Finance expense 60 71
-------- -----------
Share-based payment (credit)/charge (86) 41
-------- -----------
Decrease/(increase) in contract costs 28 (17)
-------- -----------
Decrease/(increase) in receivables 368 (1,405)
-------- -----------
Decrease in payables (930) (476)
-------- -----------
Decrease in contract liabilities (82) (224)
-------- -----------
Exchange differences on operating items 20 123
-------- -----------
Net cash generated from/(used by) operations 1,550 (244)
--------------------------------------------- -------- -----------
8. Property, plant and equipment
For the 6 months ended 30 September 2019:
Right-of-use assets Furniture, fittings and equipment Computer hardware Total
------------------- --------------------------------- ----------------- -------
GBP000 GBP000 GBP000 GBP000
------------------- --------------------------------- ----------------- -------
At 1 April 2019
------------------- --------------------------------- ----------------- -------
Cost 5,286 553 1,285 7,124
------------------- --------------------------------- ----------------- -------
Accumulated depreciation (2,666) (422) (1,189) (4,277)
------------------- --------------------------------- ----------------- -------
Net book amount 2,620 131 96 2,847
------------------- --------------------------------- ----------------- -------
6 months ended 30 September 2019
------------------- --------------------------------- ----------------- -------
Opening net book amount 2,620 131 96 2,847
------------------- --------------------------------- ----------------- -------
Additions 260 - 36 296
------------------- --------------------------------- ----------------- -------
Disposals (31) - - (31)
------------------- --------------------------------- ----------------- -------
Foreign exchange 122 2 2 126
------------------- --------------------------------- ----------------- -------
Depreciation charge for the year (533) (37) (38) (608)
------------------- --------------------------------- ----------------- -------
Closing net book amount 2,438 96 96 2,630
------------------- --------------------------------- ----------------- -------
At 30 September 2019
------------------- --------------------------------- ----------------- -------
Cost 5,541 561 1,346 7,448
------------------- --------------------------------- ----------------- -------
Accumulated depreciation (3,103) (465) (1,250) (4,818)
------------------- --------------------------------- ----------------- -------
Net book amount 2,438 96 96 2,630
------------------- --------------------------------- ----------------- -------
8. Property, plant and equipment (continued)
For the 6 months ended 30 September 2018 (restated for IFRS
16):
Right-of-use assets Furniture, fittings and equipment Computer hardware Total
------------------- --------------------------------- ----------------- -------
GBP000 GBP000 GBP000 GBP000
------------------- --------------------------------- ----------------- -------
At 1 April 2018
------------------- --------------------------------- ----------------- -------
Cost 5,018 562 1,160 6,740
------------------- --------------------------------- ----------------- -------
Accumulated depreciation (1,863) (359) (1,094) (3,316)
------------------- --------------------------------- ----------------- -------
Net book amount 3,155 203 66 3,424
------------------- --------------------------------- ----------------- -------
6 months ended 30 September 2018
------------------- --------------------------------- ----------------- -------
Opening net book amount - 203 66 269
------------------- --------------------------------- ----------------- -------
Adjustment on transition to IFRS
16 3,154 - - 3,154
------------------- --------------------------------- ----------------- -------
Additions 202 - 22 224
------------------- --------------------------------- ----------------- -------
Disposals - (2) - (2)
------------------- --------------------------------- ----------------- -------
Foreign exchange 155 5 2 162
------------------- --------------------------------- ----------------- -------
Depreciation charge for the year (492) (39) (40) (571)
------------------- --------------------------------- ----------------- -------
Closing net book amount 3,019 167 50 3,236
------------------- --------------------------------- ----------------- -------
At 30 September 2018
------------------- --------------------------------- ----------------- -------
Cost 5,378 554 1,205 7,137
------------------- --------------------------------- ----------------- -------
Accumulated depreciation (2,359) (387) (1,155) (3,901)
------------------- --------------------------------- ----------------- -------
Net book amount 3,019 167 50 3,236
------------------- --------------------------------- ----------------- -------
For the 12 months ended 31 March 2019 (restated for IFRS
16):
Right-of-use assets Furniture, fittings and equipment Computer hardware Total
------------------- --------------------------------- ----------------- -------
GBP000 GBP000 GBP000 GBP000
------------------- --------------------------------- ----------------- -------
At 1 April 2018
------------------- --------------------------------- ----------------- -------
Cost 5,018 562 1,160 6,740
------------------- --------------------------------- ----------------- -------
Accumulated depreciation (1,863) (359) (1,094) (3,316)
------------------- --------------------------------- ----------------- -------
Net book amount 3,155 203 66 3,424
------------------- --------------------------------- ----------------- -------
12 months ended 31 March 2019
------------------- --------------------------------- ----------------- -------
Opening net book amount - 203 66 269
------------------- --------------------------------- ----------------- -------
Adjustment on transition to IFRS
16 3,154 - - 3,154
------------------- --------------------------------- ----------------- -------
Additions 320 1 106 427
------------------- --------------------------------- ----------------- -------
Disposals - (2) - (2)
------------------- --------------------------------- ----------------- -------
Foreign exchange 121 3 1 125
------------------- --------------------------------- ----------------- -------
Depreciation charge for the year (975) (74) (77) (1,126)
------------------- --------------------------------- ----------------- -------
Closing net book amount 2,620 131 96 2,847
------------------- --------------------------------- ----------------- -------
At 31 March 2019
------------------- --------------------------------- ----------------- -------
Cost 5,286 553 1,285 7,124
------------------- --------------------------------- ----------------- -------
Accumulated depreciation (2,666) (422) (1,189) (4,277)
------------------- --------------------------------- ----------------- -------
Net book amount 2,620 131 96 2,847
------------------- --------------------------------- ----------------- -------
9. Intangible assets
Intangible assets of GBP916,000 (31 March 2019: GBP814,000)
include GBP885,000 of costs capitalised in respect of the
development of the Company's new Ad Ratings product, of which
GBP232,000 was capitalised during the period. Costs relating to the
research phase of the product, amounting to GBP943,000, have been
expensed during the period. Development costs are amortised over
their useful economic life of three years.
10. Share capital
At 30 September 2019, the Company had 13,226,773 shares in issue
(31 March 2019: 13,226,773) of which 650,156 were held in treasury
(31 March 2019: 650,156), and the Company had 1,857,671 stock
options outstanding of which 355,823 were fully vested.
On 17 April 2019 the Company granted an advisor to the Board,
Stefan Barden, an equity award comprising of 300,000 zero cost
options. These options vest in three tranches of 100,000 each
subject to Gross Profit and the Company's share price exceeding
certain targets. The three tranches lapse on 30 July 2024, 30 July
2029 and 30 July 2032 respectively. Full details of the grant can
be found in the Company's Annual Report for the year ended 31 March
2019.
On 4 September 2019 the Company granted 1,058,135 zero cost
options to certain members of the senior management team. Of these,
462,934 options were granted as replacements to equity awards made
under the 2017 LTIP scheme. The options vest between 12 August 2020
and 12 August 2024, subject to Gross Profit, Profit After Tax and
the Company's share price exceeding certain targets. These targets
are the same as those set under the 2017 LTIP scheme, full details
of which are given in the Company's Annual Report for the year
ended 31 March 2019. The options lapse on 21 March 2027.
11. Related party transactions
During the period the Company paid the following dividends to
directors:
Six months ended 30
Sep
---------------------
2019 2018
--------------------------------------------- ---------- ---------
GBP GBP
---------- ---------
John Kearon 189,519 212,493
---------- ---------
James Geddes 16,843 15,929
---------- ---------
Ken Ford (resigned from the Board on 24 July
2018) - 1,280
---------- ---------
Robert Brand 1,920 1,920
---------- ---------
Graham Blashill 640 640
---------- ---------
208,922 232,262
--------------------------------------------- ---------- ---------
A family member of James Geddes will receive commission from
WeWorks equal to 10% of the first year of rental payments to be
made by the Company on its new WeWorks office space in London. This
commission will amount to GBP40,000, and was reviewed by, and
received the prior approval of, the Company's Audit Committee.
12. Changes in accounting policies
The adoption of IFRS 16, 'Leases' has resulted in the following
changes to the previously reported figures:
Balance sheet (extract) Audited Impact of IFRS 16 Unaudited
12 months to 12 months to
31 Mar 2019 31 Mar 2019
Restated
-------------------------------------------- ------------- ----------------- -------------
GBP000 GBP000 GBP000
------------- ----------------- -------------
ASSETS
------------- ----------------- -------------
Non-current assets
------------- ----------------- -------------
Property, plant and equipment 227 2,620 2,847
------------- ----------------- -------------
Intangible assets 814 - 814
------------- ----------------- -------------
Deferred tax asset 275 24 299
------------- ----------------- -------------
1,316 2,644 3,960
------------- ----------------- -------------
Current assets
------------- ----------------- -------------
Contract costs 208 - 208
------------- ----------------- -------------
Trade and other receivables 6,915 (8) 6,907
------------- ----------------- -------------
Current income tax asset 431 - 431
------------- ----------------- -------------
Cash and cash equivalents 4,315 - 4,315
------------- ----------------- -------------
11,869 (8) 11,861
------------- ----------------- -------------
Total assets 13,185 2,636 15,821
------------- ----------------- -------------
EQUITY
------------- ----------------- -------------
Capital and reserves attributable to equity
holders of the Company
------------- ----------------- -------------
Share capital 132 - 132
------------- ----------------- -------------
Share premium account 1,601 - 1,601
------------- ----------------- -------------
Merger reserve 477 - 477
------------- ----------------- -------------
Foreign currency translation reserve 223 11 234
------------- ----------------- -------------
Retained earnings 4,721 (141) 4,580
------------- ----------------- -------------
Total equity 7,154 (130) 7,024
------------- ----------------- -------------
LIABILITIES
------------- ----------------- -------------
Non-current liabilities
------------- ----------------- -------------
Provisions 610 - 610
------------- ----------------- -------------
Lease liabilities 23 2,389 2,412
------------- ----------------- -------------
633 2,389 3,022
------------- ----------------- -------------
Current liabilities
------------- ----------------- -------------
Provisions 225 - 225
------------- ----------------- -------------
Lease liabilities 48 462 510
------------- ----------------- -------------
Trade and other payables 4,591 (85) 4,506
------------- ----------------- -------------
Contract liabilities 534 - 534
------------- ----------------- -------------
5,398 377 5,775
------------- ----------------- -------------
Total liabilities 6,031 2,766 8,797
------------- ----------------- -------------
Total equity and liabilities 13,185 2,636 15,821
------------- ----------------- -------------
12. Changes in accounting policies (continued)
Income statement (extract) Audited Impact of IFRS 16 Unaudited
12 months to 12 months to
31 Mar 2019 31 Mar 2019
Restated
--------------------------- ------------- ----------------- -------------
GBP000 GBP000 GBP000
------------- ----------------- -------------
Operating profit 1,932 68 2,000
------------- ----------------- -------------
Finance income/(expense) 2 (137) (135)
------------- ----------------- -------------
Income tax expense (677) 24 (653)
------------- ----------------- -------------
Profit after taxation 1,257 (45) 1,212
------------- ----------------- -------------
Cash flow statement (extract) Audited Impact of IFRS 16 Unaudited
12 months to 12 months to
31 Mar 2019 31 Mar 2019
Restated
--------------------------------------------- ------------- ----------------- -------------
GBP000 GBP000 GBP000
------------- ----------------- -------------
Net cash generated from operating activities 609 925 1,534
------------- ----------------- -------------
Net cash used by investing activities (1,030) (1,030)
------------- ----------------- -------------
Net cash used by financing activities (982) (925) (1,907)
------------- ----------------- -------------
Net decrease in cash and cash equivalents (1,403) - (1,403)
------------- ----------------- -------------
Cash and cash equivalents at 31 Mar 4,315 - 4,315
------------- ----------------- -------------
12. Changes in accounting policies (continued)
The adoption of IFRS 16, 'Leases' has resulted in the following
changes to the previously reported figures:
Balance sheet (extract) Unaudited Impact of IFRS 16 Unaudited
6 months to 6 months to
30 Sep 2019 30 Sep 2019
Restated
-------------------------------------------- ------------ ----------------- ------------
GBP000 GBP000 GBP000
------------ ----------------- ------------
ASSETS
------------ ----------------- ------------
Non-current assets
------------ ----------------- ------------
Property, plant and equipment 217 3,019 3,236
------------ ----------------- ------------
Intangible assets 510 510
------------ ----------------- ------------
Deferred tax asset 282 9 291
------------ ----------------- ------------
1,009 3,028 4,037
------------ ----------------- ------------
Current assets
------------ ----------------- ------------
Contract costs 148 - 148
------------ ----------------- ------------
Trade and other receivables 7,115 (7) 7,108
------------ ----------------- ------------
Current income tax asset 335 - 335
------------ ----------------- ------------
Cash and cash equivalents 3,552 - 3,552
------------ ----------------- ------------
11,150 (7) 11,143
------------ ----------------- ------------
Total assets 12,159 3,021 15,180
------------ ----------------- ------------
EQUITY
------------ ----------------- ------------
Capital and reserves attributable to equity
holders of the Company
------------ ----------------- ------------
Share capital 132 - 132
------------ ----------------- ------------
Share premium account 1,601 - 1,601
------------ ----------------- ------------
Merger reserve 477 - 477
------------ ----------------- ------------
Foreign currency translation reserve 270 14 284
------------ ----------------- ------------
Retained earnings 4,417 (112) 4,305
------------ ----------------- ------------
Total equity 6,897 (98) 6,799
------------ ----------------- ------------
LIABILITIES
------------ ----------------- ------------
Non-current liabilities
------------ ----------------- ------------
Provisions 456 - 456
------------ ----------------- ------------
Lease liabilities 46 2,340 2,386
------------ ----------------- ------------
502 2,340 2,842
------------ ----------------- ------------
Current liabilities
------------ ----------------- ------------
Provisions 407 - 407
------------ ----------------- ------------
Lease liabilities 47 881 928
------------ ----------------- ------------
Trade and other payables 3,950 (102) 3,848
------------ ----------------- ------------
Contract liabilities 356 - 356
------------ ----------------- ------------
4,760 779 5,539
------------ ----------------- ------------
Total liabilities 5,262 3,119 8,381
------------ ----------------- ------------
Total equity and liabilities 12,159 3,021 15,180
------------ ----------------- ------------
12. Changes in accounting policies (continued)
Unaudited Impact of IFRS 16 Unaudited
6 months to 6 months to
30 Sep 2019 30 Sep 2019
Income statement (extract) Restated
----------------------------- ------------ ----------------- ------------
GBP000 GBP000 GBP000
------------ ----------------- ------------
Operating profit 1,081 47 1,128
------------ ----------------- ------------
Finance income/(expense) 1 (72) (71)
------------ ----------------- ------------
Income tax expense (400) 9 (391)
------------ ----------------- ------------
Profit after taxation 682 (16) 666
------------ ----------------- ------------
Unaudited Impact of IFRS 16 Unaudited
6 months to 6 months to
30 Sep 2019 30 Sep 2019
Cash flow statement (extract) Restated
------------------------------------------- ------------ ----------------- ------------
GBP000 GBP000 GBP000
------------ ----------------- ------------
Net cash used by from operating activities (1,088) 540 (548)
------------ ----------------- ------------
Net cash used by investing activities (268) - (268)
------------ ----------------- ------------
Net cash used by financing activities (824) (540) (1,364)
------------ ----------------- ------------
Net decrease in cash and cash equivalents (2,180) - (2,180)
------------ ----------------- ------------
Cash and cash equivalents at 30 Sep 3,552 - 3,552
------------ ----------------- ------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR CKADNNBDBODK
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