REG - Accesso Technology - Preliminary Results
23 March 2021
accesso® Technology Group plc
("accesso" or the "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
Results ahead of revised expectations, stronger foundation for future growth
accesso Technology Group plc (AIM: ACSO), the premier technology solutions provider to leisure, entertainment and cultural markets, today announces preliminary results for the year ended 31 December 2020 ('2020').
Commenting on the results, Steve Brown, Chief Executive Officer of accesso, said:
"During 2020 we proved ourselves resilient in the face of a near-total shutdown of our industry as global travel and leisure was severely impacted by the COVID-19 pandemic. I am proud of how our team responded, and how we worked through the personal, professional, and financial impacts together.
With so many of our customers shuttered, we took the opportunity to refocus and reshape our business. We have removed duplication, refined processes, reduced costs, aligned our teams for greater efficiency, improved customer support, and delivered new innovation. We now have a growth-ready foundation on which to address substantial pent-up demand as the pandemic recedes.
During 2020 we delivered strong performance where and when our customers were able to open. This gives us confidence that our underlying opportunity is intact or even enhanced. In the last year, technology has become an even more critical element of the guest experience as both venues and customers increased their need and reliance on digital services to drive efficiency and improved experiences.
While the pandemic is not yet behind us, with vaccination programmes underway in our key geographies, we feel confident of a progression to more normal trading conditions in 2021. With the strength of our technology offering, solid relationships, and an amplified focus on technology by venue operators, we are well-set to re-embark on our growth journey."
Headline Financial Results
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Group revenue was $56.1m (2019: $117.2m), a resilient performance ahead of expectations set out at the onset of the pandemic
o
Repeatable revenues1 fell 56.8% to $41.3m due to the impact of COVID-19 closures, representing 73.6% of total revenue.
o
Non-repeatable revenue1 reduced by 32.9% to $12.3m (2019: $18.3m), with lower impact due to licence fees and professional service revenues, particularly relating to our work in the cruise segment, continuing to be delivered throughout the year.
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Cash EBITDA2, now the Group's principal operating metric, decreased to a loss of $11.5m (2019: +$7.1m). The reduction of $18.6m against a revenue decline of $61.1m is a testament to the swift and decisive actions of management to realign the Group's cost base in response to the pandemic. Statutory cash used in operations was an outflow of $11.9m (2019: inflow of $24.6m).
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Net cash at December 31, 2020 was $29.7m4 (2019: $0.4m). This reflects a $46.1m (net of costs) placing in June 2020 the proceeds of which remained at the Company's disposal due to strong cash management.
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New debt facility committed by the Group on 19 March 2021 with Investec Bank PLC. All year-end bank loan borrowings with Lloyds Bank PLC have been settled and the Group now has access to an unutilised £18m, revolving facility with a term of 3 years to March 2024; draw down is subject to securing charges over our US subsidiary entities.
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Adjusted basic EPS3 was a loss of 60.64 cents per share (2019: +30.78 cents per share), a basic loss per share of (84.78) cents per share (2019: Loss of 184.26 cents per share))
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Statutory loss before tax was $32.9m (2019: loss $57.6m) largely reflecting a $61.1m revenue reduction net of cost saving exercises deployed by management.
Operational & Strategic highlights
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Leadership change: Steve Brown returns as CEO; Fern MacDonald appointed CFO; new Chief Commercial Officer ('CCO'), new Head of Product and Head of People returned to the Group reflecting structural realignment to drive productivity and efficiency.
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Business platform transformation: Along with cost-action to manage pandemic pressures, development teams have been aligned around focus areas; operational teams aligned around key markets; support systems consolidated; and product roadmap defined.
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Innovation to support customers: Online reservations, virtual queuing, mobile Food & Beverage technology all support venue openings with social distancing while providing longer term adoption opportunities. Cross-product integration opportunity continues to receive strong validation with 50 venues now utilising more than one solution (2019: 26).
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Innovation drives new business wins: Virtual queuing success, robust demand for accesso Passport® eCommerce and strong performance from our new mobile Food & Beverage solution all underline new demand for post-COVID eCommerce and Guest Experience technologies.
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Opportunity ahead remains intact: Underlying demand remains strong while eCommerce has become more critical to operator success. More venues signed on for online ticketing solutions in 2020 (45) than signed on during 2019 (42). Markets served by accesso are expected to rebound quicker than the broader leisure space due to more localised target audiences.
Outlook & guidance
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Encouraging start to 2021: Despite European and Californian attractions remaining closed in January and February the Group delivered strong revenue performance, trading only 19% down on the same two months in 2019. Our year-to-date eCommerce trading also indicates strong pent-up demand, with year-to-date eCommerce ticket volumes in APAC at 15% and 21% above 2020 and 2019 respectively. North American volumes are up 54% and 28% over the same periods. The majority of our remaining venues have now either opened or have scheduled openings through to May 2021.
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COVID-19 remains impactful: The Group anticipates travel and tourism will be substantially restricted in 2021 however our late-2020 experience suggests significant pent-up demand will come through as the pandemic recedes. Venues in certain regions have already reopened at reduced capacity or plan to reopen between April and early summer. Out largest clients have all indicated their plans to fully reopen all parks ahead of summer (assuming Government approval).
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Cautious optimism for the year ahead: We remain cautiously optimistic for 2021 as vaccine rollouts accelerate. We expect performance in H1 to be above 2020 levels with a return to something close to normal trading expected later in H2. Our strong balance sheet and available facilities enable us to manage potential downside scenarios.
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Financial Results: With base level demand expected to be ahead of 2020, we anticipate neutral to slightly positive cash flow for 2021, based upon anticipated revenue of not less than $83m. We do not anticipate utilising any additional credit facility on a full year basis and expect to retain significant cash resources as a contingency.
Footnotes
(1)
Repeatable revenue consists of transactional revenue such as a ticket sold by a customer or as a percent of revenue generated by a venue operator and recurring maintenance, support and platform revenue. Non-repeatable revenue is revenue that occurs one-time (e.g. up-front licence fees) or is not repeatable based upon the current agreement (e.g. billable professional services hours) and is unlikely to be repeatable without additional successful sales execution by accesso
(2)
Cash EBITDA is calculated as operating profit before the deduction of amortisation, impairment of intangible assets, depreciation, acquisition costs, deferred and contingent payments, and costs related to share-based payments less capitalised development costs paid in cash as per the consolidated cash flow statement.
(3)
Adjusted basic earnings per share is calculated using an after adjusting operating profit that is adjusted for impairment of intangible assets, amortisation on acquired intangibles, deferred and contingent consideration linked to continued employment, acquisition and aborted sale expenses, finance charges relating to deferred and contingent liabilities and share-based payments, net of tax at the effective rate for the period on the taxable adjusted items
(4)
Net cash is calculated as cash and cash equivalents less borrowings
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement, this inside information is now considered to be in the public domain
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The Company will be hosting a presentation for analysts at 1300 UK time this morning. Analysts and institutional investors are also able to request a copy of the presentation and audio webcast conference details by contacting accesso@fticonsulting.com. A copy of the presentation made to analysts will be available for download from the Group's website, shortly after the conclusion of the meeting.
accesso Technology Group plc
Steve Brown, Chief Executive Officer
Fern MacDonald, Chief Financial Officer
+44 (0)118 934 7400
Numis Securities Limited (Nominated Adviser and Sole Broker)
Simon Willis, Mark Lander, Hugo Rubinstein
+44 (0)20 7260 1000
FTI Consulting, LLP
Matt Dixon, Adam Davidson
+44 (0)20 3727 1000
About accesso Technology Group
At accesso, we believe technology has the power to redefine the guest experience. Our patented and award-winning solutions drive increased revenue for attraction operators while improving the guest experience. Currently serving over 1,000 clients in more than 30 countries around the globe, accesso's solutions help our clients streamline operations, generate increased revenues, improve guest satisfaction and harness the power of data to educate business and marketing decisions.
accesso stands as the leading technology provider of choice for tomorrow's attractions, venues and institutions. We invest heavily in research and development because our industries demand it, our clients benefit from it and it makes a positive impact on the guest experience. Our innovative technology solutions allow venues to increase the volume and range of on-site spending and to drive increased transaction-based revenue through cutting edge ticketing, point-of-sale, virtual queuing, distribution and experience management software.
Furthermore, COVID-19 has highlighted the benefits our technology is able to bring to venues from facilitating social distancing using our robust and sophisticated virtual queuing solutions; reservation systems delivered through our agile eCommerce platform to enable capacity management, taking queues away from front gates; and attraction eateries utilising our contactless food and beverage offerings.
Many of our team members come from backgrounds working within the attractions and cultural industry. In this way, we are experienced operators who run a technology company serving attractions operators, versus a technology company that happens to serve the market. Our staff understands the day-to-day operations of managing complex venues and the challenges this creates, and together we strive to provide our clients and their guests with technology that empowers them to do more and enjoy more. From our agile development team to our dedicated client service specialists, every team member knows that their passion, integrity, commitment, teamwork and innovation are what drive our success.
accesso is a public company, listed on AIM: a market operated by the London Stock Exchange. For more information visit www.accesso.com. Follow accesso on Twitter, LinkedIn and Facebook.
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Chief Executive's statement
My decision to return to accesso as CEO in early 2020 was driven by my firm view that our business has a unique opportunity to be successful in the markets we serve. We have a customer-base, technology set and level of scale which sets us apart from the competition, and we have a level of ambition, driven by some of the best people in our industry, that none can match. Despite a year in which the COVID-19 pandemic has turned our industry upside-down, my level of belief remains the same.
There is no doubt that circumstance intervened and made 2020 quite different from the year I had imagined. We were only able to focus on growth for a few short weeks. Quite soon we had to shift quickly, reinforcing our financial position and building operational resilience to ensure we could weather the coming storm. We right-sized our employee base, initiated a four-day working week for many staff during the period of reduced operations, reducing our underlying administrative expenditure by $1.4m to an average of $4.7m per month during the year. We also raised $46.1m from shareholders in June 2020 as contingency and took the opportunity to bring forward planned changes that would simplify our structure, reduce inefficiency, and bring clarity to the overall accesso operation. These actions, focused on three pillars of activity we called People, Process and Product, solidified our outlook and gave us the license to focus our energy on supporting our customers by doing what we do best: innovating to help them make the most of their opportunities.
Throughout the pandemic we have adopted a simple mantra in relation to our customer base: treat clients like family. accesso has built its reputation on trusted partnership, and our relationships are strengthened in times of challenge. Whether helping to facilitate refunds for cancelled events, tapping into previously unused product features, or making last minute feature changes to enable re-openings, our teams worked with a level of quality and commitment that our customers will not soon forget.
Our proactive approach enabled us to adapt and develop technology solutions suited to our customers' new reality. During the year we used our virtual queuing technology to enable in-venue social distancing, contactless food & beverage ordering to reduce in-person interactions, online reservations and ticketing to assist with capacity management, plus a range of other modifications to support the emerging needs of our industry.
Whilst our full-year revenues were significantly impacted by the pandemic, our team's ability to adapt and align with our customers to provide essential technology was nothing short of remarkable. Together we faced unprecedented adversity with the type of purpose, passion and partnership that are at the core of our company vision statement. With the hard work done across 2020 to reshape our business, I am as optimistic as ever about the future.
2020 in review
Our Market
2020 was an incredibly difficult year for our customers and end-markets in general. The introduction of global lockdowns from March onwards put a stop to almost all trading activity through most of the European and North American summers, and although we did see some reopenings at reduced capacities during the autumn, volumes for the year were far lower than normal.
Despite the overall supressed trading, during 2020 we did see technology - and particularly eCommerce - playing an increasingly important role in the activity which did take place. With the breadth of venue-types we serve looking to manage strict capacity controls and facilitate less face-to-face interaction with staff, we saw our online ticketing business provide much-needed capability to the venues that were able to reopen.
Across the broader global environment, we saw consumers across demographics shift to online food delivery, online supermarket shopping and other web-based alternatives. Online buying took centre stage and we are confident that this increased adoption of mobile technology represents a permanent behavioural shift in many cases. Historic trends indicate that once customers adopt eCommerce, the efficiency gains and guest experience upsides tend to mean they continue transacting in this manner. We will only know the true extent of the impact of these dynamics on our addressable market when the pandemic has passed, but the early signs are certainly encouraging.
As we enter 2021, we still expect pandemic restrictions in many venues to persist in the near to mid-term. However, our overall confidence of a return to more normal conditions later in the year is bolstered by the increasing traction of the various vaccination programmes being rolled out in our key markets.
We are also aware that the various segments of our market are likely to recover at different speeds. For example, we expect the recovery for destination travel to be slower than that of the regional attractions, live event venues and cultural attractions like theatres, museums and zoos which are closer to home and can be planned at a moment's notice. Destination travel requires longer lead-times for planning, higher costs to adopt and more travelling for guests, while the regional attractions of scale can reopen quickly and capture demand as soon as restrictions ease. For live-event operators, those who can operate on a cash positive basis even with capacity restrictions are likely to recover fairly quickly. For others, progress will be uneven and dependent on the ability to invest in securing talent, committing to a planning schedule and commencing ticket sales. These are all dynamics which rely to a certain extent upon the removal of social distancing requirements in order to operate profitably.
Approximately 60% of accesso's typical transaction-based volume is concentrated in leisure categories expected to realise fairly rapid recovery versus the broader leisure sector. This assumption is underpinned by our strong trading performance through the autumn and early winter of 2020 and is also reflected in the performance we have delivered in the first part of 2021.
Whilst the early months of the year typically see lower transaction volume, our year-to-date 2021 eCommerce trading indicates the level of potential pent-up demand. Across the APAC region, eCommerce volumes for this period were up 21% and 15% on 2019 and 2020 respectively, and in North America, driven primarily by a range of new ski customers in the period, eCommerce volumes were up 54% and 28% on the same periods. Whilst our European markets remained in lockdown for much of this period, results in recent weeks show robust performance as UK theme park customers have opened up their eCommerce sites for bookings following release of the UK government's reopening plans.
Financial performance
During 2020, accesso delivered financial performance ahead of the expectations it had set out following the onset of the pandemic, reporting revenue for the year of $56.1m. Given the lower levels of activity across our industry, our transactional revenue stream, usually a bedrock of our financial performance, was down from $85.6m in 2019 to $31.3m in 2020. Our professional services revenue stream continued steadily as our TE2 work for the cruise sector and other key clients moved forward as customers looked to utilise the downtime to continue project efforts.
Profitability was impacted by this lower level of revenue although our decisive cost-management ensured the bottom-line impact was limited. This was illustrated by our Cash EBITDA, our key earnings measure, which was a loss of $11.5m in 2020, down from $7.1m of earnings in 2019, despite a $61.1m reduction in revenue. Our statutory loss for the year was $29.9m, again reflecting the revenue reduction in the year.
Importantly, the Group retains a very strong liquidity position with net cash at the December year-end of $29.7m and a refinanced debt facility from 19 March 2021. Draw down on the new facility is conditional on finalising security charges over the US subsidiary entities, providing the Group with additional liquidity of £18m through a revolving Coronavirus Large Interruption Scheme Loan facility for a 3-year term to March 2024.
Our Business
During 2020 we worked tirelessly to reshape and refocus accesso to build a more efficient and productive organisation for the longer term. This work took place in three pillars: People, Process, and Product.
People
We began our efforts in this first pillar area by reshaping our leadership team. With a new CFO, new CCO, new Head of Product and the return of our former Head of People in place, we then conducted a structural realignment across the broader organisation. This process removed duplication resulting from piecemeal merger integration, and more effectively aligns our teams with clear accountability for the future.
For example, all software engineers working on our various eCommerce solutions are now in one team rather than being spread across the various system groups within accesso. Additionally, our operational teams are now aligned with key market segments such as Theme Parks, Cultural Attractions, and the Ski Industry. The shift from software system alignment to industry alignment allows for improved client relationships, particularly as the number of clients using multiple solutions continues to increase. We now go forward with a team focused on shared success across our entire business, with a refreshed and better-structured approach to client service.
Employee turnover was notably higher in 2020 than in prior years at 33% (2019: 19%), driven largely by the impact of reductions implemented to streamline and reduce long-term operating costs. Whilst we started the year with a headcount of 560 and 17 open positions, we ended the year with a headcount of 435 and 70 open positions (excluding seasonal staff). Open positions were largely held for recruitment in 2021 as we awaited clarity on the vaccination programme. To date, nearly half of the open positions have been filled and recruiting efforts continue for the remainder.
We reinforced our commitment to Diversity and Inclusion, with the addition of a dedicated page on our website outlining our approach to providing a workplace that thrives on innovation from individuals from a wide range of backgrounds with diverse talents. That page can be found at www.accesso.com/about/diversity-inclusion.
We also continued our commitment to support our local communities as our team members utilised the days allocated for each to volunteer for a service activity of their choice. For example, one team member volunteered at an animal shelter during the California wildfires whilst another sewed masks for a local urgent care facility.
Process
Along with this organisational realignment, we needed to adjust our operational processes to ensure we can capitalise on the benefits of our new staffing structure. We therefore worked to bring teams on to the same internal support systems, enabling seamless collaboration across the group. We have also redesigned how customer system enhancement requests move through our workflow, improving quality while reducing delivery times. We have transformed accesso from a company operating in multiple product silos to a business with a single operational platform, focused on customer success and growth.
Product
Product innovation continues to be a vital part of our go-forward plan at accesso, and during the year we identified several opportunities to continue our overall improvement journey. Importantly, we have developed a clearly defined product roadmap across the full technology set, both to improve our near-term output and to ensure strategic focus into the medium and longer-term. To build the foundation for this work, this year we completed the migration to AWS of our North American technology footprint, and the migration of accesso Passport to Cybersource. These developments enable a more unified payment processing solution across the Group. Since its launch, we have generated over 5 million payment tokens through the platform and eliminated the need to store credit-card details on our systems.
During the year we also sharpened our focus on integration between systems to respond more effectively to the growing demand for operators to combine deployment of multiple accesso solutions. Furthermore, our ongoing interaction with customers has helped to develop specific upgrades in some of our existing product areas. These conversations led us to adapt our virtual queuing offering to assist with social distancing, enhance our mobile food & beverage offerings, adapt our online reservation programmes, develop live-event streaming capability and rollout a full update of the accesso SiriuswareSM solution.
With the appointment of a Head of Product to oversee our entire technology estate, we are now much better-positioned to evolve our technology platform in a manner that is more strategic, more efficient, and more responsive to customer needs. As a result of the changes we've made, our team is now set up simultaneously to work on our longer-term plan while managing our customers' evolving near-term needs.
New Business - Signs of Recovery and Opportunity
Despite the pandemic, accesso still found ways of supporting operators and bringing new innovation to the market in 2020. In the first half, new business activity was focused on facilitating social distancing through virtual queuing, and in June, Holiday World in the United States began using our accesso LoQueue® virtual queuing as the solution underpinning all visitation at its sites. Several other existing customers including Walibi Holland in the Netherlands and Village Roadshow Theme Parks in Australia also evolved their use of virtual queuing from a premium offering to a baseline feature of admission. During the second half, Parc Asterix in France also signed on for virtual queuing, with extremely positive feedback on the product's ability to drive revenue, ensure guest satisfaction and increase operational efficiency. In total, more than 6 million guest rides were fulfilled in the parks utilising our 100% virtual queuing solution to facilitate social distancing. Over 50% of guests surveyed by Walibi Holland indicated an increased likelihood to return to the venue if virtual queuing remained in place.
Alongside this, we conducted virtual queuing-related tests with other customers and expanded our virtual queuing outreach to other sectors with a view to exploring possibilities for more comprehensive offerings in the longer term. While the appetite for more widespread in-venue use of virtual queuing remains strong across the industry, most large-scale operators managed through the near term with manual processes given the lower levels of attendance. Notably, our 'classic' premium virtual queuing offering performed ahead of our expectations when customer venues have been open.
We were also pleased to work with our partner, Digisoft, to adapt our Prism wearable device in a unique manner. Utilising the range of sophisticated technical capabilities and with software enhancements developed by Digisoft, the Prism band has been adapted to identify, measure and track interactions between wearers in a GDPR compliant manner to a secure administrator information hub. Our patented wristband also provides social distancing guidance via on-screen and vibration alerts in the workplace. We were pleased to successfully pilot this program with the Irish Defence Force as well as with a large pharmaceutical company in their US based laboratory. Whilst we do not view this specific adaptation as a significant future revenue opportunity, this unique use-case is further testament to the underlying strength of our technology set and our ability to access a broad range of opportunities.
In ticketing, we quickly pivoted to offer existing reservation functionality to our general admission venues and as a result booked nearly 9 million guest reservations. Despite the significantly reduced operations around the globe, we still sold 25 million tickets through accesso Passport, down just 41% on 2019 as nearly all venues required advance purchase of tickets for entry. Nearly 3.4 million tickets were sold in the winter holiday period as venues adapted to provide drive-through or socially distanced experiences.
Overall, the challenges of 2020 have highlighted the benefit to venues of having a robust and agile eCommerce platform as they reopen. Consequently, we have been successful in implementing 29 new accesso Passport deployments during the year, of which 21 were signed during 2020. Notably, demand from our existing accesso Siriusware POS customers to add accesso Passport eCommerce was strong, with implementation at 16 new ski venues. This success highlights the opportunity for growth with our existing customer base. Whilst accesso Siriusware provides POS and Guest Management to 117 ski venues, only 21 of those are also utilising accesso Passport eCommerce. This represents a significant near-term penetration opportunity and is an area of key focus for the Group. As a result, we have now named an executive product leader to focus solely on our accesso Siriusware/accesso Passport development roadmap and champion the efforts to accelerate feature integrations between the two products. Beyond the ski sector, the remaining 165 accesso Siriusware customers remain key cross-sell prospects for our eCommerce solution particularly in light of the pandemic's impact and the overall expansion of visitor expectations over time.
During the year we also saw a rise in demand for one of our incubator solutions as leisure operators have taken time to review their future technology plans to drive improved efficiency and guest service. As venues have looked to reduce contact at food locations, we have seen more traction than anticipated with the adoption of our mobile food ordering solution. We deployed our contactless Food & Beverage solution to Alterra Mountain Company across some 40 restaurants within their ski resort portfolio, and we are now working with them to add restaurants at 8 additional resorts in 2021. Two standalone ski customers along with Grupo Vidanta and Cedar Fair are also implementing the solution. As a result of this success and building upon our significant expertise with online ticketing, we are now evaluating the potential long-term opportunity in the broader food & beverage sector. Given our solution integrates with a restaurant's POS solution (for those not utilising our own), this presents a potentially sizeable market opportunity.
Many venues in the live entertainment sector are also looking to improve their technology infrastructure as they move towards reopening, particularly as it relates to online booking functionality. Despite the industry disruption, accesso ShoWareSM was implemented at 29 new venues in 2020 (compared to 55 in 2019) as operators used the dark time to update their offerings with advanced functionality. Beyond 2020, the sales pipeline continues to gain momentum.
Within Ingresso, we are focused on the post-pandemic recovery as we onboarded 19 new distributors and 44 new supplier venues in 2020, including Merlin, which is now utilising our Ingresso platform to support digital sales through third party channels.
Security infrastructure
accesso is viewed as a premier technology solutions provider to the verticals it serves, and as a result, we continue to invest in ensuring our technology offering leads the market. An increasingly critical focus of our clients, and therefore the Group, is around data security and compliance against an evolving global landscape. Intrusion threats are becoming more sophisticated and regulations covering the handling of data demand that compliance is at the forefront of our business. accesso is acutely aware of the importance of security to the Group's clients and their guests and continues to employ state-of-the-art systems to mitigate risk across the group. With the introduction of GDPR and other global privacy initiatives, compliance continues to be a top priority across the business and accesso has maintained pace with all relevant developments.
With our migration to CyberSource, we have taken new measures to reduce our data security exposure risk. Whilst we do not disclose the details of our specific security measures or systems, throughout 2020 we continued to invest in further enhancements, new systems, and revisiting procedures as well as the organisational strength of our security group.
Brexit
The impact of the UK leaving the European Union ("Brexit") has thus far been limited for the Group. It is recognised that there could be an impact to consumer spending within the UK or EU and this could impact attendance at certain venues or investment decisions by leisure operators. Additionally, there could be a positive or negative impact on exchange rates which could alter international visitation patterns. Brexit is not anticipated to have a material impact on the operations or financial results of the Group given its significant operations in the US and its growing global presence outside of the EU.
Board
Having served as a Non-Executive director of accesso since 2010, David Gammon has now stepped down from our Board. Following an extensive search David was replaced by Jody Madden who started her tenure on January 1, 2021. Jody is an experienced technology leader, and is currently Chief Executive Officer of Foundry, a London-based creative software developer for the Media, Entertainment and Digital Design industries. She has 20 years of experience in Media and Entertainment and has held a range of senior roles at Digital Domain, Lucasfilm and Industrial Light & Magic prior to joining Foundry. Jody is also on the Board of Directors of the Sustainable Food Center, a Central Texas non-profit group. As part of her Board role Jody will be heading a new ESG committee as the Group continues its efforts to meet best-practice standards in this vital area.
Board composition is an important reflection of our focus on diversity and inclusion. We are pleased that our Board is now comprised of 50% female directors and overall represents a broad range of experience across industries. We are thankful to the Board for their continued support and strategic guidance as we have worked fervently to manage the impacts of the pandemic and ensure the long-term success of the business.
2020 Financial Review
The Group delivered a resilient financial performance against the backdrop of COVID-19 during 2020, with revenue and Cash EBITDA ahead of our revised range of expectations. accesso's two operating divisions, Guest Experience and Ticketing both started the year with strong revenue growth, before being significantly impacted by the COVID-19 pandemic. As venues reopened, both divisions acted as key enablers of social distancing and advanced ticketing.
As expected, the Group's transactional revenue stream was severely impacted by COVID-19. Decisive cost actions, fund-raising activity and a banking facility refinancing have ensured the business remains on a firm footing. As venues begin to reopen at full scale throughout 2021, the Group now sees opportunity to benefit from latent consumer demand showing through in key markets, with the deeper partnerships it has built throughout 2020 enabling it to push on to growth and success in 2021 and beyond.
Alternative performance measures
The Board continues to utilise consistent alternative performance measures ("APMs") internally and in evaluating and presenting the results of the business. The Board views these APMs to be more representative of the Group's underlying performance.
The historic strategy of enhancing accesso's technology offerings via acquisitions, as well as an all employee share option arrangement, necessitate adjustments to statutory metrics to remove certain items which the Board does not believe are reflective of the underlying business. These adjustments include aborted acquisition or aborted sale related expenses, amortisation related to acquired intangibles, deferred and contingent consideration linked to continued employment, share-based payments and impairments.
By consistently making these adjustments, the Group provides a better period-to-period comparison and is more readily comparable against businesses that do not have the same acquisition history and equity award policy.
APMs include cash EBITDA, adjusted basic EPS, net cash, underlying administrative expenditure and repeatable and non-repeatable revenue analysis. Cash EBITDA is defined as operating profit before the deduction of amortisation, impairment of intangible assets, depreciation, acquisition costs, deferred and contingent payments, and costs related to share-based payments and paid capitalised internal development costs; Adjusted basic earnings per share is calculated after adjusting operating profit for impairment of intangible assets, amortisation on acquired intangibles, deferred and contingent consideration linked to continued employment, acquisition and aborted sale expenses, finance charges relating to deferred and contingent liabilities and share-based payments, net of tax at the effective rate for the period on the taxable adjusted items; net cash is defined as available cash less borrowings and Underlying administrative expenses which is administrative expenses adjusted to add back the cost of capitalised development expenditure and property lease payments and remove amortisation, impairment of intangible assets, depreciation, acquisition costs, deferred and contingent payments, and costs related to share-based payments. Repeatable and non-repeatable revenue analysis is set out and explained below.
The Group considers Cash EBITDA, which disregards any benefit to the income statement of capitalised development expenditure, as the principle operating metric.
Key financial metrics
Revenue quality
Reported Group revenue for 2020 was $56.1m (2019: $117.2m), a reduction of 52.1% on the prior year period. The following is an analysis of the Group's revenue visibility. Transactional revenue consisting of Virtual Queuing, Ticketing and eCommerce is defined as revenue earned as either a fixed amount per sale of an item, such as a ticket sold by a customer or as a percentage of revenue generated by a venue operator. Normally this revenue is repeatable where a multi-year agreement exists and purchasing patterns by venue guests do not significantly change, as they did in 2020 as a result of the pandemic. Other repeatable revenue is defined as revenue, excluding transactional revenue, that is expected to be earned through each year of a customer's agreement, without the need for additional sales activity, such as maintenance and support revenue. Non-repeatable revenue is revenue that occurs one-time (e.g. up-front licence fees) or is not repeatable based upon the current agreement (e.g. billable professional services hours) and is unlikely to be repeatable without additional successful sales execution by accesso. Other revenue consists of hardware sales and other revenue that may or may not be repeatable with limited sales activity if customer behaviour remains consistent.
2020
2019
$000
$000
%
Virtual queuing
7,407
24,687
(70.0)
Ticketing and eCommerce
23,883
60,909
(60.8)
Maintenance and support
7,711
8,742
(11.8)
Platform fees
2,263
1,149
97.0
Total Repeatable
41,264
95,487
(56.8)
Licence revenue
2,322
3,496
(33.6)
Professional services
9,954
14,787
(32.7)
Non-repeatable revenue
12,276
18,283
(32.9)
Hardware
1,493
2,499
(40.3)
Other
1,061
913
16.2
Other revenue
2,554
3,412
(25.1)
Total revenue
56,094
117,182
(52.1)
Total Repeatable as % of total
73.6%
81.5%
The Group's revenue was severely impacted by the COVID-19 pandemic across 2020, with its repeatable revenue stream down 56.8% year-on-year due to lower customer volumes across the leisure industry. The Group's non-repeatable revenue also declined by 32.9% down to $12.3m. This stream saw lower impact as licence fees continued to be recognised and professional services work resumed after a short interruption when customer attention turned to cost saving and managing themselves through mandated closures.
The Group's ticketing and distribution segment was significantly impacted by lower guest volumes in 2020, although it did perform strongly when venues were open. On the ticketing side, its flexibility in supporting online transactions and contactless interactions enabled it to deliver revenues of $36.6m, down 37.1% on 2019 which reflects a better-than-expected performance given the length of certain markets closures. The outlook for the Group's accesso Passport platform remains healthy and should benefit from the continued trend towards eCommerce following the pandemic. The Group's distribution business, which remains dependent on the severely impacted UK West End Theatre market, saw a revenue decline of 93.5% in the year. Whilst this market is currently closed it does have a line of sight to reopening under the UK Government's four step plan, with reduced capacities and social distancing from 17 May 2021 and without restriction from 21 June 2021. Immediately following the announcement of the UK's reopening plan, consumers began booking tickets to available shows, and the Group is hopeful for a partial recovery in H2 2021 subject to the success of the UK's reopening plan.
The Group's Guest Experience segment was similarly impacted by COVID-19, however it continues to make good progress in rolling out its total-virtual-queuing solutions at scale with operators such as Village Roadshow Theme Parks, Holiday World, Walibi Holland and Parc Asterix. As part of these rollouts the Group was able to adapt its technology to facilitate social distancing, enabling venues to reopen with guest experience quality still intact. Revenue in the segment was down 52.1% in the year.
Revenue on a segmental basis was as follows:
2020
2019
$000
$000
%
Ticketing
36,603
58,237
(37.1)
Distribution
1,363
21,097
(93.5)
Ticketing and distribution
37,966
79,334
(52.1)
Queuing
8,348
25,208
(66.9)
Other guest experience
9,780
12,640
(22.6)
Guest experience
18,128
37,848
(52.1)
Total revenue
56,094
117,182
(52.1)
Revenue on a geographic and segmental basis was as follows:
2020
2019
Ticketing
and
Distribution
Guest
Experience
Group
Ticketing and Distribution
Guest
Experience
Group
$000
$000
$000
$000
$000
$000
Primary geographic markets
UK
4,380
848
5,228
25,500
2,047
27,547
Other Europe
1,177
649
1,826
1,859
2,185
4,044
Australia/South Pacific/Asia
1,663
750
2,413
2,942
768
3,710
USA and Canada
30,014
15,739
45,753
45,987
32,668
78,655
Central and South America
732
142
874
3,046
180
3,226
37,966
18,128
56,094
79,334
37,848
117,182
On a geographic basis, as was reported in the Group's interim results announcement, venues in the United Kingdom and Other Europe were largely closed from mid-March until early July and then again in November and December depending on the sector. Some regions and types of attraction remained closed through to August 2020 and in the case of the UK theatre sector, have yet to reopen. This accounts for a revenue reduction in the UK of $22.3m. From July through to November we did see some reopenings in our main geographies with the exception of California-based venues, albeit at lower capacity, and we experienced healthy demand during this period. Texas, New Jersey and New York, our other key US regions, experienced more limited mandated closures with venues remaining largely open with capacity restrictions from June.
Customer concentration
The Group continues to be a trusted technology partner to leading leisure operators. The success of these partnerships does result in a level of revenue concentration. When the Group delivered its results for H1 2020 it committed to providing investors with an ongoing update regarding the level of concentration on a full year basis. For 2020 the top five customers accounted for 50.2% of revenue (2019: 53.5%). The Group's top ten customers accounted for 57.4% (2019: 61.3%). The Group is pleased to report a negligible level of customer attrition and remains committed to working strategically with our customers to ensure we provide the best possible service aligned to their needs.
Gross margin
Management has reviewed how costs are allocated between administrative expenses and cost of sales. In order to give a clearer and more meaningful picture of activity within the business, certain costs linked to the delivery of professional services revenue, previously shown within administrative costs have been reclassified to cost of sales in 2020.
The Group's reported gross profit margin was 76.6% in 2020, compared to 67.3% in 2019 when adjusting for $6.7m of professional service cost of sales to aid comparability. This 9.3% increase primarily results from a change in sales mix compared with 2019. Our lower-margin distribution business is a smaller portion of our revenue for this period and conversely higher margin revenue streams such as licence fees, maintenance and support and platform fees are proportionately greater during 2020. These movements combine to drive a higher gross profit margin.
Administrative expenses
Reported administrative expenses, including the non-cash expense related to intangible impairments, decreased 48.3% to $73.3m (2019: $141.9m), reflecting the Group's efforts to right-size its operational footprint. Underlying administrative expenditure decreased by 23.1% to $56.5m (2019: $73.5m) due to cost action implemented following the onset of the pandemic. Management reduced the Group's monthly underlying administrative expenses by $1.4m to an average of $4.7m for the year principally by implementing a company-wide four-day working week which ended in a phased manner in H2. The Group also utilised the available government job retention schemes in the USA, UK and Australia, receiving $595k in support. Furthermore, the Group also reduced its workforce by 68 full time employees and 30 contractors alongside significantly decreased discretionary spend including travel, marketing and tradeshows. No government assistance has been sought from December 2020 onwards.
2020
2019
$000
$000
Administrative expenses as reported
73,339
141,906
Capitalised development expenditure (1)
2,969
21,064
Deferred equity settled acquisition consideration
(150)
(1,416)
Amortisation related to acquired intangibles
(2,573)
(11,286)
Share based payments
(1,398)
(1,845)
Amortisation and depreciation (2)
(14,664)
(16,014)
Property lease payments not in administrative expense (1)
1,622
1,451
Impairment of intangibles
(2,627)
(53,617)
Professional services cost (3)
-
(6,723)
Underlying administrative expenditure
56,518
73,520
(1)
See consolidated cash flow statement
(2)
This excludes acquired intangibles but includes depreciation on right of use assets.
(3)
Professional service costs incurred in the delivery of professional services revenue adjusted in comparative year to be comparable with the year ended 31 December 2020.
Cash EBITDA
The Group recorded an operating loss of $30.4m (2019 operating loss: $56.3m); and Cash EBITDA reduced from $7.1m in 2019 to a loss of $11.5m in 2020. This $18.6m Cash EBITDA reduction is entirely a result of the $61.1m revenue reduction, with the Group mitigating profit impact substantially through the cash preservation measures.
The table below sets out a reconciliation between statutory operating loss and cash EBITDA:
2020
2019
$000
$000
Operating loss
(30,354)
(56,278)
Add: Aborted sale/acquisition expenses
461
305
Add: Deferred equity settled acquisition consideration (1)
150
1,416
Add: Amortisation related to acquired intangibles
2,573
11,286
Add: Share based payments
1,398
1,845
Add: Impairment of intangible assets
2,627
53,617
Add: Amortisation and depreciation (excluding acquired intangibles)
14,664
16,014
Capitalised internal development costs paid in cash
(2,969)
(21,064)
Cash EBITDA
(11,450)
7,141
(1)
Under IFRS 3, consideration paid to employees of the acquired entity, who must remain employees' post-acquisition in order to receive earn out or deferred consideration, is treated as compensation expense rather than consideration.
The group reported a statutory loss before tax of $32.9m (2019: loss of $57.6m). Adjusted basic loss per share was 60.64 cents (2019: 30.78 cents earnings per share). Basic loss per share in 2020 was 84.78 cents (2019 basic loss per share: 184.26 cents).
Development expenditure
2020
2019
Development expenditure by segment
$000
$000
Ticketing and distribution
14,044
19,856
% of ticketing and distribution segment revenue
37.0%
25.0%
Guest Experience
7,113
13,689
% of guest experience segment revenue
39.2%
36.2%
Total development expenditure
21,157
33,545
% of total revenue
37.7%
28.6%
Total development expenditure for 2020 decreased 36.9% to $21.2m, (2019: $33.5m) due to the impact of 4-day working weeks, a reduction of 30 contractors and the restructure of our development teams into a single unit. Despite this decrease to development expenditure, 2020 has been a period of innovation within accesso, with frontline and technical teams working at great pace to deliver solutions to enable business continuity for our customers throughout the COVID-19 pandemic.
While the Group remains focused on innovation, the reduction against the previous expectation reflects an integration roadmap more in-line with the Group's overall efficiency drive, in addition to the 4-day working week being in place for longer periods of time than previously expected.
The group capitalises elements of development expenditure where it is appropriate and in accordance with IAS 38 Intangible assets. Capitalised development expenditure of $3.0m (2019: $22.0m), representing 14.0% (2019: 65.7%) of total development expenditure. This material decrease in the proportion of development expenditure being capitalised is not a reflection of lesser importance of the work being undertaken. Development continues to expand the product set and add features that will be important for our customers' operations in the future. However, a more conservative approach to thresholds for such investment expenditure has been applied. The revised approach reflects the steady maturing of the suite of commercialised products.
Cash and Net Cash
Net cash at the end of the period was $29.7m (2019: $0.4m), consisting of cash balances of $56.4m and borrowings of $26.7m.
2020
2019
$000
$000
Borrowings (including capitalised finance costs)
(26,699)
(15,851)
Less: Cash in hand & at bank
56,355
16,205
Net cash
29,656
354
This strong net cash position benefited from $46.1m of net proceeds raised through the Group's equity placing and open offer which completed in June 2020. In the absence of the equity raise our adjusted net debt would have been $16.4m reflecting the COVID-19 impact on our top line. The net cash position would have been significantly worse if it had not been mitigated by diligent working capital management, immediate action on preserving cash, utilisation of Government schemes, deferring payroll taxes where permitted and reducing underlying administrative expenses as noted above.
As a consequence of the COVID-19 pandemic impacting revenues, the Group has seen a net cash outflow from operations in the year of $14.5m (2019: $26.2m inflow).
As noted above, the Group's total development expenditure reduced significantly to $21.2m in 2020 (2019: $33.5m). The reduction in gross research and development costs, combined with a heavily curtailed capital expenditure investment into property, plant and equipment of $0.4m (2019: $1.9m) has helped to further preserve the Group's cash balances.
At the period end the Group had a borrowing facility with Lloyds Bank plc which was renegotiated in June 2020 together with the successful completion of the equity placing. The Group gained access to an additional facility of £8m ($9.8m) under the Coronavirus Large Business Interruption Loan Scheme (the "CLBILS Facility"). The CLBILS Facility was available to the Group for 15 months until August 2021 and remained undrawn as at 31 December 2020.
The Group's year end drawn borrowing facility of $26.7m was settled on 19 March 2021 following a successful refinancing of its lending facilities with Investec Bank plc, conditional on the clearance of priority security charges over US subsidiary entities. The group has a 3-year, £18m Coronavirus Large Interruption Scheme Loan revolving credit facility at a 3.5% margin expiring in March 2024 with quarterly covenant tests on minimum revenue and minimum liquidity for 2 years to December 2022. From March 2023 additional covenants are added for leverage and interest cover.
As a result of the immediate measures taken by management on cost and cash flow management and the successful equity fundraise and loan facilities refinanced in March 2021, the Board believes that the Group is in a strong financial position and ends the year with net cash of $29.7m.
Dividend
The Board maintains its consistent view that the payment of a dividend is unlikely in the short to medium term with cash more efficiently invested in continued product development and integration efforts supporting the Group's strategy.
Impairment
In line with relevant accounting standards, the Group reviews the carrying value of all intangible assets on an annual basis or at the interim where indicators of impairment exist. As announced on 16 September 2020 in our interim results release, at 30 June 2020 it was identified that the remaining intangible assets of Ingresso Group Limited had indicators of impairment due to the impact of COVID-19 and the slower anticipated recovery within the UK theatre sector. This test was revisited at 31 December 2020 with the same outcome.
The consequence of this test is that the carrying value of the Ingresso allocated assets was reduced by $1.4m (2019: $7.0m), which has been charged to administrative expenses during the year. Certain development costs of $1.2m were also impaired following a review of their year-end carrying values.
Taxation
The effective tax rate on statutory loss before tax of $32.9m (2019: $57.6m) was 9.2% (2019: 12.1%).
The key reconciling items to actual tax rates is $8.3m of unrecognised deferred tax asset on US losses, net of $0.4m of prior year items and $2.6m US carry forward credits, excluding these items the adjusted effective tax would have been 25% (2019: 17% excluding the $4.2m non-taxable goodwill impairment) being reflective of the US tax rates where the majority of the group's earnings are derived. $45m of gross US losses/credits are unrecognised due to the uncertainty of near-term profitability and the current period loss.
Consolidated statement of comprehensive income
for the financial year ended 31 December 2020
2020
2019
Notes
$000
$000
Revenue
56,094
117,182
Cost of sales
(13,109)
(31,554)
Gross profit
42,985
85,628
Administrative expenses
(73,339)
(141,906)
Operating loss before impairment of intangible assets
(27,727)
(2,661)
Impairment of intangible assets
10
(2,627)
(53,617)
Operating loss
(30,354)
(56,278)
Finance expense
(2,518)
(1,324)
Finance income
10
21
Loss before tax
(32,862)
(57,581)
Income tax benefit
8
3,008
6,985
Loss for the period
(29,854)
(50,596)
Other comprehensive income
Items that will be reclassified to income statement
Exchange differences on translating foreign operations
4,910
611
Income tax credit on items recorded in other comprehensive income
1,129
-
6,039
611
Total comprehensive loss
(23,815)
(49,985)
All profit and comprehensive income is attributable to the owners of the parent
Losses per share expressed in cents per share:
Basic
9
(84.78)
(184.26)
Diluted
9
(84.78)
(184.26)
Consolidated statement of financial position
as at 31 December 2020
Registered Number: 03959429
31 December 2020
31 December 2019
Notes
$000
$000
Assets
Non-current assets
Intangible assets
10
129,503
142,456
Property, plant and equipment
2,439
3,766
Right of use assets
4,166
5,715
Contract assets
1,109
3,654
Deferred tax assets
8
7,701
8,647
144,918
164,238
Current assets
Inventories
1,927
1,004
Contract assets
3,404
5,926
Trade and other receivables
15,968
23,676
Income tax receivable
1,858
50
Cash and cash equivalents
56,355
16,205
79,512
46,861
Liabilities
Current liabilities
Trade and other payables
17,328
31,811
Derivative financial liabilities
758
-
Finance lease liabilities
1,163
1,307
Contract liabilities
7,525
7,299
Income tax payable
667
4,005
27,441
44,422
Net current assets
52,071
2,439
Non-current liabilities
Deferred tax liabilities
8
7,580
10,778
Contract liabilities
1,303
1,823
Other non-current liabilities
-
30
Finance lease liabilities
3,790
4,976
Borrowings
26,699
15,851
39,372
33,458
Total liabilities
66,813
77,880
Net assets
157,617
133,219
Shareholders' equity
Called up share capital
11
595
427
Share premium
153,327
107,403
Own shares held in trust
-
(665)
Retained earnings
(15,864)
11,331
Merger relief reserve
19,641
19,641
Translation reserve
(82)
(4,918)
Total shareholders' equity
157,617
133,219
Consolidated statement of cash flow
for the financial year ended 31 December 2020
2020
2019
Notes
$000
$000
Cash flows from operations
Loss for the period
(29,854)
(50,596)
Adjustments for:
Depreciation (excluding finance lease assets)
1,758
1,694
Depreciation on finance leased assets
1,461
1,320
Amortisation on acquired intangibles
10
2,573
11,286
Amortisation on development costs and other intangibles
10
11,446
13,000
Impairment of intangibles
10
2,627
53,617
Loss on disposal of property, plant and equipment
22
114
Share-based payment
1,398
1,845
Deferred consideration charge
150
1,416
Finance expense
2,518
1,324
Finance income
(10)
(21)
Foreign exchange gain
1,308
(90)
Income tax benefit
8
(3,008)
(6,985)
RDEC tax credits
(384)
-
(7,995)
27,924
(Increase)/Decrease in inventories
(923)
86
Decrease/(Increase) in trade and other receivables
6,658
(5,865)
Increase/(Decrease) in contract assets/ contract liabilities
4,847
(1,140)
(Decrease)/Increase in trade and other payables
(14,444)
3,562
Cash (used in)/generated from operations
(11,857)
24,567
Tax (paid)/received
(2,657)
1,597
Net cash (outflow)/inflow from operating activities
(14,514)
26,164
Cash flows from investing activities
Deferred consideration settlement
(477)
(1,017)
Capitalised internal development costs
(2,969)
(21,064)
Purchase of property, plant and equipment
(437)
(1,945)
Acquisition of other intangible assets
-
(4)
Interest received
6
21
Net cash used in investing activities
(3,877)
(24,009)
Cash flows from financing activities
Share issue
48,215
306
Share issue costs
(2,123)
-
Sale of shares held in trust
198
-
Interest paid
(633)
(830)
Payments on property lease liabilities
(1,622)
(1,451)
Proceeds from borrowings
10,116
4,802
Repayments of borrowings
-
(9,728)
Net cash generated from/ (utilised in) financing activities
54,151
(6,901)
Increase/ (Decrease) in cash and cash equivalents
35,760
(4,746)
Cash and cash equivalents at beginning of year
16,205
20,704
Exchange gain on cash and cash equivalents
4,390
247
Cash and cash equivalents at end of year
56,355
16,205
Consolidated statement of changes in equity
for the financial year ended 31 December 2020
Share capital
Share premium
Retained
earnings
Merger relief reserve
Own shares held in trust
Translation reserve
Total
$000
$000
$000
$000
$000
$000
$000
Balance at 1 January 2020
427
107,403
11,331
19,641
(665)
(4,918)
133,219
Comprehensive income for the year
(Loss) for period
-
-
(29,854)
-
-
-
(29,854)
Other comprehensive income
Exchange differences on translating foreign operations
-
-
-
-
-
4,910
4,910
Income tax credit on items recorded in other comprehensive income
-
-
1,129
-
-
-
1,129
Total comprehensive income for the year
-
-
(28,725)
-
-
4,910
(23,815)
Issue of share capital
168
48,047
-
-
-
-
48,215
Share issue costs
-
(2,123)
-
-
-
-
(2,123)
Share-based payments
-
1,398
-
-
(74)
1,324
Equity-settled deferred consideration
-
-
150
-
-
-
150
Share option tax charge - deferred
-
-
50
-
-
-
50
Reduction of shares held in trust
-
-
(68)
-
665
-
597
Total contributions by and distributions by owners
168
45,924
1,530
-
665
(74)
48,213
Balance at 31 December 2020
595
153,327
(15,864)
19,641
-
(82)
157,617
Balance at 1 January 2019
421
107,103
60,143
19,641
(665)
(5,529)
181,114
Comprehensive income for the year
(Loss) for period
-
-
(50,596)
-
-
-
(50,596)
Other comprehensive income
Exchange differences on translating foreign operations
-
-
-
-
-
611
611
Total comprehensive income for the year
-
-
(50,596)
-
-
611
(49,985)
Contributions by and distributions to owners
Issue of share capital
6
300
-
-
-
-
306
Share-based payments
-
-
1,845
-
-
-
1,845
Equity-settled deferred consideration
-
-
1,416
-
-
-
1,416
Share option tax charge - deferred
-
-
(1,584)
-
-
-
(1,584)
Share option tax charge - current
-
-
107
-
-
-
107
Total contributions by and distributions by owners
6
300
1,784
-
-
-
2,090
Balance at 31 December 2019
427
107,403
11,331
19,641
(665)
(4,918)
133,219
Notes to the consolidated financial information
for the financial year ended 31 December 20201. Reporting entity
accesso Technology Group plc is a public limited company incorporated in the United Kingdom, whose shares are publicly traded on the AIM market. The company is domiciled in the United Kingdom and its registered address is Unit 5, The Pavilions, Ruscombe Park, Twyford, Berkshire RG10 9NN. This consolidated financial information comprises the company and its subsidiaries (together referred to as the "Group").
The Group's principal activities are the development and application of ticketing, mobile and eCommerce technologies, licensing and operation of virtual queuing solutions and providing a personalised experience to customers within the attractions and leisure industry. The eCommerce technologies are generally licensed to operators of venues, enabling the online sale of tickets, guest management, and point-of-sale ("POS") transactions. The virtual queuing solutions and personalised experience platforms are installed by the Group at a venue, and managed and operated by the Group directly or licensed to the operator for their operation.
2. Basis of accounting
The preliminary results for the year ended 31 December 2020 and the results for the year ended 31 December 2019 are prepared under International Financial Reporting Standards and applicable law. The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2020.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2020 or 2019 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS.
The Group's consolidated financial statements have been prepared in accordance with IFRS. They were authorised for issue by the Company's board of directors on 23 March 2021.
Details of the Group's accounting policies are included in Notes 3 and 4.
3. Changes to significant accounting policies
Other new standards and improvements
A number of new standards are also effective or available for early adoption from 1 January 2020 but they do not have a material effect on the Group's financial information.
·
Amendments to References to Conceptual Framework in IFRS Standards
·
Definition of a Business (Amendments to IFRS 3
·
Definition of Material (Amendments to IAS 1 and IAS8)
·
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
·
COVID-19-Related Rent Concessions (Amendment to IFRS 16)
New standards and interpretations not yet adopted
A number of new standards, amendments to standards, and interpretations are either not effective for 2020 or not relevant to the group, and therefore have not been applied in preparing these accounts.
4. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial information are set out below. The policies have been consistently applied to all the periods presented.
Basis of consolidation
This consolidated financial information incorporates the results of accesso Technology Group plc and all of its subsidiary undertakings as at 31 December 2020 using the acquisition method. Subsidiaries are all entities over which the Group has the ability to affect the returns of the entity and has the rights to variable returns from its involvement with the entity. The results of subsidiary undertakings are included from the date of acquisition.
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are written off to the Group income statement in the period incurred. The acquiree's identifiable assets, liabilities, and contingent liabilities that meet the conditions under IFRS 3 are recognised at their fair value at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities, and contingent liabilities recognised.
Investments, including the shares in subsidiary companies held as fixed assets, are stated at cost less any provision for impairment in value. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.
Lo-Q (Trustees) Limited, a subsidiary company that holds an employee benefit trust on behalf of accesso Technology Group plc, is under control of the Board of directors and hence has been consolidated into the Group results.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Going concern
The financial information has been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
Following the impact of COVID-19 and the subsequent decrease in revenues, accesso Technology Group plc (the Group), took several steps to preserve the cash position of the Group including raising additional cash of $46.1m through a placing and open offer, obtaining additional loan facilities of £8m until 31 August 2021 ($10.4m) and reducing underlying administrative expenses by $1.4m a month for the year.
Subsequent to year end the Group has signed a new banking agreement with Investec Bank PLC and settled in full the facility with Lloyds Bank PLC. This agreement gives a facility of £18m through to March 2024 and the covenants in the first 2 years are minimum revenue and minimum liquidity only. Minimum revenue covenants are tested quarterly on a 12-month basis ending on each test date at $50m for June 2021, September 2021 and December 2021; $55m for March 2022, June 2022 and September 2022; and $60m for December 2022. Minimum liquidity is £10.7m of freely available cash to be tested for four consecutive quarters starting on June 2021. As at 19 March 2021 the Group has cash of $28.6m and available facilities of £18m subject to Investec Bank PLC securing charges over our US subsidiaries.
The Directors have prepared cash flow forecasts for the Group for a period of 24 months from the date of this financial information, which indicate that, taking account of severe but plausible downsides and the anticipated impact of COVID-19, the Group will have sufficient funds to meet the liabilities of the Group as they fall due for that period.
The base case assumes that there is a steady re-opening of attractions and that Group revenue and EBITDA gradually increases through 2021 although are still below the levels seen in 2019. Within the base case there are contingencies to allow for a shortfall to the expected level of performance. Under this scenario, the Group has sufficient liquidity and adequate headroom within its existing cash reserves and facilities and complies with all covenants throughout the review period.The severe but plausible downside case assumes that the impact of COVID-19 lasts for longer with a lower and slower opening of attractions with FY21 revenues being in line with those achieved in FY20. It also assumes that steps would be taken to protect the Group's financial position by taking actions which are in the Group's control such as deferring capital expenditure, significantly reducing areas of expenditure such as use of subcontractors and travel and accommodation costs but assumes no government support in terms of furlough or delays in tax payments. Under this scenario, the Group would also have sufficient liquidity and adequate headroom within its existing cash reserves and facilities and complies with all covenants throughout the review period.
Consequently, the directors are confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for the period of assessment to 31 December 2022 and therefore have prepared the financial information on a going concern basis.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the rates ruling when the transactions occur.
Monetary assets and liabilities denominated in foreign currency are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
Foreign operations
The assets and liabilities of foreign operations, including goodwill, are translated into USD at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into USD at the rates ruling when the transactions occur, or appropriate averages.
Foreign currency differences on translating the opening net assets at an opening rate and the results of operations at actual rates are recognised in other comprehensive income and accumulated in the translation reserve. Retranslation differences recognised in other comprehensive income will be reclassified to profit or loss in the event of a disposal of the business, or the Group no longer has control or significant influence.
Revenue from contracts with customers
IFRS 15 provides a single, principles based five step model to be applied to all sales contracts as outlined below. It is based on the transfer of control of goods and services to customers and replaces the separate models for goods and services.
1.
Identify the contract(s) with a customer
2.
Identify the performance obligations in the contract
3.
Determine the transaction price
4.
Allocate the transaction price to the performance obligations in the contract
5.
Recognise revenue when or as the entity satisfies its performance obligations.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured reliably. The following table provides information about the nature and timing of the satisfication of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies.
Type of product/service/ Segment
Nature of the performance obligations and significant payment terms
Accounting policy
a. Point-of-sale (POS) licences and support revenue - Ticketing and distribution
Customers obtain control of the POS licence once it is installed on their hardware for terms between one and three years. They have access to ongoing support which is typically for a twelve-month period, this support is not necessary for the functionality of the licence, support revenue is therefore a distinct performance obligation from the licence performance obligation.
With agreements longer than one year, invoices are generated either quarterly or annually, usually payable within thirty days.
Although payments are made over the term of the agreement, the agreement is binding for the negotiated term. The total transaction price is payable over the term of the agreement via the annual or quarterly instalments.
IFRS 15 considers these licences to be recognised at a point in time which is determined to be when the customer has been provided the software. These licences provide the customer with the right of use of the POS software as it exists, it is at the customers discretion to accept any updates to the software, it is fully functional from the date it is provided to the customer and considered a distinct performance obligation.
Support revenue is carved out of the total consideration using an estimate that best reflects its stand-alone selling price and is continued to be recognised rateably out of contract liabilities as the customer receives the benefit of the support.
b. Software licences and the related maintenance and support revenue - Ticketing and distribution and Guest Experience
Certain software licences are installed on a customer's hardware in a fully functional state together with support and maintenance for a twelve-month term. The software licence does not require the maintenance and support to operate, providing the customer with control of the licence for a twelve-month term and representing a separate performance obligation.
Contract terms are typically either three years or perpetual whereby on each anniversary of the contract the customer is required to pay the annual support and maintenance to be granted the annual software licence at a 100% discount from the selling price. This option to renew is considered a material right under IFRS 15 and represents a separate performance obligation.
IFRS 15 considers right of use licences to be recognised at a point in time which is determined to be when the customer has been provided with a functional software licence.
The maintenance and support revenue is determined using an estimate that best reflects its stand-alone selling price and is continued to be recognised rateably as the customer receives the benefit of the maintenance and support.
The option to renew each year's licence at a full discount by paying the annual maintenance and support is deferred and recognised at a future point in time when the customer renews. The amount that is deferred is dependent on the term of the contract. For example: on the inception of a three-year contract, two thirds of the licence fee consideration would be deferred and released equally on the first and second anniversary when the customer renews their maintenance and support. Perpetual licences are recognised in the same manner, with the exception being that the contract term is estimated to be five years. As such, the renewal discounts are deferred and spread over the remaining four years at each point the customer renews their maintenance and support.
Type of product/service
Nature of the performance obligations and significant payment terms
Accounting policy
c. Virtual queuing system - Guest Experience
Virtual queuing systems are installed at a client's location, and revenue is recognised when the park guest uses the service. The Group's performance obligation is either to provide a licence to and maintain a system in the park or operate the system within the park.
IFRS 15 focuses on control of the goods or services. Management have determined that the Group is acting as the agent in all queuing contracts as it is the attractions who bring the guest to the parks, control hours of operation and have influence over many aspects of the service we supply. accesso therefore only recognises its portion of the sale as revenue, rather than the full amount of the guest payment.
d. Ticketing and eCommerce revenue - Ticketing and distribution
Revenue is recognised at the time the ticket is sold or the transaction takes place. Invoices are issued monthly and generally payable within thirty days.
Ticketing and eCommerce revenue is recognised at the time the ticket is sold or the transaction takes place.
e. Professional services - Ticketing and distribution and Guest Experience
Professional services revenue is typically providing customised software development and in general is agreed with the customer and billed at each month end. Certain contracts span longer time periods whereby the Group carry out customisation and deliver software releases to customers at predetermined milestones.
Bespoke professional services work is recognised over time where the Group has enforceable rights to revenue in the event of cancellation.
The group recognise revenue over time using the input method (hours/total budgeted hours) when this method best depicts the group's performance of transferring control.
For certain customers the output method is adopted where the group's right to consideration corresponds directly with the completed monthly performance obligation, revenue for these customers is recognised in line with the amount of revenue the group is entitled to invoice.
f. Hardware sales - Ticketing and distribution and Guest Experience
On certain contracts, customers request that the group procure hardware on their behalf which the group has determined to be a distinct performance obligation.
This revenue is recognised at the point the customer obtains control of the hardware which is considered to be the point of delivery when legal title passes.
g. Platform fees
Cloud-based experience management platform systems are used by certain venues to provide customer relationship management, guest personalisation, payment and ordering services, push notifications, scheduling, offers, location-based services, consumer facing screens and many other services to end users at attractions. These secure platforms are provided to venues together with support under annual contracts.
Revenue is billed monthly and recognised over-time as the performance obligations of hosting and supporting the secure platforms are provided to the venues.
Contract assets and contract liabilities
Contract assets represent licence fees which have been recognised at a point in time but where the consideration is contractually payable over time, professional service revenue whereby control has been passed to the customer and deferred contract commissions incurred in obtaining a contract which are recognised in line with the recognition of the revenue. Contract assets for point in time licence fees and unbilled professional service revenue represent financial assets and are considered for impairment on an expected credit loss model, these assets have historically had immaterial levels of bad debt and are with credit worthy customers, and consequently the group has not recognised any impairment provision against them.
Contract liabilities represent discounted renewal options on licence arrangements whereby a customer has the right to renew their licence at a full discount subject to the payment of annual support and or maintenance fees on each anniversary of the contract. Contract liabilities are recognised as income when a customer exercises their renewal right on each anniversary of the contract and pays their annual maintenance and support. In the situation of a customer terminating their contract all unexercised deferred renewal rights would be recognised as income, representing a lapse of the renewal right options. The licence fees related to these contract liabilities are non-refundable.
Where these assets or liabilities mature in periods beyond 12 months of the balance sheet date they are recognised within non-current assets or non-current liabilities as appropriate.
Interest expense recognition
Expense is recognised as interest accrues, using the effective interest method, to the net carrying amount of the financial liability.
Employee benefits
Share-based payment arrangements
The Group issues equity-settled share-based payments to full-time employees. Equity-settled share-based payments are measured at the fair value at the date of grant, with the expense recognised over the vesting period, with a corresponding increase in equity. The amount recognised as an expense is adjusted to reflect the Group's estimate of shares that will eventually vest, such that the amount recognised is based on the number of awards that meet the service and non-market performance conditions at the vesting date.
The fair value of Enterprise Management Incentive (EMI) and unapproved share options is measured by use of a Black-Scholes model, and share options issued under the Long-Term Incentive Plan (LTIP) are measured using the Monte Carlo method, due to the market-based conditions upon which vesting is dependent. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The LTIP awards contain market-based vesting conditions where they have been set. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Pension costs
Contributions to the Group's defined contribution pension schemes are charged to the Consolidated statement of comprehensive income in the period in which they become due.
Property, plant and equipment
Items of property, plant and equipment are stated at cost of acquisition or production cost less accumulated depreciation and impairment losses.
Depreciation is charged so as to write off the cost of assets, less residual value, over their estimated useful lives, using the straight-line method, on the following bases:
Plant, machinery, and office equipment
20 - 33.3%
Installed systems
25 - 33.3%, or life of contract
Furniture and fixtures
20%
Leasehold Improvements
Shorter of useful life of the asset or time remaining within the lease contract
Inventories
The Group's inventories consist of parts used in the manufacture and maintenance of its virtual queuing product, along with peripheral items that enable the product to function within a park.
Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow-moving items. Inventories are calculated on a first in, first out basis.
Park installations are valued on the basis of the cost of inventory items and labour plus attributable overheads. Net realisable value is based on estimated selling price less additional costs to completion and disposal.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the Consolidated and Company statements of financial position differs from its tax base, except for differences arising on:
·
the initial recognition of goodwill;
·
the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
·
investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities / (assets) are settled / (recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
·
the same taxable Group company; or
·
different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Current income tax
The tax expense or benefit for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. See note 8 for further discussion on provisions related to tax positions.
Goodwill
Any excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised in the Consolidated Statement of Financial Position as goodwill and is not amortised.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment at an operating segment level before aggregation, at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired.
Where the recoverable amount of the cash-generating unit is less than its carrying amount including goodwill, an impairment loss is recognised in the Consolidated Statement of Profit or Loss.
Externally acquired intangible assets
Intangible assets are capitalised at cost and amortised to nil by equal instalments over their estimated useful economic life.
Intangible assets are recognised on business combinations if they are separable from the acquired entity. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. The significant intangibles recognised by the Group and their useful economic lives are as follows:
·
Trademarks over 10 years
·
Patents over 20 years
·
Customer relationships and supplier contracts over 1 to 15 years
·
Acquired internally developed technology over 5 to 7 years
Internally generated intangible assets and research and development
Expenditure on internally developed products is capitalised if it can be demonstrated that it is substantially enhancing an asset and:
·
It is technically feasible to develop the product for it to be sold;
·
Adequate resources are available to complete the development;
·
There is an intention to complete and sell the product;
·
The Group is able to sell the product;
·
Sale of the product will generate future economic benefits; and
·
Expenditure on the project can be measured reliably
In accordance with IAS 38 'Intangible Assets', expenditure incurred on research and development is distinguished as either related to a research phase or to a development phase. Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects is recognised in the Consolidated income statement as incurred.
Development expenditure is capitalised and amortised within administrative expenses on a straight-line basis over its useful economic life between 3 - 5 years from the date the intangible asset goes into use. The amortisation expense is included within administrative expenses in the Consolidated income statement.
All advanced research phase expenditure is charged to the income statement. For development expenditure, this is capitalised as an internally generated intangible asset, only if it meets the criteria noted above. The Group has contractual commitments for development costs of $nil (2019: $nil).
Acquired intellectual property rights and patents
Intellectual property rights comprise assets acquired, being external costs, relating to know how, patents, and licences. These assets have been capitalised at the fair value of the assets acquired and are amortised within administrative expenses on a straight-line basis over their estimated useful economic life of 5 to 7 years.
Fair value of contingent consideration
Contingent consideration payable in cash in connection with acquisitions is measured at its fair value as of the reporting date and classified as a financial liability with subsequent re-measurement through profit and loss.
Equity settled contingent consideration that results in either a fixed number of equity instruments or no issue of equity where the employment condition is not met is treated as equity settled. Equity settled contingent consideration is fair valued at the acquisition date, it is not re-measured at each reporting date and its subsequent settlement is accounted for within equity.
Where cash or equity consideration is contingent on the continued employment of the sellers the fair value of the expense is recognised as a remuneration expense in the statement of comprehensive income over the deferral period, where the employment condition does not apply and the consideration is in respect of a business combination it is included within cost of investment.
Financial assets
The Group classifies all its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:
Trade and loan receivables: Trade receivables are initially recognised by the Group and carried at original invoice amount less an allowance for any uncollectible or impaired amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Debts are written off when they are identified as being uncollectible. Contract assets and other receivables are recognised at fair value. Loan receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. Impairment of a financial asset is recognised if there is objective evidence that the balance will not be recovered.
Cash and cash equivalents in the statement of financial position comprise cash at bank, cash in hand and short-term deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the consolidated statement of cash flow.
Financial liabilities
The Group treats its financial liabilities in accordance with the following accounting policies:
·
Trade payables and other short-term monetary liabilities are recognised at fair value and subsequently at amortised cost.
·
Bank borrowings and finance leases are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. "Interest expense" in this context includes initial transaction costs and premiums payable on redemption, as well as any interest payable while the liability is outstanding. For loan modifications the Group assesses if the loan can be prepaid without significant penalty and if so no gain or loss is recognised in the income statement at the date of the modification.
·
Derivative financial liability - forward foreign currency contracts that are out-of-money derivatives using period end exchange rates, relative to the forward point exchange rate entered into by the Group on inception of the agreement, are held as derivative financial liabilities. These level one financial instruments are carried in the statement of financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income in the finance expense line. Variation margin paid to the counter party on these forward contracts has been offset against the derivative financial liability in the Statement of Financial Position.
Employee benefit trust (EBT)
As the company is deemed to have control of its EBT, it is treated as a subsidiary and consolidated for the purposes of the consolidated financial information. Within the company balance sheet the EBT is accounted as an investment held at cost less accumulated impairment. The EBT's assets (other than investments in the company's shares), liabilities, income, and expenses are included on a line-by-line basis in the consolidated financial information. The EBT's investment in the company's shares is deducted from equity in the consolidated statement of financial position as if they were treasury shares.
Government grants
The Group received government support for payroll costs throughout the year including the UK Coronavirus Job Retention Scheme and equivalent schemes in Australia and Germany. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it becomes receivable.
IFRS 16 Leases
The Group assesses whether a contract is or contains a lease, under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. On transition to IFRS 16 on 1 January 2019, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 January 2019. The Group elected to measure right-of-use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
As a lessee
The Group leases commercial office space. The Group has elected not to recognise right of use assets and lease liabilities for some leases of low value. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
The Group recognises a right of use asset and lease liability at the lease commencement date. The right of use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounting using the Group's incremental borrowing rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The Group has applied judgement to determine the lease term for some lease contracts that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right of use assets recognised.
In adopting IFRS 16 on 1 January 2019 the Group took advantage of the practical expedients that were applicable. These included:
·
Applying a single discount rate to portfolio of leases with similar characteristics.
·
The Group has also relied on its previous assessment of whether leases are onerous or not immediately before initial application.
·
Leases with a term ending within 12 months of 1 January 2020 were classified as short-term leases and expensed through the administrative expenses.
·
Initial direct costs have been excluded from the measurement of the right of use asset at the date of application.
5. Functional and presentation currency
The presentation currency of the Group is US dollars (USD) in round thousands. Items included in the financial statements of each of the Group's entities are measured in the functional currency of each entity. The Group used the local currency as the functional currency including the parent company, where the functional currency is sterling. The Group's choice of presentation currency reflects its significant dealings in that currency.
6. Critical judgments and key sources of estimation uncertainty
In preparing this consolidated financial information, the Group makes judgements, estimates and assumptions concerning the future that impact the application of policies and reported amounts of assets, liabilities, income and expenses.
The resulting accounting estimates calculated using these judgements and assumptions are based on historical experience and expectations of future events and may not equal the actual results. Estimates and underlying assumptions are reviewed on an ongoing basis, and revisions to estimates are recognised prospectively.
The judgements and key sources of assumptions and estimation uncertainty that have a significant effect on the amounts recognised in the financial information are discussed below.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial information are below:
Capitalised development costs
The Group capitalises development costs in line with IAS 38 Intangible Assets. Management applies judgement in determining if the costs meet the criteria and are therefore eligible for capitalisation at the outset of a project, $0.46m has been capitalised on new projects during 2020. Significant judgements include the determination that assets have been substantially enhanced, the technical feasibility of the development, recoverability of the costs incurred, and economic viability of the product and potential market available considering its current and future customers. See internally generated intangible assets and research and development within note 4 for details on the Group's capitalisation and amortisation policies, and Intangible Assets, note 10, for the carrying value of capitalised development costs.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments in the following year are:
Goodwill, intangible and investment asset testing
The key assumptions used in the testing of goodwill allocated to operating segments and intangible assets allocated to cash generated units are set out in detail along with sensitivity analysis in note 10.
The investment impairment testing is calculated on a value in use basis and uses the key assumptions relevant to its investments set out in note 10.
Useful economic lives of capitalised development costs
The group amortise its capitalised development costs over 3 - 5 years as this has been deemed by management to be the best reflection of the lifecycle of their technology. If this useful economic life estimate were to be 4 or 6 years the impact on the current year amortisation would be $1,738k higher and $1,015k lower respectively. Management will review this estimate each year to ensure it is reflective of the technologies being developed.
7. Business and geographical segments
Segmental analysis
The Group's operating segments under IFRS have been determined with reference to the financial information presented to the Board of directors. The Board of the Group is considered the Chief Operating Decision Maker ("CODM") as defined within IFRS 8, as it sets the strategic goals for the Group and monitors its operational performance against this strategy.
The Group's Ticketing and Distribution operating segment comprises the following products:
o
accesso Passport ticketing suite using our hosted proprietary technology offering to maximise up selling, cross selling and selling greater volumes.
o
accesso Siriusware software solutions providing modules in ticketing & admissions, memberships, reservations, resource scheduling, retail, food service, gift cards, kiosks and eCommerce.
o
The accesso ShoWare ticketing solution for box office, online, kiosk, mobile, call centre and social media sales.
o
Ingresso operate a consolidated distribution platform which connects venues and distributors, opening up a larger global channel for clients to sell their event, theatre and attraction tickets.
The Group's virtual queuing solution (accesso LoQueue) and experience management platform (The Experience Engine 'TE2') are headed by segment managers who discuss the operating activities, financial results, forecasts and plans of their respective segments with the CODM. These two distinct operating segments share similar economic characteristics, customers and markets; the products are heavily bespoke, technology and software intensive in their delivery and are directly targeted at improving a guest's experience of an attraction or entertainment venue, whilst providing cross-selling opportunities and increased revenues to the venues. Management therefore conclude that they meet the aggregation criteria.
The Group's Guest Experience operating segment comprises the following aggregated segments:
o
accesso LoQueue providing leading edge virtual queuing solutions to take customers out of line, improve guest experience and increase revenue for theme parks
o
The Experience Engine ("TE2") experience management platform which delivers personalised real time immersive customer experiences at the right time elevating the guest's experience and loyalty to the brand
The Group's assets and liabilities are reviewed on a group basis and therefore segmental information is not provided for the statements of financial position of the segments.
The CODM monitors the results of the operating segments prior to charges for interest, depreciation, tax, amortisation and non-recurring items but after the deduction of capitalised development costs. The Group has a significant amount of central unallocated costs which are not segment specific. These costs have therefore been excluded from segment profitability and presented as a separate line below segment profit.
The following is an analysis of the Group's revenue and results from the continuing operations by reportable segment which represents revenue generated from external customers.
2020
$000
2019
$000
Ticketing and Distribution
37,966
79,334
Guest Experience
18,128
37,848
Total revenue
56,094
117,182
Ticketing and Distribution
Guest
Experience
Central unallocated
costs
Group
Year ended 31 December 2020
$000
$000
$000
$000
Cash EBITDA (*)
5,578
(738)
(16,290)
(11,450)
Capitalised development spend
2,969
Depreciation and amortisation (excluding acquired intangibles)
(14,664)
Aborted sale process costs
(461)
Deferred and contingent payments
(150)
Amortisation related to acquired intangibles
(2,573)
Impairment related to development intangibles
(2,627)
Share-based payments
(1,398)
Finance income
10
Finance expense
(2,518)
Loss before tax
(32,862)
Ticketing and Distribution
Guest
Experience
Central unallocated
costs
Group
Year ended 31 December 2019
$000
$000
$000
$000
Cash EBITDA (*)
22,176
7,343
(22,378)
7,141
Capitalised development spend
21,064
Depreciation and amortisation (excluding acquired intangibles)
(16,014)
Aborted sale process costs
(305)
Deferred and contingent payments
(1,416)
Amortisation related to acquired intangibles
(11,286)
Impairment related to TE2
(53,617)
Share-based payments
(1,845)
Finance income
21
Finance expense
(1,324)
Loss before tax
(57,581)
(*) Cash EBITDA is calculated as operating profit before the deduction of amortisation, impairment of intangible assets, depreciation, acquisition costs, deferred and contingent payments, and costs related to share-based payments but after capitalised development costs
The segments will be assessed as the Group develops and continues to make acquisitions.
An analysis of the Group's external revenues and non-current assets (excluding deferred tax and contract assets) by geographical location are detailed below:
Revenue
Non-current assets
2020
2019
2020
2019
$000
$000
$000
$000
UK
5,228
27,547
26,866
29,346
Other Europe
1,826
4,044
10
7
Australia/South Pacific/Asia
2,413
3,710
255
221
USA and Canada
45,753
78,655
108,714
121,915
Central and South America
874
3,226
263
447
56,094
117,182
136,108
151,936
Revenue generated in each of the geographical locations is generally in the local currency of the venue or operator based in that location.
Major customers
The Group has entered into agreements with theme parks, theme park groups, and attractions to operate its technology in single or multiple theme parks or attractions within the theme park group.
There are two park and attraction operators with which the Group has contractual relationships with combined segmental revenues in excess of 10% of the total group revenue. The first park operator accounted for $5.4m (2019: $7.3m) Ticketing and Distribution revenue, the customers of this operator accounted for $5.4m (2019: $16.4m) Guest Experience revenue. The second park and attractions operator accounted for $5.0m (2019: $9.5m) Ticketing and Distribution revenue, the customers of this operator accounted for $0.9m (2019: $4.1m) Guest Experience revenue.
Another customer within the Guest Experience segment accounted for $7.0m of group revenue in 2020 (2019: $9.6m).
8. Tax
The table below provides an analysis of the tax charge for the periods ended 31 December 2020 and 31 December 2019:
2020
2019
$000
$000
UK corporation tax
Current tax on income for the period
352
1,854
Adjustment in respect of prior periods
(1,031)
6
(679)
1,860
Overseas tax
Current tax on income for the period
(531)
230
Adjustment in respect of prior periods
415
49
(116)
279
Total current taxation
(795)
2,139
Deferred taxation
Original and reversal of temporary difference - for the current period
(2,218)
(9,037)
Impact on deferred tax rate changes
(255)
-
Original and reversal of temporary difference - for the prior period
260
(87)
(2,213)
(9,124)
Total taxation benefit
(3,008)
(6,985)
The differences between the actual tax charge for the period and the theoretical amount that would arise using the applicable weighted average tax rate are as follows:
2020
2019
$000
$000
Loss on ordinary activities before tax
(32,862)
(57,581)
Tax at United States tax rate of 24% (2019: 24%)
(7,887)
(13,820)
Effects of:
Expenses not deductible for tax purposes
(89)
615
Goodwill impairment not deductible
-
4,177
Profit/(loss) subject to foreign taxes at a lower marginal rate
(68)
440
Adjustment in respect of prior period - income statement
(356)
(32)
US R&D credits/other US tax credits
(2,584)
-
Share options
224
748
Impact of rate changes
(255)
-
Deferred tax on US losses not recognised
8,327
-
(Release)/ recognition of uncertain tax positions
(262)
897
Other
(58)
(10)
Total tax benefit
(3,008)
(6,985)
Deferred taxation
Asset
Liability
$000
$000
Group
At 31 December 2018
7,999
(17,596)
Credited to income
2,194
6,930
Credited directly to equity
(1,584)
-
Foreign Currency translation
38
(112)
At 31 December 2019
8,647
(10,778)
(Charged)/ credited to income
(1,007)
3,219
Credited directly to equity
50
-
Foreign currency translation
11
(21)
At 31 December 2020
7,701
(7,580)
Company
At 31 December 2018
-
(327)
(Credited)/charged to income
(83)
389
Credited directly to equity
(433)
-
Foreign currency translation
20
(30)
Netted against the asset
496
(496)
At 31 December 2019
-
(464)
(Credited)/charged to income
(44)
(48)
Credited directly to equity
(32)
-
Foreign currency translation
5
(22)
Netted against the asset
71
(71)
At 31 December 2020
(605)
The following table summarises the recognised deferred tax asset and liability:
2020
2019
Group
$000
$000
Recognised asset
Tax relief on unexercised employee share options
539
455
Short term timing differences
3,584
696
Net operating losses & tax credits
1,728
5,010
S163(j) US interest disallowance
1,850
2,486
Deferred tax asset
7,701
8,647
Recognised liability
Capital allowances in excess of depreciation
(4,675)
(7,651)
Uncertain tax positions
(509)
(635)
Short term timing differences
(456)
(182)
Business combinations
(1,940)
(2,310)
Deferred tax liability
(7,580)
(10,778)
Company
Recognised asset
Tax relief on unexercised employee share options
45
128
Short term timing differences
18
7
Offset against Company deferred tax asset
(63)
(135)
Deferred tax asset
-
-
Recognised liability
Capital allowances in excess of depreciation
(661)
(599)
Short term timing differences
(7)
-
Offset against Company deferred tax asset
63
135
Deferred tax liability
605
464
Group
Unrecognised asset
Net operating losses - US (Included within the unrecognised deferred tax asset is $2.2m relating to prior periods)
10,752
-
Unrecognised deferred tax asset
10,752
-
Tax rates in the UK increased from 17% to 19% with effect from 1 April 2020 and the US rate remained at 21%, before state taxes. As both rate changes had been substantively enacted, deferred tax assets and liabilities were measured at a rate of 19% (2019: 17%) and 21% (2019: 21%) plus state taxes in the UK and US, respectively.
There are no material unrecognised deferred tax assets outside of the US.
Taxation and transfer pricing
The Group is an international technology business and, as such, transfer pricing arrangements are in place to cover funding arrangements, management costs and the exploitation of IP between Group companies. Transfer prices and the policies applied directly affect the allocation of Group-wide taxable income across a number of tax jurisdictions. While transfer pricing entries between legal entities are on an arm's length basis, there is increasing scrutiny from tax authorities on transfer pricing arrangements. This could result in the creation of uncertain tax positions.
The Group provides for anticipated risks, based on reasonable estimates, for tax risks in the respective countries in which it operates. The amount of such provisions can be based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible authority. Uncertainties exist with respect to the evolution of the Group following international acquisitions holding significant IP assets, interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income.
Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.
Uncertainties in relation to tax liabilities are provided for within income tax payable to the extent that it is considered probable that the Group may be required to settle a tax liability in the future. Settlement of tax provisions could potentially result in future cash tax payments; however, these are not expected to result in an increased tax charge as they have been fully provided for in accordance with management's best estimates of the most likely outcomes.
Ongoing tax assessments and related tax risks
The Group has undertaken a review of potential tax risks and current tax assessments, and whilst it is not possible to predict the outcome of any current or future tax enquiries, adequate provisions are considered to have been included in the Group accounts to cover any expected estimated future settlements.
In common with many international groups operating across multiple jurisdictions, certain tax positions taken by the Group are based on industry practice and external tax advice or are based on assumptions and involve a degree of judgement. It is considered possible that tax enquiries on such tax positions could give rise to material changes in the Group's tax provisions.
The Group is consequently, from time to time, subject to tax enquiries by local tax authorities and certain tax positions related to intercompany transactions may be subject to challenge by the relevant tax authority.
The Group has recognised provisions where it is not probable that tax positions taken will be accepted, totalling $0.5m (2019: $0.6 million) in relation to transfer pricing risks and nil (2019: $0.3 million) in relation to availability of tax losses and international R&D claims.
9. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the net profit attributable to ordinary shareholders, after adjustments for instruments that dilute basic earnings per share, by the weighted average of ordinary shares outstanding during the period (adjusted for the effects of dilutive instruments).
Earnings for adjusted earnings per share, a non-GAAP measure, are defined as profit before tax before the deduction of amortisation related to acquisitions, impairment of intangible assets, acquisition costs, deferred and contingent consideration linked to continued employment, and costs related to share-based payments, less tax at the effective rate on tax impacted items.
The table below reflects the income and share data used in the total basic, diluted, and adjusted earnings per share computations.
2020
2019
Loss attributable to ordinary shareholders ($000)
(29,854)
(50,596)
Basic EPS
Denominator
Weighted average number of shares used in basic EPS (000s)
35,213
27,459
Basic loss per share (cents)
(84.78)
(184.26)
Diluted EPS
Denominator
Weighted average number of shares used in basic EPS (000s)
35,213
27,459
Effect of dilutive securities
Options (000s)
983
406
Deferred share consideration on business combinations (000s)
-
17
Weighted average number of shares used in diluted EPS (000s)
36,196
27,882
Diluted loss per share (cents)
(84.78)
(184.26)
The Group has made a loss in the year, and therefore the options and equity settled deferred consideration are anti-dilutive. As a result, basic and diluted earnings per share are presented on the same basis for the years ended 31 December 2020 and 31 December 2019.
2020
$000
2019
$000
Adjusted EPS
Profit attributable to ordinary shareholders ($000)
(29,854)
(50,596)
Adjustments for the period related to:
Amortisation relating to acquired intangibles from acquisitions
2,573
11,286
Impairment of goodwill
-
17,403
Impairment of intangible assets
2,627
36,214
Aborted sale process costs
462
305
Deferred and contingent consideration linked to employment
150
1,416
Share-based compensation and social security costs on unapproved options
1,398
1,845
(22,644)
17,873
Net tax related to the above adjustments (2020: 19.7%, 2019: 19.1%):
1,291
(9,420)
Adjusted profit attributable to ordinary shareholders ($000)
(21,353)
8,453
Adjusted basic EPS
Denominator
Weighted average number of shares used in basic EPS (000s)
35,213
27,459
Adjusted basic (loss)/earnings per share (cents)
(60.64)
30.78
Adjusted diluted EPS
Denominator
Weighted average number of shares used in diluted EPS (000s)
36,196
27,882
Adjusted diluted (loss)/earnings per share (cents)
(60.64)
30.32
81,718 LTIP awards were not included in the calculation of diluted EPS because their exercise is contingent on the satisfaction of certain criteria that had not been met as at 31 December 2020 (2019: 453,665).
10. Intangible assets
The cost and amortisation of the Group's intangible fixed assets are detailed in the following table:
Goodwill
Customer
relationships & supplier contracts
Trademarks
Acquired internally developed intellectual property
Patent & IPR costs
Development costs
Totals
$000
$000
$000
$000
$000
$000
$000
Cost
At 31 December 2018
116,144
18,314
1,841
52,981
732
58,026
248,038
Foreign currency translation
646
-
-
40
32
591
1,309
Additions
-
-
-
-
1
21,998
21,999
Disposals
-
-
-
-
(3)
(2,765)
(2,768)
At 31 December 2019
116,790
18.314
1,841
53,021
762
77,850
268,578
Foreign currency translation
721
-
-
16
21
481
1,239
Additions
-
-
-
-
2,969
2,969
Disposals
-
-
-
-
(6,737)
(6,737)
At 31 December 2020
117,511
18,314
1,841
53,037
783
74,563
266,049
Amortisation
At 31 December 2018
-
7,196
688
24,544
507
17,771
50,706
Foreign currency translation
-
(36)
(33)
(163)
28
482
278
Charged
-
2,468
139
8,679
97
12,903
24,286
Impairment
17,403
3,648
1,027
16,348
-
15,191
53,617
Charged
-
-
-
-
-
(2,765)
(2,765)
Disposal
At 31 December 2019
17,403
13,276
1,821
49,408
632
43,582
126,122
Foreign currency translation
-
-
-
34
18
463
515
Charged
-
882
16
1,675
21
11,425
14,019
Impairment
-
-
-
430
-
2,197
2,627
Disposal
-
-
-
-
-
(6,737)
(6,737)
At 31 December 2020
17,403
14,158
1,837
51,547
671
50,930
136,546
Net book value
At 31 December 2020
100,108
4,156
4
1,490
112
23,633
129,503
At 31 December 2019
99,387
5,038
20
3,613
130
34,268
142,456
The cost and amortisation of the company's intangible fixed assets are detailed in the following table:
Patent costs
Development costs
Totals
$000
$000
$000
Cost
At 31 December 2018
560
12,965
13,525
Foreign currency translation
1
463
464
Additions
25
1,579
1,604
Disposals
(3)
(2,765)
(2,768)
At 31 December 2019
583
12,242
12,825
Foreign currency translation
14
473
487
Additions
-
803
803
Disposals
-
(3,631)
(3,631)
At 31 December 2020
597
9,887
10,484
Amortisation
At 31 December 2018
421
6,708
7,129
Foreign currency translation
21
262
283
Charged
33
2,191
2,224
Disposals
-
(2,765)
(2,765)
At 31 December 2019
475
6,396
6,871
Foreign currency translation
11
352
363
Impairment
-
468
468
Charged
21
1,911
1,932
Disposals
-
(3,631)
(3,631)
At 31 December 2020
507
5,496
6,003
Net Book Value
At 31 December 2020
90
4,391
4,481
At 31 December 2019
108
5,846
5,954
Capitalised development costs are not treated as a realised loss for the purpose of determining the Company's distributable profits as the costs meet the conditions requiring them to be treated as an asset in accordance with IAS 38.
Impairment testing of goodwill
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment or at where indicators of impairment exist. The recoverable amount is determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows. The goodwill balances of the group are monitored and tested at an operating segment level, further details on their composition are set out below.
The carrying amount of goodwill is allocated as follows:
2020
2019
$000
$000
Ticketing and Distribution (CGU1, 2 and 3) *
71,609
70,887
LoQueue (CGU5) **
28,500
28,500
100,109
99,387
* Comprises accesso, LLC, Siriusware, Inc, accesso Passport trading within Accesso Australia PTY Limited being CGU1, VisionOne Worldwide Limited & its subsidiaries and accesso ShoWare trading within Accesso Australia PTY Limited being CGU2 and Ingresso Group Limited & subsidiaries as CGU 3.
** Comprises the accesso LoQueue trading within accesso Technology Group plc, Lo-Q, Inc., Lo-Q Service Canada Inc and Accesso Australia PTY Limited as CGU 5.
Current and prior year impairment of Ingresso Group Limited intangible assets
At 30 June 2020 it was identified that the remaining intangible assets of Ingresso Group Limited had indicators of impairment due to the impact of COVID-19 and the slower anticipated recovery within the UK theatre sector. This test was revisited at 31 December 2020 with the same outcome. At 31 December 2019 this test was performed which also required an impairment charge to the intangible assets of the CGU.
The recoverable amount of Ingresso Group Limited's allocated intangible assets, excluding goodwill, (which is part of the Ticketing and Distribution Operating Segment and tested at that level in compliance with IAS36 Impairment) was tested for impairment based on a value in use method over a period that reflected the useful life of the essential assets, being the acquired internally developed intellectual property and development costs of five years. The key assumptions used in the estimation of the recoverable amount are set out in the table below.
The discount rate was a pre‑tax measure estimated based on comparable listed company gearing and capital structures, an equity risk premium and a 30-year risk-free (2019: 20 year risk-free) rate applicable to the UK, small stock premium relative to the market and size of business and an appropriate cost of debt relative to market conditions. The pre-tax discount rate has reduced by 1.5% to 11.9% (2019: 13.4%) reflecting a reduction in the equity risk premium and risk-free rate.
The cash flow projections included specific estimates for 5 years (2019: 3 years plus 2% thereafter) per Board approved forecasts.
Average EBITDA during the forecast period was estimated by taking into account a 2-year recovery to 2019 levels following the severe impact of COVID-19 on the UK theatre sector, thereafter the growth rate from 2023 to 2025 is an average of 9%. Across the 5-year period the average is a growth rate of 55.2% (2019: 23.4%), the increase reflecting an increase from a COVID-impacted base level in 2020.
If the discount rate were to be increased or reduced by 1% the impairment would remain unchanged given the CGU assets are written down to nil with some excess. The consequence of this test the carrying value of the Ingresso allocated assets was reduced by $1.4m (2019: $7.0m), which included intangible assets as set out below.
The recoverable value of Ingresso as a stand-alone CGU over a five-year term as at 31 December 2020 was $1.8m (2019: $2.8m).
Prior year impairment of The Experience Engine ('TE2') - Cash Generating Unit and Operating Segment
The recoverable amount of The Experience Engine which also represents its own Operating Segment was based on a value in use, estimated using discounted cash flows. The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent management's assessment of the expected performance of TE2 combined with historical data from both external and internal sources are set out in the table below.
The discount rate was a pre‑tax measure estimated based on comparable listed company gearing and capital structures, an equity risk premium and a 20 year risk-free rate applicable to the US, small stock premium relative to the market and size of business and an appropriate cost of debt relative to market conditions. The pre-tax discount rate has increased by 2.7% to 14.4% to take account of increased forecasting accuracy risk.
Prior year impairment of The Experience Engine ('TE2') - Cash Generating Unit 4 (CGU4) and Operating Segment (continued)
The cash flow projections included specific estimates for three years and a 2% terminal growth rate thereafter. The terminal growth rate was determined based on management's estimate of the long‑term compound annual growth rate relative to the US market, consistent with the assumptions that a market participant would make.
Average EBITDA during the forecast period was estimated taking into account past experience and had been significantly de-risked from the previous impairment test to reflect current performance. TE2 performed below management expectations in 2019 which has required the estimated EBITDA growth assumption to move to 2%.
The estimated recoverable amount of TE2 is negative and consequently the carrying amount of all its intangible assets were been impaired to nil with a charge of $46.6m charged to administrative expenses. This impairment was not sensitive to plausible changes in key assumptions.
The below table sets out the intangible asset impairments recorded within the Guest Experience and Ticketing and Distribution segments:
2020
2020
2020
2019
2019
2019
Guest Experience
Ticketing and Distribution
Total
Guest Experience
Ticketing and Distribution
Total
$000
$000
$000
$000
$000
$000
Goodwill
-
-
-
17,403
-
17,403
Intangible assets
-
1,360
1,360
29,222
6,992
36,214
Impairment of specific development projects(*)
468
799
1,267
Impairment charge recorded within administrative expense
468
2,159
2,627
46,625
6,992
53,617
(*)A review of all project development costs capitalised was performed at year end. As a result, an impairment of $1.27m was recorded against projects which are no longer considered commercially and technically feasible.
The key assumptions used in the value in use calculations are as follows:
2020
2019
Pre-tax discount rate (%)
accesso, LLC & Siriusware, Inc. (CGU 1)
14.0%
14.4%
VisionOne Worldwide Limited and its subsidiaries (CGU 2)
14.0%
14.4%
Ingresso Group Limited and subsidiaries (CGU 3)
11.9%
13.4%
The Experience Engine (CGU 4)
14.0%
14.4%
LoQueue * (CGU 5)
14.0%
14.4%
Average EBITDA growth rate during forecast period (average %)**
accesso, LLC & Siriusware, Inc. (CGU 1)
111.1%
10.7%
VisionOne Worldwide Limited and its subsidiaries (CGU 2)
520.8%
26.3%
Ingresso Group (CGU 3)
55.2%
23.4%
The Experience Engine (CGU 4)
-44.4%
2%
LoQueue * (CGU 5)
232.6%
12.8%
Terminal growth rate (%)
accesso, LLC & Siriusware, Inc. (CGU 1)
2.0%
2.0%
VisionOne Worldwide Limited and its subsidiaries (CGU 2)
2.0%
2.0%
Ingresso Group (CGU 3)
2.0%
2.0%
The Experience Engine (CGU 4)
2.0%
2.0%
LoQueue * (CGU 5)
2.0%
2.0%
Period on which detailed forecasts based (years)
accesso, LLC & Siriusware, Inc. (CGU 1)
5
3
VisionOne Worldwide Limited and its subsidiaries (CGU 2)
5
3
Ingresso Group (CGU 3)
5
3
The Experience Engine (CGU 4)
5
3
LoQueue * (CGU 5)
5
3
* Comprises accesso LoQueue trading within accesso Technology Group plc, Lo-Q, Inc., Lo-Q Service Canada Inc and Accesso Australia PTY Limited
**Average EBITDA growth rates have increased significantly as a result of the recovery from 2020 COVID impacted base levels to 2019 levels in 2022/ 2023 and a significant business reorganisation during 2020. Growth rates in 2024 and 2025 are as follows:
2020
Average EBITDA growth rate in years 4 and 5 (average %)
accesso, LLC & Siriusware, Inc. (CGU 1)
29.9%
VisionOne Worldwide Limited and its subsidiaries (CGU 2)
14.7%
Ingresso Group (CGU 3)
1.4%
The Experience Engine (CGU 4)
-8.1%
LoQueue * (CGU 5)
13.1%
Operating margins have been based on experience, where possible, and future expectations in the light of anticipated economic and market conditions. Growth rates beyond the formally budgeted period are based on economic data pertaining to the region concerned.
The discount rates applied to all CGUs was a pre‑tax measure estimated based on comparable listed company gearing and capital structures, an equity risk premium and risk-free rate applicable to the country, small stock premium relative to the market and size of business and an appropriate cost of debt relative to market conditions.
Sensitivity analysis
If any of the following changes were made to the following key assumptions the carrying value and recoverable amount would be equal as at 31 December 2020. A considerable amount of judgement is applied in setting discount rates, forecasts and terminal values, all of which will be impacted by the current uncertainty in the market and the speed at which our customers and the wider macro markets recover from the impacts of COVID-19.
Ticketing and Distribution*
accesso
LoQueue**
2020
2019
2020
2019
Pre-tax discount rate
Increase by 1.1%
Increase by 1.5%
Increase by 7.5%
Increase by 33.6%
EBITDA Growth rate during detailed forecast period (average)
Reduce by 7.8%
Reduce by 7.7%
Reduce by 40.0%
Reduce by 68.0%
Terminal growth rate
Reduce by 1.1%
Reduce by 1.3%
Reduce by 8.6%
Reduce by 33.5%
Excess over carrying value ($000)
$10,481
$16,887
$36,138
$76,176
* Comprises accesso, LLC, Siriusware, Inc., VisionOne Worldwide Limited & its subsidiaries and Ingresso Group Limited & subsidiaries and accesso Passport/ accesso ShoWare trading within Accesso Australia PTY Limited (CGUs 1, 2 and 3)
** Comprises the LoQueue trading within accesso Technology Group plc, Lo-Q, Inc., Lo-Q Service Canada Inc and Accesso Australia PTY Limited (CGU 5)
The Ticketing and Distribution segment is sensitive to relatively small changes in the key assumptions as set out below, if there were to be a 2% increase in the pre-tax discount rate the result would be an $9.0m impairment charge. If the terminal growth rate were to reduce by 2% the result would be a $8.3m impairment charge. If the recovery of the Ticketing and Distribution segment back to 2019 levels were to be slower than anticipated in 2023, this would lead to an impairment.
We do not consider there are any plausible changes in assumptions that would give rise to an impairment in accesso LoQueue over the next financial year.
Development costs not yet available for use
Development cost assets not yet available for use reside in the CGUs as follows and are considered annually for impairment in line with the goodwill attached to those CGUs. These capitalised costs relate to development projects which have not been put into use as at the year-end:
2020
2019
$000
$000
accesso, LLC & Siriusware, Inc. (CGU 1)
49
3,069
11. Called up share capital
2020
2019
Ordinary shares of 1p each
Number
$000
Number
$000
Opening balance
27,642,822
427
27,117,995
421
Issued in relation to exercised share options
50,187
1
204,186
2
Issued in relation to deferred acquisition consideration
40,538
1
320,641
4
Issued in relation to the placing and open offer
13,481,744
166
-
-
Closing balance
41,215,291
595
27,642,822
427
On 9 June the company's shareholders approved the placing, direct subscription and open offer to issue 13,481,744 new ordinary shares at £2.90p to raise gross proceeds of £39.1 million ($48.2 million).
During the period, 50,187 shares (2019: 204,186 shares), with a nominal value $630 (2019: $1,552), were allotted following the exercise of share options.
In addition, during 2020, 40,538 shares (2019: 320,641) were issued in respect of the deferred acquisition consideration to certain employees of Blazer and Flip Flops Inc for a nominal value of $522 (2019: $4,201).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Following the adoption of new Articles of Association on 12 April 2011 the company no longer has an authorised share capital limit.
All issued share capital is fully paid as at 31 December 2020. At 31 December 2019 200,000 shares registered in the name of Lo-Q (Trustees) Limited were unpaid, a wholly owned subsidiary of the company on behalf of the Lo-Q Employee Benefit Trust.
12. Post balance sheet events
On 12 February 2021 the Long-Term Incentive Plan performance conditions were approved by the Remuneration Committee for the Chief Executive Officer and Chief Financial Officer in respect of the 582,567 and 154,422 awards issued to them on 27 January 2020 and 16 September 2020 respectively. The performance conditions are expected to reduce the fair value of the awards and will be accounted for as a modification, cumulatively reducing the share-based payment charge in 2021 following an expert's fair value computation of the awards.
On 19 March 2021 the Group settled its two drawn borrowing facilities with Lloyds of £13.2m and $8.9m and refinanced its loan facilities with Investec Bank PLC; entering into a 3 year £18m Coronavirus Large Business Interruption Scheme revolving credit facility. The draw down on the new facility is subject to securing charges over our US subsidiary entities, a process which is expected to complete by 2 April 2021. The facility is subject to quarterly covenant tests on minimum revenue and minimum liquidity for 2 years to December 2022; from March 2023 additional covenants are added for leverage and interest cover.
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