REG - Actual Experience - Preliminary Results
03/02/2022 07:00
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RNS Number : 5335A Actual Experience PLC 03 February 2022
3 February 2022
Actual Experience plc
(the "Company" or "Actual Experience" or "Actual")
Preliminary Results
Actual Experience plc (AIM: ACT), the analytics-as-a-service company,
announces its preliminary results for the year ended 30 September 2021.
Financial highlights
· Group revenue of £1.74m (2020: £1.96m), primarily generated
from sales to Channel Partners
· Gross profit decreased to £0.83m (2020: £1.02m) due to lower
revenue
· Loss for the year increased to £5.85m (2020: £4.68m) due to
lower revenues, lower tax credits, and an impairment charge of £0.8m
· Net cash at year end increased to £8.22m (2020: £2.75m) after
the completion of an oversubscribed £10m (gross) equity placing in January
2021
Operational highlights
· Launched new Human Experience Management (HXM) service
· Developed a direct sales capability to complement our existing
Channel Partner focus
· Completed our initial significant Business Impact Assessment
(BIA) project with a major energy company, followed by our first direct sales
success with a BIA order from a global FMCG company
· Received our first large multi-year Continuous Improvement (CI)
order, with resulting recurring revenue commencing after year-end
Current trading and outlook
· Achieved two important contract wins post year-end:
o BIA order to assist a Channel Partner with its hybrid workplace strategy
o Further BIA contract win with a leading global food and beverages business
through a Channel Partner
· As previously announced, received notice after year-end that a
long-standing legacy contract will not renew in the 2022 fiscal year; this
contract delivered revenue of £1.2m in 2021 and is expected to contribute
£0.4m in the 2022 fiscal year
· Investment in direct sales and marketing is delivering a strong
pipeline of large global blue-chip companies. While the length of sales cycles
remains a challenge, the focus will be to convert many of these opportunities
into significant recurring revenue streams
Dave Page, CEO of Actual Experience plc, commented:
"Our strategic pivot to focus on the people, planet and profit issues of
hybrid working is strongly aligned with ongoing changes to global working
practices. While this is gaining traction with clients, our sales cycle has
been longer than expected, and efforts to reduce this have been hampered by
the pandemic and the resultant elongation of procurement processes and
decision making across many industries. We are making every effort to speed up
this process.
"There is improving momentum in a growing pipeline of direct and Channel
Partner sales opportunities, which also includes many large global blue-chip
customers. We are expecting to grow the number of these opportunities, and
with improving referenceability, convert them to BIA and ongoing CI customers.
"Positively, the continued focus on hybrid working and a growing investor
focus on ESG and diversity, equity and inclusion are external factors that are
strongly aligned with our new offering. We believe this macro-economic
situation will continue to help us to accelerate the number of opportunities
in our pipeline and grow our business with our existing blue-chip BIA and CI
customers."
Enquiries:
Actual Experience plc Tel: +44 (0)203 128 8170
Dave Page, Chief Executive Officer
Steve Bennetts, Chief Financial Officer
Singer Capital Markets Advisory LLP Tel: +44 (0)207 496 3000
Shaun Dobson
Will Goode
MHP Communications Tel: +44 (0)203 128 8170
Reg Hoare
James Bavister
About Actual Experience
Actual Experience's goal is to make the digital world work for everyone,
everywhere, all of the time. As the working world evolves post-pandemic, the
global shift to a flexible hybrid model has brought with it a significant
challenge; how do businesses create an environment that gives their people
what they need to thrive, whilst protecting the commercial efficiency of the
business and driving growth at the same time?
By underpinning their strategic decision making with our data-driven insights,
our customers gain the clarity and confidence needed to build sustainable
ecosystems within their organisations - delivering both a great employee
experience and increasing the efficiency of the digital workplace. Powered by
over 10 years of academic research, our service doesn't need any interaction
with employees to provide a unique and highly actionable dataset that People,
Technology and Finance leaders can rely upon to plan impactful projects
against their most critical agenda items including wellbeing, profitability,
DE&I and ESG initiatives.
Actual Experience is listed on the London Stock Exchange (AIM: ACT). Our
corporate headquarters are in Bath, UK. Actual Experience's unique and
patented digital analytics-as-a-service is founded on cutting-edge research
from Queen Mary University of London.
For further information please visit www.actual-experience.com
(http://www.actual-experience.com)
Chair's Statement
Introduction
Transitioning to effective hybrid home and office working practices has become
a priority for most enterprises and our AaaS service delivers a much-needed
new source of actionable data and insights that helps companies to achieve
their people, planet, and profit goals.
2021 has been a pivotal year for Actual Experience as the pandemic emphasised
the significant digital inequalities in the UK and globally. A priority has
been to work with our large partners to enable them to develop the capability
to market our Hybrid Workplace Management System to their customer base.
Equally important has been our focus on building a direct sales capability. As
noted more fully in the Chief Executive's Statement, an important early
success has been the adoption by a leading global energy supplier of our
Continuous Improvement (CI) service. At the time of writing, three other
customers have completed their initial Business Impact Assessment (BIA) and we
are in discussions with them regarding a transition to CI engagements. The
Company is currently focused on a significant number of other commercial
opportunities with very large enterprises.
As noted in the Financial Review, an impairment charge of £820,110 has been
recorded in the Financial Information for the year. This charge primarily
arises from the decision to refocus the business on the delivery of the
Company's Hybrid Workplace Management System. A consequence of this decision
has been to de-emphasise several software development projects. While it is
possible that there will be future sales from this technology it is not
currently being actively marketed and, accordingly, it has been decided to
fully expense this previously capitalised expenditure.
As previously announced, a long-standing contract that relies on our legacy
offering, will not renew in the 2022 fiscal year due to a change in customer
strategy. This contract delivered revenues of £1.2m in the year just ended
and is expected to contribute £0.4m in the 2022 fiscal year.
Equity placing
The £10m placing in January 2021 has enabled the Company to develop a direct
sales capability to augment our existing Partner channels. In addition, we are
investing in the further development of our cloud infrastructure to enable it
to scale to meet the demands of the world's largest organisations. A further
priority is to increase the automation of customer reports; in this way, we
will be able to increase the number of customers that the Company is able to
service concurrently.
I would like to thank all shareholders for their support. Our year-end net
cash stood at £8.2m (30 September 2020: £2.7m).
People
In April, we announced my decision to retire from my role as Chair by the time
of our Annual General Meeting to be held in March 2022, with the intention of
remaining a Non-executive Director for a further year.
As announced in September 2021, Kirsten English, a current Non-executive
Director, will become our next Chair. Kirsten has extensive, relevant
experience and I am confident she will be a strong successor. Kirsten was
appointed to Actual Experience's Board in January 2020.
In March 2021, we welcomed Sandy Sadhra as General Counsel and Investor
Relations Director to the senior leadership team, and in October 2021, Scarlet
Jeffers as Chief Product Officer.
On behalf of the Board, I would like to take the opportunity to thank all our
employees for their dedication, commitment, and achievements in what has been
for many people a personally challenging time.
Outlook
As noted above, our sales team are engaged, directly or with partners, in
multiple sales opportunities. Our clear focus in the coming months is to
convert these opportunities to recurring Continuous Improvement revenue
streams. Notwithstanding this, we are aware that shareholders have been
frustrated with the rate of progress to date. Management is making every
effort to accelerate the development of the prospect pipeline by assimilating
lessons learned from initial sales engagements and is seeking to optimise
current and future sales cycles. However, one of these lessons is that sales
cycles will typically be longer than initially expected and therefore our
planning has been adjusted to accommodate this timing. Further details of
our operational and financial considerations in this regard are outlined in
Note 1 to the financial information.
Our innovative technology has been validated by early customers and, as large
enterprises increasingly recognise the need for actionable data and insights,
I remain excited by the very significant addressable opportunity and the
prospects for the Company.
Stephen Davidson
Chair
Chief Executive's Statement
As noted in the Chair's statement, the workplace has become far more digital
for the vast majority of people. Two years ago our work with customers assumed
that people spent 25-30% of their time working and interacting with each other
digitally. Following the impact of the pandemic, and the global transition to
hybrid working, our customers now tell us that their people spend 60-90% of
their time working digitally.
It is therefore critical that the digital workplace works properly for
everyone, everywhere, all the time. If it does, we know that efficiency
increases and employee experience improves. If it doesn't, stress levels
increase, trust evaporates and output declines.
Creating a more efficient workplace that supports better mental health and
work-life balance sits at the heart of what our technology does. It helps our
customers achieve digital equality for all employees and a digital workplace
so reliable that business travel, and CO2 emissions, can be sustainably
replaced by virtual meetings.
We have been working with global blue-chip organisations to provide a Hybrid
Workplace Management System that prepares the digital workplace for new ways
of working. It brings a fundamental new source of actionable data and
intelligent visibility that helps our customers achieve their people goals,
whilst benefiting the planet and enhancing their profitability ('people,
planet and profit' as we have termed it).
Performance Review
Our strategic pivot to focus on the people, planet and profit issues of hybrid
working is strongly aligned with ongoing changes to global working practices.
While this is gaining traction with clients, our sales cycle has been longer
than expected, and efforts to reduce this have been hampered by the pandemic
and the resultant elongation of procurement processes and decision-making
across many industries.
Nevertheless, we achieved a notable initial success with one of the world's
largest energy suppliers. In early 2021 our Business Impact Assessment (BIA)
identified significant people, planet and profit benefits that would result
from specified improvements to their digital workplace. In August 2021, the
customer awarded us a three-year Continuous Improvement (CI) contract worth
£1m, with the potential for subsequent extensions. The CI programme will
provide the energy supplier with actionable data on an ongoing basis to
achieve and then maintain the identified people, planet and profit benefits.
In addition, we announced a BIA with a leading FMCG company in July 2021, our
first major new business win from our direct sales team. Towards the end of
the year, we were delighted to announce two further BIA contracts. The first
of these was a sale to one of our Channel Partners to assist them with their
own hybrid workplace strategy; this also provides their sales team with the
ability to reference their own use of our offering to their customers. The
second contract was with a leading global food and beverages business through
one of our Channel Partners.
As previously announced, a long-standing contract that relies on our legacy
offering will not renew in the 2022 fiscal year due to a change in customer
strategy. This contract delivered revenues of £1.2m in the year just ended
and is expected to contribute £0.4m in the 2022 fiscal year.
As noted in the Financial Review, an impairment charge has been recorded in
the Financial Information for the year. This charge primarily arises from the
decision to pivot the business to the delivery of our Hybrid Workplace
Management System, as discussed above. A consequence of this decision has
been to de-emphasise several software development projects. While it is
possible that there will be future sales from this technology it is not
currently being actively marketed and, accordingly, it has been decided to
fully expense this previously capitalised expenditure.
People
Our people have been remarkably resilient over the last two years. Strong
teamwork has enabled us to secure new business and grow our company in an
environment that is both challenging and exciting.
We initiated our direct sales strategy early in 2021. It is intended to 'get
out ahead' of our partners, generating demand for our new offering and
creating compelling reference deployments. We expect many of these deals to be
supported by our partners in terms of fulfilment.
We now have four talented direct sales people, while our expanded marketing
team has leveraged social media channels to raise awareness of our hybrid
workplace offering. This has included some highly insightful work with
high-profile human resources (HR) thought leaders.
In parallel, our Channel Partners are improving their execution. They are
placing more focus on accessing the right people for us to sell to, such as
senior human resources executives.
Hybrid Future
Businesses, and their employees, particularly 'white-collar' workers, have
enthusiastically embraced the myriad benefits of digitally-enabled hybrid
working.
However, not all companies have realised how fundamentally hybrid working
changes their organisation, and consequently they don't yet understand the
impact the digital workplace is having on their people or their business. We
seek to work with companies that have embraced this new paradigm and who
recognise that we are able to provide the necessary new insights, visibility
and actionable data. In this way, they are able to manage their evolving
hybrid workplace to ensure that their people have the digital resources
necessary to improve the efficiency of their business.
Opportunities
We have a land-and-expand sales model, and are focused on developing and
growing our business with the blue-chip organisations that have undertaken
their initial BIA projects or are already in Continuous Improvement.
There is improving momentum in a growing pipeline of direct and Channel
Partner sales opportunities, which also includes many large global blue-chip
customers. We are expecting to grow the number of these opportunities, and
with improving referenceability, convert them to BIA and ongoing CI customers.
Investing in our Capability
We are investing to scale our business. As our commercial sales activities
increase, a priority for us is to further develop the scalability of our data
centres so that they are able to meet the demands of the world's largest
companies while improving our gross margins to 90%. Another area of focus
for us is to increasingly automate the generation of reports so that we are
able to handle higher volumes of projects.
Outlook
Overall, whilst we have made good progress during the year, our sales cycle
remains lengthy and efforts to reduce this have been hampered by the pandemic
and the resultant elongation of decision-making processes. We are, however,
making every effort to speed up this process. Further details of our
operational and financial considerations in this regard are outlined in Note 1
to the financial information.
Positively, the continued focus on hybrid working and a growing investor focus
on ESG and diversity, equity and inclusion are external factors that are
strongly aligned with our new offering. We believe this macro-economic
situation will continue to help us to accelerate the number of opportunities
in our pipeline and grow our business with our existing blue-chip BIA and CI
customers.
This has been the first full year of our people, planet and profit focused
offering, and I'm pleased to say that our patented technology is being
validated every day by some of the biggest corporates in the world.
Dave Page
Chief Executive Officer
FINANCIAL REVIEW
Revenue
Revenue recognised in the year ended 30 September 2021 was £1,741,207 (2020:
£1,960,933) and relates to the supply of hybrid workplace
Analytics-as-a-Service (AaaS) and associated consultancy services to
customers. Approximately half of the revenue reduction relates to the ending
of small legacy contracts, with the balance attributable to the increase in
value of sterling against the US dollar.
99% of revenue was derived from sales to Channel customers (2020: 99%) with
the balance arising from direct sales. This high percentage reflects the
Group's prior strategic focus on achieving revenue growth from its Channel
Partners. While our Partners will continue to represent an important sales
channel for Actual, it is expected that a significant proportion of future
revenue will be generated by the Company's recently formed direct sales team.
Cost of sales and gross profit
The gross profit for the year was £833,209 (2020: £1,020,400); the decrease
from the prior year is a result of lower revenues. Included in cost of sales
are data centre cloud expenses of £534,262 (2020: £507,566), and salary and
related costs of customer support teams totalling £373,736 (2020: £432,967).
Expenses
Administrative expenses comprising R&D, operational support, sales and
marketing, finance and administration costs, and foreign exchange gains and
losses, totalled £6,721,914, an increase of £1,121,305 compared to the prior
year. Most of the increase in expenses in the year relates to an impairment
charge of £820,110 (2020: £nil) relating to previously capitalised costs as
detailed in Note 7. This impairment charge primarily arises from the decision
to refocus the business on the delivery of the company's Hybrid Workplace
Management System. A consequence of this decision has been to de-emphasise
several software development projects. While it is possible that there will be
future sales from this technology it is not currently being actively marketed
and, accordingly, it has been decided to fully expense this previously
capitalised expenditure.
The rest of the increase arises from the additional investment in the business
following the completion of the equity fundraise in January 2021. Personnel
costs, however, continue to be the largest expense and represent approximately
63% of the Group's cost base (2020: 83%). The functional cost breakdown is as
follows:
2021 2020
Administrative expenses £ £
Research & development 2,131,682 1,960,213
Impairment to previously capitalised development spend 820,110 -
Operational support 1,008,287 1,055,113
Sales & marketing 1,548,040 1,512,709
Finance & administration 1,209,945 1,045,116
Foreign exchange losses 3,850 27,458
Total 6,721,914 5,600,609
Tax
The tax credits recognised in the current and previous financial year,
£44,103 and £295,550 respectively, arose from the accrual of R&D tax
credits.
Loss for the year
Losses after tax totalled £5,847,195 (2020: loss of £4,681,488). This
increase in losses is the result of lower revenues, lower tax credits, and the
impairment charge.
Loss per share
The loss per share for the year was 10.84p (2020: loss per share of 9.87p).
The increase in loss per share reflects the increase in total comprehensive
loss for the year, partially offset by an increase in the weighted average
number of ordinary shares in issue.
Dividend
No dividend has been proposed for the year ended 30 September 2021 (2020:
£nil).
Cash flow
As noted in the Chair's Statement, the Company completed a £10m (gross)
placing in January 2021. This placing resulted in the significant increase
in cash during the period; the Group ended the year with cash and cash
equivalents totalling £8,216,198 (2020: £2,754,274).
We are investing in the growth of our operations to address what we believe to
be a significant commercial opportunity and our cash flow from operations was
therefore negative during the year ended 30 September 2021, in line with
expectations.
The Group's costs are mostly operating related, with very little investment
required for capital infrastructure. Cash used by operating activities was
£3,145,093 for the year, compared to cash used of £3,856,067 for the year
ended 30 September 2020. The increase in trade and other payables and the
decrease in trade receivables contributed to this reduction in cash used by
operating activities. This operating cash requirement was funded by cash
reserves.
Free cash flow for the year was £(3,861,701) (2020: £(5,004,343)). Free cash
flow is defined as net cash flows used in operating activities, plus
development of intangible assets, plus purchase of property, plant and
equipment.
Software development capitalisation
The Directors believe that the software development capitalisation criteria in
IAS 38 have been met and accordingly development costs, net of amortisation
charges of £897,199 have been capitalised, as at 30 September 2021 (2020:
£1,972,781). An impairment review during the year resulted in assets of
£820,110 being written off, as detailed fully in Note 7.
Going Concern
As more fully described in Note 1 to the financial information, the amounts
and timing of future revenues remain uncertain. If the Group is unable to
secure an appropriate combination of new revenue contracts and/or cost
reductions, then it may not have sufficient resources to meet its liquidity
requirements for the foreseeable future. Accordingly, material uncertainty
exists which may cast significant doubt about its ability to continue as a
going concern.
Key performance indicators
As the Group is in the process of developing and commercialising its services,
the Directors consider the key quantitative performance indicators to be sales
revenues of £1,741,207 (2020: £1,960,933) and the level of cash held in the
business of £8,216,198 (2020: £2,754,274). The Board performs regular
reviews of actual results against budget, and management monitors cash
balances on a monthly basis to ensure that the business has sufficient
resources to enact its current strategy. Certain non-financial measures, such
as the number of active customers and deployed Dus, are monitored on a monthly
basis. The Board will continue to review the KPIs used to assess the business
as it grows.
Steve Bennetts
Chief Financial Officer
Financial information
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2021
2021 2020
Note £ £
REVENUE 2 1,741,207 1,960,933
Cost of sales (907,998) (940,533)
GROSS PROFIT 833,209 1,020,400
Administrative expenses (6,721,914) (5,600,609)
OPERATING LOSS BEFORE EXCEPTIONAL ITEM (5,888,705) (4,580,209)
Exceptional item: redundancy expense - (411,525)
OPERATING LOSS 3 (5,888,705) (4,991,734)
Finance income 2,734 13,933
Finance expense (27,285) (31,140)
Finance expense - net (24,551) (17,207)
LOSS BEFORE TAX (5,913,256) (5,008,941)
Tax 4 66,061 327,453
LOSS FOR THE YEAR (5,847,195) (4,681,488)
Other comprehensive expense:
Items that may be reclassified to profit or loss:
Foreign currency difference on translation of overseas operations (19,314) (15,350)
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR (5,866,509) (4,696,838)
LOSS PER ORDINARY SHARE
Basic and diluted 5 (10.84)p (9.87)p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2021
Share Share Accumulated Total
capital premium losses equity
£ £ £ £
At 1 October 2019 94,249 34,706,402 (24,795,182) 10,005,469
Loss for the year - - (4,681,488) (4,681,488)
Other comprehensive expense for the year - - (15,350) (15,350)
Total comprehensive expense for the year - - (4,696,838) (4,696,838)
Transactions with owners, in their capacity as owners
Issue of shares 1,035 61,947 - 62,982
Share-based payment credit - - (174,842) (174,842)
At 30 September 2020 95,284 34,768,349 (29,666,862) 5,196,771
Loss for the year - - (5,847,195) (5,847,195)
Other comprehensive expense for the year - - (19,314) (19,314)
Total comprehensive expense for the year - - (5,866,509) (5,866,509)
Transactions with owners, in their capacity as owners
Issue of shares 19,254 9,444,106 - 9,463,360
Share-based payment charge - - 42,314 42,314
At 30 September 2021 114,538 44,212,455 (35,491,057) 8,835,936
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2021
2021 2020
Note £ £
ASSETS
Non-current assets
Property, plant and equipment 48,879 58,997
Right-of-use assets 670,814 782,606
Intangible assets 7 897,199 1,972,781
TOTAL NON-CURRENT ASSETS 1,616,892 2,814,384
Current assets
Trade and other receivables 584,819 690,514
Income tax receivable 4 44,103 295,550
Cash and cash equivalents 6 8,216,198 2,754,274
TOTAL CURRENT ASSETS 8,845,120 3,740,338
TOTAL ASSETS 10,462,012 6,554,722
LIABILITIES
Non-current liabilities
Deferred tax (8,901) (7,079)
Lease liabilities (604,894) (719,177)
TOTAL NON-CURRENT LIABILITIES (613,795) (726,256)
Current liabilities
Trade and other payables (897,041) (519,393)
Lease liabilities (115,240) (112,302)
TOTAL CURRENT LIABILITIES (1,012,281) (631,695)
TOTAL LIABILITIES (1,626,076) (1,357,951)
NET ASSETS 8,835,936 5,196,771
EQUITY
Share capital 114,538 95,284
Share premium 44,212,455 34,768,349
Accumulated losses (35,491,057) (29,666,862)
TOTAL EQUITY 8,835,936 5,196,771
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2021
2021 2020
Note £ £
Cash flows from operating activities
Loss before tax (5,913,256) (5,008,941)
Adjustments for:
Depreciation of property, plant and equipment 48,413 97,458
Depreciation of right-of-use assets 111,792 111,788
Amortisation of intangible assets 7 933,780 952,124
Impairment of intangible assets 7 820,110 -
(Profit)/loss on disposal of property, plant and equipment (359) 181
Non-cash employee benefits - share-based payments expense/(credit) 42,314 (174,842)
Finance expense/(income) - net 24,551 17,207
Operating cash outflow before changes in working capital (3,932,655) (4,005,025)
Decrease/(increase) in trade and other receivables 94,827 (4,968)
Increase/(decrease) in trade and other payables 373,405 (167,605)
Cash used in operations (3,464,423) (4,177,598)
Income taxes received 319,330 321,531
Net cash outflow from operating activities (3,145,093) (3,856,067)
Cash flows from investing activities
Development of intangible assets (678,308) (1,132,440)
Purchases of property, plant and equipment (38,300) (15,836)
Proceeds from sale of property, plant and equipment 363 -
Finance income 2,734 13,933
Net cash inflow/(outflow) from investing activities (713,511) (1,134,343)
Cash flows from financing activities
Proceeds from issue of share capital, net of costs 9,463,360 62,982
Principal element of lease payments (138,630) (173,288)
Employee Benefit Trust - repayment (23) (18,299)
Net cash inflow/(outflow) from financing activities 9,324,710 (128,605)
Increase/(decrease) in cash and cash equivalents 5,466,103 (5,119,015)
Effect of exchange rate fluctuations on cash held (4,179) (3,345)
Cash and cash equivalents at start of year 2,754,274 7,876,634
Cash and cash equivalents at end of year 6 8,216,198 2,754,274
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEAR ENDED 30 SEPTEMBER 2021
1 Basis of preparation
Actual Experience plc is a public limited company domiciled in the United
Kingdom and incorporated in England. The Company's registered office is Quay
House, The Ambury, Bath, BA1 1UA.
The financial information at pages 9 to 16 is extracted from the Group's
consolidated financial statements for the year ended 30 September 2021, which
were approved by the Board of Directors on 2 February 2022.
The financial information does not constitute statutory accounts within the
meaning of sections 434(3) and 435(3) of the Companies Act 2006 or contain
sufficient information to comply with the disclosure requirements of
international accounting standards in conformity with the requirements of the
Companies Act 2006 ('IFRS'), and the applicable legal requirements of the
Companies Act 2006.
The Group's auditors, PricewaterhouseCoopers LLP, have given an unqualified
audit opinion on the consolidated financial statements for the year ended 30
September 2021. The auditors' report included an emphasis of matter on going
concern which the auditors drew attention without qualifying their report. The
consolidated financial statements will be filed with the Registrar of
Companies, subject to their approval by the Company's shareholders on Thursday
24 March 2022 at the Company's Annual General Meeting.
Going concern
As in previous years, the Group and Company have continued to utilise their
cash resources to fund losses while the sales pipeline is being further
developed. The cash balance as at 30 September 2021 was £8.2m, which will
provide the Group and Company with sufficient resources to meet their
liquidity requirements at least until 30 September 2023, based on the Group's
latest budgeted sales and cost projections. The Directors have also prepared a
severe, but plausible downside scenario, based on significantly more
pessimistic sales forecasts, with corresponding reductions in controllable
costs. In this scenario also, the Group and Company will continue to meet
their liquidity requirements over the period.
The amounts and timing of future revenues in the Group's budgets remain
uncertain. The Group is experiencing an encouraging level of interest in its
services and it is in active discussions with its Channel Partners and several
large potential end-customers. The discussions are well progressed and are
expected to result in additional revenue for the Group. However, at present a
substantial proportion of the forecast revenue remains uncommitted and if the
Group and Company are unable to secure an appropriate combination of new
revenue contracts and/or cost reductions, then the Group and Company may not
have sufficient resources to meet their liquidity requirements over the
foreseeable future. Accordingly, a material uncertainty exists which may cast
significant doubt about the Group's and the Company's ability to continue as
going concern. Nevertheless, after making appropriate enquiries and
considering the assumptions and uncertainties described above, the Directors
have a reasonable expectation that the Group and Company will have adequate
resources to continue operating at least until 30 September 2023. Therefore,
the Directors continue to adopt the going concern basis in preparing the
financial statements and the financial statements do not include any of the
adjustments that would be required if the Group or Company were unable to
continue as going concern.
2 Revenue
The information that is presented to the Chief Executive Officer (CEO), who is
considered to be the Chief Operating Decision-Maker (CODM), for the purposes
of resource allocation and assessment of performance, is based wholly on the
overall activities of the Group. Due to the current size and activities of the
Group, there is a high degree of centralisation of activities. The Directors
therefore consider that there is one operating, and hence one reportable,
segment for the purposes of presenting information under IFRS 8; that of Human
Experience Management (HXM) Services. There are no differences between the
segment results and the Consolidated Statement of Comprehensive Income. The
assets and liabilities information presented to the CODM is consistent with
the Consolidated Statement of Financial Position.
During the year ended 30 September 2021 the Group had two customers who
generated more than 10% of total revenue. These customers generated 79% and
20% of revenue respectively.
During the year ended 30 September 2020 the Group had two customers who
generated more than 10% of total revenue. These customers generated 82% and
14% of revenue respectively.
An analysis of revenues by geographic location of customers is set out below:
2021 2020
£ £
United Kingdom 387,212 353,100
United States of America 1,353,995 1,607,833
1,741,207 1,960,933
3 Operating loss
2021 2020
£ £
Loss from operations is stated after charging:
Depreciation on property, plant and equipment 48,413 97,458
Depreciation of right-of-use assets 111,792 111,788
Amortisation of intangible assets 933,780 952,124
Employee costs (including exceptional item) 3,948,871 4,332,180
Foreign exchange losses 3,850 27,458
Impairment charge 820,110 -
Auditors' remuneration:
- Audit of these financial statements 51,720 50,750
Total auditors' remuneration 51,720 50,750
In the prior year, an exceptional item of £411,525 was separately disclosed
on the Consolidated Statement of Comprehensive Income. This related to
redundancies following a corporate reorganisation. There are no exceptional
items in the current year.
4 Tax
Tax on loss
2021 2020
£ £
Current tax:
UK corporation tax on losses of the year (63,705) (295,550)
Overseas taxes (4,178) (24,665)
Deferred tax:
Origination and reversal of timing differences 1,822 (7,238)
Total tax credit (66,061) (327,453)
Factors affecting the current tax credits
The tax assessed for the year varies from the standard UK company rate of
corporation tax as explained below:
2021 2020
£ £
Loss before tax (5,913,256) (5,008,941)
Tax at the UK corporate tax rate of 19% (2020: 19%) (1,123,519) (951,699)
Effects of:
Expenses not deductible for tax purposes 189,985 174,739
Unrecognised deferred tax asset on losses 897,765 851,347
Research and development enhancement in respect of the current year (864) (342,334)
Prior year adjustment (19,602) -
Employee share acquisition adjustment (9,826) (61,156)
Change in rate of tax used to calculate deferred tax liability - 1,650
Tax credit for the year (66,061) (327,453)
The Group has tax losses carried forward of approximately £39,474,000 (2020:
£34,800,000).
The Group has incurred qualifying expenditure on research and development
projects which has given rise to tax credits due from HM Revenue and Customs.
At 30 September 2021, the amount due from HMRC was £44,103 (2020: £295,550).
5 Loss per ordinary share
Basic loss per share is calculated by dividing the loss attributable to the
owners of the parent by the weighted average number of ordinary shares in
issue during the year. Diluted loss per share is calculated by adjusting the
weighted average number of ordinary shares in issue during the year to assume
conversion of all dilutive potential ordinary shares. The Company has one
class of potentially dilutive ordinary shares, being those share options
granted to employees where the exercise price is less than the average market
price of the Company's ordinary shares during the year. However, due to losses
incurred in both the current and previous financial year, there is no dilutive
effect from the potential exercise of these dilutive shares.
2021 2020
£ £
Total loss attributable to the equity holders of the parent (5,847,195) (4,681,488)
No. No.
Weighted average number of ordinary shares in issue during the year 53,911,253 47,452,334
Loss per share
Basic and diluted on loss for the year (10.84)p (9.87)p
6 Cash and cash equivalents
2021 2020
Bank credit rating: £ £
A+ - 2,660,809
A 5,215,643 -
A- 3,000,555 -
BBB+ - 93,465
Cash and cash equivalents 8,216,198 2,754,274
The above gives an analysis of the credit rating of the financial institutions
where cash balances are held.
All of the Group's cash and cash equivalents at 30 September 2021 are held in
instant access current accounts or short-term deposit accounts. Balances are
denominated in UK sterling (£) and US dollars ($) as follows:
2021 2020
£ £
Denominated in UK sterling 7,161,566 2,482,598
Denominated in US dollars 1,054,632 271,676
Cash and cash equivalents 8,216,198 2,754,274
The Directors consider that the carrying value of cash and cash equivalents
approximates to their fair value.
7 Intangible assets
Development costs
£
Cost
At 1 October 2019 4,308,443
Additions 1,132,440
At 30 September 2020 5,440,883
Additions 678,308
At 30 September 2021 6,119,191
Accumulated amortisation and impairment losses
At 1 October 2019 2,515,978
Charge for the year 952,124
At 30 September 2020 3,468,102
Charge for the year 933,780
Impairment charge 820,110
At 30 September 2021 5,221,992
Net book value
At 30 September 2021 897,199
At 30 September 2020 1,972,781
Amortisation and impairment charge
The amortisation of development costs is recognised within administrative
expenses in the Consolidated Statement of Comprehensive Income. The Directors
have reviewed the carrying value of the development costs at 30 September 2021
and have decided to write off assets with a net book value of £820,110 which
are no longer deemed commercially viable, based on key assumptions, such as
sales projections, in the Group's latest budget. Consequently, included with
administration expenses in the Consolidated Statement of Comprehensive Income
is an impairment charge of £820,110.
The impairment charge primarily arises from the decision to refocus the
business on the delivery of the Company's Hybrid Workplace Management System.
A consequence of this decision has been to de-emphasise several software
development projects. While it is possible that there will be future sales
from this technology it is not currently being actively marketed and,
accordingly, it has been decided to fully expense this previously capitalised
expenditure.
8 Annual Report and Financial Statements
The Company's Annual Report and Financial Statements for the year ended 30
September 2021, together with a notice convening the Company's Annual General
Meeting, will be posted to shareholders in due course.
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