REG - Beeks Fin Cloud Grp - Final Results
02/10/2023 07:00
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RNS Number : 2621O Beeks Financial Cloud Group PLC 02 October 2023
Beeks Financial Cloud Group plc
("Beeks" or the "Company")
Final Results for the year ended 30 June 2023
2 October 2023 - Beeks Financial Cloud Group plc (AIM: BKS), a cloud computing
and connectivity provider for financial markets, is pleased to announce its
final results for the year ended 30 June 2023.
Financial highlights
· Revenues(1) increased 22% to £22.36m (2022: £18.29m)
· Annualised Committed Monthly Recurring Revenue (ACMRR) up 23% to
£23.8m (2022: £19.3m) increasing further to £25.0m by the end of August
2023 following a strong start to the new financial year
· Gross profit up 15% to £9.12m (2022: £7.94m)
· Underlying(2) EBITDA increased 33% to £8.42m (2022: £6.31m)
· Underlying profit before tax(3) increased 13% to £2.33m (2022:
£2.06m)
· Underlying diluted EPS(4) 3.96p (2022: 4.19p)
· Net cash(5) as at 30 June 2023 of £4.41m (30 June 2022: £7.86m)
(1 )Revenue referenced throughout the accounts excludes grant income
and rental income
(2 )Underlying EBITDA is defined as profit for the year before
amortisation, depreciation, finance costs, taxation, acquisition costs, share
based payments, exchange rate gains/losses on statement of financial position
translation and exceptional non-recurring costs
(3 )Underlying profit before tax is defined as profit before tax
excluding amortisation on acquired intangibles, acquisition costs, share based
payments, exchange rate gains/losses on statement of financial position
translation and exceptional non-recurring costs
(4 )Underlying diluted EPS is defined as profit for the year excluding
amortisation on acquired intangibles, acquisition costs, share based payments,
exchange rate gains/losses on statement of financial position translation and
exceptional non-recurring costs divided by the number of shares including any
dilutive share options
(5 )Net cash is defined as closing cash less closing asset financing
loans and bank loans.
Statutory Equivalents
The above highlights are based on underlying results. Reconciliations between
underlying and statutory results are contained within these financial
statements. The statutory equivalents of the above results are as follows:
· Loss before tax was £0.65m (2022: Profit before tax £0.07m)
· Basic (LPS)/EPS was (0.14p) (2022: EPS 1.43p)
Operational highlights
· Continued customer base expansion and growing pipeline:
· Continued customer base expansion and growing pipeline.
Johannesburg Stock Exchange (JSE) - the largest stock exchange in Africa,
signed a multi-year contract for Exchange Cloud. The contract went live during
September 2023 with capacity now sold to JSE customers and follow on
opportunities advancing The Exchange Cloud pipeline continues to build with
advanced discussions taking place with major Exchanges across the globe,
including additional proof of concept implementations.
· Continued product innovation:
· Major user interface refresh of the Beeks infrastructure
automation portal, allowing clients to tailor the user experience for their
own users.
· Re-architecture of the underlying server hosting platform to
improve the efficiency of the Group, driving long-term cost benefits.
· Investment in enhanced security:
· Completed stage 1 of industry-leading SOC 2 security
accreditation with a view to being SOC 2 compliant by calendar year end.
· Launch of Beeks Security Operations, providing end to end
security detection and response capabilities for our customers, through
partnership with cybersecurity service provider BlueVoyant.
· Investment in inventory, team and sales and marketing, to deliver
on the growth opportunity:
· Investment into inventory, ensuring the Group is capable of
delivering against all contracts either signed or in the immediate pipeline.
· Implementation of new inventory management system to streamline
stock management and audit compliance.
· Increased average headcount to 103 (2022: 89) to support the
product development roadmap.
· Increased brand awareness through attendance at international
industry conferences in Bangkok, Chicago, Boca Raton and Paris.
Outlook
· The Company continues to be supported by underlying market
trends, with the ongoing shift of the financial services sector to cloud
computing.
· Well positioned moving forward, with an established reputation
and a track record of sustained growth.
· Core focus on converting the record pipeline of opportunities
across the Group's product offerings, in particular the Exchange Cloud
offering with a number of contracts at an advanced stage.
· Exchange Cloud remains a potentially transformational opportunity
for Beeks, with significant traction with both existing and new customers,
including additional proof of concept implementations, albeit contracts of
this size take time to convert.
· The Board is confident in achieving growth acceleration and
results for FY24 in line with its expectations. Confidence underpinned by high
levels of contracted, recurring revenue, a unique proposition and growing
international profile.
Gordon McArthur, CEO of Beeks, commented: "With an established reputation
and a track record of sustained growth, we are well-positioned to capitalise
on the shift of the financial services sector to cloud computing and continue
on our growth trajectory. The deals signed to date and our exit ACMRR mean
the Board is confident in achieving results for FY24 in line with its
expectations.
We remain focused on converting our record pipeline of opportunities across
our product offerings, and in particular the recently launched Exchange Cloud
offering. The advanced nature of several of these discussions, including
additional proof of concept implementations, provides confidence in our
ability to provide growth acceleration in FY24.
With high levels of contracted, recurring revenue, a unique proposition and
growing international profile, we look to the future with continued
confidence."
For further information please contact:
Beeks Financial Cloud Group plc
Gordon McArthur, CEO via Alma PR
Fraser McDonald, CFO
Canaccord Genuity +44 (0)20 7523 8000
Adam James / Gordon Hamilton
Alma PR +44(0)20 3405 0205
Caroline Forde / Hilary Buchanan / Joe Pederzolli
About Beeks Financial Cloud
Beeks is a leading managed cloud computing, connectivity and analytics
provider for Capital Markets and financial services. Our vision is simple:
Build. Connect. Analyse.
With a growing international network of data centres, Beeks provides end to
end outsourcing of compute environments by delivering low-latency compute,
connectivity and analytics, on-demand. Our cloud-based
Infrastructure-as-a-Service (IaaS) model allows financial organisations the
flexibility and agility to deploy and connect to exchanges, trading venues and
cloud service providers at a fraction of the cost of building their own
networks and infrastructure.
ISO 27001 certified, Beeks supports its global customers at scale exclusively
within global capital markets and leading financial centres.
beeksgroup.com (http://www.beeksgroup.com)
Chairman's Statement
It has been a year of further progress for Beeks, with the Group growing the
sales pipeline for its transformational Exchange Cloud offering, while
continuing to deliver services across the globe. Revenues increased by 22% to
£22.4m, and underlying EBITDA by 33% to £8.4m. The Group delivered an exit
ACMRR of £23.8m, up 23% in the year, providing a strong basis for continued
growth in FY24.
The growth potential of the business is significant, typified by the scale of
the first two customers now secured for Exchange Cloud, the largest stock
exchange in Africa as well as a division of Intercontinental Exchange, the
world's largest exchange group and owner of the New York Stock Exchange. We
remain in discussions with a number of further major global exchanges,
including additional proof of concept implementations, with the market
opportunity remaining transformational. However, that said, as previously
flagged, deals of this magnitude with organisations such as these will take
longer to progress through to signed contracts than Private and Proximity
Cloud deals, which continue to provide a growing foundation for the business.
The funds raised early in 2022 have provided the ability to invest into
resources, ensuring the business is appropriately configured to address the
significant market opportunity. During the period strong progress has been
made in the development of the Beeks offering, the expansion of the team and
the purchase of inventory to deliver against all contracts either signed or in
the immediate pipeline. With these investments having been made, and no
immediate requirements to expand either the team or stock held, the potential
to expand the profit margins of the Group upon delivery of further contracts
is considerable.
While the macroenvironment has continued to present challenges to all
businesses, particularly surrounding supply chain issues and general
inflationary pressures, the Group has continued to trade resiliently amidst
the challenging backdrop, these aspects have been well managed within Beeks,
as reflected by the businesses' continued healthy operating margins.
On behalf of the Board, I would like to express my gratitude to our staff for
their commitment and work ethic. They have created offerings unique in the
market while delivering excellent customer service. We are fortunate to have
such a talented team and I have every confidence in their ability to
capitalise on the opportunity ahead.
With a unique compelling proposition and a growing list of high profile
customers, the Group is ideally positioned to benefit from long-term trends
towards cloud-computing within the Financial Services sector. The Group's
strong financial fundamentals: increasing Annualised Contracted Monthly
Recurring Revenue, sufficient cash reserves for medium term organic growth,
low levels of debt, a highly scalable business model and a record sales
pipeline, provide for high levels of optimism within the business moving
forward. The team is keenly focused on the conversion of the sales pipeline,
and the achievement of greater operational leverage as these deals flow
through into revenues and profits.
Mark Cubitt
Chairman
29 September 2023
Strategic Report
Market Overview
"Organisations today view cloud as a highly strategic platform for digital
transformation."
Sid Nag, research vice president at Gartner
Growth in Cloud Adoption
We operate in a considerable, and growing, market. Cloud computing is driving
the next phase of digital business, as organisations pursue disruption through
emerging technologies like generative artificial intelligence (AI) and Web3.
The global cloud computing market size was valued at USD 337.76 billion in
2022. It is projected to reach USD 1412.39 billion by 2031, growing at a CAGR
of 17.23% during the forecast period (2023-2031)(1).
Infrastructure-as-a-service (IaaS) is forecast to experience the highest
end-user spending growth in 2023 at 30.9%(2).
The finance industry has been increasingly adopting cloud solutions due to
their scalability, cost-efficiency, and flexibility. Managed cloud providers
have been a key enabler of this trend, as we offer expertise in managing
complex financial systems on cloud infrastructure.
The finance sector faces strict regulatory requirements and Beeks has spent
over 12 years developing solutions and services tailored to meet these
requirements, which makes us attractive to financial institutions seeking to
maintain compliance while leveraging the cloud. Data security and privacy are
paramount in finance. Beeks has invested heavily in security measures and
technologies to protect financial data. As financial institutions continue to
migrate sensitive operations to the cloud, the demand for secure managed cloud
services is expected to grow.
Cost management remains a critical concern for finance companies and Beeks
offer tools and services to help organisations optimise their cloud spending,
which is especially important as cloud costs can quickly spiral if not managed
effectively.
Beeks has developed industry-specific solutions for finance, including trading
platforms, asset management systems, and regulatory reporting tools and these
specialised offerings are expected to drive demand in the financial sector.
Many financial organisations are adopting hybrid and multi-cloud strategies to
balance the benefits of the public cloud with the need for on-premises
infrastructure. Beeks primary Proximity Cloud and Exchange Cloud products
were built to facilitate the management and integration of these complex
environments. As financial institutions expand their global footprint, they
require cloud solutions that can support operations in multiple regions. With
our global presence and pre-built rack solutions that can be deployed anywhere
in the world, Beeks are well positioned to capture this market.
Selecting the right capital markets and financial services managed cloud
provider involves careful consideration of an organisation's specific
requirements, including trading strategies, regulatory obligations, and data
management needs. Beeks continues to play a crucial role in enabling financial
organisations to leverage the benefits of cloud technology while navigating
the complex landscape of the financial industry.
Our addressable market is extensive with up to 21,000 banks and hundreds of
global Exchanges, a large percentage of which maintain their own IT
infrastructure and are yet to move to the Cloud computing model.
Cloud's scale, resiliency and continuous innovation mean it will likely form a
critical part of every future business and technology roadmap. The Independent
Software Vendors (ISVs) market has witnessed significant growth due to the
adoption of cloud computing in addition to the surge in automation and
visualisation for business process.
With further predicted annual growth of 13.6%(3) and a faster lead to sale
timescale, the financial ISV space is another area of focus for the sales team
in the next financial year.
Our innovations, enhanced product range, growing number of Tier 1 customers,
breadth of asset classes and a clear focus in the rapidly growing Independent
Software Vendor space, position us well to benefit from the increased appetite
in the market for automated trading and the evolution of Cloud adoption by
financial services organisations.
(1 ) Source: Straits Research (August 2023)
(2 ) Source: Gartner (April 2023)
(3 ) Source: Market Research Future (September 2020)
Business Model
#PoweredbyBeeks
For over twelve years Beeks has honed its infrastructure provision and cloud
compute approach in direct response to its customers' needs and requirements.
Beeks' mission is to deliver cloud-based low-latency compute power; ensure
maximum security; and optimise performance in the exceedingly fast-moving
capital markets and finance sector. Beeks provide cloud deployment for capital
markets and financial enterprises within our global backbone of key financial
data centres as well as on-premise, helping them formulate a cloud strategy
and replicate that in different regions.
The Group's on-demand offering continues to operate successfully in an
ambitious, time-sensitive industry and is uniquely positioned to take
advantage of the rapid acceleration of Cloud deployment in the finance sector
as well as the growing need for analytics around those infrastructure
environments. These latency-sensitive environments need to be built,
connected, and analysed, and Beeks is one of the few companies in the world
that can fulfil those requirements.
Our latest iteration of Proximity Cloud, a fully configured and pre-installed
physical trading environment was derived from an identified demand from global
exchanges for a secure, multi-client private cloud environment.
Explicitly designed for global financial exchanges and electronic
communication networks (ECNs), Exchange Cloud is a multi-home version of
Proximity Cloud. While Proximity Cloud makes it easier to quickly deploy on
premise, Exchange Cloud takes it one step further by introducing multi-home
capabilities, essentially enabling Exchanges and ECNs to become the cloud.
Building on the successful launch of Exchange Cloud, further improvements have
been made to the offering in the areas of network automation, reporting and
reduced installation times, further increasing Beeks' lead over other
providers in offering an integrated infrastructure solution for capital
markets.
The continued development of our trading analytics division complements our
product offering to include the required analytics around those cloud
infrastructure environments. Two major releases of the Beeks Analytics product
provide significant benefits to our clients including a new flexible dashboard
user experience with the introduction of Grafana as our graphical user
interface (GUI) of choice. These releases also enabled easier integration
points for clients to use the power of Beeks Analytics within their own
applications.
The setup experience for Beeks Analytics has been reimagined from the ground
up, allowing the product to reach new users who don't have the time or
resources for more complicated configuration tasks.
Beeks provides:
· Dedicated bare metal and virtual servers that host Capital
Markets and financial services organisations in key financial data centres
around the world
· Ultra-low latency connectivity between customers and key
financial venues and exchanges
· Colocation for customers to position their own computing power in
our space, benefitting from our proximity to financial hubs
· In-house security software to protect client infrastructure from
cyber attacks
· The management of hybrid cloud deployments for customers wishing
to combine the Beeks IaaS with the public cloud hyperscalers
· Our model focuses on efficiency and flexibility, offering our
customers the ability to scale up and scale down as needed. Due to market
fluctuations and the inherent risk involved in algorithmic trading, this makes
our services highly desirable
· Beeks has a unique self-service customer portal that facilitates
the same-day deployment of a host of services allowing customers to manage
their own servers
· Beeks analytics offers comprehensive monitoring and performance
analysis to allow users to independently track and analyse real-time
performance of every single price, quote or trade traversing business critical
processes.
Strategy
Our purpose is to provide a global rapid deployment service using secure and
scalable environments, both public and private, which are easy to consume for
small, medium and large financial enterprises.
Our vision is to empower our clients to work with speed and agility.
Our main strategic priority is to continue to grow our customer base both for
public, private and secure cloud deployment as well as complementary analytics
solutions.
To satisfy existing demand and attract new customers, we will continue along
our product development roadmap to develop and improve innovative new products
such as Proximity and Exchange Cloud. We also continue to plan to selectively
expand into new asset classes and geographies, encouraged by the significant
opportunities we have identified.
Chief Executive's Review
FY23 was another year of progress, in which we secured landmark customers
across our Exchange and Private Cloud offerings while raising our profile
across the global financial services industry. While the timing of contract
signatures and delivery means the financial performance was at the lower end
of our original expectations, we are continuing to grow at pace, reporting
significantly increased metrics against the prior period. The size of deals
within our sales pipelines and our position as sole vendor within these
negotiations places us in a position of strength. Following the launches of
Proximity and Exchange Cloud, we have now an expanded product set, serving a
wider pool of potential customers, including the world's largest exchanges.
Exchange Cloud, launched in June 2022, is explicitly designed for global
financial exchanges and electronic communication networks. The response by the
market has been extremely positive and we believe it has the potential to be
transformative for Beeks, with no comparable offering on the market.
We have received notable early endorsements of Exchange Cloud, securing our
first two customers, ICE Global Network, a division of Intercontinental
Exchange, the world's largest exchange group, and Johannesburg Stock Exchange
(JSE), the largest stock exchange in Africa. We were delighted to take the JSE
live in September 2023, and highlighting the speed with which these
significant implementations can launch once contracts are signed, underpinning
our FY24 performance. Feedback received from Exchange Cloud customers has been
extremely positive, and both contracts signed to date have the ability for
considerable expansion moving forwards.
We remain in talks with a number of major exchanges globally, including
additional proof of concept implementations, and while the lead times on deals
can take time, as previously disclosed, we remain confident in our ability to
convert them. The prior investments we have made into fixed inventory means we
have the capability to deliver deals rapidly, once secured.
We similarly have a strong pipeline across our Proximity Cloud offering,
launched in August 2021. We secured notable private and exchange cloud wins
and this has continued post period end into FY24. Our Proximity Cloud and
Exchange Cloud pipeline are at record levels and there are multiple contracts
in final stages of negotiations. We are encouraged by a building number of
leads and are providing confidence in securing further deals in FY24.
Confidence levels are high moving into FY24, with the size of deals within our
sales pipelines as well as our position as a sole vendor within negotiations
underpinning optimism and placing us in a position of strength during the
current period, such that the Board is confident in achieving results for FY24
in line with its expectations.
Financial performance
Revenue in the period grew by 22% to £22.4m (2022: £18.3m), resulting in an
increase in underlying EBITDA of 33% to £8.4m (2022: £6.3m). Beeks continues
to have a strong recurring revenue profile, with 91% of revenue in the year
recurring (2022: 76%) and customer retention remained within target. Our
percentage of recurring revenue can change year on year depending on the mix
of private/public and proximity/exchange cloud sales, given the upfront
revenue recognition associated with proximity and exchange cloud contracts.
Our ACMRR grew 23% to £23.8m at 30 June 2023 (2022: £19.3m).
Revenue growth in FY23 was largely due to continued momentum across our
Private Cloud offering. Whilst we have not recognised any new revenue from
Exchange Cloud during the year, the recently deployed JSE contract has given
us a strong start into FY24, which we expect to be further enhanced by our
strong proximity and exchange cloud pipeline. Operating margins have reduced
in the year due to prior year investment but these are expected to increase as
we move into FY24 and convert the considerable pipeline of opportunities
ahead.
Operational Expansion
We invested in the expansion of our team during the year, in order to
capitalise on the considerable market opportunity ahead. The main priority
when expanding the team was to build out the software development team
division, to support the roll out and evolution of Exchange Cloud. Investment
in this area was largely complete in H1, with the average headcount during the
year increasing to 103 from 89 as at 30 June 2023.
Investment made into inventory during FY23 ensures we are appropriately
configured to deliver against all contracts, including those which are signed
already and those which are in the immediate pipeline. It is pleasing to have
the capability to deliver deals quickly once secured, with significant
investment into inventory serving as a sign of confidence in the conversion of
our pipeline. The implementation of a new inventory management system to
streamline our stock management and audit compliance was introduced in FY23,
driving internal efficiencies.
In May, we were delighted that OneChronos, a U.S. equities Alternative Trading
System (ATS), selected Beeks to power high performance compute and private
environment of their new ATS, standing out as the strongest provider over
Beeks' direct competitors. The collaboration is an endorsement of Beeks' value
in delivering global, rapid deployment solutions using secure and scalable
environments, with the flexibility of no long-term contracts or commitments.
Off the back of a volatile year for equities in 2022, OneChronos have seen
substantial success on their value proposition delivery since selecting Beeks
to enhance their Smart Market Technology, in particular by meeting the
ever-growing need for on-demand compute. Adjustments to Beeks'
infrastructure automation portal have been made in FY23, which will drive
improved efficiencies across the Group as a result of long-term cost benefits.
The changes have been well-received, with the major user interface refresh
allowing Proximity and Exchange Cloud customers to tailor the user experience
for their own users.
The business has continued to show resilience in the face of inflationary
pressures and supply chain disruption during the year. Appropriate price
increases have been passed on to customers and we are pleased to see an
improving picture with regards to supply chain disruption.
We have continued to increase our data centre presence in the year with a
focus on existing locations. We will continue with our approach of expanding
into areas where we already have customer demand. The Beeks brand
continues to grow its presence globally, and we were pleased to attend
international industry conferences in Bangkok, Chicago, Boca Raton and Paris
during the year, showcasing the value of our offering to new audiences.
Product roadmap
We have continued to streamline our products and enhance them including a
focus on the investment into the security of our products during the year.
Throughout the year we focused on security automation where possible, this
included the deployment of vulnerability scanning, patch management, malware
protection and secure configuration technology. The enhancements have
strengthened the security of our Proximity/ Exchange Cloud offering to provide
customers with the confidence and assurance that their infrastructure is
secure. Furthermore, the investments we continue to make show the commitment
to align our products to industry leading information security certifications
and standards including (but not limited to) GDPR, ISO/IEC 27001, NIST CSF,
and CIS.
We have a fully funded product roadmap that extends out for the next few years
and see significant opportunity through investing resources in our two major
product lines: our Private Cloud and our Proximity/Exchange Cloud offerings.
We have continued to streamline our products and enhance them, with a focus on
the investment into the security of our products during the year. The most
significant being a new strategic partnership with 'BlueVoyant', a Managed
Security Services Provider (MSSP). BlueVoyant provide Beeks with Managed
Extended Detection & Response (MXDR) services underpinned by their 24x7
Security Operations Centre (SOC) based in New York. The MXDR service has been
fully integrated into our Proximity/ Exchange Cloud offering which provides
end to end security detection and response capabilities for our customers.
Sales and Marketing
Our central marketing strategy continues to revolve around inbound marketing,
with our ongoing efforts to expand global brand awareness serving as a driving
force behind our sales and marketing initiatives this year.
After the pandemic, our emphasis shifted towards in-person events and
investing in prominent industry event booths, specifically targeting the
global institutional market at JSE Trade Connect, FIA Boca and TradeTech
Paris, as well as the retail market at iFX Expo Bangkok.
Furthermore, senior managers and representatives from our sales team
participated in key industry events, including AWS Re-Invent, Security Traders
Association Chicago, FIA London Tech and FIA IDX London.
We extended our STAC membership and successfully secured professional
memberships with both the FIA and FISD, bolstering our industry presence and
reputation. STAC plays a crucial role in supporting our product team by
facilitating a deeper comprehension of customer preferences, competitive
landscape, collaborative opportunities, and the assessment of our company's
offerings.
FIA stands as the foremost global trade organization for futures, options, and
centrally cleared derivatives markets, with a significant focus on the
Americas market. Meanwhile, FISD serves as the preferred global forum for
essential stakeholders in the value chain, encompassing consumer firms,
third-party entities, and data providers.
Our professional memberships serve as a valuable platform for Beeks to engage
and establish connections with industry experts. These connections can
potentially result in business opportunities, partnerships, and collaborations
as well as offer access to valuable competitor insights. Furthermore, they set
us apart from large-scale cloud service providers.
Customers
We are witnessing substantial growth in the range of customers we serve, as
Beeks now provides support to a diverse clientele, including banks, brokers,
hedge funds, cryptocurrency traders and exchanges as well as insurance
companies, financial technology firms, payment providers, and Independent
Software Vendors (ISVs)
Significant new customers secured in the year include:
· Two Exchange Cloud customers, described above (JSE and ICE), both
with further expansion potential.
· The JSE contract went live in September 2023, with all units
pre-sold to JSE customers with contract extension discussions underway.
· Two multi-year Private Cloud contracts with global Asset
Management firms, worth $2 million in aggregate over three years, for
deployments across US, APAC and EMEA.
Post year end we have seen further momentum, securing Private Cloud contracts
in July with a total contract value of over $4 million, including a
significant win via a partner with one of the UK's largest banks.
Future Growth and Outlook
With an established reputation and a track record of sustained growth, we are
well-positioned to capitalise on the shift of the financial services sector
to cloud computing and continue on our growth trajectory.
The deals signed to date and our exit ACMRR mean the Board is confident in
achieving results for FY24 in line with its expectations.
We remain focused on converting the pipeline of opportunities across all of
our product offerings, and in particular the recently launched Exchange Cloud
offering. The advanced nature of several of these discussions provides
confidence in our ability to would provide growth acceleration in FY24.
With high levels of contracted, recurring revenue, a unique proposition and
growing international profile, we look to the future with continued
confidence.
Gordon McArthur
CEO
29 September 2023
Financial Review
Key Performance Indicator Review
FY23 FY22 Growth
Revenue(1) (£m) 22.36 18.29 22%
ACMRR (£m) 23.80 19.30 23%
Gross Profit (£m) 9.12 7.94 15%
Gross Profit margin(2) 40.8% 43.4% (2.6%)
Underlying EBITDA(3) (£m) 8.42 6.31 33%
Underlying EBITDA margin(4) 37.7% 34.5% 9.3%
Underlying Profit before tax(5) (£m) 2.32 2.06 13%
Underlying Profit before tax margin(6) 10.4% 11.3% (0.9%)
(Loss)/Profit before tax (£m) (0.65) 0.07 (1,029%)
Underlying EPS(7) (pence) 4.31 4.49 (4%)
(1)Revenue excludes grant income and rental income
(2)Gross profit margin is statutory gross profit divided by Revenue
(3)Underlying EBITDA is defined as profit for the year excluding amortisation,
depreciation, finance costs, taxation, acquisition costs, share based
payments, exchange rate gains/losses on statement of financial position
translation and exceptional non-recurring costs
(4)Underlying EBITDA margin is defined as Underlying EBITDA divided by Revenue
(5)Underlying profit before tax is defined as profit before tax excluding
amortisation on acquired intangibles, acquisition costs, share based payments,
exchange rate gains/losses on statement of financial position translation and
exceptional non-recurring costs
(6)Underlying profit before tax margin is defined as Underlying profit before
tax divided by Revenue
(7)Underlying EPS is defined as profit for the year excluding amortisation on
acquired intangibles, acquisition costs, share based payments, exchange rate
gains/losses on statement of financial position translation and exceptional
non-recurring costs divided by the number of shares
Revenue
FY23 was another good year in terms of revenue growth. Group revenues grew by
22% to £22.36m (2021: £18.29m) driven mainly by our core Private Cloud
offering across both existing and new customers. Refer to note 3 for a further
breakdown of the Group's revenues. 91% of revenues (2022: 76%) were recurring
with Tier 1 customers now representing 45% of delivered revenue (2022: 35%).
Historically we have always had high percentage levels of recurring revenue.
The different revenue recognition principles of Proximity and Exchange Cloud,
where a significant proportion is recognised upfront, will mean more
fluctuations in our percentage of recurring revenue each year depending on the
mix of Private/Public/Proximity and Exchange Cloud sales. It is pleasing to
see another good year of growth in contracted recurring revenue as represented
by our ACMRR growth of 23% to £23.8m which increased further to £25.0m by
the end of August following a strong start to the year.
Gross Profit
Statutory gross profit earned increased 15% to £9.12m (2022: £7.94m), with
gross margin reduced due to increased depreciation and amortisation charges
following the investment made during FY23 into both Exchange Cloud and across
our global asset base. The investment in both Proximity Cloud and Exchange
Cloud including Analytics during the year has incurred internal gross
capitalised development costs of £2.87m (2022: £2.59m) in line with the
additions to the software development team made during the year.
With a strong pipeline of Proximity and Exchange Cloud deals and with
investment expected to be at a lower quantum when compared to sales growth,
we anticipate gross margins to increase as these deals are converted.
Underlying Administrative Expenses
Underlying administrative expenses, which are defined as administrative
expenses less share based payments and non-recurring costs, have increased by
£1.08m from £5.94m to £7.02m primarily as a result of headcount increases
within our software development and engineering functions. We had an average
headcount of 103 throughout the year (2022: 89) therefore gross staff costs
have increased by 23%, from £5.64m to £6.91m. Given a high proportion of
recruitment has been to support our Proximity and Exchange Cloud development
some of these costs are capitalised. Net staff costs, which is defined as
total staff costs less capitalised development costs, has increased by 33%.
Most of our headcount increase has been to support future product and sales
growth with a relatively small increase in support staff given our automation
and self-service strategy. We have largely completed our recruitment drive and
anticipate incremental headcount increases moving forward as deals are
converted and we look to deliver better operating margins.
Underlying EBITDA
Earnings before interest, tax, depreciation, amortisation and exceptional
non-recurring costs ("Underlying EBITDA") increased by 33% to £8.42m (2022:
£6.31m). The growth in Underlying EBITDA has been driven by continued organic
revenue growth.
Underlying EBITDA, underlying profit before tax and underlying earnings per
share are alternative performance measures, considered by the Board to be a
better reflection of true business performance than statutory measures only.
The key adjusting items are share based payments, amortisation, grant income
and unrealised exchange rate gains and losses.
Underlying Profit before tax increased to £2.32m (2021: £2.06m) as a result
of the changes in the key financial metrics discussed above.
Statutory Profit before tax decreased to a loss of £0.65m (2022: Profit of
£0.07m). The other reconciling differences are shown on the table below:
Year ended 30 June 2023 Year ended 30 June 2022
£'000 £'000
Statutory (Loss) / Profit Before Tax (650) 66
Add back:
Share Based Payments 2,291 1,661
Other Non-recurring costs* 136 28
Amortisation of acquired intangibles 489 802
Exchange rate losses on intercompany translation and unrealised currencies 325 -
Deduct:
Grant Income (267) (419)
Exchange rate gains on intercompany translation - (81)
Underlying Profit before tax for the year 2,324 2,057
Year ended 30 June 2023 Year ended 30 June 2022
£'000 £'000
EBITDA(**) 8,362 6,811
Deduct:
Grant Income (267) (419)
Exchange rate losses/(gains) on intercompany translation 325 (81)
Underlying EBITDA 8,420 6,311
*Other non-recurring costs in the year relates exceptional costs in relation
to one off staff termination payments, and other one off property costs. Prior
year non-recurring costs were incurred due to refinancing, acquisition
transition costs and Covid-19 related expenditure. All of these costs are not
expected to recur and are therefore disclosed separately to trading results.
**EBITDA is defined as earnings before depreciation, amortisation, acquisition
costs, share based payments and non-recurring costs
Taxation
The effective tax rate ('ETR') for the period was (73.46%), (2022:
-1,151.51%).
The overall effective tax rate has benefitted from the UK Super-deduction on
plant and machinery assets, deferred tax on share options and prior year
adjustments for R&D claims.
See tax notes 9 and 12 for further details.
Earnings per Share
Underlying earnings per share decreased 4.00% to 4.31p (2022: 4.49p).
Underlying diluted earnings per share decreased to 3.96p (2022: 4.19p). The
decrease in underlying EPS is largely as a result of the increased group share
capital following the equity raise in April-22 given the increased underlying
profitability and higher tax credit in FY23. See note 24 for further details.
Basic loss per share decreased to 0.14p (2022: earnings per share of 1.43p).
The decrease in basic EPS is as a result of the statutory loss in the period
as well as the additional share capital in FY23 following last year's equity
raise. Diluted loss per share has also decreased to 0.13p (2022: earnings per
share 1.35p).
Statement of Financial Position and Cash flows
The statement of financial position shows an increase in total assets to
£47.44m (2022: £44.75m) with operating cash flows during the year increased
by 34% to £9.01m (2022: £6.70m). The equity raise in FY22 provided us with
the ability to further enhance our core products, most notably in Proximity
and Exchange Cloud whilst also funding additional working capital including
advanced purchases of IT rack capacity, computer servers and other associated
hardware. Our strategy is always to have sufficient infrastructure capacity
both across our global data centre network and to hold a sufficient level of
IT inventory at our Glasgow Head Office. As such, a proportion of our capital
spend during the year is to satisfy the growing pipeline demand for the year
ahead. Investment in property, plant and equipment, hardware and
infrastructure was again significant with £4.1m (2022: £5.2m) of additions
(excluding Property and new leases in accordance with IFRS 16) throughout our
expanding global network and supporting the client and revenue growth made
during the year. We hold a stock supply of almost £2m in IT infrastructure
which will cover a significant amount of FY24 sales pipeline. As global supply
chain issues ease, we will not require these levels of stock which should
assist working capital requirements going forward.
During the year we took on additional borrowings via asset finance of £2.0m
in order to preserve cash. We repaid debt of £0.5m against our borrowing
facilities. Our net cash at the end of the year is £4.4m (30 June 2022: net
cash £7.9m) and gross borrowings at £3.4m remain at 0.4x Underlying EBITDA
of £8.4m which we believe is a very comfortable level of debt to carry given
the recurring revenue business model and strong cash generation. We note the
increases to the cost of borrowing and will look to maintain or reduce our
interest rate cover as we move forward.
At 30 June 2023 net assets were £32.8m compared to net assets of £30.8m at
30 June 2022.
Fraser McDonald
Chief Financial Officer
29 September 2023
Consolidated Statement of Comprehensive Income
2023 2022
Note £000 £000
Revenue 3 22,357 18,289
Other Income 3 361 512
Cost of sales (13,602) (10,862)
Gross profit 9,116 7,939
Administrative expenses (9,447) (7,554)
Operating (loss) / profit 4 (331) 385
Analysed as
Earnings before depreciation, amortisation, acquisition costs, share based 8,362 6,811
payments and non-recurring costs:
Depreciation 11 (4,550) (3,213)
Amortisation - acquired intangible assets 10 (489) (802)
Amortisation - other intangible assets 10 (1,227) (726)
Share based payments 21 (2,291) (1,661)
Other non-recurring costs 4 (136) (24)
Operating (loss) / profit (331) 385
Finance income 6 101 21
Finance costs 5 (420) (340)
(Loss) / Profit before taxation (650) 66
Taxation 9 561 760
(Loss)/Profit after taxation for the year attributable to the owners of Beeks (89) 826
Financial Cloud Group PLC
Other comprehensive income
Amounts which may be reclassified to profit and loss
Currency translation differences 77 5
Total comprehensive income for the year attributable to the owners of Beeks (12) 831
Financial Cloud Group PLC
Pence Pence
As Restated
Basic (loss)/earnings per share 24 (0.14) 1.43
Diluted (loss)/earnings per share 24 (0.13) 1.35
The above income statement should be read in conjunction with the accompanying
notes.
Consolidated Statement of Financial Position
2023 2022
Note £000 £000
Non-current assets
Intangible assets 10 8,106 6,698
Property, plant and equipment 11 17,952 16,270
Deferred tax 12 5,398 4,201
31,456 27,169
Current assets
Trade and other receivables 14 6,391 5,600
Inventories 13 1,767 1,818
Cash and cash equivalents 15 7,829 10,160
15,987 17,578
Total assets 47,443 44,747
Liabilities
Non-current liabilities
Borrowings 17 - 1,320
Lease liabilities 17 2,047 2,303
Deferred tax 12 3,884 2,968
Total non-current liabilities 5,931 6,591
Current liabilities
Trade and other payables 18 4,952 5,139
Lease liabilities 18 1,960 1,280
Borrowings 17 1,814 978
Total current liabilities 8,726 7,397
Total liabilities 14,657 13,988
Net assets 32,786 30,759
Equity
Issued capital 20 82 82
Share premium 22 23,775 23,775
Reserves 22 4,879 2,657
Retained earnings 4,050 4,245
Total equity 32,786 30,759
These financial statements were approved by the Board of Directors on 29th
September 2023 and were signed on its behalf by:
Gordon McArthur, Chief Executive Officer,
Beeks Financial Cloud Group Plc,
Company number: SC521839
The above statement of financial position should be read in conjunction with
the accompanying notes.
Consolidated Statement of Changes in Equity
Issued capital Foreign currency reserve Merger reserve Other reserve Share based payments Share premium Retained earnings Total equity
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 July 2021 70 (12) 705 (315) 883 9,452 2,982 13,765
Profit after income tax expense for the year - - - - - - 826 826
Currency translation difference - 5 - - - - - 5
Total comprehensive income - 5 - - - - 826 831
Deferred tax - - - - - - 167 167
Issue of share capital 12 - - - - 14,323 - 14,335
Share based payments - - - - 1,661 - - 1,661
Exercise of share options - - - - (270) - 270 -
Total transaction with owners 12 - - - 1,391 14,323 437 16,163
Balance at 30 June 2022 82 (7) 705 (315) 2,274 23,775 4,245 30,759
Loss after income tax expense for the year - - - - - - (89) (89)
Currency translation difference - 77 - - - - - 77
Total comprehensive income - 77 - - - - (89) (12)
Deferred tax - - - - - - (252) (252)
Share based payments - - - - 2,291 - - 2,291
Exercise of share options - - - - (146) - 146 -
Total transaction with owners - - - - 2,145 - (106) 2,039
Balance at 30 June 2023 82 70 705 (315) 4,419 23,775 4,050 32,786
The above statement of changes in equity should be read in conjunction with
the accompanying notes.
Consolidated Cash Flow Statement
2023 2022
Note £'000 £'000
Cash flows from operating activities
(Loss)/Profit for the year before tax (650) 66
Adjustments for:
Depreciation and amortisation 10/11 6,435 4,741
Foreign exchange - (61)
Gain on disposal of property, plant and equipment - (24)
Loan interest 5 140 129
Lease liability interest 5 165 115
Share options 7 2,291 1,661
Proceeds from grant income 609 -
Operating cash flows 8,990 6,617
Increase in receivables 14 (1,667) (3,014)
Increase/(Decrease) in inventory 13 311 (988)
(Decrease)/Increase in payables (696) 1,765
Operational cash flows after movement in working capital 6,938 4,380
Corporation tax received 44
(6)
Net cash generated from operating activities 6,944 4,424
Cash flows from investing activities
Purchase of property, plant and equipment 11 (4,329) (9,562)
Proceeds from disposal of property, plant and equipment - 60
Capitalised development costs 10 (2,822) (2,590)
(7,151)
Net cash used in investing activities (12,092)
Cash flows from financing activities
Repayment of existing loan borrowings (2,900)
(618)
Repayment of lease liabilities (1,267) (936)
Interest on lease liabilities 19 (165) (131)
Issue of loans 17 - 3,670
Interest payable on bank loans 5 (140) (242)
Proceeds from the issue of new share capital - 14,989
Net cash generated from financing activities (2,190) 14,450
Net (decrease) / increase in cash and cash equivalents (2,409) 6,782
Effects on exchange rates on cash and cash equivalents 78 5
Cash and cash equivalents at beginning of year 10,160 3,372
Cash and cash equivalents at end of year 15 7,829 10,160
The above cash flow statement should be read in conjunction with the
accompanying notes.
Notes to the Consolidated Financial Statements
1. Summary of significant accounting policies
Corporate information
Beeks Financial Cloud Group PLC is a public limited company which is listed on
the AIM Market of the London Stock Exchange and is incorporated in Scotland.
The address of its registered office is Riverside Building, 2 Kings Inch Way,
Renfrew, Renfrewshire, PA4 8YU. The principal activity of the Group is the
provision of information technology services. The registered number of the
Company is SC521839. The financial statements are prepared in pounds
sterling and rounded to the nearest thousand. In certain cases, amounts in the
report have been rounded to the nearest pound.
The principal accounting policies adopted in the preparation of the financial
statements are set out below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006.
The financial statements have been prepared on the historical cost basis
except for the valuation of certain financial instruments that are measured at
fair values at each reporting period, as explained in the accounting policies
below.
The measurement bases and principal accounting policies of the group are set
out below and are consistently applied to all years presented unless otherwise
stated.
International Financial Reporting Standards and Interpretations issued but not
yet effective
New and revised IFRSs in issue but not yet effective and have not been adopted
by the Group.
At the date of authorisation of these financial statements, the following
standards, interpretations, and amendments have been issued but are not yet
effective and have no material impact on the Group's financial statements:
· IFRS 17 (including the June 2020 Amendments to IFRS 17) -
Insurance Contracts
· Amendments to IAS 1 - Classification of Liabilities as Current or
Non-current
· Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of
Accounting Policies
· Amendments to IAS 8 - Definition of Accounting Estimates
· IFRS16 - Lease Liability in a Sale and Leaseback transaction
· IFRS 4 - Amendments to IFRS 4 Insurance Contracts - deferral of
IFRS 9
· Amendments to IAS 12 - Deferred Tax related to Assets and
Liabilities arising from a single transaction
None of these have been adopted early and the Directors do not expect that the
adoption of the Standards listed above will have a material impact on the
financial statements of the Group in future periods.
Adoption of new and revised Standards - amendments to IFRS that are
mandatorily effective for the current year
There are no new accounting policies applied in the year ended 30 June 2023
which have had a material effect on these accounts. In addition, the Directors
do not consider that the adoption of new and revised standards and
interpretations issued by the IASB in 2021 has had any material impact on the
financial statements of the Group.
Going concern
The Directors have assessed the current financial position of Beeks Financial
Cloud Group PLC, taking account of its business activities, together with the
factors likely to affect its future development, performance and position as
set out in the Strategic Report on pages 7 to 22.
The key factors considered by the Directors were:
· Historic and current trading and profitability of the Group
· The rate of growth in sales both historically and forecast
· The competitive environment in which the group operates
· The current level of cash reserves
· Current level of debt obligations
· Ability to comply with existing covenants
· The finance facilities available to the Group, including the
availability of any short term funding required through the use of the
Revolving Credit Facility
The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Chief Financial Officer's Report on
pages 13 to 16.
We take great comfort from the resilience of our business model. The level of
customer churn across our business has remained low and cash collection has
been in line with our typical profile. We do however remain vigilant to the
economic impact the ongoing macro-economic environment may create,
particularly on the SME segment of the market. Note 16 to the financial
statements includes the Group's objectives, policies and processes for
managing its capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to credit risk
and liquidity risk.
The directors are of the opinion that the Group can operate within their
current debt facilities and comply with its banking covenants. At the end of
the financial year, the Group had net cash of £4.41m (2022: Net cash £7.86m)
a level which the Board is comfortable with given the strong cash generation
of the Group and low level of debt to EBITDA ratio. The Group has a diverse
portfolio of customers with relatively low customer concentration which are
split across different geographic areas. As a consequence, the directors
believe that the Group is well placed to manage its business risks.
The directors have considered the Group budgets and the cash flow forecasts to
December 2024, and associated risks, including the potential impact of the
current economic climate. We have run appropriate scenarios applying
reasonable downside sensitivities and are confident we have the resources to
meet our liabilities as they fall due including the base case assumption of
our existing loan facilities not being made available at the end of current
terms (December 2024). The budgets and cash flow forecasts have assumed all
loan facilities being repaid in full. We have also run reverse stress test
scenarios in order to identify circumstances where cash reserves would be
depleted. The circumstances that would lead into such scenarios (such as
moving from revenue growth to revenue attrition) are not considered plausible
given the historic track record and trading prospects of the group.
After making enquiries, the directors have a reasonable expectation that the
Group will be able to meet its financial obligations and has adequate
resources to continue in operational existence for the foreseeable future. For
this reason they continue to adopt the going concern basis in preparing the
financial statements.
Accordingly, the Directors have adopted the going concern basis in preparing
the Report for the year ending 30th June 2023.
Principles of consolidation
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the subsidiary and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases. The Group applies the
acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary or a business is the fair
values of the assets transferred, the liabilities incurred to former owners of
the acquiree and the equity interests issued to the Group.
The consideration transferred includes the fair values of any asset or
liability resulting from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values on the
acquisition date.
Acquisition related costs are expensed as incurred. As each of the
subsidiaries are 100% wholly owned the Group has full control over each of its
investees. Intercompany transactions, unrealised gains and losses on
intragroup transactions and balances between group companies are eliminated on
consolidation.
Foreign currency transactions
Foreign currency transactions are translated into pound sterling using the
exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from
the translation at financial year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in profit or
loss. Foreign exchange gains and losses resulting from the retranslation of
inter-company balances are recognised in profit or loss. Non-monetary assets
are translated at the historical rate.
Foreign operations
The assets and liabilities of foreign operations are translated into pound
sterling using the exchange rates at the reporting date. The revenues and
expenses of foreign operations are translated into Pound sterling using the
average exchange rates, which approximate the rates at the dates of the
transactions, for the period. All resulting foreign exchange differences are
recognised in other comprehensive income through the foreign currency reserve
in equity.
Business Combinations
Acquisitions of subsidiaries are accounted for using the acquisition method.
The acquisition method involves the recognition at fair value of all
identifiable assets and liabilities, including contingent liabilities of the
subsidiary, at the acquisition date, regardless of whether or not they were
recorded in the financial statements of the subsidiary prior to acquisition.
On initial recognition, the assets and liabilities of the subsidiary are
included in the statement of financial position at their fair values, which
are also used as the bases for subsequent measurement in accordance with the
Group accounting policies.
Where the Group's assessment of the net fair value of a subsidiary's
identifiable assets acquired and liabilities assumed is less than the fair
value of the consideration including contingent consideration of the business
combination then the excess is treated as goodwill. Where the Group's
assessment of the net fair value of a subsidiary's net assets and liabilities
exceeds the fair value of the consideration including contingent consideration
of the business combination then the excess is recognised through profit or
loss immediately.
Where an acquisition involves a potential payment of contingent consideration
the estimate of any such payment is based on its fair value. To estimate the
fair value an assessment is made as to the amount of contingent consideration
which is likely to be paid having regard to the criteria on which any sum due
will be calculated and is probability based to reflect the likelihood of
different amounts being paid. Where a change is made to the fair value of
contingent consideration within the initial measurement period as a result of
additional information obtained on facts and circumstances that existed at the
acquisition date then this is accounted for as a change in goodwill. Where
changes are made to the fair value of contingent consideration as a result of
events that occurred after the acquisition date then the adjustment is
accounted for as a charge or credit to profit or loss.
Revenue recognition
Revenue arises from the provision of Cloud-based localisation. To determine
whether to recognise revenue, the group follows a 5-step process as follows:
o Identifying the contract with a customer
o Identifying the performance conditions
o Determining the transaction price
o Allocating the transaction price to the performance conditions
o Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is measured at transaction price, stated net of VAT and other sales
related taxes, if applicable.
Infrastructure services
The group's core business provides managed Cloud computing infrastructure and
connectivity. The Group considers the performance obligation to be the
provision of access and use of servers to our clients. As the client receives
and consumes the benefit of this use and access over time, the related revenue
is recognised evenly over the life of the contract.
Monitoring software and maintenance services
The group also provides software products that analyse and monitor IT
infrastructure. Revenue from the provision of software licences is split
between the delivery of the software licence and the ongoing services
associated with the support and maintenance. The supply of the software
licence is recognised on a point in time basis when control of the goods has
transferred, being the delivery of the item to the customer, whilst the
ongoing support and maintenance service is recognised evenly over the period
of the service being rendered on an over time basis. The group applies
judgement to determine the percentage of split between the licence and
maintenance portions, which includes an assessment of the pricing model and
comparison to industry standards.
Where an agreement includes a royalty fee as a result of future sales by a
customer to third parties and there is a minimum amount guaranteed, this is
recognised at point in time when the delivery of the item is complete. Where
such contracts include a financing component, the group also adjusts the
transaction price to reflect the time value of money. Finance income is
recognised as other income in the statement of the comprehensive income
Set up fees
Set up fees charged on contracts are reviewed to consider the material rights
of the set-up fee. When a set-up fee is arranged, Beeks will consider the
material rights of the set-up fee, if in substance it constitutes a payment in
advance, the set-up fee will be deemed to be a material right. The accounting
treatment for both material rights and non-material rights set-up fees is as
follows:
· Any set up fees that are material rights are spread over the
group's average contract term
· Set up fees that are not material rights are recognised over the
enforceable right period, i.e. 1 to 3 months depending on the termination
period
Revenue in respect of installation or training, as part of the set-up, is
recognised when delivery and installation of the equipment is completed on a
point in time basis.
Hardware and software sales
Revenue from the supply of hardware is recognised when control of the goods
has transferred. For hardware, this occurs upon delivery of the item to the
customer. For software, control is deemed to pass on provision of the licence
key to the customer being the point in time the customer has the right to use
the software.
The Group has concluded it acts as a principal in each sales transaction vs an
agent. This has been determined by giving consideration to whether the Group
holds inventory risk, has control over the pricing over a particular service,
takes the credit risk, and whether responsibility ultimately sits within the
Group to service the promise of the agreements. Refer to note 2 for more
detail on these considerations.
Professional and consultancy services
Revenue from professional and consultancy services are recognised as these
services are rendered and the performance obligation satisfied. Any unearned
portion of revenue (i.e. amounts invoiced in advance of the service being
provided) is included in payables as a contract liability.
Proximity and Exchange Cloud Services
Proximity and Exchange Cloud are a fully-managed and configurable compute,
storage and analytics racks built with industry-leading low latency hardware
that allow capital markets and financial services customers to run compute,
storage and analytics on-premise.
Revenue from the sale of proximity and exchange cloud contracts has been
assessed under IFRS 15 and using the five step process, the following
performance obligations have been identified:
· Delivery and installation of the hardware, and provision of the
software licence
· Delivery of maintenance and technical support over the contract
· Delivery of unspecified upgrades and future software releases
The delivery and installation of the hardware, and provision of the software
licence are highly interrelated and considered to be one performance
obligation. This is recognised on a point in time basis when the control of
the goods have been transferred, being when delivery of the item is completed
and the right to use the software is granted.
The maintenance and technical support over the contract, as well as the
delivery of the unspecified upgrades and future software releases are
recognised evenly on an over time basis over the period of the contract. The
performance obligation for both is considered to be that of standing ready to
provide technical product support and unspecified updates, optional upgrades
and enhancements on a when-and-if-available basis over the period of service
being rendered.
These contracts include multiple deliverables. The group applies judgement to
determine the transaction price to be allocated between a) the delivery and
installation of the hardware and provision of the software licence, recognised
on a point in time basis and b) the stand ready services (support,
maintenance, unspecified upgrades) recognised over time. The Group applies the
expected cost plus margin approach to the stand ready services and the
delivery and installation of the hardware and provision of software licence is
estimated using the residual approach, given this is a new product to market
and standalone selling prices are not directly observable. Further detail is
provided within key judgement and estimations on page 84.
Where such contracts include a financing component, the group also adjusts the
transaction price to reflect the time value of money. Finance income is
recognised as other income in the statement of the comprehensive income.
Revenue recognised over time and at a point in time is disclosed at note 3 of
the notes to the financial statements.
Government grant income
Grants from Government agencies are recognised where there is reasonable
assurance that the grant will be received, and all attached conditions will be
complied with. When the grant relates to an expense item, it is recognised as
income on a systematic basis over the periods that the related costs, for
which it is intended to compensate, are expensed. When the grant relates to an
asset, it is deducted from carrying amount of the intangible asset over the
expected useful life of the related asset. Note 3 Revenue provides further
information on Government grants.
Rental Income
Rental income from the head office property leased out under operating leases
is recognised in the statement of the comprehensive income as other income as
these services are rendered, as the tenant occupies the space.
Cost of sales
Costs considered to be directly related to revenue are accounted for as cost
of sales. All direct production costs and overheads, including indirect
overheads that can reasonably be allocated, have been classified as cost of
sales.
Interest
Interest revenue is recognised as part of the financing component within some
Proximity Cloud and Software Licencing contracts. Interest accrues using the
effective interest method. This is a method of calculating the amortised cost
of a financial asset and allocating the interest income over the relevant
period using the effective interest rate, which is the rate that exactly
discounts estimated future cash flows through the expected life of the
financial asset to the net carrying amount of the financial asset.
Other non-recurring costs
The Group defines other non-recurring costs as costs incurred by the Group
which relate to material non-recurring costs. These are disclosed separately
where it is considered it provides additional useful information to the users
of the financial statements.
Taxation and deferred taxation
The income tax expense or income for the period is the tax payable on the
current period's taxable income. This is based on the national income tax rate
enacted or substantively enacted for each jurisdiction with any adjustment
relating to tax payable in previous years and changes in deferred tax assets
and liabilities attributable to temporary differences between the tax bases of
assets and liabilities and their carrying amounts in financial statements.
Deferred tax assets and liabilities are recognised for temporary differences
at the tax rates expected to be applicable when the asset or liability
crystallises based on current tax rates and laws that have been enacted or
substantively enacted by the reporting date. The relevant tax rates are
applied to the cumulative amounts of deductible and taxable temporary
differences to measure the deferred tax asset or liability.
A deferred tax asset is regarded as recoverable and therefore recognised only
when, on the basis of all available evidence, it can be regarded as more
likely than not that there will be suitable taxable profits against which to
recover carried forward tax losses and from which the future reversal of
temporary differences can be deducted. The carrying amount of deferred tax
assets are reviewed at each reporting date.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position
based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised
or intended to be sold or consumed in the Group's normal operating cycle; it
is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash
equivalent unless restricted from being exchanged or used to settle a
liability for at least 12 months after the reporting period. All other assets
are classified as non-current.
A liability is classified as current when: it is either expected to be settled
in the Group's normal operating cycle; it is held primarily for the purpose of
trading; it is due to be settled within 12 months after the reporting period;
or there is no unconditional right to defer the settlement of the liability
for at least 12 months after the reporting period. All other liabilities are
classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash at bank, overnight and longer term deposits which are held for the
purpose of meeting short term cash commitments are disclosed within cash and
cash equivalents.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset in
one entity and a financial liability or equity instrument in another and is
recognised when the Group becomes party to the contractual provisions of the
instrument.
Financial assets and liabilities are recognised initially at fair value, and
subsequently measured at amortised cost, with any directly attributable
transaction costs adjusted against fair value at initial recognition and
recognised immediately in the Consolidated income statement as a profit or
loss.
Financial assets
Trade and other receivables
Trade and other receivables are initially recognised at transaction price,
less allowances for impairment. These are subsequently measured at amortised
costs using the effective interest method. An allowance for impairment of
trade and other receivables is established when there is evidence that Beeks
Financial Cloud Group PLC will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial
difficulties of the debtors, probability that the debtor will enter bankruptcy
or financial reorganisation, and default or delinquency in payments (more than
90 days overdue) are considered indicators that the trade and other
receivables may be impaired. The amount of the allowance is the difference
between the asset's carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate. The carrying
amount of the asset is reduced through the use of an allowance account, and
the amount of the loss is recognised in profit or loss within 'administrative
expenses'. When a trade or other receivable is uncollectible, it is written
off against the allowance account for trade and other receivables. Subsequent
recoveries of amounts previously written off are credited against
'administrative expenses' in the Consolidated statement of comprehensive
income.
IFRS 9 requires an expected credit loss ("ECL") model which requires the Group
to account for expected credit losses and changes in those expected credit
losses at each reporting date to reflect changes in credit risk since initial
recognition of the financial assets. The main financial asset that is
subject to the expected credit loss model is trade receivables, which consist
of billed receivables arising from contracts.
The Group has applied the simplified approach to providing for expected credit
losses ("ECL") prescribed by IFRS 9, which permits the use of lifetime
expected loss provision for all trade receivables.
The ECL model reflects a probability weighted amount derived from a range of
possible outcomes. To measure the ECL, trade receivables and contract assets
have been grouped based on shared credit risk characteristics and the days
past due. The Group has established a provision matrix based on the payment
profiles of historic and current sales and the corresponding credit losses
experienced. The historical loss rates are adjusted to reflect current and
forward-looking information that might affect the ability of customers to
settle the receivables, including macroeconomic factors as relevant.
Provision against trade and other receivables is made when there is evidence
that the Group will not be able to collect all amounts due to it in accordance
with the original terms of those receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the
present value of estimated future cash flows. An assessment for impairment is
undertaken at least at each reporting date.
Where a financing component is applicable, the Group has chosen to measure any
loss allowance at an amount equal to lifetime expected credit losses.
Financial liabilities
Trade and other payables
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
These amounts represent liabilities for goods and services provided to Beeks
Financial Cloud Group plc prior to the end of the financial period which are
unpaid as well as any outstanding tax liabilities.
Borrowings
Loans and borrowings are initially recognised at the fair value of the
consideration received, net of transaction costs. They are subsequently
measured at amortised cost using the effective interest method.
Defined contribution schemes
The defined contribution scheme provides benefits based on the value of
contributions made. Contributions to the defined contribution superannuation
plans are expensed in the period in which they are incurred.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair
value for recognition or disclosure purposes, the fair value is based on the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date;
and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous
market.
Fair value is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming they act in their economic
best interests. For non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair
value, are used, maximising the use of relevant observable inputs, and
minimising the use of unobservable inputs.
Share based payments
The Group operates equity-settled share based remuneration plans for its
employees. Options are measured at fair value at grant date using the Black
Scholes model. Where options are redistributed, options are measured at fair
value at the redistribution date using the Black Scholes Model. The fair value
is expensed on a straight line basis over the vesting period, based on an
estimate of the number of options that will eventually vest.
Under the Group's share option scheme, share options are granted to directors
and selected employees. The options are expensed in the period over which the
share based payment vests. A corresponding increase to the share based payment
reserve in equity is recognised.
When share options are exercised, the company issues new shares. The nominal
share value from the proceeds received are credited to share capital and
proceeds received above nominal value, net of attributable transaction costs,
are credited to the share premium when the options are exercised. When share
options are forfeited, cancelled, or expire, the corresponding fair value is
transferred to the retained earnings reserve. Amounts held in the share based
payments reserve are transferred to Retained Earnings on exercise of the
related options.
The Group has no legal or constructive obligation to repurchase or settle the
options in cash.
Where the Group entity incurs a share based payment charge relating to
subsidiary employees, the charge is treated as a capital contribution in the
subsidiary and an increase in investment in the Group entity.
Property, plant and equipment (PPE)
PPE is stated at historical cost less accumulated depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of
the items. Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to Beeks Financial
Cloud Group PLC and the cost of the item can be measured reliably. All other
repairs and maintenance are charged to profit or loss during the financial
period in which they are incurred.
Depreciation on IT infrastructure and fixtures and fittings is calculated
using the straight line method to allocate their cost or revalued amounts, net
of their residual values, over their estimated useful lives, as follows:
· Leasehold property and improvements over the lease period
· Freehold property over 50 years
· Computer Equipment over 5 years and over the length of lease
· Office equipment and fixtures and fittings over 5-20 years
The residual values, useful lives and depreciation methods are reviewed, and
adjusted if appropriate, at each reporting date.
Leasehold improvements and plant and equipment under lease are depreciated
over the unexpired period of the lease or the estimated useful life of the
assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when
there is no future economic benefit to the Group. Gains and losses between the
carrying amount and the disposal proceeds are taken to profit or loss. Any
revaluation surplus reserve relating to the item disposed of is transferred
directly to retained profits.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes all expenses directly attributable to bringing the asset to its
current condition. Costs of ordinarily interchangeable items are assigned
using the first in, first out cost formula. Net realisable value is the
estimated selling price in the ordinary course of business less any directly
attributable selling expenses.
At each reporting date, an assessment is made for impairment. Any excess of
the carrying amount of inventories over its estimated selling prices less
costs to complete and sell is recognised as an impairment loss in the income
statement. Reversals of impairment losses are also recognised in profit or
loss.
Leases
A lease is defined as a contract, or part of a contract, that conveys the
right to use an asset (the underlying asset) for a period of time in exchange
for consideration. To apply this definition the Group assesses whether the
contract meets three key evaluations which are whether the contract contains
an identified asset, which is either explicitly identified in the contract or
implicitly specified by being identified at the time the asset is made
available to the Group; the Group has the right to obtain substantially all of
the economic benefits from use of the identified asset throughout the period
of use, considering its rights within the defined scope of the contract; and
the Group has the right to direct the use of the identified asset throughout
the period of use.
At the lease commencement date, the Group recognises a right-of-use asset and
a corresponding lease liability on the Consolidated statement of financial
position. The right-of-use asset is measured at cost, which is made up of the
initial measurement of the lease liability measured at the present value of
future lease payments, any initial direct costs incurred by the Group. The
Group depreciates the right-of-use assets on a straight-line basis from the
lease commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The Group assesses the
right-of-use asset for impairment under IAS 36 'Impairment of Assets' where
such indicators exist.
Lease liabilities are presented on two separate lines in the Consolidated
statement of financial position for amounts due within one year and amounts
due after more than one year. The lease liability is initially measured at the
present value of lease payments that are not paid at the commencement date,
discounted using the rate implicit in the lease. If this rate cannot readily
be determined, the Group applies an incremental borrowing rate. The lease
liability is subsequently measured by increasing the carrying amount to
reflect interest on the lease liability and by reducing the liability by
payments made. The Group re-measures the lease liability (and adjusts the
related right-of-use asset) whenever the lease term has changed, or a lease
contract is modified, and the modification is not accounted for as a separate
lease.
Lease payments included in the measurement of the lease liability can be made
up of fixed payments and an element of variable charges depending on the
estimated future price increases, whether these are contractual or based on
management's estimate of potential increases. Subsequent to initial
measurement, the liability will be reduced for payments made and increased for
interest. It is re-measured to reflect any reassessment or modification, or if
there are changes in fixed payments. When the lease liability is re-measured,
the corresponding adjustment is reflected in the right-of-use asset, or profit
and loss if the right-of-use asset is already reduced to
zero. Where non-contractual payment discounts are subsequently received from
suppliers, these are treated as a discharge of the lease liability with a
credit recognised in the profit or loss statement.
The Group has elected to account for short-term leases and leases of low-value
assets using the practical expedients available under IFRS 16. Instead of
recognising a right-of-use asset and lease liability, the payments in relation
to these are recognised as an expense in profit or loss on a straight line
basis over the lease term.
Under IFRS 16, the Group recognises depreciation of the right-of-use asset and
interest on lease liabilities in the Consolidated statement of comprehensive
income over the period of the lease. On the Consolidated statement of
financial position, right-of-use assets have been included in right of use
assets and lease liabilities have been included in lease liabilities due
within one year and after more than one year.
Intangible assets and amortisation
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the assets and liabilities assumed at the date of acquisition.
Goodwill acquired in business combinations is not amortised. Instead, goodwill
is tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Intangible assets carried forward from prior
years are re-valued at the exchange rate in the current financial year.
Impairment testing is carried out by assessing the recoverable amount of the
cash generating unit to which the goodwill relates. A bargain purchase is
immediately released to the Consolidated statement of comprehensive income in
the year of acquisition.
Customer relationships
Included within the value of intangible assets are customer relationships.
These represent the purchase price of customer lists and contractual
relationships purchased on the acquisition of the business and assets of
Gallant VPS Inc. and Commercial Network Services as well as the purchase of
Velocimetrics Ltd. These relationships are carried at cost less accumulated
amortisation or impairment losses where applicable. Amortisation is calculated
using the straight line method over periods of between five and ten years and
is charged to cost of sales.
Development costs
Expenditure on research (or the research phase of an internal project) is
recognised as an expense in the period in which it is incurred.
Development costs incurred are capitalised when all the following conditions
are satisfied:
· Completion of the intangible asset is technically feasible so
that it will be available for use or sale;
· The Group intends to complete the intangible asset and use or
sell it;
· The Group has the ability to use or sell the intangible asset;
· The intangible asset will generate probable future economic
benefits;
· There are adequate technical, financial, and other resources to
complete the development and to use or sell the intangible asset, and
· The expenditure attributable to the intangible asset during its
development can be measured reliably.
Development costs not meeting the criteria for capitalisation are expensed as
incurred. The costs which do meet the criteria range from new product
development to the enhancement of existing services. The scope of the
development team's work continues to evolve as the Group continues to deliver
business critical solutions to a growing customer base. Development costs
capitalised are amortised on a straight-line basis over the estimated useful
life of the asset. The estimated useful life is deemed to be five years for
all developments capitalised. Amortisation is charged at the point of a major
product release or upgrade in which that asset is made available for sale or
release to the customer. Charges are recognised through cost of sales in the
Consolidated statement of comprehensive income in the period in which they are
incurred.
Impairment
Goodwill and assets with an indefinite useful life are tested annually for
impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable or where the asset is still in
development and is not yet being amortised as it is not available for use. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of
disposal and value-in-use. The value-in-use is the present value of the
estimated future cash flows relating to the asset using a pre-tax discount
rate specific to the asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are grouped together to form a
cash-generating unit.
A previously recognised impairment loss is reversed only if there is an
indication that an impairment loss recognised in prior periods for an asset or
cash-generating unit may no longer exist or may have decreased. If that is
the case, the carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the carrying amount that would
be determined, net of depreciation, had no impairment loss been recognised for
the asset or cost-generating unit in prior years. Such a reversal is
recognised in profit or loss unless the asset is carried at a revalued amount,
in which case the reversal is treated as a revaluation increase.
Equity
Ordinary shares are classified as equity. An equity instrument is any
contract that evidences a residual interest in the assets of Beeks Financial
Cloud Group plc after deducting all of its liabilities. Equity instruments
issued by Beeks Financial Cloud Group plc are recorded at the proceeds
received net of direct issue costs.
The share capital account represents the amount subscribed for shares at
nominal value. Details on this can be found at note 22.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
the owners of Beeks Financial Cloud Group PLC, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account the after income tax effect of
interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued
for no consideration in relation to dilutive potential ordinary shares.
Value-added tax ('VAT') and other similar taxes
Revenues, expenses, and assets are recognised net of the amount of associated
VAT, unless the VAT incurred is not recoverable from the tax authority. In
this case it is recognised as part of the cost of the acquisition of the asset
or as part of the expense.
Trade receivables and trade payables are stated inclusive of the amount of VAT
receivable or payable. The net amount of VAT recoverable from, or payable to,
the tax authority is included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a net basis. The VAT components of cash flows
arising from investing or financing activities which are recoverable from, or
payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of VAT
recoverable from, or payable to, the tax authority.
Alternative performance measures
In addition to measuring financial performance of the Group based on statutory
profit measures, the Group also measures performance based on underlying
EBITDA, underlying profit before tax and underlying diluted earnings per
share.
The alternative performance measures provide management's view of the Group's
financial performance and are not necessarily comparable with other
entities. These alternative measures exclude significant costs (such as
Share Based Payments) and as such, should not be regarded as a complete
picture of the Group's financial performance. These measures should not be
viewed in isolation, but as supplementary information to the rest of the
financial statements.
Underlying EBITDA
Underlying EBITDA is defined as earnings before amortisation, depreciation,
finance costs, taxation, acquisition costs, share based payments and
exceptional non-recurring costs.
Underlying EBITDA is a common measure used by investors and analysts to
evaluate the operating financial performance of companies, particularly in the
sector that the Group operates.
The Group considers underlying EBITDA to be a useful measure of operating
performance because it approximates the underlying operating cash flow by
eliminating the charges mentioned above. It is not a direct measure of
liquidity, which is shown in the Consolidated statement of cash flows, and
needs to be considered in the context of the Group's financial commitments.
Reference is also made to the right of use asset implication on depreciation
in the year as a result of the Group taking additional space in data centres.
Underlying profit before tax
Underlying profit before tax is defined as profit before tax adjusted for the
following:
· Amortisation charges on acquired intangible assets;
· Exchange variances on statement of final position gains and
losses;
· Share-based payment charges;
· M&A activity including:
o Professional fees;
o Any non-recurring integration costs; Any gain or loss on the revaluation
of contingent consideration where it is material; and
o Any material non-recurring costs where their removal is necessary for the
proper understanding of the underlying profit for the period.
The Group considers underlying profit before tax to be a useful measure of
performance because it eliminates the impact of certain non-recurring items
including those associated with acquisitions and other charges commonly
excluded from profit before tax by investors and analysts for valuation
purposes.
Underlying diluted earnings per share
Underlying diluted earnings per share is calculated by taking the adjusted
profit before tax as described after deducting an appropriate taxation charge
and dividing by the total weighted average number of ordinary shares in issue
during the year and adjusting for the dilutive potential ordinary shares
relating to share options.
The Group considers adjusted diluted earnings per share to be a useful measure
of performance for the same reasons as underlying profit before tax. In
addition, it is used as the basis for consideration to the level of dividend
payments.
Net cash/Net Debt
Net cash/net debt is a financial liquidity metric that measures the ability of
a business to pay all its debts if they were to be called immediately. This is
defined as current and non-current borrowing liabilities (debt and asset
finance but excluding lease liabilities)- cash and cash equivalents.
Operational costs
Operational costs are defined as operating expenses less exceptional costs,
share based payments and non-recurring costs. These costs are adjusted to
reflect the true business operational trading costs.
Profit after Tax
Management believes that profitability measures after tax are not measures
that would specifically require alternative performance measures as they do
not constitute trading results. Tax legislation is out with the control of the
Group. Whilst the group currently benefits from some tax relief such as
R&D tax credits, the group does not rely on these in terms of trading
results or provide consideration of the tax impact of adjusted items for
alternative performance measures. Further information on tax impact on
profitability can be found on Note 9.
Annualised Committed Monthly Recurring Revenue
Annualised Committed Monthly Recurring Revenue (ACMRR) is committed recurring
revenue. Management believes that ACMRR is a key measure as it provides
investors with the total contracted committed revenue of the Group.
2. Segment Information
Operating segments are reporting in a manner consistent with the internal
reporting provided to the chief operating decision makers.
The chief operating decision makers, who are responsible for allocating
resources and assessing performance of operating segments, have been
identified as the executive directors.
In the current year there is one customer that account for more than 10% of
Group revenue. The total revenue for this customer amounts to £7.10m (2022 -
£4.58m). £0.3m of this revenue has occurred within the Proximity Cloud
operating segment, with the other £6.80m of revenue included within
public/private cloud revenue.
Performance is assessed by a focus on the change in revenue across
public/private cloud and new sales relating to Proximity Cloud/Exchange Cloud.
Cost is reviewed at a cost category level but not split by segment. Assets are
used across all segments and are therefore not split between segments so
management review profitability at a group level.
Revenues by Operating segment, further disaggregated are as follows:
Year ended 30/06/23 (£'000) Year ended 30/06/22 (£'000)
Public/Private Cloud Proximity/Exchange Cloud Total Public/Private Cloud Proximity /Exchange Cloud Total
Over time
Infrastructure/software as a service 19,162 - 19,162 13,057 - 13,057
Maintenance 537 - 537 518 518
Proximity/Exchange Cloud - 454 454 57 57
Professional services 273 - 273 234 - 234
Over time total 19,972 454 20,426 13,809 57 13,866
Point in time
Proximity/Exchange Cloud - - - - 2,222 2,222
Hardware/Software resale 529 - 529 1,601 - 1,601
Software licences 1,267 - 1,267 520 - 520
Set up fees 135 - 135 80 - 80
Point in time total 1,931 - 1,931 2,201 2,222 4,423
Total revenue 21,903 454 22,357 16,010 2,279 18,289
Revenues by operating segment, further disaggregated are as follows:
2023 2022
£'000 £'000
Revenues by geographic location are as follows:
United Kingdom 5,660 5,849
Europe 3,119 2,508
US 9,193 5,556
Rest of World 4,385 4,376
Total 22,357 18,289
During the year £267k (2022: £419k) was recognised in other income for grant
income received from Scottish Enterprise and £94k (2022: £93k) was
recognised as rental income.
2023 2022
£'000 £'000
Non-Current Assets by geographic location are as follows:
United Kingdom - Property, plant and equipment 9,235 8,132
Europe - Property, plant and equipment 1,610 1,717
Rest of World - Intangible assets 6,738 5,330
Rest of World - Goodwill 1,368 1,368
Rest of World - Property, plant and equipment 2,750 2,509
US - Property, plant and equipment 4,357 3,912
Total Non-Current Assets 26,058 22,968
Intangible assets have been classified as "Rest of World" due to the fact they
represent products that are available to customers throughout the World as
well as the US intangible assets referred to in note 10.
The Group has taken advantage of the practical expedient permitted by IFRS 15
and has therefore not disclosed the amount of the transaction price allocated
to unsatisfied performance obligations or when it expects to recognise that
revenue. Longer term contracts continue to be paid on a monthly basis.
3. Operating (Loss)/Profit
Operating (Loss)/Profit is stated after charging:
2023 2022
£000 £000
Staff costs (note 7) 6,909 5,637
Depreciation on owned assets (note 11) 3,140 2,189
Depreciation right-of-use assets (note 11) 1,410 1,024
Amortisation of acquired intangibles (note 10) 489 802
Amortisation of other intangibles (note 10) 1,227 726
Other cost of sales and admin* 7,191 6,452
Foreign exchange losses / (gains) 256 (98)
Share based payments (note 21) 2,291 1,661
Other non-recurring costs 136 24
*Included within other cost of sales and admin are the remainder of direct
costs associated with the business including data centre connectivity,
software licences, security, and other direct support costs.
Auditor's remuneration
2023 2022
£000 £000
Audit
Fees payable for the audit of the consolidation and the parent company 83 63
accounts
Fees payable for the audit of the subsidiaries 75 59
Non Audit
Fees payable for the interim review of the group 5 4
Assurance related services 20 -
183 126
4. Finance Costs
2023 2022
£000 £000
Bank charges 115 95
Interest on loan liabilities 140 129
Interest on lease liabilities 165 115
Total finance costs 420 340
5. Finance Income
2023 2022
£000 £000
Financing charge on Proximity Cloud contracts 101 21
Total finance income 101 21
6. Average number of employees and employee benefits expense
Including directors, the average number of employees (at their full time
equivalent) during the year was as follows:
2023 2022
£000 £000
Management and administration 22 21
Support and development staff 81 68
Average numbers of employees 103 89
The employee benefits expense during the year was as follows:
2023 2022
£000 £000
Wages and salaries 5,969 4,925
Social security costs 669 591
Other pension costs 271 121
Total employee benefits expense 6,909 5,637
Share based payments (note 21) 2,291 1,661
Wages and salary costs directly attributable to the development of products
are capitalised in intangible assets (note 10). The total additions
capitalised in intangible assets relates to payroll costs and external third
party costs.
7. Directors' emoluments
2023 2022
£000 £000
Aggregate remuneration in respect of qualifying services 292 239
Aggregate amounts of contributions to pension schemes in respect of qualifying 14 4
services
Other benefits in kind 2 2
Gain on exercise of options - 133
Total Directors' emoluments 308 378
Highest paid director - aggregate remuneration (excluding share based 126 109
payments)
There are two directors (2022: two) who are accruing retirement benefits in
respect of qualifying services.
8. Taxation expense
2023 2022
£000 £000
Current
Foreign tax on overseas companies 65 33
R&D tax credit received (95) -
Total current tax (30) 33
Origination and reversal of temporary differences (531) (435)
Prior year deferred tax adjustments - (358)
Total deferred tax (531) (793)
Tax on (loss)/profit on ordinary activities (561) (760)
The differences between the total tax credit above and the amount calculated
by applying the standard rate of UK corporation tax to the profit before tax,
together with the impact of the effective tax rate, are as follows:
2023 % ETR 2022 % ETR
£000 movement £000 movement
(Loss)/profit before tax (650) 66
(Loss)/profit on ordinary activities multiplied by the standard rate of (124) 21% 13 19%
corporation tax in the UK of 19% (2022: 19%)
Effects of:
Impact of super deduction (215) 33.18% (170) (257.81%)
Expenses not deductible for tax purposes 481 (74.23%) 243 368.13%
R&D tax credits relief (89) 13.73% (140) (212.12%)
Share option deduction (404) 62.35% (173) (262.12%)
Prior year deferred tax adjustments (88) 13.58% (358) (542.42%)
Adjustment for tax rate differences (37) 4.01% (175) (265.15%)
Foreign tax suffered 40 0.32% - -
R&D tax credit received (125) - - -
Total tax charge (561) 86.31% (760) (1,151.51%)
The effective tax rate (ETR) for the year was 86.31% (2022: -1,151.51%).
9. Intangible assets
Acquired customer relationships Development costs Trade name Goodwill Total
£000 £000 £000 £000 £000
Cost
As at 30 June 2021 2,383 3,990 137 2,336 8,846
Charge for year
Additions - 2,590 - - 2,590
Grant funding received - (432) - - (432)
Foreign exchange movements 147 - - - 147
As at 1 July 2022 2,530 6,148 137 2,336 11,151
Additions - 2,868 - - 2,868
Grant Funding received - (147) - - (147)
Foreign exchange movements (29) - - - (29)
As at 30 June 2023 2,501 8,869 137 2,336 13,843
Accumulated Amortisation
As at 30 June 2021 (773) (1,064) (34) (968) (2,839)
Charge for the year (287) (1,214) (27) - (1,528)
Foreign exchange movements (86) - - - (86)
As at 1 July 2022 (1,146) (2,278) (61) (968) (4,453)
Charge for the year (345) (1,343) (27) - (1,715)
Foreign exchange movements 17 - - - 17
Grant income release - 414 - - 414
As at 30 June 2023 (1,474) (3,207) (88) (968) (5,737)
NBV as at 1st July 2022 1,384 3,870 76 1,368 6,698
NBV as at 30th June 2023 1,027 5,662 49 1,368 8,106
Development costs have been recognised in accordance with IAS 38 in relation
to the network automation project and development of the Proximity and
Exchange Cloud products, including analytics and its integration into this
product. Development costs in relation to Proximity and Exchange Cloud have a
useful life of 5 years.
Brought forward development costs consist of £2.5m which was originally
capitalised in July 2021. These assets now have a carrying value of £1.5m and
a remaining useful life of 3 years.
During the year, a total of £2.9m of development costs relating to the
development of Proximity Cloud/Exchange Cloud were capitalised. Included
within this was the release of Exchange Cloud which launched in July 2022.
£1.7m was capitalised in relation to this which now has a carrying value of
£1.4m at June 2023. The remaining amortisation period on this asset is 4
years. In addition, £1.7m was capitalised in relation to further releases of
the product. This has also been amortised over a useful life of 5 years. All
costs incurred during the preliminary stages of development projects are
charged to profit or loss.
Impairment test for goodwill
For this review, goodwill was allocated to individual cash generating units
(CGU) on the basis of the Group's operations as disclosed in the segmental
analysis. As the Board reviews results on a segmental level, the Group
monitors goodwill and annually assesses it on the same basis for impairment.
The carrying value of goodwill by each CGU is as follows:
2023
£'000
Private/public cloud 1,368
Proximity/Exchange Cloud -
Total goodwill 1,368
Goodwill has been allocated to the public/private segment and management have
reviewed and confirmed that there is no indication of impairment. Within the
Proximity/Exchange Cloud segment in the current year, an impairment review was
carried out solely on the projects within development costs for which
amortisation is yet to begin.
The recoverable amount of all CGUs has been determined by using value-in-use
calculations, estimating future cash inflows and outflows from the use of the
assets and applying an appropriate discount rates to those cash flows to
ensure that the carrying value of each individual asset is still
appropriate.
In performing these reviews, under the requirements of IAS 36 "Impairment of
Assets" management prepare forecasts for future trading over a useful life
period of up to five years.
These cash flow projections are based on financial budgets and market
forecasts approved by management using a number of assumptions including;
· Historic and current trading
· Weighted sales pipeline
· Potential changes to cost base (including staff to support the
CGU)
· External factors including competitive landscape and market
growth potential
· Forecasts that go beyond the approved budgets are based on long
term growth rates on a macro-economic level.
Management performed a full impairment assessment on the goodwill allocated to
Public/Private Cloud. This included including modelling projected cash flows
based on the current weighted sales pipeline, a discount rate based on the
calculated pre-tax weighted average cost of capital (15%) and cost base
assumptions that included contingency and investment to deliver against the
weighted sales pipeline. Conservative mid-term rates of 20% and terminal
growth rates of 2% were estimated, which were significantly less than both the
Group's internal business plan and external market mid-term forecasts.
An impairment review was carried out on the two development projects, for
which amortisation is yet to begin, in line with the testing on impairment of
intangible assets as referenced within the Group's accounting policies in note
1. For Exchange Cloud, the existing weighted sales pipeline was used as a
typical pipeline profile for current and future years. Discount rates and cost
base assumptions were consistent to what has been detailed above in regards to
the impairment testing on goodwill. For Open Integration, cost comparisons of
the two platform were compared based on current pricing with discount rates
again consistent with the impairment testing on goodwill.
Based on an analysis of the impairment calculation's sensitivities to changes
in key parameters (growth rate, discount rate and pre-tax cash flow
projections) there was no reasonably possible scenario where these recoverable
amounts would fall below their carrying amounts therefore as at 30 June 2023,
no change to the impairment provision against the carrying value of
intangibles was required. The revaluation of these from prior year represents
exchange adjustment only.
10. Non-current assets - Property, plant and equipment
Computer Equipment Office equipment and fixtures and fittings Right of Use Freehold property Total
Cost £'000 £'000 £'000 £'000 £'000
As at 30 June 2021 12,311 71 3,908 - 16,290
Additions 5,055 163 1,997 3,034 10,249
Stock transfers (830) - - - (830)
Disposals - (54) (485) - (539)
Exchange adjustments 7 - - - 7
As at 1 July 2022 16,543 180 5,420 3,034 25,177
Additions 3,950 146 2,149 5 6,250
Exchange adjustments (3) - 172 - 169
As at 30 June 2023 20,490 326 7,741 3,039 31,596
Depreciation
As at 30 June 2021 (4,647) (38) (1,215) - (5,900)
Charge for the year (2,134) (28) (1,024) (27) (3,213)
Exchange adjustments 3 - - - 3
Depreciation on disposals - 18 185 - 203
As at 1 July 2022 (6,778) (48) (2,054) (27) (8,907)
Charge for the year (3,020) (49) (1,410) (71) (4,550)
Exchange adjustments (30) - (157) - (187)
As at 30 June 2023 (9,828) (97) (3,621) (98) (13,644)
NBV as at 30 June 2022 9,765 132 3,366 3,007 16,270
NBV as at 30 June 2023 10,662 229 4,120 2,941 17,952
Of the total additions in the year of £6.2m, £2.1m relates to right-of-use
assets held under IFRS16 (2022 - £2.0m).
All revenue generating depreciation charges are included within cost of sales.
Non-revenue generating depreciation charges are included with administrative
expenses.
The Group recognises rental income for the rental of units at their Head
Office property in Renfrew. This asset is disclosed as Freehold Property.
Units are leased to tenants under operating leases with rentals payable
quarterly. Full details on operating leases as a lessor can be found on note
19.
11. Non-current assets - Deferred tax
Deferred tax is recognised at the standard UK corporation tax of 25% for fixed
assets in the UK (2022: 25%). Deferred tax in the US is recognised at an
average rate of 21% for 2022 (2022: 21%). The deferred tax asset relates to
the difference between the amortisation period of the US acquisitions for tax
and reporting purposes as well as the impact of the share options exercised
during the year and tax losses carried forward in both UK and overseas
companies. Deferred tax assets and liabilities on statement of financial
position prepared after the substantive enactment of the new tax rate are
calculated using a tax rate of 25% to the extent that the temporary
differences will reverse after 2023.
2023 2022
£000 £000
The split of the deferred tax asset and liabilities are summarised as follows:
Deferred tax (liabilities) (3,884) (2,968)
Deferred tax asset 5,398 4,201
Total deferred tax 1,514 1,233
Movements
Opening balance 1,232 279
Charge to profit or loss (note 9) 531 793
Charged to goodwill / equity (252) 167
Other movement 3 (6)
Closing balance 1,514 1,233
The movement in deferred tax assets and liabilities during the year is as
follows:
Share options Tax losses c/fwd Accelerated tax depreciation and other movement Total deferred tax asset carried forward Total deferred tax (liability) carried forward
£000 £000 £000 £000 £000
At 1 July 2021 223 630 43 896 (617)
Charge to income 281 2,747 110 3,138 (2,351)
Charge to equity 167 - - 167 -
As at 30 June 2022 671 3,377 153 4,201 (2,968)
Charge to income 387 1,036 24 1,447 (916)
Charge to equity (251) - - (251) -
As at 30 June 2023 807 4,413 177 5,397 (3,884)
12. Current assets - Inventories
2023 2022
£000 £000
Materials 1,315 1,566
Consumables 452 252
1,767 1,818
With the launch of Proximity Cloud in the previous year, the Group holds
hardware which can be used in the sale of Proximity or Exchange Cloud
contracts. Subsequent to the year end, if they are not used as part of a
Proximity or Exchange Cloud sale, they will be reclassified as PPE at the
point in which they are delivered into one of the Group's data centres.
During the period, £nil (2022 - £0.99m) of inventories were recognised as an
expense in the period.
13. Current assets - Trade and other receivables
2023 2022
£000 £000
Trade receivables 2,186 1,036
Less: allowance for impairment of receivables (47) (80)
2,139 956
Prepayments 1,040 2,083
Contract asset 2,717 2,329
Other taxation 111 107
Other receivables 384 125
6,391 5,600
The contract assets primarily relate to our rights to a consideration for
goods or services delivered but not invoiced at the reporting date. The
contract assets are transferred to receivables when invoiced. Contract
liabilities relate to deferred revenue. At the end of each reporting period,
these positions are netted on a contract basis and presented as either an
asset or a liability in the Consolidated Statement of Financial Position.
Consequently, a contract balance can change between periods from a net
contract asset balance to a net contract liability balance in the statement of
financial position.
Significant changes in the contract assets and the contract liability balances
during the period are as follows:
Contract assets Contract liabilities
£000 £000
Balance at 1 July 2022 2,329 961
Transferred to receivables from contract assets from the beginning of the (901) -
period
Revenues recognised during the period to be invoiced 1,289 -
Revenue recognition that was included in the contract liability balance at the - (817)
beginning of the period
Remaining performance obligations for which considerations have been received - 1,009
Balance at 30 June 2023 2,717 1,153
The credit risk relating to trade receivables is analysed as follows:
2023 2022
£000 £000
Trade receivables 2,186 1,036
Less: allowance for impairment of receivables (47) (80)
2,139 956
Movements in the allowance for expected credit losses are as follows:
2023 2022
£000 £000
Opening balance 80 19
Movement in allowances (24) 91
Receivables written off during the year as uncollectable (9) (30)
Closing balance 47 80
The Directors consider that the carrying amount of trade and other receivables
is approximately equal to their fair value. The group has applied the
simplified approach to providing for expected credit losses prescribed by IFRS
9, which permits the use of lifetime expected loss allowance for all trade
receivables. The expected credit loss allowance under IFRS 9 as at 30 June
2023 is £25k (2022 - £74k). The decrease in expected credit loss allowance
is in line with the change in the lower risk profile of trade receivables
during the year.
The following table details the risk profile of trade receivables based on the
Group's provision matrix. As the Group's historical credit loss experience
does not show significantly different loss patterns for different customer
segments, the provision for loss allowance based on past due status is not
further distinguished between the Group's different customer segments.
2023 ECL rate 2023 ECL allowance 2022 ECL rate 2022 ECL allowance
Risk profiling category (ageing) £'000 % £'000 £'000 % £'000
Current 959 -0.10% -1 923 -1.5% -14
0-30 days 988 -1.00% -10 20 -2% -0
30-60 days 94 -2.00% -2 8 -15% -1
60-90 days 12 -5.00% -1 40 -45% -18
Over 90 days 88 -15.00% -11 45 -90% -41
Total -25 -74
The ECL rate in the current year has been reduced in line with the risk
profile of trade receivables, historic trade losses and continued tight credit
control procedures.
Trade receivables consist of a large number of customers across various
geographical areas. The aging below shows that almost all are less than three
months old and historic performance indicates a high probability of payment
for debts in this aging. Those over three months relate to customers without
history of default for which there is a reasonable expectation of recovery.
Past due but not impaired
The Group did not consider a credit risk on the aggregate balances after
reviewing the credit terms of the customers based on recent collection
practices.
The aging of trade receivables at the reporting date is as follows:
2023 2022
£000 £000
Not yet due 965 923
Due 1 to 3 months 1,115 68
Due 3 to 6 months 30 45
More than 6 months due 76 -
2,186 1,036
14. Current assets - Cash and cash equivalents
2023 2022
£000 £000
Cash and bank balances 7,829 10,160
7,829 10,160
The credit risk on cash and cash equivalents is considered to be negligible
because over 99% of the balance is with counter parties that are UK and US
banking institutions.
15. Current assets - Financial instruments and risk management
Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and cash
equivalents, short term deposits and bank and other borrowings.
The carrying amount of all financial assets presented in the statement of
financial position are measured at amortised cost.
The carrying amount of all financial liabilities presented in the statement of
financial position are measured at amortised cost.
There have been no changes to valuation techniques, or any amounts recognised
through 'Other Comprehensive Income'.
The main purpose of these financial instruments is to finance the Group's
operations. The Group has other financial instruments which mainly comprise
trade receivables and trade payables which arise directly from its operations.
Risk management is carried out by the finance department under policies
approved by the Board of Directors. The Group finance department identifies,
evaluates, and manages financial risks. The Board provides guidance on overall
risk management including foreign exchange risk, interest rate risk, credit
risk, and investment of excess liquidity.
The impact of the risks required to be discussed under IFRS 7 are detailed
below:
Market risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised
assets or liabilities are denominated in a currency that is not the functional
currency of the operations. The Group had potential exchange rate exposure
within USD trade payable balances of £1,255,542 at 30 June 2023 (£1,512,444
at 30 June 2022) and potential exchange rate exposure within EUR trade
payables balances of £59,768 (£26,500 at 30 June 2022). The Group had
potential exchange rate exposure within USD trade receivables of £1,179,455
(£403,700 at 30 June 2022) and potential exchange rate exposure within EUR
trade receivables of £37,262 (£9,300 at 30 June 2022). The Group had
potential exchange rate exposure within USD intercompany balances of
£5,807,729 (£1,157,893 as at 30 June 2022) and within JPY intercompany
balances of £189,028 (£236,780 as at 30 June 2022). The Group also has
potential exchange rate exposure within USD bank balances of £3,644,955
(£159,534 as at 30 June 2022) and £607,023 within EUR bank balances
(£164,421 as at 30 June 2022).
Cash flow and interest rate risk
The Group has relatively limited exposure to interest rate risk in respect of
cash balances and long-term borrowings held with banks and other highly rated
counterparties. Loans are at variable rates of interest based on the Bank of
England's base rate therefore the Group is subject to changes in interest
rates. Given the relatively low level of debt the Board do not consider this
to be a significant risk. At a total debt level of £3.4m, with £1.8m
contracted on a variable rate and is the remainder under a fixed interest
rate, 1% increase in interest rates would give rise to an additional annual
interest rate charge of £18,140.
Credit risk
The Group's maximum exposure to credit risk is limited to the carrying amount
of financial assets recognised at the reporting date, as summarised below:
2023 2022
£000 £000
Cash and cash equivalents 7,829 10,160
Trade receivables 2,186 1,036
Contract asset 2,717 2,329
Other receivables 384 125
13,116 13,650
Credit risk is managed on a Group basis. Credit risks arise from cash and cash
equivalents and deposits with banks and financial institutions, as well as
credit exposures to customers, including outstanding receivables and committed
transactions. Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial losses to the Group. The
Group provides standard credit terms (normally 30 days) to all of its
customers which has resulted in trade receivables of £2,139,000 (2022:
£956,000) which are stated net of applicable allowances, and which represent
the total amount exposed to credit risk.
The Group's credit risk is primarily attributable to its trade receivables and
contract assets. The Group present the amounts in the statement of financial
position net of allowances for doubtful receivables, estimated by the Group's
management based on prior experience and the current economic environment. The
Group reviews the reliability of its customers on a regular basis, such a
review takes into account the nature of the Group's trading history with the
customer, along with management's view of expected future events and market
conditions.
The credit risk on liquid funds is limited because the majority of funds are
held with two banks with high credit-ratings assigned by international
credit-rating agencies. Management does not expect any losses from
non-performance of these counterparties.
None of the Group's financial assets are secured by collateral or other credit
enhancements.
Liquidity risk
The Group closely monitors its access to bank and other credit facilities in
comparison to its outstanding commitments on a regular basis to ensure that it
has sufficient funds to meet obligations of the Group as they fall due. The
Group monitors its current debt facilities and complies both with its gross
borrowings to adjusted EBITDA, minimum adjusted cash banking and LTV
covenants. Judgement is required in assessing what items are allowable for the
adjusted components.
The Board receives regular debt management forecasts which estimate the cash
inflows and outflows over the next twelve months, so that management can
ensure that sufficient financing is in place as it is required.
As at 30 June 2023, the Group's financial liabilities (excluding leases
disclosed in Note 17) have contractual maturities (including interest payments
where applicable) as summarised below:
Current
Non-current
Within 1-3 3-12 1-5 After
1 month months months years 5 years
£'000 £'000 £'000 £'000 £'000
Trade and other payables 3,483 1,052 417 - -
Borrowings - 1,445 369 - -
The above amounts reflect the contractual undiscounted cash flows, which may
differ from the carrying values of the liabilities at the reporting date.
Trade and other payables includes trade payables, accruals, contract
liabilities, other taxation and social security and other payables.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. In order to maintain or
adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell
assets to reduce debts.
2023 2022
£000 £000
Total equity 32,786 30,759
Cash and cash equivalents 7,829 10,160
Capital 40,615 40,919
Total equity 32,786 30,759
Other loans 1,814 2,297
Lease liabilities 4,006 3,583
Overall financing 38,606 36,639
Capital-to-overall financing ratio 1.05 1.12
Other risks
Rental income from the head office property leased out under operating leases
is recognised in the statement of the comprehensive income as other income as
these services are rendered, as the tenant occupies the space. Any associated
risk of the underlying asset used to generate this rental income is believed
to be minimal given the building is utilised as the head office and the
majority of staff are based there.
16. Non-current liabilities - Borrowings and other financial liabilities
2023 2022
£000 £000
Other loans - 1,320
Lease liabilities 2,047 2,303
2,047 3,623
Other loans
Under one year 1,814 978
Between one to five years - 1,320
1,814 2,298
The bank loan derives from a £1.8m term loan facility taken out from Barclays
Bank in December 2020 and a £1.47m property loan facility taken out from
Barclays Bank in December 2021. The term loan was renewed during the financial
year leaving 6 quarterly instalments of £0.125m due from March 2023. The
property loan is repayable in 8 quarterly instalments of £0.03m which
commenced in December 2021 along with a bullet balance which was repaid at
Maturity in September 2023. This, along with the Group's revolving credit
facility available of £3.5m, is used to fund the Group's working capital
requirements when required. The available revolving credit facility balance of
£3.5m was unutilised as at 30 June 2023.
Barclays have been given security for the facility of the UK assets of the
Group and an unlimited guarantee is afforded to Barclays.
Costs of £21,500 have been amortised over the life of the term loan and aged
in line with the capital repayments.
During the year, the Group entered into two new asset financing arrangements.
These asset financing agreements have been disclosed under lease liabilities
(note 19).
Changes in liabilities arising from financing activities:
Lease liabilities Loans Total
£000 £000 £000
Balance at 1 July 2022 3,327 2,297 5,624
Lease liabilities additions IFRS 16 149 - 149
Proceeds from new leases under asset financing 1,963 - 1,963
Loan repayments - (483) (483)
Lease repayments (1,432) - (1,432)
Balance at 30 June 2023 4,007 1,814 5,821
Included within the lease liabilities balance of £4.01m is £1.61m of asset
finance lease liabilities.
17. Current liabilities - Trade and other payables
2023 2022
£000 £000
Trade payables 2,937 3,378
Other loans 1,814 978
Lease liability 1,960 1,280
Accruals 375 575
Contract liabilities 1,153 961
Other taxation and social security 373 192
Other payables 114 33
8,726 7,397
18. Leases
The Group leases assets including the space in data centres in order to
provide infrastructure services to its customers and also hardware for data
centres. Information about leases for which the Group is a lessee is presented
below:
Right-of-use assets
Leasehold Property and improvement
£000
Balance at 1 July 2022 3,366
Additions 2,101
Depreciation (1,410)
Foreign exchange 16
Balance at 30 June 2023 4,073
The right-of-use assets are disclosed as non-current assets and are disclosed
as property, plant and equipment (note 11).
Right-of-use lease liabilities
2023 2022
£000 £000
Maturity analysis:
Within one year (2,068) (1,407)
Within two years (1,574) (1,639)
Within three years (461) (769)
Within four years (12) -
Add: unearned interest 108 232
Total lease liabilities (4,007) (3,583)
Analysed as:
Non-current (Note 18) (2,047) (2,303)
Current (Note 19) (1,960) (1,280)
(4,007) (3,583)
The Group does not face a significant liquidity risk with regard to its lease
liabilities. The interest expense on lease liabilities amounted to £165k for
the year ended 30 June 2023 (2022: £131k). Lease liabilities are calculated
at the present value of the lease payments that are not paid at the
commencement date.
The Group has elected not to recognise a lease liability for short-term leases
(leases with an expected term of 12 months or less) or for leases of low value
assets. Payments made under such leases are expensed on a straight line basis.
During the year ended 30 June 2023, in relation to leases under IFRS 16, the
Group recognised the following amounts in the Consolidated statement of
comprehensive income:
2023 2022
£000 £000
Depreciation charge 1,410 1,024
Interest expense 165 131
Payments for short-term lease expenses in relation to data centre space have
not been disclosed below and are instead reflected within other cost of sales
under note 4.
Amounts recognised in the Consolidated statement of cash flows:
2023 2022
£000 £000
Amounts payable under leases:
Short-term and low value lease expense 10 25
Repayment of lease liabilities within cash flows from financing activities 1,432 1,067
The Group recognises rental income for the rental of units at their Head
Office property in Renfrew. Units are leased to tenants under operating leases
with rentals payable quarterly. Lease income from operating leases where the
group is a lessor is recognised on a straight-line basis over the lease term.
The total recognised in profit or loss during the period is as follows:
2023 2022
£000 £000
Rental income from operating leases 94 93
As part of this, The Group receives rental payments on a quarterly basis. The
amounts due to be received over the next 5 years are as follows:
2023 2022
£000 £000
Within 1 year 96 94
Between 1 and 2 years 96 94
Between 2 and 3 years 96 94
19. Equity - issued capital
2023 2022 2023 2022
shares shares £000 £000
Ordinary shares - fully paid 65,571,434 65,406,764 82 82
Movements in ordinary share capital
Details Date Shares Issue price £000
Balance 30 June 2018 50,043,100 62
EMI Share options exercised 31 August 2018 677,700 £0.00125 1
EMI Share options exercised 24 October 2018 32,200 £0.00125 -
EMI Share options exercised 20 June 2019 111,800 £0.00125 1
New share issue 14 April 2020 363,458 £0.00125 -
EMI Share options exercised 9 November 2020 44,118 £0.00125 -
New share issue 15 December 2020 430,946 £0.00125 1
New share issue 26 April 2021 4,347,827 £0.00125 5
EMI Share options exercised 15 November 2021 264,705 £0.00125 -
New share issue 25 April 2022 9,090,910 £0.00125 12
Balance 30 June 2022 65,406,764 82
EMI Share options exercised 16 January 2023 21,946 £0.00125 -
EMI Share options exercised 5 April 2023 106,796 £0.00125 -
EMI Share options exercised 31 May 2023 35,928 £0.00125 -
Balance 30 June 2023 65,571,434 82
Ordinary shares
During the year, 164,670 share options were
exercised.
20. Share based payments
The movements in the share options during the year, were as follows:
2023 2022
Number of share options Weighted Average Fair Value price per share (£) Number of share options Weighted Average Fair Value price per share (£)
Outstanding at the beginning of the year 4,925,668 1.20 2,916,973 0.89
Exercised during the year (164,670) 1.24 (264,705) 1.02
Issued during the year 1,549,000 0.83 2,273,400 1.58
Forfeited during the year (76,955) 1.43 - -
Outstanding at the end of the year 6,233,043 1.35 4,925,668 1.20
Exercisable at the end of the year 1,410,180 0.83 - -
The Group granted a total of 1,549,000 share options to members of its
management team on 2(nd) December 2022.
During the year 1,574,850 shares from Grant 2 vested, with 164,670 shares
being exercised in the year. The remaining balance remain as exercisable at
the end of the year.
Shares were forfeited during the year where employees left the business, with
their share options not being fully redistributed within the Group.
These share options outstanding at the end of the year have the following
expiry dates and exercise prices:
Grant 3 Grant 4A Grant 4B Grant 4C Grant 5A Grant 5B Grant 5C Total
Shares 1,042,063 1,022,500 597,150 632,150 604,000 462,500 462,500 4,822,863
Date of grant 9th October 2020 26th November 2021 26th November 2021 26th November 2021 2nd December 2022 2nd December 2022 2nd December 2022
Exercise price £0.00125 £0.00125 £0.00125 £0.00125
£0.00125 £0.00125 £0.00125
Vesting date 9th October 2023 26th November 2024 26th November 2024 26th November 2023 2nd December 2025 2nd December 2025 2nd December 2024
These share options vest under challenging performance conditions based on
underlying profitability growth during the periods.
The Black Scholes model was used to calculate the fair value of these options,
the resulting fair value is expensed over the vesting period. The following
table lists the range of assumptions used in the model:
Grant 1 Grant 2 Grant 3 Grant 4A Grant 4B
Shares 264,706 1,574,850 1,042,063 1,022,500 597,150
Share price (£) 1.02 0.84 0.945 1.575 1.575
Volatility 5% 5% 5% 5% 5%
Annual risk free rate 4% 4% 4% 4% 4%
Exercise strike price (£) 0.00125 0.00125 0.00125 0.00125 0.00125
Time to maturity (yrs) 3 3 3 3 3
Grant 4C Grant 5A Grant 5B Grant 5C Total
Shares 632,150 604,000 462,500 462,500 6,662,419
Share price (£) 1.575 1.43 1.43 1.43
Volatility 5% 5% 5% 5%
Annual risk free rate 4% 4% 4% 4%
Exercise strike price (£) 0.00125 0.00125 0.00125 0.00125
Time to maturity (yrs) 2 3 3 2
The total expense recognised from share based payments transactions on the
Group's profit for the year was £2,291,120 (2022: £1,661,273).
Expected volatility was determined at the date of grant from historic
volatility, adjusted for events that were not considered to be reflective of
the volatility of the share price going forward.
These share options vest on the achievement of challenging growth targets. It
is management's intention that the Group will meet these challenging growth
targets therefore, based on management's expectations, the share options are
included in the calculation of underlying diluted EPS in note 24.
21. Equity - Reserves
The foreign currency retranslation reserve represents exchange gains and
losses on retranslation of foreign operations. Included in this is revaluation
of opening balances from prior years.
The merger reserve initially arose on the share for share exchange reflecting
the difference between the nominal value of the share capital in Beeks
Financial Cloud Group PLC and the value of the Group being acquired, Beeks
Financial Cloud Limited. The merger reserve then increased upon acquisition of
Velocimetrics Ltd in FY 2018, reflecting the difference between the nominal
value of the share capital issued from Beeks Financial Cloud Group PLC and the
value of the shares issued to the owners of Velocimetrics Ltd.
Share premium represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue.
Any transaction costs associated with the issuing of shares are deducted from
share premium, net of any related income tax benefits.
Retained earnings represents retained profits and losses.
The other reserve arose on the share for share exchange and reflects the
difference between the value of Beeks Financial Cloud Group Limited and the
share capital of the Group being acquired through the share for share
exchange. Also included in the other reserve is the fair value of the warrants
issued on the acquisition of VDIWare LLC.
22. Related party transactions
Parent entity
Beeks Financial Cloud Group PLC is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 25.
Transactions with related parties
The following transactions occurred with related parties:
2023 2022
£000 £000
Withdrawals from the director, Gordon McArthur 53 41
During the financial year, Beeks Financial Cloud Limited received services in
the normal course of its business and at arm's length from A&B Property
and Rental Services Scotland Limited, a company owned by Gordon McArthur.
During the year, Beeks Financial Cloud Limited paid for services of £17,700
(2022: £nil) to A&B Property and Rental Services Scotland Limited and the
amounts due at the year end was £nil (2022: £nil).
The Group recognise that the total withdrawals from the director exceeded the
limit as defined in the Companies Act 2006 requiring shareholder approval. In
order to rectify this, the amounts due by the director will be repaid
subsequent to the financial year end.
Key management personnel
Compensation paid to key management (which comprises the executive and
non-executive PLC Board members) during the year was as follows:
2023 2022
£000 £000
Wages and salaries 292 239
Social security costs 37 27
Other pension costs 14 4
Other benefits in kind 2 2
Share based payments 188 316
23. Earnings per share
2023 Restated 2022
£000 £000
(Loss)/Profit after income tax attributable to the owners of Beeks Financial (89) 826
Cloud Group PLC
Pence Pence
Basic (loss)/earnings per share (0.14) 1.43
Diluted (loss)/earnings per share (0.13) 1.42
Number Number
Weighted average number of ordinary shares used in calculating basic earnings 65,446,755 57,885,241
per share
Adjustments for calculation of diluted earnings per share:
Dilutive impact of share options 4,736,830 3,325,122
Options over ordinary shares 125,611 96,454
Weighted average number of ordinary shares used in calculating diluted 70,309,196 61,306,817
earnings per share
2023 Restated 2022
£000 £000
(Loss)/Profit before tax for the year (650) 66
Share Based payments 2,291 1,661
Amortisation on acquired intangibles 489 802
Exceptional non-recurring costs 136 28
Exchange rate losses/(gains) on intercompany translation and unrealised 325 (81)
currencies
Grant income (267) (419)
Tax effect 494 542
Underlying profit for the year 2,818 2,599
Weighted average number of shares in issue - basic 65,446,755 57,885,241
Weighted average number of shares in issue - diluted 71,143,541 61,985,547
Underlying earnings per share - basic 4.31 4.49
Underlying earnings per share - diluted 3.96 4.19
Included in the weighted average number of shares for the calculation of
underlying diluted EPS are share options outstanding but not exercisable. It
is management's intention that the Group will meet the challenging growth
targets therefore, based on management expectations, the share options are
included in the calculation of underlying diluted EPS.
24. Subsidiaries
The Consolidated financial statements incorporate the assets, liabilities and
results of the following subsidiaries held by the company in accordance with
the accounting policy described in note 1.
The subsidiary undertakings are all 100% owned, with 100% voting rights.
Company name Country of incorporation Principal place of business/registered office Activity
Beeks Financial Cloud Co Ltd Japan FARO 1F, 2-15-5, Minamiaoyama, Minato-Ku, Tokyo, Japan. Non-trading
Beeks FX VPS USA Inc. Delaware, USA 874 Walker Road, Suite C, Dover, Kent, Delaware, 19904, USA. Non-trading
Year end 31(st) December
Beeks Financial Cloud Limited Scotland Riverside Building, 2 Kings Inch Way, Renfrew, Renfrewshire, PA4 8YU Cloud Computing Services
Velocimetrics Limited England Birchin Court, 230 Park Avenue 20 Birchin Lane, Suite 300 West, London, Software Services
England, EC3V 9DU
Velocimetrics Inc. New York, USA 230 Park Avenue, 10(th) Floor, New York 10169, USA. Software Services
In accordance with S479A of the Companies Act 2006, Velocimetrics Limited
(06943398) have not prepared audited accounts. Beeks Financial Cloud Group plc
guarantees all outstanding liabilities in this company at the year ended 30
June 2023, until they are satisfied in full.
25. Prior Period Adjustment
During the year, it was identified that share options which contained
conditions relating to future years' performance targets were not included in
the diluted EPS figure, despite the options having already achieved their
performance conditions related to EBITDA in the current period.
IAS 33 'Earnings per share' considers the conditions at the period end as if
these were the conditions at the end of the contingent period (i.e the future
performance period) and as such, these options should then be included in the
diluted EPS figure even though the vesting date and associated future profit
metric has not yet been achieved.
The error has been corrected. The number of shares included in the diluted
earnings per share calculation has increased to include options of 3.33m that
meet the above conditions taking the total number of shares within the diluted
earnings per share calculation from 57.98m to 61.31m. As a result, the
diluted earnings per share has been restated from 1.42p to 1.35p as disclosed
in note 24.
26. Ultimate controlling party
The Directors have assessed that there is no ultimate controlling party.
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