REG - GRC Intnl.Group PLC - Final results for the year ended 31 March 2022
31/08/2022 07:16
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RNS Number : 6642X GRC International Group PLC 31 August 2022
31 August 2022
GRC International Group PLC
("GRC" or the "Group")
Final results for the year ended 31 March 2022
Continued strong organic revenue growth with improved margins and positive EBITDA
GRC International Group PLC (AIM: GRC), an integrated cyber security and
privacy solutions business, announces its audited year end results for 12
months to 31 March 2022 (FY22).
Financial highlights
· Revenue up 18% to £13.9m (FY21: £11.8m)
· Billings* were up 20% to £14.8m (FY21: £12.3m)
· Recurring and contracted revenue up 22% to £8.2m (FY21: £6.7) -
59% of total revenue (FY21: 57%).
· FY22 billings from recurring revenue products accounting for 56%
of total billings (FY21: 54%)
· Gross profit was up 34% to £8.2m (FY21: £6.1m), with gross
margin up by 700 basis points to 59% (FY21: 52%) - reflecting continued
improvement in operational gearing
· EBITDA** of £1.0m (FY21: £1.1m loss)
· Loss before tax reduced to £1.0m (FY21: £2.8m loss)
· Year-end cash £2.1m (FY21: £0.2m), reflecting January 2022
share placing and particularly strong February and March trading and cash
performance
Operational highlights
· Recurring revenue subscriber base up 41% to 5,089 (FY21: 3,600)
· 57% of transactions from returning existing customers (FY21: 45%)
· Website visits up 17% to 4,312k (FY21: 3,691k)
· Internal automation projects have delivered operational
efficiencies across the business.
*Billings equate to the total value (net of VAT) of invoices raised and cash
sales through the Group's websites. This figure does not take account of
accrued or deferred income adjustments that are required to comply with
UK-adopted International Financial Reporting Standards ("IFRS") but is
considered to provide useful information to the users of the Group's financial
information. Billings is considered by the Board to be a key metric for
managing the business due to its direct relationship with cash flow. Cash
receipts are driven by billings achieved each month rather than revenue
recognised in accordance with IFRS.
**EBITDA is defined in the Financial Review within this announcement.
Alan Calder, Chief Executive Officer, said:
"We performed strongly last year, delivering on our two key objectives - to
improve the quality of earnings and revenue forward visibility with
significant organic growth and a positive EBITDA.
"Overall billings were up 21% and recurring billings were up to 56% with
transactions from returning customers up to 57%. EBITDA saw a £2.1m
turnaround to £1.0m against a prior year loss of £1.1m.
"Our domestic and international markets continue to grow and our strong
performance in the final quarter of FY22 continued into the first five months
of the current financial year. Trading remains robust and the substantial
progress we made last year should support our long term growth aspirations."
The Company's annual report and accounts for the year ended 31 March 2022 is
available to view electronically on the Company's website at
www.grci.group/results-reports-presentations
(http://www.grci.group/results-reports-presentations) and hard copies will be
sent to the shareholders on or around 1 September 2022.
Enquiries:
GRC International Group PLC +44 (0)330 999 0222
Alan Calder, Chief Executive Officer
Christopher Hartshorne, Finance Director
Singer Capital Markets (Nominated Adviser and Joint
Broker) +44
(0)20 7496 3000
Phil Davies, James Fischer
Dowgate Capital Limited (Joint
Broker)
+44 (0)20 3903 7715
James Serjeant, Russell Cook, Nicholas Chambers
Meare
Consulting
+44 (0)7990 858548
Adrian Duffield
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 (as it forms part of domestic law
of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018).
About GRC International Group PLC ("GRC" or "the Group")
GRC is an international governance, risk management and compliance company
whose main business is cyber defence-in-depth.
A technology business, its proprietary premier brands including the market
leader, IT Governance, offer 'Our expertise, your peace of mind' for GRC's
wide range of domestic and international corporate customers across all
industrial sectors.
GRC's three operating divisions - Software as a Service (SaaS), e-Commerce and
Services - offer a wide range of products and services encompassing: IT
governance, risk management, compliance with data protection and cyber
security regulations, online and in-person training and staff awareness,
consultancy, online publishing and distribution as well as software. The
Group's capabilities also include products and services to enable corporates
to address wider governance issues such as money laundering and bribery.
In addition to its UK business, GRC has operations in the EU and US.
Overview
Importantly, we achieved our two key objectives last year. The first was to
improve the quality of earnings and forward visibility of our revenue while
delivering significant organic growth. The second was to deliver positive
EBITDA.
The Group performed strongly through calendar 2021 and this accelerated into
Q4 of FY22. March 2022 was our best month of billing since May 2018, despite
the economic and geopolitical headwinds.
Year on year, overall billings were up 20%, recurring billings were up to 56%
(FY21: 51%) of total billings with our subscription numbers up 41% to 5,089.
Transactions from returning customers was also up to 57% of the total. As a
result, we saw organic revenue growth of 18%.
We moved strongly into positive EBITDA, achieving £1.0m against a prior year
EBITDA loss of £1.1m, a turnaround of just over £2m.
We also successfully completed a £3m oversubscribed share placing in January
2022. This enables us to continue to invest in products and business
automation, that substantially improves our profitability, as well as to
strengthen the balance sheet position and support working capital.
Strategy
As we have said before, we are seeing significant international growth
opportunities in the digitally transformed, Cloud-based, increasingly
vulnerable, hybrid- working environment as a result of:
• Corporates, large and small, domestic and
multinational, having to deal with increasingly complex regulations and
enforcement in the Group's three primary geographic markets of UK, EU and US
• All clients facing escalating nation-state and
criminal (serious organised crime) cyber-attacks
• Significant and deep-seated cyber and compliance
skills deficits.
In this environment, our strategy is to accelerate growth nationally and
internationally, organically and by acquisition. Today's fragmented and
rapidly growing international cyber markets offer significant organic and
consolidation opportunities. The Group's resilience and agility will enable it
to exploit those opportunities in the years ahead.
The Group's medium-term objective is to build annual revenue, both organically
and through acquisition, to approximately £50m, with gross margins and EBITDA
margins in the order of 65% and 25% respectively. Incentives are being put in
place to ensure alignment throughout the organisation with these objectives.
Current trading and outlook
The strong sales momentum, billings, numbers of new business leads and cash
generation in Q4 FY 22 has continued into the current financial year.
Importantly, we ended the last financial year with £2.4m of FY23 revenue
already invoiced.
Our overall growth is driven by client acquisition through our e-commerce
division, the continued development of expertise through our services division
to solve client problems and create opportunities for SaaS deployment.
The SaaS division underpins our Cyber Defence-in-Depth offering and is
expected to support continued double-digit
organic divisional billings growth in the current financial year.
We will continue to invest in our e-commerce and SaaS infrastructure in order
to extend our automated fulfilment and customer support. This enables our
account managers to concentrate on landing and expanding our client
relationships, which improves forward revenue visibility, widens gross margins
and increases customer lifetime value.
After a strong final quarter in FY22 momentum has continued into the first
five months of the new financial year. Trading remains robust and in line
with expectations. The substantial progress made last year should support the
Group's long term growth aspirations.
Operational review
Operational execution
Our technology capabilities and track record, together with our deep expertise
and Cyber Defence-in-Depth model, provide our clients with peace of mind. They
know that our comprehensive, integrated range of products and services enables
them to build cyber resilience through deploying our Cyber Defence-in-Depth
solutions.
We support our clients, helping them comply and thrive while they tackle cyber
resilience, compliance and data protection. Our primary focus is on the people
and process domains, and on ensuring that our solutions align
with appropriate national and international standards. Our productised
services and packaged offerings simplify choice for smaller customers. It also
enables effective cross and up-selling. At the same time, our expertise
enables us to create custom solutions for corporate and enterprise clients.
Our wide-ranging, proprietary product and service offering, supported by
substantial IP, is primarily delivered through the market- leading IT
Governance brand and our unique Cyber Defence-in-Depth model.
During the last financial year, we continued to invest in and build on our 20
years of content marketing, book publishing, PR activity and Search Engine
Optimisation (SEO) dominance which resulted in growing volumes of incoming
customers seeking specific solutions.
We also continued to add external service accreditations, wide-ranging
customer endorsements and high Net Promoter Score (NPS) scores to help convert
incoming customers.
International development
The Group is well established in the UK and its main brand, IT Governance, has
significant recognition.
Our businesses are now established in the US and EU, and we see significant
organic and M&A growth opportunities.
Our initial Asia-Pacific website is open as we begin to explore a number of
regional opportunities.
Quality and accreditations
Our business management system continues to be accredited to ISO/IEC 27001,
ISO/IEC 27701, BS 10012 and ISO 9001. These accreditations, combined with
those from professional bodies such as CREST, the UK's National Cyber Security
Centre (NCSC), and the Payment Card Industry Data Security Standard (PCI SSC),
our Cyber Essentials Plus certificate and from training organisations and exam
institutes, such as the International Board for IT Governance Qualifications
(IBITGQ), ISC2, ISACA, BCS and the UK's CIISec, are all reflections of the
care we take to ensure that we practice what we preach.
Our focus on quality is reflected in our NPS scores, which we use for engaging
customer feedback. We achieve average scores across the Group in excess of 50,
which is a consistently 'Good' score.
Divisional performance
Services
Our services division helps corporate and public organisations meet compliance
and cyber risk management objectives. This division offers:
• ISO/IEC 27001 (and related standards)
implementation, audit and support services
• A wide range of cyber security management systems
and control implementations
• Penetration testing
• PCI DSS & Cloud compliance
• Legal, General Data Protection Regulation (GDPR)
Data Protection Office (DPO) and Privacy by Design services
We continued to increase our penetration of the mid-size enterprise market,
with wins of multi- year contracts from key customers around the world. We
also steadily increased the numbers of clients who are signed up to ongoing
annual PCI QSA, Penetration testing, ISO 27001 support, DPO and EU/UK
representative contracts.
During Q4, the Group's cyber security incident response service achieved CREST
accreditation. This, combined with GRC's unique Cyber Safeguard service
package, which includes cyber insurance from Hamilton Insurance, enables the
Group to support a growing number of customers that are particularly exposed
to cyber attacks.
On 1 April 2022, the Group launched a Cloud Security consultancy service to
help mid-sized corporate clients ensure that their Cloud infrastructures are
securely configured. The service is fully described on the UK website and sold
directly to our existing medium and large consultancy clients through our
consultancy and professional services teams. Allied with the Group's Microsoft
Global Training Partnership, this expands the footprint in the fast-growing
Cloud security market.
e-Commerce
This division encompasses:
• Eight B2B e-commerce websites
• ITGP, our publishing business, offers a wide range
of books and standards, covering cyber security, GDPR, privacy/ data
protection, risk & compliance
• 'Learn from Anywhere' training delivery model,
with accredited training for a wide range of cyber security and privacy
qualifications.
We made significant progress with developing self-paced versions of all the
best-selling instructor-led courses in our portfolio. This enables us to
target markets and time zones for which our Instructor-led offering is either
difficult to attend or unaffordable.
Software as a Service
This division is focused on delivering cyber security and privacy subscription
solutions from a growing range of cloud- based platforms. These include
• CyberComply GRC platform
• Cyber Essentials certification
• Vulnerability Scanning
• GRC e-learning (staff awareness training)
• Privacy as a Service
• DocumentKits templates.
• Cyber Safeguard, our Cyber security as a Service
offering.
We significantly expanded the range of cyber security and privacy standards
and frameworks that can be addressed though the CyberComply platform. At the
same time, we started expanding the staff awareness e-learning portfolio
outside the core cyber security and privacy product range to include the other
GRC subjects (such as anti-bribery and anti-money laundering) that clients
expect to see on GRC staff awareness platforms.
Financial report
Billings
Billings were up 20% to £14.8m (FY21: £12.3m). Billings equate to the total
value of invoices raised as cash sales through the Group's websites. The
figure does not take account of accrued or deferred income adjustments that
are required to comply with accounting standards for revenue recognition.
The Board considers this to be a key performance indicator because it has a
much closer relationship than accounting revenue to cash receipts from
customers. It also provides good forward visibility of future accounting
revenue since much of the Group's invoicing takes place ahead of delivery.
Revenue
Revenue for the year ended 31 March 2022 was up 18% to £13.9m (FY21:
£11.8m). The comparative period was particularly impacted by the effects of
the early months of COVID-19. H2 revenue at £7.3m was up 11% on the previous
six months (H1 FY22: £6.6m), despite continuing uncertainty in the wider
economy over inflation, rising energy prices and other geopolitical factors.
Recurring and contracted revenue was up 22% to £8.2m (FY21: £6.7). This
accounted for 59% of total revenue (FY21: 57%).
The most significant revenue growth was in the e-Commerce division, which
includes sales of public training courses and documentation toolkits. These
were hardest hit during the COVID-19 pandemic and have recovered strongly,
with the introduction of recurring revenue product lines and longer term
projects in this division contributing to the growth and making this revenue
stream more resilient going forward. The growth in the Software as a Service
division reflects the Group's focus on and investment in developing its high
margin and highly scalable recurring revenue.
Software as a Service (SaaS)
£'m Services e-Commerce Total
FY22 6.6 3.7 3.6 13.9
FY21 6.6 2.8 2.4 11.8
FY22 vs FY21 % 0% 32% 50% 18%
International
International revenue was up 43% to £3.0m (FY21: £2.1m), representing 22%
(FY21: 18%) of total Group revenue. The Group services the majority of its US
based clients through its IT Governance USA business and most of its European
clients through its IT Governance EU business. Invoicing in USD and EUR
respectively. The use of local staff and suppliers in those territories means
cost is incurred in local currency providing a natural partial hedge against
foreign exchange risk.
The Group saw growth in both its US and European revenues, of 44% and 14%
respectively in FY22 at constant currency, notwithstanding the differing rates
of general economic recovery from the pandemic around the world, along with
other worldwide macro-economic challenges.
Gross profit
Gross profit was up 34% to £8.2m (FY21: £6.1m), with gross margin also up by
700 basis points to 59% (FY21: 52%).
The majority of the Group's direct cost base relates to headcount for
consultants and client delivery staff. The COVID-19 related sudden and
dramatic revenue drop in the early part of the comparative period meant that
sales revenue was temporarily out of alignment with the Group's costs.
Where possible, the Group focused on retaining the staff it needed to deliver
the expected strong growth and client delivery coming out of the pandemic.
This resulted in better consultant utilisation rates and therefore better
margins in the Services division as revenue recovered. This, along with the
Group's focus on higher-margin subscription services, has driven the overall
improvement in margin. In particular, the growth in retainer type arrangements
for some services contracts has driven margin improvement in the services
division and also improved forward visibility of revenue.
Notably, the Group's two fastest-growing revenue divisions, SaaS and
e-Commerce, have the highest gross margin:
FY21 FY22
Division Revenue Gross profit Revenue increase Revenue Gross profit
£ £ % % £ £ %
Services 6.6 2.1 32% -% 6.6 2.7 41%
SaaS 2.8 2.6 93% 32% 3.7 3.3 89%
e-Commerce 2.4 1.4 58% 50% 3.6 2.2 61%
Total 11.8 6.1 52% 18% 13.9 8.2 59%
Administrative expenses
Administrative expenses increased by £0.2m (2%) to £9.1m (FY21: £8.9m),
compared with revenue increasing by 18%.
The increase in administrative expenses was mostly due to staff costs and
related expenses, with only a small increase in headcount required to support
the growth in revenue.
The Group's investment in automation and focus on SaaS revenue lines has
improved the overall operational gearing which has seen top-line growth
without the proportionate increases in staff. This is expected to result in a
continued widening of margins.
EBITDA
EBITDA (earnings before interest, tax, depreciation and amortisation) is
considered by the Board to be an important key performance indicator. It is a
more accurate measure of underlying business performance as it removes the
impact of non-cash accounting adjustments.
EBITDA was £1.0m (FY21: loss £1.1m). The positive performance in the last
quarter of FY21 continued through FY22, delivering the Group's first positive
EBITDA full year result since FY18.
FY21 FY22
Revenue 11.8 13.9
Operating loss (2.6) (0.7)
Depreciation 0.4 0.3
Amortisation 1.1 1.4
EBITDA (1.1) 1.0
EBITDA as % revenue (9)% 7%
Finance expense
The net finance expense of £0.3m (FY21: £0.2m) relates to interest on the
Group's borrowings and leases accounted for under IFRS 16.
Loss before tax
Loss before tax was £1.0m (FY21: loss £2.8m).
Taxation
No provision for tax has been made in the period (FY21: £Nil).
The small tax charge recognised primarily relates to the unwinding of deferred
tax on the acquisition of DQM GRC, offset by the effect of changes in tax
rates.
Earnings/loss pe share
Loss per share was 0.98 pence (FY21: loss per share 2.58 pence).
Dividend
To ensure the Group maintains financial flexibility and an appropriate level
of financial headroom for investment and working capital the Board is not
proposing a dividend in respect of the year ending 31 March 2022. The board
will review its dividend policy annually.
Cash flow and cash/debt
The Group's closing cash position net of a bank overdraft was £2.1m (31 March
2021: £0.2m).
Borrowings (excluding lease obligations) at period end were £1.1m (31 March
2021: £1.3m).
The Group has banking facilities to provide adequate headroom for unforeseen
working capital requirements by way of an invoice discounting facility that
was inherited as part of the acquisition of DQM GRC in 2019.
In addition, the unsecured loan facility provided by Andrew Brode for the
amount of £700,000 at an interest rate of 5% above the Bank of England base
rate to provide additional working capital is available to the Company until
at least 31 December 2023 and shall automatically renew for a further 12
months unless terminated by either party. As at the period end and the date of
this report, £350,000 remained available to be drawn down.
Further information on Going Concern is provided in the Financial Statements
'Nature of operations and general information' section (Principal accounting
policies) of the Annual Report.
Statement of financial position
Net assets were £8.7m (31 March 2021: £6.9m).
Net current liabilities at period end were down by £2.0m to £3.2m (31 March
2021: £5.2m).
In January 2022, GRC International completed a successful £3m oversubscribed
share placing. This is enabling the Group to continue its product investment
and business automation programmes, including the development of new features
and functionality across all units in the SaaS division, at the same time as
making agreed repayments (under the 'time to pay' arrangements) against the
deferred HM Revenue & Customs (HMRC) tax liabilities that arose through
the COVID-19 pandemic.
The main factor in the overall decrease in net current liabilities of £1.9m
was the increase in cash balance resulting from the January share placing and
a strong Q4 trading and cash performance.
The trade and other payables balance includes a deferred income balance of
£1.8m (31 March 2021: £1.1m), relating to training and consultancy projects
due to be delivered after the statement of financial position date. The 63%
increase in this balance signifies improving revenue trends and provides some
visibility of income to be recognised in FY23.
Intangible assets
The Group's accounting policy is that only directly attributable staff costs
of the technical teams developing the assets are capitalised. No management
time is capitalised, and neither is any proportion of overheads or borrowing
costs.
Additions of £1.2m (FY21: £1.2m) relate to software, website development and
the development of courseware.
Capital structure
The issued share capital at 31 March 2022 was 107,826,246 (31 March 2021:
99,931,509) ordinary shares of £0.001 each.
There were no share options granted in the period to 31 March 2022.
Risks and uncertainties
The Board continually assesses and monitors the key risks of the business. The
key risks that could affect the Group's performance, and the factors that
mitigate these risks, are set out on pages 24 to 25 of the Annual Report.
Consolidated Income Statement
For the year ended 31 March
Notes 2022 2021
£'000 £'000
Revenue 4 13,902 11,760
Cost of sales (5,698) (5,614)
Gross profit 8,204 6,146
Administrative expenses (9,141) (8,882)
Other operating income 240 148
Operating loss (697) (2,588)
Net finance costs (304) (247)
Share of post-tax loss of equity accounted joint ventures (2) -
Loss before taxation (1,003) (2,835)
Taxation 6 264
Loss for the financial year (997) (2,571)
Loss for the financial year attributable to:
Equity shareholders of the parent (997) (2,571)
Basic loss per share (pence) 10 (0.98) (2.58)
Diluted loss per share (pence) 10 (0.98) (2.58)
Consolidated Statement of Comprehensive Income
For the year ended 31 March
2022 2021
£'000 £'000
Loss for the year (997) (2,571)
Other comprehensive (loss)/profit - items that may subsequently be
reclassified to profit/loss:
Exchange differences on translation of foreign operations (1) 4
Other comprehensive (loss)/profit for the financial year (1) 4
Total comprehensive loss for the financial year (998) (2,567)
Total comprehensive loss to equity shareholders of the parent (998) (2,567)
Consolidated Balance Sheet as at 31 March
Notes 2022 2021
£'000 £'000
Assets
Non-current assets
Goodwill 5 6,804 6,804
Intangible assets 6 5,630 5,765
Property, plant and equipment 325 426
Investments in equity-accounted joint ventures 17 7
12,776 13,002
Current assets
Inventories - 33
Trade and other receivables 7 1,612 1,694
Cash at bank 2,099 233
3,711 1,960
Current liabilities
Trade and other payables 8 (5,935) (5,986)
Borrowings 9 (722) (863)
Lease liabilities (117) (197)
Current tax (127) (127)
(6,901) (7,173)
Net current liabilities (3,190) (5,213)
Non-current liabilities
Trade and other payables 8 (73) -
Borrowings 9 (329) (460)
Lease liabilities (145) (83)
Deferred tax liability (338) (340)
(885) (883)
Net assets 8,701 6,906
Equity
Share capital 108 100
Share premium 16,012 13,227
Merger reserve 4,276 4,276
Share-based payment reserve 126 126
Translation reserve (9) (8)
Accumulated deficit (11,812) (10,815)
Total equity 8,701 6,906
Consolidated Statement of Changes in Equity
For the year ended 31 March 2022
Share-based payment reserve £'000
Share capital £'000 Share premium £'000 Merger reserve £'000 Retained earnings £'000 Translation reserve £'000
Total £'000
Balance at 1 April 2021 100 13,227 4,276 126 (10,815) (8) 6,906
Loss for the year - - - - (997) - (997)
Foreign exchange difference on consolidation - - - - - (1) (1)
Total comprehensive loss for the year - - - - (997) (1) (998)
Shares issued 8 2,992 - - - - 3,000
Cost of share issue - (207) - - - - (207)
Transactions with owners 8 2,785 - - - - 2,793
At 31 March 2022 108 16,012 4,276 126 (11,812) (9) 8,701
For the year ended 31 March 2021
Share-based payment reserve £'000
Share capital £'000 Share premium £'000 Merger reserve £'000 Retained earnings £'000 Translation reserve £'000
Total £'000
Balance at 1 April 2021 100 13,182 4,276 171 (8,289) (12) 9,428
Loss for the year - - - - (2,571) - (2,571)
Foreign exchange difference on consolidation - - - - - 4 4
Total comprehensive loss for the year - - - - (2,571) 4 (2,567)
Shares issued - 45 - (45) 45 - 45
Transactions with owners - 45 - (45) 45 - 45
At 31 March 2022 100 13,227 4,276 126 (10,815) (8) 6,906
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 MARCH
2022 2021
Notes £'000 £'000
Cash flows from operating activities
Loss for the year (997) (2,571)
Adjustments for:
Depreciation of plant and equipment 91 156
Amortisation of right of use assets 143 194
Amortisation of intangible fixed assets 1,367 1,107
Loss on disposal of fixed assets 50 4
Foreign exchange loss/(gains) 18 (22)
Share of post-tax profits of equity accounted joint ventures 2 -
Finance expenses 304 247
Income tax expense (6) (264)
972 (1,149)
Decrease in inventories 33 28
Decrease in trade and other receivables 83 588
Increase in trade and other payables 28 2,560
1,116 2,027
Income tax refund 5 187
Net cash Inflow from operating activities 1,121 2,214
Investing activities
Purchase of intangible assets (1,231) (1,168)
Purchase of plant and equipment (47) (35)
Acquisition of joint venture investment (13) -
Net cash outflow from investing activities (1,291) (1,203)
Financing activities
Proceeds from issue of shares 3,000 -
Costs of share issue (207) -
Repayment of acquired contingent consideration liability - (100)
Proceeds from borrowings 546 710
Repayment of borrowings (836) (1,249)
Interest paid (245) (186)
Interest on lease liability on right of use assets (69) (43)
Payments of lease liabilities on right of use assets (155) (168)
Net cash (outflow)/inflow from financing activities 2,034 (1,036)
Net increase/(decrease) in cash and cash equivalents 1,864 (25)
Cash and cash equivalents at beginning of financial year 233 245
Effects of exchange rate changes on cash and cash equivalents 2 13
Cash and cash equivalents at end of financial year 2,099 233
Comprising
Cash at bank 2,099 233
Nature of Operations and General Information
1. Nature of Operations and General Information
GRC International Group plc (GRC International Group or 'the Company') is a
public limited company limited by shares, incorporated and domiciled in
England and Wales. The registered company number is 11036180 and the
registered office is Unit 3 Clive Court, Bartholemew's Walk, Cambridgeshire
Business Park, Ely, Cambridgeshire, CB7 4EA.
The principal activities of GRC International Group plc and its subsidiary
companies (together, the "Group") are those of a one-stop shop for IT
Governance including books, tools, learning and consultancy services.
The financial information for the year ended 31 March 2022 and the year ended
31 March 2021 does not constitute the company's statutory accounts for those
years. Statutory accounts for the year ended 31 March 2021 have been delivered
to the Registrar of Companies. The statutory accounts for the year ended 31
March 2022 will be delivered to the Registrar of Companies in due course.
The auditors' report on the accounts for 31 March 2022 was unqualified, did
not draw attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006. The auditors'
report on the accounts for 31 March 2021 did draw attention to an emphasis of
matter regarding going concern.
2. Principal Accounting Policies
Basis of preparation
The consolidated financial statements of GRC International Group plc and
entities controlled by the Company (its subsidiaries) for the years presented
has been prepared in accordance with UK-adopted international accounting
standards
Basis of consolidation
The results for the year ended 31 March 2022 and 31 March 2021 include the
results of GRC International Group plc and its subsidiaries.
A subsidiary is a company controlled directly by the Group. Control is
achieved where the Group has the power over the investee, rights to variable
returns and the ability to use the power to affect the investee's returns.
Income and expenses of subsidiaries acquired during the year are included in
the Consolidated Income Statement from the effective date of control. When
necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with those used by the Group.
All intra-Group transactions, balances, income and expenses are eliminated in
full on consolidation.
The principal accounting policies adopted are set out in the Annual Report and
Financial Statements.
These accounting policies comply with each IFRS that is mandatory for
accounting periods ending on 31 March 2022.
3. Segmental reporting
Operating segments
For the purposes of segmental reporting, the Group's Chief Operating Decision
Maker ('CODM') is considered to be the Board of Executive Directors of the
Company. The Board receives information on a consolidated basis. Given the
extent and nature of central support services provided centrally in support of
the Group's different revenue streams, the Board therefore considers that the
Group operates as a single operating segment.
Revenue by geographic destination
Revenue across all operating segments is generated from the UK but includes
overseas sales:
2022 2021
£'000 £'000
UK 10,880 9,666
Non-UK 3,022 2,094
13,902 11,760
Information about major customers
No customers contributed 10% or more to the Group's revenue in any period
presented.
4. Revenue
Revenue is all derived from continuing operations.
Notwithstanding that the Group's revenues are often interdependent, the Group
has disaggregated revenue into various categories in the following tables
which is intended to depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic date:
2022 2021
£'000 £'000
Consultancy and similar services 8,882 8,106
Publishing and Distribution 838 750
Software 1,481 1,147
Training 2,701 1,757
Total revenue 13,902 11,760
5. Goodwill
2022 2021
Total Total
Cost and Net book value £'000 £'000
At 1 April 6,804 6,804
At 31 March 6,804 6,804
Goodwill arising from business combinations has been allocated to the Group's
DQM cash-generating unit ('CGU'). Goodwill is tested at least annually for
impairment and whenever there are indicators that goodwill might be impaired.
For the DQM CGU, the carrying amount of goodwill has been assessed for
impairment by comparing the carrying amount of the CGU in which it is included
to the recoverable amount based on value in use of the CGU. The value in use
calculation for the cash-generating unit uses: estimated future cash flows,
for which the key assumptions are forecast revenue over the next five years,
based on management's estimates; the terminal growth rate for revenues beyond
that period, which reflects a cautious approach for the purpose of measuring a
value in use; and a pre-tax discount rate, which is based on management's
assessment of risk inherent in the estimated future cash flows.
The pre-tax cash flows for the forecast period are derived from the most
recent financial budget for the year ending 31 March 2023 approved by the
Board. The extrapolation for the period 2024 to 2028 is based on management
estimates with an assumption of 15% revenue growth.
As of 31 March 2022, the value in use of the cash-generating unit was greater
by £7,015k than the CGU's carrying amount. The key assumptions used were the
forecasts as explained above, the terminal growth rate of 2%, and the pre-tax
discount rate of 7.2%. Management's methodology does not include the use of
small company or company specific risk Premia because in the judgement of the
directors, the degree of risk attached to the cash flow assumptions is such
that no additional risk premium in the discount rate is considered necessary.
The growth in cashflows and the selection of the discount rate are a judgement
that management has made which may have a bearing on the identification of
impairment losses.
The changes in key assumptions that would individually give rise to a material
impairment loss are as follows:
a) The discount rate would have to increase by 4.0%.
b) Operating costs would have to rise by 15%, assuming that revenue levels
were still to grow by 15%.
c) Future revenue increases by 14% less than is modelled in the forecast
period (assuming margins remain the same) in order to reduce the headroom to
nil, all other variables remaining constant.
6. Intangible assets
Consultancy products and courseware Software and
Marketing Publishing products £'000 website costs Trademarks Customer relationships Total
tools £'000 £'000 £'000 £'000 £'000
£'000
Cost
At 1 April 2020 63 333 881 5,234 466 1,843 8.820
Additions - 67 158 943 - - 1,168
Foreign exchange movement - - (3) - - - (3)
At 31 March 2021 63 400 1,036 6,177 466 1,843 9,985
Additions 3 51 182 995 - - 1,231
At 31 March 2022 66 451 1,218 7,172 466 1,843 11,216
Accumulated depreciation
At 1 April 2020 61 234 325 2,274 54 166 3,114
Charge for year 2 32 90 783 46 154 1,107
Foreign exchange movement - - (1) - - - (1)
At 31 March 2021 63 266 414 3,057 100 320 4,220
Charge for year - 51 112 1,003 47 153 1,366
At 31 March 2022 63 317 526 4,060 147 473 5,586
Net book value
At 31 March 2022 3 134 692 3,112 319 1,370 5,630
At 31 March 2021 - 134 622 3,120 366 1,523 5,765
At 1 April 2020 2 99 556 2,960 412 1,677 5,706
Amortisation is included within administrative expenses.
Intangible assets includes capitalised related party costs incurred.
All intangible assets have been developed internally with the exception of
those arising on the business acquisition in 2019. For CGUs requiring
impairment testing under IAS 36 Impairment of Assets, the method used to
determine recoverable amount is value-in-use.
7. Trade and other receivables
2022 2021
£'000 £'000
Trade receivables 1,284 1,186
Less: provision for impairment of trade receivables (124) -
Net trade receivables 1,160 1,186
Other receivables 32 78
Prepayments 420 430
1,612 1,694
None of the Company's trade and other receivables are secured by collateral or
credit enhancements.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses on a collective basis. To measure expected credit losses on a
collective basis, trade receivables and contract assets are grouped based on a
similar credit risk and ageing.
The Group's policy for monitoring default risk over receivables is based on
the ongoing evaluation of the collectability and ageing analysis of trade and
other receivables. Considerable judgement is required in assessing the
ultimate realisation of these receivables, including reviewing the potential
likelihood of default, the past collection history of each customer and the
current economic conditions.
The Group uses a third-party credit scoring system to assess the
creditworthiness of potential new customers before accepting them. Credit
limits are defined by customer based on this information. All customer
accounts are subject to review on a regular basis by senior management and
actions are taken to address debt ageing issues.
To determine the level of expected credit loss provision required historical
loss rates are adjusted for current and forward-looking information on
macroeconomics factors affecting the Group's customers. The Group has
identified gross domestic product growth rates, employment rates and inflation
rates as the key macroeconomic factors in the countries in which the Group
operates. The rates applied vary from 10% to 100% depending on the above
factors and the age of the debt.
The Group has not previously recorded any credit loss provision on the grounds
of materiality.
The maturity profile of trade and other receivables is set out in the table
below:
2022 2021
£'000 £'000
In one year or Less, or on demand 1,612 1,694
The analysis of trade and other receivables by foreign currency is set out in
the table below:
2022 2021
£'000 £'000
UK pound 1,476 1,581
US dollar 83 67
Euro 51 46
Australian dollar 2 -
1,612 1,694
The Group's foreign currency receivables are denominated in the functional
currency of the subsidiaries in which they arise. There is no impact on the
loss for the year from foreign exchange rate movements on such financial
instruments.
8. Trade and other payables
Amounts falling due within one year:
2022 2021
£'000 £'000
Trade payables 1,018 1,223
Other taxation and social security 2,273 2,737
Other payables 436 451
Deferred income 1,847 1,114
Accruals 361 461
5,935 5,986
Amounts falling due after one year:
2022 2021
£'000 £'000
Other taxation and social security 73 -
73 -
Amounts falling due after one year relate to the non-current element of the
tax and social security arrangements agreed with HMRC based on time to pay
arrangements. The balance payable is expected to reduce as cash payments are
made and as claims for R&D tax credits are claimed from HMRC as and when
quantified in respect of year ended 31 March 2020. 31 March 2021 and 31 March
2022 respectively.
9. Borrowings
2022 2021
Current Non-current Total Current Non-current Total
£'000 £'000 £'000 £'000 £'000 £'000
Secured
Other loans (i) 205 - 205 266 - 266
Total secured borrowings 205 - 205 266 - 266
Unsecured
Bank loans 40 193 233 63 234 297
Other loans 91 136 227 166 226 392
Loans from related parties 386 - 386 368 - 368
Total unsecured borrowings 517 329 846 597 460 1,057
(i) Secured liabilities and assets pledged as security
Of the Other loans, £82,000 (2021: £260,000) is secured against future
receivables. The remaining secured bank loans and overdrafts are secured
against assets of the business.
Lease liabilities are secured as the rights to the leased assets recognised in
the financial statements revert to the lessor in the event of default.
As at 1 April 2021 Cash proceeds from borrowings Repayments of capital Repayments of interest Interest accruing As at 31 March 2022
£'000 £'000 £'000 £'000 £'000 £'000
Secured loans 266 546 (607) (87) 87 205
Unsecured loans 689 - (229) (60) 60 460
Loans from related parties 368 - - - 18 386
Total 1,323 546 (836) (147) 165 1,051
As at 1 April 2020 Cash proceeds from borrowings Repayments of capital Repayments of interest Interest accruing Foreign exchange As at 31 March 2021
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Secured loans 528 392 (654) (71) 71 - 266
Unsecured loans 591 318 (217) (70) 70 (3) 689
Loans from related parties 728 - (378) - 18 - 368
Total 1,847 710 (1,249) (141) 159 (3) 1,323
The Group has a number of loans in the period presented, and are summarised as
follows:
Effective Interest rate
Security pledged Term Expiry/Maturity Date
Bank
Lloyds Bank - CBILS Loan Unsecured 72 Months October 2026 2.45%
Other
Wesleyan Parent company 60 Months September 2024 14.32%
guarantee
Portman Asset Finance Director's Guarantee 36 Months August 2023 10.16%
Bute Capital Secured against 14-16 Months July 2022 6.65% - 10.36%
assets of business
You Lend Secured against receipts from sales 12 Months July 2022 16.67%
LDF Finance No. 3 Ltd Director's Guarantee 36 Months August 2022 10.16%
Paypal Secured against receipts from sales 12 Months June 20022 4.26-10.49%
Uncapped finance Unsecured 12 Months July 2022 15.00%
Loans from related parties
Unsecured loan facility provided by Andrew Brode. Unsecured Available to the Group until at least December 2023 5.0% above the Bank of England
31 December 2023 and will automatically renew for a further 12 months unless base rate
terminated by
either party.
In addition, the Group has access to an Invoice discounting facility.
10. Earnings per share
Basic earnings per share is based on the loss after tax for the year and the
weighted average number of shares in issue during each year.
2022 2021
'000 '000
Loss attributable to equity holders of the Group (£) (997) (2,571)
Weighted average number of shares in issue 101,510 99,754
Basic loss per share (pence) (0.98) (2.58)
Diluted earnings per share is calculated by adjusting the average number of
shares in issue during the year to assume conversion of all dilutive potential
ordinary shares.
Taking the Group's share options into consideration in respect of the Group's
weighted average number of ordinary shares for the purposes of diluted
earnings per share, is as follows:
2022 2021
Number of shares 101,510,456 99,754,064
Dilutive (potential dilutive) effect of share options - -
Weighted average number of ordinary shares for the purposes of diluted 101,510,456 99,754,064
earnings per share
Diluted loss per share (pence) (0.98) (2.58)
Due to the losses incurred during the year, a diluted loss per share has not
been calculated as this would serve to reduce the basic loss per share. There
were 426,760 (2021: 426,760) share incentives outstanding at the end of the
year that could potentially dilute basic earnings per share in the future.
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