REG - Insig AI Plc - Interim Results
19/12/2022 07:00
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RNS Number : 0779K Insig AI Plc 19 December 2022
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Insig AI Plc / EPIC: INSG / Market: AIM
19 December 2022
INSIG AI PLC
("INSG" or the "Company")
Unaudited Interim Results for the Six Months ended 30 September 2022
Insig AI plc (AIM:INSG), the data science and machine learning solutions
company serving the asset management industry, is pleased to announce its
unaudited interim results for the six months ended 30 September 2022 and to
provide an update on the Company's progress post the half year end.
Highlights
· Loss for the period after income tax £2.8 million
· Operating loss before tax of £2.6 million after charging
depreciation and amortisation of £1.4 million
· Cash and cash equivalents at period end of £0.15 million
· Positive advanced discussions to re-negotiate and extend existing
Convertible Loan Note agreements.
Insig AI's Chief Executive, Colm McVeigh commented: "Our strong machine
learning AI capability delivers high impact fintech data science solutions
resulting in better investment outcomes and operational transformation for our
asset managers customers. Despite an increasingly difficult macro-economic
backdrop and with us taking a cautious approach, we anticipate growing
revenues throughout 2023."
Chairman's statement
In September, when we published our full year results to 31 March, we set out
how we had evolved and refined our technology offering and sales processes to
be able to take advantage of the opportunities available to us in our
addressable markets. As the asset management industry increasingly requires
technology to deliver competitive differentiation and adapt to evolving
standards, we are able to apply our advanced analytical tools, machine
learning innovative data gathering and processing in ways that can benefit our
target customer base, offering asset managers competitive advantage as well as
efficiencies. We apply our deep domain expertise in ESG, fintech data science,
machine learning and cloud data infrastructure so our customers can achieve
sustainable investment decisions and high impact operational transformation
through AI and data solutions.
Over the last year, the Company has invested heavily to build a repository of
machine learning ESG company disclosures on more than 2,500 global businesses.
Our database now encompasses all constituents of the S&P 500, the STOXX
600 and the FTSE 100/250/350 together with hundreds of non-listed corporates.
The Company is confident that this repository can be utilised to deliver a
long term revenue stream. Last month, we explained that having now secured
this capability and capacity, we are able to flex our costs based on orders
received.
In February, we announced a landmark agreement with CarVal Investors, L.P.
("CarVal") to develop and launch a new line of high yield ("HY") and
investment grade ("IG") ESG scoring tools to be used by CarVal to optimise HY
and/or IG portfolios based on ESG considerations. In May, these scoring tools
were successfully delivered. Our share of fees are based on CarVal's assets
under management ("AUM") raised in connection with these HY and/or IG focused
investment pools. We anticipate that as CarVal secures mandates, our fees will
increase commensurably and continue for several years.
Last month, we described the nascent nature of the ESG space. Whilst improved
disclosures and an end to greenwashing will be both welcome and inevitable,
timings remain uncertain. One of our frustrations is that the positive
feedback we receive on our ESG scoring tool, which provides objective evidence
of a company's ESG disclosures to market participants, asset managers,
corporates and to regulators, does not translate into immediate revenues. When
an end to greenwashing becomes mandatory, our ESG diagnostics should become a
go-to solution. At present, the optimal route to market is through
partnerships with large corporate consultancies. Whilst such sales cycles are
inevitably lengthy, they are able to deliver distribution on a broad and
substantial scale.
Whilst in recent months, the recessionary narrative has taken hold,
understandably the ESG agenda has slipped down the priorities of many
businesses. However, it remains all too easy for an asset manager to label a
fund "ESG compliant" but to do so, without a methodology that drills down to
each element of ESG, thereby exposes the asset manager to a lack of evidence
of compliance. This can expose not only a business but also its directors to
immense reputational and financial damage. That is why increasing regulation
is both necessary and inevitable.
Financial performance
For the six months ending 30 September 2022, we are reporting a total
comprehensive loss from all activities of £2.8 million which includes
depreciation and amortisation of £1.4 million, deferred tax of £0.2 million
and a profit from the Group's non-core school sport coaching facility, Sport
in Schools Limited ("SSL") of £0.02 million. The Directors are not
recommending the payment of a dividend.
Pantheon Leisure Plc ("Pantheon")
Insig holds 85.87% of the issued share capital of Pantheon which in turn owns
100% of Sport in Schools Limited ("SSL"). Pantheon's results are consolidated
into the Group accounts.
Sport in Schools Limited ("SSL")
Profit recognised in the period was £0.02 million compared with £0.1 million
during the comparable period. The current period outturn reflects a
significant marketing investment which is expected to translate into increased
revenues from spring 2023.
Funding
In March 2022, we announced that the Board had decided to secure a long-term
revenue agreement based on AUM at the expense of revenues that could have been
recognised in the year under review. Whilst this had a detrimental effect on
immediate cash flows, the quantum and longevity of receipts is expected to be
considerably more than those foregone short term revenues.
In May, I provided the Company with an unsecured convertible loan facility of
£1.0 million. The key terms were conversion at the higher of 35p per share
and the prevailing share price at the time of conversion and a coupon of 5 per
cent. per annum on funds drawn down. The first draw down took place in early
May. In June, the Company announced that it had been approached by David Kyte,
a long-term shareholder with an offer of funding of £0.5 million, on the same
terms as my own facility. These loan facilities have been fully utilised and
are due for repayment on 31 December 2022. As announced in the Company's
year-end results in September, the Board continues to believe it would not be
in the best interest of all shareholders to conduct an equity raise in the
short term. As such, the Board is pleased to have recently received proposals
from myself and David Kyte to extend the current convertible loan facilities
expiring on 31 December 2022 by 12 months. Following the release of today's
interim results, the Board is considering these proposals and is expected to
make a further announcement very shortly.
For myself, the terms of the extension include:
· interest owed on the first convertible loan facility to be rolled
up into the loan expiring on 31 December 2023,
· interest of 8 per cent. per annum from 5 per cent. per annum,
which reflects the 2.25 per cent increase in UK base rates since May 2022 and
the deterioration in debt capital markets and funding environment.
· a conversion price of 20p, which represents a 17.6 per cent.
premium to the current share price of 17p, being the closing share price on 16
December 2022, and 1,666,667 warrants expiring on 31 December 2025 exercisable
at a price of 30p, which represents a 76.5 per cent premium to the current
share price.
For David Kyte's facility, the terms of extension include:
· interest owed on the first convertible loan facility to be rolled
up into the loan expiring on 31 December 2023,
· interest of 8 per cent. per annum from 5 per cent. per annum,
which reflects the 2.25 per cent increase in UK base rates since May 2022 and
the deterioration in debt capital markets and funding environment.
· a conversion price of 18p, which represents a 5.9 per cent.
premium to the current share price of 17p, being the closing share price on 16
December 2022, and 1,388,889 warrants expiring on 31 December 2025 exercisable
at a price of 25p, which represents a 47.1 per cent premium to the current
share price.
In September, I provided a loan facility of up to £0.75 million. The key
terms were a conversion price of 35p per share and a coupon of 5 per cent. per
annum on funds drawn down. This loan is secured against the share capital held
by the Company in Westside Sports Limited, which has interests in Ultimate
Player Limited, Pantheon Leisure plc, Sport in Schools Limited and the Elms
Group Limited. In October, £0.36 million of this facility was drawn down. As
of today, £0.39 million remains available for drawdown.
Last month, the Company announced that the Board believed that no further
working capital would be required to support the operations of the business in
the short and medium term, as the business is expected to become cash flow
positive from Q2 2023. The Board remains of that view based on the combination
of committed revenues, the sales pipeline and more recent prospects. The Board
continues to closely monitor the conversions of these sales opportunities into
revenue.
Prospects
Last month, we set out that we had prioritised and accelerated the timeline to
expected profitability of the Group. This was underpinned by our expectations
for the receipt of recurring revenues from sharing of management fees.
Substantial investment over the last 18 months should result in payback with
these revenues expected to commence next summer. Over subsequent quarters,
these should grow substantially. This underpinning of revenues should position
us to withstand weak investor sentiment in global markets. Market uncertainty,
harsher fundraising conditions than in the recent past and recessionary fears
mean that we are adopting a cautious approach. Against a backdrop of budget
constraints, we are mindful of how such uncertainty can result in inertia.
Nevertheless, we have strong evidence from progressive asset management
clients that our offerings add substantial value, can generate alpha, provide
improved access to financial data and reduce regulatory risk.
Richard Bernstein
Non-Executive Chairman
19 December 2022
For further information, please visit www.insg.ai (http://www.insg.ai/) or
contact:
Insig AI plc
Colm McVeigh, CEO colm.mcveigh@insg.ai
Zeus (Nominated Adviser & Broker) David Foreman / James Hornigold / Danny Philips +44 (0) 203 829 5000
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes 6 months to 30 September 2022 Unaudited 6 months to 30 September 2021 Unaudited
£ £
Continuing operations
Revenue 953,563 895,750
Cost of sales (359,411) (477,374)
Gross profit 594,152 418,376
Administration expenses (3,224,761) (2,419,044)
Other gains/(losses) 47,533 1,436,000
Other income 201 106,348
Operating loss (2,582,875) (458,320)
Finance income - 3,892
Finance costs (15,483) (15,001)
Loss before exceptional item (2,598,358) (469,429)
Exceptional items - non - recurring costs - (374,765)
Loss before income tax (2,598,358) (844,194)
Deferred tax (208,738) -
Tax credits - 194,133
Loss for the period after income tax (2,807,096) (650,061)
Total comprehensive loss attributable to owners of the Parent (2,810,503) (663,062)
Total comprehensive profit/(loss) attributable to non-controlling interests 3,407 13,001
Basic and diluted 5 (2.660)p (0.0074)p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 September 2022 Unaudited 31 March 2022 Audited 30 September 2021 Unaudited
£ £ £
Notes
Non-Current Assets
Property, plant and equipment 66,483 65,665 347,467
Right of Use Assets 33,406 38,545 -
Intangible assets 7 37,693,489 38,217,155 31,712,235
37,793,378 38,321,365 32,059,702
Current Assets
Trade and other receivables 226,774 289,819 1,594,580
Cash and cash equivalents 150,084 473,390 2,273,661
376,858 763,209 3,868,241
Total Assets 38,170,236 39,084,574 35,927,943
Non-Current Liabilities
Lease liabilities 24,930 29,641 295,748
Borrowings - - 195,038
Deferred tax liabilities 4,368,826 4,160,088 617,304
4,393,756 4,189,729 1,108,090
Current Liabilities
Trade and other payables 984,546 810,332 523,641
Lease liabilities 8,000 8,000 8,333
Borrowings - - 36,000
Convertible loans 8 1,514,517 - -
2,507,063 818,332 567,974
Total Liabilities 6,900,819 5,008,061 1,676,064
Net Assets 31,269,417 34,076,513 34,251,879
Capital and Reserves Attributable to
Equity Holders of the Company
Share capital 3,109,804 3,109,804 3,039,579
Share premium 39,077,403 39,077,403 35,154,043
Other reserves 325,583 325,583 975,117
Retained losses (11,194,113) (8,383,610) (4,864,193)
Equity attributable to shareholders of the parent 31,318,677 34,129,180 34,304,546
Non-controlling interests (49,260) (52,667) (52,667)
Total Equity 31,269,417 34,076,513 34,251,879
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Note Share capital Share premium Other reserves Retained losses Total equity Non Controlling Interest Total equity
£ £ £ £ £ £ £
Balance as at 1 April 2021 2,479,664 3,039,531 427,727 (4,201,131) 1,745,791 (65,668) 1,680,123
Loss for the period - - - (663,062) (663,062) 13,001 (650,061)
Total comprehensive loss for the period - - - (663,062) (663,062) 13,001 (650,061)
Issue of shares 559,915 32,571,612 - - 33,131,527 - 33,131,527
Share issue costs - (434,900) - - (434,900) - (434,900)
Merger reserves on acquisition of Insig Partners Ltd - (22,200) 671,733 - 649,533 - 649,533
Equity component of convertible loan notes - - (124,343) - (124,343) - (124,343)
Total transactions with owners, recognised in equity 559,915 32,114,512 547,390 - 33,221,817 - 33,221,817
Balance as at 30 September 2021 3,039,579 35,154,043 975,117 (4,864,193) 34,304,546 (52,667) 34,251,879
Balance as at 1 April 2022 3,109,804 39,077,403 325,583 (8,383,610) 34,129,180 (52,667) 34,076,513
Loss for the period - - - (2,810,503) (2,810,503) 3,407 (2,807,096)
Total comprehensive loss for the period - - - (2,810,503) (2,810,503) 3,407 (2,807,096)
Balance as at 30 September 2022 3,109,804 39,077,403 325,583 (11,194,113) 31,318,677 (49,260) 31,269,417
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months to 30 September 2022 6 months to 30 September 2021 Unaudited
Unaudited £
£
Notes
Cash flows from operating activities
Loss before taxation (2,810,503) (844,194)
Adjustments for:
Depreciation and amortisation 1,371,290 1,178,395
Increase in deferred tax provision 198,738 -
Minority interest 3,407 -
Finance income - (3,892)
Finance expense 15,458 15,001
Working capital on subsidiary acquisition - (410,015)
Increase in trade and other receivables 7,545 (105,230)
Increase/(decrease) in trade and other payables 239,714 (42,081)
Realised gain on share investment - (1,436,000)
Net cash used in operations (974,351) (1,648,016)
Cash flows from investing activities
Purchase of property, plant and equipment (263) (6,456)
Development expenditure 7 (834,952) (1,181,756)
Finance income - 3,892
Net cash used in investing activities (835,215) (1,184,320)
Cash flows from financing activities
Funds from share issues - 6,145,491
Cash consideration to shareholders of the acquired company - (1,442,478)
Share issue costs paid - (434,901)
Finance expense - (9,836)
Repayment of leasing liabilities and bank borrowings (13,740) (87,232)
Convertible loan note 1,500,000 -
Net cash generated from financing activities 1,486,260 4,171,044
Net decrease in cash and cash equivalents (323,306) 1,338,708
Cash and cash equivalents at beginning of period 473,390 934,953
Cash and cash equivalents at end of period 150,084 2,273,661
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. General Information
Insig AI plc is a data science and machine learning company listed on the AIM
Market of the London Stock Exchange.
The Company is domiciled in the United Kingdom and incorporated and registered
in England and Wales, with registration number 03882621. The Company's
registered office is Suite 1, 15 Ingestre Place, London, W1F 0DU.
2. Basis of Preparation
The condensed consolidated interim financial statements have been prepared in
accordance with the requirements of the AIM Rules for Companies. As permitted,
the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in
preparing this interim financial information. The condensed interim financial
statements should be read in conjunction with the annual financial statements
for the year ended 31 March 2022, which have been prepared in accordance with
UK adopted international accounting standards.
The interim financial information set out above does not constitute statutory
accounts within the meaning of the Companies Act 2006. It has been prepared on
a going concern basis in accordance with the recognition and measurement
criteria of UK adopted international accounting standards.
Statutory financial statements for the year ended 31 March 2022 were approved
by the Board of Directors on 8 September 2022 and delivered to the Registrar
of Companies. The report of the auditors on those financial statements was
unqualified with a material uncertainty in relation to the Company's ability
to continue as a going concern. The condensed interim financial statements are
unaudited and have not been reviewed by the Company's auditor.
Going concern
These financial statements have been prepared on the going concern basis.
Given the Group's current cash position and its demonstrated ability to raise
capital, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of accounting
preparing the condensed interim financial statements for the period ended 30
September 2022.
Notwithstanding the above, a material uncertainty exists that may cast
significant doubt on the Groups ability to continue as a going concern and,
therefore, that the Group may be unable to realise their assets or settle
their liabilities in the ordinary course of business. As a result of their
review, and despite the aforementioned material uncertainty, the Directors
have confidence in the Groups forecasts and have a reasonable expectation that
the Group will continue in operational existence for the going concern
assessment period and have therefore used the going concern basis in preparing
these consolidated financial statements.
The factors that were extant at 31 March 2022 are still relevant to this
report and as such reference should be made to the going concern note and
disclosures in the 2022 Annual Report and Financial Statements ("2022 Annual
Report").
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business.
The key risks that could affect the Company's medium term performance and the
factors that mitigate those risks have not substantially changed from those
set out in the Company's 2022 Annual Report and Financial Statements, a copy
of which is available on the Company's website: www.insgai.com
(http://www.insgai.com) . The key financial risks are liquidity risk, credit
risk, interest rate risk and fair value estimation.
Critical accounting estimates
The preparation of condensed interim financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the end of the reporting period. Significant items subject
to such estimates are set out in Note 2 of the Company's 2022 Annual Report
and Financial Statements. The nature and amounts of such estimates have not
changed significantly during the interim period.
3. Accounting Policies
Except as described below, the same accounting policies, presentation and
methods of computation have been followed in these condensed interim financial
statements as were applied in the preparation of the Company's annual
financial statements for the period ended 31 March 2022.
3.1 Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group and Company
The International Accounting Standards Board (IASB) issued various amendments
and revisions to International Financial Reporting Standards and IFRIC
interpretations. The amendments and revisions were applicable for the period
ended 31 March 2022 but did not result in any material changes to the
financial statements of the Group or Company.
Of the other IFRS and IFRIC amendments, none are expected to have a material
effect on future Group or Company Financial Statements.
(b) New standards, amendments and Interpretations in issue but not yet
effective or not yet endorsed and not early adopted
The standards and interpretations that are issued, but not yet effective, up
to the date of issuance of the condensed interim financial statements are
listed below. The Group intends to adopt these standards, if applicable when
they become effective.
Standard Impact on initial application Effective date
IAS 8 (amendments) Accounting estimates 1 January 2023
None are expected to have a material effect on the Group or Company Financial
Statements.
4. Dividends
No dividend has been declared or paid by the Company during the six months
ended 30 September 2022 (six months ended 30 September 2021: £nil).
5. Loss per Share
The calculation of loss per share is based on a retained loss of £2,810,503
for the six months ended 30 September 2022 (six months ended 30 September
2021: £663,062) and the weighted average number of shares in issue in the
period ended 30 September 2022 of 105,675,645 (six months ended 30 September
2021: 89,182,000).
No diluted earnings per share is presented for the six months ended 30
September 2022 or six months ended 30 September 2021 as the effect on the
exercise of share options would be to decrease the loss per share.
6. Business segment analysis
Machine learning and Data services Sport in Schools Total
£
£ £
Revenue 289,524 664,039 953,563
Costs of sales (2,545) (356,866) (359,411)
Administrative expenses (2,945,323) (279,438) (3,224,761)
Other gains/(losses) 58,570 (11,037) 47,533
Other income - 201 201
Finance costs (15,483) - (15,483)
Profit/(Loss) before tax per reportable segment (2,615,257) 16,899 (2,598,358)
7. Intangible assets
The movement in capitalised intangible costs during the period was as follows:
Cost and Net Book Value Goodwill Technology assets Customer relationships Databases Total
£ £ £ £ £
Balance as at 1 April 2022 21,621,803 14,420,352 1,133,000 1,042,000 38,217,155
Additions - 834,952 - - 834,952
Amortisation - (1,233,273) (47,202) (78,143) (1,358,618)
As at 30 September 2022 21,621,803 14,022,031 1,085,798 963,857 37,693,489
8. Convertible Loans
30 September 2022 31 March 2022
£ £
Not later than one year:
Convertible loan note 1,500,000 -
Convertible loan note interest 14,517 -
Total 1,514,517 -
On the 4 May 2022, the Company entered into a formal agreement for a £1.0m
convertible loan note to be provided by Richard Bernstein, Non-Executive
Chairman of the Company.
On 17 June 2022, the Company entered into a convertible loan facility
agreement with David Kyte, a long-term shareholder in the Company for
£500,000.
9. Events after the balance sheet date
On 12 October 2022, £100,000 was drawn down on the convertible loan facility
for a total of £750,000 as announced on 12 September 2022.
On 26 October 2022, £260,000 was drawn down on the convertible loan facility
for a total of £750,000 as announced on 12 September 2022.
10. Approval of interim financial statements
The Condensed interim financial statements were approved by the Board of
Directors on 18 December 2022.
11. Availability of this announcement
Copies of this announcement are available from Insig AI website at
www.insg.ai.
**ENDS**
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