REG - Kooth PLC - FY22 Results
04/04/2023 07:00
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RNS Number : 2275V Kooth PLC 04 April 2023
4 April 2023
Kooth Plc
("Kooth" or the "Company" or the "Group")
Full year results
2022 revenue up 21%, in line with expectations
Selected for significant US contract in California
Kooth (AIM: KOO), the UK's leading digital mental health platform, announces
audited results for the twelve months ended 31 December 2022. All figures
relate to this period unless otherwise stated.
Strategic Highlights
· Excellent progress with US expansion strategy
o $3m pilot contract in the State of Pennsylvania
o Selected for significant contract in California to support all 13-25 year
olds (post period end)
· Strengthening of our market-leading position supporting children and
young people in the UK
o More than 60% of 10-25 year olds have free access to Kooth in the UK
o New commissions in Scotland, expanding from four to nine contracts
· Momentum for adult strategy in the UK
o Adult public sector: 76% Annual Recurring Revenue (ARR) growth to £3m,
eight new regions added
o Kooth Work (corporate): focus on frontline workers and charities that
support them resulting in wins for Help for Heroes, MoD and multi-academy
trusts
· Ongoing investment in Kooth platform and technology, including AI and
personalised mobile app
Financial Highlights
· Revenues in line with expectations, up 21% to £20.1m (2021: £16.7m)
· Annual Recurring Revenue up 25% to £21.1m (2021: £16.9m)
· Resilient business model with 95% of revenues from contracts 12
months or longer
· Net Revenue Retention of 107% (2021: 109%)
· Gross margin stable at 68.9% (2021: 69.5%)
· Adjusted EBITDA of £1.6m (2021: £2.1m), with investment in the US
and the end of COVID projects offsetting the benefits of the US ramp up
· Strong balance sheet with net cash of £8.5m at year end (2021:
£7.1m) and no debt
Current trading and outlook
· US market presents significant long-term opportunity
· Expect to finalise terms of California contract in Q2, resulting in
revenues ahead of 2023 market expectations
· Continuing to deliver on Pennsylvania pilot with a view to renewing
and expanding our activities
· In the UK, focus on Integrated Care System (ICS) relationships and
expansion to support their UK-wide mental health strategies
Tim Barker, Chief Executive of Kooth said:
"2022 was a pivotal year for Kooth. We have a clear mission, to digitally
transform access to effective, personalised care. I am proud of the progress
we made towards this goal on a number of fronts. Not only did we enjoy
success expanding our service for children, young people and adults across the
UK; we won our first US contract in the State of Pennsylvania. This resulted
in strong revenue growth, in line with expectations, and a net cash position
that supports our growth ambitions, notably in the US.
"Kooth is uniquely positioned to respond to long-term demand for digital
mental health services in the US and UK, with a proven track record and strong
efficacy profile, strong recurring revenue and a net cash position. This is
shown by our significant contract win in California, in March 2023, as part of
California Governor Gavin Newsom's $4.7bn investment in youth behavioural
health. As we enter 2023, our model, strategy, and market position in the UK
and US, coupled with the talent and dedication of our employees, give us
confidence of further progress this year."
The information contained within this announcement is considered to constitute
inside information as stipulated under Article 7 of the Market Abuse
Regulation (EU) no. 596/2014 as incorporated into UK domestic law by virtue of
the European Union (Withdrawal) Act 2018 ("UK MAR").
Enquiries:
Kooth plc investorrelations@kooth.com
Tim Barker, CEO
Sanjay Jawa, CFO
Panmure Gordon, Nominated Adviser
and Joint Broker
Corporate Finance: +44 (0) 20 7886 2500
Dominic Morley, James Sinclair-Ford, Daphne Zhang
Corporate Broking:
Rupert Dearden
Stifel, Joint Broker +44 (0) 20 7710 7600
Ben Maddison, Nick Adams, Nicholas Harland, Richard Short
FTI Consulting, Financial PR kooth@fticonsulting.com
Jamie Ricketts, Alex Shaw, Usama Ali
About Kooth plc:
Kooth's (AIM: KOO) mission is to make effective, personalised mental health
care accessible to everyone.
Our integrated digital mental health platform creates a welcoming, stigma-free
space for both children and adults. Individuals have rapid access to support
through self-help resources, peer-support communities, and 1:1 professional
help, all without barriers or waiting lists.
We partner with governments, healthcare providers, insurers and employers to
deliver population-wide services to tackle mental health issues before things
deteriorate, reducing the demand for downstream expensive mental health
treatments.
Established in 2001, Kooth has supported over one million individuals both in
the UK and the US (where Kooth is expanding rapidly to address the youth
mental health crisis).
For more information, please visit www.koothplc.com.
Chair's statement
This year's annual report illustrates the huge efforts that have been made by
everyone at Kooth towards our vision of expanding access to digital mental
healthcare at a population-wide scale. I want to thank all members of our team
for their continued hard work and dedication in helping to make this vision a
reality.
In 2022 we began our international expansion, with a focus on the US. Our
progress so far has exceeded our expectations. In September we announced our
first large-scale deployment in the State of Pennsylvania - a $3 million pilot
contract. After the year-end, in March, we announced that we had been selected
by the California Department of Health Care Services to provide our service to
every 13-25 year old in the State. This contract, which is still in the
process of being finalised, is part of California's $4.7 billion 5-year plan
to transform access to youth mental healthcare.
Turning to the UK, in 2022/23 the NHS budgeted £15.6 billion for mental
healthcare. We estimate that digital services represent less than 3% of this
spending today, a reminder that the UK is still very much in the early stages
of the digital transformation of mental healthcare and that significant
opportunities remain in our home market.
Our offering for children and young people continues to grow. Kooth is now
available to over 60% of 10-25 year olds across the UK, with new commissions
demonstrating our potential to become a near-nationwide service in the future.
Momentum for Kooth Adult continues, with the addition of eight new regions in
2022, including Greater Manchester, Norfolk, and Devon, growing ARR 76% to
£3.0 million (2021: £1.7 million), and expanding free access to 8.8 million
(2021: 3.8 million) adults nationwide.
I am pleased to report that our financial performance has been in line with
market expectations, with revenue growing by 21% to £20.1 million (2021:
£16.7 million). As previously highlighted, we are focused on growing our
business to ensure that we can take full advantage of the global opportunities
currently available to Kooth. This increased investment saw adjusted EBITDA
decrease from £2.1 million to £1.6 million with a consequent reduction in
adjusted EBITDA margin to 8.0% (2021: 12.5%).
Kooth's recurring revenue, which we define as contracts with a duration of 12
months or more, contributes over 95% of our revenue. As a subscription-based
business, this not only gives us strong forward revenue visibility, but also
allows our growth plans to be financed with confidence.
We enter 2023 with a solid financial position, significant growth
opportunities in both the US and the UK, £8.5 million in cash, no debt, and a
proven business model.
Peter Whiting
Non-Executive Chair
3 April 2023
Chief Executive Officer's statement
Delivering positive social impact, cost effectively and at scale
As a social impact business, our purpose is to help tackle the growing global
mental health challenge. We do this by delivering a welcoming digital mental
health platform, accessible to all. Our focus is on creating a service which
provides rapid, responsive, and effective support to individuals to address
problems earlier, reducing the need for, and cost of, acute treatment
programs.
Kooth has a quantifiably positive impact on society whilst also saving
healthcare systems money. In 2022, the York Health Economics Consortium
published an independent health economics study showing that Kooth delivers
£3.14 in cost savings for every £1 spent. Our own analysis of the US market
shows a potential 12:1 saving, due to the higher healthcare costs seen in that
market. In short, we can ensure that healthcare budgets around the world can
achieve more with less.
Outstanding progress in the US market
Our success in the US can be traced back to our heritage and the track record
we have built in the UK. When I joined Kooth three years ago, I was attracted
by the positive social impact, coupled with the expertise, passion and
thoughtfulness across the team. This is vital to ensure we can pragmatically
address the global challenge in mental healthcare. With Kooth's 20+ years of
experience and data, no other organisation has our level of operating
expertise and evidence in how to deliver population-wide digital mental
healthcare.
It is encouraging to see our expertise, and the value it can bring, recognised
internationally, with our rapid expansion into the US a particular personal
highlight.
Kooth won its first US contract in October 2022, when the State of
Pennsylvania awarded us a $3 million pilot to expand access to digital mental
health support for up to 150,000 school students.
In March 2023, Kooth was awarded a contract by the California Department of
Health Care Services (DHCS) to roll out its platform in January 2024 to over 6
million 13-25 year olds as part of the State's $4.7 billion 5-year plan to
transform access to youth mental health care. This was a competitive process,
where Kooth competed against 450 vendors and content providers.
The imperative to act on the youth mental health crisis is one that both
Federal and State governments are increasingly acting on.
The need for action is laid bare in a recent report from the US CDC (Centers
for Disease Control and Prevention). It highlights that 22% of high school
students seriously considered attempting suicide during the past year, with
10% attempting suicide one or more times.
A study by Pew Research published in January 2023 found that youth mental
health is now the top concern for parents with children under 18: Forty
percent are either very or extremely worried. This is a crisis that Kooth can,
and must, help address.
There is a clear need and opportunity for Kooth to focus on in the US. This
will remain a key strategic priority for the business in 2023.
UK market expansion, and an increase in the levels of support people need
Reviewing Kooth's UK progress in 2022, it is clear that we took significant
strides in expanding our service for children and young people across the UK.
New commissions in Scotland were a key highlight, where we grew from four to
nine contracts during the year.
Availability of our service for adults, Qwell, grew from 3.8 million at the
start of the year to over 8 million adults.
Greater Manchester Integrated Care System (ICS) represents the largest Qwell
rollout of the year. In this region we are now available to approximately 2
million people aged 10 to 99+
across all 10 localities. ARR for Kooth Adult grew over 75% to £3 million
during the year.
In 2022 new users were accessing Kooth more often than before - the platform
experienced a 15% increase in logins over the previous year. However, there
was a slight reduction in uptake among the population, from 1-in-33 in 2021 to
1-in-36 in 2022. This is a result of expanding our reach of Kooth to 19-25
year olds, who initially engage less than the 10-18 cohort. By comparison
usage pre-covid in 2019 was 1-in-40.
Furthermore, we continue to see a growing trend in the increased level of
severity and safeguarding risk for individuals seeking support, with 80% of
users presenting with a moderately severe or severe level of acuity.
In response to this shift, our clinical service strategy has evolved, with an
even larger emphasis on the 'responsive', 'safe' and 'person-centred' elements
of our clinical model, expanding our safeguarding, clinical, and training
teams, and ensured that each practitioner has access to external supervision
to support their professional development.
We are applying this expertise to help reduce the direct burden on
overstretched NHS services. This includes being commissioned in late 2022 to
ameliorate Accident & Emergency attendance by providing our service to
adults in need of urgent mental health support.
Outlook
Kooth is extremely well-positioned to respond to the long-term demand for
digital mental health services in the US and UK, with a proven track record
and detailed efficacy profile, strong recurring revenue and a net cash
position.
As we enter 2023, our model, strategy, and market position, coupled with the
talent and dedication of our employees, give us confidence in achieving
further progress this year.
In the US, our focus on State-wide contracts, coupled with the rapid progress
we have made in Pennsylvania
and California, has the potential to significantly change the growth
trajectory of Kooth as more States take action to prioritise youth mental
health.
In the UK, the NHS is not only grappling with the backlog aftermath of the
pandemic, but is also dealing with the reorganisation of NHS England. In June
2022, its structure moved from 135 Clinical Commissioning Groups (CCGs) to 42
Integrated Care Systems (ICSs).
While this reorganisation offers great potential for Kooth in the medium- to
long-term, we have seen near-term decision making slow down as a direct result
of these newly formed organisations finding their feet, filling new roles, and
starting to define their population health strategies. We are starting to see
the 'end of the beginning' for this reorganisation, and I'm optimistic that it
will provide greater opportunities for Kooth.
Tim Barker
Chief Executive Officer
3 April 2023
Chief Financial Officer's statement
Significant growth
The results reflect a successful year for the business as we continued to
execute on our strategic plans and build solid foundations to support future
growth in the UK and internationally.
Revenue
I am pleased to report Group total revenue grew during the year, in line with
market expectations, by 21% (2021: 28%) to £20.1 million (2021: £16.7
million). This has been driven by US expansion, fee uplifts from existing
clients and new business in Adult and Children and Young People. Adult
increased to just under 15% of annual recurring revenue at the year end.
Recurring revenue comprises income invoiced for services that are repeatable,
consumed and delivered on a monthly basis over the term of a customer
contract. Annual Recurring Revenue (ARR) is the annualised revenue of
customers engaged or closed at that date (31 December) and is an indication of
the upcoming annual value of the recurring revenue. This is used by management
to monitor the long term revenue growth of the business and remains strong at
95% of total revenues (2021: 94%).
Highlighting the depth and longevity of our customer relationships, net
revenue retention was 107% (2021: 109%). This is measured by the total value
of ongoing ARR at the year end from customers in place at the start of the
year as a percentage of the opening ARR from those clients. The small decrease
from 2021 was the result of churn with the ending of some COVID-19 related
contracts and partly a slowdown in uplifts as NHS England consolidates from a
Clinical Commissioning Group (CCG) to an Integrated Care System (ICS)
structure.
Gross profit
Gross profit grew by 19.6% to £13.9 million (2021: £11.6 million) with gross
margin slightly down at 68.9% (2021: 69.5%). Direct costs are the costs of the
practitioners directly involved in the delivery of our services, a total of
267 at the year-end (2021: 233 heads).
Gross margin was marginally lower as a result of increased staff costs with
the temporary increase during the year of the 1.25% Health and Social Care
levy tax and the end of some COVID-19 related projects at the end of 2021.
This was slightly offset by a positive mix impact as our new US contracts
ramped up.
Statutory loss after tax
The Group net loss after tax for the year was £0.7 million (2021: loss of
£0.3 million).
Administrative expenses
Excluding depreciation, amortisation and share based payments, administrative
expenses grew by £2.7 million in the year, a 28.8% increase year on year,
which whilst ahead of revenue growth remains in line with our strategic
investment plan.
This was driven by staff and commission costs in the US as we strengthened the
business development, clinical, HR and customer success teams. In addition, we
started to incur the non- staff costs of doing business in the US including,
legal, insurance and consulting expenses.
Excluding the US investment, administrative expenses in the UK grew by 13.3%.
This was primarily new headcount in our engagement and marketing team, pay
increases to existing staff and inflationary increases across certain
suppliers.
Adjusted EBITDA
£'m 2022 2021
Operating Loss (0.9) (0.7)
Add Back:
Depreciation and Amortisation 2.2 2.4
Share based payment expense 0.3 0.4
Adjusted EBITDA 1.6 2.1
Taxation
There has been no corporation tax charge recognised in the year due to
accumulated losses combined with the overall current year position (2021:
£nil). The tax credit for the year ended 31 December 2022 and 2021 relate to
Research and Development expenditure credits which in 2022 was partly offset
by a deferred tax charge of £0.6million (2021: £0.2million credit) as the
Research and Development claim for 2021 was received in cash at a lower
effective tax rate rather than carrying forward as a loss to be used against
future profits.
Cash
The Group has had impressive cash management in the year with net cash
generated from operating activities of £4.4 million (2021: £1.9 million).
Free cashflow, after taking account of capital expenditure was £1.3 million
in 2022 compared to an outflow of £0.7 million in 2021. The net cash at year
end was £8.5 million (2021: £7.1 million). Post year end in January 2023, an
R&D tax receipt relating to the 2021 year of £0.6m was received.
The overall improvement is due to advance payments from clients (particularly
in the US) and good working capital management as debtor days at 31 December
2022 fell to 20 days (2021: 33 days) and trade receivables were reduced by 34%
in the year to £1.1 million (2021: £1.6 million). The Group continues to be
debt free and maintains a robust financial position.
Capitalised development costs
The Group continues to invest in product and platform development resulting in
ongoing improvements in its delivery platform. Costs are a combination of
internal and external spend.
Where such work is expected to result in future revenue, costs incurred that
meet the definition of software development in accordance with IAS38,
Intangible Assets, are capitalised in the statement of financial position.
During the year the Group capitalised £3.0 million in respect of software
development (2021: £2.5 million) with an amortisation charge of £2.1 million
(2021: £2.3 million).
Investment in product and development continues to be significant to the Group
and we anticipate capitalising software costs at a higher rate over the next
few years during a period of accelerated international product investment.
Capital expenditure
Software and product development costs aside, the Group's ongoing capital
expenditure requirements remain modest at £0.1 million (2021: £0.1 million).
Capital and Reserves
The strength of the Group's balance sheet with net assets of £10.5 million
(2021: £11.0 million), high levels of recurring revenue and strong cash
generation from operating activities provide the Group with financial strength
with which to execute on its investment strategy which continues to focus on
US expansion and platform investment.
Dividend policy
As outlined at the time of the IPO the Group's intention in the short to
medium term is to invest in order to deliver capital growth for shareholders.
The Board has not recommended a dividend in respect of the year ended 31
December 2022 (2021: Nil) and does not anticipate recommending a dividend
within the next year but may do so in future years.
Sanjay Jawa
Chief Financial Officer
3 April 2023
Financial Statements
Consolidated statement of profit and loss and other comprehensive loss
For the year ended 31 December 2022
Note 2022 2021
£'000 £'000
Revenue 4 20,120 16,682
Cost of sales (6,265) (5,097)
Gross profit 13,855 11,585
Administrative expenses 5 (14,767) (12,318)
Operating loss (912) (733)
Analysed as:
Adjusted EBITDA 1,612 2,082
Depreciation & amortisation 11, 12, 13 (2,232) (2,384)
Share based payment expense 6 (292) (431)
Operating loss (912) (733)
Interest income 7 81 13
Loss before tax (831) (720)
Tax 8 115 410
Total comprehensive loss for the year (716) (310)
Loss per share - basic (£) 9 (0.02) (0.01)
Loss per share - diluted (£) 9 (0.02) (0.01)
Consolidated statement of financial position
As at 31 December 2022
Note 31 December 2022 31 December 2021
£'000 £'000
Assets
Non-current assets
Goodwill 10 511 511
Development costs 11 3,681 2,867
Right of use asset 12 68 -
Property, plant and equipment 13 122 116
Deferred tax 14 - 435
Total non-current assets 4,382 3,929
Current assets
Trade and other receivables 15 2,618 2,370
Contract assets 16 649 406
Cash and cash equivalents 17 8,492 7,079
Total current assets 11,759 9,855
Total assets 16,141 13,784
Liabilities Current liabilities Trade payables
18 (680) (417)
Contract liabilities 19 (2,583) (797)
Lease liability 12 (68) -
Accruals and other creditors 18 (977) (649)
Tax liabilities 18 (967) (948)
Deferred tax 14 (348) -
Total current liabilities (5,623) (2,811)
Net current assets 6,136 7,044
Net Assets / (Liabilities) 10,518 10,973
Equity
Share capital 20 1,653 1,653
Share premium account 20 14,229 14,229
P&L reserve 20 (2,595) (1,879)
Share-based payment reserve 20 1,221 959
Capital redemption reserve 20 115 115
Merger reserve 20 (4,104) (4,104)
Total equity 10,518 10,973
The financial statements of Kooth plc (Company registration number 12526594)
were approved by the Board of Directors and authorised for issue on 3 April
2023. They were signed on its behalf by:
Sanjay Jawa
Chief Financial Officer
3 April 2023
The accompanying notes form part of the financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2022
Share capital Share premium Share based payment reserve Capital redemption Merger reserve
P&L reserve reserve Total equity
Balance at 1 January 2021 1,653 14,229 528 (1,569) 115 (4,104) 10,852
Share based payments - - 431 - - - 431
Total comprehensive loss for the year
- - - (310) - - (310)
As at 31 December 2021 1,653 14,229 959 (1,879) 115 (4,104) 10,973
Balance at 1 January 2022 1,653 14,229 959 (1,879) 115 (4,104) 10,973
Share based payments - - 262 - - - 262
Total comprehensive loss for the year
- - - (716) - - (716)
As at 31 December 2022 1,653 14,229 1,221 (2,595) 115 (4,104) 10,518
Consolidated Cash Flow Statement
For the year ended 31 December 2022
Note 2022 2021
£'000 £'000
Cash flows from operating activities
Loss for the year Adjustments: (716) (310)
Depreciation & amortisation 11, 12, 13 2,232 2,384
Income tax received 8 330 -
Share based payment expense 6 292 520
Income tax recognised 8 (115) (410)
Interest income 7 (81) -
Movements in working capital:
(Increase) / decrease in trade and other receivables 15 78 (574)
Increase / (decrease) in trade and other payables 18 2,364 244
Net cashflow from operating activity 4,384 1,854
Cash flows from investing activities
Purchase of property, plant and equipment 13 (100) (63)
Additions to intangible assets 11 (2,952) (2,535)
Net cash used in investing activities (3,052) (2,598)
Cash flows from financing activities
Interest income 7 81 -
Net cash from financing activities 81 -
Net increase / (decrease) in cash and cash equivalents 1,413 (744)
Cash and cash equivalents at the beginning of the year 17 7,079 7,823
Cash and cash equivalents at the end of the year 17 8,492 7,079
Notes to the Financial Statements
1. Corporate Information
Kooth plc is a company incorporated in England and Wales. The address of the
registered office is 5 Merchant Square, London, England, W2 1AY.
2. Significant Accounting Policies
2.1) Basis of Preparation
The preliminary results for the year ended 31 December 2022 are an abridged
statement of the full Annual Report which was approved by the Board of
Directors on 3 April 2023. The consolidated financial statements in the full
Annual Report are prepared in accordance with UK-adopted International
Financial Reporting Standards ('IFRS'), with IFRS as issued by the
International Accounting Standards Board ('IASB') and with the requirements of
the Companies Act 2006. The auditor's report on those consolidated financial
statements was unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain statements under
section 498(2) or 498(3) of the Companies Act 2006. The preliminary results do
not comprise statutory accounts within the meaning of section 434(3) of the
Companies Act 2006. The Annual Report for the year ended 31 December 2022 will
be delivered to the Registrar of Companies following the Company's Annual
General Meeting. The financial information included in this preliminary
announcement does not itself contain sufficient information to comply with
IFRS. The annual report and audited financial statements for the year ended 31
December 2022 will be made available on the Company's website in April 2023.
Measurement Convention
The financial statements are prepared on the historical cost basis with the
exception of certain items which are measured at fair value as disclosed in
the accounting policies set out below. These policies have been consistently
applied to all years presented unless otherwise stated. All values are
presented in Sterling and rounded to the nearest thousand pounds (£'000)
except when otherwise indicated.
Going Concern
The Directors have a reasonable expectation that the Group as a whole has
adequate resources to continue in operational existence for the foreseeable
future. For this reason, the going concern basis continues to be adopted in
the accounts.
The company's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Strategic
report on pages 4 to 67. In addition, note 22 to the financial statements
include the company's objectives, policies and processes for managing its
capital; its financial risk management objectives; and its exposures to
credit risk and liquidity risk.
During the 2022 financial year the Group generated a loss of £0.7 million
(2021: £0.3 million). Adjusted EBITDA is £1.6 million (2021: £2.1 million).
The Group is in a net asset position of £10.5 million (2021: £11.0 million).
Management has performed a going concern assessment for a period of 12 months
from signing, which indicates that the Group will have sufficient funds to
trade and settle its liabilities as they fall due. This assessment takes into
account a number of sensitivities, including a downside scenario and a reverse
stress test, which models the scenarios that would lead to a default by the
Group. Both the downside scenario and reverse stress test reflect lower
activity levels than both the Group forecast and 2022 actual results. The key
assumption used in the assessment is revenue and Management has analysed the
impact of reduced revenue on the Group's performance.
Whilst Management has concluded that the possibility of the downside scenario
occurring is remote, the Group would still have adequate resources to be able
to trade and settle its liabilities as they fall due in this scenario.
Management deemed the combination of factors occurring as set out in the
default model to be implausible.
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and as such continue to adopt
the going concern basis of accounting in preparing the financial statements.
2.2) Basis of Consolidation
The consolidated financial statements comprise the financial statements of
the Company and its subsidiaries as at 31 December 2022, with the comparatives
presented for the previous 12 months being the Group's combined activities for
the 12 months ended 31 December 2021.
Control is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has:
● Power over the investee (i.e., existing rights that give it the
current ability to direct the relevant activities of the investee)
● Exposure, or rights, to variable returns from its involvement with
the investee
● The ability to use its power over the investee to affect its
returns. Generally, there is a presumption that a majority of voting rights
results in control. To support this presumption and when the Group has less
than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has
power over an investee, including:
● The contractual arrangement(s) with the other vote holders of the
investee
● Rights arising from other contractual arrangements
● The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are
attributed to the equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the non-controlling
interests having a deficit balance. When necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting policies
in line with the Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control,
is accounted for as an equity transaction. If the Group loses control over a
subsidiary, it derecognises the related assets (including goodwill),
liabilities, non-controlling interest and other components of equity, while
any resultant gain or loss is recognised in profit or loss. Any investment
retained is recognised at fair value.
Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the executive
directors that make strategic decisions. Kooth plc's operations take place in
the UK and the US.
2.3) Summary of Significant Accounting Policies
The following are the significant accounting policies applied by the Group in
preparing its consolidated financial statements:
Revenue from Contracts with Customers
Revenue arises from the provision of counselling services and mental health
support services under fixed price contracts. Contracts are typically for a
12 month period and are fixed price based on the population covered and an
expected number of hours of counselling provided.
To determine whether to recognise revenue, the Group follows the five step
process as set out within IFRS 15.
1) Identifying the contract with a customer
2) Identifying the performance obligations
3) Determining the transaction price
4) Allocating the transaction price to the performance obligations
5) Recognising revenue as/when performance obligation(s) are satisfied
Contracts with customers take the form of signed agreements from customers.
There is one distinct performance obligation, being the provision of
counselling services, to which all the transaction price is allocated. Revenue
from counselling services is recognised in the accounting period in which the
services are rendered. The contracts are satisfied monthly over the contract
term for an agreed level of support hours. Revenue is recognised over-time, on
a systematic basis over the period of the contract, as this best represents
the stage of completion.
In certain circumstances the number of hours of counselling provided may
surpass the expected number of hours within the contract. In this
circumstance, Management does not recognise additional revenue during the
period, as contractually the Group has no right to demand payment for
additional hours. In some instances, the Group has recovered additional fees
post year end for the additional hours incurred; this additional revenue is
recognised at a point in time when the Group has agreed an additional fee and
has a right to invoice. At each reporting date there was no significant
overprovision of hours noted.
In instances where the number of counselling hours provided is less than the
contracted number of hours, the full fixed fee is still payable by the
customer.
A pilot contract in the US was awarded to the Group as a government grant.
Revenue on this contract was treated in the same manner as UK revenue
contracts with revenue recognised over-time, on a systematic basis over the
period of the contract, as this best represents the stage of completion.
Revenue on a proof of concept project in the US was recognised on the
percentage of completion method of accounting. As the outcome of the contract
were reliably measurable, revenue and costs were recognised in proportion to
the stage of completion of the contract.
The Group typically receives cash from customers 40 days after invoicing a
customer.
Contract Assets
Contract assets are recognised for revenue earned not yet invoiced, for
customers who are invoiced on a quarterly basis. Upon invoicing, the amount
recognised as a contract asset is reclassified to trade receivables. The
Group has reviewed the expected credit losses for the year and note no
material expected credit losses.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is
due (whichever is earlier) from a customer before the Group transfers the
related services. Contract liabilities are recognised as revenue when the
Group performs under the contract (i.e., transfers control of the related
services to the customer).
Tax
Current tax
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted
at the reporting date in the countries where the Group operates and generates
taxable income.
Current tax relating to items recognised directly in equity is recognised in
equity and not in the statement of profit or loss. Management periodically
evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date. Deferred tax liabilities
are recognised for all taxable temporary differences, except:
● When the deferred tax liability arises from the initial recognition
of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss
● In respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint arrangements,
when the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the
foreseeable future
Deferred tax assets are recognised for deductible temporary differences, the
carry forward of unused tax credits and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, and the
carry forward of unused tax credits and unused tax losses can be utilised,
except:
● When the deferred tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or
loss
● In respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint arrangements,
deferred tax assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable
profit will be available, against which the temporary differences can be
utilised
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date. Deferred tax relating to items
recognised outside profit or loss is recognised outside profit or loss.
Deferred tax items are recognised in correlation to the underlying transaction
either in OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not satisfying
the criteria for separate recognition at that date, are recognised
subsequently if new information about facts and circumstances change. The
adjustment is either treated as a reduction in goodwill (as long as it does
not exceed goodwill) if it was incurred during the measurement period or
recognised in profit or loss.
The Group offsets deferred tax assets and deferred tax liabilities if and only
if it has a legally enforceable right to set off current tax assets and
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities which intend
either to settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Sales tax
Expenses and assets are recognised net of the amount of sales tax, except:
● When the sales tax incurred on a purchase of assets or services is
not recoverable from the taxation authority, in which case, the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the
expense item, as applicable
● When receivables and payables are stated with the amount of sales
tax included
The net amount of sales tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the statement of
financial position.
Research and Development tax claims
Where Kooth plc has made Research and Development tax claims under the Small
and Medium Enterprise scheme and tax losses have been surrendered for a
repayable tax credit, a current tax credit is reflected in the income
statement.
Property, Plant and Equipment
Property, plant and equipment is stated in the statement of financial
position at cost, less any subsequent accumulated depreciation and subsequent
accumulated impairment losses.
The cost of property, plant and equipment includes directly attributable
incremental costs incurred in its acquisition and installation.
Depreciation is charged so as to write off the cost of assets over their
estimated useful lives, as follows: Computer and office equipment 33.33%
straight line
Goodwill and Intangibles
Goodwill
Goodwill is initially measured at cost (being the excess of the aggregate of
the consideration transferred and the amount recognised for non-controlling
interests and any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the net assets
acquired is in excess of the aggregate consideration transferred, the Group
re-assesses whether it has correctly identified all of the assets acquired
and all of the liabilities assumed and reviews the procedures used to measure
the amounts to be recognised at the acquisition date. If the reassessment
still results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or
loss.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated to each of the
Group's cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of
the operation within that unit is disposed of, the goodwill associated with
the disposed operation is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed
operation and the portion of the cash-generating unit retained.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is
their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses. Internally generated intangibles, excluding
capitalised development costs, are not capitalised and the related expenditure
is reflected in profit or loss in the period in which the expenditure is
incurred.
The useful lives of intangible assets are assessed as either finite or
indefinite.
Intangible assets with finite lives are amortised over the useful economic
life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed at
least at the end of each reporting period. Changes in the expected useful life
or the expected pattern of consumption of future economic benefits embodied
in the asset are considered to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite lives is recognised in
the statement of profit or loss.
Intangible assets with indefinite useful lives are not amortised, but are
tested for impairment annually, either individually or at the cash-generating
unit level. The assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be supportable. If not,
the change in useful life from indefinite to finite is made on a prospective
basis.
An intangible asset is derecognised upon disposal (i.e., at the date the
recipient obtains control) or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising upon derecognition of the
asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the statement of profit or loss.
Expenditure on internally developed software products and substantial
enhancements to existing software product is recognised as intangible assets
only when the following criteria are met:
● The technical feasibility of completing the intangible asset so that
the asset will be available for use or sale
● Its intention to complete and its ability and intention to use or
sell the asset
● How the asset will generate future economic benefits
● The availability of resources to complete the asset
● The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the
asset is carried at cost less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins when development is
complete and the asset is available for use. It is amortised over the period
of expected future benefit. Amortisation is recorded in the Statement of
Profit and Loss.
During the period of development, the asset is assessed for impairment
annually.
Amortisation is charged on a straight line basis over the estimated useful
life of three years.
Expenditure on research activities as defined in IFRS is recognised in the
income statement as an expense.
Impairment testing of intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately independent cash inflows (CGU). Those
intangible assets including goodwill and those under development are tested
for impairment at least annually. All other individual assets or CGUs are
tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
An impairment charge is recognised for the amount by which the asset or CGUs
carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of fair value, reflecting market conditions less costs to sell, and
value in use. All assets, with the exception of goodwill, are subsequently
reassessed for indications that an impairment loss previously recognised may
no longer exist.
Financial instruments
The Group classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the underlying contractual
arrangement. Financial instruments are recognised on the date when the Group
becomes a party to the contractual provisions of the instrument. Financial
instruments are initially recognised at fair value except for trade
receivables which are initially accounted for at the transaction price.
Financial instruments cease to be recognised at the date when the Group ceases
to be party to the contractual provisions of the instrument.
Financial assets are included on the balance sheet as trade and other
receivables or cash and cash equivalents.
Trade receivables
Trade receivables are amounts due from customers for services performed in the
ordinary course of business. They are generally due for settlement within 30
days and are therefore all classified as current. Trade receivables are
recognised initially at the transaction price. The Group holds the trade
receivables with the objective of collecting the contractual cash flows and
therefore measures them subsequently at amortised cost using the effective
interest method.
The Group assess each receivable on a customer by customer basis for the
expected lifetime credit loss, which is based on an unbiased weighted average
probability of default both at initial recognition and subsequent reporting
dates. Where an expected credit loss is identified a provision is made
against the receivable. Significant financial difficulties of the customer,
probability that the customer will enter bankruptcy or financial
reorganisation default or delinquency in payments, and the unavailability of
credit insurance at commercial rates are considered indicators that the
receivable may be impaired. When these factors are confirmed for a trade
receivable it is considered uncollectible and a default event is triggered. At
this point it is written off against the credit loss provision account.
Subsequent recoveries of amounts previously written off are credited against
administrative expenses in the income statement.
Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if the company does not have an
unconditional right, at the end of the reporting period, to defer settlement
of the creditor for at least twelve months after the reporting date. If there
is an unconditional right to defer settlement for at least twelve months after
the reporting date, they are presented as non-current liabilities. Trade
payables are recognised initially at fair value and all are repayable within
one year and hence are included at the undiscounted amount of cash expected to
be paid.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other
short-term highly liquid investments that have a maturity date of three months
or less, are readily convertible to a known amount of cash and are subject to
an insignificant risk of change in value.
Leases
Short term leases or leases of low value are recognised as an expense on a
straight-line basis over the term of the lease.
The Group recognises right-of-use assets under lease agreements in which it is
the lessee. The underlying assets mainly include property and office
equipment and are used in the normal course of business. The right-of-use
assets comprise the initial measurement of the corresponding lease liability
payments made at or before the commencement day as well as any initial direct
costs and an estimate of costs to be incurred in dismantling the asset. Lease
incentives are deducted from the cost of the right-of-use asset. The
corresponding lease liability is included in the consolidated statement of
financial position as a lease liability.
The right-of-use asset is depreciated over the lease-term and if necessary
impaired in accordance with applicable standards. The lease liability shall
initially be measured at the present value of the lease payments that are not
paid at that date, discounted using the rate implicit in the lease. The lease
liability is subsequently measured by increasing the carrying amount to
reflect interest on the lease liability (application of the effective
interest method) and by reducing the carrying amount to reflect the lease
payments made. No lease modification or reassessment changes have been made
during the reporting period from changes in any lease terms or rent charges.
Employee Benefit plans
Defined Contribution Plans
The Group operates a defined contribution pension plan. Payments to defined
contribution pension plans are recognised as an expense when employees have
rendered services entitling them to the contributions.
Share-based payment
Benefits to employees are provided in the form of share-based payment
transactions, whereby employees render services in exchange for shares or
rights over shares ('equity settled transactions'). The fair value of the
employee services rendered is measured by reference to the fair value of the
shares awarded or rights granted, which takes into account market conditions
and non-vesting conditions. This cost is charged to the income statement over
the vesting period, with a corresponding increase in the share based payment
reserve.
The cumulative expense recognised at each reporting date until the vesting
date reflects the extent to which the vesting period has expired and the
company's best estimate of the number of shares that will ultimately vest. The
charge or credit to the income statement for a period represents the movement
in the cumulative expense recognised at the beginning and end of that period
and is recognised in share based payment expense.
Alternative Performance Measures
Adjusted results are prepared to provide a more comparable indication of the
Group's core business performance by removing the impact of certain items
including exceptional items, and other, non- trading, items that are reported
separately.
The Group believes that EBITDA before separately disclosed items ("adjusted
EBITDA") is the most significant indicator of operating performance and
allows a better understanding of the underlying profitability of the Group.
The Group defines adjusted EBITDA as operating profit/loss before interest,
tax, depreciation, amortisation, exceptional items and share based payments.
The Group also measures and presents performance in relation to various other
non-GAAP measures, such as gross margin, annual recurring revenue and revenue
growth.
Adjusted results are not intended to replace statutory results. These have
been presented to provide users with additional information and analysis of
the Group's performance, consistent with how the Board monitors results.
3. Significant Accounting Judgements, Estimates and
Assumptions
In the application of the Group's accounting policies, management is required
to make judgements, estimates and assumptions about the carrying value of
assets and liabilities that are not readily apparent from other sources.
Estimates and Assumptions
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of revision and future periods if the revision affects both current and future
periods.
The estimates which have the most significant impact on the amounts
recognised in the financial statements are as follows:
Useful economic lives of development costs and property, plant and equipment
Property, plant and equipment is depreciated over the economic useful lives of
the assets. Useful lives are based on management's estimates of the period
that the assets will generate revenue, which are reviewed annually for
continued appropriateness. The useful economic lives applied are set out in
the accounting policies. Development costs are amortised on a straight-line
basis over the useful life of the related asset which management estimate to
be three years, which is industry standard.
Share-based payments
Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which depends on the
terms and conditions of the grant. This estimate also requires determination
of the most appropriate inputs to the valuation model including the expected
life of the share option or appreciation right, volatility and dividend yield
and making assumptions about them. The basis for these key inputs and
assumptions are described in note 6.
Judgements
The areas of judgement which have the most significant impact on the amounts
recognised in the financial statements are as follows:
Impairment of intangible assets (including goodwill) and property, plant and
equipment
The Group tests goodwill at least annually for impairment and whenever there
is an indication that the asset may be impaired. All other intangible assets
and property, plant and equipment are tested for impairment when indicators of
impairment exist.
Assessing whether an indicator of impairment exists is a judgement. The value
in use calculated by management is an estimate.
An impairment charge is recognised for the amount by which the asset or CGUs
carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of fair value, reflecting market conditions less costs to sell, and
value in use. All assets, with the exception of goodwill, are subsequently
reassessed for indications that an impairment loss previously recognised may
no longer exist.
Deferred tax
The extent to which deferred tax assets can be recognised is based on an
assessment of the probability that future taxable income will be available
against which the deductible temporary differences and tax loss carry-forwards
can be utilised. In addition, significant judgement is required in assessing
the impact of any legal or economic limits or uncertainties.
Capitalisation of Development Costs
Distinguishing the research and development phases of a new customised project
and determining whether the recognition requirements for the capitalisation of
development costs are met requires judgement. After capitalisation, management
monitors whether the recognition requirements continue to be met and whether
there are any indicators that capitalised costs may be impaired. Capitalised
development expenditure is analysed further in note 11.
Development costs largely relate to amounts paid to external developers,
consultancy costs and the direct payroll costs of the internal development
teams. Any internal time capitalised is the result of careful judgement of the
proportion of time spent on developing the platform.
Capitalised development expenditure is reviewed at the end of each accounting
period for indicators of impairment.
4. Revenue
The total turnover of Kooth plc has been derived from its principal activity
undertaken in the UK and the US.
2022 2021
£'000 £'000
Provision of online counselling - UK 18,648 16,682
Provision of online counselling - US 1,472 -
20,120 16,682
5. Administrative expenses
2022 2021
£'000 £'000
8,701 6,876
Employee costs
Rent and rates 316 212
IT hosting and software 963 882
Professional fees 1,307 680
Marketing 490 494
Depreciation & amortisation 2,236 2,384
Share based payment expense 292 431
Other overheads 462 359
14,767 12,318
6. Employee remuneration
2022 2021
£'000 £'000
Salaries 12,033 11,543
Pensions 317 286
Social security & other staff benefits 1,396 1,203
Share based payments 304 520
14,050 13,552
Employee numbers 2022 2021
Direct 234 204
Indirect 139 126
Developers 33 32
406 362
Employee numbers disclosed represents the average number of employees for the
year.
Share based payment 2022 2021
£'000 £'000
Long term incentive awards 304 520
A portion of long term incentive awards are capitalised which accounts for the
difference in long term incentive awards shown in this note compared to the
amount disclosed as an expense in the Statement of Profit and Loss.
Long Term Incentive Awards
Long term incentive awards have been issued to all staff. The fair value of
the awards has been calculated using the Black Scholes model, based on the
market price of the underlying shares on the date of grant. Performance
conditions are attached to the incentive awards of Executives, with 50% linked
to ARR growth and 50% linked to comparative total shareholder return. Vesting
conditions require that all staff remain employed by the business for three
years. The shares vest over a three year period with a maximum term of 10
years.
Number of options Exercise price per share Number of Options Exercise price per share
2022 2022 2021 2021
Outstanding at the 1,080,066 £0.05 999,681 £0.05
beginning of the year
Granted 1,096,464 £0.05 367,173 £0.05
Forfeited (303,174) £0.05 (286,788) £0.05
Exercised - £0.05 - £0.05
Outstanding at the end of the year 1,873,356 £0.05 1,080,066 £0.05
7. Interest
2022 2021
£'000 £'000
Interest income on cash deposits 81 13
8. Taxation
2022 2021
£'000 £'000
Current tax
Corporation tax (746) (252)
Total current tax charge / (credit) (746) (252)
Deferred tax (P&L)
Origination and reversal of timing differences 631 (158)
Total deferred tax charge / (credit) (P&L) 631 (158)
Tax charge / (credit) on profit on ordinary activities (115) (410)
Reconciliation of tax charge
Loss on ordinary activities before tax (831) (720)
Expected tax charge on loss on ordinary activities at standard CT rate (158) (137)
Effects of:
Effect of tax rate changing on opening balance - (93)
R&D additional deduction (398) (430)
Difference between UK CT & DT rates 3 (33)
Surrender of tax losses for R&D tax credit refund 137 80
Prior year adjustment 313 203
Other difference (12) -
(115) (410)
9. Earnings per share
2022 2021
£'000 £'000
Earnings used in calculation of earnings per share:
On total losses attributable to equity holders of the parent (716) (310)
2022 2021
Weighted average no. of shares (Basic) 33,055,776 33,055,776
Weighted average no. of shares (Diluted) 34,360,798 34,082,252
Shares in issue
Ordinary shares in issue 33,055,776 33,055,776
Share options 1,873,356 1,080,066
Loss per share (basic, £)
On total losses attributable to equity holders of the parent (0.02) (0.01)
Loss per share (diluted, £)
On total losses attributable to equity holders of the parent (0.02) (0.01)
10. Goodwill
2022 2021
£'000 £'000
Goodwill as at 1 January and 31 December 511 511
Management has established counselling services as the one CGU during the
relevant periods. All goodwill is attributable to this CGU.
The Group tests annually for impairment or more frequently if there are
indications that it might be impaired. There were no indicators of impairment
noted during the periods presented.
The Group tests goodwill for impairment by reviewing the carrying amount
against the recoverable amount of the investment. Management has calculated
the value in use using the following assumptions:
Discount
rate
8%
Growth
rate
2%
Using alternative discount and growth rates as sensitised assumptions does not
result in any impairment.
The Group prepares forecasts based on the most recent financial budgets
approved by the Board. The forecasts have been used in the value in use
calculation along with the assumptions stated above. The forecasts used are
consistent with those used in the going concern review and discussed in note
2. There were no impairments in the years ended 31 December 2022 and 31
December
2021.
11. Development costs
2022 2021
£'000 £'000
Cost
Balance as at 1 January 7,363 4,828
Additions 2,952 2,535
Balance as at 31 December 10,315 7,363
Amortisation
Balance as at 1 January (4,496) (2,213)
Amortisation (2,138) (2,283)
Balance as at 31 December (6,634) (4,496)
Carrying amount 31 December 3,681 2,867
The 2021 amortisation charge includes £0.2m in respect of accelerated
amortisation on a project where the useful economic life was reduced from its
initial three years.
12. Leases
2022 2021
£'000 £'000
Right of use asset As at 1 January
- 14
Additions 68 -
Depreciation Disposal - -
- (14)
As at 31 December 68 -
Lease liability As at 1 January
- 17
Additions Interest charge Cash payment 68 -
Disposal - -
- -
- (17)
As at 31 December 68 -
13. Property, plant and equipment
2022 2021
£'000 £'000
Cost
Balance as at 1 January 451 388
Additions 100 63
Balance as at 31 December 551 451
Depreciation
Balance as at 1 January (335) (231)
Depreciation (94) (104)
Balance as at 31 December (429) (335)
Carrying amount 31 December 122 116
Property, plant and equipment refers to computer and office equipment.
14. Deferred tax assets and liabilities
Fixed asset temporary differences Other temporary differences Tax losses Total
At 1 January 2021 - asset / (liability) (481) 79 535 133
Movement - (charge) / credit 23 244 35 302
At 1 January 2022 - asset / (liability) (458) 323 570 435
Movement - (charge) / credit (119) (98) (566) (783)
At 31 December 2022 - asset / (liability) (577) 225 4 (348)
Deferred tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the deductible
temporary differences can be utilised.
15. Trade and other receivables
2022 2021
£'000 £'000
Trade receivables 1,110 1,609
Prepayments and other receivables 1,508 761
2,618 2,370
All amounts shown above are short term. The net carrying value of trade
receivables is considered a reasonable approximation of fair value.
16. Contract assets
2022 2021
£'000 £'000
Accrued income 649 406
17. Cash and cash equivalents
2022 2021
£'000 £'000
Cash and cash equivalents 8,492 7,079
18. Trade and other payables
2022 2021
£'000 £'000
Trade payables 680 417
Accruals and other creditors 977 649
Tax liabilities 967 948
2,624 2,014
19. Contract liabilities
2022 2021
£'000 £'000
Contract liabilities - current 2,583 797
20. Equity
2022 2021
£'000 £'000
Ordinary A shares 1,653 1,653
Number of Shares 2022 2021
Ordinary A shares 33,055,776 33,055,776
The share capital of Kooth plc consists of fully paid ordinary shares with a
nominal value of £0.05 per share.
The A ordinary shares have attached to them full voting, dividend and capital
distribution rights (including on winding up). They do not confer any right of
redemption.
2022 2021
£'000 £'000
Share Premium 14,229 14,229
Share premium represents the funds received in exchange for shares over and
above the nominal value.
2022 2021
£'000 £'000
Share based payment reserve 1,221 959
The share based payment reserve represents amounts accruing for equity settled
share options granted plus the fair value of growth shares realised upon IPO.
2022 2021
£'000 £'000
Merger reserve (4,104) (4,104)
The merger reserve was created as a result of the share for share exchange
during the year ended 31 December 2020.
2022 2021
£'000 £'000
Capital redemption reserve 115 115
The capital redemption reserve was established as a result of the deferred
share buyback during the year ended 31 December 2020.
21. Auditors remuneration
2022 2021
£'000 £'000
Fees payable to the auditor for the audit of the Company and Consolidated
financial statements
85 75
Fees payable to the auditor and its associates for other services:
Other audit related services 5 5
22. Financial assets and liabilities
2022 2021
£'000 £'000
Financial assets
Trade and other receivables 2,618 2,370
Cash and cash equivalents 8,492 7,079
Financial liabilities
Trade and other payables 2,692 2,014
Management has assessed that the fair values of cash, trade receivables, trade
payables, and other current liabilities approximate their carrying amounts
largely due to the short-term maturities of these instruments.
22.1 Financial assets and liabilities
The Group's principal financial liabilities comprise trade and other
payables. The Group has no debt facility as at 31 December 2022 (2021: £nil).
The main purpose of these financial liabilities is to finance the Group's
operations. The Group's principal financial assets include trade receivables
and cash that derive directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The
Group's senior management oversees the management of these risks. The Group's
senior management is supported by the Board of Directors who advise on
financial risks and the appropriate financial risk governance framework for
the Group. The Board provides assurance to the Group's senior management that
the Group's financial risk activities are governed by appropriate policies
and procedures and that financial risks are identified, measured and managed
in accordance with the Group's policies and risk objectives.
The Board of Directors reviews and agrees policies for managing each of these
risks, which are summarised below.
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: interest rate risk, currency risk
and other price risk, such as equity price risk and commodity risk.
Market risk is deemed to be immaterial to the Group given that:
● the Group has no debt facilities in place at the year ended 31
December 2022 (2021: £nil) that would cause interest rate risk, and
● the Group's activities are conducted in the UK and the US, both of
which are deemed to be stable economies, thereby significantly reducing
foreign currency risk.
Credit risk
The Group's principal financial assets are cash and trade receivables. The
credit risk associated with cash is limited, as the counterparties have high
credit ratings assigned by international credit-rating agencies. The credit
risk associated with trade receivables is also limited as customers are
primarily government backed organisations such as the NHS or State
governments. Credit losses historically incurred have been negligible.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is
available to meet foreseeable needs by closely managing its cash balance.
As at the year ended 31 December 2022 the Group is solely funded by equity and
as a result liquidity risk is deemed to be immaterial. The Group monitors its
risk of a shortage of funds through both review and forecasting procedures.
23. Related party transactions
Note 25 provides information about the Group's structure, including details of
the subsidiaries and the holding company. The Group has taken advantage of the
exemption available under IAS 24 Related Party Disclosures not to disclose
transactions between Group undertakings which are eliminated on consolidation.
The following table provides the total amount of transactions that have been
entered into with related parties for the relevant financial year.
2022 2021
£'000 £'000
Monitoring fees - ScaleUp Capital Limited 50 50
50 50
Key management personnel are the executive members of the Board of Directors
of the Group and their remuneration is disclosed below and in the Remuneration
Committee report.
2022 2021
£'000 £'000
Base salary and fees 709 430
Pension 21 8
730 438
24. Capital management policies and procedures
The Group's capital management objectives are:
● to ensure the Group's ability to continue as a going concern
● to provide an adequate return to shareholders by pricing products
and services in a way that reflects the level of risk involved in providing
those goods and services.
The Group monitors capital on the basis of the carrying amount of equity, less
cash and cash equivalents as presented in the statement of financial
position.
The Group has no debt facilities in place as at 31 December 2022 (2021:
£nil).
Management assesses the Group's capital requirements in order to maintain an
efficient overall financing structure while avoiding excessive leverage. The
Group manages the capital structure and makes adjustments to it in the light
of changes in economic conditions and the risk characteristics of the
underlying assets. The amounts managed as capital by the Group for the
reporting periods under review are summarised as follows:
2022 2021
£'000 £'000
Total equity 10,518 10,973
Cash and cash equivalents 8,492 7,079
Capital 19,010 18,052
Total equity 10,518 10,973
Lease liability (68) -
Financing 10,450 10,973
25. Subsidiaries and associated companies
Name Country of incorporation Proportion Held Activity Registered Address
Kooth Group Limited UK 100% Platform development 5 Merchant Square, London, England, W2 1AY
Kooth Digital Health Limited UK 100% Provision of online counselling and support to children, young people and 5 Merchant Square, London, England, W2 1AY
adults in the UK
Kooth USA LLC US 100% Provision of online counselling and support to children and young people in 1828 Walnut St, Kansas City, MO, 64108-1835
the US
26. Standards issued but not yet effective
At the date of authorisation of these consolidated financial statements,
several new, but not yet effective, Standards and amendments to existing
Standards, and Interpretations have been published by the IASB. None of these
Standards or amendments to existing Standards have been adopted early by the
Group.
Management anticipates that all relevant pronouncements will be adopted for
the first period beginning on or after the effective date of the
pronouncement. New Standards, amendments and Interpretations not adopted in
the current year have not been disclosed as they are not expected to have a
material impact on the Group's consolidated financial statements.
27. Ultimate Controlling Party
No shareholder owns a majority of shares. The directors do not consider that
there is one ultimate controlling party.
28. Events after the reporting date
Following the year end Kooth was selected as the primary vendor partner to
deliver its digital mental health platform to all 13-25 year olds in the State
of California. Kooth will provide services integral to the Behavioral Health
Virtual Services Platform, a new technology-enabled services solution, for all
children, youth, and families in the State. The service is expected to launch
in January 2024. Kooth expects the contract details to be agreed during the
course of Q2 2023, with an associated highly material impact on revenues and
ARR from 2024 onwards.
29. Capital commitments
The Group's capital commitments at 31 December 2022 are £nil (2021: £nil).
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