REG - KRM22 PLC - Final Results
23/03/2022 07:00
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RNS Number : 6766F KRM22 PLC 23 March 2022
KRM22 plc
("KRM22", the "Group" and the "Company")
AUDITED RESULTS STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2021
KRM22 plc (AIM: KRM.L), the technology and software company focused on risk
management in capital markets, announces its audited results for the year
ended 31 December 2021 ("2021", the "Year").
Financial highlights
· Gross cash as at 31 December 2021 of £5.4m (2020: £2.0m)
· Annualised Recurring Revenue (ARR)(( 1 (#_ftn1) )) as at 31 December
2021 of £3.8m (2020: £4.1m)
o New contracted ARR in the year ended 31 December 2021 of £0.7m
· Total revenue recognised of £4.1m (2020: £4.6m)
· Adjusted EBITDA loss(( 2 (#_ftn2) )) of £0.7m (2020: £0.2m)
· An improved loss before tax of £3.4m (2020: loss of £5.7m)
· Further funding received in December 2021 of £4.7m (gross) through a
direct strategic investment by Trading Technologies International, Inc.
Operational highlights
· Distribution agreement signed with Trading Technologies
International, Inc. in December 2021 following its strategic investment which
will help provide a platform for future growth
· Deployment of a major futures brokerage customer adopting multiple
KRM22 risk management products using a single data set
· 69% of customers now contacted under a Master Services Agreement on
multi-year contracts with increased ARR on an annual basis over the term of
the contract with contract commitments of between two and five years
· Soc 2 accreditation approved in March 2021 demonstrating KRM22 has
internal controls in place to safeguard customer data which will assist in new
customer procurement processes
Keith Todd CBE, Executive Chairman of KRM22, commented:
"The 2021 financial performance masks the significant progress the Company has
made strategically, with significant expansion of offerings on the Global Risk
Platform and the continued migration of many customers to new multi-year
contracts as well as new revenue contract wins. We have started 2022 with a
strong balance sheet and, most importantly, I'm pleased that the TT
partnership is progressing very well with positive reaction from prospects and
customers at the recent FIA global conference at Boca Raton clearly visible."
For further information please contact:
KRM22 plc
InvestorRelations@krm22.com
Keith Todd CBE, Executive Chairman
Stephen Casner, CEO
Kim Suter, CFO
finnCap Ltd (Nominated Adviser and Broker)
+44 (0)20 7220 0500
Carl Holmes / Kate Bannatyne / James Balicki (Corporate Finance)
Alice Lane / Sunila de Silva (ECM)
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
About KRM22 plc
KRM22 is a closed-ended investment company which listed on AIM on 30 April
2018. The Company has been established with the objective of creating value
for its shareholders through the investment in, and subsequent growth and
development of, target companies in the technology and software sector, with a
focus on risk management in capital markets.
Through its investments and the Global Risk Platform, KRM22 helps capital
market companies reduce the cost and complexity of risk management. The
Global Risk Platform provides applications to help address firms' market,
compliance operations and technology risk challenges and to manage their
entire enterprise risk profile.
Capital markets companies' partner with KRM22 to optimise risk management
systems and processes, improving profitability and expanding opportunities to
increase portfolio returns by leveraging risk as alpha.
KRM22 plc is quoted on AIM and the Group is headquartered in London, with
offices in several of the world's major financial centres.
See more about KRM22 at KRM22.com (https://www.krm22.com/) .
CHAIRMAN'S STATEMENT
2021 was a challenging year for KRM22 however we have entered 2022 well
positioned for the next phase of the Company's growth. In the almost four
years since we floated on AIM, we have created a capital markets SaaS based
risk business with £3.8m of Annual Recurring Revenue and 28 institutional
customers with multi-year contracts.
We have endured two years of the COVID-19 pandemic which has placed
restrictions on the traditional sales methods and tackled the transitioning of
acquired deployed software to SaaS platform delivered services.
We exit 2021 with a strong shareholder base and balance sheet as well as an
extensive array of risk services on our Global Risk Platform as well as many
new and renewed multi-year contracts.
Trading Technologies International Inc. ("TT") acquired a 25% strategic stake
in KRM22 in December 2021 through a subscription for new shares and we have
entered into a distribution agreement with TT to take KRM22's products
progressively into the TT customer base with significant opportunities for
growth and cross selling.
In 2021 we secured £0.7m of new business however this organic growth was
offset by an unprecedented level of existing customer churn in the year. The
churn was from legacy customers on old deployed software that did not want to
migrate to SaaS delivered services. This has been a common theme over the
last two years of the COVID-19 pandemic. Whilst some churn is expected and
budgeted for in 2022, we now believe to be at the end of that excessive churn
process and expect to see positive growth in ARR going forward.
I am pleased that Stephen Casner is taking the Company forward as CEO.
Stephen's plans to strengthen sales and marketing resource as well as continue
investment in the Global Risk Platform and KRM22 risk products, will help
accelerate KRM22 for a sustained period of growth backed up by a strong
balance sheet.
Keith Todd CBE
Executive Chairman
CEO'S STATEMENT
KRM22 is poised for a significant and rewarding year in 2022. We ended 2021
with a significant influx of capital from a new investor, a new distribution
channel with one of our industry's premier technology providers and a renewed
commitment to redeploy our sales and marketing resources, all of which is
expected to provide accelerated growth over the next two years.
2021 brought significant change to our target market. We saw companies
change the way they use, deploy and consolidate risk technology. This change
was predicted by KRM22 and underpinned the rationale for the acquisition of
legacy software products like Ancoa, ProOpticus and Object+ which have
subsequently been enhanced and rebranded as Market Surveillance, Post-Trade,
At-Trade and Pre-Trade products and the development of our Global Risk
Platform. Those acquisitions brought KRM22 key risk management talent and
technology solutions that could be modeled into services for our Global Risk
Platform, as well as a portfolio of customers who trusted these systems on a
daily basis to manage risk on their assets.
We knew the products we acquired, and their competitors, were created in
isolation of each other and significant benefit would come from
standardisation on to a seamless platform. Disruption would come to these
legacy platforms and our investments in creating a next generation, SaaS based
Global Risk Platform would prove to be a natural constituent for the market to
progress into.
2021 saw KRM22 make good progress on delivering the Global Risk Platform. A
new showcase customer was deployed, creating the first instance of an "end to
end" risk platform customer. This platform enabled our customer to use one
risk system, the KRM22 Global Risk Platform, with a common set of data
elements to manage market, compliance and enterprise risk. I am proud to
announce that this key engagement continues to be a success and new services
are being deployed weekly to further grow and mature this next generation
system.
A key deliverable last year was our ability to completely rebuild one of the
legacy systems we acquired into fresh technology and successfully deploy it
for a tier one bank as a new customer of KRM22. This Pre-Trade Risk Limit
Management application is now a key focal point of our Global Risk Platform
and is being deployed for the "showcase customer" right now. We believe by
the end of 2022 that our "showcase" will be complete and that the full power
of the Global Risk Platform will be easy to identify and its value proposition
obvious. This will have a significant impact on our core market and will act
as an accelerant to KRM22's success in becoming the capital markets premier
provider of risk technologies.
In Blackrock's CEO Larry Fink's 2022 Letter to their CEO's, he stated that the
pandemic "has turbocharged an evolution in the operating environment for
virtually every company.". This is true for KRM22 as well.
He went on to say "It's changing how people work and how consumers buy. It's
creating new businesses and destroying others. Most notably, it's
dramatically accelerating how technology is reshaping life and business.
Innovative companies looking to adapt to this environment have easier access
to capital to realize their visions than ever before. And the relationship
between a company, its employees, and society is being redefined.".
The pandemic's "turbo-charging" had significant consequences for KRM22.
Customer use of the legacy applications we acquired diminished, as five major
organisations "swapped" our legacy products for newer products. While new
customer acquisition was still strong, the sting of customer losses made it
appear that KRM22 was basically "treading water", but nothing could be further
from the truth.
Our products continued to grow into a formidable platform, our new customers
are some of the most exciting and dynamic firms in our industry and our staff
of talented risk "knowledge merchants" found a successful way to work remotely
while building great new products and providing exceptional global support
services.
One "turbo-charged" effect of the pandemic was the change in the "buying
process" our target market uses to evaluate and adopt new technology. The
traditional industry events that could highlight and showcase new products
were either cancelled, reformulated into webinars or so lightly attended that
they were no longer effective marketing and selling events. Customers no
longer tolerated the amount of "friction" in adopting modern technology.
They increasingly demand "on the go" applications that they can use without
long implementation planning and use of internal resources to manage large
scale projects.
In response to that dynamic, KRM22 announced in September 2021 that it was
looking for a strategic partner to help battle back these headwinds,
accelerate the adoption of our new products, stem the tide of customer losses
and provide capital to accelerate new features and products on the Global Risk
Platform while we build one of the best sales organisations in our industry.
To that end we took in a strategic investment and signed a major distribution
agreement with Trading Technologies International Inc. ("TT"), one of the
futures industry's most iconic technology firms. We now begin 2022 with a
strong balance sheet and one of the biggest growth opportunities for the
Global Risk Platform since we launched the platform in 2019.
We will use our balance sheet strength to continue adding to the Global Risk
Platform, to invest in new sales and marketing resources and efforts that
recognise the "new post-pandemic normal", whilst also adhering to any
financial covenants associated with the Kestrel loan facility. We are
currently working hand in hand with our new distribution partner and will
deliver exciting and proven risk technology to their customers before mid-year
in a "frictionless" method, matching exactly how these customers want to
buy. We will allow TT users to adopt KRM22 technology without having to wait
for long term implementations, risk will be available to them at the "touch of
a button". This ability quickly validates the value proposition our
technology brings and creates a "stickiness" for our applications that will
pave the way for these new customers to explore and use more and more of our
Global Risk Platform.
While we expect 2022 to be a year of transformation for KRM22, it is coming
from a sound basis of great technology, expert resources and enriching
partnerships.
Stephen Casner
CEO
FINANCIAL REVIEW
We continued to experience challenging conditions in the year with the
COVID-19 pandemic continuing to have an impact on extended sales cycles and
customer churn which reduced total revenue recognised in the year by 10% to
£4.1m (2020: £4.6m). Adjusted EBITDA loss for the year increased to £0.7m
(2020: loss of £0.2m) however the loss for the year included staff salaries
being paid at their full rate compared to the prior year when all staff agreed
to temporary salary waivers at the start of the pandemic to help KRM22's cash
flow.
Profit and Loss
Total revenue
Revenue recognised for the year to 31 December 2021 was £4.1m (2020: £4.6m),
a reduction of 10% compared with the prior year, with 96% (2020: 91%) of total
revenue generated from recurring customer contracts. Non-recurring revenue
for the year ended 31 December 2021 totalled £0.2m (2020: £0.4m) and related
principally to customer implementations and proof of concept work.
Recurring revenue
A key revenue metric for KRM22 is ARR ("Annualised Recurring Revenue") and as
at 31 December 2021, ARR was £3.8m (2020: £4.1m). KRM22 signed new
contracted ARR in 2021 of £0.7m (2020: £0.8m) with £0.3m generated from new
customers and £0.4m generated from existing customers signing new contracts
for existing products and contractual price increases. The increase in ARR
was offset by the level of customer churn, largely from legacy customers, of
£0.9m for the year (2020: £0.9m).
Gross profit
Gross profit for the year to 31 December 2021 was £3.5m (2020: £4.2m). The
reduction in gross profit margin to 84% compared to the prior year margin of
90% was due to an increase in the amount of recurring revenue generated from
partner products and services.
Capitalised research and development
A total of £0.7m (2020: £1.0m) of research and development was capitalised
in the year to 31 December 2021. Capitalised research and development is
amortised over three years.
Adjusted EBITDA
Adjusted EBITDA is the key metric that the Company considers in order to
understand the cash-profitability of the business. This is due in particular
to the non-cash items that impact the Income Statement under IFRS accounting,
such as non-cash share-based payment charges.
Adjusted EBITDA for the year to 31 December 2021 was a £0.7m loss (2020: loss
of £0.2m). The increase in adjusted EBITDA loss was driven by the reduction
in total revenue recognised, the reduction in gross margin from 90% to 84% and
that staff salaries were paid at their full rate in the year following the
temporary salary waivers implemented of between 10% and 25% in April 2020 for
the remainder of the prior year. Whilst the adjusted EBITDA loss for the
year increased compared to 2020, the loss for the year was still a significant
reduction compared to 2019 when adjusted EBITDA loss was £3.1m.
KRM22 benefited from a £0.2m (US$0.3m) Payback Protection Program ("PPP")
loan, a US government backed loan, with the proceeds being used to cover
specific US based payroll costs. Under the rules of the PPP scheme, the
total value of the loan was eligible for 100% forgiveness, with the loan being
converted to a grant and recognised as Other operating income.
A reconciliation of adjusted EBITDA loss to the reported operating loss is
provided as follows:
2021 2020
£'m £'m
Adjusted EBITDA loss (0.7) (0.2)
Depreciation and amortisation (1.7) (1.7)
Unrealised FX losses (0.1) (0.2)
Impairment of intangible assets - (3.0)
Contingent consideration (charge)/write back (0.1) 0.3
Acquisition, funding and debt expenses - (0.4)
Gain on extinguishment of debt (net) - 0.7
Group restructuring costs - (0.4)
Deferred salary bonus accrual write back - 0.4
Shared-based payment expense (0.4) (0.9)
Operating loss (3.0) (5.4)
Operating loss
Reported operating loss for the year to 31 December 2021 was £3.0m (2020:
loss of £5.4m).
Finance charges
Net finance expense in the year was £0.4m (2020: £0.3m) and includes:
· Loan interest of £0.3m (2020: £0.2m); and
· IFRS16 lease liability interest of £0.1m (2020: £0.1m).
Taxation
The tax credit in the year was £0.1m (2020: credit of £0.2m) which includes
£nil (2020: £0.1m) R&D tax credit received.
Financial position
Assets
The cash balance as at 31 December 2021 was £5.4m (2020: £2.0m).
Current assets at 31 December 2021 include trade and other receivables of
£0.7m (2020: £1.4m).
Non-current assets were £8.1m (2020: £9.2m) relating principally to: £6.1m
for goodwill and assets acquired (2020: £6.7m), £0.6m for right of use
assets recognised under IFRS16 (2020: £1.0m) and £1.3m (2020: £1.3m) for
capitalised development costs.
Liabilities
As at 31 December 2021, our principal liabilities were:
· £3.0m Convertible Loan owed to Kestrel Partners LLP. The interest
rate payable on the loan is 9.5% payable in cash quarterly in arears. The
loan can be converted into new Ordinary Shares in the Company at a conversion
price of 38p and the conversion can be requested by Kestrel Partners at any
time. The Company has the right to request conversion at any time after
eighteen months following the date of the agreement, subject to certain
conditions regarding the Company's share price at that time.
· £0.9m (US$1.1m) deferred consideration for earn out payments for the
acquisition of Object+. The liability had previously been accounted for as
contingent consideration on a discounted basis as the contingent consideration
was payable subject to earnt-out performance milestones being achieved. The
Directors believe that the third and final performance milestone has been
achieved and therefore the consideration is now disclosed as a liability due
within one year however the liability can be satisfied in either cash or
Company ordinary shares at the Company's discretion.
· £0.8m for the right of use assets relating to all future payments of
leased-office rentals under IFRS16 'Leases' whereby such lease payments are
provided for at today's value. In practice, these rental payments will be
spread over the next few years. As a result, £0.5m of the related liability
is shown in current liabilities as it relates to lease payments that will be
paid in 2022, with the balance for periods greater than one year.
· £1.7m of deferred revenue; contracted and paid services that will be
released in a future period.
Investors
As an AIM quoted business, a large proportion of KRM22's shareholders are
professional investment funds. In addition, the Directors together owned
3,764,958 shares at the year end.
Funding
On 30 December 2021, the Company raised £4.7m proceeds in equity funding
through a subscription and placement of 8,916,584 new shares at 53 pence per
share.
The Company has a £3.0m convertible loan (the "Convertible Loan") with
Kestrel Partners LLP ("Kestrel"). The interest rate payable on the
Convertible Loan is 9.5% per annum and is paid quarterly in arrears. Kestrel
can convert the Convertible Loan into new ordinary shares in the Company at
any time at a conversion price of 38p. The Company has the right to request
conversion at any time after the 18 months following the date of the
agreement, subject to certain conditions regarding the Company's share price
at that time. Kestrel has the right to prevent any conversion which would
trigger a Rule 9 event under the Takeover Code.
The Convertible Loan is secured on certain KRM22 assets and includes covenants
based on the Group's financial performance.
Use of cash in the year
Our net cash inflow in the year was £3.4m, which included the £4.7m receipt
from the share subscription completed in December 2021. Excluding the
investment proceeds of £4.7m, the net cash outflow for the year was £1.4m,
of which £0.7m was used for capitalised research and development, £0.2m was
used to pay interest on the Convertible Loan and the balance was used to
provide working capital for KRM22.
Going concern
Analysis of KRM22's going concern position is detailed in note 2 (notes to the
financial information).
Shareholdings and Earnings per share
As at 31 December 2021, KRM22 had 35,666,336 shares in issue. The undiluted
weighted average number of shares for the period to 31 December 2021 was
26,765,037. The difference in the two numbers results from the timing of
shares issued for the equity fundraise completed on 30 December 2021.
The resulting Earning per Share ("EPS") is a 12.4p loss per share (2020: loss
of 24.1p) on a weighted average number of shares basis (equivalent to
26,765,037 on the shares in issue at year end). Due to the loss made,
diluted EPS is the same as EPS.
Dividend
We aim to deliver capital growth for shareholders to generate an attractive
total return. However we do not recommend a dividend for the year, but may
choose to do so in future years.
Conclusion
Whilst 2021 has been challenging in terms of time taken to convert the sales
pipeline and increased customer churn, the TT investment of £4.7m has helped
strengthen the financial position of KRM22 and this, together with the sales
pipeline opportunities, both direct and through the distribution agreement
signed with TT, means that KRM22 is well placed for growth in 2022.
Kim Suter
CFO
Consolidated income statement and statement of comprehensive income
for the year ended 31 December 2021
Note 2021 2020
£'000 £'000
Revenue 3 4,128 4,594
Cost of sales
(676) (440)
Gross profit 3,452 4,154
Other operating income 259 -
Administrative expenses (6,695) (9,570)
Operating loss before interest, taxation, depreciation, amortisation, share (687) (167)
based payment and exceptional items ('Adjusted EBITDA')
Depreciation and amortisation (1,696) (1,688)
Impairment of assets - (3,022)
Profit/(loss) on disposal of tangible/intangible assets 6 (63)
Contingent consideration (charge)/write back (126) 342
Gain on extinguishment of debt (net) - 677
Unrealised foreign exchange loss (112) (160)
Acquisition, funding and debt related expenses (20) (401)
Company reorganisation costs - (430)
Deferred salary bonus accrual write back - 381
Share based payment expense (349) (885)
Operating loss (2,984) (5,416)
Finance charge (net) (438) (324)
Loss before taxation (3,422) (5,740)
Taxation 92 246
credit
Loss for the year (3,330) (5,494)
Loss for the year attributable to:
Equity shareholders of the parent (3,330) (5,879)
Non-controlling interest - 385
(3,330) (5,494)
Other comprehensive income
Item that may be reclassified to subsequently to profit and loss:
Exchange loss on translation of foreign operations (7) (117)
Total comprehensive loss for the year (3,337) (5,611)
Total comprehensive loss for the year attributable to:
Equity shareholders of the parent (3,337) (5,996)
Non-controlling interest - 385
(3,337) (5,611)
Loss per ordinary share
Basic earnings per (12.4p) (24.1p)
share
4
Diluted earnings per (12.4p) (24.1p)
share
4
Consolidated statement of financial position
at 31 December 2021
Note 2021 2020
£'000 £'000
Non-current assets
Goodwill 4,841 4,937
5
Other intangible 2,573 3,065
assets
5
Property, plant and 54 136
equipment
Right of use assets 632 1,041
8,100 9,179
Current assets
Trade and other 741 1,434
receivables
Cash and cash 5,362 1,974
equivalents
6,103 3,408
Total assets 14,203 12,587
Current liabilities
Trade and other 3,436 2,539
payables
Lease 483 456
liabilities
Loans and 97 97
borrowings
Derivative financial 45 45
liability
4,061 3,137
Net current assets 2,042 271
Non-current liabilities
Trade and other 45 882
payables
Lease liabilities 321 549
Loans and 2,763 2,664
borrowings
Deferred tax 301 405
liability
3,430 4,500
Total liabilities 7,491 7,637
Net assets 6,712 4,950
Equity
Share 3,567 2,672
capital
Share premium 20,517 16,676
Merger reserve (190) (190)
Convertible debt reserve 224 224
Foreign exchange reserve 115 108
Share-based payment 2,912 2,563
reserve
Retained earnings (20,433) (17,103)
Total equity 6,712 4,950
Consolidated statement of cash flows
for the year ended 31 December 2021
2021 2020
£'000 £'000
Cash flows from operating activities
Loss for the year (3,330) (5,494)
Adjustments for:
Tax credit (92) (246)
Net finance expense 438 324
Amortisation of intangible assets 1,201 1,018
Depreciation of property, plant and equipment and right of use assets 495 670
Impairment of intangible assets - 3,022
(Profit)/loss on disposal of tangible/intangible assets (6) 63
Contingent consideration charge/(write back) 126 (342)
Gain on extinguishment of debt (net) - (677)
Unrealised foreign exchange loss 112 160
Deferred salary bonus accrual write back - (381)
Equity-settled Share-based payment expense 349 885
Bad debt provision 127 340
Income taxes received - 121
(580) (537)
Decrease/(increase) in trade and other receivables 566 (76)
Decrease in trade and other payables (33) (329)
533 (405)
Net cash flows used in operating activities (47) (942)
Cash flows from investing activities
Purchase of intangible assets (749) (959)
Purchase of property, plant and equipment (6) (2)
Net cash used in investing activities (755) (961)
Cash flows from financing activities
Proceeds from issue of shares 4,735 1,280
Costs of issue of shares - (25)
Lease payments principal (204) (458)
Lease payments interest (56) (84)
Receipts from borrowings - 3,000
Interest paid (285) -
Repayments of borrowings - (874)
Net cash from financing activities 4,190 2,839
Net increase in cash and cash equivalents 3,388 936
Cash and cash equivalents at beginning of year 1,974 1,076
Effect of foreign exchange rate changes - (38)
Cash and cash equivalents at end of year 5,362 1,974
Consolidated statement of changes in equity
for the year ended 31 December 2021
Ordinary Share premium Merger Convertible debt reserve Foreign exchange reserve Share based payment reserve Retained Non- Total equity
shares
reserve
losses
controlling
interest
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 2,100 15,435 (190) - (9) 1,678 (10,871) (738) 7,405
Loss for the year - - - - - - (5,879) 385 (5,494)
Other comprehensive income - - - - 117 - - - 117
Total comprehensive loss
Non-controlling interest - - - - - - 385 (385) -
Convertible debt option - - - 224 - - - - 224
Allotment of share capital 572 1,241 - - - - - - 1,813
Share-based payments - - - - - 885 - - 885
At 31 December 2020 2,672 16,676 (190) 224 108 2,563 (17,103) - 4,950
Loss for the year - - - - - - (3,330) - (3,330)
Other comprehensive loss - - - - 7 - - - 7
Total comprehensive loss - - - - 7 - (3,330) - (3,323)
Allotment of share capital 895 3,841 - - - - - - 4,736
Share-based payments - - - - - 349 - - 349
At 31 December 2021 3,567 20,517 (190) 224 115 2,912 (20,433) - 6,712
Notes to the financial information
1. Accounting basis
The financial information set out in this document does not constitute the
Group's statutory accounts for the years ended 31 December 2020 or 2021.
Statutory accounts for the years ended 31 December 2020 and 31 December
2021, which were approved by the Directors on 22 March 2022, have been
reported on by the Independent Auditors. The Independent Auditor's Reports
on the Annual Report and Financial Statements for each of 2020 and 2021 were
unqualified, did draw attention to a matter by way of emphasis, being going
concern and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006.
Statutory accounts for the year ended 31 December 2020 have been filed with
the Registrar of Companies. The statutory accounts for the year ended 31
December 2021 will be delivered to the Registrar of Companies in due
course and will be posted to shareholders shortly, and thereafter will be
available from the Company's registered office at 5 Ireland Yard, London,
England, EC4V 5EH and from the Company's website:
http://krm22.com/investor-relations (http://krm22.com/investor-relations)
The financial information set out in these results has been prepared using the
recognition and measurement principles of International Accounting Standards,
International Financial Reporting Standards and Interpretations in conformity
with the requirements of the Companies Act 2006. The accounting policies
adopted in these results have been consistently applied to all the years
presented and are consistent with the policies used in the preparation of the
financial statements for the year ended 31 December 2020, except for those
that relate to new standards and interpretations effective for the first time
for periods beginning on (or after) 1 January 2020. There are deemed to be
no new standards, amendments and interpretations to existing standards, which
have been adopted by the Group, that have had a material impact on the
financial statements.
The Group's financial information has been presented in Pounds Sterling (GBP).
Amounts are rounded to the nearest thousand, unless otherwise stated.
2. Going concern
The Group's financial statements have been prepared on the going concern
basis. The Directors have reviewed KRM22's going concern position taking
into account of its current business activities, budgeted performance and the
factors likely to affect its future development, which are set out in this
Annual Report, and include KRM22's objectives, policies and processes for
managing its capital, its financial risk management objectives and its
exposure to credit and liquidity risks.
The Group and Company meets their day-to-day working capital requirements
through cash generated from the capital it has raised on AIM, and a
Convertible Loan facility (the "Convertible Loan") with Kestrel Partners LLP
("Kestrel"). Further, the Group has infused a capital of £4.7m during the
year. At 31 December 2021 the Group had £5.4m of cash at bank and debt due
to Kestrel of £3.0m (gross).
The Directors have undertaken a significant assessment of the cashflow
forecasts covering a period of at least twelve months from the date of
approval of the financial statements. Cashflow forecasts have been prepared
based on a range of scenarios including, but not limited to, existing customer
churn at different churn rates, no new contracted sales revenue, delayed sales
and a combination of these different scenarios.
Having assessed the sensitivity analysis on cashflows, the key risks to the
Group remaining a going concern without implementing extensive cost reduction
measures is existing customers paying on payment terms and within 45 days of
invoice, customer churn of up to 10%, conversion of the sales opportunities
that are currently at contract negotiation stage and maintaining control of
the cost base.
If the forecast is achieved, the Group will be able to operate within its
existing facilities. However, the time to close new customers and the value
of each customer, which are deemed individually as high value and low volume
in nature, is key. In addition, delayed sales and/or increased existing
customer churn could result in the Company failing to comply with financial
covenants associated with the Convertible Loan and in this circumstance the
Group would be obliged to seek resolution with Kestrel Partners on these
financial covenants and may need to seek additional funding through a
placement of shares or other courses of funding which have not yet been
secured. This event indicates the existence of a material uncertainty that
may cast significant doubt on the Group and Company's ability to continue as a
going concern. However, given the Group's forecast, visible sales pipeline
and working capital needs, the Directors have considered it is appropriate to
prepare financial statements on a going concern basis and have not included
the adjustments that would result if the Group or Company were unable to
continue as a going concern.
3. Segmental reporting
The Board of Directors, as the chief operating decision maker in accordance
with IFRS 8 Operating Segments, has determined that KRM22 have identified five
risk domains as operating segments, however for reporting purposes into a
single global business unit and operates as a single operating segment, as the
nature of services delivered are common.
The internal management accounting information has been prepared in accordance
with IFRS but has a non-GAAP 'Adjusted EBITDA' as a profit measure for the
overall group. This amount is reported on the face of the income statement.
KRM22's revenue from external customers and information about its non-current
assets, excluding deferred tax, by geography is detailed below:
Non-current Non-current
Revenue assets Revenue assets
2021 2021 2020 2020
£'000 £'000 £'000 £'000
UK 1,234 3,224 990 3,973
Europe 895 1,918 763 1,911
USA 1,697 2,958 2,383 3,294
Rest of world 302 1 458 1
Total 4,128 8,100 4,594 9,179
The Directors consider that the business has five risk domains: Enterprise,
Market, Compliance, Operations and Technology as is described in Strategic
Report. Within these five risk domains, there are two revenue streams with
different characteristics, which are generated from the same assets and cost
base.
For the years ended 31 December 2021 and 2020, no customer generated more than
10% of total revenue.
Non-current assets include goodwill and intangible assets recognised on
consolidation and are classified by reference to the geographical location of
the KRM22 group company which initially acquired the acquiree.
Recurring revenue is recognised over the period of time and non-recurring
revenue is recognised at a point in time. Other revenue comprises
miscellaneous revenue that is not part of KRM22's core business.
2021 2020
£'000 £'000
Recurring revenue 3,955 4,193
Non-recurring revenue 173 401
Total revenue 4,128 4,594
2021 2020
£'000 £'000
Enterprise 435 420
Market 1,881 2,476
Compliance 1,812 1,673
Other - 25
Total 4,128 4,594
4. Loss per share
Basic earnings per share is calculated by dividing the loss attributable to
the equity holders of KRM22 by the weighted average number of shares in issue
during the year.
KRM22 has dilutive ordinary shares, this being warrants, restricted stock
awards and share options granted to employees. As KRM22 has incurred a loss
in the year, the diluted loss per share is the same as the basic earnings per
share as the loss has an anti-dilutive effect.
2021 2020
£'000 £'000
Loss for the year attributable to equity holders of the parent (3,330) (5,879)
Basic weighted average number of shares in issue 26,765,037 24,414,093
Diluted weighted average number of shares in issue 37,502,896 33,256,848
Basic and diluted loss per share (12.4p) (24.1p)
5. Intangible assets
Acquired Capitalised
Goodwill on software & development
consolidation related assets costs Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2021 7,656 2,852 4,277 14,785
Additions - - 749 749
Foreign exchange movements
(119) (26) (24) (169)
At 31 December 2021 7,537 2,826 5,002 15,365
Accumulated amortisation
At 1 January 2021 2,719 1,085 2,979 6,783
Amortisation for the year - 446 755 1,201
Foreign exchange movements
(23) (6) (4) (33)
At 31 December 2021 2,696 1,525 3,730 7,951
At 31 December 2020 4,937 1,767 1,298 8,002
At 31 December 2021 4,841 1,301 1,272 7,414
6. Cautionary statement
This document contains certain forward-looking statements relating to KRM22.
KRM22 considers any statements that are not historical facts as
"forward-looking statements". They relate to events and trends that are
subject to risk and uncertainty that may cause actual results and the
financial performance of the Company to differ materially from those contained
in any forward-looking statement. These statements are made by the Directors
in good faith based on information available to them and such statements
should be treated with caution due to the inherent uncertainties, including
both economic and business risk factors, underlying any such forward-looking
information.
1 (#_ftnref1) Annualised Recurring Revenue (ARR) is the value of
contracted Software-as-a-Service (SaaS) revenue normalised to a one year
period and excludes one-time fees.
2 (#_ftnref2) Adjusted EBITDA is the reported loss for the year, adjusted
for recurring non-monetary costs including depreciation, amortisation gain on
extinguishment of debt, unrealised foreign exchange loss, deferred salary
bonus accrual write back and share-based payment charges and non-recurring
costs including profit/(loss) on tangible/intangible assets, impairment
charges, reorganisation costs and acquisition and funding costs.
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