REG - Merit Group PLC - Final Results
09/08/2022 07:00
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RNS Number : 3268V Merit Group PLC 09 August 2022
Merit Group plc
("Merit", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2022
Strong growth in both revenue and profitability
9 August 2022
Merit Group plc (AIM: MRIT), the data and intelligence business today
publishes its audited results for the year ended 31 March 2022.
Financial Highlights
· Gross profit increase of 31% to £10.9 million (FY2021: £8.3
million)
· Adjusted EBITDA of £2.8 million up 39% (FY2021: £2.0 million)
· Reduced loss before tax for the year of £1.9 million (FY2020: loss
before tax of £3.1 million)
· Investments in the period totalling £1.7m to drive future growth
· Net bank debt((1)) at year end of £2.1 million (31 March 2021: net
cash of £1.0 million)
· New five-year bank facility of £5 million agreed with Barclays
· Disposal of minority interest in Social 360 for a cash consideration
of £0.42 million
2022 2021 Change((5))
£m £m
Revenue 27.4 24.7 +11%
Gross profit 10.9 8.3 +31%
Gross margin %((2)) 39.6% 33.6% +18%
Adjusted EBITDA((3)) 2.8 2.0 +39%
Net margin %((4)) 10.3% 8.1% +26%
Loss before tax (1.9) (3.1) -40%
Adjusted Earnings per share (pence)((6))
1.9p (2.7p) +4.6p
( )
((1)) Net bank debt / net cash comprises the aggregate of gross debt,
excluding IFRS16 lease liabilities, and cash and cash equivalents
((2)) Gross margin is Gross profit as a percentage of Revenue
((3)) Adjusted EBITDA is calculated as earnings before tax, depreciation,
amortisation of intangible assets, share based payments and non-recurring
items
((4)) Net margin is Adjusted EBITDA as a percentage of Revenue
((5)) Year-on-year percentage change figures are calculated on unrounded
numbers
((6)) Adjusted EPS is calculated based on the profit/(loss) for the year
before amortisation of intangible assets, share based payments and
non-recurring items
Mark Smith, Chairman, commented;
"The Group is in much better shape than it has been for some time. The new
management team are getting on with the job of addressing the issues that have
impacted performance and are implementing the revised strategy that the Board
has every confidence will deliver improvements in shareholder returns."
Operational Highlights
Key operational highlights in the year include:
· Appointment of two new Executive Directors in the year, David Beck as
CEO and Philip Machray as CFO
· Tighter cost control measures leading to significant increase in
margins
· Average Employee numbers reduced by 8% despite revenue growth
· Successful re-platforming of the Dods Political Intelligence
subscription service which has delivered improved coverage and a more user
friendly customer experience
· Focus on revenue growth in Merit Data & Technology with
appointment of new sales team
· Continued high levels of subscription and recurring revenue from Dods
Political Intelligence and Merit Data & Technology
Current trading and outlook
These results demonstrate good progress in a year that was still impacted by
Covid. We have grown Adjusted EBITDA to pre-Covid levels with a significant
increase in Gross and Net Margins.
Although we have seen a recovery from Covid, the macro-economic conditions are
forecast to provide challenges for all businesses in the coming year.
Inflation, supply chain issues, labour shortages and geopolitical instability
are all driving uncertainty and caution.
Against this background the Group is well positioned to build on the
improvement achieved in the last year and is pleased with trading in the first
quarter of FY23. The Board is anticipating another year of progress.
For further information contact:
Merit Group plc
David Beck -
CEO
020 7593 5500
www.meritgroupplc.com (http://www.meritgroupplc.com)
Canaccord Genuity Limited (Nomad and Broker)
Bobbie Hilliam
020 7523 8150
Georgina McCooke
Forward looking statements
This announcement has been prepared in relation to the financial results for
the year ended 31 March 2022. Certain information contained in this
announcement may constitute 'forward-looking statements', which can be
identified by the use of terms such as 'may', 'will', 'would', 'could',
'should', 'expect', 'seek, 'anticipate', 'project', 'estimate', 'intend',
'continue', 'target', 'plan', 'goal', 'aim', 'achieve' or 'believe' (or the
negatives thereof) or words of similar meaning. Forward-looking statements can
be made in writing but also may be made verbally by members of management of
the Company (including, without limitation, during management presentations to
financial analysts) in connection with this announcement. These
forward-looking statements include all matters that are not historical facts
and include statements regarding the Company's intentions, beliefs or current
expectations concerning, among other things, the Company's results of
operations, financial condition, changes in global or regional trade
conditions, changes in tax rates, liquidity, prospects, growth and strategies.
By their nature, forward-looking statements involve risks, assumptions and
uncertainties that could cause actual events or results or actual performance
or other financial condition or performance measures of the Company to differ
materially from those reflected or contemplated in such forward-looking
statements. No representation or warranty is made as to the achievement or
reasonableness of and no reliance should be placed on such forward-looking
statements. The forward-looking statements reflect knowledge and information
available at the date of this announcement and the Company does not undertake
any obligation to update or revise any forward-looking statement, whether as a
result of new information or to reflect any change in circumstances or in the
Company's expectations or otherwise.
Chairman's statement
Progress in another exceptional year
In a second year of Covid-19 pandemic impacted trading the Group made good
progress and returned Revenue and Adjusted EBITDA to pre-pandemic levels.
Before going into further detail on the results for the year, I would like to
once again pay tribute to the resilience and dedication of our staff. Both in
India, where the majority of our people are based, and in Europe, the year in
review saw further lockdowns and work from home instructions and many
individual stories of hardship and loss. Despite this, our people have risen
to the challenges and delivered for our customers. On behalf of all our
shareholders I would like to record my sincere thanks to them for all their
efforts.
Results for the financial year
The Group grew revenue by 11% to £27.4 million in the year (FY21 £24.7
million), with the growth being driven by stronger markets, especially in
those areas of the business that were hardest hit during the pandemic. As well
as delivering top line growth the Group has maintained strong cost control to
be able to increase gross profit by 31% to £10.9 million (FY21 £8.3 million)
and gross margins by 18% to 39.6% (FY21 33.6%).
Net margins increased by more than two percentage points and the Adjusted
EBITDA of £2.8 million is 39% ahead of the previous year (FY21 £2.0
million).
FY 2022 FY2021 Change((5))
£m £m
Revenue 27.4 24.7 +11%
Gross profit 10.9 8.3 +31%
Gross margin %((1)) 39.6% 33.6% +18%
Adjusted EBITDA((2)) 2.8 2.0 +39%
Net margin %((3)) 10.3% 8.2% +26%
Loss before tax (1.9) (3.1) -40%
Adjusted earnings per share (pence) ((4)) 1.9p (2.7p) +4.6p
( )
((1)) Gross margin is Gross profit as a percentage of Revenue
((2)) Adjusted EBITDA is calculated as earnings before tax, depreciation,
amortisation of intangible assets, share-based payments and non-recurring
items
((3)) Net margin is Adjusted EBITDA as a percentage of Revenue
((4)) Adjusted EPS is calculated based on the profit/(loss) for the year
before amortisation of intangible assets, share-based payments and
non-recurring items
((5)) Year-on-year percentage change figures are calculated on unrounded
numbers
((6)) Net (debt)/cash comprises the aggregate of gross debt, excluding IFRS16
lease liabilities, and cash and cash equivalents
Cash
As disclosed in our last annual report and accounts, during the year to March
2021 the Group benefited from deferring the payments of operating liabilities
totalling £1.7 million, of which VAT (£1.4 million) was the most significant
element. During FY22, £1.2 million of the £1.7 million deferred operating
liabilities were discharged. This, along with Capex of £1.2 million and an
investment of £0.45 million in DataWorks, contributed to the Group moving to
a year end net debt((6)) position of £2.1 million (31 March 2021: net cash of
£1.0 million).
During the Covid-19 pandemic, the Group benefitted from its strong
relationship with Barclays which agreed to the deferral and rescheduling of
repayments on our term loan. Since the year end the Board is pleased to have
agreed a new bank facility with Barclays that provides the Group with a new
£3 million term loan and £2 million revolving credit facility, further
detail can be found in the Financial Review section of pages 11-13.
The Group has today announced the disposal of its 30% shareholding in Social
360 for a cash consideration of £420,000.
Board Changes
On 7 September 2021 we appointed David Beck as CEO, after he had served a
brief period as Interim CEO. We also announced that Simon Bullock would be
stepping down from the Board and that Philip Machray would be appointed as
CFO. Philip subsequently joined the Board on 17 November 2021. Cornelius
Conlon, MD of our Merit Data & Technology ("MD&T") division, took on
the additional role of CTO on 7 September 2021.
David and Philip's appointments have given a new energy to the business. The
Board has every confidence that it has the right team in place to drive the
business forward and implement its strategy.
Strategy
In April 2021 the Group changed its name from Dods Group plc to Merit Group
plc to signal its intention to focus its strategy on the business and
political intelligence sector through its technology-enabled data and
intelligence business streams.
The Group is a leading provider of UK and European political intelligence to a
subscriber base of in excess of 800 blue chip clients. Through its MD&T
division, the Group also provides large volume data capture and analysis using
its proprietary technology and skilled workforce based in Chennai, India. Both
of these parts of the Group benefit from very high levels of recurring
revenue, with the political intelligence product sold as a long term
subscription service.
The Group's ongoing recovery and improved financial performance will allow us
to concentrate on our strategic goal of building a strong growth company
focused on technology enabled business intelligence.
Current trading and outlook
These results demonstrate good progress in a year that was still impacted by
Covid. We have grown Adjusted EBITDA to pre-Covid levels with a significant
increase in our Gross and Net Margins.
Although we have seen a recovery from Covid, the macro-economic conditions are
forecast to provide challenges for all businesses in the coming year.
Inflation, supply chain issues, labour shortages and geopolitical instability
are all driving uncertainty and caution.
Against this background the Group is well positioned to build on the
improvement achieved in the last year and is pleased with trading in the first
quarter of FY23. The Board is anticipating another year of progress.
Mark Smith
Chairman
8 August 2022
Operational Review
Operating results
In the year under review, our operating businesses continued their recovery
from the difficult trading caused by the Covid-19 pandemic. In the UK, we were
able to start getting people back to our offices from the middle of the
financial year. In India, where the impacts of the pandemic were felt later,
it was the end of the financial year before our people could return to our
offices.
Merit Data & Technology ("MD&T") revenues were up by 3.9% to £10.7
million, which together with tight cost control helped the business grow
adjusted EBITDA by 27% to £1.9 million at an adjusted EBITDA margin of 18%.
MD&T's marketing data business was negatively impacted by the impact of
Covid-19 restrictions on our events and conferences clients, who contribute
70% of our marketing data revenues. We are now seeing a strong rebound in
this market segment as the events industry moves to host more live events and
refresh their marketing databases after two years of reduced activity. In
FY22, we expanded our footprint in several of our clients (Haymarket,
Wilmington, BiP and others) and secured new business from Hanson Wade,
Intertrust, Lowry Solutions and Partnerize. Our technology resourcing segment
grew revenue by 15% to over £5 million as demand for IT and digital services
continues to be strong.
The MD&T business benefits from very stable and long term customer
relationships based on close integration of our services into our clients'
operations, giving us high levels of recurring revenue and very good
visibility of future earnings. To maintain those key customer relationships,
we focus on delivering very high levels of customer service, which in turn
requires us to recruit exceptional, talented people.
Dods Political Intelligence revenues were stable at £6.9 million ahead of the
major re-platforming that was implemented in January 2022, towards the end of
the reporting period. In a subscription service, churn is a key measure of the
quality of service and customer satisfaction. We are pleased to have seen a
reduction in churn despite the challenge of migrating customers to the new
platform. We are also taking advantage of the improvements we have made in our
service to strengthen our sales and marketing initiatives, and are encouraged
by the progress to date. Dods Political Intelligence reported a gross profit
of £4.2 million at a gross profit margin of 61%. As well as attractive
margins, the business benefits from subscription revenues from a large and
stable customer base.
Dods Political Engagement, comprising our media, events and training segments,
grew revenue by 30% to £9.8 million. All three revenue streams saw good
recovery with the return to face-to-face engagements in the latter part of the
year, enabling both events and training to have a strong last quarter. Our
media titles performed well with good growth in both digital and print
revenues as advertisers and sponsors returned to more active campaigning.
We are seeing higher demand for face-to-face events and, for the first time in
three years, a return to a full schedule of in-person events at party
conferences. In our Training business, we are focusing on growing our
international business to pre-pandemic levels, with training already delivered
to teams from India and Ethiopia. However, the war in Ukraine and uncertainty
in the UK political landscape are having a negative impact on media
advertising. To address this, we have put in place a more data-driven
marketing strategy, are increasing our focus on higher value content deals,
and are increasing our sales efforts to European customers.
The improvement in margins across the Group has come from a tighter control of
costs. The Group's average number of employees during the year was 1,067,
which is an 8% reduction on the prior year.
Investing for growth
The Group invests to ensure its future growth and has been able to do so even
in the difficult pandemic years.
We continue to invest in people. As well as the Board appointments already
referred to in the Chairman's statement, we have recently welcomed Joanna
Edwards as Chief Revenue Officer of our MD&T business and Ludovica
D'Angelo as Head of Sales Operations for the Dods business.
In January 2022, we moved our core Political Intelligence product to a new
platform which we had developed at a cost of £1.25 million. Dods Political
Intelligence is the market-leading global political intelligence service
facilitating comprehensive monitoring of people, political and policy
developments. The new platform reinforces our position as the market leader
and has enabled us to improve the speed, choice and reliability of the service
that we offer customers. The re-platforming has already helped to reduce
customer churn and is enabling us to target new customers with a much improved
user experience and competitively priced product.
In May 2021, we made a £0.45 million investment in DataWorks for a 9.1%
equity stake and a commercial agreement allowing us to market the DataWorks
product and service. DataWorks is a start-up technology company focused on the
creation and deployment of a market leading web data integration engine. Web
data is useful information on websites which companies collect and use to
inform them about their customers and market trends, as well as giving them a
competitive edge over their rivals. DataWorks' platform and technology is
focused on the e-commerce market and has the ability to gather very large data
sets from multiple sites and geographies in real time. Since we made our
investment in DataWorks, the business has won its first revenue-generating
projects and we are encouraged by the progress being made in securing
customers for its services.
Merit Data & Technology ("MD&T")
Our India-based MD&T operating business is a leading data solutions
provider, specialising in harvesting, aggregating & transforming data. We
provide a highly bespoke service for each client, combining tech solutions, AI
and manual analysis. Our areas of specialist expertise cover marketing and
retail data as well as wider Industry Data Intelligence.
The business has very long standing client relationships, many of our most
significant clients have been working with us for over ten years. We are very
focused on operational delivery and the provision of excellent customer
service which helps us enjoy very high levels of customer satisfaction and
recurring revenue.
Our model of servicing largely UK-based clients with a highly skilled staff
base located in India continues to be successful. With the advent of higher
inflation, including in India, we will continue to offer customers a cost
effective solution to their data intelligence needs.
Alongside our data business we have a strong technology resourcing offer.
Merit has been a trusted partner in digital transformation for some of the
world's largest B2B intelligence providers for over 15 years. Our agile
solutions are industry agnostic, client centric and cover a wide range of
project sizes and scope from large scale digital upgrade and transformation
systems and Data Management Solutions to simpler systems for Data Operations,
Data Migration and Bespoke AI driven data products. Leveraging years of data
and digital expertise, MD&T's solutions help customers shape their
products, build robust systems, uncover deep insights, power automation and
accelerate growth.
Whilst competition for talent remains tight, we are proud of the quality of
the people we are able to attract and retain in the business. 97% of our
developers are graduates, of whom 27% have a Master's degree or equivalent.
Three quarters of our developers have at least 5 years' experience working
with us.
Dods Political Intelligence
Dods Political Intelligence is a leading provider of comprehensive monitoring
and analysis packages covering political and policy developments across the UK
and EU. We help our clients make informed decisions and develop effective
strategies to deal with a fast changing and complex political and policy
environment.
Dods Political Intelligence delivers objective, relevant and contextual
insights through a unique combination of expert consultants and innovative
technologies. The political landscape in the EU and UK generates lots of
complex information, Dods Political Intelligence acts as an expert guide. We
draw on human connection, real-time analysis and our deep understanding of
people, parliament and policy to bring our customers impartial insights that
matter.
Our monitoring service is delivered through a market leading platform that was
upgraded and relaunched in January 2022 allowing customers greater control of
the content and sectors that they wish to be informed about. Our technology
allows us to monitor over 13,000 sources of information from 35 different
sectors and provide customers with real time updates. Our premium offering
gives customers access to advice from our specialist consultants and their
dedicated research.
We provide political intelligence to over eight hundred customers from a wide
range of sectors: corporates, charities, NGOs and even government departments.
The main service covers both the EU and Westminster parliaments, and we also
offer both French and German language monitoring. During the year we have won
new mandates from, amongst others, Amnesty International, Centrica, Bet 365
and Bouygues.
Dods Political Engagement
Our Political Engagement business comprises our media titles, events business
and training offer.
Our media titles include The House Magazine, Parliament and Holyrood, which
focus on the workings and news of the parliaments in Westminster, Brussels and
Holyrood respectively. Our political news website, Politics Home, now has an
average of over 300,000 unique monthly users, over 122,000 Twitter followers,
and 9,000 newsletter subscribers.
Civil Service World ("CSW") is a digital-only publication targeted at senior
civil servants across the UK, the highly influential audience that is in
charge of decision making and is a must-have audience for all those who want
to engage with the public sector. Public Technology is the UK's leading
provider of news, information and events, for all those who work in the
digital and data landscapes across the public sector. TJ (formerly Training
Journal) has been supporting the continuing professional development of all
those involved in workplace training, learning and development for over 50
years. Our media portfolio performed very well in FY22, reporting revenue
growth of 29.5%.
Dods Events is run by a team based across London, Brussels and Edinburgh that
delivers a range of events across the political landscape, from small
in-person policy briefings to large scale expo-style events. Dods is on the
Government Framework and works in partnership with the Civil Service, Home
Office and Ministry of Defence to deliver a number of events across the UK. It
also organises awards, webinars and panel discussions for clients both at
Parliament (Westminster, EU, and Holyrood) as well as at Party Conferences.
We also have our own franchises such as the Diversity & Inclusion
("D&I") series of events which is targeted at public sector employees; a
particular success has been the Women in Leadership series that recently won
an award for Best D&I Initiative at The British Media Awards. Our events
business grew revenue by 24.3% in the year.
Dods Training specialises in providing training on Policy, Communications,
Public Affairs and Media. Our Training team uses a network of specialist
freelance trainers to deliver training sessions both virtually and in person.
We are a provider of Civil Service Learning courses through framework
contracts with KPMG, EY and Capita. This area of the business is growing and
allows us to develop and deliver new topics and sectors on a continuous basis.
For international clients, we deliver training on policy, cyber and security
essentials by working with the FCDO and a variety of EU Associations. In the
UK, we provide training to brands as diverse as the Welsh Government and BAE
Systems. After a difficult FY21, our training business recovered strongly
growing revenues in FY22 of £2.3 million, an increase of 42%.
Financial Review
The Group's financial results for the year ended 31 March 2022 and its
financial position at that date are presented on pages 47 to 100.
FY 2022 FY2021
£m £m
Revenue 27.4 24.7
Gross profit 10.9 8.3
Gross margin %((1)) 39.6% 33.6%
Adjusted EBITDA((2)) 2.8 2.0
Statutory operating loss (1.6) (2.5)
Statutory loss before tax (1.9) (3.1)
Income tax credit 0.3 0.4
Loss for the year (1.6) (2.7)
Statutory EPS (pence per share) (7.0p) (13.3p)
Adjusted EPS (pence per share) ((3)) 1.9p (2.7p)
Net (debt)/cash((4)) (2.1) 1.0
( )
((1)) Gross margin is Gross profit as a percentage of Revenue
((2)) Adjusted EBITDA is calculated as earnings before tax, depreciation,
amortisation of intangible assets, share-based payments and non-recurring
items
((3)) Adjusted EPS is calculated based on the profit/(loss) for the year
before amortisation of intangible assets, share-based payments and
non-recurring items
((4)) Net (debt)/cash comprises the aggregate of gross debt, excluding IFRS16
lease liabilities, and cash and cash equivalents
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 non-recurring items, depreciation and amortisation relating to
investment activities, share-based payments and other separately reported
items.
In addition, the Group also measures and presents performance in relation to
various other non-GAAP measures including Adjusted EBITDA. 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.
Revenue and operating results
The Group's revenue from continuing operations increased by 11% to £27.4
million (2021: £24.7 million) and gross profit increased by 31% to £10.9
million (2021: £8.3 million). Gross margin increased from 33.6% to 39.6% as
Political Engagement activities returned from a pandemic-impacted period.
Adjusted EBITDA increased to £2.8 million (2021: £2.0 million), returning to
pre-pandemic levels. The Group's operating loss was £1.6 million (2021: £2.5
million), after non-cash items including an amortisation charge of £0.9
million (2021: £0.9 million) for business combinations and an amortisation
charge of £0.3 million (2021: £0.5 million) for intangible software assets.
The depreciation charge for property, plant and equipment in the year
increased slightly to £0.7 million (2021: £0.6 million) and a right-of-use
depreciation charge was £1.3 million (2021: £1.3 million). Non-recurring
costs, impairment expense, people-related costs and other costs were £1.3
million (20210: £1.2 million).
The statutory loss before tax for the year was reduced to £1.9 million from
(2021: £3.1 million).
Financial Review continued
Taxation
The Group has a tax credit of £0.3 million for the year resulting from the
current year loss (2021: tax credit of £0.4 million).
Earnings per share
Earnings per share, both basic and diluted, from continuing operations in the
year were a loss of 7.03 pence (2021: loss of 13.28 pence) and were based on
the loss for the year of £1.6 million (2021: loss of £2.7 million) with a
basic weighted average number of shares in issue during the year of 22,367,910
(2021: 20,512,125 shares).
Adjusted earnings per share, both basic and diluted, from continuing
operations in the year were 1.93 pence (2021: loss of 2.74 pence) and were
based on the profit after tax for the year of £0.4 million (2021: loss of
£0.6 million).
Dividend
The Board is not proposing a dividend (2021: £nil).
Assets
Non-current assets of £47.0 million comprise goodwill of £28.9 million
(2021: £28.9 million), intangible assets of £9.8 million (2021: £10.4
million), property, plant and equipment of £1.8 million (2021: £2.2
million), IFRS 16 right of use assets of £5.7 million (2021: £6.7 million),
and Investments of £0.8 million (2021: £0.7 million).
Non-current asset Investments have increased by £0.1 million during the year.
This movement is the net of the Group's investment in the year of £0.5
million in DataWorks, plus a £0.1 million increase in the Group's carrying
value in Sans Frontières Associates (SFA) reflecting its share of Associate's
profits, less £0.5 million in respect of its investment in Social 360, which
was impaired by £0.1 million and has been transferred to current assets held
for resale.
In addition to its investment in Sans Frontières Associates (SFA), the Group
has also loaned SFA £0.2 million (2021: £0.6 million). The loan is
unsecured, carries no interest charge and is shown in current assets.
Trade and other receivables, excluding deferred tax, decreased by £0.4
million to £5.2 million (2021: £5.6 million).
Liabilities
Current liabilities fell by £3.1 million to £14.3 million (2021: £17.4
million) due to settlement of deferred consideration through the issue of
shares, and a significant reduction in Trade and other payables, excluding
deferred tax of £2.9 million. Of this reduction of £2.9 million, £1.2
million related to the payment of HMRC and rent liabilities that had been
deferred at 31 March 2021 due to Covid-19. Amounts payable under the bank
facility increased by £0.6 million to £2.9 million (2021: £2.3 million) in
line with the bank loan repayment schedule at the year end date.
Non-Current liabilities fell by £2.2 million to £6.8 million (2021: £9.2
million). Key changes in the year were a reduction in bank debt of £0.9
million and a reduction in lease liabilities of £1.4 million.
Capital and Reserves
Total equity increased by £0.4 million to £34.4 million (2021: £34.0
million), reflecting the loss for the year offset by the issue of shares in
October 2021.
Liquidity and capital resources
At 31 March 2022, the Group had bank debt of £4.4 million (2021: £4.6m),
comprising amounts owed on a term loan and amounts drawn down on a revolving
credit facility (RCF).
The Group had a term loan of £2.4 million (2021: £2.6 million) over a
five-year period, with interest at 3.75% over Bank of England interest rate.
The loan was taken out during FY20. In addition, the Group had a drawn RCF of
£2.0 million and the full balance was outstanding at end of year (2021: £2.0
million).
The Group had a cash and cash equivalents balance of £2.3 million (2021:
£5.6 million) and a net debt position of £2.1 million (2021: net cash of
£1.0 million).
Updated banking facilities
On 22 July 2022, the Group agreed new secured loan facilities with Barclays
which includes:
§ Term Loan: a £3 million, five-year term loan, amortising on a
straight-line basis at £150,000 per quarter;
§ RCF: a £2 million non-amortising, revolving credit facility for the
five-year duration of the Term Loan;
§ Both the Term Loan and RCF accruing interest at 4.75% above Bank of England
base rate;
§ Covenants: leverage covenants measured quarterly from September 2022, Cash
cover measured quarterly from June 2023 and Interest cover measured quarterly
from December 2023, each for the duration of the facilities. Debt service
covenants measured quarterly from June 2022 to March 2023.
These revised facilities will help support the Group in the aftermath of the
Covid-19 pandemic and we are appreciative for the support of Barclays
throughout the pandemic and going forward.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Audited Results Announcement
in accordance with applicable laws and regulations. The responsibility
statement below has been prepared in connection with the Company's full Annual
Report for the year ended 31 March 2022. Certain points thereof are not
included within this Audited Results Announcement.
The directors confirm to the best of their knowledge:
§ the consolidated financial statements, which have been prepared in
accordance with both international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union, give a true and fair view of the assets, liabilities,
financial position and profit and loss of the Group; and
§ the Audited Results Announcement includes a fair review of the development
and performance of the business and the position of the Group together with a
description of the principal risks and uncertainties that it faces.
Basis of preparation of Audit Results Announcement
The results have been extracted from the audited financial statements of the
Group for the year ended 31 March 2022. The results do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Whilst the financial information included in this announcement has been
computed in accordance with the prin ciples of UK-adopted international
accounting standards ('IFRS'), IFRIC interpretations and the Companies Act
2006 that applies to companies reporting under IFRS, this announcement does
not of itself contain sufficient information to comply with IFRS.
The Group will publish full financial statements that comply with IFRS. The
auditor has reported on those accounts. Their report for the accounts of the
year ended 31 March 2022 was (i) unqualified, and (ii) did not include a
reference of any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under section 498(2) or (3) of the Companies Act 2006. Statutory accounts for
the year ended 31 March 2021, which incorporated an unqualified auditor's
report, have been filed with the Registrar of Companies.
Financial Statements
Consolidated income statement
For the year ended 31 March 2022
2022 2021
Note £'000 £'000
Revenue 3 27,399 24,690
Cost of sales (16,540) (16,402)
Gross profit 10,859 8,288
Administrative expenses (12,490) (11,476)
Other operating income 4 42 688
(1,589) (2,500)
Operating loss
Memorandum:
Adjusted EBITDA(1) 2,821 2,024
Depreciation of property, plant and equipment 15 (689) (612)
Depreciation of right-of-use assets 25 (1,315) (1,330)
Amortisation of intangible assets acquired through business combinations 14 (862) (862)
Amortisation of software intangible assets 14 (255) (488)
Share-based payments 26 48 (27)
Non-recurring items
Impairments and asset write offs 5 (843) -
People-related costs 5 (448) (995)
Other non-recurring items 5 (46) (210)
(1,589) (2,500)
Operating loss
Net finance expense 9,10 (419) (669)
Share of profit of Associate 17 144 56
Loss before tax 6 (1,864) (3,113)
Income tax credit 11 292 389
(1,572) (2,724)
Loss for the year
(1 ) Adjusted EBITDA is defined as the operating loss after adding back
depreciation, amortisation, share-based payments, and non-recurring items.
100% of the loss is attributable to owners of the parent.
Earnings per share (pence) p per share p per share
(Restated*)
12 (7.03p) (13.28p)
Basic
12 (7.03p) (13.28p)
Diluted
* Prior period earnings per share have been restated in accordance with IAS 33
to reflect the share consolidation undertaken on 16 April 2021, as detailed in
Note 24.
All amounts relate to continuing activities.
Consolidated statement of comprehensive income
For the year ended 31 March 2022
2022 2021
£'000 £'000
Loss for the year (1,572) (2,724)
Items that may be subsequently reclassified to Profit and loss:
Exchange differences on translation of foreign operations 31 (19)
Remeasurement of defined benefits obligations 27 3 (45)
Other comprehensive income/(loss) for the year 34 (64)
Total comprehensive loss for the year (1,538) (2,788)
Consolidated statement of financial position
As at 31 March 2022
2022 2021
Note
£'000 £'000
Non-current assets
Goodwill 13 28,911 28,911
Intangible assets 14 9,826 10,449
Property, plant and equipment 15 1,807 2,184
Right-of-use assets 25 5,660 6,688
Investments 17 777 717
Total non-current assets 46,981 48,949
Current assets
Work in progress and inventories 18 14 36
Trade and other receivables 20 5,569 5,584
Loan receivable 17 210 560
Cash and cash equivalents 20 2,321 5,565
8,114 11,745
Assets held for resale 17 410 -
Total current assets 8,524 11,745
Total assets 55,505 60,694
Current liabilities
Trade and other payables 21 9,718 12,582
Defined benefit pension obligation 27 85 73
Deferred consideration 24 - 1,046
Bank loan / RCF 22 2,860 2,253
Lease liability 25 1,679 1,467
Total current liabilities 14,342 17,421
Non-current liabilities
Deferred tax liability 23 - 222
Defined benefit pension obligation 27 197 166
Bank Loan 22 1,518 2,378
Lease liability 25 5,042 6,469
Total non-current liabilities 6,757 9,235
Capital and reserves
Issued capital 24 6,708 19,501
Share premium 1,067 20,866
Merger reserves - 409
Retained profit/(loss) 13,032 (6,671)
Capital redemption reserve 13,680 -
Translation reserve (49) (80)
Other reserves (42) (45)
Share option reserve 10 58
Total equity 34,406 34,038
Total equity and liabilities 55,505 60,694
Consolidated statement of changes in equity
For the year ended 31 March 2022
1 The share premium reserve represents the amount paid to the Company by
shareholders above the nominal value of shares issued.
2 The merger reserve represents accounting treatment in relation to
historical business combinations.
3 The capital redemption reserve is a non-distributable reserve created
on cancellation of deferred shares.
4 The translation reserve comprises foreign currency translation
differences arising from the translation of financial statements of the
Group's foreign entities into Sterling.
5 The share option reserve represents the cumulative expense recognised
in relation to equity-settled share-based payments.
Consolidated statement of cash flows
For the year ended 31 March 2022
Note 2022 2021
£'000 £'000
Cash flows from operating activities
Loss for the year (1,572) (2,724)
Depreciation of property, plant and equipment 15 689 612
Depreciation of right-of-use assets 25 1,315 1,330
Amortisation of intangible assets acquired through business combinations 14 862 862
Amortisation of other intangible assets 14 255 488
Share-based payments (credit)/charge 26 (48) 27
Share of profit of Associate 17 (144) (56)
Lease interest expense 25 369 422
Loss on disposal of fixed assets 6 2 -
Write off of intangible assets 6,13 746 -
Impairment of investments in associates 6,17 97 -
Interest income 9 (28) 6
Interest expense 10 213 253
Income tax credit 11 (292) (389)
Operating cash flows before movement in working capital 2,464 819
Decrease in inventories 18 22 237
Decrease in trade and other receivables 430 852
(Decrease)/increase in trade and other payables (2,220) 670
Cash generated by operations 696 2,578
Taxation paid (332) -
Net cash generated from operating activities 364 2,578
Cash flows from investing activities
Interest and similar income received 9 28 16
Additions to property, plant and equipment 15 (314) (662)
Additions to intangible assets 14 (1,240) (561)
Acquisition of investment 16 (450) -
Repayment of long-term loan by Associate 17 350 -
Net cash used in investing activities (1,626) (1,207)
Cash flows from financing activities
Proceeds from issue of share capital 908 -
Interest and similar expenses paid 10 (213) (262)
Payment of lease liabilities 25 (2,055) (1,181)
Payment of lease interest 25 (369) (362)
Net drawings from bank facility 22 - 2,000
Repayment of bank loan (253) (369)
Net cash used in financing activities (1,982) (174)
Net (decrease)/increase in cash and cash equivalents (3,244) 1,197
Opening cash and cash equivalents 5,565 4,368
Effect of exchange rate fluctuations on cash held - -
Closing cash at bank 2,321 5,565
Comprised of:
Cash and cash equivalents 2,321 5,565
Closing cash at bank 20 2,321 5,565
Notes to the consolidated financial statements
1. Statement of significant accounting policies and judgements
Merit Group plc is a Company incorporated in England and Wales.
The consolidated financial statements of Merit Group plc have been prepared
and approved by the Directors in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006. The
Company has elected to prepare its Parent Company financial statements in
accordance with FRS 102; these are presented after the notes to the
consolidated financial statements.
The consolidated financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group"). The Parent Company
financial statements present information about the Company as a separate
entity and not about its Group.
The accounting policies set out below have, unless otherwise stated, or as
outlined in the 'Standards adopted' section below, been applied consistently
to all periods presented in these Group financial statements.
Judgements made by the Directors in the application of these accounting
policies that have a significant effect on the financial statements and
estimates with a significant risk of material adjustment in the next year are
discussed in Note 2.
Accounting developments
This report has been prepared based on the accounting policies detailed in the
Group's financial statements for the year ended 31 March 2022 and is
consistent with the policies applied in the previous financial year.
The following IFRS standards, amendments or interpretations became applicable
during the year ended 31 March 2022 but have not had a material effect on the
consolidated financial statements:
Amendment to IFRS 16 Leases (Covid-19-Related Rent Concessions)
There are no other new standards, amendments and interpretations which are
effective for periods beginning on or after 1 April 2021, which had any impact
on the Group's accounting policies and disclosures in these financial
statements.
New and revised accounting standards in issue but not yet effective
Accounting standards, amendments and interpretations issued, but not yet
effective, up to the date of the issuance of the consolidated financial
statements are disclosed below. The Group expects to adopt these standards, if
applicable, in the accounting period in which they become effective.
Standard Effective Date*
Amendments to IFRS 3 Reference to the Conceptual Framework 1 Jan 2022
Amendments to IAS 16 Property, Plant and Equipment (Proceeds before intended use) 1 Jan 2022
Amendments to IAS 37 Onerous Contracts (Cost of fulfilling a contract) 1 Jan 2022
Amendments to IFRS 1, 9, 16 and IAS 41 Annual improvements to IFRS Standards 2018 - 2020 1 Jan 2022
Amendments to IAS 1 Disclosure of accounting policies 1 Jan 2023
Amendments to IAS 8 Definition of accounting estimates 1 Jan 2023
Amendment to IAS 12 Deferred tax relating to assets and liabilities arising from a single 1 Jan 2023
transaction
*Effective for accounting periods starting on or after this date
Basis of preparation
The financial statements have been prepared in accordance with applicable
accounting standards, and under the historical cost accounting rules, except
for: goodwill (stated at the greater of its value in use and fair value less
costs to sell); forward contracts (stated at fair value at year end); and
defined benefit pension obligations (stated at fair value at year end).
In addition to statutory disclosures, the Group also measures and presents
performance in relation to various other non-GAAP measures including Adjusted
EBITDA. 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.
Adjusted EBITDA is presented to provide a more comparable indication of the
Group's core business performance by removing the impact of certain items
including non-recurring items, depreciation and amortisation relating to
investment activities, share-based payments and other separately reported
items.
The following Group entities are exempt from audit by virtue of Section 479A
of the Companies Act 2006. Merit Group plc has provided statutory guarantees
to the following entities in accordance with Section 479C of the Companies Act
2006:
§ Fenman Limited
§ Total Politics Limited
§ Holyrood Communications Limited
§ Training Journal Limited
Going Concern
The Directors have considered the implications for going concern below, for a
period of at least twelve months from the signing of these accounts.
The Directors have approved a budget for the period of 12 months from the
balance sheet date, and have additionally prepared and approved monthly-phased
projections for the 24 months from the balance sheet date. The Directors
consider the budget and projections to be reasonable. The Directors have
assessed the future funding requirements of the Group within the budget and
projections, compared them with the level of available borrowing facilities,
and assessed the impact of them on the Group's cash flow, facilities and
headroom within its future banking covenants. In addition, the Directors have
prepared a five-year forecast, which reflects the expected trading environment
over that period. The Directors consider the forecast to be reasonable.
Based on this work, the Directors are satisfied that the Group has adequate
resources to continue in operational existence for the foreseeable future.
In the 12 month period from the balance sheet date, capital repayments of
£2.9 million were due to the bank with the remaining £1.5 million due in
subsequent periods.
The Group continues to have the support of Barclays, and agreement has been
reached with them on new banking facilities, including a new term loan and
Revolving Credit Facility (RCF), with revised covenants through to 2027.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control is achieved where
the Group is exposed to, or has rights to, variable returns and has the
ability to affect those returns. The results of subsidiaries acquired or sold
are included in the consolidated financial statements from the date that
control commences to the date that control ceases. Where necessary,
adjustments are made to the results of the acquired subsidiaries to align
their accounting policies with those of the Group. All intra-group
transactions, balances, income and expenditure are eliminated on
consolidation.
Business combinations
Business combinations are accounted for using the acquisition method at the
acquisition date, which is the date on which control is transferred to the
Group. In assessing control, the Group takes into consideration potential
voting rights that currently are exercisable.
The Group measures goodwill as the fair value of the consideration transferred
(including the fair value of any previously held equity interest in the
acquiree) and the recognised amount of any non-controlling interest in the
acquiree, less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed, all measured as at the
acquisition date. When the excess is negative, a bargain purchase gain is
recognised immediately in the income statement.
Any contingent consideration payable is recognised at fair value at the
acquisition date. If the contingent consideration is classified as equity, it
is not remeasured and settlement is accounted for within equity. Otherwise,
subsequent changes to the fair value of the contingent consideration are
recognised in the income statement.
Revenue policy
Revenue is the total amount of income generated by the sale of goods or
services relating to the Group's primary operations. The Group has multiple
revenue streams, being revenue from Data, Software & Technology
Resourcing, Political Intelligence, and Political Engagement,.
Our Merit Data and Technology ("MD&T") business provides services within
Data and Software & Technology Resourcing. Across each of these services,
the performance obligation is the delivery of the service as agreed with the
client in the contract. The performance obligation is satisfied over time as
the customer simultaneously receives and consumes the benefits provided by the
Group. The revenue is measured using input method as the hours used relative
to the total expected hours to the satisfaction of that performance
obligation.
Political Intelligence is a subscription-based service; the revenue is
recognised on a straight-line basis over the life of the subscription. The
performance obligation is the provision and availability of the subscription
platform; the obligation is deemed to be satisfied as the client has ongoing
access to the subscription platform.
Political Engagement activities include events and training, along with media
publications which comprise both on-line (website advertising) and off-line
(printed magazines) offerings. Events and training are delivery-based
activities and so revenue is recognised upon delivery of the service. The
performance obligation is the delivery of the event or training course.
Revenue for on-line media is recognised at the point of publication; the
performance obligation is publication onto the relevant digital platform.
Revenue for off-line media is recognised at the point of distribution; where a
campaign runs over a number of print issues/editions, revenue is recognised
equally across the period of the campaign. The performance obligation for
off-line media is distribution (typically mailing) of the magazine or
publication.
Leases
A contract contains a lease if the contract gives a right to control the use
of an asset for a period of time in exchange for consideration. Leases which
meet the criteria of "short-term," for which the lease term is less than 12
months, or "low-value assets" are exempt from IFRS 16. Lease payments
associated with "short-term" and "low-value assets" are expensed on a
straight-line basis over the life of the lease.
For all other leases, at the lease commencement date, a right-of-use asset and
corresponding lease liability are recognised in the Consolidated statement of
financial position. The lease liability is initially measured at the present
value of the remaining lease payments, discounted using the Group's
incremental borrowing rate. Right-of-use assets are measured at the value of
the associated lease liability plus any initial direct costs incurred,
adjusted for any prepaid or accrued lease payments. The right-of-use asset is
initially recognised at cost, and subsequently measured at cost less
accumulated depreciation and impairment losses. Right-of-use assets are
depreciated over the shorter of the asset's useful life and the lease term on
a straight-line basis. The lease liability is increased by the interest cost
and decreased by the lease payments made.
During the prior year, in response to the Covid-19 pandemic, the Group
negotiated a revised payment profile relating to one of its property leases,
which continued into but ended in the current year. At 31 March 2022, all
rental payments have been made in accordance with the original lease terms.
During the current year, a rent review was completed and agreed in respect of
the remaining 5-year term of the London premises lease. As a consequence of
this review, both the Rights-of-use assets and Lease liability were remeasured
accordingly.
Post-retirement benefits - defined contribution
The Group contributes to independent defined contribution pension schemes. The
amount charged to the profit and loss account represents the contributions
payable to the schemes in respect of the accounting period.
Defined benefits pensions
The Group operates a defined benefit pension plan for eligible employees based
in India. The assets of the scheme are held separately from those of the
Group.
Pension scheme assets are measured using market values. Pension scheme
liabilities are measured using the projected unit credit method.
Past service cost and settlement gains are recognised immediately in the
Income Statement. Remeasurements comprising of actuarial gains and losses as
well as the difference between the return on plan assets and the amounts
included in net interest on the net defined benefit liability/asset, are
recognised in other comprehensive income (OCI), net of income taxes.
The pension scheme surplus (to the extent that it is recoverable) or deficit
is recognised in full.
Non-recurring items
Non-recurring items are items which in management's judgement need to be
disclosed by virtue of their size, incidence or nature. Such items are
included on the income statement on an independent line to which they relate
and are separately disclosed either in the notes to the consolidated financial
statements or on the face of the Consolidated income statement.
Non-recurring items are not in accordance with any specific IFRS definition
and therefore may be different to other companies' definition of non-recurring
items.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
Current tax is based on taxable profit for the year and any adjustment to tax
payable in respect of previous years. Taxable profit differs from net profit
as reported in the income statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible.
The Group's assets and liabilities for current tax are calculated using tax
rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profit will be available against which temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of goodwill or
from the initial recognition of other assets and liabilities in a transaction
that affects neither the tax nor the accounting profit other than in a
business combination.
Deferred tax liabilities are recognised for temporary differences arising on
investments in subsidiaries except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of the deferred tax asset is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax rates enacted or that are expected to
apply (substantively enacted) at the balance sheet dated when the liability is
settled or the asset is realised. Deferred tax is charged or credited to the
income statement, except when it relates to items charged or credited directly
to equity, in which case the deferred tax is also dealt with in equity.
Goodwill
Goodwill represents the difference between the cost of acquisition of a
business and the fair value of identifiable assets, liabilities and contingent
liabilities acquired. Identifiable intangibles are those which can be sold
separately or which arise from legal rights regardless of whether those rights
are separable. Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash generating units and is tested annually
for impairment. Any impairment is recognised immediately in profit or loss.
Intangible assets - Impairment
The carrying amounts of the Group's intangible assets are reviewed at each
reporting date to determine whether there is any indication of impairment. If
any such indication exists, then the asset's recoverable amount is estimated.
For goodwill, the recoverable amount is estimated each year at each balance
sheet date.
The recoverable amount of an asset or cash-generating unit (CGU) is the
greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
For the purpose of impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or groups of
assets (the CGU). The goodwill acquired in a business combination, for the
purpose of impairment testing, is allocated to cash-generating units that are
expected to benefit from the synergies of the combination.
An impairment loss is recognised whenever the carrying amount of an asset or
its cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised in
respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying
amounts of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and impairment losses, if any.
Depreciation is provided to write off the cost less estimated residual value
of property, plant and equipment by equal instalments over their estimated
useful economic lives as follows:
Leasehold improvements Over the shorter of the life of the asst or lease period
Equipment, fixtures and fittings 3-7 years
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Inventories are subsequently measured at average weighted cost.
Cash
Cash includes cash in hand and in the bank.
Foreign currencies
The individual financial statements of each Group Company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group Company are
expressed in Pounds Sterling, which is the presentation currency of the Group.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated but remain at the exchange rate at the date of
the transaction.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in profit or loss for the
period. Exchange differences arising on the retranslation of non-monetary
items carried at fair value are included in the income statement for the
period except for differences arising on the retranslation of non-monetary
items in respect of which gains and losses are recognised directly in equity.
For such non-monetary items, any exchange component of that gain or loss is
also recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense items are
translated at the average exchange rates for the period ended on the balance
sheet date. Exchange rate differences arising, if any, are recognised directly
in equity in the Group's translation reserve. Such translation differences are
recognised as income or as expense in the income statement in the period in
which the operation is disposed of.
Provisions
A provision is recognised on the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to settle the
obligation.
Financial Instruments
Financial assets
Financial assets are recognised on the Group's balance sheet when the Group
becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. Equity instruments
issued by the Company are recorded at the proceeds received, net of direct
issue costs.
Derivative financial instruments
All of the Group's derivatives and forward contracts are measured at their
fair value at the end of each period. Derivatives and forward contracts that
mature within one year are classified as current.
Financial assets
Financial Assets are measured at amortised cost, fair value through other
comprehensive income (FVTOCI) or fair value through income statement (FVTPL).
The measurement basis is determined by reference to both the business model
for managing the financial asset and the contractual cash flow characteristics
of the financial asset. The Group's financial assets comprise of trade and
other receivables and cash and cash equivalents.
Trade receivables
Trade receivables are measured at amortised costs and are carried at the
original invoice amount less allowances for expected credit losses.
Expected credit losses are calculated in accordance with the simplified
approach permitted by IFRS 9, using a provision matrix applying a historical
credit loss experience to the trade receivables. The expected credit loss rate
varies depending on whether, and the extent to which, settlement of the trade
receivables is overdue and it is also adjusted as appropriate to reflect
current economic conditions and estimates of future conditions. For the
purpose of determining credit loss rates, customers are classified into
groupings that have similar loss patterns. The key driver of the loss rates
are the ageing of the debtor. When a trade receivable is determined to have no
reasonable expectation of recovery it is written off, firstly against any
credit loss allowance available, and then to the income statement.
Subsequent recoveries of amounts previously provided for or written off are
credited to the income statement. Long term receivables are discounted where
the effect is material.
Cash & cash equivalents
Cash held in deposit accounts is measured at fair value.
Financial Liabilities
The Group's financial liabilities consist of trade payables, loans and
borrowings, and other financial liabilities. Trade payables are non-interest
bearing. Trade payables are initially recognised at their fair value and
subsequently measured at their amortised cost. Loans and borrowings and other
financial liabilities are initially measured at fair value, net of transaction
costs, and are subsequently measured at amortised cost using the effective
interest rate method. Interest expense is measured on an effective interest
rate basis and recognised in the income statement over the relevant period.
Fixed asset investments
Investments in unlisted entities which are held for long term investment
purposes are held at historic cost less any provision for impairment. The
carrying amount of the Group's fixed asset investments are reviewed at each
reporting date to determine whether there is any indication of impairment. If
any such indication exists, then the asset's recoverable amount is estimated.
Associated companies
Associated companies are entities over which the Group has significant
influence, but not control, generally accompanied by a shareholding giving
rise to voting rights of 20% and above
but not exceeding 50%. Investments in associated companies are accounted for
in the consolidated financial statements using the equity method of accounting
less impairment losses.
Investments in associated companies are initially recognised at cost. The cost
of an acquisition is measured at the fair value of the assets given, equity
instruments issued, or liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Periodically
management assesses whether there is any sign of impairment in the investment
in Associate, management make judgment in regard to the investee's ability to
fulfil financial obligations, significant adverse changes in the environment
where the investee operate. If management judge that evidence of impairment
exists, an impairment test will be conducted. The entire carrying amount of
the investment is tested for impairment as a single asset by comparing its
carrying amount to its recoverable amount. Recoverable amount is the higher of
value in use and fair value less cost to sell. If the carrying amount of an
investment in Associate is higher than its recoverable amount, an impairment
charge is recognised in the Consolidated income statement.
In applying the equity method of accounting, the Group's share of its
associated companies' post-acquisition profits or losses are recognised in the
income statement and its share of post-acquisition other comprehensive income
is recognised in other comprehensive income. These post-acquisition movements
and distributions received from the associated companies are adjusted against
the carrying amount of the investment. When the Group's share of losses in an
associated company equals or exceeds its interest in the associated company,
including any other unsecured non-current receivables, the Group does not
recognise further losses, unless it has obligations or has made payments on
behalf of the associated company.
Unrealised gains on transactions between the Group and its associated
companies are eliminated to the extent of the Group's interest in the
associated companies. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred.
Gains and losses arising from partial disposals or dilutions in investments in
associated companies are recognised in the income statement. Investments in
associated companies are derecognised when the Group loses significant
influence. Any retained interest in the entity is remeasured at its fair
value. The difference between the carrying amount of the retained investment
at the date when significant influence is lost and its fair value is
recognised in profit or loss.
Government grants
The Group recognises government grants under the accruals model, which
requires that the grant be recognised as "revenue based", in the financial
statements. This is recognised within other operating income. Grants which are
receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the Group with no future
related costs or unfulfilled conditions and other contingencies attached to
the government assistance, shall be recognised in income in the period in
which it becomes available.
Share based payments
Where share options are awarded to employees, the fair value of the options at
the date of grant is charged to the statement of comprehensive income on a
straight-line basis over the vesting period. Fair value is calculated using
the Monte Carlo simulation model, details of which are given in Note 26.
Non-market vesting conditions are taken into account by adjusting the number
of options expected to vest at each statement of financial position date so
that, ultimately, the cumulative amount recognised over the vesting period is
based on the number of options that eventually vest. Market vesting conditions
are factored into the fair value of the options granted. The cumulative
expense is not adjusted for failure to achieve a market vesting condition.
The key assumptions concerning the future and other key sources of estimation
and judgements at the balance sheet date that have a risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Significant Financial Judgements
a) Going concern
Management applies judgement when determining to apply the going concern basis
for preparation of the financial statements, through evaluation of financial
performance and forecasts. See "Going concern" section on pages 30-31 for
further details.
b) Recognition of deferred tax assets
Judgement is applied in the assessment of deferred tax assets in relation to
losses to be recognised in the financial statements. Deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible 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
profits will be available to allow all or part of the asset to be recovered.
See Note 23 for further details.
c) Capitalisation of development costs
Management applies judgement when determining the value of development costs
to be capitalised as an intangible asset in respect of its product development
program. Judgement includes the technical feasibility, intention and
availability of resources to complete the intangible asset so that the asset
will be available for use and assessment of likely future economic benefits.
Details of intangible assets capitalised are available in Note 14.
d) Identification of cash generating units for goodwill impairment testing
Judgement is applied in the identification of cash-generating units (CGUs).
The Directors have judged that the primary CGUs used for impairment testing
should be MD&T and Dods. See Note 13 for further details.
e) Non-recurring administrative expenses
Due to the Group's significant restructuring and acquisition related activity
in recent years, there are a number of items which require judgement to be
applied in determining whether they are non-recurring in nature. In the
current year these relate largely to restructuring and redundancy costs. See
Note 5 for further details.
f) Contingent cash pay-out
The expense relating to amounts payable arising on the acquisition of
Meritgroup Limited is contingent upon the continued employment of certain
employees. Management believes these amounts are highly probable to be paid,
and accordingly the expense is recognised over the period the payments are
due.
g) Investments
The Group takes into account the power over its investee, its exposure and
rights to variable returns from its involvement with the investee, and its
ability to use the power over the investee to affect the amount of the
investor's return to determine whether the investment is treated as an
Associate or a controlling interest. See Note 17 for further details. Where a
controlling interest exists, the investee is consolidated.
Significant Financial Estimates
a) Carrying value of goodwill
The Group uses forecast cashflow information and estimates of future growth to
assess whether goodwill is impaired. Key assumptions include the EBITDA margin
allocated to each CGU, the growth rate to perpetuity and the discount rate. If
the results of an operation in future years are adverse to the estimates used
for impairment testing, impairment may be triggered at that point. Further
details regarding impairment testing of goodwill are available in Note 13.
b) Bad debt allowance
Under the IFRS 9 simplified approach, a bad debt allowance is calculated by
segmenting debtors into categories and estimating a credit loss risk
percentage for each category. Using this approach, a bad debt allowance of
£103,000 was estimated for the year (2021: £162,000). Further details are
available in Note 19.
c) Pensions
Pension scheme assets are measured using market values. Pension scheme
liabilities are measured using the projected unit credit method.
Past service cost and settlement gains are recognised immediately in the
Income Statement. Remeasurements comprising of actuarial gains and losses as
well as the difference between the return on plan assets and the amounts
included in net interest on the net defined benefit liability/asset, are
recognised in other comprehensive income (OCI), net of income taxes.
The pension scheme surplus (to the extent that it is recoverable) or deficit
is recognised in full. Further details of the estimate are in Note 27.
d) Share based payments
Non-market performance and service conditions are included in the assumptions
about the number of options that are expected to vest. At the end of each
reporting period the Group revises its estimates of the number of options that
are expected to vest based on the non-market vesting conditions. It recognises
the impact of the revision to the original estimates, if any, in the
Consolidated statement of comprehensive income, with a corresponding
adjustment to equity.
This requires a judgement as to how many options will meet the future vesting
criteria as well as the judgements required in estimating the fair value of
the options.
Adopted IFRS not yet applied
This report has been prepared based on the accounting policies detailed in the
Group's financial statements for the year ended 31 March 2022 and is
consistent with the policies applied in the previous financial year. There are
no other new standards, amendments and interpretations which are effective for
periods beginning on or after 1 April 2021, which had any impact on the
Group's accounting policies and disclosures in these financial statements.
None of the new standards, amendments and interpretations, which are effective
for periods beginning after 1 April 2021 and which have not been adopted
early, are expected to have a significant effect on the consolidated financial
statements of the Group.
3. Segmental information
The basis on which operating results are reviewed and resources allocated is
examined from both a business and geographic perspective by the senior
management team.
Business segments
The Group now considers that it has two operating business segments, Merit
Data & Technology (MD&T) and Dods, plus a (non-revenue generating)
central corporate segment. In the prior period, the Group reported activity
against only the two operating business segments, and therefore the prior
period segmental analysis has been restated to reflect a like-for-like
comparison with the 2022 disclosures.
The Merit Data & Technology business segment focuses on the provision of
data, data engineering and machine learning, and on the provision of software
and technology resourcing.
The Dods business segment concentrates on the provision of key information and
insights into the political and public policy environments around the UK and
the European Union.
The central corporate segment contains the activities and costs associated
with the Group's head office functions.
The following table provides an analysis of the Group's segment revenue by
business segment.
2022 2021
Revenue by business segment £'000 £'000
Merit Data & Technology 10,696 10,296
Dods 16,703 14,394
27,399 24,690
No client accounted for more than 10 percent of total revenue.
2021
Revenue by stream 2022 (Restated*)
£'000 £'000
Data 5,567 5,825
Software & Technology Resourcing 5,129 4,471
Political Intelligence 6,866 6,839
Political engagement 9,837 7,555
27,399 24,690
* Prior period segmental analysis has been restated to reflect a like-for-like
comparison with the 2022 disclosures, as outlined above.
MD&T Dods Central Total
2022 2022 2022 2022
2022 Loss before tax by business segment £'000 £'000 £'000 £'000
Adjusted EBITDA 1,898 1,914 (991) 2,821
Depreciation of property, plant and equipment (279) (410) - (689)
Depreciation of right-of-use assets (531) (451) (333) (1,315)
Amortisation of intangible assets acquired through business combinations (511) (351) - (862)
Amortisation of software intangible assets - (255) - (255)
Share based payments - - 48 48
Non-recurring items
Impairments and asset write offs - (746) (97) (843)
People-related costs - (132) (316) (448)
Other non-recurring items - - (46) (46)
Operating profit/(loss) 577 (431) (1,735) (1,589)
Net finance expense 74 (383) (110) (419)
Share of profit of Associate - - 144 144
Loss before tax 651 (814) (1,701) (1,864)
Dods Central
MD&T 2021 2021 Total
2021 Loss before tax by business segment 2021 (restated*) (restated*) 2021
£'000 £'000 £'000 £'000
Adjusted EBITDA 1,494 1,216 (686) 2,024
Depreciation of property, plant and equipment (220) (392) - (612)
Depreciation of right-of-use assets (577) (441) (312) (1,330)
Amortisation of intangible assets acquired through business combinations (511) (351) - (862)
Amortisation of software intangible assets - (488) - (488)
Share based payments - - (27) (27)
Non-recurring items
Impairments and asset write offs - - - -
People-related costs - (678) (317) (995)
Other non-recurring items (42) (126) (42) (210)
Operating profit/(loss) 144 (1,260) (1,384) (2,500)
Net finance expense (245) (304) (120) (669)
Share of profit of Associate - - 56 56
Loss before tax (101) (1,564) (1,448) (3,113)
* Prior period segmental analysis has been restated to reflect a like-for-like
comparison with the 2022 disclosures, as outlined above.
Geographical segments
The following table provides an analysis of the Group's segment revenue by
geographical market. Segment revenue is based on the geographical location of
customers.
2022 2021
Revenue by geographical segment £'000 £'000
UK 21,974 19,708
Belgium 2,109 1,943
USA 424 489
France 796 768
Germany 552 391
Rest of world 1,544 1,391
27,399 24,690
2022 2021
Non-current assets by geographical segment £'000 £'000
UK 44,288 45,611
Goodwill 28,911 28,911
Intangible assets 9,826 10,449
Property, plant and equipment 1,272 1,535
Right-of-use asset 3,502 3,999
Investments 777 717
India 2,693 3,338
Property, plant and equipment 535 649
Right-of-use asset 2,158 2,689
46,981 48,949
Group Deferred revenue
The following table provides an analysis of the Group's deferred revenue:
2022 2021
Aggregate Deferred Revenue £'000 £'000
Merit Date & Technology 16 46
Dods 5,244 4,749
5,260 4,795
The Group expects to recognise £5.1 million over the next year ending 31
March 2023, and the remainder in the period up to 31 March 2024.
During the current year, the Group recognised £4.1 million of deferred
revenue from prior period, based on the performance obligation being
satisfied. The remaining £0.7 million is yet to be recognised, and is
expected to be recognised in the year ending 31 March 2023. This also forms
part of the current year balance.
4. Other operating income
During the year, the Group participated in the UK Government's Coronavirus Job
Retention Scheme (CJRS) for its London and Edinburgh based employees. Details
of the scheme criteria and eligibility are well documented.
The Group has accounted for this scheme using the accrual model; all amounts
received are recognised as Other Income in the Consolidated income statement.
There are no unfulfilled conditions and other contingencies attaching to the
government assistance.
The number of employees who were put on the CJRS varied from month to month up
to a maximum of 6 (2021: 140). The total amount received during the year was
£39,000 (2021: £648,000).
In August 2021, the Group also received a grant from the Scottish Government.
The grant was issued by the Pivotal Event Businesses Fund (the Issuer) and was
for £2,500 (2021: £40,000). The Group has accounted for this scheme using
the accrual model; all amounts received are recognised as Other operating
income in the Consolidated income statement.
5. Non-recurring items
2022 2021
£'000 £'000
Impairments and asset write offs 843 -
People-related costs 448 995
Other:
- Professional services and consultancy 46 85
- Other - 125
1,337 1,205
During the year the Group made an impairment charge of £97k (2021: £nil)
against the carrying value of Investments in Associates and wrote off £746k
(2021: £nil) of intangible fixed assets under construction.
People-related costs include deferred cash consideration on the Meritgroup
Limited acquisition. Also included are redundancy costs reflecting the effect
of Group initiatives to appropriately restructure the business. Prior year
costs included redundancy and recruitment of senior management for roles which
have been newly created within the Group.
Other non-recurring costs in the current year relate to one-off consultancy
and professional fees associated with the rental review of the London
premises. Other non-recurring costs in the prior year include branding and
marketing expenses, costs relating to ongoing strategic corporate review and
initiatives, various legal fees and one-off consultancy expenses. These are
classified as non-recurring as they relate to the rental reviews on a long
term lease, the Company name change, and the share capital restructure, and
are therefore highly unlikely to arise again.
6. Loss before tax
Loss before tax has been arrived at after charging:
Note 2022 2021
£'000 £'000
(Restated*)
Depreciation of property, plant and equipment 15 689 612
Depreciation of right-of-use assets 25 1,315 1,330
Amortisation of intangible assets acquired through business combinations 14 862 862
Amortisation of other intangible assets 14 255 488
Staff costs 8 15,812 15,706
Non-recurring items 5 1,337 1,205
Share of profit of Associate 17 144 56
Interest income 9 (28) (6)
Interest expense 10 582 600
Net foreign exchange (gain)/loss 9,10 (147) 68
Loss on disposal of fixed assets 15 2 -
*Prior year staff costs have been restated to include £579,000 of bonuses and
commissions, which were omitted in error in the 2021 disclosures.
Auditor's remuneration 2022 2021
£'000 £'000
Fees payable to the Company's auditor for the audit of the Company's 26 22
annual accounts
Fees payable to the Company's auditor and its associates for other services:
- The audit of the Company's subsidiaries, pursuant to legislation 125 102
- Non-audit services in relation to review of interim accounts 3 -
- Non-audit services in relation to review of ERS tax returns 7 4
161 128
7. Directors' remuneration
The remuneration of the Directors of the Group for the years ended 31 March
2022 and 31 March 2021 is set out below:
Salaries Committee Pension Other
/fees fees contributions Benefits((5)) Total
£ £ £ £ £
Executive Directors
David Beck((1)) 2022 125,000 - - 1,014 126,014
Chief Executive Officer 2021 - - - - -
Munira Ibrahim 2022 210,000 - 8,400 720 219,120
Managing Director 2021 204,166 - 1,313 725 206,204
Cornelius Conlon 2022 163,412 - 3,000 260,929 427,341
Managing Director 2021 202,061 - 3,436 220,768 426,265
Philip Machray((2)) 2022 70,530 - - 555 71,085
Chief Financial Officer 2021 - - - - -
Simon Bullock((3)) 2022 158,333 - 6,333 1,252 165,918
Former Chief Financial Officer 2021 192,487 - 1,094 1,483 195,064
Non-Executive Directors
Richard Boon 2022 25,000 5,000 - - 30,000
Non-Executive Director 2021 22,917 4,583 - - 27,500
Angela Entwistle((4)) 2022 25,000 5,000 - - 30,000
Non-Executive Director 2021 22,917 4,583 - - 27,500
Diane Lees 2022 25,000 5,000 - - 30,000
Non-Executive Director 2021 22,917 4,583 - - 27,500
Mark Smith 2022 50,000 5,000 - - 55,000
Non-Executive Chairman 2021 42,917 7,500 - - 50,417
Vijay Vaghela 2022 25,000 10,000 - - 35,000
Non-Executive Director 2021 8,333 3,333 - - 11,666
Total for 2022 877,275 30,000 17,733 264,470 1,189,478
Total for 2021 718,715 24,582 5,843 222,976 972,116
1 Appointed as Interim Chief Executive Officer on 13 July 2021.
Appointed as Chief Executive Officer and to the Board on 7 September 2021. In
addition to the above Director's remuneration, David Beck received £40,000
remuneration prior to his appointment to the Board.
2 Appointed as Chief Financial Officer on 17 November 2021. In addition
to the above Director's remuneration, Philip Machray received £15,944
remuneration prior to his appointment to the Board.
3 Resigned as a Director on 17 November 2021.
4 The £30,000 (2021: £27,500) paid for the services of Angela Entwistle
as a Non-Executive Director is paid to Deacon Street Partners Limited. See
also related party transactions - Note 28.
5 Other benefits are health insurance, overseas living allowance and
deferred cash consideration on acquisition of Meritgroup Limited.
The current Directors and their interests in the share capital of the Company
at 31 March 2022 are disclosed within the Directors' Report on page 23.
Remuneration of the highest paid Director was £427,341 (2021: £426,265).
The highest paid Director received pension contributions of £3,000 (2021:
£3,436).
8. Staff costs
The average number of persons employed by the Group (including Executive
Directors) during the year within each category was:
2022 2021
Number Number
Editorial and production staff 109 117
Sales and marketing staff 33 36
Managerial and administration staff 30 31
Technology and support staff 895 974
1,067 1,158
2022 2021
£'000 £'000
(Restated*)
Wages and salaries 14,275 14,147
Social security costs 1,255 1,295
Pension and other costs 330 237
Share-based payment (credit)/charge (48) 27
15,812 15,706
* Prior year wages and salaries have been restated to include £579,000 of
bonuses and commissions, which were omitted in error in the 2021 disclosures.
Staff costs do not include deferred cash consideration in relation to the
Meritgroup Limited acquisition. This is treated as non-recurring and is
included in Note 7.
9. Finance income
2022 2021
£'000 £'000
Bank interest income 28 6
Pension finance credit 9 10
Net foreign exchange gain((1)) 147 -
184 16
((1) ) Includes £35k FX gain on derivative (2021: £nil).
10. Finance expense
2022 2021
£'000 £'000
Bank interest expense 213 195
Pension finance charge 21 17
Lease interest expense 369 405
Net foreign exchange loss ((1)) - 68
603 685
((2) ) Prior year includes £6k FX gain on derivative.
11. Income tax credit
2022 2021
£'000 £'000
Current tax
Current tax on income for the year at 19% (2021: 19%) 27 -
Adjustments in respect of prior periods - -
27 -
Overseas tax
Current tax expense on income for the year 318 251
Total current tax expense 345 251
Deferred tax (see Note 23)
Origination and reversal of temporary differences (434) (479)
Effect of change in tax rate (79) -
Adjustments in respect of prior periods (124) (161)
Total deferred tax income (637) (640)
Total income tax credit (292) (389)
The tax credit for the year differs from the standard rate of corporation tax
in the UK of 19% (2021: 19%). A reconciliation is provided in the table below:
2022 2021
£'000 £'000
Loss before tax (1,864) (3,113)
(354) (591)
Notional tax credit at standard rate of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes (24) 185
Non-qualifying depreciation 7 69
Adjustments to bought forward value (124) (161)
Effect of deferred tax rate changes on realisation and recognition (80) -
Deferred tax not recognised 46 39
Utilisation of losses not provided for - (97)
Tax losses carried forward 127 107
Adjustment to agree foreign tax charge 72 66
Other 38 (6)
Total income tax credit (292) (389)
In the Spring Budget on 3 March 2021, the UK Government announced that from 1
April 2023 the corporation tax rate would increase to 25% for companies with
profits of over £250,000.
As at the balance sheet date, the increase in rates has been substantively
enacted and therefore deferred taxation has been recognised at 25% as it is
expected that the underlying timing differences will reverse after 1 April
2023.
12. Earnings per share
2022 2021
£'000 £'000
Loss attributable to shareholders (1,572) (2,724)
Add: non-recurring items 1,337 1,205
Add: amortisation of intangible assets acquired through business combinations 862 862
Add: net exchange (gains)/losses (Notes 9,10) (147) 68
Add: share-based payment (credit)/expense (48) 27
Adjusted post-tax profit/(loss) attributable to shareholders 432 (562)
2022 2021
Ordinary shares Ordinary shares
(Restated*)
Weighted average number of shares
In issue during the year - basic 22,367,910 20,512,125
Adjustment for share options - 57,870
In issue during the year - diluted 22,367,910 20,569,995
Performance Share Plan (PSP) options over 1,420,791 Ordinary shares have not
been included in the calculation of diluted EPS because their exercise is
contingent on the satisfaction of certain criteria that had not been met at 31
March 2022.
2022 2021
Pence per share Pence per share
(Restated*)
Earnings per share - continuing operations
Basic (7.03) (13.28)
Diluted (7.03) (13.28)
Adjusted earnings per share - continuing operations
Basic 1.93 (2.74)
Diluted 1.93 (2.74)
*Prior period figures for number of ordinary shares and earnings per share
have been restated in accordance with IAS 33 to reflect the share
consolidation undertaken on 16 April 2021, as detailed in Note 24.
13. Goodwill
2022 2021
£'000 £'000
Cost and net book value
As at 31 March 28,911 28,911
Goodwill acquired in a business combination is allocated at acquisition to the
cash-generating units (CGUs) that are expected to benefit from that business
combination. Of the carrying value of goodwill, £15.6 million has been
allocated to the MD&T CGU (2021: £15.6 million), and £13.3 million had
been allocated to the Dods CGU (2021: £13.3 million).
Goodwill is not amortised but is tested annually for impairment with the
recoverable amount being determined from value in use calculations. The key
assumptions for the value in use calculations are those regarding the discount
rate, growth rates and forecasts of income and costs.
The Group assessed whether the carrying value of goodwill was supported by the
discounted cash flow forecasts of the Group based on financial forecasts
approved by management covering a three-year period, considering both past
performance and expectations for future market developments. Management
estimates the discount rate using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to each separate
business.
The impairment charge in the year was £nil (2021: £nil).
Cash generating units (CGUs)
The recoverable amount of each CGU is determined from value in use
calculations. The CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from
other group of assets. Management determined that the smallest level they
could reasonably allocate the group of assets to was MD&T CGU and Dods
CGU, the MD&T CGU being the assets from prior year acquisition and the
Dods CGU being the historical element of the Group.
Value in use was determined by discounting future cash flows generated from
the continuing use of the assets and was based on the following most sensitive
assumptions:
§ cash flows for year ended 31 March 2023 were projected based on the budget
of the CGUs for the year;
§ cash flows for years ending 31 March 2024 were projected based on the
forecasts of the CGUs, which reflect management's view on likely revenues,
costs and trading conditions for that year;
§ cash flows for years ending 31 March 2025 to 2027 were projected based on
the Group five-year projections, which assume revenue and cost growth rates,
and underlying working capital assumptions based on management's view on
likely growth for those years;
§ cash flows beyond 2027 are extrapolated using a 2% growth rate for both
MD&T and Dods;
§ cash flows were discounted using the CGU's pre-tax discount rate of 10.52%
for MD&T and Dods.
Based on the above sensitivity assumptions, the calculations disclosed
headroom against the carrying value of goodwill for both the MD&T and Dods
CGUs.
14. Intangible assets
Under construction capitalised costs
Assets acquired
through business
combinations(1) Software Total
£'000 £'000 £'000 £'000
Cost
At 1 April 2021 28,042 4,834 746 33,622
Additions - internally generated - 1,240 - 1,240
Asset write off - - (746) (746)
At 31 March 2022 28,042 6,074 - 34,116
Accumulated amortisation
19,283 3,890 - 23,173
At 1 April 2021
Charge for the year 862 255 - 1,117
At 31 March 2022 20,145 4,145 - 24,290
Net book value
At 31 March 2021 8,759 944 746 10,449
At 31 March 2022 7,897 1,929 - 9,826
( )
(1) Assets acquired through business combinations comprise:
Customer
Publishing Brand Relationships Other
rights names and lists assets Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 April 2021 18,934 1,277 7,677 154 28,042
At 31 March 2022 18,934 1,277 7,677 154 28,042
Accumulated amortisation
At 1 April 2021 13,390 1,277 4,462 154 19,283
Charge for the year 352 - 510 - 862
At 31 March 2022 13,742 1,277 4,972 154 20,145
Net book value
At 31 March 2021 5,544 - 3,215 - 8,759
At 31 March 2022 5,192 - 2,705 - 7,897
The useful economic lives of the intangible assets are as follows:
Publishing rights 20-75 years (one specific right is deemed to have a useful economic life of 75
years)
Brand names 15-20 years
Customer relationships 1-8 years
Customer list 4-8 years
Order books 1 year
Software 3-6 years
The carrying value of publishing rights with a useful economic life of 75
years is £4.0 million (2021: £4.1 million).
Included within intangible assets are internally generated assets with a net
book value of £1.6 million (2021: £0.5 million).
During the period there was £nil expenses to income statement for Research
& Development (2021: £nil)
15. Property, plant and equipment
Leasehold Improvements IT Equipment and Fixtures and Fittings
Total
£'000 £'000 £'000
Cost
At 1 April 2021 2,037 2,255 4,292
Additions - 314 314
Disposals - (48) (48)
At 31 March 2022 2,037 2,521 4,558
Accumulated depreciation
At 1 April 2021 918 1,190 2,108
Charge for the year 210 479 689
Disposals - (46) (46)
At 31 March 2022 1,128 1,623 2,751
Net book value
At 31 March 2021 1,119 1,065 2,184
At 31 March 2022 909 898 1,807
IT equipment additions include £nil (2021: £77,000) of leased equipment.
Lease liabilities are recognised in Note 25.
16. Subsidiaries
Company Activity % holding Country of registration
Dods Group Limited(1) Publishing 100 England and Wales
Fenman Limited(1) Publishing 100 England and Wales
Holyrood Communications Ltd(2) Publishing 100 Scotland
Le Trombinoscope SAS(3) Publishing 100 France
Total Politics Limited(1) Publishing 100 England and Wales
Training Journal Limited(1) Holding company 100 England and Wales
Merit Data & Technology Limited(1) Data and technology 100 England and Wales
Merit Data and Technology Private Limited(4) Data and technology 99.99 India
(formerly Letrim Intelligence Services Private Limited())
Merit Processes Limited(1) Dormant 100 England and Wales
European Parliamentary Communications Services SPRL(5) Dormant 100 Belgium
Monitoring Services Limited(1) Dormant 100 England and Wales
Vacher Dod Publishing Limited(1) Dormant 100 England and Wales
VDP Limited(1) Dormant 100 England and Wales
Subsidiaries dissolved during the year:
Merit Processes Limited(6) n/a n/a n/a
1 Registered address: 11th Floor, The Shard, 32 London Bridge Street,
London, SE1 9SG.
2 Registered address: Panmure Court, 32 Calton Road, Edinburgh, EH8 8DP.
3 Registered address: Tour Voltaire, 1 place des Degrés - La Défense,
92800 Puteaux, Paris, France.
4 Registered address: SP 52, 3(rd) Street, Ambattur Industrial Estate,
Chennai 600 058.
5 Registered address: Boulevard Carlemagne 1, 1041 Bruxelles, Belgium
6 Dissolved on 27 July 2021
During the current year the Group has elected to provide a parental guarantee
to Fenman Limited, Total Politics Limited, Holyrood Communications Limited and
Training Journal Limited in accordance with section 479C of the Companies Act
2006, meaning that they are exempt from the requirement to have a statutory
audit.
There were no acquisitions during the current year.
17. Investments
Investments are presented on the balance sheet as follows:
2022 2021
£'000 £'000
Non-current asset investments
Investments in Associates 327 717
Other Unlisted Investments 450 -
777 717
Current asset investments
Investment in Associate held for resale 410 -
1,187 717
The above balances are represented by:
2022 2021
£'000 £'000
Investments in Associates 737 717
Other unlisted investments 450 -
1,187 717
Investments in Associates
Set out below are the Associates of the Group as at 31 March 2022 which, in
the opinion of the Directors, are individually not material to the Group. The
entities listed below have share capital consisting solely of ordinary shares,
which are held directly by the Group. The country of incorporation or
registration is also their principal place of business, and the proportion of
ownership interest is the same as the proportion of voting rights held.
Carrying Share of Share of Carrying
Amount profit before tax Impairment amount
% ownership 2021 tax in year charge in the year 2022
Name of entity £'000 £'000 £'000 £'000 £'000
Sans Frontières Associates Ltd(1) 40 229 125 (27) - 327
Social 360 Limited(2) 30 488 19 - (97) 410
717 144 (27) (97) 737
Place of business/country of incorporation of both entities is England and
Wales. The Group accounts for both entities as equity-accounted Associates.
((1) ) On 16 February 2017, the Group
purchased 40% of the issued share capital of Sans Frontières Associates
Limited (SFA), a company registered in England and Wales, for £40.
SFA's objective is to redefine the approach taken to international
geopolitical and crisis communications consulting.
As at the year end the Group had loaned SFA £210,000 (2021: £560,000). The
unsecured loan of £210,000 carries no interest rate charge and is repayable
during the 2022 calendar year. Recoverability is reviewed on an annual basis.
After taking into account the Group's power over its investee, its exposure
and rights to variable returns from its involvement with the investee, and its
ability to use the power over the investee to affect the amount of investor's
return, the Directors have concluded that the Group does not have a
controlling interest in SFA as it is not able to direct the activities of SFA.
Therefore SFA has been accounted for as an Associate in these financial
statements.
No dividend was received for the year (2021: £nil)
As required by IFRS12, the financial information from the unaudited abridged
accounts of SFA dated 30 November 2021 is as follows: Current Assets £1,148k
of which £1,011k is cash and cash equivalents, non-current assets £6k,
current liabilities £90k, non-current liabilities £626k. The depreciation
recorded was £3k.
((2) ) On 16 November 2017, the Group
purchased 30% of the enlarged share capital of Social 360 Limited (Social360),
a company registered in England and Wales, for £1.68 million in cash
including acquisition costs. Social360 provides intelligent digital media
monitoring and analysis.
No dividend was received for the year (2021: £nil)
As required by IFRS12, the financial information from the unaudited filleted
abridged accounts of Social360 dated 31 August 2021 is as follows: Current
Assets £959k of which £413k is cash and cash equivalents, non-current assets
£1k, current liabilities £198k, non-current liabilities £285k. The
depreciation recorded was £4k.
The total share of profit recognised from Associates which is based on the
unaudited management accounts as 31 March 2022 is £117k (2021: £56k). This
is the net of the Group's share of Associates' profit before tax of £144k
less share of Associates' tax charge of £27k.
During the year, the Group made an impairment charge of £97k (2021: £nil)
against the carrying value of its investment in Social 360 Limited.
Other unlisted Investments
Cost and NBV £'000
At 1 April 2021 -
Acquisitions in the year 450
At 31 March 2022 450
The Group acquired a 13.3% stake in Acolyte Resource Group Limited as part of
the acquisition of Meritgroup Limited in 2019. Acolyte Resource Group Limited
is an unlisted business registered in and operated from England & Wales
and is engaged in the development and operation of an online recruitment
platform. The Group's investment was written down to £nil on acquisition.
During the year, the Group acquired a 9.1% stake in Web Data Works Limited
("DataWorks") for £450k.
DataWorks is an unlisted business registered in and operated from the Republic
of Ireland, engaged in the development of e-commerce data management software
and applications.
After taking into account the Group's voting rights, exposure and rights to
variable returns from its involvement with the investee, and its ability to
use the power over the investee to affect the amount of investor's return, the
Directors have concluded that the Group does not have a significant influence
over DataWorks. The investment is therefore carried as a fixed asset
investment, at the lower of historic cost and net realisable value.
18. Work in progress and inventories
2022 2021
£'000 £'000
Work in progress and inventories 14 36
14 36
19. Financial instruments
The carrying amount of financial assets and liabilities recognised at the
balance sheet date of the reporting periods under review may also be
categorised as follows:
2022 2021
£'000 £'000
Financial assets
Trade and other receivables (amortised cost) 4,346 3,996
Derivative Contracts (FVTPL*) 35 6
Loan receivable (amortised cost) 210 560
Cash and cash equivalents (amortised cost) 2,321 5,565
6,912 10,127
Financial liabilities
Trade and other payables (amortised cost) (4,618) (9,926)
Lease liabilities (amortised cost) (6,721) (7,936)
Bank loan & RCF (amortised cost) (4,378) (4,631)
(15,717) (22,493)
Net financial assets and liabilities (8,805) (12,366)
*FVTPL stands for "Fair value through profit and loss"
The loan receivable has no discount rate. The fair value of the loan is the
same as the booked value and therefore there is no discounting on the
outstanding amount. During the financial year there were no repayments on the
loan.
On 14 February 2022, the Group signed five forward contracts of total value
approximately £1.2 million with a maturity date ranging from 21 April 2022 to
23 May 2022. The forward contracts are for currency pairing of GBP to INR.
The Group has exposure to several forms of risk through its use of financial
instruments. Details of these risks and the Group's policies for managing
these risks are included below.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group's principal financial assets are trade and other
receivables, and cash.
The Group's credit risk is primarily attributable to its trade receivables.
The amounts presented in the balance sheet are net of allowances for doubtful
receivables. The Group has no significant concentration of credit risk, with
exposure spread over a large number of counterparties and customers.
At 31 March 2022, £475,000 of the Group's trade receivables were exposed to
risk in countries other than the United Kingdom (2021: £350,000).
The ageing of trade receivables at the reporting date was:
Provided Loss Allowance Provided Loss Allowance
Gross Gross
2022 2022 2021 2021
£'000 £'000 £'000 £'000
Trade Receivables 3,971 (103) 3,882 (162)
3,971 (103) 3,882 (162)
The maximum credit risk exposure for which the Group has made provision is
£103,000.
Gross Default rate Lifetime expected
carrying amount credit losses*
£'000 £'000
Current 2,977 1.11% 33
1-30 days past due 785 1.62% 13
31-60 days past due 60 4.56% 3
61-90 days past due 46 9.98% 5
More than 90 days past due 103 47.93% 49
3,971 103
* Expected credit losses = Gross carrying amount x Default rate.
The loan receivable has not been assessed for credit losses as the Group
believes that the expectation for default is not probable given the subsequent
repayment and SFA's declaration to continue repaying. SFA is also currently in
a strong cash position.
The movement in allowance for doubtful accounts in respect of trade
receivables during the year was as follows:
2022 2021
£'000 £'000
Balance at the beginning of the year 162 64
Charged in the year - 98
Released in the year (59) -
Balance at the end of the year 103 162
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The contractual cash flows of each
financial liability are materially the same as their carrying amount.
A reconciliation of the Group's liabilities arising from financing activities
is disclosed below.
2022 2021
£'000 £'000
Loan and RCF balance at the beginning of the year 4,631 3,000
Drawdown of RCF - 2,000
Repayments of principal (253) (369)
Loan and RCF Balance at the end of the year 4,378 4,631
Banking covenants
Under the Group's new bank facilities agreed on 22 July 2022 (see Note 22),
the Group is subject to selected covenant compliance tests on a rolling 12
month basis and at each quarter end date. These covenant compliance tests are
as follows:
Covenant Compliance test
Leverage ratio Gross debt shall not be more than x Adjusted EBITDA
Profit Cover Ratio Gross financing costs (capital & interest) shall not be less than x
Adjusted EBITDA
Interest Cover Ratio Net finance expense shall not be less than x Adjusted EBITDA
Cashflow Cover Ratio Gross financing costs (capital & interest) shall not be less than x
cashflow before financing
Adjusted EBITDA: earnings before interest, tax, depreciation &
amortisation adjusted for share based payments and non-recurring items
Rolling 12 month basis, ending on Leverage Profit Interest Cashflow
Ratio Cover Ratio Cover Ratio Cover Ratio
30 June 2022 2.5x 3.0x n/a n/a
30 September 2022 2.5x 3.0x n/a n/a
31 December 2022 2.0x 3.0x n/a n/a
31 March 2023 2.0x 3.0x n/a n/a
30 June 2023 1.5x n/a n/a n/a
30 September 2023 1.5x n/a n/a n/a
31 December 2023 1.5x n/a 3.0x 1.5x
31 March 2024 1.5x n/a 3.0x 1.5x
30 June 2024 1.5x n/a 3.0x 1.5x
30 September 2024 1.5x n/a 3.0x 1.5x
31 December 2024 1.5x n/a 3.0x 1.5x
31 March 2025 1.5x n/a 3.0x 1.5x
30 June 2025 1.0x n/a 3.0x 1.5x
30 September 2025 1.0x n/a 3.0x 1.5x
31 December 2025 and thereafter 1.0x n/a 3.0x 1.5x
The Directors have approved a budget for a period of 12 months from the
balance sheet date and have additionally prepared and approved monthly-phased
projections for the 24 months from the balance sheet date and a five-year
annual forecast. The Directors consider the budget, projections and forecasts
to be reasonable.
In agreeing to the above covenants, the forecasts were sensitised to ensure
suitable headroom to enable compliance with the covenant tests.
Based on this work the Directors are satisfied that the Group is unlikely to
breach any of the above covenants.
Maturity of financial liabilities:
The tables below analyses the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities as at 31 March 2022.
The amounts disclosed in the table are the contractual undiscounted cash
flows.
Due within Due
1 year 2-5 years Total
£'000 £'000 £'000
Trade and other payables 4,623 - 4,623
Lease liability 1,679 5,042 6,721
Bank loan/RCF 2,860 1,518 4,378
The Group has a long standing and supportive relationship with Barclays and
has recently agreed new secured loan facilities for a five-year period to 2027
to give it further headroom for development of the Group. The Group has a
five-year plan that has been shared with Barclays and formed the basis of the
new banking arrangements that were put in place.
The Group has a strong track record on cash and working capital management and
carefully monitors its aged debtors to ensure its cash receipts are as
expected. The Group does not anticipate paying dividends to shareholders at
this time.
Currency risk
The Group is exposed to currency risk on transactions denominated in Euros, US
Dollars and Indian Rupees.
Share capital
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company. For further details of share capital, see Note 24.
Sensitivity analysis
In managing interest rate and currency risks, the Group aims to reduce the
impact of short-term fluctuations on the Group's earnings. Over the
longer-term, however, changes in foreign exchange and interest rates would
have an impact on consolidated earnings. The balances of the financial assets
and liabilities exposed to these sensitivities are £349,000 Trade
receivables, £578,000 Cash and cash equivalents and £45,000 Trade payables
for the year.
At 31 March 2022, it is estimated that a general increase of one percentage
point in interest rates would have decreased the Group's profit before tax by
approximately £50,000 (2021: £34,000).
It is estimated that a general increase of one percentage point in the value
of the Euro and Dollar against Sterling would have decreased the Group's
profit before tax by approximately £14,000 (2021: £13,000).
It is estimated that a general increase of one percentage point in the value
of the Rupee against Sterling would have increased the Group's profit before
tax by approximately £72,000 (2021: £1,000).
Fair values
The Directors consider that the fair value of financial instruments is
materially the same as their carrying amounts.
Capital management
The Group manages its capital to ensure that all entities will be able to
continue as a going concern while maximising return to stakeholders, as well
as sustaining the future development of the business. The capital structure of
the Group consists of cash and cash equivalents and equity attributable to the
owners of the parent, comprising issued share capital, other reserves and
retained earnings.
2022 2021
Capital Management £'000 £'000
Cash & cash equivalents 2,321 5,565
Share Capital 6,708 19,501
Other reserves 14,666 21,208
Retained Earnings 13,032 (6,671)
36,727 39,603
20. Other financial assets
2022 2021
Trade and other receivables £'000 £'000
Trade receivables 3,868 3,720
Other receivables 513 281
Deferred tax asset (Note 23) 415 -
Prepayments and accrued income 773 1,583
5,569 5,584
Trade and other receivables denominated in currencies other than Sterling
comprise £339,000 (2021: £336,000) denominated in Euros, £49,000 (2021:
£13,000) denominated in USD and £87,000 (2021: £nil) denominated in Indian
Rupees.
The Group had a balance of £421,000 of accrued income relating to contract
assets (2021: £146,000).
2022 2021
Cash related £'000 £'000
Cash and cash equivalents 2,321 5,565
2,321 5,565
Cash includes £141,000 (2021: £618,000) denominated in Euros, £126,000
(2021: £480,000) denominated in USD and £311,000 (2021: £438,000)
denominated in Indian Rupees.
21. Trade and other payables
2022 2021
Current £'000 £'000
Trade creditors 396 2,663
Other creditors including tax and social security 2,876 2,895
Accruals and deferred income 6,446 7,024
9,718 12,582
Current liabilities denominated in currencies other than Sterling compromise
£24,000 (2021: £24,000) denominated in Euros, £nil (2021: £8,000)
denominated in USD and £21,000 (2021: £113,000) denominated in Indian
Rupees.
The Group had a balance of £5.1 million of deferred revenue relating to
contract liabilities (2021: £4.8 million).
22. Interest-bearing loans and borrowings
Throughout the year, the Company had a term loan facility of £3 million,
borrowed in 2020 and amortising over a 5-year period, incurring an interest
rate (at the year-end) of 3.75% above Bank of England interest rate (2021:
3.25% over LIBOR). The Company also held throughout the year a revolving
credit facility (RCF) of £2 million (2021: £2 million) incurring a rate of
4.0% above Bank of England interest rate (2021: 3.5% over LIBOR).
As at 31 March 2022, the balance outstanding on the term loan was £2.4
million and on the RCF was £2.0 million. Of the total £4.4 million
outstanding with the bank at 31 March 2022, £2.9 million was due to be repaid
within a 12 month period with the remaining £1.5 million due in subsequent
periods.
See Note 19 for the maturity analysis of the bank loan.
On 22 July 2022, the Group agreed new secured loan facilities with Barclays
which includes:
§ Term Loan: a £3 million, five-year term loan, amortising on a
straight-line basis at £150,000 per quarter;
§ RCF: a £2 million non-amortising, revolving credit facility for the
five-year duration of the Term Loan;
§ Both the Term Loan and RCF accruing interest at 4.75% above Bank of England
base rate;
§ Covenants: leverage covenants measured quarterly from September 2022, Cash
cover measured quarterly from June 2023 and Interest cover measured quarterly
from December 2023, each for the duration of the facilities. Debt service
covenants measured quarterly from June 2022 to March 2023.
These revised facilities and covenants will help support the Group in the
aftermath of the Covid-19 pandemic and we are appreciative for the support of
Barclays throughout the pandemic and going forward.
23. Deferred taxation
The following are the major deferred tax liabilities and assets recognised by
the Group, and movements thereon during the current year and prior year:
Liabilities Assets
Accelerated capital allowances
Intangible assets arising on consolidation Other timing differences £'000
£'000 £'000 Tax losses Total
£'000 £'000
At 31 March 2020 (1,111) (41) 40 250 (862)
Charge/(credit) 152 65 (15) 438 640
At 31 March 2021 (959) 24 25 688 (222)
Charge/(credit) (99) 62 37 637 637
At 31 March 2022 (1,058) 86 62 1,325 415
Deferred tax assets and liabilities have been offset in both the current year
and preceding year as the current tax assets and liabilities can be legally
offset against each other, and they relate to taxes levied by the same
taxation authority or the Group intends to settle its current tax assets and
liabilities on a net basis.
At the balance sheet date, the Group has total carried forward tax losses of
£13.6 million (2021: £10.5 million) available to offset against future
taxable profits. Of these, the Group has recognised deferred tax assets of
£1,325,000 (2021: £688,000) in respect of carried forward tax losses of
£5.3 million (2021: £3.5 million) as it is probable that these assets shall
be recovered against the taxable profits over the foreseeable period. On the
remaining £8.3 million (2021: £7.0 million) carried forward taxable losses,
the Group has not recognised a deferred tax asset as it is less probable that
the potential asset would be utilised.
24. Issued capital
9p deferred 1p ordinary 28p ordinary
shares shares shares Total
Number Number Number £'000
Issued share capital as at 1 April 2021 151,998,453 582,071,380 - 19,501
Shares cancelled during the year (151,998,453) - - (13,680)
Share consolidation during the year - 582,071,380 20,788,375 -
Shares issued during the year - - 3,167,749 887
Issued share capital as at 31 March 2022 - - 23,956,124 6,708
On 16 April 2021, shareholders approved a reorganisation of the parent
company's share capital. This reorganisation included cancellation of the
151,998,453 Deferred Shares and the consolidation and sub-division of the
parent company's Ordinary Shares (including the purchase of certain of the
parent company's shares), having the impact of reducing the total number of
Ordinary Shares by a factor of 28 and to increase the nominal value by a
factor of 28 (from 1 pence to 28 pence nominal).
On 1 October 2021, the parent company issued 1,675,749 ordinary shares due as
contingent consideration on the acquisition of Meritgroup Limited in 2019.
On 1 October 2021, the parent company issued 1,492,000 ordinary shares in a
fundraising subscription at 62.4 pence per share, raising £908,000, net of
costs.
25. Leases
Right-of-use Lease
assets liabilities
£'000 £'000
As at 1 April 2020 7,926 (9,216)
Additions 713 (765)
Depreciation (1,330) -
Lease Interest - (422)
Lease payments(1) - 1,846
Disposals (89) 72
Translation (532) 549
As at 31 March 2021 6,688 (7,936)
Additions 287 (287)
Depreciation (1,315) -
Lease Interest - (369)
Lease payments(1) - 1,871
As at 31 March 2022 5,660 (6,721)
Current (1,679)
Non-current (5,042)
(1 ) Total lease payments in the year amounted to £2,424k,
of which £553k was in settlement of trade creditors and accruals at 31 March
2021.
The Consolidated income statement shows the following amounts relating to
leases:
2022 2021
£'000 £'000
Depreciation charge of right-of-use assets 1,315 1,330
Interest expense (included in finance cost) 370 422
The right-of-use assets relate to office space in five locations and at the
balance sheet date have remaining terms ranging up to 8 years.
There were £nil of expenses relating to diminutive payments not included in
the measurement of lease liabilities (2021: £nil).
Lease liabilities includes £77,000 of IT equipment. These assets are
capitalised within IT equipment (see Note 15).
26. Share-based payments
Long-Term Incentive Plan (LTIP)
On 21 September 2018, the Company granted the former Chief Executive Officer a
conditional award under a new long-term incentive plan. No more awards will be
made under this scheme.
Grant date Outstanding options Granted Lapsed Outstanding options at 31 March 2022
at 1 April 2021 during During
(Restated*) the year the year
21 September 2018 55,786 - (55,786) -
55,786 - (55,786) -
* Outstanding options in the prior period have been restated to reflect the
share consolidation on 16 April 2021, as detailed in Note 24.
To become exercisable, the options were dependent on the market capitalisation
of the Group. The options had a contractual life of 3 years and lapsed,
unexercised, on 21 September 2021.
Details of the LTIP share options outstanding during the year are as follows.
Number of Weighted average exercise price
Ordinary shares (pence)
(Restated*)
As at 1 April 2020 59,357 n/a
Lapsed during the year (3,571) n/a
As at 31 March 2021 55,786 n/a
Lapsed during the year (55,786) n/a
As at 31 March 2022 - n/a
There were no options outstanding under the Company's LTIP as at 31 March
2022.
The income statement credit in respect of the LTIP for the year was £58,000
(2021: charge of £27,000).
Performance Share Plan (PSP)
During the year, the Company granted a conditional award to two executive
Directors under a new performance share plan as follows:
Grant date Director Outstanding Granted Lapsed Outstanding options at
Options at during During 31 March 2022
1 April 2021 the year the year
28 January 2022 Chief Executive Officer - 762,376 - 762,376
28 January 2022 Chief Financial Officer - 658,415 - 658,415
- 1,420,791 - 1,420,791
The options become exercisable on the third anniversary of the date of
announcement of the intention to grant (17 November 2021). The performance
condition for full vesting of these options is for the share price of the
Company to increase by 100% from the closing share price on the day prior to
approval of intention to grant the options, which was 50.5 pence.
A Monte Carlo Arithmetic Brownian Motion simulation model has been used to
determine the fair value of the share options on the date of grant. The fair
value is expensed to the income statement on a straight-line basis over the
vesting period. The model assesses a number of factors in calculating the fair
value. These include the market price on the day of grant, the exercise price
of the share options, the expected share price volatility of the Company's
share price, the expected life of the options, the risk-free rate of interest
and the expected level of dividends in future periods.
The inputs into the model were as follows:
Risk free Share price Share price
rate volatility at date of grant
28 January 2022 2.3% 40.0% 50.5p
Expected volatility was determined by calculating the historical volatility of
the Company's share price for three years prior to the date of grant. The
expected life used in the model is the term of the options.
Details of the PSP share options outstanding during the year are as follows.
Number of Weighted average exercise price (pence)
Ordinary shares
As at 31 March 2021 - n/a
Granted during the year 1,420,791 n/a
As at 31 March 2022 1,420,791 n/a
The following options were outstanding under the Company's PSP scheme as at 31
March 2022:
Number of Exercise price per share (pence) Exercise
Ordinary shares period
28 January 2022 1,420,791 nil Nov 2024
1,420,791
The income statement charge in respect of the PSP for the year was £10,000
(2021: £nil).
26. Pensions
Defined benefit pension
The Group operates a defined benefit pension scheme for qualifying employees
based in India known as Gratuity Benefits which is classified as
Post-Retirement Benefits under IAS19 (revised). Under the scheme, the eligible
employees are entitled to a retirement benefit in cash based on final salary
on attainment of retirement age (or earlier withdrawal/resignment or death)
after 5 years of continual service. The assets of the scheme are held
separately to the assets of the Group in a trustee administered fund.
The Group employed an independent actuary to update the Gratuity Benefits
valuation to measure the scheme's liabilities.
The present value of the defined benefit obligation, the related current
service cost and past service cost were measured using the projected unit
credit method. The projected unit credit method is based on the plan's accrual
formula and upon services as of the beginning or end of the year, but using a
member's final compensation, projected to the age at which the employee is
assumed to leave active service. The plan liability is the actuarial present
value of the "projected accrued benefits" as of the beginning of the year for
active members.
The scheme's costs are borne by the Group. Any surplus or deficits in the
scheme may affect the Group through periodic adjustments to the Group's
contribution rate as determined by the actuary.
The plan exposes the Group to actuarial risks such as interest rate risk,
investment risk, longevity risk and inflation risk.
§ Interest rate risk - The present value of the defined benefit liability is
calculated using a discount rate determined by reference to market yields of
high quality corporate bonds.
§ Investment risk - The entire plan assets at 31 March 2022 comprise an
insurance policy. The value of assets certified by the insurer may not be the
fair value of instruments backing the liability. In such cases the present
value of the asset is independent of the future discount rate. This can result
in wide fluctuations in the net liability or the funded status if there are
significant changes in the discount rate during the valuation period.
§ Longevity risk - The Group is required to provide benefits for the members
in the gratuity scheme. Increases in the continual tenure of employment will
increase the defined benefit liability.
§ Inflation risk - A significant proportion of the defined benefit liability
is linked to inflation. An increase in the inflation rate will increase the
Group's liability. High salary growths will lead to higher level of benefits
to be paid by the Group.
The significant actuarial assumptions for the determination of the defined
benefit obligation are the discount rate, the salary growth rate, and the
withdrawal rates. The assumptions used for the valuation of the defined
benefits obligation are as follows in the table "Principal actuarial
assumptions" on page 97.
Funded status of the plan
2022 2021
£'000 £'000
Present value of funded defined benefit obligations (392) (371)
Fair value of plan Assets 110 132
Present value of unfunded defined benefit obligations (282) (239)
Current (85) (73)
Non-current (197) (166)
Net Deficit (282) (239)
Net Liability (282) (239)
Movement in present value of obligation 2022 2021
£'000 £'000
At 1 April (371) (294)
Current service cost (73) (70)
Interest cost (21) (17)
Remeasurement losses (gains) (OCI)
Due to changes in financial assumptions 11 (48)
Due to experience adjustments (7) 4
Benefits paid from fund 72 33
FX revaluation (3) 21
At 31 March (392) (371)
Movement in fair value of plan assets 2022 2021
£'000 £'000
At 1 April 132 156
Net interest Income 9 10
Return on plan assets (1) (1)
Contribution by employer 41 11
Benefits paid (72) (33)
FX revaluation 1 (11)
At 31 March 110 132
The plan asset relates 100% to an insurance policy. The plan assets are all
based geographically in India.
The amounts included in the Consolidated income statement, Consolidated
statement of other comprehensive income and Consolidated statement of
financial position arising from the Group's obligations in respect of its
defined benefit pension scheme are as follows:
Amounts recognised in Consolidated income statement 2022 2021
£'000 £'000
Service cost 73 70
Interest cost 21 17
Interest Income (9) (10)
FX Revaluation 2 (10)
Total expense recognised in Consolidated income statement 87 67
Amounts recognised in Consolidated statement of OCI 2022 2021
£'000 £'000
Actuarial changes in financial assumptions (11) 48
Actuarial experience adjustments 7 (4)
Return on plan assets 1 1
Total (credit)/expense recognised in Consolidated statement of OCI (3) 45
Movement in pension scheme net deficit 2022 2021
£'000 £'000
Opening pension scheme net deficit (239) (138)
Contributions by employer 41 11
Consolidated income statement (87) (67)
Consolidated statement of OCI 3 (45)
Closing pension scheme net deficit (282) (239)
Principal actuarial assumptions (expressed as weighted averages) are as
follow:
Principal Actuarial assumptions 2022 2021
p.a p.a
Discount rate 6.70% 6.25%
Salary growth rate 8.50% 8.50%
Withdrawal rates by age
Below 35 25.00% 25.00%
35 to 45 15.00% 15.00%
Above 45 10.00% 10.00%
Rate of return on plan assets 6.70% 6.25%
In valuing the liabilities of the pension fund, mortality assumptions have
been made as indicated below.
Mortality rates
Age (in years) 2022 2021
20 0.09% 0.09%
30 0.10% 0.10%
40 0.17% 0.17%
50 0.44% 0.44%
60 1.12% 1.12%
At 31 March 2022 the mortality rates were derived from the Indian Assured
Lives Mortality (2012-2014) report.
The Group expects to contribute approximately £85,000 in the next financial
year.
The weighted average duration of the defined benefit plan obligation at the
end of the reporting period is 6.13 years (2021: 5.90 years).
The calculation of the defined benefit obligation (DBO) is sensitive to the
assumptions set out above. The following table summarises how the define
benefit obligation at the end of the reporting period would have been because
of a change in the respective assumptions.
Sensitivity to key assumptions 2022 2021
£'000 £'000
p.a p.a
Discount rate
Increase by 0.5% 381 360
Decrease by 0.5% 405 382
Salary growth rate
Increase by 0.5% 402 379
Decrease by 0.5% 384 362
Withdrawal rate (W.R)
W.R x 110% 388 365
W.R x 90% 398 376
27. Related party transactions
During the year, the Group received a repayment of £350,000 (2021: £nil) on
its interest free loan to its Associate Sans Frontières Associates (SFA). At
31 March 2022, the balance outstanding was £210,000 (2021: £560,000).
During the year, an amount of £62,945 (2021: £69,493) was payable to an
Associate, Social 360 Limited, in relation to profit-share for monitoring
services provided. At 31 March 2022, £16,973 (2021: £nil) of this balance
was outstanding.
On acquisition of Meritgroup Limited, an arm's length non-repairing 7-year
lease was entered into between a Merit subsidiary (Letrim Intelligence
Services Private Limited) and Merit Software Services Private Limited.
Cornelius Conlon, a Director of the Group, is the beneficial owner of Merit
Software Services Private Limited. The lease relates to the Chennai office of
MD&T. During the year, payments of £781,000 (2021: £752,000) were made
to Merit Software Services Private Limited in relation to the lease and other
property-related costs.
Cornelius Conlon, a Director of the Group, is entitled to shares and a cash
consideration on the first three anniversaries of the Meritgroup Limited
acquisition in 2019. During the year, Cornelius Conlon was issued 854,732
ordinary shares of value of £533,352, and was paid cash consideration of
£220,000.
During the year, an amount of £105,000 (2021: £nil) was recognised in the
profit and loss account in relation to licence fees to software charged by Web
Data Works Limited, a company in which the Group has a 9.2% investment, and of
which Cornelius Conlon is a Director. At 31 March 2022, there was a balance of
£105,000 (2021: £nil) outstanding.
During the year, an amount of £56,000 (2021: £nil) was billed in relation to
recruitment services charged by Acolyte Resource Group Limited, a company in
which the Group has a 13.3% investment, and of which Cornelius Conlon is a
Director. At 31 March 2022, there was a balance of £nil (2021: £nil)
outstanding.
Acolyte Resource Group Limited is also a customer of MD&T and was billed
£290,000 (2021: £303,000) for Software and Technology Resourcing services.
At 31 March 2022, there was a balance of £104,000 (2021: £78,000) due.
During the current and previous years, Deacon Street Partners Limited, a
company related by virtue of Angela Entwistle, a Director of the Company also
being a Director, invoiced £30,000 (2021: £27,500) to the Company for the
services of Angela Entwistle as a Non-Executive Director. At 31 March 2022 the
balance outstanding was £2,500 (2021: £2,000).
The Executive Directors of the Group are considered key management personnel.
See Note 7 for details of Directors' remuneration.
29. Events occurring after the reporting date
On 7-8 July 2022, the Company received loan repayments totalling £70k from
its Associate, Sans Frontières Associates Limited.
On 8 August 2022, the Company completed the sale of its 30% stake in Social
360 Limited for cash consideration of £420,000.
On 22 July 2022, the Group agreed new secured loan facilities with Barclays
which includes:
§ Term Loan: a £3 million, five-year term loan, amortising on a
straight-line basis at £150,000 per quarter;
§ RCF: a £2 million non-amortising, revolving credit facility for the
five-year duration of the Term Loan;
§ Both the Term Loan and RCF accruing interest at 4.75% above Bank of England
base rate;
§ Covenants: leverage covenants measured quarterly from September 2022, Cash
cover measured quarterly from June 2023 and Interest cover measured quarterly
from December 2023, each for the duration of the facilities. Debt service
covenants measured quarterly from June 2022 to March 2023.
These revised facilities and covenants will help support the Group in the
aftermath of the Covid-19 pandemic and we are appreciative for the support of
Barclays throughout the pandemic and going forward.
END
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