REG - Merit Group PLC - Final Results
06/09/2023 07:30
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RNS Number : 5440L Merit Group PLC 06 September 2023
Merit Group plc
("Merit", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2023
Restructured Group making significant progress
6 September 2023
Merit Group plc (AIM: MRIT), the data and intelligence business today
publishes its audited results for the year ended 31 March 2023.
The FY23 year saw significant changes to the Group with the disposal of its
media, events and training operations and its shareholdings in two associate
businesses. The businesses that were sold during the year are reported on
within the statutory results as Discontinued Operations.
Financial Highlights of the Continuing Operations of the Group
· Group revenues grew to £18.6m, up 5.6% on FY22
· Merit Data & Technology (MD&T) business unit contributed
£11.6m of revenue, an increase of 8.9% on FY22
· Net margin improvement to 14.3%
· Adjusted EBITDA of £2.7m, (FY22 £2.5m) and similar to the prior
year's £2.8m including the disposed of businesses
· Loss before tax of £3.7m impacted by non recurring profits and losses
on disposals, and disposal of lease right of use assets
· £4.8m of proceeds from disposals received during the year, with a
further £0.5m due in the current year
· The Group's Continuing Operations generated operating cash of £2.9
million
· Net debt of £2.6m having paid £3.5m (inc £0.5m in recoverable VAT)
to exit the Group's excess office space prior to the year end
Continuing Operations FY 2023 FY 2022 Change((5))
£m £m
Revenue 18.6 17.6 +5.6%
Gross profit 8.6 8.9 -3.5%
Gross margin %((1)) 46.0% 50.4% -8.7%
Adjusted EBITDA((2)) 2.7 2.5 +7.7%
Net margin %((3)) 14.3% 14.0% +2.1%
Loss before tax (3.7) (1.7) +118.1%
Adjusted earnings per share (pence) ((4)) 0.8p (0.9p) +1.7p
Net debt((6)) (2.6) (2.1) +25.0%
( )
((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)) 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 (see note 13)
((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 (see note 23)
Mark Smith, Chairman, commented;
"Having successfully completed its restructuring, the Group is in a much
stronger position. It benefits from less complexity, greater focus, and a
clear strategy for growth, supported by investment in its core businesses.
"The significant cost reduction from the disposal of our London office lease
and other operational savings already made, will have a beneficial impact on
the Group's FY24 performance."
David Beck, Chief Executive, said;
"The Group is now fully focussed on data and intelligence in three distinct
market segments; global industry data; political data and intelligence; and
marketing data. Data is the building block on which Artificial Intelligence
applications are built as it serves as the foundation for training and
improving machine learning models. The Group's more than five year experience
in the field of Artificial Intelligence and Machine Learning and its expertise
in data capture and analysis present the Group with exciting opportunities."
Operational Highlights
Key operational highlights in the year include:
· the disposal of assets / businesses and associates that were not core
to the Group's strategy of building a data and intelligence business focused
on subscription or recurring revenue
· the settlement of all deferred liabilities, namely the deferred
consideration on the Meritgroup Limited acquisition and deferred VAT and rent
payments built up during the COVID pandemic
· the disposal of the Group's excess office space in London, which will
deliver a significant reduction in the Group's non-operating overheads for
FY24 and beyond
· investment in Sales & Marketing to drive growth in both new
geographies and market sectors
· the strengthening of the Group's balance sheet through the removal of
significant property liabilities and the receipt of £4.8m of proceeds from
the disposal of non-core assets
rent trading and outlook
Having successfully completed its restructuring, the Group is in a much
stronger position. It benefits from less complexity, greater focus, and a
clear strategy for growth, supported by investment in its core businesses.
Despite a challenging macro-economic environment and the impacts of both
higher inflation and interest rates, the Group has made a positive start to
the FY24 year. The significant cost reduction from the disposal of our London
office lease and other operational savings already made will have a beneficial
impact on the Group's FY24 performance. This, along with the investments made
in growing its two operating businesses, gives the Board confidence in
anticipating further growth in both revenue and profitability in FY24 and
beyond.
For further information contact:
Merit Group plc
David Beck - CEO
020 7593 5500
Philip Machray - CFO
www.meritgroupplc.com (http://www.meritgroupplc.com)
Canaccord Genuity Limited (Nomad and Broker)
Bobbie Hilliam
020 7523
8150
Harry Pardoe
Forward looking statements
This announcement has been prepared in relation to the financial results for
the year ended 31 March 2023. 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
A year of significant progress
The year under review was remarkable for the significant changes that were
made to the Group. A programme of disposals of non-core assets has
concentrated the Group on two operating units both focused on data and
intelligence. We have invested in sales and marketing resource to drive the
future growth of these two units and have afforded that investment through a
restructuring of the Group's cost base. Whilst the full effects of the cost
restructuring measures taken will not be felt until the FY24 year, the Group
is already leaner and stronger and its future financial projections are much
enhanced. The Board's restructuring plan is now largely complete, leaving
management free to pursue a growth agenda and to focus on generating
significant value for shareholders.
The Board is grateful to all employees for the contributions they have made to
a successful year and to the management team that have delivered the
transformation of the Group.
Results for the financial year
The continuing operations of the Group comprise its two operating businesses,
Merit Data & Technology (MD&T) and Dods Political Intelligence (Dods
PI). These are supported by a small Central team which is reported on
separately in our financial statements. The businesses that were disposed of
during the year are reported on within the statutory results as Discontinued
Operations; my statement will cover the Continuing Operations of the Group.
The Group grew revenue from Continuing Operations by 5.6% to £18.6 million in
the year (FY22 £17.6 million), with the growth being driven by stronger
markets, especially in those areas of the business that were hardest hit
during the pandemic. The Group has maintained strong cost control with gross
profit of £8.6 million (FY22 £8.9 million), being only £0.3 million behind
FY22 despite an unfavourable year-on-year exchange rate movement on the
Group's Indian cost base.
Net margins increased by 0.3 percentage points and the Adjusted EBITDA of
£2.7 million is 7.7% ahead of the previous year (FY22 £2.5 million).
Continuing Operations FY 2023 FY 2022 Change((5))
£m £m
Revenue 18.6 17.6 +5.6%
Gross profit 8.6 8.9 -3.5%
Gross margin %((1)) 46.0% 50.4% -8.7%
Adjusted EBITDA((2)) 2.7 2.5 +7.7%
Net margin %((3)) 14.3% 14.0% +2.1%
Loss before tax (3.7) (1.7) +118.1%
Adjusted earnings per share (pence) ((4)) 0.8p (0.9p) +1.7p
Net debt((6)) (2.6) (2.1) +25.0%
( )
((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)) 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 (see note 13)
((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 (see note 23)
Disposals
During the year, the Group disposed of the Media, Events and Training
operations ("the MET operations") of its Dods segment for £4.5 million. The
Group also disposed of both of its investments in Associates during the year,
selling its 30% shareholding in Social 360 and its 40% shareholding in Sans
Frontières Associates.
Cash
The year-on-year change to the Group's net debt((6)) position, from £2.1
million to £2.6 million, masks some significant movements during the year.
The Group received proceeds from the sale of non-core assets of £4.8 million
during FY23. The Group fully settled its deferred liabilities from prior
periods, namely £0.5 million of deferred VAT and rent built up during the
COVID pandemic, and £0.3 million of deferred consideration on the 2019
acquisition of Meritgroup Limited.
As reported in more detail below, before the end of FY23 the Group paid £3.5
million (including recoverable VAT) as a reverse premium to dispose of its
lease of 16,893 sq ft of prime office space in The Shard, thereby
extinguishing £7.4 million from future cash outflows in respect of this
property.
The Group's Continuing Operations generated operating cash of £2.9 million.
Board Changes
Following the disposal of the Dods MET operations late in 2022, Munira
Ibrahim, the MD of the Dods business, resigned and left the Board in December
2022. Given the consequent reduced complexity of the Group, and in support of
the Board's decision to reduce the size of the Board, Richard Boon and Vijay
Vaghela also resigned in January 2023.
The Company was extremely well-served by Richard and Vijay as non-executive
Directors, and I am very grateful for their contribution and wise counsel
during their time on the Board.
Lord Ashcroft KCMG PC, the Company's largest shareholder, joined the Board in
December 2022.
Strategy
Data and Intelligence is, and will remain, at the core of everything that we
do. We use technology, human expertise and Artificial Intelligence to collate,
transform and add the greatest value to the data we provide our customers.
We will grow through the expansion of the sectors and markets we address and
by constantly improving the proprietary technology platforms our customers use
to access our data and business intelligence. This growth will be driven by
our excellent reputation for the provision of valuable data and intelligence
at a competitive price point.
Our business benefits from very high levels of recurring revenue from long
standing customers; we will maintain our focus on these subscription and
recurring revenue customers. We will continue to improve our profit margins
with technology-led efficiencies and a tightly controlled cost base.
Current trading and outlook
Having successfully completed its restructuring, the Group is in a much
stronger position. It benefits from less complexity, greater focus, and a
clear strategy for growth, supported by investment in its core businesses.
Despite a challenging macro-economic environment and the impacts of both
higher inflation and interest rates, the Group has made a positive start to
the FY24 year. The significant cost reduction from the disposal of our London
office lease and other operational savings already made will have a beneficial
impact on the Group's FY24 performance. This, along with the investments made
in growing its two operating businesses, gives the Board confidence in
anticipating further growth in both revenue and profitability in FY24 and
beyond.
Mark Smith
Chairman
6 September 2023
Chief Executive's Review
Overview
The year to 31 March 2023 was the Group's first full year under a new
management team. Having agreed the strategy with the Board at the beginning of
the year, the executive team has been fully focused on delivering the first
phase of the strategic plan, the tidying up of the Group's operations, the
disposal of non-core assets, and the resolution of the remaining legacy issues
facing the Group. I am delighted to be able to report significant progress on
all fronts.
Disposal of operations
The disposal of the Dods Media, Events and Training ("MET operations"),
announced in October and completed in November 2022, was the most significant
change as it represented approximately one third of the Group's revenue and
involved the carving out from the Dods business of nearly one hundred
employees. The £4.5 million consideration represented a 9x multiple on the
FY22 EBITDA of c£0.5 million.
As well as the MET disposal, during the year the Group also disposed of:
§ its 30% shareholding in Social 360 for a cash consideration of £420,000;
§ its 40% shareholding in Sans Frontières Associates for a cash
consideration of £250,000;
§ the trade and assets of its Paris-based media and directory business, Le
Trombinoscope, for a cash consideration of €60,000.
In aggregate, the Group raised £5.2 million from disposals in the year, of
which £4.8 million of cash proceeds was received during the year and
£450,000 is due for payment in October 2023.
Exit from lease in The Shard
The other significant disposal that took place during the financial year was
the exit from the Group's unnecessarily large lease of 16,893 sq ft on the
11(th) floor of The Shard, which ran until July 2026 at an annualised total
cost of £2.1 million, giving a total outstanding cashflow over the remaining
term of the lease of £7.4 million, including dilapidations and a £3.1
million IFRS 16 lease liability. In March 2023, we announced the disposal of
this lease through an assignment at a cost of £2.9 million. We anticipate
that the disposal will reduce recognised profit & loss costs (including
operating costs and IFRS 16 charges) by approximately £1.4 million per annum,
after taking into account alternative accommodation costs. The Group has
reduced its UK office footprint by 80% and now operates from four offices
globally: Chennai, Mumbai, London and Brussels.
Settlement of remaining legacy deferred liabilities
At the beginning of the year the Group had outstanding legacy deferred
liabilities comprising £0.5 million of deferred VAT and rent built up during
the COVID pandemic, and £0.3 million of deferred consideration on the 2019
acquisition of Meritgroup Limited. All deferred liabilities have now been
settled which, when combined with the removal of the significant lease
liability, has strengthened the Group's balance sheet.
Funding
The lease disposal was funded in part with the provision of a new £1.8
million short term loan from Barclays Bank which amortises on a straight-line
basis over the next eighteen months. The effective swapping of rent and
service charge costs for bank debt repayments further strengthens the Group's
financial outlook and should allow the Group to eliminate its net debt
position over time.
Operating results
The Group's statutory revenue having been reduced by £9.8 million as a result
of the disposal of non-core operations, it is pleasing to be able to report an
Adjusted EBITDA from our Continuing Operations of £2.7 million very similar
to the prior year figure of £2.8 million for the larger Group pre disposals.
On a like-for-like Continuing Operations basis, the Group increased Adjusted
EBITDA by 8% from £2.5 million in the prior year.
The restructured Group benefits from very good visibility of its revenues,
with Dods PI's income being almost entirely subscription based and Merit
D&T having a very stable long term customer base with 85% of revenue
recurring.
Merit Data & Technology ("MD&T") revenue was up by 9% to £11.6
million; this business unit now represents nearly two thirds of the Group's
revenues. MD&T's Adjusted EBITDA of £1.8 million (FY22: £1.9m) was
impacted by sterling currency weakness particularly in the first half of the
year. Without the year-on-year currency impact, Merit D&T's full year
Adjusted EBITDA would have been £390k higher and shown growth of 20% year on
year. In the second half of the year the GBP/INR rate recovered, and the
stability of that exchange rate has continued since.
Dods Political Intelligence revenues were flat at £6.9 million (FY22:
£6.9m); however Adjusted EBITDA rose 18% to £1.8 million as it benefitted
from a lower cost base and some non-operating income from the provision of
transitional services to the disposed of MET Operations. The business will be
the primary beneficiary of the further cost savings to come in FY24 from the
downsizing of the Group's London office costs.
Focus on growth
The newly restructured Group is now able to focus on its future growth plan.
The Group's more than five years of experience in the field of Artificial
Intelligence and Machine Learning and its expertise in data capture and
analysis present the Group with exciting opportunities.
Merit Data & Technology is already benefiting from investments made in
FY23 that will help accelerate the growth of the business. We have an expanded
and reinvigorated sales and marketing team that is focused on the eight key
verticals where we have experience and a track record. We are also seeing
opportunities, and have already won business, from geographies that we were
not previously addressing.
MD&T is also benefitting from a clearer technology proposition and is
winning new business by offering data engineering solutions to both existing
and new customers.
Dods will benefit from having a simpler business entirely focused on its core
political intelligence service. Whilst the economic challenges facing
companies are having an impact on its customer base, Dods PI is an essential
service to many of its customers. The unit has been able to partly mitigate
the impacts of higher inflation with higher price increases on renewing
contracts than has been possible in the past.
Dods PI is looking to recruit specialist consultants in specific service areas
where it sees opportunity to grow market share. We are looking to appoint a
new leader for our Dods PI Sales and Marketing team to help us capitalise on
the strong operational gearing that this business enjoys.
Merit Data & Technology ("MD&T")
MD&T is a leading data solutions provider, specialising in harvesting,
aggregating & transforming large sets of data for many of the world's
leading information businesses. We provide a highly bespoke service for each
client, combining tech solutions, AI and manual analysis. We help clients to
source and manage data in multiple industries, including retail, shipping,
construction, automotive, energy, healthcare and pharma.
The business has very long-standing client relationships, and many of our most
significant clients have been working with us for over ten years. We are very
focused on developing technology tools to manage and transform data in a
scalable way, in addition to operational excellence and a level of customer
service which helps us enjoy very high levels of customer satisfaction and
recurring revenue.
Our model of servicing global clients with a highly skilled staff base located
in India continues to be successful. With the advent of higher inflation, we
continue to offer customers a technology-led and cost effective solution to
their data intelligence needs.
With many years' experience of applying machine learning techniques to data
transformation, we have a proven capability to enable AI innovation amongst
our clients, where data will be critical to the development of new models and
AI-led solutions.
Alongside our data business, we provide a strong technology solutions service
to multiple customers. Merit has been a trusted partner in digital
transformation for some of the world's largest B2B information businesses 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
upgrades and Data Management Solutions to simpler systems for Data Operations,
Data Migration and 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.
We have built a very distinct and attractive corporate culture with a
progressive mix of Western and Indian best practices at our offices in India,
where we employ over 900 people, 97% of whom are graduates. 30% of our
employees have been with us for over 5 years.
Our employee value proposition is very strong with the right mix of learning
& development and career growth opportunities. Our values and policies
nurture, develop and engage employees to the highest level of their potential.
Dods Political Intelligence
Dods Political Intelligence (Dods PI) is a leading provider of a comprehensive
subscription-based monitoring and analysis service 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. We also offer the leading database
of people that matter in the world of politics and policy, including
Parliamentarians and civil servants in both the UK and EU.
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 PI acts as an expert guide. We draw on human
connection, real-time analysis and our deep understanding of people,
parliaments and policy to bring our customers impartial insights that matter.
Our monitoring service is delivered through a market leading platform 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. In addition, Dods PI's
stakeholder management tools enable our customers to identify and engage with
key decision makers and influencers in their sector.
We provide political intelligence to 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, KPMG, Rio Tinto and Bayer.
David Beck
Chief Executive Officer
6 September 2023
Financial Review
FY 2023 FY2022
£m £m
Revenue from Continuing Operations 18.6 17.6
Gross profit from Continuing Operations 8.6 8.9
Gross margin %((1)) from Continuing Operations 46.0% 50.4%
Adjusted EBITDA((2)) from Continuing Operations 2.7 2.5
Statutory operating loss from Continuing Operations (3.7) (1.4)
Statutory loss before tax from Continuing Operations (3.7) (1.7)
Income tax credit/(charge) from Continuing Operations 0.1 (0.1)
Loss for the year from Continuing Operations (3.6) (1.8)
Loss for the year (2.7) (1.6)
Statutory EPS (pence per share) (11.2p) (7.0p)
Adjusted EPS (pence per share) ((3)) (3.1p) 1.9p
Net (debt)/cash((4)) (2.6) (2.1)
( )
((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 (see Note 23)
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 5.6% to £18.6
million (2022: £17.6 million) and gross profit decreased by 3.5% to £8.6
million (2022: £8.9 million). Gross margin decreased from 50.4% to 46.0%,
reflecting an investment in additional sales and marketing resources, together
with inflationary cost pressure.
Adjusted EBITDA from Continuing Operations increased to £2.7 million (2022:
£2.5 million), exceeding pre-pandemic and pre-disposal levels. The Group's
operating loss from Continuing Operations was £3.7 million (2022: £1.4
million), after non-cash items including an amortisation charge of £0.6
million (2022: £0.6 million) for business combinations and an amortisation
charge of £0.3 million (2022: £0.3 million) for intangible software assets.
The depreciation charge for property, plant and equipment in the year
increased slightly at £0.6 million (2022: £0.6 million) and a right-of-use
depreciation charge was £1.3 million (2022: £1.3 million). Non-recurring
costs, including profits and losses on disposals, people-related costs and
other costs, were £3.4 million (2022: £1.2 million).
The loss before tax from Continuing Operations for the year was £3.7 million,
up from £1.7 million in 2022 primarily as a result of non-recurring items,
and the loss for the year from Continuing Operations was £3.6 million, up
from £1.8 million in 2022.
Taxation
The Group has a tax credit on Continuing Operations of £0.1 million for the
year resulting from the current year loss (2022: tax charge of £0.1 million).
Earnings per share
Earnings per share, both basic and diluted, in the year were a loss of 11.21
pence (2022: loss of 7.03 pence) and were based on the loss for the year of
£2.7 million (2022: loss of £1.6 million) with a basic weighted average
number of shares in issue during the year of 23,956,124 (2022: 22,367,910
shares).
Adjusted earnings per share, both basic and diluted, in the year were a loss
of 3.14 pence (2022: 1.93 pence) and were based on the Adjusted loss after tax
for the year of £0.8 million (2022: profit of £0.4 million).
Dividend
The Board is not proposing a dividend (2022: £nil).
Assets
Non-current assets of £37.7 million (2022 restated*: £47.4 million) comprise
goodwill of £26.9 million (2022: £28.9 million), intangible assets of £7.9
million (2022: £9.8 million), property, plant and equipment of £0.3 million
(2022: £1.8 million), IFRS 16 right-of-use assets of £1.9 million (2022:
£5.7 million), Investments of £0.5 million (2022: £0.8 million) and
deferred tax assets of £0.2 million (2022: £0.4 million). Significant
year-on-year decreases reflect the disposal of MET operations and disposal of
the Shard lease.
Non-current asset Investments have decreased by £0.3 million during the year,
reflecting the disposal of the Group's shareholdings in its former Associates,
Sans Frontières Associates Ltd and Social 360 Limited. Trade and other
receivables, excluding deferred consideration receivable and deferred tax,
have decreased by £0.1 million to £5.1 million (2022: £5.2 million).
Liabilities
Current liabilities fell by £3.5 million to £10.8 million (2022: £14.3
million) due to a significant reduction in Trade and other payables. Of this
reduction, £0.5 million related to the payment of HMRC liabilities that had
been deferred at 31 March 2021 due to Covid-19. A further £1.0 million
reduction in current liabilities related to lease payments due under the Shard
lease which has now been disposed of. Amounts payable under the bank facility
increased by £0.5 million to £3.4 million (2022: £2.9 million) in line with
the bank loan repayment schedule at the year-end date, which requires £1.2
million of the term loan taken out to part-fund the disposal of the Shard
lease to be repaid within the next 12 months.
Non-current liabilities fell by £4.0 million to £2.8 million (2022: £6.8
million). Key changes in the year were a reduction in bank debt of £0.2
million and a reduction in lease liabilities of £3.8 million, in part due to
the lease disposal.
*see Note 30
Capital and Reserves
Total equity decreased by £2.7 million to £31.8 million (2022: £34.4
million), reflecting the loss for the year.
Liquidity and capital resources
At 31 March 2023, the Group had bank debt of £4.7 million (2022: £4.4
million), comprising amounts owed on term loans and amounts drawn down on a
revolving credit facility (RCF).
The Group had a term loan with £0.9 million outstanding (2022: £2.4 million)
taken out in July 2022 over a five-year period, with interest at 4.75% over
Bank of England interest rate. A further £1.8 million term loan was taken out
in March 2023 over an 18-month period, to part-fund disposal of the Shard
lease. This loan has the same interest rates and covenants as the Group's
existing term loan.
In addition, the Group had a drawn RCF of £2.0 million and the full balance
was outstanding at end of year (2022: £2.0 million).
The Group had a cash and cash equivalents balance of £2.1 million (2022:
£2.3 million) and a net debt position of £2.6 million (2022: net debt of
£2.1 million).
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 2023. 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 in the UK, 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.
Financial Statements
Consolidated income statement
For the year ended 31 March 2023
2022
Continuing Operations((1)) Note 2023 (restated)
£'000 £'000
Revenue 3 18,585 17,598
Cost of sales (10,033) (8,732)
Gross profit 8,552 8,866
Administrative expenses (12,628) (10,276)
Other operating income 4 416 -
(3,660) (1,410)
Operating loss from Continuing Operations
Memorandum:
Adjusted EBITDA((2)) 2,652 2,463
Depreciation of property, plant and equipment 16 (620) (596)
Depreciation of right-of-use assets 26 (1,313) (1,277)
Amortisation of intangible assets acquired through business combinations 15 (587) (588)
Amortisation of software intangible assets 15 (314) (255)
Adjusted EBIT((3)) (182) (253)
Share-based payments 27 (63) 48
Non-recurring items
Loss on disposal of Investments in Associates 5 (303) -
Profits and losses on disposal of Shard lease 5 (2,927) -
Impairments and asset write offs 5 - (843)
People-related costs 5 (123) (316)
Other non-recurring items 5 (62) (46)
(3,660) (1,410)
Operating loss from Continuing Operations
Net finance expense 10,11 (249) (411)
Share of profit of Associate 18 252 144
Loss before tax from Continuing Operations 7 (3,657) (1,677)
Income tax credit/(charge) 12 88 (129)
Loss for the year from Continuing Operations 7 (3,569) (1,806)
Profit for the year from Discontinued Operations 6 884 234
(2,685) (1,572)
Loss for the year
((1) ) Comparative figures for the year ended 31 March 2022 have been
restated to remove Discontinued Operations as outlined in Note 6.
((2)) Adjusted EBITDA is defined as the operating loss after adding back
depreciation, amortisation, share-based payments, and non-recurring items.
((3)) Adjusted EBIT is defined as the operating loss after adding back
share-based payments and non-recurring items.
100% of the loss is attributable to owners of the parent.
2022
Note 2023 (restated)
Earnings per share (pence) p per share p per share
13 (14.90p) (8.07p)
Basic from Continuing Operations
13 (14.90p) (8.07p)
Diluted from Continuing Operations
13 3.69p 1.05p
Basic from Discontinued Operations
13 3.69p 1.05p
Diluted from Discontinued Operations
The Notes to the consolidated financial statements form part of these
financial statements.
Consolidated statement of comprehensive income
For the year ended 31 March 2023
Note 2023 2022
£'000 £'000
Loss for the year (2,685) (1,572)
Items that may be subsequently reclassified to Profit and loss:
Foreign currency translation:
Exchange differences on translation of foreign operations (27) 31
Loss reclassified to profit and loss on disposal of foreign (48) -
operations
(75) 31
Remeasurement of defined benefits obligations 28 45 3
Other comprehensive income for the year (30) 34
Total comprehensive loss for the year (2,715) (1,538)
The Notes to the consolidated financial statements form part of these
financial statements.
Consolidated statement of financial position
As at 31 March 2023
2022
Note 2023 (restated+)
£'000 £'000
Non-current assets
Goodwill 14 26,919 28,911
Intangible assets 15 7,908 9,826
Property, plant and equipment 16 341 1,807
Right-of-use assets 26 1,874 5,660
Investments 18 450 777
Deferred tax assets 24 184 415
Total non-current assets 37,676 47,396
Current assets
Work in progress and inventories 19 - 14
Trade and other receivables 21 5,502 5,154
Loan receivable 20 - 210
Cash and cash equivalents 20,21 2,144 2,321
7,646 7,699
Assets held for resale 18 - 410
Total current assets 7,646 8,109
Total assets 45,322 55,505
Current liabilities
Trade and other payables 22 6,648 9,718
Defined benefit pension obligation 28 76 85
Bank loan / RCF 20, 23 3,373 2,860
Lease liability 26 678 1,679
Total current liabilities 10,775 14,342
Non-current liabilities
Defined benefit pension obligation 28 249 197
Bank Loan 20, 23 1,342 1,518
Lease liability 26 1,202 5,042
Total non-current liabilities 2,793 6,757
Capital and reserves
Issued capital 25 6,708 6,708
Share premium 1,067 1,067
Merger reserves - -
Retained profit/(loss) 10,347 13,032
Capital redemption reserve 13,680 13,680
Translation reserve (124) (49)
Other reserves 3 (42)
Share option reserve 73 10
Total equity 31,754 34,406
Total equity and liabilities 45,322 55,505
+ Comparative figures for the year ended 31 March 2022 have been restated to
present deferred tax assets within Non-current assets as outlined in Note 30.
The Notes to the consolidated financial statements form part of these
financial statements.
Consolidated statement of changes in equity
For the year ended 31 March 2023
Share Capital Share Total
Share Premium Merger Retained redemption Translation Other option shareholders'
capital reserve((1)) reserve((2)) earnings reserve((3)) reserve((4)) reserves reserve((5)) funds
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2021 19,501 20,866 409 (6,671) - (80) (45) 58 34,038
Total comprehensive income
Loss for the year - - - (1,572) - - - - (1,572)
Currency translation differences - - - - - 31 - - 31
Remeasurement of defined benefit pension obligation - - - - - - 3 - 3
Share-based payment - - - - - - - (48) (48)
Transactions with owners
Share consolidation (Note 25) (13,680) (20,866) (409) 21,275 13,680 - - - -
Issue of ordinary shares 887 1,067 - - - - - - 1,954
At 31 March 2022 6,708 1,067 - 13,032 13,680 (49) (42) 10 34,406
At 1 April 2022 6,708 1,067 - 13,032 13,680 (49) (42) 10 34,406
Total comprehensive income
Loss for the year - - - (2,685) - - - - (2,685)
Currency translation differences - - - - - (75) - - (75)
Remeasurement of defined benefit pension obligation - - - - - - 45 - 45
Share based payments - - - - - - - 63 63
At 31 March 2023 6,708 1,067 - 10,347 13,680 (124) 3 73 31,754
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.
The Notes to the consolidated financial statements form part of these
financial statements.
Consolidated statement of cash flows
For the year ended 31 March 2023
Note 2023 2022
£'000 £'000
Cash flows from operating activities
Loss for the year (2,685) (1,572)
Depreciation of property, plant and equipment 16 678 689
Depreciation of right-of-use assets 26 1,338 1,315
Amortisation of intangible assets acquired through business combinations 15 770 862
Amortisation of other intangible assets 15 322 255
Share-based payments charge/(credit) 27 63 (48)
Share of profit of Associate 18 (252) (144)
Lease interest expense 26 298 369
Loss on disposal of fixed assets 7 - 2
Write off of intangible assets 5,15 - 746
Profit on disposal of operations (before tax) 6 (2,074) -
Loss on disposal of IFRS16 finance lease 5 2,927 -
Loss on disposal and impairment of investments in associates 5,17 303 97
Interest income 10 (77) (28)
Interest expense 378 213
Foreign exchange charge on operating items 1 -
Income tax charge/(credit) 638 (292)
Operating cash flows before movement in working capital 2,628 2,464
(Increase)/Decrease in inventories 19 (16) 22
(Increase)/Decrease in trade and other receivables (1,520) 430
Increase/(Decrease) in trade and other payables 233 (2,220)
Cash generated by operations 1,325 696
Taxation paid (429) (332)
Net cash generated from operating activities 896 364
Cash flows from investing activities
Interest and similar income received 10 77 28
Additions to intangible assets 15 (175) (1,240)
Additions to property, plant and equipment 16 (69) (314)
Acquisition of investment 17 - (450)
Proceeds from disposal of Associate 18 654 -
Proceeds from disposal of operations 6 3,846 -
Repayment of long-term loan by Associate 18,29 210 350
Net cash generated from/(used in) investing activities 4,543 (1,626)
Consolidated statement of cash flows continued
Note 2023 2022
£'000 £'000
Cash flows from financing activities
Proceeds from issue of share capital - 908
Interest and similar expenses paid (378) (213)
Payment of lease liabilities 26 (1,901) (2,424)
Payment on disposal of lease liabilities 26 (3,683) -
Net drawdowns/(repayments) on bank loans 20,23 337 (253)
Net cash used in financing activities (5,625) (1,982)
Net decrease in cash and cash equivalents (186) (3,244)
Opening cash and cash equivalents 2,321 5,565
Effect of exchange rate fluctuations on cash held 9 -
Closing cash at bank 2,144 2,321
Comprised of:
Cash and cash equivalents 2,144 2,321
Closing cash at bank 21 2,144 2,321
The Notes to the consolidated financial statements form part of these
financial statements.
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.
Basis of preparation of the Audited Results Announcement
The financial information of the Group set out above does not constitute
"statutory accounts" for the purposes of Section 435 of the Companies Act
2006.
Statutory accounts for the year ended 31 March 2022 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 31 March
2023 will be delivered to the Registrar in due course. Those accounts have
been reported on by the Independent Auditors; their report for the accounts
for both financial years was (i) unqualified; (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 498 (2)
or 498 (3) of the Companies act 2006.
The Group financial statements are properly prepared in accordance with UK
adopted international accounting standards. The accounting policies adopted
are consistent with those followed in the preparation of the consolidated
financial statements for the year ended 31 March 2022.
At the time of approving the Audited Results Announcement, and based on a
review of the Group's forecasts and business plan, the Directors have a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in preparing the
preliminary statement.
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 2023 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 2023 but have not had a material effect on the
consolidated financial statements:
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
*Effective for accounting periods starting on or after this date
There are no other new standards, amendments and interpretations which are
effective for periods beginning on or after 1 April 2022, 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 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 of the financial statements
The financial statements have been prepared in accordance with applicable
accounting standards, and under the historical cost accounting rules, except
for forward contracts (stated at fair value at year end) and defined benefit
pension obligations (stated at the projected unit credit method in accordance
with IAS 19 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.
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 prepared and approved monthly-phased projections for the 21
months from the balance sheet date. The Directors consider the projections to
be reasonable. The Directors have assessed the future funding requirements of
the Group within the 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 considered reasonable downside risks and their
potential impact on the projections and headroom.
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
£3.4 million were due to the bank with the remaining £1.3 million due in
subsequent periods.
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 (now Discontinued
- see note 6).
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 or via periodic delivery of data where that is the contractual
requirement. Revenue is recognised either:
§ in line with the hours used under the contract for services in line with
our right to invoice for the actual hours used at a fixed contractual rate per
hour; or
§ on delivery of the data where this reflects the completion of the
contractual deliverable;
in each case in accordance with IFRS15 and dependent upon the nature of the
contractual arrangement.
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. Where subscriptions are paid in advance,
the contract balances for services not yet delivered are treated as deferred
income.
Political Engagement activities (now Discontinued - see note 6) 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.
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
Intangible assets acquired by the Group are stated at cost less accumulated
amortisation and impairment losses, if any. Intangible assets are amortised on
a straight-line basis over their useful lives in accordance with IAS 38
Intangible Assets. Assets are not revalued. The amortisation period and method
are reviewed at each financial year end and are changed in accordance with IAS
8 Accounting Policies, "Changes in Accounting Estimates and Errors" if this is
considered necessary, there were no changes from last year. The estimated
useful lives 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
Other assets 1 year
Software which is not integral to a related item of hardware is included in
intangible assets and amortised over its estimated useful lives of between 3-6
years. The salaries of staff employed in the development of new software
relating to the Group's information services products and salaries of staff
employed in building our digital platform architecture within the Group are
capitalised into software.
Intangible assets - research and development
Research costs are expensed as incurred. Development expenditure on an
individual project is recognised as an intangible asset when the Group can
demonstrate:
§ the technical feasibility of completing the intangible asset so that the
asset will be available for use;
§ its intention to complete and its ability and intention to use the asset;
§ how the asset will generate future economic benefits;
§ the availability of resources to complete the asset; and
§ the ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the
asset is carried at cost less any accumulated amortisation and accumulated
impairment losses.
Amortisation of the asset begins from the date development is complete and the
asset is available for use. It is amortised over the period of expected future
benefit. Amortisation is charged to the income statement. During the period of
development, the asset is tested for impairment.
The Directors assess the useful life of the completed capitalised projects to
be 3-10 years from the date of when benefits begin to be realised and
amortisation will begin at that time.
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 possible
impairment. If any such indication of possible impairment exists, then the
asset's recoverable amount is estimated and compared with the asset's carrying
value. 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 asset or lease period
Equipment, fixtures and fittings 3-10 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 is
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 fair value through profit and loss ("FVTPL"). The
carrying amount of the Group's fixed asset investments are reviewed at each
reporting date with changes in fair value recognised in other gains/(losses)
in the consolidated income statement.
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 judgement 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 costs 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 27.
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.
2. Critical accounting estimates and judgements and adopted IFRS not yet
effective
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 Judgements and Estimates
a) Continuing and Discontinued Operations
During the year, the Group completed the disposal of the Media, Events and
Training operations of its Dods segment, including the trade and assets of Le
Trombinoscope SAS, which together constituted the entire Media, Events and
Training operations of the Group. Further details of the disposals are
disclosed in Note 6. Whilst these operations were only part of the Dods CGU,
they generated approximately 60% of the revenues of that CGU and 35% of total
Group revenues. It is management's judgement that these operations represented
separate major lines of business, were part of a single coordinated plan to
dispose of that line of business, and given the scale of these operations, it
is appropriate to consider the disposed activities as Discontinued Operations
under IFRS 5. Accordingly, management has adopted IFRS 5 disclosures in
presenting the Consolidated Income Statement and supporting Notes on a
Continuing Operations basis, including the results of the Discontinued
Operations as a single line within the Consolidated Income Statement and
restating the comparative figures accordingly.
b) 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 for further details.
c) 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 disposals, restructuring and redundancy
costs. See Note 5 for further details.
d) Impairment testing
Where indicators of a possible impairment are identified, the Directors use
the value in use or fair value less costs to sell to determine recoverable
value. In the current year, the Directors have used the fair value less costs
to sell model. The key judgements and estimates required in this model are:
· 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.
· the assessment of fair value, which was assessed using the expected
recurring earning of the CGUs and the average earnings multiples for a group
of listed businesses which the Directors consider comparable to the MD&T
and Dods CGUs and for which published information allowing a comparable
assessment is available, with the key judgement being the identification of
comparable entities for which the Directors used their own experience to
identify entities that could be considered comparable.
· the estimate of costs to sell, which was based on management's
knowledge and experience of costs incurred on transactions to buy and sell
similar assets.
See Note 14 for further details.
3. Critical accounting estimates and judgements and adopted IFRS not yet
effective
Significant Judgements and Estimates continued
e) 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 15.
f) 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 24 for further details.
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 18 for further details. Where a
controlling interest exists, the investee is consolidated.
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 2023 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 2022, 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 2022 and which have not been adopted
early, are expected to have a significant effect on the consolidated financial
statements of the Group.
4. 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.
§ 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.
On 30 November 2022, the Group completed the disposal of the Media, Events and
Trading operations (the 'MET operations') of its Dods segment. On 13 January
2023, the Group completed the disposal of the trade and assets of Le
Trombinoscope from its Dods segment. Current year figures are presented on a
Continuing Operations basis, excluding the results of these disposed
operations (the "Discontinued Operations"), and prior year figures have been
similarly restated to exclude Discontinued Operations as outlined in Note 6.
The following table provides an analysis of the Group's segment revenue by
business segment.
2022
Revenue by business segment - continuing operations((1)) 2023 (restated)
£'000 £'000
Merit Data & Technology 11,644 10,696
Dods 6,941 6,902
18,585 17,598
(1) Comparative figures for the year ended 31 March 2022 have been restated to
remove Discontinued Operations as outlined in Note 6.
No client accounted for more than 10 percent of total revenue.
2022
Revenue by stream - continuing operations((1)) 2023 (restated)
£'000 £'000
Data 6,743 5,567
Software & Technology Resourcing 4,901 5,129
Political Intelligence 6,941 6,866
Political Engagement - 36
18,585 17,598
(1) Comparative figures for the year ended 31 March 2022 have been restated to
remove Discontinued Operations as outlined in Note 6.
2023 Profit/(loss) before tax by business segment MD&T Dods Central Total
2023 2023 2023 2023
Continuing operations((1)) £'000 £'000 £'000 £'000
Adjusted EBITDA 1,809 1,838 (995) 2,652
Depreciation of property, plant and equipment (252) (368) - (620)
Depreciation of right-of-use assets (552) (517) (244) (1,313)
Amortisation of intangible assets acquired through business combinations (510) (77) - (587)
Amortisation of software intangible assets - (314) - (314)
Share based payments - - (63) (63)
Non-recurring items
Profits and losses on disposals - - (3,230) (3,230)
People-related costs (35) 10 (98) (123)
Other non-recurring items - - (62) (62)
Operating profit/(loss) 460 572 (4,692) (3,660)
Net finance expense 83 (226) (106) (249)
Share of profit of Associate - - 252 252
Profit/(loss) before tax from continuing operations 543 346 (4,546) (3,657)
2022 Profit/(loss) before tax by business segment MD&T Dods Central Total
2022 2022 2022 2022
Continuing operations((1)) £'000 £'000 £'000 £'000
Adjusted EBITDA 1,898 1,556 (991) 2,463
Depreciation of property, plant and equipment (279) (317) - (596)
Depreciation of right-of-use assets (531) (413) (333) (1,277)
Amortisation of intangible assets acquired through business combinations (511) (77) - (588)
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 - - (316) (316)
Other non-recurring items - - (46) (46)
Operating profit/(loss) 577 (252) (1,735) (1,410)
Net finance expense 74 (375) (110) (411)
Share of profit of Associate - - 144 144
Profit/(loss) before tax from continuing operations 651 (627) (1,701) (1,677)
(1) Comparative figures for the year ended 31 March 2022 have been restated to
remove Discontinued Operations as outlined in Note 6.
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
Revenue by geographical segment - continuing operations((1)) 2023 (restated)
£'000 £'000
UK 15,333 14,176
Belgium 1,707 1,793
USA 662 390
France 321 351
Germany 424 500
Rest of world 138 388
18,585 17,598
(1) Comparative figures for the year ended 31 March 2022 have been restated to
remove Discontinued Operations as outlined in Note 6.
2023 2022
Non-current assets by geographical segment((2)) £'000 £'000
UK 35,171 43,511
Goodwill 26,919 28,911
Intangible assets 7,908 9,826
Property, plant and equipment 76 1,272
Right-of-use asset 268 3,502
India 1,871 2,693
Property, plant and equipment 265 535
Right-of-use asset 1,606 2,158
37,042 46,204
(2) Excluding Investments held as non-current assets (see Note 18) and
deferred tax assets (see Note 24).
Group Deferred revenue
The following table provides an analysis of the Group's deferred revenue:
2023 2022
Aggregate Deferred Revenue £'000 £'000
Merit Date & Technology 10 16
Dods 3,132 5,244
3,142 5,260
Of revenue deferred at the year-end date, the Group expects to recognise all
£3.1 million over the next year ending 31 March 2024.
During the current year, the Group recognised £3.1 million of deferred
revenue from the prior period within Continuing Operations, and £1.5 million
within Discontinued Operations and disposed of £0.5m, based on the
performance obligation being satisfied. The remaining £0.1 million is yet to
be recognised, and is expected to be recognised in the year ending 31 March
2024. This also forms part of the current year balance.
4. Other operating income
Continuing Operations
During the year, the Group provided transitional services to the Political
Holdings Limited group, the purchaser of the disposed Media, Events and
Training operations, as part of the agreed disposal. These services included
finance, IT and occupancy services, for which the costs are primarily incurred
within the Dods segment. The fees arising in the period from 1 December 2022
to 31 March 2023 of £416,000 have been recognised within Other operating
income.
Discontinued Operations
During the prior 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 in the prior year varied from
month to month up to a maximum of 6 and the total amount received during the
prior year was £39,000. In the current year, no amounts were claimed for any
employees.
In the prior year, 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. The Group accounted for this scheme using the
accrual model, with the total grant being recognised as Other operating income
in the prior year Consolidated income statement.
5. Non-recurring items
2022
Continuing operations((1)) 2023 2023 (restated)
£'000 £'000 £'000
Transaction-related non-recurring items:
Loss on disposal of investments in Associates (303)
Loss on disposal of Shard lease (2,927)
Profits and losses on disposals (3,230) -
Impairments and asset write offs - (843)
People-related costs (123) (316)
Other: Professional services, consultancy and finance fees (62) (46)
(3,415) (1,205)
(1) Comparative figures for the year ended 31 March 2022 have been restated to
remove Discontinued Operations as outlined in Note 6.
No impairments or asset write offs were made during the current year. During
the prior year, the Group made an impairment charge of £97k against the
carrying value of Investments in Associates and wrote off £746k 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 prior year relate to one-off consultancy and
professional fees associated with the rental review of the London premises.
These costs are classified as non-recurring as they related to a one-off rent
review under the London lease, which has since been reassigned to a third
party, and are therefore highly unlikely to arise again.
6. Disposal
On 30 November 2022, the Group completed the disposal of the Media, Events and
Training operations of its Dods segment (together, the "MET Operations") for a
cash consideration of £4.5 million to Political Holdings Limited.
On 12 January 2023, the Group completed the disposal of the trade and assets
of Le Trombinoscope SAS, the Paris-based activities of the Dods segment ("Le
Trombinoscope") to Trombimedia Limited for £0.1 million cash consideration.
As a consequence of the disposals, the activities of the MET Operations and Le
Trombinoscope have been classified as Discontinued Operations within the
Consolidated income statement.
The results of Discontinued Operations for the year, which for 2023 includes
the results of the MET operations for 8 months (2022: 12 months) and Le
Trombinoscope for 9.5 months (2022: 12 months), are as follows:
6(a) - Profit from Discontinued Operations
Discontinued Operations 2023 2022
£'000 £'000
Revenue 6,913 9,801
Cost of sales (5,861) (7,864)
1,052
Gross profit 1,937
Administrative expenses (1,450) (2,158)
Other operating income - 42
(398) (179)
Operating loss
Memorandum:
(69) 358
Adjusted EBITDA
(58) (93)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets (25) (38)
Amortisation of intangible assets acquired through business combinations (183) (274)
Amortisation of software intangible assets (8) -
Non-recurring items - people-related costs (55) (132)
(398) (179)
Operating loss
Net finance expense (66) (8)
Loss before tax (464) (187)
58 421
Income tax credit
(406) 234
(Loss)/profit for the period from Discontinued Operations
1,290 -
Profit on disposal of Discontinued Operations after tax (see Note 6(c))
884 234
Profit from Discontinued Operations for the period
6(b) - Cashflows from Discontinued Operations
Cashflows generated by the Discontinued Operation for the period were as
follows:
Discontinued Operations 2023 2022
£'000 £'000
Net cash outflow from operating activities (1,621) (330)
Net cash inflow from investing activities 3,846 -
Net cash outflow from financing activities (95) (44)
2,130 (374)
Net increase/(decrease) in cash, cash equivalents and bank overdrafts from
Discontinued Operations
6(c) Disposal details
2023 2022
£'000 £'000
Consideration received and receivable:
Cash (net of transaction costs) 3,846 -
Deferred consideration 450 -
Total disposal consideration 4,296 -
Carrying amount of net assets sold 2,290 -
Gain on disposal before tax and reclassification of foreign currency 2,006 -
translation reserve
Reclassification of foreign currency translation reserve 68 -
Tax charge on disposal (784) -
Profit on disposal of Discontinued Operations after tax 1,290 -
7. Loss before tax
Loss before tax from Continuing Operations((1)) has been arrived at after
charging/(crediting):
Note 2023 2022
Continuing Operations: £'000 £'000
Depreciation of property, plant and equipment 16 620 596
Depreciation of right-of-use assets 26 1,313 1,277
Amortisation of intangible assets acquired through business combinations 15 587 588
Amortisation of software intangible assets 15 314 255
Staff costs 9 11,991 12,336
Non-recurring items 5 3,415 1,205
Share of profit of Associate 18 252 144
Interest income 10 (77) (28)
Interest expense 11 607 574
Net foreign exchange (gain)/loss 10 (297) (147)
Loss on disposal of fixed assets 16 - 2
(1) Comparative figures for the year ended 31 March 2022 have been restated to
remove Discontinued Operations as outlined in Note 6.
Loss before tax has been arrived at after charging:
2023 2022
Auditor's remuneration £'000 £'000
Fees payable to the Company's auditor for the audit of the Company's annual 51 26
accounts
Fees payable to the Company's auditor and its associates for other services:
- The audit of the Company's subsidiaries, pursuant to legislation 137 125
- Non-audit services in relation to review of interim accounts 5 3
- Non-audit services in relation to review of ERS tax returns 4 7
197 161
8. Directors' remuneration
The remuneration of the Directors of the Group for the years ended 31 March
2023 and 31 March 2022 is set out below:
Salaries Committee Pension Other
/fees Bonus fees Contrib'ns Benefits((8)) Total
£ £ £ £ £ £
Executive Directors
David Beck 2023 227,820 25,000 - - 2,379 255,199
Chief Executive Officer 2022 125,000((1)) - - - 1,014 126,014
Cornelius Conlon 2023 153,459 - - 3,375 270,708 427,542
Managing Director 2022 163,412 - - 3,000 260,929 427,341
Philip Machray 2023 197,900 25,000 - 658 2,071 225,629
Chief Financial Officer 2022 70,530((2)) - - - 555 71,085
Munira Ibrahim((3)) 2023 145,000 - - 5,800 149,379 300,179
Managing Director 2022 210,000 - - 8,400 720 219,120
Simon Bullock((4)) 2023 - - - - - -
Former CFO 2022 158,333 - - 6,333 1,252 165,918
Non-Executive Directors
Lord Ashcroft KCMG PC((5)) 2023 - - - - - -
Non-Executive Director 2022 - - - - - -
Richard Boon((6)) 2023 25,000 - 5,000 - - 30,000
Non-Executive Director 2022 25,000 - 5,000 - - 30,000
Angela Entwistle((7)) 2023 25,000 - 5,000 - - 30,000
Non-Executive Director 2022 25,000 - 5,000 - - 30,000
Diane Lees 2023 25,000 - 5,000 - - 30,000
Non-Executive Director 2022 25,000 - 5,000 - - 30,000
Mark Smith 2023 50,000 - 5,000 - - 55,000
Non-Executive Chairman 2022 50,000 - 5,000 - - 55,000
Vijay Vaghela((6)) 2023 25,000 - 10,000 - - 35,000
Non-Executive Director 2022 25,000 - 10,000 - - 35,000
Total for 2023 874,179 50,000 30,000 9,833 424,537 1,388,549
Total for 2022 877,275 - 30,000 17,733 264,470 1,189,478
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, in the prior year 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, in the prior year Philip Machray
received £15,944 remuneration prior to his appointment to the Board.
3 Resigned as a Director on 30 November 2022.
4 Resigned as a Director on 17 November 2021.
5 Lord Ashcroft was appointed to the Board on 13 December 2022. During
the year he received £nil remuneration.
6 Resigned as a Director on 31 January 2023.
7 The £30,000 (2022: £30,000) 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 29.
8 Other benefits are health insurance, overseas living allowance, and (i)
deferred cash consideration on acquisition of Meritgroup Limited in respect of
Cornelius Conlon, and (ii) redundancy and compensation for loss of office
payments in respect of Munira Ibrahim.
Remuneration of the highest paid Director was £427,542 (2022: £427,341). The
highest paid Director received pension contributions of £3,375 (2022:
£3,000).
During the year, three (2022: three) directors accrued benefits under money
purchase pension schemes.
The current Directors and their interests in the share capital of the Company
at 31 March 2023 are disclosed within the Directors' Report of the Annual
Report & Accounts.
9. Staff costs
The average number of persons employed by the Group (including Executive
Directors) during the year within each category was:
2022
Continuing Operations((1)) 2023 (restated)
Number Number
Editorial and production staff 39 35
Sales and marketing staff 17 15
Managerial and administration staff 17 25
Technology and support staff 904 895
977 970
2022
2023 (restated)
Continuing Operations((1)) £'000 £'000
Wages and salaries 10,810 11,298
Social security costs 976 922
Pension and other costs 142 164
Share-based payment charge/(credit) 63 (48)
11,991 12,336
(1) Comparative figures for the year ended 31 March 2022 have been restated to
remove Discontinued Operations as outlined in Note 6.
Staff costs do not include deferred cash consideration in relation to the
Meritgroup Limited acquisition. This is treated as non-recurring (see Note 5)
and is included in Directors' Remuneration (see Note 8).
10. Finance income
2023 2022
Continuing Operations((1)) £'000 £'000
Bank interest income 77 28
Pension finance credit 8 9
Net foreign exchange gain((2)) 297 147
382 184
((1) ) Comparative figures for the year ended 31 March 2022 have
been restated to remove Discontinued Operations as outlined in Note 6.
((2) ) Includes £5k FX loss on derivative (2022: £35k gain).
11. Finance expense
2023 2022
Continuing Operations((1)) £'000 £'000
Bank interest expense 313 205
Pension finance charge 24 21
Lease interest expense 294 369
631 595
((1) ) Comparative figures for the year ended 31 March 2022 have
been restated to remove Discontinued Operations as outlined in Note 6.
12. Income tax credit
2023 2022
Continuing Operations((1)) £'000 £'000
Current tax
Current tax on income for the year at 19% (2022: 19%) 32 27
Adjustments in respect of prior periods 10 -
42 27
Overseas tax
Current tax expense on income for the year 364 318
Total current tax expense 406 345
Deferred tax (see Note 24)
Origination and reversal of temporary differences (416) (286)
Effect of change in tax rate - 95
Adjustments in respect of prior periods (78) (25)
Total deferred tax income (494) (216)
Total income tax (credit)/charge (88) 129
((1) ) Comparative figures for the year ended 31 March 2022 have been
restated to remove Discontinued Operations as outlined in Note 6.
The tax credit for the year differs from the standard rate of corporation tax
in the UK of 19% (2022: 19%). A reconciliation is provided in the table below:
2023 2022
Continuing Operations((1)) £'000 £'000
Loss before tax (3,657) (1,677)
(695) (319)
Notional tax credit at standard rate of 19% (2022: 19%)
Effects of:
Expenses not deductible for tax purposes 429 (24)
Non-qualifying depreciation - 7
Adjustments to brought forward value (78) (25)
Effect of deferred tax rate changes on realisation and recognition - 94
Deferred tax not recognised 32 46
Utilisation of losses not provided for 5 -
Tax losses carried forward 104 240
Adjustment to agree foreign tax charge 119 72
Other (4) 38
Total income tax (credit)/charge (88) 129
((1) ) Comparative figures for the year ended 31 March 2022 have been
restated to remove Discontinued Operations as outlined in Note 6.
13. Earnings per share
2023 2022
Continuing Operations((1)) £'000 £'000
Loss attributable to shareholders (3,569) (1,806)
Add: non-recurring items 3,415 1,205
Add: amortisation of intangible assets acquired through business combinations 587 588
Add: net exchange (gains)/losses (Note 10) (297) (147)
Add: share-based payment expense/(credit) 63 (48)
Adjusted post-tax profit/(loss) attributable to shareholders 199 (208)
((1) ) Comparative figures for the year ended 31 March 2022 have
been restated to remove Discontinued Operations as outlined in Note 6.
2023 2022
Discontinued Operations £'000 £'000
Profit attributable to shareholders 884 234
Add: non-recurring items (2,019) 132
Add: amortisation of intangible assets acquired through business combinations 183 274
Adjusted post-tax (loss)/profit attributable to shareholders (952) 640
2023 2022
Ordinary Ordinary
shares shares
Weighted average number of shares
In issue during the year - basic 23,956,124 22,367,910
Adjustment for share options - -
In issue during the year - diluted 23,956,124 22,367,910
Performance Share Plan (PSP) options over 1,420,791 Ordinary shares have not
been included in the calculation of diluted EPS for the year ended 31 March
2023 because their exercise is contingent on the satisfaction of certain
criteria that had not been met at that date.
2023 2022
Pence Pence
Continuing Operations((1)) per share per share
Earnings per share - continuing operations
Basic (14.90) (8.07)
Diluted (14.90) (8.07)
Adjusted earnings per share - continuing operations
Basic 0.83 (0.93)
Diluted 0.83 (0.93)
((1) ) Comparative figures for the year ended 31 March 2022 have
been restated to remove Discontinued Operations as outlined in Note 6.
2023 2022
Pence Pence
Discontinued Operations per share per share
Earnings per share - continuing operations
Basic 3.69 1.05
Diluted 3.69 1.05
Adjusted earnings per share - continuing operations
Basic (3.97) 2.86
Diluted (3.97) 2.86
2023 2022
Pence Pence
TOTAL per share per share
Earnings per share
Basic (11.21) (7.03)
Diluted (11.21) (7.03)
Adjusted earnings per share
Basic (3.14) 1.93
Diluted (3.14) 1.93
14. Goodwill
2023 2022
£'000 £'000
Cost as at 1 April 28,911 28,911
Disposals in the year (1,992) -
Cost as at 31 March 26,919 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. The CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cashflows from
other groups of assets. Management determined that the smallest level that
they could reasonably allocate the group of assets to was MD&T CGU and
Dods CGU.
Of the carrying value of goodwill, £15.6 million has been allocated to the
MD&T CGU (2022: £15.6 million), and £11.3 million had been allocated to
the Dods CGU (2022: £13.3 million).
Goodwill is not amortised but is tested annually for impairment.
In the prior year, the assessment for impairment was undertaken 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 five-year period, considering past
performance, known developments and committed plans, and expectations for
future business developments. Management selected a discount rate (10.52%)
reflective of the Group's estimated weighted average cost of capital and the
cost of debt financing for the Group, which it considered reflected the market
assessments of the time value of money and the risks specific to each separate
business.
In the current year, the assessment for impairment has been undertaken with
the recoverable amount being determined as fair value less costs to sell,
under Level 3 of the fair value hierarchy of IFRS 13, the key assumptions
being the assessment of fair value and the estimate of costs to sell.
The Group assessed fair value using the expected recurring earnings of the
CGUs, based on the Board's approved projections, and the average earnings
multiples for a group of listed businesses which the Directors consider
comparable to the MD&T and Dods CGUs and for which published information
allowing a comparable assessment is available. The estimate of costs to sell
was based on management's knowledge and experience of costs incurred on
transactions to buy and sell similar assets.
The Directors have changed the basis for assessment as they consider the fair
value less costs to sell method to be more applicable to the Group's
circumstances and strategy.
Based on the above assessments, the Directors concluded at each year-end that
the recoverable amount for each CGU was in excess of their carrying value,
including the value of goodwill, for both the MD&T and Dods CGUs.
Therefore no impairment charge was recognised in the year (2022: £nil).
15. Intangible assets
Under construction capitalised costs
Assets acquired
through business
combinations(1) Software Total
£'000 £'000 £'000 £'000
Cost
- 34,116
At 1 April 2022 28,042 6,074
Transferred from tangible fixed assets (Note 16) - - 70 70
Additions - internally generated - 101 74 175
Disposals (16,833) (3,999) - (20,832)
At 31 March 2023 11,209 2,176 144 13,529
Accumulated amortisation
20,145 4,145 - 24,290
At 1 April 2022
Charge for the year 770 322 - 1,092
Disposals (15,825) (3,936) - (19,761)
At 31 March 2023 5,090 531 - 5,621
Net book value
At 31 March 2022 7,897 1,929 - 9,826
At 31 March 2023 6,119 1,645 144 7,908
( )
(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 2022 18,934 1,277 7,677 154 28,042
(13,451) (1,277) (2,051) (54) (16,833)
Disposals
At 31 March 2023 5,483 - 5,626 100 11,209
Accumulated amortisation
4,972 20,145
At 1 April 2022 13,742 1,277 154
Charge for the year 260 - 510 - 770
Disposals (12,443) (1,277) (2,051) (54) (15,825)
At 31 March 2023 1,559 - 3,431 100 5,090
Net book value
2,705 7,897
At 31 March 2022 5,192 - -
At 31 March 2023 3,924 - 2,195 - 6,119
15. Intangible assets continued
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 £3.9 million (2022: £4.0 million).
Included within intangible assets are internally generated assets with a net
book value of £1.8 million (2022: £1.6 million).
During the period there was £nil expense to income statement for Research
& Development (2022: £nil)
16. Property, plant and equipment
Leasehold Improvements IT Equipment and Fixtures and Fittings
Total
£'000 £'000 £'000
Cost
At 1 April 2022 2,037 2,521 4,558
Transferred to intangible fixed assets - (70) (70)
Additions - 69 69
Foreign exchange differences - (1) (1)
Disposals (2,037) (1,070) (3,107)
At 31 March 2023 - 1,449 1,449
Accumulated depreciation
1,623 2,751
At 1 April 2022 1,128
Charge for the year 209 469 678
Disposals (1,337) (984) (2,321)
At 31 March 2023 - 1,108 1,108
Net book value
898 1,807
At 31 March 2022 909
At 31 March 2023 - 341 341
17. Subsidiaries
Company Activity % holding Country of registration
Dods Group Limited(1) Political monitoring 100 England and Wales
Le Trombinoscope SAS(2) Political monitoring 100 France
Merit Data & Technology Limited(1) Data and technology 100 England and Wales
Merit Data and Technology Private Limited(3) Data and technology 99.99 India
European Parliamentary Communications Services SPRL(4) 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
On 30 November 2022, the Group disposed of its shareholdings in the following
companies:
Company Activity
Political Engagement Limited(5) Publishing
Fenman Limited Publishing
Holyrood Communications Ltd Publishing
Total Politics Limited Publishing
Training Journal Limited Holding company
On 14 March 2023, notice to strike off and dissolve three of the Group's
subsidiaries - Monitoring Services Limited, Vacher Dod Publishing Limited, and
VDP Limited - was published in the London Gazette. These three companies were
formally dissolved on 30 May 2023.
There were no acquisitions during the current year.
1 Registered address: 9th Floor, The Shard, 32 London Bridge Street,
London, SE1 9SG.
2 Registered address: Tour Voltaire, 1 place des Degrés - La Défense,
92800 Puteaux, Paris, France.
3 Registered address: SP 52, 3(rd) Street, Ambattur Industrial Estate,
Chennai 600 058.
4 Registered address: Boulevard Charlemagne 1, 1041 Bruxelles, Belgium.
5 Incorporated on 5 July 2022.
18. Investments
Investments are presented on the balance sheet as follows:
2023 2022
£'000 £'000
Non-current asset investments
Investments in Associates - 327
Other Unlisted Investments 450 450
450 777
Current asset investments
Investment in Associate held for resale - 410
450 1,187
The above balances are represented by:
2023 2022
£'000 £'000
Investments in Associates - 737
Other unlisted investments 450 450
450 1,187
Investments in Associates
During the year, the Group disposed of its shareholdings in both of its former
Associates, Sans Frontières Associates Ltd (SFA) and Social 360 Limited. The
entities each had share capital consisting solely of ordinary shares, which
were held directly by the Group prior to disposal The Group accounted for both
entities as equity-accounted Associates up to the date of disposal.
Carrying Share of Share of Carrying
Amount profit before tax Disposed amount
% ownership 2022 tax in year charge in the year 2023
Name of entity £'000 £'000 £'000 £'000 £'000
Sans Frontières Associates Ltd 40% 327 252 (32) (547) -
Social 360 Limited 30% 410 - - (410) -
737 252 (32) (957) -
Place of business/country of incorporation of both entities is England and
Wales.
The total share of profit recognised from Associates during the year, which is
based on the unaudited management accounts as 31 March 2023, is £220k (2022:
£117k). This is the net of the Group's share of Associates' profit before tax
of £252k less share of Associates' tax charge of £32k.
The Group recognised a loss on disposal of Associates of £303k during the
year, having made an impairment charge of £97k against the carrying value of
its investment in Social 360 Limited in the prior year (current year: £nil
impairment charge).
Other unlisted Investments
Fair value 2023 2022
£'000 £'000
At 01 April 450 -
Additions 51 450
Unrealised losses recognized though profit and loss (51) -
At 31 March 450 450
In 2019, The Group acquired a 13.3% stake in Acolyte Resource Group Limited as
part of the acquisition of Meritgroup Limited. 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 participated in a fundraising round by Acolyte
Resource Group Limited via a debt-for-equity swap and increased its
shareholding to 13.5%. The £51k book cost of this investment was written off
during the year.
During the prior financial year, the Group acquired a 9.2% 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 fair value through profit and loss.
The Directors' assessment of the fair value of other unlisted investments
falls within Level 3 of the fair value hierarchy of IFRS 13. This assessment
has been based on management's experience of investing in unlisted investments
and the financial information, including financial projections, received from
the investee companies. As such, the fair value can be subject to material
change as the investee business develops and performs over time.
The Directors have determined that the fair value (FVTPL) of each investment
is as follows:
Investee entity 2023 2022
£'000 £'000
Acolyte Resource Group Limited - -
Web Data Works Limited 450 450
£51,000 of loss in respect of these investments has been recognised in the
year (2022: £nil).
19. Work in progress and inventories
2023 2022
£'000 £'000
Work in progress and inventories - 14
- 14
20. 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:
2023 2022
£'000 £'000
Financial assets
Trade and other receivables (amortised cost) 4,342 4,346
Derivative Contracts (FVTPL*) - 35
Loan receivable (amortised cost) - 210
Deferred consideration receivable (amortised cost) 450 -
Cash and cash equivalents (amortised cost) 2,144 2,321
6,936 6,912
Financial liabilities
Trade and other payables (amortised cost) (3,501) (4,618)
Derivative Contracts (FVTPL*) (5) -
Lease liabilities (amortised cost) (1,880) (6,721)
Bank loan & RCF (amortised cost) (4,715) (4,378)
(10,101) (15,717)
Net financial assets and liabilities (3,165) (8,805)
*FVTPL stands for "Fair value through profit and loss".
The deferred consideration receivable is due within the next 12 months and
accrues no interest. Its fair value is therefore the same as the booked value
with no discounting of the outstanding amount.
Between 1 August 2022 and 30 January 2023, the Group signed forward contracts
for a total value of approximately £2.1 million with maturity dates ranging
from 20 April 2023 to 20 September 2023. 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 2023, £422,000 of the Group's trade receivables were exposed to
risk in countries other than the United Kingdom (2022: £475,000).
The ageing of trade receivables at the reporting date was:
Provided Loss Allowance Provided Loss Allowance
Gross Gross
2023 2023 2022 2022
£'000 £'000 £'000 £'000
Trade Receivables 3,682 (82) 3,971 (103)
3,682 (82) 3,971 (103)
The maximum credit risk exposure for which the Group has made provision is
£82k.
Gross Default rate Lifetime expected
carrying amount credit losses*
£'000 £'000
Current 2,603 0.40% 10
1-30 days past due 827 1.00% 8
31-60 days past due 94 3.40% 3
61-90 days past due 76 34.40% 26
More than 90 days past due 82 41.90% 35
3,682 82
* Expected credit losses = Gross carrying amount x Default rate.
The movement in allowance for doubtful accounts in respect of trade
receivables during the year was as follows:
2023 2022
£'000 £'000
Balance at the beginning of the year 103 162
Charged in the year - -
Released in the year (21) (59)
Balance at the end of the year 82 103
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.
Total
Bank Loan Lease Financing
and RCF Liabilities Liabilities
£'000 £'000 £'000
At 1 April 2021 4,631 7,936 12,567
Cash movements:
Repayments of Term Loan principal (253) - (253)
Lease payments - (1,871) (1,871)
Non-cash movements:
Lease additions - 287 287
Lease interest - 369 369
At 31 March 2022 4,378 6,721 11,099
Cash movements:
Repayment of 2019 Loan and RCF (4,378) - (4,378)
Drawdown of 2022 Term Loan and RCF 5,000 - 5,000
Repayment and cancellation of 2022 Term Loan (2,000) - (2,000)
Repayments of Term Loan principal (85) - (85)
Drawdown of 2023 Property Term Loan 1,800 - 1,800
Lease payments - (1,897) (1,897)
Non-cash movements:
Lease disposals - (3,242) (3,242)
Lease interest - 298 298
At 31 March 2023 4,715 1,880 6,595
Banking covenants
Under the Group's bank facilities (see Note 23), 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
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 Cashflow
Ratio Cover Ratio Cover Ratio
30 June 2023 2.0x 3.0x n/a
30 September 2023 2.0x 1.5x n/a
31 December 2023 2.0x 1.5x n/a
31 March 2024 2.0x 1.5x n/a
30 June 2024 1.5x 1.5x n/a
30 September 2024 1.5x 1.5x n/a
31 December 2024 1.5x 1.5x n/a
31 March 2025 1.5x 3.0x 1.5x
30 June 2025 1.0x 3.0x 1.5x
30 September 2025 1.0x 3.0x 1.5x
31 December 2025 and thereafter 1.0x 3.0x 1.5x
The Directors have prepared and approved monthly-phased projections for the 21
months from the balance sheet date. The Directors consider the projections to
be reasonable.
In agreeing to the above covenants, the projections 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 table below analyses the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities as at 31 March 2023.
The amounts disclosed in the table are the contractual undiscounted cash
flows.
Due within Due Due after
1 year 2-5 years 5 years Total
£'000 £'000 £'000 £'000
Trade and other payables 3,501 - - 3,501
Derivative contracts 5 - - 5
Bank loan/RCF 3,373 1,342 - 4,715
Lease liabilities 769 1,501 37 2,307
The Group has a long standing and supportive relationship with Barclays,
having agreed secured loan facilities for a five-year period to 2027 in July
2022. The Group has recently agreed an additional 18-month facility to part
fund the disposal of the Group's lease of premises in The Shard, London. The
Group has a five-year plan that has been shared with Barclays and formed the
basis of the banking arrangements that have been 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; see Notes 21 and 22.
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 25.
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 £184,000 Trade receivables,
£821,000 Cash and cash equivalents and £263,000 Trade payables for the year.
At 31 March 2023, it is estimated that a general increase of one percentage
point in interest rates would have decreased the Group's profit before tax
from Continuing Operations by approximately £47,000 (2022: £50,000).
It is estimated that a general increase of one percentage point in the value
of the Euro and Dollar against Sterling would have increased the Group's
profit before tax from Continuing Operations by approximately £23,000 (2022:
£14,000).
It is estimated that a general increase of one percentage point in the value
of the Rupee against Sterling would have decreased the Group's profit before
tax from Continuing Operations by approximately £84,000 (2022: £72,000).
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.
2023 2022
Capital Management £'000 £'000
Cash & cash equivalents 2,144 2,321
Share Capital 6,708 6,708
Other reserves 14,699 14,666
Retained Earnings 10,976 13,032
34,527 36,727
21. Other financial assets
2022
Trade and other receivables 2023 (restated*)
£'000 £'000
Trade receivables 3,600 3,868
Other receivables 742 513
Deferred consideration receivable 450 -
Prepayments and accrued income 710 773
5,502 5,154
*comparative figures for the year ended 31 March 2022 have been restated to
present deferred tax assets within non-current assets, as outlined in Note 30.
Trade and other receivables denominated in currencies other than Sterling
comprise £137,000 (2022: £339,000) denominated in Euros, £24,000 (2022:
£49,000) denominated in USD and £23,000 (2022: £87,000) denominated in
Indian Rupees.
The Group had a balance of £56,000 of accrued income relating to contract
assets (2022: £421,000).
2023 2022
Cash related £'000 £'000
Cash and cash equivalents 2,144 2,321
2,144 2,321
Cash includes £251,000 (2022: £141,000) denominated in Euros, £29,000
(2022: £126,000) denominated in USD and £541,000 (2022: £311,000)
denominated in Indian Rupees.
22. Trade and other payables
2023 2022
Current £'000 £'000
Trade creditors 490 396
Other creditors including tax and social security 1,058 2,876
Accruals and deferred income 5,100 6,446
6,648 9,718
Current liabilities denominated in currencies other than Sterling compromise
£21,000 (2022: £24,000) denominated in Euros, £7,000 (2022: £nil)
denominated in USD and £235,000 (2022: £21,000) denominated in Indian
Rupees.
The Group had a balance of £3.1 million of deferred revenue relating to
contract liabilities (2022: £5.1 million).
23. Net debt
2023 2022
£'000 £'000
Bank loan / RCF due within one year 3,373 2,860
Bank loan due after more than one year 1,342 1,518
4,715 4,378
Cash and cash equivalents (2,144) (2,321)
Net debt 2,571 2,057
Interest-bearing loans and borrowings
On 22 July 2022, the Company agreed new secured loan facilities with Barclays
which include:
§ 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.
On 1 December 2022, the Company repaid and cancelled £2 million of the Term
Loan following receipt of the proceeds of disposals.
On 22 March 2023, the Company secured a further £1.8 million 18-month Term
Loan, amortising on a straight-line basis at £300,000 per quarter, in order
to fund the disposal of the Company's Shard lease.
At 31 March 2023, the balances outstanding on the Company's loan and RCF
facilities were as follows:
Facility Outstanding
at 31 March 2023
£'000
£1 million Term Loan: 915
£1.8 million Term Loan: 1,800
RCF 2,000
Total Term Loans and RCF 4,715
See Note 20 for the maturity analysis of the bank loan.
24. 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 2021 (959) 24 25 688 (222)
(Charge)/credit (99) 62 37 637 637
At 31 March 2022 (1,058) 86 62 1,325 415
(Charge)/credit 165 (83) 119 352 553
Derecognised on disposal 252 - - (1,036) (784)
At 31 March 2023 (641) 3 181 641 184
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
£9.6 million (2022: £13.6 million) available to offset against future
taxable profits. Of these, the Group has recognised deferred tax assets of
£641,000 (2022: £1,325k) in respect of carried forward tax losses of £2.2
million (2022: £5.3 million) as it is probable that these assets shall be
recovered against the taxable profits over the foreseeable period. On the
remaining £7.4 million (2022: £8.3 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.
25. Issued capital
9p deferred 1p ordinary 28p ordinary
shares shares shares Total
Number Number Number £'000
Issued share capital as at 31 March 2022 - - 23,956,124 6,708
Issued share capital as at 31 March 2023 - - 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 penny 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.
26. Leases
Right-of-use Lease
assets liabilities
£'000 £'000
As at 1 April 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)
Depreciation (1,338) -
Lease Interest - (298)
Lease payments(1) - 1,897
Disposals (2,448) 3,242
As at 31 March 2023 1,874 (1,880)
Current (678)
Non-current (1,202)
(1 ) Total lease payments in the year amounted to £1,901k (2022:
£2,424k), of which £4k (2022: £553k) was in settlement of trade creditors
and accruals at 31 March 2021.
The Consolidated income statement includes the following amounts relating to
leases:
2023 2022
£'000 £'000
Depreciation charge of right-of-use assets 1,338 1,315
Interest expense (included in finance cost) 298 370
The right-of-use assets relate to office space in four locations and at the
balance sheet date have remaining terms ranging up to 7 years.
There were £nil of expenses relating to diminutive payments not included in
the measurement of lease liabilities (2022: £nil).
Lease liabilities includes liabilities in respect of IT equipment with a cost
of £77,000 (2022: £77,000). These assets are capitalised within IT equipment
(see Note 16).
27. Share-based payments
Performance Share Plan (PSP)
During the prior year, the Company granted a conditional award to two
executive Directors under a performance share plan as below. No awards were
made in the current year.
Date of grant Director Outstanding Granted Lapsed Outstanding options at
Options at during During 31 March 2023
1 April 2022 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:
Date of grant 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. The PSP share
options outstanding during the year were as follows:
Number of Weighted average exercise price (pence)
Ordinary shares
As at 31 March 2022 1,420,791 n/a
Granted during the year - n/a
As at 31 March 2023 1,420,791 n/a
The following options were outstanding under the Company's PSP scheme as at 31
March 2023:
Date of grant 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 £63,000
(2022: £10,000 charge in respect of PSP and £58,000 credit in respect of
historic lapsed schemes).
28. 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 2023 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".
Funded status of the plan
2023 2022
£'000 £'000
Present value of funded defined benefit obligations (374) (392)
Fair value of plan assets 49 110
Present value of unfunded defined benefit obligations (325) (282)
Current (76) (85)
Non-current (249) (197)
Net Deficit (325) (282)
Net Liability (325) (282)
Movement in present value of obligation 2023 2022
£'000 £'000
At 1 April (392) (371)
Current service cost (83) (73)
Interest cost (24) (21)
Remeasurement losses (gains) (OCI)
Due to changes in financial assumptions 41 11
Due to experience adjustments 28 (7)
Benefits paid from fund 50 72
FX revaluation 6 (3)
At 31 March (374) (392)
Movement in fair value of plan assets 2023 2022
£'000 £'000
At 1 April 110 132
Net interest Income 8 9
Return on plan assets (24) (1)
Contribution by employer 6 41
Benefits paid (50) (72)
FX revaluation (1) 1
At 31 March 49 110
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 2023 2022
£'000 £'000
Service cost 83 73
Interest cost 24 21
Interest Income (8) (9)
FX Revaluation (5) 2
Total expense recognised in Consolidated income statement 94 87
Amounts recognised in Consolidated statement of OCI 2023 2022
£'000 £'000
Actuarial changes in financial assumptions (41) (11)
Actuarial experience adjustments (28) 7
Return on plan assets 24 1
Total credit recognised in Consolidated statement of OCI (45) (3)
Movement in pension scheme net deficit 2023 2022
£'000 £'000
Opening pension scheme net deficit (282) (239)
Contributions by employer 6 41
Consolidated income statement (94) (87)
Consolidated statement of OCI 45 3
Closing pension scheme net deficit (325) (282)
Principal actuarial assumptions (expressed as weighted averages) are as
follows:
Principal Actuarial assumptions 2023 2022
p.a. p.a.
Discount rate 7.35% 6.70%
Salary growth rate 7.00% 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 7.35% 6.70%
In valuing the liabilities of the pension fund, mortality assumptions have
been made as indicated below.
Mortality rates
Age (in years) 2023 2022
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 2023 the mortality rates were derived from the Indian Assured
Lives Mortality (2012-2014) report.
The Group expects to contribute approximately £76,000 in the next financial
year.
The weighted average duration of the defined benefit plan obligation at the
end of the reporting period is 6.15 years (2022: 6.13 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 2023 2022
£'000 £'000
p.a. p.a.
Discount rate
Increase by 0.5% 364 381
Decrease by 0.5% 385 405
Salary growth rate
Increase by 0.5% 383 402
Decrease by 0.5% 366 384
Withdrawal rate (W.R)
W.R x 110% 373 388
W.R x 90% 375 398
29. Related party transactions
MET operations
On 30 November 2022, the Group completed the disposal of the Media, Events and
Training operations of its Dods Political Engagement business (together, the
"MET Operations") to Political Holdings Limited, for a cash consideration of
£4.5 million. Political Holdings Limited is a private company owned by Lord
Ashcroft KCMG PC, a substantial shareholder in the Company as defined by the
AIM Rules. Further, Angela Entwistle, a non-executive director of the Company,
is a director of Political Holdings Limited. The Disposal therefore
constitutes a related party transaction under Rule 13 of the AIM Rules. The
Independent Directors of the Company (being all Directors save for Angela
Entwistle) consulted with Canaccord Genuity Limited in its capacity as the
Company's nominated adviser for the purposes of the AIM Rules and concluded
following this consultation that the terms of the Disposal to be fair and
reasonable insofar as the Group's shareholders are concerned. At the
year-end, 10% of the cash consideration (£450,000) remains outstanding and is
due for payment in October 2023.
As part of the disposal of the MET Operations, the Group agreed to provide
transitional services to the Political Holdings Limited group of companies
covering areas such as occupancy, IT systems and support and finance and
accounting services. In total, the group charged £416,000 for these services
during the year, which has been recognised as Other Operating Income within
the Income Statement. At 31 March 2023, a balance of £145,991 was outstanding
in respect of invoicing for these services.
Since its acquisition of the MET operations, the Political Holdings Limited
group has been a customer of MD&T and was billed £35,336 during the year
for marketing and data services. At 31 March 2023, there was a balance of
£16,094 due.
Further, as part of the disposal, the Group has continued to act as agent for
the political Holdings Limited group, invoicing customers, collecting book
debts and paying for services under contracts which were pending legal
novation to Political Holdings Limited group companies. During the year,
revenue of £7,722,749 was invoiced, cash of £5,010,321 was collected and
payments for purchases and payroll amounting to £3,776,250 were made by the
Group on behalf of Political Holdings Limited group companies. None of these
revenues or costs, all of which arises post disposal are recognised within the
Income Statement of the Group. At 31 March 2023, £233,053 of funds were held
on trust for Political Holdings Limited group companies.
Investments and Associates
During the year, the Group received a repayment of £210,000 (2022: £350,000)
of its interest free loan to its then Associate, Sans Frontières Associates
(SFA), reducing the balance outstanding to £nil (2022: £210,000).
On 3 March 2023, the Company disposed of its 40% equity stake in SFA for cash
consideration of £250,000 via a share repurchase by SFA.
During the prior year, an amount of £62,945 was payable to the Company's then
Associate, Social 360 Limited, in relation to profit-share for monitoring
services provided. The balance outstanding at 31 March 2022 of £16,973 was
paid prior to disposal of the Company's shares in Social 360 Limited for cash
consideration of £420,000 on 8 August 2022.
During the year, an amount of £nil (2022: £105,000) was payable to 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 2023, there was a balance of
£105,000 (2022: £105,000) outstanding.
During the year, an amount of £18,000 (2022: £56,000) was billed in relation
to recruitment services charged by Acolyte Resource Group Limited, a company
in which the Group has a 13.5% investment, and of which Cornelius Conlon is a
Director. At 31 March 2023, there was a balance of £nil (2022: £nil)
outstanding.
Acolyte Resource Group Limited is also a customer of MD&T and was billed
£237,201 (2022: £290,000) for Software and Technology Resourcing services.
At 31 March 2023, there was a balance of £63,989 (2022: £104,000) due.
Meritgroup Limited acquisition
Cornelius Conlon, a Director of the Company was entitled to shares and a cash
consideration on the first 3 anniversaries of the Meritgroup Limited
acquisition in 2019. During the year, Cornelius Conlon received cash
consideration of £220,000, In the prior year, he received cash consideration
of £220,00 plus 854,732 ordinary shares having a value of £533,352.
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 £726,000 (2022: £781,000) were made
to Merit Software Services Private Limited in relation to the lease and other
property-related costs.
Other related party transactions
During the year, an amount of £141,181 (2022: £nil) was billed for Software
and Technology Resourcing services to System1 Group plc, a company of which
Philip Machray is a Non-Executive Director and shareholder. At 31 March 2023,
there was a balance of £44,423 (2022: £nil) outstanding.
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 (2022: £30,000) to the Company for the
services of Angela Entwistle as a Non-Executive Director. At 31 March 2023,
the balance outstanding was £2,500 (2022: £2,500).
The Spouse of Con Conlon, a Director of the Company, is employed by a
subsidiary of the Company and received £44,873 remuneration in the year
(2022: £35,897).
The Executive Directors of the Group are considered key management personnel.
See Note 8 for details of Directors' remuneration.
30. Prior period restatement
The consolidated statement of financial position for the year ended 31 March
2022 has been restated to correctly classify deferred tax assets of £415,000
as non-current assets. These were previously included within Current assets as
part of Trade and other receivables.
The reclassification has no impact on Total assets, Total equity and
liabilities or Capital and reserves as at the 31 March 2022, nor the
Comprehensive income for the year ended 31 March 2022.
The impact of the reclassification on items within the Consolidated statement
of financial position is as follows:
At 31 March 2022 As previously Change As restated
reported £,000 £'000
£'000
Total non-current assets 46,981 415 47,396
Current assets 8,114 (415) 7,699
Assets held for resale 410 - 410
Total assets 55,505 - 55,505
ENDS
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