REG - Skillcast Group PLC - Final results for the year ended 31 December 2021
10/05/2022 07:00
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RNS Number : 8631K Skillcast Group PLC 10 May 2022
The information contained within this announcement is deemed by the Company to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended.
10 May 2022
Skillcast Group PLC
("Skillcast", the "Group" or the "Company")
Results for the year ended 31 December 2021
Skillcast Group (AIM: SKL), the provider of content and technology for digital
compliance transformation, is pleased to announce its audited results for the
year ended 31 December 2021.
Financial and operating highlights
2021 2020
£ million £ million
Revenue 8.4 7.3
Revenue growth 15% 8%
Gross Margin 71% 69%
Annualised recurring revenue* 5.8 4.5
Adjusted EBITDA* 1.1 1.1
Cash in bank 7.9 3.8
· Revenue growth of 15% (2020: 8%) driven by increased subscription
revenue
o Second half recovery also in professional services revenues
· H1 2021 total revenue 4% higher than H1 2020
· H2 2021 total revenue 27% higher than H2 2020
· Cash in bank of £7.9 million (31 December 2020: £3.8 million) due
to £3.5 million placing, higher revenues and improved debt collections
· Proposed final dividend of 0.279p per share to give total dividend
for year of £400k or 0.447p per share, based upon the number of shares
currently in issue, in line with previous year
Total revenue growth driven by recurring revenues from subscriptions
· 62% of total revenues were recurring (2020: 56%)
· Recurring revenues from subscriptions grew by 28% to £5.2 million
(2020: £4.1 million)
· Non-recurring revenues from professional services steady at £3.2
million (2020: £3.2 million)
Current trading and outlook
· Strong start with first quarter client acquisitions higher than first
quarter of 2021
· Continued growth expected in recurring revenues from subscriptions,
while professional services remains steady
Vivek Dodd, Chief Executive Officer of Skillcast, said:
"We are pleased with how the increase in our subscription revenue helped
accelerate total revenue growth from 8% in 2020 to 15% in 2021. We help our
clients build more ethical, inclusive and resilient workplaces in an
increasingly hybrid and fluid work environment. Companies face increasing
regulations and societal demands which, along with cost pressures, are causing
them to rethink and transform their staff compliance. Skillcast is helping
them to educate employees, and record, monitor, analyse and evidence their
activities for legal, regulatory and standards compliance with our e-learning
content and compliance technology.
"Over the next two years we intend to use the funds we raised in December to
build on our leadership position through investments in our technology and
content IP and through promoting our solutions to a wider market. The cost of
these investments will impact profit margins in the short term but is designed
to drive future growth. Our focus is on building ARR to enhance the
sustainable recurring nature of our business.
"Trading in the early part of the year has started well, in line with our
expectations, with continued year on year growth in subscription related
revenue. We have made material progress on hiring the new talent needed to
achieve our technology development plans and our new business development team
has gained early successes with new client acquisitions in the first quarter
up on the same period last year.
"With a strong balance sheet, an excellent set of products and an enthusiastic
and well-motivated team, we believe we are well placed to deliver on the
growth plans we have set out to build a substantial and sustainable digital
compliance transformation business."
*Further details on the calculation of adjusted EBITDA and ARR are set out in
the Financial Review below
Enquiries:
Skillcast Group plc +44 (0)20 7929 5000
Richard Amos, Chairman
Vivek Dodd, Chief Executive Officer
Chris Backhouse, Chief Financial Officer
Allenby Capital Limited (Nominated Adviser & Broker) +44 (0)20 3328 5656
James Reeve, Piers Shimwell (Corporate Finance)
Tony Quirke (Sales and broking)
Chairman's Statement
I would like to take this opportunity to thank shareholders who supported our
flotation in December and the associated fund-raise that we undertook at the
same time. That process was the culmination of several years of preparation by
the executive team and marks a pivotal moment in the growth aspirations of the
business. We are very excited to be entering this new investment phase for the
Company.
Results and Dividend
Financial results for the year ended 31 December 2021 were encouraging.
Revenue of £8.4 million was some 15% up on the prior year overall (2020:
£7.3 million) and within that the strategically important
software-as-a-service ("SaaS") subscription revenue was up 28%. Annual
recurring revenue ("ARR"), our key performance indicator to measure
subscription sales progress, grew by 29% to £5.8 million in December 2021. As
anticipated, consistent with the investment we are making, despite the growth
in revenue, adjusted EBITDA of £1.1 million was similar to the prior year
(2020: £1.1 million). This profit performance reflected the start of the
investment programme which is supported by the recent fund raise. Our stated
plan is to expand our sales and marketing capability and to enhance our
technology. The cost of both of these will impact profit margins in the short
term but is designed to drive future growth.
With a business that is backed by recurring revenues that provide strong cash
generation, the Board is committed to paying dividends. At the AGM on 22 June,
the Board will propose a final dividend of 0.279p per ordinary share. Taken in
combination with an interim dividend of 0.188p per share that was paid in
November 2021, this takes the full year dividend to £400,000 (2020:
£400,000) or an equivalent of 0.447p per share based upon the number of
shares currently in issue. It is the Board's stated policy to maintain the
full year dividend at least at this level for the foreseeable future.
Strategy
Skillcast exists to enable companies of all sizes and markets to address in a
digital format their need to ensure that their workforces are compliant with
an ever-increasing range of regulatory requirements. To do this we provide an
easy to integrate to RegTech platform which incorporates engaging,
company-specific, tailored e-learning based training content, policy
attestation hubs, registers for recording activities like continuing
professional development ("CPD") undertaken or gifts and hospitality received
and the tools to monitor and administer all of the above.
With the growing burden of compliance that all companies are experiencing we
believe that this is a key moment in the development of the digital compliance
transformation market to help companies deal with this challenge. With
Skillcast's history in producing engaging customisable e-learning content and
by harnessing that with our internally developed Regtech platform, we believe
we are uniquely placed to offer companies an easy to adopt, low-cost solution
to something that is currently causing considerable challenges and concern.
Our strategy is to grow our recurring subscription-based revenues through a
focus on supporting existing clients and acquiring similar new customers.
Naturally we will primarily target new clients in regulated industries where
the burden of compliance is at its highest although our services are equally
applicable to all companies that have a need for efficient workplace
compliance solutions. Whilst we are equally able to support companies of all
sizes, our 'sweet spot' is medium sized enterprises for whom compliance
requirements are increasingly complex but who are not large enough to warrant
full bespoke solutions.
The recent fund-raise that we completed will allow us to invest in
accelerating planned enhancements to our technology platform to make it more
scalable and easier for customers to access and integrate with. It is also
allowing us to expand our sales and marketing capability which in turn will
allow us to build market share more rapidly as the market which we serve
grows.
People and Board
I would like to thank and congratulate Vivek and the entire Skillcast team for
all that they have achieved over the last twelve months. Their achievements in
continuing to develop and grow the business despite the considerable
distraction of the flotation process is something for which they should be
rightly proud.
I also want to recognise my fellow Non-Executive Directors, Sally Tilleray who
chairs the Audit Committee and Isabel Napper who chairs the Remuneration
Committee. I've enjoyed working alongside them as we have helped the executive
team to transition Skillcast to life as a public Company and develop the
governance structures that are now required.
And I would also like to welcome the eighteen new members of the team who have
joined us since the flotation. As we embark on our new growth journey their
contribution will be vital and I look forward to working with them all.
Current Trading and Outlook
We believe that Skillcast faces a timely opportunity in a digital compliance
transformation market that offers potential for significant growth with
targeted and appropriate investment. That is why we undertook the fund- raise
in December. Investment in the technology enhancements and marketing
expansion, which that cash allows us to undertake, will impact profits in the
short term, as we explained at the time of the fund-raise, but will ultimately
allow the business to accelerate top-line growth and capture share as the
market develops.
Trading in the early part of the year has started well, in line with our
expectations, with continued year on year growth in subscription related
revenue. We have made material progress on hiring the new talent needed to
achieve our technology development plans and our new business development team
has gained early successes with new client acquisitions in the first quarter
up on the same period last year.
With a strong balance sheet, an excellent set of products and an enthusiastic
and well-motivated team, we believe we are well placed to deliver on the
growth plans we have set out to build a substantial and sustainable digital
compliance transformation business.
Richard Amos
Non-Executive Chairman
Chief Executive Officer's Review
Skillcast's off-the-shelf ("OTS") e-learning courses, technology, and
award-winning customer service help our customers achieve their compliance
objectives.
Our courses are organised into libraries, which we provide to customers on
annual subscriptions. This model simplifies their procurement process and
enables them to deliver high- quality training on key compliance topics at
short notice and with minimal effort. They can readily customise our OTS
courses, or take advantage of our customisation service if they don't have the
resource, or otherwise wish to delegate the task.
Key Products
Courses are delivered via our technology platform, which comprises the
following products, also available on annual subscriptions:
· Learning management system ("LMS") - for managing and recording
compliance and other mandatory training initiatives
· Policy Hub - for authoring policies and obtaining employee
attestations
· Anonymous surveys - for obtaining honest and unreserved employee
feedback on critical environmental, social and governance ("ESG") topics
· Staff declarations - for collecting disclosures and
self-assessments from employees
· Compliance registers - for recording activities that impact individual
and corporate compliance, such as gifts, hospitality, personal account
dealing, whistleblowing
· Training 360 - for recording in-person training, mentoring and
consultations
· Events management - for managing live training events
· SMCR 360 - to help financial firms manage all aspects of compliance
with the Senior Managers and Certification Regime ("SM&CR")
· Data integration options with customers' Human Resource or
Enterprise Resource Planning ("ERP") systems
The combination of the customisable content and the functionality of the
integrated platform allows our customers to manage their staff compliance
burden efficiently and helps them to reduce significantly their cost per
employee and regulatory compliance risk, when compared to traditional methods.
All Skillcast subscriptions are backed by highly responsive customer service.
We designate a dedicated Customer Success Manager ("CSM") for each customer.
The CSMs are organised into small groups led by a team leader to ensure
quality and continuity of service. In 2021, we received the Feefo Platinum
Trusted Service Award and e-learning Industry's Customer and User Experience
awards. We are proud of these since they are based on verified ratings and
reviews by current customers.
In addition to subscriptions, we provide a bespoke e-learning development
service. This work builds domain expertise and brand and complements our
content and technology subscriptions.
Market Opportunity
Skillcast operates in a $10 billion market for governance, risk and compliance
software. A structural shift is underway to digital compliance transformation
as companies increasingly use cloud-based platforms for staff training and
compliance processes. With this helpful backdrop, we are investing in our
people, content, technology, and processes to stay ahead of the competition.
Our admission to trading on AIM is helping us to attract talent, win customers
and strengthen our leadership in the field of digital compliance
transformation.
Organic Growth
Our recurring content and technology (SaaS) subscriptions give us consistent,
compounding revenues and high- quality earnings. We recognise annual recurring
revenue ("ARR") as the key driver of long-term shareholder value. The ARR grew
entirely organically at 29% per annum from £4.5 million in December 2020 to
£5.8 million in December 2021.
Additional sales to existing customers during the year ("upsells"), more than
offset any contracts that were not renewed ("churn"), or which were renewed at
a lower level ("downsells"). The upsells were driven by our customers
increasing their user numbers and by demand for our policy management system,
hybrid DSE self-assessment and SMCR 360 toolkit. We acquired over 200 new
customers during the year, which lifted our ARR further.
The revenue from professional services, mainly from bespoke e-learning
development for customers and customisation of OTS courses, was steady at
£3.2 million (2020: £3.2 million). We reiterate our aim to hold this revenue
stream at this level as we focus our resources on growing ARR. The total
revenue was up 15% at £8.4 million (2020: £7.3 million), and adjusted EBITDA
was £1.1 million (2020: £1.1 million). The adjusted EBITDA is expected to
lag revenue growth as we have accelerated hiring to achieve faster growth in
future periods.
Our SaaS model gives us high revenue visibility, which together with the funds
raised upon admission to AIM, adds to our confidence in making this
investment. It also gives us positive cash flows as we typically contract with
clients annually and invoice the subscription cost upfront. Our operating cash
flow was up at £1.5 million (2020: £1.4 million) despite the substantial
payments to cover the IPO costs.
In 2021, we launched our new Training 360 product on the Skillcast Portal that
enables customers to record all types of training, mentoring and consultancy
and measure their progress against CPD targets. We also unveiled a new modern
scrolling presentation for our e-learning courses and additional gamification
features. Other notable improvements included automated assignments for annual
refreshers and contingent training, a new, visual reporting dashboard with
interactive drill-down, and several third-party integrations.
We will add more third-party integrations and the ability for customers to
self-manage their portals, and scale up our IT infrastructure with MS Azure to
support our ARR growth in 2022. We have enhanced the policy attestation
product on the Skillcast Portal to support policy update/approval workflow
this year and plan to make improvements to other products in addition.
COVID Disruption
The impact of COVID-19 related disruption in 2021 was less severe than the
previous year. Our teams showed flexibility and resilience when asked to
return to the office and later, when asked to go back to full-time working
from home, when the restrictions returned. We are immensely proud and grateful
for how our colleagues managed to keep up productivity, innovation and
customer service through these disruptions. Our teams have now settled into a
hybrid model of working from office and home.
As in previous years, we did not draw upon any government support in the UK,
Malta, or any other jurisdiction.
Environmental Performance
Environmental Social and Governance (ESG) is the purpose at the core of what
we offer and what we stand for. Our content and technology are designed to
support the ESG goals of our customers. We help them build a culture of
respect, inclusivity, integrity and compliance with laws, regulations and
standards. We also help them reduce energy consumption and CO2 emissions by
digitising many activities that previously required travel.
We have substantially reduced our carbon footprint due to travel, by moving to
a hybrid working model and switching in-person events to webinars. We are
aiming to be climate neutral by the end of 2022.
Vivek Dodd
Chief Executive Officer
Financial Review
Revenues for the year ended 31 December 2021 increased by 15% to £8.4 million
(2020: £7.3 million) which resulted in an adjusted EBITDA* of £1.1 million
(2020: £1.1 million) and after exceptional items of £0.9 million, a profit
after tax of £0.4 million (2020: £1.0 million).
Software-as-a-service (SaaS) subscription revenue continued to grow during the
year, up 28% to £5.2 million (2020: £4.1 million), whilst Professional
Services revenue closed at a similar level to last year at £3.2 million
(2020: £3.2 million).
Gross Margin grew to 71% (2020: 69%), with SaaS revenue, which typically
commands a higher gross margin, making up 62% of total revenues (2020: 56%).
Overheads, before depreciation, interest, and the exceptional costs relating
to the admission of the Company to AIM, increased from £3.7 million to £4.7
million (up 25%) as the business accelerated its investment in its sales and
technology teams, with a view to sustaining and accelerating the Company's
growth. Headcount increased by nineteen to 86, as new employees were welcomed.
Staff costs comprised 79% of these overheads (2020: 76%) and 66% of total
costs (2020:62%), with payroll costs (of both direct and indirect staff) up
£1.0m on the prior year.
Alternative Performance Measures
*Adjusted EBITDA
During the year the Group incurred certain administrative expenses in
anticipation of the placing and admission of the business to AIM, so as to
deliver the anticipated growth in the business post-admission. Had the
decision to undertake the placing and admission not been taken by the Group,
then such expenditure would not have been incurred.
The Group also incurred leasehold costs on the rental of office space which
under IFRS 16 is reflected by way of the capitalisation of the lease and a
related depreciation charge.
The Directors consider Adjusted EBITDA to be a more appropriate measure of
profitability than EBITDA (Earnings before interest, tax depreciation and
amortisation) being defined as EBITDA, less the additional administrative
expenses incurred in anticipation of the placing and admission, share-based
payments and after adding back leasehold depreciation and reinstating the
related rental charge (thereby reversing the IFRS16 leasehold property
treatment).
2021 2020
£'000 £'000
EBITDA from continuing operations 361 1,253
Costs incurred in progressing the Company's admission to AIM 876 25
Reversal of IFRS treatment of depreciation on treatment of property lease (198) (209)
Share-based payment 17 -
Adjusted EBITDA for the year from continuing operations 1,056 1,069
Annual Recurring Revenue (ARR)
ARR is also used to assess the performance and the trend of subscription
revenue. ARR is calculated by multiplying the Monthly Recurring Revenue
("MRR") by twelve. MRR is defined as the subscription revenue that was
recognised in a month, excluding any retrospective upward adjustments that
arise at the end of the contract where there have been more subscribers than a
client originally contracted for, less any contract losses (Churn), or
downward adjustments arising on contract renewal. The Directors consider that
the ARR, derived from software-as-a-service (SaaS) sales is a key measure of
the performance of the business. The ARR increased 29% to £5.8 million by
December 2021.
Key Performance Indicators ('KPIs')
The following KPIs are used to track the trading performance and position of
the business.
KPIs
2021 2020
£'000 £'000
Revenue 8,408 7,293
Software-as-a-service revenue (SaaS revenue) 5,227 4,088
Gross Margin 71% 69%
Adjusted EBITDA 1,057 1,069
Annualised recurring revenue (ARR) as at 31 December 5,775 4,468
Churn (as a percentage of ARR) 7% 11%
Number of employees at 31 December 86 67
Revenue
As noted above, the main driver for growth is the development of the Group's
SaaS revenues. These increased by 28% in the year, whilst Professional
Services revenues remained steady, as summarised below.
Revenue by Service 2021 2020
£'000 £'000
Software-as-a-Service (SaaS) 5,227 4,088
Professional Services 3,181 3,205
Total 8,408 7,293
Gross Profit
The gross profit generated in the period was £5.9 million (2020: £5.0
million), with gross margin increasing to 70.5% (2020: 68.9%) on the back of
higher SaaS revenues and despite increasing staff costs.
Overheads
Overheads were £5.8 million (2020: £4.0 million) increasing by £1.8m,
including c.£0.9 million of costs relating to the Company's admission to AIM
in December 2021 and as summarised below.
In June 2021 the business relocated its London offices to Leadenhall Street
under a five-year lease dated 25 May 2021 that expires in June 2026. The
capitalised value of this lease is £517,284. The Company spent £124,447 on
leasehold improvements (2020: £ Nil).
2021 2020
£'000 £'000
Staff costs 3,738 2,823
Professional fees 229 259
Advertising and Marketing 84 240
Office accommodation 158 73
Depreciation and amortisation 283 220
Other expenses 452 337
Total Overheads before exceptional costs 4,944 3,952
Costs relating to the Company's admission to AIM 876 25
Share-based payments 17 0
Foreign exchange losses 1 7
Interest 16 11
Total Overhead costs 5,854 3,995
Adjusted Operating Profit before Tax
Adjusted operating profit from operations before tax, exceptional costs and
share-based payments, but including depreciation and interest amounted to
£1.0 million (2020: £1.0 million).
Taxation
As a result of research and development tax credits, the Company is not liable
for any UK corporation tax for 2021 and as a result the Group had unutilised
tax losses carried forward of approximately £0.7 million (2020: £0.6
million) as at 31 December 2021. Given the varying degrees of uncertainty as
to the timescale of utilisation of these losses, the Group has not recognised
the potential deferred tax assets associated with these losses.
In Malta, a withholding tax rebate of £487,149, due to Inmarkets Group Ltd
with regards to dividends declared by Inmarket International Ltd for 2019 and
2020, is netted against a total income tax expense of £177,963 to leave a
credit of £309,188 (2020: Liability of £118,630). The rebate is based upon
dividends declared by the Inmarkets International Ltd and paid to Inmarkets
Group Ltd during 2021 and its recognition is dependent upon all necessary tax
returns having been filed and accepted by the relevant authorities.
A rebate of £355,178 was paid to Inmarkets Group Ltd during 2021 in relation
to dividends declared by Inmarkets International Ltd in 2014, 2015 and 2016.
The balance due to the Inmarkets Group Ltd as at the year-end, of £825,213,
includes £338,062 in respect of the year ended 31 December 2018.
Cash and working capital
The Group cash and cash equivalents at 31 December 2021 were £7.9 million
(2020: £3.8 million), boosted by a net £3.5 million of proceeds from the
Company's admission to AIM in December 2021, making the net cash increase for
the year, after dividend payments of £0.6 million, £4.1 million (2020: £0.4
million).
Cash generated from operations was £1.5 million (2020: £1.4 million).
Working capital, excluding cash balances (current assets less current
liabilities before corporate taxes and capitalised lease premises) reduced by
£1.1 million and by £0.4 million, if the growth in deferred revenues is also
excluded.
Despite an increase in revenues of 15%, this reduction in working capital was
assisted by the close control of debtor balances, which remained in line with
2020 at £2.5 million as debtor days were reduced.
Deferred revenue
Deferred revenue increased by 30% from £2.3 million as at 31 December 2020 to
£3.0 million at 31 December 2021. This was as a result of continuing SaaS
client acquisitions and professional service projects in progress over the
year end.
Dividends
The Board has become aware of a breach of procedure concerning compliance with
the Companies Act 2006 in relation to the payment of the interim dividend of
£150,000 for 2021 financial year of the Company that was paid in October
2021.
This dividend was paid to Shareholders when the Company had sufficient
reserves. However, the Company's relevant accounts for the purposes of the
Companies Act 2006 in relation to namely those filed for the year ended 31
December 2020, did not show sufficient distributable reserves and no interim
accounts had been filed at Companies House to confirm the adequacy of reserves
at the time of the declaration and as required by the Act.
To satisfy the steps required to rectify this breach of procedure, a
resolution will be proposed at the Company's forthcoming Annual General
Meeting ('AGM'). The Company has put in place the necessary controls and
processes to ensure that a similar issue will not recur.
The Board is proposing a final dividend of 0.279p per share. In combination
with the interim dividend, if confirmed by the shareholders at the AGM, this
will represent a total dividend for the year of £400,000 (2020: £400,000) or
0.447p per share based upon the number of shares currently in issue. If
further approved by shareholders at the AGM on 22 June 2022, the final
dividend will be paid on 21 July 2022 to shareholders on the register at the
close of business on 1 July 2022.
Skillcast Group PLC
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December
Note 2021 2020
£ £
Revenue 4 8,408,056 7,292,685
Cost of sales (2,476,708) (2,264,608)
Gross profit 5,931,348 5,028,077
Administrative expenses (5,853,792) (3,995,031)
Operating profit 77,556 1,033,046
EBITDA 3 360,345 1,253,425
Adjustment items 3 695,472 (184,397)
Adjusted EBITDA 3 1,055,817 1,069,028
Other Income 1,650 -
Finance income 393 392
Finance expense (18,953) (10,690)
Profit before tax 5 60,646 1,022,748
Income tax expense 6 316,984 (118,630)
Profit after tax and total comprehensive income 377,630 904,118
Earnings per share:
Basic 11 0.467p 1.130p
Diluted 11 0.465p 1.130p
Skillcast Group PLC
Consolidated statement of financial position
As at 31 December
Note 2021 2020
£ £
Assets
Non-current assets
Property, plant and equipment 276,697 118,753
Right-of-use assets 582,517 263,353
Deferred tax assets 4,745 5,112
863,959 387,218
Current assets
Trade and other receivables 7 3,798,823 3,474,349
Cash and cash equivalents 7,856,126 3,799,804
11,654,949 7,274,153
TOTAL ASSETS 12,518,908 7,661,371
Issued capital and reserves attributable to owners
Share capital 10 89,459 2,000
Share Premium 3,490,541 -
Share Option Reserve 17,000 -
Retained earnings 3,624,369 3,874,738
Total equity 7,221,369 3,876,738
Liabilities
Trade and other payables 8 1,440,550 728,178
Contract liability 9 3,037,184 2,292,947
Current lease liabilities 182,366 123,620
Income tax payable 176,134 504,114
4,836,234 3,648,859
Non-current liabilities
Long-term lease liabilities 461,305 135,774
461,305 135,774
Total liabilities 5,297,539 3,784,633
TOTAL EQUITY AND LIABILITIES 12,518,908 7,661,371
Skillcast Group PLC
Consolidated statement of changes in equity
For period ended 31 December 2021
Share capital Share Premium Paid Share Option Reserve Retained earnings Total equity
£ £ £ £ £
01 January 2020 2,000 - - 2,970,620 2,972,620
Comprehensive Income for the period
Profit - - - 904,118 904,118
Total comprehensive Income for the period - - - 904,118 904,118
31 December 2020 2,000 - - 3,874,738 3,876,738
01 January 2021 2,000 - - 3,874,738 3,876,738
Comprehensive Income for the period
Profit - - - 377,630 377,630
Total comprehensive Income for the period - - - 377,630 377,630
Total contributions by and distributions to owners
Capitalisation of Profit and Loss 78,000 - - (78,000) -
Shares issued on admission to AIM 9,459 3,490,541 - - 3,500,000
Share Option Reserve - - 17,000 - 17,000
Dividends - - - (550,000) (550,000)
Total contributions by and distributions to owners 87,459 3,490,541 17,000 (628,000) 2,967,000
31 December 2021 89,459 3,490,541 17,000 3,624,369 7,221,369
Skillcast Group PLC
Consolidated statement of cash flows
For the year ended 31 December
2021 2020
£ £
Cash flows from operating activities
Profit before tax 60,646 1,022,748
Adjustments for:
Depreciation of property, plant and equipment 84,668 48,039
Amortisation of right-of-use assets 198,121 172,340
Finance income (393) (392)
Share based payment 17,000
-
Finance expense 18,953 10,690
Income tax expense
- -
377,345 1,253,425
Increase in trade and other receivables (324,474) (688,628)
Increase in trade and other payables, including contract liabilities 1,456,609 876,365
Cash generated from operations 1,509,480 1,441,162
Income taxes paid (10,629) (323,542)
Net cash flows from operating activities 1,498,851 1,117,620
Investing activities
Purchases of property, plant and equipment (242,612) (75,307)
Interest received
393 392
Net cash used in investing activities (240,569) (74,915)
Financing activities
Principal paid on lease liabilities (133,007) (190,413)
Dividends paid (550,000) (400,000)
Share Issued 3,500,000
-
Interest paid on lease liabilities (18,953) (10,690)
Net cash from/(used) in financing activities 2,798,040 (601,103)
Net increase in cash and cash equivalents 4,056,322 441,602
Cash and cash equivalents at beginning of period 3,799,804 3,358,202
Cash and cash equivalents at end of period 7,856,126 3,799,804
Skillcast Group PLC - Notes to the consolidated financial
statements
1 General
Information
Skillcast Group PLC ('Company') is registered in the United Kingdom with
registration number 12305914 and is limited by shares. Its registered office
is at 80 Leadenhall Street, London, England, EC3A 3DH. The Company is the
ultimate parent of Inmarkets Ltd, Inmarkets Group Ltd and Inmarkets
International Ltd.
This report and financial statements reflect the consolidated activities and
transactions of the Company and other group companies ('Group').
Up to the 28 July 2021 the Company was a private limited Company. On the 28
July 2021 the Company re-registered as a public Company as Skillcast Group
PLC. The Company did this in preparation of admission to the AIM market of the
London Stock Exchange. On 1 December 2021 the Company's ordinary shares were
admitted to trading on AIM.
The Company is primarily involved in providing management services to other
entities in the group. The Group provides software and content subscriptions
and related professional services to enable companies to transform their staff
compliance. Operating from its two bases, in London and Malta, the Group helps
companies across a broad spectrum of industry sectors in the UK, EU and in the
rest of the world, to train their staff and demonstrate compliance with
various laws, regulations, and standards that are relevant for their
business.
2.1 Basis of preparation and statement of
compliance
The Financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2021 or 2020 but
is derived from the 2021 accounts.
A copy of the statutory accounts for the year to 31 December 2020 has been
delivered to the Registrar of Companies and is also available on the Company's
website. Statutory accounts for 2021 will be delivered in due course. The
auditors have reported on those accounts, their report was (i) Unqualified,
(ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006 in
respect of the accounts for 2019 nor 2020.
Whilst the financial statements from which this preliminary announcement is
derived have been prepared in accordance with International Financial
Reporting Standards ("IFRS") and applicable law, this announcement does not
itself contain sufficient information to comply with IFRS. The Annual
Report, containing full financial statements that comply with IFRS, will be
sent to shareholders later in May 2022.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future.
Therefore, in the preparation of the 2021 financial statements they continue
to adopt the going concern basis.
2.2 Summary of significant accounting
policies
Revenue recognition
Software as a Service (SaaS)
subscriptions
The Group provides right of access of content to clients for subscription
periods ranging from six to twelve months.
Revenue is recognised evenly over the contractual period of the subscription
as the client simultaneously receives and consumes the benefits of the Group's
services.
The balance of the revenue which has not been recognised at the reporting date
is deferred as a contract liability in current liabilities, until it is due to
be recognised as
revenue.
Where a contract includes multiple performance obligations, the transaction
price is allocated to each performance obligation based on the stand-alone
selling prices.
Professional
services
The Group provides customised and standard content to its clients provided
under fixed-price contracts which is generally non-recurring
revenue.
Fixed price contracts are recognised on the percentage of completion method
unless the outcome of the contract cannot be reliably determined, in which
case contract revenue is only recognised to the extent of contract costs
incurred that are recoverable. This is because either the Group is creating an
asset with no alternative use to it and the contract contains the right to
payment for work completed to date, or the client is simultaneously receiving
and consuming the benefits of the Group's services as it performs.
Business development costs incurred as part of a bid or tender process are
expensed as incurred. There are no material costs incurred during the period
between the contract being awarded and service delivery
commencing.
For fixed-price contracts, the client pays the fixed amount based on a payment
schedule. If the services rendered by the Group exceed the payment, an amount
recoverable on contracts asset is recognised. Conversely, if the payments
exceed the services rendered, a liability is
recognised.
Amounts recoverable on contracts are included in current assets and represent
revenue recognised on account.
Segmentation
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the chief
operating decision-maker (which takes the form of the Board of Directors of
the Group), in order to allocate resources to the segment and to assess its
performance. The Directors of the Group consider the Group is organised as one
business unit and all assets, liabilities, revenues and expenditure are
retained and recorded as such. However, the Group does segment revenue by type
of revenue, namely SaaS subscriptions and Professional Services, and on a
geographic basis.
Taxes
Current and deferred tax is recognised in profit or loss, except when it
relates to items recognised in other comprehensive income or directly in
equity, in which case the current and deferred tax is also dealt with in other
comprehensive income or in equity, as
appropriate.
Current tax is based on the taxable result for the period. The taxable result
for the period differs from the result as reported in profit or loss because
it excludes items which are non-assessable or disallowed and it further
excludes items that are taxable or deductible in other periods. It is
calculated using tax rates that have been enacted or substantively enacted by
the end of the reporting
period.
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable
profit.
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 profits will be available against which deductible
temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax
rates that have been enacted or substantively enacted by the end of the
reporting period.
Current tax assets and liabilities are offset when the Group has a legally
enforceable right to set off the recognised amounts and intends either to
settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to set off its current tax assets and liabilities and the
deferred tax assets and liabilities relate to income taxes levied by the same
taxation authority on either the same taxable entity or different taxable
entities which intend either to settle current tax liabilities and assets on a
net basis, or to realise the assets and settle the liabilities simultaneously,
in each future period in which significant amounts of deferred tax liabilities
or assets are expected to be settled or
recovered.
In Malta, Inmarkets Group Ltd is able to reclaim a proportion of the
corporation tax paid by its subsidiary, Inmarkets International Ltd, as long
as it meets certain criteria laid down by the Maltese tax authorities. The
criteria include that the relevant corporation tax has been paid by Inmarkets
International Ltd and that dividends to Inmarkets Group Ltd have been declared
by Inmarkets International and are payable to non-Maltese tax resident
shareholders. It is Group policy to reclaim Maltese corporation tax to the
fullest extent permissible and to recognise this income in Inmarkets Group Ltd
based upon dividends declared, or that will be declared once tax returns are
completed, for the financial year. The reclaimed corporation tax is presented
as netted off with the income tax expense and in other receivables.
3 EBITDA and adjusted
EBITDA
EBITDA is not defined or recognised under IAS. EBITDA is defined by the Group
as 'earnings before interest, tax, depreciation and amortisation'. EBITDA is
presented below as 'operating profit' plus all depreciation added
back.
The Group also presents 'adjusted EBITDA' as the directors believe it presents
a more meaningful measure of performance. The Group incurred leasehold
depreciation in 2020 and 2021. In calculating 'adjusted EBITDA' an amount
equivalent to the rent of the leased items has been deducted from EBITDA in
2020 and 2021. The Group incurred administrative expenses in anticipation of
the Placing and Admission so as to deliver the anticipated growth in the
business post-Admission. Had the decision to undertake the Placing and
Admission not been taken by the Group, then such expenditure would not have
been incurred. In calculating 'adjusted EBITDA' such 'non-recurring
expenditure' has been added back to EBITDA. Upon Admission to AIM the
Company adopted a Share Option Plan which incurred share-based payments. Had
the decision to undertake the Placing and Admission not been taken by the
Group, then such expenditure would not have been incurred. In calculating
'adjusted EBITDA' such 'share based payments' has been added back to
EBITDA.
2021 2020
£ £
Operating profit 77,556 1,033,046
Depreciation 282,789 220,379
EBITDA 360,345 1,253,425
Rent equivalent - 198,005 - 208,897
Non-recurring expenditure 876,477 24,500
Share Based Payments 17,000 -
Adjusted EBITDA 1,055,817 1,069,028
Due to nature of calculation of EBITDA and adjusted EBITDA the reported
figures may not be comparable to other companies with similar measures.
4 Revenue
2021 2020
£ £
Major product lines
Software as a Service (SaaS) subscriptions (i) 5,227,229 4,091,819
Professional services (ii) 3,180,827 3,200,866
8,408,056 7,292,685
(i) SaaS subscriptions - The Group provides right of access of content to
the customer over time for the subscription period ranging from 6 to 12
months. The revenue recognition is deferred for the remaining period of
subscription. This revenue includes subscriptions to: (a) Skillcast Portal -
the Group's integrated compliance management application that comes with a
broad range of tools, namely SELMS, Policy Hub, Compliance Declarations,
Surveys, Compliance Registers, Training 360, Events Management and SMCR 360;
and (b) the Skillcast OTS course libraries, namely Essentials, FCA Compliance,
Insurance Compliance and
Risk.
(ii) Professional services - The Group provides customised and standard
content to its clients under fixed-price contracts. This non-recurring revenue
includes: (a) bespoke e-learning development projects for large corporates;
(b) translations of those bespoke courses; (c) customisation of OTS courses
for subscription clients; and (d) other content and technology
consultancy.
2021 2020
£ £
Geographic split
UK 5,716,503 5,454,295
Europe 1,693,379 1,272,366
Rest of world 998,176 565,280
8,408,057 7,291,941
Non-current assets in which they are based are shown below:
Property, plant and equipment
UK 205,003 58,565
Malta 71,694 60,189
276,697 118,753
Right of use assets
UK 465,188 93,602
Malta 117,329 169,751
582,517 263,353
5 Profit before
taxation
The profit before taxation is stated after charging the following
amounts:
2021 2020
£ £
Staff cost (CoS) 1,536,011 1,346,602
Subcontracted services (CoS) 865,251 875,157
Staff costs (Admin) 3,173,390 2,361,136
Directors' compensation 565,345 462,000
Professional fees 228,735 259,377
Depreciation and amortisation expense 282,789 220,379
Fees payable to the Company's auditor for the audit of Parent and Subsidiaries 87,483 33,152
Expenses related to the Admission into AIM 830,620 24,500
Included in the expenses related to the admission into AIM was payments made
to Crowe UK LLP, who are engaged as the Company's auditors, totalling
£110,000 (2020:
£0.00).
6 Income tax expense
2021 2020
£ £
Current tax on profits for the year 169,798 132,433
Deferred tax expense 367 - 13,803
Withholding taxes on intercompany dividends - 487,149 -
- 316,984 118,630
A reconciliation of the current income tax expense applicable to the profit
before taxation at the statutory rate to the current income tax expensed at
the effective tax rate of the Company is as
follows:
2021 2020
£ £
Profit before taxation 60,646 1,022,748
Tax calculated at applicable UK statutory tax rate of 19% 11,523 194,322
Tax effects of:
-Expenses not deductible for tax purposes 195,150 35,348
-Taxable losses carried forward 234,361 49,267
-Withholding tax on intercompany dividends (487,149) -
-Research and Development Credits (112,691) (103,059)
-Differing rax rates due to trade in different jurisdictions (125,230) (52,492)
-Other adjustments (32,948) (4,755)
Current income tax (316,984) 118,630
The Company provides for income taxes on the basis of its income for financial
reporting purposes, adjusted for items that are not assessable or deductible
for income tax purposes in accordance with the regulation of domestic tax
authorities.
The effective rate of tax for the year ended 31 December 2021 was -549% (2020:
11.6%). This effective tax rate is a combination of the following items:
* the tax rates and tax regimes in the UK and Malta in which the businesses
of the Company
operate;
* the diverse tax treatments of deferred consideration amounts applied in
each
jurisdiction;
* the tax loss carry forward regulations in different
jurisdictions.
The tax rates applicable in the jurisdictions
are:
* UK: The applicable statutory tax rate for 2021/20 is
19%
* Malta: Income taxes are due at 35% of taxable
income.
In 2021 a withholding tax rebate of £487,149 (2020: £0) is netted against
the income tax expense. The rebate is the withholding taxes on dividends
declared by Inmarkets International Limited to the Inmarkets Group Limited.
As of the end of the period the Post 1 April 2017 loss carry forward was
£639,719, and the Pre 1 April 2017 loss carry forward was £69,877 for the
Company.
7 Current assets - trade and other receivables
2021 2020
£ £
Trade receivables 2,569,083 2,511,043
Less: Allowance for expected credit losses - 125,286 - 67,800
2,443,797 2,443,243
Prepayments and contract assets 415,073 242,664
Maltese withholding tax 825,213 693,240
Other receivables 114,740 95,202
1,355,026 1,031,106
As of 31 December 2021, trade receivables totalled £2,569,083 (2020:
£2,511,043) of which £739,745 were over 90 days (2020: £321,174). These
primarily relate to customers for whom there is considered a low risk of
default. An allowance of £125,286 (2020: £67,800) have been set up to
offset credit risks.
During the year withholding tax rebates of £355,178 (2020: £0.00) were
received by the
Company.
8 Current liabilities - trade and other
payables
2021 2020
£ £
Trade payables 180,452 165,130
Accruals 444,141 92,188
Amount due to shareholders 450 - 7,562
Sales and payroll taxes 815,507 478,422
1,440,550 728,178
9 Current liabilities - Contract
liability
2021 2020
£ £
Deferred revenue 3,037,184 2,292,947
Contract liabilities represent subscription revenue that has not been
recognised at the reporting date, as performance obligations remain. Revenue
is recognised over the subscription period, which is generally 12 months.
10 Equity - issued capital
2021 2020
£ £
Number 89,459,460 20,000,000
Par value per share 0.10p 0.01p
Total 89,459 2,000
All the shares in the Company are fully paid up. On 28 July 2021 the Company
re-registered as a public company. Prior to re-registration the company's
shares were reclassified as Ordinary Shares, and the company capitalised
£78,000 of retained profit in order to meet the minimum capital value for
these shares required of a public company. The shares were also consolidated
into 1 share for every 10 in issue. On 1 December 2021 9,459,460 additional
shares were issued upon the Company's admission to the Alternative Investment
Market.
Ordinary shares entitle the holder to participate in dividends and the
proceeds on the winding up of the Company in proportion to the number of, and
amounts paid, on the shares held. On a show of hands, every member present at
a meeting in person or by proxy shall have one vote and upon a poll, each
share shall have one vote.
11 Earnings per
share
Earnings per share (EPS) is calculated on the basis of profit attributable to
equity shareholders divided by the weighted average number of shares in issue
for the
year.
Diluted earnings per share have been calculated on the same basis as above,
except that the weighted average number of ordinary shares that would be
issued on the conversion of the dilutive potential ordinary shares as
calculated using the treasury stock method (arising from the Company's share
option scheme and warrants) into ordinary shares has been added to the
denominator.
2021 2020
£ £
Profit before tax 60,646 1,022,748
Tax 316,984 -118,630
Profit after tax 377,630 904,118
Non-recurring expenditure 876,477 24,500
Share based payments 17,000 -
Rent equivalent -198,005 -208,897
Adjusted earnings 1,073,102 719,721
Weighted average number of ordinary shares
Basic 80,788,288 80,000,000
Effect of dilutive potential ordinary shares 402,500 -
Diluted average number of shares 81,190,788 80,000,000
Earnings per share:
Basic 0.467p 1.130p
Diluted 0.465p 1.130p
Adjusted earnings - Basic 1.328p 0.900p
Adjusted earnings - Diluted 1.322p 0.900p
*For comparative purposes the earnings per share for 2020 as stated above has
been calculated after taking into account the capitalisation of the reserves
as set out in note 10.
Basic and diluted earnings per share of 0.467p (2020: 1.130p) has been
impacted by interest, tax, depreciation, amortisation, non-core operating
expenses. Tax on adjusted earnings is the same figure as that shown on the
consolidated statement of comprehensive income given that the majority of the
adjusting items in the earnings per share calculation above are also adjusted
for when calculating the Company's tax expense.
12 Dividends
2021 2020
Pence per £ Pence per £
share share
Dividend declared - Final 2020 0.500p 400,000 0.00p -
Dividend declared - Interim 2021 0.188p 150,000 0.00p -
Dividend declared - Final 2019 0.500p 400,000
During the period under review, the Group generated a profit before tax of
£60,644. A dividend of £400,000 (0.500p) was declared and paid with
regards to the year ended 2020 and £150,000 (0.188p) interim dividend was
declared and paid with regards to the year ended 2021. A final dividend of
£400,000 in relation to 2019 was settled in 2020. The Group's policy is to at
least maintain dividend payments.
The Board has become aware of a breach of procedure concerning compliance with
the Companies Act 2006 ('Act') in relation to the payment of the interim
dividend of £150,000 for 2021 financial year of the Company that was paid in
October 2021. This dividend was paid to Shareholders when the Company had
sufficient reserves. However, the Company's relevant accounts for the
purposes of the Act, namely those filed for the year ended 31 December 2020,
did not show sufficient distributable reserves and no interim accounts had
been filed at Companies House to confirm the adequacy of reserves at the time
of the declaration and as required by the
Act.
To satisfy the steps required to rectify this breach of procedure, a
resolution will be proposed at the Company's forthcoming Annual General
Meeting ('AGM'). The Company has put in place the necessary controls and
processes to ensure that a similar issue will not recur.
The Board is proposing a final dividend of 0.279p per share, totalling
£250,000. In combination with the interim dividend, if confirmed by the
shareholders at the AGM, this will represent a total dividend for the year of
£400,000 or 0.447p per share based upon the number of shares currently in
issue. If further approved by shareholders at the AGM on 22 June 2022, the
final dividend will be paid on 21 July 2022 to shareholders on the register at
the close of business on 1 July 2022.
13 Financing cash flows
A reconciliation of the
financing cash flow is set out below:
2021 2020
Lease liability £ £
At 1 January 259,394 484,802
Additions 517,284 -
Interest expense 18,953 10,690
Lease payments -151,960 -201,103
Disposal - -34,995
At 31 December 643,671 259,394
Dividend liability
At 1 January - 400,000
Dividends declared 550,000 -
Dividend payments -550,000 -400,000
At 31 December 0 0
Admission into AIM
Capital Raised 3,500,000 -
Share Option Reserve 17,000 -
At 31 December 3,517,000 0
Net financing payments 2,815,040 -601,103
Financing per statement of cash flows 2,798,040 -601,103
A dividend of £400,000 was declared and paid in 2021 with regard to the year
ended 2020 and a £150,000 interim dividend was also declared and paid for the
year ended
2021.
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