REG - Smartspace Software - Preliminary Results
17/05/2022 07:00
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RNS Number : 6939L Smartspace Software PLC 17 May 2022
17 May 2022
SmartSpace Software Plc
("SmartSpace", the "Group" or the "Company")
Preliminary Results for the Twelve Months Ended 31 January 2022
SmartSpace Software Plc, (AIM:SMRT) the leading provider of 'Integrated Space
Management Software' for smart buildings and commercial spaces 'visitor
reception, desks and meeting rooms', announces its unaudited Preliminary
Results for the twelve months ended 31 January 2022.
Financial Highlights:
· Total Group revenues up 11% to £5.14m* (FY21: £4.63m)
· Annual recurring revenue ("ARR") up 64% year on year to £4.94m
(FY21: £3.02m) (1)
· Recurring revenues up 43% to £3.42m (FY21: £2.39m)
· Gross margin on continuing operations strong at 71% (FY21: 72%)
· Group Adjusted LBITDA of £2.49m (FY21: £2.12m)
· Loss per share 8.91p (FY21: 7.54p)
· Cash balance at the period end of £2.76m (FY21: £4.52m) and a
net cash position of £2.38m (FY21: £4.10m)
Operational Highlights
SwipedOn
· SwipedOn ARR increased by 57% year-on-year to £4.23m (NZ$8.67m)
at 31 January 2022 (FY21: £2.70m)(1)
· Monthly average revenue per user ("ARPU") increased by 58% year
on year to £75 (NZ$ 154) at 31 January 2022 (FY21: £48)(1)
· SwipedOn locations increased to 7,076 at end 31 January 2022
(FY21: 6,741)
· Net revenue retention increased to 130% (2021: 105%) as price
increase implemented
· Revenue churn at expected levels of 10.9% (FY21: 6.8%) mainly
from single site customers with lower value price plans and limited scope for
upsell
· SwipedOn Desks now available to entire customer base with
positive feedback received to date
Space Connect
· Space Connect ARR increased by 291% year-on-year to £0.61m at 31
January 2022 (FY21: £0.16m)
· At 31 January 2022, Space Connect had 69 customers, an increase
of 56 new customers in the twelve month period
· New partners signed during the year in key geographies including
Poland, The Philippines, India, Ireland, Belgium, Canada and the USA
· Sales of Evoko Naso below management expectations; primarily
impacted by Covid-19 due to offices in Evoko's key markets and territories not
yet fully back to normal working capacity, leading to delayed investment
decision making - we remain convinced of medium-term growth opportunity
Anders & Kern (A+K)
· A+K revenue for the twelve months to 31 January 2022 down 24% to
£1.73m (FY21: £2.27m) due to the continued impact of the UK lockdown during
the period, resulting in a hesitation in returning to the office
· New complementary workspace technology product lines added to the
portfolio
Post period end highlights
· The Group had cash of £2.28m at 30 April 2022
· Group ARR £5.50m at 30 April 2022 up 59% year-on-year, restated
to the prevailing exchange rate at 30 April 2022
· Group ARPU £93 at 30 April 2022 up 62% year-on-year
· SwipedOn ARR £4.79m (NZ$9.33m) at 30 April 2022 up 56% year on
year, restated to the prevailing exchange rate at 30 April 2022
· SwipedOn ARPU £85 (NZ$165) at 30 April 2022 up 58% year-on-year
· Space Connect ARR £0.61m at 30 April 2022 up 156% year on year
· SwipedOn locations 7,471 at 30 April 2022
· Recent launch of Korean language variant of SwipedOn visitor
management platform
· SwipedOn agreement with Thermo Fisher Scientific to support its
US school Covid testing program in 570 locations (2)
(1) on a constant currency basis, restated to the prevailing exchange rate at
31 January 2022
(2) revenue and locations from 5 month Thermo Fisher Scientific agreement are
not included in ARR of £4.79m or locations of 7,471
Commenting on outlook, Frank Beechinor, CEO of SmartSpace, said:
"We have planned for a year of further strong growth in FY23 whilst ensuring
our costs are tightly controlled. Expansion into non-English speaking markets
has already begun, as per our recent Korean launch for SwipedOn and will be a
key area of focus throughout the coming year. We see opportunity for growth
from SwipedOn Desks which was launched in Autumn 2021 and has already
attracted 30+ customers. Multi-location deals such as the one recently
announced with ThermoFisher also provides further opportunity for growth.
As we aim to return A&K to its pre Covid-19 revenue levels, we see good
opportunities in the pipeline for the new workspace technology lines.
Space Connect is ideally placed to capitalise on the opportunity presented by
hybrid working fast becoming the expected norm in many parts of the world. We
will continue to develop unique features that allow us to increase our market
share.
With such a large addressable market and well placed product set, we are
confident in our strategy to grow our high margin recurring revenues and
maximise value for shareholders."
A copy of these Preliminary results together with a results presentation with
further information on the Company will be posted on the Company's website at:
www.smartspaceplc.com (http://www.smartspaceplc.com) .
Investor Meet Company Presentation
Frank Beechinor, CEO and Kris Shaw, CFO will provide a live presentation on
the 'Investor Meet Company' ("IMC") platform at 12.00 midday on 19 May 2022.
Investors can sign up for free via:
https://www.investormeetcompany.com/smartspace-software-plc/register-investor
(https://www.investormeetcompany.com/smartspace-software-plc/register-investor)
Questions can be submitted pre-event through the platform or at any time
during the live presentation. Management may not be in a position to answer
every question it receives but will address those it can while remaining
within the confines of information already disclosed to the market.
Those who have already registered and requested to meet SmartSpace will be
automatically invited.
Enquiries:
SmartSpace Plc via Lisa Baderoon
Frank Beechinor (CEO)
Kris Shaw (CFO)
Lisa Baderoon (Head of Investor Relations) +44 (0) 7721 413 496
lbaderoon@smartspaceplc.com (mailto:lbaderoon@smartspaceplc.com)
Singer Capital Markets (NOMAD and Joint Broker) + 44 (0) 20 7496 3000
Shaun Dobson
Jen Boorer
Alex Bond
Canaccord Genuity (Joint Broker) +44 (0) 20 7523 8000
Adam James
Georgina McCooke
Chairman's statement
Overview
I am pleased to report a period of strong organic revenue growth, especially
when taking into account another year of challenging trading conditions for
many businesses. Despite the considerable disruption caused by Covid-19, Group
recurring revenue grew by 43% year on year, to £3.42m and contributed towards
a total Group revenue of £5.14m, up 11% from the prior year. Growing
recurring revenue is one of our key objectives and now accounts for 66% of
Group revenue (2021: 52%). Our LBITDA has increased by 18% to £2.49m as a
result of higher staff costs as we establish the team needed for our growth
plans.
Growth in Average Revenue Per User ("ARPU") has contributed significantly
towards an overall growth in Annual Recurring Revenue ("ARR") of 64% to
£4.94m at 31 January 2022. With lockdowns and 'work from home' ("WFH")
mandates in place our focus has been concentrated on expanding revenue from
existing clients. By growing the value of each customer, with more customers
on higher tier plans, more locations, and more 'add-on' software sales, we
were able to achieve many of our key financial objectives for the year.
The overall growth in Group revenue was achieved despite Anders & Kern
("A&K") being severely impacted by ongoing Covid-19 restrictions in its UK
customer base. This led to a fall in hardware revenues for A&K which was
mitigated to the extent possible by utilising the UK Government Job Retention
Scheme. Sales of our strategic partner's meeting room panel (the "Evoko Naso")
were impacted by Covid-19 as businesses across multiple markets in the US and
Europe delayed hardware investment decisions, leading to significantly lower
than expected revenues for this product.
People
The continued strength of the Group is due to the hard work and resilience of
all the people who work for SmartSpace. I would like to thank the team for
their contribution, especially for the commitment and focus they have shown
throughout this year. We have continued to invest in employees who are being
supported through professional training relevant to their functional areas, as
well as other relevant role-specific training. We recognise the importance of
the right people to our business and therefore are pro-actively monitoring
salary levels to ensure staff retention is managed.
Our priority during the Covid-19 pandemic has been the health and safety of
our employees. We minimised the risk of infection in our offices and worked
from home when necessary. Our staff showed great flexibility and patience in
dealing with these challenges.
Last year we decided to re-locate all our software development to New Zealand,
centralising development for the Group under the management of Matt Cooney,
Group Chief Technology Officer ("CTO"). This task was completed by Autumn
2021. Whilst we do not expect to see financial synergies from this change the
operational benefit will be significant.
Board changes
In May 2021 Bruce Morrison and Diana Dyer Bartlett stepped down as directors
of the Company to be replaced by Kris Shaw as Chief Financial Officer ("CFO")
and Philip Wood as non-executive director ("NED"). Kris had been with
SmartSpace for over two years before his appointment as CFO having worked
closely with Bruce on both the acquisition of Space Connect and disposal of
SmartSpace Global. The experience of working with both Bruce and Diana has
provided Kris with the core foundations to be an excellent CFO.
With our increased focus on software offerings, there was a requirement that
the role of the NED has direct experience of building fast growing
international software businesses. We therefore appointed Philip Wood as an
independent NED and Chair of the Audit Committee. Philip is the Deputy Chief
Executive Officer and Chief Financial Officer of Aptitude Software Group plc,
a specialist provider of powerful financial management software to large
global businesses. The experience Philip brings in growing software businesses
and mentoring finance teams is being hugely helpful to SmartSpace, as we move
through our next phase of development as a global SaaS business.
Annual General Meeting
The Board will shortly be sending out a notice of the Annual General Meeting
which once again will be fully open to all shareholders to attend. For those
unable to attend I would urge shareholders to email any questions they may
have to investors@smartspaceplc.com and to send in proxies so their votes on
the resolutions contained in the notice of meeting will be counted.
Future developments and outlook
Our intention is to become a profitable business and we have plans in place to
transition SmartSpace through to cash generation. The board believes the
Company has sufficient liquidity to complete this transition to cash
generation towards the end of FY23.
The global economy has entered a period of higher inflation with raised living
costs and consequently higher wage expectations for both existing staff
members and new hires. The majority of our customers are on contracts of one
year or less allowing us to factor inflation into our price plans upon
renewal.
Recent investment activity within our sector values our SaaS peers on higher
multiples than that commanded by SmartSpace. We intend to close this gap and
build shareholder value by growing recurring revenues and delivering high
quality cash generative earnings. With such a large addressable market for our
products globally we are confident in our ability to capitalise on the
opportunities open to us.
As we target strong revenue growth in all three divisions we intend to:
· Focus on entering new geographies, with a view to building our
customer base in non-English speaking markets. Our recent launch into South
Korea is a first step in this process.
· We will continue to prioritise revenue expansion opportunities
from existing customers by growing customer accounts to include more
locations. A key focus for growth will be to continue to build ARPU by selling
SwipedOn Desks and other add-ons to new and existing customers.
· Build on the momentum achieved so far with the now well
established Space Connect indirect partner network.
· Seek new technology offerings in the area of workplace
optimisation for A&K to sell to its established channel partner customers.
These actions combined with the already strong growth in recurring revenues
are key to achieving our financial plans, allowing us to transition SmartSpace
through to cash generation.
Whilst Covid-19 has hampered sales of Evoko Naso to date, we remain optimistic
about the prospects of this product, especially as customers return to the
office and WFH mandates are lifted. The feedback on Naso from the Evoko
partner network around the globe is very positive.
Our ambition and confidence for the year ahead remains high following a good
start to the year. Our revenue, profitability and cash generation targets
remain unchanged. As we continue to grow our high margin recurring revenues,
we add financial strength to the business, and with such a large addressable
market and well placed product set, we believe this can continue for the
foreseeable future.
Guy van Zwanenberg
Chairman
16 May 2022
Strategic report: Strategy and operational review
The Directors present their strategic report for the year ended 31 January
2022:
Business model, purpose and strategy
The Group's business model is to provide Software as a Service ("SaaS")
workspace solutions including desk, meeting room, and visitor management
products for small and medium sized enterprises ("SME") and mid-market,
enabling our international client base to optimise the use of their corporate
real estate. The Group's products are fast to deploy, easy to implement and
configure making them ideally suited to SMEs but also larger companies in the
market for simple but effective solutions for their space management. The
Group also provides complementary hardware solutions which integrate with the
Group's software solutions.
The Board believes that technology driven changes in working practices
continues to generate demand from all industry sectors. Covid-19 has
accelerated the move towards hybrid working further increasing the need for
technology to enable companies to control the use of meeting rooms and desks
more effectively as well as manage visitors to their premises. The Board has
set the following strategic priorities:
· to focus on delivering pure SaaS revenues where the
Group is not overly exposed to one market or a particular customer;
· to develop technology-led intellectual property to help
businesses optimise use of their corporate real estate focussing on rooms,
desks and visitors;
· to develop new sales channels to market our software
solutions by establishing a global network of channel partners;
· to bring together the technologies of Space Connect and
SwipedOn in order to offer a complete solution to both customer bases and
therefore maximise revenue per user;
· to continue with a strategy of both organic and
acquisitive growth both in our domestic market and overseas; and
· to deliver higher quality earnings which will, in turn,
improve cash generation.
We believe as working practices change and businesses reconfigure their office
real estate the market will gravitate towards greater use of technology to
optimise how businesses operate. As employees demand hybrid working
arrangements, and remote working becomes more prevalent, businesses will look
for real estate efficiencies which will need technological solutions. Many
businesses have indicated that they plan to reduce their real estate footprint
whilst maintaining headcount. This change will stimulate demand for SmartSpace
solutions which will allow employees to book desks for times they are in the
office and to coordinate meetings between participants in the office and those
working remotely. The strategy is to focus on developing our software to take
advantage of the opportunities afforded by this fast-growing market.
Review of the business
SwipedOn
We have continued our approach of growing revenue from existing customers by
increasing ARPU, focusing on clients with the potential to use more of our
products across multiple locations. Our sales team are incentivised to attract
high value, multi-site customers who comprise an increasing proportion of our
customer base and represent a higher proportion of our revenues.
From February 2021 all new customers have been moved to our new price plans,
and, progressively, we have implemented the price increase across our existing
customer base. These new price plans reflect the investment we have made in
the platform enhancing functionality over the last 18 months. Despite the
increased prices, we maintain a significant price advantage over our
competitors, and SwipedOn remains one of the most cost effective offerings in
the market. The average ARPU of new customers for the year has been £90
(2021: £72).
In implementing the price increase we anticipated an increase in customer
churn. Encouragingly this was at levels lower than forecast and mainly
occurred amongst our smaller, lower value, single site customers, who are
often on the lowest value starter plans. Customer churn for the year averaged
15.6% whilst revenue churn was 10.9%. The average ARPU of churning customers
was £51, significantly less than our new customer ARPU of £90.
The number of new SwipedOn customers in the year has been lower than
historical rates. However as we target higher value customers with more
locations, and expand revenue from existing customers, our recurring revenue
has continued to grow. The average CAC (Customer Acquisition Cost), which
includes the costs of all sales and marketing staff as well as direct
marketing costs, has increased due to digital marketing price inflation, in
particular Google Ad words. The Company continually reviews the effectiveness
of its marketing spend including the consideration of alternative delivery
channels in order to optimise CAC.
Net revenue retention measures revenue change from the customer base over a
set period of time and includes the impact of churn, price increases, customer
expansion and contraction, but does not include growth from new customers. As
a result of the price increase SwipedOn's NRR at 31 January 2022 was a very
strong 130% (2021: 105%). Such a strong NRR is not expected in future periods
but we will continue to aim to maintain NRR above 100%.
Our recent launch into South Korea is our first step into new non-English
speaking geographical markets. With less competition in these markets digital
marketing costs are lower, therefore rebalancing the cost of acquisition back
to historical levels. The launch into South Korea begins the process of
broadening the addressable market for SwipedOn allowing us to open in other
Far Eastern markets.
It has taken 18 months of development to ensure the functionality in the
SwipedOn platform is fully multi-language, multi country and multi-location
ready. To support the launch into South Korea there is a localised website
https://www.swipedon.kr (https://www.swipedon.kr) , along with a range of
localised marketing collateral. The launch is supported by an in-country
marketing agency with a digital marketing campaign that will focus on Naver,
the dominant search engine in South Korea. Pre-sales and ongoing customer
support will be handled in local language.
SwipedOn key performance indicators 31 January 2022 31 January 2021
Annual recurring revenue (ARR) £4.23m £2.70m
Monthly average revenue per user (ARPU) £75 £48
Number of customers 4,700 4,735
Number of customer locations 7,076 6,741
Locations per customer 1.51 1.42
Net Revenue Retention (NRR) 130% 105%
Annual revenue churn 10.9% 6.9%
12 month average customer acquisition cost (CAC) £1,730 £744
Space Connect
We have been focused on expanding our channel partner distribution network for
Space Connect with new partners signed during the financial year in key
geographies including Poland, The Philippines, India, Ireland, Belgium, Canada
and the USA. Through these new partnerships, and our existing relationships
with other partners such as Softcat, we have increased our ARR by 291% to
£0.61m. The pipeline of new customer opportunities remains strong,
reinforcing the momentum seen in the business and underpinning our confidence
in the opportunity for Space Connect, its product capabilities and the
potential market.
During the past year we have invested in the Space Connect platform including
developing our own space mapping tool which allows faster on-boarding of new
customers. The mapping tool also facilitates self-provisioning by customers
and replaces a third-party service provider, therefore reducing cost of sales.
Sales of our strategic partner's meeting room panel (the "Evoko Naso") for
which Space Connect receives both licence fees and SaaS revenues were below
our expectations. This is a continued result of Covid-19, with offices in
Evoko's key markets not fully back to normal working capacity. As a result,
many have delayed investment decisions for new hardware. The Board remains
convinced by the medium-term growth opportunity for Naso and expects that once
businesses return to normal, sales will accelerate.
Space Connect key performance indicators 31 January 2022 31 January 2021
Annual recurring revenue (ARR) £0.61m £0.15m
Monthly average revenue per user (ARPU) 627 980
Number of customers 69 13
In order to meet our growth expectations for Space Connect we have built a
strong team of software developers, sales staff and customer support. To
maximise cost synergies we have created a unified helpdesk providing 'follow
the sun' support for both Space Connect and SwipedOn customers. Whilst this
has increased the overhead for Space Connect, and therefore losses, we believe
this is the right foundation needed for future growth.
Anders & Kern
The third arm of the Group's business is Anders & Kern ("A&K"), our
specialist distributor and integrator of AV solutions such as meeting room
booking solutions, workplace sensors and digital signage. A&K operates
solely in the UK. The closure of offices and business premises during the
various lockdowns and WFH measures continued to impact order intake during
FY22, therefore resulting in an EBITDA loss for the year. A&K's network of
200 resellers contributes to the development of the market for both Evoko Naso
and Space Connect in the UK. Our focus in A&K has been to pivot from its
traditional market of Audio Visual to focus on workplace optimisation
solutions. As a result, A&K has continued to add to its offering with new
workspace technology product lines being added to its portfolio which often
complement the Group's software solutions.
Customer support for all three SmartSpace divisions is now being led by our
newly appointed Group Customer Services Manager who is based in A&K's
Mildenhall premises.
Anders & Kern key performance indicators 31 January 2022 31 January 2021
Revenue £1.73m £2.16m
Gross margin * 35% 38%
* FY21 figures have been adjusted for zero margin A&K sales made to
SmartSpace Global which was agreed as part of the disposal process. These
sales amounted to £0.93m in FY21.
Software development
The software development of Space Connect used to take place in the Ukraine.
During the year we made the decision to move all our software development to
New Zealand. Our last developer in the Ukraine left us in October 2021 and all
engineering of Space Connect now takes place in New Zealand and a new
offshoring base in Vietnam. This provides us with a flexible development
resource that can be quickly stood-up for specific projects at a competitive
price.
With the centralisation of software development headed by our Group CTO we are
able to further converge the technologies of SwipedOn and Space Connect, offer
greater opportunities for our staff to develop their skills, whilst also
allowing the Group to benefit from a consistent approach to software
development. New Zealand has had a strong focus on developing its software
industry and as a result has a great talent pool to draw upon. Employment
costs are competitive with other similarly developed jurisdictions.
During the year we invested £1.56 million (2021: £1.30m) in maintaining and
further enhancing our software solutions. This included the development of our
mobile application for contactless sign-in, regional cloud hosting facilities,
vaccine pass functionality, and internationalisation to allow full
multi-lingual services.
Space Connect completed the development of its in-house mapping tool which
streamlines customer onboarding and reduces external costs. An updated version
of Evoko Naso has been developed to improve and add to the functionality
offered to customers. SwipedOn Desks was released during the year and is now
generating new revenue for the Group.
Outlook
We have planned for a year of further strong growth in FY23 whilst ensuring
our costs are tightly controlled. On a constant currency basis ARR has grown
by a further 7% in the first quarter of FY23. Growth in ARR has predominantly
been driven by the successful implementation of price increases in FY22,
coupled with the expansion of existing customers, cross selling and new
customer wins. We continue to see opportunities to make use of our products in
new ways as demonstrated by the agreement with Thermo Fisher Scientific to
support its school Covid-19 testing program in 570 locations.
As demonstrated by our recent launch into South Korea, expansion into
non-English speaking markets will be a key area of focus throughout the coming
year. We see opportunity for growth from SwipedOn Desks which was launched in
Autumn 2021 and has progressively built customer numbers and ARR.
Hybrid working is fast becoming the expected norm in many parts of the world.
Space Connect is ideally placed to take advantage of the technological demands
of this change. We will continue to develop unique features that allow us to
target and attract a greater share of the addressable market. We are
encouraged by Evoko's optimism in Naso and the feedback that has been received
so far. We are optimistic on the opportunities from this product as workplaces
reopen and businesses fit out new office spaces.
The team at A&K are eager to make up for ground lost during the pandemic.
We have new products available to be sold and with businesses gaining
confidence that lockdown will not return, we aim to return this business to
pre Covid-19 revenue levels.
Frank Beechinor
Chief Executive Officer
16 May 2022
Financial review
Overview
The Group has made good progress during the year in growing its recurring
revenues by 43% to £3.42m (2021: £2.39m). Cash at 31 January 2022 was
£2.76m (2021: £4.52m). As we progressed through FY22 cash consumption
reduced, and with further growth in FY23, we aim to be cash generative by the
end of the year. Revenue growth for Space Connect and returning A&K to
pre-Covid-19 revenue levels are key next steps in making the Group cashflow
positive. Despite increased revenue and gross profit, LBITDA increased by 18%
to £2.49m due to higher staff costs as we build the team needed for our
growth plans.
Revenue
Overall revenue for the Group increased by 11% to £5.14m driven by a 43%
increase in recurring revenues generated by the Group's SwipedOn and Space
Connect software products. Recurring revenues increased as a result of higher
ARPU and customer locations. Revenue from the Group's A&K division
decreased by £0.55m as Covid-19 restrictions continued to impact this
division.
2022 2021
£'000 £'000
Recurring revenues
- SwipedOn 2,916 2,124
- Space Connect 373 119
- Anders & Kern 127 151
Total recurring revenue 3,416 2,394
Non-recurring revenue
- SwipedOn 37 37
- Space Connect 85 73
- Anders & Kern 1,602 2,125
Total non-recurring revenue 1,724 2,235
Total revenue 5,140 4,629
The growth in recurring revenues for SwipedOn was generated by a 58% increase
in average revenue per user ("ARPU") to £75. SwipedOn focussed on selling
more to its existing customers with 7% more customers on our highest priced
tiers, and 6% increase in the number of paying locations per customer. A
number of feature improvements also allowed us to apply a price increase to
both new and existing customers whilst still remaining competitively priced.
Covid-19 continued to impact the business with increased churn from changing
customer needs and business closures. Annual user churn for the year was 15.6%
(2021: 11.3%) and revenue churn 10.9% (2021: 6.9%). These factors all
contribute towards net revenue retention which increased to 130% for the year
(2021: 105%).
Space Connect focussed on building its recurring revenues by adding new
customers through its partner network. Overall customer numbers increased from
13 at the beginning of the year to 69 at the end. Revenues from the sale of
the white label version of Space Connect through our partners meeting room
booking panel were impacted by Covid-19 reducing demand for new meeting room
panels. As businesses return to more normal routines we expect demand to
return and revenues from this product to grow.
A&K continued to see reduced revenues from the sale of its hardware
offerings. Our A&K customer base is UK orientated selling workplace
solutions and therefore the impact of lockdowns and work from home mandates
was significant. As we exit the lockdown restrictions we expect normal level
of sales for A&K to return.
Gross profit
Gross profit margin was 71% (2021: 72% *) giving a total gross profit of
£3.65m (2021: £2.65m). Gross margins from our SaaS business are 89% (2021:
91%) whilst A&K contributes a 35% margin (2021: 38%*).
* FY21 figures have been adjusted for zero margin A&K sales made to
SmartSpace Global which was agreed as part of the disposal process. These
sales amounted to £0.93m in FY21.
Administrative expenses
Administrative expenses have increased by 35% to £7.32m (2021: £5.42m) as
detailed in the table below.
2022 2021
£'000 £'000
Research and development 1,563 1,319
Less capitalised development (340) (290)
Research and development costs not capitalised 1,223 1,029
Staff and contractor costs excluding those relating to R&D 3,030 2,267
Sales, general and administrative expenses 1,921 1,605
Share based payment charge 288 150
Depreciation and amortisation 666 375
Reorganisation and transformation costs 192 -
Total 7,320 5,426
Excluding share based payments, depreciation and amortisation, and
reorganisation costs, administrative expenses have increased by £1.27m. This
increase arose from increased expenditure on staff costs (£0.91m), marketing
expenditure (£0.18m) and various other increased costs (£0.18m). Increased
staff costs are largely contributed by the team we have put in place for Space
Connect which has increased from 3 at the beginning of FY21, to 18 at the end
of FY22. Inflation in digital advertising has led to the increased marketing
expenditure during the year.
Financial support amounting to £0.05m (FY21: £0.10m) from the UK Government
through wage subsidy schemes was offset against staff costs.
In the coming year we anticipate inflationary pressure on our cost base in all
geographic regions. This is particularly strong in areas where we see skills
shortages such as software development. The majority of our software contracts
with customers are for a 12 months or less therefore we will have an
opportunity to pass on this inflationary burden when contracts are due for
renewal.
Adjusted LBITDA
Adjusted LBITDA is the loss for the year before net finance costs, tax,
depreciation, amortisation, reorganisation and transactional items, impairment
charges and share based payment charge. Adjusted LBITDA was £2.49m (FY21:
£2.12m). Whilst SwipedOn made a LBITDA loss for the year, as ARR grows and
customers pay annually in advance it is now consistently cashflow positive and
expected to breakeven at an EBITDA level in the coming year. Space Connect
remains loss making at an EBITDA level whilst it continues to build its
customer base. A&K was loss making due to reduced sales as a result of
Covid-19.
Taxation
The taxation credit of £1.11m results from the recognition of tax assets
relating to losses incurred in the current year which will be utilised in
future periods, together with a re-measurement of losses recognised in prior
periods to the new rate of corporation tax. Due to a change in the main rate
of UK corporation tax from April 2023 onwards tax losses have been recognised
at a tax rate of 25% which is the rate expected to be in place when the losses
are utilised. Losses recognised as assets in prior years have been re-measured
based on this new rate of corporation tax resulting in a credit of £0.46m.
Foreign Exchange
The Group sells its products throughout the world therefore revenues are
received in a number of currencies, with pounds sterling (47%), US dollars
(26%), Australian dollars (13%) and New Zealand dollars (6%) being the most
common. Our administration costs are denominated in pounds sterling (40%), New
Zealand Dollars (37%) and US Dollars (22%). Overall foreign currency revenue
is closely matched to foreign currency costs therefore trading exposure to
fluctuations in exchange rates is reduced.
Assets and liabilities denominated in foreign currencies are mostly limited to
our operations in New Zealand where working capital, deferred revenue,
property plant and equipment, right of use assets and liabilities, deferred
tax assets, and intangible assets are held in New Zealand Dollars. Net assets
denominated in foreign currencies amount to £4.52m. The Group does not hedge
this foreign currency exposure.
Foreign exchange movements in the period resulted in a charge of £21,000
(2021: £13,000) to the profit and loss, and a charge of £0.34m (2021: credit
£0.64m) to other comprehensive income.
Earnings per share
The loss per share was 8.91p (FY21: loss per share 7.54p). The adjusted loss
per share which excludes the after-tax impact of exceptional items,
share-based payments and the amortisation of intangible assets recognised on
acquisition was 7.04p (FY21: loss per share 6.59p).
Intangible assets and goodwill
Intangible assets comprise £8.37m of goodwill (2021: £8.72m), £0.86m (2021:
£0.88m) internally generated software, and £1.39m (2021: £1.62m) of other
intangibles acquired as part of business combinations. Software development
costs relating to both SwipedOn and Space Connect products amounting to
£0.34m were capitalised. An amortisation charge of £0.55m was recorded
against intangible assets; internally generated software is amortised over 3
years and intangible assets acquired through business combinations are
amortised over 10 years. Intangible assets denominated in currencies other
than pounds sterling decreased in value by £0.39m due to movements in
exchange rates.
Financial position
Current tax receivables of £0.07m (2021: £0.10m) relate to tax credits which
the Group receives for qualifying research and development activities. Cash
reimbursement of these tax credits was received in February 2022.
Contract liabilities of £1.77m (2021 £1.13m) relate to SaaS subscriptions
received in advance by SwipedOn and Space Connect which are spread over the
period to which they relate.
Borrowings amount to £0.38m (2021: £0.40m) of which £0.36m (2021: £0.38m)
relate to a mortgage on the Group's freehold property in Mildenhall where
A&K are based, together with a Covid-19 support loan provided by the New
Zealand government of £0.03m (2021: £0.03m). The mortgage is due for
repayment in January 2023 and therefore classified as a current liability.
Management intends to extend the mortgage period when it comes due for
repayment. The Covid-19 support loan is interest free and will be repaid in
FY23.
Cash flow
Cash and cash equivalents decreased during the year by £1.76m (2021: increase
£1.93m) due to a cash outflow from operating activities of £1.61m (2021:
£1.44m). As we move into FY23 cash consumption is at lower levels than at the
beginning of FY22 and further growth in recurring revenues for SwipedOn and
Space Connect, combined with a return to profitability for A&K, is
expected to transition the business to being cashflow positive by the end of
the financial year.
The net cash outflow from investing activities of £48,000 (2021: inflow
£3.44m) includes the final £327,000 of disposal proceeds for SmartSpace
Global Limited offset by investments in software development and property
plant and equipment. Cash outflow from financing activities amounted to
£79,000 (2021: outflow £86,000) as payments were made against the finance
leases and property mortgage.
Our forecasts for revenue growth over the coming year mean that the Group has
sufficient cash flow resources to continue operations until profitability is
achieved.
Dividend policy
The Group reported a retained loss of £2.56m (FY21: loss of £2.26m), which
has been transferred to reserves. At 31 January 2022, the Group had retained
earnings of £9.16m (FY21: £11.70m). The Board considers that it is in
shareholders' best interests to retain resources in the Group.
Kristian Shaw
Chief Financial Officer
16 May 2022
Consolidated statement of comprehensive income for the year ended 31 January
2022
Year ended Year ended
31 January 2022 31 January 2021
£'000 £'000
Continuing operations
Revenue from contracts with customers 5,140 4,629
Costs of sale of goods (1,068) (1,695)
Costs of providing services (427) (283)
Gross profit 3,645 2,651
Administrative expenses (7,320) (5,426)
Net impairment losses on financial and contract assets (14) (72)
Other income 36 130
Operating loss (3,653) (2,717)
Adjusted LBITDA* (2,493) (2,120)
Reorganisation and transactional items (192) -
Depreciation (114) (103)
Amortisation (552) (272)
Impairment of financial asset (14) (72)
Share based payment charge (288) (150)
Operating loss (3,653) (2,717)
Finance income 1 1
Finance costs (26) (27)
Loss before tax (3,678) (2,743)
Taxation 1,114 612
Loss for the year after tax (2,564) (2,131)
Loss for the year from discontinued operations - (124)
Loss for the year (2,564) (2,255)
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Revaluation of property, plant and equipment 73 -
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (339) 643
Total other comprehensive (loss) / income (266) 643
Total comprehensive loss attributable to the owners of the group (2,830) (1,612)
Basic loss per share
Continuing operations (8.91p) (7.54p)
Discontinued operations 0.00p (0.44p)
Total (8.91p) (7.98p)
Diluted loss per share
Continuing operations (8.91p) (7.54p)
Discontinued operations 0.00p (0.44p)
Total (8.91p) (7.98p)
* Loss for the year from continuing operations before net finance costs, tax,
depreciation, amortisation, reorganisation and transactional items, impairment
charges and share based payment charge.
Consolidated balance sheet at 31 January 2022
31 January 2022 31 January 2021
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 751 683
Right-of-use assets 94 156
Intangible assets 10,619 11,222
Deferred tax assets 2,465 1,389
Total non-current assets 13,929 13,450
Current assets
Inventories 203 89
Contract assets 5 4
Trade and other receivables 399 550
Other financial assets at amortised cost - 328
Current tax receivable 70 101
Prepayments 163 114
Cash and cash equivalents 2,758 4,516
Total current assets 3,598 5,702
Total assets 17,527 19,152
LIABILITIES
Non-current liabilities
Borrowings - 355
Lease liabilities 41 110
Total non-current liabilities 41 465
Current liabilities
Trade and other payables 1,379 826
Contract liabilities 1,774 1,129
Other tax liabilities 127 341
Borrowings 383 58
Lease liabilities 67 63
Total current liabilities 3,730 2,417
Total liabilities 3,771 2,882
13,756 16,270
NET ASSETS
EQUITY
Capital and reserves attributable to equity shareholders
Share capital 2,894 2,826
Share premium 3,839 3,830
Other reserves (2,133) (2,087)
Retained earnings 9,156 11,701
Total equity 13,756 16,270
Consolidated statement of changes in equity for the year ended 31 January 2022
Share capital Share premium Other reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000
At 31 January 2020 2,826 3,830 (2,832) 13,956 17,780
- - - (2,255) (2,255)
Loss for the year
Other comprehensive income for the year - - 643 - 643
Total comprehensive loss for the year - - 643 (2,255) (1,612)
Transactions with owners in their capacity as owners:
Share-based payment expense - - 150 - 150
- continuing operations
Share-based payment expense - - (48) - (48)
- discontinued operations
At 31 January 2021 2,826 3,830 (2,087) 11,701 16,270
- - - (2,564) (2,564)
Loss for the year
Other comprehensive loss for the year - - (266) - (266)
Total comprehensive loss for the year - - (266) (2,564) (2,830)
Transactions with owners in their capacity as owners:
Issue of ordinary shares as consideration for a business combination 67 - (67) - -
Issue of ordinary shares to option holders 1 9 (3) 3 10
Lapsed share options - - (16) 16 -
Exchange difference - - (4) - (4)
Share-based payment expense - - 310 - 310
At 31 January 2022 2,894 3,839 (2,133) 9,156 13,756
Consolidated statement of cash flows for the year ended 31 January 2022
Year ended 31 January 2022 Year ended 31 January 2021
£'000 £'000
Cash from operating activities
Cash consumed by operations (1,614) (1,791)
Interest received 1 1
Interest paid (26) (42)
Income taxes received 28 394
Net cash outflow from operating activities (1,611) (1,438)
Cash flows from investing activities
Payments for property, plant and equipment (36) (44)
Payment of software development costs (340) (682)
Proceeds from disposal of subsidiary (net of cash disposed) 327 4,167
Net cash from investing activities (49) 3,441
Cash flows from financing activities
Proceeds from issues of share capital (net of issue costs) 10 -
Proceeds from borrowings - 31
Repayment of borrowings (27) (19)
Principal elements of lease payments (62) (98)
Net cashflow from financing activities (79) (86)
Net change in cash and cash equivalents (1,739) 1,917
Cash and cash equivalents at the beginning of the financial year 4,516 2,587
Effects of exchange rate changes on cash and cash equivalents (19) 12
Cash and cash equivalents at the end of the financial year 2,758 4,516
Cash and cash equivalents comprise cash at bank and other short-term highly
liquid investments with maturity of three months or less, as adjusted for any
bank overdrafts.
Notes to the Financial Statements
1. Basis of preparation
The preliminary financial information does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006 for the financial
year ended 31 January 2022 but has been derived from those accounts and is
prepared on the same basis as the accounting policies to be adopted in those
accounts. The financial information for the year ended 31 January 2022 is
unaudited.
The annual accounts for the year ended 31 January 2022 have been prepared in
accordance with UK adopted International Accounting Standards using the
historical cost convention except where the measurement of balances at fair
value is required. The financial information included in this preliminary
announcement does not include all the disclosures required in accounts
prepared in accordance with UK adopted International Accounting Standards and
accordingly it does not itself comply with UK adopted International Accounting
Standards.
The audit of the statutory accounts for the year ended 31 January 2022 is not
yet complete. These accounts will be finalised on the basis of the financial
information presented by the directors in this preliminary announcement. The
statutory accounts for the year ended 31 January 2022 will be delivered to the
Registrar of Companies following the Company's annual general meeting.
The financial information for the period ended 31 January 2021 is derived from
the statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditors have reported on the accounts for the
year ended 31 January 2021; their reports was unqualified, did not include
any matters to which the auditor drew attention by way of emphasis and did not
contain a statement under s498(2) or s498(3) of the Companies Act 2006.
2. Changes to accounting policies
The Group changed its accounting policy for land and buildings from being held
at historical cost less accumulated depreciation to a revaluation model. The
impact of the change can be seen in note 7.
3. Operating segments
Description of segments and principal activities
The Group's operating board, consisting of the Chief Executive Officer and
Chief Financial Officer examines the Group's performance from a product
perspective and has identified three reportable segments of its business:
SwipedOn
- based in New Zealand
provides the sale and support of self-service visitor management software to
customers throughout the world.
Space Connect
- based in the UK
provides the sale and support of self-service space management software
through a network of partners, distributors and resellers to customers
throughout the world
Anders &
Kern
- based in the UK makes sales of hardware and
related integration services to customers in the UK.
The operating board primarily uses an adjusted measure of earnings before
interest, tax, depreciation and amortisation (EBITDA) to assess the
performance of the operating segments. However, the operating board also
receives information about the segments' revenues and assets on a monthly
basis. Information about segment revenue is disclosed in note 4.
3(b) Adjusted LBITDA
Adjusted LBITDA excludes discontinued operations and the effects of
significant items of income and expenditure which might have an impact on the
quality of earnings, such as reorganisation and transactional costs and
impairment of assets. It also excludes the effects of equity-settled
share-based payments.
Interest income and finance costs are not allocated to segments, because this
type of activity is driven by the central treasury function which manages the
cash position of the Group.
Year ended 31 January 2022 Year ended 31 January 2021
£'000 £'000
Software
Space Connect (1,082) (646)
SwipedOn (164) (195)
Hardware
Anders & Kern (118) (84)
Central operating costs (1,129) (1,195)
Total adjusted LBITDA (2,493) (2,120)
3(c) Segmental financial performance
Year ended 31 January 2022 Central
Space Connect Swiped Anders & Kern operating
On costs Total
£'000 £'000 £'000 £'000 £'000
Revenue from contracts with customers 458 2,953 1,729 - 5,140
Costs of sale of goods (1) (18) (1,049) - (1,068)
Costs of providing services (64) (284) (79) - (427)
Gross profit 393 2,651 601 - 3,645
Administrative expenses (1,927) (3,134) (874) (1,385) (7,320)
Impairment losses on financial and contract assets (3) (11) - - (14)
Other income - 36 - - 36
Operating loss (1,537) (458) (273) (1,385) (3,653)
(1,082) (164) (118) (1,129) (2,493)
Adjusted LBITDA*
Reorganisation and transactional items - - (83) (109) (192)
Depreciation (6) (79) (22) (7) (114)
Amortisation (431) (100) (21) - (552)
Impairment of financial assets (3) (11) - - (14)
Share based payment charge (15) (104) (29) (140) (288)
Operating loss (1,537) (458) (273) (1,385) (3,653)
Finance income - 1 - - 1
Finance costs - (11) (12) (3) (26)
Loss before tax (1,537) (468) (285) (1,388) (3,678)
Taxation 446 98 58 512 1,114
Loss after tax (1,091) (370) (227) (876) (2,564)
Year ended 31 January 2021 Central
Space Connect Swiped Anders & Kern operating
On costs Total
£'000 £'000 £'000 £'000 £'000
Revenue from contracts with customers 192 2,161 2,271 5 4,629
Costs of sale of goods 1 (16) (1,680) - (1,695)
Costs of providing services (4) (196) (83) - (283)
Gross profit 189 1,949 508 5 2,651
Administrative expenses (1,011) (2,441) (648) (1,326) (5,426)
Impairment losses on financial and contract assets - (18) - (54) (72)
Other income - 130 - - 130
Operating loss (822) (380) (140) (1,375) (2,717)
(646) (195) (84) (1,195) (2,120)
Adjusted LBITDA*
Depreciation (3) (66) (22) (12) (103)
Amortisation (171) (80) (21) - (272)
Impairment of financial assets - (18) - (54) (72)
Share based payment charge (2) (21) (13) (114) (150)
Operating loss (822) (380) (140) (1,375) (2,717)
Finance income - 1 - - 1
Finance costs (102) (12) (12) 99 (27)
Loss before tax (924) (391) (152) (1,276) (2,743)
Taxation 832 16 46 (282) 612
Loss after tax (92) (375) (106) (1,558) (2,131)
* (Loss)/profit for the year from continuing operations before net finance
costs, tax, depreciation, amortisation, reorganisation and transactional
items, impairment charges and share based payment charge.
3(d) Segment assets
31 January 2022 31 January 2021
Additions to non-current assets* Additions to non-current assets*
Segment Segment
assets assets
£'000 £'000 £'000 £'000
Space Connect 5,360 146 4,884 294
SwipedOn 6,533 224 6,687 64
Anders & Kern 2,653 32 2,640 12
Segment assets 14,546 402 14,211 370
Unallocated assets 2,981 - 4,941 7
Total assets 17,527 402 19,152 377
*Other than contract assets and deferred tax assets
For the purpose of monitoring segment performance and allocating resource
between segments, the Group's Chief Executive Officer monitors the tangible,
intangible and financial assets attributable to each segment. All assets are
allocated to reportable segments with the exception of cash held by the Parent
Company, other financial assets (except for trade and other receivables) and
tax assets.
The total of non-current assets other than deferred tax assets broken down by
location of assets is shown as follows:
31 January 2022 31 January 2021
£'000 £'000
UK 5,878 6,124
Australia - 3
New Zealand 5,586 5,934
Total assets 11,464 12,061
3(e) Segment liabilities
Segment liabilities are measured in the same way as in the financial
statements. These liabilities are allocated based on the operations of the
segment.
31 January 2022 31 January 2021
£'000 £'000
Space Connect 524 171
SwipedOn 2,018 1,460
Anders & Kern 865 996
Segment liabilities 3,407 2,627
Unallocated 364 255
Total liabilities 3,771 2,882
3(f) Revenue by customer geographical location
Year ended 31 January 2022 Space Connect Swiped Anders & Kern
On Central Total
£'000 £'000 £'000 £'000 £'000
UK 266 440 1,729 - 2,435
USA 2 1,340 - - 1,342
Australia 93 566 - - 659
New Zealand - 311 - - 311
Canada - 173 - - 173
Sweden 82 - - - 82
Rest of the world 15 123 - - 138
Total 458 2,953 1,729 - 5,140
Year ended 31 January 2021 Space Connect Swiped Anders & Kern
On Central Total
£'000 £'000 £'000 £'000 £'000
UK 34 304 2,213 5 2,556
USA - 974 - - 974
Australia 135 475 - - 610
New Zealand - 214 - - 214
Canada - 151 - - 151
Sweden 23 - - - 23
Rest of the world - 43 58 - 101
Total 192 2,161 2,271 5 4,629
4. Revenue from contracts with customers
Disaggregation of revenue from contracts with customers
The Group derives revenue from the transfer of goods and services over time
and at a point in time in the following major product lines and geographical
regions.
Year ended 31 January 2022 Space Connect SwipedOn Anders & Kern Central
UK New Zealand UK UK Total
£'000 £'000 £'000 £'000 £'000
Segment revenue 458 2,953 1,729 - 5,140
Timing of revenue recognition
At a point in time 84 37 1,599 - 1,720
Over time 374 2,916 130 - 3,420
458 2,953 1,729 - 5,140
Year ended 31 January 2021 Space Connect SwipedOn Anders & Kern Central
Australia New Zealand UK UK Total
£'000 £'000 £'000 £'000 £'000
Segment revenue 192 2,161 2,271 5 4,629
Timing of revenue recognition
At a point in time 74 36 2,120 5 2,235
Over time 118 2,125 151 - 2,394
192 2,161 2,271 5 4,629
Revenues from external customers come from the sale of software as a service,
the sale of software licences, the sale of professional services and the sale
of hardware. The revenue from the sale of software as a service and software
licences relates to the Group's intellectual property owned by SwipedOn and
Space Connect. No single customer represents 10 per cent or more of the
Group's total revenues.
4(b) Assets and liabilities related to contracts with
customers
The Group has recognised the following assets and liabilities related to
contracts with customers:
Current contract assets 31 January 31 January
2022 2021
£'000 £'000
Software 5 4
Loss allowance - -
Total current contract assets 5 4
Current contract liabilities 31 January 31 January
2022 2021
£'000 £'000
Software 1,774 1,055
Hardware - 74
Total contract liabilities 1,774 1,129
Contract liability movement
£'000
At 31 January 2020 641
Recognised as revenue in period (641)
New contract liabilities 1,129
At 31 January 2021 1,129
Recognised as revenue in period (1,129)
New contract liabilities 1,774
At 31 January 2022 1,774
The Group expects all of the deferred revenue as of 31 January 2022 to be
recognised during the next reporting period.
Unsatisfied contracts
The following table shows unsatisfied performance obligations resulting from
fixed-price software as a service contracts and software support agreements:
31 January 31 January
2022 2021
£'000 £'000
Aggregate amount of the transaction price allocated to software as a service 1,774 1,055
agreements and software support agreements that are partially or fully
unsatisfied as at 31 January
4(c) Accounting policies
The Group has a number of different types of contractual arrangements and
consequently applies a variety of methods of revenue recognition, based on the
principles set out in IFRS 15 Revenue from Contracts with Customers. The
revenue and profit in any period are based on the delivery of performance
obligations and an assessment of when control is transferred to the customer.
Revenue is recognised when the performance obligation in a contract has been
performed (so 'point in time' recognition) or over time as the performance
obligation is transferred to the customer.
For contracts where the Group does not provide the final services judgement is
applied as to whether the Group is acting as a principal or agent. Where the
Group controls the goods or services before they are transferred to the
customer a principal relationship is considered to be in place, and revenue is
recognised gross. Where the Group arranges for the goods or services to be
provided by another party without the Group taking control over those goods or
services the relationship is considered to be that of an agent, and the
revenue is recognised net of cost of sales.
The transaction price, being the amount to which the Group expects to be
entitled and has rights to under the contract, is allocated to the identified
performance obligations.
For each performance obligation, the Group determines if revenue will be
recognised over time or at a point in time. Where the Group recognises revenue
over time for long-term contracts, this is in general due to the Group
performing and the customer simultaneously receiving and consuming the
benefits provided over the life of the contract. For each performance
obligation to be recognised over time, the Group applies a revenue recognition
method that faithfully depicts the Group's performance in transferring control
of the goods or services to the customer. This decision requires assessment of
the real nature of the goods or services that the Group has promised to
transfer to the customer. The Group applies the relevant output or input
method consistently to similar performance obligations in other contracts.
If performance obligations in a contract do not meet the over time criteria,
the Group recognises revenue at a point in time (see below for further
details).
The Group disaggregates revenue from contracts with customers by reporting
segment and timing of transfer of goods and services as management believe
this best depicts how the nature, amount, timing and uncertainty of the
Group's revenue and cash flows are affected by economic factors.
Sale of software as a service
The Group offers its software as a service hosted in the cloud. Under terms of
the contract, the customer receives the right to access the software for an
agreed period of time. To the extent that the customer has been invoiced in
excess of the value services received to date a contract liability for the
provision of the software as a service is recognised at the time of sale.
Management considers that revenue is recognised over time as the service is
delivered until the point that the agreement expires.
Revenue invoiced during the reporting period which relates to future periods
is classified as deferred income contract liabilities on the balance sheet.
The software comprises a number of different modules which can be sold as a
bundle at the outset or separately if a customer chooses to take a
subscription at a later date. Additional modules will continue to be developed
and offered as part of the initial product offering or sold separately to
existing customers who have not subscribed to that module.
Sale of professional services
The Group sells professional services comprising implementation, configuration
and support services. These services can be purchased in advance and used by
customers when required and revenue is recognised at a point in time when the
service has been provided.
Hardware and Systems Integration
The Group sells hardware through Anders & Kern or as part of a contract
for software through its software division. Revenue is recognised at the point
when the performance obligation is fulfilled, usually when the hardware is
delivered to the customer. Where installation services are sold alongside
the hardware, revenue from those installation services is recognised when
those services are delivered. Customers have no right to return goods and no
warranties are issued to customers.
Contract assets and liabilities
Where the Group provides software as a service or software support agreements,
customers often pay in advance for a service to be delivered over time. Where
payments made are greater than the revenue recognised at the period end date,
the Group recognises a deferred income contract liability for this difference.
Where payments made are less than the revenue recognised at the period end
date, the Group recognises an accrued income contract asset for this
difference.
At each reporting date, the Group assesses whether there is any indication
that accrued income contract assets may be impaired by considering whether the
revenue remains highly probable that no revenue reversal will occur. Where an
indicator of impairment exists, the Group makes a formal estimate of the
asset's recoverable amount. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to
its recoverable amount.
5. Cash flow information
31 January 2022 31 January 2021
£'000 £'000
Loss before income tax from continuing operations (3,678) (2,743)
Adjustments for:
Depreciation and amortisation 666 375
Non-cash employee benefit expense - share-based payments 288 150
Net loss on sale of non-current assets - 2
Finance costs - net 25 25
Credit loss 14 72
Net exchange differences (9) 3
Change in operating assets and liabilities of continuing operations
Decrease / (increase) in trade and other receivables 114 (14)
Decrease / (increase) in contract assets - 29
Decrease / (increase) in inventories (113) 157
Decrease / (increase) in prepayments (53) (43)
Increase / (decrease) in trade creditors 123 (371)
Increase / (decrease) in other creditors 276 280
Increase / (decrease) in contract liabilities 733 439
Cash consumed by continuing operations (1,614) (1,639)
Cash consumed by discontinued operations - (152)
Cash consumed by operations (1,614) (1,791)
6. Loss per share
Basic loss per share
Year ended 31 January 2022 Year ended 31 January 2021
Pence Pence
Attributable to the ordinary equity holders of the Company:
From continuing operations (8.91p) (7.54p)
From discontinued operations - (0.44p)
Total basic loss per share (8.91p) (7.98p)
6(b) Diluted loss per share
Year ended 31 January 2022 Year ended 31 January 2021
Pence Pence
Attributable to the ordinary equity holders of the Company:
From continuing operations (8.91p) (7.54p)
From discontinued operations - (0.44p)
Total diluted loss per share (8.91p) (7.98p)
6(c) Reconciliation of earnings used in calculating earnings
per share
Earnings per share data is based on the Group loss for the year and the
weighted average number of ordinary shares in issue.
Year ended 31 January 2022 Year ended 31 January 2021
£'000 £'000
Basic (loss) / earnings per share
Loss attributable to the ordinary equity holders of the Company:
From continuing operations (2,564) (2,131)
From discontinued operations - (124)
(2,564) (2,255)
Diluted (loss) / earnings per shares
Loss attributable to the ordinary equity holders of the Company:
From continuing operations (2,564) (2,131)
From discontinued operations - (124)
(2,564) (2,255)
6(d) Weighted average number of shares used as the denominator
Year ended 31 January 2022 Year ended 31 January 2021
Number Number
Weighted average number of shares used as the denominator in calculating basic 28,780,768 28,255,823
earnings per share
Adjustments for calculation of diluted earnings per share
Options - -
Weighted average number of shares and potential ordinary shares used as the 28,780,768 28,255,823
denominator in calculating diluted earnings per share
6(e) Information concerning the classification of securities
Options
Options granted to employees under the Group's share option schemes are
considered to be potential ordinary shares. Whilst options are never included
in the determination of basic earnings per share, they are included in the
calculation of diluted earnings per share if considered dilutive.
At 31 January 2022 options are considered antidilutive and therefore not
included in the calculation of diluted earnings per share. These options could
potentially be dilutive in the future.
6(f) Alternative measure of earnings per share
Year ended 31 January 2022 Year ended 31 January 2021
£'000 £'000
Loss for the year from continuing operations (2,564) (2,131)
Adjustment to basic (loss)/earnings:
Reorganisation and transactional costs 192 -
Tax credit on reorganisation and transactional costs (36) -
Amortisation of acquired intangibles 198 194
Deferred tax credit on amortisation of acquired intangibles (49) (48)
Share based payment charge 288 150
Deferred tax credit on share-based payment charge (55) (28)
Adjusted (loss)/earnings attributable to owners of the Company (2,026) (1,863)
Number of shares No. No.
Weighted average ordinary shares in issue 28,780,768 28,255,823
Weighted average potential diluted shares in issue 28,780,768 28,255,823
Adjusted (loss)/earnings per share
Basic (loss)/earnings per share (7.04p) (6.59p)
Diluted (loss)/earnings per share (7.04p) (6.59p)
7. Property plant and equipment
Freehold land & buildings Fixtures & fittings Plant & machinery Office equipment Total
£'000 £'000 £'000 £'000 £'000
At 31 January 2020
Cost 649 13 13 126 801
Accumulated depreciation (36) (10) (9) (53) (108)
Net book amount 613 3 4 73 693
Year ending 31 January 2021
Opening net book amount 613 3 4 73 693
Additions - - - 44 44
Disposals - - - (2) (2)
Depreciation charge (13) (2) (2) (37) (54)
Foreign exchange impact - - - 2 2
Closing net book amount 600 1 2 80 683
At 31 January 2021
Cost 649 13 13 154 829
Accumulated depreciation (49) (12) (11) (74) (146)
Net book amount 600 1 2 80 683
Year ending 31 January 2022
Opening net book amount 600 1 2 80 683
Additions - - - 36 36
Revaluation 90 - - - 90
Disposals - - - (2) (2)
Depreciation charge (13) (1) (2) (38) (54)
Foreign exchange impact - - - (2) (2)
Closing net book amount 677 - (0) 74 751
At 31 January 2022
Cost or valuation 680 13 13 179 885
Accumulated depreciation (3) (13) (13) (105) (134)
Net book amount 677 - - 74 751
Leased assets
Leased assets are presented as a separate line item in the balance sheet.
Revaluation, depreciation methods and useful lives
The Group has changed its accounting policy for land and buildings which are
now recognised at fair value based on periodic valuations by external
independent valuers, less subsequent depreciation for buildings. Previously
land and buildings were accounted for at historical cost less depreciation. A
revaluation surplus is credited to other reserves in shareholders' equity. All
other property, plant and equipment is recognised at historical cost less
depreciation.
Depreciation is provided so as to write off to the cost or valuation of assets
(other than freehold land) less their estimated residual values over their
expected useful economic lives using the straight-line method on the following
bases
· Fixtures and fittings
4-5 years
· Plant and
machinery 4-5 years
· Office equipment
3-4 years
· Leasehold
improvements 5 years
· Freehold buildings
50 years
Revaluation of land and building
Land and buildings are comprised of a single detached industrial building
where the Group bases its UK operations. For the first time in the group
financial statements, freehold land and buildings are stated at their revalued
amounts, being the fair value at the date of revaluation, less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. The
fair value measurements of the Group's freehold land and buildings as at
October 2021 were performed by Arnolds Keys LLP, independent valuers not
related to the Group. Arnolds Keys LLP are members of the Royal Institute
Chartered Surveyors and they have appropriate qualifications and recent
experience in the fair value measurement of properties in the relevant
locations. The valuation conforms to International Valuation Standards and was
based on recent market transactions on arm's length terms for similar
properties. The Group re-values its land and buildings with sufficient
regularity to ensure that the carrying amount does not differ materially from
that which would be determined using fair value at the end of the reporting
period. The Directors asses on an annual basis if there has been any
significant change in fair value. Where it is assessed that there has been a
significant change an independent revaluation is made.
To provide an indication about the reliability of the inputs used in
determining fair value, the group classifies its non-financial assets and
liabilities into the three levels prescribed under the accounting standards.
The inputs used in the valuation of land and buildings are based on similar
observable transactions in the market and have therefore been allocated to in
their entirety to level 2. When appropriate the group's policy is to recognise
transfers into and transfers out of fair value hierarchy levels as at the end
of the reporting period. There have been no transfers between hierarchy levels
during the year.
The valuation of the land and buildings has been made using comparable rental
transactions for properties in the local area.
If freehold land and buildings were stated on the historical cost basis, the
amounts would be as follows:
31 January 2022 31 January 2021
£'000 £'000
Cost 649 649
Accumulated depreciation (62) (49)
Net book amount 587 600
8. Events occurring after the end of the reporting period
There are no subsequent events occurring after the reporting date that require
adjustment or disclosure.
9. Annual General Meeting
Further details in relation to the Annual General Meeting will be provided in
due course.
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