REG - Smarttech247 Group - Final Results
29/01/2024 07:00
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RNS Number : 1728B Smarttech247 Group PLC 29 January 2024
Certain information contained within this Announcement is deemed by the
Company to constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014 ("MAR") as applied in the United Kingdom. Upon
publication of this Announcement, this information is now considered to be in
the public domain.
29 January 2024
Smarttech247 Group PLC
("Smarttech247", the "Group" or the "Company")
Final Results
Smarttech247 (AIM: S247), a multi-award-winning provider of AI-enhanced
cybersecurity services providing automated managed detection and response for
a portfolio of international clients, is pleased to announce its audited final
results for the 12 months ended 31 July 2023.
Operational highlights
· Admitted to trading on AIM in December 2022, raising £3.7 million
via a placing of new ordinary shares
· A number of new contracts have been won during the period, and since
the period end, spearheaded by the Group's Managed Detection and Response
(MDR) platform, VisionX
· In April 2023 the Company announced its participation in Managed
Security Service Provider Program by its partner, Forcepoint, a global
security leader
· Named as Cybersecurity Company of the Year by Chambers of Ireland
InBusiness Recognition Awards in May 2023
· In July 2023 Smarttech247 partnered with SentinelOne, a cybersecurity
platform company, to deliver cybersecurity solutions
· The Group has expanded, with headcount increased significantly, to be
positioned to deliver growth and develop new products
· Continued development of new products, including new VisionX features
with further development of ThreatHub and NoPhish
Post-period end
· Listing of VisionX on the Amazon Web Services (AWS) Marketplace in
August 2023
· Strategic partnership with Abnormal Security, a leading behavioural
AI-based email security platform in August 2023
· In October 2023 Smarttech247 announced a strategic partnership with
Splunk, a cybersecurity platform company, to deliver automation-driven and
human-led MDR capabilities to global clients
· Won a tender contract from an existing Government of Ireland
department client and secured a contract renewal with AutoNation, the largest
automotive retailer in the United States, in October 2023
· New three-year contract secured with a global pharmaceutical
solutions organisation in November 2023
· Ranked as a Deloitte Fast 50 Technology Company and won the 'Email
Security Solution of the Year' at The Computing Security Award 2023 for the
Company's NoPhish product
· Announced the launch of Aio, a new AI Assistant and the launch of the
Company's Mid-Market MDR solution for its VisionX platform in January 2024
Financial highlights
· Revenue increased by 19.3% to €12.18 million (31 July 2022:
€10.21 million)
· Gross profit increased by 22.7% to €6.81 million (31 July 2022:
€5.55 million)
· Adjusted EBITDA increased by 36% to €2.70 million (31 July 2022:
€1.98 million)
· Adjusted operating profit of €2.15 million (31 July 2022: €1.76
million)
· Cash of €6.06 million at the period end (31 July 2022: €2.36
million)
Raluca Saceanu, CEO of Smarttech247, commented:
"I am pleased to announce our first, full-year results as an AIM-quoted
company, marking a major milestone for Smarttech247. We have entered into
several new contracts during the period, and since the period end, with large,
international organisations, and hope to continue this momentum with our
larger sales capacity to further increase our revenue and profit growth going
forward.
"The year under review, and the period to date, has been marked by significant
strides in our Research and Development as well as forming strategic
partnerships with top companies like Forcepoint, SentinelOne, Abnormal
Security, and Splunk. These synergies have empowered us to offer our clients a
comprehensive security ecosystem, one that is not only robust, but also
dynamically tailored to meet the evolving demands of their unique business
landscapes.
"Smarttech247 now has the platform in place to support and accelerate its
growth in the cybersecurity sector. We are confident as we enter 2024 and look
forward to updating the market on our further progress in due course."
- Ends -
The Annual Report and Accounts for the financial year ended 31 July 2023 will
be available to download from the Group's website via:
https://www.smarttech247.com/aim-rule-26/
(https://www.smarttech247.com/aim-rule-26/)
For further information please contact:
Smarttech247 Group PLC Tel: +353 21 206 6033
Ronan Murphy, Executive Chairman
Raluca Saceanu, Chief Executive Officer
Nicholas Lee, Finance Director
SPARK Advisory Partners Limited - Nominated Adviser Tel: + 44 (0) 20 3368 3550
Mark Brady / Adam Dawes
Shard Capital - Joint Broker Tel: +44 (0) 20 7186 9900
Damon Heath
Fortified Securities - Joint Broker Tel: +44 7493 989014
Guy Wheatley, CFA
Yellow Jersey PR Tel: +44 (0) 20 3004 9512
Sarah Hollins / Annabelle Wills / Bessie Elliot
About Smarttech247
Smarttech247 is a multi-award winning automated MDR (Managed Detection &
Response) company. Its platform is trusted by international organisations and
provides threat intelligence with managed detection and response to provide
actionable insights, 24/7 threat detection, investigation and response.
The Group's services are geared towards proactive prevention and it achieves
this by utilising the latest in cloud, big data analytics and machine
learning, along with an experienced incident response team. In recognition of
its innovative technology, Smarttech247 was named by Chambers Ireland
InBusiness Recognition Awards as Cyber Security Company of the Year 2023.
Smarttech247's offices are located in Ireland, United Kingdom, Romania, Poland
and the USA. The Company was admitted to trading on AIM on 15 December 2022.
For further information please visit www.smarttech247.com
(http://www.smarttech247.com)
Chairman's statement
Introduction
Smarttech247 Group plc (the "Company") is a public limited company whose
shares are quoted on the AIM market of the London Stock Exchange. The Company
is a multi-award-winning provider of AI-enhanced cybersecurity services
providing automated managed detection and response for a portfolio of
international clients. It has four directly and indirectly owned subsidiaries,
Zefone Limited, Smart Systems Security Limited, Smarttech 247 Cyber Security
Sarl incorporated and Smarttech Sp z.o.o. (together "Smarttech247" or the
"Group").
We are pleased to report our results for the year to 31 July 2023.
Highlights
The key highlights for the year are as follows:
Year ended 31 July 2023 31 July 2022 Change
Audited Unaudited
€000 €000 %
Revenue 12,180 10,206 +19.3
Gross profit 6,806 5,545 +22.7
Gross profit margin 55.9% 54.3%
Operating costs 6,981 3,850
Adjusted EBITDA (Note 6)* 2,698 1,984 +36.0%
Operating profit 303 1,756
Profit before tax 204 1,534
As at
Cash 6,062 2,358
Net assets 11,483 4,533
* Adjusted EBITDA is a non-IFRS measure and has been reconciled to the
underlying IFRS numbers in Note 6
· Listing achieved on the London Stock Exchange, raising £3.7 million
· Revenue and profits continue to grow strongly
· A number of new contracts have been won during the period, spearheaded
by the Group's Managed Detection and Response ("MDR") VisionX
· A number of significant partnerships have been entered into with
leading players in the industry
· The platform has been expanded and headcount increased in order to be
in a position to deliver growth and develop new products
· New sales capacity established to increase the rate of revenue growth
· New products are being developed including a new VisionX product with
further development of ThreatHub and NoPhish
Review of the year
2023 has had a transformational year for the Group with a listing being
achieved on the London Stock Exchange in December 2022 and funds successfully
raised from new investors. At the same time, the business has continued to
grow significantly, building out its platform and headcount to service
demand.
The Group now has the platform in place to support and accelerate its revenue
growth. We have also launched new products and won multiple new contracts with
major global companies and institutions. These contracts are important as
they provide clear validation of the service that we provide and clear
reference points for new customers. We are often competing with global
companies to win new business and succeeding, more details on which will be
covered in the Chief Executive Officer's ("CEO") Statement.
We firmly believe that our listing will give Smarttech247 greater visibility
and credibility in overseas geographies, including the USA and Europe, and
will support our growth plans in the short and long term. I am extremely
proud of the team that we now have in place and would like to thank them for
their hard work and dedication in getting the Group to its current position. I
would also like to welcome our new investors.
Outlook and strategy
Cyber-attacks continue to increase with serious implications for the companies
concerned. There is no simple solution to defend an organisation against
everything that it can be exposed to but our combination of managed detection
and response capabilities can help to significantly reduce the impact of an
attack and manage the situation. We therefore see clear opportunities for
future growth.
We have started FY2024 well with more contracts being won and a number of
existing contracts being renewed so we are very much looking forward to
continuing this progress in FY2024.
Ronan Murphy
Executive Chairman
26 January 2024
Chief Executive Officer's statement
During the year under review, the Group made notable progress on a number of
fronts. It has focused on building out its platform and launching new products
and is now extremely well-placed to grow revenue. As we embark on a new era at
Smarttech247, we are pleased with the Group's prospects and the strategic
advances that we are making.
Products
To support its extensive capabilities for Managed Detection and Response
("MDR"), the Group launched its VisionX technology during the year. This
technology, together with our award-winning capabilities and expertise,
provides 24/7 proactive threat detection and response, using cloud data
analytics, machine learning and an incident response capability.
This AI-enabled platform is used in tandem with human-led monitoring from
Smarttech247's expert team, empowering organisations to leverage AI and
intelligent automation to enhance their security operations.
During the year, we have also embarked on the development of a new version of
the VisionX product. This offers a very different functionality in that it is
multi-tenancy and has a completely new User Interface - this is a very
important element of the VisionX platform as it is heavily relied upon by
product users to enable them to assess the effectiveness of their security
operations in real time. This new design offers users an intuitive approach
that simplifies complex security operations. With improved functionality,
advanced analytics, threat hunting and customisable dashboards, customers will
gain unprecedented insights into their organisation's security posture.
Post period end in August 2023, the Group also announced that its VisionX
platform is available on the Amazon Web Services ("AWS") Marketplace. AWS's
well-established, trusted platform allows us to showcase VisionX to a wider
range of customers, demonstrating our commitment to delivering leading
security solutions to a global audience.
The Group is continuing to develop its threat and vulnerability software
called Threathub. Threathub has attack surface intelligence management
features which allow organisations to manage their risk continuously by
providing them with automated threat modelling and dynamic risk governance
capabilities based on their internal and external attack surface.
We are progressing with the revamping of our Managed Phishing Response
Platform, NoPhish, underscoring our steadfast commitment to addressing the
dynamic landscape of cybersecurity threats. The latest developments represent
a pivotal advancement, facilitating expeditious responses to phishing
incidents through a streamlined and intuitive user experience. This
enhancement is poised to significantly contribute to the efficacy of our
platform by minimising response times and optimising operational agility.
Contracts
Smarttech247 holds a strong position within the cybersecurity market, and we
are pleased to be able to deliver revenue and adjusted EBITDA growth. Just
prior to joining AIM, the Group won a three-year contract with a total sales
value of US$800,000 with a Fortune 150 leading automotive retailer in the USA
with annual revenues of over US$20 billion. This was followed by a three-year
agreement with a large US tech company headquartered in Massachusetts and a
two-year agreement with a prestigious university in Ireland worth circa
US$400,000 and US$450,000 respectively over the length of the contracts. All
these contracts are centred on the Group's MDR platform, VisionX.
In July 2023, the Group announced that it had received an order from an
existing client, a global, automotive technology company, worth in total
circa US$3 million over three years. This order includes the provision and
implementation of the Group's cutting-edge security intelligence technology,
VisionX to provide enhanced visibility and threat detection. Once integrated,
it provides a unified and proactive security solution by combining real-time
threat monitoring, rapid incident response and advanced analytics. This will
enable the digital resilience of the client's assets to be strengthened
thereby safeguarding them more effectively.
Post period end in August 2023, as part of Smarttech247's partnership with
Abnormal Security a multi-year contract worth nearly €400k, over two years,
was won with a global organisation within the aviation industry sector.
In October 2023, the Group won a tender contract from an existing Government
of Ireland department client, worth circa €400,000 over two years. This
deal will see Smarttech247 leverage its strategic partnership with IBM to
provide its IBM QRadar Security Information and Event Management ("SIEM")
solution. The technology is designed to provide security teams with
centralised visibility into enterprise-wide security data. This resource
empowers Smarttech247 clients with actionable insight into the most critical
threats, enabling more effective threat management, near real-time visibility
and the production of detailed data access and user activity reports.
Smarttech247's client, and the largest automotive retailer in the United
States, AutoNation, has recently extended its existing partnership for a
further three years. This will allow Smarttech247 to continue supporting this
Fortune 150 global enterprise in its cybersecurity solutions and is a
testament to the success of the ongoing partnership. Furthermore,
AutoNation's Vice President and CISO, Chip Regan, recently explained in a
recent case study why Smarttech247 was the obvious choice when it came to its
cybersecurity needs and specifically how partnering with Smarttech247 has
allowed AutoNation to achieve a granular level of security and monitoring on a
scale that suits such a large, global enterprise.
In November 2023, the Group announced that it had signed a new deal with a
global pharmaceutical solutions organisation, based in the USA, worth
approximately €900,000 over three years, deploying its AI-enhanced VisionX
platform.
Combining the VisionX MDR platform with the managed services offering creates
competitive differentiation for the Group. Major new customers have
highlighted factors like this as the reason for selecting Smarttech247.
Smarttech247 currently has multiple contracts with leading global
organisations. The majority of these contracts are multi-year thereby
providing greater certainty of revenue. Also, with contracts now in place
with such prestigious organisations, this represents an excellent source of
reference for new business.
Partnerships
In the dynamic field of cybersecurity, our strategic technology alliances play
a pivotal role in providing best-of-breed solutions to our clients. These
collaborations and integrations with our platform VisionX represent a
proactive approach to addressing evolving threats, incorporating cutting-edge
technologies such as Secure Access Service Edge ("SASE"), Data Loss Prevention
("DLP"), autonomous security, and AI-driven email protection.
In April 2023, the Group announced its participation in the newly released
Managed Security Service Provider Program ("MSSP") by its partner, Forcepoint,
a global security leader. The program is centred on Forcepoint ONE SSE
cloud-native and Forcepoint enterprise data security solutions. As a partner
of Forcepoint, Smarttech247 will be able to quickly incorporate Secure Access
Service Edge ("SASE") and DLP managed services into its offerings through the
MSSP program. Partners of this service can also benefit from flexible
consumption of Forcepoint converged, cloud-delivered security solutions,
update customer configurations and offer multi-tenant services, all with a few
clicks.
With the Group's hosted and managed services centred on Forcepoint ONE SSE
cloud-native and Forcepoint enterprise data security solutions, this will
allow today's enterprises to manage risk holistically and simplify security
operations. This is a potential game-changer when adversaries are constantly
finding new ways to steal confidential data.
In July 2023, the Group announced that it had joined forces with SentinelOne
(NYSE: S), the autonomous cybersecurity platform company, to deliver
comprehensive cybersecurity solutions to businesses of all sizes.
SentinelOne, a recognised leader in protecting endpoints, cloud, networks and
identities in an intelligent, holistic way. Its technology is at the forefront
of the industry and combined with Smattech247's expertise in cybersecurity
consulting and MDR services, businesses can be provided with a complete
security solution that can adapt and scale with their changing needs.
The partnership combines Smarttech247's expertise in cybersecurity consulting,
MDR services and threat intelligence with SentinelOne's market-leading
autonomous security technology to provide a comprehensive security solution
that protects against cyber threats.
Smarttech247 will maximise the benefits and value of SentinelOne's leading
technology for its customers with specialist-managed endpoint protection and
response services, whilst SentinelOne will provide Smarttech247 with access to
its latest threat intelligence and research.
Post period end, in August 2023, the Group announced a strategic partnership
agreement with Abnormal Security, a leading behavioural AI-based email
security platform. Unlike traditional secure email gateways, Abnormal
Security takes a different approach to stopping email attacks. The
cloud-native API architecture ingests thousands of signals across multiple
platforms to build a baseline of the known-good behaviour of every employee
and vendor in an organisation based on communication patterns, sign-in events
and thousands of other attributes. It then applies advanced AI models
including natural language processing ("NLP") and behavioural analytics to
detect abnormalities in email behaviour that indicate a potential threat and
prevent attacks from reaching end users.
Abnormal Security will be integrated into Smarttech247's comprehensive MDR
service, VisionX, to provide a unified and proactive security solution.
In October 2023, the Group announced a strategic partnership agreement with
Splunk Inc. Splunk Inc. (NASDAQ: SPLK), a cybersecurity and observability
leader, helps make organisations more digitally resilient. Businesses use
Splunk's unified security and observability platform to keep digital systems
secure and reliable. This partnership brings together Smarttech247's
automation-driven and human-led VisionX MDR capabilities and Splunk's powerful
SIEM technology solutions.
The Group also works with a number of other leading industry players whose
products can be incorporated within its MDR platform as required. Such
partners include Microsoft, IBM and Crowdstrike among many others.
People and platform
During FY2023, the Group has increased its headcount significantly in order to
provide the capacity for future revenue growth. This in itself is a
significant achievement given the demand for suitably qualified high-quality
personnel. This has also been implemented against the background of tight
control over costs to maintain existing margins.
During FY2023, one key area of focus was to build out the Group's sales
capability and operations. Investment has now been made in this area and
progress achieved which will support the Group's revenue growth going forward.
Also, during the period Paul Garvey was appointed to the Group's Advisory
Board. Paul Garvey is currently Vice President and Head of Global Accounts
at Check Point Software Technologies Ltd, a leading provider of cyber security
solutions to over 100,000 global customers, where he oversees the entire Go To
Market capability for Check Point's largest customers. Subsequently, and post
period end, Sascha Maier was also appointed to the Group's Advisory Board.
Sascha is currently the Group Chief Information and Security Officer at SV
Group, a leading hospitality and catering group in Europe. In this role, he
oversees the Cyber Resilience strategy for the entire group, including all
brands, subsidiaries, and the foundation.
Awards and profile
On 9 March 2023, the Group hosted its annual Zero Day Con conference at
the Dublin Convention Centre, bringing together leading technology firms,
industry experts and government officials to allow business leaders to learn
more about the latest cybersecurity trends. This year, over 500 international
cybersecurity industry leaders attended, and speakers included senior
professionals from the FBI, the Government of Ireland, and top cybersecurity
and medical companies.
In May 2023, the Group was named Cyber Security Company of the Year by
Chambers Ireland InBusiness Recognition Awards 2023. This is a prestigious
award and an important recognition for Smarttech247 to receive in its first
year as a publicly quoted organisation.
The Group has once again been nominated as a Deloitte Fast 50 Technology
Company for 2023. Deloitte Fast 50 is one of Ireland's foremost
technology award programs, each year highlighting the 50 fastest-growing
technology companies across Ireland.
The Group also secured the 'Email Security Solution of the Year' title at The
Computing Security Awards 2023 for its product 'NoPhish'. This cutting-edge
solution operates in real-time, detecting and responding to phishing attempts.
By analysing reported emails and identifying malicious elements, such as
attachments or URLs, NoPhish enables organisations to stay ahead of cyber
threats. Phishing remains a critical concern for companies globally and
NoPhish offers clients a defence through its proactive approach and
intelligence. The 'Email Security Solution of the Year' award signifies
Smarttech247's commitment to innovation and the security of its clients.
Furthermore, Smarttech247 has been recognised as a finalist for the 'Scale Up
of the Year' award at the prestigious Tech Industry Alliance Awards and has
also received a nomination for the 'Cyber Security Solution Provider of the
Year' award at the 2023 EU Cyber Awards. Smarttech247 was also shortlisted
for the 'Best Newcomer' Award at the AIM Awards 2023, for seven awards at the
Computing Security Awards 2023 (these include New Product/Solution of the
Year, One to Watch Security and Data Protection as a Service Provider of the
Year) and for Tech Scale up of the Year award at the Tech Industry Alliance
Awards in October 2023.
Financial commentary
In terms of financial performance, the revenue of the Group increased by
around 20% over the prior year as a result of winning several new contracts
during FY2023. Gross profit margins improved slightly leading to a gross
profit increase of around 23%.
Operating costs increased significantly, principally as a result of the costs
of the Company's Initial Public Offering on AIM ("IPO") and other costs
incurred during the year. Underlying operating costs, after adjusting for IPO
related and other costs increased during the period reflecting the increase in
the scale of operations and the commencement of amortisation of certain of the
Group's new products.
Underlying adjusted EBITDA (as reconciled in Note 6), after adjusting for
certain costs and amortisation/depreciation, grew by over 36% during the
period. The Group's underlying cash generation was strong, providing cash to
deploy in the development of new products which is fundamental to a business
like Smarttech247.
The Group's financial position also improved significantly over the period as
a result of the conversion of the convertible loan note and the funds raised
at IPO. Consequently, the Group is very well positioned to fund future growth.
FY2024 has started well with both new contracts being won and a number of
existing clients renewing their contracts.
Raluca Saceanu
CEO
26 January 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 July 2023
2023 2022
€'000
€'000
Unaudited
Note
Continuing operations
Revenue 4 12,180 10,206
Cost of sales 5 (5,374) (4,661)
Gross profit 6,806 5,545
Administrative expenses 6 (6,981) (3,850)
Other operating income 7 478 61
Operating profit 303 1,756
Investment income 10 - 2
Other gains and losses 11 1 (8)
Finance costs 12 (100) (216)
Profit before taxation 204 1,534
Income tax 13 (371) (156)
Profit for the year from continuing operations (167) 1,378
Total profit for the year attributable to equity holders of the parent
Other comprehensive income - (1)
Total comprehensive profit for the year attributable to equity holders of the (167) 1,377
parent
Basic earnings per share - € cents 14 (0.1662) 1.5749
STATEMENT OF FINANCIAL POSITION
As at 31 July 2023
Note 2023 2022
€'000
€'000
GROUP
Unaudited
Non-current assets
Intangible assets 15 3,934 1,739
Property, plant and equipment 16 153 97
Right-of-use asset 21 331 64
Financial assets 17 1,162 1,161
Total non-current assets 5,580 3,061
Current assets
Trade and other receivables 19 6,423 6,153
Cash and cash equivalents 20 6,062 2,358
Total current assets 12,485 8,511
TOTAL ASSETS 18,065 11,572
Equity attributable to owners of the parent
Called up share capital 22 1,436 -
Share premium 22 6,365 -
Share based payment reserve 23 554 -
Other reserves 24 (1,215) 23
Foreign exchange reserve 34 34
Retained earnings 4,309 4,476
Total equity 11,483 4,533
Non-current liabilities
Borrowings 26 - 2,342
Lease liability 21 260 4
Total non-current liabilities 260 2,346
Current liabilities
Trade and other payables 27 6,231 4,629
Lease liability 21 91 64
Total current liabilities 6,322 4,693
Total liabilities 6,582 7,039
TOTAL EQUITY AND LIABILITIES 18,065 11,572
These Financial Statements were approved by the Board of Directors on 26
January 2024 and were signed on its behalf by:
Raluca Saceanu
Director
Company number: 14385467
COMPANY Note 2023
€'000
Non-current assets
Investments 18 1,116
Total non-current assets 1,116
Current assets
Intercompany receivable 3,166
Trade and other receivables 19 184
Cash and cash equivalents 20 2,949
Total current assets 6,299
TOTAL ASSETS 7,415
Equity attributable to owners of the parent
Called up share capital 22 1,436
Share premium 22 6,365
Share based payment reserve 23 554
Foreign exchange reserve 22
Retained earnings (1,016)
Total equity 7,361
Current liabilities
Trade and other payables 27 54
Total current liabilities 54
Total liabilities 54
TOTAL EQUITY AND LIABILITIES 7,415
Under section 408 of the Companies Act 2006, the Company is exempt from the
requirement to present its own income statement or statement of comprehensive
income. The Company's loss for the year was €1,016K.
These Financial Statements were approved by the board of Directors on 26
January 2024 and were signed on its behalf by:
Raluca Saceanu
Director
STATEMENT OF CASHFLOW
For the year ended 31 July 2023
GROUP Notes 2023 2022
€'000
€'000
Unaudited
Cash flow from operating activities
(Loss) / profit for the financial year (167) 1,378
Adjustments for:
Interest payable 64 1
Finance costs 36 215
Impact of foreign exchange (9) (270)
Taxation 371 156
Share based payments 554 -
IPO costs in shares 608 -
Depreciation and amortisation 549 228
Taxation paid (148) -
Fair value loss / (gain) on investments (1) 8
Changes in working capital:
Decrease / (increase) in trade and other receivables (241) (1,622)
(Decrease) / increase in trade and other payables 1,532 611
Net cash inflow from operating activities 3,148 705
Cash flow from investing activities
Cash acquired on acquisition 7 13
Purchase of intangible fixed assets (2,625) (1,434)
Purchase of tangible fixed assets (112) (38)
Sale / (purchase) of financial assets - (2)
Net cash inflow / (outflow) from investing activities (2,730) (1,461)
Cash flows from financing activities
Net proceeds from the issue of shares 3,373 -
Repayment of lease liabilities 21 (76) (101)
Other finance costs (7) -
Net cash inflow from financing activities 3,290 (101)
Net increase / (decrease) in cash and cash equivalents 3,708 (857)
Cash and cash equivalents at beginning of period 2,358 3,215
Foreign exchange impact on cash (4) -
Cash and cash equivalents at the end of the period 20 6,062 2,358
Significant non-cash transactions
The only significant non-cash transactions that are included in the cash flow
were the issue of shares and share options as detailed in Notes 22 and 23.
COMPANY Notes 2023
€'000
Cash flow from operating activities
(Loss) / profit for the financial year (1,016)
Adjustments for:
Share based payments 450
IPO costs in shares 608
Changes in working capital:
(Increase) / decrease in trade and other receivables (521)
Increase / (decrease) in trade and other payables 55
Net cash outflow from operating activities (424)
Cash flows from financing activities
Net proceeds from the issue of shares 3,373
Net cash inflow from financing activities 3,373
Net increase / (decrease) in cash and cash equivalents 2,949
Cash and cash equivalents at beginning of period -
Foreign exchange impact on cash -
Cash and cash equivalents at the end of the period 20 2,949
Significant non-cash transactions
The only significant non-cash transactions that are included in the cash flow
were the issue of shares and share options as detailed in Notes 22 and 23.
STATEMENT OF CHANGE IN EQUITY
As at 31 July 2023
GROUP Share Capital Share Premium SBP Reserve Merger Reserve Foreign Exchange Reserve Retained Earnings Total Equity
€'000 €'000 €'000 €'000 €'000 €'000 €'000
At 1 August 2021 - - - - 35 3,098 3,133
Profit for the year - - - - - 1,378 1,378
Other comprehensive income - - - - (1) - (1)
Total comprehensive income for the year - - - - (1) 1,378 1,377
Acquisition of Smarttech Poland - - - 23 - - 23
Total transaction with owners - - - 23 - - 23
Balance at 31 July 2022 (unaudited) - - - 23 34 4,476 4,533
Loss for the year - - - - - (167) (167)
Other comprehensive income - - - - - - -
Total comprehensive income for the year - - - - - (167) (167)
Capital reorganisation 1,012 - - (1,012) - - -
Issue of shares to settle acquired CLN 159 2,577 - - - - 2,736
Issue of shares 265 4,108 - - - - 4,373
Acquisition of Smart Securities - - - (226) - - (226)
Share based payments - - 554 - - - 554
Share issue costs - (320) - - - - (320)
Total transaction with owners 1,436 6,365 554 (1,238) - - 7,117
Balance at 31 July 2023 1,436 6,365 554 (1,215) 34 4,309 11,483
COMPANY Share Capital Share Premium SBP Reserve Foreign Exchange Reserve Retained Earnings Total Equity
€'000 €'000 €'000 €'000 €'000 €'000
Loss for the year - - - - (1,016) (1,016)
Other comprehensive income - - - 22 - 22
Total comprehensive income for the year - - - 22 (1,016) (994)
Issue of shares as part of capital reorganisation 1,012 - - - - 1,012
Issue of shares to settle acquired CLN 159 2,577 - - - 2,736
Issue of shares 265 4,108 - - - 4,373
Share based payments - - 554 - - 554
Share issue costs - (320) - - - (320)
Total transaction with owners 1,436 6,365 554 - - 8,355
Balance at 31 July 2023 1,436 6,365 554 22 (1,016) 7,361
NOTES TO THE FINANCIAL INFORMATION
For the year ended 31 July 2023
1 GENERAL INFORMATION
Smartech247 Group plc ("Smartech247") is a public limited company incorporated
and registered in England and Wales with its registered office at 165 Fleet
Street, London, EC4A 2DY. The Company's registered number is 14385467. The
Company has four direct and indirectly 100% owned subsidiaries, Zefone Limited
incorporated and registered in Ireland, Smart Systems Security Limited,
incorporated and registered in England and Wales, Smarttech 247 Cyber Security
Sarl incorporated and registered in Romania and Smartech Sp z.o.o.
incorporated and registered in Poland (together "the Group").
The Group's principal activities consist of providing Managed Detection and
Response capabilities to global organisations, and associated services
including penetration testing, governance risk and compliance and cyber
consultancy.
The consolidated Financial Statements were approved for issue by the Board of
Directors on 26 January 2024.
2 ACCOUNTING POLICIES
IAS 8 requires that management shall use its judgement in developing and
applying accounting policies that result in information which is relevant to
the economic decision-making needs of users, that are reliable, free from
bias, prudent, complete and represent faithfully the financial position,
financial performance and cash flows of the entity.
2.1 Basis of preparation
The financial statements for the period ended 31 July 2023 have been prepared
in accordance with UK-adopted International Accounting Standards ('IFRS') and
in accordance with the requirements of the Companies Act 2006 with the
principal accounting policies applied in the preparation of the Financial
Statements as set out below. These policies have been consistently applied to
the period presented, unless otherwise stated.
On 18 November 2022, Smarttech247 Group plc which had never traded, acquired
100% of Zefone Limited. The Group has used merger accounting to account for
this acquisition as there was no change in the shareholders or holdings, and
therefore it is accounted for as a common control transaction with no change
in the book values of assets and liabilities and no fair value accounting
applied. No goodwill arises as a result. Consequently, FY2023 incorporates the
full year results for Zefone Limited and its subsidiaries as well as the
trading of the parent Company from incorporation on 29 September 2022 to 31
July 2023, prepared under IFRS. See Note 2.6 for further information.
The comparative financial information for the year ended 31 July 2022 has been
derived from the unaudited IFRS financial information included in the Group's
regulatory news service announcement of 4 April 2023. This comprises the
results of Zefone Limited which is the Group's principal trading subsidiary
and its other subsidiaries. Zefone Limited's Irish GAAP financial statements
were audited during this period whilst any necessary IFRS adjustments made and
the consolidation with its subsidiaries were subject to a formal review by
Group's auditors.
The preparation of financial statements in conformity with UK IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements. The
areas involving a higher degree of judgement or complexity, or areas where
assumptions or estimates are significant to the Financial Statements, are
disclosed in Note 2.23.
The principal accounting policies are set out below and have, unless otherwise
stated, been applied consistently in the Financial Statements.
The consolidated financial statements are presented in Euros (€) unless
otherwise stated, which is Zefone's functional currency and the Group and
Company's presentational currency, and presented to the nearest €'000.
2.2 New standards, amendments and interpretations
The Group and Company have adopted all of the new and amended standards and
interpretations issued by the International Accounting Standards Board that
are relevant to its operations and effective for accounting periods commencing
on or after 1 July 2021.
No Standards or Interpretations that came into effect for the first time for
the financial year beginning 1 July 2021 have had an impact on the Group or
Company.
2.3 New standards and interpretations not yet adopted
Standards and amendments to standards that have been issued that are
applicable to the Group but are not effective for 2023 and have not been early
adopted are:
Standard Impact on initial application Effective date
Annual Improvements 2018-2020 Cycle 1 January 2023
IFRS 17 Insurance Contracts 1 January 2023
IAS 1 Classification of liabilities as Current or Non-current 1 January 2023
IAS 8 Accounting estimates 1 January 2023
IAS 12 Deferred tax arising from a single transaction 1 January 2023
IFRS 16 Amendments to IFRS 16 1 January 2024
IAS 1 Amendments to IAS 1 1 January 2024
The effect of these new and amended Standards and Interpretations which are in
issue but not yet mandatorily effective is not expected to be material.
The directors are evaluating the impact that these standards may have on the
financial statements of Group.
2.4 Going concern
Management has prepared the Financial Statements on a going concern basis. The
Directors are satisfied that adequate resources are held by the Group, taking
into consideration the successful AIM listing, and associated fundraise,
during the year, and consequently they have no reason to believe that any
material uncertainty exists that would cast a doubt about the ability of the
Group and Company to continue as a going concern.
In making this judgement management considered the Group's budgets and cash
flow forecasts for a period of at least twelve months from the date of
approval of the financial information and the level of existing cash resources
which demonstrates that the Group will be in a position to meet its
liabilities as they fall due.
The Group and Company have therefore adopted the going concern basis in
preparing the Financial Statements.
2.5 Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated.
The Group has used merger accounting as described in more detail below in note
2.6 for the combination of Smarttech247 Group plc and its direct and
indirectly held subsidiaries.
2.6 Merger accounting
The Company was incorporated on 29 September 2022 with one £0.01 ordinary
share and on 18 November 2022, became the parent company of the Group when it
issued 87,499,999 £0.01 ordinary shares in exchange for 100% of the ordinary
shares in Zefone Limited as part of a share for share exchange.
This transaction is not considered to be a business combination within the
scope of IFRS3 as the transaction was between entities under common control.
This is a key judgement, and as a transaction where there was no change in the
shareholders or holdings, is accordingly accounted for using merger accounting
with no change in the book values of assets and liabilities and no fair value
accounting applied.
As permitted, the Group has applied 'predecessor' accounting and although the
consolidated financial statements have been issued in the name of Smarttech247
Group plc, the legal parent, it represents a continuation of the financial
information of the legal subsidiary. As such, the comparative information
presented for the year ended 31 July 2022 is that of the Company's subsidiary
which has been derived from the unaudited IFRS financial information included
in the Group's regulatory news service announcement of 4 April 2023.
Further information on the transaction is included in Note 24.
Merger accounting was applied in relation to the acquisition of Smart Systems
Security Limited andSmarttech247 so. z o.o. These transactions have not been
presented as a continuation of trade and the subsidiary's net assets and
trading results have been included in the consolidation at their book value
from the date of acquisition.
2.7 Foreign currency translation
(i) Functional and presentation currency
Items included in the financial information for each of the Group's entities
are measured using the currency of the primary economic environment in which
the entity operates ('the functional currency'). The consolidated financial
information is presented in € Euro, which is the Group's presentation and
functional currency. The individual financial statements of each of the
Company's wholly owned subsidiaries are prepared in the currency of the
primary economic environment in which it operates (its functional currency).
IAS 21 The Effects of Changes in Foreign Exchange Rates requires that assets
and liabilities be translated using the exchange rate at period end, and
income, expenses and cash flow items are translated using the rate that
approximates the exchange rates at the dates of the transactions (i.e. the
average rate for the period). The foreign exchange differences on translation
is recognised in other comprehensive income (loss).
(ii) Transactions and balances
Transactions denominated in a foreign currency are translated into the
functional currency at the exchange rate at the date of the transaction.
Assets and liabilities in foreign currencies are translated to the functional
currency at rates of exchange ruling at statement of financial position date.
Gains or losses arising from settlement of transactions and from translation
at period-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the statement of comprehensive income for
the period.
(iii) Group companies
The results and financial position of all the Group entities that have a
functional currency different from the presentation currency are translated
into the presentation currency as follows:
- assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of the statement of
financial position;
- income and expenses for each statement of comprehensive income are
translated at the average exchange rate; and
- all resulting exchange differences are recognised as a separate
component of equity.
On consolidation, exchange differences arising from the translation of the net
investment in foreign operations are taken to shareholders' equity. When a
foreign operation is partially disposed or sold, exchange differences that
were recorded in equity are recognised in the statement of comprehensive
income as part of the gain or loss on sale.
2.8 Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Executive
Board of Directors.
2.9 Impairment of non-financial assets
Non-financial assets and intangible assets not subject to amortisation are
tested annually for impairment at each reporting date and whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment review is based on discounted future cash flows. If the expected
discounted future cash flow from the use of the assets and their eventual
disposal is less than the carrying amount of the assets, an impairment loss is
recognised in profit or loss and not subsequently reversed.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are largely independent cash flows (cash generating
units or 'CGUs').
2.10 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, and demand
deposits with banks and other financial institutions and bank overdrafts.
2.11 Fair value measurement
Fair value measurement IFRS 13 establishes a single source of guidance for all
fair value measurements. IFRS 13 does not change when an entity is required to
use fair value, but rather provides guidance on how to measure fair value
under IFRS when fair value is required or permitted. The resulting
calculations under IFRS 13 affected the principles that the Company uses to
assess the fair value, but the assessment of fair value under IFRS 13 has not
materially changed the fair values recognised or disclosed. Further
information is set out at Note 2.12 (c).
IFRS 13 mainly impacts the disclosures of the Company. It requires specific
disclosures about fair value measurements and disclosures of fair values, some
of which replace existing disclosure requirements in other standards.
2.12 Financial instruments
IFRS 9 requires an entity to address the classification, measurement and
recognition of financial assets and liabilities.
a) Classification
The Group classifies its financial assets in the following measurement
categories:
- those to be measured at amortised cost;
- At fair value through profit or loss.
The classification depends on the Group's business model for managing the
financial assets and the contractual terms of the cash flows.
The Group classifies financial assets as at amortised cost only if both of the
following criteria are met:
- the asset is held within a business model whose objective is to
collect contractual cash flows; and
- the contractual terms give rise to cash flows that are solely payment
of principal and interest.
b) Recognition
Purchases and sales of financial assets are recognised on trade date (that
is, the date on which the Group commits to purchase or sell the asset).
Financial assets are derecognised when the rights to receive cash flows
from the financial assets have expired or have been transferred and the Group
has transferred substantially all the risks and rewards of ownership.
c) Measurement
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit
or loss.
Debt instruments
Amortised cost: Assets that are held for collection of contractual cash flows,
where those cash flows represent solely payments of principal and interest,
are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate
method. Any gain or loss arising on derecognition is recognised directly in
profit or loss and presented in other gains/(losses) together with foreign
exchange gains and losses. Impairment losses are presented as a separate line
item in the statement of comprehensive income.
Financial investments
Listed investments are valued at closing bid price on 31 July of each year.
Unlisted investments that are not publicly traded and whose fair value cannot
be measured reliably, are measured at fair value through profit and loss. For
details of the key assumptions used and the impact of changes to these
assumptions, see note 17.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place
either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market
for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market
participant's ability to generate economic benefits by using the asset in its
highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair
value, maximising the use of relevant observable inputs and minimising the use
of unobservable inputs. All assets and liabilities for which fair value is
measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input
that is significant to the fair value measurement as a whole:
- Level 1 - Quoted (unadjusted) market prices in active markets for
identical assets or liabilities
- Level 2 - Valuation techniques for which the lowest level input that
is significant to the fair value measurement is directly or indirectly
observable
- Level 3 - Valuation techniques for which the lowest level input that
is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the Financial Statements on
a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Group has determined classes of
assets and liabilities on the basis of the nature, characteristics and risks
of the asset or liability and the level of the fair value hierarchy, as
explained above.
d) Impairment
The Group assesses, on a forward looking basis, the expected credit losses
associated with any debt instruments carried at amortised cost.
The impairment methodology applied depends on whether there has been a
significant increase in credit risk.
In response to increased risk of credit losses due to Covid, the Group has
included the following procedures:
- Performing credit checks on existing, new or prospective customers
- Maintaining regular dialogue with senior staff of existing customers
to discuss payments of invoices
For trade receivables, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables. The Group's most significant clients are
public or regulated industry entities which generally have high credit ratings
or are of a high credit quality due to the nature of the client.
Expected credit losses are assessed on an individual customer basis, based on
the historical payment profiles of the customers, the current and historic
relationship with the customer, and the industry in which the customer
operates. There have been no impairments of trade receivables in the periods.
2.13 Leases
Leases are recognised as a right-of-use asset and a corresponding lease
liability at the date at which the leased asset is available for use by the
Group.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
- Fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
- Variable lease payments that are based on an index or a rate,
initially measured using the index or rate as at the commencement date;
- Amounts expected to be payable by the Group under residual value
guarantees;
- The exercise price of a purchase option if the Group is reasonably
certain to exercise that option; and
- Payments of penalties for terminating the lease, if the lease term
reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
In all instances the leases were discounted using the incremental borrowing
rate.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period. Right-of-use assets
are measured at cost which comprises the following:
- The amount of the initial measurement of the lease liability;
- Any lease payments made at or before the commencement date less any
lease incentives received;
- Any initial direct costs; and
- Restoration costs.
Right-of-use assets are depreciated over the shorter of the asset's useful
life and the lease term on a straight line basis. If the Group is reasonably
certain to exercise a purchase option, the right-of-use asset is depreciated
over the underlying asset's useful life.
Payments associated with short-term leases (term less than 12 months) and all
leases of low-value assets (generally less than €5k) are recognised on a
straight-line basis as an expense in profit or loss.
2.14 Equity
Share capital is determined using the nominal value of shares that have been
issued.
Share premium account includes any premiums received on the initial issuing of
the share capital. Any transaction costs associated with the issuing of shares
are deducted from the Share premium account, net of any related income tax
benefits.
Retained losses includes all current and prior period results as disclosed in
the statement of comprehensive income.
2.15 Share based payments
The Group has made awards of warrants and options on its unissued share
capital to certain parties in return for services provided to the Group. Under
IFRS 2, these share based payments are either valued at the value of the
services provided or where this data is not available a fair value should be
calculated using the Black Scholes Option Pricing model and/or the Monte Carlo
valuation model which is how they have been valued in this case The
valuation of these warrants and options involve making a number of critical
estimates relating to price volatility, future dividend yields, expected life
of the options and interest rates. These assumptions have been integrated into
the Black Scholes Option Pricing model and the Monte Carlo valuation model to
derive a value for these share-based payments. These assumptions are described
in more detail in Note 23.
2.16 Revenue
Under IFRS 15, Revenue from Contracts with Customers, five key points to
recognise revenue have been assessed:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the
contract; and
Step 5: Recognise revenue when (or as) a Group entity satisfies a performance
obligation.
The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the Group,
and specific criteria have been met for each of the Group's activities, as
described below.
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for services provided in the
normal course of business, net of discounts, VAT and other sales related
taxes.
The Group bases its estimates on all available information including
historical results and experience taking into consideration the type of
customer, the type of transaction and the specifics of each arrangement. Where
the Group makes sales relating to a future financial period, these are
deferred and recognised under 'accrued expenses and deferred income' in the
Statement of Financial Position.
The Group derives revenue from the provision of managed detection and response
and other cyber security services, whereby revenue from a contract to provide
services is recognised in the period in which the services are provided in
accordance with the stage of completion of the contract when all of the
following conditions are satisfied:
- the amount of revenue can be measured reliably;
- it is probable that the Company will receive the consideration due
under the contract;
- the stage of completion of the contract at the end of the reporting
period can be measured reliably; and
- the costs incurred and the costs to complete the contract can be
measured reliably.
In arrangements where fees are invoiced ahead of revenue being recognised,
deferred income is recorded.
2.17 Government grants
Capital grants received and receivable are treated as deferred income and
amortised to the Income Statement annually over the useful economic life of
the asset to which it relates. Revenue grants are credited to the Income
Statement when received.
2.18 Taxation
The taxation expense for the year comprises current and deferred tax and is
recognised in the statement of comprehensive income except to the extent that
it relates to items recognised in other comprehensive income, or directly in
equity, in which case the tax expense is also recognised in other
comprehensive income or directly in equity.
Current tax represents the amount expected to be paid or recovered in respect
of taxable profits for the financial year and is calculated using the tax
rates and laws that have been enacted or substantially enacted at the
Statement of Financial Position date.
Deferred tax arises from timing differences that are differences between the
taxable profits and total comprehensive income as stated in the financial
statements. The timing differences arise from the inclusion of income and
expenses in tax assessments in periods different from those in which they are
recognised in the financial statements.
Deferred tax is proved in full on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the
financial statement. Deferred tax is determined using tax rates (and laws)
that have been enacted or substantively enacted by the balance sheet date and
are expected to apply when the related deferred income tax asset is realised
of the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which temporary differences
can be utilised. Current or deferred taxation assets and liabilities are not
discounted.
2.19 Property, plant and equipment
Property, plant and equipment are recorded at historical cost or deemed cost,
less accumulated depreciation and impairment losses.
Depreciation is provided on all tangible fixed assets at rates calculated to
write off the cost of fixed assets, less their estimated residual value, over
their estimated useful lives as follows:
Plant and machinery - 12.5% straight line
Fixtures and fittings - 12.5% straight
line
The Group's policy is to review the remaining useful economic lives and
residual values of property, plant and equipment on an on-going basis and to
adjust the depreciation charge to reflect the remaining estimated useful
economic useful life and residual value.
Fully depreciated property, plant and equipment are retained in the cost of
property, plant & equipment and related accumulated depreciation until
they are removed from service. In the case of disposals, assets and related
depreciation are removed from the financial statements and the net amounts,
less proceeds from disposal, is charges or credited to the income statement.
2.20 Intangible assets
Intangible asset impairment reviews are undertaken annually, or more
frequently if events or changes in circumstances indicate a potential
impairment. The method and useful lives of finite life intangible assets, or
assets not yet available for use, are reviewed annually. Changes in the
expected pattern of consumption or useful life are accounted for prospectively
by changing the amortisation method or period.
Research and development expenditure
Development expenditure is written off in the same period unless the directors
are satisfied as to the technical, commercial and financial viability of
individual projects. In this situation, the expenditure is capitalised and
amortised over the period from which the Group is expected to benefit.
Amortisation is provided on all intangible assets so as to write off the cost
of an asset over its estimated useful life as follows:
Development costs
- 20-33.3% straight line
Software license
Software licenses are valued at cost less accumulated amortisation
Website and software licenses - 33.3% straight
line or over the term of the licence
2.21 Convertible loan notes, borrowings and borrowing costs
Convertible loan notes are assessed for whether they are a compound financial
instrument. In the current year, the convertible loan notes were classified as
financial liabilities and recognised initially at fair value, net of
transaction costs. After initial recognition, loans are subsequently carried
at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the statement of
comprehensive income over the period of the borrowings using the effective
interest method. Fees paid on the establishment of loan facilities are
capitalised as a prepayment for liquidity services and amortised over the
period of the loan to which it relates.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability or at least 12 months
after the end of the reporting period.
Further details on the convertible loan notes and borrowings are set out in
Note 26.
2.22 Employee benefits
Short-term benefits
Short-term benefits, including holiday pay and other similar non-monetary
benefits are recognised as an expense in the period in which the employee's
entitlement to the benefit accrues.
Defined contribution pension plan
The Group makes contribution to a defined contribution plan. A defined
contribution plan is a pension plan under which the company pays fixed
contributions into a separate fund. Under defined contribution plans, the
Group has no legal or constructive obligations to pay further contributions if
the fund does not hold sufficient assets to pay all employees the benefits
relating to employee services in the current and prior periods.
For defined contribution plans, the Group pays contributions to privately
administered pension plans on a contractual or voluntary basis. The Group has
no further payment obligations once the contributions have been paid. The
contributions are recognised as employee benefit expense when they are due.
Prepaid contributions are recognised as an asset to the extent that a cash
refund or reduction in the future payments is available.
2.23 Non-current investments
Investments made in subsidiaries by the Company are carried at the cost of
investment less any provision for impairment within the Company's balance
sheet. The carrying values are reviewed at each period end to determine
whether there is any indication that these investments have suffered an
impairment loss.
2.24 Critical accounting judgements and key sources of
estimation uncertainty
The preparation of these Financial Statements requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses.
Judgements and estimates are continually evaluated and are based on historical
experiences and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Basis of acquisition accounting
The Group has applied the merger accounting method to account for the
acquisitions within the Group. With this method, assets and liabilities of the
acquired entity are recognised at their book value and any difference between
the consideration paid and net assets is recognised in the merger reserve.
Merger accounting has been applied as the entities are considered to be
commonly controlled which is a key judgement in the preparation of the
Financial Statements.
Establishing useful economic lives for depreciation purposes of property,
plant and equipment
Long-lived assets, consisting primarily of property, plant and equipment,
comprise a significant portion of the total assets. The annual depreciation
charge depends primarily on the estimated useful economic lives of each type
of asset and estimates of residual values. The directors regularly review
these asset useful economic lives and change them as necessary to reflect
current thinking on remaining lives in light of prospective economic
utilisation and physical condition of the assets concerned. Changes in asset
useful lives can have a significant impact on depreciation and amortisation
charges for the period. Detail of the useful economic lives is included in the
accounting policies.
Providing for doubtful debts
The Group makes an estimate of the recoverable value of trade and other
receivables. The Group uses estimates based on historical experience in
determining the level of debts, which the Company believes, will not be
collected. These estimates include such factors as the current credit rating
of the debtor, the ageing profile of receivables and historical experience.
Any significant reduction in the level of customers that default on payments
or other significant improvements that resulted in a reduction in the level of
bad debt provision would have a positive impact on the operating results. The
level of provision required is reviewed on an ongoing basis.
Amortisation of Intangible Assets
The annual amortisation of intangible assets depends primarily on the
estimated useful lives of assets and estimates of residual value. The
directors regular review these assets useful lives and change them as
necessary to reflect current thinking on remaining lives in light of
prospective economic utilisation. Changes in asset useful lives can have a
significant impact on amortisation charges for the period. Detail of the
useful life is included in the accounting policy.
Carrying Value of Intangible Assets
In determining whether impairment of the Group's intangible assets is
required, the factors taken into consideration in reaching such a decision
include the economic viability and expected future financial performance of
the asset and where it is a component of a larger cash-generating unit, the
viability and expected future performance of that unit. The Directors are
satisfied that the carrying value of the Group's intangible assets are at
least equal to their recoverable amounts.
Valuation of unlisted investments
The fair value of financial instruments that are not traded in an active
market is determined using valuation techniques. The company uses its
judgement to select a variety of methods and make assumptions that are mainly
based on market conditions existing at the end of each reporting period. For
details of the key assumptions used and the impact of changes to these
assumptions, see Note 17.
Share based payments
The Group has made awards of warrants and options on its unissued share
capital to certain parties in return for services provided to the Group. Under
IFRS 2, these share based payments are either valued at the value of the
services provided or where this data is not available a fair value should be
estimated using a model such as the Black Scholes Option Pricing model and/or
the Monte Carlo valuation model which is how they have been valued in this
case The valuation of these warrants and options involve making a number of
critical estimates relating to price volatility, future dividend yields,
expected life of the options and interest rates. These assumptions have been
integrated into the Black Scholes Option Pricing model and the Monte Carlo
valuation model to derive a value for these share-based payments. These
assumptions are described in more detail in Note 23.
3. SEGMENT REPORTING
The following information is given about the Group's reportable segments:
The Chief Operating Decision Maker is the Executive Board of Directors. The
Board reviews the Group's internal reporting in order to assess performance of
the Group. Management has determined the operating segment based on the
reports reviewed by the Board.
The Board considers that during the years ended 31 July 2022 and 31 July 2023
the Group operated in the single business segment of Managed Detection and
Response capabilities to global organisations.
4. REVENUE
2023 2022
€,000
€,000
Revenue 12,180 10,206
The vast majority of the Group's revenue is recognised in the Republic of
Ireland and is derived from the principal activity of providing Managed
Detection and Response capabilities to global organisation, and associated
services including penetration testing, governance risk and compliance and
cyber consultancy.
The Group recognises revenue both at the point of sale and over time. The
following table sets out the amount of revenue that is recognised at a point
in time and the revenue that is recognised over time.
2023 2022
€'000
€'000
Revenue recognised at a point in time 5,720 5,908
Revenue recognised over time 6,460 4,298
12,180 10,206
In 2023, the Group had two customers that represented 37% of total revenue.
In 2022, the Group had one customer that represented 31% of total revenue.
5. COST OF SALES
2023 2022
€'000
€'000
Cost sales - purchases 5,374 4,622
Cost sales - direct costs - 39
5,374 4,661
6. ADMINISTRATIVE EXPENSES
2023 2022
€'000
€'000
Wages and salaries (including directors) 3,186 3,154
Consultancy and professional fees 395 286
Overhead expenses 924 322
Amortisation of intangible fixed assets 430 113
Depreciation of right-of-use assets 63 80
Depreciation of tangible fixed assets 56 35
IPO related costs 977 -
CLN settlement costs 315 -
Share based payments 554 -
(Profit)/loss on foreign currencies (9) (272)
Other expenses 90 132
6,981 3,850
Included above within Administrative Expenses are certain costs that
principally relate to IPO costs, the issue of share options/warrants and the
CLN settlement costs, as follows:
2023 2022
€'000
€'000
IPO related costs 977 -
Share based payments 554 -
CLN settlement costs 315 -
Total 1,846 -
Operating profit 303 1,756
Adjusted operating profit 2,149 1,756
Add back depreciation and amortisation 549 228
Adjusted EBITDA 2,698 1,984
The following auditors' fees are included in Administrative Expenses:
2023 2022
€'000
€'000
Audit of Group and Company 50 -
For audit work in relation to subsidiary companies 25 -
For audit related services 33 -
For non-audit services 85 -
Total 193 -
7. OTHER OPERATING INCOME
2023 2022
€'000
€'000
Government grant income 478 61
478 61
During the year, the Group received:
(i) Market Discovery Fund grant of €34,900 from
Enterprise Ireland (2022: €nil).
(ii) GradStart grant of €28,327 from Enterprise Ireland
(2022: €nil).
(iii) Research and Development grant of €414,572 from
Enterprise Ireland (2022: €14,500).
(iv) R&D tax rebate of €nil (2022: €46,187).
8. EMPLOYEES
Staff costs (inclusive of director's salaries) comprise:
2023 2022
€'000
€'000
Wages and salaries 2,838 2,952
Pension costs 75 13
Share based payments 443 -
Other costs and taxes 272 189
3,628 3,154
The average monthly number of employees, including the Directors, during the
year was 135 (2022: 67)
9. DIRECTORS' REMUNERATION
2023 2022
€'000
€'000
Directors' remuneration 313 132
Pension costs 18 10
Share based payments 296 -
Other costs and taxes 11 -
638 142
During the year retirement benefits accruing to Directors were €nil (2022:
€nil) in respect of defined contribution pension schemes.
The highest paid Director received remuneration of €157K (2022: €132K).
During the year, R Saceanu received an additional €32K from Zefone Limited,
although she was not a director of that company.
The value of the Group's contributions paid to a defined contribution pension
scheme in respect of the highest paid Director amounted to €14K (2022:
€10K).
10. INCOME FROM INVESTMENTS
2023 2022
€'000
€'000
Investment income - dividends received - 2
- 2
11. OTHER GAINS AND LOSSES
2023 2022
€'000
€'000
Unrealised (loss) / gain on investments in shares 1 (8)
1 (8)
12. FINANCE COSTS
2023 2022
€'000
€'000
Interest 64 205
Lease liability finance charges (Note 21) 29 11
Other finance costs 7 -
100 216
13. TAXATION
2023 2022
€'000
€'000
The charge for year is made up as follows:
Corporation tax
Corporation taxation on the results for the year 371 156
371 156
Deferred tax
Deferred tax - -
- -
Taxation charge on profits on ordinary activities 371 156
In the previous period to 31 Jul 2022, prior to 1 April 2022, the main rate of
UK corporation tax was 19%. The headline rate of UK corporation tax for the
year ended 31 July 2023 is 25%, however, within the onset of the UK's marginal
Relief Rules from 1 April 2023. This rate applies broadly where a company
has augmented profits in excess of £250K.
Factors affecting tax change for the year
2023 2022
€'000
€'000
Profit on ordinary activities before tax 204 1,534
Tax calculated at domestic tax rates applicable to profits in the 37 191
respective countries
Effects of:
Expenses not deductible for tax purposes 365 -
Group relief surrendered/(claimed) (3) -
Foreign tax - other 3 -
Remeasurement of deferred tax for changes in tax rate (2)
Adjustments in respect of prior year 30 1
Difference in overseas tax rates (109) -
Other movements 50 (38)
Income tax on medical insurances - 4
Taxation charge on profits on ordinary activities 371 156
The weighted average applicable tax rate was 18% (2021: 12%). The increase
is caused by the change in group structure and introduction of the loss making
parent company and subsidiaries.
14. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is calculated by
dividing the profit or loss for the year by the weighted average number of
ordinary shares in issue during the year.
2023 2022
(Loss) / profit for the year from continuing operations - € (167,000) 1,378,000
Weighted number of ordinary shares in issue 100,500,026 87,500,000
Basic earnings per share from continuing operations - € cents (0.1662) 1.5749
The weighted average number of ordinary shares in issue for the prior year has
been used as the total number of shares swapped for the purchase of Zefone
Limited as if those shares were in issue during the prior year. No diluted
earnings per share is calculated in 2022 as it is assumed that there were no
dilutive instruments.
15. INTANGIBLE ASSETS
Group Website & software licenses Development costs Total €'000
€'000
€'000
Cost
At 1 August 2021 947 377 1,324
Additions 280 1,156 1,436
At 31 July 2022 1,227 1,533 2,760
Additions - 2,625 2,625
At 31 July 2023 1,227 4,158 5,385
Amortisation
At 31 July 2021 805 103 908
Charge for the year 107 6 113
At 31 July 2022 912 109 1,021
Charge for the year 241 189 430
At 31 July 2023 1,153 298 1,451
Net book value
31 July 2022 315 1,333 1,739
31 July 2023 74 3,860 3,934
The Directors have considered the carrying value of these balances in order to
determine whether any impairment of the Group's intangible assets is required.
This has included considering the economic viability and expected future
financial performance of the products relating to these assets by modelling
the expected net future cash flows expected to be generated. The Directors
are satisfied that the carrying value of the Group's intangible assets are at
least equal to their recoverable amounts.
16. PROPERTY, PLANT AND EQUIPMENT
Group Plant & machinery Fixtures & fittings €'000 Total
€'000 €'000
Cost
At 1 August 2021 27 164 191
Additions 8 30 38
Disposals - - -
At 31 July 2022 35 194 229
Additions 20 92 112
At 31 July 2023 55 286 341
Depreciation
At 1 August 2021 13 84 97
Charge for the year 13 22 35
At 31 July 2022 26 106 132
Charge for the year 11 45 56
At 31 July 2023 37 151 188
Net book value
At 31 July 2022 9 88 97
At 31 July 2023 18 135 153
17. FINANCIAL FIXED ASSETS
Group Level 3- Unlisted investments €'000 Level 1- Listed investments €'000 Total
€'000
Investment
Cost of valuation
At 1 August 2021 1,039 130 1,169
Additions - - -
Revaluations - (8) (8)
At 31 July 2022 1,039 122 1,161
Additions - - -
Revaluations - 1 1
At 31 July 2023 - 123 123
Carrying amount
At 31 July 2022 1,039 122 1,161
At 31 July 2023 1,039 123 1,162
IFRS 13 valuation hierarchy:
Level 1 represents those assets, which are
measured using unadjusted quoted prices for identical assets.
Level 2 applies inputs other than quoted
prices that are observable for the assets either directly (as prices) or
indirectly (derived from prices).
Level 3 applies inputs, which are not based
on observable market data.
Unlisted investments comprise the investment in Visibility Blockchain Limited
of 35,940 B Preference Shares. These shares do not give rights to receive
notice of any general meeting of Visibility Blockchain Limited, or to attend
or vote on any resolution at a general meeting. Unlisted investments are
valued using level 3 inputs under the IFRS 13 Fair Value Hierarchy. These
include the value at which the most recent funding round involving third party
investors took place where over €10 million in new equity was raised,
together with management's view of the likely proceeds from the sale of this
company based on indications received to date and growth in revenue. As a
result of the above analysis, the revaluation during the year is €nil (2022:
€nil).
Listed investments relate to a portfolio investment comprising of various
equities, bonds and alternative financial instruments. These are valued
using the share price at each reporting date, which is a level 1 input under
the IFRS 13 Fair Value Hierarchy.
18. INVESTMENTS
Company 2023
€000
Acquisition of Zefone Limited 1,012
Further investments in subsidiaries 104
1,116
Company subsidiary undertakings
The Group includes interests in the following subsidiary undertakings, which
are included in the consolidated financial statements. Zefone Limited is
owned directly by the Company whilst the other companies are owned indirectly
through Zefone Limited.
Name Business Activity Country of Incorporation Registered Address Percentage Holding
Zefone Limited Provision of cybersecurity products and services Ireland Unit 17A, 100%
Building 4700
Cork Airport Business Park, Cork
Smart Systems Security Limited Provision of cybersecurity products and services England and Wales 85 Great Portland Street, London W1W 7LT 100%
Smartech 247 sp. z.o.o. Provision of cybersecurity products and services Poland Krakovie Przy ul., Podole 60, 100%
30-394 Krakov
Smartech247 Cyber Security SRL Provision of cybersecurity products and services Romania Bd Iancu de Hunedoara 54 B, Etaj 2, Bucuresti - Sectorul 1 99%
19. TRADE AND OTHER RECEIVABLES
Group 2023 2022
€'000
€'000
Trade receivables 5,194 5,237
Accrued revenue 53 54
Tax and other receivables 278 517
Director's current account 57 53
Prepayments 841 292
6,423 6,153
Company 2023
€'000
Other receivables 167
Prepayments 17
184
Other receivables principally comprise amounts due from the EBT and other tax
recoverable.
In terms of trade receivables, the majority of the amounts receivable are in
Euros and USD, and are current in terms of age profile with the majority of
the balance having now been received post year end.
2023 2022
€'000
€'000
Due in less than 30 days 2,103 3,266
Due between 30 and 60 2,333 970
Due between 60 and 90 days 341 527
Over 90 days 417 474
5,194 5,237
Further details with regard to the Directors current account are set out in
Note 32.
2023 2022
€'000
€'000
Currency of receivables
Euro 1,726 1.869
USD 3,340 2,787
GBP 128 581
5,194 5,237
20. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and short term deposits held
with banks with a A-1+ rating. The carrying value of these approximates to
their fair value. Cash and cash equivalents included in the cash flow
statement comprise the following statement of financial position amounts.
Group 2023 2022
€'000
€'000
Cash and cash equivalents 6,062 2,358
6,062 2,358
Company 2023
€'000
Cash and cash equivalents 2,949
2,949
The table below shows the currency profiles of cash and cash equivalents:
Group 2023 2022
€'000
€'000
Euro 289 778
USD 2,714 1,440
GBP 3,002 113
Polish Zloty 49 13
Romanian Leu 8 14
6,062 2,358
Company 2023
€'000
GBP 2,949
2,949
21. LEASES
The Group had the following right of use assets and lease liabilities:
Group 2023 2022
€'000
€'000
Right-of-use assets
Properties 331 64
331 64
Lease liabilities
Current 91 64
Non-current 260 4
351 68
2023 2022
€'000
€'000
Maturity on the lease liabilities are as follows:
Current 91 64
Due between 1-2 years 68 4
Due between 2-5 years 105 -
Due beyond 5 years 87 -
351 68
Right of use assets
A reconciliation of the carrying amount of the right-of-use asset is as
follows:
2023 2022
€'000
€'000
Properties
Opening balance 64 43
Additions on acquisition of subsidiary - 5
Additions 330 96
Depreciation (63) (80)
331 64
Lease liabilities
A reconciliation of the carrying amount of the lease liabilities is as
follows:
2023 2022
€'000
€'000
Opening balance 68 58
Additions on acquisition of subsidiary - 4
Additions 330 96
Payment made (76) (101)
Finance charge (Note 12) 29 11
351 68
The Group leases captured under IFRS 16 relate predominant to the office
premises in both Ireland and Romania, with an office lease in Poland coming to
an end in 2023, which was extended on a short-term basis.
The Group also incurred the following expenses during the year of €nil
(2022: €nil) which related to leases that were either short term in nature
(12 months of less) or of low value in nature, thus being excluded from
treatment under IFRS 16: Leases.
22. SHARE CAPITAL
Number of £0.01 shares Share Capital Share premium
€'000 €'000
One £0.01 share issued on incorporation 1 - -
Shares issued on exchange for Zefone Limited shares (1) 87,499,999 1,012 -
Shares issued on conversion of convertible loan note at £0.1732 (2) 13,646,441 158 2,577
Shares subscribed for by EBT (3) 10,546,713 122 -
Placing shares issued at £0.2966 12,385,828 144 4,108
Share issue costs - - (320)
124,078,982 1,436 6,365
(1) The issue of shares with a nominal value of €1,012,000 (£875,000) in
exchange for the 2 £1 shares in Zefone Limited with a nominal value of £2
results on elimination of the difference in a credit to a merger reserve
(within other reserves) of €1,012,000 (£875,000) in accordance with the
merger accounting principles as set out in note 2.
(2) The issue price for the issue of shares to convert the convertible loan
notes was based on the conversion terms which specified a particular valuation
at which the conversion should take place. The liability to be settled
amounted to €2,683,562 and the number of shares issued amounted to
13,646,441 which therefore gave an effective issue price of £0.1732.
(3) During the period, the Company established an Employee Benefit Trust
("EBT") and issued 10,546,713 shares to the EBT at nominal value. The
subscription of these shares was funded through a loan provided by the Group
to the EBT.
During the period certain costs associated with the IPO amounting to €868K
were also settled by the issue of new shares, of which €260k was included in
share issue costs.
The number of shares authorised to be issued at the time of Admission was 66.8
million, although this authority has now lapsed, and a new authority will be
put in place at the Company's next AGM.
23. SHARE BASED PAYMENT RESERVE
2023 2022
€'000
€'000
Advisor warrants issued (1) 107 -
Employee options issued (2, 3) 447 -
554 -
( )
(1) On 15 December 2023, 863,115 warrants were issued to advisors and have
been fair valued in accordance with IFRS 2. The warrants have an exercise
price of £0.2966 and a time to expiry of 4 years from grant.
(2) On 30 November 2022, 4,541,290 employee options were granted under the
Group's LTIP. These options have different vesting conditions based on
performance milestones that can be viewed below.
(3) On 28 April 2023 and 23 May 2023 2,425,291 and 177,195 employee options
were granted under the Group's LTIP. These options have different vesting
conditions based on performance milestones as outlined below.
Share based payments valuation
The following tables summarise the valuation techniques and inputs used to
calculate the values of share based payments in the period:
Warrants
Grant date Number Share price Exercise price Volatility RF Rate Technique
£ £ % %
15 Dec 2022 863,115 0.2966 0.2966 41.0 3.00 Black Scholes
Options
On 30 November 2022, 28 April 2023 and 23 May 2023 4,541,290, 1,446,735 and
147,589 employee options were granted under the Group's LTIP respectively. The
option vesting details are listed below:
Vesting Event Trigger for Vesting Number of options vested on date of vesting
1 - First anniversary date of the date of Admission 50%
2 - Second anniversary date of date of Admission; and 25%
- The date if any on which the placing price has increased by 200%
3 - Third anniversary date of date of Admission; and 25%
- The date if any on which the placing price has increased by 200%
On 28 April 2023 and 23 May 2023 978,556 and 29,606 employee options were
granted under the Group's LTIP respectively. The option vesting details are
listed below:
Vesting Event Trigger for Vesting Number of options vested on date of vesting
1 - First anniversary date of the date of Admission 50%
2 - Second anniversary date of date of Admission; and 50%
- The date if any on which the placing price has increased by 200%
All of the options issued subject to vesting condition 1 were valued using the
Black Scholes methodology, whilst the options issued subject to vesting
conditions 2 and 3 were value using the Monte Carlo technique. Additionally, a
non-marketable discount rate of 7.94% has been applied across all of the
employee warrants when calculating their value.
Vesting Condition 1
Grant date Number Share price Exercise price Volatility RF Rate Technique
£ £ % %
30 Nov 2022 2,270,645 0.2966 0.2966 48.5 3.24 Black Scholes
28 Apr 2023 1,212,645 0.3600 0.2966 48.6 3.72 Black Scholes
23 May 2023 88,597 0.3600 0.2966 48.6 4.38 Black Scholes
Vesting Condition 2
Grant date Number Share price Exercise price Volatility RF Rate Technique
£ £ % %
30 Nov 2022 1,135,323 0.2966 0.2966 48.5 3.24 Monte Carlo
28 Apr 2023 850,962 0.3600 0.2966 48.6 3.72 Monte Carlo
23 May 2023 51,700 0.3600 0.2966 48.6 4.38 Monte Carlo
Vesting Condition 3
Grant date Number Share price Exercise price Volatility RF Rate Technique
£ £ % %
30 Nov 2022 1,135,323 0.2966 0.2966 48.5 3.24 Monte Carlo
28 Apr 2023 361,684 0.3600 0.2966 48.6 3.80 Monte Carlo
23 May 2023 36,897 0.3600 0.2966 48.6 4.38 Monte Carlo
The number and average exercise price of share options and warrants as
follows:
2023
Weighted average exercise price Number of options/ warrants
Granted during the year (options) £0.2966 863,115
Granted during the year (warrants) £0.2966 7,143,776
Outstanding at the end of the year £0.2966 8,006,891
Exercisable at the end of the year £0.2966 863,115
Share options and warrants outstanding at 31 July 2023 had a weighted average
exercise price of £0.2966 and a weighted average contractual life of 3.48
years. To date no share options and warrants have been exercised.
There are no market based vesting conditions attaching to any of the warrants.
24. MERGER RESERVE
2023 2022
€'000
€'000
Merger reserve (1,215) 23
(1,215) 23
As referred to in Note 2, on 18 November 2022, the Company became the parent
company of the Group when it issued 87,499,999 £0.01 ordinary shares in
exchange for 100% of the ordinary shares in Zefone Limited. Zefone Limited has
been shown as the continuing entity and its comparative financial information
shown for 2022. Intercompany transactions and balances between Group companies
are therefore eliminated in full. The equity presented is that of the Company
with the difference on elimination of Zefone Limited's capital of €1,012,000
(£875,000) being shown as a merger reserve.
In the current year, Zefone acquired Smart Systems Security Limited for
€1,190 (£1,000) with the total identifiable net liabilities acquired being
€225,000, resulting in €226,000 being recorded to the merger reserve.
In the prior year, Zefone acquired Smarttech247 sp. z o.o. for €2,112
(10,000 Polish Zloty) with the total identifiable net assets acquire being
€26,000, resulting in the €23,000 being recorded to the merger reserve.
25. OTHER RESERVES
Foreign exchange reserve
Foreign exchange differences arising on translating into the reporting
currency.
Share based payment reserve
Cumulative charge recognised under IFRS 2 in respect of share based payment
awards.
Retained earnings
Retained earnings represents cumulative profits and losses net of dividends
and other adjustments.
26. BORROWINGS
Group 2023 2022
€'000
€'000
Non-current
Convertible secured loan notes - 2,342
- 2,342
Refer to note 30 for movements in borrowings.
Analysis of maturity of loans is given below:
2023 2022
€'000
€'000
Amounts falling due 1-2 years
Other loans - 2,342
- 2,342
Convertible Secured Loan Notes
The convertible secured loan notes were issued by Zefone Limited in May 2021
to provide the company with additional funding for the development of its
business. They carried an interest rate at 5% per annum with a requirement to
redeem the outstanding loan notes on 7 May 2024 unless converted or repaid
prior to that date.
The holders of the convertible secured loan notes had the right to convert the
loan notes into ordinary shares in the event of a sale or listing. The holder
could also elect to convert the loan notes into ordinary shares prior to any
such event based on a conversion rate.
The convertible secured loan notes were secured by a debenture incorporating
fixed and floating charges over the Group's assets both present and future.
During the year, at the time of the acquisition of Zefone Limited by the
Company and subsequent IPO, the convertible loan notes and associated interest
was assigned to the Company as it was intended that the loan notes would be
settled through the issue of new shares in the Company. On the listing of the
Group, the convertible loan notes and accrued interest were converted by the
issue of 13,646,441 new shares in the Company. Further details are set out in
in note 22.
27. TRADE AND OTHER PAYABLES
Group 2023 2022
€'000
€'000
Trade creditors 3,183 1,880
Corporation tax 220 50
Other taxation and social security 753 633
Accruals 56 658
Deferred income 1,869 1,333
Other payables 150 75
6,231 4,629
Company 2023
€'000
Trade creditors 7
Other taxation and social security 5
Accruals 10
Intercompany payable 32
54
The table below sets out the maturity profile of the trade payables at 31 July
2023:
2023 2022
€'000
€'000
Due in less than 30 days 2,201 185
Due in between 30 and 60 days 772 1,608
Due in more than 60 days 210 87
3,183 1,880
The table below sets out the maturity profile of the deferred income balance
at 31 July 2023:
2023 2022
€'000
€'000
Due within 1 year 1,449 1,015
Due after 1 year 420 318
1,869 1,333
28. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Capital Risk Management
The Company manages its capital to ensure that entities in the Group will be
able to continue as a going concern while maximising the return to
stakeholders. The overall strategy of the Company and the Group is to minimise
costs and liquidity risk.
The capital structure of the Group consists of equity attributable to equity
holders of the parent, comprising issued share capital, foreign exchange
reserves and retained earnings as disclosed in the Consolidated Statement of
Changes of Equity.
The Group is exposed to a number of risks through its normal operations, the
most significant of which are interest, credit, foreign exchange, and
liquidity risks. The management of these risks is vested to the Board of
Directors.
Credit Risk
Credit risk arises on financial instruments such as trade receivables,
short-term bank deposits.
Policies and procedures exist to ensure that customers have an appropriate
credit history. The Group's most significant clients are public or regulated
industry entities which generally have high credit ratings or are of a high
credit quality due to the nature of the client.
Counterparty exposure positions are monitored regularly so that credit
exposures to any one counterparty are within acceptable limits.
At the balance sheet date there were no significant concentrations of credit
risk.
Trade and other receivables and contract assets included in the balance sheet
are stated net of expected credit loss (ECL) provisions which have been
estimated on a customer-by-customer basis, based on the relationship with the
customer and its historical payment profile. There are no provisions held
against trade receivables at the balance sheet date.
The Group's maximum exposure to credit by class of individual financial
instrument is shown in the table below:
2023 2023 2022 2022
Carrying Value Maximum Exposure Carrying Value Maximum Exposure
€'000 €'000 €'000 €'000
Cash and cash equivalents 6,062 6,062 2,358 2,358
Trade receivables 5,194 5,194 5,237 5,237
11,256 11,256 7,595 7,595
Currency Risk
The Group operates in a global market with income and costs possibly arising
in a number of currencies and is exposed to foreign currency risk primarily in
respect of entities within the Group entering into commercial transactions
arising from sales or purchases in currencies other than the Companies'
functional currency. Currency exposures are reviewed regularly.
The Group has a limited level of exposure to foreign exchange risk through
their foreign currency denominated cash balances and a portion of the Group's
costs being incurred in Euro, Polish Zloty and Romanian Leu. Accordingly,
movements in the Euro exchange rate against these currencies could have a
detrimental effect on the Group's results and financial condition. Such
changes are not considered likely to have a material effect on the Group's
financial position at 31 July 2023.
Currency risk is managed by maintaining some cash deposits in currencies other
than Sterling. The table below shows the currency profiles of cash and cash
equivalents:
2023 2022
€'000
€'000
Cash and cash equivalents
Euro 289 778
USD 2,714 1,440
GBP 3,002 113
Polish Zloty 49 13
Romanian Leu 8 14
6,062 2,358
Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
The Group seeks to manage liquidity risk by regularly reviewing cash flow
budgets and forecasts to ensure that sufficient liquidity is available to meet
foreseeable needs and to invest cash assets safely and profitably. The Group
deems there is sufficient liquidity for the foreseeable future.
The Group had cash and cash equivalents at year end as below:
2023 2022
€'000
€'000
Cash and cash equivalents 6,062 2,358
6,062 2,358
Interest Rate Risk
The Group is exposed to interest rate risk whereby the risk can be a reduction
of interest received on cash surpluses held and an increase in interest on
borrowings the Group may have. The maximum exposure to interest rate risk at
the reporting date by class of financial asset was:
2023 2022
€'000
€'000
Bank balances 6,062 2,358
6,062 2,358
29. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Group Financial assets at amortised cost Financial liabilities at amortised cost Total
2023
Financial assets / liabilities €'000 €'000 €'000
Trade and other receivables (1) 5,582 - 5,582
Cash and cash equivalents 6,062 - 6,062
Trade and other payables (2) - (6,175) (6,175)
Lease liabilities (current and non-current) - (351) (351)
11,644 (6,526) 5,118
( )
(1) Trade and other receivables excludes prepayments
(2) Trade and other payables excludes accruals
Group Financial assets at amortised cost Financial liabilities at amortised cost Total
2022
Financial assets / liabilities €'000 €'000 €'000
Trade and other receivables (1) 5,861 - 5,861
Cash and cash equivalents 2,358 - 2,358
Trade and other payables (2) - (3,971) (3,971)
Lease liabilities (current and non-current) - (68) (68)
Borrowings - (2,342) (2,342)
8,219 (6,381) (1,838)
( )
(1) Trade and other receivables excludes prepayments.
(2) Trade and other payables excludes accruals.
Company Financial assets at amortised cost Financial liabilities at amortised cost Total
2023
Financial assets / liabilities €'000 €'000 €'000
Trade and other receivables (1) 167 - 167
Cash and cash equivalents 2,949 - 2,949
Trade and other payables (2) - (8) (8)
3,116 (8) 3,108
( )
(1) Trade and other receivables excludes prepayments.
(2) Trade and other payables excludes accruals.
30. RECONCILIATION OF MOVEMENT IN NET DEBT
2023 At 1 August 2022 Non-cash changes Cashflow At 31 July 2023
€'000 €'000 €'000 €'000
Cash at bank 2,358 (4) 3,708 6,062
Borrowings - non-current (2,342) 2,342 - -
Lease liabilities - current & non-current (68) (359) 76 (351)
Net Debt (52) 1,979 3,784 5,711
2022 At 1 August 2021 Non-cash changes Cashflow At 31 July 2022
€'000 €'000 €'000 €'000
Cash at bank 3,215 - (857) 2,358
Borrowings - non-current (2,263) (79) - (2,342)
Lease liabilities - current & non-current (58) (111) 101 (68)
Net Debt 894 (190) (756) (52)
*Non-cash movements in cash related to the foreign exchange impact on non €
denominated cash balances, whilst on the lease liabilities relates to the
finance charges incurred on the lease liabilities plus additional leases
executed during the year.
The non-cash movements on borrowings principally relate to the conversion of
the CLN which took place during the year.
31. MERGER ACQUISITIONS
Smart Systems Security Limited
On 18 November 2022, Zefone acquired Smart Systems Security Limited for
€1,190 (£1,000). The book value of the assets acquired and liabilities
assumed of Smarttech Systems Security Limited at the date of acquisition based
upon the balance sheet at 18 November 2022 are as follows:
€'000
Cash 1
Total consideration 1
Recognised amounts of assets and liabilities acquired:
Trade and other receivables 5
Cash 8
Trade and other liabilities (241)
Total identifiable net assets (226)
Net difference taken to merger reserve (225)
Zefone Limited
On 18 November 2022, through the Share Exchange Agreement, Smarttech247 Group
plc acquired 100% of the shares of Zefone Limited.
On 18 November 2022, the convertible loan notes described in Note 26 were
novated up to Smarttech247 Group plc under the Deed of Novation, conditional
on the share for share exchange noted above and admission to the AIM market.
For more detail, please refer to note 24 and note 2.6 for information on the
presentation of the Financial Statements.
32. RELATED PARTY TRANSACTIONS
The Group's investments in subsidiaries have been disclosed in Note 18 and
details of directors' emoluments are set out in the directors remuneration
report beginning on page x .
Ronan Murphy, who is a director of the Group, is also a director of and has a
significant indirect interest in Visibility Blockchain Limited of 21.4%.
Consequently, Visibility Blockchain Limited is regarded as a related party by
virtue of Ronan Murphy's ability to exert significant influence over
Visibility Blockchain Limited.
The following amounts are receivable at the financial year end:
2023 2022
€'000
€'000
Visibility Blockchain Limited 89 26
89 246
The following amounts are due to related parties:
2023 2022
€'000
€'000
Visibility Blockchain Limited 441 296
441 296
Net balance with related parties:
2023 2022
€'000
€'000
Visibility Blockchain Limited` (352) (269)
(352) (50)
Certain revenue is recognised between Zefone Limited and Visibility Blockchain
Limited under a reseller agreement. During the year the total amount of
services charged under a reseller agreement by Visibility Blockchain Limited
to Zefone Limited amounted to €446,789 (2022: €503,174).
Certain operating expenses are allocated 40%/60% based on an intercompany
overhead agreement. During the year the total amount of expenses allocated to
Visibility Blockchain Limited by Zefone Limited amounted to €365,475 (2022:
€150,570).In the opinion of the Directors, these amounts arise in the
ordinary course of business and the terms of the amounts due are in accordance
with the terms ordinarily offered by the Group.
On 18 November 2022, Amplified Technologies Limited, which is 100% owned by
Ronan Murphy, a director of the Company, sold its 100% shareholding in Zefone
Limited to the Company in return for new shares in the Company, effectively
exchanging 100% ownership of Zefone Limited for 100% ownership of the Company
as a precursor to the IPO of the Company.
Nicholas Lee, who is a director of the Group, is also a director of RiverFort
Global Opportunities plc which has a 6.16% shareholding in the Group.
Ronan Murphy has a loan outstanding with the Group amounting to €57,000.
This loan is unsecured, interest free and is repayable on demand.
33. PENSION COMMITMENTS
The Group operates a defined contribution scheme. The assets of the scheme are
held separately from those of the Group in an independently administered fund.
The pension cost charge represents contributions payable by the Group to the
fund and amounted to €75,307 (2022: €12,553). €10,480 (2022: € nil)
was payable to the fund at the statement of financial position date and is
included with creditors.
34. CAPITAL COMMITMENTS
There were no capital commitments as at 31 July 2023 or 31 July 2022.
35. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 July 2023 or 31 July 2022.
36. EVENTS SUBSEQUENT TO PERIOD END
There have been no further events subsequent to period end.
37. CONTROL
In the opinion of the Directors as at the year end and the date of the
financial statements, Ronan Murphy is the ultimate controlling party.
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