Final Results
22/08/2022 07:00
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RNS Number : 6855W Smoove PLC 22 August 2022
Smoove plc
(The "Group", "Smoove" or the "Company")
Final Results for the 12 months to 31 March 2022
Proposed Tender Offer
Smoove plc (AIM: SMV), the customer focused technology and services business
aiming to revolutionise home moving and ownership, announces its Final Results
for the 12 months ended 31 March 2022 ("the Period").
This was a busy period for the Company - with continued investment in
development and technology, strong growth in routes to market, instructions
and completions as well as a number of new product launches and contract wins.
The post Period name change and rebranding highlight management's ambition to
develop a consumer-centric, data driven product suite and deliver value across
all industry stakeholders, with a view to amplifying the strong progress made
during the Period.
Financial Highlights
· 13% increase in revenues to £19.2m (2021: £16.9m), reflecting
strong growth in broker channel, progress in developing core business and
exposure to a buoyant housing market
· Gross profit of £7.8 million (2021: £6.9 million)
· Underlying EBITDA £3.8 million loss (2021: £0.4 million
profit), reflecting investment in the core eConveyancer business and in new
product areas
· Underlying loss before tax of £4.9m (2021: £0.9m loss)
· Statutory loss before tax of £5.4m (2021: £2.4m)
· Net cash £20.0 million (2021: £24.0 million)
Operational Highlights
· Expanded product range to support the broader home moving
experience
· Enhanced capabilities across marketing, data/analytics, and
technology platforms
· Conveyancing completions in the Period grew by 11% to 37,104
(2021: 33,543)
· Conveyancing instructions in the Period grew by 20% to 66,394
(2021: 55,120)
· Continued growth of broker channel with 10% growth in the number
of active users to 2,207 from 1,998 at the end of FY 2021
· Several new client wins across a range of B2B and B2C channels,
including Chase de Vere, Moneyfacts, and Haysto
· Strengthened existing relationships, notably the long-standing
relationship with Lloyd's Banking Group - adding a new service
Post Period End Highlights
· Change of name to Smoove plc - amplifying the Group's strategy to
simplify and revolutionise the home moving and ownership process
· Operational restructuring to align cost base with product
development and growth strategy
· Smoove Start launched for paying customers following the
successful conclusion of pilot phase
· Re-contracting with Lloyds Banking Group for the provision of
conveyancing services for a further two years
· Michael Cress commenced his role as Chief Financial Officer
· Proposed tender offer to return up to £5m
Current trading and Outlook
Despite the economic headwinds facing households there is still a reasonable
amount of momentum in the housing market. This, coupled with the substantial
uptick in remortgaging instructions we have seen in recent eConveyancer
trading, has allowed us to make a solid start to this financial year. With
projections of further interest rate rises and 1.1 million homeowners on
standard variable rate mortgages and a further 850,000* on tracker rates our
diversified offer ensures eConveyancer is well positioned to drive scale.
Our new estate agent offering, Smoove Start, is building subscription revenue
as well as expanding our services to new market segments such as property
sellers. We are at the early stages of piloting Smoove Complete, a
conveyancing platform for Consultant Conveyancing Lawyers, which is designed
to meet the changing technological and lifestyle trends in the sector.
Our strategic approach is broadening our reach beyond our strong position in
the first-time buyer market and providing a good balance across multiple
audiences. The home ownership process remains broken and provides huge
opportunity for radical change. We are ideally placed to take a leading role
and are very optimistic given the progress over the last 12 months.
Proposed Share Buyback
The Group announces a proposed return of capital to shareholders via a tender
offer of up to £5 million. The Board believes that this is the best way to
achieve a balance between an immediate return of capital to shareholders
whilst retaining funds to support value creating new products and business
improvements.
A resolution authorising the tender offer will be put to shareholders at the
annual general meeting which is expected to take place in late September.
The tender offer is expected to be completed during October.
Jesper With-Fogstrup, Chief Executive, commented: "In the last year we have
set out ambitious plans to make the home moving and ownership experience
better for everyone. We have made significant progress in the key areas that
will be the bedrock of our future success. Our proposal to return capital to
shareholders will allow us to create value for investors while at the same
time ensuring we retain funds to continue to invest in the technology and
business developments required to deliver our strategy.
"The investment we have made in eConveyancer, including fully integrating the
DigitalMove offering, has allowed us to further grow routes to market and
consolidated our position as one of the leading conveyancing platforms in the
UK. The improvements we continue to make are likely to drive scale and
generate increasing returns.
"Overall, we are pleased with the headway we have made with our growing
portfolio of products and services including the recent roll out of Smoove
Start following a successful pilot with estate agents. In building our diverse
range of products, we are well placed for economic uncertainty and the impact
that will have on the property sector.
"The year ahead will be another opportunity to grow, as we look to continue
our journey of revolutionising the home ownership market while simplifying
processes and reducing the stress and frustration for everyone involved."
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018.
Analyst Briefing: 9.30am on Monday 22 August 2022
An online briefing for analysts will be hosted by Jesper With-Fogstrup, Chief
Executive Officer, and Michael Cress, Chief Financial Officer, at 9.30am
today, Monday 22 August 2022, to review the results and prospects. Analysts
wishing to attend should contact Walbrook PR on smoove@walbrookpr.com or 020
7933 8780.
Enquiries:
Smoove plc Via Walbrook PR
Jesper With-Fogstrup, CEO
Michael Cress, CFO
Panmure Gordon (UK) Limited (NOMAD and Broker) +44 (0)20 7886 2500
Dominic Morley
Erik Anderson
Walbrook PR Limited smoove@walbrookpr.com or Tel: 020 7933 8780
Tom Cooper/ Nick Rome
About Smoove:
Smoove's (hellosmoove.com) mission is to revolutionise the home moving and
owning process for everyone involved. The Company's cornerstone cloud-based
platforms provide significant leverage for growth with strong, established
client bases and routes to market - including mortgage brokers, conveyancers,
estate agents and lenders.
eConveyancer ( https://econveyancer.com/ (https://econveyancer.com/) ) is one
of the leading distribution channels for conveyancing in the UK, bringing
consumers and legal professionals together via comparison services, which
provide solutions for home movers and the re-mortgage market.
The Company's existing platforms have been designed with a view to adding
services and reach and the Company is well placed to create exponential
returns as functionality increases.
Chief Executive's statement
In my second final results statement to shareholders, I am delighted to
deliver this strategic and financial performance review under our new name -
Smoove plc. While we continued to work under the backdrop of a global pandemic
and volatile markets, we remained focused on leveraging our strong
eConveyancer business and delivering on our strategy to provide a more
satisfying experience to homebuyers, sellers and industry stakeholders, while
building long-term value for shareholders.
The consumer, a core part of our strategy, has never been more central to the
home-moving process and we believe they deserve the best possible home moving
and ownership experience. Not only are we increasingly providing the necessary
digital products to manage this, but we are using our platforms to listen to
and engage with our customer base to ensure we adapt the business to align
with their evolving needs through proven data and analytics. In order to
achieve this, we are using our robust balance sheet to strategically invest in
the business to develop our technology and services and build our business for
sustainable growth.
Innovating in a traditional sector is not an easy task, but we are confident
in our strategy, as we continue to grow, importantly at the same time
maintaining and deepening our strong relationships with partners such as
Lloyds Banking Group.
Underpinning our growth
Our focus on having tech enabled data insights provides a strong foundation
for sustaining and growing our business.
DigitalMove, now fully integrated into eConveyancer, has made the user
experience even better, and we have received positive feedback from the
market.
Significant take-up progress continues, with more than 85% of eConveyancer
transactional cases now enabled on the platform, handling more than 88,000
instructions to date, compared with 51,000 in 2021.
We have built a better operating platform which is increasingly providing
invaluable insights across all lines of the business allowing us to increase
our distribution model and customer retention. These developments have
included growth drivers such as user experience enhancements to remove
conversion friction, integrating the Salesforce platform to improve customer
interaction and management, pilot repeat purchase mechanics and reorganising
our sales teams which has resulted in more efficient processes and improved
sales results.
Our core brand
Our strong eConveyancer brand is performing well and continues to be one of
the leading distribution channels for conveyancing in the UK, bringing
consumers and legal professionals together via comparison services, which
provide a straightforward, digitalised process for home movers and the
remortgage market. We have made significant investment in this technology so
that our customer-centric, data driven strategy sustains the value of this
strong B2B brand.
We continue to grow our distribution network, identifying additional routes to
market with both more broker networks using the platform, and also
instructions from other parts of the market. We have had several significant
contractual wins across a range of B2B and B2C channels, including Haysto and
Chase De Vere. These new partners are pivotal to our future, as they provide
increased flow of demand across our products and services. Smoove Start will
provide access to the estate distribution channel for conveyancing
instructions and increase the Group's exposure to property sellers, which will
complement its traditional strength among first time buyers.
We have grown existing relationships, notably our long-standing relationship
with Lloyds Banking Group adding a new service by providing support for a
fees-assisted remortgage product line in England and Wales. This
demonstrates the strength and growing importance of the broad range of
solutions we are able to deliver while responding to market dynamics. This
is a key part of our sustained growth, as we look to build on our existing
relationships, tailoring products specifically for clients, as well as
widening our offering to take advantage of growing areas of the market such as
remortgages.
We are encouraged by the consistent performance of our core offering, and this
has given us the ability to also expand our product range to support the
broader home moving experience. Notably, we launched Smoove Start, which
enables estate agents to onboard their clients with digital ID verification,
anti-money laundering checks and customer details. Smoove Start, critically,
allows buyers to complete property information more quickly, preparing for the
legal conveyancing process earlier and speeding up the transaction time when a
sale is agreed. Smoove Start also allows the home mover to instruct a
conveyancer from our broad panel of trusted service providers. We are now
taking this product to market following a successful pilot that provided
valuable and positive feedback.
We are also at the initial stages of testing a number of other strategic
initiatives. This includes exploring a new business model to improve the
conveyancing experience for both consumers and conveyancers with the ultimate
aim of making the entire process more efficient for everyone, as well as
providing home movers with a frictionless service for accessing utility and
insurance products.
Overall, we are pleased with the progress of our growing portfolio of products
and services and continue to see great potential to improve the frustrating
home moving experience, helping movers have a better, less stressful home
moving experience through our products and services.
Elevating our operations
Smoove's successful year has been made possible by our dedicated team of
experts and the investments we are making into our resources and operations.
We have made important hires across the management team and in specialist
roles to bring in new capabilities, especially in our technology and data
teams, which are key to delivering our strategy.
In January 2022, we announced that John Williams, the Chief Financial Officer
stepped down from our board, and the new Chief Financial Officer, Michael
Cress, commenced his role in May 2022, just after the financial year end. I
would like to take this opportunity to welcome Michael, who will help drive
the growth and development of our business, harnessing his in-depth commercial
knowledge and sector expertise. We are grateful to John for his hard work and
commitment to Smoove over more than ten years with the business.
Looking more closely at our colleagues, we are striving to develop a diverse
environment that reflects our customer-base and its changing needs. Whilst
technology is key for the innovation and efficiency of the business, we
recognise the importance and value of human interaction with customers and
specifically being able to understand their needs and concerns. Our workplace
culture is also very important to us and as we emerge from the restrictions of
the pandemic into a new working landscape, we have welcomed a return to the
office, but have provided our colleagues with the flexibility for hybrid
working so they can choose when they come in. We are very aware of keeping our
workforce happy and engaged and so will monitor how our colleagues feel about
this flexibility and whether we need to change it in any way in the future.
You can read more about our initiatives in the CSR section of the annual
report.
We continue to invest heavily in our technology capabilities and are now a
100% Cloud business, having moved all our production hosting and services and
workplace systems to the Cloud. We are also focused on consolidating onto
highly scalable platform services (PaaS) to optimise our technology cost base
to accommodate further growth.
Outlook
In the last year we have set out ambitious plans to make the home moving and
ownership experience better for everyone. We have made significant progress
in the key areas that will be the bedrock of our future success. We continue
to invest in technology so that our consumer-centric, data driven strategy
focuses on delivering value across all industry stakeholders.
The investment we have made in eConveyancer has allowed us to further grow
routes to market and consolidate its position as one of the leading
conveyancing platforms in the UK. The improvements we continue to make are
likely to drive scale and generate increasing returns.
Our Smoove Start offering for estate agents will benefit from the Group's
already strong credentials in the B2B market, and as we work with the
industry, its development and roll out will be a core focus over the coming
months. Smoove Start will benefit the eConveyancer business by broadening
its distribution and diversifying the instruction mix away from the
traditional focus on first time buyers.
Whilst some progress has been made on improving the way that the conveyancing
industry works, there is still huge scope to make it more effective and
efficient. The property conveyancing market remains fundamentally broken and
is ripe for new ways of working that benefits all stakeholders. As well as
utilising technology smartly to ensure a consistent and transparent process we
are in an ideal position to collaborate and influence the sector to remove the
complexity in the market.
There continue to be a number of challenges for the UK market, with inflation,
cost of living, rising interest rates and a tight labour market being among
the headwinds. The economic outlook is uncertain, particularly for first time
buyers who will find it hard to buy when facing the combination of a
cost-of-living crunch on real income and high house prices. That being said,
we believe these conditions make our offering even more important, as
consumers look for easier, more efficient processes for the home buying and
moving process.
In building our diverse range of products, we believe we are well placed for
economic uncertainty and the impact that will have on the property sector.
Next year will be another opportunity to grow, as we look to continue our
journey of revolutionising the home ownership market while simplifying
processes and reducing the stress and frustration for everyone involved.
Jesper With-Fogstrup
Chief Executive Officer
Financial review
Continuing operations
Revenue £19.2 million (2021: £16.9 million).
Gross margin £7.8 million (2021: £6.9 million).
Underlying EBITDA £(3.8) million (2021: £0.4 million)
Underlying PBT £(4.9) million (2021: £(0.9) million).
Reported PBT £(5.4) million (2021: £(2.4) million).
Results
Revenue from continuing operations increased by 13% during the year, which
reflects the Group's progress in developing its core business as well as its
exposure to a buoyant housing market. The strength of the market has been
seen in both the home mover segment, which recovered strongly from the impact
of COVID-19 as well as the remortgage segment, which has seen a surge of
activity in response to increases in the Bank of England's base rate.
The underlying PBT loss has widened from £0.9 million to £4.9 million as a
result of higher administrative expenses as the Group invests in both the core
eConveyancer business and in new product areas to create a strong platform for
future growth. Within the core business the investments have encompassed
enhanced capabilities across marketing, data/analytics, and technology
platforms with the aim of extracting more value from our existing
relationships with introducers and conveyancers. We have already started
seeing results from this, with the broadening of our relationship with Lloyds
Banking Group, and a strong pipeline of new contracts.
A milestone in the Group's development of new products is the release of
Smoove Start, a product for estate agents, which after the period end
concluded a successful pilot during which it received strong positive
feedback.
We continue to believe that these investments will generate enduring value for
shareholders, but we keep the level of investment under constant to review to
ensure that it is commensurate with scale of the opportunities and background
market conditions.
The Group's capitalised web development expenditure was £316,000 during the
period, a substantial decrease from the £831,000 reported in the prior
period. The change arises primarily because development work on new product
areas did not meet the criteria for capitalisation. Conversely,
development expenditure not capitalised increased to £848,000 from £136,000
in the prior period.
On 8 October 2021, the Group acquired Amity Law Limited, a firm of
conveyancers located in Bolton. The acquisition provides a platform for
the pilot of the Group's new digital products and will accelerate its product
development activities. Amity is also the foundation for Smoove Complete,
the group's pilot for a flexible environment for consultant conveyancing
lawyers to operate within an optimised digital and legal environment.
Consideration for the acquisition was £305,000, of which £100,000 is
unconditional deferred consideration payable in October 2022. Detail on the
acquisition is provided in note 12. During the year Amity contributed
revenues of £0.2 million.
The results for the current period include an impairment of £503,000 to the
carrying value of the Group's investment in Homeowners Alliance. In the
consolidated accounts the investment is accounted for an associate under the
equity method of accounting. The impairment review is described in note 13.
The results for the prior period have been adjusted to exclude the
contribution of Conveyancing Alliance Holdings Limited, the sale of which was
completed on 27 November 2020. Consideration for the sale was £27.4 million
before transaction costs. Consideration was upfront and in cash with no
deferred element.
Key performance indicators
Our non-financial measures are shown below:
Continuing Operations 2022 2021
Instructions 66,394 55,120
Completions 37,104 33,543
The non-financial KPIs of instructions and completions closely mirror
financial KPIs. During the year instructions increased 20% and Completions
11%. The difference in growth rate between the two measures reflects both the
time lag between instructions and completions and the distribution of
instructions through the reporting periods.
Cash and debt
The Group continues to hold significant cash balances, which stood at £20.0
million at year end. Cash flow during the period was £3,949,000, (2021:
£21,636,000 because of subsidiary disposal) which closely tracks the
underlying EBITDA reported above. As noted above, the year-on-year-reduction
in cash mirrors the significant investment in eConveyancer and new product
areas. Management believes that cash resources are sufficient to develop the
products to completion and to transition back to profitability and cash
generation.
Cash balances are allocated across three high street banks with £5m allocated
to a 'Green' notice account.
Shares and dividends
No dividend was paid in the year. As the Company is pursuing a growth
strategy, the Board is not recommending a final dividend be paid.
No new shares were issued in the year.
Non-IFRS profit measures
Whilst we give due prominence to the IFRS measures of profit, we feel it is
useful to show non-IFRS measures which the Board review on a regular basis in
order to evaluate business performance. These additional measures have the
advantage of excluding major non-cash non-recurring items such as impairment
charges. In addition, the Board believe that EBITDA is a metric that is
commonly used by the Group's investors. Therefore, we believe that
highlighting these measures in addition to the IFRS measures gives a useful
insight to the readers of the report. The table below lays out two key
measures and shows how they are derived:
Calculation of Non-IFRS profit measures 2022 2021
£000's £000's
(Loss) before taxation (PBT) (5,365) (2,389)
Write down of intangible asset - 1,457
Impairment of investment 503 -
Underlying (Loss) before taxation (Underlying PBT) (4,862) (932)
Finance income (25) (16)
Finance costs 102 126
Amortisation 683 898
Depreciation 329 332
Underlying EBITDA (3,773) 408
Michael Cress
Chief Financial Officer
Consolidated Income Statement
for the year ended 31 March 2022
Notes 2022 2021
£000's £000's
Continuing operations
Revenue 1 19,168 16,926
Cost of sales (11,407) (10,013)
Gross profit 7,761 6,913
Exceptional administrative expenses 3 - (1,457)
Other administrative expenses (12,577) (7,829)
Administrative expenses (12,577) (9,286)
Operating loss before exceptional expenses (4,816) (916)
Exceptional admin expenses 3 - (1,457)
Operating loss 2 (4,816) (2,373)
Finance income 5 25 16
Finance costs 6 (102) (126)
Share of results of associate 13 31 94
Impairment of associate 13 (503) -
Loss before tax (5,365) (2,389)
Tax credit 7 248 562
Loss for the financial year from continuing operations (5,117) (1,827)
Discontinued operations 8
Profit for the year from discontinued operations - 1,060
Gain on disposal 26 - 18,145
Total profit for the year from discontinued operations - 19,205
(Loss) / profit for the financial year attributable to the Group's equity (5,117) 17,378
shareholders
Loss per share from continuing operations
Basic loss per share (£) 9 (0.0789) (0.0282)
Diluted loss per share (£) 9 (0.0789) (0.0282)
(Loss) / earnings per share from continuing and discontinued operations
Basic (loss) / earnings per share (£) 9 (0.0789) 0.2679
Diluted (loss) / earnings per share (£) 9 (0.0789) 0.2536
Consolidated statement of comprehensive income
for the year ended 31 March 2022
2022 2021
£000's £000's
(Loss) / profit for the financial year (5,117) 17,378
Total comprehensive (loss) / profit for the financial year attributable to the (5,117) 17,378
owners of the parent
Consolidated Balance Sheet
as at 31 March 2022
Notes 2022 2021
£000's £000's
Assets
Non-current assets
Intangible assets 14 1,432 1,799
Goodwill 11 4,745 4,524
Investment in associates 13 155 627
Property, plant and equipment 15 1,572 1,830
Long-term receivables 16 100 200
Prepayments 16 94 111
8,098 9,091
Current assets
Trade and other receivables 16 1,545 1,452
Current tax receivable 291 249
Cash and cash equivalents 17 20,027 23,976
21,863 25,677
Total assets 29,961 34,768
Equity and liabilities
Capital and reserves attributable to the Group's equity shareholders
Share capital 18 259 259
EBT reserve (298) (397)
Share premium 4,609 4,609
Capital redemption reserve 113 113
Share based payment reserve 474 418
Retained earnings 19,645 24,913
Total equity 24,802 29,915
Non-current liabilities
Lease liabilities 25 1,012 1,162
Deferred taxation 7 79 280
1,091 1,442
Current liabilities
Trade and other payables 20 3,918 3,249
Lease liabilities 25 150 162
4,068 3,411
Total liabilities 5,159 4,853
Total equity and liabilities 29,961 34,768
The notes to these financial statements form an integral part of these
financial statements.
The financial statements were approved by the Board of Directors on 19 August
2022 and were signed on its behalf by:
Jesper With-Fogstrup Michael Cress
Chief Executive Officer Chief Financial Officer
Smoove plc Smoove plc
Company number: 07466574
Consolidated statement of changes in equity
for the year ended 31 March 2022
Share EBT Share premium Capital redemption reserve Share-based payments reserve Retained earnings Total
capital
reserve
Equity
£000's £000's £000's £000's
£000's £000's £000's
Balance at 1 April 2020 259 (453) 4,609 113 427 7,624 12,579
Profit for the year - - - - - 17,378 17,378
Total comprehensive income - - - - - 17,378 17,378
Purchase of shares by EBT - (91) - - - - (91)
Exercise of options - 147 - - (10) (89) 48
Share-based payments - - - - 1 - 1
Total transactions with owners - 56 - - (9) (89) (42)
Balance at 31 March 2021 259 (397) 4,609 113 418 24,913 29,915
Balance at 1 April 2021 259 (397) 4,609 113 418 24,913 29,915
Loss for the year - - - - - (5,117) (5,117)
Total comprehensive loss - - - - - (5,117) (5,117)
Purchase of shares by EBT - (345) - - - - (345)
Exercise of options - 444 - - (52) (151) 241
Share-based payments - - - - 108 - 108
Total transactions with owners - 99 - - 56 (151) 4
Balance at 31 March 2022 259 (298) 4,609 113 474 19,645 24,802
Consolidated statement of cash flows
for the year ended 31 March 2022
Notes 2022 2021
£000's £000's
Cash flow from operating activities
Loss before tax from continuing operations (5,365) (2,389)
Profit before tax from discontinued operations 8 - 19,039
Group (loss) / profit before tax for the financial year (5,365) 16,650
Finance income 5 (25) (16)
Finance costs 6 102 126
Loss on disposal of plant and equipment 63 1,457
Share of profit from associate 13 (31) (94)
Impairment of investment in associate 503 -
Amortisation 14 683 1,158
Depreciation 15 329 345
Share-based payments 19 108 1
Tax paid (23) (319)
Gain on disposal of discontinued operations excl. costs 26 - (18,027)
(3,656) 1,281
Changes in working capital
Decrease / (increase) in trade and other receivables 14 (120)
Increase in trade and other payables 413 931
Cash (used in) / from operating activities (3,229) 2,092
Cash flow from investing activities
Purchase of intangible software assets 14 (316) (831)
Purchase of property, plant and equipment 15 (97) (64)
Disposal of subsidiary 26 - 26,426
Acquisition of subsidiary (net of cash acquired) 12 (135) -
Interest received 5 25 17
Net cash (used in) / from investing activities (523) 25,548
Cash flow from financing activities
Interest paid 6 - (91)
Lease payments 25 (192) (170)
Repayment of loan to associate 100 50
Movement on RCF 21 - (4,000)
Repayment of loans 21 - (1,750)
Shares traded by EBT (105) (43)
Net cash used in financing activities (197) (6,004)
Net (decrease) / increase in cash and cash equivalents (3,949) 21,636
Cash and cash equivalents at beginning of financial year 23,976 2,340
Cash and cash equivalents at end of financial year 20,027 23,976
Notes to the consolidated financial statements
Principal accounting policies
Basis of preparation
The Consolidated Financial Statements of Smoove plc and its subsidiaries
(together, 'the Group') have been prepared in accordance with International
Financial Reporting Standards ('IFRS'), as adopted by the UK, IFRIC
interpretations and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
IFRS is subject to amendment and interpretation by the International
Accounting Standards Board ('IASB') and the IFRS Interpretations Committee,
and there is an on-going process of review and endorsement by the United
Kingdom Endorsement Board. These accounting policies comply with each IFRS
that is mandatory for accounting periods ending on 31 March 2022.
The financial statements have been prepared under the historical cost
convention except for the revaluation of certain assets to fair value as
explained in the accounting policies below. The principal accounting policies
set out below have been consistently applied to all periods presented.
The financial information set out in this announcement does not constitute
Smoove plc's statutory accounts for the year ended 31 March 2022. Statutory
accounts for the year ended 31 March 2022 will be delivered to the Registrar
of Companies following the Company's Annual General Meeting. The Auditor has
reported on those accounts; their report was unqualified, did not draw
attention by way of emphasis and did not contain a statement under Section 498
(2) or (3) of the Companies Act 2006.
Going Concern
In determining the appropriate basis of preparation of the financial
statements, the Directors are required to consider whether the Group and
Parent Company can continue in operational existence for the foreseeable
future. Management have prepared and the board of Directors have approved cash
flow forecasts for the Group for a period including 12 months from the date of
signing of these Financial Statements. In doing so the Directors have
considered existing commitments together with the financial resources
available to the Group.
The housing market has remained buoyant as the UK emerged from the coronavirus
pandemic. Transaction volumes have varied during the period as a result of the
expiry of the various stamp duty holidays. The broad trend in the market has
been favourable throughout.
The sale of CAL in November 2020 transformed the liquidity of the Group with
the Group having £20m net cash at the end of the period with no borrowings
and VAT payments up-to-date. This enables the Group to continue with its plans
to accelerate its investments from current cash reserves.
The Board looks at the sensitivity of changes in various profit and cash
drivers in its business plan to determine the robustness of its cash adequacy.
Reductions in margin and/or transaction volumes are tested and the Directors
are confident that the Group retains sufficient cash to cope with a prolonged
period of reduced revenues.
The cash flow forecasts prepared show that the Group and Parent Company can
continue to operate without borrowings and maintaining substantial cash
reserves through the period including 12 months from the date of signing of
these financial statements.
As a result of the above, the Directors concluded that there are no material
uncertainties that lead to significant doubt upon the Parent Company's and
Group's ability to continue as a going concern and therefore continue to adopt
the going concern basis of accounting in preparing these Financial Statements.
Basis of consolidation
The Consolidated Financial Statements incorporate the results of Smoove plc
('the Company') and entities controlled by the Company (its subsidiaries).
Control is achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain benefits from its
activities and the ability to use its power over the investee to affect the
returns from the investee.
Income and expenses of subsidiaries acquired or disposed of during the year
are included in the Consolidated Income Statement from the effective date of
acquisition and up to the effective date of disposal, as appropriate. When
necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated in
full on consolidation.
Business combinations
The Consolidated Financial Statements consolidate those of the Parent Company
and all of its subsidiaries as of 31 March 2022. All subsidiaries have a
reporting date of 31 March.
The Group applies the acquisition method of accounting to account for business
combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date except in relation to leases, where the lease liability is initially
measured at the present value of future lease payments using the Group's
incremental borrowing rate, and the right of use asset measured at the same
value with adjustment for favourable or unfavourable lease terms.
All transactions and balances between Group companies are eliminated on
consolidation, including unrealised gains and losses on transactions between
Group companies. Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or
disposed of during the year are recognised from the effective date of
acquisition, or up to the effective date of disposal, as applicable.
Acquisition-related costs are expensed as incurred.
When an operation is disposed of, it is classified as a discontinued operation
if it represents a separate major line of business. In this case the results
of the discontinued operation and the profit or loss on disposal are
aggregated in a single line item in the income statement and the prior period
is restated for comparability.
Discontinued operations
A discontinued operation is a component of the Group's business, the
operations and cash flows
of which can be clearly distinguished from the rest of the Group and which:
· represents a separate major line of business or geographic area
of operations;
· is part of a single co-ordinated plan to dispose of a separate
major line of business or geographic area of operations; or
· is a subsidiary acquired exclusively with a view to re-sale.
Classification as a discontinued operation occurs at the earlier of disposal
or when the operation meets the criteria to be classified as held-for-sale.
When an operation is classified as a discontinued operation, the comparative
statement of profit or loss and OCI is re-presented as if the operation had
been discontinued from the start of the comparative year.
Interest in associates
An associate is an entity over which the Group has significant influence and
that is neither a subsidiary nor an interest in a joint venture. Significant
influence is the power to participate in the financial and operating policy
decisions of the investee, but is not control or joint control over those
policies.
The post-tax results of associates are incorporated in the Group's results
using the equity method of accounting. Under the equity method, investments in
associates are carried in the Consolidated Balance Sheet at cost as adjusted
for post-acquisition changes in the Group's share of the net assets of the
associate, less any impairment in the value of investment. Losses of
associates in excess of the Group's interest in that associate are not
recognised. Additional losses are provided for, and a liability is recognised,
only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the joint venture or associate.
Employee benefit trust
The Directors consider that the Employee Benefit Trust (EBT) is under the de
facto control of the Company as the trustees look to the Directors to
determine how to dispense the assets. Therefore the assets and liabilities of
the EBT have been consolidated into the Group accounts. The EBT's investment
in the Company's shares is eliminated on consolidation and shown as a
deduction against equity. Any assets in the EBT will cease to be recognised in
the Consolidated Balance Sheet when those assets vest unconditionally in
identified beneficiaries.
Revenue recognition
Revenue comprises revenue recognised in respect of services, supplied during
the period and is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be reliably
measured, based on when performance obligations have been satisfied.
Revenue is measured as the fair value of the consideration received or
receivable, excluding discounts, rebates, value added tax and other sales
taxes.
Revenue from a contract to provide services which are completed at an
identifiable point in time is recognised when the performance obligation is
met, and when all of the following conditions are satisfied:
· the amount of revenue can be measured reliably;
· it is probable that the Group 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.
Revenue is recognised on completion of the legal services. For a conveyancing
transaction, this will be on completion of the property transaction and if the
transaction falls through prior to completion no fees will be payable by the
consumer to the conveyancer or by the conveyancer (customer) to the Company or
by the Company to the introducer (supplier).
The proportion of the fee that the Company receives on completion of a
conveyancing transaction that is remitted to a third party (introducer), such
as a mortgage broker or intermediary, is recognised as a cost of sale. This is
because the Group bears most of the credit risk, delivers the service and sets
the pricing.
Segmental reporting
An operating segment is a component of an entity that engages in business
activities from which it may earn revenues and incur expenses (including
revenues and expenses related to transactions with other components of the
same entity), whose operating results are regularly reviewed by the entity's
Chief Operating Decision Maker to make decisions about resources to be
allocated to the segment and assess its performance, and for which discrete
financial information is available. The Chief Operating Decision Maker has
been identified as the Board of Executive Directors, at which level strategic
decisions are made.
Details of the Group's reporting segments are provided in note 1.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the
service or as incurred.
Exceptional operating expenses are non-recurring in nature or of a size
sufficient to merit separate disclosure. Items are classified as exceptional
to aid the understanding of the underlying performance of the business.
Finance income and costs
Interest is recognised using the effective interest method which calculates
the amortised cost of a financial asset or liability and allocates the
interest income or expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts or
payments through the expected life of the financial asset or liability to the
net carrying amount of the financial asset or liability.
Goodwill
Goodwill represents the future economic benefits arising from a business
combination that are not individually identified and separately recognised.
Goodwill arising on an acquisition of a business is carried at cost as
established at the date of acquisition of the business less accumulated
impairment losses, if any.
Other intangible assets
Capitalised development expenditure
An internally-generated intangible asset arising from development expenditure
is recognised if, and only if, all of the following criteria have been
demonstrated:
· The technical feasibility of completing the intangible asset so
that it will be available for use or sale;
· The intention to complete the intangible asset and use or sell
it;
· The ability to use or sell the intangible asset;
· How the intangible asset will generate probable future economic
benefits;
· The availability of adequate technical, financial and other
resources to complete the development and to use or sell the intangible asset;
· The ability to measure reliably the expenditure attributable to
the intangible asset during its development; and
· The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure incurred from the date when
the intangible asset first meets the recognition criteria listed above. Where
no internally-generated intangible asset can be recognised, development
expenditure is expensed in the period in which it is incurred.
Amortisation is calculated so as to write off the cost of an asset, net of any
residual value, over the estimated useful life of that asset as follows:
· Capital development expenditure - Straight line over 4 years
Brand names and customer and introducer relationships
Brand names and customer and introducer relationships acquired in a business
combination that qualify for separate recognition are recognised as intangible
assets at their fair values.
Amortisation is calculated so as to write off the cost of an asset on a
straight line basis, net of any residual value, over the estimated useful life
of that asset as follows:
· Customer and introducer relationships - 10 to 12 years
· Brand names - 10 years
· Acquired technology platform - 9 years
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation and less any recognised impairment losses. Cost includes
expenditure that is directly attributable to the acquisition or construction
of these items. Subsequent costs are included in the asset's carrying amount
only when it is probable that future economic benefits associated with the
item will flow to the Group and the costs can be measured reliably. All other
costs, including repairs and maintenance costs, are charged to the
Consolidated Income Statement in the period in which they are incurred.
Depreciation is provided on all property, plant and equipment and is
calculated on a straight-line basis as follows:
· Leasehold improvements - Over the remaining life of the lease
· Computer equipment - 25% on cost
· Fixtures and fittings - 25% on cost
Depreciation is provided on cost less residual value over the asset's useful
life. The residual value, depreciation methods and useful lives are annually
reassessed.
Each asset's estimated useful life has been assessed with regard to its own
physical life limitations and to possible future variations in those
assessments. Estimates of remaining useful lives are made on a regular basis
for all equipment, with annual reassessments for major items. Changes in
estimates are accounted for prospectively.
The gain or loss arising on disposal or scrapping of an asset is determined as
the difference between the sales proceeds, net of selling costs, and the
carrying amount of the asset and is recognised in the Consolidated Income
Statement.
Impairment of non-current assets including goodwill
For the purposes of impairment testing, goodwill is allocated to each of the
Group's cash-generating units (or groups of cash-generating units) that is
expected to benefit from the synergies of the combination. Each unit to which
goodwill is allocated represents the lowest level within the entity at which
the goodwill is monitored for internal management purposes. Goodwill is
monitored at the operating segment level.
A cash-generating unit to which goodwill has been allocated is tested for
impairment annually, or more frequently when there is indication that the unit
may be impaired.
At each Balance Sheet reporting date the Directors review the carrying amounts
of the Group's tangible and intangible assets, other than goodwill, to
determine whether there is any indication that those assets are impaired. If
any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss, if any. Where the
asset does not generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit to which
the asset belongs. For further details of the impairment reviews conducted see
note 11.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to
be less than its carrying amount, the carrying amount of the asset or
cash-generating unit is reduced to its recoverable amount. If the recoverable
amount of a cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro
rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent
periods.
Where an impairment loss subsequently reverses, the carrying amount of the
asset or cash-generating unit is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset or cash-generating unit in prior periods. A
reversal of an impairment loss is recognised in the Consolidated Income
Statement immediately.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with
banks and other short-term highly liquid investments with original maturities
of approximately three months or less.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged,
cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing
component and are measured at the transaction price in accordance with IFRS
15, all financial assets are initially measured at fair value adjusted for
transaction costs (where applicable).
Financial assets are classified into the following categories:
· amortised cost; or
· fair value through profit or loss (FVTPL); or
· fair value through other comprehensive income (FVOCI).
In the periods presented the Company does not have any financial assets
categorised as FVTPL.
The classification is determined by both:
· the entity's business model for managing the financial asset; and
· the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in
profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented
within other administrative expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
· they are held within a business model whose objective is to hold
the financial assets and collect its contractual cash flows; and
· the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the principal
amount outstanding.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group's cash and cash equivalents, trade and
other receivables fall into this category of financial instruments.
Financial assets at fair value through other comprehensive income (FVOCI)
The Company accounts for financial assets at FVOCI if the assets meet the
following conditions:
· they are held under a business model whose objective it is 'hold
to collect' the associated cash flows and sell; and
· the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the principal
amount outstanding.
Any gains or losses recognised in other comprehensive income (OCI) will be
recycled upon derecognition of the asset.
Impairment of financial assets
IFRS 9's impairment requirements use forward-looking information to recognise
expected credit losses - the 'expected credit loss (ECL) model'. Instruments
within the scope of these requirements included loans and other debt-type
financial assets measured at amortised cost, trade receivables, contract
assets recognised and measured under IFRS 15 and loan commitments and some
financial guarantee contracts (for the issuer) that are not measured at fair
value through profit or loss.
The Group considers a broader range of information when assessing credit risk
and measuring expected credit losses, including past events, current
conditions, reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
· financial instruments that have not deteriorated significantly in
credit quality since initial recognition or that have low credit risk ('Stage
1'), and
· financial instruments that have deteriorated significantly in
credit quality since initial recognition and whose credit risk is not low
('Stage 2').
'Stage 3' would cover financial assets that have objective evidence of
impairment at the reporting date.
'12-month expected credit losses' are recognised for the first category while
'lifetime expected credit losses' are recognised for the second category.
Measurement of the expected credit losses is determined by a
probability-weighted estimate of credit losses over the expected life of the
financial instrument.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for trade and other
receivables as well as contract assets and records the loss allowance as
lifetime expected credit losses. These are the expected shortfalls in
contractual cash flows, considering the potential for default at any point
during the life of the financial instrument. In calculating, the Group uses
its historical experience, external indicators and forward-looking information
to calculate the expected credit losses using a provision matrix.
The Group assess impairment of trade receivables on a collective basis as they
possess shared credit risk characteristics they have been grouped based on the
days past due. Refer to Note 22 for further details.
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and other payables
and contingent consideration.
Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method except for financial liabilities designated at
FVTPL, which are carried subsequently at fair value with gains or losses
recognised in profit or loss. Contingent consideration is measured at FVTPL.
All interest-related charges and, if applicable, changes in an instrument's
fair value that are reported in profit or loss are included within finance
costs or finance income.
Current taxation
Current taxation for each taxable entity in the Group is based on the taxable
income at the UK statutory tax rate enacted or substantively enacted at the
Balance Sheet reporting date and includes adjustments to tax payable or
recoverable in respect of previous periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial information. However, if the deferred tax
arises from the initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates and laws that have been enacted or
substantively enacted by the Balance Sheet reporting date and
are expected to apply when the related deferred tax asset is realised or the
deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which the temporary
differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the Consolidated Income Statement, except where they relate to
items that are charged or credited directly to equity or other comprehensive
income in which case the related deferred tax is also charged or credited
directly to equity or other comprehensive income.
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle the balances
on a net basis.
Employment benefits
Provision is made in the financial information for all employee benefits.
Liabilities for wages and salaries, including non-monetary benefit and annual
leave obliged to be settled within 12 months of the Balance Sheet reporting
date, are recognised in accruals.
The Group's contributions to defined contribution pension plans are charged to
the Consolidated Income Statement in the period to which the contributions
relate.
Leasing
The Group considers whether any new contract involving use of an asset is, or
contains a lease. A lease is defined as 'a contract, or part of a contract,
that conveys the right to use an asset (the underlying asset) for a period of
time in exchange for consideration'. To apply this definition the Group
assesses whether the contract meets three key evaluations which are whether:
• the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group;
• the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the period of
use, considering its rights within the defined scope of the contract; and
• the Group has the right to direct the use of the identified
asset throughout the period of use.
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the balance sheet. The right-of-use asset is measured at
cost, which is made up of the initial measurement of the lease liability, any
initial direct costs incurred by the Group, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any incentives
received).
The Group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the
lessee's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments (including in substance fixed), variable payments based on
an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be
exercised. Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to reflect any
reassessment or modification, or if there are changes in in-substance fixed
payments. When the lease liability is remeasured, the corresponding adjustment
is reflected in the right-of-use asset, or profit or loss if the right-of-use
asset is already reduced to zero.
On the balance sheet, right-of-use assets have been included in property,
plant and equipment and lease liabilities are separately shown on the face of
the balance sheet.
Equity and reserves
Equity and reserves comprise the following:
· 'Share capital' represents amounts subscribed for shares at
nominal value.
· 'EBT reserve' represents cost of shares bought and sold through
the Employee Benefit Trust.
· 'Share premium' represents amounts subscribed for share capital,
net of issue costs, in excess of nominal value.
· 'Capital redemption reserve' represents the nominal value of
re-purchased and cancelled share capital.
· 'Share-based payment reserve' represents the accumulated value of
share-based payments expensed in the profit and loss less charge in relation
to exercised options.
· 'Retained earnings' represents the accumulated profits and losses
attributable to equity shareholders.
Share-based employee remuneration
The Group operates share option based remuneration plan for its employees.
None of the Group's plans is cash settled.
Where employees are rewarded using share-based payments, the fair value of
employees' services is determined indirectly by reference to the fair value of
the equity instruments granted. This fair value is appraised at the grant date
using the Black-Scholes model.
All share-based remuneration is ultimately recognised as an expense in profit
and loss with a corresponding credit to share-based payment reserve. The
expense is allocated over the vesting period. Other than the requirement to be
an employee at the point of exercise there are no other vesting requirements
and all share options are expected to become exercisable. Subsequent revisions
to this give rise to an adjustment to cumulative share-based compensation
which is recognised in the current period. The number of vested options
ultimately exercised by holders does not impact the expense recorded in any
period.
Upon exercise of share options, the proceeds received net of any directly
attributable transaction costs, are allocated to share capital up to the
nominal (par) value of the shares issued with any excess being recorded as
share premium. Alternatively share options may be exercised via shares held by
the EBT.
Contingent liabilities
No liability is recognised if an outflow of economic resources as a result of
present obligations is not probable. Such situations are disclosed as
contingent liabilities unless the outflow of resources is remote.
New and amended International Financial Reporting Standards adopted by the
Group
There were no new standards, amendments to standards or interpretations which
were effective for the first time this year and applicable to the Group.
International Financial Reporting Standards in issue but not yet effective
At the date of authorisation of these Consolidated Financial Statements, the
IASB and IFRS Interpretations Committee have issued standards, interpretations
and amendments which are applicable to the Group.
Whilst these standards and interpretations are not effective for, and have not
been applied in the preparation of, these Consolidated Financial Statements,
the following may have an impact going forward:
New/Revised International Financial Reporting Standards Effective date: UK adopted Impact on Group
annual periods beginning on or after:
IAS 1 Amendments to IAS 1 Classification of Liabilities as Current or Non-current 1 January 2023 No Immaterial
IAS 1 Amendments to IAS 1 Disclosure of Accounting Policies 1 January 2023 No Immaterial
IFRS 3 Amendment to IFRS 3 Business Combinations 1 January 2022 Yes Immaterial
IAS 16 Amendments to IAS 16 Property, Plant and Equipment 1 January 2022 Yes Immaterial
IAS 37 Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1 January 2022 Yes Immaterial
1 January 2022
Yes
Immaterial
IAS 16
Amendments to IAS 16 Property, Plant and Equipment
1 January 2022
Yes
Immaterial
IAS 37
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets
1 January 2022
Yes
Immaterial
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with generally accepted
accounting practice requires management to make estimates and judgements that
affect the reported amounts of assets and liabilities as well as the
disclosure of contingent assets and liabilities at the Balance Sheet reporting
date and the reported amounts of revenues and expenses during the reporting
period.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Estimates
The following are the significant estimates used in applying the accounting
policies of the Group that have the most significant effect on the financial
statements:
Impairment review
The Group assesses the useful life of intangible assets to determine if there
is a definite or indefinite period of useful economic life; this requires the
exercise of judgement and directly affects the amortisation charge on the
asset. The Group tests whether there are any indicators of impairment at each
reporting date. Discounted cash flows are used to assess the recoverable
amount of each cash generating unit, and this requires estimates to be made.
If there is no appropriate method of valuation of an intangible asset, or no
clear market value, management will use valuation techniques to determine the
value. This will require assumptions and estimates to be made. Further detail
is provided in note 14.
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at
each reporting date, based on the expected utility of the assets.
Uncertainties in these estimates relate to technological obsolescence that may
change the utility of certain software and IT equipment. Depreciation rates
are shown in the accounting policy for property, plant and equipment.
Judgements
The following are the significant judgements used in applying the accounting
policies of the Group that have the most significant effect on the financial
information:
Capitalisation of development expenditure
The Group applies judgement in determining whether internal research and
development projects meet the qualifying criteria set out in IAS 38 for the
capitalisation of development expenditure as internally generated intangible
assets. The particular uncertainty and judgement centres around whether a
project will be commercially successful, particularly in the pre-revenue
phase.
Investment in Associates
An impairment charge of £503,000 related to the Group's investment in
Homeowners Alliance was recognised during the year. The impairment
judgement relies on an estimation of future cash flows of the investment
discounted to its present value using a discount rate of 12.6%. The
judgement also applies a minority discount of 40% reflecting the Group's lack
of majority control of the investment. Further detail is provided in note
13.
Intangible assets arising from business combination
Judgement has been applied concerning the identification of intangible assets
arising from the acquisition of Amity. The value of consideration paid on
the acquisition, in excess of the net assets acquired, has been allocated
entirely to goodwill. Furthermore, goodwill arising from the acquisition of
Amity has been included within the Core CGU and therefore assessed within the
impairment review of the Core CGU. This is because the value that Amity adds
to the Group's product development capabilities cannot be segregated
1. Segmental reporting
Operating segments
Management identifies its operating segments based on the Group's service
lines, which represent the main product and services provided by the Group.
The Group of similar services which makes up the Group's Comparison Services
segment represents more than 95% of the total business. Additionally, the
Board reviews Group consolidated numbers when making strategic decisions and,
as such, the Group considers that it has one reportable operating segment. All
sales are made in the UK.
Revenues from customers who contributed more than 10% of revenues were as
follows:
2022 2021
£000's £000's
Customer 1 4,079 6,288
Customer 2 2,030 1,781
The discontinued operation that was disposed of during the prior year was not
identified as a separate segment.
2. Operating (loss)
Operating (loss) is stated after charging: 2022 2021
£000's £000's
Fees payable to the Group's auditors for the audit of the annual financial 60 56
statements
Fees payable to the Group's auditors and its associates for other services to
the Group:
- Audit of the accounts of subsidiaries 65 34
- Non-audit services 10 16
Amortisation 683 1,158
Depreciation 329 345
Share-based payments expense 108 1
Exceptional administrative expenses - 1,457
Development expenditure not capitalised 848 136
3. Exceptional administrative expenses
2022 2021
£000's £000's
Write-off of capitalised development costs - 1,457
- 1,457
The write-off of the intangible asset during the prior period relates to the
decision to move DigitalMove on to a low code/no code environment. While the
learnings from the original version of DigitalMove will be re-used it was not
possible to separate the value of that from the actual code. For that reason,
it was deemed that the amount capitalised so far and previously included
within the capitalised development expenditure category of intangible fixed
assets would need to be written-off and the loss on derecognition of the asset
has been classified as exceptional due to both the size and the uncommon
nature of the event.
4. Directors and employees
The aggregate payroll costs of the employees, including both management and
Executive Directors, were as follows:
2022 2021
£000's £000's
Staff costs
Wages and salaries 6,538 4,975
Social security costs 655 545
Pension costs 578 424
7,771 5,944
Average monthly number of persons employed by the Group during the year was as
follows:
2022 2021
Number Number
By activity:
Production 60 34
Distribution 34 30
Administrative 30 27
Management 10 9
134 100
2022 2021
£000's £000's
Remuneration of Directors
Emoluments for qualifying services 833 801
Payments for loss of office - 90
Pension contributions 35 28
Social security costs 84 106
952 1,025
The emoluments above (and in the following table for Remuneration of key
management) include amounts for share-based payments charges but not for the
actual gain on exercise. During the period share options were exercised
giving rise to a gain of £86,000 (2021: £35,000). This amount applies to the
table below also.
A breakdown of the emoluments for Directors can be found in the Directors'
Remuneration Report where the Highest paid Director can also be identified.
Key management personnel are identified as the Executive Directors.
2022 2021
£000's £000's
Remuneration of key management
Emoluments for qualifying services 671 524
Payments for loss of office - 90
Pension contributions 30 23
Social security costs 74 79
775 716
Payments of pensions contributions have been made on behalf of Directors.
5. Finance income
2022 2021
£000's £000's
Bank interest 25 16
6. Finance costs
2022 2021
£000's £000's
Interest on borrowings - 91
Lease interest 31 35
Other interest and finance costs 71
102 126
7. Taxation
Analysis of credit in year 2022 2021
£000's £000's
Current tax
United Kingdom
UK corporation tax on (losses) / profits for the year (41) 24
Deferred tax
United Kingdom
Origination and reversal of temporary differences (207) (752)
Corporation tax credit (248) (728)
Continuing and discontinued operations
Continuing operations (248) (562)
Discontinued operations - 259
Tax relating to disposal - (425)
Corporation tax credit (248) (728)
The differences are explained as follows:
2022 2021
£000's £000's
(Loss) / profit before tax (5,364) 16,650
UK corporation tax rate 19% 19%
Expected tax (credit) / expense (1,019) 3,164
Adjustments relating to prior year (41) 30
Adjustment for additional R&D tax relief - (229)
Non-taxable gain on sale of Group company - (3,900)
Unused tax losses 617 208
Adjustment for non-deductible expenses
- Expenses not deductible for tax purposes 143 42
- Other permanent differences 52 (42)
Income tax credit (248) (728)
Deferred tax
2022 2021
£000's £000's
Deferred tax liabilities at applicable rate for the period of 19%:
Opening balance at 1 April 280 1,045
- Property, plant and equipment and capitalised development spend temporary (21) (217)
differences
- Deferred tax recognised on acquisitions of Legal Eye and Conveyancing (26) (65)
Alliance
- Deferred tax released on sale of Conveyancing Alliance - (425)
- Deferred tax on share options 32 (58)
- Acquisition of subsidiary 6 -
- Utilisation of tax losses (192) -
Deferred tax liabilities - closing balance at 31 March 79 280
2022 2021
£000's £000's
Deferred tax liabilities at period end:
Property, plant and equipment and capitalised development spend temporary 218 233
differences
Deferred tax recognised on acquisitions of Legal Eye and Conveyancing Alliance 79 105
Deferred tax on share options (26) (58)
Tax losses (192) -
Deferred tax liabilities - closing balance at 31 March 79 280
A potential deferred tax asset of £916,100 (2021: £208,000) in respect of
tax losses carried forward has not been recognised due to uncertainty over the
availability of taxable profits in future chargeable accounting periods. The
unrecognised deferred tax asset in respect of tax losses as at 31 March 2022
has been measured at 25%.
The future tax rate has not been applied to the deferred tax liabilities shown
above on the basis the effect of applying the future tax rate is not material.
8. Discontinued operations
On 27 November 2020 the Group disposed of Conveyancing Alliance (Holdings)
Limited and its subsidiary Conveyancing Alliance Limited, which carried out
operations similar to the rest of the Group. The disposal was effected as it
was felt that the disposed of companies were not core to the ambition to
disrupt and transform the home moving and home owning experience for
consumers. Therefore, the proceeds from the sale could be better used to help
fulfil this ambition.
Details of the assets and liabilities disposed of, and the calculation of the
profit on disposal, are included in note 26.
The results of the discontinued operation, which have been included in the
profit for 2021, are as follows:
2022 2021
£'000 £'000
Revenue - 4,545
Expenses - (3,226)
Profit before tax of discontinued operations - 1,319
Profit on disposal of discontinued operations - 17,720
Total profit before tax on discontinued operations - 19,039
Tax on discontinued operations - (259)
Tax credit on disposal of discontinued operations - 425
Net profit on discontinued operations attributable to owners of the company - 19,205
2022 2021
£'000 £'000
Profit after tax of discontinued operations - 1,060
Profit after tax on disposal of discontinued operations - 18,145
Net profit on discontinued operations attributable to owners of the company - 19,205
Results above for 2021 cover the 7 months to the date of disposal.
During 2021, Conveyancing Alliance Limited contributed £1,435,000 to the
group's net operating cash flows and paid £31,000 in respect of investing
activities and £2,008,000 in respect of financing activities.
During 2021, A profit after tax of £18,145,000 arose on disposal of
Conveyancing Alliance Holdings Limited, being the difference between the
proceeds of disposal and the carrying amount of the subsidiary's net assets
and attributable goodwill.
9. (Loss) / earnings per share
Basic (loss) / earnings per share is calculated by dividing the (loss) /
profit attributable to Ordinary Shareholders by the weighted average number of
ordinary shares outstanding during the year.
From continuing and discontinued operations:
Basic (loss) / earnings per share
2022 2021
£ £
Total basic (loss) / earnings per share (0.0789) 0.2679
Total diluted (loss) / earnings per share (0.0789) 0.2536
The (loss) / profit used in the calculation of basic (loss) / earnings per
share were as follows:
2022 2021
£000's £000's
(Loss) / profit used in the calculation of total basic and diluted (loss) / (5,117) 17,378
earnings per share
From continuing operations:
Basic loss per share
2022 2021
£ £
Total basic loss per share (0.0789) (0.0282)
Total diluted loss per share (0.0789) (0.0282)
The loss used in the calculation of basic loss per share from continuing
operations were as follows:
2022 2021
£000's £000's
Loss used in the calculation of total basic and diluted loss per share (5,117) (1,827)
From discontinued operations:
Basic earnings per share
2022 2021
£ £
Total basic earnings per share - 0.2960
Total diluted earnings per share - 0.2803
The profit used in the calculation of basic earnings per share from
discontinued operations were as follows:
2022 2021
£000's £000's
Profit used in the calculation of total basic and diluted earnings per share - 19,205
The weighted average number of ordinary shares used in all of the calculations
of basic (loss) / earnings per share were as follows:
Number of shares 2022 2021
Number Number
Weighted average number of ordinary shares for the purposes of basic earnings 64,871,276 64,871,276
per share
Taking the Group's share options into consideration in respect of the Group's
weighted average number of ordinary shares for the purposes of diluted
earnings per share, is as follows:
Number of shares 2022 2021
Number Number
Dilutive (potential dilutive) effect of share options 4,149,182 3,642,014
Weighted average number of ordinary shares for the purposes of diluted 69,020,458 68,513,290
earnings per share
As the Group reported a loss (2021: loss on continuing operations),
outstanding share options do not further dilute the loss per share in the
current period so the diluted loss per share is the same as the loss per share
(2021: loss per share for continuing operations).
10. Subsidiaries
Details of the Group's subsidiaries are as follows:
Name of subsidiary Principal activity Class of Place of % ownership held
shares
incorporation
by the Group
and operation
2022 2021
United Legal Development and hosting of internet-based software applications for legal Ordinary England & Wales 100% 100%
Services Limited services businesses
United Home Development and hosting of internet-based software applications for property Ordinary England & Wales 100% 100%
Services Limited services businesses
Legal-Eye Limited Compliance consultancy services for solicitors Ordinary England & Wales 100% 100%
Amity Law Limited Solicitors Ordinary England & Wales 100% -
Hello Smoove Limited Dormant Ordinary England & Wales 100% -
During the year the Group acquired a 100% interest in Amity Law Limited.
Detail on the acquisition is provided in note 12. Hello Smoove Limited was
incorporated on 28 February 2022 with share capital of £1.
The Group disposed of its previous 100% interests in Conveyancing Alliance
(Holdings) Limited and Conveyancing Alliance Limited during the 2021 financial
year. The gain on disposal is shown in note 8 and included within results from
discontinued operations.
The registered office of each of the subsidiaries (except for Amity Law
Limited) is the same as the registered office of the parent company: The Old
Grammar School, Church Road, Thame, Oxfordshire, OX9 3AJ. The registered
office of Amity Law Limited is 17-19 Lee Lane, Horwich, Bolton, Lancashire,
United Kingdom, BL6 7BP.
11. Goodwill
2022 2021
£000's £000's
Opening value at 1 April 4,524 11,008
Sale of CAL - (6,484)
Purchase of Amity 221 -
Closing value at 31 March 4,745 4,524
Goodwill split by CGU is as follows:
2022 2021
£000's £000's
Core 3,518 3,297
Legal-Eye 1,227 1,227
4,745 4,524
The key assumptions in the performance of impairment reviews related to the
projection period, the growth rate applied subsequent to this period, and the
discount rate applied to projected cash flows to determine a value in use.
For Core, the recoverable amounts of intangible assets and goodwill was
determined using value-in-use calculations, based on cash flow projections
from a three-year forecast which has been extrapolated into perpetuity. A
three-year period has been used to properly reflect a planned investment
period followed by profitable growth. Goodwill arising from the acquisition of
Amity has been included within the Core CGU and therefore assessed within the
impairment review of the Core CGU. This is because the value that Amity adds
to the Group's product development capabilities cannot be separately
segregated.
For the Core GGU goodwill, the recoverable amount exceeds its holding value by
£6.2 million. No reasonably plausible increase in discount rate or reduction
in growth rate would give rise to an impairment of goodwill.
For Legal-Eye, the recoverable amounts of intangible assets and goodwill was
determined using value-in-use calculations, based on cash flow projections
from a three-year forecast which has been extrapolated into perpetuity. Its
recoverable amount exceeds its holding value by £1.0 million. No reasonably
plausible increase in discount rate or reduction in growth rate would give
rise to an impairment of goodwill.
For both CGUs a growth rate of 2% has been applied to extrapolate the cash
flows beyond the forecast periods by reference to the long-term growth rate of
the UK economy.
The base post-tax discount rate for each CGU was 12.60% which reflect current
market assessments of the time value of money and specific risks using
external sources of data. A higher discount rate was used for new revenue
streams reflecting their higher risk.
12. Business combinations
On 8 October 2021 the Group acquired 100% of the share capital of Amity Law
Limited, a company whose principal activity is conveyancing legal services.
The principal reason for the acquisition was to provide a platform for the
pilot of the group's new digital products and to accelerate the product
development process by providing faster insights into the needs of the various
stakeholders in the home moving journey.
Details of the fair value of identifiable assets and liabilities acquired are
shown below.
£'000
Property, plant, and equipment 37
Trade and other receivables 92
Cash and equivalents 70
Provision for legal claims (5)
Deferred taxation (6)
Trade and other payables (81)
Current tax payable (23)
Total Net Assets 84
Fair value of consideration paid
£'000
Cash 205
Deferred consideration 100
Total consideration 305
Goodwill (note 11) 221
The deferred consideration is not contingent and is payable in October
2022.
Acquisition costs of £44k arose as a result of the transaction and are
included in administrative expenses.
The main factor leading to the recognition of goodwill is the value that Amity
adds to the group's product development activities, which does not qualify for
separate recognition. The goodwill recognised will not be deductible for tax
purposes.
Since the acquisition date Amity has contributed to £205,000 to Group
revenues and £87,000 to Group losses. If the acquisition had occurred on 1
April 2021, revenue from the Group would have been £19,494,000 and loss
before tax for the group would have been (£5,376,000).
13. Investment in associates
2022 2021
£'000 £'000
Opening value at 1 April 627 533
Share of profit for the year 31 94
Impairment of associate (503) -
Closing value at 31 March 155 627
The Group acquired 35% of Homeowners Alliance Ltd on 29 February 2016.
Homeowners Alliance Ltd's place of incorporation and operation is in the UK
and its registered address is Pound House, 62a Highgate High St, London N6
5HX.
An impairment review of the investment in Homeowners Alliance has given rise
to an impairment of £503,000. The review assumed a post-tax discount rate of
12.60%, long term growth rate of 2%, and a discount associated with lack of
control of 40%. The impairment reflects the year-on-year decline in profits
of the associate.
14. Intangible assets
Capitalised development expenditure Acquired technology platform Customer and Introducer relationships Brands Total
£000's £000's £000's £000's £000's
Cost
At 1 April 2020 5,791 1,117 3,619 568 11,095
Additions 831 - - - 831
Subsidiary Sale (307) (1,117) (2,549) (342) (4,315)
Disposals (1,688) - - - (1,688)
At 31 March 2021 4,627 - 1,070 226 5,923
Additions 316 - - - 316
At 31 March 2022 4,943 - 1,070 226 6,239
Accumulated amortisation
At 1 April 2020 3,024 408 1,283 229 4,944
Charge 800 73 243 40 1,156
Subsidiary Sale (241) (481) (892) (132) (1,746)
Disposals (230) - - - (230)
At 31 March 2021 - 634 137 4,124
3,353
Charge 551 - 109 23 683
At 31 March 2022 - 743 160 4,807
3,904
Net book value
At 1 April 2020 2,767 709 2,336 339 6,151
At 31 March 2021 1,274 - 436 89 1,799
At 31 March 2022 1,039 - 327 66 1,432
Amortisation is included within administrative expenses. Capitalised
development expenditure has a remaining amortisation period of up to 4
years. Consumer and introducer relationships and brands have a remaining
amortisation period of 3 years.
The loss on the derecognition of capitalised costs relating to Digital Move in
the prior year is included in exceptional items and further details are given
in note 3.
During the year ended 31 March 2021, the Group disposed of Conveyancing
Alliance (Holdings) Limited and its subsidiary Conveyancing Alliance Limited.
This meant that intangible assets originally recognised on acquisition of
those companies are no longer recognised in the consolidated balance sheet and
neither are the software assets those companies had developed. See Note 8 for
further details.
15. Property, plant and equipment
Leasehold improvements Right of use assets Computer equipment Fixtures Total
and fittings
£000's £000's £000's
£000's
£000's
Cost
At 1 April 2020 815 1,623 1,071 128 3,637
Additions - - 58 7 65
Subsidiary Sale - (34) (68) (6) (108)
Disposals - - (23) - (23)
At 31 March 2021 815 1,589 1,038 129 3,571
Additions 4 - 93 - 97
Subsidiary Acquisition 5 - 31 - 36
Disposals - - (730) - (730)
At 31 March 2022 824 1,589 432 129 2,974
Accumulated depreciation
At 1 April 2020 579 121 714 83 1,497
Charge 24 167 143 11 345
Subsidiary Sale - (25) (52) (2) (79)
Disposals - - (23) - (23)
At 31 March 2021 604 263 781 92 1,740
Charge 27 157 135 10 329
Disposals - - (667) - (667)
At 31 March 2022 631 420 249 102 1,402
Net book value
At 1 April 2020 236 1,502 357 45 2,140
At 31 March 2021 212 1,326 256 37 1,830
At 31 March 2022 193 1,169 183 27 1,572
Depreciation is recognised within administrative expenses.
During the year ended 31 March 2021, the Group disposed of Conveyancing
Alliance (Holdings) Limited and its subsidiary Conveyancing Alliance Limited.
This meant that property, plant and equipment held by those companies are no
longer included in the consolidated balance sheet. See Note 8 for further
details
16. Trade and other receivables
2022 2021
£'000 £'000
Current assets
Trade receivables 977 857
Other receivables 87 52
Prepayments 481 543
1,545 1,452
Non-current assets
Prepayments 94 111
Long-term receivables (loans to associate) 100 200
194 311
The Directors consider the carrying value of trade and other receivables is
approximate to its fair value.
Details of the Group's exposure to credit risk is given in Note 22.
17. Cash and cash equivalents
2022 2021
£'000 £'000
Cash at bank (GBP) 20,027 23,976
At March 2022 and 2021 all significant cash and cash equivalents, which
include deposits with maturities up to approximately three months, were
deposited with major clearing banks in the UK with at least an 'A' rating.
18. Share capital
Allotted, issued and fully paid
The Company has one class of ordinary share which carries no right to fixed
income nor has any preferences or restrictions attached.
2022 2021
No £000's No £000's
Ordinary shares of £0.004 each 64,871,276 259 64,871,276 259
64,871,276 259 64,871,276 259
As regards income and capital distributions, all categories of shares rank
pari passu as if the same constituted one class of share.
2022 2021
Number Number
Shares issued and fully paid
Beginning of the year 64,871,276 64,871,276
New shares issue - -
Shares issued and fully paid 64,871,276 64,871,276
During the year the Company issued no new ordinary shares (2021: nil).
19. Share-based payments
Ordinary share options:
The Group operates an EMI share option scheme to which the Executive Directors
and employees of the Group may be invited to participate by the Remuneration
Committee. Options are exercisable at a price equal to the closing price of
the Company's share on the day prior to the date of grant. The options vest in
three equal tranches, three, four and five years after date of grant or in one
tranche three years after date of grant. The options are settled in equity
once exercised. Where the individual limits for an EMI scheme the options will
be treated as unapproved but within the same scheme rules.
If the options remain unexercised after a period of 10 years from the date of
grant, the options expire. Options are forfeited if the employee leaves the
Group before the options vest.
Options were valued using the Black-Scholes option-pricing model using the
following assumptions:
2022 2021
Share price at date of grant £0.785 Range of £0.539 to £0.860
Contractual life 10 years 10 years
Expected volatility 55.517% 52.045% to 55.788%
Expected dividend rate 0% 0% to 4.64%
Risk free rate 0.2825% -0.057% to 0.2825%
The expected volatility was calculated as a 2 year volatility of the Company's
share price.
Certain share options include performance conditions relating to share price
and gross margin. These are classified as market conditions and did not have a
material effect on the fair value of options at the date of grant.
The following table shows options issued which were outstanding as at
31 March 2022:
Date of grant Exercise Share price at Options in issue
price (£)
date of grant (£) as 31 March 2022
18 August 2014 0.4000 0.4800 85,468
21 August 2015 0.5350 0.5350 34,520
7 November 2016 0.7025 0.7025 440,133
21 December 2016 0.7675 0.7675 151,839
28 June 2018 1.3425 1.3425 200,000
9 August 2018 1.3325 1.3325 320.000
14 July 2020 0.5390 0.5390 1,050,000
14 January 2021 0.8000 0.8000 200,000
19 February 2021 0.8600 0.8600 675,000
20 July 2021 0.7850 0.8030 500,000
The Group recognised total expenses of £108,000 (2021: £1,000) related to
share options accounted for as equity-settled share-based payment transactions
during the year.
The weighted average fair value of options granted in the year was £0.29 per
share (2021: £0.64).
A reconciliation of option movements over the year to 31 March 2022 is shown
below:
As at 31 March 2022 As at 31 March 2021
Number of Weighted average exercise price Number of Weighted average exercise price
options
options
£ £
Outstanding at 1 April 4,200,360 0.78 3,131,007 0.94
Granted 500,000 0.79 2,625,000 0.64
Forfeited prior to vesting (622,343) 0.86 (1,437,768) 0.90
Exercised (421,057) 0.57 (117,879) 0.40
Outstanding at 31 March 3,656,960 0.79 4,200,360 0.78
Of the share options outstanding at the year end, 883,560 were exercisable at
the year end (2021: 1,029,541).
The weighted average remaining contractual life of the outstanding options was
7.5 years (2021: 7.7 years).
The weighted average share price at the date of exercise of those options
exercised in the year was £0.82 per share (2021: £0.80).
20. Trade and other payables
2022 2021
£000's £000's
Trade payables 2,120 2,110
PAYE and social security 316 140
VAT 296 292
Other creditors 11 292
Accruals and deferred income 1,075 414
Deferred consideration 100 -
3,918 3,249
The Directors consider the carrying value of trade and other payables is
approximate to its fair value.
21. Borrowings
Reconciliation of liabilities arising from financing activities
2022 2021
Bank loans Leases Total debt Bank loans Leases Total debt
£'000
£'000
£'000
£'000
£'000 £'000
Balance at 1 April - 1,324 1,324 5,750 1,467 7,217
Loan or lease repayments - (192) (192) (1,750) (170) (1,920)
Finance charges - 30 30 - 35 35
Disposal of subsidiary - - - - (8) (8)
Movement in revolving cash flow facility - - - (4,000) - (4,000)
Balance at 31 March - 1,162 1,162 - 1,324 1,324
Summary of borrowing arrangements:
· In December 2016, the Group took out a five year term loan for
£5 million and had a £4 million revolving cash flow facility. Both the
remaining balance on the loan and the revolving cash flow facility were repaid
in full during 2021 and the facilities cancelled.
· Loans were secured by way of fixed and floating charges over all
assets of the Group which have now been released.
· Amounts shown represent the loan principals; accrued interest is
recognised within accruals. Any amounts due at the reporting date were paid
within a few days.
· During 2021 a six month repayment holiday was agreed on the term
loan and a £1m overdraft agreed. However, the loan was repaid in full and the
overdraft cancelled.
22. Financial instruments
Classification of financial instruments
The Group applies the IFRS 9 simplified model of recognising lifetime expected
credit losses for all trade receivables as these items do not have a
significant financing component.
Trade receivables are written off when there is no reasonable expectation of
recovery. Failure to make payments within 120 days from the invoice date and
failure to engage with the Group on alternative payment arrangements amongst
others are considered indicators of no reasonable expectation of recovery. The
Group generally has a low incidence of unpaid receivables.
The tables below set out the Group's accounting classification of each class
of its financial assets and liabilities.
Financial assets
Measured at amortised cost
2022 2021
£000's £000's
Trade receivables net of provision for credit losses (note 16) 977 857
Loans and other receivables (note 16) 187 252
Cash and cash equivalents (note 17) 20,027 23,976
21,191 25,085
All of the above financial assets carrying values are approximate to their
fair values, as at 31 March 2022 and 2021.
Financial liabilities
Measured at amortised cost
2022 2021
£000's £000's
Financial liabilities measured at amortised cost (note 20) 3,206 2,816
Borrowings (note 21) - -
Lease liability (note 21) 1,162 1,324
Deferred consideration (note 20) 100 -
4,468 4,140
Financial assets and financial liabilities measured at fair value in the
Consolidated Balance Sheet are grouped into three Levels of a fair value
hierarchy. The three Levels are defined based on the observability of
significant inputs to the measurement, as follows:
· Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
· Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly.
· Level 3: unobservable inputs for the asset or liability.
No financial liabilities are carried at fair value.
Financial instrument risk exposure and management
The Group's operations expose it to degrees of financial risk that include
liquidity risk, credit risk and interest rate risk.
This note describes the Group's objectives, policies and process for managing
those risks and the methods used to measure them. Further quantitative
information in respect of these risks is presented in notes 16, 17, 20, and
21.
Liquidity risk
Liquidity risk is dealt with in note 23 of this financial information.
Credit risk
The Group's credit risk is primarily attributable to its cash balances and
trade receivables. The Group does not have a significant concentration of
risk, with exposure spread over a number of third parties.
All of the Group's trade and other receivables have been reviewed for
indicators of impairment. The Group suffers a very small incidence of credit
losses. However, where management views that there is a significant risk of
non-payment, a specific provision for impairment is made and recognised as a
deduction from trade receivables.
2022 2021
£000's £000's
Impairment provision 75 40
The amount of trade receivables past due but not considered to be impaired at
31 March is as follows:
2022 2021
£000's £000's
Not more than 3 months 35 65
More than 3 months but not more than 6 months 25 22
More than 6 months but not more than 1 year - 4
More than one year - -
Total 60 91
The credit risk on liquid funds is limited because the third parties are large
international banks with a credit rating of at least A.
The Group's total credit risk amounts to the total of the sum of the
receivables and cash and cash equivalents.
Interest rate risk
In previous periods, the Group had secured debt as disclosed in note 21. The
interest on this debt was linked to LIBOR and therefore there was an interest
rate risk. In the current reporting period the Group had no outstanding
borrowings thus reducing interest rate exposure to the interest received on
the cash held on deposit, which is immaterial.
23. Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash
balances to ensure the Group can meet liabilities as they fall due.
In managing liquidity risk, the main objective of the Group is therefore to
ensure that it has the ability to pay all of its liabilities as they fall due.
The Group monitors its levels of working capital as part of its regular
reviews of financial performance. The table below shows the undiscounted cash
flows on the Group's financial liabilities as at 31 March 2022 and 2021, on
the basis of their earliest possible contractual maturity. The Board has
concluded that the Group does have sufficient cash to meet liabilities as they
fall due.
Total Within Within 6-12 months 1-2 years Greater than
2 months
2-6 months
2 years
£000's
£000's £000's
£000's £000's £000's
At 31 March 2022
Trade payables 2,120 2,120 - - - -
Other payables 11 11 - - - -
Accruals 1,075 1,075 - - - -
Lease liabilities 1,273 - 89 89 177 918
Deferred consideration 100 - - 100 - -
4,579 3,206 89 189 177 918
Total Within Within 6-12 months £000's 1-2 years £000's Greater than
£000's
2 months £000's
2-6 months £000's
2 years £000's
At 31 March 2021
Trade payables 2,110 2,110 - - - -
Other payables 292 292 - - - -
Accruals 414 414 - - - -
Lease liabilities 1,466 16 89 89 177 1,095
4,282 2,832 89 89 177 1,095
24. Capital management
The Group's capital management objectives are:
· To ensure the Group's ability to continue as a going concern; and
· To provide long-term returns to shareholders.
The Group defines and monitors capital on the basis of the carrying amount of
equity plus its outstanding loan notes, less cash and cash equivalents as
presented on the face of the Consolidated Balance Sheet.
The Board of Directors monitors the level of capital as compared to the
Group's commitments and adjusts the level of capital as is determined to be
necessary by issuing new shares. The Group is not subject to any externally
imposed capital requirements.
These policies have not changed in the year. The Directors believe that they
have been able to meet their objectives in managing the capital of the Group.
The amounts managed as capital by the Group for the reporting period under
review are summarised as follows:
2022 2021
£000's £000's
Total Equity 24,802 29,915
Cash and cash equivalents 20,027 23,976
Capital 44,829 53,891
Total Equity 24,802 29,915
Financing 24,802 29,915
Capital-to-overall financing ratio 1.81 1.80
25. Lease arrangements
The Group does not have an option to purchase any of the leased assets at the
expiry of the lease periods.
The Group has leases over two main properties, with remaining lease terms
ranging from seven to nine years although there are break clauses in both
leases. A further lease associated with the acquisition of Amity does not
give rise to a right of use asset because management expect the lease's break
clause will be exercised within one year.
Lease liabilities are secured by the related underlying assets. The
undiscounted maturity analysis of lease liabilities at 31 March 2022 is as
follows:
Within one year 1-2 years 2-5 years 6-10 years Total
£000's £000's £000's £000's £000's
31 March 2022
Gross liability 177 177 532 386 1,272
Finance charges (27) (24) (47) (12) (110)
150 153 485 374 1,162
Within one year 1-2 years 2-5 years 6-10 years Total
£000's £000's £000's £000's £000's
31 March 2021
Gross liability 193 178 532 563 1,466
Finance charges (31) (28) (59) (24) (142)
162 150 473 539 1,324
The total cash outflow in respect of leases during the year was £192,000.
The interest expense in the year relating to lease liabilities was £31,000.
For details of right of use assets see note 15.
26. Disposal of subsidiaries
As referred to in note 8, on 27 November 2020 the Group disposed of its
interest in Conveyancing Alliance Holdings Limited and Conveyancing Alliance
Limited.
The net assets of the two subsidiaries at the date of disposal were as
follows:
2021
£000's
Cash consideration received 27,355
Total Consideration received 27,355
Cash disposed of (929)
Net cash inflow on disposal of discontinued operation 26,426
Net assets disposed of (other than cash):
Property, plant and equipment 95
Receivables 349
Prepayments 205
Trade and other payables (54)
Accruals (254)
Tax liabilities including VAT (928)
Attributable goodwill 6,484
Other intangibles arising on consolidation 2,503
Net assets disposed of 8,400
Costs of disposal 306
Pre-tax gain on disposal of discontinued operation 17,720
Related tax credit 425
Gain on disposal of discontinued operation 18,145
The impact of the discontinued operation on the group's activities is
disclosed in note 8.
27. Financial commitments
There are no other financial commitments.
28. Retirement benefit plans
The Group operates a defined contribution pension scheme for its employees.
The pension cost charge represents contributions payable by the Group and
amounted to £578,000 (2021: £424,000).
29. Related party transactions
Directors:
M Rowland
O Scott
E Bucknor
M Cress (appointed 3 May 2022)
A Weston (resigned 11 May 2021)
J Williams (resigned 3 May 2022)
For remuneration of Directors please see note 4.
Legal-Eye Ltd uses a training platform provided by DeepHarbour Ltd, a company
of which Martin Rowland and his wife are the Directors and in which they own
more than more than 50% of the share capital. During the year, the Group were
invoiced £15,000 (2021: £13,000) by DeepHarbour Ltd for the provision of its
training platform. The was no balance outstanding at the period end. The terms
of the provision of the training platform were in place prior to the
appointment of Martin as a Director of the Group and are considered to be at
arms-length.
30. Contingent liabilities
The Directors are not aware of any contingent liabilities within the Group or
the Company at 31 March 2022 and 2021.
31. Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
32. Events after the Balance Sheet date
There have been no reportable subsequent events between 31 March 2022 and the
date of signing this report.
33. Dividends paid
The Directors have recommended that no final dividend be payable in respect of
the year ended 31 March 2022.
At the period end, the company's Employee benefit Trust held 357,804 (2021:
357,804) shares in the Company. It waives any dividend that may be due on that
holding.
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