REG - Smoove PLC - Final Results
05/07/2023 07:00
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RNS Number : 9798E Smoove PLC 05 July 2023
Smoove plc
(The "Group", "Smoove" or the "Company")
Final Results for the 12 months to 31 March 2023
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 2023 ("the Period").
The Company continued to make significant operational advancements and traded
in line with the Board's expectations during the Period, whilst investing in
its product suite and routes to market, against a highly uncertain market and
macroeconomic backdrop.
Financial Highlights
· 7.4% increase in revenues to £20.6m (2022: £19.2m), despite
increased uncertainty in the housing market
· Gross profit of £7.8 million (2022: £7.8 million)
· Underlying EBITDA loss of £4.8 million (2022: £3.7 million
loss), reflecting investment in the core eConveyancer business and in new
product areas. The effect of previously announced cost reduction initiatives
was seen at the end of the period and will be more impactful in the current
financial year to 31 March 2024
· Underlying loss before tax of £5.6m (2022: £4.9m loss)
· Statutory loss before tax of £5.8m (2022: £5.4m loss)
· Net cash of £10.1 million (2022: £20.0 million), following the
£3.7 million return of capital via a Tender Offer in January 2023
Operational Highlights
· Release of new eConveyancer user interface and APIs deepening
integration with introducers.
· 85% of applicable cases now enabled on DigitalMove
· Significant growth in remortgage segment driven in part by the
new fees-assisted remortgage product line through Lloyds Banking Group
· Conveyancing completions in the Period grew 44% to 53,224 (2022:
36,965). This is composed of transactional completions of 18,382 (2022:
21,837) and remortgage completions of 34,842 (2022: 15,128)
· Conveyancing instructions in the Period grew 5% to 69,662 (2022:
66,394). This is composed of transactional instructions of 26,877 (2022:
35,917) and remortgage instructions of 42,785 (2022: 30,447)
· Significant contractual wins including Mojo, Legal & General,
Chimnie and Unbiased
· Pivoted the Smoove Start sales effort to focus on a
conveyancing-led offering to emphasise the fee earning potential to estate
agents
· Launched Smoove Complete, the Group's platform for self-employed
Consultant Conveyancing Lawyers ("CCL") - 11 CCLs contracted at Period end
Post Period End Highlights
· Strategic partnership with Mortgage Advice Bureau (Holdings) plc
("MAB"), significantly enhancing market reach by positioning Smoove to provide
conveyancing comparison services to MAB's 2000+ Advisers through both Smoove's
web platform and Connect APIs
· 18 CCLs are now contracted with Smoove Complete, an increase of 7
compared with the Period end
Current trading and Outlook
The current year has started positively for the Company. The remortgage
segment has been buoyant with instructions up strongly year-on-year. The
transactional segment has been stable with instructions lower year-on-year, in
line with the Board's expectations and the overall housing market, but
supplemented by various contract wins and the recent strategic partnership
with Mortgage Advice Bureau. The Board reaffirms the profit outlook announced
in its trading update of 2 May 2023, which stated that the outlook for FY24
profit is in line with the Board's expectations, but with a different
composition than previously expected. As previously announced, the Board
expects the Company's cash burn to reduce significantly during the current
financial year as a result of the initiatives it has put in place.
Whilst the Board is mindful of ongoing volatility in the macroeconomic,
housing and interest rate environment, it is nevertheless confident in the
Group's future prospects, underpinned by successes in new business
development, increasing yields in eConveyancer as well as the growth potential
of new businesses such as Smoove Complete.
Discussions with PEXA Group Limited
On 24 April 2023 the Company announced that it was in early discussions with
PEXA Group Limited ("PEXA"), regarding a possible cash offer for the entire
issued and to be issued share capital of the Company. Discussions between the
parties remain ongoing and the Company remains in an "offer period" in
accordance with the City Code on Takeovers and Mergers.
As announced on 16 June 2023, under the requirements of the Takeover Code,
PEXA is required to either announce a firm intention to make an offer for
Smoove in accordance with Rule 2.7 of the Code or to announce that it does not
intend to make an offer, in which case the announcement will be treated as a
statement to which Rule 2.8 of the Code applies. Such announcement must be
made by not later than 5.00 p.m. on 14 July 2023. This deadline can be further
extended by the Board, with the consent of the Takeover Panel in accordance
with Rule 2.6(c) of the Code.
There can be no certainty either that an offer will be made nor as to the
terms of any offer, if made. A further announcement will be made as and when
appropriate.
Jesper With-Fogstrup, Chief Executive, commented: "The financial year ended 31
March 2023 was another volatile period, presenting both opportunities and
challenges. The growth in our remortgage volume demonstrates our ability to
adapt to market conditions while the development of a new user interface and
APIs for eConveyancer provides a strong platform for future growth of that
business. Smoove Complete's early results are promising and suggest latent
demand among conveyancers for a way of working that is flexible, innovative,
and customer focused."
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.
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 / Amrit Mahbubani
Cenkos Securities plc (Rule 3 Adviser) +44 (0)20 7397 8900
Adrian Hadden / Stephen Keys / George Lawson
Walbrook PR Limited smoove@walbrookpr.com or Tel: +44 (0)20 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.
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
Smoove remains focused on delivering against its strategy during a period of
increasing turbulence in the housing market and the broader economy. The
cost-of-living crisis, rapidly rising interest rates, and inflation hitting a
41-year high in October 2022, have all led to even greater volatility in the
property market after the exceptional conditions of the pandemic. The housing
market transitioned abruptly from benign conditions during the first half of
the financial year to a steep decline in both the transactional and remortgage
markets in Q3 FY 23 as the government's mini-budget created a climate of
uncertainty. Fortunately, meaningful recovery emerged in the final quarter as
consumers began adjusting to the new normal of high interest rates.
At Smoove, we are investing in our product suite and routes to market to
prosper and gain share through the housing market cycle. We are building a
diversified business that has not only been resilient through these volatile
periods, but one that is well positioned to grow as market conditions improve.
I am pleased that the Company traded in line with the Board's expectations
during the period.
I have now been in this role for two years and have been focused on extending
our participation in the ecosystem of the home moving market, for all involved
- from the consumer, who remains a core part of our strategy, to B2B
stakeholders such as mortgage brokers and conveyancers, who can also benefit
from our services to create the best possible home moving and remortgage
experience. This financial year saw the Group delivering on its strategy, with
progress across our major business segments: eConveyancer, Smoove Start and
Smoove Complete.
Our major business segments
eConveyancer
eConveyancer performed well in difficult market conditions and remains a
leading distribution channel for conveyancing in the UK, bringing consumers
and legal professionals together via comparison services.
During the year we released our new user interface after several years of no
innovation which generated positive feedback from users. We also launched new
APIs which promise to deeply integrate our proposition into the systems of
mortgage brokers and other introducers.
Both developments are central to our relationship with introducers and aim to
drive instructions by improving conversion, removing points of friction in the
user journey, and accessing a larger pool of demand. Alongside this, we are
investing in data infrastructure to improve the effectiveness of our sales and
marketing efforts by ensuring we contact the right customer with the best
offer at the right time.
DigitalMove continues to provide a value-added onboarding experience within
eConveyancer, with more than 110,000 total cumulative cases at the period end
and 85% penetration within applicable cases.
As part of our navigation of the everchanging market, we have positioned
eConveyancer to capture a significant share of remortgage work, to offset some
of the decline in transactional cases. In particular, our relationship with
Lloyds Banking Group was extended late in FY22 to include a new fees-assisted
remortgage product that contributed meaningfully to volumes in FY23.
We added several new eConveyancer relationships during the year including
Mojo, Legal & General, Chimnie and Unbiased. These relationships further
establish our position and brand in the market.
Smoove Start
Smoove Start launched in late August 2022 after a well-received limited
product pilot. After encouraging levels of branch acquisitions initially,
momentum for Smoove Start slowed significantly as market conditions became
more challenging following the mini-budget. Estate agents were less receptive
to spending on Smoove Start's software offering for ID verification,
anti-money laundering, and upfront information. As a result, we pivoted the
sales effort to focus on a conveyancing-led offering to emphasise the fee
earning potential to estate agents from referral of cases into eConveyancer.
Despite this change, our ambition remains unchanged - to open up the estate
agency channel as a source of instructions for eConveyancer enabling Smoove to
target a previously unaddressed market.
Smoove Complete
Smoove Complete is a platform for self-employed Consultant Conveyancing
Lawyers ("CCLs"). In exchange for a share of the conveyancing fee income,
Smoove provides CCLs with a suite of services including onboarding and
post-completion services, as well as support infrastructure including
technology, regulatory oversight and professional indemnity insurance. Smoove
Complete targets a large addressable market of conveyancers and benefits from
several favourable industry trends. We see this as an exciting pillar of our
offering with great potential for scale and have already seen strong early
feedback from the ecosystem of CCLs, introducers and consumers. The first CCL
joined Smoove Complete on 25 October 2022 and at the period end 11 CCLs were
contracted with the platform.
Overall, we are encouraged by the progress of our business segments as we
strive to innovate and improve the industry. This year has shown that the
Company is quickly able to adapt and pivot to changing demands, solve complex
problems and create opportunity for our customers and partners.
Investing in the business
Over the last two years we have invested significantly to both reverse a
period of under investment and also to broaden the business by cultivating
opportunities within new introducer channels and market segments; as we are
doing with Smoove Complete. This is positioning the Group to increase market
share and shareholder value as we participate in more of the home moving
market.
On 9 January 2023, Smoove completed a tender offer to repurchase 9,129,236
shares representing 14.0 per cent. of the issued ordinary share capital. This
represented a return of capital to shareholders of £3.65 million at a tender
price of 40p. The take up of the offer was 73% of the 12,500,000 shares and
£5 million that had been authorised by shareholder resolution. I would like
to take this opportunity to thank shareholders for their continued support of
our evolving offering.
In August 2022, we also announced a cost reduction initiative, and at the end
of the financial year the Board approved significant further cost reductions.
These reductions aim to ensure that the Group's cost base is appropriate for
turbulent market conditions, whilst retaining sufficient investment to execute
the Group's strategy and capitalise on the sizable available growth
opportunities.
Our team
We have a great set of colleagues at Smoove and are encouraged by our levels
of employee engagement. We appreciate that our Group benefits from employees
with a mix of profiles, backgrounds and experiences. This includes colleagues
with a long tenure at Smoove, deep conveyancing and mortgage broking
experience, and specialist technical skills, including product, software
engineering and data.
Our colleagues are both resilient and committed. They have contributed to
the Company's success through the challenges of the pandemic and the many
fluctuations in the market that we continue to face. I would like to thank the
team for their hard work again this year.
Outlook
This year has been another volatile period, presenting both challenges and
opportunities. The growth in our remortgage volume demonstrates our ability to
adapt to market conditions. The development of a new user interface and APIs
for eConveyancer provide a strong platform for future growth of that business.
Smoove Complete's early results are promising and suggest latent demand among
conveyancers for a way of working that is flexible, innovative, and customer-
focused.
As I mentioned, the fourth quarter saw encouraging signs in the market, which
suggest that the house buying and remortgage sectors may normalise following a
period of turbulence. The year ending 31 March 2024 has started positively
for the Company. The remortgage segment has been buoyant with instructions up
strongly year-on-year. The transactional segment has been stable with
instructions lower year-on-year, in line with the Board's expectations and the
overall housing market but supplemented by various contract wins and the
recent strategic partnership with Mortgage Advice Bureau. While we cannot
predict what is on the horizon, we have proven our resilience, and are well
placed to grow and profit from the home moving sector, now involving more of
the ecosystem, from estate agents to consultant conveyancing lawyers.
Jesper With-Fogstrup
Chief Executive Officer
Smoove plc
Financial review
Summary
Revenue £20.6 million (2022: £19.2 million).
Gross margin £7.8 million (2022: £7.8 million).
Underlying(1) EBITDA £(4.8) million (2022: £(3.7) million)
Underlying(1) PBT £(5.6) million (2022: £(4.9) million).
Reported PBT £(5.8) million (2022: £(5.4) million).
(1) See table below for detail on the calculation of non-IFRS profit measures.
Results
Revenue increased by 7% year-on-year against a background of increased
uncertainty in the housing market and the broader macroeconomic
environment. This revenue growth was accompanied by a significant change
in mix driven by divergent trends in transactional and remortgage volumes.
As shown on the table of key performance indicators below, transactional
instructions and completions declined during the period by 25% and 16%
year-on-year, respectively. In contrast, remortgage instructions and
completions increased by 40% and 130%, respectively. Whilst we are pleased
that we were able to capture demand within the remortgage segment, the lower
yields of remortgage work translated into a reduction in gross margin as a
percentage of revenue from 40% in the previous period to 38% in the current
period. The trend in transactional volumes was heavily influenced by
background market conditions. In the first half of the period year-on-year
comparatives were distorted by the expiry of the stamp duty holidays which
stimulated demand in the prior year. In the second half both transactional
and remortgage volumes contracted severely during Q3 in response to the
uncertainty associated with government's mini-budget of September 23(rd)
before recovering significantly during Q4.
Underlying PBT loss widened from £4.9 million to £5.6 million as a result of
increased administrative expenses and stable gross profit. At the
announcement of annual results on 22 August 2022, the Group announced a series
of cost reduction initiatives, which were followed by a further cost reduction
initiative implemented following the period end. The initiatives are
beginning to bear fruit and will reduce the level of cost in the next
financial period but occurred too late to significantly benefit current year
administrative expenses.
The Group launched Smoove Start, its product for estate agents, in August
2022. After an encouraging initial level of branch signups, branch
acquisition slowed following the uncertainty of the mini-budget. As a
result, the product was refocused to emphasise the fee earning potential for
estate agents through referral of cases to eConveyancer, the Group's core
business. The change of emphasis will involve lower support costs for the
product and underscores the Board's intention to align product investment with
market conditions.
Smoove Complete, the Group's platform for self-employed conveyancers, launched
in late October 2022 and had 11 Consultant Conveyancing Lawyers ("CCLs")
contracted at the end of the period, which was in line with management
expectations. Because the contracts were signed late in the period, Smoove
Complete did not materially contribute to gross profit during the year.
Smoove Complete operates within Amity Law Limited, the firm of conveyancers
that the Group acquired in October 2021.
The Group's capitalised web development expenditure was £746,000 during the
period, an increase from the £316,000 reported in the prior period, but below
the level of prior years. The year-on-year increase arises primarily
because development work met the criteria for capitalisation to a greater
extent. Key focuses for development during the period were the new
eConveyancer user interface and APIs, both of which are fundamental to the
Group's relationship with introducers. Development expenditure not capitalised
in the period was £989,000 (2021: £848,000).
The results for the period include exceptional administrative expenses of
£222,000 (2022: nil). This is composed £176,000 of advisory and legal
fees associated with the share buyback and £46,000 resulting from the early
termination of an office lease.
The results for the prior period include an impairment of £503,000 to the
carrying value of the Group's investment in Homeowners Alliance Limited. In
the consolidated accounts the investment is accounted for as an associate
under the equity method of accounting. No assets were impaired in the current
period. The impairment review is described in note 12.
Key performance indicators
Our non-financial measures for the financial years ended 31 March 2022 and
2023, respectively are shown below:
Non-Financial Metrics 2023 2022
Instructions
Transactional 26,877 35,917
Remortgage 42,785 30,477
Total 69,662 66,394
Completions
Transactional 18,382 21,837
Remortgage 34,842 15,128
Total 53,224 36,965
Cash and debt
The cash balance at year end stood at £10.1 million (2022: 20.0 million). The
reduction in cash included the £3.65 million return of capital to
shareholders through a repurchase of shares executed via a tender offer that
closed on 9 January 2023. The Board believe that the tender offer achieved a
balance between an immediate return to shareholders and investment to deliver
future returns.
Shares and dividends
No dividend was paid in the year. The Board is not recommending a final
dividend be paid. As noted above, a return of capital was made during the
year via the tender offer for repurchase of shares.
No new shares were issued in the year. The Group repurchased 9,129,236
shares in the tender offer at a price of 40 pence per share. Of this total
7,854,726 shares were cancelled and 1,274,510 shares were transferred to the
Smoove plc Employee Benefit Trust at a price of 0.4 pence to facilitate the
Long Term Incentive Plan ("LTIP") adopted on 17 January 2023.
Non-IFRS profit measures
In addition to the IFRS measures of profit the Board believe 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. The calculation of EBITDA has been modified compared with
prior years to exclude share-based payment expense and the share of profit
from associates, both of which are significant non-cash items. The cash cost
of the exercise of share options is reported in the Statement of Changes in
Equity and was nil in 2023 (2022: £52,000).
Calculation of Non-IFRS profit measures 2023 2022
£000's £000's
(Loss) before taxation (PBT) (5,784) (5,365)
Impairment of investment - 503
Exceptional administrative expenses 222 -
Underlying (Loss) before taxation (Underlying PBT) (5,562) (4,862)
Finance income (217) (25)
Finance costs 28 102
Amortisation 582 683
Depreciation 298 329
Share-based payment expense 110 108
Share of profit from associate (58) (31)
Underlying EBITDA (4,819) (3,696)
Consolidated Income Statement
for the year ended 31 March 2023
Notes 2023 2022
£000's £000's
Revenue 1 20,595 19,168
Cost of sales (12,777) (11,407)
Gross profit 7,818 7,761
Exceptional administrative expenses 3 (222) -
Other administrative expenses (13,627) (12,577)
Administrative expenses (13,849) (12,577)
Operating loss before exceptional expenses (5,809) (4,816)
Exceptional administrative expenses 3 (222) -
Operating loss 2 (6,031) (4,816)
Finance income 5 217 25
Finance costs 6 (28) (102)
Share of results of associate 12 58 31
Impairment of associate 12 - (503)
Loss before tax (5,784) (5,365)
Tax credit 7 33 248
Loss for the financial year attributable to the Group's equity shareholders (5,751) (5,117)
Loss per share from operations
Basic loss per share (£) 8 (0.0910) (0.0789)
Diluted loss per share (£) 8 (0.0910) (0.0789)
The notes to these financial statements below form an integral part of these
financial statements.
Consolidated statement of comprehensive income
for the year ended 31 March 2023
2023 2022
£000's £000's
Loss for the financial year (5,751) (5,117)
Total comprehensive loss for the financial year attributable to the owners of (5,751) (5,117)
the parent
The notes to these financial statements below form an integral part of these
financial statements.
Consolidated Balance Sheet
as at 31 March 2023
Notes 2023 2022
£000's £000's
Assets
Non-current assets
Intangible assets 13 1,596 1,432
Goodwill 10 4,745 4,745
Investment in associates 12 213 155
Property, plant and equipment 14 1,067 1,572
Long-term receivables 15 50 100
Prepayments 15 73 94
7,744 8,098
Current assets
Trade and other receivables 15 1,704 1,545
Current tax receivable 7 295 291
Cash and cash equivalents 16 10,131 20,027
12,130 21,863
Total assets 19,874 29,961
Equity and liabilities
Capital and reserves attributable to the Group's equity shareholders
Share capital 17 228 259
EBT reserve (808) (298)
Share premium 4,609 4,609
Capital redemption reserve 144 113
Share-based payment reserve 584 474
Retained earnings 10,752 19,645
Total equity 15,509 24,802
Non-current liabilities
Lease liabilities 24 633 1,012
Deferred taxation 7 65 79
698 1,091
Current liabilities
Trade and other payables 19 3,551 3,918
Lease liabilities 24 116 150
3,667 4,068
Total liabilities 4,365 5,159
Total equity and liabilities 19,874 29,961
The notes to these financial statements below form an integral part of these
financial statements.
The financial statements were approved by the Board of Directors on 4 July
2023 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 2023
Share EBT Share premium Capital redemption reserve Share-based payments reserve Retained earnings Total
capital
reserve
Equity
Treasury Reserve
£000's £000's £000's £000's
£000's £000's £000's
£000s
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
Balance at 1 April 2022 - 259 (298) 4,609 113 474 19,645 24,802
Loss for the year - - - - - - (5,751) (5,751)
Total comprehensive loss - - - - - - (5,751) (5,751)
Purchase of shares by EBT 510 - (510) - - - - -
Share-based payments - - - - - 110 - 110
Repurchase of shares (3,652) - - - - - - (3,652)
Cancellation of shares 3,142 (31) - - 31 - (3,142) -
Total transactions with owners - (31) (510) - 31 110 (3,142) (3,542)
Balance at 31 March 2023 - 228 (808) 4,609 144 584 10,752 15,509
The notes to these financial statements below form an integral part of these
financial statements.
Consolidated statement of cash flows
for the year ended 31 March 2023
Notes 2023 2022
£000's £000's
Cash flow from operating activities
Loss before tax (5,784) (5,365)
Finance income 5 (217) (25)
Finance costs 6 28 102
Loss on disposal of plant and equipment 24 63
Share of profit from associate 12 (58) (31)
Impairment of investment in associate - 503
Amortisation 13 582 683
Depreciation 14 298 329
Disposal of right of use asset (15) -
Share-based payments 18 110 108
Tax received / (paid) 16 (23)
(5,016) (3,656)
Changes in working capital
(Increase) / Decrease in trade and other receivables (139) 14
(Decrease) / Increase in trade and other payables (268) 413
Cash used in operating activities (5,423) (3,229)
Cash flow from investing activities
Purchase of intangible software assets 13 (746) (316)
Purchase of property, plant and equipment 14 (76) (97)
Acquisition of subsidiary (net of cash acquired) 11 (100) (135)
Interest received 5 217 25
Net cash used in investing activities (705) (523)
Cash flow from financing activities
Lease payments 24 (166) (192)
Repayment of loan to associate 50 100
Shares traded by EBT - (105)
Share buyback (3,652) -
Net cash used in financing activities (3,768) (197)
Net decrease in cash and cash equivalents (9,896) (3,949)
Cash and cash equivalents at beginning of financial year 20,027 23,976
Cash and cash equivalents at end of financial year 10,131 20,027
The notes to these financial statements below form an integral part of these
financial statements.
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 ongoing 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 2023.
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 2023. Statutory
accounts for the year ended 31 March 2023 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 experienced significant volatility during the year.
Transactional and remortgage volumes contracted sharply during Q3 in response
to the government's mini-budget but recovered significantly in Q4. The Group
had cash balances of £10.1 million and no borrowings at the end of the
period. The Group returned £3.65 million in capital to shareholders during
the period via a tender offer for the repurchase of purchase of shares. The
Board considered a range of forecast scenarios as part its deliberations
regarding the tender offer.
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.
As referred to in note 30, Subsequent Events, at the date of signing of the
financial statements, the Group was in discussions with PEXA Group Ltd.
("PEXA"), which could lead to a cash offer for the entire share capital of the
company. There can be no certainty that the discussions will lead to a
successful offer for the company. In the event that the discussions do lead
to an offer that is approved by shareholders, the Directors have concluded
that it is highly likely that PEXA would manage the Group in a manner that is
consistent with continuing as a going concern. This conclusion is supported
by the underlying rationale of the potential transaction and consideration of
publicly available information regarding PEXA.
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 2023. 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.
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 administrative expenses
Exceptional administrative 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 to 33% 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 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 10.
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 on an asset other than goodwill 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 assesses 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 21 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 asset 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 profit or 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 for awards issued in prior years and either a
Monte Carlo simulation or Binomial model for awards granted in 2023.
All share-based remuneration is ultimately recognised as an expense in profit
or loss with a corresponding credit to share-based payment reserve. The
expense is allocated over the vesting period. 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
New standards and amendments to standards or interpretations which were
effective for the first time this year and applicable to the Group are as
follows:
New/Revised International Financial Reporting Standards Effective date: UK adopted Impact on Group
annual periods beginning on or after:
IFRS 3 Reference to the Conceptual Framework Amendments to IFRS 3 Business 1 January 2022 Yes Immaterial
Combinations
IAS 16 Property, plant and equipment: proceeds before intended use 1 January 2022 Yes Immaterial
Amendments to IAS 16 Property, Plant and Equipment
IAS 37 Onerous contracts - cost of fulfilling a contract 1 January 2022 Yes Immaterial
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent
Assets
IFRS 1, IFRS 9, IAS 41 Annual Improvements to IFRS Standards 2018-2020 1 January 2022 Yes Immaterial
Amendments to IFRS 1, IFRS 9 and IAS 41
1 January 2022
Yes
Immaterial
IAS 16
Property, plant and equipment: proceeds before intended use
Amendments to IAS 16 Property, Plant and Equipment
1 January 2022
Yes
Immaterial
IAS 37
Onerous contracts - cost of fulfilling a contract
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent
Assets
1 January 2022
Yes
Immaterial
IFRS 1, IFRS 9, IAS 41
Annual Improvements to IFRS Standards 2018-2020
Amendments to IFRS 1, IFRS 9 and IAS 41
1 January 2022
Yes
Immaterial
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 Disclosure of accounting policies 1 January 2023 No Immaterial
Amendments to IAS 1
IAS 8 Definition of Accounting Estimates 1 January 2023 Yes Immaterial
Amendments to IAS 8
IAS 12 Deferred tax relating to assets and liabilities arising from a single 1 January 2023 Yes Immaterial
transaction
Amendments to IAS 12
IAS 1 Classification of Liabilities as Current or Non-current 1 January 2024 No Immaterial
Amendments to IAS 1
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 13.
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
In the year ended 31 March 2022 an impairment charge of £503,000 related to
the Group's investment in Homeowners Alliance was recognised. 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. An impairment review for the year ended
March 2023 indicated that no further impairment of the investment is required.
The impairment review methodology was similar to the review conducted in the
previous year but used a higher discount rate of 13.6%. Further detail is
provided in note 12.
Intangible assets arising from business combination
Judgement has been applied concerning the identification of intangible assets
arising from the acquisition of Amity Law Limited in the year ended 31 March
2022. 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:
2023 2022
£000's £000's
Customer 1 2,477 4,079
Customer 2 4,100 2,030
2. Operating loss
Operating loss is stated after charging: 2023 2022
£000's £000's
Fees payable to the Group's auditors for the audit of the annual financial 90 60
statements
Fees payable to the Group's auditors and its associates for other services to
the Group:
- Audit of the accounts of subsidiaries 73 65
- Non-audit services - 10
Amortisation 582 683
Depreciation 298 329
Share-based payments expense 110 108
Exceptional administrative expenses 222 -
Development expenditure not capitalised 989 848
3. Exceptional administrative expenses
2023 2022
£000's £000's
Loss on disposal of right of use asset 46 -
Share buyback costs 176 -
222 -
During the year the Group surrendered the lease on premises which had been
accounted for under IFRS 16 - Leases. The disposal of the right of use asset
and the corresponding lease liability, which had been recognised over the full
life of the lease, has been classified as exceptional due to the uncommon
nature of the event.
During the year the Group repurchased 9,129,236 shares accounting for 14% of
the issued share capital through a tender offer that closed on 9 January
2023. The costs in relation to the Tender Offer (share buyback costs) have
been classified as exceptional due to their non-recurring nature.
4. Directors and employees
The aggregate payroll costs of the employees, including both management and
Executive Directors, were as follows:
2023 2022
£000's £000's
Staff costs
Wages and salaries 7,317 6,538
Social security costs 929 655
Pension costs 830 578
9,076 7,771
Average monthly number of persons employed by the Group during the year was as
follows:
2023 2022
Number Number
By activity:
Production 58 60
Distribution 33 34
Administrative 38 30
Management 11 10
140 134
2023 2022
£000's £000's
Remuneration of Directors
Emoluments for qualifying services 844 833
Pension contributions 31 35
Social security costs 86 84
961 952
The emoluments shown above (and in the following table for the remuneration of
key management) include amounts for share-based payments charges but not for
the actual gain on exercise. During the period no share options were exercised
and therefore no gain was realised (2022: £86,000). 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.
2023 2022
£000's £000's
Remuneration of key management
Emoluments for qualifying services 679 671
Pension contributions 26 30
Social security costs 76 74
781 775
Payments of pensions contributions have been made on behalf of Directors.
5. Finance income
2023 2022
£000's £000's
Bank interest 150 25
Other interest and finance income 67 -
217 25
6. Finance costs
2023 2022
£000's £000's
Lease interest 28 31
Other interest and finance costs - 71
28 102
7. Taxation
Analysis of credit in year 2023 2022
£000's £000's
Current tax
United Kingdom
UK corporation tax adjustment in respect of prior year (20) (41)
Deferred tax
United Kingdom
Origination and reversal of temporary differences (13) (207)
Corporation tax credit (33) (248)
The differences are explained as follows:
2023 2022
£000's £000's
(Loss) before tax (5,784) (5,365)
UK corporation tax rate 19% 19%
Expected tax (credit) (1,099) (1,019)
Adjustments relating to prior year (20) (41)
Movement in deferred tax not recognised 1,002 617
Remeasurement of deferred tax for changes in tax rates 47 -
Adjustment for non-deductible expenses
- Expenses not deductible for tax purposes 77 143
- fixed asset temporary differences (40) 52
Income tax (credit) (33) (248)
Deferred tax
2023 2022
£000's £000's
Deferred tax liabilities at applicable rate for the period of 19%:
Opening balance at 1 April 79 280
- Property, plant and equipment and capitalised development spend temporary (69) (21)
differences
- Deferred tax recognised on acquisition of Legal-Eye (14) (26)
- Deferred tax on share options 26 32
- Acquisition of subsidiary - 6
- Utilisation of tax losses 43 (192)
Deferred tax liabilities - closing balance at 31 March 65 79
2023 2022
£000's £000's
Deferred tax liabilities at period end:
Property, plant and equipment and capitalised development spend temporary 149 218
differences
Deferred tax recognised on acquisition of Legal-Eye 65 79
Deferred tax on share options - (26)
Tax losses (149) (192)
Deferred tax liabilities - closing balance at 31 March 65 79
A potential deferred tax asset of £2,400,000 (2022: £916,000) 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 2023
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. Loss per share
Basic loss per share is calculated by dividing the loss attributable to
Ordinary Shareholders by the weighted average number of ordinary shares
outstanding during the year.
Basic loss per share
2023 2022
£ £
Total loss per share (0.0910) (0.0789)
Total diluted loss per share (0.0910) (0.0789)
The losses used in the calculation of basic loss per share were as follows:
2023 2022
£000's £000's
Loss used in the calculation of total basic and diluted loss per share (5,751) (5,117)
The weighted average number of ordinary shares used in all of the calculations
of basic loss per share were as follows:
Number of shares 2023 2022
Number Number
Weighted average number of ordinary shares for the purposes of basic loss per 63,186,426 64,871,276
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 loss
per share, is as follows:
Number of shares 2023 2022
Number Number
Dilutive (potential dilutive) effect of share options 3,712,985 4,149,182
Weighted average number of ordinary shares for the purposes of diluted 66,899,411 69,020,458
earnings per share
As the Group reported a loss (2022: loss), outstanding share options do not
further dilute the loss per share in any period presented so the diluted loss
per share is the same as the loss per share (2022: loss per share).
9. 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
2023 2022
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% 100%
Hello Smoove Limited Dormant Ordinary England & Wales 100% 100%
The registered office of each of the subsidiaries (except for Amity Law
Limited) is the same as the registered office of the parent company: Masters
Court, Church Road, Thame, OX9 3FA. The registered office of Amity Law Limited
is The Loweswater Suite, Second Floor Paragon House, Paragon Business Park,
Chorley New Road, Horwich, Bolton, Lancashire, United Kingdom, BL6 6HG.
10. Goodwill
2023 2022
£000's £000's
Opening value at 1 April 4,745 4,524
Purchase of Amity - 221
Closing value at 31 March 4,745 4,745
Goodwill split by CGU is as follows:
2023 2022
£000's £000's
Core 3,518 3,518
Legal-Eye 1,227 1,227
4,745 4,745
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. 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
£14.9m. 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. Its recoverable amount exceeds its holding value
by £500,000. A 1% increase or decrease in the discount rate used would give a
range in the excess of recoverable amount over holding value of £363,000 to
£663,000. The recoverable amount would be equal to the holding amount if the
discount rate rose by 4.7% or the growth rate used to extrapolate cash flows
fell by 6.5%.
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.
A post-tax discount rate of 13.60% was used for mature revenue streams within
Core and for Legal-Eye, which reflects 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.
11. 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. Smoove Complete, the Group's
proposition for self-employed conveyancers has been launched with the Amity
Law entity.
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 10) 221
The deferred consideration was not contingent and was paid in October
2022.
Acquisition costs of £44,000 arose as a result of the transaction and are
included in administrative expenses in the year ended 31 March 2022.
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.
12. Investment in associates
2023 2022
£'000 £'000
Opening value at 1 April 155 627
Share of profit for the year 58 31
Impairment of associate - (503)
Closing value at 31 March 213 155
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.
During the year ended 31 March 2022, an impairment review of the investment in
Homeowners Alliance Ltd. gave 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%. An impairment review for
the year ended 31 March 2023 relied on a substantially similar methodology as
the prior year but used a higher discount rate of 13.60% to reflect an
increase in risk free interest rates in the economy. This review concluded
that no additional impairment was required.
13. Intangible assets
Capitalised development expenditure Customer and introducer relationships Brands Total
£000's £000's £000's £000's
Cost
At 1 April 2021 4,627 1,070 226 5,923
Additions 316 - - 316
At 31 March 2022 4,943 1,070 226 6,239
Additions 746 - - 746
At 31 March 2023 5,689 1,070 226 6,985
Accumulated amortisation
At 1 April 2021 3,353 634 137 4,124
Charge 551 109 23 683
At 31 March 2022 743 160 4,807
3,904
Charge 451 109 22 582
At 31 March 2023 4,355 852 182 5,389
Net book value
At 1 April 2021 1,274 436 89 1,799
At 31 March 2022 1,039 327 66 1,432
At 31 March 2023 1,334 218 44 1,596
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 2 years.
14. 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 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
Additions - 48 57 19 124
Disposals (615) (531) - - (1,146)
At 31 March 2023 209 1,106 489 148 1,952
Accumulated depreciation
At 1 April 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
Charge 25 165 84 24 298
Disposals (591) (224) - - (815)
At 31 March 2023 65 361 333 126 885
Net book value
At 1 April 2021 211 1,326 257 37 1,831
At 31 March 2022 193 1,169 183 27 1,572
At 31 March 2023 144 745 156 22 1,067
Depreciation is recognised within administrative expenses.
15. Trade and other receivables
2023 2022
£'000 £'000
Current assets
Trade receivables 756 977
Other receivables 163 87
Prepayments and accrued income 785 481
1,704 1,545
Non-current assets
Prepayments 73 94
Long-term receivables (loans to associate) 50 100
123 194
The Directors consider the carrying value of trade and other receivables is
approximate to its fair value.
Included in prepayments and accrued income are contract assets of £358,000
(2022: Nil).
Details of the Group's exposure to credit risk is given in note 21.
16. Cash and cash equivalents
2023 2022
£'000 £'000
Cash at bank (GBP) 10,131 20,027
At March 2023 and 2022 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.
17. 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.
2023 2022
No £000's No £000's
Ordinary shares of £0.004 each 57,016,550 228 64,871,276 259
57,016,550 228 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.
2023 2022
Number Number
Shares issued and fully paid
Beginning of the year 64,871,276 64,871,276
Cancelled (7,854,726) -
Shares issued and fully paid 57,016,550 64,871,276
During the year the Group repurchased 9,129,236 shares representing 14% of the
issued ordinary share capital. The repurchase was achieved by way of a
tender offer with a tender price of 40 pence that closed on 9 January 2023. Of
the repurchased shares, 7,854,726 were cancelled and 1,274,510 were acquired
by the Employee Benefit Trust ("EBT") at a price of 0.4 pence to enable awards
under the Joint Share Ownership Plan ("JSOP").
At the period end, the EBT held 1,632,314 (2022: 357,804) shares in the
Company with a market value of £518,260 (2022: £254,041). The EBT
shareholding consists of 1,274,510 shares associated with the JSOP and 357,804
shares, which are unallocated and support the administration of the Company's
share option plans.
18. Share-based payments
The Group provides share-based awards to employees, which are equity settled.
These have been issued under the Share option scheme rules adopted in 2014 and
amended in 2020 and under the new scheme rules adopted in January 2023.
Options granted prior to 2020 vested in three equal tranches, three, four and
five years after date of grant or in one tranche three years after date of
grant and were not subject to performance conditions. Awards granted after
2020 were subject to performance conditions measured three years from the date
of grant.
During the year the Board adopted new share option scheme rules applying to
future option grants and a Long Term Incentive Plan ("LTIP"). The Group made
awards of 3,400,000 ordinary shares "Performance Shares" under the LTIP to its
two Executive Directors and other senior employees. The vesting of all
Performance Share awards is conditional on meeting both a performance
condition relating to gross profit and a share price performance condition,
both of which are measured three years from the award date. The gross profit
condition specifies a target gross profit for the year ended 31 March 2026 of
£13,574,000. The definition of gross profit used by the condition
corresponds with that used in the Group's accounts. Provided that the gross
profit condition is met, the share price performance condition specifies that
shares will vest on a straight-line basis if the measured share price is
between 55 pence (33% vesting) and 80 pence (100% vesting). If either the
gross profit condition is not met or the measured share price is below 55
pence, then the awards will lapse. The awards are subject to a post-vesting
holding restriction by which the holder may not dispose or deal in more than
50% of the vested shares until the fourth anniversary of the date of the
award.
2,125,490 of the LTIP awards were granted as options and 1,274,510 of the
awards were granted as awards under the Joint Share Ownership Plan ("JSOP").
The JSOP shares were purchased by Group as part of the buyback tender offer
that completed on 9 January 2023 and were subsequently transferred from
treasury to the employee benefit trust to be granted as JSOP awards. The
performance conditions of the JSOP shares are identical to those of the
options granted under the LTIP.
In addition to the LTIP awards, the Group awarded 1,318,937 additional options
during the year to employees other than the executive directors, which were
subject to various performance conditions measured three years from the date
of grant.
All awards granted by the Group will expire 10 years from the date of grant if
they remain unexercised. The awards are forfeited if the employee leaves the
Group before the options vest.
Options granted in prior years were valued using the Black-Scholes
option-pricing model. Awards granted in 2023 were valued using either a
Monte Carlo simulation or Binomial model. Valuation assumptions are shown in
the table below:
2023 2022
Share price at date of grant £0.408-£0.470 £0.785
Contractual life 10 years 10 years
Expected volatility 45%-50% 55.517%
Expected dividend rate 0% 0%
Risk free rate 3.25%-3.35% 0.2825%
The expected volatility was calculated, with reference to the Company's share
price, based on a period commensurate with the expected life of the options,
estimated between 3 - 6.5 years.
The following table shows awards issued which were outstanding as at 31 March
2023:
Date of grant Exercise Share price at Awards in issue
price (£)
date of grant (£) as 31 March 2023
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 116,505
21 December 2016 0.7675 0.7675 64,828
9 August 2018 1.3325 1.3325 55,000
14 July 2020 0.5390 0.5390 750,000
19 February 2021 0.8600 0.8600 675,000
18 January 2023 0.4080 0.4080 818,937
18 January 2023 0.0040 0.4080 3,400,000
10 February 2023 0.0040 0.4750 90,000
13 February 2023 0.4700 0.4700 410,000
The Group recognised total expenses of £110,000 (2022: £108,000) 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 £0.17 per
share (2022: £0.29).
A reconciliation of option movements over the year to 31 March 2023 is shown
below:
As at 31 March 2023 As at 31 March 2022
Number of Weighted average exercise price Number of Weighted average exercise price
Awards
Awards
£ £
Outstanding at 1 April 3,656,960 0.79 4,200,360 0.78
Granted 4,718,937 0.11 500,000 0.79
Forfeited prior to vesting (1,875,639) 0.88 (622,343) 0.86
Exercised - - (421,057) 0.57
Outstanding at 31 March 6,500,258 0.27 3,656,960 0.79
Of the awards outstanding at the year end, 337,986 were exercisable (2022:
883,560).
The weighted average remaining contractual life of the outstanding options was
9.0 years (2022: 7.5 years).
No options were exercised during the year. The weighted average share price at
the date of exercise of those options exercised in the prior year was £0.82
per share.
19. Trade and other payables
2023 2022
£000's £000's
Trade payables 1,976 2,120
PAYE and social security 281 316
VAT 288 296
Other creditors 3 11
Accruals and deferred income 1,003 1,075
Deferred consideration - 100
3,551 3,918
The Directors consider the carrying value of trade and other payables is
approximate to its fair value.
20. Borrowings
Reconciliation of liabilities arising from financing activities
2023 2022
Leases Total debt Leases Total debt
£'000
£'000
£'000 £'000
Balance at 1 April 1,162 1,162 1,324 1,324
Loan or lease repayments (166) (166) (192) (192)
Finance charges 28 28 30 30
Additions 48 48 - -
Disposals (323) (323) - -
Balance at 31 March 749 749 1,162 1,162
21. 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
2023 2022
£000's £000's
Trade receivables net of provision for credit losses (note 15) 756 977
Loans and other receivables (note 15) 213 187
Cash and cash equivalents (note 16) 10,131 20,027
11,100 21,191
All of the above financial assets carrying values are approximate to their
fair values, as at 31 March 2023 and 2022.
Financial liabilities
Measured at amortised cost
2023 2022
£000's £000's
Financial liabilities measured at amortised cost (note 19) 2,842 3,206
Lease liability (note 20) 749 1,162
Deferred consideration (note 19) - 100
3,591 4,468
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 15, 16, 19, and
20.
Liquidity risk
Liquidity risk is dealt with in note 22 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.
2023 2022
£000's £000's
Impairment provision 48 75
The amount of trade receivables past due but not considered to be impaired at
31 March is as follows:
2023 2022
£000's £000's
Not more than 3 months 25 35
More than 3 months but not more than 6 months 32 25
More than 6 months but not more than 1 year - -
More than one year - -
Total 57 60
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 20. 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.
22. 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 2023 and 2022, 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 2023
Trade payables 1,976 1,976 - - - -
Other payables 3 3 - - - -
Accruals 863 863 - - - -
Lease liabilities 813 5 62 66 133 547
Deferred consideration - - - - - -
3,655 2,847 62 66 133 547
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 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
23. 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:
2023 2022
£000's £000's
Total Equity 15,509 24,802
Cash and cash equivalents 10,131 20,027
Capital 25,640 44,829
Total Equity 15,509 24,802
Financing 15,509 24,802
Capital-to-overall financing ratio 1.65 1.81
24. 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 properties, with remaining lease terms ranging
from three to seven years with a break clause for the longer lease.
Lease liabilities are secured by the related underlying assets. The
undiscounted maturity analysis of lease liabilities at 31 March 2023 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 2023
Gross liability 133 133 354 193 813
Finance charges (17) (15) (27) (5) (64)
116 118 327 188 749
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
The total cash outflow in respect of leases during the year was £166,000
(2022: £192,000).
The interest expense in the year relating to lease liabilities was £28,000
(2022: £31,000).
For details of right of use assets see note 14.
25. Financial commitments
There are no other financial commitments.
26. 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 £830,000 (2022: £578,000).
27. Related party transactions
Directors:
M Rowland
O Scott
E Bucknor
M Cress
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 £17,000 (2022: £15,000) by DeepHarbour Ltd for the provision of its
training platform. The balance outstanding at the period end was £4,000
(2022: Nil). 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.
28. Contingent liabilities
The Directors are not aware of any contingent liabilities within the Group or
the Company at 31 March 2023 and 2022.
29. Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
30. Events after the Balance Sheet date
On 24 April 2023 the Group publicly confirmed that it was in discussions with
PEXA Group Ltd, which may lead to a cash offer for the entire share capital of
the Group. There can be no certainty that the discussions will lead to a
successful offer for the Group. As at the date of signing of these
financial statements, the discussions remain ongoing.
31. Dividends paid
The Directors have recommended that no final dividend be payable in respect of
the year ended 31 March 2023.
At the period end, the Company's Employee Benefit Trust held 1,632,314 (2022:
357,804) shares in the Company. It waives any dividend that may be due on that
holding.
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