Access Intelligence Regulatory News (ACC)

RNS Number : 7013U

Access Intelligence PLC

11 April 2016

 

11 April 2016

 

ACCESS INTELLIGENCE PLC

("Access Intelligence", "the Company" or "the Group")

 

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2015

 

Access Intelligence Plc (AIM: ACC), a leading supplier of Software-as-a-Service (SaaS) solutions for reputation and operational risk management, announces its unaudited results for the year ended 30 November 2015.

 

Highlights

· Strategic M&A activity has strengthened the Group's portfolio of core products and services

· Group revenue from continuing operations at year end up by 89% to £8.1m from £4.3m

· Recurring revenue from continuing operations up by 99% to £7.5m from £3.7m

· Strategic shift in focus with increased emphasis on the development of the reputation and risk management divisions of the business

· Cash balance of £1,523,000 (2014: £1,144,000)

· Total technology spend of £3,448,000 (2014: £3,940,000) of which £1,526,000 (2014: £1,577,000) was capitalised

 

Michael Jackson, Non-Executive Chairman, commented:

 

"I am pleased to announce the results for FY2015 in what has been a pivotal year for Access Intelligence plc. Our strategic M&A activities have refocussed the Group firmly in the Reputation Management market, whilst divesting a non-core asset in software maintenance and hosting. The EBITDA loss reflects the substantial reorganisation costs associated with Group M&A and research and development. Post year end, the Group also divested of a non-core asset Due North Ltd for £4.5 million."

 

For further information:

Access Intelligence plc	0843 659 2940
Michael Jackson (Non-Executive Chairman)
Joanna Arnold (CEO) Daryl Paton (CFO)
Allenby Capital Limited (Nominated Adviser & Broker)	020 3328 5656
Simon Clements / James Thomas

 

 

Forward looking statements

 

This announcement contains forward-looking statements.

 

These statements appear in a number of places in this announcement and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, revenue, financial condition, liquidity, prospects, growth, strategies, new products, the level of product launches and the markets in which we operate.

 

Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors.

 

These factors include any adverse change in regulations, unforeseen operational or technical problems, the nature of the competition that we will encounter, wider economic conditions including economic downturns and changes in financial and equity markets. We undertake no obligation publicly to update or revise any forward-looking statements, except as may be required by law.

 

 

Chairman's Statement  and Strategic Report

 

I am pleased to announce our results for the year ended 30 November 2015.

 

2015 has been a pivotal year for Access Intelligence, during which we restructured our portfolio around our reputation and risk management software interests though a series of acquisitions and divestments.

 

During the year we made a substantial acquisition of the UK operations of Cision UK Ltd and Vocus UK Ltd. This acquisition, combined with our existing reputation business significantly strengthens our position in the reputation management space.

 

Our strategic focus on reputation and risk management software also prompted the divestment of the software maintenance and hosting business Willow Starcom Ltd and, more recently in 2016, the e-procurement solution provider Due North Ltd.

 

Outlook

 

The current global political, economic and business climate continues to reinforce the importance of effective reputation and risk management, and, moreover, the interdependence of the two.

 

Organisations in both regulated and non-regulated environments recognise the importance of bringing highly flexible, domain-driven software and responsive business analytics to bear on building and safeguarding reputation through both responsible, compliant operations and effective communication. It is therefore essential that we continue to invest in innovative research and development to unify the position of our products in the market and to make our software synonymous with customer success.

 

We are excited about the acquisition and development of the reputation management business. The media and communications environment has been subject to dramatic change in recent years, and as such our software is increasingly relevant, with customers seeking to influence multiple stakeholders in support of tangible operational success. We expect our strengthened product suite to drive greater market share as we build on the momentum post- acquisition.

 

I would like to take this opportunity on behalf of the Board to thank you for your continued support of Access Intelligence.

 

Strategic Report

 

Results

 

The 2015 financial year has been a year of significant opportunity for the Group to restructure its operations and focus its commitment on the SaaS business model within the reputation and risk management sectors. This has included the strategic acquisition of a substantial new business in June 2015 to complement the Group's existing reputation software platform and the divestment of a non-core IT support services business in April 2015. Prior to the year-end, the Board also made the decision to divest a further non-core e-procurement business, with the sale being completed in February 2016.

 

All companies that form part of the Group's continuing operations saw their revenue increase year on year, with the exception of A.I. Talent Limited. Notable revenue increases were delivered by AITrackRecord Limited (34%) and Access Intelligence Media & Communications Limited (19%), with total revenue from existing continuing operations increasing by 11% to £4,768,000 (2014: £4,291,000).

 

In addition, the acquisition contributed revenue of £3,351,000 for the six month period that it formed part of the Group, resulting in Group revenue from continuing operations increasing by 89% to £8,119,000 (2014: £4,291,000). Reported revenue for the acquisition is not considered by the Board to be fully reflective of the business acquired due to the requirements of acquisition accounting (see Note 8 of the consolidated accounts for further detail on the estimation of the fair value of deferred revenue on acquisition).

 

Recurring revenue from existing continuing operations increased by 14% to £4,297,000 (2014: £3,756,000), with the acquisition contributing a further £3,189,000. As a result, total recurring revenue from continuing operations increased significantly to £7,486,000 for the year (2014: £3,756,000) and accounted for 92% (2014: 88%) of total revenue.

 

At 30 November 2015, total deferred revenue from continuing operations stood at £4,643,000 (2014: £1,932,000) reflecting again the impact of the acquisition in the year which added £2,794,000 to deferred revenue at year end. Total Group deferred revenue at year end stood at £5,264,000 (2014: £3,246,000).

 

Gross margin from existing continuing operations has remained broadly consistent at 77% (2014: 78%). However, overall gross profit from continuing operations has fallen to 60%, primarily as a result of the acquisition which has higher direct costs of sales than the existing continuing operations and short-term transition and migration costs.

 

The Group has undertaken extensive and ongoing restructuring during the year to reduce costs with the full impact of this not being fully reflected in the 2015 financial performance. In addition, the acquisition had immediate synergistic benefits as the Group consolidated London offices and removed duplicated roles although it is notable that the benefit of these synergies is also not fully reflected in the 2015 financial performance. As a result of the restructuring and refocusing of the business during the year, earnings before interest, tax, depreciation and amortisation (EBITDA) pre- impairment charges from existing continuing operations declined to a loss of £1,359,000 (2014: loss £696,000). The acquisition contributed a further EBITDA loss for the period that it was part of the group of £379,000, resulting in a total EBITDA loss for the year of £1,738,000 (2014: loss £696,000).

 

Operating loss from continuing operations before impairments was £2,523,000 (2014: loss £565,000), with a loss of £1,686,000 from existing continuing operations and a loss of £837,000 from the acquisition. In arriving at the operating loss the Group has charged £1,922,000 (2014: £2,363,000) for research and development expenditure, £716,000 (2014: £270,000) for depreciation and amortisation, £153,000 (2014: Nil) in acquisition costs, £70,000 (2014: Nil) loss on disposal of fixed assets and £278,000 (2014: Nil) in restructuring costs. Development costs relating to the risk platform moved to normalised operational levels mid-year.

 

2016 will see continued restructuring of the business and investment across the Company's brands with the full benefits expected to come through towards the end of the current financial year and into 2017.

 

Loss per share

 

The basic loss per share from continuing operations was 1.55p (2014: loss 0.68p). Basic earnings per share from discontinued operations was 0.27p (2014: 0.22p).

 

Cash

 

Cash at the year-end stood at £1,523,000 (2014: £1,144,000) whilst net debt increased to £2,593,000 (2014: £157,000) during the year, primarily as a result of new loan notes issued to finance the strategic acquisition.

 

Dividend

 

As a result of the significant investment the Company has made in the strategic product innovation and sales development, the directors do not propose to pay a dividend for 2015.

 

OPERATIONS

 

Software as a Service

 

PR, Public Affairs and Reputation Management

 

The landscape for Vuelio radically changed in 2015 when we acquired the UK assets of communications software company Cision, prompting a rebrand and refocus. The deal also immediately increased our customer base in this space from 300 to more than 2,000. Where we previously served primarily the public sector and FTSE 100 companies, we now have customers of all sizes in numerous sectors, in particular, marketing, PR and digital agencies.

 

We have reorganised our sales and marketing operations to support a dual focus on growth and strategic services. The addition of trade and assets of Cision UK Ltd and Vocus UK Ltd brings immediate scale and bolsters our growth opportunity. To underpin this, we have built a talented team to continue delivering solutions relevant to this evolving market. This team will target high-value accounts, particularly through up selling and cross selling, in key public sector and high-regulation sectors.

 

Access Intelligence has rapidly developed Vuelio's communications management software platform to address the needs of this expanded market. These changes are also aimed at supporting a swift migration of clients from Cision and Vocus software, which is currently underway, providing a platform for profitable growth through further development.

 

Incident & Crisis Management

 

AIControlPoint saw a 100% client retention in 2015 but limited revenue growth due to the downturn in the oil and gas market. We have also helped ensure future growth by diversifying our target markets and focusing on several new industries. Among our wins were new clients in the transport sector, including the Manchester Airport Group, as well as building a pipeline in the aviation, travel and local government space.

 

Training, Competence and Employee Performance Management

 

Tightening FCA regulation has brought a focus on senior managers and individual accountability in the financial services sector. This provided us with an opportunity to augment AITrackRecord in 2015, empowering customers in the face of these changes. Our improved Training and Competence system unifies competence, performance, accountability and compliance tracking and, crucially, provides evidence of adherence to the new regime. The updated platform centralises all pertinent information, even digitising legacy paper-based processes. This simplifies compliance and significantly reduces cost.

 

Leading FTSE 100 wealth management firm St. James's Place was an early adopter of the new platform. Additional customers are targeted for switchover throughout 2016.

 

Strategy and Market

 

The M&A activity that the Group has undergone over the past 12 months has created a seismic shift in focus towards Reputation Management. We now have an exceptional portfolio of products and services for stakeholder engagement and reputation management throughout the UK and Europe. As customers seek to drive a unified, consistent engagement strategy across multiple stakeholders, they require a comprehensive software portfolio integrated across their communications teams. Highly regulated industries continue to champion the embedding of best practices in good corporate governance, risk management and effective compliance ensuring that our product suite is well positioned to gain continued traction in both reputation and risk management.

 

SaaS based solutions continue to provide companies with a scalable, resilient and value-driven alternative to the costly maintenance of in-house on premise solutions. Access Intelligence continues to capitalise on the wider adoption of SaaS solutions and services to provide tangible alternatives to customers, as well as long term revenue visibility and stability for investors.

 

2016 represents a challenging year of customer migrations and further operational restructuring to ensure the optimal platform for growth. Our focus over the coming year will be maximising the opportunities secured from our recent acquisition and embedding our market share in an ever-shifting competitive landscape. As the sole provider of a multi- faceted stakeholder engagement platform we are well positioned to offer a truly diversified offering.

 

Disposal of Willow Starcom

 

Following the Group's decision to focus on reputation and risk management SaaS based solutions, Access Intelligence divested Willow Starcom Limited on 21 April 2015. Willow Starcom delivered infrastructure support and cloud based IT services but was considered non-core to the Group as it looked to scale its SaaS offering. The net cash inflow received for the company amounted to £1,141,000 and resulted in a profit on disposal of the company of £900,000.

 

Disposal of Due North Limited

 

In line with Access Intelligence's strategy to focus on SaaS solutions in reputation and risk management, on 3 February 2016, the Group disposed of Due North Limited for a cash consideration of £4,500,000. The decision to divest Due North was a result of the management team's commitment to dispose of non-core businesses and provide the Group with greater financial flexibility and value for our shareholders

 

Directors and Staff

 

2015 has demonstrated that our core belief of building a Group based on the expertise, experience and integrity of our industry-leading team is delivering significant value. I would like to thank all our staff for their hard work and commitment, which has enabled us to recognise considerable progress during 2015 and we expect to benefit from this in the coming years. As a Group we have delivered growth, and I look forward to our continued operational successes in 2016.

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

Year ended 30 November 2015

 

Note Continuing Operations 2015 £'000			Discontinued Operations 2015 £'000	Continuing Operations 2014 £'000	Discontinued Operations 2014 £'000
Revenue Cost of sales	3	8,119 (3,277)	2,737 (881)	4,291 (949)	4,255 (1,419)
Gross profit		4,842	1,856	3,342	2,836
Administrative expenses		(7,339)	(2,046)	(3,871)	(2,292)
Share-based payment		(26)	-	(36)	-
Operating (loss)/profit before impairment		(2,523)	(190)	(565) 544	544
Profit on disposal of subsidiary undertaking	6	-	900	-	-
Impairment of intangibles	11	(1,899)	-	(798)	-
Operating (loss)/profit	5	(4,422)	710	(1,363)	544
Financial income		1	-	1	-
Financial expense		(266)	-	(115)	-
(Loss)/profit before taxation		(4,687)	710	(1,477)	544
Taxation credit/(charge)	9	763	(29)	(121)	(28)
(Loss)/profit for the year		(3,924)	681	(1,598)	516
Profit for the year from discontinued operations	6	681	-	516	-
Loss for the year		(3,243)	(1,082)
Other comprehensive income		-	-
Total comprehensive income for the period attributable to the owners of the parent company		(3,243)	(1,082)
Earnings per share
Basic (loss)/earnings per share	10	(1.55)p	0.27p	(0.68)p	0.22p
Diluted (loss)/earnings per share	10	(1.55)p	0.25p	(0.68)p	0.22p

 

 

 

Consolidated Statement of Financial Position

At 30 November 2015

 

		Note	2015£'000	2014£'000
	Non-current assets
	Property, plant and equipment		273	523
	Intangible assets		7,423	8,406
	Deferred tax assets		865	419
	Total non-current assets		8,561	9,348
	Current assets
	Inventories		-	142
	Trade and other receivables		3,628	2,613
	Current tax receivables		101	237
	Cash and cash equivalents		1,523	1,144
	Assets classified as held for sale	7	3,869	-
	Total current assets		9,121	4,136
	Total assets		17,682	13,484
	Current liabilities
	Trade and other payables		1,225	1,526
	Accruals and deferred income		6,398	4,050
	Interest bearing loans and borrowings	12	1,277	-
	Liabilities classified as held for sale	7	1,455	-
	Total current liabilities		10,355	5,576
	Non-current liabilities
	Trade and other payables		391	60
	Interest bearing loans and borrowings	12	2,839	1,301
	Deferred tax liabilities		336	956
	Total non-current liabilities		3,566	2,317
	Total liabilities		13,921	7,893
	Net assets		3,761	5,591
	Equity
	Share capital		1,535	1,324
	Treasury shares		(148)	(148)
	Share premium account		1,271	224
	Capital redemption reserve		191	191
	Share option reserve		364	338
	Equity reserve		255	126
	Retained earnings		293	3,536
	Total equity attributable to the equity holders of the parent company		3,761	5,591

 

 

 

Consolidated Statement of Changes in Equity

Year ended 30 November 2015

 

	Share capital £'000	Treasury shares £'000	Share premium account £'000	Capital redemption reserve £'000	Share option reserve £'000	Equity reserve £'000	Retained earnings £'000	Total £'000
Group
At 1 December 2013	1,324	(148)	224	191	331	126	4,618	6,666
Total comprehensive loss for the year	-	-	-	-	-	-	(1,082)	(1,082)
Transactions with owners
Share-based payments - current year	-	-	-	-	36	-	-	36
Tax reversal relating to share-based payment	-	-	-	-	(29)	-	-	(29)
At 30 November 2014	1,324	(148)	224	191	338	126	3,536	5,591
At 1 December 2014	1,324	(148)	224	191	338	126	3,536	5,591
Total comprehensive loss for the year	-	-	-	-	-	-	(3,243)	(3,243)
Equity component of convertible loan notes net of deferred tax	-	-	-	-	-	129	-	129
Transactions with owners
Issue of share capital	211	-	1,047	-	-	-	-	1,258
Share-based payments - current year	-	-	-	-	26	-	-	26
Tax reversal relating to share-based payment	-	-	-	-	-	-	-	-
At 30 November 2015	1,535	(148)	1,271	191	364	255	293	3,761

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flow

Year ended 30 November 2015

	Note	2015 £'000	2014 £'000
Loss for the year		(3,243)	(1,082)
Adjusted for:
Taxation	9	(734)	149
Depreciation and amortisation	11	948	409
Impairment of intangible assets	11	1,899	798
Share option charge		26	36
Financial income		(1)	(1)
Financial expense		266	115
Loss on disposal of property, plant and equipment		70	2
Profit on sale of Willow Starcom Ltd	6	(900)	-
Operating cash (outflow)/inflow before changes in working capital		(1,669)	426
(Increase) in trade and other receivables		(496)	(590)
Decrease in inventories		8	26
Increase in trade and other payables		344	1,192
Net cash (outflow)/inflow from operations before taxation		(1,813)	1,054
Taxation received		237	356
Net cash (outflow)/inflow from operations		(1,576)	1,410
Cash flows from investing
Interest received		1	1
Acquisition of property, plant and equipment and software licences	11	(66)	(140)
Cost of software development	11	(1,541)	(1,573)
Acquisition of trade and assets	8	(1,340)	-
Disposal of Willow Starcom	6	1,487	-
less: cash and cash equivalents disposed of	6	(346)	-
Move to held for sale of Due North	7	(207)	-
Net cash outflow from investing		(2,012)	(1,712)
Cash flows from financing activities
Interest paid		(192)	(75)
Issue of shares and share option exercise proceeds		1,200	-
Exercise of share options		59	-
Issue of loan notes	12	2,900	-
Net cash inflow/(outflow) from financing		3,967	(75)
Net increase/(decrease) in cash and cash equivalents		379	(377)
Opening cash and cash equivalents		1,144	1,521
Closing cash and cash equivalents		1,523	1,144

 

 

 

Notes to the financial statements

 

1. Basis of preparation

 

This announcement has been prepared in accordance with the Company's accounting policies, which in turn are in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an on-going process of review and endorsement by the European Commission. The accounting policies comply with each IFRS that is mandatory for accounting periods ended 30 November 2015.

 

The results are unaudited, however we do not expect there to be any difference between the results presented and those within the annual report.

 

The financial information set out above does not constitute the Group's statutory accounts, but is derived from those accounts. The statutory accounts for the year ended 30 November 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Group's annual general meeting.

2. Basis of consolidation

 

The Group results comprise the financial statements of Access Intelligence plc and its subsidiaries as at 30th November 2015. They are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000).

 

3. Revenue

 

The Group's revenue is primarily derived from the rendering of services with the value of sales of goods being not significant in relation to total Group revenue.

 

The Group's revenue was split into the following territories:

 

	Continuing Operations 2015 £'000	Discontinued Operations 2015 £'000	Continuing Operations 2014 £'000	Discontinued Operations 2014 £'000
United Kingdom	7,269	2,737	3,790	4,255
European Union	464	-	202	-
Rest of the world	386	-	299	-
Total	8,119	2,737	4,291	4,255

 

All non-current assets are held in the United Kingdom as they were in 2014. No customer represents 10% or more of revenue as was the case in 2014.

 

4. Segment reporting

 

Segment information is presented in respect of the Group's operating segments which are based upon the Group's management and internal business reporting.

 

Inter-segment pricing is determined on an arm's length basis.

 

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly head office expenses.

 

Segment non-current asset additions show the amounts relating to property, plant and equipment and intangible assets including goodwill. All non-current assets are located in the UK.

 

 

Operating segments

 

The Group operating segments have been decided upon according to their revenue model and product or service offering being the information provided to the chief operating decision maker, the non-executive Chairman. The Reputation and Governance, Risk & Compliance segments derive their revenues from software licence sales and support and training revenues. As a result of the Group's divestments and acquisitions during the year the segments reported have changed to reflect the Board's focus. The segments are:

 

• Reputation

• Governance, Risk & Compliance

• Discontinued - Disposals & Held for Sale

• Head Office

 

The segment information for the year ended 30 November 2015 is as follows:

 

.2914...................	Reputation	Governance, Risk & Compliance	Head office	Consolidation adjustment	Continuing Operations	Discontinued - Disposals	Discontinued - Held for Sale	Consolidation adjustment	Discontinued Operations	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
External revenue	6,119	2,000	-	-	8,119	944	1,793	-	2,737	10,856
Internal revenue	-	-	-	-	-	-	-	-	-	-
Operating (loss)/profit	(1,716)	(1,157)	(2,470)	2,820	(2,523)	(366)	176	-	(190)	(2,712)
Profit on sale of subsidiary	-	-	-	-	-	-	-	900	900	900
Impairment	-	(1,899)	-	-	(1,899)	-	-	-	-	(1,899)
Financial income	-	-	1	-	1	-	-	-	-	1
Financial expense	-	-	(266)	-	(266)	-	-	-	-	(266)
Taxation	341	319	82	21	763	-	(29)	-	(29)	734
(Loss)/profit after taxation	(1,375)	(2,737)	(2,653)	2,841	(3,924)	(366)	147	900	681	(3,245)
Reportable segment assets	13,393	870	10,853	(10,158)	14,958	-	4,121	-	4,121	19,080
Reportable segment liabilities	10,518	5,233	7,801	(12,105)	11,447	-	1,652	-	1,652	13,100
Other information: Additions to property, plant and equipment	12	1	10	-	23	24	20	-	44	67
Depreciation and amortisation	577	147	102	(110)	716	52	182	-	234	950

 

The segment information for the year ended 30 November 2014 (restated), is as follows:

 

.2914...................	Reputation	Governance, Risk & Compliance	Head office	Consolidation adjustment	Continuing Operations	Discontinued - Disposals	Discontinued - Held for Sale	Consolidation adjustment	Discontinued Operations	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
External revenue	2,325	1,966	-	-	4,291	2,288	1,967	-	4,255	8,546
Internal revenue	-	-	-	-	-	368	-	(368)	-	-
Operating (loss)/profit	953	(237)	(1,272)	(10)	(566)	103	442	-	545	(21)
Impairment	-	(798)	-	-	(798)	-	-	-	-	(798)
Financial income	1	-	-	-	1	-	-	-	-	1
Financial expense	-	-	(115)	-	(115)	-	-	-	-	(115)
Taxation	(12)	106	(147)	(68)	(121)	(6)	(22)	-	(28)	(149)
(Loss)/profit after taxation	942	(929)	(1,534)	(78)	(1,599)	97	420	-	517	(1,082)
Reportable segment assets	5,677	2,457	9,996	(10,654)	7,476	2,101	3,907	-	6,008	13,484
Reportable segment liabilities	1,878	4,024	7,534	(8,481)	4,955	1,353	1,585	-	2,938	7,893
Other information:
Additions to property, plant and equipment	5	2	18	-	25	101	14	-	115	140
Depreciation and amortisation	79	32	270	(115)	266	93	50	-	143	409

 

 

5. Operating loss

 

Operating loss is stated after charging:

 

	2015 £'000	2014 £'000
Depreciation of property, plant and equipment	257	233
Amortisation of development costs	378	80
Amortisation of brand values	60	60
Amortisation of software licences	44	36
Amortisation of database	138	-
Amortisation of customer list	70	-
Loss on disposal of property, plant and equipment	70	2
Impairment of intangible assets	1,899	798
Loss on foreign currency translation	-	12
Exceptional costs (see below)	278	-
Operating lease charges - land and buildings	574	420
Auditor's remuneration (see below)	85	54
Share based payments	26	36
Research and development and other technical expenditure (income statement) (a further £1,526k (2014: £1,577k) was capitalised)	1,922	2,363
Inventories recognised as expense	-	514
Increase in provision for receivables	46	19

 

Exceptional costs in the year ended 30 November 2015 were incurred as a result of restructuring and non-recurring one off termination of employment costs for staff and directors, along with associated legal fees. The exceptional costs are made up of the following:

 

	2015 £'000	2014 £'000
Compensation for loss of office - directors	88	-
Compensation and notice payments - all staff	152	-
Legal costs incurred on compensation of loss of office for directors	38	-
	278	-

 

6. Discontinued operations

 

In April 2015 the Group sold its entire IT support segment (see note 4: Discontinued - Disposals); the segment was not a discontinued operation or classified as held for sale at 30 November 2014 and the comparative consolidated statement of comprehensive income has been re-presented to show the discontinued operation separately from continuing operations. Management committed to a plan to sell this segment early in 2015 following a strategic decision to focus on Software as a Service lines and move away from non-core activities.

 

Due North Limited is also presented as a disposal group held for sale following the commitment of the Group's management, in June 2015, to a plan to sell the entity.

 

	2015 £'000	2014 £'000
Results of discontinued operation
Revenue	2,737	4,255
Expenses	(2,927)	(3,711)
Results from operating activities	(190)	544
Tax	(29)	(28)
Results from operating activities, net of tax	(219)	516
Gain on sale of discontinued operation	900	-
Tax on gain on sale of discontinued operation	-	-
Profit for the year	681	516
Basic earnings per share	0.27p	0.22p
Diluted earnings per share	0.25p	0.22p

 

The profit from discontinued operations of £681,000 is entirely attributable to the owners of the Company.

 

	2015 £'000	2014 £'000
Cash flows from (used in) discontinued operation
Net cash used in operating activities	398	760
Net cash from investing activities	(444)	(876)
Net cash from financing activities	-	-
Net cash flows for the year	(46)	(116)

 

The following is a breakdown of the effects of the disposal of the IT support segment on the financial position of the

Group:

 

	2015 £'000
Goodwill	800
Property, plant and equipment	166
Inventories	134
Trade and other receivables	776
Cash and cash equivalents	346
Deferred tax liabilities	(20)
Trade and other payables	(1,740)
Net assets and liabilities	462
Consideration received, satisfied in cash	1,487
Cash and cash equivalents disposed of	346

 

7. Disposal group held for sale

 

Due North Limited is presented as a disposal group held for sale following the commitment of the Group's management, in June 2015, to a plan to sell the entity. Efforts to sell the disposal group had therefore commenced before the year end with the sale being completed on 3 February 2016 (see note 30).

 

At 30 November 2015 the disposal group comprised the following assets and liabilities:

 

Assets classified as held for sale

 

	2015 £'000
Goodwill	412
Development costs	2,661
Property, plant and equipment	73
Trade and other receivables	516
Cash and cash equivalents	207
	3,869

 

Liabilities classified as held for sale

 

	2015 £'000
Trade and other payables	1,022
Deferred tax liabilities	433
	1,455

 

8. Acquisition of business combinations

 

On 23 June 2015, the group entered into an asset purchase agreement to acquire certain trade and assets of Cision UK Limited and Vocus UK Limited for an aggregate cash consideration of £1,340,000. The trade and assets were acquired through a newly incorporated subsidiary company, AIMediaData Limited, as a single economic unit which will continue to be operated on this basis

 

The Board believe the acquisition will provide the Group with a developed media contacts database which will strengthen the long term ability of Group subsidiary Access Intelligence Media & Communications Limited to compete within the IMS market in the UK.

 

In the six months to 30 November 2015, AIMediaData Limited contributed revenue of £3,351,000 and a loss of £929,000. The Directors do not consider it practicable to report either the revenue or the loss of AIMediaData as though the acquisition date had been as of the beginning of the reporting period. The reason that this is considered impracticable is that only certain trade and assets of Cision UK Limited and Vocus UK Limited were acquired and the Group has made significant changes to the operations of the acquired business during its period of ownership. As a result, both the revenue profile and the cost base of the business are fundamentally different to pre-acquisition results of the Cision UK and Vocus UK businesses.

 

Consideration transferred

 

The following table summarises the acquisition date fair value of each major class of consideration transferred.

 

	£'000
Cash	1,340
Total consideration transferred	1,340

 

Acquisition related costs

 

The Group incurred acquisition related costs of £153,000 on legal fees and due diligence costs. These costs have been included in 'administrative expenses'.

 

Identifiable assets acquired and liabilities assumed

 

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.

 

	£'000
Property, plant and equipment	254
Intangible assets	1,835
Trade and other receivables	1,452
Cash and cash equivalents	-
Trade and other payables	(877)
Accruals and deferred income	(3,367)
Total identifiable net liabilities acquired	(703)

 

The intangible assets identified above primarily comprise the fair values estimated for the media contacts database and customer list acquired.

 

A cost based approach was used to value the media contacts database, determining the likely cost of building an equivalent media contacts database from new. The useful life of the database has been estimated at 3 years.

 

The customer list was valued by assessing a discounted cash flow for the acquired customer list, based on customer attrition rates and using a discount factor of 12%. This discount factor is in line with value-in-use calculations performed for intangibles testing (see Note 15). The useful life of the customer list has been estimated at 5 years.

 

Trade and other receivables comprise gross contractual amounts due of £1,536,000, of which £84,000 was expected to be uncollectable at the date of acquisition.

 

Trade and other payables include an amount of £3,074,000 which relates to the fair value of deferred revenue acquired. The fair value has been estimated based on the value of deferred revenue relating to contracts transferred, discounted in accordance with IFRS.

 

Goodwill

 

Goodwill recognised on this acquisition represents the difference between the consideration paid and the fair value of the net liabilities acquired. It includes the value inherent in the assembled workforce acquired. The goodwill arising has been recognised as follows:

 

	£'000
Consideration transferred	1,340
Fair value of identifiable net liabilities	703
Total identifiable net liabilities acquired	2,043

 

9. Taxation

 

	2015 £'000	2014 £'000
Current income taxes credit: UK corporation tax credit for the year	(101)	(237)
Adjustment in respect of prior year	-	(19)
Total current income tax credit	(101)	(256)
Deferred tax (note 23) Impact of change in tax rate	27	-
De-recognition of deferred tax assets	80	363
Origination and reversal of temporary differences	(740)	42
Total deferred tax	(633)	405
Total tax (credit)/expense	(734)	149
Attributable to:
Continuing operations	(763)	121
Discontinued operations	29	28
Total	(734)	149

 

As shown above the tax assessed on the loss on ordinary activities for the year is higher than (2014: higher than) the standard rate of corporation tax in the UK of 20.3% (2014: 21.7%).

 

The differences are explained as follows:

 

Factors affecting tax credit	2015 £'000	2014 £'000
Loss on ordinary activities before tax	(3,977)	(933)
Loss on ordinary activities by effective rate of tax of 20.3% (2014: 21.7%) of 20.3% (2014: 21.7%)	(809)	(202)
Expenses not deductible for tax purposes	274	142
Adjustment in respect of prior year	-	(19)
De-recognition of deferred tax assets	80	363
Additional R&D claim CTA 2009	(279)	(135)
Total tax (credit)/expense	(734)	149

 

Factors that may affect future tax expenses

The main rate of corporation tax was reduced to 20% from 1 April 2015 and is due to be further reduced by a further 1% from April 2017 and by a further 1% from April 2020. All deferred tax assets and liabilities are assumed to cease or be utilised at 19%.

 

10. Earnings per share

 

The calculation of earnings per share is based upon the total Group loss after taxation of £3,243,000 (2014: loss of £1,082,000) divided by the weighted average number of ordinary shares in issue during the year which was 252,593,681 (2014: 235,110,347).

 

In 2015 and 2014 potential ordinary shares from the share option schemes and convertible loan notes have an anti- dilutive effect due to the Group being in a loss position. This includes the convertible loan notes issued during the year. As a result, dilutive loss per share is disclosed as the same value as basic loss per share.

 

This has been computed as follows:

 

	Continuing Operations	Discontinued Operations	Total	Continuing Operations	Discontinued Operations	Total
Numerator	2015 £'000	2015 £'000	2015 £'000	2014 £'000	2014 £'000	2014 £'000
(Loss)/Profit for the year and earnings used in basic EPS	(3,924)	681	(3,243)	(1,598)	516	(1,082)
Earnings used in diluted EPS	(3,924)	681	(3,243)	(1,598)	516	(1,082)
Denominator	'000	'000	'000	'000	'000	'000
Weighted average number of shares used in basic EPS	252,594	252,594	252,594	235,110	235,110	235,110
Effects of:
Dilutive effect of options	N /A	14,821	14,821	N/A	420	420
Dilutive effect of loan note conversion	N/A	N/A	N/A	N/A	N/A	N/A
Weighted average number of shares used in diluted EPS	252,594	267,415	267,415	235,110	235,530	235,530
Basic (Loss)/earnings per share (pence)	(1.55)	0.27	(1.28)	(0.68)	0.22	(0.46)
Diluted loss per share for the year (pence)	(1.55)	0.25	(1.30)	(0.68)	0.22	(0.46)

 

On 21 September 2011 29,666,667 shares were returned to the Company and were held in Treasury at the year end. Once in treasury they were removed from the earnings per share calculation.

 

The total number of options and warrants granted at 30 November 2015 of 33,958,676 (2014: 38,436,281) would generate £984,626 (2014: £1,176,190) in cash if exercised. At 30 November 2015, 545,000 (2014: 34,936.281) were priced above the mid-market closing price of 5.13p per share (2014: 2.31p) per share and 33,413,676 (2014: 3,500,000) were below.

 

At the 30 November 2015 9,258,676 (2014: 6,947,387) staff options were eligible for exercising at an average price of 3.2p (2014: 4.2p). Also eligible for exercising are the 21,300,000 warrants priced at 2.75p per share held by M Jackson, D Lowe and Elderstreet VCT plc consequent to their investment in October 2008.

 

The below table shows the amount of outstanding convertible loan notes at 30 November 2015 and the amount of shares they would convert into if the holder chooses the conversion option:

 

Holder	Loan Notes £'000	Convert into shares '000	Date of conversion
Elderstreet VCT	500	12,500	31 December 2016
Unicorn AIM VCT	750	18,750	31 December 2016
Elderstreet VCT	200	6,667	4 December 2019
Hawk Investments	300	10,000	4 December 2019
Kestrel Partners LLP	400	13,333	4 December 2019
Octopus AIM VCT	200	6,667	4 December 2019
Total	2,350	67,917

 

11. Intangible fixed assets

 

	Brand value £'000	Goodwill £'000	Development costs £'000	Software licences £'000	Database £'000	Customer list £'000	Total £'000
Cost
At 1 December 2013	1,369	12,005	3,119	160	-	-	16,653
Capitalised during the year	-	-	1,573	-	-	-	1,573
At 30 November 2014	1,369	12,005	4,692	160	-	-	8,226
At 1 December 2014	1,369	12,005	4,692	160	-	-	18,226
Capitalised during the year	-	-	1,533	68	-	-	1,601
Additions through business combination	-	2,043	-	8	997	830	3,878
Disposals	-	(1,430)	-	-	-	-	(1,430)
Held for sale	-	(1,481)	(2,846)	-	-	-	(4,327)
At 30 November 2015	1,369	11,137	3,379	236	997	830	17,948
Amortisation and impairment
At 1 December 2013	349	7,978	472	47	-	-	8,846
Charge for the year	60	-	80	36	-	-	176
Impairment in year	-	798	-	-	-	-	798
At 30 November 2014	409	8,776	552	83	-	-	9,820
At 1 December 2015	409	8,776	552	83	-	-	9,820
Charge for the year	60	-	378	44	138	70	690
Disposals	-	(630)	-	-	-	-	(630)
Held for sale	-	(1,069)	(185)	-	-	-	(1,254)
Impairment in year	-	-	1,899	-	-	-	1,899
At 30 November 2015	469	7,077	2,644	127	138	70	10,525
Net Book Value
At 30 November 2015	900	4,060	735	109	859	760	7,423
At 30 November 2014 960		3,229	4,140	77	-	-	8,406

 

For the purpose of impairment testing, goodwill is allocated by entity, which represent the Group's CGUs and the lowest level within the Group at which the goodwill is monitored.

 

The carrying value of capitalised development costs which are not yet being amortised and goodwill, allocated to each CGU are:

 

2015	Development Costs £'000	Goodwill £'000
Continuing operations:
Access Intelligence plc	-	89
Access Intelligence Media & Communications Ltd	-	1,928
AI Media Data Ltd.	78	2,043
AITrackRecord Ltd	-	-
AI Talent Ltd	-	-
	78	4,060

 

2014	Development Costs £'000	Goodwill £'000
Continuing operations:
Access Intelligence plc	30	89
Access Intelligence Media & Communications Ltd	425	1,928
AITrackRecord Ltd	1,242	-
AI Talent Ltd	44	-
	1,741	2,017
Discontinued operations:
Willow Starcom Ltd	-	800
Due North Ltd	2,399	414
	4,140	3,231

 

At the balance sheet date, impairment tests were undertaken by comparing the carrying values of goodwill, capitalised development costs and other assets with the recoverable amount of the CGU to which the goodwill, capitalised development costs and other assets have been allocated. The recoverable amount of the CGU is based on value-in- use calculations. These calculations use pre-tax cash flow projections covering a five-year period based on financial budgets and forecasts as approved by the Board with a terminal value for goodwill impairment assessment and covering a ten-year period based on financial budgets and forecasts as approved by the Board with no terminal value for other intangible assets. Ten years were selected as this represents the estimated lifetime of the software platforms.

 

The key assumptions used for value-in-use calculations are those regarding revenue growth rates and discount rates over the forecast period. Growth rates are based on past experience, the anticipated impact of the CGUs significant investment in research and development, and expectations of future changes in the market. The value in use calculations use information from approved budgets in the first three years, followed by applying specific growth rates for which the key assumptions in respect of annual revenue growth rates range between 0% and 7% from year 4 onwards.

 

The discount rate used for all companies was 12%, based on an assessment of the Group's cost of capital and on comparison with other listed technology companies. The terminal growth rate used for the purposes of goodwill impairment assessments was 2.5%. The Board considered that no impairment to goodwill is necessary based on the value-in-use reviews of Access Intelligence Media & Communications Limited and AIMediaData Limited.

 

After review of the value-in-use of AITrackRecord Limited, the Board considers that the recent history of losses in that company and net cash outflows forecast in the immediate future mean that a provision should be recognised representing the full carrying value of development costs capitalised by that company, being £1,692,000. After review of the value-in-use of AITalent Limited, the Board considers that the recent history of losses in that company and net cash outflows forecast in the immediate future mean that a provision should be recognised representing the full carrying value of development costs capitalised by that company being £30,000.

 

The value-in-use calculations for Access Intelligence Media & Communications Limited and AIMediaData Limited significantly exceeded the carrying values of goodwill and intangibles relating to those companies.

 

Sensitivity analysis has been performed on reasonably possible changes in assumptions upon which recoverable amounts have been estimated. Based on the sensitivity analysis, a reduction of 77% in the EBITDA delivered by Access Intelligence Media & Communications Limited would result in the carrying value of its goodwill being to equal its recoverable amount. For AIMediaData Limited, a 31% reduction in the revenue growth rate would result in the carrying value of its goodwill being equal to its recoverable amount. For both companies, an increase in the discount rate by 25 percentage points would still not result in the carrying value of goodwill exceeding the recoverable amount.

 

Other impairments

 

Other intangible assets are tested for impairment if indicators of an impairment exist. Such indicators include performance falling short of expectation.

 

In 2015, development costs of £177,000 were impaired as a result of projects that did not perform as expected.

 

The directors considered that there were no further indicators of impairment relating to the remaining intangible fixed assets at 30 November 2015.

 

12. Interest bearing loans and borrowings

 

	2015 £'000	2014 £'000
Current
Convertible loan notes	1,277	-
	1,277	-
Non-current
Convertible loan notes	1,009	1,301
Non-convertible loan notes	1,830	-
	2,839	1,301

 

On 30th June 2009 £1,750,000 convertible loan notes were issued. At 30 November 2014 and 30 November 2015, £1,250,000 of these loan notes were in issue.

 

The original terms were that these loan notes were redeemable at par or convertible to ordinary shares at 4p per ordinary share on or before maturing on 30th June 2015 and carried a coupon rate of 6% per annum payable semi-annually until such time as they were repaid or were converted in accordance with their terms. The holder of the notes may convert all or part of the notes held by them into new ordinary shares in the Company on delivery to the Company of a conversion notice at 4p per share.

 

In 2014, the Company agreed terms with Elderstreet VCT (a company related to Chairman Michael Jackson) and Unicorn AIM VCT plc to extend the loans such that they mature on 31 December 2015, with enhanced interest at 8% during this extended period with conversion rights unchanged at 4p per share.

 

In January 2016 the Company agreed the same terms as those agreed in the prior year with both note holders such that the notes are redeemable at par or convertible to ordinary shares at 4p per ordinary share on or before maturing on 31 December 2016 and carry a coupon rate of 8% per annum, payable semi-annually until such a time as they are repaid or converted in accordance with their terms. These notes are classified as current at the year end.

 

In December 2014 the company issued a further £1,100,000 of convertible loan notes. These loan notes are redeemable at par or convertible to ordinary shares at 3p per ordinary share on or before maturing on 3 December 2019 and carry a coupon rate of 8% per annum payable semi-annually until such time as they are repaid or converted.

 

No redemptions or conversions of the convertible loan stock arose in the year ended 30 November 2015.

 

The net proceeds received from the issues of the convertible loan notes have been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the Company, as follows:

 

 

	2015 £'000	2014 £'000
Proceeds of issue of convertible loan notes	1,100	-
Existing loan notes rolled over	1,250	1,250
Equity component	(255)	(126)
Deferred taxation	(79)	(49)
Initial fair value of liability component	2,016	1,075
Cumulative interest charged	792	601
Cumulative interest paid	(522)	(375)
Liability component at 30 November	2,286	1,301

 

The equity component of £255,000 (2014: £126,000) has been credited to equity reserve (see note 10 of the parent company). The interest charged for the year is calculated by applying an effective rate of interest of 9.8% (2014: 9.8%) to the liability component for the 12-month period. The liability component is measured at amortised cost. The difference between the carrying amount of the liability component at the date of issue and the amount reported in the balance sheet at 30 November 2015 represents the effective interest rate less interest paid to that date.

 

The movement on the convertible loan note liability is summarised below:

 

	2015 £'000	2014 £'000
Opening loan liability	1,301	1,261
Issue of convertible loan notes	941	-
Interest charged for the year	191	115
Interest paid in the year	(147)	(75)
Liability component at 30 November	2,286	1,301

 

On 22 June 2015 the company issued £1,818,000 non-convertible loan notes which carry an interest rate of 10% for one year rising to 12% thereafter. Interest is payable quarterly in arrears. The loans notes are fully repayable in 5 years.

 

	2015 £'000	2014 £'000
Opening loan liability	-	-
Issue of non-convertible loan notes	1,818	-
Costs associated with the issue of loans	(18)
Interest charged for the year	75	-
Interest paid in the year	(45)	-
Liability component at 30 November	1,830	-

 

13. Availability of Annual Report and AGM date

 

Copies of the Report and Accounts has been posted to shareholders where requested and is available from the Company's website (www.accessintelligence.com). It is intended that the annual general meeting will take place at the Company's registered office, Longbow House, 14-20 Chiswell Street, London, EC1Y 4TW, at 14.00pm on Thursday, 5 May 2016.

 

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