3 Feb 2022 07:00
3 February 2022
Actual Experience plc(the "Company" or "Actual Experience" or "Actual")
Preliminary Results
Actual Experience plc (AIM: ACT), the analytics-as-a-service company, announces its preliminary results for the year ended 30 September 2021.
Financial highlights
· Group revenue of £1.74m (2020: £1.96m), primarily generated from sales to Channel Partners
· Gross profit decreased to £0.83m (2020: £1.02m) due to lower revenue
· Loss for the year increased to £5.85m (2020: £4.68m) due to lower revenues, lower tax credits, and an impairment charge of £0.8m
· Net cash at year end increased to £8.22m (2020: £2.75m) after the completion of an oversubscribed £10m (gross) equity placing in January 2021
Operational highlights
· Launched new Human Experience Management (HXM) service
· Developed a direct sales capability to complement our existing Channel Partner focus
· Completed our initial significant Business Impact Assessment (BIA) project with a major energy company, followed by our first direct sales success with a BIA order from a global FMCG company
· Received our first large multi-year Continuous Improvement (CI) order, with resulting recurring revenue commencing after year-end
Current trading and outlook
· Achieved two important contract wins post year-end:
o BIA order to assist a Channel Partner with its hybrid workplace strategy
o Further BIA contract win with a leading global food and beverages business through a Channel Partner
· As previously announced, received notice after year-end that a long-standing legacy contract will not renew in the 2022 fiscal year; this contract delivered revenue of £1.2m in 2021 and is expected to contribute £0.4m in the 2022 fiscal year
· Investment in direct sales and marketing is delivering a strong pipeline of large global blue-chip companies. While the length of sales cycles remains a challenge, the focus will be to convert many of these opportunities into significant recurring revenue streams
Dave Page, CEO of Actual Experience plc, commented:
"Our strategic pivot to focus on the people, planet and profit issues of hybrid working is strongly aligned with ongoing changes to global working practices. While this is gaining traction with clients, our sales cycle has been longer than expected, and efforts to reduce this have been hampered by the pandemic and the resultant elongation of procurement processes and decision making across many industries. We are making every effort to speed up this process.
"There is improving momentum in a growing pipeline of direct and Channel Partner sales opportunities, which also includes many large global blue-chip customers. We are expecting to grow the number of these opportunities, and with improving referenceability, convert them to BIA and ongoing CI customers.
"Positively, the continued focus on hybrid working and a growing investor focus on ESG and diversity, equity and inclusion are external factors that are strongly aligned with our new offering. We believe this macro-economic situation will continue to help us to accelerate the number of opportunities in our pipeline and grow our business with our existing blue-chip BIA and CI customers."
Enquiries:
Actual Experience plc Dave Page, Chief Executive Officer Steve Bennetts, Chief Financial Officer
| Tel: +44 (0)203 128 8170 |
Singer Capital Markets Advisory LLP Shaun Dobson Will Goode
| Tel: +44 (0)207 496 3000 |
MHP Communications Reg Hoare James Bavister
| Tel: +44 (0)203 128 8170 |
About Actual Experience
Actual Experience's goal is to make the digital world work for everyone, everywhere, all of the time. As the working world evolves post-pandemic, the global shift to a flexible hybrid model has brought with it a significant challenge; how do businesses create an environment that gives their people what they need to thrive, whilst protecting the commercial efficiency of the business and driving growth at the same time? By underpinning their strategic decision making with our data-driven insights, our customers gain the clarity and confidence needed to build sustainable ecosystems within their organisations - delivering both a great employee experience and increasing the efficiency of the digital workplace. Powered by over 10 years of academic research, our service doesn't need any interaction with employees to provide a unique and highly actionable dataset that People, Technology and Finance leaders can rely upon to plan impactful projects against their most critical agenda items including wellbeing, profitability, DE&I and ESG initiatives. Actual Experience is listed on the London Stock Exchange (AIM: ACT). Our corporate headquarters are in Bath, UK. Actual Experience's unique and patented digital analytics-as-a-service is founded on cutting-edge research from Queen Mary University of London.
For further information please visit www.actual-experience.com
Chair's Statement
Introduction
Transitioning to effective hybrid home and office working practices has become a priority for most enterprises and our AaaS service delivers a much-needed new source of actionable data and insights that helps companies to achieve their people, planet, and profit goals.
2021 has been a pivotal year for Actual Experience as the pandemic emphasised the significant digital inequalities in the UK and globally. A priority has been to work with our large partners to enable them to develop the capability to market our Hybrid Workplace Management System to their customer base. Equally important has been our focus on building a direct sales capability. As noted more fully in the Chief Executive's Statement, an important early success has been the adoption by a leading global energy supplier of our Continuous Improvement (CI) service. At the time of writing, three other customers have completed their initial Business Impact Assessment (BIA) and we are in discussions with them regarding a transition to CI engagements. The Company is currently focused on a significant number of other commercial opportunities with very large enterprises.
As noted in the Financial Review, an impairment charge of £820,110 has been recorded in the Financial Information for the year. This charge primarily arises from the decision to refocus the business on the delivery of the Company's Hybrid Workplace Management System. A consequence of this decision has been to de-emphasise several software development projects. While it is possible that there will be future sales from this technology it is not currently being actively marketed and, accordingly, it has been decided to fully expense this previously capitalised expenditure.
As previously announced, a long-standing contract that relies on our legacy offering, will not renew in the 2022 fiscal year due to a change in customer strategy. This contract delivered revenues of £1.2m in the year just ended and is expected to contribute £0.4m in the 2022 fiscal year.
Equity placing
The £10m placing in January 2021 has enabled the Company to develop a direct sales capability to augment our existing Partner channels. In addition, we are investing in the further development of our cloud infrastructure to enable it to scale to meet the demands of the world's largest organisations. A further priority is to increase the automation of customer reports; in this way, we will be able to increase the number of customers that the Company is able to service concurrently.
I would like to thank all shareholders for their support. Our year-end net cash stood at £8.2m (30 September 2020: £2.7m).
People
In April, we announced my decision to retire from my role as Chair by the time of our Annual General Meeting to be held in March 2022, with the intention of remaining a Non-executive Director for a further year.
As announced in September 2021, Kirsten English, a current Non-executive Director, will become our next Chair. Kirsten has extensive, relevant experience and I am confident she will be a strong successor. Kirsten was appointed to Actual Experience's Board in January 2020.
In March 2021, we welcomed Sandy Sadhra as General Counsel and Investor Relations Director to the senior leadership team, and in October 2021, Scarlet Jeffers as Chief Product Officer.
On behalf of the Board, I would like to take the opportunity to thank all our employees for their dedication, commitment, and achievements in what has been for many people a personally challenging time.
Outlook
As noted above, our sales team are engaged, directly or with partners, in multiple sales opportunities. Our clear focus in the coming months is to convert these opportunities to recurring Continuous Improvement revenue streams. Notwithstanding this, we are aware that shareholders have been frustrated with the rate of progress to date. Management is making every effort to accelerate the development of the prospect pipeline by assimilating lessons learned from initial sales engagements and is seeking to optimise current and future sales cycles. However, one of these lessons is that sales cycles will typically be longer than initially expected and therefore our planning has been adjusted to accommodate this timing. Further details of our operational and financial considerations in this regard are outlined in Note 1 to the financial information.
Our innovative technology has been validated by early customers and, as large enterprises increasingly recognise the need for actionable data and insights, I remain excited by the very significant addressable opportunity and the prospects for the Company.
Stephen Davidson
Chair
Chief Executive's Statement
As noted in the Chair's statement, the workplace has become far more digital for the vast majority of people. Two years ago our work with customers assumed that people spent 25-30% of their time working and interacting with each other digitally. Following the impact of the pandemic, and the global transition to hybrid working, our customers now tell us that their people spend 60-90% of their time working digitally.
It is therefore critical that the digital workplace works properly for everyone, everywhere, all the time. If it does, we know that efficiency increases and employee experience improves. If it doesn't, stress levels increase, trust evaporates and output declines.
Creating a more efficient workplace that supports better mental health and work-life balance sits at the heart of what our technology does. It helps our customers achieve digital equality for all employees and a digital workplace so reliable that business travel, and CO2 emissions, can be sustainably replaced by virtual meetings.
We have been working with global blue-chip organisations to provide a Hybrid Workplace Management System that prepares the digital workplace for new ways of working. It brings a fundamental new source of actionable data and intelligent visibility that helps our customers achieve their people goals, whilst benefiting the planet and enhancing their profitability ('people, planet and profit' as we have termed it).
Performance Review
Our strategic pivot to focus on the people, planet and profit issues of hybrid working is strongly aligned with ongoing changes to global working practices. While this is gaining traction with clients, our sales cycle has been longer than expected, and efforts to reduce this have been hampered by the pandemic and the resultant elongation of procurement processes and decision-making across many industries.
Nevertheless, we achieved a notable initial success with one of the world's largest energy suppliers. In early 2021 our Business Impact Assessment (BIA) identified significant people, planet and profit benefits that would result from specified improvements to their digital workplace. In August 2021, the customer awarded us a three-year Continuous Improvement (CI) contract worth £1m, with the potential for subsequent extensions. The CI programme will provide the energy supplier with actionable data on an ongoing basis to achieve and then maintain the identified people, planet and profit benefits.
In addition, we announced a BIA with a leading FMCG company in July 2021, our first major new business win from our direct sales team. Towards the end of the year, we were delighted to announce two further BIA contracts. The first of these was a sale to one of our Channel Partners to assist them with their own hybrid workplace strategy; this also provides their sales team with the ability to reference their own use of our offering to their customers. The second contract was with a leading global food and beverages business through one of our Channel Partners.
As previously announced, a long-standing contract that relies on our legacy offering will not renew in the 2022 fiscal year due to a change in customer strategy. This contract delivered revenues of £1.2m in the year just ended and is expected to contribute £0.4m in the 2022 fiscal year.
As noted in the Financial Review, an impairment charge has been recorded in the Financial Information for the year. This charge primarily arises from the decision to pivot the business to the delivery of our Hybrid Workplace Management System, as discussed above. A consequence of this decision has been to de-emphasise several software development projects. While it is possible that there will be future sales from this technology it is not currently being actively marketed and, accordingly, it has been decided to fully expense this previously capitalised expenditure.
People
Our people have been remarkably resilient over the last two years. Strong teamwork has enabled us to secure new business and grow our company in an environment that is both challenging and exciting.
We initiated our direct sales strategy early in 2021. It is intended to 'get out ahead' of our partners, generating demand for our new offering and creating compelling reference deployments. We expect many of these deals to be supported by our partners in terms of fulfilment.
We now have four talented direct sales people, while our expanded marketing team has leveraged social media channels to raise awareness of our hybrid workplace offering. This has included some highly insightful work with high-profile human resources (HR) thought leaders.
In parallel, our Channel Partners are improving their execution. They are placing more focus on accessing the right people for us to sell to, such as senior human resources executives.
Hybrid Future
Businesses, and their employees, particularly 'white-collar' workers, have enthusiastically embraced the myriad benefits of digitally-enabled hybrid working.
However, not all companies have realised how fundamentally hybrid working changes their organisation, and consequently they don't yet understand the impact the digital workplace is having on their people or their business. We seek to work with companies that have embraced this new paradigm and who recognise that we are able to provide the necessary new insights, visibility and actionable data. In this way, they are able to manage their evolving hybrid workplace to ensure that their people have the digital resources necessary to improve the efficiency of their business.
Opportunities
We have a land-and-expand sales model, and are focused on developing and growing our business with the blue-chip organisations that have undertaken their initial BIA projects or are already in Continuous Improvement.
There is improving momentum in a growing pipeline of direct and Channel Partner sales opportunities, which also includes many large global blue-chip customers. We are expecting to grow the number of these opportunities, and with improving referenceability, convert them to BIA and ongoing CI customers.
Investing in our Capability
We are investing to scale our business. As our commercial sales activities increase, a priority for us is to further develop the scalability of our data centres so that they are able to meet the demands of the world's largest companies while improving our gross margins to 90%. Another area of focus for us is to increasingly automate the generation of reports so that we are able to handle higher volumes of projects.
Outlook
Overall, whilst we have made good progress during the year, our sales cycle remains lengthy and efforts to reduce this have been hampered by the pandemic and the resultant elongation of decision-making processes. We are, however, making every effort to speed up this process. Further details of our operational and financial considerations in this regard are outlined in Note 1 to the financial information.
Positively, the continued focus on hybrid working and a growing investor focus on ESG and diversity, equity and inclusion are external factors that are strongly aligned with our new offering. We believe this macro-economic situation will continue to help us to accelerate the number of opportunities in our pipeline and grow our business with our existing blue-chip BIA and CI customers.
This has been the first full year of our people, planet and profit focused offering, and I'm pleased to say that our patented technology is being validated every day by some of the biggest corporates in the world.
Dave Page
Chief Executive Officer
FINANCIAL REVIEW
Revenue
Revenue recognised in the year ended 30 September 2021 was £1,741,207 (2020: £1,960,933) and relates to the supply of hybrid workplace Analytics-as-a-Service (AaaS) and associated consultancy services to customers. Approximately half of the revenue reduction relates to the ending of small legacy contracts, with the balance attributable to the increase in value of sterling against the US dollar.
99% of revenue was derived from sales to Channel customers (2020: 99%) with the balance arising from direct sales. This high percentage reflects the Group's prior strategic focus on achieving revenue growth from its Channel Partners. While our Partners will continue to represent an important sales channel for Actual, it is expected that a significant proportion of future revenue will be generated by the Company's recently formed direct sales team.
Cost of sales and gross profit
The gross profit for the year was £833,209 (2020: £1,020,400); the decrease from the prior year is a result of lower revenues. Included in cost of sales are data centre cloud expenses of £534,262 (2020: £507,566), and salary and related costs of customer support teams totalling £373,736 (2020: £432,967).
Expenses
Administrative expenses comprising R&D, operational support, sales and marketing, finance and administration costs, and foreign exchange gains and losses, totalled £6,721,914, an increase of £1,121,305 compared to the prior year. Most of the increase in expenses in the year relates to an impairment charge of £820,110 (2020: £nil) relating to previously capitalised costs as detailed in Note 7. This impairment charge primarily arises from the decision to refocus the business on the delivery of the company's Hybrid Workplace Management System. A consequence of this decision has been to de-emphasise several software development projects. While it is possible that there will be future sales from this technology it is not currently being actively marketed and, accordingly, it has been decided to fully expense this previously capitalised expenditure.
The rest of the increase arises from the additional investment in the business following the completion of the equity fundraise in January 2021. Personnel costs, however, continue to be the largest expense and represent approximately 63% of the Group's cost base (2020: 83%). The functional cost breakdown is as follows:
2021 | 2020 | |
Administrative expenses | £ | £ |
Research & development | 2,131,682 | 1,960,213 |
Impairment to previously capitalised development spend | 820,110 | - |
Operational support | 1,008,287 | 1,055,113 |
Sales & marketing | 1,548,040 | 1,512,709 |
Finance & administration | 1,209,945 | 1,045,116 |
Foreign exchange losses | 3,850 | 27,458 |
Total | 6,721,914 | 5,600,609 |
Tax
The tax credits recognised in the current and previous financial year, £44,103 and £295,550 respectively, arose from the accrual of R&D tax credits.
Loss for the year
Losses after tax totalled £5,847,195 (2020: loss of £4,681,488). This increase in losses is the result of lower revenues, lower tax credits, and the impairment charge.
Loss per share
The loss per share for the year was 10.84p (2020: loss per share of 9.87p). The increase in loss per share reflects the increase in total comprehensive loss for the year, partially offset by an increase in the weighted average number of ordinary shares in issue.
Dividend
No dividend has been proposed for the year ended 30 September 2021 (2020: £nil).
Cash flow
As noted in the Chair's Statement, the Company completed a £10m (gross) placing in January 2021. This placing resulted in the significant increase in cash during the period; the Group ended the year with cash and cash equivalents totalling £8,216,198 (2020: £2,754,274).
We are investing in the growth of our operations to address what we believe to be a significant commercial opportunity and our cash flow from operations was therefore negative during the year ended 30 September 2021, in line with expectations.
The Group's costs are mostly operating related, with very little investment required for capital infrastructure. Cash used by operating activities was £3,145,093 for the year, compared to cash used of £3,856,067 for the year ended 30 September 2020. The increase in trade and other payables and the decrease in trade receivables contributed to this reduction in cash used by operating activities. This operating cash requirement was funded by cash reserves.
Free cash flow for the year was £(3,861,701) (2020: £(5,004,343)). Free cash flow is defined as net cash flows used in operating activities, plus development of intangible assets, plus purchase of property, plant and equipment.
Software development capitalisation
The Directors believe that the software development capitalisation criteria in IAS 38 have been met and accordingly development costs, net of amortisation charges of £897,199 have been capitalised, as at 30 September 2021 (2020: £1,972,781). An impairment review during the year resulted in assets of £820,110 being written off, as detailed fully in Note 7.
Going Concern
As more fully described in Note 1 to the financial information, the amounts and timing of future revenues remain uncertain. If the Group is unable to secure an appropriate combination of new revenue contracts and/or cost reductions, then it may not have sufficient resources to meet its liquidity requirements for the foreseeable future. Accordingly, material uncertainty exists which may cast significant doubt about its ability to continue as a going concern.
Key performance indicators
As the Group is in the process of developing and commercialising its services, the Directors consider the key quantitative performance indicators to be sales revenues of £1,741,207 (2020: £1,960,933) and the level of cash held in the business of £8,216,198 (2020: £2,754,274). The Board performs regular reviews of actual results against budget, and management monitors cash balances on a monthly basis to ensure that the business has sufficient resources to enact its current strategy. Certain non-financial measures, such as the number of active customers and deployed Dus, are monitored on a monthly basis. The Board will continue to review the KPIs used to assess the business as it grows.
Steve Bennetts
Chief Financial Officer
Financial information
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2021
2021 | 2020 | ||
Note | £ | £ | |
REVENUE | 2 | 1,741,207 | 1,960,933 |
Cost of sales | (907,998) | (940,533) | |
GROSS PROFIT | 833,209 | 1,020,400 | |
Administrative expenses | (6,721,914) | (5,600,609) | |
OPERATING LOSS BEFORE EXCEPTIONAL ITEM | (5,888,705) | (4,580,209) | |
Exceptional item: redundancy expense | - | (411,525) | |
OPERATING LOSS | 3 | (5,888,705) | (4,991,734) |
Finance income | 2,734 | 13,933 | |
Finance expense | (27,285) | (31,140) | |
Finance expense - net | (24,551) | (17,207) | |
LOSS BEFORE TAX | (5,913,256) | (5,008,941) | |
Tax | 4 | 66,061 | 327,453 |
LOSS FOR THE YEAR | (5,847,195) | (4,681,488) | |
Other comprehensive expense: | |||
Items that may be reclassified to profit or loss: | |||
Foreign currency difference on translation of overseas operations | (19,314) | (15,350) | |
TOTAL COMPREHENSIVE EXPENSE FOR THE YEAR | (5,866,509) | (4,696,838) | |
LOSS PER ORDINARY SHARE | |||
Basic and diluted | 5 | (10.84)p | (9.87)p |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2021
Share | Share | Accumulated | Total | ||
capital | premium | losses | equity | ||
£ | £ | £ | £ | ||
At 1 October 2019 | 94,249 | 34,706,402 | (24,795,182) | 10,005,469 | |
Loss for the year | - | - | (4,681,488) | (4,681,488) | |
Other comprehensive expense for the year | - | - | (15,350) | (15,350) | |
Total comprehensive expense for the year | - | - | (4,696,838) | (4,696,838) | |
Transactions with owners, in their capacity as owners | |||||
Issue of shares | 1,035 | 61,947 | - | 62,982 | |
Share-based payment credit | - | - | (174,842) | (174,842) | |
At 30 September 2020 | 95,284 | 34,768,349 | (29,666,862) | 5,196,771 | |
Loss for the year | - | - | (5,847,195) | (5,847,195) | |
Other comprehensive expense for the year | - | - | (19,314) | (19,314) | |
Total comprehensive expense for the year | - | - | (5,866,509) | (5,866,509) | |
Transactions with owners, in their capacity as owners | |||||
Issue of shares | 19,254 | 9,444,106 | - | 9,463,360 | |
Share-based payment charge | - | - | 42,314 | 42,314 | |
At 30 September 2021 | 114,538 | 44,212,455 | (35,491,057) | 8,835,936 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2021
2021 | 2020 | ||
Note | £ | £ | |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 48,879 | 58,997 | |
Right-of-use assets | 670,814 | 782,606 | |
Intangible assets | 7 | 897,199 | 1,972,781 |
TOTAL NON-CURRENT ASSETS | 1,616,892 | 2,814,384 | |
Current assets | |||
Trade and other receivables | 584,819 | 690,514 | |
Income tax receivable | 4 | 44,103 | 295,550 |
Cash and cash equivalents | 6 | 8,216,198 | 2,754,274 |
TOTAL CURRENT ASSETS | 8,845,120 | 3,740,338 | |
TOTAL ASSETS | 10,462,012 | 6,554,722 | |
LIABILITIES | |||
Non-current liabilities | |||
Deferred tax | (8,901) | (7,079) | |
Lease liabilities | (604,894) | (719,177) | |
TOTAL NON-CURRENT LIABILITIES | (613,795) | (726,256) | |
Current liabilities | |||
Trade and other payables | (897,041) | (519,393) | |
Lease liabilities | (115,240) | (112,302) | |
TOTAL CURRENT LIABILITIES | (1,012,281) | (631,695) | |
TOTAL LIABILITIES | (1,626,076) | (1,357,951) | |
NET ASSETS | 8,835,936 | 5,196,771 | |
EQUITY | |||
Share capital | 114,538 | 95,284 | |
Share premium | 44,212,455 | 34,768,349 | |
Accumulated losses | (35,491,057) | (29,666,862) | |
TOTAL EQUITY | 8,835,936 | 5,196,771 |
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2021
2021 | 2020 | ||
Note | £ | £ | |
Cash flows from operating activities | |||
Loss before tax | (5,913,256) | (5,008,941) | |
Adjustments for: | |||
Depreciation of property, plant and equipment | 48,413 | 97,458 | |
Depreciation of right-of-use assets | 111,792 | 111,788 | |
Amortisation of intangible assets | 7 | 933,780 | 952,124 |
Impairment of intangible assets | 7 | 820,110 | - |
(Profit)/loss on disposal of property, plant and equipment | (359) | 181 | |
Non-cash employee benefits - share-based payments expense/(credit) | 42,314 | (174,842) | |
Finance expense/(income) - net | 24,551 | 17,207 | |
Operating cash outflow before changes in working capital | (3,932,655) | (4,005,025) | |
Decrease/(increase) in trade and other receivables | 94,827 | (4,968) | |
Increase/(decrease) in trade and other payables | 373,405 | (167,605) | |
Cash used in operations | (3,464,423) | (4,177,598) | |
Income taxes received | 319,330 | 321,531 | |
Net cash outflow from operating activities | (3,145,093) | (3,856,067) | |
Cash flows from investing activities | |||
Development of intangible assets | (678,308) | (1,132,440) | |
Purchases of property, plant and equipment | (38,300) | (15,836) | |
Proceeds from sale of property, plant and equipment | 363 | - | |
Finance income | 2,734 | 13,933 | |
Net cash inflow/(outflow) from investing activities | (713,511) | (1,134,343) | |
Cash flows from financing activities | |||
Proceeds from issue of share capital, net of costs | 9,463,360 | 62,982 | |
Principal element of lease payments | (138,630) | (173,288) | |
Employee Benefit Trust - repayment | (23) | (18,299) | |
Net cash inflow/(outflow) from financing activities | 9,324,710 | (128,605) | |
Increase/(decrease) in cash and cash equivalents | 5,466,103 | (5,119,015) | |
Effect of exchange rate fluctuations on cash held | (4,179) | (3,345) | |
Cash and cash equivalents at start of year | 2,754,274 | 7,876,634 | |
Cash and cash equivalents at end of year | 6 | 8,216,198 | 2,754,274 |
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEAR ENDED 30 SEPTEMBER 2021
1 Basis of preparation
Actual Experience plc is a public limited company domiciled in the United Kingdom and incorporated in England. The Company's registered office is Quay House, The Ambury, Bath, BA1 1UA.
The financial information at pages 9 to 16 is extracted from the Group's consolidated financial statements for the year ended 30 September 2021, which were approved by the Board of Directors on 2 February 2022.
The financial information does not constitute statutory accounts within the meaning of sections 434(3) and 435(3) of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS'), and the applicable legal requirements of the Companies Act 2006.
The Group's auditors, PricewaterhouseCoopers LLP, have given an unqualified audit opinion on the consolidated financial statements for the year ended 30 September 2021. The auditors' report included an emphasis of matter on going concern which the auditors drew attention without qualifying their report. The consolidated financial statements will be filed with the Registrar of Companies, subject to their approval by the Company's shareholders on Thursday 24 March 2022 at the Company's Annual General Meeting.
Going concern
As in previous years, the Group and Company have continued to utilise their cash resources to fund losses while the sales pipeline is being further developed. The cash balance as at 30 September 2021 was £8.2m, which will provide the Group and Company with sufficient resources to meet their liquidity requirements at least until 30 September 2023, based on the Group's latest budgeted sales and cost projections. The Directors have also prepared a severe, but plausible downside scenario, based on significantly more pessimistic sales forecasts, with corresponding reductions in controllable costs. In this scenario also, the Group and Company will continue to meet their liquidity requirements over the period.
The amounts and timing of future revenues in the Group's budgets remain uncertain. The Group is experiencing an encouraging level of interest in its services and it is in active discussions with its Channel Partners and several large potential end-customers. The discussions are well progressed and are expected to result in additional revenue for the Group. However, at present a substantial proportion of the forecast revenue remains uncommitted and if the Group and Company are unable to secure an appropriate combination of new revenue contracts and/or cost reductions, then the Group and Company may not have sufficient resources to meet their liquidity requirements over the foreseeable future. Accordingly, a material uncertainty exists which may cast significant doubt about the Group's and the Company's ability to continue as going concern. Nevertheless, after making appropriate enquiries and considering the assumptions and uncertainties described above, the Directors have a reasonable expectation that the Group and Company will have adequate resources to continue operating at least until 30 September 2023. Therefore, the Directors continue to adopt the going concern basis in preparing the financial statements and the financial statements do not include any of the adjustments that would be required if the Group or Company were unable to continue as going concern.
2 Revenue
The information that is presented to the Chief Executive Officer (CEO), who is considered to be the Chief Operating Decision-Maker (CODM), for the purposes of resource allocation and assessment of performance, is based wholly on the overall activities of the Group. Due to the current size and activities of the Group, there is a high degree of centralisation of activities. The Directors therefore consider that there is one operating, and hence one reportable, segment for the purposes of presenting information under IFRS 8; that of Human Experience Management (HXM) Services. There are no differences between the segment results and the Consolidated Statement of Comprehensive Income. The assets and liabilities information presented to the CODM is consistent with the Consolidated Statement of Financial Position.
During the year ended 30 September 2021 the Group had two customers who generated more than 10% of total revenue. These customers generated 79% and 20% of revenue respectively.
During the year ended 30 September 2020 the Group had two customers who generated more than 10% of total revenue. These customers generated 82% and 14% of revenue respectively.
An analysis of revenues by geographic location of customers is set out below:
2021 | 2020 | |
£ | £ | |
United Kingdom | 387,212 | 353,100 |
United States of America | 1,353,995 | 1,607,833 |
1,741,207 | 1,960,933 |
3 Operating loss
2021 | 2020 | ||
£ | £ | ||
Loss from operations is stated after charging: | |||
Depreciation on property, plant and equipment | 48,413 | 97,458 | |
Depreciation of right-of-use assets | 111,792 | 111,788 | |
Amortisation of intangible assets | 933,780 | 952,124 | |
Employee costs (including exceptional item) | 3,948,871 | 4,332,180 | |
Foreign exchange losses | 3,850 | 27,458 | |
Impairment charge | 820,110 | - | |
Auditors' remuneration: | |||
- Audit of these financial statements | 51,720 | 50,750 | |
Total auditors' remuneration | 51,720 | 50,750 |
In the prior year, an exceptional item of £411,525 was separately disclosed on the Consolidated Statement of Comprehensive Income. This related to redundancies following a corporate reorganisation. There are no exceptional items in the current year.
4 Tax
Tax on loss
2021 | 2020 | |
£ | £ | |
Current tax: | ||
UK corporation tax on losses of the year | (63,705) | (295,550) |
Overseas taxes | (4,178) | (24,665) |
Deferred tax: | ||
Origination and reversal of timing differences | 1,822 | (7,238) |
Total tax credit | (66,061) | (327,453) |
Factors affecting the current tax credits
The tax assessed for the year varies from the standard UK company rate of corporation tax as explained below:
2021 | 2020 | |
£ | £ | |
Loss before tax | (5,913,256) | (5,008,941) |
Tax at the UK corporate tax rate of 19% (2020: 19%) | (1,123,519) | (951,699) |
Effects of: | ||
Expenses not deductible for tax purposes | 189,985 | 174,739 |
Unrecognised deferred tax asset on losses | 897,765 | 851,347 |
Research and development enhancement in respect of the current year | (864) | (342,334) |
Prior year adjustment | (19,602) | - |
Employee share acquisition adjustment | (9,826) | (61,156) |
Change in rate of tax used to calculate deferred tax liability | - | 1,650 |
Tax credit for the year | (66,061) | (327,453) |
The Group has tax losses carried forward of approximately £39,474,000 (2020: £34,800,000).
The Group has incurred qualifying expenditure on research and development projects which has given rise to tax credits due from HM Revenue and Customs. At 30 September 2021, the amount due from HMRC was £44,103 (2020: £295,550).
5 Loss per ordinary share
Basic loss per share is calculated by dividing the loss attributable to the owners of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume conversion of all dilutive potential ordinary shares. The Company has one class of potentially dilutive ordinary shares, being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. However, due to losses incurred in both the current and previous financial year, there is no dilutive effect from the potential exercise of these dilutive shares.
2021 | 2020 | |
£ | £ | |
Total loss attributable to the equity holders of the parent | (5,847,195) | (4,681,488) |
No. | No. | |
Weighted average number of ordinary shares in issue during the year | 53,911,253 | 47,452,334 |
Loss per share | ||
Basic and diluted on loss for the year | (10.84)p | (9.87)p |
6 Cash and cash equivalents
2021 | 2020 | |
Bank credit rating: | £ | £ |
A+ | - | 2,660,809 |
A | 5,215,643 | - |
A- | 3,000,555 | - |
BBB+ | - | 93,465 |
Cash and cash equivalents | 8,216,198 | 2,754,274 |
The above gives an analysis of the credit rating of the financial institutions where cash balances are held.
All of the Group's cash and cash equivalents at 30 September 2021 are held in instant access current accounts or short-term deposit accounts. Balances are denominated in UK sterling (£) and US dollars ($) as follows:
2021 | 2020 | |
£ | £ | |
Denominated in UK sterling | 7,161,566 | 2,482,598 |
Denominated in US dollars | 1,054,632 | 271,676 |
Cash and cash equivalents | 8,216,198 | 2,754,274 |
The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.
7 Intangible assets
Development costs | |
£ | |
Cost | |
At 1 October 2019 | 4,308,443 |
Additions | 1,132,440 |
At 30 September 2020 | 5,440,883 |
Additions | 678,308 |
At 30 September 2021 | 6,119,191 |
Accumulated amortisation and impairment losses | |
At 1 October 2019 | 2,515,978 |
Charge for the year | 952,124 |
At 30 September 2020 | 3,468,102 |
Charge for the year | 933,780 |
Impairment charge | 820,110 |
At 30 September 2021 | 5,221,992 |
Net book value | |
At 30 September 2021 | 897,199 |
At 30 September 2020 | 1,972,781 |
Amortisation and impairment charge
The amortisation of development costs is recognised within administrative expenses in the Consolidated Statement of Comprehensive Income. The Directors have reviewed the carrying value of the development costs at 30 September 2021 and have decided to write off assets with a net book value of £820,110 which are no longer deemed commercially viable, based on key assumptions, such as sales projections, in the Group's latest budget. Consequently, included with administration expenses in the Consolidated Statement of Comprehensive Income is an impairment charge of £820,110.
The impairment charge primarily arises from the decision to refocus the business on the delivery of the Company's Hybrid Workplace Management System. A consequence of this decision has been to de-emphasise several software development projects. While it is possible that there will be future sales from this technology it is not currently being actively marketed and, accordingly, it has been decided to fully expense this previously capitalised expenditure.
8 Annual Report and Financial Statements
The Company's Annual Report and Financial Statements for the year ended 30 September 2021, together with a notice convening the Company's Annual General Meeting, will be posted to shareholders in due course.