30 Sep 2020 07:00
Drumz Plc - Half-year ReportDrumz Plc - Half-year Report
PR Newswire
London, September 29
30 September 2020
Drumz plc('Drumz' or the 'Company', formerly Energiser Investments Plc)
Interim Results to 30 June 2020
CHAIRMAN’S STATEMENT
I am pleased to present the interim results for Drumz for the six months ended 30 June 2020.
Board
These results are the first that I have presented to Drumz shareholders and are for a period that predates my appointment to the Board, which was approved by shareholders at the Annual General Meeting of the Company held on 30 June 2020 (the “AGM””). Also at the AGM Angus Forrest was appointed to the Board as Chief Executive Officer (“CEO”) and John Wakefield as a non-executive director. I am delighted to report that Nishith Malde has agreed to remain on the Board as a non-executive director. Following the changes approved by shareholders at the AGM, Stephen Wicks and John Depasquale stepped down from the Board as agreed. I would like to take this opportunity to thank Stephen Wicks and John Depasquale for their service and their collective contributions.
The Board now comprises Angus Forrest (CEO), who has over 25 years’ experience in investing in technology companies and three non-executives, Nishith Malde and John Wakefield, who both have significant commercial and City experience and me (collectively the “New Board”).
Results
The Group’s results showed no revenue (30 June 2019: £Nil) and an operating loss of £36,000 (30 June 2019: loss £50,000).
Historically, the principal asset of the Company was its investment in KCR REIT plc (“KCR”), an AIM quoted Real Estate Investment Trust (“REIT”), operating in the private rented residential investment market. KCR’s principal activity is to acquire blocks of studio, one and two bedroom apartments that are rented to private tenants in the UK.
This investment comprises 2,437,710 ordinary shares, representing 8.83% of the issued share capital of KCR. KCR’s share price performance fell in the six months ended 30 June 2020 and as a result the Company suffered a loss on this investment in the period of £414,000 (30 June 2019: loss £122,000). As at 30 June 2020 the investment had a carrying value of £767,000, equivalent to a KCR price per ordinary share of 31.5 pence per share.
Principally due to the loss described above, the result for the period was a loss before and after taxation of £450,000 (30 June 2019: loss of £172,000). The loss per ordinary share amounted to £0.36p (30 June 2019: loss £0.14p). The Company will not be declaring a dividend.
As at 30 June 2020, the net assets of the Company had decreased to £754,000 (30 June 2019: £1,104,000) which equates to a net asset value per ordinary share of £0.61 pence (30 June 2019: £0.89p).
On 18 September 2020, KCR released its audited results for the year ended 30 June 2020 which included the following comments from their Chairman:
“The Coronavirus has had a global negative impact on demand, supply chains, stock markets and consumer and business confidence. The economic impact is now being felt by companies and families. This has the potential to negatively impact the occupancy level and rentals that can be achieved in KCR's portfolio. However, at the accounts issue date, KCR has maintained a high occupancy and rental collection level of more than 95% and rents overall have continued to increase.
There is greater supply of studio, one and two bed flats in the letting market which has increased letting times from less than one week to up to three weeks in our London portfolio. However, there continues to be strong tenant demand in all the Company's locations. UK residential rented property remains fundamentally under-supplied and KCR continues to target studio, one and two bed units, that are in high demand and relatively short supply.”
New Investing Policy
Previously, the Company had principally invested in real estate, but the then Board had concluded that, following the COVID-19 worldwide pandemic, the short term prospects for real estate in the UK might be adversely affected. With the change in the Board, at the Company’s AGM, shareholders approved a new investing policy.
The Company's new investing policy will be to invest principally, but not exclusively, in the technology sector within Europe (“New Investing Policy”). Although the Company intends the main focus of the New Investing Policy to be on technology businesses, this will not preclude the Company from considering investment in suitable projects in other sectors or geographies where the New Board believes that there are high-growth opportunities.
In accordance with the New Investing Policy, the New Board will pursue a strategy under which the Company will invest in and acquire technology businesses, improve them by a combination of new management and investment and then realise or retain the value created. The Company may be either an active investor and acquire a controlling interest in companies or it may acquire non-controlling shareholdings.
Whilst it is not possible to be entirely prescriptive, the Company will be actively seeking investment opportunities which can be improved through the introduction of management skills and expertise from the Board and/or further investment capital. The Board considers that the broad collective experience of the Directors together with their extensive network of contacts will assist them in the identification, evaluation and funding of suitable investment opportunities.
The opportunities are likely to have some or all of the following characteristics, namely:
a majority of their revenue derived from technology or the use of technology, which the New Board believes is strongly positioned to benefit from market growth; a trading history which reflects past profitability and potential for significant capital growth; and where all or part of the consideration might be satisfied by the issue of new ordinary shares or other securities in the Company.The Company’s financial resources may be invested in a small number of projects or investments or potentially in just one investment. These investments may be in either quoted or unquoted companies. The Company’s investments may take the form of equity, debt or convertible instruments. Investments may be made in all types of assets falling within the remit of the New Investing Policy and there will be no investment restrictions. The New Board may consider it appropriate to take an equity interest in any proposed investment, which may range from a minority position to 100 per cent ownership. The Company may be either an active or passive investor.
The objective of the New Board is to generate investment returns principally through capital appreciation. Any income generated by the Company will first be applied to cover the Company’s overheads and then any surplus will be added to the funds available to further implement the New Investment Policy. In view of this and the considerable deficit on the Company’s profit and loss account, it is extremely unlikely that the New Board will be in a position to recommend any dividends in the early years of its existence without effecting a capital reconstruction, which would need to be approved by the courts. However, the New Board may recommend or declare dividends at some future date, depending on the financial position of the Company at that time. Given the nature of the Company’s New Investing Policy, the Company does not intend to make regular periodic disclosures or calculations of net asset value.
Placing
In order to facilitate the Company’s New Investing Policy, the Company undertook a placing of 130,000,000 new ordinary shares at a price of 0.5p per ordinary share, which raised approximately £650,000 (before the expenses of the issue) (the “Placing”). The Placing was approved by shareholders on 30 June 2020 and the new ordinary shares commenced trading on 1 July 2020.
First Technology Investment
Having changed the Company’s investment policy and completed the Placing, the Company was able in September 2020 to make its first new investment, being the acquisition of a minority stake in Acuity Risk Management Ltd, (“Acuity”), which operates an award winning software business specialising in risk management. Acuity’s business is the supply of its proprietary software, STREAM™, and services for cyber security and risk management, used by organisations globally for customers ISO 27001, GDPR, NIST Cyber Security Framework and other programs.
The Company has invested £500,000 in cash for an initial 20 per cent. shareholding in Acuity, with an option to acquire an additional 5 per cent. for a further £125,000.
The Acuity business was founded in 2005 by a team who had previously built a consultancy business specialising in cyber security which was later acquired by Siemens. The founders encapsulated their knowledge in developing the STREAM™ software which was launched in 2007. This software enables a risk-based approach to cyber security, reducing the risk of security breaches, optimising cyber security activities and, in the event of a breach, mitigating damage through a strategic risk-based approach.
Acuity’s customers include government organisations, large and medium sized private enterprises in the UK, Europe, Africa and North America. Gartner reports the global market for Integrated Risk Management (‘IRM’) in 2020 to be $7.3 billion with projected growth to $9.3 billion by 2023. This is being driven by the development of new digital products and services designed to propel a company’s future growth. In turn this introduces new risks that require IRM technology.
Acuity regularly wins awards including in Information Age and TechWorld’s top cyber security companies in the UK supplying cybersecurity services to organisations globally. STREAM™ has been awarded a five star rating in the SC Media GRC, Risk and Policy Management Review for five consecutive years. In 2018, STREAM™ was Continuity, Insurance and Risk magazine’s cyber security product of the year.
The last published accounts for the Acuity business were issued by Acuity RM LLP for the 12 months to 31 March 2019 and show that the business generated a profit before tax of £226,000 on revenues of £858,000. The net assets of Acuity RM LLP as at 31 March 2019 were £11,000. Acuity RM LLP transferred its business to Acuity earlier in 2020.
Outlook
This has been a productive period for your New Board, with the introduction of the New Investment Policy, finalisation of the Placing and completion of the Company’s first technology Investment. I look forward to being able to report on further progress made by Drumz, as and when appropriate.
Simon BennettChairman29 September 2020
Group statement of comprehensive income
| Unaudited 6 months to 30 June 2020 | Unaudited 6 months to 30 June 2019 | Audited year to 31 December 2019 | |||
| Note | £’000 | £’000 | £’000 | ||
| Continuing operations | |||||
| Revenue arising in the course of ordinary activities | — | — | 2 | ||
| Cost of sales | — | — | — | ||
| Gross profit | — | — | 2 | ||
| Reversal of accrued remuneration for former director | — | — | 117 | ||
| Administrative expenses | (36) | (50) | (76) | ||
| Operating (loss) / profit | 5 | (36) | (50) | 43 | |
| Loss on investments | (414) | (122) | (134) | ||
| Recovery of bad debt written off in previous periods | — | — | 19 | ||
| Loss before and after taxation | 5 | (450) | (172) | (72) | |
| Loss for the period attributable to shareholders of the Company | (450) | (172) | (72) | ||
| Total comprehensive loss | (450) | (172) | (72) | ||
| Loss per share | |||||
| Basic and diluted loss per share from total and continuing operations | 4 | (0.36)p | (0.14)p | (0.06)p | |
Diluted earnings per share is taken as equal to basic earnings per share as the Group’s average share price during the period is lower than the exercise price and therefore the effect of including share options is anti-dilutive.
Group statement of financial position
| Unaudited as at 30 June 2020 | Unaudited as at 30 June 2019 | Audited as at 31 December 2019 | ||
| Note | £’000 | £’000 | £’000 | |
| ASSETS | ||||
| Non-current assets | ||||
| Investments | 6 | 767 | 1,193 | 1,181 |
| 767 | 1,193 | 1,181 | ||
| Current assets | ||||
| Trade and other receivables | 9 | 15 | 5 | |
| Cash and cash equivalents | 25 | 163 | 96 | |
| 34 | 178 | 101 | ||
| Total assets | 801 | 1,371 | 1,282 | |
| LIABILITIES | ||||
| Current liabilities | ||||
| Trade and other payables | 47 | 267 | 78 | |
| Total liabilities | 47 | 267 | 78 | |
| Net assets | 754 | 1,104 | 1,204 | |
| EQUITY | ||||
| Share capital | 2,392 | 2,392 | 2,392 | |
| Share premium account | 7,189 | 7,189 | 7,189 | |
| Convertible loan | 88 | 88 | 88 | |
| Merger reserve | 1,012 | 1,012 | 1,012 | |
| Retained earnings | (9,927) | (9,577) | (9,477) | |
| Total equity | 754 | 1,104 | 1,204 |
Group statement of changes in equity
| Share | ||||||
| Share | premium | Convertible | Merger | Retained | Total | |
| capital | account | loan | reserve | earnings | equity | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Balance at 1 January 2019 | 2,392 | 7,189 | 88 | 1,012 | (9,405) | 1,276 |
| Total comprehensive profit | — | — | — | — | (172) | (172) |
| Balance at 30 June 2019 | 2,392 | 7,189 | 88 | 1,012 | (9,577) | 1,104 |
| Total comprehensive profit | — | — | — | — | 100 | 100 |
| Balance at 31 December 2019 | 2,392 | 7,189 | 88 | 1,012 | (9,477) | 1,204 |
| Total comprehensive loss | — | — | — | — | (450) | (450) |
| Balance at 30 June 2020 | 2,392 | 7,189 | 88 | 1,012 | (9,927) | 754 |
Group statement of cash flows
| Unaudited 6 months to 30 June 2020 | Unaudited 6 months to 30 June 2019 | Audited year to 31 December 2019 | |
| £’000 | £’000 | £’000 | |
| Cash flows from operating activities | |||
| (Loss)/profit before taxation | (450) | (172) | (72) |
| Adjustments for: | |||
| Fair value adjustment for listed investments | 414 | 122 | 134 |
| Changes in working capital: | |||
| - (Increase)/decrease in trade and other receivables | (4) | (7) | 3 |
| - (Decrease)/increase in trade and other payables | (31) | 43 | (146) |
| Net cash used in operating activities | (71) | (14) | (81) |
| Net decrease in cash and cash equivalents | (71) | (14) | (81) |
| Cash and cash equivalents at beginning of period | 96 | 177 | 177 |
| Cash and cash equivalents at end of period | 25 | 163 | 96 |
Notes
1. Nature of operations and general information
The principal activity of the Group is as an investing company investing in quoted and unquoted companies to achieve capital growth.
Drumz plc is the Group’s ultimate parent company. It is incorporated and domiciled in Great Britain. The address of Drumz plc’s registered office is Burnham Yard, London End, Beaconsfield, Buckinghamshire, HP9 2JH.
Drumz plc’s shares are quoted on AIM, a market operated by the London Stock Exchange. The consolidated half-yearly financial report has been approved for issue by the Board of Directors on 29 September 2020.
The financial information set out in this half-yearly financial report does not constitute statutory accounts as defined in Sections 434(3) and 435(3) of the Companies Act 2006. The Group’s statutory financial statements for the year ended 31 December 2019 have been filed with the Registrar of Companies and are available at www.drumzplc.com. The auditor’s report on those financial statements was unqualified and did not contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006.
2. Basis of preparation
This consolidated half-yearly financial report has been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting.
On 11 March 2020, the World Health Organisation declared the coronavirus (COVID-19) a global pandemic. There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a potential pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak or a similar health epidemic is uncertain. As such, there is still significant uncertainty as to what foreseen or unforeseen action or actions the Group may be required to take in order to respond to any circumstances that may arise in the future.
The Directors have considered the possible impact of COVID-19 on Drumz and its business activities, which are now increasingly focussed on software businesses. They believe that many businesses in the software sector can be operated remotely in a virtual environment which should reduce the impact of COVID-19 on their activities.
The net proceeds of the placing were used to make the Group’s first technology investment of £500,000 (further details of which are set out in Note 7 Post Balance Sheet Events) and to provide additional working capital. In addition the Group has an existing investment in KCR REIT plc, further details of which are included in the Chairman’s statement, which could be realised. As a result, the Directors consider it appropriate to prepare the interim report on the going concern basis.
The consolidated half-yearly financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with IFRS as adopted by the European Union.
3. Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2019.
4. Loss per ordinary share
The loss per ordinary share is based on the weighted average number of ordinary shares in issue during the period of 123,912,957 ordinary shares of 0.1p (2018: 123,912,957 ordinary shares of 0.1p) and the following figures:
| Unaudited 6 months to 30 June 2020 | Unaudited 6 months to 30 June 2019 | Audited year to 31 December 2019 | |
| Loss attributable to equity shareholders £’000 | (450) | (172) | (72) |
| Loss per ordinary share | (0.36)p | (0.14)p | (0.06)p |
Diluted loss per share is taken as equal to basic earnings per share as the Group’s average share price during the period is lower than the exercise price and therefore the effect of including share options is anti-dilutive.
5. Income and segmental analysis
| Unaudited 6 months to 30 June 2020 | Unaudited 6 months to 30 June 2019 | Audited year to 31 December 2019 | |
| £’000 | £’000 | £’000 | |
| Segment result | |||
| Investment activities: | |||
| Reversal of accrued remuneration for former director | — | — | 117 |
| Administrative expenses | (36) | (50) | (76) |
| (36) | (50) | 41 | |
| Rental activities: | |||
| Rental income | — | — | 2 |
| — | — | 2 | |
| Operating loss | (36) | (50) | 43 |
| Finance income | |||
| Other gains and losses | (414) | (122) | (115) |
| Loss before tax | (450) | (172) | (72) |
| Unaudited as at 30 June 2020 | Unaudited as at 30 June 2019 | Audited as at 31 December 2019 | |
| £’000 | £’000 | £’000 | |
| Segment assets | |||
| Investment activities: | |||
| Non-current assets | 767 | 1,193 | 1,181 |
| Current assets - other | 34 | 178 | 101 |
| 801 | 1,371 | 1,282 | |
| Total assets | 801 | 1,371 | 1,282 |
| Segment liabilities | |||
| Investment activities: | |||
| Current liabilities | 47 | 267 | 78 |
| 47 | 267 | 78 | |
| Total liabilities | 47 | 267 | 78 |
| Total assets less total liabilities | 754 | 1,104 | 1,204 |
The activity of both the investments and rentals arose wholly in the United Kingdom. No single customer accounts for more than 10% of revenue.
6. Investments
During the year ended 31 December 2018 the Group acquired 2,435,710 shares in KCR Residential Reit PLC, an AIM listed real estate investment trust who specialise in the acquisition and management of rented residential portfolios in the UK.
Investments
| £’000 | |
| Cost | |
| At 1 January 2019, 30 June 2019 and 31 December 2019 | 1,705 |
| At 30 June 2020 | 1,705 |
| Fair value losses | |
| At 1 January 2019 | (390) |
| Change in fair value recognised in profit and loss | (122) |
| At 30 June 2019 | (512) |
| Change in fair value recognised in profit and loss | (12) |
| At 31 December 2019 | (524) |
| Change in fair value recognised in profit and loss | (414) |
| At 30 June 2020 | (938) |
| Fair Value | |
| At 30 June 2020 | 767 |
| At 31 December 2019 | 1,181 |
| At 30 June 2019 | 1,193 |
7. Post balance sheet events
On 1 July 2020, the Company placed 130,000,000 new ordinary shares of 0.1 pence each at a price of 0.5p each. Following the placing, the Company had a total of 253,912,957 ordinary shares in issue.
On 4 September 2020 the Group made its first technology investment in Acuity Risk Management Limited (“Acuity”), which operates an award winning software business specialising in risk management. Drumz invested £500,000 in cash for an initial 20% shareholding in Acuity with an option to acquire an additional 5% for a further £125,000. Further details can be found in the Chairman’s Statement.