Elixirr International Regulatory News (ELIX)

ELIXIRR INTERNATIONAL PLC

("Elixirr", the "Company" or the "Group")

Final Results for the Year Ended 31 December 2021

Elixirr International plc (AIM:ELIX), an established, global award-winning challenger consultancy, is pleased to announce its final results for the year ended 31 December 2020.

Financial Highlights

§ 12 months ended 31 December 2019 (including the predecessor entity Elixirr Partners LLP through which the business traded prior to 1st July 2019). FY19 represents the six month period ended 31 December 2019.

* Adjusted EBITDA represents operating profit, adjusted for depreciation, amortisation and exceptional items.

Operating Highlights

Commenting on the results, Founder & CEO of Elixirr, Stephen Newton said:

"I am very proud of the continued growth through the year and our achievements against our four pillar growth strategy. With a strong foundation in place, the Board looks to the future with great optimism. We will continue to help businesses navigate their biggest challenges, support our growing team and the communities in which we operate. The performance of the business to date, combined with the support of our high-quality shareholder base, positions the Company well for continued strong growth and success."

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About Elixirr International plc

Elixirr is an established global award-winning management consultancy, challenging the larger consultancies by delivering innovative and bespoke solutions to a repeat, globally-recognised client base.

Elixirr was founded in 2009, by Stephen Newton, Graham Busby, Ian Ferguson, Andy Curtis and Mark Goodyear, experienced business advisors who identified a market opportunity to provide bespoke, personal services as a 'challenger' to the traditional consultancy businesses in the market. Elixirr guides its clients to overcome challenges such as: future-proofing against technological disruption; development and roll-out of new propositions, products and services; incubating new businesses; navigating a more complex and multinational regulatory environment; and project management and implementation of major change programmes.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

Non-Executive Chairman's Report

OVERVIEW

In my first statement to you as Chairman of the Board, I am pleased to introduce Elixirr's first annual report following the Group's successful admission to the AIM market of the London Stock Exchange. Despite the challenging environment which 2020 presented, the business performed exceptionally well, and its first set of full year financial results are ahead of the market expectations set at the time of the Group's IPO in July 2020.

The Group delivered strong revenues over the year of £30.3 million, a 24% increase from £24.5 million in the 12 months ended 31st December 2019 (including its predecessor business), with three record months of revenue achieved during FY20. Adjusted EBITDA of £9.7 million represents a 32% EBITDA margin. This performance is due to our focus on excellent client service with our entrepreneurial Partner team strengthening and growing key accounts.

During the year Elixirr continued to support its clients to address their key challenges, with the Group's services in high demand, particularly in the areas of digital transformation and innovation. COVID-19 brought some challenges, but the Group reacted quickly to the pandemic, putting necessary measures in place during the initial uncertainty, and adjusting quickly to a new way of working to ensure seamless continuation of service to our clients. On behalf of the Board, I would like to thank the whole team for their dedication and resilience throughout this period.

STRATEGY

The Board was pleased to see that the business continued to deliver on all facets of its four pillar growth strategy during FY20. Organic growth in revenue and profit was delivered by improved performance at the individual Partner level, augmented by new additions into the Partner team from both existing talent within the Group and external hires.

Inorganic growth is an exciting opportunity for the Group, given our unique House of Brands platform providing an opportunity for businesses to join us and access new clients and new markets, with significant cross-selling opportunities between our various brands. A particular highlight in FY20 was the acquisition of a full-service digital marketing firm, Coast Digital, adding to the breadth and depth of the Group's expertise in this area. Combined with our existing digital business, Den Creative, we can now offer clients an end-to-end digital service - an area of critical importance to our clients, particularly in the current climate.

The Group's placing of shares during the IPO was oversubscribed and raised gross proceeds of £20m for the Group. This fundraising has provided the Group with a strong balance sheet to grow the business further through strategic acquisition opportunities. The IPO also achieved its other objectives of raising the profile of the Elixirr brand and providing liquidity for our equity to make it more valuable to incentivise our Partner team, our employees and the shareholders of new brands that we may acquire, and attract new investors. We implemented an EMI Share Option Scheme ("EMI Scheme") to incentivise our employees and Partner team, aligning their interests with those of our shareholders.

GOVERNANCE

An important part of the Group's AIM listing has been fulfilling the Group's transition from a private to public company. Since the Company's IPO on 9th July 2020, Elixirr has complied with the QCA Corporate Governance Code and in the current uncertain economic environment, management of risk remains a key focus for the Board. The Elixirr Board and its Committees meet regularly to oversee the Group's corporate activities.

The Notice of Annual General Meeting will be made available on our website at: www.elixirr.com/investors.

With a strong foundation in place, the Board looks to the future with great optimism. We will continue to help businesses navigate their biggest challenges, support our growing team and the communities in which we operate. The performance of the business to date, combined with the support of our high-quality shareholder base, positions the Company well for continued strong growth and success.

Gavin Patterson

Non-Executive Chairman

9th April 2021

CEO'S Report

OVERVIEW

I am delighted to present to you Elixirr's first set of Annual Results. Elixirr is a high returns business, serving globally recognised clients with a proposition that challenges the traditional consulting market. We are a 'firm of entrepreneurs', focusing on building long-term, trusted relationships with clients by consistently delivering bespoke, innovative, impactful solutions. We work across the value chain, from strategy to execution including digital design and product development, leveraging our established global innovation network of start-ups and relationships with venture capital firms. This year the Group has reached some incredible milestones and achieved stellar results - testament to our dedicated team, and the continued support of our fantastic clients.

July 2020 marked the biggest achievement for Elixirr to date, with the firm listing on the AIM market of the London Stock Exchange. As one of the few companies to IPO during 2020, and the first to IPO onto the AIM market since lockdown was put into place, it was certainly a highlight for me during the year, and since founding Elixirr in 2009. The listing was a significant undertaking, and its success was made possible by our dedicated internal team and external advisers who managed the process expertly to meet our timetable without any distraction from managing the business. Not only has the IPO helped to accelerate our expansion into new clients and markets, but crucially it has reinforced the ownership mentality and entrepreneurial culture that has existed since the business was founded - giving team members the ability to be an owner through owning shares and/or earning share options through their own performance. This has strengthened the resolve of the team to continually raise the bar for clients, key to our firm's success.

Since Elixirr was formed, we have endeavoured to tackle our clients' toughest business challenges, and 2020 undoubtedly posed the biggest disruption many businesses had experienced to date. I am incredibly proud of my team's versatility and seamless adjustment to working in this new environment, and they have continued to provide an exceptional service to our clients. From helping businesses put rapid measures in place to enable remote working, to speeding up the digitalisation of products and services - from building a new digital bank to redefining the way customers are serviced through digital channels to rapidly accelerating consumer goods and retailers' ecommerce capabilities - we have done some fantastic work to ensure businesses can endure the challenges they have faced, and thrive in the quickly changing landscape.

In March 2020 we put decisive measures in place in response to the pandemic, to increase the resilience of the Group given initial uncertainty about the impact of the pandemic on the business and the wider economy. We wanted to be proactive in responding to any market shock, rather than reactive, and therefore placed a small proportion of our team on furlough, and all team members including the directors accepted salary reductions over the months of April and May. In fact, the business performed very strongly through the pandemic and we have since voluntarily repaid the furlough grants to HMRC and reimbursed the pay reductions to team members. I am pleased to be able to report that the Company does not expect any material adverse impact from the pandemic over the long term.

In 2020 we also aimed to increase our brand presence and there have been notable increases in our online following, resulting in increased client leads that have led to direct project wins. The Group achieved multiple shortlistings and accolades over the course of 2020, winning three awards - "Best Web Design", "Best Web Development" and "Best Usability" at 'The Drum Recommends Digital' and a Drum B2B marketing award for "Digital Transformation Initiative of the Year", having designed and built a digital onboarding solution for our client Apex Group. Recently Elixirr was selected for the 2021 IAOP® Global Outsourcing 100 list for providing excellence in outsourcing advisory services, reinforcing Elixirr's role as a trusted advisor in this area.

Following on from our landmark year in 2020, we considered that 2021 was the right time to refresh our visual identity. We have distilled and evolved Elixirr's brand strategy through strategically led design, producing an identity that has our values at its core. Our brand platform has always been, and remains, 'The Challenger Consultancy'. Building on this foundational idea, we have produced a holistic identity which epitomises our approach in solving our clients' toughest business challenges. Our bold new aesthetic and brand architecture is designed to evolve and progress in parallel with the Group's significant growth ambitions.

PERFORMANCE

The Group delivered a record revenue result over the year of £30.3 million, a 24% increase from the 12 months ended 31st December 2019 (including our predecessor entity Elixirr Partners LLP through which the business traded prior to 1st July 2019). In 2020, we delivered three record months of revenue, specifically in June, July and September 2020 respectively. I am particularly pleased to report that we have continued to achieve exceptional growth in the US market with a 49% increase in revenues compared with the 12 months ended 31st December 2019 (including our predecessor entity Elixirr Partners LLP).

Our gross profit margin of 37% was three percentage points higher than in 2019 due to controlled staffing and higher rates of utilisation, plus lower travel and business development expenditure as a result of the restrictions in place.

Our Adjusted EBITDA of £9.7 million in the year ended 31st December 2020 represented 32% of revenue, demonstrating Elixirr's positioning as a high value, high returns business.

GROWTH

A key part of our business strategy is our four pillar growth model, and we made great progress in each aspect of these over the course of 2020:

1. Stretching our existing Partners

2. Promoting Partners from within

3. Hiring new Partners

4. Acquiring new businesses

My Partner team have performed exceptionally well in FY20 - with revenue and Adjusted EBITDA per client-facing Partner having increased in 2020 despite the difficult market environment. We have always incentivised our Partner team to grow sales, deepen existing client relationships and develop opportunities with new clients, through bonus and equity incentives. The IPO enabled the restructuring of the Company to provide increased equity participation to fully embed the entrepreneurial culture in the Partner team and ensure 100% alignment with shareholders' interests.

Our clients are at the core of what we do, and we aim to form long-term partnerships with them from initial engagements, based on the quality of our service and delivery. We deepened our client relationships throughout 2020, including signing a new volume deal with a large regional bank to be their digital and overall bank transformation partner until 2022. We have worked with multiple new clients during lockdown, demonstrating how successfully our team were able to embrace remote working and build new, remote relationships to deliver a seamless service to our clients, both existing and new.

As part of our organic growth strategy, we seek to grow the talent within our Group, with six of Elixirr's longstanding client facing Partners having worked in junior grades before making Partner. One of our experienced Principals was promoted to the Partner team in 2020, and we continue to focus on developing the grade, with targets tailored to prepare them for operating at Partner level. A further Principal was promoted to Partner effective January 2021. In 2020 we implemented an EMI Share Option Scheme that appropriately incentivises the Principal grade with options that vest for performance and on achieving promotion to Partner.

External hires with existing networks and industry expertise remained a key focus in 2020 and continues to be into 2021. The appointment of two new non-executive directors in July 2020 saw us deepen the strength of the Board, and we hired a new Partner during 2020 who brought invaluable experience in the financial services sector.

We recently welcomed three new Partners in the US, bringing a wealth of consulting and industry expertise to the team, and the US remains a key focus for both our organic and inorganic growth pillars. We have embedded relationships with our US clients and expanded two UK-based accounts into US projects and revenue, whilst also increasing our US-based team over the course of the year.

A key part of the Group's inorganic growth is building on our in-house expertise and expanding the variety of services we can offer to clients. In 2017 we acquired Den Creative Limited, a digital and creative business. This started our House of Brands strategy, giving boutique businesses and their passionate founders a unique platform for growth without giving up the clients, brand and culture they have spent so much time cultivating. The capital raised in our July 2020 IPO has given us the funds to acquire further complementary businesses to enhance one or more of Elixirr's capabilities, industries or geographical coverage.

In October 2020, the Group acquired Coast Digital Limited, a high-quality digital marketing firm. This acquisition has extended the Group's existing digital capabilities and complements our design and digital Den Creative business. We now have a full-service digital offering for clients, including technical, design and marketing. In addition, we can combine these services with our core consulting service and provide an integrated service to clients to enable them to realise the true potential of their digital aspirations.

In April 2021, simultaneously with the publication of our results, we are pleased to also announce the acquisition of The Retearn Group Limited, a procurement and transformation consultancy that enables clients to be as lean, efficient and profitable as possible. Their services enable clients to self-fund their transformation and growth aspirations (which are key areas our core consulting business works with our clients on) through savings elsewhere in the business. Their services will become increasingly vital as businesses face financial pressures in the aftermath of the pandemic, and they are a fantastic addition to our House of Brands and to the offerings we can provide to our clients.

Our clients' needs will always be the crucial factor in future acquisitions, as we continue to seek new expertise in growing markets. With support from a dedicated internal acquisition team, we have made strong progress in identifying opportunities and bringing targets through stages of our pipeline, shortlisting over 100 firms from a database of 30,000 between July and December 2020. These firms are at different stages in our pipeline, and will continue to be a priority focus of our strategy in 2021, and into the future.

OUTLOOK AND FUTURE DEVELOPMENTS

Trading in Q1 2021 has been strong with revenue increasing by more than 60% (including the impact of the acquisition of Coast Digital Limited) compared with Q1 2020. We have a strong pipeline of projects for Q2 and, although we have more limited visibility over the second half of 2021 due to the project-based nature of our work, the directors' current expectation is that 2021 revenue (including the impact of the acquisition of The Retearn Group Limited) will be in the range of £44-47 million with an Adjusted EBITDA margin of approximately 29%.

We formed Elixirr in the financial crisis, and 2020 proved our resilience during another testing period. With a fantastic team, and a reformed structure facilitated by our IPO, we are well placed to continue our positive trajectory, working towards my ultimate goal as Founder - to build the best consulting firm in the world.

Stephen Newton

Founder & CEO

9th April 2021

Financial Review1

GROUP RESULTS

The Board is pleased to report that the Group has performed exceptionally well this financial year and has continued to grow revenue despite the turbulent market conditions. The Group has seen organic growth in new and existing client accounts as we continue to build long-term, trusted relationships with our clients. The Group also successfully acquired Coast Digital Limited and grew margins whilst maintaining healthy cash generation, ending the year in a strong financial position. In the year ended 31st December 2020 the Group delivered revenue of £30.32m and adjusted EBITDA of £9.72m at a 32.1% margin.

1 The Group commenced trading on 1 July 2019. Prior to that date, the business was operated through a predecessor entity, Elixirr Partners LLP. Consequently, annual comparatives are not available for the Group.

REVENUE

Revenue increased to £30.32m in 2020 compared to £13.13m for the Group in the six-month period ending 31st December 2019. A more relevant comparison is the 24% increase in revenue from £24.5m in 2019 for the Group plus its predecessor entity, Elixirr Partners LLP.

The double-digit growth in revenues is testament to the Group's relentless focus on continuing to build long-term, trusted relationships with our clients by consistently delivering innovative, impactful solutions to solve our clients' key business challenges. The relevance of digital transformation and the solutions that we provide have become of critical importance to many businesses due to the impact of COVID-19.

COVID-19 has had minimal impact on trading with employees able to work remotely to continue to provide exceptional service to our clients. The ability to react quickly is embedded in the Elixirr culture and we have continued to support our clients with remote working and digital delivery, which ensured continued strong trading through the COVID-19 period.

Revenue growth was achieved in all geographic regions in which the Group operates, and we have continued to achieve exceptional growth in the US market with a 49% increase in revenues compared with the 12 months ended 31st December 2019 (including Elixirr Partners LLP). We are also pleased to report that revenue per client-facing Partner grew during the year, despite the difficult market environment, reflecting the high quality of our Partner team.

GROUP PROFITABILITY

The Group realised a gross profit margin of 36.9%, up 2.8 percentage points when compared with the 34.1% in the six months ended 31st December 2019. This improved profitability is the result of a combination of improved utilisation of consultants with tight control over service pricing and our cost base. In particular, the lockdown environment resulted in lower spend on travel and business development.

Adjusted EBITDA of £9.72m was delivered at an improved margin of 32.1% when compared with the 28.1% in the six months ended 31st December 2019. The increased EBITDA margin is because of the improved gross profit margin discussed above.

Profit before tax (after exceptional items) of £5.82m was also delivered at an improved margin of 19.2% compared with 13.2% for the six-month period ended 31st December 2019. Further detail of exceptional items is set out in note 5 of the Group and Company Financial Statements of this report.

NET FINANCE EXPENSE

Net finance expense of £0.66m includes preference dividends of £0.39m paid up to 9th June 2020 on the 10% non-redeemable cumulative preference shares which were extinguished as part of the Group restructure transactions explained further in note 23 of the Group and Company Financial Statements. As at 31st December 2020 the Group has no interest rate risk exposure as following the IPO, on 15th July 2020, the Group's bank loan was repaid in full from the proceeds of the Placing.

TAXATION

The Group's tax charge for the year was £1.0m, reflecting a lower effective tax rate compared with the six-month period ended 31st December 2019. This was largely due to utilisation of foreign losses from prior periods and allowable trademark amortisation deductions. The Group's cash tax payment in the year was £1.2m and includes section 455 tax payments which are recoverable in future periods. For further detail on taxation see notes 9 and 10 of the Group and Company Financial Statements. Adjusted profit after tax, used in calculating adjusted earnings per share, is shown after adjustments for the applicable tax on adjusting items as set out in note 6.

EARNINGS PER SHARE

Basic earnings per share was 11.73p and, after adjusting for the after-tax impact of adjusting items the adjusted basic earnings per share was 16.72p. Adjusting items and their tax impacts are set out in note 6.

CASH FLOW

The Group's net cash position increased to £17.5m compared with £3.0m at 31st December 2019. The Group enjoyed strong cash generation with net cashflow generated from operations of £12.2m in the year ended 31st December 2020, including some working capital timing benefit. The Group continues to see conversion of adjusted EBITDA less tax to operating cash at close to 100%.

Net cash utilised from investing activities reflects £2.3m cash consideration for the acquisition of Coast Digital plus additional cash consideration of £0.6m for surplus cash on acquisition (with a further £0.6m payable in 2021), net of cash of £1.4m acquired on acquisition.

Net cash generated from financing activities of £3.9m represents funds raised in the successful IPO in July 2020 (£18.6m), net of funds used to make loans to Partners (£9.8m, principally to enable them to acquire shares to the Company to align their interests with other shareholders), repayment of bank debt (£1.6m) and purchases of shares by the Employee Benefit Trust (£1.2m).

The Group is debt-free as at 31st December 2020 (other than its office lease capitalised under IFRS 16), having paid down its bank debt and loans from shareholders in July 2020.

STATEMENT OF FINANCIAL POSITION

Net assets as at 31st December 2020 totalled £70.7m (31st December 2019: £44.6m). The increase in net assets is as a result of the capital raised on IPO (£18.6m), retained profit for the year (£4.8m increase in retained earnings), conversion of preference shares to ordinary shares (£6.5m increase in merger relief reserve), partially offset by a capital reduction and share buy backs of £3.9m and Employee Benefit Trust share purchases of £1.2m.

DIVIDENDS

No interim or final ordinary dividends were paid in relation to the year ended 31st December 2019 and no interim ordinary dividend has been paid in relation to the year ended 31st December 2020. The Directors are proposing a final ordinary dividend in respect of the financial year ended 31st December 2020 of 2.2p per share.

Group Statement of Comprehensive Income

For the year ended 31st December 2020

All results relate to continuing operations.

The notes form part of these accounts.

Group and Company Statements of Financial Position

As at 31st December 2020

As permitted by section 408 of the Companies Act 2006, a separate statement of comprehensive income of the parent company has not been presented. The company's profit for the year was £9,397,979 (2019: £3,510).

The notes form part of these accounts.

The Financial Statements were approved by the Board of Directors on 9th April 2021 and were signed on its behalf by:

Stephen Newton

Director

Group Statement of Changes in Equity

For the year ended 31st December 2020

The notes form part of these accounts. Please refer to note 30 for explanations of reserve accounts.

Company Statement of Changes in Equity

For the year ended 31st December 2020

The notes form part of these accounts. Please refer to note 30 for explanations of reserve accounts.

Group and Company Cash Flow Statements

For the year ended 31st December 2020

The notes form part of these accounts.

Notes to the Financial Statements

1. Basis of preparation

1.1. General information

Elixirr International plc (the "Company") and its subsidiaries' (together the "Group") principal activities are the provision of consultancy services.

The Company is a limited company incorporated in England and Wales and domiciled in the UK. The address of the registered office is 12 Helmet Row, London, EC1V 3QJ and the company number is 11723404.

The Company was incorporated on 12th December 2018 but was dormant from this date until 1st July 2019. An acquisition occurred in July 2019 resulting in the Company no longer being dormant. As such, the comparative financial statements present the trading period from 1st July to 31st December 2019.

1.2. Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards and interpretations issued by the International Financial Reporting Standards Interpretations Committee ("IFRIC") as adopted by the European Union ("IFRS").

The presentational currency of these financial statements and the functional currency of the Group is pounds sterling.

1.3. Basis of consolidation

These financial statements consolidate the financial statements of the Company and its subsidiary undertakings as at 31st December 2020.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The acquisition method of accounting has been adopted. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

1.4. Measurement convention

The consolidated financial information has been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The preparation of the consolidated financial information in compliance with IFRS requires the use of certain critical accounting estimates and management judgements in applying the accounting policies. The significant estimates and judgements that have been made and their effect is disclosed in note 2.1.

1.5. Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. The Group's forecasts and projections, taking into account reasonable possible changes in trading performance, show that the Group has sufficient financial resources, together with assets that are expected to generate cash flow in the normal course of business. Accordingly, the Directors have adopted the going concern basis in preparing these consolidated financial statements.

2. Significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements of the Group and Company, which have been applied consistently to the period presented, are set out below.

2.1. Judgements and key sources of estimation uncertainty

The preparation of the financial statements requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, costs and revenue in the financial statements. Actual results could differ from these estimates. The judgements, estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.

Key sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of assets or liabilities within the next accounting period are:

- Revenue is recognised in line with time worked on a project unless the engagement is conditional or contingent. Management review accrued revenue to determine whether there is any likelihood of any amendments or provisions required based on project progress and relationship with the client.

- Full provision is made for loss making projects in the period in which the loss is first foreseen, and for the cost of conditional or contingent engagements prior to the event occurring. Estimation is required of costs to complete and the provision necessary.

- The Group's policy on recognising an impairment of the trade receivables balance is based on a review of individual receivable balances, their ageing and management's assessment of realisation. This review and assessment is conducted on a continuing basis and any material change in management's assessment of trade receivable impairment is reflected in the carrying value of the asset.

- Provisions for dilapidations are accrued based on estimation of the cost expected to crystallise on vacating leased premises.

- Amortisation period of trademarks is an estimate based on the expected useful life and is assessed annually for any changes based on current circumstances.

2.2. Revenue recognition

Revenue is measured as the fair value of consideration received or receivable for satisfying performance obligations contained in contracts with clients, excluding discounts and Value Added Tax. Variable consideration is included in revenue only to the extent that it is highly probable that a significant reversal will not be required when the uncertainties determining the level of variable consideration are resolved. This occurs as follows for the Group's various contract types:

- Time-and-materials contracts are recognised over time as services are provided at the fee rate agreed with the client where there is an enforceable right to payment for performance completed to date.

- Fixed-fee contracts are recognised over time based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided where there is an enforceable right to payment for performance completed to date. This is determined based on the actual inputs of time and expenses relative to total expected inputs.

- Performance-fee contracts are recognised when the right to consideration arises on having met the relevant performance-related elements.

- Contingent-fee contracts, over and above any agreed minimum fee, are recognised at the point in time that the contingent event occurs and the Group has become entitled to the revenue.

Where contracts include multiple performance obligations, the transaction price is allocated to each performance obligation based on its stand-alone selling price. Where these are not directly observable, they are estimated based on expected cost-plus margin. Adjustments are made to allocate discounts proportionately relative to the stand-alone selling price of each performance obligation.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increase or decrease in estimated revenues or costs are reflected in the statement of comprehensive income in the period in which the circumstances that give rise to the revision became known.

For time-and-materials and fixed-fee contracts, fees are normally billed on a monthly basis. For performance-fee and contingent-fee contracts, fees are normally billed and paid when entitlement to the revenue has been established. If the revenue recognised by the Group exceeds the amounts billed, a contract asset is recognised. If the amounts billed exceed the revenue recognised, a contract liability is recognised. Contract assets are reclassified as receivables when billed and the consideration has become unconditional because only the passage of time is required before payment is due.

The Group's standard payment terms require settlement of invoices within 30 days of receipt.

The Group does not adjust the transaction price for the time value of money as it does not expect to have any contracts where the period between the transfer of the promised services to the client and the payment by the client exceeds one year.

2.3. Business combinations, goodwill and consideration

Business combinations

The Group applies the acquisition method of accounting to account for business combinations in accordance with IFRS 3, 'Business Combinations'.

The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. All transaction related costs are expensed in the period they are incurred as operating expenses. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement.

The Group acquired the trade and some of the assets of Elixirr Partners LLP, an entity under common control, on 1st July 2019.

Transactions with entities under common control are not within the scope of IFRS 3 "Business Combinations". In these circumstances IAS 8 requires the Directors to develop a policy that is relevant to the decision-making needs of the users and that is reliable as there is no specific applicable standard or interpretation.

Having considered the nature of the transaction, noting that some assets were not transferred with the business and the anticipation of a future corporate transaction, the Directors chose to apply IFRS 3 as this was considered to be the most appropriate method to reflect the acquisition.

The fair value of the purchase consideration was £50,000,000 and the nature of the consideration was shares issued. The difference between the fair value of the purchase consideration and the fair value of the identifiable assets acquired and liabilities assumed was recognised as goodwill. The goodwill is attributable to the company's workforce and working methodologies and it is not deductible for tax purposes.

On 28th October 2020 the Group acquired 100% of the share capital and voting interests of Coast Digital Limited, a digital marketing business. The difference between the fair value of the purchase consideration of £4,999,521 and the fair value of the identifiable assets acquired and liabilities assumed of £2,143,683 was recognised as goodwill of £2,855,838. The goodwill is attributable to the company's workforce and working methodologies and it is not deductible for tax purposes. Please refer to note 15 for further details.

Goodwill

Goodwill is initially measured at cost and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the income statement.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired.

The Group performs impairment reviews at the reporting period end to identify any goodwill or intangible assets that have a carrying value that is in excess of its recoverable amount. Determining the recoverability of goodwill and the intangible assets requires judgement in both the methodology applied and the key variables within that methodology. Where it is determined that an asset is impaired, the carrying value of the asset will be reduced to its recoverable amount with the difference recorded as an impairment charge in the income statement.

In accordance with IAS 36, the Group has tested goodwill for impairment at the reporting date. No goodwill impairment was deemed necessary as at 31st December 2020. For further details on the impairment review please refer to note 14.

Contingent and non-contingent deferred consideration on acquisition

Contingent and non-contingent deferred consideration may arise on acquisitions. Non-contingent deferred consideration may arise when settlement of all or part of the cost of the business combination falls due after the acquisition date. Contingent deferred consideration may arise when the consideration is dependent on future performance of the acquired company.

Deferred consideration associated with business combinations settled in cash is assessed in line with the agreed contractual terms. Consideration payable is recognised as capital investment cost when the deferred or contingent consideration is not employment-linked. Alternatively, consideration is recognised as remuneration expense over the deferral or contingent performance period, where the consideration is also contingent upon future employment. Where the consideration is settled in shares, the consideration is classified as equity, it is not re-measured, and settlement is accounted for within equity. Otherwise, subsequent changes to fair value of the deferred consideration are recognised in the statement of comprehensive income.

2.4. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profits as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's and Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the reporting end date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

2.5. Foreign currency translation

Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in 'sterling', which is the Group's and Company's functional currency and presentation currency.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

2.6. Intangible assets

Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets acquired in a business combination are initially measured at their fair value (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any accumulated impairment losses.

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset under IAS 38. Such assets are only recognised if either:

- They are capable of being separated or divided from the company and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the company intends to do so; or

- They arise from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

The cost of such intangible assets is the fair value at the acquisition date. All intangible assets acquired through business combinations are amortised over their estimated useful lives. The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of the intangibles acquired in business combinations are as follows:

2.7. Tangible assets

Tangible fixed assets are stated at cost net of accumulated depreciation and accumulated impairment losses.

Costs comprise purchase costs together with any incidental costs of acquisition.

Depreciation is provided to write down the cost less the estimated residual value of all tangible fixed assets by equal instalments over their estimated useful economic lives on a straight-line basis. The following rates are applied:

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date. Low value equipment including computers is expensed as incurred.

2.8. Impairments of tangible and intangible assets

At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.

2.9. Employee benefits

Post-retirement benefits

The Group pays into defined contribution pension schemes on behalf of employees that are operated by third parties. The assets of the schemes are held separately from those of the Group in independently administered funds.

The amount charged to the income statement represents the contributions payable to the scheme in respect of the accounting period.

Share-based payments

The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of share options, is recognised as an employee benefit expense in the statement of profit and loss.

The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non-market based vesting conditions) at the grant date. Fair value is measured by use of Black Scholes option valuation model.

At the end of each reporting period the assumptions underlying the number of awards expected to vest are adjusted for the effects of non-market based vesting conditions to reflect conditions prevailing at that date. The impact of any revisions to the original estimates is recognised in the statement of profit or loss, with a corresponding adjustment to equity.

Please refer to note 25 for further details.

2.10. Earnings per share

The Group presents basic and diluted earnings per share on an IFRS basis. In calculating the weighted average number of shares outstanding during the period, any share restructuring is adjusted to allow comparability with other periods.

The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, which arise from share options outstanding.

2.11. Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on trade date when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are recognised initially at fair value plus, in the case of a financial instrument not a fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments are de-recognised on the trade date when the Group is no longer a party to the contractual provisions of the instrument.

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.

Trade and other receivables and trade and other payables

Trade and other receivables are recognised initially at transaction price less attributable transaction costs. Trade and other payables are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any expected credit losses in the case of trade receivables. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of interest for a similar debt instrument.

Unbilled revenue

Unbilled revenue is recognised at the fair value of consultancy services provided at the reporting date reflecting the stage of completion (determined by costs incurred to date as a percentage of the total anticipated costs) of each assignment. This is included in contract assets.

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only on the cash flow statement.

Preference shares

Preference shares, which are non-redeemable with non-discretionary dividends, have both equity and liability elements.

The liability element is calculated as the present value of the future contractual cash flows, discounted at a market rate of interest, estimated at 10%. This amount is recorded as a liability on an amortised cost basis until extinguished or converted. The equity element is calculated as the residual value (i.e. the difference between the proceeds from the issue of the shares less the liability component) and is recognised and included in shareholders' equity.

The dividends on the preference shares are recognised in the profit or loss as finance costs.

Contingent consideration

Contingent deferred consideration may arise on acquisitions where the consideration is dependent on the future performance of the acquired company. In circumstances where the acquiree will receive contingent consideration in a variable number of shares and is not employment-linked, the Group has recognised a financial liability at the fair value of the contingent consideration. Subsequent changes to the fair value of the contingent consideration are recognised in the statement of comprehensive income.

At the balance sheet date the contingent consideration liability represents the fair value of the remaining contingent consideration valued at acquisition. The contingent consideration liability for acquisitions under IFRS 3 contains estimation uncertainty as they relate to future expected performance of the acquired business. In estimating the fair value of the contingent consideration, management have assessed the potential future cash flows of the acquired business and the likelihood of an earn-out payment being made.

2.12. Provisions

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

2.13. Right-of-use assets: Leases

The Group leases two properties in the UK from which it operates.

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

- Leases of low value assets; and

- Leases with a duration of twelve months or less.

Lease liabilities are measured at the present value of contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. This has been estimated at 5.0 per cent. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

- Lease payments made at or before commencement of the lease;

- Initial direct costs incurred; and

- The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations).

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to be made over the revised term, which are discounted at the same discount rate that applied on lease commencement. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

2.14. Financing income and expenses

Financing expenses comprise interest payable, finance charges on shares classified as liabilities, finance leases recognised in the income statement using the effective interest method and the unwinding of the discount on provisions.

Financing income includes interest receivable on funds invested.

Interest income and interest payable are recognised in the statement of comprehensive income as they accrue, using the effective interest method.

2.15. Standards issued but not yet effective

At the date of authorisation of these financial statements, there is expected to be no material impact to the Group or Company's financial statements from IFRSs, IFRICs or other standards or interpretations that have been issued but which are not yet effective.

At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRSs that have been issued but are not yet effective and had not yet been adopted by the UK Endorsement Board:

The new standards, listed above, are not expected to have a material impact on the Group or Company in the current or future reporting periods and on foreseeable future transactions.

3. Alternative performance measures

In order to provide better clarity to the underlying performance of the Group, Elixirr uses adjusted EBITDA and adjusted earnings per share as alternative performance measures. These measures are not defined under IFRS. These non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, but have been included as the Directors consider adjusted EBITDA and adjusted earnings per share to be a key measures used within the business for assessing the underlying performance of the Group's ongoing business across periods. Adjusted EBITDA excludes from operating profit, non-cash depreciation and amortisation charges and non-recurring exceptional costs. Adjusted EPS excludes from profit after tax, amortisation charges and non-recurring exceptional items and their related tax impacts. Please refer to note 6 for reconciliations to Alternative Performance Measures ("APMs").

4. Segment reporting

IFRS 8 requires that operating segments be identified on the basis of internal reporting and decision-making. The Group is operated as one global business by its executive team, with key decisions being taken by the same leaders irrespective of the geography where work for clients is carried out. Management therefore consider that the Group has one operating segment. As such, no additional disclosure has been recorded under IFRS 8.

The Company is a holding Company operating in the UK with its assets and liabilities given in the Company Statement of Financial Position. Other Company information is provided in the other notes to the accounts.

5. Profit before taxation

The following items have been included in arriving at profit before taxation:

The exceptional items totalling £729,573 in 2020 include non-recurring costs associated with the pre-initial public offering (IPO) capital restructuring, IPO on the AIM market (refer to note 23) and EMI share option scheme (refer to note 25). The exceptional items totalling £265,042 in 2019 include costs associated with the acquisition that occurred in July 2019 and a strategic review of the options for the Group.

During the year the Group obtained the following services from the Company's auditors as detailed below:

6. Reconciliations to Alternative Performance Measures ("APMs")

In order to provide better clarity to the underlying performance of the Group, Elixirr uses adjusted EBITDA and adjusted earnings per share as alternative performance measures. These measures are not defined under IFRS. These non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, but have been included as the Directors consider adjusted EBITDA and adjusted earnings per share to be key measures used within the business for assessing the underlying performance of the Group's ongoing business across periods. Adjusted EBITDA excludes from operating profit, non-cash depreciation and amortisation charges and non-recurring exceptional costs. Adjusted EPS excludes from profit after tax, amortisation charges and non-recurring exceptional items and their related tax impacts.

The table below sets out the reconciliation of the Group's adjusted EBITDA and adjusted profit before tax from profit before tax.

The table below sets out the reconciliation of the Group's adjusted profit after tax to adjusted profit before tax.

Adjusted profit after tax is used in calculating adjusted basic and adjusted diluted EPS. Adjusted profit after tax is stated before adjusting items and their associated tax effects.

Adjusted EPS is calculated by dividing the adjusted profit after tax for the period attributable to Ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Adjusted diluted EPS is calculated by dividing adjusted profit after tax by the weighted average number of shares adjusted for the impact of potential ordinary shares.

Potential Ordinary shares are treated as dilutive when their conversion to Ordinary shares would decrease EPS. Please refer to note 12 for further detail.

7. Net finance expense

8. Profit on disposal of subsidiary

On 31st July 2019, Medius Consulting Limited, a direct subsidiary company, was sold back to the previous majority shareholder.

9. Taxation on profit on ordinary activities

Analysis of tax charge:

Numerical reconciliation of income tax expense:

The tax assessed on the profit on ordinary activities for the year is lower than the standard rate of corporation tax in the UK of 19%.

10. Deferred tax

Net deferred tax liability/(asset)

The balances comprise temporary differences attributable to:

The deferred tax liability on intangible assets relates to trademarks and customer relationships and those on property, plant and equipment relate to accelerated capital allowances.

The deferred tax asset recognised represents the future tax effect of share-based payment charges in respect of options that are yet to vest. Deductions in excess of the cumulative share-based payment charge recognised in the statement of comprehensive income are recognised in equity.

Movements in deferred tax:

11. Ordinary dividends

No interim or final ordinary dividends were paid in relation to the year ended 31st December 2019 and no interim ordinary dividend has been paid in relation to the year ended 31st December 2020. The Directors are proposing a final ordinary dividend in respect of the financial year ended 31st December 2020. Please refer to post balance sheet events note 29 for final ordinary dividend proposed.

12. Earnings per share

The Group presents non-adjusted and adjusted basic and diluted earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS takes into consideration the Company's dilutive contingently issuable shares. The weighted average number of ordinary shares used in the diluted EPS calculation is inclusive of the number of share options that are expected to vest subject to performance criteria, as appropriate, being met.

The profits and weighted average number of shares used in the calculations are set out below:

13. Employees and directors

The monthly average number of persons employed by the Group during the year, analysed by category, was as follows:

The average number of persons employed and staff costs includes both executive and non-executive directors.

The aggregate payroll costs of these persons were as follows:

Defined contribution pension schemes are operated by third parties on behalf of the employees of the Group. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension charge represents contributions payable by the Group to the funds and amount to £251,467 (2019: £133,170) for the period ended 31st December 2020. Contributions amounting to £36,162 (2019: £34,550) were payable to the fund as at 31st December 2020 and are included in creditors.

Key management personnel include the directors and senior managers across the Group who together have authority and responsibility for planning, directing and controlling the activities of the Group. The total compensation (including employers' national insurance) paid in respect of key management personnel for services provided to the Group is as follows:

There was no share-based payment charge in respect of key management personnel.

Details of the Directors' remuneration, including salary, bonus, share option awards, pension and other benefits are included in the tables within the Directors' Report.

14. Goodwill and intangible fixed assets

The Company has no intangible assets.

Goodwill

Goodwill arising on the acquisition of a business in 2019 relates to the acquisition of Elixirr Consulting Limited on 15th July 2019.

Goodwill on acquisition of a business in the current year represents the goodwill on acquisition of Coast Digital Limited and was calculated as the fair value of initial consideration paid less the fair value of the net identifiable assets at the date of the acquisition (see note 15).

Goodwill impairment review

The breakdown of goodwill by acquisition is listed below:

Following initial recognition, goodwill is subject to impairment reviews, at least annually, and measured at fair value less accumulated impairment losses. Any impairment is recognised immediately in the consolidated statement of comprehensive income and is not subsequently reversed.

Key assumptions used in value in use calculation

The key assumptions for the value in use calculation are those regarding:

The carrying values of goodwill for Elixirr Consulting Limited and Coast Digital Limited are reflected in the above table and are calculated as the fair value of the consideration payable for the acquisition less the net assets on acquisition. No impairment is indicated for either Elixirr Consulting Limited or Coast Digital Limited using the value in use calculation.

Number of years of cash flows used and budgeted growth rate

The recoverable amount of the cash generating unit ("CGU") is based on a value in use calculation using specific cash flow projections over a five-year period and a terminal growth rate thereafter.

The budget for the following financial year forms the basis for the cash flow projections for a CGU. The cashflow projections for the four years subsequent to the budget year reflect the Directors' expectations based on market knowledge, numbers of new engagements and the pipeline of opportunities.

Discount rate

The Group's post-tax weighted average cost of capital has been used to calculate a discount rate of 10% for the Group and 17% for Coast Digital Limited. This reflects current market assessments of the time value of money for the period under review and the risks specific to the Group and company acquired.

Terminal growth rate

An appropriate terminal growth rate is selected, based on the Directors' expectations of growth beyond the five-year period. The terminal growth rate used is 2%.

Sensitivity to changes in assumptions

With regard to the value in use assumptions, the Directors believe that reasonably possible changes in any of the above key assumptions would not cause the carrying value of the unit to exceed its recoverable amount. In forming this view, the Directors have considered the following:

Customer relationships

Current year additions represent the fair value of customer relationships from the acquisition of Coast Digital Limited. Refer note 15 for further details.

The fair value has been determined by applying the Multi-Period Excess Earnings method to the cash flows expected to be earned from customer relationships. The key management assumptions are in relation to forecast revenues, margins and discount factors. The fair value represents the present value of the earnings the customer relationships generate.

A useful economic life of 10 years has been deemed appropriate based on the average realisation rate of cumulative cash flows. The projected cash flows have been discounted over this period. The amortisation charge since acquisition is recognised within administrative expenses.

15. Business combinations

On 28th October 2020 the Group acquired 100% of the share capital and voting interests of Coast Digital Limited ("Coast Digital"), a digital marketing business.

The acquisition extends the existing digital capabilities of the Group, so that the Group can offer a full-service digital capability to its clients. The acquisition also complements Elixirr's creative and technical business, Den Creative Limited.

The Group acquired Coast Digital Limited for a total consideration of £5.0 million, consisting of:

Of the £5.0 million consideration, £2.9 million was paid during the year and £1.1 million was satisfied through the issue of Ordinary shares (see note 23). The remaining £1.0 million is recorded within liabilities, of which £0.6 million is recorded within current liabilities and £0.4 million in non-current liabilities (refer note 22).

The earn-out consideration of £0.4 million has been estimated by management based on anticipated future EBITDA and the impact of discounting is considered to be immaterial.

The Ordinary shares issued pursuant to the acquisition will be subject to the same restrictions as certain other shareholders of the Company, as described in the Company's IPO Admission Document. These restrictions consist of a lock-in arrangement until 8th July 2021 and certain limitations to the sale of shares until 8th July 2024.

Included within exceptional items is an amount of £156,216 for stamp duty, legal and advisory fees in relation to the acquisition.

Coast Digital contributed £983,997 to the Group's revenue and £166,264 to the Group's profit before tax for the period from the date of acquisition to the 31st December 2020. If the acquisition of Coast Digital had been completed on 1st January 2020, Group revenues for the year would have been £34.1 million and Group profit before tax would have been £6.4 million.

In calculating the goodwill arising, the fair value of the net assets of Coast Digital have been assessed, and there were no fair value adjustments deemed necessary, other than for the recognition of customer relationship intangibles and the related deferred tax liability. Customer relationships were assessed to be separately identifiable assets, recognised at fair value and are included within intangible assets below. Refer to note 14 for further details.

The table below sets out the amounts recognised as of the acquisition date for each major class of assets acquired and liabilities assumed, the consideration and goodwill on the acquisition of Coast Digital:

16. Property, plant and equipment

The Company has no property, plant and equipment.

The lease liability in respect of the right-of-use asset was £5,285,741 (2019: £5,711,949).

17. Investments

The Group has no investments.

The undertakings in which the Company's interest at the year-end is 20 percent or more are as follows:

* Elixirr Consulting AI Limited was struck off the Companies House register on 19th January 2021 and dissolved on 26th January 2021.

18. Receivables

As at 31st December 2020, the Company was due £2,975,118 from other Group companies including £10,000 from Elix-irr Consulting Services (South Africa) Limited and £2,965,118 from Elixirr Consulting Limited for a Preference share dividend, management charges and an Ordinary share dividend, net of costs incurred by Elixirr Consulting Limited on behalf of the Company for the period.

Loans to shareholders represent amounts owed to the Company and Elixirr Consulting Limited by shareholders who are senior employees of the Group. The loans to shareholders are interest-free and expected to be repaid beyond one year.

Non-current other receivables include property deposits and section 455 tax receivable.

Trade receivables are non-interest bearing and receivable under normal commercial terms. Management considers that the carrying value of trade and other receivables approximates to their fair value. The carrying value of non-current other receivables and loans to shareholders is considered to be a reasonable approximation of their fair value, but has not been discounted to present value.

The impairment loss included in administrative expenses in the statement of comprehensive income for the period in respect of bad and doubtful trade receivables was £20,416 (2019: £14,471).

The expected credit loss on trade and other receivables was not material at the current or prior year ends. For analysis of the maximum exposure to credit risk at 31st December 2020, please refer to note 27.