MNO.L Regulatory News (MNO)

Maestrano Group plc

Andrew Pearson, CEO

c/o IFC

Grant Thornton (Nominated Adviser)

Colin Aaronson / Jamie Barklem / Niall McDonald

+44 (0)20 7383 5100

Arden Partners (Broker)

Ruari McGirr / Ciaran Walsh

+44 (0)20 7614 5900

IFC Advisory Limited (Financial PR & IR)

Graham Herring / Zach Cohen

graham.herring@investor-focus.co.uk

Zach.cohen@investor-focus.co.uk

+44 (0)20 3934 6630

The directors present their strategic report on the consolidated entity (referred to hereafter as the 'Group') consisting of MaestranoGroup plc (referred to hereafter as the 'Maestrano', 'Company' or 'parent entity') and the entities it controlled at the end of, or during,the year ended 30 June 2019.

The strategic report includes the following sections:

Cautionary statement regarding forward-looking statementsThis document contains certain forward-looking statements. These forward-looking statements include references to matters that arenot historical facts or are statements regarding the Company's intentions, beliefs or current expectations concerning, among otherthings, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies, and the industries in which theGroup operates. Forward-looking statements are based on the information available to the directors at the time of preparation of thisdocument, and will not necessarily be updated subsequent to the issue of this document. The directors can give no assurance thatthese expectations will prove to be correct. Due to inherent uncertainties, including both economic and business risk factors underlyingsuch forward-looking information, actual results may differ materially from those expressed or implied by these forward-lookingstatements.

Principal activities

Maestrano is a United Kingdom ('UK') incorporated software company with operations in Australia (main country of operation),Japan and the UK. Maestrano offers a patented cloud-based platform for master data management and business analytics, togetherwith specialist hardware and software for capturing, analysing and reporting on large datasets within the transport sector, employingsophisticated artificial intelligence algorithms.

1. Chairman's statement

The financial year 2018-19 was characterized by 10 months of strong execution and delivery in line with both our business plan andmarket expectations, followed by the unexpected news that our major US bank customer had decided to focus on other areas of itstechnology and close their Maestrano driven platform.

Revenue for the year was down by 7% compared to 2017-18 but was close to market expectations and our business plan. Expenseswere driven by the requirements of the contracts we held through the year, and as such were also in line with our business plan.From May onwards the Company moved to curtail headcount and expenses significantly as we began to review strategy and futureoptions. 

I would like to express the board's appreciation for the exceptional dedication and hard work of our teams around the world indelivering a live and scalable data management and data sharing solution for one of the world's leading banks. We can be proud ofwhat we achieved in product and technology terms. 

On 23 September 2019, the Group announced the signing of a sale and purchase agreement to acquire, subject inter alia toShareholder consent, the entire issued share capital of Airsight Holdings Pty Ltd ("Airsight"). Airsight offers engineering surveyingservices with digital recording devices and a reason for the acquisition was that the Airsight software performs a similar function tothat of Maestrano, capturing, analysing and reporting on large datasets within the transport sector, but with the addition of sophisticatedartificial intelligence algorithms. On 31 October 2019, our Shareholders approved the acquisition. A copy of the circular convening thegeneral meeting at which the acquisition of Airsight was approved can be found on the investor section of the Company's website,www.maestrano.com.

The board has confidence in the long-term outlook for shareholder value, based on progress achieved by Airsight since the acquisition.  

Ian BudderyChairman27 November 2019

2. Review of operations by the chief executive officer

Maestrano Group Plc ("the group") provides a Master Data Management Platform that enables medium to large enterprises to offer adifferentiated service to their SMB customers, who benefit from data sharing between existing popular Cloud applications and theEnterprise's services, together with custom data analytics, thus increasing customer engagement and business volume.

Maestrano was able to make good progress throughout the majority of year to 30 June 2019 until the point that our major US bankingcustomer elected to focus on other areas of its technology and accordingly took the decision to close their Maestrano driven platform.

Overview of resultsRevenue for the year was close to market expectations, following the Company taking a cautious view of outlook in prior tradingstatements.

Maestrano signed a multi-phase contract with a major USA bank in December 2017 for a platform roll out that was intended eventuallyto reach all of its 4 million small to medium business ("SMB") customer base. The platform was successfully delivered and taken livein November 2018, a major achievement for a small company working with such a prestigious, large and very well-known US bank.

The majority of the revenue for year emanated from the major USA bank contract, with revenues also being gained from a contract withan Australian bank, which, as announced, also ended subsequently to the end of the financial year. Revenues from the company's twoother active contracts were less than 10% of revenue during the year.

The company recruited for sales, engineering and customer support specialists to service these contracts, incurring the expectedsignificant expenses as a result. The teams in place performed very strongly throughout the year and leading up to the decision takenby the US bank in May 2019. The losses for the year were in line with expectations and were required to enable contracts withpreviously expected future revenues to be serviced.

Ongoing operationsThe Company operated from offices in London, Sydney and New York City. Following the decision taken by the major US bank in Maythe company significantly reduced headcount and expenses to conserve cash, closed the London office on the expiration of lease inJune 2019, and subsequently also ceased operations in New York following the end of the financial year. As of 30 June 2019, theCompany had cash and receivables totalling £2,739,986. 

OutlookThe Company spent significant time and effort from May 2019 onwards and into the subsequent financial period assessing its strategyand generating various options, as well as seeking to conserve cash, and accordingly investors should note that the revenue and profitoutlook for the year to 30 June 2020 is largely subject to events occurring after the end of the year to 30 June 2019 and in particularthe acquisition of Airsight that was approved by shareholders on 31 October 2019. It is noted that revenue from the US bank continuedbeyond 30 June 2019 but will cease during the year ending 30 June 2020.

Andrew PearsonChief Executive Officer27 November 2019

3. Principal risks and uncertainties

The management of the business and the execution of the Group's growth strategies are subject to a number of risks which couldadversely affect the Group's future development. The following is not an exhaustive list or explanation of all risks and uncertaintiesassociated with the Group, but those considered by management to be the principal risks:

Risks relating to the Group and the industry in which it operates

Dependence on major clientsThe Group's future growth relies on new sales to rail and road network owners in multiple countries. These owners typically havecomplex procurement arrangements which include product trials and competitive tenders. This risk is mitigated by the Group's plan toenter into reseller agreements with Engineering Consulting firms, who will in effect become the clients.

Business strategyAlthough the Group has a clearly defined strategy, there can be no guarantee that its objectives will be achieved or that the Group willachieve the level of success that the Company's directors expect. Therefore, the Group may decide to change aspects of its strategyas needed. The Group's ability to implement its business strategy successfully may be adversely impacted by factors that the Groupcannot currently foresee, such as unanticipated market forces, costs and expenses or technological factors. Should it be unsuccessfulin implementing its strategy or should it take longer than expected to implement, the future financial results of the Group could benegatively impacted. This risk is mitigated by the continual review of the business performance to its plan and that changes are made toensure the Group has sufficient liquidity to pursue its current plan.

Technological changes

Generally, product markets are exposed to rapid technological change, changes in use, changes to customer requirements andpreferences, and services employing new technologies and the emergence of new industry standards and practices. The Groupoperates in a market with such changes which have the potential to render the Group's existing technology and products competitivelyimpaired.To successfully remain competitive, the Group will ensure continued product improvement, and the development of new markets andcapabilities to maintain a pace congruent with changing technology. This added strain may stretch the Group's capital resources whichmay adversely impact the revenues and profitability of the Group. The Group's success is dependent on the ability to effectivelyrespond and adapt to technological changes and changes to customer preferences. There can be no assurance that the Group will beable to effectively anticipate future technological changes or changes in customer preferences. Furthermore, there is also noassurance that the Group will have sufficient financial resources to effectively respond in a timely manner if such a change is anticipated.

CompetitionThere is no guarantee against new entrants or current competitors providing superior technologies, products or services to the market.There is no certainty that new entrants or current competitors will not provide equivalent products for a lower price. The Group may beforced to make changes to one or more of its products or to its pricing strategy to effectively respond to changes in customerpreferences in order to remain competitive. This may impact negatively on the Group's financial performance. The Group will continue toreview its competitive position and adjust its business plan to maintain relevance to its customer's requirements.

Inability to contract with customers on the most favourable terms to the GroupThe Group contracts with a wide variety of companies and partners, many of which are in strong negotiating positions and have greaterfinancial resources than the Group. The Group may in the future have limited scope for negotiation of the price or contract terms with itssome of its major clients.

The Group's software may not perform as expected and the Group could be at risk of defects which adversely affect its customers

There is no guarantee that the Group's platforms will perform as intended. Costs spent on developing the Platform may therefore not berecouped and this may result in reduced profitability for the Group. As the Group's platforms are complex, they may contain defects orvulnerabilities which may not be detected until after its deployment to major customers. To mitigate this risk the Group has implementedapplicable internal code review and testing processes. The software is then subject to customer acceptance testing and an ongoing highlevel of technical support. 

Data security and data privacyThe Group is subject to data and privacy regulations, particularly General Data Protection Regulation ('GDPR'). Failure to comply withlegal or regulatory requirements relating to data security or data privacy in the course of the Group business activities, results inreputational damage, fines or other adverse consequences, including criminal penalties and consequential litigation, adverse impact onthe Group's financial results or unfavourable effects on the Group's ability to do business. To mitigate this risk the Group hasimplemented policies and processes to ensure data is held securely and privacy is maintained.

Dependence on key executives and personnel

The Group is dependent on a small number of key executives. In addition, the future performance of the Group will, to some extent,be dependent on its ability to retain the services and personal connections or contacts of key executives and to attract, recruit,motivate and retain other suitably skilled, qualified and industry experienced personnel to form a high calibre management team. Suchkey executives are expected to play an important role in the development and growth of the Group, in particular by maintaining goodbusiness relationships with regulatory and governmental departments and essential partners, contractors and suppliers. The failure toappoint or retain such people could adversely affect the Group.

Ability to recruit and retain skilled personnelThe Group believes that it has the appropriate incentive structures to attract and retain the calibre of employees necessary to ensurethe efficient management and development of the Group. However, any difficulties encountered in hiring appropriate employees andthe failure to do so, or a change in market conditions that renders current incentive structures ineffective, may have a detrimental effectupon the trading performance of the Group. The ability to attract new employees with the appropriate expertise and skills cannot beguaranteed.

Financial controls and internal reporting proceduresThe Group's future growth and prospects will depend on its ability to manage growth and to continue to maintain, expand andimprove operational, financial and management information systems on a timely basis, whilst at the same time maintaining effective costcontrols. Any damage to, failure of or inability to maintain, expand and upgrade effective operational, financial and managementinformation systems and internal controls in line with the Group's growth could have a material adverse effect on the Group's business,financial condition and results of operations. The Group mitigates this through the implementation of internal controls as well as thereview of monthly financial performance by the Board.

Economic uncertainty

Any economic downturn either globally or locally in any area in which the Group operates may have an adverse effect on demand forthe Group's products. A more prolonged downturn may lead to an overall decline in sales. Economic uncertainty might have anadverse impact on the Group's operations and business results. To mitigate this risk the Group will monitor both the Group'sperformance and general market conditions on a monthly basis. The Group will also maintain adequate liquidity to sustain short termfluctuations in market conditions. 

Brexit

Brexit is the withdrawal of the UK from the European Union ('EU'), following a referendum held in 2016. Failure to prepare for the UK'sdeparture from the EU causes disruption to and creates uncertainty around the Group's business including: the ability to recruit; aswell as impacting the Group's relationships with existing and future customers, suppliers and colleagues. These disruptions anduncertainties could have an adverse effect on the Group's business, financial results and operations. Given the vast majority of theGroup's operations were outside UK and indeed the EU and similarly those of Airsight the recent new acquisition are as well, thedirectors do not believe Brexit will have a significant impact on the Group.

4. People

 Equal opportunityThe Group is committed to an active equal opportunities policy. It is the Group's policy to promote an environment free fromdiscrimination, harassment and victimisation, where everyone receives equal treatment regardless of gender, colour, ethnic or nationalorigin, disability, age, marital status, sexual orientation or religion. Employment practices are applied which are fair, equitable andconsistent with the skills and abilities of the employees and the needs of the Group.

Disabled employeesApplications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned.In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues andthat appropriate re-training is arranged. It is the policy of the Group that the training, career development and promotion of disabledpersons should, as far as possible, be identical with that of other employees.

This report is made in accordance with a resolution of directors.

On behalf of the directors

CORPORATE GOVERNANCE

The directors acknowledge the importance of high standards of corporate governance and intend, given the Group's size and theconstitution of the Board, to comply with the principles set out in the QCA Corporate Governance Code published by theQuoted Companies Alliance in April 2018 (the 'QCA Code') and, where it does not comply with any of its recommendations, to explainthe reasons therefor.

In the Board's opinion, the Group currently complies with the ten principles of the QCA Code which, together, are designed to delivergrowth, maintain a dynamic management framework and build trust. As the Group expands, the Board will review its corporategovernance framework and will consider adoption of additional principles and practices including from the UK Corporate GovernanceCode 2018 published by the Financial Reporting Council (the 'UK Corporate Governance Code').

Read more in our Corporate Governance Statement of Compliance with the QCA Corporate Governance Code at the following websitelink: https://maestrano.com/wp-content/uploads/2018/09/Maestrano-Statement-of-QCA-compliance.pdf

On behalf of the directors

Ian BudderyChairman 

27 November 2019

DIRECTORS' REPORT

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group')consisting of Maestrano Group plc (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of,or during, the year ended 30 June 2019.

Directors

The following persons were directors of Maestrano Group plc since incorporation on 6 December 2017 and up to the date of this report,unless otherwise stated:

Ian Buddery, aged 62 - Non-Executive ChairmanIan has extensive public company experience and a long background in the telecommunications and financial services industries inboth international and local markets. Ian has founded multiple companies; obtained venture capital and angel funding, performedtwo IPOs, six acquisitions and two significant trade sales. Ian was the founder, CEO and Executive Chair of eServGlobal, founded in1991 and listed on the Australian Securities Exchange ('ASX') in 2000 and the AIM in 2004. (LSE: ESG).Ian was appointed a Director of Maestrano Pty Ltd in October 2013.

Andrew Pearson, aged 57 - Executive Director and Chief Executive OfficerAndrew is a seasoned CEO who successfully scaled global a cloud software company in the US, EMEA and APAC markets, achievinga ten-fold increase in recurring subscriber US$ revenue. Prior to this he achieved similar results at Intralinks, a SaaS vendor ofinformation exchange solutions and prior to Maestrano was CEO of AIM listed LIghtwave (LSE AIM: LWRF).Andrew was appointed as Managing Director of Maestrano Pty Ltd on 3 December 2018.

John Davis, aged 50 - Independent Non-Executive DirectorJohn has been working with banks and SMBs for nearly 20 years. Based in London, John was the Marketing and Product Directorfor Barclays Business from 2005-2010 before setting out on an entrepreneurial career as the co-owner and Managing Director ofBusiness Centric Services Group Limited, an award winning, high growth business, helping banks and telecommunication companiesto enhance their digital engagement with and propositions for small and medium sized businesses. He also acted as Chair and coownerof two other London based FinTech start-ups. John completed the sales of all three of these companies during 2016 and 2017.

Jonathan Macleod, aged 62 - Independent Non-Executive DirectorJonathan is a practising Chartered Accountant and Financial Adviser with over 30 years of experience in the Financial Services andSoftware industries in both NZ and Australia. He has held senior executive positions within the National Bank of NZ and RabobankAustralia/NZ. Jonathan was the Chief Financial Officer of ASX listed company eServGlobal from 2008 to 2010.

Stephane Ibos, aged 34 - Non-Executive DirectorStephane is qualified in Engineering, Programs and Business Management. Previously a Business Unit manager for Thales Australia,Stephane has had full responsibility for a business division and large program teams, with large scale projects and budgets in thegovernment and defence sectors. Stephane has a Master's degree in Engineering from the Grande Ecole Telecom ParisTech.Stephane is the co-founder of Maestrano and has been a Director of Maestrano Pty Ltd since August 2011.

Nicholas Smith aged 34, Executive Director and Vice President Global Sales

Following the acquisition of Airsight, Nick Smith was appointed a director of the Company on 7 November 2019. Nicholas co-foundedAirsight Australia in 2012 and operated as 'Chief Pilot' for 4 years. Nicholas has extensive experience in technology services, hardware,drones, sales, marketing and strategic business development and has proven his ability to lead and operate a diverse, geographicallydispersed technical and operational team.

Craig Holden, aged 55 - Executive Director, Chief Financial Officer and Company SecretaryCraig is an experienced Chief Financial Officer, with over 20 years' experience in rapidly growing, technology businesses that addressglobal markets. These businesses cover a number of industry sectors including mining, communications, enterprise software, wholesaledistribution and industrial systems and services.Craig joined Maestrano as Chief Financial Officer in July 2016 and resigned on 23 August 2019.

Principal activities

Information on the Group's principal activities are disclosed in the strategic report.

Results and dividends

The loss for the Group after providing for income tax and non-controlling interest amounted to £2,679,754 (30 June 2018: £1,948,703).

No dividend has been paid during the financial year and the directors do not recommend a final dividend in respect of the year ended30 June 2019 (30 June 2018: £nil).

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and financial position aregiven in the strategic review and this directors' report. In addition, the notes to the financial statements include details on theGroup's borrowing facilities and its objectives, policies and processes for managing its capital; its financial risk management objectives;and its exposures to credit risk and liquidity risk. 

The Group has considerable financial resources together with a member base split across different geographic areas. The Group'sforecasts and projections, taking into account reasonably possible changes in trading performance and the newly acquired business,show that the Group should be able to operate for the foreseeable future with the current working capital. As a consequence, thedirectors believe that the Group is well placed to manage its business risks successfully. 

The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group haveadequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basisof accounting in preparing the financial statements. 

Matters subsequent to the end of the financial year

On 28 August 2019 the company announced an Australian banking customer would not proceed with a custom platform, The projectedsubscriber income from the platform was not a significant part of Maestrano's revenue forecast and accordingly this change of itselfwould have a minimal impact on revenue outlook for the next financial year. 

On 23 September 2019, the Group announced the signing of a sale and purchase agreement to acquire, subject inter alia toShareholder consent, the entire issued share capital of Airsight Holdings Pty Ltd ("Airsight"). Airsight offers engineering surveyingservices with digital recording devices and a reason for the acquisition was that the Airsight software performs a similar function to thatof Maestrano, capturing, analysing and reporting on large datasets within the transport sector in this case, but with the addition ofsophisticated artificial intelligence algorithms. On 31 October 2019, the Shareholders approved the acquisition and the issue of up to73,383,375 new shares in Maestrano Group plc. The purchase price allocation exercise is not yet complete and therefore more detailedbusiness combination disclosures cannot be made at this stage.

No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the Group'soperations, the results of those operations, or the Group's state of affairs in future financial years.

Likely future developments

Information on likely future developments of the Group are disclosed in the strategic report.

Financial instruments

Information on the Group's financial instruments are disclosed in the strategic report and note 24 to the financial statements.

Charitable and political donations

No charitable or political donations were made during the financial year.

Disabled employees

Due to the size of the Group, no formal policy for the employment of disabled persons has been established. However the Group givesfull consideration to employment applications from disabled persons where the candidate's particular aptitudes and abilities areconsistent with adequately meeting the requirements of the job.

Indemnity of directors

The Company has indemnified the directors of the Company for costs incurred, in their capacity as a director, for which they may beheld personally liable, except where there is a lack of good faith.

Substantial shareholdings

There were no substantial shareholders in the Company, as defined in the AIM Rules for Companies, as at 30 June 2019.Nick Smith and Aaron Hoye, co-founders of Airsight, became substantial shareholders in the Company following the acquisition ofAirsight.

Disclosure of information to the auditors

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, beinginformation needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries offellow directors and the Group's auditor, each director has taken all the steps that they are obliged to take as a director in orderto make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

Auditor

Ernst & Young LLP was appointed auditor during the financial year and pursuant to section 487 of the Companies Act 2006 will bedeemed to be re-appointed and therefore continue in office.

This report is made in accordance with a resolution of directors.

On behalf of the directors

DIRECTORS' RESPONBSIBILITIES STATEMENT

The directors are responsible for preparing the strategic report, directors' report and the financial statements in accordance withapplicable law and regulation.

UK Company law requires the directors to prepare financial statements for each financial year. Under that law the directors haveelected to prepare the Group financial statements in accordance with International Financial Reporting Standards ('IFRS') as adoptedby the European Union and financial statements of the Company in accordance with United Kingdom Generally Accepted AccountingPractice (United Kingdom Accounting Standards and applicable law) including FRS 101 'Reduced Disclosure Framework'. Undercompany law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of thestate of affairs of the Group and Company and the profit or loss of the Group for that year.

In preparing these financial statements, the directors are required to:

The directors confirm they have complied with all the above requirements in preparing the financial statements.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's andCompany's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company andenable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financialstatements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and Company andhence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 Ian Buddery Chairman 27 November 2019 

Group

Parent company

Consolidated balance sheet as at 30 June 2019

Balance sheet as at 30 June 2019

Consolidated income statement for the year then ended

Statement of changes in equity for the year then ended

Consolidated statement of comprehensive income for the year then ended

Related notes 1 to 17 to the financial statements including a summary of significant accounting policies

Consolidated statement of changes in equity for the year then ended

Consolidated statement of cash flows for the year then ended

Related notes 1 to 34 to the financial statements, including a summary of significant accounting policies

Key audit matters

·; Revenue recognition arising as a result of inappropriate cut off via manipulation of deferred revenue.

·; Going concern

Audit scope

·; We performed an audit of the complete financial information of all 3 components.

·; The components where we performed full or specific audit procedures accounted for 100% of Profit before tax, 100% of Revenue and 100% of Total assets.

Materiality

·; Overall group materiality of £78k which represents 2% of operating expenses

Risk

Our response to the risk

Key observations communicated to the Audit Committee

Revenue recognition

Refer to the Accounting policies (page 25); and Note 5 of the Consolidated Financial Statements (page 34)

The group recorded revenue of £905,400 (2018: £977,106).

There is a risk of a cut-off error or manipulation of the timing of revenue recognised at or near year-end through the manipulation of deferred revenue balances.

► We tested cut-off has been applied appropriately at the 30 June 2019 year-end by selecting every transaction recognised as revenue in June and July 2019 and ensuring that any revenue had been recognised in the appropriate period by agreeing to supporting documentation such as contracts and agreements;

► We tested a sample of journal entries posted to implementation revenue to establish whether a service had been provided in the financial year to support the revenue recognised;

► We tested the amounts included in the accrued revenue and deferred revenue balances at 30 June 2019 by agreeing to contracts and agreements and assessing value base on stage of completion with reference to costs incurred and the total costs estimated for each contract selected;

► We tested a sample of key items for each revenue stream by agreeing revenue recognised to source documentation including contracts and agreements (to assess valuation) and to bank statements for evidence of receipt of cash;

► We performed an analytical review of major revenue contracts, including analysis of forecasts, management reporting, as well as enquiries with individuals outside of the finance function; and

► We checked disclosures in the Annual Report and financial statements.

Based on the procedures performed, we concluded that the revenue recorded for the year ended 30 June 2019 is materially correct.

We were satisfied with the disclosures in the Annual Report and financial statements.

Going Concern

Refer to the Accounting policies (page 25)

The group recorded a net loss for 2019 of £2,691,754.Following the decision during the year of the group's major US banking customer to focus on other areas of its technology, the Directors chose to suspend the Maestrano driven platform.

There is a risk that following the suspension of the platform, being the main revenue generator, that the company does not have sufficient funds to meet its debts as they fall due for the foreseeable future.

.

► We inspected management's going concern assessment and challenged management's forecast assumptions, particularly in respect of costs and outflows of cash across the period to June 2021. 

► We confirmed the cash balance at year end and inspected post year end bank statements to assess use of funds against forecasted run rate;

► Following the acquisition by the group subsequent to year-end of Airsight Holdings Pty Limited we inspected the updated going concern assessment and challenged management's forecasts regarding the acquired business's cash flows in the foreseeable future including forecasts of revenue and costs;

► We inspected a sample of supporting documentation including contracts and agreements supporting forecasted revenue; 

► We re-performed management's sensitivity analysis and also performed a stress test on the going concern assessment;

► We performed management inquiries, obtained supporting documentation and performed a reasonability check on the mitigating actions available to management; and

► We assessed the appropriateness of the going concern disclosure in the Annual Report and financial statements.

Based on our audit procedures we concurred with management's conclusion that it is appropriate to apply going concern basis in preparing the consolidated financial statements at 30 June 2019.  

We were satisfied with the disclosures in the Annual Report and financial statements.

*2018 has been reclassified following the adoption of IFRS 15 and IFRS 9. See note 2.

CONSOLIDATED BALANCE SHEET

*2018 has been reclassified following the adoption of IFRS 15 and IFRS 9. See note 2.

The financial statements of Maestrano Group plc (company number 11098701 (England and Wales)) were approved by the Board of Directors and authorised for issue on 27 November 2019. They were signed on its behalf by:

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General information

The financial statements covers Maestrano Group plc ('Company') and the entities it controlled at the end of, or during, the financial year (referred to as the 'Group'). The financial statements are presented in Pound Sterling, which is Maestrano Group plc's functional and presentation currency.

The Company was incorporated on 6 December 2017 as a private company, Maestrano Group Limited. On 11 May 2018, the Company converted to a public company, Maestrano Group plc and on 30 May 2018 was admitted onto the Alternative Investment Market ('AIM'). On 19 April 2018, as part of a group reorganisation, the Company acquired 100% of the ordinary shares of Maestrano Pty Ltd from the existing shareholders and became the immediate and ultimate parent of the Group.

Maestrano Group plc is a listed public company limited by shares, incorporated and domiciled in England and Wales. Its registered office and principal place of business are:

A description of the nature of the Group's operations and its principal activities are included in the strategic report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 November 2019. The directors have the power to amend and reissue the financial statements.

Note 2. Significant accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

New or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the International Accounting Standards Board ('IASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group.

The following Accounting Standards and Interpretations are most relevant to the Group:

IFRS 9 Financial Instruments

The Group has adopted IFRS 9 from 1 July 2018. The standard introduced new classification and measurement models for financial assets with no significant change for financial liabilities. There are new simpler hedge accounting requirements and an 'expected credit loss' model to recognise impairment allowance and the impact on adoption was minimal.

IFRS 15 Revenue from Contracts with Customers

The Group has adopted IFRS 15 from 1 July 2018. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This is described further in the accounting policies below. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with customers are presented in an entity's balance sheet as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract period.

Impact of adoption

IFRS 9 and IFRS 15 were adopted using the full retrospective approach. The impact of adoption on opening accumulated losses as at the transition date of 1 July 2017 was £nil.

Due to the nature of the contracts and their terms there has been no material impact on adoption of IFRS 9 and IFRS 15 in 2019 nor in 2018 following the full retrospective adoption nor to the opening balance sheet of 2018, other than the changes to disclosure as required by these standards, which includes in both years:

A "third" balance sheet as at 1 July 2017 has not been presented as would be normal when adopting the full retrospective approach because the amounts in that balance sheet are not impacted.There has been no material impact of IFRS 9 as the group and company have virtually no experience of bad debts and credit losses and do not expect any such credit losses in the future.

Going concern

The financial statements have been prepared assuming the Group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future. In assessing whether the going concern assumption is appropriate, the directors have considered the Group's existing working capital and are of the opinion that the Group has adequate resources to undertake its planned programme of activities for the 12 months from the date of approval of these financial statements. Further details of the directors' considerations in relation to going concern are included in the directors' report.

Basis of preparation

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards ('IFRS' or 'IFRSs') as adopted for use in the European Union (the 'EU') and IFRS Interpretations Committee interpretations (together 'EU IFRS') and the UK Companies Act 2006.

Historical cost convention

The consolidated financial statements are prepared under the historical cost convention.

Critical accounting estimates

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's and Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

Group reorganisation and comparative informationMaestrano Group plc (previously known as Maestrano Group Limited) was incorporated on 6 December 2017. Shareholders of the former parent company Maestrano Pty Ltd (the 'legal subsidiary'), approved a formal business entity reorganisation, whereby Maestrano Group plc ('the legal parent') became the parent of the Group, effective 19 April 2018, by acquiring all the outstanding shares of the Group's previous ultimate holding company Maestrano Pty Ltd in exchange for the issue of its own shares. This share for share transaction is not a business combination and does not result in any economic substance from the perspective of the Group. The substance of the group reorganisation is a continuation of the existing group, as a result the financial statements reflect that fact. This share for share transaction is hereafter referred to as the group reorganisation and accounted for as follows:

Therefore, the consolidated financial statements are presented as if Maestrano Group plc had been the parent company of the existing group throughout the periods presented. No reclassifications or adjustments to previously reported figures and no changes in the operations of the group resulted from this change.

Principles of consolidation

The consolidated financial statements incorporates the assets and liabilities of all subsidiaries of Maestrano Group plc as at the balance sheet dates presented and the results of all subsidiaries for the year then ended.

Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The acquisition of common control subsidiaries is accounted for at book value. The acquisition of other subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

Operating segments

Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance.

Foreign currency translation

The consolidated financial statements are presented in Pound Sterling, which is Maestrano Group plc's presentation currency.

Foreign currency transactions

Foreign currency transactions are translated into Pound Sterling 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 financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign operations

The assets and liabilities of foreign operations are translated into Pound Sterling using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Pound Sterling using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.

The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.

Revenue recognition

Revenue from contracts with customers

Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability.Enterprise implementation consists of (i) licensing and support and (ii) consulting and other professional services.

Licensing and support

Licensing and support revenue is recognised on a straight-line basis over the period of the contract, including when the customer is provided access to the software over the internet. These products are delivered to the customer as a service over time.

Consulting and other professional services

Consulting and other professional services revenue is recognised on a time and material basis. In the case of fixed agreements and where the contract outcome can be reliably measured, revenue is recognised by reference to the stage of completion of the contract at the reporting date.

Stage of completion is measured by reference to costs incurred to date as a percentage of total estimated costs for each contract. Where the contract outcome cannot be reliably estimated, revenue is only recognised to the extent of the recoverable costs incurred to date.

Enterprise subscriber

Enterprise subscriber revenue is recognised on a monthly basis as the service is provided monthly and the cash inflows are received from subscribers monthly.

Grants from government

Grants from government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants which represent compensation for expenses or losses already incurred are included in other income in profit or loss when they become receivable.

Interest incomeInterest income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Other income

Other income is recognised when it is received or when the right to receive payment is established.

Income tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets is reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

Current and non-current classification

Assets and liabilities are presented in the balance sheet based on current and non-current classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Trade and other receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.

The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.

Other receivables are recognised at amortised cost, less any allowance for expected credit losses.

Contract assets

Contract assets are recognised when the Group has transferred goods or services to the customer but where the Group is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes.

Plant and equipment

Equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation is calculated on a straight-line basis to write off the depreciable amount of each item of equipment over their expected useful lives as follows:

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

Equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter.

An item of equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.

Intangible assets

Intangible assets acquired as part of a business combination, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The amortisation method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Software

Significant costs associated with purchased software are deferred and amortised on a reducing balance basis over the period of their expected benefit, being their finite useful life of two years.

Research and development

Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or sell the asset; the Group has sufficient resources; and intent to complete the development and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit. Amortisation commences when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Impairment of non-financial assets

Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

Contract liabilities

Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer.

Employee benefits

Short-term employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

Share-based payments

Equity-settled share-based compensation benefits are provided to employees.

Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services.

The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.

The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

Fair value measurement

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.

For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Dividends

Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of Maestrano Group plc, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Value-Added Tax ('VAT')/Goods and Services Tax ('GST') and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated VAT/GST, unless the VAT/GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of VAT/GST receivable or payable. The net amount of VAT/GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the balance sheet.

Cash flows are presented on a gross basis. The VAT/GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

Commitments and contingencies are disclosed net of the amount of VAT/GST recoverable from, or payable to, the tax authority.

New Accounting Standards and Interpretations not yet mandatory or early adopted

Accounting Standards that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2019. The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below.

IFRS 16 Leases

This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces IAS 17 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the balance sheet, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under IFRS 16 will be higher when compared to lease expenses under IAS 17. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under IFRS 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. Had the standard been adopted from 1 July 2018, and using the transitional rules available, the Group would have recognised a lease liability of the remaining lease payments as disclosed in note 27, discounted using the lessee's incremental borrowing rate, with a corresponding increase in plant and equipment. As at the transition date 1 July 2019, all leases were short term with less than one year remaining and the Group has used the transitional election to continue to account for leases as operating leases. Therefore, there is no impact from the initial adoption of IFR16.

IASB new Conceptual Framework for Financial Reporting

The new framework is applicable for annual reporting periods beginning on or after 1 January 2020 and the application of the new definition and recognition criteria may result in future amendments to several accounting standards. Furthermore, entities who rely on the conceptual framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under IFRS may need to revisit such policies. The Group will apply the revised conceptual framework from 1 July 2020 and is yet to assess its impact.

Note 3. Critical accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.

Estimates:

Revenue recognition where contracts are in progress

In accordance with the revenue recognition policy detailed in note 2, in measuring revenue relating to fixed agreements the Group measures the stage of completion with reference to costs incurred and the total costs estimated for each contract. The total estimated costs for each contract is reviewed monthly to ascertain the current stage of completion and requires reasonable judgments to be made. Refer to note 16 for the accrued revenue asset and the balance sheet for the deferred revenue liability.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Refer to note 32 for valuation model inputs.

Note 4. Operating segments

Identification of reportable operating segments

The Group operates in one segment being provision of data integration and analytic services. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources.

The operating segment information is the same information as provided throughout the consolidated financial statements and are therefore not duplicated.

Major customers

There are 3 customers contributing external revenue of more than 10% amounting to £465,817, £112,891 and £236,467 respectively (2018: 3 customers amounting to £402,383, £281,970 and £124,121 respectively).

Revenue by geographical area

Revenue from the principal activities of the Group is attributable to the following geographical areas:

Note 5. Revenue from contracts with customer

Enterprise implementation and enterprise subscriber income are recognised as revenue over time as opposed to a point in time.

Note 6. Other income

Government grants and rebates predominately relates to research and development rebates.

Note 7. EBITDA reconciliation (earnings before interest expense, taxation, depreciation and amortisation)

Underlying EBITDA represents EBITDA adjusted for significant, unusual and other one-off items.

The financial statements include both the statutory financial statements and additional performance measures of EBITDA and Underlying EBITDA. The directors believe these additional measures provide useful information on the underlying trend in operational performance going forward without these unusual and other one-off items.

Note 8. Expenses

Research and development costs recorded in the consolidated statement of profit and loss and other comprehensive income were £1,195,616 in 2019 and £1,068,395 in 2018.

Note 9. Staff costs

The average number of employees during the year was as follows:

The employee benefits expense during the year was as follows:

Note 10. Directors' remuneration

Details of directors' remuneration is set out below:

The total remuneration in respect of the years ended 30 June 2019 and paid to each director who held office during the year was as follows: