OTAQ.L Regulatory News (OTAQ)

OTAQ PLC

('OTAQ', or the 'Company')

Final Results

Strong revenue and gross margin growth across the business

OTAQ, the marine technology products and solutions group for the global aquaculture and offshore oil and gas industries, announces its Final Results for the year ended 31 March 2020.

During the period, the Company was a cash shell named Hertsford Capial plc, successfully completing the reverse takeover by OTAQ Group Limited ("OTAQ Group") on 31 March 2020. As a result of the acquisition and consolidation of OTAQ Group, the Company is reporting results refelecting the ongoing operations of OTAQ Group and its subsidiaries.

Financial Highlights

· Revenue £3.42m (FY 2019: £1.58m)

· Gross Profit £1.96m (FY 2019: £902,000)

· Adjusted EBITDA increase £451,000 (FY 2019: £50,000)

· Adjusted operating loss £339,000 (FY 2019 loss: £343,000)

· Adjusted earnings per share 1.5p (FY 2019: n/a)

· Net cash/(debt) £2.86m (FY 2019: (£317,000))

Operating Highlights

· Listing of OTAQ on London Stock Exchange's Main Market through a reverse takeover - completed on 31 March 2020.

· 20% increase in rental revenue for the Company's core product, SealFence:

o Long term rental contracts underpin high levels of visibility.

· Continued focus on innovation and R&D to broaden the Company's market share and reach:

o Currently developing an active biomass measurement system and plankton/algal bloom early detection system.

o Strategic alliance with US-based aquaculture start-up Minnowtech LLC announced in June, post period end, broadening the Company's reach into innovative technologies and helping farmers grow other species such as shrimp.

· Despite some understandable impact of Covid 19 and falling oil prices, the first quarter of the current year was broadly in line with expectations.

Board Changes

· Post period-end Matt Enright joined the Board on 26 June 2020 as Chief Financial Officer and Company Secretary. He replaced interim Chief Financial Officer Simon Walters, who oversaw the successful transaction to list OTAQ on the Stock Market.

Analyst Briefing

A briefing for analysts will be held at 09.30 this morning via web conference. Analysts wishing to join should contact otaq@walbrookpr.com or telephone 020 7933 8780 for more information.

Investor Results Presentation

The Company will be hosting a presentation through the digital platform Investor Meet Company at 16.30 this sfternoon. Phil Newby, Chief Executive, and Matt Enright, Chief Financial Officer will present operational and financial results for the year ended 31 March 2020, as well as an overview of the Company and its plans for the future. Investors can sign up to Investor Meet Company for free and add to meet OTAQ plc via the following link: https://www.investormeetcompany.com/otaq-plc/register-investor.

Alex Hambro, Non-Executive Chairman of OTAQ plc, commented: "This has certainly been a busy year for OTAQ notwithstanding the current economic and social climate of COVID-19. The reverse takeover of Hertsford Capital plc has placed OTAQ in a strong cash position which, in line with our strong revenue and margin growth, we can use to further innovate and broaden our offering across the global aquaculture sector.

"We have still maintained business throughout the lockdown with minimal interference, as our employees were granted special dispensation to continue supplying critical products and services throughout. As we come through this period, our objectives are to continue development and contracts with SealFence, while also looking to acquire small and medium-sized marine technology companies, taking advantage of the continuing growth in the salmon-farming and aquaculture industry."

Contacts:

About OTAQ:

OTAQ is a highly innovative marine technology company focused on the marine aquaculture, offshore energy, renewables and oceanographic research sectors. It operates in four worldwide locations: Lancaster, Aberdeen and Ulverston in the UK and Puerto Montt in Chile.

OTAQ's marine technology portfolio includes a market-leading intelligent acoustic deterrent system, Sealfence, designed to protect marine-based aquaculture sites from predation, with multiple systems deployed in Scotland, Chile, Finland and Russia.

The Company's Oceansense leak detection systems have a global reputation as the industry standard solution and have been deployed successfully on hundreds of jobs. OTAQ's Dragonfish laser measurement system is fast becoming recognised as one of the most accurate underwater precision laser measurement systems available. OTAQ also has significant experience in the design and manufacture of underwater connectors, penetrators and communication systems.

It seeks to develop and continuously improve its products using its specialist mechanical, electronic and software engineers with decades of experience in bringing underwater technology products to market.

OTAQ is proud to be fully ISO 9001:2015 accredited through DNV-GL. ISO 9001 is an internationally recognised quality management system and demonstrates OTAQ's commitment to consistency, continual improvement and customer satisfaction. The certification also demonstrates its ability to consistently deliver products and services to market whilst meeting statutory and regulatory requirements by applying an effective quality management system.

Chairman's Statement

I am delighted to present my first Chairman's Statement of OTAQ plc, formed by the reverse takeover of Hertsford Capital plc by OTAQ Group Limited on 31 March 2020. The Company changed its name from Hertsford Capital plc to OTAQ plc on 24 June 2020.

Prior to the reverse transaction, the Company had been a cash shell, listed on the Main Market of the London Stock Exchange and had been seeking an acquisition with a technology focus since its formation in November 2018. The merger accounting methodology used assumes that the share capital and share premium are those of Hertsford Capital plc for comparative purposes with the reverse acquisition reserve being created as a result. All other results are those of OTAQ Group Limited prior to acquisition. This is fully in accordance with IFRS3 which relates to accounting for business combinations.

Strategy

The strategy of the Group is to build a business of significance within the aquaculture industry focussed on helping salmon producers and farmers of other aquatic species to become more productive by helping them overcome environmental challenges in their operations. Over time, the Group intends to have a range of products designed to meet these needs that are based on a common infrastructure and a cloud-based information system. The strategy is to design, develop, install and support these systems on an Infrastructure as a Service ('IaaS') basis on long-term rental contracts.

The Group's core aquaculture product, SealFence, significantly improves yields for the salmon farming industry by reducing the frequency of predator attacks using acoustic technology. SealFence accounts for the majority of revenues with the combination of 24-month and 48-month rental contracts and recurring monthly purchase orders underpinning strong earnings visibility. During the last 12 months the number of units deployed has grown 20% from 962 to 1,156.

Other products in the Group's portfolio include a range of sub-sea cameras, laser measuring devices, leak detection systems and high integrity electrical connectors for use in the offshore oil & gas market, which form the Group's Offshore and Connectors divisions. The Group is also focused on broadening its reach via R&D and is currently developing biomass measurement and bloom and plankton detection systems.

In addition, the Group will continue to look to acquire small and medium-sized marine technology companies, and to finance any acquisition, ideally, through existing cash resources or bank borrowings. We are highly selective in acquiring businesses with either sustainable profits or with nascent technology that can be applied to our marine-based systems to create a future profitable revenue stream. It is paramount that acquisitions are completed only when the Company is satisfied that the target business has sound underlying strength.

The global aquaculture market remains robust and the sector's long-term growth drivers provide comfort that the Group will deliver durable returns for shareholders. Long-term market drivers are rooted in the global consumer demand for salmon as a food substance and the need for increased farming efficiencies to maximise farming yields. Medium and long-term demand may be enhanced by increasing regulatory requirements. 

Our team

I would like to welcome the new directors who joined the Board and all the OTAQ employees to the new Group and am confident our new colleagues will continue to deliver successful growth for the shareholders. I also take this opportunity to thank the directors involved with the formation of Hertsford Capital who stood down from its board on completion of the OTAQ transaction in March.

The executive team and all employees within the Group worked hard in 2019 and 2020 to produce these results and achieve the successful reverse listing - a process that is inevitably distracting from the normal business activities. The Board and, I am sure, our shareholders are grateful to all our colleagues for the efforts that have delivered such a positive performance and in particular their flexibility in coping with the difficult working conditions currently prevailing.

Alex Hambro

Chairman

24 July 2020 

Chief Executive's Report

Review of the period

The enlarged Group achieved encouraging year-on-year growth in revenue, SealFence unit rentals, and adjusted pre-tax profit, as measured by our preferred measure of adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (underlying adjusted EBITDA). On 29 April 2019, the Group completed the acquisition of Link Subsea Limited (subsequently renamed OTAQ Connectors Limited) and completed a placing of new shares contemporaneously with the reverse-takeover on 31 March 2020. This enabled the Group to report a net cash position of £2.9m at year-end.

The growth in the business over the course of the financial year was attributable to the acquisition of OTAQ Connectors Limited and a full year of revenue contribution from the prior-year acquisition of Marinesense Limited (subsequently renamed OTAQ Offshore Limited). The organic growth in the aquaculture businesses was also a key driver and the results achieved provide a solid framework for future organic growth in this division. Demand for the Group's SealFence systems remains robust with Covid-19 disruptions and exchange rates having had little impact on demand so far.

Revenue

Group revenue for the year ended 31 March 2020 increased from £1.58 million to £3.42 million, an increase of 117%. This reflects organic* growth (which was largely due to the increased rental of SealFence units in the Aquaculture division) of 73% and a contribution of £0.70m from OTAQ Connectors, which was acquired on 29 April 2019. Group revenue benefitted from a full year of revenue from OTAQ Offshore which was acquired on 23 November 2018, where revenue increased to £0.62m for the year ended 31 March 2020 from £0.14m in the four months from acquisition to 31 March 2019.

The Group continues to grow globally with revenue in Chile now representing 9% of total revenue. Other European countries account for 6% of total revenue and the rest of the world for 8% of total revenue.

Profit

Adjusted operating loss improved by 1% to £339,000 (2019: loss £343,000). Organic* gross profit was up 100% to £1.80m; all Group businesses showed excellent progress. OTAQ Aquaculture Limited - formerly known as OTAQ Limited, the main trading subsidiary of the Group - contributed a 180% increase in gross profit over the year to 31 March 2020 and represents 52% of Group gross profit. The performance of this subsidiary is driven by increased rentals of SealFence units in the UK in the year.

The Group has continued to invest in the development of new products and improvement of existing products. Investment in research and development, capitalised as development costs, amounted to £0.38 million in the year to 31 March 2020 (2019: £0.23 million), equivalent to 11% of Group revenue (2019: 15%).

The Group incurred a number of exceptional charges in the year including £1.05m relating to the costs of re-listing, the reverse takeover of Hertsford Capital plc and placing of new shares, and £0.66m for the share-based payment charge as a result of listing relating to the Hertsford Capital plc acquisition. These are one-off costs that will not be repeated.

A share option charge of £0.56m was incurred during the year; the need for ongoing charges relating to share options will be reviewed as share options change. 

New contracts and order intake

The award of new contracts and development of those contracts was positive with strong momentum behind the aquaculture business both in the UK and in Chile. However, Chile was impacted by social unrest in that country in 2019 although this now appears to have subsided. Consequently, the number of seal units on rental in Chile increased from 84 at the end of March 2019 to 142 at the end of March 2020. Order intake and rentals in the Offshore and Connectors business were in line with expectations, with Offshore having a solid first full year and Connectors performing in line with expectations following the April 2019 acquisition.

Dividends

The Board is not recommending a final dividend.

Trading environment

The long-term fundamentals supporting demand for aquaculture products remain positive. The North Sea oil market in which OTAQ Offshore operates is experiencing a period of reduced activity in line with the reduction in oil prices. Market demand for the aquaculture market is being driven primarily by demand for improved salmon farming efficiencies.

The short-term variables in the Group's growth strategy are predominated by customer behaviour and, to a lesser extent, the behaviour of governments regulating the salmon farming industry. However, the long-term contract rental model in the aquaculture businesses provides visibility and stability to an extent. In non-aquaculture areas, the businesses are impacted more by customer behaviour as well as normal industry economics.

Despite 23% percentage of the Group's revenue being generated overseas, exchange rates have only a minor influence on the Group's business: OTAQ's supply costs are largely denominated in Sterling and most of its revenue is invoiced in Sterling with less than 10% of revenue invoiced in different currencies. The currency movements in the run-up to the Brexit vote and since have had only an immaterial influence on our margins and our competitiveness.

In June 2020, the Group announced a strategic alliance with Minnowtech LLC, an innovative aquaculture technology company that provides an imaging platform to enable shrimp farmers to measure shrimp abundance to optimise feeding. With this new alliance with Minnowtech LLC, the Group is broadening its reach into innovative technologies to help farmers grow other species such as shrimp.

Acquisitions

As a buy-and-build group, the acquisition of new businesses is a key feature of Group strategy. Executing this effectively is required to ensure that long-term value is generated for shareholders, as we are highly selective in relation to both the acquisition price paid and the long-term quality of any potential addition to our Group.

The industries in which we operate contain a multitude of start-ups and small niches that are potentially complementary to the strategy of the Group. The Group has demonstrated expertise at executing a number of acquisitions and integrating them into the Group successfully.

On 29 April 2019, the Group acquired 100% of the share capital of Link Subsea Limited ("Link Subsea"), subsequently renamed OTAQ Connectors Limited, for a cash consideration of £642,000 and share consideration of £66,000 with a deferred consideration of £25,000 in shares and £87,000 in deferred cash.

In May 2019, agreement was reached to purchase an additional 10% of OTAQ Chile. On 21 February 2020, agreement was reached to acquire the remaining 10% of OTAQ Chile in exchange for shares. As a result, the Group's percentage holding in OTAQ Chile increased from 80% at 31 March 2019 to 100% at 31 March 2020.

Innovation

The Group's growth strategy is also focused on designing, developing and launching new products, with current focus on active measurement of salmon weight and biomass measurement, algae bloom detection, plankton detection as well as improved Acoustic Deterrent Devices (ADDs). Development work for the Live Plankton Analysis System (LPAS) is currently underway and is focused on automating a highly labour-intensive function for farmers. The Biomass system is aimed at providing farmers with average weight data in real time. This would enable the industry to become more intelligent in its feeding operations and have greater insight into harvesting in response to market conditions

Current trading and prospects

This was an extremely busy period for the Group as it strengthened its position within the aquaculture industry and developed further growth opportunities. We are excited by the potential afforded via our core product SealFence and see scope for continued growth given the market dynamics. With an established product and client base in place and highly visible revenue streams alongside a growing geographic reach and product portfolio we envisage further exponential growth in the medium to long term.

It's worth noting that several months into the new financial year, the impact of the Covid-19 pandemic is apparent. The Group started the year with the visibility provided by a long-term contract rental model for aquaculture and a good order book in our other businesses. Travel and business development activities have been restricted as the Group chases growth in this market and as a result some territories are not progressing as quickly as would otherwise have been the case. However, new orders are being placed and new contracts finalised.

OTAQ Offshore has been more heavily impacted by reduced activity in the North Sea oil fields. The next few months will remain unpredictable as working life adjusts to the Covid-19 pandemic. We are ensuring that our businesses take all necessary precautions, in line with government guidelines, and of course we hope that our sites and employees will remain safe and that operations are unaffected. It is impossible, at this stage, to quantify any impact on current year trading as the duration of the pandemic is unpredictable; the only guidance your Board can provide is that the impact will be limited if the outbreak lasts only a short time, and trade should grow significantly thereafter.

In any event, your directors believe that the Group will only be affected temporarily and that with its robust financial position, its ability to conduct its business model will remain intact.

* "Organic" in this report describes the performance of the Group excluding OTAQ Connectors, acquired since 1 April 2019.

Phil Newby

Chief Executive

24 July 2020

Chief Financial Officer's Report

The strategy of the Group is to build a business of significance within the aquaculture industry with the key financing requirements being to ensure there is sufficient resource to acquire additional SealFence units and sufficient resource to fund new product development.

The Group's Key Performance Indicators are aligned to revenue, profits and ensuring sufficient cash flow to deliver future growth. These three measures were in line with targets in the year to 31 March 2020.

Basis of presentation

Results in this report refer to the year to 31 March 2020, with comparative figures for the year to 31 March 2019. However, the company - known as Hertsford Capital plc at the time - had a year-end of 30 June and presented accounts for its non-trading period as a cash shell, to 30 June 2019.

The merger accounting methodology used assumes that the share capital and share premium are those of Hertsford Capital plc for comparative purposes with the reverse acquisition reserve being created as a result. All other results are those of OTAQ Group Limited prior to acquisition. This is fully in accordance with IFRS3 which relates to accounting for business combinations.

Revenue

Group revenue increased by 117% to £3.42 million compared with £1.58 million in the prior year with organic growth, adjusted for acquisitions in the year, of 73%. Revenue growth benefitted from the acquisition of Link Subsea Limited (subsequently renamed to OTAQ Connectors Limited) in April 2019 and the acquisition of Marinesense Limited (subsequently renamed to OTAQ Offshore Limited) in November 2018.

Across our three business units, Aquaculture revenues increased by £0.68m to £2.09 million with OTAQ Offshore contributing £0.62m (2019: £0.14m) to revenue and OTAQ Connectors making up the balance of £0.70m (2019: nil).

Profits

The preferred measure of assessing profits for the Group is explained below:

* Earnings before income, tax, depreciation, share option charges and amortisation.

Adjusted EBITDA grew strongly to £0.45 million from £0.05m in 2019. This improvement was driven by the overall revenue growth across all three business units with good cost control in each of them. The adjusted EBITDA profit margin improved to 13% from an adjusted EBITDA operating profit margin of 3% in 2019. 

Statutory operating losses increased to £2.65 million (2019: £0.37 million), and statutory loss before tax was £2.76 million compared to £0.37 million in 2019.

Adjusting items

The total pre-tax adjusting items recorded in the year to 31 March 2020 were £2.27 million (2019: nil). This relates to associated goodwill relating to the reverse takeover written off, being a charge of £0.66m, £0.56m for non-cash share options granted in March 2020 and £1.05 for fees relating to the placing of new shares and the reverse takeover of OTAQ Group on 31 March 2020.

In addition to this were depreciation and normalised amortisation costs of £0.58 million and £0.16m, goodwill written off of £0.03m and IFRS16 depreciation of £0.02m: Including ne finance costs of £0.16m, this fully explains the variance between OTAQ adjusted operating profit of £0.45m and the statutory retained loss of £2.76m.

Finance costs

Net finance costs totalled less than £0.16m and related to the shareholder loan balance of £0.49m, which was fully repaid in April 2020, and the unwinding of a discounting charge on deferred shares issued in the year.

Taxation

As the Group remains in a statutory loss-making position, there is no overall Group tax charge. The Group continues to benefit from research and development tax credits which accounts for the majority of the £0.11m tax credit in the year.

Earnings and losses per share

Adjusted basic earnings per share were 1.5p with no meaningful comparison with prior year available as Hertsford Capital plc was a non-trading cash shell as at 31 March 2019. This is based on the adjusted EBITDA value of £0.45m divided by the number of shares at 31 March 2020, being 30,548,599.

Statutory basic losses per share were 8.3p and statutory diluted losses per share totalled 7.8p. These are calculated using the weighted average number of shares in existence during the year.

New accounting standard

From 1 April 2019, the Group adopted the new accounting standard IFRS 16 Leases, which meant that the original method of accounting for leases as a rental charge has been replaced with a combination of depreciation from right-of-use leased assets and an interest charge from right-of-use lease liabilities.

The overall impact of the new standard on results for the year to 31 March 2020 is to increase depreciation by £20k and decrease rental lease charges by £20k.

In relation to the impact of the new standard on the balance sheet, a right-of-use asset of £0.31m was recognised with an offsetting right-of-use lease liability. The cashflow statement was also impacted as lease repayments are now treated as a financing activity instead of within operating cashflows. This has resulted in Cash generated from operations increasing by £0.02 million and cash outflows from financing activities increasing by £0.02 million. There is no overall impact on total cashflow, but the new standard has created a small artificial improvement to the Group's cash conversion as explained below in the Cashflow section of this report. There is no change to the prior year comparatives as this standard was implemented prospectively from 1 April 2019.

Return on Capital

The Group intends to report on capital returns once sustained profitability has been achieved. Whilst capital returns are monitored currently, it is a not a key performance or key results measure given the Growth's high revenue growth and current statutory loss-making position. The placing on the main listing on the London Stock Exchange and the reverse takeover on 31 March 2020 also mean key capital was only acquired on the last day of the financial year and so return on capital measures would not be meaningful.

Dividends

No dividends have been paid in the year and no dividend is recommended. As the Group is in a high-growth phase with the associated capital expenditure requirements for SealFence units, it is expected that cash resources will be retained to deliver the growth as quickly as possible.

Headcount

The Group's number of employees for 2020 stood at 36 (2019: 15). The change in staff numbers during the year was due to the growth of the business as well as the acquisitions of OTAQ Connectors Limited (formerly Link Subsea Limited and a full year of OTAQ Offshore Limited (formerly Marinesense Limited).

Share capital and share options

The Group's issued share capital at 31 March totalled 30,548,599 Ordinary shares (2019: 32,000,005). As part of the reverse takeover on 31 March 2020, the share capital was consolidated on 27 March 2020 from 32,000,005 at a nominal value of 3p to 6,400,001 with a nominal of value of 15p. On 31 March 2020, there was an issue of new shares totalling 24,148,598 at a nominal value of 15p.

Share options issued on 9 March 2020 totalled 1,481,912 with the total share options in issue at the year-end totalling 1,481,912.

Warrants totalling 1,600,000 in place at 30 June 2019 were consolidated into Warrants totalling 320,000 following the consolidation of the Hertsford Capital share capital on 27 March 2020.

CHIEF FINANCIAL OFFICER'S REPORT (CONTINUED)

FOR THE YEAR ENDED 31 MARCH 2020

Cashflow and net cash

This year's improved performance resulted in cash generated from operations of £0.87 million (2019: £0.41 million). The Group's conversion of profit into cash was 25.3% (2019: 26.3%). Total capital expenditure and amounted to £0.50 million (2019: £1.19 million).

Year-end cash balances totalled £4.09 million compared to £0.37 million in 2019. The Group finished 2020 with net cash of £2.86 million compared to £0.30 million of net debt at the end of 2019 as reconciled below:

The increase resulted from the 31 March 2020 placing of new shares for £1.50m less reverse takeover and listing costs of £1.05m. Shareholder loans were received during the year of £0.18m and the Group repaid £0.49m of shareholder loans in April 2020. The reverse takeover of Hertsford Capital plc contributed £2.60m of cash balances.

Assets

Total current assets at 31 March 2020 were £5.87m compared to total current assets of £1.42m at 31 March 2019. The key improvement during the year relates to the increase in cash balances to £4.09m from £0.37m. Inventories have increased to £0.97m from £0.54m but have decreased to 28% of revenue from 34% of revenue in the prior year.

Total liabilities have increased from £2.16m at 31 March 2019 to £3.58m at 31 March 2020. This increase relates to trade payables of £2.21m (2019: £1.32m) which includes additional balances relating to the reverse takeover on 31 March 2020. IFRS16 lease liabilities recognised on adoption of the new standard have results in an additional £0.29m total liability.

Following the reverse takeover and placing of new shares on 31 March 2020, the Group's financial position is strong and will adequately support future organic growth and new product development.

Summary

The newly-amalgamated Group will begin the new financial year in a strong position with key SealFence long-term rental contracts in place, healthy cash resources and a strong balance sheet. This will help to underpin the Group's strategy for growth and allow contingency for possible economic downturns related to the ongoing Covid-19 pandemic or unexpected consequences of the results of the Brexit negotiations.

Matt Enright

Chief Financial Officer

24 July 2020

consolidated Statement of comprehensive income

FOR the year ended 31 March 2020

The loss for the year arises from the Group's continuing operations.

There were no other items of comprehensive income for the year (2019: £nil) and therefore the loss for the year is also the total comprehensive expenses for the year.

The accompanying notes form an integral part of these consolidated financial statements.

CONSOLIDATED Statement of financial position

as at 31 march 2020

The accompanying notes form an integral part of these consolidated financial statements. .............................

consolidated Statement of changes in equity

FOR THE year ended 31 MARCH 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE year ENDED 31 MARCH 2020

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2020

1. Reporting entity

OTAQ plc ("the Company'') and its subsidiaries (together, "the Group'') develop, provide and support the technology for use in the aquaculture industry and offshore oil & gas industries.

The principal activity of the Company is that of a holding company for the Group as well as performing all administrative, corporate finance, strategic and governance functions of the Group.

The Company is a public limited company, which is listed on the London Stock Exchange and domiciled in England and incorporated and registered in England and Wales.

The address of its registered office is 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England, LA1 4XF. The registered number of the Company is 11429299. 

The principal accounting policies adopted by the Group and Company are set out in note 2.

2. Accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied unless otherwise stated.

(a) Basis of preparation

The consolidated financial statements of OTAQ plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), issued by the International Accounting Standards Board (IASB), including interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified for any financial assets which are stated at fair value through profit or loss. The consolidated financial statements of OTAQ plc are presented in pounds sterling, which is the presentation currency for the consolidated financial statements. The functional currency of each of the group entities is Sterling apart from OTAQ Chile SpA which is the Chilean Peso. Figures have been rounded to the nearest thousand.

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

Reverse Takeover of Hertsford Capital plc

On 31 March 2020 the Company, then named Hertsford Capital plc, became the legal parent of OTAQ Group Limited. The consolidated financial statements are presented as proforma to present the substance of the transaction.

The comparative results to 31 March 2019 represent the consolidated position of OTAQ Group Limited prior to the reverse acquisition.

This transaction is deemed outside the scope of IFRS 3 (Revised 2008) and not considered a business combination because the directors have made a judgement that prior to the transaction, Hertsford Capital plc was not a business under the definition of IFRS 3 Appendix A and the application guidance in IFRS 3.B7-B12 due to Hertsford Capital plc being a shell company that had no processes or capability for outputs (IFRS 3.B7).

On this basis, the Directors have developed an accounting policy for this transaction, applying the principles set out in IAS 8.10-12, in that the policy adopted is:

- relevant to the users of the financial information;

- more representative of the financial position,

- performance and cash flows of the Group;

- reflects the economic substance of the transaction, not merely the legal form; and

- free from bias, prudent and complete in all material aspects.

The accounting policy adopted by the Directors applies the principles of IFRS 3 in identifying the accounting acquirer and the presentation of the consolidated financial statements of the legal parent (OTAQ plc) as a continuation of the accounting acquirer's financial statements (OTAQ Group Limited). This policy reflects the commercial substance of this transaction as follows:

- the original shareholders of the subsidiary undertakings are the most significant shareholders post initial public offering, owning 70.5 per cent of the issued share capital; and

- the cash consideration paid as part of the initial public offering returned equity to the original shareholders of the legal subsidiary undertaking and as a consequence diluted their shareholding.

Accordingly, the following accounting treatment and terminology has been applied in respect of the reverse acquisition:

- the assets and liabilities of the legal subsidiary OTAQ Group Limited are recognised and measured in the group financial statements at the pre-combination carrying amounts, without reinstatement to fair value;

- the retained earnings and other equity balances recognised in the group financial statements reflect the retained earnings and other equity balances of OTAQ Group Limited immediately before the business combination, and the results of the year from 1 April 2019 to the date of the business combination are those of OTAQ Group Limited.

However, the equity structure appearing in the group financial statements reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the business combination; the cost of the combination has been determined from the perspective of OTAQ Group Limited.

The fair value of the shares in OTAQ Group Limited has been determined from the OTAQ plc shares prior to its suspension for the trading on the London Stock Exchange for 10 pence per share. The value of the consideration shares was £12,385,000. The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is £3,231,000. The difference between the notional consideration paid by OTAQ plc for OTAQ Group Limited and the OTAQ plc net assets acquired of £2,570,000 has been charged to the consolidated statement of comprehensive income as a share-based payment charge as a result of listing amounting to £661,000 with a corresponding entry to the reverse acquisition reserve.

Transaction costs of equity transactions relating to the issue and re-admission of the Company's shares are accounted for as a deduction from equity where they relate to the issue of new shares and listing costs are charged to the consolidated statement of comprehensive income.

Basis of consolidation

The Group's financial statements consolidate the financial information of OTAQ plc and the entities it controls (its subsidiaries) drawn up to 31 March each year.

All business combinations (except for the Hertsford Capital plc reverse takeover on 31 March 2020 which used the merger accounting method) are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

The Group measures goodwill at the acquisition date as:

- the fair value of the consideration transferred; plus

- the recognised amount of any non-controlling interests in the acquiree; plus

- the fair value of the existing equity interest in the acquiree; less

- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Transaction costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

All subsidiaries are entities over which the Group has the power to govern the financial and operating policies. The percentage holdings of the Company in its subsidiaries is set out in note 14. The subsidiaries have been fully consolidated from the date control passed.

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. The accounting policies of subsidiaries are amended where necessary to ensure consistency with the policies adopted by the Group.

(b) Going concern

The Group is developing new products for its services, including procurement of hardware for installation on aquaculture sites, principally salmon farms. The Group has invested heavily in the development and procurement of these products and has achieved this through significant funding in the form of equity and debt during the year ended 31 March 2020.

As at 31 March 2020, the Group had cash and cash equivalents of £4,087,000. The directors have prepared and reviewed the Group's funding requirements over the next two years and are confident the Group has sufficient financial resources to meet its financial commitments and strategic objectives.

The Group has experienced some impact due to the Covid-19 pandemic but has taken measures to ensure it can continue to operate. OTAQ Offshore has experienced reduced demand following the year-end and its performance is being continually reviewed but, following updated forecasts and sensitising of those forecasts, is not expected to impact on going concern. A Scottish government grant of £102,000 was received on 17 May 2020 to help mitigate the impact of the reduced demand OTAQ Offshore has experienced. 

For these reasons they continue to adopt the going concern basis in preparing Group's financial statements.

(c) Functional and presentational currency

The financial statements are presented in pounds sterling, which is the Group's functional currency. All financial information presented has been rounded to the nearest thousand.

(d) Foreign currency transactions

Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the Consolidated statement of comprehensive income.

(e) Segmental reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segmental information is set out in note 4.

(f) Revenue recognition

Revenue is recognised in accordance with IFRS 15. Revenue is recognised when a contract with a customer is held and the performance obligation associated with the customer contract has been satisfied. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other sales taxes or duties. Revenue under service contracts is recognised over time following the performance obligation being satisfied over time.

(g) Government grants

Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment. Government grants of a revenue nature are deducted from administrative expenses in the consolidated statement of comprehensive income in line with the terms of the underlying grant agreement. Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset.

(h) Lease payments

The Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information has not been restated and is presented under IAS 17. The details of accounting policies under both IAS 17 and IFRS 16 are presented separately below.

Policies applicable prior to 1 April 2019

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. The costs associated with operating leases are taken to the income statement on an accruals basis over the period of the lease.

Policies applicable from 1 April 2019

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:

- Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;

- Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

- The amount expected to be payable by the lessee under residual value guarantees;

- The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

- Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

- The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

- The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and

- A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Group did not make any such adjustments during the periods presented.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.

The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the statement of financial position.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in 'Administrative expenses' in profit or loss.

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.

(i) Finance expense

Finance expense comprises interest expense on borrowings. All borrowing costs are recognised using the effective interest method.

(j) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

(k) Income tax (continued)

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:

- where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss; and

- in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantively enacted by the date and which are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future is uncertain.

(l) Property, plant and equipment

Property, plant and equipment assets are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises both the aggregate amount paid and the fair value of any other consideration given to acquire the asset, and includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component.

The following bases and rates are used to depreciate classes of assets:

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

All property, plant and equipment item is de-recognised on disposal, or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset is included in the Consolidated statement of comprehensive income in the period of de-recognition.

(m) Intangible assets

Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill, provided they are separable and their fair value can be measured reliably. This includes the costs associated with acquiring and registering patents in respect of intellectual property rights. Trademarks are assessed on recognising fair value of assets acquired by calculating the future net book value of expected cash flows. Development costs are recognised only when costs incurred are part of a project that is expected to generate future profitable revenue.

Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight-line basis over those lives. Development costs are amortised once the project to which they relate is viewed to be completed and capable of generating revenue. The nature of those intangibles recognised and their estimated useful lives are as follows:

(n) Impairment of assets

At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an assessment of the asset's recoverable amount.

An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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. In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the Consolidated statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Consolidated statement of comprehensive income unless the asset is carried at re-valued amount, in which case the reversal is treated as a valuation increase. 

After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

The carrying values of plant, equipment, intangible assets and goodwill as at the reporting date have not been subjected to impairment charges.

(o) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving or obsolete items.

(p) Financial instruments

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) - debt investment; FVOCI - equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

The Group has only financial assets measured at amortised cost. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets - Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

- the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

- how the performance of the portfolio is evaluated and reported to the Company's management;

- the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

- how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

- the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

- contingent events that would change the amount or timing of cash flows;

- terms that may adjust the contractual coupon rate, including variable‑rate features;

- prepayment and extension features; and

- terms that limit the Group's claim to cash flows from specified assets (e.g. non‑recourse features). 

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in the income statement. Any gain or loss on derecognition is recognised in the income statement.

Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into.

Basic financial liabilities, including trade and other payables and bank loans are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derecognition of financial liabilities

Financial liabilities are derecognised when, and only when, the company's obligations are discharged, cancelled, or they expire.

(p) Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less.

(q) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The expense relating to any provision is presented in the consolidated statement of comprehensive income, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain. 

Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

There were no provisions at 31 March 2020 (2019: £nil).

(r) Share capital

Proceeds on issue of shares are included in shareholders' equity, net of transaction costs. The carrying amount is not re-measured in subsequent years.

(s) Investments

Fixed asset investments in subsidiaries are stated at cost less provision for impairment.

(t) Defined contribution pension scheme

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period.

(u) New and amended standards adopted by the Company

New and amended standards adopted by the Group

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 April 2019:

· IFRS 16 "Leases";

· Annual Improvements to IFRS Standards 2015 - 2017 Cycle; and

· Interpretation 23 'Uncertainty over Income Tax Treatments'

The Group had to change its accounting policies as a result of adopting IFRS 16. The Group elected to adopt the new rules using the modified retrospective approach. This is disclosed in note and note 12 "Leases". The other amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. 

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2020 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods an on foreseeable future transactions. 

3 Use of estimates and judgements

The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual amounts could differ from those estimates. Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements.

The key sources of judgement and estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

Taxation

Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised deferred tax asset for tax losses and other timing differences at 31 March 2020 was £647,000 (2019: £309,000). The value of the deferred tax liability at the year-end is £136,000 (2019: £101,000) and which has not been recognised, as it is covered by accumulated tax losses. Further information is included in notes 8 and 23.

Revenue recognition

Judgements are required as to whether and when contractual obligations have been fulfilled and in turn the period over which systems rental revenue should be recognised. Further information is included in note 4.

Development costs

Management judgement is required to determine the appropriate amount and timing of recognition as an asset development cost incurred on projects to improve and develop products for sale and rental by the group, based upon the likely timing and level of future revenues. The value of the development costs capitalised at 31 March 2020 was £650,000 (2019: £329,000).

4. Segmental information

A segment is a distinguishable component of the Group's activities from which it may earn revenue and incur expenses, whose operating results are regularly reviewed by the Group's chief operational decision makers to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available. In identifying its operating segments, management generally follows the Group's service line which represent the main products and services provided by the Group.

The directors believe that the Group operates in three primary segments being the rental of intelligent acoustic systems designed to deter seals and sea lions from attacking fish farms (Aquaculture), the rentals of underwater measurement and leak detection devices in the Offshore (oil & gas) market and the manufacture and supply of underwater communication and other marine goods. 

All of the Group's revenue have been generated from continuing operations and are from external customers.

Included within revenue are amounts earned from system rentals and associated charges from two material customers of £1,041,000 and £506,000 (2019: £770,000 and £485,000).

The Group operates in five main geographic areas, although all are managed in the UK. The Group's revenue per geographical segment based on the customer's location is as follows:

The Group's assets are located in the UK and Chile and although some of its tangible assets, in the form of systems for rental, are located in Chile, all are owned by the company or its subsidiaries.

5. Operating loss

Operating loss is stated after charging/(crediting):

The fees payable to the Group's auditor for non-audit services in the year relate to services provided to OTAQ Group Limited and its subsidiaries prior to the reverse acquisition with Hertsford Capital Plc. Since the date of the reverse acquisition no non-audit services have been provided.

6. Staff costs and numbers

The average monthly number of employees (including executive directors) for the continuing operations was:

Directors are 0 in the year due to executive directors being appointed only on 31 March 2020. Prior year directors are directors of OTAQ Group Limited.

Staff costs for the Group during the year including executive directors:

Directors' remuneration

Full details of the directors' remuneration, for current directors, is provided in the audited part of the Directors' Remuneration Report.

Directors' remuneration in the year for current directors is nil due to executive directors only being appointed on 31 March 2020. Directors' remuneration for all directors who resigned during the year was:

The Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in an independently administered fund.

The charge to the statement of comprehensive income in respect of defined contribution schemes was £27,000 (2019: £10,000). Contributions totalling £5,000 (2019: £2,000) were payable to the fund at the year-end and are included in creditors.

7 Net finance costs

8 Taxation

The tax credit is made up as follows:

The tax charge differs from the standard rate of corporation tax in the UK of 19% for the year ended 31 March 2020, (19% for the year ended 31 March 2019). The differences are explained below:

The Chancellor announced in the Spring 2020 Budget that the corporation tax rate would remain at 19%, rather than falling to 17% for financial years starting on 1 April 2020. This became substantially enacted on the 17 March 2020 through the Provision of Collection Taxes mechanism as a result of Coronavirus.

The Group has accumulated losses available to carry forward against future trading profits. The estimated value of the deferred tax asset measured at a standard rate of 19% (2019: 17%) is £647,000 (2019: £309,000), of which £Nil (2019: £Nil) has been recognised, as it is not certain that future taxable profits will be available against which the unused tax losses can be utilised.

The Group also has a deferred tax liability being accelerated capital allowances, for which the tax measured at a standard rate of 19% (2019: 17%) is £136,000 (2019: £101,000) and which has not been recognised, as it is covered by accumulated tax losses.

9. Earnings per share

Basic earnings per share is calculated by dividing the loss/profit after tax attributable to the equity holders of the Group by the weighted average number of shares in issue during the year. Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potential dilutive shares, namely share options. The calculation of earnings per share is based on the following earnings and number of shares.

In calculating the weighted average number of ordinary shares outstanding (the denominator of the earnings per share calculation) during the period in which the reverse occurs:

(a) The number of ordinary shares outstanding from the beginning of that period to the acquisition date shall be computed, on the basis of the weighted average number of ordinary shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement; and

(b) The number of ordinary shares outstanding from the acquisition date to the end of that period shall be the actual number of ordinary shares of the legal acquirer (the accounting acquiree) outstanding during that period.

The basic earnings per share for each comparative period before the acquisition date presented in the consolidated financial statements following a reverse acquisition shall be calculated by dividing:

(a) The profit or loss of the legal acquiree attributable to ordinary shareholders in each of those periods by

(b) The legal acquiree's historical weighted average number of ordinary shares outstanding multiplied by the exchange ratio established in the acquisition agreement.

A reconciliation is set out below.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has share options that are dilutive potential ordinary shares.

10. Property, plant and equipment

The net carrying value of property, plant and equipment includes the following in respect of assets held under hire purchase contracts:

11. Leases

The Group leases several assets including buildings and facilities. The average lease term by asset is 3.3 years. This term includes an extension option, which the Group is reasonably certain to exercise.

The total cash outflow for leases amount to £44,000.

Lease liabilities

Maturity analysis

A maturity analysis of lease liabilities based on discounted gross cash flows is reported in the table below:

The Group does not face a significant liquidity risk with regard to its lease liabilities. All lease obligations are denominated in pounds sterling.

12. Intangible assets

Intellectual property licenses are amortised on a straight line basis over four years, development costs are amortised on a straight line basis over six years and trademarks are amortised on a straight line basis over eight years. Amortisation provided during the year is recognised in administrative expenses.

Goodwill

In the year, shares were issued for the purchase of the minority interest of 10% in OTAQ Chile SpA valued at £28,000 and this was subsequently written-off. 

Goodwill in the prior year has arisen due to the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited). The current year addition has arisen due to the acquisition of OTAQ Connectors Limited (formerly Link Subsea Limited).

Goodwill (continued)

Acquisition of OTAQ Connectors Limited (formerly Link Subsea Limited)

a) Summary of acquisition

On 29 April 2019 OTAQ Group Limited acquired 100% of the issued share capital of Link Subsea Limited (subsequently renamed OTAQ Connectors Limited), a supplier of connectors, penetrators and underwater communication products for the offshore, seismic, commercial, diving and nuclear energy industries. The acquisition has significantly increased the Group's market share in these industries. Details of the purchase consideration, the net assets acquired and goodwill are as follows:

The deferred consideration consists of 8 shares to be issued to the former owners of Link Subsea Limited (subsequently renamed OTAQ Connectors Limited) on the first anniversary of the acquisition plus half of the deferred cash payment; on the second anniversary of completion a further 7 shares will be issued together with a final payment of the balance of the deferred cash payment. There is no contingent consideration.

The fair value of the 35 shares issued as part of the consideration paid for Link Subsea Limited ((subsequently renamed OTAQ Connectors Limited) at completion date as well as the fair value of 15 deferred consideration shares was based on OTAQ Group Limited's share price of £1,900 per share determined as a result of valuation performed in April 2019. The 15 deferred shares were issued in March 2020 earlier than intended at £1,900, the price prevailing at that time.

The assets and liabilities recognised as a result of the acquisition are as follows:

Acquisition of OTAQ Connectors Limited (formerly Link Subsea Limited)

a) Summary of acquisition (continued)

The goodwill is attributable to the workforce and the high profitability of the acquired business. It will not be deductible for tax purposes. The company manufactures a range of industry standard products and has not historically used trade names, so the directors consider there are no intangibles to be recognised at fair value. The fair value of acquired receivables is £174,000. The gross contractual amount for trade receivables due is £174,000 none of which is expected to be uncollectible.

b) Purchase consideration - cash outflow

Acquisition of OTAQ Offshore Limited (formerly MarineSense Limited)

a) Summary of acquisition

On 23 November 2018 OTAQ Group Limited acquired 100% of the issued share capital of MarineSense Limited (subsequently renamed OTAQ Offshore Limited), a developer and lessor of measuring equipment and cameras equipment for underwater use by the offshore industry. Details of the purchase consideration, the net assets acquired, and goodwill are as follows:

The deferred consideration consists of 151 shares payable to the former owners of MarineSense Limited (subsequently renamed OTAQ Offshore Limited) on the first anniversary of the acquisition, a deferred cash payment as shown due on the second anniversary of completion, and a final payment of 151 shares on the third anniversary.Details of the contingent consideration are set out in (b) below.

The fair value of the 151 shares issued as part of the consideration paid for MarineSense Limited (subsequently renamed OTAQ Offshore Limited) at completion date was £1,650, the price prevailing at the time. The fair value of 302 deferred consideration shares was based on OTAQ Group Limited's share price of £1,900 per share determined as a result of valuation performed in April 2019. The fair value of the deferred cash payment and the contingent consideration, totalling £418,000, are included in financial liabilities. See also note 21 to the consolidated financial statements.

The remaining 151 deferred shares were issued in March 2020 earlier than the intended third anniversary date at £1,900, the price prevailing at that time.

The assets and liabilities recognised as a result of the acquisition are as follows:

Acquisition of OTAQ Offshore Limited (formerly MarineSense Limited) (continued)

Fair value adjustment pertains to recognition of MarineSense Limited's (subsequently renamed OTAQ Offshore Limited) trademarks on acquisition. The goodwill is attributable to the knowledge and the high profitability of the acquired business. It will not be deductible for tax purposes.

b) Significant estimate: contingent consideration

In the event that on the third anniversary of completion the market value of OTAQ Group Limited's shares is less than £3,320 per share, a sum up to £250,000 might be payable to the previous owners. The fair value of the contingent consideration of £188,000 was estimated by calculating the present value of the future expected cash flows. The estimates are based on a discount rate of 10% and assumed the market value of OTAQ Group Limited's shares on the third anniversary of completion of £1,900 per share. 

In the event that certain pre-determined earnings before interest and taxes (EBIT) are achieved by the subsidiary for the year ended 31 March 2020, additional consideration of up to £150,000 might be payable in cash once the subsidiaries audited accounts for the year ended 31 March 2020 are available. The directors believe that the current forecast means that this earn out will not be achieved.

c) Acquired receivables

The fair value of acquired receivables is £140,000. The gross contractual amount for trade receivables due is £140,000, none of which is expected to be uncollectible.

d) Material intangible assets

The trademarks held by MarineSense Limited (subsequently renamed OTAQ Offshore Limited) are material to the Group. On average these trademarks have a remaining amortisation period of 5 years.

e) Revenue and profit contributions

The acquired business contributed revenues of £142,000 and profit of £7,000 after tax to the group for the period from 23 November 2018 to 31 March 2019.

If the acquisition had occurred on 1 April 2018, consolidated revenue and profit for the year ended 31 March 2019 would have been higher by £339,000 and £107,000 respectively.

Acquisition of OTAQ Offshore Limited (formerly MarineSense Limited) (continued)

f) Purchase consideration - cash outflow

g) Acquisition-related costs

Acquisition-related costs of £24,000(2018: £nil) (2017: £nil) that were not directly attributable to the issue of shares are included in administrative expenses in profit or loss and in operating cash flows in the consolidated statement of cash flows.

13 Business combination

On 31 March 2020 Hertsford Capital plc became the legal parent of OTAQ Group Limited by way of reverse acquisition. The cost of the acquisition is deemed to have been incurred by OTAQ Group Limited, the legal subsidiary in the form of equity instruments issued to the owners of the legal parent. This acquisition has been accounted for as a reverse acquisition as described in Note 2(a), Basis of Preparation.

The fair value of the shares in OTAQ Group Limited has been determined from the Hertsford Capital plc's shares prior to its suspension for the trading on LSE for 10 pence per share. The value of the consideration shares was £12,385,000. The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is £3,231,000. The difference between the notional consideration paid by Hertsford Capital plc for OTAQ Group Limited and the Hertsford Capital plc net assets acquired of £2,570,000 has been charged to the consolidated statement of comprehensive income as a share-based payment charge as a result of listing amounting to £661,000 with a corresponding entry to the reverse acquisition reserve.

Details of net assets acquired and the share-based payment charge as a result of listing are as follows:

14 Subsidiaries of the Group

The principal subsidiaries of the Group at 31 March 2020 are as follows:

15. Trade and other receivables

Trade receivables are non-interest bearing and are generally due and paid within 30 days. The directors consider that the carrying amount of trade and other receivables approximates to their fair value and that no impairment is required at the reporting date. Trade and other receivables represent financial assets and are considered for impairment on an expected credit loss model. Therefore, there is no provision for impairment at the statement of financial position date (2019: £Nil).

The Group's trade receivables at 31 March 2020 include £174,000 for OTAQ Connectors Limited (formerly Link Subsea Limited) added at date of acquisition (2019: £140,000 for OTAQ Offshore Limited (formerly MarineSense Limited)).

16. Income tax asset

17. Inventories

The Group's inventories at 31 March 2020 include £60,000 for OTAQ Connectors Limited (formerly Link Subsea Limited) inventories added at date of acquisition (2019: £206,000 for OTAQ Offshore Limited (formerly MarineSense Limited)).

The value of inventory provided for as at 31 March 2020 is £90,000 (2019: nil). £1,211,000 of stock was expensed in the year through cost of sales. (2019: £1,020,000)

18. Cash and cash equivalents

Cash at banks earns interest at floating rates based on daily bank deposit rates. An analysis of cash and cash equivalents by denominated currency is given in note 28.

19. Share capital and share premium

The called-up and fully paid share capital of the Company is as follows:

On 10 March 2020, the Company announced that it had agreed to acquire the entire issued and to be issued share capital of OTAQ Group Limited. The consideration for the acquisition was £12,385,000 comprising the issue on 31 March 2020, credited as fully paid, of 21,539,904 consideration shares to the OTAQ shareholders at a price of 57.5 pence per ordinary share amounting to £12,385,000 in total and being at a ratio of five OTAQ plc (then Hertsford Capital plc) shares for every one share owned in OTAQ Group Limited.

The acquisition, resulted in OTAQ plc (then Hertsford Capital plc) becoming an operating company instead of an investing company, and constituted a reverse takeover. On the same date, the Company issued a further 2,608,694 placing shares through the placing at the placing price of 57.5 pence per ordinary share to satisfy the payment of certain fees amounting circa £1,000,000 in connection with the acquisition.

A summary of the shares issued is as follows:

A reconciliation of share capital is set out below:

Share premium

The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value and is non-distributable.

20. Reserves

Share option reserve

The share option reserve arises from the requirement to value share options in existence at the year end at fair value. Further details of share options are included at note 25.

Merger relief reserve

The merger relief reserve arose on the Company's reverse acquisition of OTAQ Group Limited and relates to the share premium on the 21,539,904 shares issued to acquire OTAQ Group Limited.

Reverse acquisition reserve

The reverse acquisition reserve was created in accordance with IFRS 3 'Business Combinations'. The reserve arises due to the elimination of the Company's investment in OTAQ Group Limited. Since the shareholders of OTAQ Group Limited became the majority shareholders of the enlarged group, the acquisition is accounted for as though there is a continuation of the legal subsidiary's financial statements. In reverse acquisition accounting, the business combination's costs are deemed to have been incurred by the legal subsidiary.

Other reserve

In the prior year, the balance classified as other reserve of £477,000 represents the value of deferred shares to be issued as part of the consideration for the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited).

On 29 April 2019, OTAQ Group Limited acquired 100% of the issued share capital of OTAQ Connectors Limited (formerly Link Subsea Limited) of which an amount of £25,000 was recorded as the value of deferred shares to be issued as part of the consideration.

On 31 March 2020, the deferred shares were issued earlier than intended hence the other reserve balance was nil at 31 March 2020.

Revenue reserve

The revenue reserve accumulates the losses attributable to the equity holders of the parent company.

21. Deferred payment for acquisition

As part of the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited) on 23 November 2018, there is a deferred cash payment of £230,000 due on the secondary anniversary of completion. There is also a contingent consideration in place in that in the event that on the third anniversary of completion the market value of OTAQ plc's share is less than 64p per share, a sum of up to £250,000 might be payable to the previous owners. The fair value of the contingent consideration of £188,000 was estimated by calculating the present value of the future expected cash flows. The estimates are based on a discount rate of 10% and assumed the market value of OTAQ plc's shares on the third anniversary of completion of 36 pence per share. The fair value of the deferred cash payment and the contingent consideration, totalling £418,000, are included in liabilities as shown above.

As part of the acquisition of OTAQ Connectors Limited (formerly Link Subsea Limited) on 29 April 2019, there is deferred cash payment of £87,000, half of which is due on the first anniversary of completion and the remaining half on the second anniversary of completion.

22. Trade and other payables

Trade and other payables comprise amounts outstanding for trade purchases and on-going costs. All trade and other payables are due in less than 1 year. Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period on purchases is 30 days. No interest is paid on trade payables over 30 days.

The directors consider that the carrying amount of trade payables approximates to their fair value. 

The Group's trade and other payables at 31 March 2020 include £195,000 for OTAQ Connectors Limited (formerly Link Subsea Limited) added at date of acquisition (2019: £57,000 for OTAQ Offshore Limited (formerly MarineSense Limited)).

23. Deferred tax and Income tax liability

24. Financial liabilities