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Be Heard Group PLC Final results for the year ended 31 Dec 2019

20/04/2020 7:00am

UK Regulatory (RNS & others)


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Be Heard Group PLC

20 April 2020

BE HEARD GROUP PLC

Final Results For The Year Ended 31 December 2019

Be Heard Group plc ("Be Heard'"), the marketing services group, is pleased to report another year of good progress.

Operational Highlights

   --      Continued new business wins 
   --      Investment in key management resources within partner companies 
   --      Repositioning of the creative and influencer businesses 

Financial Highlights

   --      Group revenue increased by 1.1% to GBP29.8m (2018: GBP29.5m) 
   --      Adjusted EBITDA (1)  increased to GBP4.7m (2018: GBP3.0m) 
   --      Operating Margin (2)  increased by 5.5% to 15.8% (2018: 10.3%) 
   --      Net cash of GBP1.7m (3)  (December 2018: net debt GBP0.8m) 
   --      Earnout (cash) balance of GBP8.7m (December 2018: GBP9.9m) 
   --      Cash generated from operations increased by GBP5.3m to GBP5.9m (2018: GBP0.5m). 

David Morrison, Non-Executive Chairman of Be Heard Plc, commented:

" Against a background of testing market conditions many businesses in our industry found 2019 to be a challenging year, with little or no growth accompanied by margin and earnings erosion. Be Heard, whilst not immune to the vicissitudes of the market in which it operates, has, in comparison, faired reasonably well, and our improved results should be considered more than satisfactory .

The evolving Covid-19 pandemic is having, and will continue to have a material and adverse impact on the demand and supply side of economies throughout the world. The effects of this economic shock will no doubt be profound, even if it should prove to be short lived. With regards to the Group, we expect a reduction to our earnings for the current financial year as clients adopt a cautious approach and look to defer or curtail engagements, but the full impact is impossible to assess at present and we have been guardedly encouraged by both the extension of existing contracts and new business activity in certain areas.

In mitigation, the Group's response to the sudden economic and operational challenges brought about by the Covid-19 pandemic, has been both decisive and quickly implemented. Consequently, we do expect to remain both profitable (adjusted EBITDA) and cash generative."

NOTES

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014

Note 1

We define Adjusted EBITDA which is inclusive of IFRS16 (accounting for leases), as EBITDA adjusted for costs associated with acquisitions, restructuring of the Group, share based payments and impairments.

Note 2

Operating margins are Adjusted EBITDA divided by revenue.

Note 3

Net cash (debt) excludes GBP3,677k of convertible loan notes issued on 28 November 2017. The notes are convertible by the holder into ordinary shares of the Company at any time between the date of issue of the notes and their redemption date. The notes are convertible at 3.5 pence per share.

ENQUIRIES

   Be Heard Group plc                                              +44 20 3828 6269 

David Morrison, Non-Executive Chairman

Simon Pyper, Chief Executive Officer

NOMAD

   Cairn Financial Advisers                                          +44 20 7213 0885 

Jo Turner / James Lewis

Broker

   Dowgate                                                                  +44 20 3903 7715 

James Serjeant

Financial PR

   Hudson Sandler                                                      +44 20 7796 4133 

Nick Lyon / Dan de Belder

Strategic Report:

Non-Executive Chairman's Statement

Against a background of testing market conditions many businesses in our industry found 2019 to be a challenging year, with little or no growth accompanied by margin and earnings erosion. Be Heard, whilst not immune to the vicissitudes of the market in which it operates, has, in comparison, fared reasonably well, and our improved results should be considered more than satisfactory.

The Group, despite a disappointing set of results from its creative business, has delivered improved results across a broad range of metrics, recording improved revenues, margins and earnings (adjusted EBITDA). Additionally, the Group has also seen noteworthy improvements in its working capital and cash generated by operations. We now have a more secure financial platform from which to develop.

The improvements in our results reflect the fact that the management team focused on doing a few things well in the last year. However, whilst much has been done to improve the Group's prospects, the business remains constrained by its capital structure and, in particular, the earnout and loan note obligations. These balance sheet constraints limit the Group's ability to invest in the partner companies that are delivering growth and bring into focus the strategic challenges facing the Board. Broadly, and putting to one side the impact of the Covid-19 pandemic, the choice is either to continue slowly to trade out of the current financial straitjacket or to consider other options that might deliver a more rapid and satisfactory outcome for all the stakeholders in the Group.

Board Changes

There have been no changes to the Board during the year.

Our Employees

Be Heard is totally dependent on its people and the turnaround in operating performance would not have been possible without their commitment. I would particularly like to thank the employees of the Group and in all the partner companies for their efforts, as well as both my executive and non-executive colleagues on the Board.

Current Trading and Outlook

The evolving Covid-19 pandemic is having, and will continue to have a material and adverse impact on the demand and supply side of economies throughout the world. The effects of this economic shock will no doubt be profound, even if it should prove to be short-lived. With regards to the Group, we expect a reduction to our earnings for the current financial year as clients adopt a cautious approach and look to defer or curtail engagements, but the full impact is impossible to assess at present and we have been guardedly encouraged by both the extension of existing contracts and new business activity in certain areas.

In mitigation, the Group's response to the sudden economic and operational challenges brought about by the Covid-19 pandemic, has been both decisive and quickly implemented. Consequently, we do expect to remain both profitable (adjusted EBITDA) and cash generative.

David Morrison

Non-Executive Chairman

17 April 2020

Strategic Report:

Chief Executive's Report

The prolonged political and economic uncertainty coupled with structural changes in how clients purchase, price and deploy marketing services undoubtedly made 2019 a challenging year. For many businesses within our sector, these structural changes, coupled with increased client focus on data-led insights, left many struggling to find their footing. For Be Heard, despite the decline in performance from our creative business as a whole, 2019 was in many respects a good year.

In 2018, we set ourselves one simple objective which was to return the business to profitability and financial stability. In 2019, we set ourselves the objective of improving on our 2018 results and developing the partner companies, whilst continuing to improve the financial health of the business as a whole. Our results for 2019 clearly demonstrate that we achieved the objectives which we set ourselves.

Key Performance Indicators 2019

The key performance indicators selected are used by the Executive Directors to monitor the Group's performance and progress.

 
                             Revenue   Adjusted   Adjusted EBITDA   Net (Debt)/ 
                                         EBITDA            Margin          Cash 
 2019                       GBP29.8m    GBP4.7m             15.8%       GBP1.7m 
                           =========  =========  ================  ============ 
 2018                       GBP29.5m    GBP3.0m             10.3%     GBP(0.8)m 
                           =========  =========  ================  ============ 
 
 % Growth or GBPm Change       +1.1%     +54.8%             +5.5%       GBP2.6m 
                           =========  =========  ================  ============ 
 

We define Adjusted EBITDA (which is inclusive of IFRS16 adjustments), as EBITDA adjusted for costs associated with acquisitions, restructuring of the Group, share based payments and impairments. Note that the 2018 adjusted EBITDA figure does not included an adjustment for IFRS 16.

Net debt is short and long-term borrowings (excluding earnouts and convertible loan note) less cash and cash equivalents.

The Group was founded with the intention of buying and building a "partnership" of marketing services companies fit for the digital age. The main components for such a Group are broadly in place and the emphasis is now on organising and managing the partner companies to maximise their potential. The Group has four constituent parts: Data Analytics from Freemavens, Technology led by MMT, Media led by agenda21, and Creative led by The Corner.

Group Performance 2019

Note: Partner contribution is equal to Group adjusted EBITDA before central overheads of (GBP1.8) million (2018: (GBP2.2) million) and IFRS 16 benefit of GBP1.1 million (2018: Nil)

Freemavens:

   Revenues                 GBP4.3 million             44% ahead of last year 
   Contribution            GBP1.7 million             2018 GBP1.0 million 

Analytics and insight business which makes use of customer, audience and market data to provide critical insights to blue chip clients. Freemavens is our only partner company which regularly engages with client-side senior executives. Growth has come from both increased engagements from its top clients and from notable new business wins.

MMT Digital:

   Revenues                 GBP15.2 million           9% ahead of last year 
   Contribution            GBP2.8 million             2018 GBP2.9 million 

Delivering award-winning websites and software, MMT works with clients to transform their digital performance. The results for 2019 reflect MMT's focus on delivering quality solutions for clients to timetable and to budget. Growth has come from both existing clients and a number of client referrals. Contribution for 2019 reflects the impact of a higher contractor mix (technical delivery) and investment in key management roles.

agenda21:

   Revenues                 GBP4.5 million             (8%) below last year 
   Contribution            GBP0.5 million             2018 GBP0.1 million 

agenda21 is a media planning and buying business which optimises media and content across connected devices. The business suffered some client attrition towards the mid to end of 2018, adversely impacting the 2019 results. However, the new management team has done well to steady the business and return it to profitability.

The Corner:

   Revenues                 GBP5.7 million             (24%) below last year 
   Contribution            GBP0.4 million             2018 GBP1.2 million 

A brand and creative company which helps clients become more relevant to their audience through new thinking and new ideas. Despite the business securing nearly GBP1.4 million of revenues from new clients during 2019, The Corner has not as yet fully recovered from the loss of its largest client in 2018 and moreover the adverse impact of delayed or deferred engagements from existing clients. The business is now focused on growing its B2B and influencer proposition which should underpin expectations for 2020. During the year the staff and contracts of Kameleon Worldwide Limited were moved into The Corner, and the combination is now treated internally as one business, although they have not yet formally been merged.

New Clients

Revenues from new clients in 2019 was GBP3.8m with notable wins including Barclays, B.P, Carlsberg UK, Emirates, Onitsuka Tiger and the Chartered Institute of Taxation.

Impairment of Intangible Assets

The Group has taken a non-cash impairment charge to goodwill and other intangible assets of GBP7.8 million in relation to its investment in The Corner. The industrial logic supporting the acquisition of the Corner remains valid. It is also valid to conclude that the previous management team of Be Heard held expectations for returns which, even allowing for prevailing market conditions, have proved somewhat optimistic.

Earnout Liability 2019

As at 31 December 2019 the Group had GBP8.7m of earnout liabilities which are payable in cash. Earnouts are subordinated to bank debt (Barclays) with the total earnout payments restricted to GBP0.5 million per calendar year. As part of the subordination of the Group's earnout obligations, earnout holders waived their right to sue or make claims against the Group in relation their earnout arrangements.

Cash Generation

Cash generated from operations improved by GBP5.4 million to GBP5.9 million (2018: GBP0.5 million).

Net Cash / Debt

Net Cash, which excludes the GBP3.8m of convertible loan notes, improved by GBP2.6 million to GBP1.7 million as at 31 December 2019 (2018: Net Debt of GBP0.8 million) reflecting the improvement in the Group's cash generation.

Strategic Priorities

The challenge ahead, given the financial constraints of the Group and the less than consistent performance of the partner companies, is how best to deliver profitable growth over the medium to long-term. If we are to achieve growth without recourse to additional capital then the most appropriate approach is to: more fully leverage our proposition, to further improve our operational effectiveness, and where appropriate to enter into capital-light joint ventures with businesses operating within or adjacent to our competitive footprint.

Leveraging our Proposition

We are on many levels a successful business, winning a number of new client engagements and achieving revenue growth from several existing clients. Despite some notable successes, we, like many of our competitors, have seen a general reduction in the volume and value of new business, which, in part, reflects the impact on marketing budgets brought about by the continued economic and political uncertainty in the United Kingdom. Aligned with the softening of new business, we have also found that the pitch process has become more competitive, with prolonged client decision timeframes and, furthermore, with procurement playing an ever-greater part in the client's decision-making mix.

Moreover, in response to demand-side structural changes, many marketing services firms are re-engineering their business model. We have seen a number of our competitors moving to a "single provider model", whereby individual brands are no longer as relevant as the competencies and services being offered. Whilst other companies have invested further in the "holding company" model, where the individual agencies with minimal support from the parent deliver client solutions, we at Be Heard believe that a more flexible approach is needed, one which recognises that "one size" does not fit all and that the key to success is in providing clients with creative solutions to real commercial challenges. Our business model allows us to present ourselves as a single provider with deep expertise in a number of areas, or to act as an individual agency, or to provide multiple service combinations from two or more partner companies.

Leveraging Operational Effectiveness

Be Heard's four different partner companies had historically been run independently with separate operations and discrete processes. Over the past 18 months the Group has where appropriate, introduced a number of common processes and systems. The benefits from the simplification of our operations have as yet to be fully seen, nonetheless we believe that we have made good progress.

Ben Rudman, Group Chief Operating Officer, has continued to make good progress in:

   --      Implementing common processes particularly around resource planning; 
   --      Standardising reporting processes and output; and 
   --      Implementing cost reduction initiatives. 

The Market

The market, led by the changing needs and priorities of clients, is undergoing structural change, whereby established relationships are often forgone in favour of "supplier agnostic" insight led solution providers, who can deliver demonstrable returns. In many respects, we are well placed to address these changes, but our lack of scale and our capital structure do act as limiting factors.

Covid-19

The economic shock brought about by the Covid-19 pandemic is having a profound impact on our business with clients becoming more cautious with regards to spend decisions, whilst operationally we are having to adapt to the challenges of distributed (home) working and moreover the disruption brought about by increased staff absences due to ill health. In simple terms we are taking a pragmatic approach to running our business, an approach which is focused on delivering outstanding outcomes for our clients and safeguarding the wellbeing of our employees.

Priorities

Our immediate priorities are to improve cash generation, reduce costs and to remain profitable.

Simon Pyper

Chief Executive Officer

17 April 2020

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2019

 
                                                            Year ended        Year ended 
                                                                    31       31 December 
                                                              December              2018 
                                                                  2019 
                                               Notes           GBP'000           GBP'000 
 
 Billings                                        2              55,839            49,720 
 Cost of sales                                                (26,047)          (20,261) 
                                                       ---------------   --------------- 
 NET REVENUE                                                    29,792            29,459 
 Administrative expenses                                      (36,778)          (39,156) 
                                                       ---------------   --------------- 
 LOSS FROM OPERATIONS                            3             (6,986)           (9,697) 
 
 
 Operating profit before non-recurring 
  and non-cash items (adjusted EBITDA)(1,2)                      4,707             3,040 
 
 Non-recurring and non-cash items                4            (11,693)          (12,737) 
                                                       ---------------   --------------- 
 LOSS FROM OPERATIONS                            3             (6,986)           (9,697) 
--------------------------------------------  ------  ----------------  ---------------- 
 
 Finance costs                                   7               (949)             (602) 
                                                       ---------------   --------------- 
 LOSS BEFORE TAXATION                                          (7,935)          (10,299) 
 
 Taxation                                        8               1,069               884 
                                                       ---------------   --------------- 
 LOSS AFTER TAX                                                (6,866)           (9,415) 
 
 Loss and Total Comprehensive Expense 
  attributable to: 
 Non-controlling interest                                          415               413 
 Equity holders of the parent                                  (7,281)           (9,828) 
                                                       ---------------   --------------- 
 TOTAL COMPREHENSIVE EXPENSE FOR 
  THE PERIOD                                                   (6,866)           (9,415) 
                                                               =======           ======= 
 
 LOSS PER SHARE 
 Basic                                           9          GBP (0.01)        GBP (0.01) 
 Diluted                                         9          GBP (0.01)        GBP (0.01) 
                                                               =======           ======= 
 

All of the above losses after taxation arise from continuing operations.

There was no other comprehensive income for the year. Total comprehensive expense for the year ended 31 December 2019 is GBP6,866k (2018: GBP9,415k).

The notes to the accounts are published in our Annual Report Accounts for 2019, available on our website.

(1) Adjusted EBITDA is after deducting depreciation, amortisation, impairments, acquisition costs, restructuring costs and share based payments.

(2) Adjusted EBITDA in 2019 includes the impact of adopting IFRS 16 Accounting for Leases, deducting the rental charge on the relevant assets amounting to GBP1,193k. A comparable adjustment has not been made in 2018 in accordance with the modified retrospective basis of adoption.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2019

 
                                                Share            Merger                        Attributable              Non- 
                              Share           Premium            Relief          Retained         to Owners       Controlling 
                            Capital           Reserve           Reserve          Earnings         of Parent         Interests             Total 
                            GBP'000           GBP'000           GBP'000           GBP'000           GBP'000           GBP'000           GBP'000 
 
 Balance at 1 
  January 
  2018                        9,819            13,224             6,689           (5,533)            24,199              (98)            24,101 
 
 Total 
  comprehensive 
  expense for the 
  year 
  ended 31 
  December 
  2018                            -                 -                 -           (9,828)           (9,828)               413           (9,415) 
 
 Issue of new 
  shares                        588                 -             1,349                 -             1,937                 -             1,937 
 Issue costs 
  deducted 
  from equity                     -              (16)                 -                 -              (16)                 -              (16) 
 
 Share based 
  payment 
  expense                         -                 -                 -                11                11                 -                11 
                    ---------------   ---------------   ---------------   ---------------   ---------------   ---------------   --------------- 
 Balance at 1 
  January 
  2019                       10,407            13,208             8,038          (15,350)            16,303               315            16,618 
 
 Total 
  comprehensive 
  expense for the 
  year 
  ended 31 
  December 
  2019                            -                 -                 -           (7,281)           (7,281)               415           (6,866) 
 
 Issue of new 
  shares                      2,061                 -             3,140                 -             5,201                 -             5,201 
 
 Share based 
  payment 
  expense                         -                 -                 -                43                43                 -                43 
 Dividends paid 
  to 
  Non-Controlling 
  Interests                       -                 -                 -                 -                 -             (319)             (319) 
                    ---------------   ---------------   ---------------   ---------------   ---------------   ---------------   --------------- 
 Balance at 31 
  December 
  2019                       12,468            13,208            11,178          (22,588)            14,266               411            14,677 
                            =======           =======           =======           =======           =======           =======           ======= 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 31 December 2019

 
                                                        2019                                2018 
                                  Notes           GBP'000           GBP'000           GBP'000           GBP'000 
 ASSETS: 
 NON-CURRENT ASSETS 
 Property, plant and equipment     10                                   507                                 391 
 Investments in associates         14                                   320                                   - 
 Intangible assets                 11                                24,561                              33,876 
 Right of Use Assets               15                                 4,306                                   - 
                                                            ---------------                     --------------- 
 TOTAL NON-CURRENT ASSETS                                            29,694                              34,267 
 
 CURRENT ASSETS 
 Trade and other receivables       16               9,293                              12,540 
 Cash and cash equivalents                          3,130                               2,167 
                                          ---------------                     --------------- 
 TOTAL CURRENT ASSETS                                                12,423                              14,707 
 
 LIABILITIES: 
 CURRENT LIABILITIES 
 Trade and other payables          17            (15,828)                            (19,071) 
 Lease Liability                   15               (944)                                   - 
 Bank and other loans              18               (722)                             (3,000) 
                                          ---------------                     --------------- 
 TOTAL CURRENT LIABILITIES                       (17,494)                            (22,071) 
 
 NON-CURRENT LIABILITIES 
 Other payables                    17             (2,160)                             (3,150) 
 Lease Liability                   15             (3,332)                                   - 
 Bank and other loans              18             (4,435)                             (3,520) 
 Deferred tax liability            20                (19)                               (395) 
 Provision for liabilities         21                   -                             (3,220) 
                                          ---------------                     --------------- 
 TOTAL NON-CURRENT                                (9,946)                            (10,285) 
 LIABILITIES 
 
 TOTAL LIABILITIES                                                 (27,440)                            (32,356) 
                                                            ---------------                     --------------- 
 TOTAL NET ASSETS                                                    14,677                              16,618 
                                                                    =======                             ======= 
 CAPITAL AND RESERVES: 
 ATTRIBUTABLE TO EQUITY 
 HOLDERS OF THE PARENT 
 Share capital                     22                                12,468                              10,407 
 Share premium reserve             23                                13,208                              13,208 
 Merger relief reserve             23                                11,178                               8,038 
 Retained earnings                 23                              (22,588)                            (15,350) 
                                                            ---------------                     --------------- 
 Equity attributable to 
  owners of parent company                                           14,266                              16,303 
 Non-controlling interests         24                                   411                                 315 
                                                            ---------------                     --------------- 
 TOTAL EQUITY                                                        14,677                              16,618 
                                                                                                             19 
                                                                    =======                             ======= 
 

The notes to the accounts are published in our Annual Report Accounts for 2019, available on our website.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2019

 
                                                       2019                                2018 
 OPERATING ACTIVITIES                            GBP'000           GBP'000           GBP'000           GBP'000 
 Loss before taxation                                              (7,935)                            (10,299) 
 Adjustments for: 
 Depreciation                                      1,303                                 182 
 Amortisation                                      1,535                               2,976 
 Impairment of intangibles                           667                               1,159 
 Impairment of goodwill                            7,113                               7,221 
 Movement in deferred and contingent 
  consideration                                        -                                 104 
 Revaluation of loan note                           (12)                               (662) 
 Share based payment expense                          43                                  11 
 Finance costs                                       949                                 602 
                                         ---------------                     --------------- 
                                                                    11,598                              11,593 
                                                           ---------------                     --------------- 
 Cash generated from operations 
  before changes                                                     3,663                               1,294 
 in working capital and provisions 
 Decrease/(increase) in trade 
  and other receivables                            2,120                             (1,834) 
 Increase in trade and other 
  payables                                           110                                 997 
                                         ---------------                     --------------- 
                                                                     2,230                               (837) 
                                                           ---------------                     --------------- 
 Cash generated from operations                                      5,893                                 457 
 
 Net tax received                                                      516                                 296 
                                                           ---------------                     --------------- 
 Cash flow from operating activities                                 6,409                                 753 
 
 INVESTING ACTIVITIES 
 Purchase of property, plant 
  and equipment                                    (345)                               (253) 
 Consideration paid on investment 
  in 
 associate                                         (320)                                   - 
 Deferred consideration paid                     (1,165)                             (3,063) 
 Dividend payments to Non-Controlling              (319)                                   - 
  Interests 
                                         ---------------                     --------------- 
 Cash flow used in investing 
  activities                                                       (2,149)                             (3,316) 
 
 FINANCING ACTIVITIES 
 Share issue expenses                                  -                                (16) 
  Bank loan drawn/(repaid)                       (1,520)                               2,000 
 Finance costs                                     (583)                               (361) 
 Cash payments for principal 
  portion of lease liability                     (1,194) 
                                         ---------------                     --------------- 
 Cash flow from financing activities                               (3,297)                               1,623 
                                                           ---------------                     --------------- 
 INCREASE/(DECREASE) IN CASH 
  AND CASH EQUIVALENTS                                                 963                               (940) 
 Cash and cash equivalents 
  at 1 January                                                       2,167                               3,107 
                                                           ---------------                     --------------- 
 Cash and cash equivalents 
  at 31 December                                                     3,130                               2,167 
                                                                   =======                             ======= 
                                                                     3,130                               2,167 
 Cash available on demand                                          =======                             ======= 
 

The notes to the accounts are published in our Annual Report Accounts for 2019, available on our website.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2019 (continued)

 
 Reconciliation of net cashflow to movement                         2019              2018 
  in net debt : 
                                                                 GBP'000           GBP'000 
 
 Net increase/(decrease) in cash and cash equivalents                963             (940) 
 
 Revolving credit facility repaid                                  1,000                 - 
 Term loan repaid/(drawn)                                            520           (2,000) 
 Interest accrued on convertible loan notes                        (488)             (488) 
 Interest paid on convertible loan notes                             319               320 
 Revaluation of share option component of convertible 
  loan notes                                                          12               662 
                                                         ---------------   --------------- 
 Movement in net debt in the year                                  2,326           (2,446) 
 
 Net debt at 1 January                                           (4,353)           (1,907) 
                                                         ---------------   --------------- 
 Net debt at 31 December                                         (2,027)           (4,353) 
                                                                 =======           ======= 
 

There were no significant non-cash transactions .

SELECTED NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2019

 
 2.    BILLINGS                             Year ended        Year ended 
                                           31 Dec 2019       31 Dec 2018 
                                               GBP'000           GBP'000 
       Billings arises from: 
  Provision of services                         55,839            49,720 
                                               =======           ======= 
 
    Billings by geographical location and by operating segment 
    is given in note 26. 
 
 
 3.    LOSS FROM OPERATIONS                                      Year ended     Year ended 
                                                                31 Dec 2019    31 Dec 2018 
                                                                    GBP'000        GBP'000 
 
       This has been arrived at after charging/(crediting): 
 
  Staff costs (see note 5)                                           16,199         17,358 
  M&A transaction costs                                                 270             50 
  Depreciation of property, plant and equipment                         229            182 
       Depreciation of right to use asset                             1,074              - 
       Amortisation of other intangible assets                        1,535          2,976 
   Impairment of intangible assets                                      667          1,159 
  Impairment of goodwill                                              7,113          7,221 
  Movement in deferred and contingent consideration                       -            104 
  Audit fees                                                             33             30 
  Audit of accounts of subsidiaries of the 
   company pursuant to legislation                                       61             64 
  Non-audit fees: taxation advisory services                             12             12 
  Operating lease rentals (note 15)                                      50            992 
  Foreign exchange differences                                           12           (42) 
  Convertible loan note revaluation                                    (12)          (662) 
                                                                    =======        ======= 
 
   4.      NON-RECURRING AND NON CASH ITEMS 
 
                                                           Year ended        Year ended 
                                                          31 Dec 2019       31 Dec 2018 
                                                              GBP'000           GBP'000 
 
 Depreciation of right to use asset                             1,074                 - 
 Depreciation                                                     229               183 
 Amortisation                                                   1,535             2,976 
 Impairment of intangibles                                        667             1,159 
 Impairment of goodwill                                         7,113             7,221 
 Movement in deferred and contingent consideration                  -               104 
 Revaluation of convertible loan note                            (12)             (662) 
 M&A transaction Costs                                            270                50 
 Termination payments                                             774             1,398 
 Legacy adjustments                                                 -               297 
 Share based payments                                              43                11 
                                                      ---------------   --------------- 
                                                               11,693            12,737 
                                                              =======           ======= 
 
 
 7.    FINANCE COSTS                                      Year ended        Year ended 
                                                         31 Dec 2019       31 Dec 2018 
                                                             GBP'000           GBP'000 
 
  Loan note interest                                             488               488 
       Right of use lease liability interest                     215                 - 
  Other interest                                                 246               114 
                                                     ---------------   --------------- 
  Total finance costs                                            949               602 
                                                             =======           ======= 
 
  Interest on the 8% convertible loan has been charged at the rate 
   of 11.9%, being the estimated interest that would have been applied 
   on a pure loan in the absence of the convertible element. This 
   has increased the interest charge in the year by GBP168k (2018: 
   GBP168k). 
 
 
 8.    TAX EXPENSE                                           2019              2018 
                                                          GBP'000           GBP'000 
       Current tax credit 
  UK corporation tax on profits or losses 
   for the current year                                     (519)             (296) 
  UK corporation tax on profits or losses 
   for the prior year                                       (174)               111 
 
  Deferred tax credit                                       (376)             (699) 
                                                  ---------------   --------------- 
  Total tax credit                                        (1,069)             (884) 
                                                          =======           ======= 
 
 

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK

applied to profits for the year are as follows:

 
                                                           2019              2018 
                                                        GBP'000           GBP'000 
 
  Loss before tax                                       (7,935)          (10,299) 
                                                ---------------   --------------- 
  Expected tax charge based on the effective 
   standard rate of corporation tax in the 
   UK of 19.00% (2018: 19.00%)                          (1,508)           (1,956) 
 
  Effect of: 
  Expenses not deductible for tax purposes                1,531             1,365 
  Additional deduction for R&D expenditure              (1,013)             (851) 
  Surrender of tax losses for R&D tax credit 
   refund                                                   161                73 
  Other adjustment                                          (2)                 5 
  Adjustment in respect of prior periods                  (174)               111 
  Deferred tax not recognised                              (64)               369 
                                                ---------------   --------------- 
  Tax credit for the year                               (1,069)             (884) 
                                                        =======           ======= 
 
 
 16.    TRADE AND OTHER RECEIVABLES               2019              2018 
                                               GBP'000           GBP'000 
         CURRENT 
  Trade receivables                              6,837            10,260 
  Corporation tax recoverable                      515               424 
  Other receivables                                203               379 
  Prepayments                                      638               657 
  Contract assets                                  995               715 
                                       ---------------   --------------- 
                                                 9,188            12,435 
 
        NON-CURRENT 
 
  Other receivables                                105               105 
                                       ---------------   --------------- 
                                                 9,293            12,540 
                                               =======           ======= 
 
 
 17.    TRADE AND OTHER PAYABLES                      2019              2018 
                                                   GBP'000           GBP'000 
         CURRENT 
  Trade payables                                     3,249             2,951 
  Other taxes and social security                    1,666             2,400 
  Other payables                                     6,527             8,900 
  Accruals                                           2,941             3,846 
  Contract liabilities                               1,445               974 
                                           ---------------   --------------- 
                                                    15,828            19,071 
                                                   =======           ======= 
 
    Other payables due in less than one year include GBP6,500k of 
    deferred consideration (2018: GBP8,657k) 
 
 
 NON-CURRENT 
 
 Other payables               2,160             3,150 
                    ---------------   --------------- 
                              2,160             3,150 
                            =======           ======= 
 
 

Other payables due in greater than one year include GBP2,160k of deferred consideration (2018: GBP3,150k).

 
 Deferred consideration reconciliation    Current   Non-current 
                                          GBP'000       GBP'000 
 Balance at 31 December 2018                8,657         3,150 
 Moved from contingent                      3,220             - 
 Moved to current                             990         (990) 
 Paid in year                             (6,367)             - 
                                            _____         _____ 
 Balance at 31 December 2019                6,500         2,160 
                                            =====          ==== 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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April 20, 2020 02:00 ET (06:00 GMT)

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