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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Beeks Financial Cloud Group Plc | LSE:BKS | London | Ordinary Share | GB00BZ0X8W18 | ORD GBP0.00125 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 177.00 | 174.00 | 180.00 | 177.00 | 177.00 | 177.00 | 4,509 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computer Related Svcs, Nec | 22.36M | -89k | -0.0014 | -1,264.29 | 116.66M |
From Apr 2019 to Apr 2024
TIDMBKS
RNS Number : 2756L
Beeks Financial Cloud Group PLC
05 September 2019
Beeks Financial Cloud Group plc
("Beeks" or the "Company")
Final Results for the year ended 30 June 2019
5 September 2019 - Beeks Financial Cloud Group plc (AIM: BKS), a cloud computing and connectivity provider for financial markets, is pleased to announce its final results for the year ended 30 June 2019.
Financial highlights
-- Revenues increased 32% to GBP7.35m (2018: GBP5.58m) -- Annualised Committed Monthly Recurring Revenue (ACMRR) up 32% to GBP9.1m (2018: GBP6.9m) -- Gross profit up 22% to GBP3.65m (2018: GBP2.98m) -- Gross profit margin 50% (2018: 53%) -- Underlying* EBITDA increased 27% to GBP2.48m (2018: GBP1.95m) -- Underlying* EBITDA margin 34% (2018: 35%) -- Underlying profit before tax** increased 11% to GBP1.32m (2018: GBP1.19m) -- Underlying EPS** 2.58p (2018: 2.27p) -- Net cash as at 30 June 2019 of GBP1.02m (30 June 2018: Net cash GBP2.09m)
-- Proposed final dividend of 0.15p per share equating to full year dividend payment of 0.35p (2018: 0.30p)
* Underlying EBITDA is defined as earnings before amortisation, depreciation, finance costs, taxation, acquisition costs, share based payments and exceptional non-recurring costs
** Underlying profit before tax and underlying EPS excludes amortisation on acquired intangibles, acquisition costs, share based payments and exceptional non-recurring costs
Operational Highlights
-- Signing of three Tier 1 clients representing a major step change for the Company with strong pipeline of further institutional contracts
-- No. of institutional customers increased to 220 (2018: 192)
-- Average entry level new institutional customer contract increased to GBP2,200/month (2018: GBP800/month)
-- Expansion of second Equinix New York data centre, and generation of first revenues from our two newest data centres - London InterXion and Singapore
-- Acquisition of Commercial Network Services (CNS), a US-based online service provider, for $1.4m
-- Continued expansion of our new asset classes, including our Fixed Income and Cryptocurrency offerings, including new partnership with BeQuant Exchange, a leading cryptocurrency exchange based in London and Malta
-- Further key developments to the Self-service portal, including the ability to provision dedicated servers, manage infrastructure inventory, and monitor Beeks' global server capacity
Outlook
-- Positive market environment and considerably increased sales pipeline -- Confident in securing additional Tier 1 customers in the year ahead
Statutory Equivalents
The above highlights are based on underlying results. Reconciliations between underlying and statutory results are contained within these financial statements. The statutory equivalents of the above results are as follows:
-- Profit before tax was GBP1.04m (2018: GBP0.75m) -- Basic EPS was 2.10p (2018: 2.37p)
Gordon McArthur, CEO of Beeks Financial Cloud commented:
"Following an excellent close to the year, during which Beeks signed three Tier 1 clients, we have entered the new financial year in a strong position and enjoyed a good level of trading in the first two months of the year. Our core business with mid-tier organisations continues to grow and we are now layering on more strategic engagements with larger organisations.
Overall, the business is delivering on its early promise, using the enhanced profile and strengthened balance sheet resulting from the IPO in 2017 to capitalise on the growth in demand for Infrastructure as a Service offerings within financial markets. We are confident the quality of our service will see our client list continue to grow in the year ahead, and we look to the future with confidence."
For further information, please contact:
Beeks Financial Cloud Group plc Gordon McArthur, CEO via Alma PR Fraser McDonald, CFO Cenkos Securities plc +44(0)131 220 6939 Derrick Lee / Pete Lynch Alma PR +44(0)20 3405 0212 Caroline Forde / Josh Royston / Helena Bogle
ABOUT BEEKS FINANCIAL CLOUD
Beeks Financial Cloud is a UK-based low-latency Infrastructure-as-a-Service (IaaS) provider for automated trading in Forex, Futures, Equities, Fixed income and cryptocurrency financial products. With eleven data centres globally and low-latency connectivity between sites, the Beeks Financial Cloud focuses on reducing barriers to entry and time to market for institutional clients. For more information, visit: www.beeksfinancialcloud.com.
Chairman's statement
I am pleased to report on another successful year of trading for Beeks Financial Cloud as a public company. As anticipated, we experienced a significant increase in momentum in the second half of the year. For the year, we delivered GBP7.4m revenue, an increase of 32%, underlying EBITDA of GBP2.5m, an increase of 27% and a strong exit run rate of Annualised Committed Monthly Recurring Revenue of GBP9.1m. This provides us with an excellent foundation for growth in the year ahead.
A key strategic focus through the year was the expansion of our client base to include larger Tier 1 organisations. Significant progress was achieved in this respect, signing a financial services organisation from within the insurance sector, a global bank and a global investment management organisation. Importantly, we have a strong pipeline of additional institutional contracts ahead, demonstrating the growing capabilities of the business and our expanding addressable market. With our enhanced product offering and global network, we are well placed to take advantage of these opportunities.
We have continued to invest in our platform and operations, and expanded our geographical footprint, in line with our stated strategy set out at the time of the IPO. With the addition of the second Equinix data centre in New York, we now operate out of eleven data centres and were pleased to see our two newest data centres, London InterXion and Singapore, become revenue generating in the year, in line with our targets.
Alongside our focus on growing the institutional client base, we were pleased to complete our first acquisition since Admission. The addition of Commercial Network Services augmented our retail trade offering, bringing established customer relationships and strong levels of recurring revenue, and I am pleased to say that the integration is going well. We expect this acquisition to be earnings enhancing in this new financial year.
As a result of our strong financial performance, the Board is pleased to propose a final dividend payment of 0.15p, which, combined with the interim dividend of 0.2p, equates to a total dividend for the year of 0.35p (2018: 0.30p).
In October, Fraser McDonald was appointed to the Board as CFO following the departure of Simon Goulding. Fraser greatly contributed to the success of the Company's IPO in 2017, in his role as Financial Controller, and has been an excellent addition to the Board.
We would like to take this opportunity to thank our entire team for their hard work and dedication which has enabled Beeks to expand and enter new markets, while retaining and growing our existing customer base. We have entered the new financial year in a strong position and are confident for further growth in the year ahead.
Mark Cubitt
Chairman
4 September 2019
Strategic overview
Market Overview
The Group continues to operate successfully in a demanding, time-sensitive industry. Our addressable market is extensive with up to 20,000 financial institutions as potential customers. The majority of these organisations are currently utilising their own IT infrastructure and are yet to move to the cloud computing model. We believe the decreased latency, increased flexibility and cost-benefits of cloud computing that we facilitate will see a gradual long-term shift to this model. The flexibility of cloud computing will allow financial institutions to accelerate new product development, generate new sources of income and test new geographies and markets, while moving costs from a capital expenditure to an operational expenditure model. Our innovations, enhanced product range position, breadth of asset classes and growing number of referenceable Tier 1 customers, positions us well to benefit from the growth in the market for automated trading, the continued adoption of cloud computing by financial services organisations and the opportunity for accelerated growth through corporate acquisitions in a fragmented market place.
Business Model
Beeks Financial Cloud is a leading cloud computing and connectivity provider for financial markets, offering Infrastructure as a Service and the management of hybrid cloud deployments to institutional and retail traders in forex, futures, equities, fixed income and cryptocurrency asset classes.
Beeks provides:
-- Dedicated and virtual servers that host traders and brokers in 11 data centres around the world
-- Ultra-low latency connectivity between clients and key financial venues and exchanges
-- Co-location for clients to position their own computing power in our space, benefitting from our proximity to financial hubs
-- In-house security software in order to protect client infrastructure from DDoS attacks
-- The management of hybrid cloud deployments for customers wishing to combine the Beeks IaaS with the public cloud
-- Our model focuses on efficiency and flexibility, offering our clients the ability to scale up and scale down as needed. Due to market fluctuations and the inherent risk involved in algorithmic trading, this makes our services highly attractive to clients.
Strategy
Our main strategic priority is to grow our institutional customer base both for hybrid cloud management and our core low latency offering and we are encouraged by the significant opportunities we have identified.
In order to satisfy existing client demand, and attract new customers, we will continue expanding into new asset classes and geographies, furthering our offering.
Our retail trader offering continues to grow, providing the business with a strong, profitable foundation. We will maintain our investment into this part of the business, to ensure we continue to provide a market leading offering, while we focus our strategic initiatives on the growth of the institutional offering.
While our focus is on organic growth, we will continue to assess further strategic acquisition opportunities that will accelerate growth and complement our business model. The acquisition of CNS adds both scale and cost-synergies to Beeks' retail trader offering, and we will look to acquire other businesses that are profitable and will add additional resources.
Strategic Report - Chief Executive's Review
Our vision is simple: to provide a rapidly deployed, secure and scalable cloud environment for trading applications.
The year under review was another successful one for Beeks in which we both delivered strong financial results and also built more of the foundations that will continue to benefit the Company in years to come.
The signing of our first three Tier 1 customers represents a major milestone and one that undoubtedly reflects on our successful AIM Admission in 2017. The procurement processes for Tier 1 customers are long and detailed and it is hard to envisage us having achieved this goal as a private company, despite the fact that the quality of our offering has never been in question. It is evident that Beeks' reputation continues to grow, as does our pipeline of opportunities.
The reason for the increasing adoption of our services is that our cloud-based Infrastructure as a Service ('IaaS') model allows financial organisations the flexibility and agility to deploy and connect to a variety of trading venues globally, at speed and at a fraction of the cost of building their own networks and infrastructure, irrespective of the organisation's size. We continue to invest in our offering and the ability to now offer dedicated servers is resonating well in our market.
In line with our clients' needs, we have continued to expand into new data centres and the relationship that we have with our partners in this field is stronger than ever as we continue to grow together.
As well as our ongoing focus on institutional clients we were pleased to complete our first acquisition since Admission. The addition of Commercial Network Services, acquired in May 2019, is highly complementary to our existing retail trader offering, bringing an established customer base, high levels of recurring revenue and a strong service offering. I am pleased to report that integration is proceeding well and the business is performing in line with our expectations. Following the acquisition, 20% of our revenue is currently derived from retail customers. While this segment is expected to be a strong profit generator for the Group moving forward and enhancements will continue to be made to the offering, the main focus of the management team will be on the growth of the institutional customer base.
Financial performance
I am very pleased to report another year of strong growth for the Company and one which has continued the trend of quarter on quarter growth since inception. Revenue increased by 32% year on year with growth in institutional sales, on which management is focussed, particularly encouraging. Beeks has strong recurring revenue and customer retention remained high with losses mainly as a result of customers exiting the market. Our Annualised Committed Monthly Recurring Revenues (ACMRR) reached GBP9.10m at 30 June 2019, increasing 32% from GBP6.90m at 30 June 2018.
Gross profit margin has reduced in line with our expectations to 50%, reflecting investment in the Group including the expansion into two new data centres and our self-service portal.
Market & Strategy
Our principal objective is to grow our institutional customer base in the markets for automated trading and hybrid cloud. Financial institutions around the world are looking to increase their customer offerings and require sophisticated cloud-based technology platforms to do so. Ongoing growth will continue to be achieved through entry into new geographies, further development of our offerings across the asset classes, and the continued evolution of our self-service web portal. The ease and speed with which our customers can increase their use of our platform via the web portal continues to be a strong competitive differentiator for the Group. The success of this approach is evident by the traction that we are gaining through our Fixed Income offering, an asset class that was only introduced by the Company in the prior financial year. We are particularly pleased with the progress we are making in this field and see this is a significant area of future growth for our business.
We will continue to add further services to our platform, such as data feeds from additional trading venues, data normalisation (where data from trading venues is collated and packaged), cloud data recovery and additional connectivity offerings and WAN capacity.
We have made our first strides into the Tier 1 institutional space with three significant wins and remain confident that we will add further in this space looking forward into the next financial year.
We continue to see the forex sector fragment, with new entrants requiring IaaS solutions. The cryptocurrency markets continue to evolve at break-neck speed and we are seeing a maturing in exchanges' hosting and connectivity requirements. We anticipate these factors as being continued drivers for demand for our service in the year ahead.
Competitive positioning
We have an established customer base and a strong competitive advantage through the breadth of our connectivity to trading venues, the sophistication of our self-service web portal, and the breadth of our services. We now have a foot-hold in all asset classes of note, meaning we can enter into contract discussions with any financial institution within the trading ecosystem. We believe we are now one of only very few businesses with this breadth globally and are unique in delivering these services via the cloud. We will continue to develop our cloud services in the year ahead, to capitalise on our strength in this area of the market. We are confident in our ability to remain at the forefront of this evolving market and grow our market share.
Operational Strengthening
This year saw the strengthening of our business in several key areas: across our people, our locations, the asset classes we cover and the sophistication of our product offering.
Headcount has remained steady at 33 as at 30 June 2019, compared with 33 as at 30 June 2018. Included within this though are a number of senior hires towards the end of the financial year, including a Global Head of Sales and a Head of Pre-Sales and Service Delivery. Both of these new hires bring over 40 years of industry experience and will help the Group access and support the larger customers in the market.
IT Support and development staff have also increased, replacing some management and administration roles.
Whilst we continue to hire quality people, our aim is to automate tasks wherever possible - from billing through to service delivery, to allow us to provide a competitive price and to build operational leverage.
Our two newest sites became revenue generating during the year, being Singapore Exchange, Asia's leading international, multi-asset exchange, and InterXion in London. Good levels of customer interest means we are on track to reach break-even at a monthly operating level at these new sites within our targeted timeline of 12 months. Following a period of investigation of the B3 exchange in Brazil, we have decided not to launch in this data centre for commercial and operational reasons. With the recent regulatory changes in the domestic Chinese market we have maintained our "wait and see" strategy before investing in hard assets in country.
We will continue to review new sites and locations as part of our growth and expansion plans and be led by customer demand.
Our expansion into new asset classes and geographies has aided the increase in our average monthly client revenue, as well as bringing new customers. We have continued to add connectivity to several cryptocurrency exchanges, as well as beginning to host more crypto exchanges and platforms on our infrastructure, meeting the rise in customer demand and connecting clients to mutual partners. We will continue to expand our offering in this area, in addition to seeking to exploit further opportunities within the Fixed Income and Equities space as client demand dictates.
Our web portal is an industry-leading customer self-service portal that automates the creation of infrastructure to allow clients the ability to build servers themselves. By reducing human intervention, the speed and ease of the provision of products is greatly improved with a basic virtual private server, the building block for our clients being able to trade, being ready in as little as five minutes. Our continuous development of the portal now allows for provision of dedicated servers, as well as providing a platform for our clients to take inventory of their infrastructure and to check available capacity of Beeks' servers across our global locations. This, in turn, facilitates the scaling of client infrastructure as clients can choose and build additional servers at their own pace. This is unique to Beeks in the financial services sector.
We have sufficient unused power and capacity around the world to meet our current growth projections without significant additional increase in monthly operating spend requirements.
Customers
Institutional customer numbers using the platform grew from 192 at 30 June 2018 to 220 at 30 June 2019 and the average entry level new institutional customer contract has increased to GBP2,200 per month from GBP800 per month when compared to the same period last year. Institutional revenue, which continues to be our focus, represented almost 90% of total revenue before the CNS acquisition. This percentage has been reduced to approx. 80% following the acquisition of the predominately retail business of CNS.
The opportunist acquisition of CNS in May 2019, added approximately 1,000 retail trader customers to the Group and GBP0.8m of Annualised Committed Monthly Recurring Revenue. Integration of the business has progressed well and we believe there is the opportunity for revenue expansion through the provision of additional elements of the Beeks service, not previously available to the CNS customers.
The last year has seen a considerable expansion of the types of customer we support, with Beeks now catering for banks, brokers, hedge funds, insurers, crypto traders and exchanges.
Future Growth and Outlook
Following an excellent close to the year, we have entered the new financial year in a strong position and enjoyed a good level of trading in the first two months of the year. Our core business with mid-tier organisations continues to grow and we are now layering on more strategic engagements with larger organisations.
The market environment is positive, with a growing number of financial institutions turning to the flexibility and scalability offered by Infrastructure as a Service. This positive market backdrop, combined with an increased breadth of offering and depth of experience within our sales team, means our sales pipeline is considerably larger than ever before and our existing customers continue to increase their use of the Beeks Financial Cloud. While the more strategic Tier 1 engagements naturally take longer to close, the number of opportunities in which we are engaged gives us confidence that we will secure additional long-term Tier 1 customers this year.
Overall, the business is delivering on its early promise, using the enhanced profile and strengthened balance sheet resulting from the IPO in 2017 to capitalise on the growth in demand for Infrastructure as a Service offerings within financial markets. We are confident the quality of our service will see our client list continue to grow in the year ahead, and we look to the future with confidence.
Gordon McArthur
Chief Executive Officer
4 September 2019
Strategic Report - Financial Review
KEY PERFORMANCE INDICATOR REVIEW
Hot Features
Premium
2019 2018 Growth
Revenue GBP7.35m GBP5.58m 31.7%
--------- --------- -------
ACMRR GBP9.10m GBP6.90m 31.9%
--------- --------- -------
Gross margin 49.6% 53.4%
--------- --------- -------
Underlying EBITDA* GBP2.48m GBP1.95m 27.1%
--------- --------- -------
Underlying EBITDA margin 33.7% 34.7%
--------- --------- -------
Underlying profit before tax GBP1.32m GBP1.19m 10.9%
--------- --------- -------
Underlying EPS (note 23) ** 2.58p 2.27p 13.7%
--------- --------- -------
Dividend per share 0.35p 0.30p 16.7%
--------- --------- -------
* Underlying EBITDA is defined as earnings before amortisation, depreciation, finance costs, acquisition costs, share based payments, taxation and exceptional costs
** Underlying profit before tax and underlying EPS excludes amortisation on acquired intangibles, acquisition costs, share based payments and exceptional non-recurring costs
Revenue
FY19 was a good year in terms of revenue growth. Group revenues grew by 31.7% to GBP7.35m (2018: GBP5.58m), driven mainly by continued organic growth. The CNS acquisition contributed GBP0.1m revenue in the final two months of the year. 99% of the Group's revenues were recurring. Annualised Committed Monthly Recurring Revenues (ACMRR) increased by 31.9% to GBP9.1m (2018: GBP6.9m) with CNS representing GBP0.8m of this increase.
We continue to have a healthy level of customer concentration with no single customer accounting for more than 6% of ACMRR. We have increased the number of institutional customers to 220 from 192 as at 30 June 2018 and our top 10 customers accounted for 32% of recognised revenue in the year (2018: 29%).
Gross Profit
Gross profit earned increased 22.5% to GBP3.65m (2018: GBP2.98m), however the Group saw a decrease in gross margins from 53.4% to 49.6% as anticipated. Part of this reduction was within direct costs due to the investment made this year into our two new data centres in London InterXion and Singapore. These data centres are revenue generating but not yet at breakeven levels which is typically achieved 12 months from go-live. Gross margin has also been impacted by an increase of depreciation to GBP0.89m (FY18: GBP0.58m) as the Group has continued to invest in capacity to support our increased revenues and customer growth. In relation to sales growth, fixed asset investment and therefore depreciation has increased at a higher rate, partly due to the timing of sales order to revenue recognition and the longer sales cycle we have seen in the Tier 1 space. The Group has continued to invest in developing innovative technology solutions such as the customer portal and has incurred internal capitalised development costs of GBP0.8m (2018: GBP0.4m).
Other Operating Expenses
Operational costs, which are defined as operating expenses less exceptional costs, share based payments and non-recurring costs, have increased by GBP0.5m as we support both a growing and more mature customer base and to gear up for future growth plans. Overall, they increased by 29% to GBP2.2m (2018: GBP1.7m). Within this, staff costs have increased by GBP0.4m mainly as a result of having our staff numbers in place for the full financial year in comparison to last year. This year was also our first full financial year as a PLC, therefore the added regulatory, legal and financial costs had an impact of an additional GBP0.1m when compared with last year.
Finance Costs
Finance costs are relatively flat when compared with last year. Finance lease interest costs have reduced as a result of some finance leases coming to the end of life but this has been offset partly by higher loan interest latterly due to the GBP1m debt facility taken to finance the CNS acquisition. Other than the loan to finance the acquisition, there has been no additional debt taken on by the Group during the period as operating cash flow and IPO proceeds has been sufficient to meet the Group's working capital requirements.
Earnings before interest, tax, depreciation, amortization and exceptional non-recurring costs ("Underlying EBITDA") increased by 27.1% to GBP2.48m (2018: GBP1.95m) with underlying EBITDA margin largely maintained when compared to last year at 33.7% (2018: 34.7%). The growth in Underlying EBITDA has largely been driven by the increase in organic sales.
Underlying EBITDA, underlying profit before tax and underlying earnings per share are alternative performance measures, considered by the Board to be a better reflection of true business performance than statutory measures only.
PROFIT BEFORE TAX
Year ended Year ended
30 June 2019 30 June 2018
GBP'000 GBP'000
Profit before tax for the year 1,043 747
Add back:
IPO Exceptional costs - 368
Acquisition costs 127 -
Share Based payments 63 -
Exceptional Non-recurring costs 21 -
Amortisation of acquired intangibles 62 76
-------------- --------------
Underlying profit for the period 1,316 1,191
Underlying Profit before tax increased to GBP1.32m (2018: GBP1.19m). The impact of higher depreciation and amortization as a result of both investment in our operational asset base and the self-service customer portal have had an impact on PBT.
Taxation
The effective tax rate ('ETR') for the period was (1.9%), (2018: (1.3%)).
The ETR has been reduced by both deductions for share options and R&D tax credit claims.
Further tax has become payable in the US which has been provided for at a US tax rate estimate of 25%.
Earnings per Share and Dividends
Underlying earnings per share rose 14% to 2.58p (2018: 2.27p). Underlying diluted earnings per share rose to 2.55p (2018: 2.20p).
Basic earnings per share decreased to 2.10p (2018: 2.37p). Basic EPS has shown a decrease due to the calculation method used in 2018 where the weighted average number of ordinary shares was impacted by the share split during IPO. Diluted earnings per share was also impacted by this and reduced to 2.09p (2018: 2.26p).
The Board proposes a final dividend of 0.35p (2018:0.3p). This is in line with our progressive dividend policy for dividend growth. Subject to shareholder approval at the forthcoming Annual General Meeting, the final dividend is expected to be paid on 31 October 2019 to shareholders on the register at 30 September 2019.
Balance Sheet and Cash flows
The statement of financial position shows an increase in non-current assets to GBP4.81m (2018: GBP3.24m). This is as a result of the GBP1.1m acquisition of the trade assets of CNS, investment in property, plant and equipment of over GBP1m (2018: GBP1.4m) and further investment in our customer self-service portal of GBP0.4m (2018: GBP0.4m), offset by depreciation and amortization. Trade and other receivables have increased proportionately with revenue growth and because of the CNS acquisition. The increase in accrued income is largely driven by the two months of CNS income that was transferred to Beeks' bank following the year end.
During the year the Group repaid GBP0.4m of loan and lease finance and drew down GBP1m of loan finance to part fund the CNS acquisition of trade assets.
At 30 June 2019 net assets were GBP5.63m compared to net assets of GBP4.84m at 30 June 2018.
The Group ended the period with net cash of GBP1.02m (30 June 2018: net cash GBP2.09m).
Fraser McDonald
Chief Financial Officer
4 September 2019
Beeks Financial Cloud Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2019
2019 2018
Note GBP000 GBP000
-------- --------
Revenue 3 7,352 5,583
Cost of sales (3,707) (2,602)
Gross profit 3,645 2,981
Administrative expenses (2,457) (2,081)
Operating profit 4 1,188 900
Analysed as
Earnings before depreciation, amortisation,
acquisition costs, share based payments
and non-recurring costs: 2,479 1,946
Depreciation 11 898 584
Amortisation 10 182 94
Acquisition costs 9 127 -
Share based payments 19 63 -
Non-recurring costs 21 368
-------- --------
Operating profit 1,188 900
------------------------------------------------- ----- -------- --------
Finance income 7 2
Finance costs 5 (152) (155)
Profit before taxation 1,043 747
Taxation 8 20 10
Profit after taxation for the year attributable
to the owners of Beeks Financial Cloud
Group PLC 1,063 757
-------- --------
Other comprehensive income
Amounts which may be reclassified to profit
and loss
Gain on exchange 18 1
Total comprehensive income for the year 1,081 758
-------- --------
Basic earnings per share 23 2.10 2.37
Diluted earnings per share 23 2.09 2.26
The above income statement should be read in conjunction with the accompanying notes.
Beeks Financial Cloud Group PLC
Consolidated Statement of Financial Position
As at 30 June 2019
2019 2018
Note GBP000 GBP000
Non-current assets
Intangible assets 10 2,229 852
Property, plant and equipment 11 2,440 2,137
Deferred tax 12 136 255
------- -------
4,805 3,244
Current assets
Trade and other receivables 13 1,104 664
Cash and cash equivalents 14 2,338 2,887
------- -------
3,442 3,551
Total assets 8,247 6,795
Liabilities
Non-current liabilities
Borrowings and other financial liabilities 16 699 332
Deferred tax 12 48 108
Total non-current liabilities 747 440
Current liabilities
Trade and other payables 17 1,868 1,511
Total current liabilities 1,868 1,511
Total liabilities 2,615 1,951
Net assets 5,632 4,844
------- -------
Equity
Issued capital 18 64 62
Reserves 20 4,531 4,450
Retained earnings 1,037 332
------- -------
Total equity 5,632 4,844
------- -------
The above statement of financial position should be read in conjunction with the accompanying notes.
Beeks Financial Cloud Group PLC
Consolidated Statement of Changes in Equity
As at 30 June 2019
Foreign Share Share
Issued currency Merger Other based premium Retained Total
capital reserve reserve reserve payments reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1 July 2017 2 83 372 (315) - - (517) (375)
Profit after income
tax expense for
the year - - - - - - 757 757
-------- --------- -------- -------- --------- -------- --------- -------
Total comprehensive
income - - - - - - 757 757
Exchange gain - 1 - - - - - 1
Deferred tax - - - - - - 104 104
Issue of share
capital 60 - - - - 4,309 (12) 4,357
-------- --------- -------- -------- --------- -------- --------- -------
As at 30 June 2018 62 84 372 (315) - 4,309 332 4,844
Profit after income
tax expense for
the year - - - - - - 1,063 1,063
-------- --------- -------- -------- --------- -------- --------- -------
Total comprehensive
income - - - - - - 1,063 1,063
Exchange gain - 18 - - - - - 18
Deferred tax - - - - - - (104) (104)
Issue of share
capital 2 - - - - - - 2
Share based payments - - - - 63 - - 63
Dividends paid - - - - - - (254) (254)
-------- --------- -------- -------- --------- -------- --------- -------
As at 30 June 2019 64 102 372 (315) 63 4,309 1,037 5,632
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Beeks Financial Cloud Group PLC
Consolidated Cash Flow Statement
For the year ended 30 June 2019
2019 2018
Note GBP000 GBP000
------- -------
Cash flows from operating activities
Profit before taxation for the year 1,043 747
Adjustments for:
Depreciation and amortisation 1,080 678
Share options 63 -
Impairment 21 -
Foreign exchange (16) -
Interest received (7) (2)
Finance fees and interest 152 155
------- -------
Operating cash flows 2,336 1,578
(Increase) in receivables (440) (270)
Increase/ (decrease) in payables 229 (768)
------- -------
Operational cash flows after movement in working capital 2,125 540
Corporation tax paid (26) (92)
------- -------
Net cash inflow from operating activities 2,099 448
Cash flows from investing activities
Capitalised development costs 10 (437) (384)
Acquisition of trading assets of business 9/10 (1,112) -
Payments for property, plant and equipment 11 (1,222) (1,071)
Net cash (outflow)/ inflow from investing activities (2,771) (1,455)
Cash flows from financing activities
Repayment of existing loan borrowings (34) (78)
Dividends paid (254) -
Sale and leaseback of property, plant and equipment - 203
Issue of loans 990 -
Finance lease repayments (435) (458)
Finance fees and interest 5 (152) (155)
Interest received 5 7 2
Proceeds from the issue of share capital 1 4,357
Net cash outflow from financing activities 123 3,871
Net (decrease) / increase in cash and cash equivalents (549) 2,864
Cash and cash equivalents at beginning of year 2,887 23
Cash and cash equivalents at end of year 14 2,338 2,887
------- -------
The above cash flow statement should be read in conjunction with the accompanying notes.
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
1. Summary of significant accounting policies
CORPORATE INFORMATION
Beeks Financial Cloud Group PLC is a public limited company which is listed on the AIM Market of the London Stock Exchange and is incorporated in Scotland. The address of its registered office is Lumina Building, 40 Ainslie Road, Ground Floor, Hillington Park, Glasgow, UK, G52 4RU. The principal activity of the Group is the provision of information technology services. The registered number of the Company is SC521839.
The financial statements are prepared in pounds sterling.
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
BASIS OF PREPARATION
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical cost convention.
Publication of non-statutory accounts
The financial information set out in this announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.
The consolidated statement of financial position, the consolidated statement of changes in equity and the consolidated statement of cash flows as at 30 June 2019 and the consolidated statement of comprehensive income for the year ended 30 June 2019, together with the associated notes, have been extracted from the Group's 2019 financial statements upon which the auditor's opinion is unqualified and does not include any statement under section 498 of the Companies Act 2006.
International Financial Reporting Standards and Interpretations issued but not yet effective
At the date of authorisation of these financial statements, the following standards, interpretations and amendments have been issued but are not yet effective and have no material impact on the Group's financial statements:
-- IFRS 10 and IAS 28 (amendments) - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.
-- IFRS 11 - Amendments relating to Acquisitions of Interests in Joint Operations. -- IFRS 2 (amendments) - Classification and Measurement of Share-Based Payment Transactions.
-- Annual Improvements to IFRSs 2012 - 2014 cycle - Amendments to IFRS 1 first-time adoption of International Financial Reporting Standards.
Amendments that are expected to have an impact on the Group's consolidated financial statements:
IFRS 16 - Leases
The Group is currently completing its assessment of IFRS 16, however, at this time the Group intends to transition to IFRS 16 applying the modified retrospective adoption method, with no restatement of prior year comparatives, and will therefore recognise leases on balance sheet as at 1 July 2019. Adopting IFRS 16 will result in the recognition of a right-of-use asset and corresponding liability on the balance sheet for each lease, with the associated depreciation and interest expense being recognised in the income statement over the period of the lease. The right-of-use asset will be assessed for impairment under IAS 36 at the date of initial application.
The current initial impact assessment of IFRS 16 has provisionally concluded that our intention is to make the following policy choices on transition to IFRS 16 on 1 July 2019:The Group plans to apply IFRS 16 initially on 1 July 2019 using the modified retrospective approach with the cumulative effect of adopting IFRS 16 recognised through opening retained earnings with no restatement of comparatives.
-- The value of the right-of-use asset recognised on the initial application of IFRS 16 will be equal to the lease liability.
-- The Group intends to apply the practical expedient that permits the exclusion of initial direct costs from the measurement of the right-of-use asset at the date of initial application.
-- The Group intend to use the practical expedient not to recognise short-term leases (with a term of less than twelve months) and low-value leases (where the value of lease on inception is less than GBP5,000). These leases will continue to be classed as operating leases under IAS 17.
-- The lease liability at 1 July 2019 will be measured at the present value of unpaid lease payments applying an appropriate incremental borrowing rate based on the rate of interest on the Group's external borrowings, adjusted for the term of the lease.
Based on our preliminary assessment the impact will be:
-- There will be recognition of a right-of-use asset and lease liability of an estimated GBP1.3m to GBP1.5m at 1 July 2019 based on the values disclosed in the operating lease commitment note adjusted to present value and for our provisional view of the definition of a lease under IFRS 16.
-- It is estimated that proforma EBITDA for the year ended 30 June 2019 would have increased by GBP500k to GBP560k as operating lease expenses previously recognised as operating expenses will be reclassified to depreciation and finance costs under IFRS 16.
-- Our preliminary assessment will be further advanced over the coming months.
ADOPTION OF NEW AND REVISED STANDARDS
Amendments to IFRS that are mandatorily effective for the current year. In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective in the current year.
A number of new and revised standards are effective for annual periods beginning on or after 1 July 2018.
The Group has considered the impact of these standards and revisions and has concluded that they will not have a significant impact on the Group's financial statements. The accounting policies set out below have been applied consistently to all periods presented in the financial statements by the Group.
IFRS 9 "Financial Instruments"
IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement". It makes major changes to the previous guidance on the classification and measurement of financial assets and introduces an "expected credit loss" model for the impairment of financial assets. The Group's finance team performs valuations of financial items for financial reporting purposes. The Group has no complex Financial Instruments.
Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The finance team reports directly to
the Chief Financial Officer (CFO) and to the audit committee. Valuation processes and fair value changes are discussed among the audit committee and the valuation team at least every year, in line with the Group's reporting dates.
When adopting IFRS 9, the group has applied transitional relief and opted not to restate prior periods. Differences arising from the adoption of IFRS 9 in relation to classification, measurement, and impairment are recognised in retained earnings.
The adoption of IFRS 9 has impacted the following areas:
-- The impairment of financial assets applying the expected credit loss model. This affects the group's trade receivables and investments in debt type assets measured at amortised cost. For contract assets arising from IFRS 15 and trade receivables, the group applies a simplified model of recognising lifetime expected credit losses on these assets. There are no significant financing components attached to these assets.
-- The reclassification of financial instruments, financial assets previously classified as loans and receivables are now classified as financial assets subsequently measured at amortised cost. There has been no reclassification of financial liabilities, and the reclassification of financial assets has not resulted in any adjustment to the values previously reported.
IFRS 9 has no impact on the on the balance sheet presentation of financial liabilities and minimal impact for financial assets, mainly being the reduction of the categories of financial assets.
IFRS 15 "Revenue from Contracts with Customers"
IFRS 15 "Revenue from Contracts with Customers" and the related "Clarifications to IFRS 15 Revenue from Contracts with Customers" (hereinafter referred to as "IFRS 15") replaced IAS 18 "Revenue", IAS 11 "Construction Contracts", and several revenue-related Interpretations. The new Standard has been applied retrospectively without restatement as it had no material impact on previously reported results or retained earnings. In accordance with the transition guidance, IFRS 15 has only been applied to contracts that are incomplete as at 1 July 2018.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under IFRS 15, revenue is recognised when the performance obligation on each contract has been satisfied with the customer. At the outset of each contract, an assessment is completed to determine the relevant performance obligations on each contract. As defined in IFRS 15, performance obligations in a contract are either goods or services that are distinct, or a series of goods or services that are substantially the same. Services which are not distinct, are combined with other services in the contract until a performance obligation is satisfied.
Whilst implementing IFRS 15 the Group has not made any significant judgements.
The Group has considered the following areas where IFRS 15 may have a potential Impact: -
1) Set-up fees charged on contracts. When a set-up fee is arranged, Beeks will consider the material rights of the set-up fee, if in substance it constitutes a payment in advance, the set-up fee will be deemed to be a material right.
The accounting treatment for both material rights and non-material rights set-up fees is as follows:
-- Any set up fees that are material rights are spread over the term of the contract. -- Set up fees that are not material rights are recognised over one month.
2) Access and use of server, here revenue is generally recognised over time as the group satisfies performance obligations by transferring the promised services to its customers.
3) In addition to recurring services, the Group also generates revenue from the sale of hardware, software, and consultancy services. Again consistent with IFRS 15, revenue is recognised in line with the satisfaction of the performance obligation which in the vast majority of instances is in line with the delivery of the item or service to the customer. As a result, the revenue recognition policy for these services remains unchanged under IFRS 15.
The Group has considered these areas and is of the opinion that adoption of IFRS 15 has not resulted in any adjustment to previously reported results or retained earnings.
As the Group enters into new streams of business it will consider the impact of IFRS 15 on an individual basis.
GOING CONCERN
The Directors have assessed the current financial position of Beeks Financial Cloud Group PLC, taking account of its business activities, together with the factors likely to affect its future development, performance and position as set out in the Strategic Report on pages 6 to 16.
The key factors considered by the Directors were:
-- historic and current trading and profitability of the Group, -- the rate of growth in sales both historically and forecast, -- the competitive environment in which the group operates, -- the current level of cash reserves, -- current level of debt obligations,
-- the finance facilities available to the Group, including the availability of any short term funding required.
The Group prepares regular forecasts and projections of revenues, profits and cash flows that are essential for identifying areas on which management can focus to improve performance and mitigate the possible adverse impact of a deteriorating economic outlook. They also provide projections of working capital requirements. The Directors have reviewed the trading and cash flow forecasts for the 18 months after the year ended 30th June 2019 as part of their going concern assessment, including downside sensitivities, which take into account the uncertainties in the current operating environment.
Having considered all the factors impacting the Group's business and having prepared relevant financial projections and sensitivities, including financial projections which allow for reasonably possible downsides to the Group's base case projections, and taking account of mitigating actions that can be taken in periods when headroom is tight, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors have adopted the going concern basis in preparing the annual financial statements.
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.
PRINCIPLES OF CONSOLIDATION
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary or a business is the fair values of the assets transferred, the liabilities incurred to former owners of the acquiree and the equity interests issued to the Group. The consideration transferred includes the fair values of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date. Acquisition related costs are expensed as incurred. As each of the subsidiaries are 100% wholly owned, the Group has full control over each of its investees. Intercompany transactions, unrealised gains and losses on intragroup transactions and balances between group companies are eliminated on consolidation.
Foreign currency transactions
Foreign currency transactions are translated into pound sterling using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into pound sterling using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Pound sterling using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.
REVENUE RECOGNITION
Revenue arises from the provision of cloud-based localisation. To determine whether to recognise revenue, the group follows a 5-step process as follows:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is measured at transaction price, stated net of VAT and other sales related taxes, if applicable.
The Group considers the performance condition to be the provision of access and use for clients of our servers. As the client receives and consumes the benefit of this use and access over time, the related revenue is recognised evenly over the life of the contract.
Revenue is generally recognised over time as the group satisfies performance obligations by transferring the promised services to its customers.
Cost of Sales
Costs considered to be directly related to revenue are accounted for as cost of sales. All direct production costs and overheads, including indirect overheads that can reasonably be allocated, have been classified as cost of sales.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
TAXATION AND DEFERRED TAXATION
The income tax expense or income for the period is the tax payable on the current period's taxable income. This is based on the national income tax rate enacted or substantively enacted for each jurisdiction with any adjustment relating to tax payable in previous years and changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in financial statements.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applicable when the asset or liability crystallises based on current tax rates and laws that have been enacted or substantively enacted by the reporting date. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.
A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of temporary differences can be deducted. The carrying amount of deferred tax assets are reviewed at each reporting date.
CURRENT AND NON-CURRENT CLASSIFICATION
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
CASH AND CASH EQUIVALENTS
Cash at bank, overnight and longer term deposits which are held for the purpose of meeting short term cash commitments are disclosed within cash and cash equivalents.
IFRS 9 - FINANCIAL INSTRUMENTS
In the current year, the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments of IFRS 7 Financial Instruments: Disclosures that are effective for an annual period that begins on or after 1 July 2018. The Group and parent company has elected to apply the transition provisions of IFRS 9 and opted not to restate comparatives. Any differences from the adoption of IFRS 9 in relation to classification, measurement and impairment are recognised in retained earnings.
IFRS 9 introduced new requirements for:
1. The classification and measurement of financial assets and financial liabilities; 2. Impairment of financial assets; and 3. Hedge accounting.
There has not been a material impact to the Group on adoption of IFRS 9. The Group has applied the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables.
The expected credit loss provision under IFRS 9 as at 30 June 2019 is GBP4,000. In the prior year, the impairment of trade receivables was assessed based on the incurred loss model under IAS 39. The allowance provision for impairment calculated under IAS 39 "Financial instruments: recognition and measurement" and IFRS 9 "Financial Instruments" at 1 July 2019 are not materially different, accordingly, there are no adjustments on transition.
TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised at fair value, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that Beeks Financial Cloud Group PLC will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade and other receivables may be impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit or loss within 'administrative expenses'. When a trade or other receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against 'cost of sales' in the profit or loss.
SHARE BASED PAYMENTS
Options are measured at fair value at grant date using the Black Scholes model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.
Under the group's share option scheme, share options are granted to directors and selected employees. The options are expensed in the period over which the share based payment vests. A corresponding increase to the share option reserve under shareholder's funds is recognised.
When share options are exercised, the company issues new shares. The nominal share value from the proceeds received are credited to share capital and proceeds received above nominal value, net of attributable transaction costs, are credited to the share premium when the options are exercised. When share options are forfeited, cancelled or expire, the corresponding fair value is transferred to the accumulated losses reserve.
The group has no legal or constructive obligation to repurchase or settle the options in cash.
PROPERTY, PLANT AND EQUIPMENT (PPE)
PPE is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Beeks Financial Cloud Group PLC and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation on plant and machinery and fixtures and fittings is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:
- Leasehold improvements over the lease period
- Computer Equipment 3 to 4 years and over the length of lease
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
LEASES
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease.
Sale and leaseback transactions
For a sale and leaseback transaction that results in a finance lease, any excess of proceeds over the carrying amount is deferred and amortised over the lease term.
For a transaction that results in an operating lease:
-- if the transaction is clearly carried out at fair value - the profit or loss should be recognised immediately,
-- if the sale price is below fair value - profit or loss should be recognised immediately, except if a loss is compensated for by future rentals at below market price, the loss it should be amortised over the period of use,
-- if the sale price is above fair value - the excess over fair value should be deferred and amortised over the period of use,
-- if the fair value at the time of the transaction is less than the carrying amount - a loss equal to the difference should be recognised immediately.
INTANGIBLE ASSETS AND AMORTISATION
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the assets and liabilities assumed at the date of acquisition. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Intangible assets carried forward from prior years are re-valued at the exchange rate in the current financial year. Impairment testing is carried out by assessing the recoverable amount of the cash generating unit to which the goodwill relates. Negative goodwill is immediately released to the Income Statement in the year of acquisition.
Customer relationships
Included within the value of intangible assets are customer relationships. These represent the purchase price of customer lists and contractual relationships purchased on the acquisition of the business and assets of Gallant VPS Inc., and Commercial Network Services. These relationships are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method over periods of between five and ten years.
Development costs
The Group reviews half yearly whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each bi-annual review. During the year ended 30 June 2019, management conducted a comprehensive review of all capitalised development. Development costs relating to the company's customer self-service portal and cyber-attack prevention products have been capitalised. Management have estimated that 5 years is an appropriate useful life of these asset based on future revenues and cost savings. All new capitalised development is reviewed on an individual project basis and management will select the most appropriate rate of amortisation for each asset. For details on the estimates made in relation to intangible assets, see note 2.
IMPAIRMENT
Goodwill and assets that are subject to amortisation are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to Beeks Financial Cloud Group plc prior to the end of the financial period which are unpaid as well as any outstanding tax liabilities.
BORROWINGS
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.
DEFINED CONTRIBUTION SCHEMES
The defined contribution scheme provide benefits based on the value of contributions made. Contributions to the defined contribution superannuation plans are expensed in the period in which they are incurred.
FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
EQUITY
Ordinary shares are classified as equity. An equity instrument is any contract that evidences a residual interest in the assets of Beeks Financial Cloud Group plc after deducting all of its liabilities. Equity instruments issued by Beeks Financial Cloud Group plc are recorded at the proceeds received net of direct issue costs.
The share capital account represents the amount subscribed for shares at nominal value.
The accounting policies set out above have, unless otherwise stated, been applied consistently by the Group to all periods presented.
EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Beeks Financial Cloud Group PLC, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
VALUE-ADDED TAX ('VAT') AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the amount of associated VAT, unless the VAT incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of VAT receivable or payable. The net amount of VAT recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The VAT components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of VAT recoverable from, or payable to, the tax authority.
ROUNDING OF AMOUNTS
Amounts in this report have been rounded off to the nearest thousand pounds, or in certain cases, the nearest pound.
2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Sensitivity analysis is also performed to reduce growth assumptions and increase discount rates and there is still sufficient headroom in the asset, see note 10.
Valuation of intangible assets and fair value adjustments on acquisition
As the Group continues to implement its acquisition strategy there is a requirement to fair value the assets and liabilities of any business acquired during the year. The Group is required to make an assessment as to what intangible assets exist within the acquired business at the time of the acquisition and what fair value adjustments are required. When reviewing the existence of intangible assets, consideration has been given to potential intangible assets such as customer relationships. The estimation of the valuation of customer relationships is based on the value in use calculation which requires estimates of the future cash flows expected to arise from the existing customer relationships over their useful life and to select a suitable discount rate in order to calculate the present value. Full details of the assumptions used in the calculation of intangible assets and fair value adjustments on the acquisitions that have occurred during the current year are disclosed in note 9.
Development costs
The Group reviews half yearly whether the recognition criteria for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each review period. In addition, all internal activities related to the development of new products are continuously monitored by the Directors. See note 10 for further information.
Taxation
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
The Group has tax losses available to offset future taxable profits. In estimating the amount of deferred tax to be recognised as an asset the Group estimates the future profitability of the relevant business unit. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Within the deferred tax provisions are deferred tax assets that have been recognised in the US due to the difference between the amortisation period. The group has elected to amortise the US assets over a period of 15 years in line with US tax authorities. This gives rise to a deferred tax asset as the Group is using a five year useful life for financial reporting purposes. The deferred tax asset has been calculated at an average US tax rate of 30%. This is shown in note 12.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates.
Share based payments
The Group operates equity-settled share based remuneration plans for its employees. All goods and services received in exchange for the grant of any share based payment are measured at their fair values. Where employees are rewarded using share based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant.
All share based remuneration plans are ultimately recognised as an expense through profit or loss with a corresponding credit to 'retained earnings'.
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share based incentives expected to vest differs from previous estimates. The two main vesting conditions that apply to share options relate to the achievement of annual objectives and continuous employment. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share based incentives ultimately exercised are different to that estimated on vesting.
Upon exercise of share based incentives the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium.
3. Segment Information
Operating segments are reporting in a manner consistent with the internal reporting provided to the chief operating decision makers.
The chief operating decision makers, who are responsible for allocating resources and assessing performance of operating segments, have been identified as the PLC Board.
During the year ended 30 June 2019, the Group was organised into two main business segments for revenue purposes, institutional and private customers. The group does not place reliance on any specific customer and has no individual customer that generates 6% or more of its total group revenue. Performance is assessed by a focus on the change in revenue across both institutional and retail revenue. Cost is reviewed at a cost category level but not split by segment. Assets are used across all segments and are therefore not split between segments so management review profitability at a group level.
2019 2018
GBP000 GBP000
------- -------
Revenues by business segment are as follows:
Institutional 6,437 4,752
Retail 915 831
------- -------
Total 7,352 5,583
------- -------
Revenues by geographic location are as follows:
United Kingdom 1,525 760
Europe 863 729
Rest of World 4,964 4,094
------- -------
Total 7,352 5,583
------- -------
Non-Current Assets by geographic location
are as follows:
United Kingdom - Property, plant and equipment 1,369 1,268
Europe - Property, plant and equipment 30 20
Rest of World - Intangible assets 1,701 459
Rest of World - Goodwill 528 393
Rest of World - Property, plant and equipment 1,041 849
------- -------
Total Non-Current Assets 4,669 2,989
------- -------
Intangible assets have been classified as "Rest of World" due to the fact they represent products that are available to customers throughout the World as well as the US intangible assets referred to in note 10.
The Group has taken advantage of the practical expedient permitted by IFRS 15 and has therefore not disclosed the amount of the transaction price allocated to unsatisfied performance obligations or when it expects to recognise that revenue, as contracts have an expected duration of less than one year.
4. Operating Profit
Operating Profit is stated after charging:
2019 2018
GBP000 GBP000
-------- --------
Staff costs (note 6) 1,839 1,390
Depreciation (note 11) 898 584
Amortisation of intangibles (note 10) 182 94
Foreign exchange losses 36 15
Operating leases* 608 617
Acquisition costs (note 9) 127 -
Share based payments (note 19) 63 -
Leasehold property write down 21 -
IPO exceptional items - 368
*2018 figures have been restated to reflect
IFRS 16 (see note 21),
Exceptional costs are recognised in relation to corporate transactions.
Auditors remuneration
Audit
Auditors services
Fees payable for the audit of the consolidation
and the parent company accounts 24 18
Fees payable for the audit of the subsidiaries 15 15
Non Audit
Fees payable for the interim review of the group 9 6
Tax compliance - 8
Corporate finance - 62
48 109
5. Finance costs
2019 2018
GBP000 GBP000
------- -------
Bank charges 61 62
Loans and leasing 91 89
Other finance costs - 4
------- -------
Total finance income 152 155
6. Average number of employees and employee benefits expense
2019 2018
GBP000 GBP000
------- -------
Excluding directors, the average number of employees
(at their full time equivalent) during the year
was as follows:
Management and administration 11 10
Support and development staff 18 13
------- -------
Average numbers of employees 29 23
The employee benefits expense during the year
was as follows:
Wages and salaries 1,612 1,241
Social security costs 201 139
Other pension costs 26 10
------- -------
Total employee benefits expense 1,839 1,390
Share based payments (note 19) 63 -
7. Directors remuneration
2019 2018
GBP000 GBP000
------- -------
Aggregate remuneration in respect of qualifying
services 264 304
Aggregate amounts of contributions to pension
schemes in respect of qualifying services 3 2
Highest paid director - aggregate remuneration 78 120
There are two directors (2018: two) who are accruing retirement benefits in respect of qualifying services.
8. Taxation expense
2019 2018
GBP000 GBP000
------- -------
Current tax
Foreign tax on overseas companies 25 56
Adjustment in respect of prior periods - 3
------- -------
Total current tax 25 59
Origination and reversal of temporary differences (45) (53)
Adjustment in respect of prior periods - (16)
------- -------
Total deferred tax (45) (69)
Tax on profit on ordinary activities (20) (10)
------- -------
The differences between the total tax charge above and the amount
calculated by applying the standard rate of UK corporation tax to
the profit before tax, together with the impact of the effective
tax rate, are as follows:
2019 % ETR 2018 % ETR
GBP000 movement GBP000 movement
------- --------- ------- ---------
Profit before tax 1,043 747
------- --------- ------- ---------
Profit on ordinary activities
multiplied by the standard
rate of corporation tax in
the UK of 19% (2018: 19%) 198 19% 142 19.00%
------- --------- ------- ---------
Effects of:
------- --------- ------- ---------
Expenses not deductible for
tax purposes 42 4.03% 16 2.14%
------- --------- ------- ---------
R&D tax credits relief (86) (8.25%) (63) 19.00%
------- --------- ------- ---------
Share option deduction (128) (12.28%) (104) (13.92%)
------- --------- ------- ---------
Prior year over-provision - - 3 0.40%
------- --------- ------- ---------
Prior year deferred tax adjustments (44) (4.22%) (16) (2.14%)
------- --------- ------- ---------
Adjustment for tax rate differences - - 6 0.80%
------- --------- ------- ---------
Foreign tax suffered (3) (0.29%) 2 0.27%
------- --------- ------- ---------
Other 1 0.1%- 4 0.54%
------- --------- ------- ---------
Total tax charge (20) (1.92%) (10) (1.34%)
------- --------- ------- ---------
The effective tax rate ('ETR') for the period was (1.9%), (2018:
(1.3%)).
UK unrelieved Foreign Total Tax effect
trading unrelieved unrelieved
losses trading trading
losses losses
GBP000 GBP000 GBP000 GBP000
-------------- ------------ ------------ -----------
As at 1 July 2018 258 315 573 109
-------------- ------------ ------------ -----------
Recognised during the year (74) (315) (389) (74)
-------------- ------------ ------------ -----------
As at 30 June 2019 184 - 184 35
-------------- ------------ ------------ -----------
9. Acquisitions
On 9 May 2019, the Group acquired the assets of Commercial Network Services ("CNS"), a US-based online service provider, for a total consideration of up to USD $1.4 million. This has been financed by a loan of GBP1m ($1.27m) the remainder being funded by Beeks own cash resources.
CNS specialises in hosting low latency algorithmic trading systems, virtual private networks and streaming media from data centres in London, New York and Los Angeles. Founded in 2000, CNS provides services to approximately 1,000 retail traders across multiple geographies.
During the current period the Group incurred GBP127k of third party acquisition related costs in respect of this acquisition and another acquisition that failed during diligence. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income for the year ended 30 June 2019.
The following table summarises the consideration to acquire CNS and the amounts of identified assets acquired and liabilities assumed at the acquisition date which are now final.
Recognised amounts of net assets acquired USD $ Customer relationship 1,186 Other intangibles 75 Identifiable net assets 1,261 Goodwill 151 Total consideration 1,412 Satisfied by: Cash - payable on acquisition 1,362 Contingent consideration - payable 50 Total consideration transferred 1,412
Under the terms of the Transaction, $1.3m was due on completion (the "Initial Consideration") with $0.1m held as retention subject to satisfactory completion of warranties (the "Contingent Consideration"). The Initial Consideration and Contingent Consideration was financed out of the Group's existing cash balance and banking facilities.
The goodwill arising on the acquisition of CNS is attributable to the premium payable for a pre-existing, well positioned business and the specialised, industry specific knowledge of its staff, together with the benefits to the Group in merging the business with its existing infrastructure and the anticipated future operating synergies from the combination.
The fair value included in respect of the acquired customer relationships intangible asset is GBP0.993m. There is no difference between the fair value and the book value of the intangible asset. To estimate the fair value of the customer relationships intangible asset, a discounted cash flow method, specifically the income approach, was used with reference to the directors' estimates of the level of revenue, which will be generated from them. A post-tax discount rate of 14.5% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 10 years.
CNS earned revenue of GBP0.10m and generated profits, before allocation of group overheads, share based payments and tax, of GBP0.03m in the period since acquisition. If the CNS business had been owned by Beeks for the entire 12 months, the effect on the results, before cost synergies, would have been: increase in profits, GBP0.1m increase in revenue GBP0.8m.
10. Intangible assets
Customer Development
list Costs Goodwill Total
GBP000 GBP000 GBP000 GBP000
Cost
Balance at 1 July 2017 390 - 400 790
Additions - 384 - 384
--------- ------------ --------- -------
Balance at 30 June 2018 390 384 400 1,175
Acquisition of trading assets 993 - 119 1,112
Additions - 437 - 437
--------- ------------ --------- -------
As at 30 June 2019 1,383 821 519 2,723
Accumulated Depreciation
Balance at 1 July 2017 (216) - - (216)
Charge for the year (76) (18) - (94)
Foreign exchange movements (5) - (7) (12)
--------- ------------ --------- -------
Balance at 30 June 2018 (297) (18) (7) (323)
Charge for the year (99) (83) - (182)
Foreign exchange movements (6) - 16 10
--------- ------------ --------- -------
As at 30 June 2019 (402) (101) 9 (495)
N.B.V. 30 June 2018 93 366 393 852
========= ============ ========= =======
N.B.V. 30 June 2019 981 720 528 2,229
========= ============ ========= =======
The customer relationships list primarily relates to the acquisition of CNS with a net book value of USD $1.3m and with a remaining useful life of 10 years. The customer relationship list relating to Gallant VPS Inc. was fully amortised during the year. Fair value is not considered to be materially different to the value paid by the Group.
Development costs have been recognised in accordance with IAS 38 in relation to the creation of the company's self-service portal, website and cyber-attack prevention software (DDoS). As at 30 June 2019 the remaining useful lives of these assets are 3 years and 7 months, 3 years and 6 months and 3 years and 5 months respectively.
Included within goodwill is:-
-- goodwill relating to the recent acquisition CNS with a value of GBP119k, -- the historic goodwill relating to VDIWare LLC with a value of GBP409k.
The goodwill relating to CNS has been recently valued and will be assessed for impairment on an annual basis.
Goodwill arising from the acquisition of the business and assets of VDIWare LLC has been capitalised and is assessed on an annual basis for impairment. The revaluation represents exchange adjustment only. Impairment reviews are carried out on an annual basis to ensure that the carrying value of each individual asset is still appropriate. In performing these reviews, under the requirements of IAS 36 "Impairment of Assets" management prepared forecasts for future trading in which assumptions over sales growth, gross margins and costs were applied over a useful life period of five years.
The forecasts were performed assuming an 8% growth in sales with a 3% annual price increase as was applied by the company during June 2019. There was an assumption of 2% growth in costs for the period which was considered prudent and appropriate, using a discount rate of 12%. Sensitivities were applied by reducing the growth assumptions to 4% and increasing the discount rate to 14%. After running these sensitivities, management concluded that there is still sufficient headroom in the value of the asset.
Management consider these assumptions to be reasonable based on current performance of the Group. As at 30 June 2019, no change to the impairment provision against the carrying value of intangibles was required.
11. Non-current assets - Property, plant and equipment
Computer Office Leasehold
equipment equipment improvement Total
GBP000 GBP000 GBP000 GBP000
Cost
Balance at 1 July 2017 2,219 7 30 2,256
Additions 1,622 14 - 1,636
Disposals (222) - - (222)
---------- ---------- ------------ --------
Balance at 30 June 2018 3,619 21 30 3,670
Additions 1,220 2 - 1,222
Disposals - - (30) (30)
As at 30 June 2019 4,839 23 - 4,862
Depreciation
Balance at 1 July 2017 (943) (2) (4) (949)
Charge for the year (576) (3) (5) (584)
---------- ---------- ------------ --------
Balance at 30 June 2018 (1,519) (5) (9) (1,533)
Charge for the year (892) (6) - (898)
Disposals - - 9 9
---------- ---------- ------------ --------
As at 30 June 2019 (2,411) (11) - (2,422)
N.B.V. 31 June 2018 2,100 16 21 2,137
========== ========== ============ ========
N.B.V. 31 June 2019 2,428 12 - 2,440
========== ========== ============ ========
The Group recognised a loss of GBP21,000 (2018: a profit of GBP4k) in relation to fixed asset disposals during the year. GBP21,000 of this related to non-recurring leasehold improvement costs in relation to the Group's Head office
All depreciation charges are included within cost of sales.
The net book value of assets held under finance lease at 30 June 2019 was GBP0.54m (2018: GBP1.01m), the depreciation for the year on these assets was GBP0.45m (2018: GBP0.40m).
12. Non-current assets - Deferred tax
Deferred tax is recognised at the standard UK corporation tax of 19% for fixed assets in the UK (2018: 19%). Deferred tax in the US is recognised at an average rate of 25% for 2019 (2018: 21%).. The deferred tax asset relates to the difference between the amortisation period of the US acquisitions for tax and reporting purposes as well as the impact of the share options exercised during the year and tax losses carried forward in both UK and overseas companies.
2019 2018
GBP000 GBP000
------- -------
The split of fixed and intangible asset are
summarised as follows:
Deferred tax liabilities (48) (108)
Deferred tax asset 136 255
Total deferred tax 88 147
Movements
Opening balance 147 (39)
Charged to profit or loss (note 8) 45 69
Charged to equity (104) 104
Other movement - 13
------- -------
Closing balance 88 147
The movement in deferred income tax assets and liabilities during the year is as follows:
Tax Total Total
Share losses Accelerated deferred deferred
--------- -------- ------------- --------- ----------
based carried tax tax tax
--------- -------- ------------- --------- ----------
payments forward depreciation asset liability
--------- -------- ------------- --------- ----------
GBP000 GBP000 GBP000 GBP000 GBP000
--------- -------- ------------- --------- ----------
At July 2017 - - 27 27 (66)
--------- -------- ------------- --------- ----------
Charge to income - 110 14 124 (29)
--------- -------- ------------- --------- ----------
Charge to equity 104 - - 104 -
--------- -------- ------------- --------- ----------
Other movement - - - - (13)
--------- -------- ------------- --------- ----------
As at 30 June 2018 104 110 41 255 (108)
--------- -------- ------------- --------- ----------
Charge to income - (75) 60 (15) 60
--------- -------- ------------- --------- ----------
Charge to equity (104) - - (104) -
--------- -------- ------------- --------- ----------
As at 30 June 2019 - 35 101 136 (48)
--------- -------- ------------- --------- ----------
13. Current assets - Trade and other receivables
2019 2018
GBP000 GBP000
------- -------
Trade receivable 679 460
Less: provision for impairment of receivables (63) (82)
------- -------
616 378
Prepayments and accrued income 388 169
Other taxation 40 69
Other receivables 60 48
------- -------
1,104 664
The credit risk relating to trade receivables is analysed as follows:
Trade receivables 679 460
Less: provision for impairment of receivables (63) (82)
------ ------
616 378
Movements in the allowance for expected credit
losses are as follows:
Opening balance 82 5
Additional provisions recognised 63 86
Receivables written off during the year as
uncollectable (82) (6)
Unused amounts reversed - (3)
------ ------
Closing balance 63 82
The provision allowance in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the amounts are considered irrecoverable and are written off against the trade receivable directly. Where trade receivables are past due, an assessment is made of individual customers and the outstanding balance.
Past due but not impaired
The Group did not consider a credit risk on the aggregate balances
after reviewing the credit terms of the customers based on recent
collection practices.
The aging of trade receivables at the reporting
date is as follows:
Past due 365 287
Past due 1 to 3 months 152 116
Past due 3 to 6 months 23 15
More than 6 months past due 139 42
----- ----
679 460
14. Current assets - Cash and cash equivalents
The credit risk on cash and cash equivalents is considered to be negligible because over 99% of the balance is with counter parties that are UK and US banking institutions.
15. Current assets - Financial instruments and risk management
Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and cash equivalents, short term deposits and bank and other borrowings.
The main purpose of these financial instruments is to finance the Group's operations. The Group has other financial instruments which mainly comprise trade receivables and trade payables which arise directly from its operations.
Risk management is carried out by the finance department under policies approved by the Board of Directors. The Group finance department identifies, evaluates and manages financial risks. The Board provides guidance on overall risk management including foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity.
The impact of the risks required to be discussed under IFRS 7 are detailed below:
Market risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the functional currency of the operations. The Group has minimal exposure to foreign exchange risk as a result of natural hedges arising between sales and cost transactions. A 10% movement in the USD rate would have an impact on the Group's profit and equity by approximately GBP6,000. The Group had potential exchange rate exposure within USD trade payable balances of GBP91,842 as at 30 June 2019 (GBP69,775, at 30 June 2018).
Cash flow and interest rate risk
The Group has limited exposure to interest rate risk in respect of cash balances and long-term borrowings held with banks and other highly rated counterparties. All loans and leases are at fixed rates of interest therefore the group does not have exposure to interest rate risk.
Credit risk
The Group's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below:
2019 2018
GBP000 GBP000
------- -------
Cash and cash equivalents 2,338 2,887
Trade receivables 679 460
Accrued income 234 91
Other receivables 60 48
VAT 40 69
------- -------
3,351 3,555
Credit risk is managed on a Group basis. Credit risks arise from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.
The Group's credit risk is primarily attributable to its trade receivables. It is the policy of the Group to present the amounts in the balance sheet net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and the current economic environment. The Group reviews the reliability of its customers on a regular basis, such a review takes into account the nature of the Group's trading history with the customer.
The credit risk on liquid funds is limited because the majority of funds are held with two banks with high credit-ratings assigned by international credit-rating agencies. Management does not expect any losses from non-performance of these counterparties.
None of the Group's financial assets are secured by collateral or other credit enhancements.
Liquidity risk
The Group closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments on a regular basis to ensure that it has sufficient funds to meet obligations of the Group as they fall due.
The Board receives regular debt management forecasts which estimate the cash inflows and outflows over the next twelve months, so that management can ensure that sufficient financing is in place as it is required. Surplus cash within the Group is put on deposit in accordance with limits and counterparties agreed by the Board, the objective being to maximise return on funds whilst ensuring that the short-term cash flow requirements of the Group are met.
As at 30 June 2019, the Group's financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:
Current Non-current
Within 1-3 3-12 1-5 After
1 month months months years 5 years
GBP GBP GBP GBP GBP
-------- ------- ------- ------ --------
Trade payables 413 47 169 - -
Other payables 22 210 - - -
Other loans 5 90 263 701 -
The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of the liabilities at the reporting date.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.
2019 2018
GBP000 GBP000
Total equity 5,632 4,844
Cash and cash equivalents 2,338 2,887
Capital 7,970 7,731
Total equity 5,632 4,844
Other loans 997 35
Finance leases 326 761
Overall financing 6,955 5,640
Capital-to-overall financing ratio 1.15 1.37
16. Non-current liabilities - Borrowings and other financial liabilities
2019 2018
GBP000 GBP000
------- -------
Other loans 672 6
Finance leases 27 326
699 332
------- -------
Other loans
Under one year 325 35
Between one to five years 672 6
997 41
---- ---
Finance leases
Under one year 299 435
Between one to five years 27 326
326 761
---- ----
Finance leases, The future minimum finance lease payments are as follows:
Under one year 348 494
Between one to five years 33 380
Total gross payments 381 874
---- ----
The finance leases are secured on the fixed assets to which they relate.
The present value of the future minimum finance
lease payments:
Under one year 316 450
Between one to five years 27 312
343 762
---- ----
The discount applied to the future payments was 10% per annum.
Reconciliation of net debt: Finance
Leases Other Total
-------- ------ ------
Balance at 1 July 2018 761 41 802
Proceeds from new loans - 990 990
Loan and lease repayments (435) (34) (469)
Balance at 30 July 2019 326 997 1,323
During the year a loan of GBP1m was taken out to fund the acquisition of CNS.
17. Current liabilities - Trade and other payables
2019 2018
GBP000 GBP000
------- -------
Trade payables 629 662
Other loans 325 35
Finance leases 299 435
Accruals and deferred income 364 319
Other taxation and social security 28 45
Other payables 223 15
1,868 1,511
------- -------
18. Equity - issued capital
2019 2018 2019 2018
shares shares GBP000 GBP000
Ordinary shares - fully paid 50,864,800 50,043,100 64 62
---------------- ----------- ---------- -------
Movements in ordinary share capital
Details Date Shares Issue GBP000
price
Balance 30 June 2018 50,043,100 62
EMI Share options exercised 31 August 2018 677,700 GBP.00125 1
EMI Share options exercised 24 October 2018 32,200 GBP.00125 -
EMI Share options exercised 20 June 2019 111,800 GBP.00125 1
Balance 30 June 2019 50,864,800 64
Ordinary shares
During the year there were 821,700 of share options exercised. At the date of the grant the fair value was immaterial.
19. Share based payments
The movements in the share options during the year, were as follows:-
2019 2018
Outstanding at the beginning of the year 821,700 1,864,800
Exercised during the year (821,700) (1,043,100)
Issued during the year 308,824 -
Outstanding at the end of the year 308,824 821,700
Exercisable at the end of the year - 821,700
The Group granted a total of 308,824 share options to members of its management team on 6 September 2018. These share options outstanding at the end of the year have the following expiry dates and exercise prices:
-- The exercise price for all of the outstanding issued share options is GBP0.00125. -- All of these options vest on 6 September 2021, which is three years after the issue date.
These share options vest under challenging performance conditions based on underlying EPS growth during the three year period.
The Black Scholes model was used to calculate the fair value of these options, the resulting fair value is expensed over the vesting period. The following table lists the range of assumptions used in the model:
Stock price 1.02 Standard deviation 5% Annual risk free rate 4% Exercise strike price 0.00125 Time to maturity (yrs.) 2.1667
The total expense recognised from share based payments transactions on the group's profit for the year was GBP62,647 (2018: nil).
These share options vest on the achievement of challenging growth targets. It is management's intention that the Company will meet these challenging growth targets therefore, for prudency, the share options are included in the calculation of underlying diluted EPS in note 23.
20. Equity - Reserves
The foreign currency retranslation reserve represents exchange gains and losses on retranslation of foreign operations. Included in this is revaluation of opening balances from prior years.
The merger relief reserve arose on the share for share exchange reflecting the difference between the nominal value of the share capital in Beeks Financial Cloud Group Limited and the value of the Group being acquired, Beeks Financial Cloud Limited.
Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.
Retained earnings represents retained profits.
The other reserve arose on the share for share exchange and reflects the difference between the value of Beeks Financial Cloud Group Limited and the share capital of the Group being acquired through the share for share exchange. Also included in the other reserve is the fair value of the warrants issued on the acquisition of VDIWare LLC.
Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.
21. Capital and other commitments
The Group had the following future minimum lease payments under non-cancellable operating leases for each of the following periods. Operating lease payments represent rentals payable by the Group for office premises and computer equipment. The leases for computer equipment contain an option to purchase the assets at the end of the lease period. The leases are standard operating leases with no special clauses.
restated
2019 2018
GBP000 GBP000
------- ---------
Lease commitments - operating
Committed at the reporting date but not recognised
as liabilities, payable:
Within one year 497 629
One to five years 862 797
Over five years 235 133
------- ---------
1,594 1,559
------- ---------
*Based on our preliminary assessment of the impact of IFRS 16 (see note 1), we have restated the prior year to include contracts identified as containing a lease under IAS 17 Leases.
A new office lease contract was entered into during the year, this lease commences on 1 July 2019.
22. Related party transactions
Parent entity
Beeks Financial Cloud Group PLC is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 24.
Transactions with related parties
The following transactions occurred with related parties:
2019 2018
GBP000 GBP000
-------- --------
Withdrawals from the director, Gordon McArthur 33 24
The loan account owed by the director; Gordon McArthur was repaid
in full following the year end.
Beeks Financial Cloud Limited provided services in the normal
course of its business and at arm's length to Ofelia Algos Limited,
a company owned by Gordon McArthur. During the financial year
Beeks Financial Cloud Limited made sales of GBP141,120 (2018:
GBP72,453) to Ofelia Algos Limited and the amounts due to Beeks
Financial Cloud Limited at the year-end were GBP53,600 (2018:
GBP35,280).
Key management personnel
Compensation paid to key management (which comprises the executive
and non-executive PLC Board members) during the year was as follows:
2019 2018
GBP000 GBP000
Wages and salaries including social security
costs 256 294
Other pension costs 3 2
Other benefits in kind 11 10
23. Earnings per share
2019 2018
GBP000 GBP000
Profit after income tax attributable to
the owners of Beeks Financial Cloud Group
PLC 1,063 757
Pence Pence
Basic earnings per share 2.10 2.37
Diluted earnings per share 2.09 2.26
Number Number
Weighted average number of ordinary shares
used in calculating basic earnings per
share 50,632,965 31,900,070
Adjustments for calculation of diluted
earnings per share:
Options over ordinary shares 231,835 1,660,204
----------- -----------
Weighted average number of ordinary shares
used in calculating diluted earnings per
share 50,864,800 33,560,274
2019 2018
GBP000 GBP000
Underlying earnings per share
Profit for the year 1,043 757
Exceptional costs - 368
Acquisition costs 127 -
Share Based payments 63 -
Amortisation on acquired intangibles 62 76
Exceptional non-recurring costs 21 -
Tax effect (12) (84)
----------- -----------
Underlying profit for the year 1,304 1,117
Weighted average number of shares in issue
- basic 50,632,965 49,204,596
Weighted average number of shares in issue
- diluted 51,116,936 50,864,800
Underlying earnings per share - basic 2.58 2.27
Underlying earnings per share - diluted 2.55 2.20
Included in the weighted average number of shares for the calculation of underlying diluted EPS are share options outstanding but not exercisable. It is management's intention that the Company will meet the challenging growth targets therefore, for prudency, the share options are included in the calculation of underlying diluted EPS.
24. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries held by the company in accordance with the accounting policy described in note 1.
The subsidiary undertakings are all 100% owned, with 100% voting rights.
Country of Principal place of business/
Company name incorporation Registered office
Beeks Financial Cloud Japan FARO 1F, 2-15-5, Minamiaoyama,
Co Ltd Minato-Ku, Tokyo, Japan.
Beeks FX VPS USA Inc. Delaware, 874 Walker Road, Suite C,
USA Dover, Kent, Delaware, 19904,
USA.
Beeks Financial Cloud Scotland Lumina Building, 40 Ainslie
Limited Road, Ground Floor, Hillington
Park, Glasgow, UK, G52 4RU
25. Events after the reporting period
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
26. Ultimate controlling party
The Group is ultimately controlled by Gordon McArthur by virtue of his majority shareholding.
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
FR CKQDNDBKBFCK
(END) Dow Jones Newswires
September 05, 2019 02:01 ET (06:01 GMT)
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