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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Krm22 Plc | LSE:KRM | London | Ordinary Share | GB00BFM6WC61 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.50 | 10.00% | 27.50 | 25.00 | 30.00 | 27.50 | 25.00 | 27.50 | 3,812 | 08:00:19 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Prepackaged Software | 4.4M | -3.1M | -0.0869 | -3.16 | 9.81M |
From Apr 2019 to Apr 2024
TIDMKRM
RNS Number : 3330S
KRM22 PLC
16 March 2021
KRM22 plc
("KRM22", the "Group" and the "Company")
AUDITED RESULTS STATEMENT FOR THE YEARED 31 DECEMBER 2020
KRM22 plc (AIM: KRM.L), the technology and software company focused on risk management in capital markets, announces its audited results for the year ended 31 December 2020 ("2020", the "Year").
Financial highlights
-- Total revenue recognised of GBP4.6m (2019: GBP4.1m) -- A significantly improved adjusted EBITDA loss(1) of GBP0.2m (2019: GBP3.1m)
-- Annualised Recurring Revenue (ARR)(2) as at 31 December 2020 of GBP4.3m (2019: GBP4.3m) at the 2020 constant rate (GBP4.1m at current rates)
o New contracted ARR in the year ended 31 December 2020 of GBP0.8m
-- Gain on extinguishment of debt (net) of GBP0.7m -- Impairment of intangibles of GBP3.0m (2019: GBP2.3m) -- Loss before tax of GBP5.7m (2019: loss of GBP7.3m) -- Group Cash at 31 December 2020 of GBP2.0m (2019: GBP1.1m) -- Net increase in cash and cash equivalents of GBP0.9m (2019: outflow of GBP2.3m) -- Completed two capital raises in the year
o An equity fundraise in May 2020 raising gross proceeds of GBP1.3m through a placement and subscription for new ordinary shares
o Replacement of the Harbert GBP10.0m loan facility, of which we had drawn down GBP1.0m in 2019, with a new GBP3.0m convertible loan facility with Kestrel Partners in September 2020
Operational highlights
-- Acquisition of remaining 40% shareholding in KRM22 Market Surveillance in April 2020
-- Managing the impact of COVID-19 with KRM22 with the Company being fully operational, globally, from home as a result of internal infrastructure and process implemented from launch
-- Group restructure, with annual cost savings of GBP0.7m -- Soc 2 accreditation approved in March 2021
Keith Todd, Chief Executive Officer and Chairman of KRM22 plc, commented:
"2020 was a challenging year but we made good progress with new customer wins, improved quality of the customer base, the expansion of the Global Risk Platform (GRP) and a significant reduction in the Adjusted EBITDA loss. We now have a strong sales pipeline and suite of risk products on the GRP that will be the springboard for our future growth and delivery of the market expectations."
(1) Adjusted EBITDA is the reported loss for the year, adjusted for recurring non-monetary costs including depreciation, amortisation gain on extinguishment of debt, unrealised foreign exchange loss, deferred salary bonus accrual write back and share-based payment charges and non-recurring costs including profit/(loss) on tangible/intangible assets, impairment charges, reorganisation costs and acquisition and funding costs.
(2) Annualised Recurring Revenue (ARR) is the value of contracted Software-as-a-Service (SaaS) revenue normalised to a one year period and excludes one-time fees.
For further information please contact:
KRM22 plc
InvestorRelations@krm22.com
Keith Todd CBE, Executive Chairman and CEO
Kim Suter, CFO
finnCap Ltd (Nominated Adviser and Sole Broker) +44 (0)20 7220 0500
Carl Holmes / Kate Bannatyne / Matthew Radley
Alice Lane / Sunila de Silva (ECM)
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
About KRM22 plc
KRM22 is a closed-ended investment company which listed on AIM on 30 April 2018. The Company has been established with the objective of creating value for its investors through the investment in, and subsequent growth and development of, target companies in the technology and software sector, with a focus on risk management in capital markets.
Through its investments and the Global Risk Platform, KRM22 helps capital market companies reduce the cost and complexity of risk management. The Global Risk Platform provides applications to help address firms' market, compliance operations and technology risk challenges and to manage their entire enterprise risk profile.
Capital markets companies' partner with KRM22 to optimise risk management systems and processes, improving profitability and expanding opportunities to increase portfolio returns by leveraging risk as alpha.
KRM22 plc is quoted on AIM and the Group is headquartered in London, with offices in several of the world's major financial centres.
See more about KRM22 at KRM22.com .
CHAIRMAN'S STATEMENT
KRM22 continued to make good progress in 2020, winning top tier institutions and broadening its product offerings delivered through the Global Risk Platform. We are creating a powerful platform to help capital markets participants manage risk. The Company reported a small, adjusted EBITDA loss for the year of GBP0.2m compared with an adjusted EBITDA loss of GBP3.1m in 2019 on revenue of GBP4.6m (2019: GBP4.1m).
We completed one equity capital and one debt capital raise in 2020 to provide working capital and strengthen the balance sheet. This, together with the improving financial performance, provides KRM22 with a strong financial base for 2021.
When we started 2020, we did not envisage the dramatic impact the pandemic would have on the operating environment. In April 2020, we implemented cost cutting actions through a voluntary salary waiver that all team members participated in and general overhead reductions. In June 2020, we made some roles redundant as we continued to adjust to a slowing business climate. Travel was suspended and all team members operated from home from March 2020. There was little impact on our operating effectiveness as a result of the infrastructure and processes that we implemented from launch in 2018.
Our customers and prospects were however significantly impacted. Across the board the high volume of trading in March 2020 and April 2020, at a time when they were implementing home working for the first time, meant that there was no time for new initiatives and therefore consideration of our products was not an immediate priority. Whilst trading activity had evened out by the middle of the third quarter, adjustments to normal business practices had to be absorbed to support prospect and customer engagement through remote channels versus in person visits. The consequence of this was significant delays in new customer signings. However, despite this new contract wins in the year included the sale of new risk products to existing customers and the signing of a new contract for a suite of risk products with a major London based brokerage firm, with the customer seeing the benefits of our ability to simplify the cost and complexity of risk through technology delivered on one platform as a one-stop service. This impacted the carrying value of our intangibles, including goodwill, asset base too. We experienced an unprecedented impact of churn in the year as traders withdrew from trading while the trading pits were closed or suspended as well as some customer retrenching and reducing external spend. While some churn in 2021 can be expected as part of any market, we anticipate the level of churn going back to more normalised levels.
Market
As we enter 2021, we are seeing strong engagement from prospects and existing customers.
Regulators are moving to an enforcement phase with increasing fines and threats of fines covering a plethora of regulatory areas. The pressure on cost efficiency, alongside regulatory compliance is top of the agenda.
Vision and mission
Our vision 'A world in which organisations operate at their optimal threshold of risk to drive increased returns' and mission 'To bring increased visibility and lower cost risk management to capital market organisations' have not changed since our inception.
Our ability to offer integrated functionality as a technology service significantly reduces the cost and complexity of managing risk for our customers. Most organisations are, in today's market, tackling the challenges of an increase in costs added to historically costly infrastructure leading to a motivation to reduce cost. We are however on a journey with our customers to help them optimise business performance and thus deliver superior returns to their shareholders. We do this by providing cost effective risk tools as a service that eliminate multiple distinct applications that demand separate infrastructure and data sources. The replacement solution is one holistic Global Risk Platform that operates a series of risk based business processes, increasingly supported by AI tools, that operate on one single data source. As our journey progresses, and with customer agreement, we will be able to create risk benchmarks and indices that will fundamentally change how the industry measures itself. It is a truly exciting journey we are on.
What we sell
We position our product offerings within five domains of risk Enterprise, Market, Compliance, Operations and Technology. They are delivered through our single Global Risk Platform.
The Global Risk Platform is not sold as a separate product, it comes with any functional offering and includes the ability to receive news feeds, raise support questions and provides insight to other integrated risk offerings that are not currently used by the customer. The Global Risk Platform provides the unifying glue between the offerings, reduces integration costs and provides a platform for our growth. Our product offerings are supported by experienced subject matter experts which prospects and customers leverage to help define and manage risk on new instruments, respond to regulatory changes and build the ultimate risk platform tailored for each customer.
Our 'Risk Cockpit' offering has a full range of functionality to support real time enterprise risk as well as other department use cases. We have found that the application of what we know as the Risk Cockpit to have specific use cases within operations, compliance as well as others such as people and culture risk. The structured accountability framework, along with integrated risk functionality and dashboards, provides customers with a holistic view of a risk area and the ability to track and improve risk management. We are now exploring the use of AI to help predict risk events. This will become an add on sale to the core Risk Cockpit.
Our Market Risk offerings cover the life cycle of risk: Pre-trade, At-trade and Post-trade risk. The offerings are used across the spectrum of customers from Tier one banks to traders.
Our Compliance offerings cover a full range of regulatory requirements, the anchor of which is surveillance but extends across market abuse online training, digital on boarding (Know Your Customer) as well as regulatory reporting, enhanced individual due diligence and senior management regime. Our Compliance offering includes many partner products which expand what we can do for customers and leverages the partners investment in offerings as well as subject matter expertise.
We launched our People and Culture Risk offering in February 2021 in conjunction with Kintail Consulting as part of our Operations offering. This will leverage the Risk Cockpit functionality and online training partnerships and specifically addresses one of the industries key risk areas as identified by the Regulators - people and culture.
How we sell
We have a clear focus for increasing sales, starting with expanding sales to current customers and then targeting people we know and who are within our addressable market. We are increasing our online marketing presence as we are no longer able to attend physical industry conferences due to the pandemic. We specifically target a range of buying points within a customer organisation so that we can benefit from the master services agreement we have and internal cross referencing about the positive KRM22 experience.
Strategy
Our strategy consists of six core pillars that ensure we build a successful company.
'Foundation of the business' 'Driving Growth' Technology as a service Organic growth Business automation Acquisitions Team effectiveness Partnerships
Technology as a service
At the heart of our philosophy is the concept of reducing the cost and complexity of risk management for customers through technology delivered on an open platform, while driving increased business margins for investors.
Organic growth
Organic growth is the central tenant of our business approach. In 2020 we secured GBP0.8m of new business however this organic growth was offset by an unprecedented level of existing customer churn in the year. We have implemented a sophisticated customer relationship management system that provides visibility and allows us to manage and track sales activities through completion of sales opportunities. We have a very strong pipeline of prospects across Enterprise, Market, Compliance and Operations risk.
Business automation
We have implemented extensive business automation to ensure we have a scalable operational foundation covering customer acquisition, service delivery and through to financial control and administration. This will ensure that as we increase margin, we will also improve the bottom line performance.
Acquisitions and commercial partnerships
We have been clear from the start of KRM22 that we build, acquire and partner to bring products to the Global Risk Platform and therefore to our customers and prospects. We have established partnerships to complement our existing portfolio across Market, Compliance and Operations risk. We had to hold back on acquisitions and further partnerships in 2020 but we look to reignite these initiatives in 2021.
Team effectiveness
The investment in the team we have recruited and acquired is at the heart of our business. Team members know their roles and that KRM22 operates under the philosophy that business is a team game. The Board and I would like to thank the team for their commitment and work during a difficult year.
We are fully committed to our stakeholders including the communities in which we work. The Executive team and Board will take further action to establish a more comprehensive Environmental, Social and Governance ("ESG") programme in 2021.
Outlook
After a challenging 2020, we have entered the new financial year stronger than last year. A higher quality of customers that can grow with us and an extensive sale opportunities and prospects list, together with vaccines helping to bring the pandemic under control, we are confident of continuing our growth and delivering market expectations.
Keith Todd CBE
Executive Chairman and CEO
FINANCIAL REVIEW
Despite the challenging trading conditions in the year due to the COVID-19 pandemic, total revenue recognised for the year was GBP4.6m, an increase of 11% on 2019 and adjusted EBITDA loss for the year was GBP0.2m, a significant reduction on 2019 when the Company reported an adjusted EBITDA loss of GBP3.1m. The reduction in adjusted EBITDA loss was a result of the continued tight control of the cost base, the full year effect of company reorganisations completed in 2019, together with a further reorganisation in 2020, and short-term cost savings through temporary salary sacrifices accepted by all staff in 2020.
Scope of financial results
This financial review focuses on the twelve month period ending 31 December 2020, whilst the prior year comparatives include the seven months of revenue and costs for the Object+ group of companies from the date of acquisition on 30 May 2019 and full year revenue and costs for all other KRM22 group companies.
Profit and Loss
Total revenue
Revenue recognised for the year to 31 December 2020 was GBP4.6m (2019: GBP4.1m), an increase of 11% compared with the prior year, with 91% (2019: 91%) of total revenue generated from recurring customer contracts. Non-recurring revenue the year ended 31 December 2020 totalled GBP0.4m (2019: GBP0.3m) and related principally to customer implementations and proof of concept work.
Recurring revenue
A key revenue metric for KRM22 is ARR (Annualised Recurring Revenue) and as at 31 December 2020, ARR was GBP4.1m at the year end FX rate or GBP4.3m at the FY20 average FX rate. KRM22 signed new contracted ARR in 2020 of GBP0.8m (2019: GBP0.7m) with GBP0.1m generated from Enterprise Risk products, GBP0.5m from Market Risk products and GBP0.2m from Compliance Risk products. The increase in ARR was offset by an increased level of churn and also impacted by the increased strengthening of Sterling against the US dollar.
Gross profit
Gross profit for the year to 31 December 2020 was GBP4.2m (2019: GBP3.7m) and the consistent gross profit margin of 90% continues to demonstrate the operating leverage of the business and indicates how the cost base can be covered efficiently as new recurring revenue contracts are signed.
Capitalised research and development
A total of GBP1.0m (2019: GBP1.5m) of research and development was capitalised in the year to 31 December 2020. Capitalised research and development is amortised over three years.
Impairment
In the year ended 31 December 2020, impairment costs of GBP2.7m were recognised in connection with the recoverability of goodwill associated with the acquisition of KRM22 Market Surveillance, KRM22 ProOpticus and Object+ and impairment on account of trademarks at GBP0.3m. The impairment reflects the uncertain economic conditions in 2020 and in year revenue growth which was less than initial forecasts. The impairment does not reflect a change in the overall Group's strategic outlook.
Reorganisation costs
In response to delays in new customer contract signatures and general economic uncertainty as a result of COVID-19, a total or 8 FTE roles were made redundant and our Spanish operations were closed. As a result of the staff redundancies made in the year, a total of GBP0.4m (2019: GBP0.5m) of company reorganisation costs has been recognised in the year ended 31 December 2020.
Extinguishment of debt
On 16 April 2020, the Group acquired the remaining 40% minority interest in KRM22 Market Surveillance Limited ("KRM22 Market Surveillance") from Cinnober Financial Technology AB ("Cinnober"). Under the terms of the transaction, a total of GBP2.9m in debt due to KRM22 and Cinnober (together the "Parent Companies") together with GBP0.3m of other liabilities due to the Parent Companies was converted into ordinary shares in KRM22 Market Surveillance immediately prior to KRM22 consolidating its ownership of KRM22 Market Surveillance.
On completion of the debt to equity conversion in KRM22 Market Surveillance, KRM22 immediately acquired the remaining 40% stake in KRM22 Market Surveillance for a total consideration of GBP0.6m payable to Cinnober by way of a convertible loan note (CLN) provided by KRM22 to Cinnober. The CLN was for a one-year term and could be satisfied by either the allotment and issue of ordinary shares by no later than 31 July 2020 or settled by cash at any point in the CLN term, at the Company's sole discretion. On 28 June 2020, the CLN was converted into 1,454,434 new ordinary shares at 38.4p per share in the Company and therefore no cash consideration was paid as part of the acquisition. The settlement of GBP1.3m of debt due to Cinnober, through the issue of the CLN, resulted in a gain on extinguishment of debt of GBP0.7m which has been recognised in the consolidated income statement for the year ended 31 December 2020.
Adjusted EBITDA
Adjusted EBITDA is the key metric that the Company considers in order to understand the cash-profitability of the business. This is due in particular to the non-cash items that impact the Income Statement under IFRS accounting, such as non-cash share-based costs.
Adjusted EBITDA for the year to 31 December 2020 was a GBP0.2m loss (2019: loss of GBP3.1m) and was in line market forecasts and a significant reduction on prior year. The reduction in Adjusted EBITDA loss was driven by new sales, tight management of the underlying cost base of the business, the full year impact of cost savings plans and company reorganisations implemented in 2019, a further company reorganisation implemented in June 2020 and reduced salaries paid in the year due to the voluntary temporary salary sacrifice scheme. A reconciliation of Adjusted EBITDA loss to the reported operating loss is provided as follows:
Hot Features
Premium
2020 2019
GBP'm GBP'm
Adjusted EBITDA loss (0.2) (3.1)
Depreciation and amortisation (1.7) (1.3)
Unrealised FX losses (0.2) -
Impairment of intangible assets (3.0) (2.3)
Contingent consideration write back 0.3 1.5
Acquisition and debt expenses (0.4) (0.4)
Gain on extinguishment of debt (net) 0.7 -
Group restructuring costs (0.4) (0.5)
Deferred salary bonus accrual write back 0.4 -
Shared-based payment expense (0.9) (1.0)
------- -------
Operating loss (5.4) (7.1)
------- -------
Finance charges
Net finance expense in the year was GBP0.3m (2019: GBP0.2m) and includes:
-- Interest paid of GBP0.1m (2019: GBP0.1m), inclusive of early repayment charges of 5%, on the Harbert debt facility;
-- Interest accrued/paid on the Kestrel Convertible Loan Facility of GBP0.1m; and -- IFRS16 lease liability interest of GBP0.1m (2019: GBP0.1m).
Taxation
The tax credit in the year was GBP0.2m (2019: credit of GBP0.8m) which includes GBP0.1m (2019: GBP0.6m) R&D tax credit received.
Reported operating loss
Reported operating loss for the year to 31 December 2020 was GBP5.5m (2019: loss of GBP6.5m).
Financial position
Assets
The cash balance as at 31 December 2020 was GBP2.0m (2019: GBP1.1m).
Current assets at 31 December 2020 include trade and other receivables of GBP1.4m (2019: GBP1.4m).
Non-current assets were GBP9.2m (2019: GBP13.1m) relating principally to: GBP6.7m for goodwill and assets acquired (2019: GBP10.4m), GBP1.0m for right of use assets recognised under IFRS16 (2019: GBP1.6m) and GBP1.3m (2019: GBP0.8m) for capitalised development costs.
Liabilities
As at 31 December 2020, our principal liabilities were:
-- GBP3.0m Convertible Loan owed to Kestrel Partners LLP. The interest rate payable on the loan is 9.5% payable in cash quarterly in arears. The loan can be converted into new Ordinary Shares in the Company at any time at a conversion price of 38p and the conversion can be requested by Kestrel Partners at any time. The Company has the right to request conversion eighteen months following the date of the agreement, subject to certain conditions regarding the Company's share price at that time.
-- GBP0.8m (US$1.1m) discounted contingent consideration (GBP1.1m (US$1.6m) undiscounted) for earn out payments for the acquisition of Object+. The contingent consideration can be satisfied in either cash or Company or ordinary shares at the Company's discretion. The undiscounted contingent consideration of US$1.6m was reduced by US$0.5m, reflecting re-appraisal of expected cash outflows given probable conditions at the statement of financial position date and this adjustment has been included in the discounted liability of GBP0.8m recognised at the statement of financial position date.
-- GBP1.0m for the right of use of assets relating to all future payments of leased-office rentals under IFRS16 'Leases' whereby such lease payments are provided for at today's value. In practice, these rental payments will be spread over the next few years. As a result, GBP0.5m of the related liability is shown in current liabilities as it relates to lease payments that will be paid in 2021, with the balance for periods greater than one year.
-- GBP1.5m of deferred revenue; contracted and paid services that will be released in a future period.
As a result of acquiring the remaining 40% shareholding in KRM22 Market Surveillance, by way of a Convertible Loan Note ("CLN") and the subsequent conversion of the CLN into ordinary shares in the Company, a total of GBP1.3m in debt was removed from the statement of financial position in the year ended 31 December 2020.
Investors
As an AIM-listed business, a large proportion of KRM22's shareholders are professional investment funds. In addition, the Directors together owned 3,701,389 shares at the year end.
Funding
On 13 May 2020, the Company raised GBP1.3m gross proceeds in equity funding through a subscription and placement of 4,266,664 new shares at 30 pence per share.
On 15 September 2020, KRM22 entered into an agreement for a new three year GBP3.0m convertible loan facility (the "Convertible Loan") with Kestrel Partners LLP ("Kestrel"), the Company's largest shareholder following the fundraise completed on 13 May 2020. The proceeds of the Convertible Loan were used to replace the Company's existing debt facility (the "Debt Facility") provided Harbert European Growth Capital Fund II ("Harbert"). The outstanding balance of the Debt Facility, inclusive of loan principal, accrued interest and early repayment charges of 5%, was GBP0.8m.
In conjunction with the Debt Facility, the Company issued warrants over 495,049 new ordinary shares in the Company to Harbert with an exercise price of GBP1.01 per ordinary share. Whilst the balance of the Debt Facility was settled, the warrants remain in place and are exercisable by Harbert until 29 April 2029.
The interest rate payable on the Convertible Loan is 9.5% per annum, which compares favourably to the 11% per annum interest rate on the Harbert Debt Facility, and is paid quarterly in arrears. Kestrel can convert the Convertible Loan into new ordinary shares in the Company at any time at a conversion price of 38p. The Company has the right to request conversion 18 months following the date of the agreement, subject to certain conditions regarding the Company's share price at that time. Kestrel has the right to prevent any conversion which would trigger a Rule 9 event under the Takeover Code.
The Convertible Loan is secured on certain KRM22 assets and includes covenants based on the Group's financial performance, based on ARR, solvency and profitability.
COVID-19 reinforced the principle that companies need access to greater to liquidity to address uncertainties, extended sales cycles and provide potential customers with confidence in the financial strength of the Group. In addition, the Convertible Loan strengthened the financial position of the Company and provides access to working capital and growth capital.
Use of cash in the year
Our net cash inflow in the year was GBP0.9m, which included the GBP3.0m Kestrel Convertible Loan receipt, of which GBP1.0m was used for capitalised research and development, GBP0.9m was used to settle the Harbert Debt Facility and the balance was used to provide working capital for KRM22.
Going concern
Analysis of KRM22's going concern position is detailed in note 2 (notes to the financial information).
Shareholdings and Earnings per share
As at 31 December 2020, KRM22 had 26,719,127 shares in issue. The undiluted weighted average number of shares for the period to 31 December 2020 was 24,414,093. The difference in the two numbers results from the timing of shares issued for the equity fundraise completed on 13 May 2020 and the conversion of the Cinnober Convertible Loan Note on 28 June 2020.
The resulting Earning per Share ("EPS") is a 24.1p loss per share (2019: loss of 30.4p) on a weighted average number of shares basis (equivalent to 24,414,093 on the shares in issue at year end). Due to the loss made, diluted EPS is the same as EPS.
Dividend
We aim to deliver capital growth for shareholders to generate an attractive total return. However we do not recommend a dividend for the year, but may choose to do so in future years.
Conclusion
Whilst 2020 has been challenging in terms of time taken to convert the sales pipeline and increased customer churn, adjusted EBITDA loss has reduced to GBP0.2m from GBP3.1m in 2019 and total recognised revenue has increased to GBP4.6m from GBP4.1m in 2019. The Kestrel Convertible Loan has helped strengthen the financial position of KRM22 and this, together with the sales pipeline opportunities, means that KRM22 is well placed for growth in 2021.
Kim Suter
CFO
Consolidated income statement and statement of comprehensive income
for the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
-------------------------------------------------- -------- -------- -----------
Revenue 3 4,594 4,143
Cost of sales (440) (434)
-------------------------------------------------- -------- -------- -----------
Gross profit 4,154 3,709
Administrative expenses (9,570) (10,830)
Operating loss before interest, taxation, depreciation,
amortisation, share based payment and exceptional
items ('Adjusted EBITDA') (167) (3,072)
Depreciation and amortisation (1,688) (1,259)
Impairment of assets (3,022) (2,344)
(Loss)/profit and loss on disposal of tangible/intangible
assets (63) 22
Contingent consideration write back 342 1,493
Gain on extinguishment of debt (net) 677 -
Unrealised foreign exchange loss (160) -
Acquisition and debt related expenses (401) (413)
Company reorganisation costs (430) (527)
Deferred salary bonus accrual write back 381 -
Share based payment expense (885) (1,021)
------------------------------------------------------------ -------- ---------
Operating loss (5,416) (7,121)
------------------------------------------------------------ -------- ---------
Finance charge (net) (324) (196)
Loss before taxation (5,740) (7,317)
Taxation 246 792
------------------------------------------------------------ -------- -----------
Loss for the year (5,494) (6,525)
Loss for the year attributable to:
Equity shareholders of the parent (5,879) (5,648)
Non-controlling interest 385 (877)
------------------------------------------------------------ -------- -----------
(5,494) (6,525)
------------------------------------------------------------ -------- -----------
Other comprehensive income Item that may be reclassified
to subsequently to profit and loss;
Exchange (loss)/gain on translation of foreign
operations (117) 33
------------------------------------------------------------ -------- -----------
Total comprehensive loss for the year (5,611) (6,492)
------------------------------------------------------------ -------- -----------
Total comprehensive loss for the year attributable
to:
Equity shareholders of the parent (5,996) (5,615)
Non-controlling interest 385 (877)
------------------------------------------------------------ -------- -----------
(5,611) (6,492)
------------------------------------------------------------ -------- -----------
Loss per ordinary share
Basic earnings per share 4 (24.1p) (30.4p)
Diluted earnings per share 4 (24.1p) (30.4p)
------------------------------------------------------------ -------- -----------
Consolidated statement of financial position
at 31 December 2020
2020 2019
Note GBP'000 GBP'000
--------------------------------- -------- --------
Non-current assets
Goodwill 5 4,937 7,667
Other intangible assets 5 3,065 3,562
Property, plant and equipment 136 233
Right of use assets 1,041 1,642
Other receivables - 42
--------------------------------- -------- --------
9,179 13,146
Current assets
Trade and other receivables 1,434 1,358
Cash and cash equivalents 1,974 1,076
--------------------------------- -------- --------
3,408 2,434
--------------------------------- -------- --------
Total assets 12,587 15,580
--------------------------------- -------- --------
Current liabilities
Trade and other payables 2,539 2,954
Lease liabilities 456 488
Loans and borrowings 97 388
Derivative financial liability 45 45
3,137 3,875
Net current assets/(liabilities) 271 (1,441)
Non-current liabilities
Trade and other payables 882 1,179
Lease liabilities 549 988
Loans and borrowings 2,664 1,597
Deferred tax liability 405 536
--------------------------------- -------- --------
4,500 4,300
--------------------------------- -------- --------
Total liabilities 7,637 8,175
--------------------------------- -------- --------
Net assets 4,950 7,405
--------------------------------- -------- --------
Equity
Share capital 2,672 2,100
Share premium 16,676 15,435
Merger reserve (190) (190)
Convertible debt reserve 224 -
Foreign exchange reserve 108 (9)
Share-based payment reserve 2,563 1,678
Retained earnings (17,103) (10,871)
--------------------------------- -------- --------
4,950 8,143
Non-controlling interest - (738)
--------------------------------- -------- --------
Total equity 4,950 7,405
--------------------------------- -------- --------
Consolidated statement of cash flows
for the year ended 31 December 2020
2020 2019
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Cash flows from operating activities
Loss for the year (5,494) (6,525)
Adjustments for:
Tax credit (246) (792)
Net fi nance expense 324 196
Amortisation of intangible assets 1,018 672
Depreciation of property, plant and equipment
and right of use assets 670 587
Impairment of intangible assets 3,022 2,344
Loss/(profit) on disposal of tangible/intangible
assets 63 (22)
Write back of contingent consideration (342) (1,493)
Gain on extinguishment of debt (net) (677) -
Unrealised foreign exchange loss 160 85
Deferred salary bonus accrual write back (381) -
Equity-settled Share-based payment expense 885 1,021
Bad debt provision 340 -
Income taxes received 121 562
(537) (3,428)
(Increase)/decrease in trade and other receivables (76) 98
(Decrease)/increase in trade and other payables (329) 71
----------------------------------------------------- -------- --------
(405) 169
----------------------------------------------------- -------- --------
Net cash flows used in operating activities (942) (3,259)
Cash flows from investing activities
Acquisition of subsidiary undertakings (net of
cash acquired) - (379)
Purchase of intangible assets (959) (1,599)
Purchase of property, plant and equipment (2) (16)
----------------------------------------------------- -------- --------
Net cash used in investing activities (961) (1,994)
Cash flows from financing activities
Proceeds from issue of shares 1,280 2,787
Costs of issue of shares (25) (65)
Lease payments principal (458) (559)
Lease payments interest (84) (93)
Receipts from borrowings 3,000 1,056
Repayments of borrowings (874) (203)
----------------------------------------------------- -------- --------
Net cash from financing activities 2,839 2,923
----------------------------------------------------- -------- --------
Net increase/(decrease) in cash and cash equivalents 936 (2,330) Cash and cash equivalents at beginning of year 1,076 3,355 Bank overdraft - 22 Effect of foreign exchange rate changes (38) 29 ----------------------------------------------------- -------- -------- Cash and cash equivalents at end of year 1,974 1,076 ----------------------------------------------------- -------- --------
Consolidated statement of changes in equity
for the year ended 31 December 2020
Share
Convertible Foreign based Non-
Ordinary Share Merger debt exchange payment Retained controlling Total
shares premium reserve reserve reserve reserve losses interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- ------------- ------- ------------ --------- --------- -------- ----------- ----------
At 1 January
2019 1,638 12,659 (190) - 24 657 (5,223) 139 9,704
---------------- ----------- ------------- ------- ------------ --------- --------- -------- ----------- ----------
Loss for the
year - - - - - - (5,648) (877) (6,525)
Other
comprehensive
income - - - - (33) - - - (33)
---------------- ----------- ------------- ------- ------------ --------- --------- -------- ----------- ----------
Total
comprehensive
loss - - - - (33) - (5,648) (877) (6,558)
Allotment
of share
capital 462 2,776 - - - - - - 3,238
Share-based
payments - - - - - 1,021 - - 1,021
At 31 December
2019 2,100 15,435 (190) - (9) 1,678 (10,871) (738) 7,405
---------------- ----------- ------------- ------- ------------ --------- --------- -------- ----------- ----------
Loss for the
year - - - - - - (5,879) 385 (5,494)
Other
comprehensive
loss - - - - 117 - - - 117
---------------- ----------- ------------- ------- ------------ --------- --------- -------- ----------- ----------
Total
comprehensive
loss - - - - 117 - (5,879) 385 (5,377)
Non-controlling
interest - - - - - - 385 (385) -
Convertible
debt option - - - 224 - - - - 224
Allotment
of share
capital 572 1,241 - - - - - - 1,813
Share-based
payments - - - - - 885 - - 885
At 31 December
2020 2,672 16,676 (190) 224 108 2,563 (17,103) - 4,950
---------------- ----------- ------------- ------- ------------ --------- --------- -------- ----------- ----------
Notes to the financial information
1. Accounting basis
The financial information set out in this document does not constitute the Group's statutory accounts for the years ended 31 December 2019 or 2020. Statutory accounts for the years ended 31 December 2019 and 31 December 2020, which were approved by the directors on 15 March 2021, have been reported on by the Independent Auditors. The Independent Auditor's Reports on the Annual Report and Financial Statements for each of 2019 and 2020 were unqualified, did draw attention to a matter by way of emphasis, being going concern and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2019 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2020 will be delivered to the Registrar of Companies in due course and will be posted to shareholders shortly, and thereafter will be available from the Company's registered office at 5 Ireland Yard, London, England, EC4V 5EH and from the Company's website: https://krm22.com/investor-relations
The financial information set out in these results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations in conformity with the requirements of the Companies Act 2006. The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2019, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019. There are deemed to be no new standards, amendments and interpretations to existing standards, which have been adopted by the Group, that have had a material impact on the financial statements.
The Group's financial information has been presented in Pounds Sterling (GBP). Amounts are rounded to the nearest thousand, unless otherwise stated.
2. Going concern
The Group's financial statements have been prepared on the going concern basis. The Directors have reviewed KRM22's going concern position taking into account of its current business activities, budgeted performance and the factors likely to affect its future development, which are set out in this Annual Report, and include KRM22's objectives, policies and processes for managing its capital, its financial risk management objectives and its exposure to credit and liquidity risks.
The Group meets its day-to-day working capital requirements through cash generated from the capital it has raised on AIM, and a Convertible Loan facility with Kestrel Partners LLP ("Kestrel"). On 15 September 2020 KRM22 signed a three-year convertible loan agreement with Kestrel for GBP3.0m with some proceeds of the loan being used to settle the existing Debt Facility with. At 31 December 2020 KRM22 had GBP2.0m of cash at bank and debt due to Kestrel of GBP3.0m (gross).
The Directors have undertaken a significant assessment of the cashflow forecasts covering a period of at least twelve months from the date of approval of the financial statements. Cashflow forecasts have been prepared based on a range of scenarios including, but not limited to, existing customer churn at different churn rates, no new contracted sales revenue, delayed sales, cost reductions and a combination of these different scenarios.
Having assessed the sensitivity analysis on cashflows, the key risks to KRM22 remaining a going concern without implementing extensive cost reduction measures is, existing customers paying on payment terms and within 45 days of invoice, customer churn of up to 10%, conversion of some of the sales opportunities that are currently at contract negotiation stage and maintaining control of the cost base.
If the forecasts are achieved, KRM22 will be able to operate within its existing facilities. However, the time to close new customers and the value of each customer, which are deemed individually as high value and low volume, is key. As such, there is a risk that KRM22's working capital may prove insufficient to cover both operating activities and the repayment of its debt facility. In such circumstances, KRM22 would be obliged to seek additional funding, through a placement of shares or other source of funding. There is no certainty that such funds could be raised.
The Directors have concluded that the circumstances set forth above represent a material uncertainty, which may cast significant doubt about KRM22's ability to continue as a going concern. However the Directors expect to be able to raise funds through a placement of shares or other source of funding and believe that taken as a whole, the factors described above enable KRM22 to continue as a going concern for the foreseeable future, being twelve months from their signing of their financial statements. The financial statements do not include the adjustments that would be required if the Group were unable to continue as a going concern.
3. Segmental reporting
The Board of Directors, as the chief operating decision maker in accordance with IFRS 8 Operating Segments, has determined that KRM22 have identified five risk domains as operating segments, however for reporting purposes into a single global business unit and operates as a single operating segment, as the nature of services delivered are common.
The internal management accounting information has been prepared in accordance with IFRS but has a non-GAAP 'Adjusted EBITDA' as a profit measure for the overall group. This amount is reported on the face of the income statement.
KRM22's revenue from external customers and information about its non-current assets, excluding deferred tax, by geography is detailed below:
Non-current Non-current
Revenue assets Revenue assets
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
UK 990 3,973 422 5,151
Europe 763 1,911 798 2,463
USA 2,383 3,294 2,489 5,531
Rest of world 458 1 434 1
--------------- ---------- ------------ ---------- ------------
Total 4,594 9,179 4,143 13,146
--------------- ---------- ------------ ---------- ------------
The Directors consider that the business has five risk domains: Enterprise, Market, Compliance, Operations and Technology as is described in Strategic Report. Within these five risk domains, there are three revenue streams with different characteristics, which are generated from the same assets and cost base.
For the years ended 31 December 2020 and 2019, no customer generated more than 10% of total revenue.
Non-current assets include goodwill and intangible assets recognised on consolidation and are classified by reference to the geographical location of the KRM22 group company which initially acquired the acquiree.
Recurring revenue is recognised over the period of time and non-recurring revenue is recognised at a point in time. Other revenue comprises miscellaneous revenue that is not part of KRM22's core business.
2020 2019
GBP'000 GBP'000
Recurring revenue 4,193 3,753
Non-recurring revenue 401 305
Other revenue - 85
----------------------- -------- --------
Total revenue 4,594 4,143
----------------------- -------- --------
2020 2019
GBP'000 GBP'000
Enterprise 420 81
Market 2,476 2,447
Compliance 1,673 1,530
Other 25 85
------------ -------- --------
Total 4,594 4,143
------------ -------- --------
4. Loss per share
Basic earnings per share is calculated by dividing the loss attributable to the equity holders of KRM22 by the weighted average number of shares in issue during the year.
KRM22 has dilutive ordinary shares, this being warrants, restricted stock awards and share options granted to employees. As KRM22 has incurred a loss in the year, the diluted loss per share is the same as the basic earnings per share as the loss has an anti-dilutive effect.
2020 2019
GBP'000 GBP'000
-------------------------------------------- ----------- -----------
Loss for the year attributable to equity
holders of the parent (5,879) (5,648)
Basic weighted average number of shares in
issue 24,414,093 18,552,176
Diluted weighted average number of shares
in issue 33,256,848 25,933,265
-------------------------------------------- ----------- -----------
Basic and diluted loss per share (24.1p) (30.4p)
-------------------------------------------- ----------- -----------
5. Intangible assets
Acquired Capitalised
Goodwill software Trademarks development
on & & licenses costs Total
consolidation related assets GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
Cost
At 1 January 2020 7,667 2,856 704 3,320 14,547
Additions - - - 959 959
Disposals - - (169) - (169)
Foreign exchange
movements (11) (4) (19) (2) (36)
-------------------------- ---------------- ---------------- ------------- ------------- ----------
At 31 December 2020 7,656 2,852 516 4,277 15,301
-------------------------- ---------------- ---------------- ------------- ------------- ----------
Accumulated amortisation
At 1 January 2020 - 640 180 2,498 3,318
Amortisation for
the year - 451 80 487 1,018
Impairment charge 2,719 - 303 - 3,022
Disposals - - (38) - (38)
Foreign exchange
movements - (6) (9) (6) (21)
-------------------------- ---------------- ---------------- ------------- ------------- ----------
At 31 December 2020 2,719 1,085 516 2,979 7,299
-------------------------- ---------------- ---------------- ------------- ------------- ----------
At 31 December 2019 7,667 2,216 524 822 11,229
-------------------------- ---------------- ---------------- ------------- ------------- ----------
At 31 December 2020 4,937 1,767 - 1,298 8,002
-------------------------- ---------------- ---------------- ------------- ------------- ----------
6. Events after the reporting date
On 4 March 2021, the Company signed an addendum (the "Addendum") to the Object+ Share Purchase Agreement dated 29 May 2019. Under the terms of the Addendum, the undiscounted deferred consideration of US$1.6m (GBP1.2m) associated with the third performance milestone was reduced by US$0.5m (GBP0.4m) to US$1.1m (GBP0.8m) in return for a cash payment of US$0.1m (GBP0.1m) to the Seller of Object+ and the Company waiving the US$0.1m (GBP0.1m) promissory loan note due from the Seller to the Company. As of the statement of financial position date the Director's expectation was that such a position was probable taking account of the performance of the Group and engagement with the seller.
7. Cautionary statement
This document contains certain forward-looking statements relating to KRM22 plc (the "Group"). The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Company to differ materially from those contained in any forward-looking statement. These statements are made by the Directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
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END
FR DKPBQDBKBOND
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