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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Uls Technology Plc | LSE:ULS | London | Ordinary Share | GB00BNG8T458 | ORD 0.4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 73.00 | 72.40 | 73.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMULS
RNS Number : 6791S
ULS Technology PLC
27 June 2018
ULS Technology plc
("ULS", the "Group" or the "Company")
Final Results
ULS Technology plc (AIM:ULS), the provider of online technology platforms for the UK conveyancing and financial intermediary markets, announces its Full Year results for the 12 month period to 31 March 2018.
Financial Highlights
-- Revenue increased by 38% to GBP30.7m (FY 2017: GBP22.2m) -- Gross Margin increased 32% to GBP12.5m (FY 2017: GBP9.5m) -- Underlying EBITDA(1) increased 25% to GBP6.4m (FY 2017: GBP5.1m) -- Underlying Profit Before Tax(1) increased by 26% to GBP5.5m (FY 2017: GBP4.4m) -- Underlying EPS(1) grew by 24% to 7.2p (FY 2017: 5.8p) -- Net debt reduced to GBP1.9m (FY 2017: GBP3.5m)
-- Proposed dividend of 1.15p per share taking the total for the year to 2.30p per share (FY 2017: 2.20p per share)
(1) before exceptional items and amortisation of intangibles arising on consolidation
Operating Highlights
-- Organic growth in core business with transactional volumes growing twice as fast as the market
-- Excellent performance from Conveyancing Alliance Holdings Limited ("CAL") in first full year of ownership:
o Strong growth in revenue, profit and transaction volumes
o Planned synergies achieved
o Increase in expected contingent consideration payable as a result of performance being ahead of budget
-- New products released for mortgage lenders with more signing up to be customers -- Continued investment in technology and products
o Launch of the Group's Lender Panel Management solution
Post Period Events
-- Steve Goodall succeeded Ben Thompson as CEO
o Steve knows the company well and has a proven record growing similar businesses
-- Strengthening of Board with Elaine Bucknor joining as a NED
o Adds significant technology expertise
-- Conveyancing service agreed with Easyconveyance(R)
Steve Goodall, Chief Executive of ULS Technology plc, commented: "We are delighted with the strong underlying organic growth the core business achieved during the past year. This was supplemented by the strong performance of CAL, which was acquired during the latter half of the previous financial year. We also invested in product development, with a view to helping the Company further grow its routes to market with new products coming on stream during the period and more to follow this year."
Enquiries:
Hot Features
Premium
ULS Technology plc Tel: 01844 262392
Geoff Wicks, Non-Executive Chairman
Steve Goodall, CEO
John Williams, Finance Director
Numis Securities Limited (Nomad & Tel: 0207 260 1000
Broker)
Stuart Skinner / Paul Gillam, Corporate
Advisory
Michael Burke, Corporate Broking
Walbrook PR Limited ulsgroup@walbrookpr.com or Tel: 020 7933
8780
Paul Cornelius
Nick Rome
Sam Allen
Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.
Chairman's statement
The year has been one of strong growth with a focus on putting building blocks in place to enable the Group to continue along its growth path.
Review of the year
The year saw tremendous growth in all areas for the Company. Organic growth in the core business has been excellent as new introducers have come on stream during the year; the acquisition of CAL in December 2016 meant that we had a full 12 months of their numbers, which have also seen significant growth; both of which demonstrate the effectiveness of our strategy to concentrate on growing our core business by focusing on market share while carefully targeting acquisitions in our market. Reported profit before tax fell but this was simply due to the increase in the estimated earnout payable on the CAL acquisition due to their excellent performance. The underlying position remained one of growth.
At the same time the housing market remained fairly flat with housing transactions slightly up year-on-year. However, it was not the same picture across the country. The South-East, in particular, seemed to suffer from lower transaction volumes but other areas such as the West Midlands and the North-West were quite buoyant. Our national footprint means that we have been less impacted by these regional variations.
Product development has always been a focus of the business and we have been increasing activity in this area over the last year. The Group's Lender Panel Management solution went live at the start of the period with customers now using it.
Final dividend
Subject to approval by shareholders at the Annual General Meeting to be held on 25 July 2018, the Board proposes a final dividend of 1.15p per share, payable on 3 August 2018 to those shareholders on the register at the close of business on 6 July 2018. This, together with the interim dividend of 1.15p per share already paid, takes the total proposed distribution relating to the year ending 31 March 2018 to 2.30p per share.
Board changes
In April 2018 Ben Thompson stood down as CEO. The Board would like to thank Ben for his contribution to the business over the last few years. At the same time, we have been delighted to appoint Steve Goodall as our new CEO, a year after he joined the Group as Managing Director. Steve has made a big impact on the Group since joining, growing our introducer base, broadening the market we address and driving product development. I am sure that Steve will continue this success in his new role.
I am also delighted to welcome Elaine Bucknor to our Board as an additional Non-Executive Director. Elaine is a member of the Group Technology Executive team at Sky and I am sure her knowledge and experience in the technology space will benefit the Group greatly.
Peter Opperman will be stepping down from the Board at the AGM. Peter joined the Company in 2011 as Chairman and oversaw the Group's listing in 2014. I would like to thank Peter for all the time and effort he has put in since joining the Group and for his support since I took over as Chairman. We have started the search for a replacement Non-Executive Director who will chair the Audit Committee.
Outlook
The Board is positive about the outlook for the business and sees potential to continue to increase market share as well as to grow through broadening our product base. Commentary on the housing market suggests that current conditions will remain for some time, so our focus on market share will continue and we see plenty of scope to build on our position.
Recent reviews of the housing market by the DCLG (Department for Communities and Local Government) and legal services by CMA (Competition and Markets Authority) call for more transparency of fees and more competition. These are areas addressed by our products so we feel any changes to market practices will be favourable for us.
Geoff Wicks
Independent Chairman
ULS Technology plc
26 June 2018
Chief Executive's statement
ULS has had a very strong year. We have successfully grown our share of new conveyancing, building our presence and strength in all market segments that we cover. Whilst we have continued to grow our core business, I am particularly pleased to highlight the impressive momentum built by CAL, who we acquired in the previous financial year.
Overview of operational performance
Last year we invested in developing new technology to enable us to offer a more comprehensive range of conveyancing services to mortgage lenders. We also acquired CAL to drive stronger progress in providing conveyancing to both smaller mortgage intermediaries and estate agents. Both strategies have delivered results.
In terms of lenders, we have won new contracts throughout the year, taking the total number of lenders we work with to nine. Some of these new relationships have required us to provide similar services to those that we had been offering previously. However, we also won new types of work as a result of our new technology solutions for lenders.
We will continue our efforts in building further and deeper relationships with lenders and will do so by understanding what they need, both for today and for the future, and delivering exactly this for them. We strongly believe that there remains significant upside for the Group in this area.
With regard to intermediaries, ULS has always had a strong pedigree in this market segment. Historically it has forged long term relationships with many of the large national mortgage brokers, networks and clubs. However, relationships with the smaller intermediary firms - most typically directly authorised and regulated by the FCA - were relatively undeveloped. Acquiring CAL has enabled the Group to experience very strong growth in this market segment. CAL provides its 'Broker Conveyancing' technology platform and services to these smaller intermediaries and has built some very healthy momentum throughout this last year.
In terms of estate agency, ULS already helps home sellers to select the best estate agent to sell their home for them, based on a unique range of performance criteria. The Group built this technology platform (Estateagent4me) to enable contact with home sellers before they were potentially sold conveyancing from the estate agent. ULS has started to transact new conveyancing in this area directly with home movers via this route. Additionally, through CAL's two estate agency brands (Agency Convey and Conveyancing Alliance), the Group now provides conveyancing technology directly to an increasing number of estate agents.
CAL has therefore proved to be a tremendous acquisition and I would like to recognise and congratulate them for their excellent performance and work ethic over this last year, which has contributed significantly to the Group's overall results.
Strategic progress
ULS has always been clear that its strategic focus will be to grow its conveyancing market share, year on year. Over the last few years we have designed and built technology platforms to provide conveyancing services to all market segments.
This means that we now have a foot in every camp;
a. Mortgage Intermediaries - we provide them with technology to help their customers re-mortgage, move home or buy a property to let.
b. Lenders - we provide technology for their branch staff to help their customers. We also offer platforms for lenders to help them with their re-mortgage conveyancing as well as some of their automated documentation movement and quality controls.
c. Estate Agents - mostly through CAL, the Group now provides conveyancing technology to enable estate agents to help their own customers.
d. House builders - ULS provides unique technology specifically designed to improve all-round conveyancing communication and speed of execution in this sector.
e. Consumer portals - ULS provides white labelled B2C conveyancing platforms, enabling its platform partners to offer conveyancing services directly to their customers. Home Owners Alliance, where ULS currently holds a 35% stake, is one of these.
We will continue to improve and innovate in each of these areas to enable our business partners to improve their customer experience and the Group to build its market share further.
Outlook
Our aim is simple and that is to outperform our competitors and the market itself.
We have positioned the business to target continued growth even in a flat market by focussing on growing market share through establishing new introducer relationships. Brexit related uncertainty and the possibility of rising interest rates will likely present both challenges and new opportunities.
We are very pleased with how the Group has performed over this last year and are excited about how various forces (e.g. DCLG, Housing White Paper) are combining to position the Group for even stronger relevance and growth. We know there remains a lot of upside growth for us to chase and earn the right to win.
We very much look forward to what we know will be an exciting FY19.
Steve Goodall
Chief Executive Officer
ULS Technology plc
26 June 2018
Financial review
The Group delivered significant profit growth and increased market share.
Summary
-- Revenue GBP30.7 million (2016: GBP22.3 million). -- Gross margin GBP12.5 million (2016: GBP9.5 million). -- Underlying PBT GBP5.5 million (2016: GBP4.4 million). -- PBT GBP2.7 million (2016: GBP3.5 million). -- Net debt GBP1.9 million (2016: GBP3.5 million). -- Group continues to pay a progressive dividend. -- Increase in underlying EBITDA of 25%.
Results
The Group delivered significant profit growth in 2018 with underlying profit before tax up by 25%. Approximately GBP0.7 million of this growth was due to CAL being included in the numbers for the full year as opposed to just over three months in the prior year. Reported PBT actually fell year-on-year. This was due to an increase of GBP1.4 million in the expected contingent consideration relating to the acquisition of CAL. As a Board the key profitability measure we use is underlying PBT. We believe that this measure gives a better guide to the longer-term cash generating ability of the Group.
Capitalisation of internal IT resource
In accordance with accounting rules, we capitalise internal and external IT resource where there is a clear definable project and we can identify a profitable revenue stream. The capitalisation is shown under intangible assets and amortised over the expected useful life of the asset. However, it is useful to look at the impact on profit if we had purely expensed all of this type of expenditure and we do this in the table opposite. This gives a closer indication as to the cash generative ability of the business rather than looking at reported profit.
2017 2016
GBP000's GBP000's
---------------------------------------- --------- ---------
Underlying PBT 5,513 4,364
---------------------------------------- --------- ---------
Capitalised development resource (671) (642)
---------------------------------------- --------- ---------
Amortisation of capitalised development
resource 474 395
---------------------------------------- --------- ---------
Adjusted underlying PBT 5,316 4,117
---------------------------------------- --------- ---------
During the year more development projects were undertaken and more resource taken on as we continue to invest in the future of the Company. Additionally, a limited amount of external resource was used and the acquisition of CAL increased the spend in this area (as they also capitalise development, which they outsource entirely).
Key performance indicators
Underlying PBT 2018 2018 2017 2017
GBP000's GBP000's GBP000's GBP000's
----------------------------------------- --------- --------- --------- ---------
Profit before taxation (PBT) 2, 735 3,456
----------------------------------------- --------- --------- --------- ---------
Amortisation of intangible assets
arising on acquisition 540 204
----------------------------------------- --------- --------- --------- ---------
Exceptional operating costs
----------------------------------------- --------- --------- --------- ---------
Acquisition activity costs 85 386
----------------------------------------- --------- --------- --------- ---------
Adjustment to expected contingent
consideration 2,062 -
----------------------------------------- --------- --------- --------- ---------
Exceptional operating costs 2,147 386
----------------------------------------- --------- --------- --------- ---------
NPV adjustment of deferred consideration 91 318
----------------------------------------- --------- --------- --------- ---------
Underlying PBT 5,513 4,364
----------------------------------------- --------- --------- --------- ---------
Underlying EBITDA 2018 2017
GBP000's GBP000's
-------------------------------- --------- ---------
Underlying PBT 5,513 4,364
--------------------------------- --------- ---------
Finance income (6) (12)
--------------------------------- --------- ---------
Finance costs 135 83
--------------------------------- --------- ---------
Amortisation (excluding arising
on acquisition) 474 395
--------------------------------- --------- ---------
Depreciation 274 271
--------------------------------- --------- ---------
Underlying EBITDA 6,390 5,101
--------------------------------- --------- ---------
Shares and dividends
In December 2017, the Group paid an interim dividend of 1.15 pence per share. We have proposed a final dividend of 1.15 pence per share in line with our aim of paying the total dividend in two equal amounts.
No new shares have been issued in the year.
Conveyancing Alliance Holdings Limited
On the 19 December 2016, the Group acquired the entire share capital of Conveyancing Alliance Holdings Limited and its wholly owned subsidiary, Conveyancing Alliance Limited. This was for an initial cash consideration of GBP7.2 million plus an amount for free cash, together with an earn-out until 31 March 2019 to be wholly satisfied in cash. The excellent performance of CAL during the year has resulted in us upgrading the estimated contingent consideration amount payable. We are now estimating that we will pay the full earn-out amount which is GBP5.3 million.
Cash and debt
The Group continued to generate positive operating cash flow:
-- Scheduled payments of GBP1 million made against the term loan with HSBC;
-- RCF balance with HSBC reduced by GBP1 million although ability to draw down that additional amount remains;
-- Dividends paid of GBP1.5 million; -- Leverage fell from 0.69 to 0.29 as at 31 March 2018; and
-- First contingent consideration payment due to previous owners of CAL in July 2018 estimated at GBP2.9 million.
-- Leverage is calculated as net debt against underlying EBITDA.
The underlying position of the Group is that it continues to turn a significant proportion of its profit into cash, which we expect to allow payment of a progressive dividend, while still investing in the growth of the business. Where opportunities exist, the business will also take on debt facilities to fund acquisition growth and we currently use a guideline of having a maximum leverage of one times EBITDA which it is currently well below. Our bank covenants allow for much higher leverage.
Board of Directors
Geoff Wicks
Independent Chairman
Geoff Wicks was CEO of Group NBT plc, a specialist in online brand protection and digital asset management, from 2001 until he led the sale of the business to HgCapital in 2011. He remained as part of the Group NBT business, now renamed NetNames, as a Non-Executive Director until 2013.
Geoff spent much of his earlier career at Reuters, including heading divisions in the UK, France and Nordic regions, and latterly was Director of Corporate Communications. Prior to Reuters, Geoff worked in the banking and insurance industries.
Steve Goodall
Chief Executive Officer
Steve joined the Company as Managing Director in May 2017 and has been responsible for the day to day management of the Company's products and services. In addition, Steve has been instrumental in building the Company's success in tailoring conveyancing services and technology for lenders as well as introducing and commercialising new products and services for existing and new B2B relationships.
Prior to joining ULS, Steve worked for Legal & General Surveying Services ('LGSS') for over 15 years, most recently holding the post of Managing Director. During his tenure, he successfully transformed LGSS from a modest surveying business into the number one, market leading property risk and valuation distribution business, which in 2016 handled over 500,000 valuation instructions and generated revenue of approximately GBP80 million.
Steve was awarded the Royal Institute of Chartered Surveyors' Fellowship in 2012 and also holds numerous high-profile industry awards, both personally and on behalf of LGSS.
John Williams
Finance Director
John joined the business in January 2011 at the point of Lloyds Development Capital (LDC) investment in the Group. Prior to joining the Company, John was Finance Director at Stortext FM Limited, a private equity backed SaaS business specialising in document management. There, he led a merger process before taking the lead in a successful trade sale of the merged entity to Box-it Limited.
John is a chartered accountant, having qualified with Ernst & Young, before he gained blue-chip experience with Motorolain a number of roles.
Andrew Weston
Co-founder and IT Director
Andrew co-founded ULS in 2003. He started his career developing and implementing software solutions at PE International plc and Vintner Computer Systems. He founded his own businesses: Weston Computing, in 1995; and Weston Technology in 2000.
Andrew has spent the last 14 years building property, financial and legal services applications for the Group and also co-founded ehips Ltd (now known as United Home Services Ltd) in 2007, which is now part of ULS.
Peter Opperman
Non-Executive Director
Peter joined the Company in January 2011 at the point that LDC invested in the business. Peter has spent over 20 years in executive and Non-Executive roles working in private equity backed businesses.
Peter is currently Non-Executive Chairman of private equity backed companies Zenergi Limited, Adestra Limited, Decision Technology Limited and Connect Managed Services Limited.
Peter will be stepping down from the Board at the AGM.
Elaine Bucknor
Independent Non-Executive Director
Elaine joined as Non-Executive Director in June 2018. She is currently Sky Plc's Group Chief Information Security Officer and a Group Director in its Technology Executive team. Elaine has over 20 years in operational and strategic technology consultancy and leadership roles, with multinational market leaders in the telecommunications, media, technology, travel, financial and public sectors. She has advised at Board level on technology capabilities to enable scalable growth and resilience in highly disruptive markets and specialises in shaping and executing innovative technology strategies.
Elaine is a key sponsor on a number of programmes to encourage more women into technology-based careers and is also a member of a number of industry councils in the Technology and Cyber Security sectors.
Directors' report
The Directors present their report and the financial statements of ULS for the year ended 31 March 2018.
Principal activity
The Company acts as a holding company for its three subsidiaries and provides management services to its subsidiary companies.
The main subsidiary, United Legal Services Limited, develops and provides software that supports the provision of online legal comparison services, particularly in the conveyancing sector. Its disruptive technology creates competition amongst the providers of legal services to the benefit of the consumer. Conveyancing Alliance Limited operates in a similar fashion.
Legal-Eye Limited provides risk management and compliance services to solicitors and licensed conveyancers.
United Home Services Limited develops, hosts and operates web based systems that provide property information, including energy performance certificates (EPCs). It is has also developed a commercial proposition for the estate agency comparison product. Its operations are currently immaterial to the Group.
Review of business and future developments
The review of the business and future developments is outlined in the Chairman's statement.
Dividends
A final dividend in respect of the year ended 31 March 2017 of 1.10 pence per share was paid on 4 August 2017. An interim dividend of 1.15 pence per share was paid on 22 December 2017. A final dividend of 1.15 pence per share is proposed by the Directors subject to approval at the AGM.
Directors
The Directors of the Company during the year and their beneficial interest in the ordinary shares and share options of the Company at 31 March 2018 are set out below:
Ordinary shares Share options
--------------- -------------------- --------------------
2018 2017 2018 2017
--------------- --------- --------- --------- ---------
Peter Opperman 2,704,625 2,704,625 - -
--------------- --------- --------- --------- ---------
Andrew Weston 1,276,625 1,276,625 226,898 226,898
--------------- --------- --------- --------- ---------
John Williams 48,291 48,291 485,809 485,809
--------------- --------- --------- --------- ---------
Ben Thompson 53,333 20,000 1,618,698 1,942,337
--------------- --------- --------- --------- ---------
Geoffrey Wicks 52,000 52,000 - -
--------------- --------- --------- --------- ---------
4,134,874 4,101,541 2,331,405 2,655,044
--------------- --------- --------- --------- ---------
Directors' remuneration
The following table sets out an analysis of the pre-tax remuneration for the year ended 31 March 2018 for the individual Directors who held office in the Company during the year:
2018 2018
2018 2018 Benefits 2018 Share-based 2018 2017
Salary/fees Bonuses in kind Sub Total payment Total Total
GBP GBP GBP GBP GBP GBP GBP
--------------- ------------ -------- --------- ---------- ------------ ------- -------
Nigel Hoath - - - - - - 21,780
--------------- ------------ -------- --------- ---------- ------------ ------- -------
Peter Opperman 34,900 - 210 35,110 - 35,110 35,051
--------------- ------------ -------- --------- ---------- ------------ ------- -------
Andrew Weston 112,170 40,000 2,374 154,544 9,840 164,384 138,845
--------------- ------------ -------- --------- ---------- ------------ ------- -------
John Williams 112,500 40,000 15,000 167,500 14,162 181,662 147,222
--------------- ------------ -------- --------- ---------- ------------ ------- -------
Ben Thompson 158,417 25,000 3,325 186,742 36,890 223,632 250,552
--------------- ------------ -------- --------- ---------- ------------ ------- -------
Geoffrey Wicks 36,726 - - 36,726 - 36,726 35,050
--------------- ------------ -------- --------- ---------- ------------ ------- -------
454,713 105,000 20,909 580,622 60,892 641,514 628,500
--------------- ------------ -------- --------- ---------- ------------ ------- -------
Nigel Hoath resigned as a Director on 2 August 2016.
Ben Thompson resigned as a Director on 4 April 2018.
Share options and warrants
The share-based payment of GBP60,892 (2017: GBP42,159) to Directors represents the share-based expense relating to share options issued in prior years. The following share options table comprises share options held by Directors who held office during the year ended 31 March 2018:
Options
Options held
held at Options Options at Exercise
31 March granted exercised 31 March price Exercisable Exercisable
2017 in period in period 2018 (p) from to
-------------- --------- ---------- ---------- --------- -------- ----------- -----------
John Williams 258,911 - - 258,911 40.00 18/08/17 17/08/24
-------------- --------- ---------- ---------- --------- -------- ----------- -----------
John Williams 226,898 - - 226,898 76.75 21/12/19 20/12/26
-------------- --------- ---------- ---------- --------- -------- ----------- -----------
Ben Thompson 970,918 - 323,639 647,279 39.50 28/11/17 27/11/24
-------------- --------- ---------- ---------- --------- -------- ----------- -----------
Ben Thompson 647,279 - - 647,279 47.50 30/03/18 29/03/25
-------------- --------- ---------- ---------- --------- -------- ----------- -----------
Ben Thompson 324,140 - - 324,140 76.75 21/12/19 20/12/26 -------------- --------- ---------- ---------- --------- -------- ----------- ----------- Andrew Weston 226,898 - - 226,898 76.75 21/12/19 20/12/26 -------------- --------- ---------- ---------- --------- -------- ----------- -----------
Employee involvement
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through informal discussions between Group management, operating company management and employees as well as regular 'town hall' meetings.
The Group operates an EMI share option scheme and, as well as options issued to Directors as shown above, options have also been issued to and are held by a significant number of employees.
Substantial shareholders
The Company has been notified of the following interests of three per cent or more in its issued share capital as at 31 March 2018.
Shareholder No. of shares % ------------------------- ------------- ----- Kestrel Partners LLP 13,048,800 20.13 ------------------------- ------------- ----- Schroder Investment Management 7,000,000 10.80 ------------------------- ------------- ----- Nigel Hoath 6,351,789 9.80 ------------------------- ------------- ----- Unicorn Asset Management Ltd 4,550,200 7.02 ------------------------- ------------- ----- Herald Investment Management Ltd 4,400,000 6.79 ------------------------- ------------- ----- Lombard Odier Asset Management (Europe) Ltd 3,992,580 6.16 ------------------------- ------------- ----- BlackRock 2,794,022 4.31 ------------------------- ------------- ----- Peter Opperman* 2,704,625 4.17 ------------------------- ------------- ----- Canaccord Genuity Group Inc 2,700,000 4.16 ------------------------- ------------- -----
* Peter Opperman Non-Executive Director
Research and development
The Group develops software products in-house and CAL uses an external provider to do the same. These are capitalised in line with the accounting policies shown on page 39.
Financial instruments and risks
The Group's operations expose it to a variety of liquidity, credit and interest rate risks. Details of the use of financial instruments by ULS and these risks are contained in pages 56 to 58 of the financial statements.
Corporate governance
ULS Technology plc and its subsidiaries are committed to high standards of corporate governance. The Directors recognise the importance of sound corporate governance and confirm that they aim to comply with best practice appropriate for a company of its nature and scale.
Audit Committee
The Audit Committee is chaired by Peter Opperman and includes Geoff Wicks. It meets at least twice a year and may invite other Directors to attend its meetings. The Committee is responsible for reviewing a wide range of matters, including half-year and annual results before their submission to the Board, and for monitoring the controls that are in force to ensure the integrity of information reported to the shareholders. The Audit Committee will also meet with the auditors without the presence of the Executive Directors.
During the year the Company received a Corporate Reporting Review enquiry from the Financial Reporting Council ('FRC') in respect of certain matters in the Group's 2017 financial statements which resulted in an internal review of these points. As a result of this review the Company identified an error in its 2017 consolidated statement of cash flows which has resulted in a reclassification of GBP318,000 from interest paid to decrease in trade and other payables from the amounts previously disclosed.
The FRC review was based on the annual report and accounts and does not benefit from detailed knowledge of the business or an understanding of the underlying transactions entered into. Accordingly, while all points raised by the FRC have been resolved, this provides no assurance that the report and accounts are correct in all material respects; the FRC's role is not to verify the information provided but consider compliance with reporting requirements. FRC letters are written on the basis that the FRC accepts no liability for reliance on them by the Company or any third party, including but not limited to investors and shareholders.
Remuneration Committee
The Remuneration Committee is chaired by Geoff Wicks and includes Peter Opperman. It meets at least twice a year and no Director is permitted to participate in discussion or decisions concerning his own remuneration. The Remuneration Committee reviews the performance of the Executive Directors. It sets and reviews the scale and structure of their remuneration, the basis of their remuneration and the terms of their service agreements with due regard to the interests of shareholders. In determining the remuneration of Executive Directors, the Remuneration Committee will seek to enable the Group to attract and retain staff of the highest calibre. The Remuneration Committee will also make recommendations to the Board concerning the allocation of share options to employees.
Nominations Committee
The Nominations Committee is chaired by Peter Opperman and includes Geoff Wicks. It meets at least twice a year and is responsible for reviewing the size, structure and composition of the Board, succession planning, the appointment and/or replacement of additional Directors and for making appropriate recommendations to the Board.
Share dealing code
The Group has adopted a share dealing code for Directors and applicable employees of the Group for the purpose of ensuring compliance by such persons with the provisions of the AIM rules relating to dealings in the Group's securities (including, in particular, Rule 21 of the AIM rules). The Directors consider that this share dealing code is appropriate for a company whose shares are admitted to trading on AIM. The Group takes proper steps to ensure compliance by the Directors and applicable employees with the terms of the share dealing code and the relevant provisions of the AIM rules (including Rule 21).
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Group's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
Disclosure of information to auditors
The Directors confirm that, in so far as each Director is aware:
-- There is no relevant audit information of which the Group's auditor is unaware; and
-- The Directors have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Group's auditor is aware of that information.
Directors' responsibilities statement
The Directors are responsible for preparing the strategic report, Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable laws). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit and loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:
Select suitable accounting policies and then apply them consistently;
-- Make judgments and accounting estimates that are reasonable and prudent;
-- State whether applicable IFRSs and UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
-- Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions, and disclose with reasonable accuracy at any time the financial position of the Group, and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Auditors
Grant Thornton UK LLP are the appointed auditor of ULS Technology plc. A resolution to reappoint them as auditors and to authorise the Directors to agree their remuneration will be placed before the forthcoming Annual General Meeting of the Company.
Approved by the Board of Directors and signed on its behalf:
Steve Goodall
CEO
ULS Technology plc
John Williams
Finance Director
ULS Technology plc
26 June 2018
Company number: 07466574
Independent auditor's report
to the members of ULS Technology plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of ULS Technology plc (the 'parent company') and its subsidiaries (the 'Group') for the year ended 31 March 2018 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows, notes to the consolidated financial statements, including a summary of significant accounting policies, the parent company balance sheet, the parent company statement of changes in equity, and notes to the parent company financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 'Reduced Disclosures Framework' (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
-- the financial statements give a true and fair view of the state of the Group's and of the parent company's affairs as at 31 March 2018 and of the Group's profit for the year then ended;
-- the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-- the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
-- the Directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
-- the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group's or the parent company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Overview of our audit approach
-- Overall materiality: GBP249,000, which represents 5% of the Group's profit before taxation, after adding back the exceptional expense relating to the adjustment to consideration payable on a previous acquisition;
-- The key audit matters were identified as impairment of goodwill and other intangible assets; and
-- We performed a full scope audit covering ULS Technology plc, the parent company, and its five wholly owned subsidiaries; and targeted procedures on ULS Technology plc Employee Benefit Trust .
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter How the matter was addressed in Key Observations
- Group the audit - Group
Impairment of goodwill Our audit work included, but The calculations
and other intangible was not restricted to: and forecasts
assets Obtaining management's assessment used by management
Management are of the relevant CGUs used in were considered
required to make the impairment calculation and reasonable.
an annual assessment comparing this information to There have
to determine whether our understanding of the business been no material
the Group's goodwill units and operating structure misstatements
and other intangible of the Group identified
assets, which are Testing the assumptions utilised within either
valued at in the impairment models by calculation the goodwill
GBP17.7 million, of our own estimates of growth balances or
are impaired. rates and discount rates to evaluate other intangible
The process for management's point estimate assets within
assessing whether Challenging management assessment the consolidated
assets are impaired of impairment indicators relating balance sheet.
under International to intangible assets by inputting
Accounting Standard less favourable assumptions into
(IAS) 36 Impairments a sensitivity analysis of key
of assets is complex. factors, such as revenue and
It involves determining cost growth
the value in use Testing the accuracy of management's
through forecasting forecasting through a comparison
cash flows related of budget to actual data and
to cash generating historical variance trends and
units (CGUs) and checking the cash flows for exceptional
the determination or unusual items or assumptions
of the appropriate to consider whether management
discount rate and has a robust process for assessing
other assumptions impairment
to be applied which The Group's accounting policy
are highly judgemental on impairment of intangible assets
and can significantly is shown in the principal accounting
impact the results policies under the sub-heading
of the impairment "Impairment of non-current assets
review. including goodwill" and related
We therefore identified disclosures are included in notes
the impairment 10 and 13.
of goodwill and
other intangible
assets as a significant
risk, which was
one of the most
significant assessed
risks of material
misstatement.
------------------------------------------- ----------------------
We did not identify any key audit matters in respect of the parent company.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure Group Parent
Financial statements GBP249,000 which is 5% GBP186,000 which we based
as a whole of the Group's profit on 5% of net assets,
before taxation, after but reduced it to the
adding back the exceptional level of Group performance
expense relating to the materiality. This benchmark
adjustment to consideration is considered the most
payable on a previous appropriate because the
acquisition. This benchmark parent company's principal
is considered the most activity is that of a
appropriate because it holding company and therefore
is a key performance does not generate any
indicator for both management revenues.
and users of the financial Materiality for the current
statements. year is higher than the
Materiality for the current level that we determined
year is higher than the for the year ended 31
level that we determined March 2017 to reflect
for the year ended 31 the increased revenue
March 2017 to reflect and profitability of
the increased revenue the Group.
and profitability of
the Group.
--------------------------------- ---------------------------------
Performance materiality 75% of financial statement 75% of financial statement
used to drive materiality. materiality.
the extent of
our testing
--------------------------------- ---------------------------------
Communication GBP12,450 and misstatements GBP9,300 and misstatements
of misstatements below that threshold below that threshold
to the audit committee that, in our view, warrant that, in our view, warrant
reporting on qualitative reporting on qualitative
grounds. grounds.
--------------------------------- ---------------------------------
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the Group's business, its environment and risk profile and in particular included:
-- Evaluation by the Group audit team of identified components to assess the significance of that component and to determine the planned audit response based on a measure of materiality;
-- Understanding the Group's internal control environment by performing process walkthroughs and documenting the controls covering the Key Audit Matter, revenue, payables, debt and employee remuneration.;
-- Performing full scope audit of the financial statements of the parent company, ULS Technology plc, which includes 100% of the Group's investments;
-- Performing a full scope audit of the financial statements of United Legal Services Limited, United Homes Services Limited, Legal-Eye Limited and Conveyancing Alliance Limited, the trading entities within the Group, and Conveyancing Alliance (Holdings) Limited, an intermediate holding company; and
-- Performing targeted procedures on ULS Technology Employee Benefit Trust, primarily in respect of the shares held in the parent company at the balance sheet date and share movements during the period.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report set out on pages 1 to 69, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
-- In our opinion, based on the work undertaken in the course of the audit:
-- the information given in the strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
-- the strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
-- adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
-- the parent company financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by law are not made; or -- we have not received all the information and explanations we require for our audit
Responsibilities of Directors for the financial statements
As explained more fully in the Directors' responsibilities statement set out on page 26, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Mark Bishop FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
26 June 2018
Consolidated Income Statement
for the year ended 31 March 2018
2018 2017
Notes GBP000's GBP000's
----------------------------------------- ----- --------- ---------
Revenue 1 30,672 22,260
----------------------------------------- ----- --------- ---------
Cost of sales (18,192) (12,796)
----------------------------------------- ----- --------- ---------
Gross profit 12,480 9,464
----------------------------------------- ----- --------- ---------
Administrative expenses (7,378) (5,233)
----------------------------------------- ----- --------- ---------
Operating profit before exceptional
expenses 5,102 4,231
----------------------------------------- ----- --------- ---------
Exceptional admin expenses 3 (2,147) (386)
----------------------------------------- ----- --------- ---------
Operating profit 2 2,955 3,845
----------------------------------------- ----- --------- ---------
Finance income 5 6 12
----------------------------------------- ----- --------- ---------
Finance costs 6 (135) (83)
----------------------------------------- ----- --------- ---------
Exceptional finance costs 6 (91) (318)
----------------------------------------- ----- --------- ---------
Profit before tax 2,735 3,456
----------------------------------------- ----- --------- ---------
Tax expense 7 (769) (581)
----------------------------------------- ----- --------- ---------
Profit for the financial year attributable to
the Group's equity shareholders 1,966 2,875
------------------------------------------------ --------- ---------
Earnings per share from operations
----------------------------------------- ----- --------- ---------
Basic earnings per share (GBP) 8 0.0305 0.0443
----------------------------------------- ----- --------- --------- Diluted earnings per share (GBP) 8 0.0284 0.0421 ----------------------------------------- ----- --------- ---------
Consolidated statement of comprehensive income
for the year ended 31 March 2018
2018 2017
GBP000's GBP000's
-------------------------------------------------- --------- ---------
Profit for the financial year 1,966 2,875
-------------------------------------------------- --------- ---------
Total comprehensive income for the financial year
attributable to the owners of the parent 1,966 2,875
-------------------------------------------------- --------- ---------
Consolidated Balance Sheet
as at 31 March 2018
2018 2017
Notes GBP000's GBP000's
------------------------------------- ----- --------- ---------
Assets
------------------------------------- ----- --------- ---------
Non-current assets
------------------------------------- ----- --------- ---------
Intangible assets 13 6,720 7,064
------------------------------------- ----- --------- ---------
Goodwill 10 11,008 11,008
------------------------------------- ----- --------- ---------
AFS financial assets 11 100 100
------------------------------------- ----- --------- ---------
Investment in associates 12 547 549
------------------------------------- ----- --------- ---------
Property, plant and equipment 14 272 516
------------------------------------- ----- --------- ---------
Long-term receivables 16 200 200
------------------------------------- ----- --------- ---------
Prepayments 16 153 173
------------------------------------- ----- --------- ---------
19,000 19,610
------------------------------------- ----- --------- ---------
Current assets
------------------------------------- ----- --------- ---------
Inventory 15 55 40
------------------------------------- ----- --------- ---------
Trade and other receivables 16 1,511 1,676
------------------------------------- ----- --------- ---------
Cash and cash equivalents 17 2,889 2,242
------------------------------------- ----- --------- ---------
4,455 3,958
------------------------------------- ----- --------- ---------
Total assets 23,455 23,568
------------------------------------- ----- --------- ---------
Equity and liabilities
------------------------------------- ----- --------- ---------
Capital and reserves attributable to
the Group's equity shareholders
------------------------------------- ----- --------- ---------
Share capital 18 259 259
------------------------------------- ----- --------- ---------
EBT reserve (527) -
------------------------------------- ----- --------- ---------
Share premium 4,585 4,585
------------------------------------- ----- --------- ---------
Capital redemption reserve 113 113
------------------------------------- ----- --------- ---------
Share based payment reserve 267 151
------------------------------------- ----- --------- ---------
Retained earnings 4,643 4,145
------------------------------------- ----- --------- ---------
Total equity 9,340 9,253
------------------------------------- ----- --------- ---------
Non-current liabilities
------------------------------------- ----- --------- ---------
Borrowings 20 2,750 3,750
------------------------------------- ----- --------- ---------
Deferred/contingent consideration 28 2,100 2,613
------------------------------------- ----- --------- ---------
Deferred taxation 7 747 1,092
------------------------------------- ----- --------- ---------
5,597 7,455
------------------------------------- ----- --------- ---------
Current liabilities
------------------------------------- ----- --------- ---------
Trade and other payables 19 6,184 4,229
------------------------------------- ----- --------- ---------
Borrowings 20 2,000 2,000
------------------------------------- ----- --------- ---------
Current tax payable 334 631
------------------------------------- ----- --------- ---------
8,518 6,860
------------------------------------- ----- --------- ---------
Total liabilities 14,115 14,315
------------------------------------- ----- --------- ---------
Total equity and liabilities 23,455 23,568
------------------------------------- ----- --------- ---------
Consolidated statement of changes in equity
for the year ended 31 March 2018
Capital Share-based
Share EBT redemption payments Retained Total
capital reserve Share premium reserve reserve earnings Equity
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Balance at 1 April
2016 259 - 4,585 113 80 2,148 7,185
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Profit for the year - - - - - 2,875 2,875
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Total comprehensive
income - - - - - 2,875 2,875
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Exercise of options - - - - (1) 1 -
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Share-based payments - - - - 72 - 72
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Payment of dividends - - - - - (879) (879)
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Total transactions
with owners - - - - 71 (878) (807)
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Balance at 31 March
2017 259 - 4,585 113 151 4,145 9,253
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Balance at 1 April
2017 259 - 4,585 113 151 4,145 9,253
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Profit for the year - - - - - 1,966 1,966
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Total comprehensive
income - - - - - 1,966 1,966
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Purchase of shares
by EBT - (1,050) - - - - (1,050)
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Exercise of options - 523 - - (25) (293) 205
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Share-based payments - - - - 141 - 141
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Deferred taxation
share options - - - - - 277 277
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Payment of dividends - - - - - (1,452) (1,452)
--------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Total transactions
with owners - (527) - - 116 (1,468) (1,879) --------------------- --------- --------- ------------- ----------- ----------- --------- --------- Balance at 31 March 2018 259 (527) 4,585 113 267 4,643 9,340 --------------------- --------- --------- ------------- ----------- ----------- --------- ---------
Consolidated statement of cash flows
for the year ended 31 March 2018
Restated
2018 2017
Notes GBP000's GBP000's
---------------------------------------------- ----- --------- ---------
Cash flow from operating activities
---------------------------------------------- ----- --------- ---------
Profit for the financial year before
tax 2,735 3,456
---------------------------------------------- ----- --------- ---------
Finance income 5 (6) (12)
---------------------------------------------- ----- --------- ---------
Finance costs 6 226 401
---------------------------------------------- ----- --------- ---------
Loss on disposal of plant and equipment - 1
---------------------------------------------- ----- --------- ---------
Share of loss from associate 12 2 26
---------------------------------------------- ----- --------- ---------
Amortisation 13 1,014 599
---------------------------------------------- ----- --------- ---------
Depreciation 14 274 271
---------------------------------------------- ----- --------- ---------
Share-based payments 141 72
---------------------------------------------- ----- --------- ---------
Tax paid (1,134) (625)
---------------------------------------------- ----- --------- ---------
3, 252 4,189
---------------------------------------------- ----- --------- ---------
Changes in working capital
---------------------------------------------- ----- --------- ---------
Increase in inventories (15) (18)
---------------------------------------------- ----- --------- ---------
Decrease/(increase) in trade and other
receivables 185 (246)
---------------------------------------------- ----- --------- ---------
Increase/(decrease) in trade and other
payables 2,431 (386)
---------------------------------------------- ----- --------- ---------
Cash inflow from operating activities 5,853 3,539
---------------------------------------------- ----- --------- ---------
Cash flow from investing activities
---------------------------------------------- ----- --------- ---------
Purchase of intangible software assets 13 (670) (642)
---------------------------------------------- ----- --------- ---------
Purchase of property, plant and equipment 14 (30) (281)
---------------------------------------------- ----- --------- ---------
Disposal of property, plant and equipment - 4
---------------------------------------------- ----- --------- ---------
Acquisition of subsidiary (net of cash
acquired) 28 - (6,989)
---------------------------------------------- ----- --------- ---------
Payment of deferred consideration (1,080) (1,080)
---------------------------------------------- ----- --------- ---------
Interest received 5 6 12
---------------------------------------------- ----- --------- ---------
Net cash used in investing activities (1,774) (8,976)
---------------------------------------------- ----- --------- ---------
Cash flow from financing activities
---------------------------------------------- ----- --------- ---------
Dividends paid 32 (1,452) (879)
---------------------------------------------- ----- --------- ---------
Interest paid 6 (135) (83)
---------------------------------------------- ----- --------- ---------
New loans 20 - 7,000
---------------------------------------------- ----- --------- ---------
Repayment of loans 20 (1,000) (2,140)
---------------------------------------------- ----- --------- ---------
Shares Traded by EBT (845) -
---------------------------------------------- ----- --------- ---------
Net cash generated (used in)/from financing
activities (3,432) 3,898
---------------------------------------------- ----- --------- ---------
Net increase/(decrease) in cash and cash
equivalents 647 (1,539)
---------------------------------------------- ----- --------- ---------
Cash and cash equivalents at beginning
of financial year 2,242 3,781
---------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of financial
year 2,889 2,242
---------------------------------------------- ----- --------- ---------
Notes to the consolidated financial statements
Principal accounting policies
Basis of preparation
The Consolidated Financial Statements of ULS Technology plc and its subsidiaries (together, 'the Group') have been prepared in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the EU, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
IFRS is subject to amendment and interpretation by the International Accounting Standards Board ('IASB') and the IFRS Interpretations Committee, and there is an on-going process of review and endorsement by the European Commission. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 31 March 2017.
The financial statements have been prepared under the historical cost convention. The principal accounting policies set out below have been consistently applied to all periods presented.
Going Concern
The Board and Key Management routinely plan future activities including forecasting future cash ows. They have reviewed their plans and formed a judgement that the Group has adequate resources to continue as a going concern for at least 12 months from the date of signing of the nancial statements. In arriving at this judgement, the Directors have reviewed the cash ow projections of the Group for the foreseeable future and have considered existing commitments together with nancial resources available to the Group.
Basis of consolidation
The Consolidated Financial Statements incorporate the results of ULS Technology plc ('the Company') and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities and the ability to use its power over the investee to affect the returns from the investee.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the Consolidated Income Statement from the effective date of acquisition and up to the effective date of disposal, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Business combinations
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 31 March 2018. All subsidiaries have a reporting date of 31 March.
The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.
Acquisition-related costs are expensed as incurred.
Interest in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
The post-tax results of associates are incorporated in the Group's results using the equity method of accounting. Under the equity method, investments in associates are carried in the Consolidated Balance Sheet at cost as adjusted for post-acquisition changes in the Group's share
of the net assets of the associate, less any impairment in the value of investment. Losses of associates in excess of the Group's interest in that associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture or associate.
Employee benefit trust
The Directors consider that the Employee Benefit Trust (EBT) is under the de facto control of the Company as the trustees look to the Directors to determine how to dispense the assets. Therefore the assets and liabilities of the EBT have been consolidated into the Group accounts. The EBT's investment in the Company's shares is eliminated on consolidation and shown as a deduction against equity. Any assets in the EBT will cease to be recognised in the Consolidated Balance Sheet when those assets vest unconditionally in identified beneficiaries.
Revenue recognition
Revenue recognised represents the value of all services provided during the period at selling price exclusive of Value Added Tax.
Revenue is recognised on completion of the legal services. For a conveyancing transaction, this will be on completion of the property transaction and if the transaction falls through prior to completion no fees will be payable by the consumer to the solicitor or by the solicitor (customer) to the Company or by the Company to the introducer (supplier).
The proportion of the fee that the Company receives on completion of a conveyancing transaction that is remitted to a third party (introducer), such as a mortgage broker or intermediary, is recognised as a cost of sale. This is because the Group bears most of the credit risk, delivers the service and sets the pricing.
Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses related to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Chief Operating Decision Maker has been identified as the Board of Executive Directors, at which level strategic decisions are made.
Details of the Group's reporting segments are provided in note 1.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred.
Exceptional operating expenses are non-recurring in nature and of a material size. Items are classified as exceptional to aid the understanding of the underlying performance of the business.
Finance income and costs
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability and allocates the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability.
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
Other intangible assets
Capitalised development expenditure
An internally-generated intangible asset arising from development expenditure is recognised if, and only if, all of the following criteria have been demonstrated:
-- The technical feasibility of completing the intangible asset so that it will be available for use of sale;
-- The intention to complete the intangible asset and use or sell it; -- The ability to use or sell the intangible asset; -- How the intangible asset will generate probable future economic benefits;
-- The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
-- The ability to measure reliably the expenditure attributable to the intangible asset during its development.
-- The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is expensed in the period in which it is incurred.
Amortisation is calculated so as to write off the cost of an asset, net of any residual value, over the estimated useful life of that asset as follows:
Capital development expenditure - Straight line over 4-7 years
Development expenditure not meeting the criteria to be capitalised totalled GBP28,000 (2017: GBP66,000).
Brand names and customers lists
Brand names and customer lists acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values.
Amortisation is calculated so as to write off the cost of an asset on a straight line basis, net of any residual value, over the estimated useful life of that asset as follows:
Customer and introducer relationships - 10 to 12 years
Brand names - 10 years
Acquired technology platform - 9 years
The estimated useful economic life of customers acquired in the acquisition of Legal Eye has been reduced from 20 years to 10 years after reviewing the levels of churn since acquisition. The effect of this change in the year was to increase the amortisation charge by GBP48,000 net of tax.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and less any recognised impairment losses. Cost includes expenditure that is directly attributable to the acquisition or construction of these items. Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the costs can be measured reliably. All other costs, including repairs and maintenance costs, are charged to the Consolidated Income Statement in the period in which they
are incurred.
Depreciation is provided on all property, plant and equipment and is calculated on a straight-line basis as follows:
Leasehold improvements - Over the life of the lease
Computer equipment - 25% on cost
Fixtures and fittings - 25% on cost
Depreciation is provided on cost less residual value over the asset's useful life. The residual value, depreciation methods and useful lives are annually reassessed.
Each asset's estimated useful life has been assessed with regard to its own physical life limitations and to possible future variations in those assessments. Estimates of remaining useful lives are made on a regular basis for all equipment, with annual reassessments for major items. Changes in estimates are accounted for prospectively.
The gain or loss arising on disposal or scrapping of an asset is determined as the difference between the sales proceeds, net of selling costs, and the carrying amount of the asset and is recognised in the Consolidated Income Statement.
Impairment of non-current assets including goodwill
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. Each unit to which goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired.
At each Balance Sheet reporting date the Directors review the carrying amounts of the Group's tangible and intangible assets, other than goodwill, to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. If the recoverable amount of a cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior periods. A reversal of an impairment loss is recognised in the Consolidated Income Statement immediately.
Inventories
Work in progress is valued on the basis of direct costs attributable to jobs under completion at the reporting date.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs. Financial assets and financial liabilities are measured subsequently as described below.
Financial assets
The Group classifies its financial assets as 'loans and receivables' and available for sale (AFS) financial assets. The Group assesses at each Balance Sheet reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the Balance Sheet date, which are classified as non-current assets. Loans and receivables are classified as 'trade and other receivables' in the Consolidated Balance Sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulty, high probability of bankruptcy or a financial reorganisation and default are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at original effective interest rate. The loss is recognised in the Income Statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the Consolidated Income Statement.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.
AFS financial assets
AFS financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group's AFS financial assets includes the Group's 15% share in Financial Eye Limited.
The equity investment in Financial Eye Limited is measured at cost less any impairment charges, as its fair value cannot currently be estimated reliably. Impairment charges are recognised in profit or loss.
Financial liabilities
The Group's financial liabilities include trade and other payables, borrowings and contingent consideration.
Trade payables and borrowings are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Contingent consideration is measured at fair value at each reporting date with movements recognised as a profit or loss.
A financial liability is de-recognised when it is extinguished, discharged, cancelled or expires.
Current taxation
Current taxation for each taxable entity in the Group is based on the taxable income at the UK statutory tax rate enacted or substantively enacted at the Balance Sheet reporting date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial information. However, if the deferred tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet reporting date and
are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Consolidated Income Statement, except where they relate to items that are charged or credited directly to equity or other comprehensive income in which case the related deferred tax is also charged or credited directly to equity or other comprehensive income.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Employment benefits
Provision is made in the financial information for all employee benefits. Liabilities for wages and salaries, including non-monetary benefit and annual leave obliged to be settled within 12 months of the Balance Sheet reporting date, are recognised in accruals.
The Group's contributions to defined contribution pension plans are charged to the Consolidated Income Statement in the period to which the contributions relate.
Leasing
Operating lease payments are recognised as an expense on a straight-line basis over the lease term.
Equity and reserves
Equity and reserves comprises the following:
'Share capital' represents amounts subscribed for shares at nominal value.
'EBT reserve' represents cost of shares bought and sold through the Employee Benefit Trust.
'Share premium' represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
'Capital redemption reserve' represents the nominal value of re-purchased share capital.
'Share-based payment reserve' represents the accumulated value of share-based payments expensed in the profit and loss.
'Retained earnings' represents the accumulated profits and losses attributable to equity shareholders.
Share-based employee remuneration
The Group operates share option based remuneration plan for its employees. None of the Group's plans are cash settled.
Where employees are rewarded using share-based payments, the fair value of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date using the Black-Scholes model.
All share-based remuneration is ultimately recognised as an expense in profit and loss with a corresponding credit to retained earnings. The expense is allocated over the vesting period. Other than the requirement to be an employee at the point of exercise there are no other vesting requirements and all share options are expected to become exercisable. Subsequent revisions to this give rise to an adjustment to cumulative share-based compensation which is recognised in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs, are allocated to share capital up to the nominal (par) value of the shares issued with any excess being recorded as share premium.
Restatement of prior year Consolidated statement of cash flows
The 2017 numbers in the Consolidated statement of cash flow has been restated, Please see page 25 for further details.
Contingent liabilities
No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.
New and amended International Financial Reporting Standards adopted by the Group
There were no new standards, amendments to standards or interpretations which are effective for the first time this year applicable to or which had a material effect on the Group.
International Financial Reporting Standards in issue but not yet effective
At the date of authorisation of these Consolidated Financial Statements, the IASB and IFRS Interpretations Committee have issued standards, interpretations and amendments which are applicable to the Group.
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these Consolidated Financial Statements, the following may have an impact going forward:
Effective date:
annual periods
New/Revised International Financial beginning on
Reporting Standards or after: EU adopted Impact on Group
------------------------------------- --------------- ---------- ---------------------
IFRS Financial Instruments: 1 January 2018 Yes No material impact
9 Classification and Measurement
---- ------------------------------- --------------- ---------- ---------------------
IFRS Revenue from Contracts 1 January 2018 Yes No material impact
15 with Customers
---- ------------------------------- --------------- ---------- ---------------------
IFRS Leases 1 January 2019 Yes Most operating leases
16 will be capitalised
on the Balance Sheet
---- ------------------------------- --------------- ---------- ---------------------
IFRS 9 'Financial Instruments' will supersede IAS 39 'Financial Instruments: Recognition and Measurement' and is effective for annual periods beginning on or after 1 January 2018. IFRS 9 covers classification and measurement of financial assets and financial liabilities, impairment of financial assets and hedge accounting. The Group expects to adopt IFRS 9 on 1 April 2018. Management note that given current operations the anticipated impact is expected to be limited to a review of expected credit losses on receivables, although the impact is not expected to be material. At transition the Group will take the choice not to restate comparatives.
IFRS 15 'Revenue from Contracts with Customers' will supersede IAS 18 'Revenue', and is effective for annual periods beginning on or after 1 January 2018. IFRS 15 provides a single model for accounting for revenue arising from contracts with customers, focusing on the identification and satisfaction of performance obligations. The Group expects to adopt IFRS 15 on 1 April 2018. The Group has evaluated the impact of IFRS 15 and determined that it will not have a material effect on the financial statements.
IFRS 16 'Leases' provides a new model for lessee accounting in which all leases, other than short-term and small-ticket-item leases, will be accounted for by the recognition on the Balance Sheet of a right-to-use asset and a lease liability, and the subsequent amortisation of the right-to-use asset over the lease term. IFRS 16 will be effective for annual periods beginning on or after 1 January 2019.The Group expects to adopt IFRS 16 on 1 April 2019. The requirements of IFRS 16 will extend to the Group's operating leases for land & buildings (note 24) and as such the Group expects a material impact with these leases being recognised on the Consolidated Balance Sheet.
There are no other standards and interpretations in issue but not yet adopted that the Directors anticipate will have a material effect on the reported income or net assets of the Group.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the Balance Sheet reporting date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Estimates
The following are the significant estimates used in applying the accounting policies of the Group that have the most significant effect on the financial statements:
Fair value of intangible assets acquired in business combinations
In determining the fair value of intangible assets acquired in business combinations, estimates have been used by a specialist valuation company on behalf of management, using information supplied by management, in order to determine the fair values using appropriate modelling techniques.
Impairment review
The Group assesses the useful life of intangible assets to determine if there is a definite or indefinite period of useful economic life; this requires the exercise of judgement and directly affects the amortisation charge on the asset. The Group tests whether there are any indicators of impairment at each reporting date. Discounted cash flows are used to assess the recoverable amount of each cash generating unit, and this requires estimates to be made. If there is no appropriate method of valuation of an intangible asset, or no clear market value, management will use valuation techniques to determine the value. This will require assumptions and estimates to be made.
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and IT equipment.
Contingent consideration arising on business combinations
Contingent consideration is payable based on the future performance of an acquisition to the former shareholders. The likelihood of payment and ultimate value payable are a matter of judgement.
Contingent Consideration occurs in the circumstances where an element of the consideration for an acquired business is determined based upon one or more criteria that are achievable in future periods. The most commonly applied is the achievement of forecast profitability. A defined value of consideration will be payable based on such achievement, and any underperformance against those targets will be credited back to the Consolidated Income Statement.
Judgements
The following are the significant judgements used in applying the accounting policies of the Group that have the most significant effect on the financial information:
Capitalisation of development expenditure
The Group applies judgement in determining whether internal research and development projects meet the qualifying criteria set out in IAS 38 for the capitalisation of development expenditure as internally generated intangible assets. The particular uncertainty and judgment centres around whether a project will be commercially successful, particularly in the pre-revenue phase.
1. Segmental reporting
Operating segments
Management identifies its operating segments based on the Group's service lines, which represent the main product and services provided by the Group. The Group of similar services which makes up the Group's Comparison Services segment represents more than 95% of the total business. Additionally the Board reviews Group consolidated numbers when making strategic decisions and, as such, the Group considers that it has one reportable operating segment. All sales are made in the UK.
Revenues from customers who contributed more than 10% of revenues were as follows:
2018 2017
GBP000's GBP000's
----------- --------- ---------
Customer 1 5,854 3,523
----------- --------- ---------
Customer 2 4,255 2,785
----------- --------- ---------
Customer 3 2,890 2,606
----------- --------- ---------
2. Operating profit
2018 2017
Operating profit is stated after charging: GBP000's GBP000's
-------------------------------------------------------- --------- ---------
Fees payable to the Group's auditors for the audit
of the annual financial statements 27 27
-------------------------------------------------------- --------- ---------
Fees payable to the Group's auditors and its associates
for other services to the Group:
-------------------------------------------------------- --------- ---------
- Audit of the accounts of subsidiaries 21 17
-------------------------------------------------------- --------- ---------
- Tax compliance services - 7
-------------------------------------------------------- --------- ---------
- Tax advisory services 3 2
-------------------------------------------------------- --------- ---------
- Audit-related assurance services 15 -
-------------------------------------------------------- --------- ---------
Amortisation 1,014 599
-------------------------------------------------------- --------- ---------
Depreciation 274 271
-------------------------------------------------------- --------- ---------
Operating lease rentals payable:
-------------------------------------------------------- --------- ---------
- Office and equipment 68 53
-------------------------------------------------------- --------- ---------
3. Exceptional administrative expenses
2018 2017
GBP000's GBP000's
------------------------------------------------ --------- ---------
Acquisition expenses (including abortive costs) 85 386
------------------------------------------------ --------- ---------
Adjustment to expected contingent consideration 2,062 -
------------------------------------------------ --------- ---------
2,147 386
------------------------------------------------ --------- ---------
2018 2017
GBP000's GBP000's
------------------------------------------------ --------- ---------
Staff costs
------------------------------------------------ --------- ---------
Wages and salaries 4,225 3,115
------------------------------------------------ --------- ---------
Social security costs 573 471
------------------------------------------------ --------- ---------
Pension costs 223 51
------------------------------------------------ --------- ---------
5,021 3,637
------------------------------------------------ --------- ---------
Part of the consideration for CAL is contingent on their performance in the period between acquisition and 31 March 2019. The Board periodically reviews CAL's performance and updates its estimate of the final consideration payable. The adjustment to the expected contingent consideration in the table above reflects the fact that CAL have performed above initial expectations and the Board have therefore increased its estimate of the final consideration payable. The estimate is now at the maximum payable and therefore there should be no further increases.
4. Directors and employees
The aggregate payroll costs of the employees, including both management and Executive Directors, were as follows:
Average monthly number of persons employed by the Group during the year was as follows:
2018 2017
Number Number
--------------- ------- -------
By activity:
--------------- ------- -------
Production 25 22
--------------- ------- -------
Distribution 31 20
--------------- ------- -------
Administrative 19 18
--------------- ------- -------
Management 12 10
--------------- ------- -------
87 70
--------------- ------- -------
2018 2017
GBP000's GBP000's
----------------------------------- --------- ---------
Remuneration of Directors
----------------------------------- --------- ---------
Emoluments for qualifying services 621 628
----------------------------------- --------- ---------
Pension contributions 21 2
----------------------------------- --------- ---------
Social security costs 74 89
----------------------------------- --------- ---------
716 719
----------------------------------- --------- ---------
2018 2017
GBP000's GBP000's
---------------------- --------- ---------
Highest paid Director
---------------------- --------- ---------
Remuneration 224 251
---------------------- --------- ---------
The highest paid Director received share options as shown in the Directors' report on page 25.
A breakdown of the emoluments for Directors can be found in the Directors' report on page 24.
Key management personnel are identified as the Executive Directors and Steve Goodall.
2018 2017
GBP000's GBP000's
----------------------------------- --------- ---------
Remuneration of key management
----------------------------------- --------- ---------
Emoluments for qualifying services 887 628
----------------------------------- --------- ---------
Pension contributions 22 2
----------------------------------- --------- ---------
Social security costs 90 89
----------------------------------- --------- ---------
999 719
----------------------------------- --------- ---------
No share options have been issued to Directors during the 2018 financial year; see page 25 and 322,500 share options were issued to Steve Goodall.
323,639 share options have been exercised during the year by Ben Thompson, (2017: none).
Payments of pensions contributions have been made on behalf of Directors (see page 24).
Share option expense relating to key management other than Directors included in the above table was GBP21,000 (2017: GBPnil)
5. Finance income
2018 2017
GBP000's GBP000's
-------------- --------- ---------
Bank interest 6 12
-------------- --------- ---------
6. Finance costs
2018 2017
GBP000's GBP000's
----------------------------------------- --------- ---------
Interest on borrowings (135) (83)
----------------------------------------- --------- ---------
Exceptional Finance costs
----------------------------------------- --------- ---------
NPV adjustment of deferred consideration (91) (318)
----------------------------------------- --------- ---------
(226) (401)
----------------------------------------- --------- ---------
7. Taxation
2018 2017
Analysis of credit in year GBP000's GBP000's
-------------------------------------------------- --------- ---------
Current tax
-------------------------------------------------- --------- ---------
United Kingdom
-------------------------------------------------- --------- ---------
UK corporation tax on profits for the year 850 608
-------------------------------------------------- --------- ---------
Deferred tax
-------------------------------------------------- --------- ---------
United Kingdom
-------------------------------------------------- --------- ---------
Origination and reversal of temporary differences (81) (27)
-------------------------------------------------- --------- ---------
Corporation tax charge 769 581
-------------------------------------------------- --------- ---------
The differences are explained as follows:
2018 2017
GBP000's GBP000's
--------------------------------------------- --------- ---------
Profit before tax 2,735 3,456
--------------------------------------------- --------- ---------
UK corporation tax rate 19% 20%
--------------------------------------------- --------- ---------
Expected tax expense 520 691
--------------------------------------------- --------- ---------
Adjustments relating to prior year (56) (113)
--------------------------------------------- --------- ---------
Adjustment for changes in tax rate - (2)
--------------------------------------------- --------- ---------
Adjustment for additional R&D tax relief (140) (159)
--------------------------------------------- --------- ---------
Adjustment for non-deductible expenses
--------------------------------------------- --------- ---------
- Expenses not deductible for tax purposes 461 164
--------------------------------------------- --------- ---------
- Other permanent differences (16) -
--------------------------------------------- --------- ---------
Income tax charge 769 581
--------------------------------------------- --------- ---------
Deferred tax
2018 2017
GBP000's GBP000's
----------------------------------------------------- --------- ---------
Deferred tax liabilities at applicable rate for
the period of 19%:
----------------------------------------------------- --------- ---------
Opening balance at 1 April 1,092 438
----------------------------------------------------- --------- ---------
- Property, plant and equipment and capitalised
development spend temporary differences 119 10
----------------------------------------------------- --------- ---------
- Deferred tax recognised on acquisitions of Legal
Eye and Conveyancing Alliance (note 28) (96) 644
----------------------------------------------------- --------- ---------
- Deferred tax on share options (368) -
----------------------------------------------------- --------- ---------
Deferred tax liabilities - closing balance at 31
March 747 1,092 ----------------------------------------------------- --------- ---------
8. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to Ordinary Shareholders by the weighted average number of Ordinary Shares outstanding during the year.
Basic earnings per share
2018 2017
GBP GBP
--------------------------------- ------ ------
Total basic earnings per share 0.0305 0.0443
--------------------------------- ------ ------
Total diluted earnings per share 0.0284 0.0421
--------------------------------- ------ ------
The earnings and weighted average number of Ordinary Shares used in the calculation of basic earnings per share were as follows:
2018 2017
GBP000's GBP000's
------------------------------------------------ --------- ---------
Earnings used in the calculation of total basic
and diluted earnings per share 1,966 2,875
------------------------------------------------ --------- ---------
2018 2017
Number of shares Number Number
----------------------------------------------- ---------- ----------
Weighted average number of Ordinary Shares for
the purposes of basic earnings per share 64,549,992 64,828,057
----------------------------------------------- ---------- ----------
Taking the Group's share options and warrants into consideration in respect of the Group's weighted average number of ordinary shares for the purposes of diluted earnings per share, is as follows:
2018 2017
Number of shares Number Number
------------------------------------------------------- ---------- ----------
Dilutive (potential dilutive) effect of share options,
conversion shares and warrants 4,589,034 3,542,525
------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 69,139,026 68,370,582
------------------------------------------------------- ---------- ----------
9. Subsidiaries
Details of the Group's subsidiaries are as follows:
% ownership
held
by the Group
--------------------- -------------------------------------- --------- --------------- ---------------
Place of
Class of incorporation
Name of subsidiary Principal activity shares and operation 2018 2017
--------------------- -------------------------------------- --------- --------------- ------- ------
Development and hosting of
United Legal internet based software applications England &
Services Limited for legal services businesses Ordinary Wales 100% 100%
--------------------- -------------------------------------- --------- --------------- ------- ------
Development and hosting of
United Home internet based software applications England &
Services Limited for property services businesses Ordinary Wales 100% 100%
--------------------- -------------------------------------- --------- --------------- ------- ------
Compliance consultancy services England &
Legal-Eye Limited for solicitors Ordinary Wales 100% 100%
--------------------- -------------------------------------- --------- --------------- ------- ------
Conveyancing
Alliance (Holdings) Intermediary non-trading England &
Limited holding company Ordinary Wales 100% 100%
--------------------- -------------------------------------- --------- --------------- ------- ------
Development and hosting of
Conveyancing internet based software applications England &
Alliance Limited for legal services businesses Ordinary Wales 100% 100%
--------------------- -------------------------------------- --------- --------------- ------- ------
10. Goodwill
2018 2017
GBP000's GBP000's
----------------------------------- --------- ---------
Opening value at 1 April 11,008 4,524
----------------------------------- --------- ---------
Acquired in the year (see note 28) - 6,484
----------------------------------- --------- ---------
Closing value at 31 March 11,008 11,008
----------------------------------- --------- ---------
Goodwill split by CGU is as follows:
2018 2017
GBP000's GBP000's
---------- --------- ---------
Core 3,297 3,297
---------- --------- ---------
Legal Eye 1,227 1,227
---------- --------- ---------
CAL 6,484 6,484
---------- --------- ---------
11,008 11,008
---------- --------- ---------
The recoverable amounts of intangible assets and goodwill was determined using value-in-use calculations, based on cash flow projections from a formally approved 12 month forecast which has been extrapolated into perpetuity. A growth rate of 2% has been applied to extrapolate the cash flows by reference to the long-term growth rate of the UK economy. The pre-tax discount rate for each CGU was in the range 12.0% to 15.6% which reflecting current market assessments of the time value of money and specific risks.
The analysis performed calculates that the recoverable amount of each CGU's assets exceeds their carrying value, as such no impairment was identified. For the Legal Eye CGU the excess of recoverable amount over carrying value was GBP189,000. If the pre-tax discount rate was increased by or the growth rate reduced by one percentage point then the recoverable amount would equal the carrying value. The Board have also reviewed the key assumptions in the forecast and the risks in the business. Margins are expected to remain consistent and the Board considers there to be no significant customer concentration. For all other CGUs there is significant headroom.
The Legal Eye CGU is increasingly becoming indistinct from the Core CGU with resource being shared and a joint product offering in terms of ULS Complete (see page 4). The Directors have judged that Legal Eye remains a distinct CGU but will continue to evaluate that on an ongoing basis.
11. AFS financial assets
2018 2017
GBP'000 GBP'000
-------------------------- -------- --------
Opening value at 1 April 100 100
-------------------------- -------- --------
Closing value at 31 March 100 100
-------------------------- -------- --------
The Group acquired 15% of Financial Eye on 27 February 2015 as a separately identifiable part of the transaction in which Legal Eye was acquired.
12. Investment in associates
2018 2017
GBP'000 GBP'000
----------------------------- -------- --------
Opening value at 1 April 549 575
----------------------------- -------- --------
Share of losses for the year (2) (26)
----------------------------- -------- --------
Closing value at 31 March 547 549
----------------------------- -------- --------
The Group acquired 35% of Homeowners Alliance Ltd on 29 February 2016. Homeowners Alliance Ltd's place of incorporation and operation is in the UK.
The associate is not material to the Group's results.
13. Intangible assets
Capitalised Acquired Customer
development technology and Introducer
expenditure platform relationships Brands Total
GBP000's GBP000's GBP000's GBP000's GBP000's
------------------------- ------------ ----------- --------------- --------- ---------
Cost
------------------------- ------------ ----------- --------------- --------- ---------
At 1 April 2016 2,675 - 1,071 226 3,972
------------------------- ------------ ----------- --------------- --------- ---------
Additions 642 - - - 642
------------------------- ------------ ----------- --------------- --------- ---------
Acquired within business
combination (note 28) 130 1,117 2,548 342 4,137
------------------------- ------------ ----------- --------------- --------- ---------
Disposals (29) - - - (29)
------------------------- ------------ ----------- --------------- --------- ---------
At 31 March 2017 3,418 1,117 3,619 568 8,722 ------------------------- ------------ ----------- --------------- --------- --------- Additions 670 - - - 670 ------------------------- ------------ ----------- --------------- --------- --------- Disposals - - - - - ------------------------- ------------ ----------- --------------- --------- --------- At 31 March 2018 4,088 1,117 3,619 568 9,392 ------------------------- ------------ ----------- --------------- --------- --------- Accumulated amortisation ------------------------- ------------ ----------- --------------- --------- --------- At 1 April 2016 929 - 73 25 1,027 ------------------------- ------------ ----------- --------------- --------- --------- Charge 395 36 135 33 599 ------------------------- ------------ ----------- --------------- --------- --------- Acquired within business combination (note 28) 61 - - - 61 ------------------------- ------------ ----------- --------------- --------- --------- Disposals (29) - - - (29) ------------------------- ------------ ----------- --------------- --------- --------- At 31 March 2017 1,356 36 208 58 1,658 ------------------------- ------------ ----------- --------------- --------- --------- Charge 474 124 359 57 1,014 ------------------------- ------------ ----------- --------------- --------- --------- Disposals - - - - - ------------------------- ------------ ----------- --------------- --------- --------- At 31 March 2018 1,830 160 567 115 2,672 ------------------------- ------------ ----------- --------------- --------- --------- Net book value ------------------------- ------------ ----------- --------------- --------- --------- At 1 April 2016 1,746 - 998 201 2,945 ------------------------- ------------ ----------- --------------- --------- --------- At 31 March 2017 2,062 1,081 3,411 510 7,064 ------------------------- ------------ ----------- --------------- --------- --------- At 31 March 2018 2,258 957 3,052 453 6,720 ------------------------- ------------ ----------- --------------- --------- ---------
Amortisation is included within administrative expenses.
14. Property, plant and equipment
Leasehold Computer Fixtures
improvements equipment and fittings Total
GBP000's GBP000's GBP000's GBP000's
------------------------------------- ------------- ---------- ------------- ---------
Cost
------------------------------------- ------------- ---------- ------------- ---------
At 1 April 2016 569 429 84 1,082
------------------------------------- ------------- ---------- ------------- ---------
Additions - 280 1 281
------------------------------------- ------------- ---------- ------------- ---------
Acquired within business combination
(note 28) - 40 8 48
------------------------------------- ------------- ---------- ------------- ---------
Disposals - (130) (9) (139)
------------------------------------- ------------- ---------- ------------- ---------
At 31 March 2017 569 619 84 1,272
------------------------------------- ------------- ---------- ------------- ---------
Additions - 30 - 30
------------------------------------- ------------- ---------- ------------- ---------
Disposals - (48) - (48)
------------------------------------- ------------- ---------- ------------- ---------
At 31 March 2018 569 601 84 1,254
------------------------------------- ------------- ---------- ------------- ---------
Accumulated depreciation
------------------------------------- ------------- ---------- ------------- ---------
At 1 April 2016 292 267 38 597
------------------------------------- ------------- ---------- ------------- ---------
Charge 119 136 16 271
------------------------------------- ------------- ---------- ------------- ---------
Acquired within business combination
(note 28) - 20 2 22
------------------------------------- ------------- ---------- ------------- ---------
Disposals - (130) (4) (134)
------------------------------------- ------------- ---------- ------------- ---------
At 31 March 2017 411 293 52 756
------------------------------------- ------------- ---------- ------------- ---------
Charge 119 139 16 274
------------------------------------- ------------- ---------- ------------- ---------
Disposals - (48) - (48)
------------------------------------- ------------- ---------- ------------- ---------
At 31 March 2018 530 384 68 982
------------------------------------- ------------- ---------- ------------- ---------
Net book value
------------------------------------- ------------- ---------- ------------- ---------
At 1 April 2016 277 162 46 485
------------------------------------- ------------- ---------- ------------- ---------
At 31 March 2017 158 326 32 516
------------------------------------- ------------- ---------- ------------- ---------
At 31 March 2018 39 217 16 272
------------------------------------- ------------- ---------- ------------- ---------
15. Inventories
2018 2017
GBP'000 GBP'000
----------------- -------- --------
Work in progress 55 40
----------------- -------- --------
16. Trade and other receivables
2018 2017
GBP'000 GBP'000
------------------------------------------- -------- --------
Current assets
------------------------------------------- -------- --------
Trade receivables 1,017 1,179
------------------------------------------- -------- --------
Other receivables 307 282
------------------------------------------- -------- --------
Pre-payments 187 215
------------------------------------------- -------- --------
1,511 1,676
------------------------------------------- -------- --------
Non-current assets
------------------------------------------- -------- --------
Pre-payments 153 173
------------------------------------------- -------- --------
Long-term receivables (loans to associate) 200 200
------------------------------------------- -------- --------
353 373
------------------------------------------- -------- --------
The Directors consider the carrying value of trade and other receivables is approximate to its fair value.
Details of the Group's exposure to credit risk is given in Note 21.
17. Cash and cash equivalents
2018 2017
GBP'000 GBP'000
------------------- -------- --------
Cash at bank (GBP) 2,889 2,242
------------------- -------- --------
At March 2018 and 2017 all significant cash and cash equivalents were deposited with major clearing banks in the UK with at least an 'A' rating.
18. A) Share capital
Allotted, issued and fully paid
The Company has one class of Ordinary share which carries no right to fixed income nor has any preferences or restrictions attached.
2018 2017
---------------------------- -------------------- --------------------
No GBP000's No GBP000's
---------------------------- ---------- -------- ---------- --------
Ordinary shares of GBP0.004
each 64,828,057 259 64,828,057 259
---------------------------- ---------- -------- ---------- --------
64,828,057 259 64,828,057 259
---------------------------- ---------- -------- ---------- --------
As regards income and capital distributions, all categories of shares rank pari passu as if the same constituted one class of share.
2018 2017
Number Number
----------------------------- ---------- ----------
Shares issued and fully paid
----------------------------- ---------- ----------
Beginning of the year 64,828,057 64,828,057
----------------------------- ---------- ----------
New shares issue - -
----------------------------- ---------- ----------
Shares issued and fully paid 64,828,057 64,828,057
----------------------------- ---------- ----------
During the year the Company has not issued any new ordinary shares (2017: no shares issued).
18. B) Share-based payments
Ordinary share options:
The Group operates an EMI share option scheme to which the Executive Directors and employees of the Group may be invited to participate by the remuneration committee. Options are exercisable at a price equal to the closing price of the Company's share on the day prior to the date of grant. The options vest in three equal tranches, three, four and five years after date of grant. The options are settled in equity once exercised. Where the individual limits for an EMI scheme the options will be treated as unapproved but within the same scheme rules.
If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest.
Options were valued using the Black-Scholes option-pricing model. The following table shows options issued which were outstanding as at 31 March 2018:
Options in
Share price issue as
Exercise at date of 31 March
Date of grant price (GBP) grant (GBP) 2018
----------------- ------------ ------------ ----------
18 August 2014 0.4000 0.4800 722,992
----------------- ------------ ------------ ----------
28 November 2014 0.3950 0.3950 647,279
----------------- ------------ ------------ ----------
30 March 2015 0.4750 0.4750 647,279
----------------- ------------ ------------ ----------
21 August 2015 0.5350 0.5350 77,670
----------------- ------------ ------------ ----------
4 March 2016 0.5600 0.5600 64,828
----------------- ------------ ------------ ----------
7 November 2016 0.7025 0.7025 595,576
----------------- ------------ ------------ ----------
21 December 2016 0.7675 0.7675 1,231,661
----------------- ------------ ------------ ----------
2 May 2017 1.0600 1.0600 322,500
----------------- ------------ ------------ ----------
The Group recognised total expenses of GBP141,000 (2017: GBP72,000) related to share options accounted for as equity-settled share-based payment transactions during the year.
A reconciliation of option movements over the year to 31 March 2018 is shown below:
As at 31 March 2018 As at 31 March 2017
--------------------------- ---------------------------- ----------------------------
Weighted Weighted
average exercise average exercise
Number of price Number of price
options GBP options GBP
--------------------------- --------- ----------------- --------- -----------------
Outstanding at 1 April 4,552,364 0.56 3,178,218 0.43
--------------------------- --------- ----------------- --------- -----------------
Granted 322,500 1.06 1,853,127 0.76
--------------------------- --------- ----------------- --------- -----------------
Forfeited prior to vesting (47,465) 0.60 (466,036) 0.44
--------------------------- --------- ----------------- --------- -----------------
Exercised (517,614) 0.40 (12,945) 0.40
--------------------------- --------- ----------------- --------- -----------------
Outstanding at 31 March 4,309,785 0.62 4,552,364 0.56
--------------------------- --------- ----------------- --------- -----------------
19. Trade and other payables
2018 2017
GBP000's GBP000's
---------------------------------- --------- ---------
Trade payables 1,942 2,039
---------------------------------- --------- ---------
PAYE and social security 126 100
---------------------------------- --------- ---------
VAT 725 586
---------------------------------- --------- ---------
Other creditors 27 21
---------------------------------- --------- ---------
Accruals and deferred income 789 494
---------------------------------- --------- ---------
Deferred/contingent consideration 2,575 989
---------------------------------- --------- ---------
6,184 4,229
---------------------------------- --------- ---------
20. Borrowings
2018 2017
GBP000's GBP000's
---------------------------- --------- ---------
Secured - at amortised cost
---------------------------- --------- ---------
- Bank loan 4,750 5,750
---------------------------- --------- ---------
4,750 5,750
---------------------------- --------- ---------
Current 2,000 2,000
---------------------------- --------- ---------
Non-current 2,750 3,750
---------------------------- --------- ---------
4,750 5,750
---------------------------- --------- ---------
Reconciliation of liabilities arising from financing activites
Bank loans Total debt
GBP'000 GBP'000
------------------------- ---------- ----------
Balance at 1 April 2017 5,750 5,750
------------------------- ---------- ----------
Loan repayments (1,000) (1,000)
------------------------- ---------- ----------
Subtotal
------------------------- ---------- ----------
Balance at 31 March 2018 4,750 4,750
------------------------- ---------- ----------
Summary of borrowing arrangements:
-- In December 2016, it took out a five-year term loan for GBP5 million and a GBP2 million revolving cash flow facility. Both have a current interest rate of 1.55% above LIBOR. The term loan is subject to repayments of GBP250,000 plus accrued interest quarterly. At the end of the financial period GBP1 million was drawn down on the revolving cash flow facility.
-- Loans are secured by way of fixed and floating charges over all assets of the Group.
-- Amounts shown represent the loan principals; accrued interest is recognised within accruals - any amounts due at the reporting date are paid within a few days.
21. Financial instruments
Classification of financial instruments
The Group has AFS financial assets (see note 11) which are measured at cost less impairment cost.
The tables below set out the Group's accounting classification of each class of its financial assets and liabilities.
Financial assets
Loans and other receivables
------------------------------------ -----------------------------
2018 2017
GBP000's GBP000's
------------------------------------ -------------- -------------
Loans and receivables (note 16) 1,524 1,661
------------------------------------ -------------- -------------
AFS asset (note 11/12) 647 649
------------------------------------ -------------- -------------
Cash and cash equivalents (note 17) 2,889 2,242
------------------------------------ -------------- -------------
5,060 4,552
------------------------------------ -------------- -------------
The investment in HomeOwners Alliance Limited represents a 35% equity interest in an unlisted company acquired in 2016. The investment in Financial Eye Limited represents a 15% equity interest in an unlisted company acquired in 2015. All of the above financial assets carrying values are approximate to their fair values, as at 31 March 2018 and 2017.
Financial liabilities
Measured at amortised
cost
------------------------------------------------- -----------------------
2018 2017
GBP000's GBP000's
------------------------------------------------- ----------- ----------
Financial liabilities measured at amortised cost
(note 22) 2,758 2,554
------------------------------------------------- ----------- ----------
Borrowings (note 20) 4,750 5,750
------------------------------------------------- ----------- ----------
7,508 8,304
------------------------------------------------- ----------- ----------
Current loan instruments are linked to LIBOR with a margin of 1.55% per annum, which is a fairly standard market rate.
Financial assets and financial liabilities measured at fair value in the Consolidated Balance Sheet are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
-- Level 3: unobservable inputs for the asset or liability.
The Group carries none of its assets at fair value. The only financial liability carried at fair value is the contingent consideration (carried at fair value through profit or loss).
The fair value of contingent consideration related to the acquisition of Conveyancing Alliance Holdings Limited (see note 28) is estimated using a present value technique.
For Conveyancing Alliance Holdings Limited, the GBP4,674,000 fair value is using as estimated amount of consideration due adjusting for risk and discounting at 16.2%. The estimated consideration before discounting is GBP5,272,000. The discount rate used is 16.2%, based on the Group's estimated weighted average cost of capital at the reporting date, and therefore reflects the Group's credit position. Sensitivity analysis using a +/- 1% change in the discount rate gives a fair value range of GBP4,643,000 to GBP4,706,000.
Level 3 fair value measurements
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows:
Contingent consideration
-------------------------------------- --------------------------
2018 2017
GBP000's GBP000's
-------------------------------------- ------------ ------------
Balance at 1 April 2017 3,602 1,841
-------------------------------------- ------------ ------------
Acquired through business combination - 2,523
-------------------------------------- ------------ ------------
Payments made (1,080) (1,080)
-------------------------------------- ------------ ------------
Movement in consideration 1,404 -
-------------------------------------- ------------ ------------
Movement in NPV 748 318
-------------------------------------- ------------ ------------
Balance at 31 March 2018 4,674 3,602
-------------------------------------- ------------ ------------
Financial instrument risk exposure and management
The Group's operations expose it to degrees of financial risk that include liquidity risk, credit risk and interest rate risk.
This note describes the Group's objectives, policies and process for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented in notes 15, 16, 17, 19, and 20.
Liquidity risk
Liquidity risk is dealt with in note 22 of this financial information.
Credit risk
The Group's credit risk is primarily attributable to its cash balances and trade receivables. The Group does not have a significant concentration of risk, with exposure spread over a number of third parties.
All of the Group's trade and other receivables have been reviewed for indicators of impairment. The Group suffers a very small incidence of credit losses. However, where management views that there is a significant risk of non-payment, a specific provision for impairment is made and recognised as a deduction from trade receivables.
2018 2017
GBP000's GBP000's
--------------------- --------- ---------
Impairment provision 126 99
--------------------- --------- ---------
The amount of trade receivables past due but not considered to be impaired at 31 March is as follows:
2018 2017
GBP000's GBP000's
---------------------------------------------- --------- ---------
Not more than 3 months 74 122
---------------------------------------------- --------- ---------
More than 3 months but not more than 6 months 4 10
---------------------------------------------- --------- ---------
More than 6 months but not more than 1 year 39 8
---------------------------------------------- --------- ---------
More than one year 12 21
---------------------------------------------- --------- ---------
Total 129 161
---------------------------------------------- --------- ---------
The credit risk on liquid funds is limited because the third parties are large international banks with a credit rating of at least A.
The Group's total credit risk amounts to the total of the sum of the receivables and cash and cash equivalents, as described in note 17.
Interest rate risk
The Group has secured debt as disclosed in note 20. The interest on this debt is linked to LIBOR and therefore there is an interest rate risk. However, the relative amount of debt outstanding is low which limits the risk.
The balances disclosed above represent the principal debt. Interest is paid quarterly, and all interest due has either been paid at each reporting date, or is paid within a few days of that date - in the latter case, interest accrued is included within accruals.
The Group's only other exposure to interest rate risk is the interest received on the cash held on deposit, which is immaterial.
22. Liquidity risk
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they fall due.
In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all of its liabilities as they fall due. The Group monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due. The table below shows the undiscounted cash flows on the Group's financial liabilities as at 31 March 2018 and 2017, on the basis of their earliest possible contractual maturity.
Greater
Within Within than
Total 2 months 2-6 months 6-12 months 1-2 years 2 years
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------------------ --------- --------- ----------- ----------- --------- ---------
At 31 March 2018
------------------------ --------- --------- ----------- ----------- --------- ---------
Trade payables 1,942 1,942 - - - -
------------------------ --------- --------- ----------- ----------- --------- ---------
Other payables 27 27 - - - -
------------------------ --------- --------- ----------- ----------- --------- ---------
Accruals 789 789 - - - -
------------------------ --------- --------- ----------- ----------- --------- ---------
Deferred and contingent
consideration 5,272 - - 2,707 2,565 -
------------------------ --------- --------- ----------- ----------- --------- ---------
Loans 4,917 - 1,544 534 1,051 1,788
------------------------ --------- --------- ----------- ----------- --------- ---------
12,947 2,758 1,544 3,241 3,616 1,788
------------------------ --------- --------- ----------- ----------- --------- ---------
Greater
Within Within than
Total 2 months 2-6 months 6-12 months 1-2 years 2 years
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------------------ --------- --------- ----------- ----------- --------- ---------
At 31 March 2017
------------------------ --------- --------- ----------- ----------- --------- ---------
Trade payables 2,039 2,039 - - - -
------------------------ --------- --------- ----------- ----------- --------- ---------
Other payables 21 21 - - - -
------------------------ --------- --------- ----------- ----------- --------- ---------
Accruals 494 494 - - - -
------------------------ --------- --------- ----------- ----------- --------- ---------
Deferred and contingent
consideration 4,553 - - 1,080 1,453 2,020
------------------------ --------- --------- ----------- ----------- --------- ---------
Loans 6,043 - 1,562 550 1,081 2,850
------------------------ --------- --------- ----------- ----------- --------- ---------
13,150 2,554 1,562 1,630 2,534 4,870
------------------------ --------- --------- ----------- ----------- --------- ---------
The amounts payable for loans, as presented above, include the quarterly interest payments due in accordance with the terms described in note 20 in addition to the repayment of principal at maturity.
23. Capital management
The Group's capital management objectives are:
-- To ensure the Group's ability to continue as a going concern; and -- To provide long-term returns to shareholders.
The Group defines and monitors capital on the basis of the carrying amount of equity plus its outstanding loan notes, less cash and cash equivalents as presented on the face of the Consolidated Balance Sheet and further disclosed in notes 17 and 20.
The Board of Directors monitors the level of capital as compared to the Group's commitments and adjusts the level of capital as is determined to be necessary by issuing new shares. The Group is not subject to any externally imposed capital requirements.
These policies have not changed in the year. The Directors believe that they have been able to meet their objectives in managing the capital of the Group.
The amounts managed as capital by the Group for the reporting period under review are summarised as follows:
2018 2017
GBP000's GBP000's
----------------------------------- --------- ---------
Total Equity 9,340 9,253
----------------------------------- --------- ---------
Cash and cash equivalents 2,889 2,242
----------------------------------- --------- ---------
Capital 12,229 11,495
----------------------------------- --------- ---------
Total Equity 9,340 9,253
----------------------------------- --------- ---------
Borrowings 4,750 5,750
----------------------------------- --------- ---------
Financing 14,090 15,003
----------------------------------- --------- ---------
Capital-to-overall financing ratio 0.87 0.77
----------------------------------- --------- ---------
24. Operating lease arrangements
The Group does not have an option to purchase any of the operating leased assets at the expiry of the lease periods.
2018 2017
Payments recognised as an expense GBP000's GBP000's
---------------------------------- --------- ---------
Minimum lease payments 68 53
---------------------------------- --------- ---------
2018 2017
Non-cancellable operating lease commitments GBP000's GBP000's
--------------------------------------------- --------- ---------
Not later than 1 year 42 56
--------------------------------------------- --------- ---------
Later than 1 year and not later than 5 years 35 37
--------------------------------------------- --------- ---------
77 93
--------------------------------------------- --------- ---------
25. Financial commitments
There are no other financial commitments.
26. Retirement benefit plans
The Group operates a defined contribution pension scheme for its employees. The pension cost charge represents contributions payable by the Group and amounted to GBP223,000 (2017: GBP51,000).
27. Related party transactions
Directors:
P Opperman
G Wicks
N Hoath (resigned 2 August 2016)
B Thompson
A Weston
J Williams
For remuneration of Directors please see note 4 and the more detailed disclosures in the Directors' Report on page 24.
Dividends paid to Directors are as follows:
2018 2017
GBP000's GBP000's
--------------- --------- ---------
Peter Opperman 58 35
--------------- --------- ---------
Geoff Wicks 1 1
--------------- --------- ---------
Nigel Hoath - 100
--------------- --------- ---------
Ben Thompson 1 -
--------------- --------- ---------
Andrew Weston 27 17
--------------- --------- ---------
John Williams 1 1
--------------- --------- ---------
28. Business combinations
During the prior year, the Group acquired 100% of the issued ordinary share capital of Conveyancing Alliance Holdings Limited and its 100% subsidiary Conveyancing Alliance Limited, companies incorporated in England and Wales:
Proportion
of voting
equity interest
Date of acquired Consideration
Principal activity acquisition (%) transferred
------------------------------------- ------------- ---------------- -------------
Conveyancing comparison software and
services 19 Dec 16 100% 10,552,000
------------------------------------- ------------- ---------------- -------------
The primary purpose of the acquisition of Conveyancing Alliance Limited was to enhance the earnings of the Group and its market share in the conveyancing comparison market.
Consideration transferred
GBP000's
------------------------- --------
Cash 8,029
------------------------- --------
Contingent consideration 2,523
------------------------- --------
Total consideration 10,552
------------------------- --------
Assets acquired and liabilities recognised at the date of acquisition:
GBP000's
---------------------------- --------
Current assets
---------------------------- --------
Cash and cash equivalents 1,040
---------------------------- --------
Trade and other receivables 221
---------------------------- --------
Non-current assets
---------------------------- --------
Goodwill 6,484
---------------------------- --------
Intangible assets 4,076
---------------------------- --------
Tangible assets 26
---------------------------- --------
Current liabilities
---------------------------- --------
Trade and other payables (598)
---------------------------- --------
Non-current liabilities
---------------------------- --------
Deferred tax (697)
---------------------------- --------
10,552
---------------------------- --------
Goodwill is primarily related to growth expectations, expected future profitability, the skill and expertise of Conveyancing Alliance's workforce and expected synergies. Goodwill is not expected to be deductible for tax.
The contingent consideration is based on a range of between 0.5 and 1.75 times annualised PBT of Conveyancing Alliance for the period between completion to 31 March 2018 and also for the 12 months ending 31 March 2019. The undiscounted value of this element of the consideration has been estimated at GBP3,473,000. The total undiscounted consideration including that already paid is capped at GBP13,329,000.
Net cash inflow on acquisition of subsidiaries
2017
GBP000's
------------------------------------------------- ---------
Consideration paid in cash 8,029
------------------------------------------------- ---------
Less: cash and cash equivalent balances acquired (1,040)
------------------------------------------------- ---------
6,989
------------------------------------------------- ---------
The acquiree was included in the consolidated financial information for the first time in 2017, with revenue of GBP1,446,000 and a net profit of GBP239,000 included. If the acquiree had been in the Group from 1 April 2016, Group revenues for the year ended 31 March 2017 would have been GBP26,012,000 and net profit would have been GBP3,625,000.
Acquisition-related expenses of GBP212,000 were incurred in the acquisition of Conveyancing Alliance. These are included within exceptional admin expenses in the consolidated Income Statement for the year ended 31 March 2017.
For further details of the contingent consideration see page 67.
29. Contingent liabilities
The Directors are not aware of any contingent liabilities within the Group or the Company at 31 March 2018 and 2017.
30. Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party.
31. Events after the Balance Sheet date
There have been no reportable subsequent events between 31 March 2018 and the date of signing this report.
32. Dividends paid
2018 2017
GBP000's GBP000's
--------------------------------------------------- --------- ---------
Final dividend for the year ended 31 March 2017
of 1.10p (2017: 0.26p) per share 711 168
--------------------------------------------------- --------- ---------
1st Interim dividend 1.15p (2017: 1.10p) per share 741 711
--------------------------------------------------- --------- ---------
Total dividends paid 1,452 879
--------------------------------------------------- --------- ---------
As well as the dividends paid as shown in the table above, the Board proposes a final dividend of GBP741,000 (1.15 pence per share) in respect of the year ended 31 March 2018 and subject to approval at the Annual General Meeting. As the final dividend is declared after the Balance Sheet date it is not recognised as a liability in these financial statements.
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 UNRKRWRANUAR
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