New client win to provide a real-time market data platform
ARCONTECH GROUP PLC
(“Arcontech”, the “Company” or the “Group”)
New client win to provide a real-time market data platform
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, is pleased to announce the signing of a new Tier 1 bank client for its CityVision platform. The components being deployed include: MVCS (Multi-Vendor Contribution System) which enables those that create market data content, to contribute to multiple vendors and internal destinations at the same time; Arcontech Cache, a calculations engine that allows distribution of vendor feeds such as Bloomberg B-PIPE and Refinitiv Real-Time to end users and other destinations; along with Excelerator, the Company’s highly performant real-time Excel Add-In for data consumption and financial instrument pricing and publication.
A multi-year agreement, with the initial deployment in New York, marks the start of an important relationship with a Tier 1 global institution that should see expansion to Europe and Asia.
Matthew Jeffs, CEO of Arcontech said:
“Discussions commenced as the bank wished to both access and contribute real-time prices to a global market-data vendor, their risk-management platform and other internal systems for which the existing market-data infrastructure was unable to cope with the frequency and volume of updates. Arcontech was selected as we have tried and tested solutions for both large and small deployments as well as the ability to customise quickly to meet specific client requirements. The continual development of our systems also enables our clients to meet their resiliency, monitoring, data management, visualisation and reporting needs. This win is especially important as it underpins management’s expectations for the year whilst reinforcing our optimism in the overall business outlook which is evidencing the re-engagement of prospects interested in securing additional value whilst minimising operational risk”.
Enquiries:
Arcontech Group plc
020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
Cavendish Capital Markets Ltd (Nomad & Broker)
020 7220 0500
Carl Holmes / George Dollemore – Corporate Finance Harriet Ward – ECM
To access more information on the Group please visit: www.arcontech.com
Result of Annual General Meeting
ARCONTECH GROUP PLC
(“Arcontech”, the “Company” or the “Group”)
Result of Annual General Meeting
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, announces that at the Annual General Meeting of the Company held earlier today, all Resolutions were duly passed.
Enquiries:
Arcontech Group plc 020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
Cavendish Capital Markets Ltd (Nomad & Broker) 020 7220 0500
Carl Holmes / George Dollemore – Corporate Finance
Harriet Ward – ECM
To access more information on the Group please visit: www.arcontech.com
Posting of Annual Report & Notice of AGM
ARCONTECH GROUP PLC
(“Arcontech”, the “Company” or the “Group”)
Posting of Annual Report & Notice of AGM
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, confirms that its Annual Report and Accounts for the year ended 30 June 2023, together with the Notice of the Annual General Meeting, have been posted to shareholders. The documents will be available to download from the Company’s website www.arcontech.com later this afternoon.
The Company’s Annual General Meeting will be held at the Company’s offices at 1st Floor, 11-21 Paul Street, London EC2A 4JU at 10.00 a.m. on 25 October 2023.
If you will be attending the Annual General Meeting, please ensure you bring proof of identity and share ownership.
Change of Name of Nominated Adviser and Broker
The Company also announces that its Nominated Adviser and Broker has changed its name to Cavendish Capital Markets Ltd following completion of its own corporate merger.
Enquiries:
Arcontech Group plc 020 7256 2300 Geoff Wicks, Chairman and Non-Executive Director Matthew Jeffs, Chief Executive
Cavendish Capital Markets Limited (Nomad & Broker) 020 7220 0500 Carl Holmes/George Dollemore Harriet Ward – ECM
To access more information on the Group please visit: www.arcontech.com
Preliminary Results for the year ended 30 June 2023
ARCONTECH GROUP PLC
(“Arcontech”, the “Company” or the “Group”)
Final Results for the year ended 30 June 2023
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, is pleased to announce its final audited results for the year ended 30 June 2023.
Financial Highlights:
Turnover was £2,730,172 (2022: £2,757,795)
Profit before taxation was £985,696 (2022: £758,573) up by £227,123
Recurring revenues represented 100% of total revenues for the period (2022: 99%)
Net cash of £6,411,241 (2022: £6,026,468), an increase of 6.4%
Final dividend increased 7.7% to 3.5 pence per share (2022: 3.25 pence per share)
Operational Highlights:
Sales team improved and building a strong pipeline of near and mid-term prospects
Singapore-based consultant engaged to extend sales reach
Continued exploration of potential complementary acquisitions
Planned developments delivered to clients for testing
Investment in technical operations e.g., Python API’s developed
PoC cloud installation tested and proven
Commenting on the results, Geoff Wicks, Chairman and Non-Executive Director of Arcontech said:
“We remain optimistic that we will return to revenue growth in the near term even though our markets remain challenging. Interest in our products is higher than we have seen for some time, and we have demonstrated we can compete in a price sensitive market with products that are market leading”.
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (“MAR”), and is disclosed in accordance with the company’s obligations under Article 17 of MAR.
Enquiries:
Arcontech Group plc
020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
finnCap Ltd (Nomad & Broker)
020 7220 0500
Carl Holmes/George Dollemore – Corporate Finance Harriet Ward – ECM
To access more information on the Group please visit: www.arcontech.com
Chairman’s Statement
Arcontech retains a significant customer base and has worked hard to ensure that products are resilient and competitive. We have also successfully renewed contracts for longer periods of time in order to increase the stability of our revenue base which also provides good forward visibility. There is now revenue growth at our existing customers and a number of potential new customers at an advanced stage of negotiation. We are of course cognisant that the market for our products remains challenging as turbulence in financial markets generally has slowed down decision making and increased competitive pressure. However, the year has started positively, and the Company remains confident about the outcome for the current year.
The year to 30 June 2023 had a better level of new orders although, as reported earlier, cancellations late in the previous year and during the course of the year had a negative impact on revenue for FY23. We go into the new financial year with a growing and more positive list of potential new customers that will drive better results in future years but with our starting revenue base for the current year lower than last year.
Turnover was £2,730,172 (2022: £2,757,795) down by £27,623 on last year as a result of a net customer loss. Profit before taxation was £985,696 (2022: £758,573) up by £227,123. This increase in profit before tax is, as previously reported, due to a combination of lower than anticipated staff related costs arising from lower variable costs and delayed hires, and a release of accruals to the Consolidated Statement of Income totalling £110,000. These are expected to be once off savings in the year to 30 June 2023. 100% of our revenue was recurring and average contract periods have increased over the last year so while revenue has reduced, it has increased in resilience and quality. Statutory earnings per share for the year to 30 June 2023 were 7.33p (2022: 4.57p).
Investment in growing technical and sales and marketing operations was held back in the early part of the year as costs were kept under review. However, towards the end of the year the Company was back up to the expected staffing levels in order to support our existing base and the increasing number of customer trials and product developments.
The strong revenue base of recurring revenue gives us confidence to continue with our strategy to grow our core business and to expand into new market areas. We have started to extend our reach geographically and continue to build our sales and marketing capability.
Financing
Cash balances were £6,411,241 (2022: £6,026,468) at the year end, an increase of 6.4%. This strong balance sheet allows the Company to invest in both organic growth and to and to be alert for opportunities to make complementary acquisitions.
Dividend
I am pleased to announce that subject to approval at the Annual General Meeting we intend to pay a dividend of 3.5p per share for the year ended 30 June 2023 (2022: 3.25 pence) an increase of 7.7%, to those shareholders on the register as at the close of business on 6 October 2023 with a dividend payment date of 3 November 2023.
Outlook
We remain optimistic that we will return to revenue growth in the near term even though our markets remain challenging. Interest in our products is higher than we have seen for some time, and we have demonstrated we can compete in a price sensitive market with products that are market leading.
Geoff Wicks
Chairman and Non-Executive Director
Chief Executive’s Review
The 2022/23 financial year evidenced greater engagement with both our existing and prospective clients when compared with last year. Our continued focus on positioning ourselves as an independent provider of market-data platform components allows us to add value to the data vendors solutions and meet the varied requirements of the data consumer.
The year has seen the addition of one new client and a 9% increase in the number of end users of our products. Whilst end user growth generally has less revenue impact than the higher margin side of the business, it is encouraging, nonetheless. We are also working on several active opportunities with both existing and prospective Tier 1 clients where our software has been installed for testing. These opportunities encompass both server-side (high margin) and our user-based solutions and have involved a good degree of work to both facilitate integration and accommodate in-house client development. This work adds optionality to our product range to create additional opportunities for deployment in the wider marketplace.
During the year we have continued to work on extending the terms of our contracts with our larger clients to multiple years so that we now have just under 50% of our recurring revenues subject to multi-year agreements and further discussions are underway.
With regard to sales resources, we have two seasoned and highly experienced professionals based in London. As a result, the current pipeline is looking increasingly optimistic whilst being added to with new opportunities. Further and in recognising the value of local sales and support, we have engaged a consultants based in Asia. The consultant has several decades of experience and has been a client of Arcontech in the past. Having started working with us at the end of the reporting year we look forward to seeing the benefit of this association in terms of reassurance, continuity and new business with both clients and prospective clients, over the coming year.
During the year we have looked at and entered discussions with prospective acquisitions, however, the fit has to be right, and our search continues.
Our staff are a key asset to the Company and have continued to provide exemplary service and support to our clients. I would like to express my thanks for their continued commitment.
With our increased sales footprint and the encouraging signs from existing clients and prospects alike, we feel optimistic for the year ahead and beyond.
Matthew Jeffs
Chief Executive
Strategic Report
The Directors present the group strategic report for Arcontech Group plc and its subsidiaries for the year ended 30 June 2023.
Principal activities
The principal activities of the Company and its subsidiaries during the year were the development and sale of proprietary software and provision of computer consultancy services.
Review of the business and prospects
A full review of the operations, financial position and prospects of the Group is given in the Chairman’s Statement and Chief Executive’s Review on pages 2 to 3.
Key performance indicators (KPIs)
The Directors monitor the business using management reports and information, reviewed and discussed at monthly Board meetings. Financial and non-financial KPIs used in this report include:
Profit after tax and before release of accruals for administrative costs in respect of prior years . This is an alternative, non-IFRS performance measure, that is considered relevant as it provides a more accurate reflection of trading performance than net profit after tax. The adjusted profit is Net profit after tax less the amount of accruals for administrative costs released as disclosed in the footnote to the Income Statement. The accruals release for 2023 includes a release of £110,000 which is disclosed separately in the Group Statement of Income.
Performance:
Revenue is constant with the previous year and staff costs were below the previous year due to a temporary reduced headcount.
Net retention after adjusting for joiners and leavers during the year
Performance:
Staff morale from our dedicated employees remains strong, reflected in the stable retention rate
Principal risks and uncertainties
The Group’s performance is affected by a number of risks and uncertainties, which the Board monitor on an ongoing basis in order to identify, manage and minimise their possible impact. General risks and uncertainties include changes in economic conditions, interest rate fluctuations and the impact of competition. The Group’s principal risk areas and the action taken to mitigate their outcome are shown below:
Risk area
Nature
Mitigation
Competition
Loss of business due to existing competition or new entrants into the market
Ongoing investment in research and development responding to the changing needs of clients to remain competitive
Loss of key personnel
Inability to execute business plan due to the risk of losing key personnel
Employee share option scheme in place
Brexit
Business made difficult due to increased regulations between the UK and Europe caused by Brexit
Arcontech is a global company and as such seeks growth across a geographically diverse customer base
Relations with shareholders
Section 172(1) Statement – Promotion of the Company for the benefit of the members as a whole
The Directors believe they have acted in the way most likely to promote the success of the Group for the benefit of its members as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
Consider the likely consequences of any decision in the long term;
Act fairly between the members of the Company;
Maintain a reputation for high standards of business conduct;
Consider the interests of the Company’s employees;
Foster the Company’s relationships with suppliers, customers and others;
The desirability of the Company maintaining a reputation for high standards of business conduct; and
Consider the impact of the Company’s operations on the community and the environment.
Section 172(1) Companies Act 2006
The Board takes decisions with the long term in mind, and collectively and individually aims to uphold the highest standards of conduct. Similarly, the Board understands that the Company can only prosper over the long term if it understands and respects the views and needs of its customers, distributors, employees, suppliers and the wider community in which it operates.
A firm understanding of investor needs is also vital to the Company’s success. The Directors are fully aware of their responsibilities to promote the success of the Company in accordance with Section 172(1) of the Companies Act 2006. The text of Section 172(1) of the Companies Act 2006 has been sent out to each main Board Director.
Strategic Report (continued)
The Board ensures that the requirements are met, and the interests of stakeholders are considered as referred to elsewhere in this report and through a combination of the following:
A rolling agenda of matters to be considered by the Board through the year, which includes an annual strategy review meeting, where the strategic options for the following year are developed;
At each board meeting, to receive and discuss a will report on customers, employees and other colleagues, and investors;
Standing agenda points and papers;
A review of certain of these topics through the Audit Committee and the Remuneration Committee agenda items referred to in this report; and
Detailed consideration is given to of any of these factors where they are relevant to any major decisions taken by the Board during the year.
The Group’s operation is the development and sale of proprietary software and provision of computer consultancy services. The Board has identified its key stakeholders as its customers, shareholders, employees and suppliers. The Board keeps itself appraised of its key stakeholders’ interests through a combination of both direct and indirect engagement, and the Board has regard to these interests when discharging its duties.
The application of the s172 requirements can be demonstrated in relation to some of the key decisions made during the year to 30 June 2023:
Allocation of the Group’s capital in a way which offers significant returns to shareholders in line with the Company’s dividend policy, while also ensuring that the Group retains flexibility to continue to deploy capital towards profitable growth;
Continuation of a hybrid location working format for staff as working environments continue to evolve post Covid-19, while ensuring that the Group continued to deliver both the high level of service and security that our customers depend on without compromising the health and safety of employees.
During the year to 30 June 2023, the Board assessed its current activities between the Board and its stakeholders, which demonstrated that the Board actively engages with its stakeholders and takes their various objectives into consideration when making decisions. Specifically, actions the Board has taken to engage with its stakeholders over the last twelve months include:
All Directors attended the 2022 AGM to answer questions and receive additional feedback from investors;
The outcome of the AGM is published on the Company’s corporate website;
The Board receives regular updates on the views of shareholders through briefings and reports from the executive directors, and the Company’s brokers;
Arranged meetings with certain stakeholders to provide them with updates on the Company’s operational activities and other general corporate updates;
We discussed feedback from investors’ and analysts’ meetings following the release of our annual and half-year announcements. We have an investor relations programme of meetings with existing and potential shareholders;
Monitored company culture and engaged with employees on efforts to continuously improve company culture and morale; and
A range of corporate information (including all Company announcements) is also available to shareholders, investors and the public on the Company’s corporate website: www.arcontech.com.
The Board believes that appropriate steps and considerations have been taken during the year so that each Director has an understanding of the various key stakeholders of the Company. The Board recognises its responsibility to contemplate all such stakeholder needs and concerns as part of its discussions, decision-making, and in the course of taking actions, and will continue to make stakeholder engagement a top priority in the coming years.
Approved on behalf of the board on 4 September 2023 by:
Matthew Jeffs
Chief Executive
Group Income Statement and Statement of Comprehensive Income
For the year ended 30 June 2023
Note
2023
2022
£
£
Revenue
3
2,730,172
2,757,795
Administrative costs
(1,924,962)
(1,999,523)
Operating profit
4
805,210
758,272
Net finance income
5
70,486
301
Changes in estimated variable remuneration liability
2
110,000
–
Profit before taxation
985,696
758,573
Taxation
9
(5,587)
(148,007)
Profit for the year after tax
980,109
610,566
Total comprehensive income for the year
980,109
610,566
Earnings per share (basic)
10
7.33p
4.57p
Adjusted* Earnings per share (basic)
10
6.44p
4.50p
Earnings per share (diluted)
10
7.32p
4.56p
Adjusted* Earnings per share (diluted)
10
6.43p
4.49p
*Adjusted to exclude the release of accruals for administrative costs of £118,393 (2022: £9,000), which includes the £110,000 (2022: nil) shown above in respect of estimated variable remuneration liability releases in respect of prior years. This is a non-IFRS alternative performance measure that the Board considers to be a more accurate indicator of underlying trading performance. This measure has been adopted as a KPI and is disclosed in the Strategic Report on page 4.
All of the results relate to continuing operations.
There was no Other Comprehensive Income other than Profit for the year after tax for the year under review.
The notes on pages 33 to 59 form part of these financial statements
Statement of Changes in Equity
For the year ended 30 June 2023
Group:
Sharecapital
Sharepremium
Share option reserve
Retainedearnings
Totalequity
£
£
£
£
£
Balance at 30 June 2021
1,665,977
92,360
271,207
4,553,329
6,582,873
Profit for the year
–
–
–
610,566
610,566
Total comprehensive income for the year
–
–
–
610,566
610,566
Dividend paid
–
–
–
(367,752)
(367,752)
Exercise of options
5,624
23,401
–
–
29,025
Share-based payments
–
–
116,612
–
116,612
Transfer between reserves
–
–
(116,994)
116,994
–
Balance at 30 June 2022
1,671,601
115,761
270,825
4,913,137
6,971,324
Profit for the year
–
–
–
980,109
980,109
Total comprehensive income for the year
–
–
–
980,109
980,109
Dividend paid
–
–
–
(434,616)
(434,616)
Share-based payments
–
–
97,328
–
97,328
Transfer between reserves
–
–
(88,698)
88,698
–
Balance at 30 June 2023
1,671,601
115,761
279,455
5,547,328
7,614,145
Company:
Sharecapital
Sharepremium
Share option reserve
Retainedearnings
Totalequity
£
£
£
£
£
Balance at 30 June 2021
1,665,977
92,360
271,207
4,331,751
6,361,295
Profit for the year
–
–
–
273,286
273,286
Total comprehensive expense for the year
–
–
–
273,286
273,286
Dividend paid
–
–
–
(367,752)
(367,752)
Exercise of options
5,624
23,401
–
–
29,025
Share-based payments
–
–
116,612
–
116,612
Transfer between reserves
–
–
(116,994)
116,994
–
Balance at 30 June 2022
1,671,601
115,761
270,825
4,354,279
6,412,466
Profit for the year
–
–
–
304,044
304,044
Total comprehensive income for the year
–
–
–
304,044
304,044
Dividend paid
–
–
–
(434,616)
(434,616)
Share-based payments
–
–
97,328
–
97,328
Transfer between reserves
–
–
(88,698)
88,698
–
Balance as at 30 June 2023
1,671,601
115,761
279,455
4,312,406
6,379,222
The notes on pages 33 to 59 form part of these financial statements.
Statements of Financial Position
Registered number: 04062416
As at 30 June 2023
Group 2023 £
Group 2022£
Company 2023 £
Company 2022£
Note
Non-current assets
Goodwill
11
1,715,153
1,715,153
–
–
Property, plant and equipment
12
5,950
6,545
–
–
Right of use asset
17
73,152
219,455
–
–
Investments in subsidiaries
13
–
–
2,017,471
2,017,471
Deferred tax asset
19
328,000
318,000
68,000
56,000
Trade and other receivables
14
–
141,750
–
–
Total non-current assets
2,122,255
2,400,903
2,085,471
2,073,471
Current assets
Trade and other receivables
14
499,861
348,686
3,842,300
3,322,737
Cash and cash equivalents
15
6,411,241
6,026,468
518,678
1,074,294
Total current assets
6,911,102
6,375,154
4,360,978
4,397,031
Current liabilities
Trade and other payables
16
(1,308,888)
(1,558,880)
(67,227)
(58,036)
Lease liabilities
17
(40,324)
(148,450)
–
–
Provisions
18
(50,000)
–
–
–
Total current liabilities
(1,399,212)
(1,707,330)
(67,227)
(58,036)
Non-current liabilities
Lease liabilities
17
–
(47,403)
–
–
Provisions
18
(20,000)
(50,000)
–
–
Total non-current liabilities
(20,000)
(97,403)
–
–
Net current assets
5,511,890
4,667,824
4,293,751
4,338,995
Net assets
7,614,146
6,971,324
6,383,222
6,412,466
Equity
Called up share capital
20
1,671,601
1,671,601
1,671,601
1,671,601
Share premium account
21
115,761
115,761
115,760
115,760
Share option reserve
21
279,455
270,825
279,455
270,825
Retained earnings
21
5,547,328
4,913,137
4,312,406
4,354,279
7,614,145
6,971,324
6,379,222
6,412,466
As permitted by s408 of the Companies Act 2006, the Company has not presented its own income statement. The parent Company profit for the year was £304,044 (2022: £273,286).
The notes on pages 33 to 59 form part of these financial statements.
Approved on behalf of the board on 4 September by:
Matthew Jees, Chief Executive
Group Statement of Cash Flows
For the year ended 30 June 2023
Note
2023
2022
£
£
Cash generated from operations
22
901,422
1,109,608
Tax paid
–
(2,642)
Net cash generated from operating activities
901,420
1,106,966
Investing activities
Interest received
76,977
13,911
Purchases of plant and equipment
(3,480)
(2,688)
Net cash generated from investing activities
73,497
11,223
Financing activities
Proceeds from the issue of shares
–
29,025
Dividend paid
(434,616)
(367,752)
Payment of lease liabilities
17
(155,529)
(148,450)
Net cash used in financing activities
(590,145)
(487,177)
Net increase in cash and cash equivalents
384,772
631,012
Cash and cash equivalents at beginning of year
6,026,469
5,395,457
Cash and cash equivalents at end of year
15
6,411,241
6,026,469
For the year to 30 June 2023, the Group had no debt, and there were no material non-cash transactions.
The notes on pages 33 to 59 form part of these financial statements.
Company Statement of Cash Flows
For the year ended 30 June 2023
Note
2023
2022
£
£
Net cash (used in) / generated by operating activities
22
(129,978)
330,075
Tax paid
–
(1,221)
Net cash (used in) / generated from operating activities
(129,978)
328,854
Investing activities
Interest received
8,978
6,426
Net cash generated from investing activities
8,978
6,426
Financing activities
Proceeds from the issue of shares
–
29,025
Dividend paid
(434,616)
(367,752)
Net cash used in financing activities
(434,616)
(338,727)
Net decrease in cash and cash equivalents
(555,616)
(3,447)
Cash and cash equivalents at beginning of year
1,074,294
1,077,741
Cash and cash equivalents at end of year
15
518,678
1,074,294
For the year to 30 June 2023, the Company had no debt, and there were no material non-cash transactions.
The notes on pages 33 to 59 form part of these financial statements.
Notes to the Financial Statements
For the year ended 30 June 2023
Accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the period covered by these financial statements except where changes have been noted below.
Reporting entity
Arcontech Group plc (“the Company”) is a company incorporated in England and Wales with a registered address at 1st floor, 11-21 Paul Street, London, EC2A 4JU. The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries (together referred to as “the Group”).
Principal Activity
The principal activities of the Company and its subsidiaries during the year were the development and sale of proprietary software and provision of computer consultancy services.
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006.
On the basis of current projections, confidence of future profitability and cash balances held, the Directors have adopted the going concern basis in the preparation of the financial statements.
The financial statements have been prepared under the historical cost convention. As at 30 June 2023 all assets and liabilities are recorded at amortised cost, and there were no assets or liabilities recorded at fair value.
Going Concern
On the basis of current projections and having regard to the Group’s existing cash reserves, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion the Directors have projected cash flow out twelve months from the date of signing this report. Revenue projection has been based on recurring revenue streams from existing customers and a forecast for new revenue from additional sales that the Directors feel is achievable. The Group has a highly stable cost base which has been reviewed to incorporate the impact of additional costs for revenue generation activities such as industry trade shows. The Directors have stress tested the cash flow projections assuming no new revenue generation and an increase in costs of up to 8.5%, given the current inflationary environment. Under this scenario given expected cash generation from operations and existing cash balances, the Group will have sufficient resources to continue trading for well in excess of the next twelve months. Accordingly, the Directors have adopted the going concern basis in the preparation of the financial statements.
Changes in accounting policies and disclosures
New and amended Standards and Interpretations adopted by the Group and Company
The International Accounting Standards Board (IASB) issued various amendments and revisions to International Financial Reporting Standards and IFRIC interpretations per the table below. The amendments and revisions were applicable for the period year 30 June 2023 but did not result in any material changes to the financial statements of the Group.
Standard
Impact on initial application
Effective date
IAS 16 (Amendments)
Property, Plant and Equipment
1 January 2022
IAS 37 (Amendments)
Provisions, Contingent Liabilities and Contingent Assets
1 January 2022
Annual Improvements to IFRS Standards
2018 – 2020 Cycle
1 January 2022
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
Accounting policies (continued)
New and amended Standards and Interpretations issued but not effective for the financial year beginning 1 July 2022
Standard
Impact on initial application
Effective date
IAS 1 (Amendments)
Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies
1 January 2023
IAS 12 (Amendments)
ncome Taxes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction
1 January 2023
IAS 8 (Amendments)
Accounting policies, Changes in Accounting Estimates and Errors – Definition of Accounting Estimates
1 January 2023
IFRS 16 (Amendments)
Leases: Lase Liability in a Sale and Leaseback
1 January 2024
IAS 1 (Amendments)
Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current
1 January 2024
The new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be material.
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) prepared to 30 June 2023. Subsidiaries are entities controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).
Exposure, or rights, to variable returns from its involvement with the investee
The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee.
Rights arising from other contractual arrangements.
The Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. The acquisition method is used to account for the acquisition of subsidiaries.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Business combinations and goodwill
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair value at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
Revenue recognition
Revenue is recognised in accordance with the transfer of promised services to customers (i.e. when the customer gains control of the service) and is measured as the consideration which the group expects to be entitled to in exchange for those services. Consideration is typically fixed on the agreement of a contract except for quarterly flexible license contracts. Payment terms are agreed on a contract by contract basis.
A service is distinct if the customer can benefit from the service on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the service to the customer is separately identifiable from other promises in the contract.
Contracts with customers do not contain a financing component.
Under IFRS 15, revenue earned from contracts with customers is recognised based on a five-step model which requires the transaction price for each identified contract to be apportioned to separate performance obligations arising under the contract and recognised either when the performance obligation in the contract has been performed (point in time recognition) or over time as control of the performance obligation is transferred to the customer.
The group recognises revenue when it satisfies a performance obligation by transferring a promised service to the customer as follows:
• Revenue from recurring license fees and other license fees is recognised on an over time basis via a straight line across the period the services are provided. In reaching this conclusion the group has assessed that ongoing contractual obligations are not separately identifiable from other promises in the contract and are not distinct from the licence, and hence are accounted for as a single performance obligation. As the license is not distinct the combined performance obligation is recognised over time.
In assessing whether a licence is distinct the Group considered the continuing requirement to:–
– optimise functionality;
– optimise performance; and
– provide enhancements to ensure user regulatory compliance.
• Revenue from flexible license contracts that include variable consideration are quarterly contracts assessed at the end of each calendar quarter and revenue is recognised based on actual usage confirmed for that quarter at the point of customer acceptance;
• Revenue from project work is recognised on satisfactory completion of each project, as this is considered to be the point in time the customer gains control over the results of the project work.
Taxation
The tax charge/(credit) represents the sum of the tax payable/(receivable) and any deferred tax.
Research and development tax credits are recognised when received.
The tax payable/(receivable) is based on the taxable result for the year. The taxable result differs from the net result as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
1. Accounting policies (continued)
Taxation (continued)
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.
Share-based payments
The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of shares or share options, is recognised as an employee benefit expense in the income statement.
The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non market-based vesting conditions) at the date of grant. Fair value is measured by the use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of the non-transferability, exercise restrictions and behavioural considerations. A cancellation of a share award by the Group or an employee is treated consistently, resulting in an acceleration of the remaining charge within the consolidated income statement in the year of cancellation.
Impairment of tangible and intangible assets
The carrying amounts of the Group’s and Company’s tangible and intangible assets are reviewed at each year end date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
Expenses incurred on Research & Development are currently expensed through the income statement as the expenditure is incurred on the maintenance and enhancement of existing products. The applicability of this treatment is reviewed regularly by the Company.
For goodwill, the recoverable amount is estimated at each year end date, based on value in use. The recoverable amount of other assets is the greater of their net selling price 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 an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis.
A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
1. Accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, on the following bases:
Leasehold property
– over the period of the lease
Computer equipment
– 33% – 40% on cost
Office furniture and equipment
– 20% – 25% on cost or reducing balance
Investments in subsidiaries
Investments in subsidiaries are stated at cost less any provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
The Group does not hold any investments other than investments in subsidiaries.
Trade receivables are held in order to collect the contractual cash flows and are initially measured at the transaction price as defined in IFRS 15, as the contracts of the Group do not contain significant financing components. Impairment losses are recognised based on lifetime expected credit losses in profit or loss.
Other receivables are held in order to collect the contractual cash flows and accordingly are measured at initial recognition at fair value, which ordinarily equates to cost and are subsequently measured at cost less impairment due to their short-term nature. A provision for impairment is established based on 12-month expected credit losses unless there has been a significant increase in credit risk when lifetime expected credit losses are recognised. The amount of any provision is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
Effective interest rate method
The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset or liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
1. Accounting policies (continued)
Financial instruments (continued)
(a) Classification
The Group classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through OCI or through profit or loss); and
those to be measured at amortised cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded either in profit or loss or in OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). See Note 16 for further details.
(b) Recognition
Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Debt instruments
Amortised cost; Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.
(d) Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Leases
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
1. Accounting policies (continued)
Leases (continued)
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;
Amounts expected to be payable by the Group under residual value guarantees;
The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period.
Right-of-use assets are measured at cost which comprises the following:
The amount of the initial measurement of the lease liability;
Any lease payments made at or before the commencement date less any lease incentives received;
Any initial direct costs; and
Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets (generally less than £4k) are recognised on a straight-line basis as an expense in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation, legal or constructive, resulting from past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the obligation.
Research and development
Research costs are charged to the income statement in the year incurred. Development expenditure is capitalised to the extent that it meets all of the criteria required by IAS 38, otherwise it is charged to the income statement in the year incurred. In order for development expenditure to meet the capitalisation criteria of IAS 38, it must be both technically feasible to complete the work, and there must be the intention to either use or sell the asset created.
Pension costs and other post-retirement benefits
The Group makes payments to occupational and employees’ personal pension schemes. Contributions payable for the year are charged in the income statement.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
1. Accounting policies (continued)
Foreign currencies
Transactions denominated in foreign currencies are translated into sterling at the exchange rate ruling when the transaction was entered into. Where consideration is received in advance of revenue being recognised the date of the transaction reflects the date the consideration is received. Foreign currency monetary assets and liabilities are translated into sterling at the exchange rate ruling at the balance sheet date. Exchange gains or losses are included in operating profit.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker as required by IFRS 8 “Operating Segments”. The chief operating decision-maker responsible for allocating resources and assessing performance of the operating segments has been identified as the Board of Directors. The accounting policies of the reportable segments are consistent with the accounting policies of the group as a whole. Segment profit/(loss) represents the profit/(loss) earned by each segment without allocation of foreign exchange gains or losses, investment income, interest payable and tax. This is the measure of profit that is reported to the Board of Directors for the purpose of resource allocation and the assessment of segment performance. When assessing segment performance and considering the allocation of resources, the Board of Directors review information about segment assets and liabilities. For this purpose, all assets and liabilities are allocated to reportable segments with the exception of cash and cash equivalents and current and deferred tax assets and liabilities.
2. Critical accounting judgments and key sources of estimation uncertainty
The preparation of financial statements 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 date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Judgements
Determination of performance obligations and satisfaction thereof
For the purposes of recognising revenue, the Directors are required to identify distinct services in contracts and allocate the transaction price to the performance obligations. Details of determining performance obligations, passing of control and amounts recognised as costs incurred to obtain or fulfil a contract are given in Note 1 – Revenue recognition. There has been no change in the Group’s business model from the previous year and the Directors are satisfied that the revenue recognition policy remains correct for the year under review.
Changes in estimated variable remuneration liability
The Group Income Statement includes the release of £110,000 in accrued bonuses which has been disclosed separately in the current year. The Board’s best estimate of the liability to pay bonuses as at 30 June 2022 was £170,000 and this was recorded with the prior year accruals balance. In the current year, £110,000 of this liability was released to the Group Income Statement following annual reappraisal of the estimated liability at 30 June 2023. The balance being carried forward to the future periods, is the Board’s estimation of a constructive obligation with regards to bonuses in respect of work undertaken to date in progressing new business development and sales opportunities.
Capitalisation of development costs
As described in Note 1, the Group capitalises development costs when certain criteria are met including the probability of relevant future economic benefits. The key variable in making judgement of the correct treatment of development costs is new product development versus modification and maintenance of existing products. The development work undertaken has been to existing products, and having assessed the likelihood of future economic benefit, the Directors have judged it appropriate to not capitalise any development costs (2022 – £Nil).
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
2. Critical accounting judgments and key sources of estimation uncertainty (continued)
Estimates
Impairment of intangible assets
Determining whether non-current assets are impaired requires an estimation of the value in use of the cash generating units to which non-current assets have been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The key variables used in cash flow projections are: a timeline of fourteen years (the “time period”); the forecast for the next year which is used as the base for future years; revenue and cost projections for the time period using the average rate of increase / (decrease) achieved over the preceding ten years. No provision for impairment was made in the year to the carrying value of goodwill (see note 11) or investments in subsidiaries (see note 13).
Recognition of deferred tax assets
As described in Note 1, the Group recognises deferred tax assets arising from unused tax losses when certain criteria are met including the probability that future relevant taxable profits will be available. The directors have assessed the likelihood of future taxable profits being available and have judged it appropriate to recognise deferred tax assets for unused losses. The key variables used in the calculation of deferred tax assets are: a timeline of three years out from reporting date; revenue and cost projections on the same basis as used in the assessment of impairment of goodwill; a cost of capital of 8.44%. At the year-end a deferred tax asset of £328,000 (2022 – £318,000) was recognised.
Share based payment transactions
The Company has made awards of options and over its unissued share capital to certain Directors and employees as part of their remuneration package.
The valuation of these options involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in Note 20.
3. Revenue
An analysis of the Group’s revenue is as follows:
2023 £
2022 £
Software development, licence fees and project work
2,730,172
2,757,795
All of the Group’s revenue relates to continuing activities.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
4. Operating profit for the year is stated after charging/(crediting):
2023 £
2022 £
Depreciation of plant and equipment (see note 12)
4,074
7,291
Depreciation of leased assets (see note 17)
146,303
146,303
Interest on leased assets (see note 17)
6,471
13,550
Staff costs (see note 8)
1,374,676
1,491,348
Research and development
476,491
409,618
Release of accruals for administrative costs in respect of prior years
(8,393)
(9,000)
5. Finance income and Finance costs:
2023 £
2022 £
Finance income
Income on cash and cash equivalents
76,977
13,911
Finance costs
Lease interest expense
(6,471)
(13,550)
Other interest expense
(20)
(60)
Net finance income
70,486
301
6. Auditor’s remuneration:
2023 £
2022 £
Fees payable to the Group’s auditor for the audit of the Group’s annual accounts
37,750
31,500
Fees payable to the Group’s auditor for other services:
– audit of the Company’s subsidiaries
7,000
7,000
44,750
38,500
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
7. Operating segments:
The Group reports internally to the Chief Operating Decision Maker (CODM), who is considered to be the Board. Intersegment license fees and management charges are not included in the reports reviewed by the CODM during the year but are calculated for statutory reporting purposes and therefore are excluded from the following revenue and operating profit disclosures.
2023
2022
£
£
Revenue by segment
Software development and licence fees
2,730,172
2,757,795
External segment revenue
2,730,172
2,757,795
Operating profit by segment
Software development and licence fees
1,366,930
1,193,637
Unallocated overheads
(458,211)
(448,975)
Total operating profit
908,719
744,662
Finance income
76,977
13,911
Total profit before tax as reported in the Group income statement
985,696
758,573
2023
2022
£
£
Segment total of assets
Software development and licence fees
8,295,757
7,541,527
Unallocated assets
4,559,078
4,545,031
12,854,835
12,086,558
Less intercompany debtors
(3,821,478)
(3,310,501)
Total assets
9,033,357
8,776,057
2023
2022
£
£
Segment total of liabilities
Software development and licence fees
5,172,801
5,056,787
Unallocated liabilities
67,889
58,447
5,240,690
5,115,234
Less intercompany creditors
(3,821,478)
(3,310,501)
Total liabilities
1,419,212
1,804,733
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
7. Operating segments (continued):
2023
2022
£
£
Additions of property, plant and equipment assets by segment
Software development and licence fees
3,480
2,688
Total additions
3,480
2,688
2023
2022
£
£
Depreciation of property, plant and equipment assets recognised in the period by segment
Software development and licence fees
4,074
7,291
Total depreciation
4,074
7,291
Non-current assets by country
2023
2022
£
£
UK
2,122,255
2,400,903
Total non-current assets
2,122,255
2,400,903
Geographical information – External revenue
2023
2022
£
£
UK
1,979,802
2,013,140
Europe (excluding UK)
584,987
581,981
Africa
42,500
40,000
North America
89,656
89,447
Australia
12,603
12,603
Asia Pacific
20,624
20,624
2,730,172
2,757,795
During the year there were 4 customers (2022: 4) who accounted for more than 10% of the Group’s revenues as follows:
2023
2022
Value of sales £
% of Total
Value of sales£
% of Total
Customer 1
685,720
25%
672,091
24%
Customer 2
520,990
19%
523,138
19%
Customer 3
361,152
13%
360,661
13%
Customer 4
342,588
13%
285,051
10%
1,910,451
70%
1,840,942
66%
These revenues are attributable to the software development and licence fees segment.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
8. Staff costs:
2023£
2022£
a)Aggregate staff costs, including Directors’ remuneration
Wages and salaries
1,114,182
1,197,220
Social security costs
136,786
153,261
Pension contributions
26,380
24,255
Share-based payments
97,328
116,612
1,374,676
1,491,348
b)The average number of employees (including Directors) was:
Sales and administration
7
7
Development and support
9
7
16
14
£
£
c)Directors’ emoluments
Short-term employee benefits
252,883
231,714
Pension contributions
5,513
5,250
Share-based payments
45,673
57,200
304,069
294,164
Social security costs
31,260
30,843
Total Director compensation
335,329
325,007
Directors’ emoluments represent the staff costs of the parent company.
The average number of employees of the parent company is 3 (2022: 3)
The highest paid Director received remuneration of £192,114 (2022: £183,464).
The number of Directors that are members of a defined contribution pension scheme is 1 (2022: 1). Pension contributions paid to a defined contribution scheme in respect of the highest paid Director amounted to £5,513 (2022: £5,250).
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
9. Taxation
2023
2022
£
£
Current tax
(15,587)
4,993
Deferred tax
10,000
(153,000)
Total tax charge for the year
5,587
148,007
The difference between the total tax credit shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows:
2023£
2022£
Profit on ordinary activities before tax
985,696
758,573
Profit on ordinary activities multiplied by the effective rate of corporation tax in the UK of 20.49 % (2022: 19.00%)
201,969
144,128
Effects of:
Disallowed expenses
52
288
Temporary differences on deferred tax
494
796
Research and development tax credits
–
(4,993)
Deferred tax asset movement
(10,000)
153,000
Brought forward losses utilised
(186,928)
(145,212)
Total tax charge for the year
5,587
148,007
From 1 April 2023 the UK Government increased the corporation tax rates 25% on profits above £250,000. Companies with profits of £50,000 or less will be taxed at 19% and companies with profits between £50,000 and £250,000 will pay tax at 25% that is reduced by marginal relief on a sliding scale. The effect of this change to tax rates resulted in an additional £960 tax payable for the year to 30 June 2023, with the Group having an effective tax rate of 20.49%.
Factors which may affect future tax charges
At 30 June 2023 the Group has tax losses of approximately £8,000,000 (2022: £8,300,000) to offset against future trading profits.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
10. Earnings per share
2023
2022
£
£
Earnings
Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity shareholders
980,109
610,566
980,109
610,566
No.
No.
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share
13,372,811
13,364,195
Number of dilutive shares under option
14,805
25,145
Weighted average number of ordinary shares for the purposes of dilutive earnings per share
13,387,616
13,389,340
The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options.
11. Goodwill
2023
2022
£
£
Cost and net book amount
At 1 July 2022 and at 30 June 2023
1,715,153
1,715,153
Goodwill acquired in a business combination is allocated at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:
2023
2022
£
£
Arcontech Limited
1,715,153
1,715,153
1,715,153
1,715,153
The CGU used in these calculations is Arcontech Limited. The group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The discount rate is estimated using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Long-term growth rates are based on industry growth forecasts. Changes in selling prices are based on past practices and expectations of future changes in the market. Changes in direct costs are based on expected cost of inflation of 6.0% and 1.8% after year 5.
As the Group does not have any borrowings, the rate used to discount all the forecast cash flows is 8.8% (2022: 8.8%), which represents the Group’s cost of capital.
Goodwill on the purchase of Arcontech Limited is attributable to the operating synergies that have arisen as a result of the combination.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
12. Property, plant and equipment – Group
Leasehold Property
Office furniture & equipment
Total
Cost
£
£
£
At 1 July 2021
26,199
143,700
169,899
Additions
–
2,688
2,688
Disposals
–
(40,447)
(40,447)
At 1 July 2022
26,199
105,941
132,140
Additions
–
3,480
3,480
Disposals
–
(6,056)
(6,056)
At 30 June 2023
26,199
103,365
129,564
Depreciation
At 1 July 2021
22,058
136,694
158,752
Charge for the year
1,462
5,829
7,291
Disposals
–
(40,447)
(40,447)
At 1 July 2022
23,520
102,076
125,596
Charge for the year
1,461
2,613
4,074
Disposals
–
(6,056)
(6,056)
At 30 June 2023
24,981
98,633
123,614
Net book amount at 30 June 2023
1,218
4,732
5,950
Net book amount at 30 June 2022
2,679
3,865
6,545
13. Investment in subsidiaries
2023
2022
Carrying amount
£
£
At 1 July 2022
2,017,471
2,017,471
At 30 June 2023
2,017,471
2,017,471
Details of the investments in which the Group and the Company holds 20% or more of the nominal value of any class of share capital are listed below. The Goodwill recognised in Note 11 is in connection with investments made in subsidiaries:
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
13. Investment in subsidiaries (continued)
Country of Incorporation
Address
Nature of business
Ordinarysharesheld
Arcontech Solutions Limited
England
11-21 Paul Street, London EC2A 4JU
Dormant
100%
Cognita Technologies Limited
England
11-21 Paul Street, London EC2A 4JU
Software development
100%
Arcontech Limited
England
11-21 Paul Street, London EC2A 4JU
Software development and consultancy
100%
14. Trade and other receivables
Group 2023 £
Group 2022£
Company 2023 £
Company 2022 £
Due within one year:
Trade and other receivables
136,250
196,541
–
–
Amounts owed by group undertakings
–
–
3,821,378
3,310,401
Prepayments and accrued income
221,861
152,145
20,922
12,336
Other receivables
141,750
–
–
–
499,861
348,686
3,842,300
3,322,737
Group 2023 £
Group 2022£
Company 2023 £
Company 2022 £
Due after more than one year:
Other receivables
–
141,750
–
–
–
141,750
–
–
Trade receivables, which are the only financial assets at amortised cost, are non-interest bearing and generally have a 30-90 day term. Due to their short maturities, the carrying amount of trade and other receivables is a reasonable approximation of their fair value. A provision for impairment of trade receivables is established using an expected loss model. Expected loss is calculated from a provision based on the expected lifetime default rates and estimates of loss on default.
As at 30 June 2023, trade receivables of £Nil were impaired (2022: £Nil) and during the year an impairment charge relating to trade receivables of £Nil (2022: £Nil) was recognised. As at 30 June 2023 trade receivables of £63,314 (2022: £nil) were past due but not impaired as fully recovery is expected. The ageing analysis of these trade receivables is as follows:
Group 2023 £
Group 2022£
Company 2023 £
Company 2022 £
Up to 3 months past due
63,314
–
–
–
3 to 6 months past due
–
–
–
–
63,314
–
–
–
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
15. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.
16. Trade and other payables
Group 2023 £
Group 2022 £
Company 2023 £
Company 2022 £
Trade payables
44,995
77,772
4,595
3,849
Amounts owed to group undertakings
–
–
100
100
Other tax and social security payable
58,185
62,148
12,740
7,843
Other payables and accruals*
323,850
440,724
49,792
46,244
Deferred income
881,858
978,236
–
–
1,308,888
1,558,880
67,227
58,036
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Trade payables and other payables and accruals constitute the financial liabilities within the category “Financial liabilities at amortised cost.” The total value of Financial liabilities at amortised cost is £438,845 (2022: £568,496) which includes provisions (Refer to note 18).
* Other payables and accrual includes accrued bonuses of £70,000. The material decrease in other payables and accrual is due to the release of £110,000 of accrued bonus provisions. (Refer to Note 2)
17. Leases
Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for all leases on its balance sheet. The only lease applicable under IFRS 16 is the Group’s office.
The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position are as follows:
As at 30 June 2023
Lease liability £
Right of use asset £
Income statement £
Carrying value at 30 June 2022
(195,853)
219,455
–
Depreciation
–
(146,303)
(146,303)
Interest
(6,471)
–
(6,471)
Lease payments
162,000
–
–
Carrying value at 30 June 2023
(40,324)
73,152
(152,774)
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
17. Leases (continued)
Reconciliation of lease liabilities
Operating cash flow £
Financing cash flow £
Non-cash £
Total £
As at 1 July 2022
–
–
–
195,853
Cash flows:
Interest paid
(6,471)
–
–
(6,471)
Liability reduction
–
(155,529)
–
(155,529)
Non-cash changes:
Interest expense
–
–
6,471
6,471
As at 30 June 2023
(6,471)
(155,529)
6,471
40,324
As at 30 June 2022
Lease liability £
Right of use asset £
Income statement £
Carrying value at 30 June 2021
(344,303)
365,758
–
Depreciation
–
(146,303)
(146,303)
Interest
(13,550)
–
(13,550)
Lease payments
162,000
–
–
Carrying value at 30 June 2022
(195,853)
219,455
(159,853)
Reconciliation of lease liabilities
Operating cash flow £
Financing cash flow £
Non-cash £
Total £
As at 1 July 2021
–
–
–
344,303
Cash flows:
Interest paid
(13,550)
–
–
(13,550)
Liability reduction
–
(148,450)
–
(148,450)
Non-cash changes:
Interest expense
–
–
13,550
13,550
As at 30 June 2022
(13,550)
(148,450)
13,550
195,853
Contractual maturity analysis of lease liabilities as at 30 June 2023
Less than 3 months £
3 – 12 Months £
1 – 5 Year £
Longer than 5 years £
Total £
Lease liabilities
40,324
–
–
–
40,324
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
18. Provisions
Group 2023 £
Group 2022£
Company 2023 £
Company 2022 £
As at 1 July
50,000
50,000
–
–
Increase in provision
20,000
–
–
–
As at 30 June
70,000
50,000
–
–
Disclosed as:
Current liabilities
50,000
–
–
–
Non-current liabilities
20,000
50,000
–
–
Provisions consists of dilapidations for the Office premises of £70,000 (2022: £50,000). Refer to note 1 for the Accounting Policy for Provisions. The increase during the year is management’s estimate of an increase in cost of returning the office to it’s original state upon termination of lease. The total estimate of dilapidation costs for the Paul Street office is £50,000 which is disclosed as a current liability as at 30 June 2023, the lease is due to end within twelve months. The £20,000 non-current dilapidations provision relates to a potential liability in connection with a previous office.
19. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using the tax rate of 20.4% which is the effective tax rate of the Group. The movement on the deferred tax account is as shown below:
Group 2023 £
Group 2022 £
Company 2023 £
Company 2022 £
At 1 July
318,000
471,000
56,000
55,000
Effect of change in tax rate
78,000
–
16,000
–
Effect of movement in temporary differences
(68,000)
(153,000)
(4,000)
1,000
At 30 June
328,000
318,000
68,000
56,000
The deferred tax asset has been recognised in relation to forecast taxable profits which are considered probable.
Losses to offset against future trading profits at 30 June 2023 amounted to approximately £8,000,000 (2022: £8,300,000).
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
20. Share capital
The Company has authorised share capital of 16,000,000 Ordinary shares of £0.125 each.
Company Allotted and fully paid:
Sharesof 12.5p each
Share Capital £
Share Premium£
As at 1 July 2022
13,372,811
1,671,601
115,761
As at 30 June 2023
13,372,811
1,671,601
115,761
Share options
Under the Company’s approved 2002 Share Option Scheme, certain Directors and employees held options at 30 June 2023 for unissued Ordinary Shares of 12.5 pence each as follows:
Share options
At 1 July 2022
Granted
Exercised
Lapsed
At 30 June 2023
Exercise price
Normal exercise period
Employees:
100,000
–
–
–
100,000
64.50 pence
25 Apr 20 – 24 Apr 27
50,000
–
–
–
50,000
110.00 pence
30 Jun 21 – 29 Jun 28
32,000
–
–
(12,000)
20,000
196.00 pence
30- Jun 22 – 27 Sep 29
75,000
–
–
(32,000)
43,000
164.50 pence
30 Jun 23 – 2 Oct 30
73,500
–
–
(6,000)
67,500
130.50 pence
30 Jun 24 – 11 Oct 31
–
70,000
–
–
70,000
76.50 pence
30 Jun 25 – 21 Oct 32
Directors:
Geoff Wicks
30,000
–
–
–
30,000
164.50 pence
30 Jun 23 – 2 Oct 30
Matthew Jeffs
100,000
–
–
–
100,000
110.00 pence
30 Jun 21 – 29 Jun 28
50,000
–
–
(50,000)
–
164.50 pence
30 Jun 23 – 2 Oct 30
50,000
–
–
–
50,000
130.50 pence
30 Jun 24 – 11 Oct 31
–
50,000
–
–
50,000
76.50 pence
30 Jun 25 – 21 Oct 32
Total
560,500
120,000
–
(100,000)
580,500
Weighted average exercise price
126.4 pence
76.5 pence
–
166.6 pence
109.2 pence
The number of options exercisable at 30 June 2023 was 343,000 (at 30 June 2022: 282,000), these had a weighted average exercise price of 113.3 pence (2022: 103.6 pence).
The weighted average share price as at the exercise date of the shares exercised in the year was nil pence (2022: 64.5 pence) and of the shares were forfeited in the year was 166.2 pence (2022: 122.3).
Options granted under the Company’s approved 2002 Share Option Scheme are forfeited when the Optionholder ceases to be a Director or employee of a Participating Company. The Directors may before the expiry of 3 months following cessation of employment permit an Optionholder to exercise their Option within a period ending no later than 12 months from the cessation of employment.
The highest price of the Company’s shares during the year was 85.5 pence, the lowest price was 63.5 pence and the price at the year-end was 64.5 pence.
The Group operates an approved Share Option Scheme for the benefit of Directors and employees. Options are granted to acquire shares at a specified exercise price at any time following but no later than 10 years after the grant date. There are no performance conditions on the exercise of the options granted prior to 1 July 2018. The performance conditions of those granted after 1 July 2018 which apply to executive directors and certain key staff, are set out below.
The options issued to certain directors and members of staff in November 2018, September 20192, October 20203, October 2021 and in October 2022 will be exercisable from 30 June 2021, 30 June 2022, 30 June 2023, 30 June 2024 and 30 June 2025 respectively, dependent on the Company’s compound annual rate of growth in fully diluted earnings* for the three financial years ending 30 June 2022, 2023, 2024 and 2025, respectively.
Options issued date
Exercisable from
Dependent on the Company’s compound annual rate of growth in fully diluted earnings1 for the three financial years ending
November 2018
30 June 2021
30 June 2021
September 2019
30 June 2022
30 June 2022
October 2020
30 June 2023
30 June 2023
October 2021
30 June 2024
30 June 2024
October 2022
30 June 2025
30 June 2025
The Options will vest subject to performance criteria as follows:
– compound annual earnings growth of 10% or more – fully vested (100%);
– compound annual earnings growth between 5%-10% – partial vesting between 0% and 100% on a sliding scale; and
– compound annual earnings growth of 5% and below – nil.
Any Ordinary Shares arising from the vesting of Options must be held for a period of two years after vesting.
1 Fully diluted earnings will be based on: (a) the Company’s pre-tax profit excluding exceptional items and the share option
charge and (b) the current UK corporation tax rate of 19%, such that the fully diluted earnings calculation takes no account
of R&D and deferred tax credits. For the purposes of the fully diluted earnings calculation, the applied rate of corporation tax
will remain constant at 19% irrespective of any current or future changes to corporation tax.
2 70,000 options issued in September 2019 lapsed on 30 June 2022 as compound annual earnings growth targets for the financial years ended 30 June 2020, 2021 and 2022 were not achieved.
3 70,000 options issued in October 2020 lapsed on 30 June 2023 as compound annual earnings growth targets for the financial years ended 30 June 2021, 2022 and 2023 were not achieved.
The fair value of options is valued using the Black-Scholes pricing model. An expense of £97,328 (2022: £116,612) has been recognised in the year in respect of share options granted. The cumulative share option reserve at 30 June 2023 is £279,455 (2022: £270,805).
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
20. Share capital (continued)
The inputs into the Black-Scholes pricing model are as follows:
Directors & Employees
Grant date
25 Apr 2017
29 Nov 2018
27 Sep 2019
2 Oct 2020
11 Oct 2021
21 Oct 2022
Exercise price
64.5 pence
110.0 pence
196.0 pence
164.5 pence
130.5 pence
76.5 pence
Expected life
10 years
10 years
10 years
10 years
10 years
10 years
Expected volatility
50%
50%
50%
49%
45%
44%
Risk free rate of interest
0.5%
0.75%
0.75%
0.00%
0.60%
3.69%
Dividend yield
Nil
Nil
Nil
0.01%
0.01%
0.04%
Fair value of option
36.7 pence
57.0 pence
115.0 pence
91.92 pence
70.03 pence
45.47 pence
Volatility has been estimated based on the historic volatility over a period equal to the expected term from the grant date.
21. Reserves
Details of the movements in reserves are set out in the Statement of Changes in Equity. A description of each reserve is set out below.
Share capital reserve
This is used to record the aggregate nominal amount of the Company’s shares on issue.
Share premium account
This is used to record the aggregate amount or value of premiums paid when the Company’s shares are issued at a premium, net of issue costs, less amounts cancelled by court order.
Share option reserve
This relates to the fair value of options granted which has been charged to the income statement over the vesting period of the options, less amounts transferred to retained earnings.
Retained earnings
This relates to accumulated profits and losses together with distributable reserves arising from capital reductions, less amounts distributed to shareholders.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
22. Net cash generated from operations – Group
2023
2022
£
£
Operating profit and exceptional items before tax
915,210
758,272
Depreciation charge
150,377
153,594
Non cash share option charges
97,328
116,612
Lease interest paid
(6,471)
(13,550)
Other interest paid
(20)
(60)
(Increase) / decrease in trade and other receivables
(9,425)
126,624
Decrease in trade and other payables
(265,577)
(31,884)
(Increase) in provisions
20,000
–
Cash generated from operations
901,422
1,109,608
Net cash generated from operations – Company
2023
2022
£
£
Operating profit
284,772
265,860
Non cash share option charges
45,673
116,612
Increase in trade and other receivables
(469,614)
(59,270)
Increase in trade and other payables
9,191
6,873
Cash (used in) / generated from operations
(129,978)
330,075
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
23. Related party transactions
Group
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are disclosed in this part of the note.
Key management compensation
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Group. In the opinion of the Board, the Group’s key management are the Directors of Arcontech Group PLC. Information regarding their compensation is given in notes 8 and 20 for each of the categories specified in IAS 24 Related Party Disclosures. All emoluments given in notes 8 and 20 relate to short-term employee benefits and there are no post-employment or other long-term benefits.
The financial statements include the following amounts in respect of services provided to the Group:
Company
Transactions between the Parent Company and its subsidiaries during the year were as follows:
Management charges payable by subsidiaries £546,676 (2022: £536,216).
The amounts due from/to subsidiaries at the balance sheet date were as follows:
2023 £
2022 £
Amount due from subsidiaries
7,415,999
7,098,581
Less: Provision for impairment
(3,594,521)
(3,788,180)
Amount due from subsidiaries – net
3,821,478
3,310,401
During the year a provision of £193,659 was released (2022: £176,491) in respect of balances due from subsidiaries.
2023 £
2022 £
Amount due to subsidiaries
546,676
536,216
546,676
536,216
24. Dividends
A final dividend of 3.5 pence will be proposed at the Annual General Meeting but has not been recognised as it requires approval (2022: 3.25 pence).
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
25. Financial instruments
The Group’s financial instruments comprise cash and cash equivalents, and items such as trade payables and trade receivables, which arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Group’s operations.
The Group’s operations expose it to a variety of financial risks including credit risk, liquidity risk and interest rate risk. Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Company’s finance department.
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the Board. Trade receivables are considered in default and subject to additional credit control procedures when they are more than 30 days past due in line with industry practice. Trade receivables are only written off when there is no reasonable expectation of recovery due to insolvency of the debtor.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Group 2023 £
Group 2022 £
Company 2023 £
Company 2022£
Trade receivables
136,250
196,541
–
–
Cash and cash equivalents
6,411,241
6,026,468
518,678
1,074,294
Amounts owed by group undertakings
–
–
3,821,378
3,310,401
6,547,491
6,223,009
4,340,056
4,384,695
Interest rate risk
The Group has interest bearing assets and no interest-bearing liabilities. Interest bearing assets comprise only cash and cash equivalents, which earn interest at a variable rate.
The Group has not entered into any derivative transactions during the period under review.
The Group has no short-term debt finance. The Group monitors its levels of working capital to ensure that it can meet its liabilities as they fall due.
The Group’s financial liabilities comprise trade payables and other payables, provisions and accruals, excluding deferred income, with a carrying value equal to the gross cash flows payable of £438,845 (2022: £568,496) all of which are payable within 6 months.
Notes to the Financial Statements
For the year ended 30 June 2023 (continued)
25. Financial instruments (continued)
Market risk and sensitivity analysis
Equity price risk
The Directors do not consider themselves exposed to material equity price risk due to the nature of the Group’s operations.
Foreign currency exchange risk
The Directors do not consider themselves exposed to material foreign currency risk due to the nature of the Group’s operations. All invoices are raised in sterling.
Interest rate risk
The Group is exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn interest at variable and fixed rates. As at 30 June 2023, if bank base rate had increased by 0.5% with all other variables held constant, post-tax profit would have been £32,056 (2022: £30,132) higher and equity would have been £32,056 (2022: £30,132) higher. Conversely, if bank base rate had fallen 0.5% with all other variables held constant, post-tax profit would have been £32,056 (2022: £30,132) lower and equity would have been £32,056 (2022: £30,132) lower.
26. Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and maintain an optimal capital structure.
The Group defines capital as being share capital plus reserves. The Board of Directors continually monitors the level of capital.
The Group is not subject to any externally imposed capital requirements.
27. Ultimate controlling party
There is no ultimate controlling party.
28. Subsequent events
The Company has reached agreement on terms for a new lease agreement on the office at 11- 21 Paul Street, London, EC2A 4JU. The lease is for a five year term an on similar financial terms as the current lease which expires in December 2023. As at the date of signing this report the new lease agreement has not yet been signed as we wait for final documentation to be received from the Land Registry Office.
29. Copies of these statements
Copies of this statement are available from the Company Secretary at the Company’s registered office at 1st Floor, 11-21 Paul Street, London, EC2A 4JU or from the Company’s website at www.arcontech.com.
2023 Trading Update
ARCONTECH GROUP PLC
(“Arcontech” or the “Company”)
Trading Update & Notice of Results
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, announces that for the year ended 30 June 2023 turnover is expected to be in line with market expectations and adjusted EBITDA and adjusted profit before tax is expected to be ahead of market expectations by approx. 31% and 49% respectively through a combination of lower than anticipated staff related costs arising from lower variable costs and delayed hires. These are expected to be once off savings in the year to 30 June 2023. Expectations for the current financial year therefore remain unchanged.
Financial expectations noted above are preliminary and subject to year-end financial close and audit review processes.
Notice of Results
The Company’s results for the 12 months ended 30 June 2023 are expected to be announced in early September 2023 and the Board look forward to updating shareholders with further details at that time.
Enquiries:
Arcontech Group plc 020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
finnCap Ltd (Nomad & Broker 020 7220 0500
Carl Holmes/George Dollemore
Harriet Ward (ECM)
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.
About Arcontech
Arcontech Group Plc (LSE: ARC) is the leading independent provider of financial market-data infrastructure and display solutions. With multi-source data collection, value added processing, publishing, distribution and display, Arcontech provides a highly performant, cost effective and flexible alternative to traditional market data infrastructure or building it in-house.
Solutions can be “off-the-shelf”, customised or completely new developments; Cloud, On-prem or Hybrid. Our deep domain knowledge and automated test suite ensure the right solution at the right time at the right price.
We are also Bloomberg, Refinitiv and Symphony development partners underlining our independence and ability to deliver viable, value added, vendor agnostic solutions to meet financial institutions real-time market data workflow needs.
Our clients include Global Tier 1 and Tier 2 financial market participants along with key market regulators.
For more information about us and what we can do for you, please visit: www.Arcontech.com
Director/PDMR Shareholding
ARCONTECH GROUP PLC
(“Arcontech” or the “Company”)
Director/PDMR Shareholding
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, announces the following PDMR dealing in Arcontech’s ordinary shares.
Ben Hodges, Chief Financial Officer, has bought 6,766 ordinary shares at a price of 73.89 pence per share. Following this purchase, Ben Hodges has a beneficial interest of 6,766 ordinary shares in the Company representing 0.05% of the issued share capital.
Further information is disclosed below pursuant to Article 19(3) of the Market Abuse Regulation.
Enquiries:
Arcontech Group plc
020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
finnCap Ltd (Nomad & Broker)
Carl Holmes/George Dollemore (Corporate Finance) Harriet Ward (ECM)
020 7220 0500
To access more information on the Group please visit:www.arcontech.com
Notification and public disclosure of transactions by persons discharging managerial responsibilities and persons closely associated with them
1.
Details of the person discharging managerial responsibilities / person closely associated
a)
Name
Ben Hodges
2.
Reason for the Notification
a)
Position/status
Chief Financial Officer
b)
Initial notification/Amendment
Initial notification
3.
Details of the issuer, emission allowance market participant, auction platform, auctioneer or auction monitor
a)
Name
Arcontech Group Plc
b)
LEI
213800O7PM9V79TP7523
4.
Details of the transaction(s): section to be repeated for (i) each type of instrument; (ii) each type of transaction; (iii) each date; and (iv) each place where transactions have been conducted
a)
Description of the Financial instrument, type of instrument
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, announces that Louise Barton, Non-Executive Director, is to retire from the Board with effect from 7 April 2023 .
Louise has been a Non-Executive Director of the Company since 2007 and has been instrumental in steering the Company through its evolution to become a well-regarded financial technology company. The Board is grateful for her tireless work on behalf of the Company and the knowledge and market insights she brought to the development and strategy that has helped to cement Arcontech’s position in the market. The Company would like to thank Louise for her dedication and wish her well for the future.
The Company announced the appointment of Raj Nagavedia to the Board as Non-Executive Director on 26 October 2022. Raj will continue with Louise’s oversight of the finance function of Arcontech and in due course the Company expects to review the Composition of the Board to further strengthen the Company’s markets and marketing strategy.
Enquiries:
Arcontech Group plc
020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
finnCap Ltd (Nomad & Broker)
020 7220 0500
Carl Holmes/George Dollemore Harriet Ward (ECM)
To access more information on the Group please visit: www.arcontech.com
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2022
ARCONTECH GROUP PLC
(“Arcontech” or the “Group”)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2022
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, reports its unaudited results for the six months ended 31 December 2022.
Overview:
Turnover decreased by 6.6% to £1,357,041 (H1 2021: £1,452,498) due to the effect of contract losses announced during the previous financial year
Profit before tax decreased by 13.2% to £372,414 (H1 2021: £428,924) reflecting the lower turnover
Our preferred measure of adjusted profit before tax, which excludes the release of accruals unrelated to the underlying business, declined by 13.3% to £367,914 (H1 2021: £424,425)
Recurring revenues represented 100% of total revenues for the period (H1 2021: 98%)
Net cash of £5,908,814 at 31 December 2022, up 5.13% (H1 2021: £5,620,352) after a record dividend payment of £434,616 paid on 24 October 2022
Revenue and profit before tax for the year to 30 June 2023 are expected to be in line with current expectations
Geoff Wicks, Chairman of Arcontech, said:
“Our strategy to support our existing customers to maximise opportunities while building our sales capability to grow our customer base globally, ensures we focus on growth in our core market. We are starting to see small amounts of growth and are confident that this will continue, although this must be balanced against continuing difficult markets for our customers.”
Enquiries:
Arcontech Group plc
020 7256 2300
Geoff Wicks, Chairman and Non-Executive Director
Matthew Jeffs, Chief Executive
finnCap Ltd (Nomad & Broker)
020 7220 0500
Carl Holmes/George Dollemore Harriet Ward (ECM)
To access more information on the Group please visit: www.arcontech.com
The interim report will only be available to view online enabling the Group to communicate in a more environmentally friendly and cost-effective manner.
Chairman’s Statement
While our results for the first half of this year show a decline in both revenue and profit compared to the same period last year, this is the result of the loss of business in the second half of last year. This impact will continue in the second half of the year given the recurring nature of our revenue. However, we are starting to see some growth with new and existing clients although the market remains difficult with customers seeking to reduce spend and prospects continuing to take time to commit.
We have worked hard at retaining customers and now have a significant proportion of our customer base on longer term contracts. At the same time, we are building a prospect list that gives us confidence of sustainable growth in the future. We have also managed our costs appropriately to ensure continued strong profitability and excellent cash generation.
Revenue was £1,357,041, down 6.6% on the same period last year, due to the loss of two contracts in the second half of 2021/22. Profit before tax (“PBT”) was £372,414, 13.2% lower than the same period last year, reflecting the loss of revenue. Adjusted profit before tax, which is PBT before the release of accruals for administrative costs in respect of prior years, was down 13.3% to £367,914.
We continue to invest in our sales, marketing and support teams which has helped us to retain our excellent customer list and to start to build back some of the business lost in the previous financial year.
Financing
Our balance sheet remains robust with net cash of £5.9 million, £0.3 million higher than at 31 December 2022, and £0.1 million lower than the level at 30 June 2022 after payment to shareholders of a record dividend of £0.4 million. This cash position provides resources for continued investment in sales and products and for small complementary acquisitions.
Dividend
No interim dividend is proposed to be paid in respect of the half year. The Board expects to continue its policy of paying a dividend following the announcement of its full year results.
Outlook
Our strategy to support our existing customers to maximise opportunities while building our sales capability to grow our customer base globally, ensures we focus on growth in our core market. We are starting to see small amounts of growth and are confident that this will continue although this must be balanced against continuing difficult markets for our customers.
Geoff Wicks
Chairman and Non-Executive Director
GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
Note
Six months ended 31 December
Six months ended 31 December
Year ended 30 June
2022
2021
2022
(unaudited)£
(unaudited) £
(audited) £
Revenue
1,357,041
1,452,498
2,757,795
Administrative costs
(995,636)
(1,021,879)
(1,999,523)
Operating profit
4
361,405
430,619
758,272
Finance income
15,840
6,521
13,911
Finance costs
(4,831)
(8,216)
(13,610)
Profit before taxation
372,414
428,924
758,573
Taxation
6
–
–
(148,007)
Profit for the period after tax
372,414
428,924
610,566
Total comprehensive income
372,414
428,924
610,566
Profit per share (basic)
2.78p
3.21p
4.57p
Adjusted* Profit per share (basic)
2.75p
3.18p
4.50p
Profit per share (diluted)
2.77p
3.20p
4.56p
Adjusted* Profit per share (diluted)
2.74p
3.16p
4.49p
All of the results relate to continuing operations and there was no other comprehensive income in the period.
* Before release of accruals for administrative costs in respect of prior years.
GROUP BALANCE SHEET
Note
31 December 2022
31 December 2021
30 June 2022
(unaudited) £
(unaudited) £
(audited) £
Non-current assets
Goodwill
1,715,153
1,715,153
1,715,153
Property, plant and equipment
4,420
7,489
6,545
Right of use asset
12
146,303
292,606
219,455
Deferred tax asset
318,000
471,000
318,000
Trade and other receivables
141,750
141,750
141,750
Total non-current assets
2,325,626
2,627,998
2,400,903
Current assets
Trade and other receivables
9
1,584,539
322,885
348,686
Cash and cash equivalents
5,908,814
5,620,352
6,026,468
Total current assets
7,493,353
5,943,237
6,375,154
Current liabilities
Trade and other payables
10
(891,203)
(553,435)
(630,644)
Deferred income
(1,854,240)
(1,017,829)
(978,236)
Lease liabilities
12
(118,994)
(151,948)
(148,450)
Total current liabilities
(2,864,437)
(1,723,212)
(1,757,330)
Non-current liabilities
Lease liabilities
12
–
(118,994)
(47,403)
Total non-current liabilities
–
(118,994)
(47,403)
Net current assets
4,628,916
4,220,025
4,617,824
Net assets
6,954,542
6,729,029
6,971,324
Equity
Share capital
1,671,601
1,671,601
1,671,601
Share premium account
115,761
115,761
115,761
Share option reserve
306,440
290,713
270,825
Retained earnings
4,860,740
4,650,954
4,913,137
6,954,542
6,729,029
6,971,324
GROUPCASH FLOW STATEMENT
Note
Six months ended 31December
Six months ended 31 December
Year ended 30 June
2022
2021
2022
(unaudited)£
(unaudited) £
(audited) £
Cash generated from operating activities
11
383,087
630,439
1,109,608
Tax paid
6
(4,993)
–
(2,642)
Net cash generated from operating activities
378,094
630,439
1,106,966
Investing activities
Interest received
15,840
6,521
13,911
Purchases of plant and equipment
(114)
(527)
(2,688)
Net cash generated from investing activities
15,726
5,994
11,223
Financing activities
Proceeds from the exercise of options
–
29,024
29,025
Dividends paid
(434,616)
(367,202)
(367,752)
Payment of lease liabilities
(76,859)
(73,360)
(148,450)
Net cash used in financing activities
(511,475)
(411,538)
(487,177)
Net (decrease) / increase in cash and cash equivalents
(117,655)
224,895
631,012
Cash and cash equivalents at beginning of period
6,026,469
5,395,457
5,395,457
Cash and cash equivalents at end of period
5,908,814
5,620,352
6,026,469
GROUP STATEMENT OF CHANGES IN EQUITY
Sharecapital
Sharepremium
Share-based payments reserve
Retainedearnings
Total
£
£
£
£
£
At 1 July 2021
1,665,977
92,360
271,207
4,553,329
6,582,873
Profit for the period
–
–
–
428,924
428,924
Total comprehensive income for the period
–
–
–
428,924
428,924
Exercise of options[1]
5,624
23,401
–
–
29,025
Transfer between reserves
–
–
(35,904)
35,904
–
Dividends paid
–
–
–
(367,202)
(367,202)
Share-based payments
–
–
55,409
–
55,409
Total transactions with owners
5,624
23,401
19,505
(331,298)
(282,768)
At 31 December 2021
1,671,601
115,761
290,712
4,650,955
6,729,029
Profit for the period
–
–
–
181,642
181,642
Total comprehensive income for the period
–
–
–
181,642
181,642
Transfer between reserves
–
–
(81,090)
81,090
–
Dividends paid
–
–
–
(550)
(550)
Share-based payments
–
–
61,203
–
61,203
Total transactions with owners
–
–
(19,887)
80,540
60,653
At 30 June 2022
1,671,601
115,761
270,825
4,913,137
6,971,324
Profit for the period
–
–
–
372,414
372,414
Total comprehensive income for the period
–
–
–
372,414
372,414
Transfer between reserves
–
–
(9,805)
9,805
–
Dividends paid
–
–
–
(434,616)
(434,616)
Share-based payments
–
–
45,420
–
45,420
Total transactions with owners
–
–
35,615
(424,811)
(389,196)
At 31 December 2022
1,671,601
115,761
306,440
4,860,740
6,954,542
NOTES TO THE FINANCIAL INFORMATION
The figures for the six months ended 31 December 2022, and 31 December 2021, are unaudited and do not constitute statutory accounts. The accounting policies adopted are consistent with those applied by the Group in the preparation of the annual consolidated financial statements for the year ended 30 June 2022. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2022, but these do not have a material impact on the interim condensed consolidated financial statements of the Group.
The financial information for the year ended 30 June 2022 set out in this interim report does not comprise the Group’s statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 30 June 2022, which were prepared in accordance with UK-adopted international accounting standards, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.
Copies of this statement are available from the Company Secretary at the Company’s registered office at 1st Floor 11-21 Paul Street, London, EC2A 4JU or from the Company’s website at www.arcontech.com.
Operating profit is stated after release of accruals for administrative expenses in respect of prior years of £4,500 (31 December 2021: £4,500; 30 June 2022: £9,000).
Earnings per share have been calculated based on the profit after tax and the weighted average number of shares in issue during the half year ended 31 December 2022 of 13,372,811 (31 December 2021: 13,355,719 30 June 2022: 13,364,195).
The number of dilutive shares under option at 31 December 2022 was 18,612 (31 December 2021: 62,727; 30 June 2022: 25,145). The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at the average market price during the period, based upon the issue price of the outstanding share options including future charges to be recognised under the share-based payment arrangements.
Taxation is based on the unaudited results and provision has been estimated at the rate applicable to the Company at the time of this statement and expected to be applied to the total annual earnings. No corporation tax has been charged in the period as any liability has been offset against tax losses brought forward from prior years. The tax paid represents the cash payment of tax liability from the preceding income tax year.
A final dividend in respect of the year ended 30 June 2022 of 3.25 pence per share (2021: 2.75 pence per share) was paid on 24 October 2022.
The Directors have elected not to apply IAS 34 Interim financial reporting.
Trade and other receivables
31 December 2022 £(unaudited)
31 December 2021 £ (unaudited)
30 June 2022 £ (audited)
Due within one year:
Trade and other receivables
1,468,165
209,800
196,541
Prepayments and accrued income
116,374
113,085
152,145
1,584,539
322,885
348,686
Trade and other payables
31 December 2022 £(unaudited)
31 December 2021 £ (unaudited)
30 June 2022 £ (audited)
Trade payables
33,078
45,063
77,772
Other tax and social security payable
319,265
64,548
62,148
Other payables and accruals
538,860
443,824
490,724
891,203
553,435
630,644
Cash generated from operations
Six months ended 31December
Six months ended 31 December
Year ended 30 June
2022
2021
2022
(unaudited)£
(unaudited) £
(audited) £
Operating profit
361,405
430,619
758,272
Depreciation charge
75,390
77,337
153,594
Non-cash share option charges
45,420
55,410
116,612
Lease interest paid
(4,141)
(7,640)
(13,550)
Other interest paid
(690)
(576)
(60)
(Increase)/decrease in trade and other receivables
(1,240,846)
147,432
126,624
Increase/(decrease) in trade and other payables
1,146,549
(72,143)
(31,884)
Cash generated from operations
383,087
630,439
1,109,608
12. Leases
As a lessee, under IFRS 16 the Group recognises right-of-use assets and lease liabilities for all leases on its balance sheet. The only lease applicable under IFRS 16 is the Group’s office.
The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position are as follows: