Notes to the Consolidated Financial Statements

For the financial year ended 31 March 2021

 

1. Basis of preparation

Kinovo Plc and its subsidiaries (together the "Group") operate in the gas heating, electrical and general building services industries. The Company is a public company operating on the AIM market of the London Stock Exchange (AIM) and is incorporated and domiciled in England and Wales (registered number 09095860). The address of its registered office is 201 Temple Chambers, 3-7 Temple Avenue, London EC4Y 0DT. The Company was incorporated on 20 June 2014.

The Group's financial statements have been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the United Kingdom, the International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued by the International Accounting Standards Boards ("IASB") that are effective or issued and early adopted as at the time of preparing these financial statements and in accordance with the provisions of the Companies Act 2006.

The Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB, as they have been adopted by the United Kingdom, that are relevant to its operations and effective for accounting periods beginning on 1 April 2020.

The preparation of financial statements requires management to exercise its judgement in the process of applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in notes 2 and 4. The functional and presentational currency of the Group is Pounds Sterling (£) rounded to the nearest thousand. The principal accounting policies adopted by the Group are set out in note 2.

2. Summary of significant accounting policies

2.1. Going concern

Accounting standards require that Directors satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare the financial statements on a going concern basis. The Group's business activities together with factors that are likely to affect its future development and position, are set out in the Group Chief Executive Officer's Review.

In assessing the Group's ability to continue as a going concern, the Board reviews and approves the annual budget and longer-term strategic plan, including forecasts of cash flows.

In building these budgets and forecasts, the Board has considered the continuing potential impact of Covid-19 on the trading of the Group. Whilst the impact of Covid-19 has been felt strongly particularly where the operations are directly people facing, the business has demonstrated its resilience. Access to properties is now becoming easier as lockdown restrictions are gradually lifted, and residents/tenants are more comfortable given the precautions that have been implemented and the continued successful roll out of the vaccination program.

The Board also reviews the Group's sources of available funds and the level of headroom available against its committed borrowing facilities and associated covenants.

The Group reduced its level of net debt during the year by £4.5m. The level of reduction represents an acceleration on the repayment of the term loan over and above the timeline agreed in the banking facility. Given this positive result for the year ended 31 March 2021, the banks agreed to amend the facility agreement to remove any requirement for covenant testing during the first half of the year ending 31 March 2022.

After taking into account the above factors and taking into account possible sensitivities in trading performance, the Board has reasonable expectation that Kinovo Plc and the Group as a whole have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Board continues to adopt the going concern basis in preparing the consolidated financial statements.

2.2. Basis of consolidation

The consolidated financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March each year. Subsidiaries are entities that are controlled by the Company. The definition of control involves three elements: power over the investee; exposure or rights to variable returns; and the ability to use power over the investee to affect the amount of the investors' returns. The Group generally obtains power through voting rights.

The consolidated financial statements incorporate the financial information of Kinovo Plc and its subsidiaries. Subsidiary companies are consolidated from the date that control is gained. The subsidiaries of the Group are detailed in note 6 of the Company financial statements. All intra-group transactions, balances, income and expense are eliminated on consolidation.

2.3. Business combinations and goodwill

Business combinations are accounted for using the acquisition method, with the exception of the acquisition of P&R Installation Company Limited. The acquisition method involves the recognition at fair value of all identifiable assets, liabilities and contingent liabilities of the subsidiary at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the Consolidated Statement of Financial Position at their fair values, which are also used as the bases of subsequent measurement in accordance with the Group accounting policies.

The acquisition of P&R installation Company Limited did not meet the definition of a business combination as the Company was not a business and therefore falls outside the scope of IFRS3 (Revised) Business Combinations. As IFRS does not provide specific guidance in relation to group reorganisations it defers to the next appropriate GAAP being UK GAAP. The acquisition of P&R Installation Company Limited by the Company has therefore been accounted for in accordance with the principles of merger accounting as set out in Section 19 of FRS 102. Costs relating to acquisitions in the year are expensed and are included in administrative expenses.

Goodwill arising on acquisitions is recognised for an acquisition as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

Where applicable, the consideration for an acquisition includes any assets or liabilities resulting from a contingent consideration arrangement, measured at fair value at the acquisition date. Subsequent changes in such fair values are adjusted against the cost of acquisition where they result in additional information, obtained within one year from the acquisition date, about facts and circumstances that existed at the acquisition date. All other subsequent changes in fair value of contingent consideration classified as an asset or liability are recognised in accordance with IAS 39, either in profit or loss or as a change to other comprehensive income. Changes in fair value of contingent consideration classified as equity are not recognised.

2.4. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the provision of the Group's services. Revenue is recognised by the Group, net of value added tax, based upon the following:

•     Gas maintenance - Gas services are supplied under a term contract or framework agreement with both local authority and corporate customers that usually span three or more years. These contracts will outline a number of services that the Group is retained to provide to the customer ranging from boiler servicing and meter connections to installing central heating solutions. These services will be provided on request from the customer, and work will be charged based on the customer rate card. Each service is considered to have a single performance obligation, and generally take less than a day to complete. Revenue is only recognised at the point that the service is complete. Invoicing only occurs once the customer has agreed that the relevant service has been received and completed. The invoice is subsequently settled on average within 26 days of issue. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Any work completed but not yet agreed with the customer/invoiced is recognised as accrued income.

•     Building services - Building Services contracts typically range between one to six years, and can range from ad-hoc maintenance work to long-term construction contracts:

•     Long-term construction contracts: During the course of a project an independent surveyor will conduct a monthly valuation of the work done and issue a certification of the stage of completion, which is the trigger for an invoice to be generated and a stage payment to be made as per the terms of the contract. Payment occurs on average within 26 days of the invoice being issued. These monthly valuations are seen to represent the performance obligations that have been satisfied under the terms of the contract, as they reflect the benefit that has been transferred to the customer. The Group thus recognises the revenue in line with the certified stage of completion. If there is a delay in receiving the certification of work, revenue will be recognised based on management's estimate of the value of the performance obligation fulfilled. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Revenue recognisable in relation to work completed is recognised as accrued income until invoiced.

      A twelve year warranty is issued on any new build developments completed. Any claims made within the first two years of the warranty are the responsibility of the Group to rectify. The subsequent ten years are then covered by a third-party warranty provider. No warranty claims have previously been made against the Group, and therefore no provision for potential warranty claims are made within these financial statements.

•     Maintenance work: Maintenance work is supplied under a term contract or framework agreement which sets out the range of services the Group is retained to provide to the customer including refurbishments, replacements of kitchens and bathrooms, window installs and painting and decorating. These services will be provided on request from the customer, and work will be charged based on the customer rate card. Each service is considered to have a single performance obligation, and generally take less than a day to complete. Revenue is only recognised at the point that the service is complete. Invoicing only occurs once the customer has agreed that the relevant service has been received and completed. The invoice is subsequently settled on average within 26 days of issue. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Any work completed but not yet agreed with the customer/invoiced is recognised as accrued income.

•     Electrical services - Electrical services are supplied under a term contract or framework agreement with both local authority and corporate customers that usually span three or more years. These contracts will outline a number of services that the Group is retained to provide to the customer including servicing, maintenance, emergency call-outs and rewires. These services will be provided on request from the customer, and work will be charged based on the customer rate card. Each service is considered to have a single performance obligation, and generally take less than a day to complete. Revenue is only recognised at the point that the service is complete. Invoicing only occurs once the customer has agreed that the relevant service has been received and completed. The invoice is subsequently settled on average within 26 days of issue. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Any work completed but not yet agreed with the customer/invoiced is recognised as accrued income.

It is considered by management that the above revenue recognition policies are suitable for recognising revenue arising from the Group's key market verticals. All revenue streams are wholly attributable to the principal activity of the Group and arise solely within the United Kingdom. Note 5 gives further detail of any work in progress and accrued income balances recognised in relation to contracts with customers.

2.5. Operating profit and non-underlying items

Operating profit comprises the Group's revenue for the provision of services, less the costs of providing those services and administrative overheads, including depreciation of the Group's non-current assets.

Underlying operating profit before the deduction of exceptional costs and other adjusting items is one of the key measures used by the Board to monitor the Group's performance. Exceptional costs are disclosed on the face of the Consolidated Statement of Comprehensive Income as "non-underlying items".

These non-underlying items comprise costs that are considered by the Board to not relate to the underlying financial performance of the Group and are separately analysed so that the users of the accounts can compare trading performance on a like-for-like basis. Costs falling within this category will have one or more of the following attributes:

•     one-off transactions not relating to current or future trading;

•     non-cash items such as amortisation and impairment of financial assets and share based payment charges; and

•     exceptional in size such that they distort the understanding of underlying trading activities.

2.6. Dividends

The Group has a policy of paying dividends to shareholders in accordance with the amount recommended by the Directors. If the Directors believe the dividends are justified by the profits of the Group available for distribution, they also pay interim dividends. Dividends are recognised when they become legally payable. In the case of interim dividends, this is when dividends are paid. In the case of final dividends, this is when the dividends are approved by the shareholders at the Annual General Meeting.

2.7. Segmental reporting

The board of directors of Kinovo Plc (which is considered to be the Chief Operating Decision Maker) has identified the reportable segments to be gas maintenance, building services and electrical service. Costs are allocated to the appropriate segment as they arise within central overheads apportioned on a reasonable basis. Operating segments are presented in a manner consistent with internal reporting, with inter- segment revenue and expenditure eliminated on consolidation. The segmental reporting is outlined in note 6.

2.8. Intangible assets

In accordance with IFRS 3, an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible asset reflects market expectations about the probability that future economic benefits embodied in the asset will flow to the Group.

Software expenditure is capitalised as an intangible asset if the asset created can be identified, if it is probable that the asset created will generate future economic benefits and if the development cost of the asset can be measured reliably.

Following initial recognition, the carrying amount of an intangible asset is its cost less any accumulated amortisation and any accumulated impairment losses. Amortisation expense is charged to administrative expenses in the income statement on a straight-line basis over its useful life.

The identifiable intangible assets and associated periods of amortisation are as follows:

•     Customer relationships                                               over the period expected to benefit, typically seven years

•     Software and development costs              over four years

2.9. Impairment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows: cash-generating units ("CGUs"). As a result, some assets are tested individually for impairment, and some are tested at CGU level. Goodwill is allocated to CGUs that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

Goodwill or CGUs that include goodwill and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised in the Statement of Comprehensive Income for the amount by which the asset or CGU's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for CGUs to which goodwill has been allocated are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the CGU. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

2.10. Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation. Depreciation is calculated to write off the cost of the assets, net of anticipated disposal proceeds, over the expected useful lives of the assets concerned as follows:

•    Freehold property	- 2% on freehold building cost
•    Long leasehold improvements	- 5% on long leasehold improvements cost
•    Office and computer equipment	- 25% reducing balance
•    Fixtures and fittings	- 25% reducing balance
•    Motor vehicles	- 25% reducing balance

 

Freehold land is not depreciated.

Subsequent expenditure is included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the Statement of Comprehensive Income.

The residual values and economic lives of assets are reviewed by the Directors on at least an annual basis and are amended as appropriate.

2.11. Impairment of property, plant and equipment

At each Statement of Financial Position date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. For assets other than goodwill, where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the Statement of Comprehensive Income, net of any depreciation or amortisation that would have been charged since the impairment.

2.12. Inventories

Raw materials and consumables are measured at the lower of cost and net realisable value. Net realisable value is based on estimated selling price less additional costs to completion and disposal.

Work in progress is measured at the lower of cost and net realisable value. Cost comprises direct materials and direct labour costs that have been incurred in advance of the performance obligations on contracts being completed.

2.13. Financial instruments

Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.

(a) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the Statement of Comprehensive Income when there is objective evidence that the assets are impaired. Interest income is recognised by applying the effective interest rate, except for short-term trade and other receivables when the recognition of interest would be immaterial.

The Group incurs costs in advance of new contracts commencing in association with preparatory work to ensure the contract can be delivered from day one. These costs are included within work in progress and released over the life of the contract.

(b) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

(c) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

(d) Trade and other payables

Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the "effective interest rate" to the carrying amount of the liability.

(e) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Statement of Comprehensive Income over the period of the borrowings using the effective interest method.

2.14. Current and deferred tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(a) Current tax

Tax payable is based on taxable profit for the year. Taxable profit differs from net profit reported in the Statement of Comprehensive Income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date. As the Group has brought forward tax losses available for utilisation there is no tax payable for the year to 31 March 2021. Details of the tax losses utilised during the year are outlined in note 13.

(b) Deferred tax

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying value of assets and liabilities in the financial information 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 recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is charged or credited to the Statement of Comprehensive Income except when it relates to items credited or charged directly in equity, in which case the deferred tax is also dealt with in equity.

Deferred tax is calculated at the tax rates and laws that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the reporting date.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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 tax assets and liabilities on a net basis.

2.15. Leases

The Group leases various premises, vehicles and equipment. Rental contracts are typically made for fixed periods of six months to 20 years, but may have extension options. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate the lease and non-lease components and instead accounts for these as a single lease component.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

Leases are recognised as a right-of-use asset and a corresponding liability at the date which the leased asset is available for use by the Group.

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 payments that are based on an index or a rate, initially measured using the index or rate as at commencement date;

•     amounts expected to be payable by the Group under residual value guarantees;

•     the exercise price or 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 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.

To determine the incremental borrowing rate, the Group uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in the financing conditions since the third-party financing was received.

Lease payments are allocated between principal and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

•     the amount of the initial measurement of 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 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 assets useful life.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight line basis as an expense in profit or loss. Short-term leases are leases with a lease term of twelve months or less. Low-value assets comprise small items of office equipment and IT.

2.16. Employee benefits

The Group operates defined contribution pension schemes for certain employees of the Group. The assets of the schemes are held separately from those of the Group in an independently administered fund. The pension costs charged to profit or loss are the contributions payable to the scheme in respect of the accounting period.

All Group companies are in compliance with their pension obligations and have auto-enrolled, offering all employees the opportunity to participate.

2.17. Share based payments

The Group issues equity-settled share-based payment transactions to certain employees. Equity-settled share-based payment transactions are measured at fair value at the date of grant. The calculation of fair value at the date of grant requires the use of management's best estimate of volatility, risk free rate and expected time to exercise the options. Details regarding the determination of the fair value of equity-settled transactions are set out in note 28.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any changes in fair value recognised in profit or loss for the year.

2.18. New standards and interpretations

The Group has applied the following standards and amendments for the first time for the annual reporting period commencing on 1 April 2020:

•     Definition of Material - amendments to IAS 1 and IAS 9

•     Definition of a Business- amendments to IFRS3

•     Interest Rate Benchmark Reform - amendments to IFRS9, IAS39 and IFRS 7

•     Revised Conceptual Framework for Financial Reporting

The Group has also elected to adopt the following amendments early:

•     Annual Improvements to IFRS Standards 2018- 2020 Cycle.

•     Interest Rate Benchmark Reform - amendments to IFRS9, IAS 39 and IFRS 7

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

2.19. New standards and interpretations not yet adopted

The following new accounting standards and interpretations are currently in issue but not effective for accounting periods commencing on 1 April 2020 and therefore have not been early adopted by the Group.

-       IFRS 17 - Insurance Contracts

-       Amendments to IFRS 16 - Covid-19-Related Rent Concessions

-       Amendments to IFRS 3 - Business Combinations

-       Amendments to IAS 1 - Disclosure of Accounting policies

-       Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before intended use

-       Amendments to IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract

-       Amendments to IAS 8 - Accounting policies, Changes in Accounting Estimates and Errors: Definition of accounting estimates

-       Amendments to IFRS 10 and IAS 28 - Sale or contribution of assets between an investor and its associate or joint venture

These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

3. Financial risk management

3.1. Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by management under policies approved by the Board of Directors. Management identifies and evaluates financial risks and provides principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk and investment of excess liquidity.

3.2. Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange and security prices.

(a) Interest rate risk

The Group has exposure to interest rate risk by virtue of its borrowings with HSBC UK Bank Plc, which attract a variable rate of interest at a mark-up to the base rate. Details of actual interest rates can be found in note 21 to these consolidated financial statements. No hedging arrangements are currently in place but the Board keeps this under constant review.

3.3. Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises principally from the Group's cash balances and trade receivables balances. The Group's customers are primarily local authorities and housing associations with high credit ratings.

The Group has a number of policies for managing the credit risk of its new and existing customers, and has dedicated functions focused on cash conversion, collection and management.

The Group gives careful consideration to which organisations it uses for its banking services in order to minimise credit risk and therefore only financial institutions with a minimum rating of B are used. Currently the Group bank accounts are held primarily with HSBC UK Bank Plc which has a Fitch rating of AA-.

3.4. Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the Group's prudent liquidity risk management and implies maintaining sufficient cash reserves to meet the Group's working capital requirements. Management monitors rolling forecasts of the Group's liquidity and cash and cash equivalents on the basis of expected cash flow.

As at 31 March 2021, the Group had cash and cash equivalents of £1,293,000 (2020: overdraft £3,351,000 and cash and cash equivalents £19,000).

The Group has a centralised treasury function and actively manage cash flows on both a daily and longer-term basis.

3.5. Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern whilst maximising the return to shareholders. The Group funds its expenditures on commitments from existing cash and cash equivalent balances.

There are no externally imposed capital requirements.

Financing decisions are made by the Board of Directors based on forecasts of the expected timing and level of capital and operating expenditure required to meet the Group's commitments and development plans.

The capital structure of the Group consists of cash and cash equivalents and equity, comprising issued share capital and retained profits.

4. Critical accounting estimates and judgements

The preparation of financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during year. The estimates and associated judgements are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying judgements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In the process of applying the Group's accounting policies, management has decided the following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities recognised in the consolidated financial statements.

4.1. Critical judgements in applying the Group's accounting policies

(a) Valuation of accrued income

Work completed under either a framework agreement or term contract for gas services, building services and electrical services is recognised as accrued income until it has been billed to the client. A level of judgement is involved in determining whether the Group has met all of the required performance obligations necessary in order to recognise the revenue. Accrued income of £8.6 million was recognised within the Statement of Financial Position at 31 March 2021 (2020: £10.0 million).

(b) Valuation of amounts due from long-term contracts

Work completed under long-term construction contracts is recognised as amounts due from long-term contracts until billed to the client, and similar to accrued income requires judgement on whether the Group has met all its performance obligations to recognise the revenue. Amounts due from long-term contracts of £1.5 million was recognised within the Statement of Financial Position at 31 March 2021 (2020: £0.8 million).

(c) Share-based payment charge

The Black Scholes model and the Monte Carlo simulation have been used to calculate the appropriate charge for the share options issued across the Group's share option plans in the current and previous years. The use of these models to calculate a charge involves using a number of judgements to establish the appropriate inputs to be entered into the models, covering areas such as exercise restrictions and behavioural considerations of scheme members. Full details of judgements used within the calculation to derive the charge are given within note 28. Underlying estimates and a full sensitivity analysis have not been disclosed as management do not feel that any reasonable change would materially influence the interpretation of the charge.

(d) Recoverability of trade receivable balances

Provisions for trade debtors were previously considered to be an area of key judgement for the Group, given the underlying materiality of the associated trade receivable balances. However, given that a large proportion of the customer base are local councils with little risk of default and minimal historic levels of write-off, bad debt provisions are no longer considered an area of key judgement.

4.2. Key sources of estimation uncertainty

(a) Customer relationships

Customer relationship assets recognised on acquisition are consider to have the following key areas of estimate:

•     Determining the useful economic life of customer relationships and the corresponding rate of amortisation is considered a critical estimate. Management are required to predict the future timeframe over which customer relationships will continue to generate a positive contribution to Group cash flow. This estimate is made on a case-by-case basis and will reflect management's latest plans and long-term forecasts for the related contracts. Amortisation of customer relationships has resulted in a charge to the Statement of Comprehensive Income of £1.8 million during the year (2020: £1.9 million).

•     The valuation of customer relationships requires the use of estimates, as the valuation model utilises assessments of both future cash flows and appropriate discount factors. The valuation of customer relationship assets held within the Statement of Financial Position was £2.5 million (2020: £4.3 million).

No acquisitions have been made in the current year. See note 15.1 for full details on the estimates applied by management in valuing customer relationships arising on past acquisitions.

(b) Impairment of goodwill

Determining whether goodwill is impaired requires an estimate of the value in use of the cash-generating units ("CGUs") to which goodwill has been allocated. The value in use calculation involves an estimate of the future cash flows of the CGUs and also the selection of appropriate discount rates to calculate present values. Future cash flows are estimated based on contract value and duration, together with margin based on past performance. Change in contract values and duration, together with margins achieved could result in variations to the carrying value of goodwill. In addition, an adverse movement in the discount factor due to an increased risk profile or a change in the cost of debt (increase in interest rates) would also result in a variation to the carrying value of goodwill. The primary sensitivity is the discount rate; however, the Directors consider that there is no reason to believe it is not appropriate. See note 15.2 for details on the key estimates used within the impairment test for goodwill, along with the Groups sensitivity analysis.

(c) Right-of-use assets

Management are required to make a number of estimates in recognising right-of-use assets. These key estimates are considered to be:

•     estimation of the lease term, which is done on a lease-by-lease basis;

•     determination of the appropriate rate to discount the lease payments. This is set with reference to the Group's incremental cost of borrowing. The incremental rate was 3.4% in the current year (2020: 3.4%); and

•     assessment of whether a right-of-use asset is impaired. An impairment is considered to be present where the net present value of future cash benefit of utilising the asset within the business, or if applicable potential sub lease income if the asset is no longer required, is less than the net present value of future lease payments.

Management considers all facts and circumstances including its past practice and business plans in making this estimate on a lease-by-lease basis.

At 31 March 2021 the Group holds £1.7 million of right-of-use assets (2020: £2.1 million). Management have reviewed the future benefit and costs of the underlying assets and have not identified the need to recognise any impairment.

 

5. Revenue

All results in the current and prior period derive from continuing operations and all revenues arose in the UK.

There are six customers who individually contributed 13%, 9%, 8%, 6%, 6% and 5% respectively towards the revenue (2020: four contributing 10%, 10%, 6% and 5%).

The Group has recognised the following assets within the Statement of Financial Position related to contracts with customers:

 

	2021 £'000	2020 £'000
Current assets relating to contracts with customers
Trade receivables	5,564	7,383
Work in progress	1,561	2,874
Accrued income	8,634	9,968
Electrical services	1,461	832
	17,220	21,057

 

 

As set out in note 2.4 above, work in progress balances arise where costs are incurred in advance of the performance obligations required to recognise revenue having been met, and therefore the costs are recognised as an asset.

Accrued income relates to performance obligations that have been satisfied, but the invoice has not yet been raised to the customer.

Amounts due from long-term contracts relate to performance obligations met in regard to construction contracts, but the invoice has yet to be raised to the customer.

There were no contracts liabilities required to be recognised as at 31 March 2021 (31 March 2020: £nil).

As set out in note 2.4 above, the Group is party to long-term construction contracts which may have performance obligations spanning a number of years. The following shows unsatisfied performance obligations resulting from these long-term construction contracts:

 

	2021 £'000	2020 £'000
Aggregate amounts of the transaction price allocated to long-term construction contracts That are partially or fully unutilised as at 31 March 2021	44,600	51,350

 

 

Management expects that 46.0% of the transaction price allocated to unsatisfied performance obligations as at 31 March 2021 will be recognised as revenue during the next reporting period (£20.5 million). The remaining 54.0% (£24.1 million) will be recognised over the 2023/24 financial years.

Other services are provided under framework agreements and therefore not considered to have any unsatisfied performance obligations as at 31 March 2021.

The value of unsatisfied long-term construction contracts of £44.6 million (2020: £51.4 million) forms part of the overall balance of visible revenues of £170.4 million (2020: £172.1 million).

 

6. Segmental reporting

 

The Board of Directors has determined an operating management structure aligned around the three core activities of the Group, with the following operating segments applicable:

Ø Gas maintenance: The group offers a range of services within the Gas services segment which is inclusive but not limited to: boiler servicing and meter connections to installing central heating solutions.

Ø Building services: The group offers a range of services which is inclusive but not limited to: refurbishment, replacements of kitchens and bathrooms, window installs and painting and decorating, as well as long term construction contracts.

Ø Electrical services: This group offers a range of services within the electrical services segment which is inclusive but not limited to: servicing, maintenance, emergency call-outs and rewires.

The Board adopt the operating profit before exceptional and amortisation of acquisition intangibles as the profit measure. The following is an analysis of the Group's revenue and Operating profit before non-underlying items by reportable segment:

 

	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
Gas maintenance	12,262	11,872
Building services	34,002	31,039
Electrical services	13,922	22,481
	60,186	65,392

 

 

Reconciliation of Operating profit before non-underlying items to profit before taxation from continuing operations.

 

 

	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
Operating profit before exceptional items and amortisation of Acquisition intangibles by segment
Gas maintenance	1,406	N/a
Building services	878	N/a
Electrical services	1,723	N/a
Unallocated central costs	(1,183)	N/a
Total operating profit before non-underlying items	2,824
Amortisation of acquisition intangibles	(1,814)	N/a
Share based payment charge	(30)	N/a
Exceptional costs	(379)	N/a
Operating profit	601	N/a
Finance costs	(461)	N/a
Profit before tax	140	N/a

 

Prior year comparatives have not been presented as this is the first year the CODM have received segmental information as part of the internal reporting.

Only the Group Consolidated Statement of Comprehensive Income is regularly reviewed by the chief operating decision maker and consequently no segment assets or liabilities are disclosed under IFRS 8.

 

7. Operating profit

Operating profit is stated after charging all costs including non-underlying items which are detailed in note 9.

 

	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
Inventory recognised as an expense in cost of sales	10,557	13,049
Staff costs[1]	13,102	14,214
Depreciation	179	258
Depreciation of right-of-use asset	668	801
Amortisation of software costs	29	31
(Profit)/loss on disposal of property, plant and equipment	(2)	162
Auditors remuneration	109	149
Non-audit remuneration	2	3

 

 

 

The depreciation and amortisation charges as stated in the table above are included within administrative expenses in the Consolidated Statement of Comprehensive Income.

^[2] The Group has offset Government grants of £1.1m (2020: £Nil) received through the Coronavirus Job Retention Scheme against staff costs.

 

8. EBITDA

Earnings before interest, taxation, depreciation and amortisation ("EBITDA")

EBITDA is calculated as follows:

 

	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
Underlying profit before tax	2,363	3,691
Finance costs	461	565
Depreciation property, plant and equipment	179	258
Depreciation of right-of-use assets	668	801
Amortisation of software costs	29	31
(Profit)/Loss on disposal of property, plant and equipment	(2)	162
EBITDA (before lease payment charges)	3,698	5,508
Lease payments	(681)	(840)
Adjusted EBITDA (after lease payment charges)	3,017	4,668

 

 

9. Non-underlying items

Operating profit includes the following items which are considered by the Board to be either exceptional in size, one-off in nature or non-trading related items as defined in note 2.5.

 

	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
Amortisation of customer relationships (a)	1,814	1,925
Share-based payment charge (b)	30	39
Exceptional items (c)	379	-
	2,223	1,964

 

 

(a) Amortisation of customer relationships

Amortisation of acquisition intangibles was £1,814,000 for the year (2020: £1,925,000) and relates to amortisation of the customer relationships identified by the Directors on the acquisition of Purdy, DCB (Kent), Spokemead and R. Dunham.

(b) Share based payment charge

A number of Group share option schemes are in place and new options have been granted during the year as detailed in note 28. The share-based payment charge has been separately identified as it is a non-cash expense for the Group.

(c) Exceptional items

Costs comprising redundancy and notice period and other related costs to align operational skill sets with the strategic repositioning of the business during the year ended 31 March 2021. There were no exceptional items in 2020.

 

10. Employee expenses

The average number of employees (including Directors) employed during the year was:

 

 

	12 months ended 31 March 2021 No	12 months ended 31 March 2020 No
Management	43	38
Administration	53	73
Engineers	189	230
	285	341

 

The aggregate remuneration of the above employees (including Directors) comprised:

	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
Wages and salaries	11,650	12,664
Social security costs	1,203	1,264
Pension costs	249	286
	13,102	14,214

 

 

 

The remuneration of the Directors and other key management personnel of the Group is shown in note 27 and the Remuneration Committee Report.

11. Finance costs and finance income

The Group received no finance income in either the current or prior period.

 

 

	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
Interest payable on bank borrowings and loans	310	416
Interest payable on lease liabilities	62	77
Other interest costs	24	28
Other finance costs	65	44
	461	565

 

 

12. Dividends

The Directors recommend a final dividend of 0.50 pence per share for the year ended 31 March 2021. There was no dividend payment made for the year ended 31 March 2020.

 

 

	12 months ended 31 March 2021			12 months ended 31 March 2020
	Per share	Total paid		Per share	Total paid
	(p)	£'000		(p)	£'000
Dividend paid during the year relating to final dividend declared for previous period	-	-		-	-
Interim dividend paid during the year	-	-		-	-
	-	-		-	-

 

 

13. Income tax

13.1. Components of income tax (credit)/expense

 

	12 months ended 31 March  2021 £'000	12 months ended 31 March  2020 £'000
Current income tax expense
Current income tax expense	12	-
Total current tax	12	-
Deferred tax
Credit in connection with intangible assets acquired	(327)	(347)
Charge in relation to use of brought forward tax losses	309	699
Charge/(credit) for lease liabilities recognised on adoption of IFRS 16	55	(385)
(Credit)/charge for right-of-use asset recognised on adoption of IFRS 16	(60)	381
Credit for share-based payment charge	(6)	-
Total deferred tax	(29)	348
Income tax (credit)/expense reported in income statement	(17)	348

 

 

 

13.2. Tax reconciliation

The tax assessed in each period differs from the standard rate of corporation tax in the UK. The differences are explained below.

 

	12 months ended 31 March  2021 £'000	12 months ended 31 March  2020 £'000
Profit on ordinary activities before taxation	140	1,727
Profit on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 19% (2020: 19%)	27	328
Effects of:
Non-deductible expenses	345	666
Utilisation of brought forward tax losses	(309)	(699)
Utilisation of tax losses not previously recognised within deferred tax	(17)	-
Research and development claim	(63)	-
Other tax adjustments	-	53
	(17)	348

 

 

 

14. Earnings per share

14.1. Basic and diluted earnings per share

The calculation of basic and diluted earnings per share is based on the result attributable to shareholders divided by the weighted average number of ordinary shares in issue during the year.

Basic earnings per share amounts are calculated by dividing net profit for the year or period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. The Group has potentially issuable shares all of which relate to the Group's share options issued to Directors and employees.

Basic and diluted profit per share from continuing operations is calculated as follows:

 

	12 months ended 31 March  2021 £'000	12 months ended 31 March  2020 £'000
Profit used in calculating basic and diluted earnings per share	157	1,379
Number of shares
Weighted average number of shares for the purpose of basic earnings per share	58,956,248	47,105,684
Weighted average number of shares for the purpose of diluted earnings per share	58,956,248	47,105,684
Basic earnings per share (pence)	0.27	2.93
Diluted earnings per share (pence)	0.27	2.93

 

 

Options over 5,409,754 ordinary shares remained outstanding as at 31 March 2021 (2020: 750,000) as detailed in note 28.

There was no earnings per share dilution in 2021 or 2020 as the outstanding options granted were priced above the average share price for the year.

14.2. Adjusted earnings per share

Profit after tax is stated after deducting non-underlying items totalling £2,223,000 (2020: £1,964,000) as set out in note 9 and the impact of these items on corporation tax. Non-underlying items are either exceptional in size, one-off in nature or non-trading related items. These are shown separately on the face of the Consolidated Statement of Comprehensive Income.

The calculation of adjusted basic and adjusted diluted earnings per share is based on the result attributable to shareholders, adjusted for non-underlying items, divided by the weighted average number of ordinary shares in issue during the year.

 

	12 months ended 31 March  2020 £'000	12 months ended 31 March  2019 £'000
Profit after tax	157	1,379
Add back
Amortisation of customer relationships	1,814	1,925
Share based payment charge	30	39
Exceptional costs	379	-
Impact of above adjustments on corporation tax	(72)	-
Adjusted profit after tax	2,308	3,343
Number of shares
Weighted average number of shares for the purpose of adjusted earnings per share	58,956,248	47,105,684
Weighted average number of shares for the purpose of diluted adjusted earnings per share	58,956,248	47,105,684
Adjusted earnings per share (pence)	3.91	7.10
Diluted adjusted earnings per share (pence)	3.91	7.10

 

 

 

15. Intangible assets

 

 

	Software	Customer
	costs	relationships	Goodwill	Total
	£'000	£'000	£'000	£'000
Cost
At 1 April 2020	217	14,032	5,543	19,792
Additions in the year	115	-	-	115
At 31 March 2021	332	14,032	5,543	19,907
Amortisation
At 1 April 2020	126	9,729	-	9,855
Charge for the year	29	1,814	-	1,843
At 31 March 2021	155	11,543	-	11,698
Net book value
At 31 March 2020	91	4,303	5,543	9,937
At 31 March 2021	177	2,489	5,543	8,209

 

 

15.1. Customer relationships

The customer relationships intangible assets arise on acquisition of subsidiaries when accounted for as a business combination and relate to the expected value to be derived from contractual and non-contractual customer relationships. The value placed on the contractual customer relationship is based on the expected cash revenue inflows over the estimated remaining life of each existing contract. The value placed on the non-contractual customer relationships is based on the expected cash inflows based on past revenue performance by virtue of the customer relationship, but using an attrition rate depending on the length of the relationship. Associated cash outflows have been based on historically achieved margins and overhead run rates per £1 of revenue. The net cash flows are discounted at a rate which the Directors consider is commensurate with the risks associated with capturing returns from the customer relationships.

The estimated life for customer relationships is based on the average of the contracted remaining life of contracted relationships and estimated life of the non-contractual relationships.

 

 

	Purdy	Spokemead	DCB (Kent)	R. Dunham	Total
Attrition rate where relationship < 5 years	80%	n/a	100%	n/a
Attrition rate where relationship > 5 years	50%	n/a	100%	n/a
Discount rate	13.3%	12.84%	12.84%	15.79%
Estimated life of relationship at date of acquisition	7 years	7.5 years	1 to 8 years	1.5 years
Remaining life of intangible	1.5 years	0.2 years	5 years	-
Fair value of customer relationships at date of acquisition	£5,586,000	£5,922,000	£2,324,000	£200,000	£14,032,000
Current carrying value of customer relationships	£1,924,000	£960,000	£1,396,000	£23,000	£4,303,000

 

 

15.2. Goodwill

Goodwill on consolidation arises on the excess of cost of acquisition over the fair value of the net assets acquired on purchase of the Company. Each subsidiary is its own CGU for the purposes of the goodwill calculation and impairment reviews and is monitored on an ongoing basis by the Board.

The goodwill allocated to each subsidiary entity is presented below:

 

	Purdy £'000	Spokemead £'000	DCB (Kent) £'000	R. Dunham £'000	Total £'000
Allocation of goodwill	1,719	1,186	1,351	1,287	5,543

 

 

The Group tests whether goodwill has suffered any impairment on an annual basis. For the 2021 and 2020 reporting periods, the recoverable amount of the cash-generating units ("CGUs") was determined based on the value in use calculations which require the use of key assumptions. The calculations use cash flow projections based on the level of recurring revenue from secured contracts, plus an estimate of revenue generated from long-term construction contracts which have already been won and are expected to be won in the future. Cash flows beyond five years are extrapolated using the estimated growth rates stated below. These growth rates are consistent with forecasts included in industry reports specific to the industry in which the CGU operates.

The following table sets out the key assumptions for those CGUs that have significant goodwill allocated to them. The same assumptions have been used across the CGUs as they are all considered to operate in markets with similar characteristics.

 

Key assumptions	2021	2020
Long-term growth rate (used after 5 years)	1.5%	1%
3 to 5 year growth rate	3%	2%
Pre-tax discount rate	14.7%	14.2%

 

 

 

Cash flows in year one have been adjusted to account for the potential impact of the Covid-19 pandemic on performance for the 2022 financial year, but have been shown to recover within the medium term in line with management's expectations as the impact of Covid-19 is not expected to result in a permanent diminution in the value of the goodwill.

A higher growth rate for both the short term and long term has been utilised in the current year reflecting a more positive outlook in the wider economy than at this point 12 months earlier.

15.3. Sensitivity review

Management have performed a range of sensitivity analysis around movements in both the discount rates and future growth rates used within the model. The discount rate would need to increase by 2.25% to 16.99% or long-term growth would have to be reduced to 0.3% before the CGU reaches breakeven point.

 

16. Property, plant and equipment

 

At 31 March 2021

 

 

	Freehold land £'000	Freehold property £'000	Long leasehold improvements £'000	Motor  vehicles £'000	Fixtures and fittings £'000	Office and  computer  equipment £'000	Total £'000
Cost
At 1 April 2020	300	523	198	291	91	1,163	2,566
Additions	-	32	-	-	2	53	87
Disposals	-	-	-	(54)	-	(13)	(67)
At 31 March 2021	300	555	198	237	93	1,203	2,586
Depreciation
At 1 April 2020	-	100	95	172	53	728	1,148
Charge for the year	-	23	23	8	33	92	179
Disposals	-	-	-	(48)	-	-	(48)
At 31 March 2021	-	123	118	172	53	728	1,148
Net book value
At 1 April 2020	300	423	103	119	338	435	1,418
At 31 March 2021	300	432	80	105	7	383	1,307

 

 

At 31 March 2020

 

 

	Freehold land £'000	Freehold property £'000	Long leasehold improvements £'000	Motor  vehicles £'000	Fixtures and fittings £'000	Office and  computer  equipment £'000	Total £'000
Cost
At 1 April 2019	300	523	398	489	87	1,111	2,908
Additions	-	-	-	-	50	226	276
Disposals	-	-	(200)	(198)	(46)	(174)	(618)
At 31 March 2020	300	523	198	291	91	1,163	2,566
Depreciation
At 1 April 2019	-	78	141	246	61	721	1,247
Charge for the year	-	22	34	51	33	118	258
Disposals	-	-	(80)	(125)	(41)	(111)	(357)
At 31 March 2020	-	100	95	172	53	728	1,148
Net book value
At 1 April 2019	300	445	257	243	26	390	1,661
At 31 March 2020	300	423	103	119	38	435	1,418

 

 

Freehold land and building property was included at its net book value of £784,000 at the date of acquisition, being the fair value of the land and buildings at £815,000, less accumulated depreciation of £31,000. The property was valued by an independent valuer with a recognised and relevant professional qualification and with recent experience in the location and category of investment property being valued, Savills (UK) Limited, as at 22 May 2015 on the existing use value basis in accordance with the Appraisal and Valuation Manual of The Royal Institution of Chartered Surveyors. The critical assumptions made relating to its valuation are the market rent at £65,000 per annum and the yield at 8.00%.

The bank loans detailed in note 21 are secured on the property, plant and equipment of the Group. The bank facility does not impose any restrictions of use on the assets.

 

17. Right-of-use assets

 

 

	Leasehold property £'000	Motor  vehicles £'000	Office and computer  equipment £'000	Total £'000
Cost
At 1 April 2020	1,320	1,275	201	2,796
Additions	-	277	-	277
Disposals	(69)	(433)	(37)	(539)
At 31 March 2021	1,251	1,119	164	2,534
Depreciation
At 1 April 2020	202	449	66	717
Charge for the year	152	459	57	668
Disposals	(69)	(433)	(37)	(539)
At 31 March 2021	285	475	86	846
Net book value
At 1 April 2020	1,118	826	135	2,079
At 31 March 2021	966	644	78	1,688

 

 

18. Inventories

 

	2021 £'000	2020 £'000
Raw materials	906	907
Work in progress	1,561	2,874
	2,467	3,781

 

 

19. Trade and other receivables

 

 

	2021 £'000	2020 £'000
Current
Trade receivables	5,564	7,383
Other receivables	473	463
Prepayments	594	805
Accrued income	8,634	9,968
Amounts due from long-term contracts	1,461	832
	16,726	19,451

 

The ageing of trade receivables that are past due but not impaired is shown below

	2021 £'000	2020 £'000
Between 1-2 months	262	709
Between 2-3 months	65	181
More than 3 months	252	150
	579	1,041

 

 

An allowance for doubtful debt of £Nil (2020: £120,000) has been recognised in the above balance for trade receivables. The prior year amount was a specific provision against a customer where management had concerns over the recoverability of the debt. The provision was fully utilised in 2021. Otherwise, management does not consider that there are any issues over recoverability, due to the creditworthiness of the customer profile and little historical issue of default.

The Group's exposure to credit risk is discussed in note 26 to the consolidated financial statements, including how the Group assesses the credit quality of potential new customers and its policy for providing against overdue invoices.

The average credit period taken on invoiced sales of services as at 31 March 2021 is 26 days (31 March 2020: 34 days). No interest was charged on overdue receivables during the year.

The Directors believe that the carrying value of the trade and other receivables is considered to represent its fair value. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable shown above. The Group does not hold any collateral as security. The bank loans detailed in note 21 are secured on trade receivables of £5,564,000 (2020: £7,383,000).

The Group's trade and other receivables are all denominated in Pounds Sterling.

 

20. Cash and cash equivalents

Cash and cash equivalents comprise cash at bank. The Group's cash and cash equivalents are held at floating interest rates and are primarily held at HSBC UK Bank Plc which has an AA- credit rating as assessed by Fitch ratings. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

 

	2021 £'000	2020 £'000
Cash and bank balances	1,285	-
Other cash and bank balances	8	19
	1,293	19

 

 

 

21. Borrowings

The maturity analysis of borrowings, inclusive of finance charges, is included below. All of the loans are denominated in Pounds Sterling.

 

	2021 £'000	2020 £'000
Non-current borrowings
Bank and other borrowings: Term Loans	2,533	-
Other loans	109	176
Mortgage Loans	200	-
Total non-current borrowings	2,842	176
Current borrowings:
Bank and other borrowings:
Term loans	1,000	3,333
Other loans	67	59
Mortgage loan	57	314
Overdraft	-	3,351
Total current borrowings	1,124	7,057
Bank and other borrowings:
Term loans	3,533	3,333
Other loans	176	235
Mortgage loans	257	314
Overdraft	-	3,351
Total borrowings	3,966	7,233

 

 

The fair value of the borrowings outstanding as at 31 March 2021 is not materially different to its carrying value since interest rates applicable on the loans are close to the current market rates.

On 22 May 2020 the Group agreed refinancing arrangements with HSBC UK Bank plc in regard to the restructuring of the debt facility and related covenants. The Group secured new debt facilities totalling £9.8 million. The Group's previous debt facility was in the form of a £3.3 million term loan and a £6.5 million overdraft facility. The new debt facility consisted of a £7.3 million term loan facility and a £2.5 million overdraft facility. The facility expires in September 2022 and there are £0.5 million quarterly repayments that started in August 2020.

As the agreement was still in negotiation as at 31 March 2020, all the term loans were classified as current borrowing for that financial year. They have now been reclassified in accordance with their contractual repayment terms.

The first covenant test for the new facility was to achieve a minimum EBITDA of £1.1 million for the year ended 31 March 2021, which was achieved. The covenants for the period beyond 31 March 2021 are to be tested quarterly and they are (i) achievement of minimum levels of EBITDA; (ii) debt service cover; and (iii) interest cover.

On 26 March 2021 the Group amended and restated the facility agreement. This was required to facilitate early repayment of part of the Term loan aligned to changes to covenant tests. On 31 March 2021, the Group repaid £2.3 million of the Term loan. £1.3 million related to the contractual repayment based on the adjusted cash balances in the Group as at 31 March 2021 and £1.0 million related to the accelerated repayment of the scheduled quarterly repayments in May 2021 and August 2021 of £0.5 million each. The first covenant test was amended to be as at 31 December 2021. As part of the restated agreement, the Group agreed the transition from LIBOR to an interest measure based on Sterling Overnight Interbank Average Rate ("SONIA"), effective from 30 September 2021.

(a) Working capital facilities

At 31 March 2021 the Group had an unused £2.5 million working capital facility with HSBC UK Bank Plc. The facility has an interest rate of 2.5% above LIBOR (The London Interbank Offered Rate) and is repayable on demand. All cash at bank balances are denominated in Pounds Sterling.

(b) Bank and other loans

Term loans

At 31 March 2021 the Group had a term loan in place with HSBC UK Bank Plc with an original principal value of £7.3 million repayable by quarterly instalments. As at 31 March 2021 £3.53 million of the loan remained outstanding. Interest is payable at 3.75% above LIBOR.

Mortgage loan

A ten-year mortgage loan of £570,000 with HSBC UK Bank Plc was drawn down in July 2015, with interest payable at 1.9% above LIBOR. The mortgage is held over the freehold property of Purdy known as Brooklyn Lodge, Mott Street, Chingford, London E4 7RW. £257,000 remained unpaid at the end of the period.

Other loan

A five-year term loan, originally drawn down in September 2018 of £317,000 with Funding Circle, was assumed by the Group on the acquisition of R. Dunham in November 2018 and is unsecured. The loan is repayable by fixed monthly instalments of £7,024 and interest is at a fixed rate of 11.9%. £176,000 remained unpaid at the end of the period.

(c) Security

Bank loans are secured on related property, plant and equipment and debtor books of the Group.

In respect of bank debt there is an Unlimited Composite Company Guarantee given by Kinovo Plc, Purdy, P&R, DCB (Kent), Spokemead and R. Dunham to secure all liabilities of each borrower.

22. Lease liabilities

 

As at 31 March 2021 the following amounts are included in the Statement of Financial Position in relation to non-cancellable leases:

 

	2021 £'000	2020 £'000
Lease liabilities
Current	552	620
Non-current	1,183	1,486
	1,735	2,106

 

The maturity analysis of obligations under non-cancellable leases is shown in the following table:

 

	2021 £'000	2020 £'000
No later than 1 year	552	620
Later than 1 year and no later than 5 years	837	955
After 5 years	346	531
	1,735	2,106

 

 

The interest expense recognised through the Consolidated Statement of Comprehensive Income during the year in relation to lease liabilities was £62,000 (2020: £77,000).

 

23. Trade and other payables

 

	2021 £'000	2020 £'000
Trade payables	11,082	12,885
Other payables	21	134
Other taxation and social security	2,450	1,651
Accruals	875	1,273
	14,428	15,943

 

 

 

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing.

The Directors consider that the carrying value of trade and other payables approximates their fair value as the impact of discounting is insignificant.

The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices.

The average credit period taken on trade purchases is 80 days (2020: 81 days). Trade purchases include the purchase of materials and subcontractor costs.

Included within trade payables is a balance of £2,555,000 (2020: £2,731,000) on a purchasing card facility provided by HSBC UK Bank Plc. The purchasing card is typically used to facilitate administration and reporting of costs on maintenance contracts at a granular level. Payment terms for Kinovo Plc on the purchasing cards are typically 60-90 days, which aligns with existing credit terms with suppliers. Approved suppliers benefit from increased volumes and receive funds upfront from HSBC UK Bank Plc. Based on the nature of the transactions the Board consider it appropriate to disclose the balance within trade creditors.

At 31 March 2021 deferred HMRC liabilities amounted to £1,023,0000 (2020: £377,000). Repayment instalments commenced in April 2021 by agreement with HMRC.

24. Share capital and reserves

24.1. Ordinary shares

 

Ordinary shares of £0.10 each		2021 £'000	2020 £'000
At the beginning of the year		5,872	4,054
Issued in the year		249	1,818
At the end of the year		6,121	5,872
Number of shares
At the beginning of the year		58,721,845	40,540,027
Issued in the year		2,492,858	18,181,818
At the end of the year		61,214,703	58,721,845

 

Issued in the year

During the year, the company issued a total of 2,492,858 ordinary shares to RBC Cees Trustee (Nominees) Limited for £850,000. These shares are to be held for future redemption by members of the JSOP scheme subject to successful achievement of vesting conditions. Within the group accounts the share trust is consolidated and the £850,000 value of shares is shown in equity as the group ownership of own share capital.

In the prior year, the Company completed a fund raise which generated £2,000,000, gross of issue costs, from the issue of 18,181,818 new shares at 11 pence per share. Share issue costs of £182,000 were offset against the share premium account.

 

 

24.2. Share premium

 

 

	2021 £'000	2020 £'000
At the beginning of the year	8,609	8,609
Issued in the year (net of share issue costs)	601	-
At the end of the year	9,210	8,609

 

 

24.3. Merger reserve

 

 

	2021 £'000	2020 £'000
At the end of the year	(248)	(248)

 

 

25. Note to the consolidated statement of cash flows

 

	12 months ended 31 March  2021 £'000	12 months ended 31 March  2020 £'000
Cash flow from operating activities
Profit before income tax	140	1,727
Adjustments for:
Net finance cost	461	565
(Profit)/loss on disposal of property, plant and equipment	(2)	162
Depreciation	847	1,059
Amortisation of intangible assets	1,843	1,956
Share-based payments	30	39
Fair value adjustment	-	(100)
Movement in receivables	2,580	(759)
Movement in payables	(1,561)	(116)
Movement in inventories	1,313	(647)
Tax reclaimed	163	-
	5,814	3,886

 

 

 

26. Financial instruments

The Group's principal financial assets are cash and cash equivalents and trade and other receivables. All financial assets are classified as loans and receivables.

The Group's principal financial liabilities are financing liabilities and trade and other payables. All financial liabilities are held at amortised cost.

The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and processes of the Group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these consolidated financial statements.

26.1. Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

•     cash and cash equivalents;

•     trade and other receivables;

•     trade and other payables;

•     borrowings; and

•     lease liabilities.

 

The Group held the following financial assets at each reporting date:

 

	2021 £'000	2020 £'000
Loans and receivables:
Trade receivables	5,564	7,383
Accrued income	8,634	9,968
Amounts due from long-term contracts	1,461	832
Other receivables	1,067	1,268
Cash and cash equivalents	1,293	19
	18,019	19,470

 

 

The Group held the following financial liabilities at each reporting date:

 

	2021 £'000	2020 £'000
Held at amortised costs:
Bank loans and overdrafts	3,966	7,233
Lease liabilities	1,735	2,106
Accruals	875	1,273
Trade payables	11,082	12,885
Other payables	21	134
	17,679	23,631

 

 

 

26.2. Financial risk management

The Group's treasury function monitors and manages the financial risks in relation to its operations. These risks include those arising from interest rate risk, credit risk, liquidity risk and capital risk. The Group seeks to minimise the effects of these risks by using effective control measures. The Group's policies for financial risk management are outlined below.

(a) Interest rate risk management

The Group finances its operations through a combination of retained earnings and bank borrowings from major financial institutions, with a minimum Fitch rating of B, at floating rates of interest above the Bank of England base rate. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

The Group's treasury function reviews its risk management strategy on a regular basis and gives careful consideration to interest rates when considering its borrowing requirements and where to hold its excess cash.

The Group currently has loans and overdrafts totalling £4.0 million (2020: £7.2 million) at variable interest rates. The Group is exposed to interest rate risk on some of its financial assets, being its cash and cash equivalents. The interest rate receivable on these balances at 31 March 2021 was at an average rate of less than 1% (2020: less than 1%).

The Group's policy is to minimise interest charges through active cash management. Interest charged on the Group's borrowings is kept under constant review.

(b) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises principally from the Group's trade and other receivables and its cash balances. The Group has an established credit policy under which each new customer is analysed for creditworthiness before the Group's standard payment and delivery terms and conditions are offered.

The maximum exposure the Group will bear with a single customer is dependent upon that customer's credit rating, the level of anticipated trading and the time period over which the relationship is likely to run.

Social housing customers are typically local authorities or housing associations and the nature of which means the credit risk is minimal. Other trade receivables contain no specific concentration of credit risk with amounts recognised representing a large number of receivables from various customers.

(c) Trade and other receivables

The Group is exposed to the risk of default by its customers. At 31 March 2021, the Group had 3 customers with an outstanding balance over £250,000 (31 March 2020: eight). An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. No specific provision against receivables has been recognised (2020: £120,000) in the Statement of Financial Position as outlined in note 19.

There are no other significant concentrations of credit risk at the balance sheet date.

At 31 March 2021, the Group held no collateral as security against any financial asset. The carrying amount of financial assets recorded in the consolidated financial statements, net of any allowances for losses, represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained.

(d) Liquidity risk management

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity risk management is to ensure it will always have sufficient liquidity to meet the Group's working capital requirements. Management monitors rolling forecasts of the Group's liquidity and cash and cash equivalents on the basis of expected cash flow.

The Directors manage liquidity risk by regularly reviewing cash requirements by reference to short-term cash flow forecasts and medium-term working capital projections prepared by management and operate a centralised treasury function and actively manage cash flows on both a daily and longer-term basis.

The Group had total available working capital facilities at an interest rate of 2.5% over LIBOR amounting to £2,500,000 with HSBC UK Bank Plc as at 31 March 2020. The Group maintains a good relationship with its bank, which has a high credit rating. As at 31 March 2021, the Group had cash and cash equivalents of £1,293,000 (2020: overdraft £3,351,000 and cash and cash equivalents £19,000).

The table below shows the maturity profile of the Group's non-derivative financial liabilities:

 

2021	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000
Non-derivative financial liabilities HSBC mortgage	57	57	143	-	257
HSBC term loan	1,000	2,533	-	-	3,533
Funding Circle unsecured loan	67	109	-	-	176
Trade payables	11,082	-	-	-	11,082
At 31 March 2021	12,206	2,699	143	-	15,048

 

2020	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000
Non-derivative financial liabilities HSBC mortgage	314	-	-	-	314
HSBC term loan	3,333	-	-	-	3,333
Funding Circle unsecured loan	59	67	109	-	235
HSBC overdraft	3,351	-	-	-	3,351
Trade payables	12,885	-	-	-	12,885
At 31 March 2020	19,942	67	109	-	20,118

 

 

 

 

(e) Capital management risk

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders through the optimisation of debt and equity.

The capital structure of the Group consists of net debt as disclosed below and equity as disclosed in the Consolidated Statement of Changes in Equity.

 

	2021 £'000	2020 £'000
Net debt comprised as follows:
Cash and cash equivalents	1,293	19
Bank borrowings and overdrafts	(3,966)	(7,233)
Lease liabilities	(1,735)	(2,106)
	(4,408)	(9,320)

 

 

 

27. Related party transactions

There were no related party transactions in the period.

27.1. Key management compensation

The Group's key management are considered to comprise the Directors of Kinovo Plc, the Chief Operating Officer and three Non-Executive Directors of Kinovo Plc. The aggregate remuneration of the key management is as follows:

 

	2021 £'000	2020 £'000
The aggregate remuneration comprised:
Aggregate emoluments	771	905
Share-based payments	6	3
Total remuneration	777	908

 

 

The remuneration of the highest paid Director during the year was £218,000 (2020: £259,000). The remuneration of individual Directors is disclosed in the Remuneration Committee Report.

There were no other transactions with Directors or key personnel to disclose.

28. Share based payments

 

As at 31 March 2021 the Group maintained four share-based payment schemes for employee remuneration, a Share Incentive Plan (SIP), Company Share Option Plan (CSOP), Joint Share Ownership Plan (JSOP) and Enterprise Management Incentive (EMI). As at 31 March 2020 the Group also had unapproved share options awards outstanding which have now all been cancelled .

Share Incentive Plan (SIP)

The SIP is an HMRC-approved scheme plan open to all employees. The plan was established on 1 August 2020.  Employees were invited to buy shares in the Company at a price, of 17.5 pence, being the market price immediately prior to the date of establishment of the plan. The acquisition of the shares is funded through a salary sacrifice scheme with monthly deductions taken through payroll over a 12-month accumulation period. At the end of the accumulation period (31st July 2021) the SIP Trust use the contributions to acquire the shares on behalf of the employees ("partnership shares"). At 31 March 2021 employees had accumulated contributions of £56,416.

Employees are also awarded a matching share for each partnership share acquired. Once awarded these shares are held in trust, and are subject to forfeiture, in accordance with the scheme rules, for three years. The retention rate has been estimated as 82%.

The SIP is considered a hybrid financial instrument with characteristics of both share and option awards and linked to a 12-month accumulation contract. The obligation of the Company arose when the plan was established, at the beginning of the accumulation period. The employee pays the market value for the partnership shares and therefore no share-based payment charge is recognised. The matching shares give rise to a share-based payment charge based on the market value of the shares at the date the plan was established adjusted for the risk of forfeiture.

Company Share Option Plan (CSOP)

The CSOP is open to all employees at the discretion of the Remuneration Committee. In the year ended 31 March 2021, the Company issued four CSOP awards totalling 1,772,142 ordinary shares at market prices ranging from 20.50 pence to 35.00 pence.

The vesting period is for three years, during which the holder must remain in the employment of the Group. There are no performance conditions attached to the awards. No shares have vested yet.

The CSOP and EMI schemes were valued using the Black Scholes model. The use of this model to calculate a charge involves using a number of estimates and judgements to establish the appropriate inputs to be entered into the model, covering areas such as the use of an appropriate interest rate and dividend rate, exercise restrictions and behavioural considerations. A significant element of judgement is therefore involved in the calculation of the charge.

Joint Share Ownership Plan (JSOP)

The JSOP is open to certain senior executives at the discretion of the Remuneration Committee. In the year ended 31 March 2021, the Company issued two JSOP awards, 250,000 ordinary shares of 10 pence each on 21^st December 2020 at the market price of 26.0 pence and 2,242,858 ordinary shares of 10 pence each on 5th March 2021 at the market price of 35.0 pence, to three senior executives.

Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating executives and the trustees of the JSOP trust, with such shares held in the JSOP trust.

Under IFRS, the awards are treated as a share-based payment arrangement. The JSOP trust holds the shares of the JSOP until such time as the JSOP shares are vested and the participating executives exercise their rights under the JSOP.

The JSOP trust is granted a non-interest-bearing loan by the Company in order to fund the purchase of its interest in the JSOP shares. The loan held by the trust is eliminated on consolidation in the financial statements of the Group.

The Company funded portion of the share purchase price is deemed to be held as own shares until such time as they are transferred to the employee and is recorded as a reduction in equity.

The award on 21^st December 2020 had no performance conditions. The awards on 5th March 2021 vest based on certain non-market conditions and specific fair market share price hurdles, as defined by the plan.

Under the JSOP and subject to the vesting of the participants' interest, participating executives will, when the JSOP shares are sold, be entitled to a share of the proceeds of sale equal to the growth in market value of the JSOP shares versus the exercise price, net of executives' cash contribution at inception, as agreed for each grant (the "Carry Charge").

The balance of the proceeds will remain to the benefit of the JSOP trust and will be applied to the repayment of the loan originally made by the Company to the JSOP trust. Any funds remaining in the JSOP trust after settlement of the loan and any expenses of the JSOP trust are for the benefit of the Company. No shares have vested at 31 March 2021.

The JSOP awards are valued based on the component conditions comprising each of the awards. Components of awards containing non-market based conditions and awards with no performance conditions are valued using the Black Scholes model. Components of awards with market based performance conditions are determined by the Monte Carlo simulation.

 

A number of estimates and judgements are required to establish the appropriate inputs to be entered into the model, covering areas such as the use of an appropriate interest rate and dividend rate, exercise restrictions and behavioural considerations. A significant element of judgement is therefore involved in the calculation of the charge.

Having established the full value of the JSOP awards using the Black Scholes model and Monte Carlo simulation outlined above, a deduction is made in respect of the anticipated Carry Charge in order that the expense recorded in the financial statements only represents the participating executives' net interest in the awards.

Enterprise Management Incentive Scheme (EMI)

The EMI options scheme was open to all employees at the discretion of the Remuneration Committee. In the year ended 31 March 2021, no grants were awarded and the majority of the grants have now been cancelled.

The vesting period is for three years, during which the holder must remain in the employment of the Group subject to the discretion of the Remuneration Committee. They can be exercised at any time from the date of vesting to the day before the tenth anniversary of their grant and are not subject to performance conditions.

 

The net charge recognised for share-based payments in the year was £30,000 (2020: £39,000) analysed as follows:

 

 

Scheme	12 months  ended 31 March 2021 £'000	12 months ended 31 March 2020 £'000
SIP	16	-
CSOP	10	-
JSOP	4	-
EMI/Unapproved	-	39
	30	39

 

 

In the year ended 31 March 2021, options were granted in respect of the SIP, CSOP and JSOP schemes. All share-based employee remuneration will be settled in equity. Options are generally exercisable at a price equal to the market price of the Kinovo plc shares on the day immediately prior to the date of the grant. Options are forfeited if the employee leaves the Group before the Options vest except in specific circumstances allowed by the terms of the schemes.

  

 

	SIP	CSOP	JSOP	EMI/Unapproved	Total
Number
At 1 April 2019	-	-	-	1,548,103	1,548,103
Lapsed	-	-	-	(798,103)	(798,103)
At 31 March 2020	-	-	-	750,000	750,000
Granted	644,754	1,772,142	2,492,858	-	4,909,754
Lapsed	-	-	-	(250,000)	(250,000)
At 31 March 2021	644,754	1,772,142	2,492,858	500,000	5,409,754
Weighted average exercise price (p) At 1 April 2020 Granted Lapsed	- - -	24.3 -	- 34.1 -	105.8 N/A (127.5)
At 31 March 2021	-	24.3	34.1	95.0

 

Assumptions used in estimating the fair value
Exercise price (p)			17.5p		20.50p -		26.00p -		95.00p
					35.00p		35.00p
Expected dividend yield			N/A		1.00%		1.00%		2.15%
Risk free rate			N/A		0.50%		0.50%		4.00%
Expected volatility			N/A		35.00%		35.00%		45.7%
Expected life			4 years		3 years		3 years		6.5 years

 

 

Expected volatility for the CSOP and JSOP awards is based upon the historical volatility as adjusted for management expectations over the life of the schemes. The expected life is based upon scheme rules and reflect management's best estimates for the effects of no-transferability, exercise restrictions and behavioural considerations.

The risk-free interest rate for the CSOP and JSOP awards is based upon the expected yield of UK gilts over the expected life of the awards.

The Company has applied an expected dividend yield of 1% for the CSOP and JSOP awards as the Company anticipates making dividend payments during the expected life of the awards.

During the year £612,000 (2020: £254,000) was transferred from the share based payment reserve to retained earnings in relation to tranches where all options have now been cancelled.

29. Deferred tax

The following are the significant deferred tax liabilities and assets recognised by the Group and the movements thereon during the current and prior reporting period.

 

 

	Intangible assets acquired £'000	Unused  tax losses £'000	Short-term timing  differences £'000	Right-of-use  assets £'000	Lease  liabilities £'000	Share Based Payments £'000	Lease  liabilities £'000
At 1 April 2019	(1,294)	1,008	(145)	-	-	-	(431)
Credit to income statement and other comprehensive income	347	(699)	-	(381)	385	-	(348)
At 31 March 2020	(947)	309	(145)	(381)	385	-	(779)
Credit/(charge) to income statement and other comprehensive income	327	(309)	-	60	(55)	57	80
At 31 March 2021	(620)	-	(145)	(321)	330	57	(699)

 

 

	2021 £'000	2020 £'000
Deferred tax asset	387	694
Deferred tax liability	(1,086)	(1,473)
Net deferred tax liability	(699)	(779)

 

 

 

30. Ultimate controlling party

The directors consider that there is no ultimate controlling party of Kinovo Plc.

31. Events after the balance sheet date

On 1 April 2021 the Group surrendered the lease on one of its properties. There was no cost associated with the surrender. At 31 March 2021, the property had a net book value of £483,000 and a lease liability of £499,000.