Source - LSE Regulatory
RNS Number : 4533P
essensys PLC
19 October 2021
 

19 October 2021

 

essensys plc
("essensys" or the "Group")

Full Year Results

Resilient performance in line with market expectations

 

Momentum building and structural change taking shape

 

 

essensys plc (AIM:ESYS), the leading global provider of mission critical software-as-a-service (SaaS) platforms and on-demand cloud services to the flexible workspace industry, announces audited results for the year ended 31 July 2021.

 

 

Financial summary:

 

£m unless otherwise stated

2021

2020

Change

 

 

 

 

Revenue

22.0

22.5

-2%

Recurring revenue

19.1

19.4

-2%

Run Rate Annual Recurring Revenue

19.8

19.7

+1%

 

 

 

 

Revenue at constant currency

22.9

22.5

+2%

Recurring revenue at constant currency

19.8

19.4

+2%

Run Rate Annual Recurring Revenue at constant currency

20.6

19.7

+5%

 

 

 

 

Statutory (loss) / profit before tax

(2.9)

0.3

 

 

 

 

 

Adjusted EBITDA

1.3

4.2

-69%

 

 

 

 

 

 

 

 

(Loss) / profit per share (pence)

(6.2p)

0.3p

 

 

 

 

 

Proposed Final Dividend per share (pence)

Nil

Nil

 

 

 

 

 

Net Cash

36.9

8.5

 

 

 

Platform to capture structural market shift

 

·          US business continues to grow strongly, with US Dollar recurring revenues up 20%

·          Long-term structural drivers for flexible real estate offerings accelerated by Covid-19

o    Traditional landlords and corporate real estate operators seeking flexible workspace solutions

·          Clear plan to capture global market opportunity

o    £33.2m oversubscribed fundraising to accelerate growth strategy

o    Flex Services Platform launched and customer migrations underway

o    Appointment of CEOs in North America and Asia Pacific to accelerate international growth; UK/EMEA CEO appointment agreed

·          Demand from existing and new customers continues to underpin future growth

o    474 Connect live sites at year end, up 13% (2020: 419)

o    33 new Connect sites contracted;

o    Addition of 24 new customers during the year further underpinning future growth

 

Resilient performance, in line with expectations

 

·          Group revenue up 2% on a constant currency basis

·          Constant currency recurring revenue up 2%; Recurring revenue represented 87% of Group revenue (2020: 86%)

·          Constant currency Annual Recurring Revenue (ARR) up 5% (run rate as at 31 July 2021)

·          Revenue at reported currency and Adjusted EBITDA in line with market expectations following planned expansion of business in the year

·          Group remains debt free; £36.9m net cash at year end, including net proceeds of £31.8m from successful equity fundraising

 

Current trading and outlook

 

·          Sales pipeline from new and existing customers underpins confidence for continued progress in 2022 - 91 existing customer locations in current sales pipeline

·          Asia Pacific business established based in Hong Kong; First Asia Pacific Connect site contracted and due to 'go live' in Q2 FY22; Singapore office expected to open shortly

·          Major renewal with our largest customer, Industrious, as part of new three-year global framework contract

·          Largest UK customer also renewed

·          Investment in future go-to-market and further product and software development underway following fundraising

 

Mark Furness, CEO of essensys, said:

"essensys' performance in the last twelve months underlines the resilience of our business model. Against the backdrop of Covid-19, we have delivered results in line with expectations, with underlying recurring revenue growth and strong growth in the US.  Covid-19 is accelerating the shift towards flexible workspace, particularly from traditional landlords and commercial real estate operators and have taken proactive steps to capture this long-term growth opportunity in the flexible workspace market.  In March we launched our new Flex Services Platform to provide real estate leaders a single software and digital infrastructure platform to operate and scale up their flexible workspaces.  In July, we successfully raised c.£33m to accelerate our proven growth strategy.  These actions support our long-term goal to increase our market share by 10% in North America, Asia Pacific, the UK and Europe.

 

"Our strong platform for growth, combined with our pipeline of activity with current and new customers, gives us confidence of further progress in the year ahead, notwithstanding the uncertainty relating to Covid-19."

 

 

For further information, please contact:

 

essensys plc

+44 (0)20 3102 5252

Mark Furness (Chief Executive Officer)
Alan Pepper (Chief Financial Officer)

 

Singer Capital Markets (nominated adviser and joint broker)

+44 (0)20 7496 3000

Peter Steel / Harry Gooden / George Tzimas

 

Berenberg (joint broker)

+44 (0)20 3207 7800

Ben Wright / Mark Whitmore

 

FTI Consulting (public relations adviser)

+44 (0)20 3727 1000

Jamie Ricketts / Eve Kirmatzis / Talia Jessener / Victoria Caton

 

 

About essensys plc

essensys is the leading global provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry. essensys' software is specifically designed and developed to help solve the complex operational challenges faced by multi-site flexible workspace operators as they grow and scale their operations. The Group's technology allows operators to deliver a range of differentiated, flexible and customer-specific services to a broad base of tenants across multiple locations and helps operators to manage the cost, operational and technological challenges they typically encounter.

 

essensys' Flex Services Platform, addresses these complex operational challenges, and reduces costs by simplifying the day-to-day management of flexible workspaces and the provision of on-demand IT, technology and infrastructure services to tenants. essensys' platforms automate key tasks and processes and help flexible workspace providers deliver highly efficient, customer-centric workspace solutions and member experiences with enterprise class services.

 

 

Chairman's Statement

 

In another successful year, I would like to start with the contribution of our people who are the first and most important pillar in our success.  Their role in essensys' progress cannot be underestimated.  We have now lived through 19 months of the largest global crisis for decades.  The Board continues to be impressed - but not surprised - by the commitment, talent and positivity of our teams.  That focus on our people will be a continued element of our future success as we continue to expand the business.

 

Our financial performance was in line with market expectations, with continued growth in recurring revenues and in our US business.  Despite some weakness in the UK which was primarily Covid-19 related, Group revenue was up 2% on a constant currency basis, US recurring revenues were up 20% (in US Dollars) and EBITDA was in line with market expectations.  Our underlying business has continued to grow during the pandemic and as restrictions have been eased we have seen market activity increase in our current regions and those geographies where we are just launching.

 

essensys has an excellent platform for long-term growth.  We owe this to the scalable nature of our business model, the clarity of our strategy and - in the last twelve months - our resilient performance in the ongoing context of COVID-19.  essensys has been debt-free since IPO, and, following our recent oversubscribed equity fundraising, has a strong balance sheet with £36.9m net cash at year end.

 

Our growth platform has been clearly communicated not just to customers but also to investors.  In July 2021, we raised gross proceeds of c.£33.2m in an oversubscribed fundraising, to support the acceleration of our long-term growth strategy.  We have a supportive investor base that understands our plans to capture the opportunity in the flexible workspace market and this is reflected in their recent financial support.  I am delighted to see early progress following the fundraising, including the appointment of Eric Schaffer to lead our newly established Asia Pacific business and some initial business in that region.

 

essensys remains extremely well placed to take advantage of expected increasing demand for flexible workspace, in spite of the continued uncertainty relating to Covid-19.  We see opportunities to grow not just with existing flexible workspace operators, but also with traditional landlords and the broader real estate sector, as they take more steps to enter the flexible workspace industry.  The launch of our Flex Services Platform in recent months is an example of our commitment to product development to meet these demands and has been well received by customers.  Notwithstanding the current uncertainty in the wider environment the Group remains confident of further progress in the year ahead and beyond.

 

Jon Lee

Non-Executive Chairman

18 October 2021

 

CEO Report

 

Vision, purpose and offering

 

essensys' vision is to power the world's largest community of tech-driven flexible workspaces.  Our technology has two fundamental purposes.  First, we allow operators to deliver a range of differentiated, flexible and customer-specific services to a broad base of tenants across multiple locations.  Second, we help operators to manage the cost, operational and technological challenges they typically encounter.

 

The problem we solve

 

Occupiers are demanding greater flexibility and exceptional in-building experiences.  For landlords, meeting these expectations can bring significant risk, cost and complexity.  As the leading global provider of mission-critical SaaS platforms and on-demand cloud services to the flexible workspace segment of the commercial real estate industry, essensys' software is specifically designed and developed to help solve the complex operational challenges faced by landlords and multi-site flexible workspace operators as they grow and scale their operations.

 

Strong platform for long-term growth

 

In our 2021 financial year, we performed in line with market expectations and made strong progress in the key North American market, growing our US recurring revenues by 20%.  At constant currency we grew Annual Recurring Revenue by 5% in the year.

 

Our business model is characterised by high visibility and resilience and strong SaaS metrics, with recurring revenues now accounting for 87% of Group revenues.  Our overall gross margin has grown slightly to 65% due to an increase in the proportion of recurring revenue, our ARR gross margin is stable at 69% and net retention over the last three years has averaged 104%.  Our customer base continues to diversify both in terms of type and location with new customers in new regions and an increasing number of more traditional landlords and commercial real estate operators becoming customers.  We see these trends continuing.

 

Our progress is particularly pleasing in the context of the greatest global crisis in decades.  This is testament to a proven growth strategy which we define as land, expand and grow with the landlords and flex operators we support.  essensys has very few direct competitors within our target markets.  Our initial expansion into new territories is typically driven by existing customer demand, as customers seek to realise their own growth plans and we offer a solution not already available locally.  It is estimated that by 2025 the Group's target addressable markets will have grown to £375 million in North America, £225 million in Asia Pacific and £250 million across the United Kingdom and Continental Europe (source; extrapolated from JLL data and information).

 

Oversubscribed fundraising to support long-term growth strategy

 

essensys has built a strong platform to capture the flexible workspace opportunity.  We believe there is a significant opportunity to increase the Group's market share ahead of the rapid expansion expected in the market and the recent fundraising will underpin the next phase of our long-term growth strategy. 

 

We are investing the proceeds of that fundraising in accelerating our go-to-market, geographic expansion and product development plans.  Specifically, we will focus on four key areas:

 

1.   "Land-grab" opportunity in the flexible real estate market. We have identified a significant "land-grab" opportunity resulting from the massive structural shift in commercial real estate, as landlords respond to the increased demand for flexible real-estate solutions from their customers;

2.     Increase market share in a growing market. We aim to increase market share in a growing market through our go-to-market strategy, focusing on the key markets of North America, the United Kingdom and Continental Europe and Asia Pacific, with a long-term plan to increase market share by 10% across these regions.

3.    Accelerate our proven strategy. We aim to accelerate our proven strategy by targeting the expansion opportunity within the existing customer base and through developing key, high value, strategic accounts to build a pipeline which underpins significant future runway; and

4.     Accelerate product development to strengthen market position.  We intend to achieve this by reducing time-to-market, time-to-differentiation and accelerating disruptive innovation.

 

"Land-grab" opportunity in the flexible real estate market

 

essensys' industry, the flexible workspace market, has undergone significant growth in recent years.  This trend has been strengthened by traditional landlords and commercial real estate ("CRE") firms accelerating the development of their own flexible workspace products and services to meet the evolving needs of their tenants.  30% of all office space is expected to be consumed flexibly by 2030 (source: JLL), by which time the market is expected to be worth £4 billion (source: Berenberg).

 

At the same time, landlords of traditional office spaces are facing increased operating costs, increased vacancy rates and reduced rents.

 

Covid-19 has underlined the increase in appetite for agile workspace solutions to both occupiers and landlords. For example, a recent CBRE survey showed 86% of occupiers in September 2020 (compared to 73% in June 2020) saw flexible office space as a key component of their future real estate strategy.  Recent research by the Worktech Academy (2021) suggests that demand for flex workspace in the UK alone will grow by more than 20% per annum by 2023.

 

Increase market share in a growing market

essensys is well positioned to capitalise on demand for powerful digital and in-building experiences, having developed the most comprehensive, end-to-end software and technology solution for flexible workspace providers available today.

Currently, property technology investment is still an insignificant proportion of CRE total expenditure.  To meet the demand for flexible workspace solutions, it is expected that there will be a substantial structural change and digital transformation of existing office solutions over the next decade.  Market studies show that consumers of flexible space are prepared to pay a premium for tech-driven services, with CRE firms increasingly seeking ways to make the management of flexible space more efficient and improve client experience.

Based on independent market studies, flexible office space across North America, Continental Europe, Asia Pacific and the United Kingdom, is expected to increase at a CAGR of 31%. between 2020 and 2030, accounting for approximately 2.6 billion square feet by the end of this period (0.2 billion square feet in 2020). The total addressable market in essensys' key regions is expected to grow significantly in the next decade.  These markets are expected to be worth, in aggregate, approximately £3.4 billion by 2030, broken down as follows:

·          North America             £1.7 billion;

·          Europe                          £0.9 billion;

·          Asia Pacific                  £0.7 billion; and

·          United Kingdom          £0.1 billion.

 

Accelerate our go-to-market strategy

 

There is a significant expansion opportunity within the Group's existing portfolio of customers across landlords, flexible space operators and other distribution channels such as property agents, brokers and franchise operators.  We estimate that these customers have the long-term potential to deliver over £1 billion in annual recurring revenues ("ARR").

 

In particular, the Group's existing high-value strategic accounts can provide significant long-term expansion opportunities, as the Group's growth is also driven by customers expanding their own operations. One existing customer represents real estate assets comprising over 62 million square feet within the Group's addressable markets alone. Assuming a penetration rate of 30%., which we believe is achievable, the future expansion opportunity for essensys' Flex Services Platform could equate to 18 million square feet of office space with this one customer.

 

We intend to capitalise on this opportunity by increasing the penetration of the Group's products in each building essensys serves. By increasing the adoption of the Flex Services Platform within a building, the Group's services become embedded and can generate significantly higher ARR and gross margins due to its 'per square foot' pricing model.

 

In addition, essensys' current new customer pipeline includes leading CRE landlords, asset managers and flexible workspace operators, which provides a further substantial future high value and longer-term ARR opportunity.

 

Accelerate product development to strengthen market position

 

To maintain the competitive advantage of essensys' products and services, the Group will increase its investment in product and software development with a focus on introducing technically and commercially disruptive innovation to create seamless digital experiences and extend the reach of the Flex Service Platform launched in March 2021.

 

The Flex Services Platform is a modular, integrated platform designed to address the unique challenges of flexible workspaces.  It gives real estate leaders a single software and digital infrastructure platform to operate and scale up their flexible workspaces. 

 

Using essensys' digital infrastructure and IP developed over the last 15 years, the Flex Services Platform allows landlords and flexible workspace operators to provide next-generation experiences for occupiers and meet their rapidly evolving needs in coming years.

 

Built on private network and cloud infrastructure, the platform supports the four key components that determine the quality of occupier experience: secure digital infrastructure, effective space setup, flexible operations management, and easy-to-use mobile-first occupier interactions.  We are in the process of migrating existing customers onto the new platform in order that they can take advantage of its increased functionality.

 

The Company intends to accelerate its software development roadmap and expects to deliver additional capabilities including environmental and occupancy sensors as well as space visualisation by the end of 2021.

 

Our combined product and software development capability now numbers some 51 personnel, with 43 based in the UK - over one third of our employees.

 

International expansion

 

In the last year, we have made significant progress with our international expansion plans in North America, Asia and Europe. This is in line with the strategy we laid out at the time of our recent fundraising.

 

Appointment of CEO North America

 

In November 2020, we appointed Jeremy Bernard as CEO of our North American business to lead our scale-up in the region. Jeremy most recently served as the Global Head of Real Estate for Knotel, one of the world's largest flexible office providers.  Since Jeremy's appointment, we have seen a significant increase in engagement with the broader real estate market driving increased pipeline activity which is already resulting in a higher volume of sales proposals.

 

Appointment of CEO Asia Pacific

 

In August 2021, we appointed Eric Schaffer as CEO of our Asia Pacific business to establish our business in that region. Eric previously served as Head of Real Estate Advisory for APAC for WeWork.  Following his appointment we have implemented our staff hiring plan for APAC and have a number of new employees in process together with a developing new business pipeline.  Eric has commenced engagement with a number of large potential customers across APAC, both flexible workspace operators and landlords and we have our first Connect site contracted to go live in Australia in Q2 FY22.

 

Expansion into continental Europe & Appointment of CEO UK & Europe

 

During the year we established our European business development operation, based in Paris.  This has generated wide interest across mainland Europe from Sweden to Spain and eastwards to Poland.  We are now seeing active engagement with a number of local, pan-European and global property operators and expect our first sites to be live in mainland Europe by Q3 FY22.  We have recently agreed the appointment of a well-known industry figure as the CEO for the UK & European region - he is expected to join in February 2022.

 

Existing customer activity and expansion

 

Our target market remains large, multi-site operators of flexible workspace, be they specialist operators, traditional landlords or broader real estate operators.  During FY21 a number of our existing customers continued to expand their businesses, albeit slower than previously due to the continued impact of the pandemic.  Our software is mission critical to those operators and we work hard with our customers to ensure that our software meets their needs and allows them to provide a great customer experience to their own customers.  The recent recontracting with our largest customer, Industrious and the renewal of the existing contract with our largest UK customer during FY21 demonstrate our success in these areas.

 

As Covid-19 restrictions continue to be eased we are seeing existing customer activity increase and we currently have an additional 92 existing customer locations in our sales pipeline.

 

Growth targets

 

As announced at the time of our fundraising in July 2021, we have set an internal target for 2025 of ARR of £68 million, equalling approximately 8%. market share and representing an increase of £22 million against existing targets, growing to £100 million ARR in 2026.

 

essensys' longer-term plan is to increase its market share by 10% from current levels.  If achieved, this would result in a market share across North America, Asia Pacific and the United Kingdom and Europe of 18%, 10% and 22% respectively, and an overall market share of 17% by 2030.

 

Current trading and outlook

 

essensys remains mission critical to our customers and our business remains underpinned by a high proportion of contracted, recurring revenue.  We provide flexible workspace providers with operational efficiencies and cost savings whilst removing complexity from their businesses.  In addition to established flexible workspace operators, these attributes are particularly attractive to new landlord and CRE entrants into the market where we can de-risk their establishment and delivery to their, increasingly corporate, customers.

 

We remain confident that the structural shift to flexible working will continue and, if anything, accelerate due to Covid-19; notwithstanding the ongoing challenges and uncertainty the pandemic still represents and the additional risks to the UK economy resulting from Brexit.  This is evidenced by traditional landlords and major commercial real estate companies looking to increase their flexible workspace footprint since the outbreak of the pandemic.  We expect this trend to continue globally.  The acceleration of our product development, go-to-market strategy, and international expansion in FY21 have given us a strong platform to capture the opportunities we see in the flexible workspace market. 

 

The Group continues to trade in line with the Board's expectations.  Sales activity levels continue to increase in all geographies and our early engagement in the Asia Pacific region is very encouraging.  As noted above we are seeing existing customers in both the UK and US continue or re-establish their growth plans and this is translating into an active sales pipeline.  Sales cycles continue to be longer than prior to the Covid-19 pandemic as landlords in particular remain uncertain about the timing of new projects however we are now seeing an acceleration of activity and are confident that we will continue to make good progress towards our longer-term growth targets this year.

 

Mark Furness

Chief Executive Officer

18 October 2021

 

Financial Review

 

This is the third full year results issued by essensys plc following its admission to trading on AIM on 29 May 2019 (the "IPO") and represents the second full year of the Group being listed on AIM.

 

Scope of financial results, original incorporation & pre-IPO reorganisation

 

The financial results included in this announcement cover the Group's combined activities for the 12 months ended 31 July 2021.  The comparatives for the previous 12 months were for the Group's combined activities for the 12 months ended 31 July 2020.

 

Financial Key Performance Indicators

 

£'m unless otherwise stated

2021

2020

Change

 

 

 

 

Group Total Revenue

22.0

22.5

-2%

UK

10.6

12.2

-13%

USA

11.3

10.3

+10%

ROW

0.1

-

-

 

 

 

 

Recurring Revenue

19.1

19.4

-2%

UK

10.1

11.3

-11%

USA

9.0

8.1

+11%

Recurring Revenue %age of Total

87%

86%

 

 

 

 

 

Run Rate Annual Recurring Revenue

19.8

19.7

+1%

 

 

 

 

Non-recurring revenue

2.9

3.1

-6%

 

 

 

 

Product Revenue

 

 

 

Connect

20.0

20.6

-2%

Operate

2.0

1.9

+5%

 

 

 

 

Gross Profit

14.2

14.3

-1%

Gross Profit percentage

65%

64%

 

Recurring Revenue margin %age

69%

69%

 

 

 

 

 

Statutory (loss) / profit before tax

(2.9)

0.3

 

 

 

 

 

Adjusted EBITDA

1. 3

4.2

-69%

Adjusted EBITDA margin

6.0%

19%

 

 

 

 

 

Net Cash

36.9

8.5

 

 

See commentary following and in the CEO report above together with the financial statements below for explanation of significant movements in the above Financial Key Performance Indicators.

 

Revenue

 

Group total revenue fell by 2% to £22.0m in the year driven primarily by a reduction in revenue in the UK from a combination of fewer sites going live in FY21, a slight reduction in customer site numbers and reduced Marketplace revenue resulting from lower occupancy as a consequence of the Covid-19 pandemic.  In addition non cash deferred income related to a pre-IPO transaction ceased in FY20 and was not repeated in FY21.  This was largely offset by continued growth in revenue from the Group's North American business where active Connect sites grew to 286 at the year-end from 223 (as at 31 July 2021).  Operate revenue grew by 5% in the full year to £2.0m (2020: £1.9m).  The weakening of the US Dollar compared to the Pound Sterling also impacted reported revenue in the year by £0.9m compared to FY20.

 

Recurring revenue comprises income invoiced for services that are repeatable and consumed and delivered monthly over the term of a customer contract.  Run Rate Annual Recurring Revenue (Run Rate ARR) is an annualisation of the recurring revenue for the month identified (July 2021 and 2020, as appropriate), and is used an indication of the annual value of the recurring revenue for that month.  Run Rate ARR is also used by management to monitor long term revenue growth of the business.

 

Non-recurring revenue comprises activation fees charged to customers in respect of installations of hardware and services at locations together with training and customer onboarding.

 

Recurring revenue fell by 2% in the year driven by the reasons set out above.  Run Rate ARR grew 1% to £19.8m (from £19.7m in 2020) (5% at constant currency) driven primarily by the net increase in Group Connect sites by 13% to 474 at year end (2020: 419).

 

Gross margins

 

Overall gross margins increased slightly to 65% (2020: 64%) with margin improvements across all areas of the business, in particular in the Group's North American business.  Recurring revenue margins were in line with 2020 from a combination of continued increasing margins in the Group's North American business offset by its increasing proportion of overall Group revenue.

 

Administrative expenses

 

Excluding depreciation charges, administrative expenses increased by £2.3m in the year, as we continued our strategic investment plan.  This was driven primarily by increases in staff costs both from the full-year effect of increases in overall headcount implemented in FY20 but also by the impact of a 22% increase in average numbers of staff in FY21, a significant proportion of which was in development personnel.  In addition, the Group spent an additional £0.6m on third party marketing activities in FY21.

 

Other operating income: Covid-19 support payments

 

During the year the Group continued to utilise government support schemes related to the Covid-19 pandemic in the UK, albeit modestly, receiving £42,000 under the Coronavirus Job Retention Scheme (2020: £386,000).

 

Statutory (loss) / profit for the year

 

The Group made a loss before tax for the year of £2.9m (2020: profit of £0.3m).  The year-on-year change is primarily as a result of the investment in the Group to deliver the growth plans:

 

£'m

2021

2020

 

 

 

UK

-

1.7

North America (US & Canada)

0.5

2.1

ROW

(0.2)

-

Group central costs

(2.6)

(3.0)

Profit / (loss) before tax (pre-share based payments)

(2.3)

0.8

 

 

 

Share based payment expense

(0.6)

(0.5)

 

 

 

(Loss) / profit before taxation

(2.9)

0.3

 

Adjusted EBITDA

 

Adjusted results are prepared to provide a more comparable indication of the Group's core business performance by removing the impact of certain items including exceptional items (material and non-recurring), and other, non-trading, items that are reported separately. Adjusted results exclude adjusting items as set out in the statement of consolidated loss and below, with further details given in Notes 7, 14, 15, 16 and 27 of the financial statements. In addition, the Group also measures and presents performance in relation to various other non-IFRS measures, such as recurring revenue, run-rate annual recurring revenue and revenue growth. 

 

Adjusted results are not intended to replace statutory results.  These have been presented to provide users with additional information and analysis of the Group's performance, consistent with how the Board monitors results.

 

Adjusted EBITDA (being EBITDA prior to exceptional costs, forex translation costs and share based payment expense) is calculated as follows:

 

£'m

2021

2020

 

 

 

Operating (loss) / profit

(2.8)

0.5

Add back:

 

 

Depreciation & Amortisation

3.6

3.1

EBITDA

0.8

3.6

Add back:

 

 

Forex translation adjustments

(0.1)

0.1

Share based payment expense

0.6

0.5

 

 

 

Adjusted EBITDA

1.3

4.2

 

The share-based payment expense and forex translation adjustments are excluded from Adjusted EBITDA as they are non-cash charges and not considered relevant for assessment of underlying profitability.

 

Taxation

 

The Group incurred a tax charge in the year of £411,000 (2020: £191,000).  This was entirely made up of non-cash deferred tax charges arising from timing differences on the taxation related to capitalised development costs.

 

July 2021 Share Placing

 

On 26 July 2021 the Company issued 11,641,890 new ordinary shares of 0.25 pence each at a price of 285 pence per share by way of a share placing (the "Share Placing").  Gross funds raised were approximately £33.2m and the Company's issued ordinary share capital increased to 64,385,219 shares.  The funds were raised to provide funds to accelerate the Group's geographical expansion.

 

Net proceeds of the Share Placing were £31.8m after costs of £1.4m which were all charged to the share premium account.

 

Cash

 

Net cash at year end was £36.9m (2020: £8.5m) following the receipt of the proceeds of the Share Placing.  The Group's current cash reserves provide sufficient capital for the foreseeable future and will enable it to fund the accelerated geographic expansion, continued product and software development, and additional working capital as the business continues to grow.

 

Capital Expenditure

 

During the year the Group continued to execute the planned expansion and upgrading of its digital infrastructure in both the UK and North America in order to provide additional capacity, resilience and improved service to customers.

 

Capitalised Software Development Costs

 

The Group continues to invest in software development resulting in ongoing enhancements to its software platforms.  During the year it launched its new Flex Services Platform which will, in time, replace its existing platforms, Connect and Operate.  The Group continues to increase its onshore software development capacity following a strategic decision in FY20 to bring the majority of the Group's development work back to the UK.  Where such work is expected to result in future revenue, costs incurred that meet the definition of software development in accordance with IAS38, Intangible Assets, are capitalised in the statement of financial position.  During the year the Group capitalised £2.5m in respect of software development (2020: £2.3m).

 

In implementing its accelerated product development strategy the Group anticipates capitalising software costs at a similar rate to FY21 in the next few years.

 

Dividend policy

 

It remains the Group's intention in the short to medium-term to invest in order to deliver capital growth for shareholders.  The Board has not recommended a dividend in respect of the year ended 31 July 2021 and does not anticipate recommending a dividend within the next year but may do so in future years.

 

Alan Pepper

Chief Financial Officer

18 October 2021 

essensys plc

 

Consolidated Statement of Comprehensive Loss

for the year ended 31 July 2021

 

 

 

Notes

2021

2020

 

 

£000

£000

 

 

 

 

Turnover

6

21,982

22,499

Cost of sales

 

(7,750)

(8,117)

 

 

_________

_________

 

 

 

 

Gross profit

 

14,232

14,382

 

 

 

 

Administrative expenses

 

(16,515)

(13,778)

Other operating income

 

42

386

 

 

 

 

Share based payment expense

 

(560)

(514)

 

 

_________

_________

 

 

 

 

Operating (loss)/profit

7

(2,801)

476

 

 

 

 

Interest receivable and similar income

10

-

2

Interest payable and similar charges

11

(127)

(132)

 

 

_________

_________

 

 

 

 

(Loss)/profit before taxation

 

(2,928)

346

 

 

 

 

Taxation

12

(411)

(191)

 

 

_________

_________

 

 

 

 

(Loss)/profit for the year from continuing operations

 

(3,339)

155

 

 

_________

_________

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

Items that may be reclassified to profit or loss:

 

 

 

 

 

 

 

Currency translation differences

 

(200)

(272)

 

 

_________

_________

 

 

 

 

Other comprehensive loss for the year

 

(200)

(272)

 

 

_________

_________

 

 

 

 

Total comprehensive loss for the year

 

(3,539)

(117)

 

 

_________

_________

 

 

 

 

Basic and Diluted (loss)/profit per share

13

(6.2p)

0.3p

 

 

 

 

 

 

 

essensys plc

Registered Number: 11780413

 

Consolidated Statement of Financial Position

as at 31 July 2021

 

 

 

Notes

2021

2020

 

 

£000

£000

ASSETS

 

 

 

 

 

 

 

Non-current assets

 

 

 

Intangible assets

14

6,198

5,013

Property, plant and equipment

15

1,471

1,695

Right of use assets

16

2,160

2,055

 

 

_________

_________

 

 

 

 

 

 

9,829

8,763

 

 

 

 

Current assets

 

 

 

Inventories

18

184

323

Trade and other receivables

19

5,279

5,186

Cash at bank and in hand

 

36,903

8,496

 

 

_________

_________

 

 

 

 

 

 

42,366

14,005

 

 

_________

_________

 

 

 

 

TOTAL ASSETS

 

52,195

22,768

 

 

_________

_________

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

Called up share capital

20

161

132

Share premium

21

51,660

19,881

Share based payment reserve

 

2,045

1,490

Merger reserve

 

28

28

Retained earnings

 

(8,969)

(5,435)

 

 

_________

_________

 

 

 

 

TOTAL EQUITY

 

44,925

16,096

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

Lease liabilities

23

992

796

Deferred tax

24

779

409

 

 

_________

_________

 

 

 

 

 

 

1,771

1,205

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

22

4,229

3,561

Contract liabilities

6E

323

550

Lease liabilities

23

943

1,346

Current taxes

 

4

10

 

 

_________

_________

 

 

 

 

 

 

5,499

5,467

 

 

_________

_________

 

 

 

 

TOTAL LIABILITIES

 

7,270

6,672

 

 

_________

_________

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

52,195

22,768

 

 

_________

_________

 

The financial statements were approved by the Board of Directors and authorised for issue on 18 October 2021.

 

Alan Pepper

Director

 

essensys plc

 

Consolidated Statement of Changes in Equity

for the Year Ended 31 July 2021

 

 

 

Share

Share

Share based payment

Merger

Retained

Total

 

capital

premium

Reserve

Reserve

earnings

equity

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

1 August 2020

132

19,881

1,490

28

(5,435)

16,096

 

 

 

 

 

 

 

Comprehensive loss for the year

 

 

 

 

 

 

Loss for the year

-

-

-

-

(3,339)

(3,339)

Currency translation differences

-

-

(5)

-

(195)

(200)

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

Total comprehensive loss for the year

-

-

(5)

-

(3,534)

(3,539)

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

Transactions with shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

New shares issued

29

33,150

-

-

-

33,179

Cost incurred in issuing new shares

-

(1,371)

-

-

-

(1,371)

Share based payment charge

-

-

560

-

-

560

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

31 July 2021

161

51,660

2,045

28

(8,969)

44,925

 

_______

_______

_______

_______

_______

_______

 

 

Consolidated Statement of Changes in Equity

For the Year Ended 31 July 2020

 

 

 

Share

Share

Share based payment

Merger

Retained

Total

 

capital

premium

Reserve

Reserve

earnings

equity

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

1 August 2019

120

13,184

979

28

(5,318)

8,993

 

 

 

 

 

 

 

Comprehensive loss for the year

 

 

 

 

 

 

Profit for the year

-

-

-

-

155

155

Currency translation differences

-

-

(3)

-

(272)

(275)

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

Total comprehensive loss for the year

-

-

(3)

-

(117)

(120)

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

Transactions with shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

New shares issued

12

6,988

-

-

-

7,000

Cost incurred in issuing new shares

-

(291)

-

-

-

(291)

Share based payment charge

-

-

514

-

-

514

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

31 July 2020

132

19,881

1,490

28

(5,435)

16,096

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

essensys plc

 

Consolidated Statement of Cash Flows

for the Year Ended 31 July 2021

 

 

 

Notes

2021

2020

 

 

£000

£000

 

 

 

 

Cash from operations

31 A

1,808

4,026

 

 

 

 

Corporation tax (paid)/received

 

(36)

185

Foreign exchange

 

122

(140)

 

 

_________

_________

 

 

 

 

Net cash generated from operating activities

 

1,894

4,071

 

 

_________

_________

 

 

 

 

Cash flows from investing activities

 

 

 

Purchases of intangible assets

14

(2,493)

(2,290)

Purchases of property plant and equipment

15

(786)

(992)

Interest received

 

-

2

 

 

_________

_________

 

 

 

 

Net cash used in investing activities

 

(3,279)

(3,280)

 

 

_________

_________

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from the issuance of new shares

 

33,179

7,000

Costs of issuing new shares

 

(1,371)

(291)

Receipts from government grants

 

-

386

Repayment lease liabilities

23

(1,863)

(1,926)

Interest paid on lease liabilities

23

(127)

(132)

 

 

_________

_________

 

 

 

 

Net cash generated from financing activities

 

29,818

5,037

 

 

_________

_________

 

 

 

 

Net increase in cash and cash equivalents

 

28,433

5,828

Cash and cash equivalents at beginning of year

 

8,496

2,688

Effects of foreign exchange rate changes

 

(26)

(20)

 

 

_________

_________

 

 

 

 

Cash and cash equivalents at end of year

 

36,903

8,496

 

 

_________

_________

Cash and cash equivalents comprise:

 

 

 

Cash at bank and in hand

 

36,903

8,496

 

 

_________

_________

 

1

General information

 

essensys plc (the "Company") is a public limited company, incorporated in the United Kingdom under the Companies Act 2006 (registration number 11780413). The Company is domiciled in the United Kingdom and its registered address is Aldgate Tower 7th Floor, 2 Leman Street, London, E1 8FA.  The Company's ordinary shares are traded on the Alternate Investment Market (AIM) of the London Stock Exchange.

 

The Group's principal activities are the provision of software and technology platforms that manage critical digital infrastructure and business processes, primarily of operators of flexible workspace within the real estate industry.  These activities are carried out by the Group's wholly owned subsidiaries.

 

The Company's principal activity is to provide funding and management services to its subsidiaries.

 

2

Authorisation of financial statements and statement of compliance with IFRS

 

The financial statements for the year ended 31 July 2021 were authorised for issue by the Board of Directors and the Statements of Financial Position were signed on the Board's behalf by Mark Furness and Alan Pepper on 18 October 2021.

 

The Group's financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006.

 

The financial statements of the Company have been prepared in a manner consistent with those of the Group.

 

3

Basis of Preparation

 

These financial statements have been prepared under the historical cost basis and are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

 

The Group's business activities, together with factors likely to affects its future development, performance and position are set out in the Strategic Report section of the Annual Report and Accounts which will be published shortly.  The financial position of the Group is described in the Financial Review above.

 

Publication of non-statutory accounts

 

In accordance with section 435 of the Companies Act 2006, the Directors advise that the financial information set out in this announcement for the years ended 31 July 2020 and 31 July 2019 do not constitute the Group's statutory financial statements for those years but is derived from those financial statements.

 

The statutory financial statements for the year ended 31 July 2020 have been audited and filed with the Registrar of Companies. The statutory financial statements for the year ended 31 July 2021 have been audited and will be delivered to the Registrar of Companies in due course.


The Independent Auditor's Reports on the Group's financial statements for the years ended 31 July 2021 and 31 July 2020 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

Going concern

 

The Group's consolidated financial statements have been prepared on a going concern basis.

 

As at 31 July 2021 the Group had net assets of £44.9m (2020: £16.1m), including cash of £36.9m (2020: £8.5m) as set out in the Consolidated Statement of Financial Position, with no external debt.  In the year ended 31 July 2021 the Group generated a loss before tax of £2.9m (2020: profit of £0.3m).  The group used net cash before financing in the year of £1.4m (2020: net cash generated of £0.8m) after investment in software development of £2.5m.

 

During the year, Group revenue decreased by 2.3% with recurring revenue falling by 1.3% primarily as a result of reduced occupancy based marketplace revenue.  The Group generated an operating loss of £2.8m (2020: profit of £0.5m) as it started to expand its operations internationally.  The reduction in revenue was also driven in part due to a weakening of the US dollar, which reduced the reported revenue from its US subsidiary which is an increasing proportion of the Group's business.  The Group has long term contracts with a number of customers and suppliers across different geographical areas and industries.

 

The Directors have prepared a detailed budget and forecast of the Group's expected performance over a period covering at least the next twelve months from the date of the approval of these financial statements. As well as modelling the realisation of the sales pipeline, these forecasts also cover a number of scenarios and sensitivities in order for the Board to satisfy itself that the Group remains within its current cash facilities.

 

Whilst the Directors are confident in the Group's ability to grow revenue, the Board's sensitivity modelling shows that the Group can remain within its cash facilities in the event that revenue growth is delayed (i.e. new sales bookings are not achieved) for a period in excess of twelve months. The Directors' financial forecasts and operational planning and modelling also include the actions, under the control of the Group, that they could take to further significantly reduce the cash outflow expected as the Group expands geographically.  On the basis of this financial and operational modelling, the Directors believe that the Group has the capability and the operational agility to react quickly, cut further costs from the business and ensure that the cost base of the business is aligned with its revenue and funding scale.

 

As a consequence, the Directors have a reasonable expectation that the Group can continue to operate and be able to meet its commitments and discharge its liabilities in the normal course of business for a period of not less than twelve months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the Group financial statements.

3

Basis of Preparation (continued)

 

Basis of consolidation

 

The consolidated financial statements incorporate the results of essensys plc and all of its subsidiary undertakings.

 

essensys plc was incorporated on 22 January 2019, and on 18 May 2019 it acquired the issued share capital of essensys (UK) Ltd, previously essensys Limited, by way of a share for share exchange.  The latter had four wholly owned subsidiaries:

 

·          essensys, Inc

·          Hubcreate Limited

·          TVOC Limited

·          Spacebuddi Limited

 

The consideration for the acquisition was satisfied by the issue of 38,836,044 ordinary shares in essensys plc to the shareholders of essensys (UK) Limited.

 

The accounting treatment for the year to 31 July 2020 in relation to the addition of essensys plc as a new UK holding company of the group falls outside the scope of IFRS 3 'Business Combinations'.  The share scheme arrangement constituted a combination of entities under common control due to all shareholders of essensys (UK) Ltd being issued shares in the same proportion, and the continuity of ultimate controlling parties.  The reconstructed group was consolidated using merger accounting principles which treated the reconstructed group as if it had always been in existence.  Any difference between the nominal value of shares issued in the share exchange and the book value of the shares obtained was recognised in a merger reserve.

 

The company applied the statutory relief as prescribed by Companies Act 2006 in respect of the share for share exchange as the issuing company has secured more than 90% equity in the other entity.  The carrying value of the investment is carried at the nominal value of the shares issued.

 

4

Summary of significant accounting policies

 

Revenue

 

The Group generates revenue primarily in the UK and the United States of America (USA).  Turnover represents services provided in the normal course of business; net of value added tax. Services provided to clients during the year, including any amounts which at the reporting date have not yet been billed to the clients, have been recognised as revenue.

 

(a) Contract

 

Set up and installation costs are partially invoiced once the customer contract is signed with the remaining balance invoiced when the service goes live.  Fixed monthly costs are invoiced one month in advance and revenue is recognised in the month the service is provided. Deferred revenue is recognised for the Group's obligation to transfer services to customers for which they have already received consideration (or an amount of consideration is due) from the customer.  Variable monthly costs (including internet usage and telephone call charges) are invoiced monthly in arrears and accrued revenue is recognised in the month that the services were consumed.

 

(b) Contractual obligation

 

The majority of customer contracts have two main services that the Group provides to the customer:

 

·          Set up / installation

·          Ongoing monthly software, services and support

 

Where a contract is modified and the remaining services are distinct from the services transferred on or before the date of the contract modification, then the Group accounts for the contract modifications as if it were a termination of the existing contract and the creation of a new contract.

 

The amount of consideration allocated to the remaining performance obligations is the sum of the consideration promised by the customer and the consideration promised as part of the contract modification.

 

(c) Determining the transaction price

 

The transaction price is determined as the fair value of the consideration the Group expects to receive over the course of the contract.  There are no incentives given to customers that would have a material effect on the financial statements.

 

(d) Allocate the transaction price to the performance obligations in the contract

 

The allocation of the transaction price to the performance obligations in the contract is non-complex for the Group. There is a fixed unit price for each product sold. Therefore, there is limited judgement involved in allocating the contract price to each unit ordered.

  

 

4

Summary of significant accounting policies (continued)

 

Revenue (continued)

 

(e) Recognise revenue when or as the entity satisfies its performance obligations

 

The contracts may cover multiple sites, but the overarching terms are consistent in each contract. The set up/installation is seen as a distinct performance obligation and revenue is recognised at a point in time, when the installation is completed, and any hardware is provided to the client for their use. The customer can benefit from the set up / installation such as new internet connectivity or new hardware provided, and therefore revenue is recognised in full when these services are provided.

 

The second performance obligation is the provision of software, infrastructure and on-demand services over the term of the contract, and the Group recognises the revenue each month as it provides these services for the duration of the contract, i.e. over time.

 

(f) Costs to obtain and fulfil a contract

 

Set up and installation costs are partially invoiced once the customer contract is signed.  The value of the invoiced amount is held as a contract liability until the performance obligation is satisfied.

 

The company incurs incremental costs in obtaining a contract in the form of sales commissions.  The Company recognises the sales commissions as an asset in relation to costs to obtain a contract.  The company believes that the costs are recoverable as the proceeds from the customer over the contract period exceed the costs to obtain the contract.  The asset is amortised over the contract life on a systematic basis.

 

Contract assets arise from the group's revenue contracts, where work is performed in advance of invoicing customers, and contract liabilities arise where revenue is received in advance of work performed.  Cumulatively, payments received from customers at each balance sheet date do not necessarily equal the amount of revenue recognised on the contracts.  Commission costs capitalised on contracts represents internal sales commission costs incurred on signing of customer contracts and, in line with the requirements of IFRS15, spread over the life of the customer contract.

 

Finance income

 

Finance income comprises interest receivable on funds invested and loans to related parties. Interest income is recognised in profit or loss as it accrues using the effective interest method.

 

Finance costs

 

Finance costs comprise interest on bank loans and lease liabilities. Interest on bank loans and lease liabilities is charged to the consolidated statement of comprehensive income over the term of the debt using the effective interest rate method so that the amount charged is at a constant rate on the carrying amount.  Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

 

Government grants

 

Government grants comprise payments from those governments where the Group has operations that have been impacted by the Covid-19 pandemic.  The grants are specific to providing business support where there has been clear impact of the pandemic.  Payment of the grants have substantive conditions where repayment of the grant is not required.  Where management are certain that these repayment measures are met the grant is treated as other operating income.

 

Intangible assets

 

(a) Internal software development

 

Research expenditure is written off in the year in which it is incurred.

 

Expenditure on internally developed products is capitalised if it can be demonstrated that:

 

·          it is technically and commercially feasible to develop the asset for future economic benefit;

·          adequate resources are available to maintain and complete the development;

·          there is the intention to complete and develop the asset for future economic benefit;

·          the company is able to use the asset;

·          use of the asset will generate future economic benefit; and

·          expenditure on the development of the asset can be measured reliably.

 

Where the costs are capitalised, they are written off over their economic life which is considered by the directors to be 5 to 7 years.

 

Internally developed products in the course of construction are carried at cost, less any recognised impairment loss. Amortisation of these assets, determined on the same basis as other property assets, commences when the assets are ready for their intended use.

 

 

4

Summary of significant accounting policies (continued)

 

Intangible assets (continued)

 

(b) Goodwill

 

Goodwill arising on the acquisition of a business represents the excess of the fair value of the consideration and the fair value of the Group's share of the identifiable assets and liabilities acquired. The identifiable assets and liabilities acquired are incorporated into the consolidated financial statements at their fair value to the Group.

 

Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.  Goodwill is tested for impairment annually.  Any impairment is recognised immediately in the Consolidated Statement of Comprehensive Income and is not subsequently reversed.  On disposal of a business, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

(c) Other intangible assets

 

Other intangible assets are initially recognised at cost or, if recognised as part of a business combination, at fair value. After recognition, intangible assets are measured at cost or fair value less any accumulated amortisation and any accumulated impairment losses. Amortisation is calculated to write off the cost or fair value of intangible assets in equal annual instalments over their estimated useful lives and is included within administrative expenses.

 

The estimated useful lives for other intangible fixed assets range as follows:

 

 

Customer relationships

-

6.3 years

 

Website

-

1 year

 

Acquired software

-

5 years

 

Property, plant and equipment

 

Property, plant and equipment is carried at historical cost less accumulated depreciation and any accumulated impairment losses.  Historical cost comprises the aggregate amount paid to acquire assets and includes costs directly attributable to making the asset capable of operating as intended.

 

At each reporting date the Group assesses whether there is an indication of impairment.  If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use.  An impairment loss is recognised where the carrying value exceeds the recoverable amount.

 

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives or, if held under a finance lease, over the shorter of the lease term and the estimated useful life, using the straight line method.  Depreciation is provided at the following annual rates:

 

 

Leasehold improvements

-

20%

 

Fixtures and fittings

-

25%

 

Computer equipment

-

10% - 25%

 

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date.

 

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'other operating income or losses' in the statement of comprehensive income.

 

Leasehold improvements include security equipment purchased.

 

Foreign currency translation

 

(a) Functional and presentation currency

 

Items included in the financial information of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency").  The consolidated financial information is presented in 'sterling', which is essensys plc's functional and the Group's presentation currency.

 

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place.  All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date, including any goodwill in relation to that entity.  Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.  

 

4

Summary of significant accounting policies (continued)

 

Foreign currency translation (continued)

 

(b) Transactions and balances

 

Foreign currency transactions are translated into essensys plc's functional currency using the exchange rates prevailing at the dates of the transactions.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

 

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within 'finance income or costs.  All other foreign exchange gains and losses are presented in the statement of comprehensive income within 'other operating income or expense'.

 

Inventories

 

Inventories are valued at the lower of cost and net realisable value.  Inventories consist exclusively of work in progress, which are items that have been purchased and allocated to satisfy specific customer contracts.   As the items have yet to be installed at the customer location, and where title has not yet passed, they remain on the statement of financial position until title has passed.

 

Trade and other receivables

 

Trade receivables, which are generally received by the end of the month following terms, are recognised and carried at the lower of their original invoiced value less provision for expected credit losses.

 

Cash and cash equivalents

 

All cash and short-term investments with original maturities of three months or less are considered cash and cash equivalents, since they are readily convertible to cash. These short-term investments are stated at cost, which approximates fair value.

 

Trade and other payables

 

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers.  Trade and other payables are recognised at original cost.

 

Exceptional items

 

Exceptional items are those that, in the Directors' view, are required to be separately disclosed by virtue of the size or incidence to enable a full understanding of the Group's financial performance.

 

Taxation

 

The tax expense for the period comprises current and deferred tax.  Tax is recognised in the consolidated statement of comprehensive income, except that a charge attributable to an item of income or expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

 

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where essensys plc's subsidiaries operate and generate taxable income.

 

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the statement of financial position date, except:

 

·          The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits;

·          Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and

·          Where timing differences relate to interests in subsidiaries, associates, branches and joint ventures and the Group can control their reversal and such reversal is not considered probable in the foreseeable future.

 

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.

 

Share capital

 

Ordinary shares are classified as equity. There is one class of ordinary share in issue, as detailed in note 20.   

 

4

Summary of significant accounting policies (continued)

 

Reserves

 

The Group and Company's reserves are as follows:

 

·          Called up share capital reserve represents the nominal value of the shares issued;

·          The share premium account includes the premium on issue of equity shares, net of any issue costs;

·          Share based payment reserve represents the total value expensed at the balance sheet date in relation to the fair value of the share options at their grant date expensed over the vesting period under the relevant share option schemes;

·          Merger reserve arose on the business combination that was accounted for as a merger in accordance with FRS 102;

·          Retained earnings represents cumulative profits or losses, net of dividends paid and other adjustments.

 

Financial assets

 

The Group classifies all of its financial assets at amortised cost.  Financial assets do not comprise prepayments, or contract assets, although contract assets are in scope of IFRS 9's impairment requirements as discussed below.  Management determines the classification of its financial assets at initial recognition.

 

Financial assets (continued)

 

The Group's financial assets held at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.  These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold their assets in order to collect contractual cash flows and the contractual cash flows are solely payments of the principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

 

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net; such provisions are recorded in a separate provision account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

 

The expected loss rates are based on the Group's historical credit losses experienced over the last three periods prior to the period end.  The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers.  The Group has identified the gross domestic product (GDP), unemployment rates and inflation rate as the key macroeconomic factors in the countries that the Group operates.

 

Impairment provisions for other receivables are recognised based on the general impairment model within IFRS 9.  Under the General approach, at each reporting date, the Group determines whether there has been a significant increase in credit risk (SICR) since initial recognition and whether the loan is credit impaired. This determines whether the loan is in Stage 1, Stage 2 or Stage 3, which in turn determines both the amount of ECL to be recognised i.e. 12-month ECL or Lifetime ECL.

 

Financial liabilities

 

The Group classifies its financial liabilities in the category of financial liabilities at amortised cost.  All financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provision of the instrument.

 

Financial liabilities measured at amortised cost include:

 

·          Trade payables and other short-dated monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

·          Bank and other borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument.  Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

 

Unless otherwise indicated, the carrying values of the Group's financial liabilities measured at amortised cost represents a reasonable approximation of their fair values.

 

 

4

Summary of significant accounting policies (continued)

 

Impairment of assets

 

Assets that are subject to depreciation or amortisation are assessed at each reporting date to determine whether there is any indication that the assets are impaired. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or CGUs).

 

Where there is any indication that an asset may be impaired, the carrying value of the asset (or CGUs to which the asset has been allocated) is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's (or CGU's) fair value less costs to sell and value in use. Non-financial assets that have been previously impaired are reviewed at each reporting date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased. Goodwill is reviewed for impairment on an annual basis, with any impairment to goodwill not reversed at a later period.

 

 Business combinations

 

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired.

 

The consideration transferred for the acquisition of a subsidiary comprises the:

 

·          fair values of the assets transferred

·          liabilities incurred to the former owners of the acquired business

·          equity interests issued by the essensys Group

·          fair value of any asset or liability resulting from a contingent consideration arrangement, and

·          fair value of any pre-existing equity interest in the subsidiary.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.  Acquisition related costs are expensed as incurred.

 

The excess of the consideration transferred and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill.

 

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

 

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

 

Share-based payments

 

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

 

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 on the number of equity investments expected to vest.  The impact of the revision of the original estimates, if any, is recognised in the Statement of Comprehensive Income over the remaining vesting period, with a corresponding adjustment to the Share Based Payment Reserve.

 

Leases

 

All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets; and leases with a duration of twelve months or less, in line with the requirements of IFRS 16.

 

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

 

On initial recognition, the carrying value of the lease liability also includes:

 

·          Amounts expected to be payable under any residual value guarantee;

·          The exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option;

·          Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

 

4

Summary of significant accounting policies (continued)

 

Leases (continued)

 

Right-of-use assets ("ROUA") are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

 

·          Lease payments made at or before commencement of the lease;

·          Initial direct costs incurred; and

·          The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.

 

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

 

When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification:

 

·          If the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy;

·          In all other cases where the renegotiated increases the scope of the lease (whether that is an extension to the lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount;

·          If the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount.

 

For contracts that both convey a right to The Group to use an identified asset and require services to be provided to The Group by the lessor, The Group has elected to account for the entire contract as a lease, i.e. it does allocate any amount of the contractual payments to, and account separately for, any services provided by the supplier as part of the contract.

 

Retirement benefits

 

The Group operates a number of defined contribution plans.  A defined contribution plan is a pension plan under which the employer pays fixed contributions into a separate entity.  Contributions payable to the plan are charged to the income statement in the period in which they relate.  The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

 

Holiday pay accrual

 

All employees accrue holiday pay during the calendar year, the Board encourages all employees to use their full entitlement throughout the year.  A liability is recognised to the extent of any unused holiday pay entitlement which has accrued at the statement of financial position date and carried forward to future periods.  This is measured at the undiscounted salary cost of the future holiday entitlement so accrued at the balance sheet date.

 

Standards adopted in the year

 

No new standards have been adopted in the reporting period as all were adopted previously.

 

Standards, amendments and interpretations not yet effective

 

There are no standards issued not yet effective that will have a material effect on the Group's financial statements.  The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.

 

5

Significant accounting judgements, estimates and assumptions

 

The Group makes certain estimates and assumptions regarding the future.  Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectation of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.  The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are detailed below.

 

Capitalisation of development costs

 

Costs are capitalised in relation to the development of the underlying software utilised within the Group.  The most critical judgement is establishing whether the costs capitalised meet the criteria set out within IAS 38.  Further, the most critical estimate is how the intangible asset can generate future economic benefit.   Projects that are maintenance in nature are expensed as incurred whereas development that generates benefits to the group are capitalised.  After capitalisation management monitors whether the recognition requirements continue to be met and whether there are any indicators that the capitalised costs are required to be impaired. See note 14 for details of amounts capitalised.

 

Measurement and impairment of goodwill and intangible assets

 

As set out in note 4 above the carrying value of goodwill is reviewed for impairment at least annually and for other intangible assets when an indication of impairment is identified.  In determining whether goodwill or intangible assets are impaired, an estimation of the value in use of the Group is required.  This calculation of value in use requires estimates to be made relating to the timing and amount of future cash flows expected and suitable discount rates based on the Group's weighted average cost of capital, in addition to the estimation involved in preparing the initial projected cash flows for the next 5 years.

 

These estimates have been used to conclude that no impairment is required to either goodwill or intangible assets but are judgemental in nature.  See note 14 for details of the key assumptions made.

 

Valuation of Share Options

 

During the year the Group incurred a share-based payment charge of £560,000 (2020: £514,000).

 

The charge related to options in the Group at IPO and during the year ended 31 July 2021 are based on valuations undertaken using a Black Scholes or Monte Carlo Simulation option pricing models, depending on the type of option.  Judgements were required when assessing the valuation in relation to  share price volatility, the expected life of the options issued, the proportion that would be exercised, the risk-free rate applicable and the likely achievement of performance targets where applicable.  The valuation of those options issued after IPO is spread over the vesting period and there will, therefore, be further share based payment expenses in future years in relation to those options.  See note 27 for details.

 

6

Segmental Reporting

 

 

 

The Group generates revenue largely in the UK and the USA. The majority of the Group's customers provide flexible office facilities together with ancillary services (e.g. meeting rooms and virtual services) including technology connectivity.

 

The Group generates revenue from the following activities:

 

·  Establishing services at customer sites (e.g. providing and managing installations, equipment and training on software);

·  Recurring monthly fees for using the Group's software platforms;

·  Revenue from usage of on demand services such as internet and telephone usage and other, on demand, variable services; and

·  Other ad-hoc services.

 

The Group has one single business segment which is the provision of software and technology platforms that manage the critical infrastructure and business processes, primarily to the flexible workspace segment of the real estate industry. The Group has two revenue segments and two geographical segments, as detailed in the tables below.

 

 

6A

Revenue analysis by geographic area

 

 

 

 

 

 

 

The Group operates in two main geographic areas, the United Kingdom and the United States of America.  The whole of the turnover is attributed to the principal activity.  The Group's revenue per geographical segment is as follows:

 

 

 

 

 

 

2021

2020

 

 

£000

£000

 

Analysis of turnover by country of destination:

 

 

 

 

 

 

 

United Kingdom

10,610

12,193

 

United States of America

11,334

10,306

 

Rest of World

38

-

 

 

_________

_________

 

 

 

 

 

Total Income

21,982

22,499

 

 

_________

_________

 

6

Segmental Reporting (continued)

 

 

 

 

 

 

6B

Revenue analysis by revenue streams

 

 

 

 

 

 

 

The Group has two main revenue streams, Operate and Connect. The Group's revenue per revenue stream is as follows: 

 

 

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Connect

19,934

20,552

 

Operate

2,048

1,947

 

 

_________

_________

 

 

 

 

 

Total Income

21,982

22,499

 

 

_________

_________

 

 

 

 

 

 

 

 

 

Connect revenue includes all revenue generated in relation to the Group's Connect product.  It includes revenue recognised at a point in time as well as recognised over a period of time.

 

Operate revenue includes all revenue generated in relation to the Group's Operate product.  The revenue is recognised over a period of time.

 

6C

Revenue disaggregated by 'point in time' and 'over time'

 

 

 

 

 

 

 

The Group revenue disaggregated between revenue recognised 'at a point in time' and 'over time' is as follows:

 

 

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Revenue recognised at a point in time

2,868

3,138

 

Revenue recognised over time

19,114

19,361

 

 

_________

_________

 

 

 

 

 

Total Income

21,982

22,499

 

 

_________

_________

 

 

 

 

 

6D

Revenue from customers greater than 10%

 

 

 

 

 

 

 

Revenue from customers greater than 10% in each reporting period is as follows:

 

 

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Customer 1

4,319

3,377

 

Customer 2

2,302

2,787

 

 

_________

_________

 

 

 

6

Segmental Reporting (continued)

 

 

 

6E

Contract assets and liabilities

 

 

 

 

Contract asset movements were as follows:

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

At 1 August

420

475

 

Transfers in the period from contract assets to trade receivables

(159)

(271)

 

Excess of revenue recognised over cash (or rights to cash) being recognised during the period

75

164

 

Capital asset contract contributions capitalised

32

-

 

Capital asset contract contributions released as contract obligations are fulfilled

(19)

-

 

Capitalised commission cost released as contract obligations fulfilled

(297)

(159)

 

Commission costs capitalised on contracts

293

211

 

 

_________

_________

 

 

 

 

 

At 31 July

345

420

 

 

_________

_________

 

 

 

 

 

 

 

 

 

Contract liability movements were as follows:

 

 

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

At 1 August

550

1,044

 

Amounts included in contract liabilities that were recognised as revenue during the period

(550)

(1,044)

 

Cash received and receivables in advance of performance and not recognised as revenue during the period

323

550

 

 

_________

_________

 

 

 

 

 

At 31 July

323

550

 

 

_________

_________

 

 

 

 

 

Contract assets are included within 'trade and other receivables' and contract liabilities is shown separately on the face of the statement of financial position.  Contract assets arise from the group's revenue contracts, where work is performed in advance of invoicing customers, and contract liabilities arise where revenue is received in advance of work performed.  Cumulatively, payments received from customers at each balance sheet date do not necessarily equal the amount of revenue recognised on the contracts.  Capital asset contract contributions represents costs incurred by the Group in the form of customer incentives spread over the life of the customer contract.  Commission costs capitalised on contracts represents internal sales commission costs incurred on signing of customer contracts and, in line with the requirements of IFRS15, spread over the life of the customer contract.

 

 

 

7

Operating  (loss)/profit

 

 

 

 

2021

2020

 

 

£000

£000

 

This is arrived at after charging/(crediting):

 

 

 

 

 

 

 

Depreciation of tangible fixed assets

969

587

 

Amortisation of intangible assets

1,308

1,009

 

Depreciation of right of use assets

1,205

1,424

 

Fees payable to the Group's auditor (see below)

197

130

 

Amortisation of loan arrangement fee

202

66

 

Write off loan arrangement fees

-

-

 

Exchange differences

(122)

140

 

Research & Development expense

1,345

363

 

Staff costs (note 8)

11,643

8,149

 

Share based payment charges

560

514

 

Increase to expected credit loss provision

45

470

 

 

_______

_______

 

 

 

 

 

 

 

 

 

Analysis of fees paid to the Group's auditor:

 

 

 

 

 

 

 

Annual financial statements - parent company

36

19

 

Annual financial statements - subsidiary companies

82

81

 

 

_________

_________

 

 

 

 

 

Audit Fee

118

100

 

 

_________

_________

 

 

 

 

 

Assurance services

35

30

 

Other services

44

-

 

 

_________

_________

 

 

 

 

 

Non audit services

79

30

 

 

_________

_________

 

 

 

 

 

Total fee

197

130

 

 

_______

_______

 

 

 

 

 

 

 

8

Employees

 

 

 

 

 

 

 

Staff costs (including directors) consist of:

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Wages and salaries

8,663

6,186

 

Social security costs

1,003

794

 

Cost of defined contribution scheme

284

213

 

Other

1,693

956

 

 

_________

_________

 

 

 

 

 

 

11,643

8,149

 

 

_________

_________

 

 

 

 

 

The average number of employees (including directors) during the year was as follows:

 

 

 

2021

2020

 

 

No.

No.

 

 

 

 

 

Executive

6

5

 

Sales & Marketing

20

18

 

Finance & Administration

14

12

 

Support

32

29

 

Development

33

20

 

Provisioning

7

8

 

 

_________

_________

 

 

 

 

 

 

112

92

 

 

_________

_________

             

 

9

Key management remuneration

 

 

 

 

 

 

 

Key management personnel include all the directors of the Company and the senior management and directors of essensys (UK) Limited, the Group's principal trading subsidiary, who together have authority and responsibility for planning, directing, and controlling the activities of the Group.

 

 

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Salaries and fees

1,687

1,838

 

Social security costs

187

243

 

Short term non-monetary benefits

17

15

 

Company contributions to money purchase pension schemes

110

108

 

Share based payment expense

408

317

 

 

_________

_________

 

 

 

 

 

 

2,409

2,521

 

 

_________

_________

 

 

 

 

 

Full details of directors' remuneration are included within the Remuneration Committee Report section of the Annual Report and Accounts.

 

 

 

 

 

10

Interest receivable and similar income

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Interest receivable from related parties

-

2

 

 

_________

_________

 

 

 

 

 

 

-

2

 

 

_________

 

 

 

11

Interest payable and similar charges

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Lease liabilities

127

132

 

 

_________

_________

 

 

 

 

 

 

127

132

 

 

_________

_________

 

 

 

 

12

Taxation on (loss)/profit  on ordinary activities

 

 

2021

2020

 

 

£000

£000

 

Current tax

 

 

 

UK corporation tax

-

-

 

Recovery of irrecoverable tax on loans to participators

-

(159)

 

Adjustment in respect of previous periods

-

(4)

 

Foreign tax on income for the year

41

12

 

 

_________

_________

 

 

 

 

 

Total current tax

41

(151)

 

 

_________

_________

 

Deferred tax

 

 

 

Origination and reversal of timing differences

241

334

 

Adjustments in respect of prior periods

129

8

 

 

_________

_________

 

 

 

 

 

Total deferred tax

370

342

 

 

_________

_________

 

 

 

 

 

Taxation on profit on ordinary activities

411

191

 

 

_________

_________

 

The tax assessed for the year is higher than the standard rate of corporation tax in the UK applied to profit before tax.  The differences are explained below:

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

(Loss)/profit on ordinary activities before tax

(2,928)

346

 

 

_________

_________

 

 

 

 

 

Tax using the Group's domestic tax rates (19%)

(556)

66

 

 

 

 

 

Effects of:

 

 

 

Fixed asset differences

239

110

 

Expenses not deductible for tax purposes

19

102

 

Adjustments to tax charge in respect of previous periods

-

11

 

Irrecoverable tax on loans to participators

-

(159)

 

Adjustment in respect of prior periods

-

(4)

 

Adjustment to losses

-

(225)

 

Deduction for R&D expenditure

-

(123)

 

Foreign tax on income for the year

-

18

 

Current tax (other)

-

63

 

Adjust closing deferred tax to average rate

19

7

 

Adjust opening deferred tax to average rate

-

(18)

 

Timing differences not recognised

(85)

228

 

Deferred tax not recognised

775

115

 

 

_________

_________

 

 

 

 

 

Total tax charge for period

411

191

 

 

_________

_________

 

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2021 (on 10 June 2021).  This included an increase to the main rate to increase the rate to 25% from 1 April 2023.

 

The deferred tax arises primarily from timing differences on the taxation related to capitalised development costs.

 

 

13

Earnings per share

 

 

 

 

2021

2020

 

 

 

 

 

Basic weighted average number of shares

53,713,487

49,652,821

 

 

_________

_________

 

 

 

 

 

Fully diluted weighted average number of shares

53,713,487

49,794,049

 

 

_________

_________

 

 

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

(Loss)/profit for the year attributable to owners of the group

(3,339)

155

 

 

_________

_________

 

 

 

 

 

Basic and diluted (loss)/profit per share (pence)

(6.2p)

0.3p

 

 

_________

_________

 

The (loss)/profit per share has been calculated using the (loss)/profit for the year and the weighted average number of ordinary shares outstanding during the period.

 

Share options held at the year-ended 31 July 2021 are anti-dilutive and so have not been excluded in the diluted earnings per share calculation.

14

Intangible assets

 

 

 

 

 

 

 

 

Assets in the course

Customer

Internal software

 

 

 

 

Group

Of construction

relationships

development

Software

Goodwill

Total

 

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

 

At 1 August 2020

-

335

6,751

280

1,263

8,629

 

Additions

1,412

-

1,081

-

-

2,493

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

At 31 July 2021

1,412

335

7,832

280

1,263

11,122

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

At 1 August 2020

-

293

3,043

280

-

3,616

 

Charge for year

-

42

1,266

-

-

1,308

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

At 31 July 2021

-

335

4,309

280

-

4,924

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 July 2021

1,412

-

3,523

-

1,263

6,198

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

At 31 July 2020

-

42

3,708

-

1,263

5,013

 

 

_________

_________

_________

_________

_________

_________

 

The goodwill relates to the acquisition of Hubcreate Limited on 18 February 2016 and has not been impaired since acquisition. The goodwill all relates to the one cash generating unit (CGU).

 

The Group estimates the recoverable amount of the CGU using a value in use model by projecting pre-tax cash flows for the next 5 years together with a terminal value using the long-term growth rate. The key assumptions underpinning the recoverable amount of the CGU are forecast revenue and forecast EBITDA percentage. The forecast revenues in the model are based on management's past experience and future expectations of performance. The pre-tax discount rate used in all periods is 12% derived from a WACC calculation and benchmarked against similar organisations within the sector. The long-term growth rate used is 2% in all periods which is the underlying growth rate of the economy. Using a discount rate of 15% and a long-term growth rate of 1% as sensitised assumptions also does not result in any impairment. The total recoverable amount in respect of goodwill as assessed by management using the above assumptions is greater than the carrying amount and therefore no impairment charge has been booked in each period.

 

 

14

Intangible assets

 

 

 

 

 

 

 

 

Assets in the course

Customer

Internal software

 

 

 

 

Group

Of construction

relationships

development

Software

Goodwill

Total

 

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

Cost

-

 

 

 

 

 

 

At 1 August 2019

-

335

4,461

280

1,263

6,339

 

Additions

 

-

2,290

-

-

2,290

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

At 31 July 2020

-

335

6,751

280

1,263

8,629

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

At 1 August 2019

-

217

2,162

228

-

2,607

 

Charge for year

-

76

881

52

-

1,009

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

At 31 July 2020

-

293

3,043

280

-

3,616

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 31 July 2020

-

42

3,708

-

1,263

5,013

 

 

_________

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

At 31 July 2019

-

118

2,299

52

1,263

3,732

 

 

_________

_________

_________

_________

_________

_________

 

 

 

15

Property, plant and equipment

 

 

 

 

 

 

 

Fixtures and

Computer

Leasehold

 

 

Group

 

fittings

equipment

improvements

Total

 

 

 

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

At 1 August 2020

 

247

6,601

132

6,980

 

Additions

 

3

783

-

786

 

Transfers (note 16)

 

142

1,185

-

1,327

 

Exchange adjustments

 

(10)

(182)

(2)

(194)

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2021

 

382

8,387

130

8,899

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 1 August 2020

 

154

5,053

78

5,285

 

Charge for year

 

33

926

10

969

 

Transfers (note 16)

 

142

1,185

-

1,327

 

Exchange adjustments

 

(7)

(144)

(2)

(153)

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2021

 

322

7,020

86

7,428

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 31 July 2021

 

60

1,367

44

1,471

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2020

 

94

1,547

54

1,695

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

Fixtures and

Computer

Leasehold

 

 

 

 

fittings

equipment

improvements

Total

 

 

 

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

At 1 August 2019

 

186

4,763

133

5,082

 

Additions

 

73

917

2

992

 

Transfers (note 16)

 

-

1,305

-

1,305

 

Exchange adjustments

 

(12)

(384)

(3)

(399)

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2020

 

247

6,601

132

6,980

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 1 August 2019

 

120

3,513

73

3,706

 

Charge for year

 

41

531

15

587

 

Transfers (note 16)

 

-

1,138

-

1,138

 

Exchange adjustments

 

(7)

(125)

(10)

(142)

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2020

 

154

5,053

78

5,285

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 31 July 2020

 

93

1,548

54

1,695

 

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2019

 

66

1,250

60

1,376

 

 

 

_________

_________

_________

_________

 

Transfers represent right of use assets which reached their contract term and where legal title transferred to the Group.
 

16

Right of use assets

 

 

 

 

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

Group

property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

At 1 August 2020

4,204

142

1,527

584

6,457

 

Additions

1,237

-

-

-

1,237

 

Transfers (note 15)

-

(142)

(1,185)

-

(1,327)

 

Exchange adjustments

41

-

-

-

41

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2021

5,482

-

342

584

6,408

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 1 August 2020

2,609

134

1,440

219

4,402

 

Charge for year

1,116

8

23

58

1,205

 

Transfers (note 15)

-

(142)

(1,185)

-

(1,327)

 

Exchange adjustments

(32)

-

-

-

(32)

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2021

3,693

-

278

277

4,248

 

 

_________

_________

_________

______

_________

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 31 July 2021

1,789

-

64

307

2,160

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2020

1,595

8

87

365

2,055

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

 

Property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

At 1 August 2019

4,362

142

2,815

584

7,903

 

Lease remeasurement

(37)

-

64

-

27

 

Transfers (note 15)

-

-

(1,305)

-

(1,305)

 

Exchange adjustments

(121)

-

(47)

-

(168)

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2020

4,204

142

1,527

584

6,457

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 1 August 2019

2,260

99

2,265

160

4,784

 

Charge for year

985

35

345

59

1,424

 

Lease remeasurement

(596)

-

-

-

(596)

 

Transfers (note 15)

-

-

(1,138)

-

(1,138)

 

Disposals

(38)

-

-

-

(38)

 

Exchange adjustments

(40)

-

(32)

-

(72)

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2020

2,609

134

1,440

219

4,402

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 31 July 2020

1,595

8

87

365

2,055

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2019

2,102

43

550

424

3,119

 

 

_________

_________

_________

_________

_________

 

 

 

17

Subsidiaries

 

 

 

 

 

Subsidiary undertakings, associated undertakings and other investments

 

The following were subsidiary undertakings of the company:

 

 

 

Proportion of

 

 

 

Country of

voting rights

 

 

 

incorporation

and ordinary

 

 

Name

or registration

share capital held

Status

Nature of business

 

 

 

 

 

essensys (UK) Ltd

United Kingdom

100%

Trading

Provider of software and technology platforms to the flexible workspace industry

essensys, Inc

United States of America

100%

Trading

Provider of software and technology platforms to the flexible workspace industry

essensys (Canada) Inc

Canada

100%

Trading

Provider of software and technology platforms to the flexible workspace industry

essensys (Europe) BV

Netherlands

100%

Trading

Provider of software and technology platforms to the flexible workspace industry

Hubcreate Limited

United Kingdom

100%

Non-trading

Provider of workspace management software

TVOC Limited

United Kingdom

100%

Non-trading

Virtual office provider

Spacebuddi Limited

United Kingdom

95%

Dormant

-

 

The registered office of essensys Inc is Nelson Tower, 450 7th Avenue, New York, NY 10123. 

 

The registered office of essensys (Canada) Inc is 550 Burrard Street, Vancouver, British Columbia, V6C 0A3

 

The registered office of essensys (Europe) BV is Herikerbergweg 88, Amsterdam, 1101CM. 

 

The registered offices of Hubcreate Limited, TVOC Limited and Spacebuddi Limited are as per the Company.

 

18

Inventories

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Work in progress

184

323

 

 

_________

_________

 

 

 

 

 

 

184

323

 

 

_________

_________

 

Work in progress are items and third party services purchased to satisfy specific customer contracts, where title has not yet passed.

 

19

Trade and other receivables

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Trade receivables (net)

3,462

3,116

 

Other receivables

409

491

 

Prepayments

1,063

1,159

 

Contract asset

345

420

 

 

_________

_________

 

 

 

 

 

 

5,279

5,186

 

 

_________

_________

 

 

 

19

Trade and other receivables (continued)

 

 

 

Analysis of trade receivables based on age of invoices

 

 

< 30

£'000

31 - 60

£'000

61 -90

£'000

> 90

£'000

Total Gross

£'000

ECL

£'000

Total Net

£'000

2021

2,103

334

217

1,388

4,042

(580)

3,462

2020

1,922

280

254

1,195

3,696

(535)

3,116

 

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. The majority of trade and other receivables are non-interest bearing. Where the effect is material, trade and other receivables are discounted using discount rates which reflect the relevant costs of financing. The carrying amount of trade and other receivables approximates fair value.

 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECL) which uses a lifetime expected loss allowance for all trade receivables. The ECL balance has been determined based on historical data available to management in addition to forward looking information utilising management knowledge.

 

At 31 July 2021 the lifetime expected loss provision for trade receivables and contract assets is as follows:

 

 

31 July 2021

 

 

 

 

 

 

Less than 30

31 to 60

61 to 90

91 or more

 

 

 

days past due

days past due

days past due

days past due

Total

 

 

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Expected loss rate

0%

5.4%

10.6%

38.8%

 

 

Gross carrying amount

2,448

334

217

1,388

4,387

 

ECL

-

18

23

539

580

 

 

 

 

 

 

 

 

 

31 July 2020

 

 

 

 

 

 

Less than 30

31 to 60

61 to 90

91 or more

 

 

 

days past due

days past due

days past due

days past due

Total

 

 

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

Expected loss rate

0%

5.7%

10.6%

39.6%

 

 

Gross carrying amount

2,294

280

254

1,243

4,071

 

ECL

-

16

27

492

535

 

 

 

 

 

 

 

 

Movements in the ECL are as follows:

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Opening ECL at 1 August

535

65

 

 

 

 

 

Increase during the year

220

656

 

Receivables written off as uncollectable

(175)

(186)

 

 

_______

_______

 

 

 

 

 

ECL charge for the year

45

470

 

 

_______

_______

 

 

 

 

 

At 31 July

580

535

 

 

_______

_______

 

 

 

20

Share capital

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Allotted, called up and fully paid

 

 

 

64,385,219 (2020 - 52,743,329) ordinary shares of 0.25p each (2020 - 0.25p)

161

132

 

 

_______

_______

 

 

On 26 July 2021 the Company issued 11,641,890 new ordinary shares of 0.25 pence each at a price of 285 pence per share by way of a share placing.

 

On 9 April 2020 the Company issued 4,635,762 new ordinary shares of 0.25 pence each at a price of 151 pence per share by way of a share placing.

 

 

21

Share premium

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Share premium at start of period

19,881

13,184

 

Issue of new shares

33,150

6,988

 

Cost of issuing new shares recognised in equity

(1,371)

(291)

 

 

_______

_______

 

 

 

 

 

 

51,660

19,881

 

 

_______

_______

           

22

Trade and other payables

 

 

 

2021

2020

 

 

£000

£000

 

Amounts falling due within one year

 

 

 

Trade payables

2,376

1,912

 

Other taxes and social security

282

456

 

Other creditors

439

404

 

Accruals

1,132

789

 

 

_________

_________

 

 

 

 

 

 

4,229

3,561

 

 

_________

_________

 

 

 

 

 

 

23

Lease liabilities

 

Nature of leasing activities

 

The Group leases a number of assets in the jurisdictions from which it operates in with all lease payments fixed over the lease term.

 

 

 

 

 

2021

2020

 

 

 

 

£000

£000

 

 

 

 

 

 

 

Number of active leases

 

 

15

15

 

 

 

 

_________

_________

 

The Group sometimes negotiates break clauses in its leases. On a case-by-case basis, the Group will consider whether the absence of a break clause would expose the Group to excessive risk. Typically, factors considered in deciding to negotiate a break clause include:

 

·          The length of the lease term;

·          The economic stability of the environment in which the property is located; and

·          Whether the location represents a new area of operations for the Group.

 

 

 

23

Lease liabilities (continued)

 

At both 31 July 2021 and 2020 the carrying amounts of lease liabilities are not reduced by the amount of payments that would be avoided from exercising break clauses because on both dates it was considered reasonably certain that the Group would not exercise its right to exercise any right to break the lease.  Where extensions to leases are permitted the Group has chosen to assume that the extensions will be taken and liabilities reflect this position.

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

 

property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

At 1 August 2020

1,820

57

88

177

2,142

 

Additions

1,514

-

-

-

1,514

 

Interest expense

108

4

4

11

127

 

Effect of modifying lease term

79

-

-

-

79

 

Lease payments

(1,616)

(32)

(72)

(143)

(1,863)

 

Foreign exchange movements

(64)

-

-

-

(64)

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2021

1,841

29

20

45

1,935

 

 

_________

_________

_________

_________

_________

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

 

property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

At 1 August 2019

2,444

86

620

298

3,448

 

Additions

586

-

-

-

586

 

Interest expense

78

6

25

23

132

 

Lease payments

(1,204)

(35)

(543)

(144)

(1,926)

 

Foreign exchange movements

(84)

-

(14)

-

(98)

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

At 31 July 2020

1,820

57

88

177

2,142

 

 

_________

_________

_________

_________

_________

 

 

Lease maturity

 

 

 

 

 

 

 

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

 

property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

2021

2021

2021

2021

2021

 

 

 

 

 

 

 

 

Up to 3 months

4

-

-

45

49

 

3 to 12 months

126

29

20

-

175

 

1-2 years

252

-

-

-

252

 

2-5 years

1,459

-

-

-

1,459

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

1,841

29

20

45

1,935

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

 

property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

2020

2020

2020

2020

2020

 

 

 

 

 

 

 

 

Up to 3 months

-

-

-

-

-

 

3 to 12 months

706

-

34

-

740

 

1-2 years

126

57

54

177

414

 

2-5 years

510

-

-

-

510

 

More than 5 years

478

-

-

-

478

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

1,820

57

88

177

2,142

 

 

_________

_________

_________

_________

_________

 

 

 

23

Lease liabilities (continued)

 

 

 

 

 

 

 

 

Analysis by current and non-current

 

 

 

 

 

 

 

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

 

property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

2021

2021

2021

2021

2021

 

 

 

 

 

 

 

 

Due within a year

849

29

20

45

943

 

Due in more than one year

992

-

-

-

992

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

1,841

29

20

45

1,935

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

Leasehold

Fixtures and

Computer

Leasehold

 

 

 

property

fittings

equipment

improvements

Total

 

 

£000

£000

£000

£000

£000

 

 

2020

2020

2020

2020

2020

 

 

 

 

 

 

 

 

Due within a year

1,113

31

71

131

1,346

 

Due in more than one year

707

26

17

46

796

 

 

_________

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

1,820

57

88

177

2,142

 

 

_________

_________

_________

_________

_________

 

24

Deferred taxation

 

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Brought forward

409

67

 

Charged to the income statement

370

342

 

 

_________

_________

 

 

 

 

 

Carried forward

779

409

 

 

_________

_________

 

 

 

 

 

 

The provision for deferred taxation is made up as follows:

 

 

 

 

 

 

 

 

 

 

 

 

2021

2020

 

 

 

 

£000

£000

 

 

 

 

 

 

 

Fixed asset timing differences

 

 

779

409

 

 

 

 

_________

_________

 

 

 

 

 

 

 

 

 

 

779

409

 

 

 

 

_________

_________

 

Factors that may affect future tax charges

 

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7 September 2016). These included reductions to the main rate to reduce the rate to 19 per cent. from 1 April 2017 and to 17 per cent. from 1 April 2021.  However, on 17 March 2021 the rate reduction due to come in effect on 1 April 2021 was substantively reversed so that the main rate of taxation will remain at 19 per cent, and this has been reflected in these financial statements.

 

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2021 (on 10 June 2021).  This included an increase to the main rate to increase the rate to 25% from 1 April 2023.
 

25

Financial instruments

 

The Group is exposed through its operations to the following financial risks:

 

·          Credit risk

·          Foreign exchange risk

·          Liquidity risk

 

In common with all other business, the Group is exposed to risks that arise from its use of financial instruments.  This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.  Further quantitative information in respect to these risks is presented throughout these financial statements.

 

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and procedures for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

 

Principal financial instruments

 

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

 

·          Trade receivables

·          Cash and cash equivalents

·          Trade and other payables

·          Bank overdrafts

·          Bank loan

 

It is Group policy that no trading in financial instruments should be undertaken.

 

Financial instruments by category

 

 

 

2021

2020

 

 

£000

£000

 

Financial assets at amortised cost

 

 

 

 

 

 

 

Cash and cash equivalents

36,903

8,496

 

Trade and other receivables

3,946

3,771

 

 

_________

_________

 

 

 

 

 

Total financial assets at amortised cost

40,849

12,267

 

 

_________

_________

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

Trade and other payables

3,947

3,105

 

Lease liabilities

1,935

2,142

 

 

_________

_________

 

 

 

 

 

Total financial liabilities

5,882

5,247

 

 

_________

_________

 

Financial instruments not measured at fair value

 

These include cash and cash equivalents, trade and other receivables, trade and other payables, and loans and borrowings.  Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables and trade and other payables approximates their fair value.

 

The Group's activities expose it to a variety of financial risks:

 

·          Market risk (including foreign exchange risk, price risk and interest rate risk)

·          Credit risk

·          Liquidity risk

 

The financial risks relate to the following financial instruments:

 

·          Cash and cash equivalents

·          Trade and other receivables

·          Trade and other payables

·          Loans and borrowings 

 

 

 

25

Financial instruments (continued)

 

The accounting policies with respect to these financial instruments are described above.

 

Risk management is carried out by the key management personnel.  Key management personnel include all the directors of the Company and the senior management and directors of essensys (UK) Limited, the Group's principal trading subsidiary, who together have authority and responsibility for planning, directing, and controlling the activities of the Group.  The key management personnel identify and evaluate financial risks and provide principals for overall risk management.

 

(a) Credit Risk

 

Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations.  The Group is mainly exposed to credit risk from credit sales.  It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts.

 

 (b) Market risk

 

(i) Foreign exchange risk

 

Foreign exchange risk arises because the Group operates in the United Kingdom and the United States of America, whose functional currency is not the same as the presentational currency of the Group.  Foreign exchange risk also arises when individual companies within the group enter into transactions denominated in currencies other than their functional currency.  Such transactions are kept to a minimum either through the choice of suppliers or presenting sales invoices in the functional currency.

 

Certain assets of the group companies are denominated in foreign currencies.  Similarly, the Group has financial liabilities denominated in those same currencies.  In general, the Group seeks to maintain the financial assets and financial liabilities in each of the foreign currencies at a reasonably comparable level, thus providing a natural hedge against foreign exchange risk and reducing foreign exchange exposure to a minimal level.

 

 

 

 

 

2021

2020

 

 

 

 

£000

£000

 

 

 

 

 

 

 

Financial assets

 

 

35,683

9,027

 

Financial liabilities

 

 

2,443

1,640

 

 

 

 

_________

_________

 

 

 

 

 

 

 

The table below represents financial instruments that are denominated in currencies other than the functional currencies of the group entities:

 

 

 

 

2021

2020

 

 

 

 

US$000

US$000

 

 

 

 

 

 

 

Financial assets

 

 

6,891

4,212

 

Financial liabilities

 

 

2,118

1,916

 

 

 

 

_________

_________

 

 

 

 

 

 

 

 

 

 

2021

2020

 

 

 

 

CA$000

CA$000

 

 

 

 

 

 

 

Financial assets

 

 

317

56

 

Financial liabilities

 

 

6

11

 

 

 

 

_________

_________

 

 

 

 

 

 

 

 

 

 

2021

2020

 

 

 

 

€000

€000

 

 

 

 

 

 

 

Financial assets

 

 

191

-

 

Financial liabilities

 

 

109

-

 

 

 

 

_________

_________

 

 

 

 

 

 

 

 

 

25

Financial instruments (continued)

 

A 10 per cent weakening of the Group's reporting currency against the United States Dollar would have the following impacts on the groups reporting currency on the financial assets and liabilities listed above in United States Dollar:

 

 

 

 

 

2021

2020

 

 

 

 

$000

$000

 

 

 

 

 

 

 

Financial assets

 

 

(450)

(323)

 

Financial liabilities

 

 

(138)

(145)

 

 

 

 

_________

_________

 

(ii) Interest rate risk

 

The Group's interest rate exposure arises mainly from the interest-bearing borrowings as disclosed in note 23.  All the Group's facilities were floating rates excluding interest from leases, which exposed the group to cash flow risk.  As at 31 July 2021 there are no loans outstanding, (2020 - £nil) and the overdraft facility is available but not in use.  Therefore, there is no material exposure to interest rate risk.

 

(c) Liquidity Risk

 

Prudent liquidity risk management implies maintaining sufficient cash flows for operations.  The Group manages its risk to shortage of funds by monitoring forecast and actual cash flows.  The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.  This tool considers the majority of both its borrowings and payables.

 

The Group has no borrowings at 31 July 2021 (2020 £nil).

 

A maturity analysis of the Group's trade and other payables is shown below:

 

 

 

 

 

2021

2020

 

 

 

 

£000

£000

 

 

 

 

 

 

 

Less than one year

 

 

3,947

3,561

 

 

 

 

_________

_________

 

 

 

 

 

 

 

 

 

 

3,947

3,561

 

 

 

 

_________

_________

 

 

 

 

 

 

 

26

Pension commitments

 

 

 

The group operates defined contribution pension schemes. The assets of the schemes are held separately from those of the group in an independently administered fund. The pension cost charge represents contributions payable by the group to the funds.

 

 

 

2021

2020

 

 

£000

£000

 

 

 

 

 

Pension charge

284

213

 

 

_______

_______

 

 

 

 

 

Pension liability

38

35

 

 

_______

_______

 

 

 

 

 

 

 

27

Share based payments

 

 

 

The Company operates five equity-settled share-based remuneration schemes for employees; two United Kingdom tax authority approved schemes (one EMI and one CSOP), an unapproved Performance Share Plan scheme, a share option plan for non-United Kingdom employees and an unapproved Non-Executive Director Plan.  The UK plans includes employees from the Company and its main UK trading subsidiary essensys (UK) Ltd.

 

 

 

Weighted

 

Weighted

 

 

 

average

 

average

 

 

 

exercise

 

exercise

 

 

 

price

 

price

 

 

 

(£)

Number

(£)

Number

 

 

2021

2021

2020

2020

 

 

 

 

 

 

 

Outstanding at the beginning of the year

1.02

2,966,241

£0.95

2,694,954

 

Granted during the year

1.56

576,479

£1.60

467,818

 

Forfeited during the year

1.52

(163,891)

£1.52

(196,531)

 

Exercised during the year

-

-

-

-

 

 

 

_________

 

_________

 

 

 

 

 

 

 

Outstanding at the end of the year

1.08

3,378,829

£1.02

2,966,241

 

 

 

_________

 

_________

 

The weighted average exercise price of options outstanding at the end of the year was 108.48p (2020: 101.67p) and their weighted average contractual life was 8.0 years (2020: 8.9 years).

 

Of the total number of options outstanding at the end of the year, no options had vested and were exercisable.

 

Market Value Options were valued using the Black Scholes option pricing model.  Performance Share options were valued using a Monte Carlo Simulation option pricing model.  Expected dividends are not incorporated into the fair value calculations.  The assumptions used in the calculations are as follows:

 

 

 

2021

2020

 

 

 

 

 

Risk free investment

0.22% - 0.73%

0.23% - 0.54%

 

Expected life

2.6 years

3.5 years

 

Expected volatility

42.8%

50%

 

The volatility used for the share option grants during the current year was that actually experienced during the period from the IPO.  The expected life was based initially on the minimum vesting period with an assumption that more senior personnel would not exercise immediately.  The risk-free rate was based on the yield on UK government 10-year gilts at the time of the grant.

 

The Group recognised a total Share based payment expense of £560,000 in the year (2020: £514,000), all of which related to options in the Company issued immediately prior to the IPO or subsequent thereto. 

 

28

Related party transactions

 

The Group has taken advantage of the exemption available under IAS 24 Related Party Disclosures not to disclose transactions between Group Undertakings which are eliminated on consolidation.

 

Key management personnel

 

Key management personnel include all the directors of the Company and the senior management and directors of essensys (UK) Limited, the Group's principal trading subsidiary, who together have authority and responsibility for planning, directing, and controlling the activities of the Group.  Details of key management compensation is shown in note 9.

 

Directors Loans

 

There were no directors loans during the years ended 31 July 2021 and 31 July 2020.   

 

 

29

Capital commitments and contingent liabilities

 

The Group had no capital commitments or contingent liabilities at 31 July 2021 (2020: £NIL)

 

30

Events after the reporting date

 

There are no events of any materiality after the reporting date to report.

 

31

Notes supporting statement of cash flows

 

31 A    Cash from operations

 

 

 

 

 

 

 

 

 

2021

2020

 

 

£000

£000

Cash flows from operating activities

 

 

 

 

 

 

 

(Loss)/profit for the financial year before taxation

 

(2,928)

346

 

 

 

 

Adjustments for non-cash/non-operating items:

 

 

 

Amortisation of intangible assets

 

1,308

1,009

Depreciation of property plant and equipment

 

969

587

Amortisation of loan arrangement fee

 

203

66

Depreciation of right of use assets

 

1,205

1,424

Share based payment expense

 

560

514

Gains and losses on foreign exchange transactions

 

(122)

140

Finance income

 

-

(2)

Finance expense

 

127

132

Receipts from government furlough grants treated as operating income

 

-

(386)

 

 

_________

_________

 

 

 

 

 

 

1,322

3,830

Changes in working capital:

 

 

 

Decrease/(Increase) in inventories

 

139

(31)

(Increase)/decrease in trade and other debtors

 

(93)

541

(Increase)/decrease in trade and other creditors

 

440

(314)

 

 

_________

_________

 

 

 

 

Cash from operations

 

1,808

4,026

 

 

_________

_________

 

 

 

 

31

 

 

 

 

 

 

 

 

 

 

 

 

31 B

Movement in net debt

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

Leases

Total

 

 

 

 

 

 

£000

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 August 2019

2,688

(3,448)

(760)

 

 

 

 

Lease additions

-

(586)

(586)

 

 

 

 

 

Cashflow

5,828

1,926

7,754

 

 

 

 

 

Interest charges

-

(132)

(132)

 

 

 

 

 

Exchange movements

(20)

98

78

 

 

 

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 July 2020

8,496

(2,142)

6,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease additions

-

(1,514)

(1,514)

 

 

 

 

Effect of modifying lease term

-

(79)

(79)

 

 

 

 

 

Cashflow

28,433

1,863

30,296

 

 

 

 

 

Interest charge

-

(127)

(127)

 

 

 

 

 

Exchange movements

(26)

64

38

 

 

 

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 July 2021

36,903

(1,935)

34,968

 

 

 

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

Leases

Total

 

 

 

 

 

 

£000

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as at 31 July 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

36,903

-

36,903

 

 

 

 

 

Current liabilities

-

(943)

(943)

 

 

 

 

 

Non-current liabilities

-

(992)

(992)

 

 

 

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,903

(1,935)

34,968

 

 

 

 

 

 

_________

_________

_________

 

 

 

 

 

 

Cash and cash equivalents

 

 

Leases

Total

 

 

 

 

 

 

£000

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as at 31 July 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

8,496

-

8,496

 

 

 

 

 

Current liabilities

-

(1,346)

(1,346)

 

 

 

 

 

Non-current liabilities

-

(796)

(796)

 

 

 

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,496

(2,142)

6,354

 

 

 

 

 

 

_________

_________

_________

 

                   

 

 

 

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