Company Announcements

Interim Results

Source: RNS
RNS Number : 9641M
Elixirr International PLC
27 September 2021
 

Elixirr International plc

 

("Elixirr", the "Company" or the "Group")

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

Elixirr International plc (AIM:ELIX), an established, global award-winning challenger consultancy, is pleased to report its unaudited interim results for the six months ended 30 June 2021 (H1 21). Comparative results are presented for the six months ended 30 June 2020 (H1 20).

 

Financial Highlights

 

Elixirr is pleased to report the following financial highlights for the Group for H1 21:

·       A 77% increase in revenue compared to H1 2020, with revenue totalling £24.0m and record revenue in five of the six months in the period

·       Strong organic revenue growth of 45%, including growth in excess of 100% in our US business, and material contributions from the two acquisitions made in H2 20 and H1 21

·       A 78% increase in Adjusted EBITDA[1] compared to H1 20, totalling £8.1m, and maintaining our strong track record of profitability with an Adjusted EBITDA margin of 33.8%

·       A 145% increase in profit before tax, totalling £6.4m (H1 20: £2.6m)

·       Robust and healthy balance sheet with net cash of £21.1m and no debt[2]

·       Strong pipeline for the remainder of the year leading to the second upgrade in board expectations for FY 21 of c.£47m-£50m of revenue with an Adjusted EBITDA[1] margin in the 30-32% range

 

6 months to
30-June-21

(H1 21)

6 months to
30-June-20

(H1 20)


Change

 

Revenue

£24.0m

£13.5m

+77%

 

Adjusted EBITDA[1]

£8.1m

£4.6m

+78%

 

Adjusted EBITDA margin

33.8%

33.6%

+0.5%

 

Profit before tax

£6.4m

£2.6m

+145%

 

 

[1] Adjusted EBITDA represents operating profit, adjusted for depreciation, amortisation, exceptional items and share-based payments.

[2] No debt other than office lease capitalised under IFRS16.

 

Operating Highlights

·       Strong organic growth through both consistently growing existing relationships and bringing in 42 new logos, supported by a growing brand presence and strong market reputation for high quality delivery

·       Expanding our US business with revenue growth in excess of 100% and a significant expansion in our US Partner team

·       Enhancing and expanding the services we can offer through our House of Brands, both to our core client base and to the expanded client base that has come through our acquisitions, resulting in strong inorganic growth and increased performance of each brand individually

·       Maintaining consistently strong gross profit and Adjusted EBITDA margins through focus on delivery of high value to clients, accountability to project profitability, resource utilisation and tight control of the cost base

·       Strengthening the alignment between the employees of the Group and its overall success through the launch of an Employee Share Purchase Plan (ESPP), open to all employees

·       Progress on all four elements of our four-pillar growth strategy, including:

-       Stretching existing partners - increased revenue per client-facing Partner in H1 21, while continuing to grow the Partner team

-       Promoting Partners from within - one Partner promotion was effective as of January 2021 with two new Partner promotions made to take effect from January 2022, with continued focus on nurturing and developing our Principal grade

-       Hiring new Partners globally - six new Partners, four hires in the US and two in Europe, bringing new global networks and noteworthy experience from a variety of industries and previous high calibre roles

-       Inorganic growth through acquisitions - acquisition of The Retearn Group Limited (Retearn) completed in April 2021 following the acquisition of Coast Digital Limited (Coast Digital) in H2 20. Continued focus on intensive scouting and detailed discussions with multiple potential acquisition targets throughout H1 21 to identify and execute further value-enhancing acquisitions

 

Commenting on the results, Stephen Newton, Chief Executive Officer said:

"After a hugely successful 2020 supported by our admission to the AIM market of the London Stock Exchange, I am delighted with our progress in the first six months of 2021. We have continued to demonstrate a proven growth formula that positions us very strongly in a competitive market - highlighted by our strong financial results.

Our clients remain at the core of what we do, and we are uncompromising in the service we provide to them as we continue to help them navigate their toughest business challenges - something that truly differentiates us in the consulting market.

The progress across all four pillars of our growth strategy has been fantastic in the first half of the year with a particular highlight being our US growth, which is a key market for our business, and I'm delighted with the developments over H1 21. Our inorganic growth has also been immensely successful as we have continued to prove the significance of our unique House of Brands model, which continues to be value enhancing across the entire spectrum of our business. 

Overall, our growing team across the globe - from entry level, through to Partner grade has never been more aligned with the vision of the Company. The introduction of our Employee Share Purchase Plan has further strengthened the ownership mentality and entrepreneurial nature of our people, which truly differentiates us in the market. I'm really proud to be able to offer each and every team member a unique platform for their long-term growth - all of which will continue to positively impact our clients, and the success of Elixirr as a whole."   

 

Enquiries:

 

For enquiries, please refer to our Investor Contacts page:

https://www.elixirr.com/investors/investor-contacts

 

Elixirr International plc                                                +44 (0)20 7220 5410  

Stephen Newton, Chief Executive Officer

Graham Busby, Chief Financial Officer

 

Public and Investor Relations                                      investor-relations@elixirr.com

Caroline Pitt

 

finnCap Ltd (Nominated Adviser & Sole Broker)         +44 (0)20 7220 0500

Christopher Raggett

Simon Hicks

Kate Bannatyne

 

Notes to editors

Elixirr International plc (AIM: ELIX) is an established, global, award-winning management consultancy. The Company challenges the larger consultancies by delivering innovative and bespoke solutions to a repeat, globally-recognised client base.

 

This announcement is released by Elixirr International plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR). It is disclosed in accordance with Elixirr's obligations under Article 17 of MAR. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Graham Busby, Chief Financial Officer.

 

Disclaimer

This announcement contains certain statements that are, or may be, forward looking statements with respect to the financial condition, results of operations, business achievements and/or investment strategy of the Company. Such forward looking statements are based on the Board's expectations of external conditions and events, current business strategy, plans and the other objectives of management for future operations, and estimates and projections of the Company's financial performance. Though the Board believes these expectations to be reasonable at the date of this document they may prove to be erroneous. Forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, achievements or performance of the Group, or the industry in which the Group operates, to be materially different from any future results, achievements or performance expressed or implied by such forward looking statements.

 

 

INTERIM MANAGEMENT REPORT

We are delighted with the progress of the Group over H1 21 as we continue to see the positive results of our overarching strategic growth strategy. Having proven our resilience in a turbulent market in FY20 with a strong set of results, our breadth of offering, and distinct way of working with clients continues to be successful as we report a significant increase in revenue and profit for the six-month period ended 30 June 2021.

 

Financial Performance Review

In the six-month period ended 30 June 2021 the Group delivered revenue of £24.0m and Adjusted EBITDA of £8.1m representing a 33.8% margin.

Profit before tax increased by 145% to £6.4m and adjusted basic earnings per share increased by 64% to 13.5p.

At 30 June 2021, the Group held net cash of £21.1m.

 

6 months to
30-June-21

(H1 21)

6 months to
30-June-20

(H1 20)


Change

 

Revenue

£24.0m

£13.6m

+77%

 

Gross Profit

£9.2m

£5.3m

+74%

 

Gross Profit margin

38.3%

39.1%

-2%

 

Adjusted EBITDA

£8.1m

£4.6m

+78%

 

Adjusted EBITDA margin

33.8%

33.6%

+0.5%

 

Profit before tax

£6.4m

£2.6m

+145%

 

Adjusted basic earnings per share[3]

13.5p

8.2p

+64%

 

Basic earnings per share

11.1p

5.4p

+106%

 

Net cash at period end

£21.1m

£1.9m

N/A

 

 

[3] Adjusted basic earnings per share is calculated using profit after tax, adjusted for amortisation, exceptional items, share-based payments and their related tax impacts.

During H1 21, Group revenue increased to £24.0m. This represents 77% growth compared to H1 20 and includes the impact of both strong organic growth (+45%) and the contribution from the acquisitions of Coast Digital and Retearn (together +32%).

The Group generated gross profit of £9.2m at a gross profit margin of 38.3%. The margin achieved was similar to that achieved in H1 20, reflecting a continued focus throughout the business on the delivery of value to our clients, utilisation and control of the cost base.

Adjusted EBITDA increased by 78% to £8.1m. The Adjusted EBITDA margin of 33.8% was similar to that achieved in H1 20 with no material changes in the overhead cost base.

Profit before tax (after exceptional items) increased by 145% to £6.4m (H1 20: £2.6m). Further detail of exceptional items is set out in note 3.

Adjusted basic earnings per share increased by 64% to 13.5p (H1 20: 8.2p) and basic earnings per share increased by 106% to 11.1p (H1 20: 5.4p).

Net assets as at 30 June 2021 totalled £80.0m (31 December 2020: £70.7m). The £9.3m increase in net assets during H1 21 includes the retained profit for the period (£5.1m), the shares issued as consideration for the acquisition of Retearn (£2.2m), net sales of shares by the Elixirr employee benefit trust (EBT) (£2.6m), less the accrual of the final 2020 dividend (£1.0m).

The Group continues to generate strong cashflow. Net cash increased from £17.5m at 31 December 2020 to £21.1m at 30 June 2021. The increase in cash of £3.6m during H1 21 reflected:

·       Operating cash inflows of £3.1m, with working capital movements during the period reflecting the timing of annual bonus payments in Q1 and the timing of debtor receipts

·       Financing cash inflows of £2.7m, principally loan repayments made to the Group by Partners

·       Cash utilised for investing activities of £2.3m, representing net cash consideration for the acquisition of Retearn less cash acquired with the business (£1.7m) and a final payment for surplus cash on the acquisition of Coast Digital (£0.6m)

 

Operational Review

Elixirr continues to be well positioned to assist our clients in solving their toughest business challenges. Some of our recent activity during the period includes:

·       Development of both existing accounts and new client relationships, resulting in continued growth in revenue through the period, working with numerous repeat clients and bringing on board 42 new clients across the Group in H1 21

·       Continued scaling in the US market and growing our most strategic growth accounts in this geography with US revenue increasing by over 100% compared to H1 20

·       Strengthening our House of Brands with increased year on year financial performance from both Coast Digital and Retearn, following on from the successful growth of our pre-IPO acquisition Den Creative

·       Bolstering our "challenger" positioning, launching new branding in April 2021, increasing our digital following and creating more direct inbound commercial opportunities

·       Utilisation of our new procurement and digital marketing House of Brands capabilities across some of our biggest strategic growth accounts, creating new opportunities for the Group that were not possible for the individual brands alone

·       Multiple notable client engagements including:

-       Launching a bank's Mobile and Online digital banking solution

-       Designing and building a customisable client-facing portal for a global real estate company

-       Transforming a UK insurer's digital user journey, utilising our creative expertise in strategy, digital marketing and user experience

-       Advising an international healthcare group on a billion-dollar healthcare acquisition - evaluating M&A opportunities against alternative growth options

-       Contracting and commercial support for the extension of an automation company's global TMT network services deal

·       Winning numerous awards and accolades including:

-       Winning two awards ('Advisory Firm of the Year' and 'Financial Services Project of the Year') at the 2021 Global Sourcing Association Awards

-       Listed as a Global Outsourcing 100®, the annual list of the world's best outsourcing service providers and advisors

-       Our Founder & CEO, Stephen Newton, recognised as a 2021 Global Leader in Consulting again by Consulting Magazine for 'Excellence in Execution'

-       Our latest acquisition Retearn, listed as a Leading Management Consultant by the Financial Times and shortlisted at the CIPS Excellence in Procurement Awards 2021

Growth Strategy

Elixirr's overarching growth strategy continues to be centred around the four pillars of:

1. Stretching our existing Partners

2. Promoting Partners from within

3. Hiring new Partners

4. Acquiring new businesses

 

1.   Stretching our existing Partners

We have continued to motivate our Partner team to grow sales, strengthen existing client relationships and shape new opportunities across both our organic business and cross-selling our acquired capabilities. We are pleased to report revenue per client-facing partner increased in H1 21 compared to H1 20.

 

Our Partners continue to be incentivised both through a financial year bonus scheme and equity incentives. In H1 21, the Group introduced additional profitability targets for the Partner team as part of the financial year bonus scheme, ensuring that Partners are accountable for the profitable delivery of all aspects of the business they generate.

 

To ensure total alignment with the goals of the business, upon joining the team, all new Partners acquire equity in the firm through purchases of Ordinary shares, financed by loans from the Company.

 

This equity alignment is also important for our team below Partner level. Following the successful implementation of our share option scheme in May 2020, in June 2021 we established an ESPP which is open to all of our employees at all grades. It gives every individual within the Group the opportunity to invest a proportion of their salary in shares, 100% matched by the Company, which vest over a five-year period. This enables us to retain the quality team we have, while creating an attractive proposition for new joiners. Offering our people an equity stake in Elixirr is deeply rooted in our firm's entrepreneurial culture as we continue to build and scale a firm of people who have an ownership mentality, positively impacting our clients, and ultimately everyone as shareholders of the firm.

 

2.   Promoting Partners from within

We continue to dedicate much of our focus on 'growing our own timber' - our existing team are already culturally integrated within Elixirr and through the exposure they get from junior grades can start establishing client relationships early on - something that is hugely valuable to take forward as they progress within the firm.

One of our new Partners who was promoted from Principal last year officially joined the Partner team in January 2021, with a particular focus on continuing to grow our South African business. We have recently announced the promotion of another two Principals to our Partner team, effective from 1 January 2022. One of these new Partners originally joined the firm from university as an Analyst (our entry level grade), demonstrating the very real opportunity for talented individuals to progress the entire way through the firm. This Principal represents the first person to grow all the way from graduate to Partner within Elixirr - truly 'growing our own timber', of which we are extremely proud, and we hope plots a path for many others to follow.

We have made good progress in expanding our Principal grade over H1 21 with five additional team members, a combination of promotions and external hires. While this grade is incentivised with specific targets in preparation for Partner level, our entire team have performance related bonuses and equity incentives. These targets are designed to encourage an individual's progression within the firm and maintain the high standards we expect - integral to the impact we can make for clients, and the overall performance of the Group.

 

3.   Hiring new Partners

 

Hiring external Partners with existing networks and industry expertise continues to be a key part of our organic growth strategy, and we invest heavily in ensuring an individual's suitability to Elixirr to ensure they add value from day one with the firm. In H1 21 we continued to focus on scouting candidates with diverse backgrounds with an emphasis on the US as it remains the largest global consulting market, with optimal opportunities for our advisory services. We also focused on continually driving business development in our talent search, aiming to bring in individuals with expansive networks of potential clients across the globe.

 

In the first six months of the year, we made great progress in this growth pillar with five new partner hires in the period. Between January and June 2021, we hired four US based Partners with widespread experience in a variety of industries including media, healthcare and advertising and a diverse range of skill sets. The team have already established themselves in the market, growing existing accounts and bringing in valuable new logos - one example being a Fortune 100 technology company. A new European partner joined in June bringing a wealth of industry experience including TMT, IT and retail, and over 25 years of executive experience at CXO level. He has already brought in new logos and revenue into the Group.

 

We have continued to make great progress in this space during H2 21 to date, having hired another UK based partner in August 2021. With a proven entrepreneurial background, over the course of his career he established a global advisory consulting practice, guiding the evolution of a team of over 300 people across 13 countries. He has held a number of notable leadership positions with over 15 years of experience, engaging with large multinationals and blue-chip clients worldwide.

 

4.   Acquiring new businesses

A key part of the Group's inorganic growth is building on our in-house expertise and expanding the variety of services we can offer to clients. Our House of Brands strategy was formed in 2017, designed to give boutique businesses and their passionate founders a unique platform for growth while retaining their client base, brand and culture.

Our first acquisition (pre-IPO), Den Creative, has continued to be a fantastic case study for our future acquisitions, with revenue growing by over 700% since joining our House of Brands in 2017. The business continues to strengthen with a consistent pipeline of creative and digital opportunities, complemented by our wider consulting offering.

Following this success, the Group acquired Coast Digital in October 2020. Digital growth has continued to be at the top of our clients' agendas and, combined with our existing capabilities, the acquisition of Coast Digital has already made a huge impact to our offering. Alongside the additive value in service offering for our clients, the platform we have been able to offer Coast Digital has made a substantive impact to its own business performance.

Throughout H1 21 we continued to scout multiple acquisition opportunities, and in April 2021 we were pleased to announce the acquisition of Retearn. The business was acquired for a maximum consideration of £7.0m (including an element contingent on earn out targets) at a multiple of 7x EBITDA and was immediately earnings enhancing for the Group. Retearn has an outstanding reputation in the market - its clients rated it 51% higher than the competition and it featured in the FT's list of the UK's Leading Management Consultants for 2021.

Retearn's expertise across transformation and procurement - intended to support businesses on their biggest operational challenges - has already begun to generate high demand across our Group client base. Since joining our House of Brands five months ago, Retearn's capabilities have already been utilised across, amongst others, two of our biggest strategic growth accounts, adding over 20% to Retearn's contracted revenue for H2 21, and we see a strong pipeline of additional opportunities going forward.

Growing our House of Brands continues to be one of the Group's major strategic focuses and we have continued to actively scout new suitable targets across the globe. Having engaged with over 150 firms since our IPO, 85 were pursued in H1 21 and we continue to develop a compelling pipeline of targets going into the remainder of the year. Our dedicated M&A team are disciplined in their approach, and consistent with our client work in this space, remain uncompromising on the quality and value of any deals they pursue.

Outlook

The Group has continued to trade well since the end of H1 21, with further year on year revenue and Adjusted EBITDA growth in July and August 2021.

Given the H1 21 results and the strong pipeline that we see for the remainder of FY21, the Board's current expectation is that full year FY21 revenue will now be in the range of £47m-£50m with an Adjusted EBITDA margin in the 30-32% range. Previously our expectation was to achieve revenues at the upper end of the £44m-47m range, at c.29% EBITDA margin. We are pleased to update this.

By sustaining focus on exceptional delivery for our clients and progressing all elements of our four-pillar growth strategy, the Board believes that the Group is well positioned for further growth and success for the remainder of the year and beyond.

 

 

Gavin Patterson                                  Stephen Newton

Chairman                                              Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interim condensed consolidated statement of comprehensive income

For the six months ended 30 June 2021

 

 

 

Six months ended

30 June 2021

Unaudited

 

 

Six months ended

30 June 2020

Unaudited

 

Note

£ 000's

 

£ 000's

 

 

 

 

 

 

 

 

 

 

Revenue

 

              24,046

 

              13,550

Cost of sales

 

 (14,840)

 

 (8,245)

Gross profit

 

              9,206

 

              5,305

 

 

 

 

 

Administration expenses

 

           (2,546)

 

           (2,081)

Exceptional items

 

(142)

 

(263)

Operating profit

 

6,518

 

2,961

 

 

 

 

 

 

 

 

 

 

Depreciation

 

                 333

 

                 391

Amortisation of intangible assets

 

730

 

938

Share-based payments

6

394

 

-

Exceptional items

3

142

 

263

Adjusted EBITDA

 

              8,117

 

              4,553

 

 

 

 

 

 

 

 

 

 

Net finance expense

 

                   (109)

 

                   (344)

Profit before tax

 

              6,409

 

              2,617

Taxation

 

             (1,294)

 

             (624)

 

 

 

 

 

Profit for the period

 

               5,115

 

               1,993

 

 

 

 

 

Exchange differences on translation of foreign operations

 

18

 

134

 

 

 

 

 

Total comprehensive income for the period

 

5,133

 

2,127

 

 

 

 

 

Basic earnings per Ordinary share (p)

5

11.1

 

5.4

Diluted earnings per Ordinary share (p)

5

10.3

 

5.2

Adjusted basic earnings per Ordinary share (p)

5

13.5

 

8.2

Adjusted diluted earnings per Ordinary share (p)

5

12.5

 

7.9

 

 

All results relate to continuing operations.

The attached notes form part of these interim condensed consolidated financial statements.

 

 

 

 

 

Interim condensed consolidated statement of financial position

As at 30 June 2021

 

 

 

 

As at

30 June 2021

Unaudited

 

 

As at

31 December 2020

Audited

 

 

As at

30 June 2020

Unaudited

 

Note

£ 000's

 

£ 000's

 

£ 000's

Assets

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Intangible assets

7

          56,842

 

        51,188

 

48,386

Property, plant and equipment

 

              5,261

 

5,545

 

5,828

Other receivables

 

431

 

596

 

416

Loans to shareholders

 

7,237

 

7,784

 

7,408

Deferred tax asset

 

161

 

161

 

-

Total non-current assets

 

           69,932

 

          65,274

 

62,038

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Trade and other receivables

 10

          8,641

 

          4,220

 

5,187

Cash and cash equivalents

 

           21,081

 

17,503

 

1,915

Total current assets

 

29,722

 

           21,723

 

7,102

 

 

 

 

 

 

 

Total assets

 

             99,654

 

             86,997

 

60,140

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Loans and borrowings

 

4,604

 

4,837

 

7,976

Deferred tax liability

 

697

 

547

 

463

Other non-current liabilities

9

1,564

 

601

 

148

Total non-current liabilities

 

6,865

 

5,985

 

8,587

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 11

          8,720

 

8,107

 

7,353

Loans and borrowings

 

459

 

448

 

2,441

Corporation tax

 

1,716

 

1,157

 

1,421

Other creditors

9

1,909

 

612

 

-

Total current liabilities

 

12,804

 

          10,324

 

11,215

 

 

 

 

 

 

 

Total liabilities

 

           19,669

 

16,309

 

19,802

 

 

 

 

 

 

 

Net assets

 

             79,985

 

70,688

 

49,338

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Share capital

12

52

 

                 52

 

2

Share premium

12

           23,562

 

            19,729

 

23

Capital redemption reserve

 

2

 

2

 

2

EBT share reserve

 

(297)

 

(1,248)

 

-

Merger relief reserve

12

46,870

 

46,870

 

46,870

Foreign currency translation reserve

 

          (54)

 

(72)

 

88

Retained earnings

 

            9,850

 

5,355

 

2,355

Total shareholders' equity

 

79,985

 

70,688

 

49,338

 

Interim condensed consolidated statement of cash flows

For the six months ended 30 June 2021

 

 

 

Six months ended

30 June 2021

Unaudited

 

Six months ended

30 June 2020

Unaudited

 

 

£ 000's

 

£ 000's

Cash flows from operating activities:

 

 

 

 

Cash generated from operations

13 

3,892

 

6,259

Taxation paid

 

               (748)

 

               (88)

Net cash generated from operating activities

 

3,144

 

6,171

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of property, plant and equipment

 

             (33)

 

             (11)

Payment for acquisition of subsidiary, net of cash acquired

 

(1,473)

 

-

Payment of deferred consideration for acquisition of subsidiary

 

 (792)

 

 -

Interest received

 

16

 

2

Net cash utilised from investing activities

 

(2,282)

 

(9)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Issue of ordinary share capital

 

-

 

23

Issue of redeemable preference shares

 

           -

 

           50

Capital reduction and share buy-backs

 

                  -

 

                 (626)

EBT Ordinary share purchases

 

(370)

 

-

EBT Ordinary share sales

 

3,000

 

-

Loans to shareholders

 

          (3,000)

 

          (5,944)

Loans repaid by shareholders

 

3,545

 

-

Repayment of borrowings

 

-

 

(375)

Lease liability payments

 

(326)

 

(301)

Interest paid

 

(125)

 

(152)

Net cash generated/(utilised) from financing activities

 

          2,724

 

          (7,325)

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

3,586

 

(1,163)

 

 

 

 

 

Cash and cash equivalents at beginning of the period

 

17,503

 

3,001

Effects of exchange rate changes on cash and cash equivalents

 

               (8)

 

               77

 

 

 

 

 

Cash and cash equivalents at end of the period

 

21,081

 

1,915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interim condensed consolidated statement of changes in equity

For the six months ended 30 June 2021

 

 

 

 

 

Unaudited

Share capital

£ 000's

Share premium

£ 000's

 

 

 

 

 

Capital redemption reserve

£ 000's

 

 

 

 

 

EBT share reserve
£ 000's

Merger relief reserve

£ 000's

Foreign currency translation reserve

£ 000's

Retained earnings

£ 000's

 

 

 

 

 

 

 

Total

£ 000's

 

 

 

 

 

 

 

 

 

As at 01 January 2020

3

-

-

-

43,497

(46)

1,182

44,636

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

1,993

1,993

Other comprehensive income

-

-

-

-

-

134

-

134

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

Share issues

1

23

-

-

-

-

-

24

Share buy-backs at par and cancelled

(2)

-

2

-

(3,127)

-

(820)

(3,947)

Redesignation/conversion of shares

-

-

-

-

6,500

-

-

6,500

 

 

 

 

 

 

 

 

 

As at 30 June 2020

2

23

2

-

46,870

88

2,355

49,338

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

2,801

2,801

Other comprehensive income

-

-

-

-

-

(160)

-

(160)

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

Share issues

-

-

-

-

-

-

-

-

Contributions of equity, net of transaction costs

-

18,583

-

-

-

-

-

18,583

Share issue as consideration for a business combination

-

1,123

-

-

-

-

-

1,123

Preference shares reclassified from loans and borrowings

50

-

-

-

-

-

-

50

Share buy-backs at par and cancelled

-

-

-

-

-

-

-

-

Acquisition of Ordinary shares

-

-

-

(1,198)

-

-

-

(1,198)

Acquisition of Redeemable Preference shares

-

-

-

(50)

-

-

-

(50)

Share-based payments

-

-

-

-

-

-

47

47

Deferred tax recognised in equity

-

-

-

-

-

-

152

152

 

 

 

 

 

 

 

 

 

As at 31 December 2020 and 01 January 2021

52

19,729

2

(1,248)

46,870

(72)

5,355

70,688

 

 

 

-

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

5,115

5,115

Other comprehensive income

-

-

-

-

-

18

-

18

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

Share issue as consideration for a business combination

-

2,154

-

-

-

-

-

2,154

Dividends

-

-

-

-

-

-

(1,014)

(1,014)

Share-based payments

-

-

-

-

-

-

394

394

Sale of Ordinary shares

-

1,679

-

1,321

-

-

-

3,000

Acquisition of Ordinary shares

-

-

-

(370)

-

-

-

(370)

 

 

 

 

 

 

 

 

 

As at 30 June 2021

52

23,562

2

(297)

46,870

(54)

9,850

79,985


 

Share capital

Share capital represents the nominal value of share capital subscribed.

 

Share premium

The share premium account is used to record the aggregate amount or value of premiums paid when the Company's shares are issued at a premium, net of associated share issue costs. It also records gains on the sale of shares by the EBT.

 

Capital redemption reserve

The capital redemption reserve is a non-distributable reserve into which amounts are transferred following the redemption or purchase of the Company's own shares.

 

EBT share reserve

The EBT share reserve represents the cost of shares repurchased and held in the employee benefit trust.

 

Merger relief reserve

This reserve records the amounts above the nominal value received for shares sold, less transaction costs in accordance with section 610 of the Companies Act 2006.

 

Foreign currency translation reserve

The foreign currency translation reserve represents exchange differences that arise on consolidation from the translation of the financial statements of foreign subsidiaries.

 

Retained earnings

The retained earnings reserve represents cumulative net gains and losses recognised in the statement of comprehensive income and equity-settled share-based payment reserves and related deferred tax on share-based payments.

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the interim condensed consolidated financial statements

 

1.    Basis of preparation and significant accounting policies

 

1.1.  General information

 

Elixirr International plc (the "Company") and its subsidiaries' (together the "Group") principal activities are the provision of consultancy services.

 

The Company is a limited company incorporated in England and Wales and domiciled in the UK. The address of the registered office is 12 Helmet Row, London, EC1V 3QJ and the company number is 11723404.

 

The consolidated financial statements were authorised for issue in accordance with a resolution of the Directors on 24 September 2021.

 

1.2.  Basis of preparation

 

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group's last annual consolidated financial statements, as at and for the year ended 31 December 2020. They do not include all of the information required for a complete set of IFRS financial statements, however, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements. 

 

Statutory accounts

 

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ("the Act").

 

The financial information provided for the current six-month period ended 30 June 2021 and comparative period ended 30 June 2020 is unaudited. The financial information provided in comparative period ended 31 December 2020 was audited.

 

The presentational currency of these financial statements and the functional currency of the Group is pounds sterling.

 

1.3.  Basis of consolidation

 

These financial statements consolidate the financial statements of the Company and its subsidiary undertakings as at 30 June 2021.

 

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The acquisition method of accounting has been adopted. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

 

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

 

1.4.  Measurement convention

The consolidated financial information has been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The preparation of the consolidated financial information in compliance with IFRS requires the use of certain critical accounting estimates and management judgements in applying the accounting policies. The significant estimates and judgements that have been made and their effect is disclosed in note 1.6.1.

1.5.  Going concern

 

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. The Group's forecasts and projections, taking into account reasonable possible changes in trading performance, show that the Group has sufficient financial resources, together with assets that are expected to generate cash flow in the normal course of business. Accordingly, the Directors have adopted the going concern basis in preparing these consolidated financial statements.  

 

1.6.  Principal accounting policies

 

Please refer to the Group's last annual consolidated financial statements for full disclosures of the principal accounting policies that have been adopted in the preparation of these interim condensed consolidated financial statements. The key accounting policies that affected the Group in the period are documented below.

 

1.6.1.    Significant judgements and estimates

 

The preparation of the financial statements requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, costs and revenue in the financial statements. Actual results could differ from these estimates. The judgements, estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.

 

Key sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of assets or liabilities within the next accounting period are:

-       Revenue is recognised in line with time worked on a project unless the engagement is conditional or contingent. Management review accrued revenue to determine whether there is any likelihood of any amendments or provisions required based on project progress and relationship with the client.

-       Full provision is made for loss making projects in the period in which the loss is first foreseen, and for the cost of conditional or contingent engagements prior to the event occurring. Estimation is required of costs to complete and the provision necessary.

-       The Group's policy on recognising an impairment of the trade receivables balance is based on a review of individual receivable balances, their ageing and management's assessment of realisation. This review and assessment is conducted on a continuing basis and any material change in management's assessment of trade receivable impairment is reflected in the carrying value of the asset.

-       Provisions for dilapidations are accrued based on estimation of the cost expected to crystallise on vacating leased premises.

-       The amortisation periods of intangible assets are estimates based on the expected useful life and are assessed annually for any changes based on current circumstances.

1.6.2.    Revenue recognition

Revenue is measured as the fair value of consideration received or receivable for satisfying performance obligations contained in contracts with clients, including expenses and disbursements but excluding discounts and Value Added Tax. Variable consideration is included in revenue only to the extent that it is highly probable that a significant reversal will not be required when the uncertainties determining the level of variable consideration are resolved. This occurs as follows for the Group's various contract types:

-       Time-and-materials contracts are recognised over time as services are provided at the fee rate agreed with the client where there is an enforceable right to payment for performance completed to date.

-       Fixed-fee contracts are recognised over time based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided where there is an enforceable right to payment for performance completed to date. This is determined based on the actual inputs of time and expenses relative to total expected inputs.

-       Performance-fee contracts are recognised when the right to consideration arises on having met the relevant performance-related elements.

-       Contingent-fee contracts, over and above any agreed minimum fee, are recognised at the point in time that the contingent event occurs and the Group has become entitled to the revenue.

Where contracts include multiple performance obligations, the transaction price is allocated to each performance obligation based on its stand-alone selling price. Where these are not directly observable, they are estimated based on expected cost-plus margin. Adjustments are made to allocate discounts proportionately relative to the stand-alone selling price of each performance obligation.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increase or decrease in estimated revenues or costs are reflected in the statement of comprehensive income in the period in which the circumstances that give rise the revision became known.

For time-and-materials, and fixed-fee contracts, fees are normally billed on a monthly basis. For performance-fee and contingent-fee contracts, fees are normally billed and paid when entitlement to the revenue has been established. If the revenue recognised by the Group exceeds the amounts billed, a contract asset is recognised. If the amounts billed exceed the revenue recognised, a contract liability is recognised. Contract assets are reclassified as receivables when billed and the consideration has become unconditional because only the passage of time is required before payment is due.

The Group's standard payment terms require settlement of invoices within 30 days of receipt.

The Group does not adjust the transaction price for the time value of money as it does not expect to have any contracts where the period between the transfer of the promised services to the client and the payment by the client exceeds one year.

1.6.3.    Business combinations, goodwill and consideration

Business combinations

The Group applies the acquisition method of accounting to account for business combinations in accordance with IFRS 3, 'Business Combinations'.

The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. All transaction related costs are expensed in the period they are incurred as operating expenses. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement.

On 9th April 2021 the Group acquired 100% of the share capital and voting interests of The Retearn Group Limited, a UK-based procurement, transformation and insights consultancy firm. Their services enable clients to self-fund their transformation and growth aspirations through savings elsewhere in the business. The difference between the fair value of the purchase consideration of £7,361,052 and the fair value of the identifiable assets acquired and liabilities assumed of £2,103,563 was recognised as goodwill of £5,257,489. The goodwill is attributable to the company's workforce and working methodologies and it is not deductible for tax purposes. Please refer to note 8 for further details.

Goodwill

Goodwill is initially measured at cost and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the income statement.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired.

The Group performs impairment reviews at the reporting period end to identify any goodwill or intangible assets that have a carrying value that is in excess of its recoverable amount. Determining the recoverability of goodwill and the intangible assets requires judgement in both the methodology applied and the key variables within that methodology. Where it is determined that an asset is impaired, the carrying value of the asset will be reduced to its recoverable amount with the difference recorded as an impairment charge in the income statement.

Contingent and non-contingent deferred consideration on acquisition

Contingent and non-contingent deferred consideration may arise on acquisitions. Non-contingent deferred consideration may arise when settlement of all or part of the cost of the business combination falls due after the acquisition date. Contingent deferred consideration may arise when the consideration is dependent on future performance of the acquired company.

Deferred consideration associated with business combinations settled in cash is assessed in line with the agreed contractual terms. Consideration payable is recognised as capital investment cost when the deferred or contingent consideration is not employment-linked. Alternatively, consideration is recognised as remuneration expense over the deferral or contingent performance period, where the consideration is also contingent upon future employment. Where the consideration is settled in shares, the consideration is classified as equity, it is not re-measured, and settlement is accounted for within equity. Otherwise, subsequent changes to fair value of the deferred consideration are recognised in the statement of comprehensive income.

1.6.4.    Foreign currency translation

 

Functional and presentational currency

Items included in the financial statements 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 financial statements are presented in 'sterling', which is the Group's and Company's functional currency and 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. 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.

Transactions and balances

Foreign currency transactions are translated into the 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 period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

1.6.5.    Intangible assets

 

Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets acquired in a business combination are initially measured at their fair value (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any accumulated impairment losses.   

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset under IAS 38. Such assets are only recognised if either:

-       They are capable of being separated or divided from the company and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the company intends to do so; or

-       They arise from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

The cost of such intangible assets is the fair value at the acquisition date. All intangible assets acquired through business combinations are amortised over their estimated useful lives. The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of the intangibles acquired in business combinations are as follows:           

 

Intangible asset

Useful economic life

Valuation method

Trademark

33.33% reducing balance method

Relief from Royalty method

Customer relationships

10% reducing balance method

Multi-Period Excess Earnings method

 

1.6.6.    Tangible assets

 

Tangible fixed assets are stated at cost net of accumulated depreciation and accumulated impairment losses.

 

Costs comprise purchase costs together with any incidental costs of acquisition.

 

Depreciation is provided to write down the cost less the estimated residual value of all tangible fixed assets by equal instalments over their estimated useful economic lives on a straight-line basis. The following rates are applied:

 

Tangible fixed asset

Useful economic life

Leasehold improvements

Over the life of the lease

Computer equipment

3 years

Fixtures and fittings

3 years

 

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. Low value equipment including computers is expensed as incurred.

 

1.6.7.    Impairments of tangible and intangible assets

 

At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

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

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.

 

1.6.8.    Employee benefits

Post-retirement benefits

The Group pays into defined contribution pension schemes on behalf of employees, that are operated by third parties. The assets of the schemes are held separately from those of the Group in independently administered funds.

The amount charged to the income statement represents the contributions payable to the scheme in respect of the accounting period.

Share-based payments

The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of share options, is recognised as an employee benefit expense in the statement of comprehensive income.

The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non-market based vesting conditions) at the grant date. Fair value is measured by use of Black Scholes option valuation model.

At the end of each reporting period the assumptions underlying the number of awards expected to vest are adjusted for the effects of non-market based vesting conditions to reflect conditions prevailing at that date. The impact of any revisions to the original estimates is recognised in the statement of profit or loss, with a corresponding adjustment to equity.

Please refer to note 6 for further details.

1.6.9.    Earnings per share

The Group presents basic and diluted earnings per share on an IFRS basis. In calculating the weighted average number of shares outstanding during the period, any share restructuring is adjusted to allow comparability with other periods.  

The calculation of diluted earnings per share assumes conversion of all potentially dilutive Ordinary shares, which arise from share options outstanding.

1.7.    Alternative performance measures

 

In order to provide better clarity to the underlying performance of the Group, Elixirr uses adjusted EBITDA and adjusted earnings per share as alternative performance measures. These measures are not defined under IFRS. These non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, but have been included as the Directors consider adjusted EBITDA and adjusted earnings per share to be key measures used within the business for assessing the underlying performance of the Group.

Adjusted EBITDA excludes the following from operating profit: share-based payment costs, non-cash depreciation and amortisation charges and non-recurring exceptional costs. Adjusted EPS excludes the following from profit after tax: share-based payment costs, amortisation charges and non-recurring exceptional items and their related tax impacts.

 

 

2.    Segmental reporting

 

IFRS 8 requires that operating segments be identified on the basis of internal reporting and decision-making. The Group is operated as one global business by its executive team, with key decisions being taken by the same leaders irrespective of the geography where work for clients is carried out. The Directors therefore consider that the Group has one operating segment. As such, no additional disclosure has been recorded under IFRS 8.

 

 

3.    Exceptional items

 

 

 

 

Period ended

30 June 2021

Period ended

30 June 2020

 

 

 

£ 000's

£ 000's

Exceptional items

 

 

142

263

 

 

 

 

 

The exceptional items in the current period relate to costs associated with the acquisition of Retearn (refer note 8). The exceptional items during the six-month period ended 30 June 2020 related to non-recurring costs associated with the pre-initial public offering (IPO) capital restructuring, IPO on AIM, the market of that name operated by the London Stock Exchange (AIM), and EMI share option scheme.

 

 

4.    Ordinary dividends

 

The Board proposed a final Ordinary share dividend in respect of the financial year ended 31 December 2020 of 2.2 pence per Ordinary share, which was approved by shareholders at the Annual General Meeting on 16 June 2021.

 

 

5.    Earnings per share and adjusted earnings per share

The Group presents non-adjusted and adjusted basic and diluted earnings per share (EPS) for its Ordinary shares. Basic EPS is calculated by dividing the profit for the period attributable to Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the period.

Diluted EPS takes into consideration the Company's dilutive contingently issuable shares. The weighted average number of Ordinary shares used in the diluted EPS calculation is inclusive of the number of share options that are expected to vest subject to performance criteria, as appropriate, being met.

The profits and weighted average number of shares used in the calculations are set out below:

 

 

 

 

Period ended

30 June 2021

Period ended

30 June 2020

Basic and diluted EPS 

 

 

£ 000's

£ 000's

 

 

 

 

 

Profit attributable to the Ordinary equity holders of the Group used in calculating basic and diluted EPS

 

 

5,115

1,993

 

 

 

 

 

Basic earnings per Ordinary share (p)

 

 

11.1

5.4

Diluted earnings per Ordinary share (p)

 

 

10.3

5.2

 

 

 

 

Period ended

30 June 2021

 

Period ended

30 June 2020

Adjusted basic and diluted EPS 

 

 

£ 000's

£ 000's

 

 

 

 

 

Reconciliation of earnings used in calculating adjusted EPS:

 

 

 

 

Profit attributable to the Ordinary equity holders of the Group used in calculating basic and diluted EPS

 

 

5,115

1,993

 

 

 

 

 

Adjusting items:

 

 

 

 

Amortisation of intangible assets

 

 

730

938

Exceptional items (note 3)

 

 

142

263

Share-based payments

 

 

394

-

 

 

 

 

 

Tax impact of adjusting items

 

 

(192)

(174)

 

 

 

 

 

Profit attributable to the Ordinary equity holders of the Group used in calculating adjusted basic and diluted EPS

 

 

6,189

3,019

 

 

 

 

 

Adjusted basic earnings per ordinary share (p)

 

 

13.5

8.2

Adjusted diluted earnings per ordinary share (p)

 

 

12.5

7.9

 

 

 

 

 

Period ended

30 June 2021

Period ended

30 June 2020

 

 

 

Number (000's)

Number (000's)

Weighted average number of shares

 

 

 

 

Weighted average number of Ordinary shares used as the denominator in calculating non-adjusted and adjusted basic EPS

 

 

45,889

36,787

Number of dilutive Ordinary shares

 

 

3,788

1,682

Weighted average number of Ordinary shares used as the denominator in calculating non-adjusted and adjusted diluted EPS

 

 

49,677

38,469

 

 

6.    Share-based payments

 

Share Option Plans

 

During the period ended 30 June 2021, a total of 5,830,430 share options were granted to employees and senior management.

 

Details of share option awards made are as follows:

 

 

 

 

Number of share options

Weighted average exercise price

 

 

 

Number (000's)

£

 

 

 

 

 

Outstanding at the beginning of the period

 

 

5,836

0.71

Granted during the period

 

 

5,830

4.00

Forfeited during the period

 

 

(640)

1.95

Outstanding at the period end

 

 

11,026

2.38

Exercisable at the period end

 

 

-

-

 

No share options were exercisable in the period ended 30 June 2021.

 

The options outstanding at 30 June 2021 had a weighted average remaining contractual life of 4 years and a weighted average exercise price of £2.38 per share.

 

The weighted average of the estimated fair values of the options outstanding as at 30 June 2021 is £3.21 per share.

 

At the grant date of the EMI Share Option Plan in 2020 the market price of the options was aligned to the exercise price hence the share-based payment charge calculated under IFRS 2 was immaterial for the period ended 30 June 2020.

 

The options granted in the period ended 30 June 2021 were fair valued at the grant date using the Black Scholes option valuation model.

 

The inputs into the model were as follows:

 

 

 

 

Period ended 30 June 2021

Weighted average share price at grant date (£)

 

 

4.73

Weighted average exercise price (£)

 

 

4.00

Volatility

 

 

21.33%

Weighted average vesting period (years)

 

 

4.56

Risk free rate

 

 

0.30%

Expected dividend yield

 

 

1.18%

 

 

Reasonable changes in the above inputs do not have a material impact on the share-based payment charge in the period ended 30 June 2021.

 

On 28 October 2020, as part of the acquisition of Coast Digital Limited, share options were issued to selling shareholders which are employment-linked and vesting is contingent on Coast Digital Limited achieving EBITDA targets in 2021, 2022 and 2023. The Coast Digital Limited options outstanding at 30 June 2021 had a weighted average remaining contractual life of 3 years and a weighted average exercise price of £0.00005 per share.

 

On 9 April 2021, as part of the acquisition of The Retearn Group Limited (please refer note 8), share options were issued to selling shareholders which are employment-linked and vesting is contingent on The Retearn Group Limited and individual selling shareholders achieving revenue growth targets in 2021, 2022, 2023 and 2024. The options have a fair value of £1.3 million and were issued at an exercise price of £0.00005 per share. The value will be expensed in the income statement per IFRS 3 proportionately over the vesting period. The options outstanding at 30 June 2021 had a weighted average remaining contractual life of 3 years and a weighted average exercise price of £0.00005 per share.

 

The Coast Digital Limited and The Retearn Group Limited share options referred to above are excluded from the reconciliation set out above of the number of options outstanding. These share options are for a fixed consideration where the number of share options is variable and dependent on the share price at the time of vesting.

 

Employee Share Purchase Plan ('ESPP')

 

On 16 June 2021, an ESPP was implemented for the 2021 financial year.

 

Under the scheme, Group employees can contribute a percentage of their gross salary (in the range of 5% to 20%) to purchase shares in the Company and the Company will award the employees with matching shares on the basis of one matching share for every one employee share held on 1 January 2022.

 

The matching shares vest equally over a five-year period with the first share vesting on 31 January 2023.

 

 

7.    Goodwill and intangible fixed assets

 

Goodwill

£ 000's

Trademarks

£ 000's

 

 

 

 

 

Customer relationships
£ 000's

Total

£ 000's

 

 

Cost

 

 

 

 

 

 

At 31 December 2019 and 01 January 2020

43,299

7,135

-

50,434

 

 

At 30 June 2020

43,299

7,135

-

50,434

 

 

Acquisition of business

2,856

-

748

3,604

 

 

At 31 December 2020

46,155

7,135

748

54,038

 

 

Acquisition of business (note 8)

5,257

-

1,126

6,383

 

 

At 30 June 2021

51,412

7,135

1,874

60,421

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

At 31 December 2019 and 01 January 2020

-

(1,110)

-

(1,110)

 

 

Charge for the period

-

(938)

-

(938)

 

 

At 30 June 2020

-

(2,048)

-

(2,048)

 

 

Charge for the period

-

(790)

(12)

(802)

 

 

At 31 December 2020

-

(2,838)

(12)

(2850)

 

 

Charge for the period

-

(668)

(61)

(729)

 

 

At 30 June 2021

-

(3,506)

(73)

(3,579)

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 30 June 2020

43,299

5,087

-

48,386

 

 

At 31 December 2020

46,155

4,297

736

51,188

 

 

At 30 June 2021

51,412

3,629

1,801

56,842

 

 

 

 

 

 

 

 

 

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of the acquisition. Goodwill is represented by the assets that do not qualify for separate recognition.

 

Goodwill on acquisition of a business in the six months ended 30 June 2021 represents the goodwill on acquisition of The Retearn Group Limited and was calculated as the fair value of initial consideration paid less the fair value of the net identifiable assets at the date of the acquisition (see note 8).

 

In line with IAS 36, the carrying value of goodwill is not subject to systematic amortisation but is reviewed at least annually for impairment. In line with IAS 36, the Group performs an annual impairment assessment. At 30 June 2021, the Directors determined that there are no indications that the assets held are at risk of impairment.

 

The trading performance in the six months to 30 June 2021 has been significantly above the downside sensitivity levels applied in the last full impairment assessment at 31 December 2020. As such, there is not considered to be an indicator that an additional impairment assessment is required for this interim period.
 

Customer relationships

Current period additions represent the fair value of customer relationships from the acquisition of The Retearn Group Limited. Refer to note 8 for further details. The fair value has been determined by applying the Multi-Period Excess Earnings method to the cash flows expected to be earned from customer relationships. 

 

The key management assumptions are around forecast revenues, margins and discount factors. The fair value represents the present value of the earnings the customer relationships generate. A useful economic life of 10 years has been deemed appropriate based on the average realisation rate of cumulative cash flows. The projected cash flows have been discounted over this period. The amortisation charge since acquisition is recognised within administrative expenses.

 

8.    Business combinations

On 9 April 2021, the Group acquired 100% of the share capital and voting interests of The Retearn Group Limited, a UK-based procurement, transformation and insights consultancy firm. Their services enable clients to self-fund their transformation and growth aspirations through savings elsewhere in the business. The acquisition brings specialists in procurement and self-funded transformation, and allows the Group to meet demand from clients to find savings to fund strategic initiatives.

The Group acquired The Retearn Group Limited for a total consideration of approximately £7.4 million, consisting of:

-       An initial cash consideration of £2.15 million;

-       The issue of 543,939 ordinary shares of 0.005 pence each in the capital of the Company ("Ordinary shares") at a price of 396 pence per Ordinary share (being the closing mid-market price of an Ordinary Share on 8 April 2021), equating to an additional £2.15 million;

-       Potential earn out payments of up to £0.65 million in cash and up to £2.05 million in new Ordinary shares totalling a maximum of £2.7 million which are contingent on The Retearn Group Limited achieving revenue growth and EBITDA margin targets in periods up to 30 June 2024;

-       Additional cash consideration of £0.4 million based on the working capital of The Retearn Group Limited at completion.

Of the £7.4 million consideration, £2.35 million was paid during the period ended 30 June 2021 and £2.15 million was satisfied through the issue of Ordinary shares. The remaining £2.9 million is recorded within liabilities, of which £1.7 million is recorded within current liabilities and £1.2 million in non-current liabilities (refer note 9).

 

The earn out consideration of £2.7 million has been estimated by management based on anticipated future revenue and EBITDA and the impact of discounting is considered to be immaterial.

 

The Ordinary shares issued pursuant to the acquisition will be subject to the same restrictions as certain other shareholders of the Company, as described in the Company's IPO Admission Document. These restrictions consisted of a lock-in arrangement until 8 July 2021 and certain limitations to the sale of shares until 8 July 2024.

 

Included within exceptional items is an amount of £134,534 for stamp duty, legal and advisory fees in relation to the acquisition.

 

The Retearn Group Limited contributed £1.7 million to the Group's revenue and £0.3 million to the Group's profit before tax for the period from the date of acquisition to 30 June 2021.

 

If the acquisition of the Retearn Group Limited had been completed on 1 January 2021, Group revenues for the period ended 30 June 2021 would have been £26.1 million and Group profit before tax would have been £6.7 million.

 

In calculating the goodwill arising, the fair value of the net assets of The Retearn Group Limited have been assessed, and there were no fair value adjustments deemed necessary, other than for the recognition of customer relationship intangibles and the related deferred tax.

 

Customer relationships were assessed to be separately identifiable assets, recognised at fair value and are included within intangible assets. Refer note 7 for further details.

 

The table below sets out the amounts recognised as at the acquisition date for each major class of assets acquired and liabilities assumed, the consideration and goodwill on the acquisition of The Retearn Group Limited:

 

 

Fair value

£ 000's

Assets

 

Non-current assets

 

Intangible assets

1,126

Property, plant and equipment

14

Total non-current assets

1,140

 

 

Current assets

 

Trade and other receivables

1,407

Cash and cash equivalents

681

Total current assets

2,088

 

 

Total assets

3,228

 

 

 

 

Liabilities

 

Current liabilities

 

Trade and other payables

754

Corporation tax

155

Total current liabilities

909

 

 

Non-current liabilities

 

Deferred tax liability

215

Total non-current liabilities

215

 

 

Total liabilities

1,124

 

 

Fair value of net assets acquired

2,104

Goodwill (note 7)

5,257

Fair value of purchase consideration

7,361

Cash and cash equivalents in subsidiaries acquired

681

 

 

9.    Other creditors and other non-current liabilities

 

 

 

 

As at

30 June 2021

As at

31 December 2020

 

 

 

£ 000's

£ 000's

Other non-current liabilities

 

 

 

 

Dilapidations

 

 

195

195

Contingent consideration

 

 

1,369

406

 

 

 

1,564

601

Other creditors

 

 

 

 

Deferred consideration

 

 

181

612

Contingent consideration

 

 

1,728

-

 

 

 

1,909

612

 

 

Other non-current liabilities include earn-out share payments arising from the acquisition of The Retearn Group Limited and Coast Digital Limited. These share payments are contingent on performance and fall due beyond 12 months from the balance sheet date.

 

Other creditors include contingent share and cash consideration from the acquisition of The Retearn Group Limited and contingent share consideration on Coast Digital Limited that fall due within 12 months from the balance sheet date. Other creditors also include deferred consideration which represents surplus cash payable to selling shareholders of The Retearn Group Limited.

 

 

10.    Trade and other receivables

 

 

 

 

As at

30 June 2021

As at

31 December 2020

 

 

 

£ 000's

£ 000's

 

 

 

 

 

Trade receivables

 

 

7,555

3,770

Prepayments and deposits

 

 

771

373

Contract assets

 

 

282

39

Other receivables

 

 

33

38

 

 

 

8,641

4,220

 

Trade receivables are non-interest bearing and receivable under normal commercial terms. Management consider that the carrying value of trade and other receivables approximates to their fair value.

 

The expected credit loss on trade and other receivables was not material at the current or prior period ends.

 

 

11.    Trade and other payables

 

 

 

 

As at

30 June 2021

As at

31 December 2020

 

 

 

£ 000's

£ 000's

 

 

 

 

 

Trade payables

 

 

1,057

526

Other taxes and social security costs

 

 

1,462

1,577

Accruals

 

 

4,471

4,963

Dividend payable

 

 

1,014

-

Contract liabilities

 

 

561

935

Other payables

 

 

155

106

 

 

 

8,720

8,107

 

 

The fair value of trade and other payables approximates to book value at the period end. Trade payables are non-interest bearing and are normally settled monthly.

 

Trade payables comprise amounts outstanding for trade purchases and ongoing costs.

 

Contract liabilities arise from the Group's revenue generating activities relating to payments received in advance of performance delivered under a contract. These contract liabilities typically arise on short-term timing differences between performance obligations in some milestone or fixed fee contracts and their respective contracted payment schedules.

 

 

12.    Share capital, share premium and merger relief reserve
 

 

 

As at 30 June 2021

 

 

  Issued shares

Number (000's)

Par value

£ 000's

 

Merger relief reserve

£ 000's

Share premium

£ 000's

 

 

 

 

 

£0.00005 Ordinary shares

46,187

2

      46,870

23,562

£1 Redeemable Preference shares

50

50

-

-

 

         46,237

           52

46,870

23,562

 

 

 

As at 31 December 2020

 

 

  Issued shares

Number (000's)

Par value

£ 000's

 

Merger relief reserve

£ 000's

Share premium

£ 000's

 

 

 

 

 

£0.00005 Ordinary shares

45,643

2

46,870

19,729

£1 Redeemable Preference shares

50

50

-

-

 

45,693

52

46,870

19,729

 

The total number of voting rights in the Company at 30 June 2021 was 46,186,481.

 

Ordinary shares

 

On a show of hands every holder of Ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and on a poll each share is entitled to one vote.

 

The shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the Company in proportion to the number of and amounts paid on the shares held.

 

These rights are subject to the prior entitlements of the Redeemable Preference shareholders.

 

Movements in Ordinary shares:

 

Issued shares

Number (000's)

Par value

£ 000's

 

Merger relief reserve

£ 000's

Share premium

£ 000's

 

 

 

 

 

At 31 December 2020

            45,643

            2

46,870

          19,729  

Share issue as consideration for a business combination (note 8)

544

-

-

2,154

Sale of Ordinary shares from the EBT

-

-

-

1,679

At 30 June 2021

         46,187

            2

46,870

23,562

 

Redeemable Preference shares

 

On 22 June 2020, 50,001 Redeemable Preference shares with a nominal value of £1.00 each were issued. There are no voting rights attached to the Redeemable Preference shares.

 

The Redeemable Preference shares were initially classified as a financial liability at date of issue. The shares were reclassified from loans and borrowings to share capital when the EBT acquired the shares during H2 2020. They continue to be held by the EBT at 30 June 2021.

 

The Redeemable Preference shares are entitled to dividends at a rate of 1% per annum of paid up nominal value. The shares have preferential right, before any other class of share, to a return of capital on winding-up or reduction of capital or otherwise of the Company.

 

The Redeemable Preference shares are redeemable 100 years from the date of issue or at any time prior at the option of the Company.

 

Employee Benefit Trust ('EBT')

 

The EBT is accounted for under IFRS 10 and is consolidated on the basis that the parent has control, thus the assets and liabilities of the EBT are included in the Group statement of financial position and shares held by the EBT in the Company are presented as a deduction from equity.

 

The EBT share reserve comprises of Ordinary and Redeemable Preference shares bought and held in the Group's EBT.

 

At 30 June 2021, the Group EBT held 117,289 (30 June 2020: Nil) Ordinary shares and 50,001 Preference shares (30 June 2020: Nil) at a weighted average cost of £2.11 and £1.01 respectively.

 

 

13.    Cash flow information

 

Cash generated from operations

 

 

 

Period ended

30 June 2021

Period ended

30 June 2020

 

 

 

£ 000's

£ 000's

 

 

 

 

 

Profit before taxation

 

 

6,409

2,617

Adjustments for:

 

 

 

 

Depreciation and amortisation

 

 

1,063

1,329

Net finance expense

 

 

109

343

Share-based payments

 

 

394

-

Increase in trade and other receivables

 

 

(3,017)

(514)

(Decrease)/increase in trade and other payables

 

 

(1,138)

2,445

Foreign exchange

 

 

72

39

 

 

 

3,892

6,259

 

 

14.    Related party transactions

 

Related parties, following the definitions in IAS 24, are the Group's subsidiary companies, members of the Board, key management personnel and their families, and shareholders who have control or significant influence over the Group.


On 27 April 2021, a total of 604,524 options over Ordinary shares were granted to Directors and Persons Discharging Managerial Responsibilities ("PDMRs") of the Company at an exercise price of 545 pence. The options have a five-year vesting period.

 

On 12 May 2021, certain Directors and PDMRs of the Company sold 457,515 shares at a price of 500 pence in order to satisfy strong institutional demand. Each of the selling shareholders applied the proceeds to satisfy in part/full loans provided to them by the Company to acquire Ordinary shares prior to the Company's IPO in July 2020.

 

 

15.    Events after the reporting date

 

On 13 August 2021, the Company paid the final Ordinary share dividend in respect of the financial year ended 31 December 2020 of £1,014,173 which represented 2.2 pence per Ordinary share.

 

As at 24 September 2021, the Company continues to have 46,186,481 Ordinary shares in issue, of which none are held in Treasury. The total number of voting rights in the Company is 46,186,481. This figure of 46,186,481 may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

 

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