Final Results
22 July 2021
ActiveOps Plc
("ActiveOps", the "Company, "the Group")
Final Results for the year ended 31 March 2021
ActiveOps plc (AIM: AOM), a leading provider of Management Process Automation (MPA) software for running complex and global back-offices, is pleased to announce its unaudited results for the financial year ended 31 March 2021.
Financial Highlights:
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Year ended 31 March |
2021 |
2020 |
Change |
|
Annual recurring revenue "ARR" |
£18.3m |
£17.1m |
+7% |
|
Revenue |
£20.4m |
£20.4m |
- |
|
Software and Subscription revenue |
£17.8m |
£16.2m |
+10% |
|
Training & implementation "T&I" revenue |
£2.6m |
£4.2m |
-38% |
|
Gross margin |
82% |
74% |
+8ppts |
|
Adjusted EBITDA1 |
£0.4m |
£(1.0)m |
|
|
Profit/(loss) before tax |
£(2.0)m |
£(2.9)m |
+29% |
|
Earnings per share on continuing operations |
(3.91)p |
(4.48)p |
+13% |
|
Profit from discontinued operations net of tax |
£11.8m |
£2.1m |
+461% |
|
Statutory profit /(loss) for the year |
£9.1m |
£(0.7)m |
|
|
Net cash and cash equivalents |
£16.6m |
£4.1m |
+305% |
|
· |
Strong ARR growth despite Covid-19 pandemic |
|
· |
Net Revenue Retention at 104% on 31 March 2021 (110% 31 March 2020) |
|
· |
10% growth in Software and Subscription revenue |
|
· |
Training & Implementation (T&I) revenues fell in first half as the uncertainty created by Covid-19 lockdowns delayed change programmes and implementations. T&I revenues recovered in the second half of the year |
|
· |
Adjusted EBITDA moved to a profitable position of £0.4m (FY20 loss £1.0m) by management of cost base in line with revenue growth |
|
· |
Successful sale of non-core assets from OpenConnect subsidiary (acquired in 2019) delivered £11.8m profit from the sale and discontinued operations |
|
· |
Ended the year with a strong balance sheet with net cash of £16.6m2 at 31 March 2021 |
1 Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, share based payments and IPO costs.
2 Includes £3.5m employment taxes due on share option exercise which were paid in April 2021.
Strategic and Operational Highlights:
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· |
Added 11 new customers globally with wins in all key regions and targeted industries |
|
· |
Added 6 new customers and delivered SaaS revenue growth of 48% in the important North American market |
|
· |
Divested OpenConnect subsidiary, retaining strategically important WorkiQ software and US healthcare administration customer base |
|
· |
Significant product innovation, including the complete re-platforming of core software, resulting in the launch of ControliQ and integration of WorkiQ to create our next generation platform, Workware+ |
|
· |
Launched OpsIndex -unique operations performance benchmarking service enabling customers to make comparisons between their own operations and those of their peers |
|
· |
Responding to the Covid-19 pandemic, updated our Training and Implementation (T&I) approach to enable fully remote customer deployments with no reduction in benefits delivered |
|
· |
Successful IPO on the London Stock Exchange in March 2021 |
Outlook:
|
· |
Trading in the first quarter of the year has progressed in line with Board expectations, demonstrating considerable improvements on Q1 FY21 when Covid-19 delayed implementations and sales |
|
· |
The Group has secured two new-logo customers, expanded within 13 existing accounts and continued to progress its investment plans |
|
· |
The Board is confident ActiveOps is well placed to deliver on its growth ambitions |
Richard Jeffery, Chief Executive of ActiveOps, commented, "The year to March 2021 has been one of considerable achievement for ActiveOps. We added to our global customer list, completed a divestment of non-core products acquired through OpenConnect, deployed the next generation of our Workware+ platform and completed a successful IPO on AIM, all against the challenging backdrop of the pandemic. I join our Chairman and the rest of the management team in thanking all our team around the world for their support through what has been a tough year for so many.
"I am incredibly proud of everything the team has achieved to date, building a market-leading offering and long-term, blue-chip customer base with users in over 40 countries around the world. We are very much still at the start of our journey. Increasing regulation, automation and the changing dynamics of the workforce mean back-office operations are becoming ever more complex. We see a clear and growing need for our offering, which through the enhanced credibility and profile of our IPO we are well-placed to deliver.
For more information, please contact:
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ActiveOps |
Via Alma PR |
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Richard Jeffery, Chief Executive Officer |
|
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Patrick Deller, Chief Financial Officer |
|
|
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|
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Investec Bank plc |
+44 (0)20 7597 5970 |
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Corporate Broking & PLC Advisory |
|
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Patrick Robb / David Anderson / Ben Griffiths |
|
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|
|
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Alma PR |
+ 44(0) 203 405 0205 |
|
Caroline Forde / Sam Modlin / Faye Calow |
|
About ActiveOps
ActiveOps is a leader in Management Process Automation (MPA), providing a SaaS platform to large enterprises with complex and often global back-offices. The Group's software and embedded back-office operations management methodology enables enterprises to adopt a data-driven, scientific approach to organising work and managing capacity.
The Group's enterprise platform comprises Workware+, its MPA software platform, and AOM, the Group's operations methodology and framework for effective back-office management. Together, this combination of software and embedded methodology enables operations managers to balance the competing priorities of meeting service and quality standards while improving productivity and reducing cost.
As at 31 March 2021, the Group has 170 employees, serving its global customer base of approximately 80 enterprise customers from offices in the UK, Ireland, USA, Australia, India and South Africa. The Group's customers are predominantly in the banking, insurance and business process outsourcing (BPO) sectors, including Nationwide, TD Bank, Anthem Inc and DXC Technology.
Chairman's Statement
I am delighted to report on the progress of ActiveOps for the first time as a public company following the successful floatation on the London Stock Exchange in March 2021. I would like to thank our long-term shareholders for their ongoing support and welcome those who joined us at IPO and thereafter.
The transparency provided by a public listing adds further credibility to our offering as we interact with leading businesses around the world. The success of the Company's entry onto the public markets and the demand from leading institutional investors reflects the quality of the business and the opportunity ahead. The Board and management team look forward to delivering on the fantastic platform we now enjoy, for the benefit of our customers and all our stakeholders.
This has of course been a tremendously difficult year for many, both personally and professionally and our thoughts are with all those who have been impacted by the effects of the Covid-19 pandemic. For ActiveOps, the strong spirit of cohesion within our business, effective management practices and agility of our teams enabled rapid adjustment to the changing world around us. The entire team has performed with resilience and creativity throughout this difficult time, supporting our customers through the most unexpected change that any of us have had to experience in a long time, and for that I and the Board would like to thank each of them.
Financial performance
The resilience of the Group as a result of high levels of recurring revenues and high levels of customer retention was clearly seen this year. We are pleased to report the business delivered successfully against management expectations for the year, achieving SaaS revenue growth of 10% to £17.8m (FY20: £16.2m), with total revenue steady at £20.4m (FY20: £20.4m) and growth in adjusted EBITDA to a profitable position of £0.4m (2020: loss £1.0m) excluding the impact of costs associated with the IPO of £0.9m (2020: £0.4m) and share-based payments, with profit for the year of £9.1m (2020: loss £0.7m). Training & Implementation revenues were significantly impacted at the start of the Covid-19 period, due to the inability to be on-site with customers, but swift adaptation in approach meant these recovered to pre-pandemic levels in the second half.
These results underpin our confidence that ActiveOps is a very scalable business, with high margins and strong cash generation. With a significant opportunity ahead, the Board believes the right approach is to continue to invest in expanding our teams and capitalising on our strong reputation and valuable customer base to accelerate growth.
Operational achievements
Alongside the IPO, key events during the year included the disposal of the non-core assets within the OpenConnect business (acquired during the prior year) to Rocket Software, strengthening our balance sheet, and eliminating the need to raise primary capital for investment in the business through the IPO process. The value of the retained assets from the acquisition continue to grow, both as a result of the OpenConnect customers we retained and the broadening of our product set. It has enhanced our Workware+ platform through the addition of the WorkiQ offering, whose tools are particularly relevant in this new era of hybrid working which is a significant change from traditional working practices in the back-office. Overall, the Group continued to make excellent progress against all its strategic objectives.
Governance
From early in the Company's development, the management team has adopted a professional approach to all aspects of governance, running the business with an eye to being able to support expansion, ensuring depth of management and capacity to deal with crises or change in business operations that may occur. As a result, ActiveOps has both strong fundamentals and high levels of business oversight, two factors which ensured we were well placed to continue to service our customers to the highest degree during the transition to working from home and all the disruption that brought for our customers.
We were delighted to welcome Hilary Wright and Michael McLaren to the Board as Non-executive Directors at IPO. Both are highly experienced public company directors, who bring a strong knowledge base of the technology sector, governance, HR best practice and financial matters and are already proving valuable additional stewards of the Company and a pleasure to work alongside.
Diversity
Diversity of thought and employee engagement has always been an acknowledged element in the success of ActiveOps. Richard and the senior management team work hard to enable all team members to have a voice.
Climate change
Climate change is important to both us and our customers. In the latter part of this report, we detail information regarding our ongoing measures to reduce the carbon footprint of ActiveOps and activities in which we partake to ensure we are delivering a positive impact on our stakeholders and communities around us. One of the key initiatives in the year was the complete migration of our platform to Microsoft Azure, a carbon neutral environment. We will expand our reporting in areas of carbon reporting, diversity, equality and inclusion, and expect this to be in place by the 2022 AGM.
Looking ahead
The world of operations in our core sectors is only becoming more complex, more demanding, more regulated and more competitive. An increasing need for security, quality and better governance, the need to deliver excellent service at ever decreasing cost, and the need to rapidly implement change are all challenges increasingly being faced by the world's largest companies. These are all driving demand for Management Process Automation technologies to simplify and control these challenges.
The Covid-19 pandemic has only amplified and accelerated these challenges, forcing the introduction of working from home and highlighting the lack of embedded oversight within teams and visibility of workflows.
Given these changes, it is clear to me that ActiveOps is in a powerful position with a proven and expanding proposition a large addressable market underpinned by loyal customers and an astonishing track record of success.
Chief Executive's Report
The year to 31 March 2021 was one of considerable achievement for ActiveOps. We added to our global customer list, completed a divestment of non-core products acquired through OpenConnect, deployed the next generation of our Workware+ platform and completed a successful IPO on AIM.
The growth of our customer base from the beginning of the year, divestment of the no-core operations of OpenConnect, release of the next generation of our Workware+ platform and successful IPO were major programmes of work and so it is a huge testament to the hard work of our team that these achievements were delivered against the backdrop of the Covid-19 pandemic. As with so many businesses, our standard form of interaction with newly onboarded customers and prospects was restricted by the introduction of lock-down measures. ActiveOps responded with ingenuity and commitment, and within weeks we had adapted our implementation programmes to be delivered remotely and are proud to have delivered the same benefits to our customers as via on-site delivery. We also extended our offering by building digital adoption technology into the platform and were delighted to see increased engagement with our online training Academy, with over 21,000 customer employees having now successfully achieved their certifications in our methodology, Active Operations Management.
While Covid-19 reduced our Training and Implementation (T&I) revenue in the year and delayed the recognition of some of our associated SaaS revenue from customers, overall we see the move to more digitally enabled implementation as having long-term benefits for ActiveOps. These approaches provide even greater scalability in our offering while continuing to ensure our customers become experts in our methodology and use of Workware+ platform.
Robust financial performance
The Group reported revenue of £20.4m (2020: £20.4m) with a profit for the year of £9.1m (2020: loss £0.7m) in the year to March 2021. The strength of the Group's recurring revenue business model and strong cash generation was particularly evident this year, protecting the business to a large extent from the financial impacts of Covid-19. The Group once again delivered strong growth in SaaS revenues, reaching £17.8m, an increase of 10% on the prior year, offset to some extent by the lower SaaS and T&I revenue recognised from newly secured customers as Covid-19 delayed the completion of new sales. We are pleased to report that by Q4 our implementation activities had returned to normal levels. The change in our revenue mix benefited our gross margins, which combined with savings from reduced travel and lower sales expenses resulted in the movement to an adjusted EBITDA profit of £0.4m (2020: loss (£1.0m)) (adjusted EBITDA excludes the impact of costs associated with the IPO (£0.9m) and share-based payments). Net Revenue Retention Rates remain strongly positive and EBITDA cash conversion, continued to be strong at 350% (2020: 279%). The Group finished the year with an increased net cash balance of £16.6m (31 March 2020: £4.1m).
An evolving industry
The major shift to home working that took place across all industries and markets in 2020 in response to the Covid-19 pandemic shone a light on the importance of Management Process Automation and its vital role in enabling businesses to continue to run their back-office operations safely and effectively against a dynamic and rapidly evolving landscape.
Enforced home working demonstrated to businesses how many of their processes for managing operations were hugely reliant on supervisory presence and line of sight management. By contrast, those businesses with established data-led and formalised management approaches were better equipped to cope with the disruption and turn challenges into commercial opportunity.
We have seen employee wellbeing and happiness rise to the top of the agenda, as managers have sought to proactively guide their teams through their changing priorities, while also responding to individual needs. Across our customer base, we saw the data collated by the Workware+ platform used to improve forecasting, planning and team communication, taking the stress out of managing a rapidly evolving workload through the pandemic, while sustaining productivity levels.
Each of these factors is a driver of demand for our platform and the industry as a whole, alongside the core underlying market drivers of increasing regulation, compliance requirements and growing technological complexity of the back-office.
Industry analysts continue to predict increased interest in technologies which enable the hybrid operating models many organisations are moving towards, whilst also highlighting the need for organisations to move beyond simplistic and invasive monitoring techniques. In its recent report, Plan for the Aftermath of COVID-19 for Your HCM Technology Portfolio, Gartner observed that "Remote productivity monitoring will increase in sophistication. As a starting point, many organisations have deployed time tracking tools to understand how remote workers spend their time. More sophisticated tools are available to help managers understand workload and workload-balancing, and mid-tier managers balance between teams"[i]. ActiveOps was cited as an example of these more sophisticated tools.
An expanded offering and team
For over 15 years we have been working closely alongside our customers to evolve our offering, ensuring it meets their needs and helps to promote a healthy, productive environment.
The Group's enterprise platform comprises Workware+, our Management Process Automation software platform, and AOM, the Group's operations methodology and framework for effective back-office management. Together, this combination of software and embedded methodology enables operations managers to balance the competing priorities of meeting service and quality standards while improving productivity and reducing cost.
The intellectual property behind both Workware+ and AOM has been developed and refined over two decades by the ActiveOps management team, who are among the leading authorities in back-office operations management. The Workware+ platform consists of two core software products:
· ControliQ - the Group's cloud delivered workforce optimisation software. It consolidates data from the multitude of systems used in a typical back-office to provide managers with comprehensive, real-time insight to support the management of operations performance and provides forecasting and planning functionality; and
· WorkiQ - the Group's employee productivity monitoring (EPM) software which analyses a user's interaction with their PC and the applications running on it to provide insights into how their time is spent and the performance of those employees and their employer's processes.
Uniquely in our market Workware+ also provides customers with access to OpsIndex, the Group's benchmarking service which allows customers to compare the performance of their operations within their own enterprise and with their geographical and industry peer groups.
One of the key areas of expansion in FY21 was the evolution of our WorkiQ offering, following the successful acquisition in 2019 of OpenConnect. Not only did the acquisition allow us to add desktop-based activity monitoring to our toolkit, which has proven especially vital during these times of working from home, but it also gave us a greater footprint in the US. The year saw the divestment of the non-core elements of the OpenConnect business to Rocket Software enabling us to focus on our core areas of expertise, whilst providing funds for investment in the growth of the business.
We completed the re-platforming of our core technology in the year, bringing together our two offerings under one next generation platform, Workware+ which offers additional insight and slicker integration for users. We also introduced an industry-first benchmarking tool in OpsIndex, which enables objective measurement of every business's performance on an enterprise, department by department, and community level, providing senior managers insight for the first time into the health of their back-office operations relative to their peers.
During the year we invested in our people, increasing headcount by 22 with new joiners across our teams in the UK and US, significantly boosting headcount in our Technology, Product and Sales teams. We have been delighted to welcome so many new members to our teams, providing us with a fantastic platform to support our growing, global customer base.
The achievements mentioned above add up to a very successful year in delivering against our strategy. Further information on our performance against each of the five pillars of our strategy can be found in the 'Our Strategy' section of this report.
Our Strategy
Our success has been built upon our authority and expertise in two distinct areas. Firstly, our back-office operations management expertise and secondly our ability to codify this into a platform which is effective, easy to adopt and simple to maintain at enterprise scale. Our future success will be built upon maintaining our position as thought leaders, expanding the scope of Management Process Automations we offer and thus further simplifying the running of operations.
We have 5 strategic pillars:
1) Operations research
Priorities: Understanding the challenges and future requirements of running operations
Developments in FY20/21
· Launch of the OpsIndex benchmarking service
· Creation of regional customer councils to further engage customers in our research and development.
· Significantly expanded industry analyst programme to capture greater market insight.
2021 focus areas
· Expand research activity through the creation of a dedicated innovation and insight function within our product group.
· Enhance linkages to academic research via a Knowledge Transfer Partnership with Reading University.
· Refine our organisation structure to better connect our Customer Success team with our research and development agenda.
2) Industry-leading solutions
Priorities: Developing and codifying intellectual property into enterprise scale solutions to the challenges of running complex operations
Developments in FY20/21
· Completed re-platforming of our core software, launching ControliQ as the next generation of the Workware software application. ControliQ enables the Group to increase its pace of R&D development, deploy upgrades and newer versions of the Group's software more efficiently.
· Transformed our ability to integrate with customers' existing applications through creation of the ControliQ API library.
· Created the Workware+ platform by incorporating the WorkiQ product acquired from OpenConnect.
· Embedded our unique AOM management method within the WorkiQ offering.
· Added digital adoption technology to the Workware+ platform to enable easier user adoption.
2021 focus areas
· Our product roadmap will continue to deliver new features across the product set.
· New desktop task-mining capability will significantly enhance both the ControliQ and WorkiQ products.
· Significant investment in new roles to expand our research and development functions and further increase the pace of product development.
3) Industry benchmarks
Priorities: Publishing data and setting definitions which support organisations to make informed choices about their operations
Developments in FY20/21
· Launched OpsIndex, our unique operations performance benchmarking service. It draws on our 15 years of data to provide benchmarks which are genuinely comparable between operations.
· Used our consolidated data set to identify regional and industry trends and insights to assist our customers managing the disruption of global lock-downs.
2021 focus areas
· Grow OpsIndex as part of our wider product roadmap. An area of focus is employee wellness oversight, which is a topic of great interest within our customer base due to the impacts of lock-downs and home working.
· Utilise insight from our benchmarking data to drive our research and innovation agenda.
4) Enterprise fitness
Priorities: Making our solutions uniquely accessible and persistent in the largest enterprises
Developments in FY20/21
· Extended our AOM method specifically to support the WorkiQ Employee Productivity Monitoring product acquired from OpenConnect.
· Updated our training/implementation approaches and toolkits to support fully remote implementation with no reduction in benefits experienced by customers.
· Reached the milestone of more than 20,000 awards to customer employees via our accreditation programmes.
2021 focus areas
Our product development will continue to be based upon our principles of enterprise fitness:
· Solutions which are agnostic to business process or organisational function.
· Enterprise-grade technical scalability.
· Functionality built upon best practice management process.
· Complete support for enterprise adoption and sustainability.
5) Recognition of Management Process Automation
Priorities: Make Management Process Automation a recognised capability for back-office operations
Developments in FY20/21
· Positioned ourselves as a Management Process Automation provider, recognising the convergence of Employee Productivity Monitoring and workforce management.
· Brought together the ControliQ and WorkiQ products to create the Workware+ MPA platform.
· Published a book showcasing our AOM methodology and the strategic role of operations management.
2021 focus areas
Work to increase awareness of the requirement for and benefits of Management Process Automation technology via:
· Thought leadership.
· Our regional councils.
· Leading analysts.
· Our work with our partners at the heart of major transformation programmes.
Successful IPO
Of course a key event in the year was our entry onto the AIM market of the London Stock Exchange, helping some of our long-term shareholders monetise their investment in ActiveOps, but importantly providing us with the enhanced profile and credibility that PLC status brings. We welcome all of our new shareholders and look forward to growing with them in the years ahead.
Growth of our customer base: Land & expand
Our new customer acquisition activity is focused on a tightly defined set of banks, insurers and BPOs in our target geographies, representing an expected ARR opportunity of £750m. We secured 11 new customers during the financial year, including LifeWorks, Molina Healthcare, Move Bank and Coca Cola, which is particularly impressive given the disruptions of Covid-19.
We have a strong track record in expanding our customer engagements over time, through expansion into adjacent departments, functions and geographies within the same organisation. Through the activities described above, we now also have the ability to cross-sell the newly integrated WorkiQ offering to existing customers or use it as a lower-cost entry point into our platform and then cross-sell our ControliQ offering. Currently, there is only a modest overlap in the user bases of the two applications, thus generating significant opportunity for cross-selling.
We leverage partner relationships to accelerate our sales cycle, increase lead generation and gain access to influential senior stakeholders in target customer organisations.
Selective M&A
We have historically undertaken acquisitions to support our organic growth strategy, most recently, acquiring OpenConnect in the USA in 2019, adding the WorkiQ application to the Workware+ platform. Although we are principally focused on organic growth, we will also consider further such bolt-on acquisitions if they would add clear technological capability or market penetration.
Focus for the year ahead
Our focus in the year ahead is to further strengthen our position in the rapidly developing market for enterprise management of capacity and work. Through our growing US presence, working alongside our transformation partners, our work with leading industry analysts and continuing to support our long-standing customers to achieve success in their markets we see major opportunities to make a significant impact.
Internally we are accelerating our development capacity to maximise the opportunities created from the re-platforming of ControliQ and the expanded product set with WorkiQ, particularly within the Employee Productivity Monitoring market, where we believe the sophistication of our platform sets us apart. We are investing in our product capabilities to further differentiate the Workware+ platform through increased task-mining capabilities, including the successful launch of WorkiQ Premium in the first quarter of the new financial year. We are investing in our Sales and Customer Success teams to increase our enterprise level sales capabilities, drive further customer expansion and increase levels of product cross-sales.
A positive outlook
Our purpose is to simplify running operations - and never has that been more important. We know simplifying how organisations manage operational performance has a transformative impact on organisational success, the wellbeing of employees and the outcomes for customers.
When we look back at what was a tumultuous year for us all, we are excited at the progress we have made as a business and proud of the support we have given our customers, providing them with the insight, tools and methodology to thrive in these challenging times. I join our Chairman and the rest of the management team in thanking all our team around the world for their support through what has been a tough year for so many.
I am incredibly proud of everything the team has achieved to date, building a market leading offering and long-term, blue-chip customer base in over 40 countries around the world. But we are very much still at the start of our journey. Increasing regulation, automation and the changing dynamics of the workforce mean back-office operations are becoming ever more complex. We see a clear and growing need for our offering which, through the enhanced credibility and profile of our IPO, we are increasingly well placed to deliver.
Trading in the start of the new financial year has progressed well, in line with Board expectations and ahead of Q1 FY21. We have secured new customers, expanded within existing accounts and continued to progress our investment plans to support our strategy. With strong market drivers, only amplified by the Covid-19 pandemic, alongside a proven and expanding proposition, we remain confident that we are well placed to deliver on our growth ambitions.
Chief Financial Officer's Report
Financial Review
I am pleased to report on a good financial performance by the Group, growing ARR, software and subscription revenue, and delivering an adjusted EBITDA profit despite a challenging year, alongside a profitable disposal of non-core activities and a successful IPO. Key metrics for the Group have moved in the right direction, with a significantly strengthened balance sheet that will enable us to invest to drive growth where appropriate.
Revenue
Annual Recurring Revenue ('ARR') is the key performance metric for the Group. Included within ARR are ActiveOps' software annual licence fees along with small amounts of maintenance for the legacy OpenConnect customer base and recurring support revenue where a customer has purchased an ongoing care package.
ActiveOps' ARR at 31 March 2021 totalled £18.3m (31 March 2020 £17.1m), representing year-on-year growth of 7%. This increase has been delivered as a result of expanding our footprint in existing customer accounts and both direct and partner influenced sales to new customers.
Total revenue for the Group at £20.4m was in line with the prior year, however, software and subscription revenues increased by 10% to £17.8m (2020: £16.2m) on a reported basis, with an 11% increase at constant currency. Software and Subscription revenues now represent 87% of overall revenue (2020: 79%).
Training and Implementation ('T&I') revenues at £2.6m (2020: £4.2m) were significantly impacted by the Covid-19 pandemic in the first half of the year with customers pausing implementations for both new and expansion opportunities whilst they managed the initial uncertainty of the pandemic and secured their business operations. T&I revenues recovered strongly in the second half of the year as remote implementations resumed and businesses returned to a more normal operating basis with Q4 being broadly in line with pre-pandemic levels.
Operating Profit and Margins
Gross margins improved to 82% (2020: 74%) primarily as a result of a lower proportion of lower margin T&I revenues driven by the Covid-19 pandemic, an improvement of 4% in software gross margins follows the consolidation of hosting services to Microsoft Azure. T&I margins also moved positively in the year 48% (2020: 43%). T&I revenues and margins vary according to the product mix (between WorkiQ and ControliQ), the location of implementations (with higher cost jurisdictions delivering a higher margin), and the level of support required by ActiveOps coaches on each delivery. 2021 saw a higher mix of North American ControliQ implementations than in prior years that resulted in a higher margin than seen in prior years.
Operating expenses (excluding share-based payments and costs associated with the IPO increased by 2% to £16.4m (2020: £16.0m) following continued investment in sales, marketing and technology development offset by reductions in travel costs as a result of the Covid-19 pandemic. All commission and development costs are expensed to the P&L in the period, as well as non-recurring costs associated with the disposal of the OpenConnect entity.
Adjusted EBITDA moved to a profitable position of £0.4m (2020: loss £0.9m) excluding the impact of costs associated with the IPO (£0.9m) and share-based payments (de-minimis).
Foreign Exchange
The Group has 50% (2020: 54%) of revenues invoiced in currencies other than GBP with movement in exchange rates, especially for USD and AUD impacting reported revenue.
Research and Development Expenditure
Total expenditure on product management, research, development and support in the year increased to £3.4m (2020: £2.1m). The Board has continued to determine that none of the internal research and development costs incurred during the year meet the criteria for capitalisation. Consequently, these have been expensed as incurred through the income statement.
Depreciation and Amortisation
Depreciation and amortisation of £1.1m (2020: £1.1m) principally comprised intangible amortisation following the acquisition of the OpenConnect entity in 2019 and the Australian entities in 2017.
Profit from Discontinued Operations
ActiveOps acquired OpenConnect Systems Inc (a US registered business) in August 2019 for $7m in order to enhance our product portfolio (through the addition of the WorkiQ product to the Workware+ platform), extend our software development capabilities, add to our North American customer base and establish a US headquarters in Dallas. The acquisition was funded by a debt facility with Wells Fargo. In October 2020, ActiveOps sold the OpenConnect Systems Inc legal entity, along with the legacy product, associated customers and small support team to Rocket Software Inc for $19m. This inflow of funds allowed ActiveOps to repay the debt in the business, with £7.3m of cash being added to the balance sheet with a further £1.4m held in escrow until October 21.
Taxation
The Group had a tax charge in the year of £0.7m (2020: credit (£0.3m)), with a prudent approach taken with regards to the recognition of deferred tax assets. At IPO the company derived a potential tax benefit from the exercise of share options, which increased tax losses in the business beyond the level deemed recoverable in the short term, consequently the group has derecognised the previously recognised deferred tax asset in the UK. The Group operates a transfer pricing policy to ensure that profits are correctly recorded in each of the jurisdictions in which it operates. ActiveOps has brought forward tax losses in the UK and Irish legal entities that reduce the overall tax rate for the business.
Statutory Results
The Group reported a profit for the period of £9.1m (2020: loss £0.7m).
Earnings per Share
As a result of the Group's growth in profit attributable to equity shareholders, Basic Earnings per Share increased to 12.61p (2020: (0.92p)).
Dividend
The Board has determined that no dividend will be paid in the year. The Group is primarily seeking to achieve capital growth for shareholders. It is the Board's intention during the current phase of the Group's development to retain distributable profits from the business to the extent they are generated.
Balance Sheet
The Group has moved to a strong balance sheet position following the disposal of OpenConnect with no debt and net assets at 31 March 2021 of £10.5m (2020: (£0.4m)), including cash of £16.6m at the end of the year. This cash balance included £3.5m of employment taxes owed to tax authorities relating to the exercise of share options and sale of shares in the AIM admission that were paid to the appropriate tax authorities in early April 2021.
Cash conversion, calculated by taking cash generated from operations over EBITDA, continued to be strong at 350% (excluding the above noted cash received at IPO relating to employee taxes on share option exercise) (2020: 279%). The Group generated cash associated with the discontinued operations of £14.4m which was used to repay outstanding loans of £7.3m on the sale of the OpenConnect entity. Share option exercises at the IPO generated £1.7m cash inflow, with a further £3.5m of associated employee taxes which were paid to the tax authorities in April 2021.
Paddy Deller,
Chief Financial Officer
Consolidated statement of profit and loss and other comprehensive income
for the year ended 31 March 2021
|
| 2021 | 2020 |
Year ended 31 March | Notes | £000 | £000 |
Revenue | 3 | 20,394 | 20,402 |
Cost of sales | 4 | (3,725) | (5,260) |
Gross profit |
| 16,669 | 15,142 |
Administrative expenseexcluding share option charges, depreciation, amortisation and exceptional items |
| (16,363) | (16,015) |
Administrative expenses - share option charges only |
| (42) | (16) |
Administrative expense - depreciation and amortisation only | 7-9 | (1,104) | (1,124) |
Administrative expense - exceptional items only | 5 | (927) | (428) |
Operating loss |
| (1,767) | (2,441) |
Finance income |
| 8 | 23 |
Financing costs |
| (289) | (464) |
Loss before taxation |
| (2,048) | (2,882) |
Taxation | 6 | (743) | 296 |
Loss for the year from continuing activities |
| (2,791) | (2,586) |
Profit for the year from discontinued activities, net of tax | 12 | 11,783 | 2,056 |
Profit / (loss) for the year |
| 8,992 | (530) |
|
|
|
|
Other comprehensive income |
|
|
|
Items that may be subsequently reclassified to profit or loss: |
|
|
|
Exchange differences on translating foreign operations |
| 113 | (128) |
|
|
|
|
Total comprehensive income / (loss) for the year attributable to the owners of the parent Company |
| 9,105 | (658) |
|
|
|
|
Basic and diluted earnings / (loss) per share |
|
|
|
Continuing operations |
| (3.91p) | (4.48p) |
Discontinued operations |
| 16.52p | 3.56p |
Total |
| 12.61p | (0.92p) |
Consolidated statement of financial position at 31 March 2021
|
|
|
| 2021 | 2020 | 2019 |
At 31 March |
|
| Notes | £000 | £000 | £000 |
Non-current assets |
|
|
|
|
|
|
Intangible assets |
|
| 7 | 5,655 | 11,879 | 3,917 |
Property, plant and equipment |
|
| 8 | 241 | 388 | 387 |
Right-of-use assets |
|
| 9 | 736 | 932 | 952 |
Deferred tax assets |
|
|
| 296 | 1,807 | 493 |
Total non-current assets |
|
|
| 6,928 | 15,006 | 5,749 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Trade and other receivables |
|
| 10 | 5,836 | 5,858 | 4,170 |
Corporation tax recoverable |
|
|
| 54 | 255 | 199 |
Cash and cash equivalents |
|
|
| 16,617 | 4,093 | 1,969 |
Total current assets |
|
|
| 22,507 | 10,206 | 6,338 |
|
|
|
|
|
|
|
Total assets |
|
|
| 29,435 | 25,212 | 12,087 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Share capital |
|
|
| 71 | 19 | 19 |
Share premium account |
|
|
| 6,430 | 4,755 | 4,747 |
Share option reserve |
|
|
| 4 | 221 | 205 |
Foreign exchange reserve |
|
|
| (204) | (317) | (189) |
Retained earnings |
|
|
| 4,210 | (5,041) | (4,511) |
Total equity |
|
|
| 10,511 | (363) | 271 |
|
|
|
|
|
|
|
Non-Current liabilities |
|
|
|
|
|
|
Lease liabilities |
|
| 9 | 655 | 715 | 801 |
Borrowings |
|
|
| - | 7,339 | 999 |
Provisions |
|
|
| 89 | 50 | 50 |
Deferred tax liabilities |
|
|
| 1,210 | 2,282 | 1,059 |
Total non-current liabilities |
|
|
| 1,954 | 10,386 | 2,909 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
|
| 11 | 16,808 | 14,870 | 8,683 |
Lease liability |
|
| 9 | 162 | 319 | 224 |
Total current liabilities |
|
|
| 16,970 | 15,189 | 8,907 |
|
|
|
|
|
|
|
Total equity and liabilities |
|
|
| 29,435 | 25,212 | 12,087 |
Consolidated statement of cash flows
for the year ended 31 March 2021
|
| 2021 | 2020 |
Year ended 31 March | Notes | £000 | £000 |
Profit / (loss) after tax |
| 8,992 | (530) |
Taxation |
| 745 | (84) |
Finance income |
| (8) | (23) |
Financing costs |
| 294 | 469 |
Operating profit / (loss) |
| 10,023 | (168) |
|
|
|
|
Adjustments for: |
|
|
|
Depreciation property, plant and equipment | 8 | 203 | 223 |
Depreciation right-of-use asset | 9 | 242 | 304 |
Amortisation of intangible assets | 7 | 744 | 897 |
Profit on sale of discontinued operations | 12 | (10,269) | - |
Share option charge |
| 42 | 16 |
(Profit) / loss on disposal of non-current assets |
| (3) | 1 |
Direct costs incurred on sale of subsidiary |
| (469) | - |
Change in trade and other receivables |
| (97) | (1,150) |
Change in trade and other payables | 11 | 4,342 | 1,562 |
Cash from operations |
| 4,578 | 1,685 |
Interest paid |
| (294) | (469) |
Taxation paid |
| (253) | (440) |
Net cash generated from operating activities |
| 4,211 | 776 |
|
|
|
|
Investing activities |
|
|
|
Purchase of property, plant and equipment | 8 | (68) | (52) |
Purchase of software | 7 | (30) | - |
Interest received |
| 8 | 23 |
Sale of subsidiary (net of cash included in disposal) | 12 | 14,654 | - |
Acquisition of subsidiary (net of cash acquired) |
| - | (4,563) |
Net cash generated from / (used in) investing activities |
| 14,564 | (4,592) |
|
|
|
|
Financing activities |
|
|
|
Proceeds from issue of shares |
| 1,727 | 8 |
Repayment of related party loans |
| (999) | (1) |
Repayment of lease liabilities |
| (250) | (313) |
(Repayment) / proceeds of bank borrowings |
| (6,340) | 6,340 |
Net cash (used in) / generated from financing activities |
| (5,862) | 6,034 |
|
|
|
|
Net change in cash and cash equivalents |
| 12,913 | 2,218 |
Cash and cash equivalents at beginning of the year |
| 4,093 | 1,969 |
Effect of foreign exchange on cash and cash equivalents |
| (389) | (94) |
Cash and cash equivalents at end of the year |
| 16,617 | 4,093 |
Consolidated statement of changes in equity
for the year ended 31 March 2021
| Share capital | Share premium | Share option reserve | Foreign exchange reserve | Retained earnings | Total |
Year ended 31 March | 000 | 000 | 000 | 000 | 000 | 000 |
At 1 April 2019 | 19 | 4,747 | 205 | (189) | (4,511) | 271 |
|
|
|
|
|
|
|
Loss for the year | - | - | - | - | (530) | (530) |
Exchange differences on translating foreign operations | - | - | - | (128) | - | (128) |
Total comprehensive loss for the year | - | - | - | (128) | (530) | (658) |
Transactions with owners, recorded directly in equity |
|
|
|
|
|
|
Share based payment charge | - | - | 16 | - | - | 16 |
Issue of shares | - | 8 | - | - | - | 8 |
Total transactions with owners | - | 8 | 16 | - | - | 24 |
At 31 March 2020 | 19 | 4,755 | 221 | (317) | (5,041) | (363) |
|
|
|
|
|
|
|
| Share capital | Share premium | Share option reserve | Foreign exchange reserve | Retained earnings | Total |
Year ended 31 March | 000 | 000 | 000 | 000 | 000 | 000 |
At 1 April 2020 | 19 | 4,755 | 221 | (317) | (5,041) | (363) |
|
|
|
|
|
|
|
Profit for the year | - | - | - | - | 8,992 | 8,992 |
Exchange differences on translating foreign operations | - | - | - | 113 | - | 113 |
Total comprehensive income for the year | - | - | - | 113 | 8,992 | 9,105 |
Transactions with owners, recorded directly in equity |
|
|
|
|
|
|
Reserve transfer on exercising of share options | - | - | (259) | - | 259 | - |
Share based payment charge | - | - | 42 | - | - | 42 |
Bonus issue of shares | 39 | (39) | - | - | - | - |
Issue of shares | 13 | 1,714 | - | - | - | 1,727 |
Total transactions with owners | 52 | 1,675 | (217) | - | 259 | 1,769 |
At 31 March 2021 | 71 | 6,430 | 4 | (204) | 4,210 | 10,511 |
Notes forming part of the financial statements
for the year ended 31 March 2021
1. General information
ActiveOps plc ('the Company') is a public company limited by shares incorporated in England and Wales. The registered office and principal place of business is One Valpy, 20 Valpy Street, Reading, Berkshire, RG1 1AR. On the 17 March 2021, the Company re-registered as a public limited company, having formerly been known as ActiveOps Limited.
The Company, together with its subsidiary undertakings ('the Group') is principally engaged in the provision of hosted operations management Software as a Service ('SaaS') solutions to industry leading companies around the world.
2. Accounting policies
a) Basis of preparation
This preliminary announcement does not constitute full statutory financial statements.
The 31 March 2021 annual report and financial statements are expected to be posted to shareholders and included within the investor relations section of our website shortly and will be considered at the Annual General Meeting. The financial statements for the period ended 31 March 2021 have not yet been delivered to the Registrar of Companies.
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies.
The financial statements of the Group have been prepared on a going concern basis and in accordance with international accounting standards ('IAS') in conformity with the requirements of the Companies Act 2006. These are the Group's first consolidated financial statements prepared in accordance with IASs and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied.
The Group has used a transition date of the 1 April 2019 for the move to IFRS. Prior to that date the Group reported in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
The Group has taken the allowed exemption under IFRS 1 to only restate any business combinations that have occurred on or after the 1 April 2017.
The Group has also taken the allowed exemption under IFRS 1 to only apply the IAS 21 requirement of the fair value and goodwill arising in business combinations that have occurred since the transition date of 1 April 2019 as being in the functional currency of the subsidiary.
The Company's shares were admitted to trading on the Alternative Investment Market ('AIM'), a market operated by the London Stock Exchange, on 29 March 2021. These financial statements are the Company's first subsequent to its admission to AIM.
b) Going Concern
The Directors have a reasonable expectation that there are no material uncertainties that cast significant doubt about the Group's ability to continue in operation and meet its liabilities as they fall due for the foreseeable future, being a period of at least 12 months from the date of approval of the financial statements. During the year, the Group has achieved a significant cash inflow following the sale of OpenConnect for $19.5m. The Group also benefits from positive operating cashflows, ensuring that the business remains financially robust, with strong prospects for the future.
In light of the Covid-19 outbreak, the Directors have considered appropriate measures to respond to the uncertain outlook and ensure that the Group remains a going concern for a period of at least 12 months. Whilst there can be no certainty due to the conditions across the world at present, the Directors have reviewed cash flow forecasts for the business covering a period of at least 12 months from the date of approval of the financial statements, and together with the projected revenue and available cash reserves following the sale of OpenConnect, they are confident that sufficient funding is available to support ongoing trading activity and investment plans for the business. The financial statements have therefore been prepared on a going concern basis.
c) Revenue
The Group sells SaaS solutions and Training & Implementation ('T&I').
SaaS solutions are sold as both a cloud IT environment or as an-on-premise solution which can be hosted within a customer's server. Alongside the software, the Group provides ongoing management services contracts which involves ongoing support of the software. This support is typically achieved by accessing the software to ensure it is operating efficiently and to make changes as requested by the customer. The licence and associated management services contract are considered to be a single performance obligation because although the customer obtains possession of the software, they are unable to benefit from the software solution without the associated management services.
T&I relates to implementation of the SaaS solution and training in the Group's methodology on how to use the solution to the best effect. This is typically delivered at the start of a new customer relationship, or when a customer expands the use of the Group's software into other parts of their business. Ad-hoc training is also provided to existing customers. T&I is a single performance obligation.
Both SaaS performance obligations are provided under fixed-price contracts, which is mainly contracted as a fixed price for a period of time for up to a contractual number of users, but also can be achieved via a price per user, where the number of actual users is determined in arrears. SaaS contracts are typically for a period of one year. Where the number of users is determined in arrears, a best estimate of the expected revenue is accrued each month based upon recent usage.
SaaS solutions, both hosted and on-premise, are recognised on a straight-line basis over the length of the contract during which the customer has daily access to these services.
T&I services are recognised over time based upon the delivery of the service. Variable and contingent consideration exists in T&I revenues for some customers typically dependent on the customer achieving a level of efficiency due to the purchase of the Group's software and methods. Management agrees with the customer the expected amount of productivity gain and the associated contingent revenue with the customer at the outset of the contract, based upon an initial health check of the customers operations. Management considers the likelihood of the efficiency being achieved given what is discovered in the initial health check and past performance of the Group's products with other customers, and if the gain is considered to be probable the variable revenue is recognised alongside the non-variable T&I revenue. If the gain is not initially thought to be probable, then the revenue is only recognised once the efficiency improvements demonstrate that the targets are likely to be achieved. At present this isn't a significant judgement as it applies to a relatively small amount of revenues and the efficiency targets have, historically, been achieved.
Revenue has been allocated between performance obligations using stand-alone selling prices. Most sales are only for one performance obligation, as customers who remain with the Group over many years do not usually require additional T&I. Equally T&I is sold at daily rates that are comparable to third party training providers who run management courses or similar for organisations that are comparable to the broad customer base of the Group. Any non-trivial variation from the total cost of a sale of both performance obligation when compared to stand-alone prices and external providers prices are applied on a pro rata basis to the agreed sales price with the customer to determine the split between the two performance obligations.
The IFRS 15 practical expedient that an entity need not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less has been applied. That an entity may recognise the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less has also been applied.
No financing cost has been considered to be part of the revenue due to the duration of the performance obligations lasting for one year or less.
Warranty fixes are provided as required within the agreed services of the SaaS solutions performance obligations. These are assurance-type warranties (i.e. a product guarantee) and so are not separate performance obligations.
In the case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised. Contract assets and liabilities are recognised within 'prepayments and accrued income' and 'accruals and deferred income' respectively.
d) Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls a subsidiary when it is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. In assessing control, the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
e) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group's presentational currency, sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation reserve. When a foreign operation is disposed of, such that control, joint control or significant influence (as the case may be) is lost, the entire accumulated amount in the translation reserve, net of amounts previously attributed to non-controlling interests, is recycled to the Statement of Comprehensive Income as part of the gain or loss on disposal.
f) Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
A. Financial Assets
Classification and initial measurement of financial assets
Financial assets are classified into the following categories:
· amortised cost
· fair value through profit or loss ('FVTPL')
· fair value through other comprehensive income ('FVOCI').
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within administrative expenses.
Subsequent measurement of financial assets
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
· they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
· the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.
Impairment of financial assets
IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'.
The Group considers a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
· financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk ('Stage 1'); and
· financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low ('Stage 2').
'Stage 3' would cover financial assets that have objective evidence of impairment at the reporting date.
'12-month expected credit losses' are recognised for the first category while 'lifetime expected credit losses' are recognised for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.
Trade and other receivables
The Group makes use of a simplified approach in accounting for trade and other receivables and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses.
The Group does not have a history of material credit losses on its trade receivables and no change to this is expected when considering forward-looking information.
B. Financial Liabilities
Classification and measurement of financial liabilities
The Group's financial liabilities include interest-bearing loans and borrowings and trade payables and other payables.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income.
g) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Depreciation is charged to administrative expenses in the Statement of Comprehensive Income. The principal annual rates used for this purpose are:
· leasehold improvements - straight line over three years;
· plant and machinery - straight line over three years;
· furniture, fittings and equipment - straight line over five years;
· right-of-use assets - straight line over the earlier of useful life of the right-of-use asset or the lease term.
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
h) Leases
The Group has applied IFRS 16 on a fully retrospective basis in the financial statements. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group has taken advantage of the practical expedient within IFRS 16 to not reassess whether a contract is, or contains, a lease.
The Group recognises a right-of-use ('ROU') asset and a lease liability at the lease commencement date. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to restore the underlying asset, less any lease incentives received.
The ROU asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. In addition, the ROU asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liabilities. Depreciation is charged to administrative expenses in the Statement of Comprehensive Income.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The Group uses its incremental borrowing rate (6.5%) as the discount rate.
Lease payments included in the measurement of the lease liability comprise:
· fixed payments, including in-substance fixed payments;
· variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
· amounts expected to be payable under a residual value guarantee; and
· the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the ROU asset, or is recorded in profit or loss if the carrying value of the ROU asset has been reduced to zero.
The Group presents ROU assets and lease liabilities separately from property, plant and equipment.
Short-term leases and low value assets
The Group has elected not to recognise ROU assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
i) Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units ('CGU') and is not amortised but is tested annually for impairment.
At the transition date, pre-existing goodwill has been carried at its previous carrying value under FRS 102 and has not been re-stated.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the Statement of Comprehensive Income as an expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is charged to the administrative expenses in the Statement of Comprehensive Income on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. The Group has no assets with indefinite lives, other than Goodwill, throughout the reporting periods.
Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
· customer relationships -straight line over 10 years
· purchased software - straight line over three to 10 years
· intellectual property rights acquired on acquisition - straight line over three years.
The estimated useful lives are as estimated based upon management's best estimate of the expected life of the asset. Useful lives are reconsidered if circumstances relating to the asset change or if there is an indication that the initial estimate requires revision.
j) Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker ('CODM'). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors of ActiveOps plc.
The Group will provide information to the CODM on the basis of products and services, being SaaS and T&I services. The CODM receives information for these two segments down to gross margin level.
k) Discontinued operations
OpenConnect was acquired on 1 August 2019 as it was sold on the 19 October 2020 and the financial statements provides a track record of the continuing activities of the Group throughout the period.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Comprehensive Income. For the Group this means that the economic activities of OpenConnect that remained in OpenConnect at the date of sale have been shown as a discontinued operation.
3. Revenue
The Group derives all its revenue from the transfer of goods and services over time.
A disaggregated geographical split of revenue by operating segment is shown below between Europe, the Middle East, India and Africa ('EMEIA'), North America and Australia. All revenue streams are recognised over time.
|
|
|
|
|
SaaS |
T&I |
Total |
|
Year ended 31 March 2021 |
|
|
|
000 |
000 |
000 |
|
EMEIA |
|
|
|
9,295 |
1,671 |
10,966 |
|
North America |
|
|
|
4,283 |
498 |
4,781 |
|
Australia |
|
|
|
4,216 |
431 |
4,647 |
|
|
|
|
|
17,794 |
2,600 |
20,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SaaS |
T&I |
Total |
|
Year ended 31 March 2020 |
|
|
|
000 |
000 |
000 |
|
EMEIA |
|
|
|
8,956 |
2,270 |
11,226 |
|
North America |
|
|
|
2,893 |
1,024 |
3,917 |
|
Australia |
|
|
|
4,329 |
930 |
5,259 |
|
|
|
|
|
16,178 |
4,224 |
20,402 |
4. Segmental analysis
The Group has two reporting segments, being SaaS and T&I. The Group focuses its internal management reporting predominantly on revenue and cost of sales. No non-GAAP reporting measures are monitored. Total assets and liabilities are not provided to the CODM in the Group's internal management reporting by segment and therefore a split has not been presented below. Information about geographical revenue by segment is disclosed in note 3.
No individual customer accounted for 10% or more of turnover during the reporting period.
|
|
|
|
|
SaaS |
T&I |
Total |
|
Year ended 31 March 2021 |
|
|
|
000 |
000 |
000 |
|
Revenue |
|
|
|
17,794 |
2,600 |
20,394 |
|
Cost of sales |
|
|
|
(2,364) |
(1,361) |
(3,725) |
|
|
|
|
|
15,430 |
1,239 |
16,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SaaS |
T&I |
Total |
|
Year ended 31 March 2020 |
|
|
|
000 |
000 |
000 |
|
Revenue |
|
|
|
16,178 |
4,224 |
20,402 |
|
Cost of sales |
|
|
|
(2,860) |
(2,400) |
(5,260) |
|
|
|
|
|
13,318 |
1,824 |
15,142 |
5. Exceptional items
|
| 2021 | 2020 |
Year ended 31 March |
| £000 | £000 |
Costs associated with listing on the Alternative Investment Market |
| 927 | 428 |
The Group started to incur costs relating to listing on the London Stock Exchange in the year ended March 2020. However, due to the Covid-19 pandemic the plans were delayed for several months, and the listing was achieved on the 29 March 2021. The above costs are fees paid to various external advisers. No internal costs have been included.
6. Taxation
|
| 2021 | 2020 |
Year ended 31 March |
| £000 | £000 |
Current income tax |
|
|
|
Adjustments in respect of prior periods |
| - | (8) |
Foreign current tax on profit for the current period |
| 211 | 197 |
Foreign current tax on profit for the prior period |
| 105 | 155 |
Deferred tax |
|
|
|
Origination and reversal of timing differences |
| 473 | (473) |
Adjustments in respect of prior periods |
| (53) | (118) |
Effect of decrease tax rate on opening deferred tax position |
| 7 | (49) |
Total tax charge / (credit) |
| 743 | (296) |
|
|
|
|
|
| 2021 | 2020 |
Year ended 31 March |
| £000 | £000 |
Loss before tax |
| (2,048) | (2,882) |
|
|
|
|
Tax at domestic rate of 19% (2020: 19%) |
| (389) | (548) |
|
|
|
|
Effect of: |
|
|
|
Expenses that are not deductible in determining taxable profit |
| 245 | 192 |
Income not subject to taxation |
| (7) | - |
Differences in current and deferred tax rates |
| 7 | (43) |
Exercising of share options and movement in share option provisions |
| (2,073) | - |
Deferred tax not recognised |
| 2,833 | - |
Withholding taxes |
| 54 | - |
Adjustment in respect of prior periods |
| 52 | 29 |
Effect of other tax rates |
| 21 | 74 |
Total tax charge / (credit) |
| 743 | (296) |
At 31 March 2021 the Company and its Group had tax losses of approximately £18.4m (2020: £10.1m) to carry forward to offset against future taxable profits.
7. Intangible assets
| Goodwill | Customer relationships | Purchased software | Intellectual property rights | Total |
| 000 | 000 | 000 | 000 | 000 |
Cost |
|
|
|
|
|
At 1 April 2019 | 577 | 4,297 | 333 | 126 | 5,333 |
Foreign exchange | 18 | (104) | (8) | - | (94) |
Disposals | - | - | - | (1) | (1) |
Acquired through business combinations | 1,674 | 6,736 | 545 | - | 8,955 |
At 31 March 2020 | 2,269 | 10,929 | 870 | 125 | 14,193 |
Foreign exchange | (113) | (431) | (55) | - | (599) |
Additions | - | - | 30 | - | 30 |
Disposals | (1,028) | (4,288) | - | - | (5,316) |
At 31 March 2021 | 1,128 | 6,210 | 845 | 125 | 8,308 |
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
At 1 April 2019 | - | 957 | 333 | 126 | 1,416 |
Foreign exchange | - | 2 | - | - | 2 |
Charge for the year | - | 861 | 36 | - | 897 |
Disposals | - | - | - | (1) | (1) |
At 31 March 2020 | - | 1,820 | 369 | 125 | 2,314 |
Foreign exchange | - | (30) | (4) | - | (34) |
Charge for the year | - | 693 | 51 | - | 744 |
Disposals | - | (371) | - | - | (371) |
At 31 March 2021 | - | 2,112 | 416 | 125 | 2,653 |
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 March 2021 | 1,128 | 4,098 | 429 | - | 5,655 |
At 31 March 2020 | 2,269 | 9,109 | 501 | - | 11,879 |
£659k (March 2020: £597k) amortisation and impairment charges are included within depreciation and amortisation in the statement of profit and loss and other comprehensive income. £85k (March 2020: £300k) of amortisation is included in profit from discontinued activities.
8. Property, plant and equipment
|
| Leasehold improvements | Plant and machinery | Fixtures, fittings and equipment | Total |
|
| 000 | 000 | 000 | 000 |
Cost |
|
|
|
|
|
At 1 April 2019 |
| 181 | 318 | 532 | 1,031 |
Foreign exchange |
| (7) | 19 | 39 | 51 |
Additions |
| - | 35 | 17 | 52 |
Disposals |
| (1) | (110) | (54) | (165) |
Acquired through business combinations |
| 116 | 6 | 69 | 191 |
At 31 March 2020 |
| 289 | 268 | 603 | 1,160 |
Foreign exchange |
| (19) | 43 | 3 | 27 |
Additions |
| - | 66 | 3 | 69 |
Disposals |
| (71) | (24) | (58) | (153) |
At 31 March 2021 |
| 199 | 353 | 551 | 1,103 |
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
At 1 April 2019 |
| 135 | 211 | 298 | 644 |
Foreign exchange |
| (4) | 29 | 42 | 67 |
Provided during the period |
| 78 | 55 | 90 | 223 |
Disposals |
| - | (110) | (52) | (162) |
At 31 March 2020 |
| 209 | 185 | 378 | 772 |
Foreign exchange |
| 5 | 10 | 18 | 33 |
Provided during the period |
| 50 | 76 | 77 | 203 |
Disposals |
| (71) | (21) | (54) | (146) |
At 31 March 2021 |
| 193 | 250 | 419 | 862 |
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
At 31 March 2021 |
| 6 | 103 | 132 | 241 |
|
|
|
|
|
|
At 31 March 2020 |
| 80 | 83 | 225 | 388 |
All depreciation and impairment charges are included within depreciation and amortisation in the statement of profit and loss and other comprehensive income.
9. Right-of-use assets
|
|
| Buildings |
|
|
| £000 |
Net book value |
|
|
|
At 1 April 2019 |
|
| 952 |
Foreign exchange |
|
| (28) |
Additions |
|
| 125 |
Acquired through business combinations |
|
| 187 |
Depreciation charge for the year |
|
| (304) |
At 31 March 2020 |
|
| 932 |
Foreign exchange |
|
| 5 |
Additions |
|
| 128 |
Disposals |
|
| (87) |
Depreciation charge for the year |
|
| (242) |
At 31 March 2021 |
|
| 736 |
The right-of-use asset relates to the property leases for operating premises across the Group.
Amounts recognised in the statement of financial position:
|
| 2021 | 2020 |
At 31 March |
| £000 | £000 |
Lease liabilities |
|
|
|
Current |
| 162 | 319 |
Non-current |
| 655 | 715 |
|
| 817 | 1,034 |
Amounts recognised in the statement of profit or loss:
|
| 2021 | 2020 |
Year ended 31 March |
| £000 | £000 |
Interest expense |
| 59 | 67 |
Expense for short-term leased properties |
| 29 | 44 |
Depreciation of right-of-use assets |
| 242 | 304 |
Amounts recognised in the statement of cashflows:
|
| 2021 | 2020 |
Year ended 31 March |
| £000 | £000 |
Total cash outflows |
| 279 | 357 |
There are several property leases in the Group on a one-month rolling contract. These are treated as short-life assets and are recognised on a straight-line basis.
10. Trade and other receivables
|
| 2021 | 2020 |
At 31 March |
| £000 | £000 |
Trade receivables |
| 3,167 | 4,839 |
Prepayments and accrued income |
| 1,046 | 935 |
Other receivables |
| 1,623 | 84 |
|
| 5,836 | 5,858 |
The Directors consider the carrying value of trade and other receivables to be approximately equal to their fair value.
|
| 2021 | 2020 |
At 31 March |
| £000 | £000 |
Trade receivables from contracts with customers |
| 3,194 | 4,846 |
Less loss allowance |
| (27) | (7) |
|
| 3,167 | 4,839 |
Trade receivables are amounts due from customers for services performed in the ordinary course of business. They are generally due for settlement within 30 days and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional. The Group holds the trade receivables with the objective of collecting the contractual cash flows, and so it measures them subsequently at amortised cost using the effective interest method.
11. Trade and other payables
|
| 2021 | 2020 |
At 31 March |
| £000 | £000 |
Trade payables |
| 689 | 545 |
Other taxation and social security |
| 4,524 | 892 |
Other payables |
| 101 | 32 |
Accruals and deferred income |
| 11,494 | 13,401 |
|
| 16,808 | 14,870 |
Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.
Included within other taxes and social security is £3,498k of taxes payable on the share options that exercised as part of the listing of the Company on the 29 March 2021. According to the terms of the share options, all option holders had an obligation to reimburse the Group for any taxes that became payable on their options. These proceeds were recovered from the cash generated from the shares being issued and sold into the market. This unpaid tax has significantly increased the change in trade and other payables in the consolidated statement of cashflows to its reported value of £4,342k.
Included within accruals and deferred income is the following contract liabilities:
|
| 2021 | 2020 |
At 31 March |
| £000 | £000 |
Contract liabilities |
| 8,423 | 10,789 |
12. Discontinued operations
The non-WorkiQ product related activities of OpenConnect was sold on 19 October 2020 and has been reported in both the year ended 31 March 2021 and the comparative year ended 31 March 2020 as a discontinued operation. As OpenConnect was purchased on 1 August 2019, the financial performance and cash flow information presented are for the period 1 April 2020 to 19 October 2020 along with a comparative of 1 August 2019 to 31 March 2020.
|
| Period from 1 Apr 2020 to 19 Oct 2020 | Period from 1 Aug 2019 to 31 Mar 2020 |
|
| £000 | £000 |
Income statement |
|
|
|
Revenue |
| 2,179 | 3,123 |
Cost of sales |
| (394) | (205) |
Gross profit |
| 1,785 | 2,918 |
Administrative expenseexcluding depreciation and amortisation |
| (120) | (345) |
Administrative expense - depreciation and amortisation only |
| (85) | (300) |
Operating profit |
| 1,580 | 2,273 |
Finance income |
| - | - |
Financing costs |
| (5) | (5) |
Profit before taxation |
| 1,575 | 2,268 |
Taxation |
| (2) | (212) |
Profit for the year from discontinued activities |
| 1,573 | 2,056 |
Recycled foreign exchange from foreign exchange reserve through profit and loss |
| (59) | - |
Gain on disposal of subsidiary after tax |
| 10,269 | - |
Total comprehensive income for the year arising from discontinued operations |
| 11,783 | 2,056 |
|
|
|
|
Cashflow statement |
|
|
|
Net cash generated from operating activities |
| 1,409 | 311 |
Net cash generated from investing activities |
| 14,654 | (4,563) |
Net cash used in financing activities |
| (5) | (4) |
Net increase in cash generated by the subsidiary |
| 16,058 | (4,256) |
The book value of the net assets disposed of in the sale of OpenConnect and the gain arising on disposal are as follows:
|
|
| 2021 |
|
|
| £000 |
Net assets disposed |
|
|
|
Intangible assets |
|
| 3,917 |
Deferred tax liability on intangible assets |
|
| (744) |
Goodwill |
|
| 1,028 |
Deferred tax assets |
|
| 896 |
Trade and other receivables |
|
| 132 |
Cash and cash equivalents |
|
| 551 |
Trade and other payables |
|
| (53) |
Deferred income liability |
|
| (1,324) |
Corporation tax liabilities |
|
| 64 |
Net assets disposed |
|
| 4,467 |
|
|
|
|
Consideration received |
|
|
|
Proceeds received / receivable |
|
| 15,205 |
Less direct costs incurred |
|
| (469) |
|
|
| 14,736 |
|
|
|
|
Gain on disposal excluding direct costs incurred |
|
| 10,738 |
Gain on disposal |
|
| 10,269 |
The sale of OpenConnect was for cash, however £1,317k is in an escrow account, and will be paid to the Group one year after the sale. This is included within other receivables in note 10.
[i] Source, Gartner, Plan for the Aftermath of COVID-19 for Your HCM Technology Portfolio, 17 March 2021. Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's Research & Advisory organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. The Gartner content described herein (the "Gartner Content") represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Gartner Content speaks as of its original publication date (and not as of the date of this Annual Report), and the opinions expressed in the Gartner Content are subject to change without notice.
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