Final Results and notice of AGM

RNS Number : 8400M

React Group PLC

26 January 2021

 

26 January 2021

REACT Group plc

("REACT" or the "Company")

Final Results and notice of AGM

REACT (AIM: REAT.L), the leading specialist cleaning, hygiene, and decontamination company, is pleased to announce its final results for the year ended 30 September 2020.

Financial performance

Summary	FY 2020 '000	FY 2019 '000	change
Revenue	£4,360	£3,103	+41%
Gross profit	£1,449	£885	+64%
Gross profit margin	33.2%	28.5%	+470-bps
EBITDA	£261	(£131)	+299%
Profit before tax	£188	(£183)	+203%
EPS	0.04p	(0.04p)	+200%
Net cash	£1,783	£440	+305%

Highlights

· Revenue up 41% at £4.36 million

· Gross profit up 64% at £1.45 million

· Gross profit margins up a further 470-basis points to 33.2%, an increase of 1,220-basis points over two years

· Maiden full year profit

· EBITDA reversed from past losses to £261,000, representing a 6% operating margin

· Profit before tax of £188,000

· EPS of 0.04p

· Net cash of £1.78m

· Outlook is positive following a strong first 3-months of the new financial year (Q1, FY 2021)

Impact of COVID-19

COVID-19-specific business generated c.£444,000 of revenue in the period and replaced some of the revenue and gross profit contribution lost to the temporary decline in some of our customer's requirements.

Excluding the increase in revenue from COVID-19 decontaminations & despite the negative impact of lockdown in some key business segments, the core business still grew revenues by +26% and gross profit contribution by +41%.

Posting of Annual Report and Accounts & Notice of Annual General Meeting

The annual report and accounts will be sent to shareholders today, along with notice of the Company's annual general meeting ("AGM"). These documents will be made available on the Company's website www.reactsc.co.uk/react-group-plc later on today.

The AGM will be held at 11am on 18 February 2021. Due to the COVID-19 pandemic the AGM will be held virtually. Shareholders will be able to participate in the virtual AGM via the Investor Meet Company ("IMC") platform but will not be able to vote at the meeting.  Accordingly, shareholders are strongly urged to appoint the Chairman of the AGM as their proxy in order for their votes to be counted. Shareholders wishing to participate in the virtual AGM should sign up to IMC for free ahead of the AGM via https://www.investormeetcompany.com/react-group-plc/register-investor and request to meet the Company. Once registered shareholders will automatically be emailed an invitation which they should accept in order to receive a unique link to access the AGM.  Shareholders are encouraged to register with IMC before the day of the AGM to avoid entry to the meeting being delayed.

Commenting on the results Shaun Doak, Chief Executive, said:

"We are pleased to report a strong financial performance with improvements across the board on all key metrics alongside a year of substantial progress in developing our business through accelerating organic growth.

"The new financial year has begun well and the outlook for the Group remains positive. We believe REACT is well positioned to continue to support its customers' critical requirements.

"On behalf of the Board I'd like to thank all of our colleagues and business partners for their contribution, our results are a measure of their commitment, hard work and dedication throughout this challenging period - thank you!"

For more information:

REACT Group plc
Shaun Doak, Chief Executive Officer Andrea Pankhurst, Chief Financial Officer	via Allenby Capital Tel: [phone]
Allenby Capital Limited (Nominated Adviser and Broker)
Nick Athanas / Liz Kirchner (Corporate Finance) Amrit Nahal / Tony Quirke (Sales & Corporate Broking)	Tel: [phone]

Executive Chairman's Statement

For the year ended 30 September 2020

I am delighted to report strong progress in the year to 30^th September 2020, the second trading year reported by this management team and the first full year since the business restructured.

The Board of REACT Group is pleased to report that the Company has delivered significant organic growth in the period under review and continued to deliver material improvements in operational performance and profit contribution.

Details of business performance are set out in reviews by both the Chief Executive and the Chief Financial Officer.

In summary, the business performance resulted in the Company's maiden profit and an out-turn that was ahead of market expectations.

For the year ended 30 September 2020 (FY 20), EBITDA¹ on a consistent accounting basis was £261,000, (2019: loss of £131,000), on sales revenue of £4.36 million, up +41% on the prior year (2019: £3.10m).

Profit before tax (PBT) was £188,000 (2019: loss before tax of £183,000), with basic earnings per share of 0.04 pence, (2019: loss of 0.04 pence).

Gross profit margins continue to improve due to more disciplined sales engagement alongside better operational processes to closely monitor costs at a job and task level.

COVID-19 impacted the business from March 2020, roughly 6-months into the financial year, providing both opportunities and challenges for the management team.  The Company delivered a high quality, rapid response to customer demands, whilst at the same time redeployed resources from sectors where work temporarily declined due to the government restrictions put in place.

COVID-19-specific business generated c.£444,000 of revenue in the period and replaced some of the revenue and gross profit contribution lost to the temporary decline in some of our customers' requirements.

The circumstances surrounding COVID-19 and REACT's response to it, has helped accelerate the sales engagement process with new customer prospects, and enhanced the Company's reputation with many in the existing customer base.  This resulted in incremental new business opportunities for other of REACT's services, some of which were delivered during the period with others flowing into the new financial year.

A key focus has been to maintain the resilience of the Company's service and to keep our workforce safe.  We rapidly moved operational and support staff to working from home and deployed equipment, improved methods, and reinforced training for all our specialist operators.  Despite coming into close contact with contaminated property, I am pleased to report that at the time of writing we have not had any of our specialist operators or operational and support colleagues at REACT test positive for COVID-19.

Our strategy for growth is clear; we will continue to build a leading position across our business through fast-paced organic growth and if the right opportunities present themselves, via strategic acquisitions, to support our goal of becoming the country's most trusted name in the provision of specialist cleaning, decontamination, and hygiene services.

¹ EBITDA represents the adjusted profit for the year (Note 8)

Mark Braund

Chairman

26 January 2021

Chief Executive Officer's Report and Strategic Review

I am pleased to report excellent progress in FY20, the second year of turnaround for the business and the year during which I was appointed CEO, (February 2020).

REACT Group delivered significant organic growth and continued to deliver material improvements in operational performance, profit contribution and cash generation. 

At the beginning of the period, we set long-term priorities for the business to focus on improving performance, customer satisfaction, innovation, culture, and trust.  COVID-19 could easily have distracted our mission, instead we urgently focused to galvanise the team into the appropriate action.

COVID-19 brought both opportunities and challenges. REACT was well placed to advise and respond to customer requirements to decontaminate their property from SARS-CoV-2, the virus that causes COVID-19.  We developed an unrivalled ability to deliver these services across mainland Great Britain within less than 4-hours of a call for help and focused on our most important customers and key prospects to ensure they could rely on and be confident in the efficacy of our solution.

Whilst at times during the year COVID-19 decontaminations surged, some of our other call-out work temporarily shrank as facilities in some sectors were much quieter than normal.  Much of the work we do with the judiciary and police cleaning cells and transport vehicles, was suspended during specific periods over the course of the year, as too was much of our work with housing associations.

Although the Company responded well to the call for help in dealing with COVID-19, we also worked hard to not allow it to distract us from our strategic goals.

At the same time as developing and deploying a rapid response to customer demand for COVID-19 decontaminations we also grew other parts of our business.  During the year, REACT won a small number of material contracts, all of which were announced via RNS.  We also expanded our services with existing customers and won a number of smaller projects, none of which alone were material enough to formally announce, however all contributed to this period of success.  These included the award to carry out a deep cleaning programme to twelve care home sites for one of our newly appointed nationwide customers; deep cleaning programmes at a number of prestigious manufacturing sites, distilleries, film studios and offices throughout Great Britain.

Additionally, the Company successfully negotiated new specialist reactive cleaning contracts for two large highway organisations.  Amongst other things this work will see our specialist operators deal with cleaning and decontamination following road traffic accidents, clearance of unauthorised camp sites and other anti-social behaviour, such as graffiti removal and needle picks.

To support our growth and develop the reach and range of our capability, we have grown our team of specialist operators.  We also launched a partner programme aimed at developing a network of trained and authorised subcontractors, to help us to more rapidly scale to meet the often-demanding needs of nationwide coverage.

REACT continued to develop innovative offerings; we were amongst the first nationwide service to provide ATP²-testing as part of the pre- and post-cleaning process to verify the efficacy of our work and we continue to develop the use of innovative chemicals and UV-light as a means to provide greater efficiency and environmentally friendly results.

We have established a number of delighted customer case studies across our most important sectors, which continue to help verify the quality of our work and provide reassurance to new customers who place trust in our capability.

The speed and commitment with which the whole team has responded to constantly changing parameters during this period has helped build a continuous sense of urgency and resilience into our customer-centric, can-do culture.

Financial Review

Turnover for year ended 30 September 2020 was £4.36m, representing organic growth of +41% (2019: £3.1m).  These revenues generated a gross profit contribution of £1.45m, up +64% on the prior year (2019: £0.89m) as margins were driven 474-basis points higher to 33.2% (2019: 28.5%), by our continued focus on tasks with greater value to our customers, alongside more disciplined sales engagement, and improved operational processes closely monitoring costs at a job and task level.

EBITDA on a consistent accounting basis was £261,000, a solid turnaround from the prior year's losses (2019: loss of £131,000).

Profit before tax was £188,000, (2019: loss of £183,000), representing the Company's maiden profit, and basic earnings per share of 0.04 pence (2019: loss of 0.04 pence).

Improved processes and disciplines have been applied to the accounting and administration functions.  We are invoicing customers on a much more timely basis, daily (previously monthly), and any queries are resolved promptly.  This has resulted in improved cash collections and aged debtor profile.  No further provisions for bad debt are required and £8,000 of the provision brought forward at the start of the year has been released.

The Group's cash position at the year end was £1.78 million, aside from the net placing proceeds of £1.13 million received in June 2020, this represents a notable 40% improvement on the previous year's balance of £0.44 million.

REACT reports three main areas of business; the first two are Contract Maintenance, where the Company delivers regular deep cleaning regimes, (such as in the healthcare and public transport sectors) and; Contract Reactive, where REACT is the first responder to an on-call emergency response service operating under a formal contract or framework agreement, typically 24-hours a day, 7-days per week, 365-days of the year.  These two areas together are recurring in nature and represent c.80% of our revenue and c.74% of our gross profit contribution. 

The third area is Ad Hoc, where REACT provides a solution to typically one-off situations outside a framework agreement, such as for fly tipping, void clearance, and COVID-19 decontaminations.  Because of the relatively short to mid-term nature of COVID-19, the Company has recorded all COVID-19 decontamination work in the Ad Hoc category of business.

COVID-19-specific decontamination business generated c.£444,000 of revenue in the period and replaced some of the revenue and gross profit contribution lost to the temporary decline in some of our customers' Contract Reactive and other Ad Hoc requirements.

The vast majority of our growth in performance came from other areas of the business.  A number of the material contracts announced during the period were non-COVID-19 related, although as the pandemic became more prevalent it placed operational challenges on the team, which they successfully navigated.

In the second half of the year COVID-19 understandably had an influence on how urgently customers wished to engage; the quality and timeliness with which REACT answered their calls created further opportunities and contributed to growth of business across other areas of our service offering, which have continued into the new financial year.

All three areas of the business grew in FY 20, albeit the Contract Reactive business grew more slowly that the Contract Maintenance and Ad Hoc areas.  This was primarily driven by what we consider to be a temporary reduction in demand due to restrictions in relevant parts of the economy.  Specifically, we saw temporary reductions in activity in the judiciary and police sector, where we carry out a significant amount of deep cleaning to cells, courts, and transport vehicles, alongside a decline in the housing sector where we typically carry out void cleans, deep cleans and needle picks.  We saw this business return in the late summer of 2020, only to reduce again post-year end as lockdown restrictions began to intensify.  REACT operates on long-term framework agreements, which we continue to add to. We therefore anticipate this business will re-emerge and grow as the impact of restrictions eases in each of these sectors.

Perhaps the most pleasing growth came in the Contract Maintenance business.  Revenue grew by +74% and gross profit contribution by +94%, demonstrating the team's ability during this challenging period to remain focused on our core objective of improving the quality and recurring nature of our business.  During the period, the Contract Maintenance business grew to become 39% of our overall sales revenues, with Contract Reactive and Ad Hoc being 41% and 20% respectively.

Strategy

Our strategy for growth is clear; we will continue to build a leading position across our business through fast-paced organic growth and if the right opportunities present themselves, via strategic acquisitions, to support our goal of becoming the country's most trusted name in the provision of specialist cleaning, decontamination, and hygiene services.

We continue to invest in sales and marketing to engage with the large addressable market for our services.  This includes further developing our use of the right sales and marketing tools, especially during this period requiring a hybrid approach to customer engagement, i.e. where both face to face and virtual/electronic sales environments coexist.

In addition to scaling the business we continue to look at operational efficiencies as a means to improve operating margins.  We see opportunities to add better technology and automation to further simplify operational procedures at the same time as improving scalability and resilience.

Key Performance Indicators (KPIs)

Financial : The key financial indicators are as follows:

		2020		2019
Revenue		£4.36m		£3.10m
Gross margin		33.2%		28.5%
Profit/(Loss) from continuing operations before exceptional items		£188,000		(£178,000)
Exceptional items		-		(£5,000)
Profit/(Loss) from continuing operations after exceptional items		£188,000		(£183,000)
Cash and cash equivalents		£1,783,000		£440,000

The Board recognises the importance of KPIs in driving appropriate behaviours and enabling the monitoring of Group performance.

Non-financial: The Board continues to monitor and improve customer relationships, the motivation and retention of employees as well as service quality and brand awareness.

Outlook

The new financial year has begun well, with profit and cash generation stronger in the first quarter of FY 21 than the prior year.  Although the impact of the current COVID-19 crisis remains unpredictable, we believe REACT is well positioned to continue to support our customers' critical requirements.

We remain ambitious, aiming to drive a high-performance culture placing our colleagues and customers at the heart of our business.  Through our focused efforts and competitive service proposition the business remains committed to leveraging both existing relationships and new ones to help underpin our ambitious growth strategy and upward trend of sustainable profitability.

Finally, and on behalf of the Board, I wish to thank all of the team here at REACT for their dedication, hard work and tenacity in a year largely overshadowed by the pandemic, our performance is a reflection of their commitment and talent.  Additionally, I would like to thank our partners and customers for their continued support during my first year as CEO, I very much look forward to working with them in 2021 and beyond. 

² ATP testing is a process of rapidly measuring the actively growing microorganisms through detection of adenosine triphosphate, or ATP.  This allows REACT to verify the presence and removal of microorganisms before and after cleaning.

Shaun D Doak

Chief Executive Officer

26 January 2021

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2020

 

	Notes		2020 £'000		2019 £'000
Continuing Operations
Revenue			4,360		3,103
Cost of sales			(2,911)		(2,218)
Gross profit			1,449		885
Other operating income			70		-
Administrative expenses	5		(1,308)		(1,068)
Exceptional costs included in  administrative expenses	5		-		(5)
Operating profit/(loss)			211		(183)
Finance cost	6		(23)		-
Income tax credit	7		-		-
Profit/(Loss) for the year			188		(183)
Other comprehensive Income			-		-
Total comprehensive profit/(loss) for the year attributable to the equity holders of the company			188		(183)
Basic and diluted profit/(loss) per share - pence	8
Basic earnings/(loss) per share			0.04p		(0.04)p
Diluted earnings/(loss) per share			0.04p		(0.04)p
Adjusted basic earnings/(loss) per share			0.06p		(0.03)p
Adjusted diluted earnings/(loss) per share			0.05p		(0.03)p

Consolidated Statement of Financial Position

As at 30 September 2020

	Notes		2020	2019
ASSETS			£'000	£'000
Non-current assets
Intangible assets	10		174	174
Property, plant & equipment	11		85	81
Right-of-use assets	11		27	-
			286	255
Current assets
Trade and other receivables	13		1,089	718
Cash and cash equivalents	15		1,783	440
			2,872	1,158
TOTAL ASSETS			3,158	1,413
EQUITY
Shareholders' Equity
Called-up equity share capital	16		1,246	1,039
Share premium account			5,852	4,926
Reverse acquisition reserve			(5,726)	(5,726)
Capital redemption reserve			3,337	3,337
Merger relief reserve			1,328	1,328
Share-based payments			15	12
Accumulated losses			(3,861)	(4,038)
Total Equity			2,191	878
LIABILITIES
Current liabilities
Trade and other payables	17		924	535
Lease liabilities within one year			13	-
Non-current liabilities
Lease liabilities after one year	17		30	-
TOTAL LIABILITIES			967	535
TOTAL EQUITY AND LIABILITIES			3,158	1,413

Consolidated Statement of Changes in Equity

For the year ended 30 September 2020
 

	Share capital	Share Premium	Merger Relief Reserve	Capital Redemption Reserve	Reverse Acquisition Reserve	Share-Based Payments	Accumulated Deficit	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 October 2018	1,039	4,926	1,328	3,337	(5,726)	20	(3,863)	1,061
Issue of options	-	-	-	-	-	2	(2)	-
On surrender of warrants	-	-	-	-	-	(10)	10	-
Loss for the year	-	-	-	-	-	-	(183)	(183)
At 30 September 2019	1,039	4,926	1,328	3,337	(5,726)	12	(4,038)	878
Issue of shares	207	926	-	-	-	-	-	1,133
Share-based payments	-	-	-	-	-	3	-	3
Effect of adoption of IFRS16	-	-	-	-	-	-	(11)	(11)
Profit for the year	-	-	-	-	-	-	188	188
At 30 September 2020	1,246	5,852	1,328	3,337	(5,726)	15	(3,861)	2,191

Consolidated Statement of Cash Flows

For the year ended 30 September 2020

	Notes		2020	2019
			£'000	£'000
Cash flows from operating activities
Cash generated by operations	1		281	34
Net cash inflow from operating activities			281	34
Cash flows from financing activities
Proceeds of share issue			1,246	-
Expenses of share issue			(113)	-
Lease liability payments			(29)	-
Net cash inflow from financing activities			1,104	-
Cash flows from investing activities
Disposal of fixed assets			2	8
Capital expenditure			(44)	(25)
Net cash outflow from investing activities			(42)	(17)
Increase in cash, cash equivalents and overdrafts			1,343	17
Cash, cash equivalents and overdrafts at beginning of year			440	423
Cash, cash equivalents and overdrafts at end of year	2		1,783	440

Notes to the Consolidated Statement of Cash Flows

For the year ended 30 September 2020

1.  Reconciliation of profit for the year to cash outflow from operations

		2020 £'000		2019 £'000
Profit/(Loss) before taxation		188		(183)
(Increase)/Decrease in trade and other receivables		(371)		441
Increase/(Decrease) in trade and other payables		389		(275)
Depreciation and amortisation charges		50		52
Finance costs		21		-
Loss/(Profit) on disposal of fixed assets		1		(3)
Share-based payment		3		2
Net cash inflow from operations		281		34

2.  Cash and cash equivalents

	2020 £'000	2019 £'000
Cash at bank and in hand	1,783	440

Notes to the Financial Statements

For the year ended 30 September 2020

1.  General Information

  Basis of preparation and consolidation

The Company is a public company, limited by shares, based in the United Kingdom and incorporated in England and Wales.  Details of the registered office, the officers and advisors to the Company are presented on the Company Information page at the start of this report.

The consolidated financial statements present the results of the company and its subsidiaries ('the Group') as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.  Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The functional and presentational currency of the Group is pounds sterling.  The figures presented have been rounded to the nearest one thousand pounds.

The equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, REACT Group PLC, including the equity instruments issued in order to effect reverse acquisition accounting.  The merger relief reserve represents a premium on the issue of the ordinary shares for the acquisition of subsidiary undertakings. The relief is only available to the issuing company securing at least a 90% equity holding in the acquired undertaking in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided by the issue of equity shares in the other company.

2.  Accounting Policies

  Statement of compliance

The consolidated financial statements of REACT Group PLC have been prepared in accordance with International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively 'IFRSs') as adopted for use in the European Union and as issued by the International Accounting Standards Board and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

  Basis of preparation

The financial statements have been prepared under the historical cost convention. The principal accounting policies are summarised below.  They have all been applied consistently throughout the year under review.

  Going concern

  Following its review of the Group's financial plans and forecast growth, the cash balance held at the year end and the management team currently in place, the Board has a good expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  Therefore, the financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.

New , amended standards, interpretations not adopted by the Group

Th e following Adopted IFRSs have been issued but have not been applied by the Group in these Financial Statements. The full impact of their adoption has not yet been fully assessed; however, management do not expect the changes to have a material effect on the Financial Statements unless otherwise indicated:

· Amendments to IAS 1 and IAS 8 - on definition of materiality (1 January 2020)

· Amendments to IFRS 3 "Business combinations" on definition of a business (1 January 2020)

· Amendments to IFRS 9, IFRS 7 and IAS 39 financial instruments (1 January 2020)

· IFRS 17 Insurance contracts (1 January 2023)

Change s in Accounting Policies and Disclosures

Ne w and amended standards adopted by the Group

Th e Group has applied any applicable new standards, amendments to standards and interpretations   that are mandatory for the financial year beginning on or after 1 January 2020. However, none of them has a material impact on the Group's Consolidated Financial Statements.

Impact of IFRS 16 - Leases

The Group has adopted IFRS 16 Leases using the modified retrospective approach with recognition of transitional adjustments on the date of initial application (1 October 2019), without re-statement of comparative figures.  As a lessee, the Group previously classified leases as operating leases or finance leases.  Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for leases that meet the recognition criteria.

Revenue recognition

Revenue is recognised in accordance with the requirements of IFRS 15 'Revenue from Contracts with Customers'. The Company recognises revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework:

1. Identify the contract(s) with the customer; 

2. Identify the performance obligations in the contract; 

3. Determine the transaction price; 

4. Allocate the transaction price to the performance obligations in the contract; and 

5. Recognise revenue when (or as) the entity satisfy a performance obligation.

The Group recognises revenue in the accounting period in which its services are rendered, by reference to stage of completion of the specific transaction and assessed on the basis of the actual service provided as a proportion of the total services to be provided. Revenues exclude intra-group sales and value added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. The net invoice value is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied.

  Taxation

  Income tax expense represents the sum of the tax currently payable and deferred tax.

(i)  Current tax

Current taxes are based on the results shown in the financial statements and are calculated   according to local tax rules using tax rates enacted or substantially enacted by the statement of financial position date. Income tax is recognised in the income statement or in equity if it relates to items that are recognised in the same or a different period, directly in equity. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

(ii)  Deferred tax

Deferred tax is provided, using the liability method, on temporary differences at the statement of   financial position date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.

  Deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference, and the carrying forward or unused tax assets and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilised.  Conversely, previously unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

            Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

  Investments

  Investments in subsidiaries are held at cost less any impairment.

  Financial assets and liabilities

The Group classifies its financial assets at inception into three measurement categories; 'amortised cost', 'fair value through other comprehensive income' ('FVOCI') and 'fair value through profit and loss' ('FVTPL'). The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost. Management determines the classification of its investments at initial recognition. A financial asset or financial liability is measured initially at fair value. At inception transaction cost that are directly attributable to its acquisition or issue, for an item not at fair value through profit or loss, is added to the fair value of the financial asset and deducted from the fair value of the financial liability.

Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and maturity amount, minus any reduction for impairment.

Fair value measurement

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date. The fair value of assets and liabilities in active markets are based on current bid and offer prices respectively. If the market is not active the group establishes fair value by using appropriate valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net present value and discounted cash flow analysis.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the group has transferred substantially all of the risks and rewards of ownership. In transaction in which the group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. There have not been any instances where assets have only been partly derecognised. The group derecognises a financial liability when its contractual obligation are discharged, cancelled or expired.

Impairment

The Group assesses at each financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is objective experience (such as significant financial difficulty of obligor, breach of contract, or it becomes probable that debtor will enter bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (that is, the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of an allowance account. The amount of loss is recognised in the Statement of Comprehensive Income.

  Cash and cash equivalents

  Cash and cash equivalents comprise cash at bank and in hand.

  Leases

  During the year the Group adopted IFRS 16 Leases for the first time.  IFRS 16 replaces IAS 17 Leases.

The Group previously split leases between 'finance leases' that transferred substantially all the risks and rewards incidental to ownership of the asset to the Group, and 'operating leases'.  Under IFRS 16, for all leases except for short-term leases and leases of low-value assets, other than those which are subleased, previously classified as operating leases:

  As at 1 October 2019, the Group has recognised a lease liability measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at 1 October 2019 and  for all leases the Group has elected to recognise a right-of-use asset at an amount equal to the lease liability, adjusted by the amount of prepaid or accrued lease payments relating to those leases recognised in the statement of financial position immediately before the date of initial application.

  The Group elected the following practical expedients:

• it has applied a single discount rate to a portfolio of leases with reasonably similar characteristics;

• it has relied on its assessment of whether leases are onerous applying IAS37 immediately before 1 October 2019 as an alternative to performing an impairment analysis. The analysis of the onerous contracts as at 30 September 2018 has not resulted in a need to recognise an impairment allowance. The right-of-use assets as at 1 October 2019 were therefore not adjusted for any impairment;

• it has opted not to apply the new lessee accounting model to leases for which the lease term ends within 12 months after the date of initial application. Instead, it has accounted for those leases as short-term leases.

Impact of the transition to IFRS 16:

	£'000
Operating lease commitments as at 30/9/2019 under IAS17	(57)
Leases previously not included	(41)
Non-lease commitments
Excluded short-term leases
Excluded low value assets (other than those which are subleased)
The effect of discounting using the incremental borrowing rate at 1/10/2019	47
Lease liability as at 1/10/2019	(51)
Short-term portion	(8)
Long-term portion	(43)

  Trade and other receivables

  Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  Subsequent to the initial recognition, trade and other receivables are measured at amortised cost less impairment losses for bad and doubtful debts, except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial.  In such cases, the receivables are stated at cost less impairment losses for bad and doubtful debts.  Impairment losses for bad and doubtful debts are measured as the difference between the carrying amount of financial asset and the estimated future cash flows, discounted where the effect of discounting is material.

  Trade and other payables

  Trade and other payables are initially recognised at fair value and thereafter stated in amortised cost, except where the payables are interest free loans made by related parties without any fixed repayment terms or the effect of discounting would be immaterial, in which case they are stated at cost.

  Impairment of non-financial assets

At each statement of financial position date, the Group reviews the carrying amounts of its investments to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.  If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (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 (cash-generating unit) in prior periods. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

  Capital management

  Capital is made up of stated capital, premium and retained earnings.  The objective of the Group's capital management is to ensure that it maintains strong credit ratings and capital ratios. This will ensure that the business is correctly supported and shareholder value is maximised.

  The Group manages its capital structure through adjustments that are dependent on economic conditions.  In order to maintain or adjust the capital structure, the company may choose to change or amend dividend payments to shareholders or issue new share capital to shareholders.  There were no changes to the objectives, policies or processes during the year ended 30 September 2020.

Equity instruments

  Equity instruments issued by the company are recorded at the proceeds received. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against share premium.

Share-based compensation

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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

Depreciation on property, plant and equipment is calculated using the straight-line method to write off their cost over their estimated useful lives at the following annual rates:

  Leasehold property                                              20%

  Vehicles                                                                  25%

  Fixtures, fittings & equipment  20% / 33%

Useful lives and depreciation methods are reviewed and adjusted if appropriate, at the end of each reporting period.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.  Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss in the period in which the asset is derecognised.

A right-of-use asset is recognised at commencement of the lease and initially measured at the amount of the lease liability, plus any incremental costs of obtaining the lease and any lease payments made at or before the leased asset is available for use by the Group.  They are subsequently measured at cost less accumulated depreciation and any accumulated impairment losses.

Intangibles

Purchased goodwill represents the excess of the cost of acquisition over the company's interest in the fair value of the identifiable assets and liabilities of a business acquired at the date of acquisition.

Purchased goodwill is recognized as an asset, reviewed for impairment at least annually and carried at cost less accumulated impairment losses. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. Purchased goodwill is deemed to have an indefinite useful life due to the expectation of the acquired business to operate in perpetuity, so is not amortised.

Customer list represents the value placed on the retained customer list at the acquisition date. The value recognises that customers, although contracted to the company are not under an obligation to use the company services.

The customer list will be amortised over a period of 5 years. An impairment review will be conducted each year and will look at significant changes in the turnover received from major customers.

Employee benefit costs

The group operates a defined contribution pension scheme for eligible employees.  Contributions payable are charged to the income statement in the period to which they relate.

Exceptional items

Exceptional items are material items of income or expenses which have arisen in the normal course of business but are not expected to re-occur on a regular basis.

Critical accounting judgments and key sources of estimation uncertainty

The preparation of the financial statements requires management to make estimates and assumptions concerning the future that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

The resulting accounting estimates will, by definition, differ from the related actual results.

· Estimated impairment of goodwill

The Directors have carried out a detailed impairment review in respect of goodwill. The Group assesses at each reporting date whether there is an indication that an asset maybe impaired, by considering the net present value of discounted cashflow forecasts which have been discounted at 15%. The cashflow projections are based on the assumption that the Group can realise projected sales.

· Share-based payments

The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry.

· Goodwill and customer list valuation

Management originally estimated that the useful life of the fair value of the customer lists acquired on the acquisition to be 5 years. As part of the annual impairment review on 30 September 2018, based on the medium-term trading outlook, the decision was taken to write down the purchased goodwill and acquired customer list to £174,000.  As at 30 September 2020 a further review was undertaken, and management judged that no additional impairment was required.

· Bad debt provision

We perform ongoing credit evaluations of our customers and grant credit based on past payment history and industry conditions.  Customer payments are closely monitored and a provision for doubtful debts is established based on management's assessment of the expected collectability of all accounts receivable.

3.  Segmental Reporting

In the opinion of the Directors, the Group has one class of business, being that of specialist cleaning and decontamination services. Although the Group operates in only one geographic segment, which is the UK, it has also analysed the sources of its business into the segments of Contract Maintenance, Contract Reactive or Ad Hoc work.

	2020					2019
	Contract Maintenance Work	Contract Reactive Work	Ad Hoc Work	Total		Contract Maintenance Work	Contract Reactive Work	Ad Hoc Work	Total
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000
Revenue	1,694	1,775	891	4,360		974	1,751	378	3,103
Cost of Sales	(1,178)	(1,214)	(519)	(2,911)		(708)	(1,251)	(259)	(2,218)
Gross Profit	516	561	372	1,449		266	500	119	885
Administrative Expenses	(441)	(479)	(318)	(1,238)		(321)	(603)	(144)	(1,068)
Operating Profit/(Loss) for the year	75	82	54	211		(55)	(103)	(25)	(183)
Total Assets	1,125	1,221	812	3,158		424	798	191	1,413
Total Liabilities	(344)	(374)	(249)	(967)		(161)	(302)	(72)	(535)

The Directors have changed the segmental reporting this year to give a more meaningful presentation of the figures.  In the prior year, the segmental reporting analysed the sources of the Group's business into the segments of either public or private sector customers.

4.  Employees and Directors

	2020	2019
	£'000	£'000
Wages and salaries	2,258	1,932
Social security costs	203	174
Pension contributions	37	28
Share based payments	3	2
	2,501	2,136
The average monthly number of employees :
	No.	No.
Directors	4	3
Operators and administration staff	83	79
	87	82
The number of directors to whom retirement benefits were accruing under money purchase schemes	2	1
The number of directors who exercised share options during the year	-	-
The number of directors who received share options during the year	-	-

Details of emoluments received by Directors of the Group for the year ended 30 September 2020 were as follows:

	Salaries	Car benefit	Share based payment	2020	2019
	£'000	£'000	£'000	£'000	£'000
G Leates	49	-	1	50	58
R Gilbert	24	-	-	24	22
M Joyce	30	-	-	30	17
L Innes	-	-	-	-	17
S Doak	119	-	1	120	-
A Pankhurst	75	-	-	75	-
Total	297	-	2	299	114

These amounts include the share-based payments referred to in Note 2.

The key management personnel are the Directors and therefore disclosure is the same as the above.

5.  Administrative expenses

		2020		2019
		£'000		£'000
Auditor remuneration - audit fees (Company £3,000; 2019 : £4,000)		16		25
- other services		2		3
Staff costs (note 4)		2,498		2,134
Less staff costs included in cost of sales		(1,701)		(1,623)
Recruitment		5		38
Legal and professional fees (incl AIM related costs)		161		155
Property costs		80		53
Travel expenses		36		42
Insurance		54		54
Marketing		99		61
Provision against bad debts and accrued income		(8)		(70)
Other expenses		44		180
Depreciation		50		52
Less depreciation included in cost of sales		(28)		(36)
		1,308		1,068

There were £Nil non-recurring exceptional costs included in administrative expenses during the year (2019: £5,000)
		2020		2019
		£'000		£'000
Recruitment fees & other employee related costs associated with the changes in the management of the business during the period under review		-		(61)
Legal fees relating to resolution of an historic debt		-		(10)
Release of historic VAT provision		-		66
		-		(5)

6.   Finance Costs

		2020 £'000		2019 £'000
Lease liability interest on:
-  Land and buildings		13		-
-  Other		8		-
Other interest expense		2		-
At 30 September 2020		23		-

7.  Income Tax

			2020		2019
			£'000		£'000
Current tax charge			-		-
Deferred tax credit			-		-
			-		-

  Analysis of tax expense:

		2020 £'000		2019 £'000
Profit/(Loss) on ordinary activities before income tax		188		(183)
Profit/(Loss) on ordinary activities multiplied by the standard rate of corporation tax in UK of 19% (2019: 19%)		36		(35)
Effects of:
Fixed asset differences		4		-
Amortisation and depreciation not deductible for tax		-		10
(Decrease)/Increase in net losses carried forward		(40)		25
Corporation tax charge/(credit)		-		-
The Group has estimated excess management expenses carried forward of £1.3m (2019: £1.3m) and trading  losses of approximately £800,000 (2019: £1.0m) available to use against future profits.  The tax losses have resulted in a deferred tax asset of approximately £0.4m (2019: £0.4m) which has not been recognised as it is uncertain when future taxable profits will be sufficient to utilise the losses.

8.  Earnings/(Loss) per Share (basic and adjusted)

The calculations of earnings/(loss) per share (basic and adjusted) are based on the net profit/(loss) and adjusted profit/(loss) respectively and the ordinary shares in issue during the year.  The adjusted profit/(loss) represents the EBITDA for the year.  For diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential ordinary shares.

		2020		2019
		£'000		£'000
Net profit/(loss) for year		188		(183)
Adjustments:
Interest		23		-
Depreciation		50		52
Adjusted profit/(loss) for the year		261		(131)
		Number		Number
Weighted average shares in issue for basic earnings/(loss) per share		441,291,857		415,407,753
Weighted average dilutive share options and warrants		65,065,130		*
Average number of shares used for dilutive earnings/(loss) per share		506,356,987		415,407,753
		pence		pence
Basic earnings/(loss) per share		0.04p		(0.04p)
Diluted earnings/(loss) per share		0.04p		(0.04p)
Adjusted basic earnings/(loss) per share		0.06p		(0.03p)
Adjusted diluted earnings/(loss) per share		0.05p		(0.03p)

* Where a loss is incurred, the effect of outstanding share options and warrants is considered anti-dilutive.

9.   Company's result for the year

The company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company income statement account. The result for the parent company for the year was a profit of £30,000 (2019: profit of £74,000).

10. Intangible assets

Group		Purchased Goodwill		Customer List Acquired		Total
		£'000		£'000		£'000
Cost
At 1 October 2019		1,280		220		1,500
Disposals				(220)		(220)
At 30 September 2020		1,280		-		1,280
Amortisation and impairment
As at 1 October 2019		1,106		220		1,326
Amortisation charge for the year		-		-		-
Disposals		-		(220)		(220)
As at 30 September 2020		1,106		-		1,106
Carrying amount
As at 30 September 2020		174		-		174
As at 30 September 2019		174		-		174

The purchased goodwill relates to intangible assets that do not qualify for separate recognition on the acquisition of the REACT specialist cleaning services business, an unincorporated division of Autoclenz Limited.

The Group assesses at each reporting date whether there is an indication that an asset may be impaired, by considering the net present value of discounted cash flow forecasts. Purchased goodwill has been allocated for impairment testing purposes to the individual businesses acquired which are also the cash‐generating units ("CGU") identified. The recoverable amount of a CGU is determined based on value in use calculations using cash flow projections based on financial budgets approved by the Directors. The projections are based on the assumption that the company can realise projected sales. A prudent approach has been applied with no residual value being factored into these calculations. If the projected sales do not materialise there is a risk that the total value of the intangible assets shown above would be impaired. A pre-tax discount rate of 15% per annum has been applied to the cashflow projections, taking into consideration the expected rate of return and various risks relating to the CGU.

As a result of this annual review, it was decided that given the current trading performance of the business and the short/medium term outlook, there was no need to further impair the carrying value of the Purchased Goodwill.

The key assumptions used in the estimation of the revised value of Purchased Goodwill are set out below.  The values assigned to the key assumptions represent management's assessment of future revenues and cash flows of the CGU.  The most recent financial results and forecast approved by management for the next five years were used and a terminal growth rate thereafter.  The projected results were discounted at a rate which is a prudent evaluation of the time value of money and the risks specific to the CGU.

Key assumptions used:

	%
Average revenue growth rate (of next five years)	10
Terminal value growth rate	0
Discount rate	15

11. Property, Plant and equipment

Group		Leasehold property		Vehicles		Fixtures, fittings & equipment		Right-of-Use Assets		Total
		£'000		£'000		£'000		£'000		£'000
Cost
At 1 October 2019		21		181		109		-		311
Additions		-		28		16				44
IFRS16 implementation		-		-		-		40		40
Disposals		-		(60)		(10)		-		(70)
At 30 September 2020		21		149		115		40		325
Depreciation
At 1 October 2019		8		153		69		-		230
Depreciation charge for the year		4		18		15		13		50
Disposals		-		(57)		(10)		-		(67)
At 30 September 2020		12		114		74		13		213
Net book value
At 30 September 2020		9		35		41		27		112
At 30 September 2019		13		28		40		-		81
Company		Leasehold property		Vehicles		Fixtures, fittings & equipment		Right-of-Use Assets		Total
		£'000		£'000		£'000		£'000		£'000
Cost
At 1 October 2019		21		-		-		-		21
Additions		-		-		-		-		-
IFRS16 implementation		-		-		-		21		21
Disposals		-		-		-		-		-
At 30 September 2020		21		-		-		21		42
Depreciation
At 1 October 2019		8		-		-		-		8
Depreciation charge for the year		4		-		-		7		11
Disposals		-		-		-		-		-
At 30 September 2020		12		-		-		7		19
Net book value
At 30 September 2020		9		-		-		14		23
At 30 September 2019		13		-		-		-		13

12. Investment in subsidiary undertakings

Company
		£'000
Cost
At 1 October 2019 and 30 September 2020		1,560
Impairment
At 1 October 2019		1,386
Impairment charge for the year		-
At 30 September 2020		1,386
Carrying amount
At 30 September 2020		174
At 30 September 2019		174

As at 30 September 2020, the company held the following subsidiaries:

Name of company	Principal activities	Country of incorporation and place of business	Proportion of equity interest of ordinary shares
REACT SC Holdings Limited	Holding company	United Kingdom	100%
REACT Specialist Cleaning Limited (held indirectly by REACT SC Holdings Limited)	Specialist cleaning & decontamination services	United Kingdom	100%

13. Trade and other receivables

Current	Note	Group		Group	Company		Company
		2020		2019		2020		2019
		£'000		£'000		£'000		£'000
Trade receivables		989		696		-		-
Provision for impairment	14	(42)		(83)		-		-
Net trade receivables		947		613		-		-
Amounts owed by Group undertakings		-		-		1,151		1,242
Provision against amounts owed by Group undertakings		-		-		(1,151)		(1,226)
Prepayments and accrued income		142		105		4		22
Other debtors		-		-		42		-
		1,089		718		46		38

Trade receivables are amounts due from customers for services performed in the ordinary course of business.  The Group's impairment and other accounting policies for trade and other receivables are outlined in note 2.

14. Provision for impairment of receivables

A provision is established for irrecoverable amounts where there is an indication that amounts due under the original payment terms will not be collected.

Provision for impairment of receivables Relating to debt over 3 months past due		Group		Group
		2020		2019
		£'000		£'000
Opening provision		83		339
Impairments in the year		-		64
Amounts released in the year		(8)		(189)
Amounts utilised in the year		(33)		(131)
Closing provision		42		83

There are no receivables in the Company, as all are held by the trading subsidiary, REACT Specialist Cleaning Limited.

As at 30 September 2020, excluding balances provided for by the impairment provision, £25,000 (2019: £157,000) of trade receivables were past their due settlement date but not impaired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      The ageing analysis of these trade receivables is as follows:

		2020		2019
		£'000		£'000
Up to 3 months past due		18		119
3 to 6 months past due		7		37
Over 6 months past due		-		1
		25		157

Trade receivables that are neither past due nor impaired are considered to be fully recoverable.

15. Cash and cash equivalents

		Group		Group		Company		Company
		2020		2019		2020		2019
		£'000		£'000		£'000		£'000
Cash and bank balances		1,783		440		1,446		256

16. Called Up Share Capital

		2020		2019
		£'000		£'000
Issued share capital comprises:
498,509,350 (2019 : 415,407,753) Ordinary shares of 0.25p each		1,246		1,039
83,101,597 Ordinary shares of 0.25p were issued on 9 June 2020 at a price of 1.5p per share.  This transaction resulted in an increase of £207,000 to the Company's share capital and an increase of £926,000 to its share premium, after deducting the cost of issue of £113,000.

17.  Trade and other payables

		Group		Group		Company		Company
		2020		2019		2020		2019
		£'000		£'000		£'000		£'000
Current:
Trade payables		402		232		55		39
-  Accrued expenses		192		128		3		-
Social security and other taxes		330		175		4		(2)
Lease Liability <12 months		13		-		9		-
Non-current:
Lease Liability >12 months		30		-		15		-
		967		535		86		37

18. Deferred Tax

Deferred tax is provided, using the liability method, on temporary differences at the statement of financial position date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19%, the movement on the deferred tax liability is as shown below:

Group		2020		2019
		£'000		£'000
At 1 October 2019		-		-
Income credit		-		-
At 30 September 2020		-		-

Deferred tax assets have not been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets as the Directors believe it is uncertain when these assets will be recovered.

19.  Related Party Disclosures

  Group and company

  During the years ended 30 September 2019 and 30 September 2020, there were no related party transactions. 

20. Ultimate Controlling Party

  No one shareholder has control of the company.

21. Warrants

There were no movements in the number of share warrants outstanding and their related weighted average exercise prices during the year.

		Number of warrants				Average exercise price
		2020		2019		2020		2019
		No.		No.		£		£
Outstanding at the beginning of the year		19,939,537		2,380,000		0.0030		0.0168
Granted during the year		-		19,939,537		-		0.0030
Lapsed during the year		-		(2,380,000)		-		(0.0168)
Outstanding at the end of the year		19,939,537		19,939,537		0.0030		0.0030

The fair value of the share warrants issued on 17 May 2019 with an exercise price of 0.30p is £5,834 and was derived using the Black Scholes model. The following assumptions were used in the calculations:

Share price at grant date	0.30p
Risk-free rate	0.58%
Volatility	25%
Expected life	5 years

Expected volatility is based on a conservative estimate for the company. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

£1,167 (2019: £389) has been recognised during the year for the share warrants over the vesting period.

22. Share options

The company has implemented a share option programme to grant share options as an incentive for employees.  Each share option converts into one ordinary share of the company on exercise.  No amounts are paid or payable by the recipient on receipt of the option and the company has no legal obligation to repurchase or settle the options in cash.  The options carry neither rights to dividends nor voting rights prior to the date on which the options are exercised.  Options may be exercised at any time from the date of vesting to the date of expiry.

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

		Number of options				Average exercise price
		2020		2019		2020		2019
		No.		No.		£		£
Outstanding at the beginning of the year		45,125,593		2,754,077		0.0038		0.0168
Granted during the year		-		42,371,516		-		0.0030
Lapsed during the year		-		-		-		-
Outstanding at the end of the year		45,125,593		45,125,593		0.0038		0.0038

The Options shall vest and become capable of exercise in specified quantities if the mid-market price (as derived from the AIM Appendix of the Daily Official List and as certified in writing by the Company's stockbrokers) equals or exceeds a series of defined Share Hurdle Prices between £0.004 and £0.0280 for 5 consecutive business days at any time or times during the vesting period. £3,646 (2019: £1,215) has been recognised during the year for the share-based payments over the vesting period. 

The prior year figures showing the number of options have been restated as the warrants detailed in Note 21 were previously incorrectly included in the total. However the share based charge was correctly calculated, so there is no impact on the Consolidated Statement of Comprehensive Income.

23. Financial risk management, objectives and policies

  The Group's financial instruments comprise cash balances and receivables and payables that arise directly from its operations. The main risks the Group faces are liquidity risk and capital risk.

  The board regularly reviews and agrees policies for managing each of these risks.  The Group's policies for managing these risks are summarised below and have been applied throughout the year.  The numerical disclosures exclude short-term debtors and their carrying amount is considered to be a reasonable approximation of their fair value.

  Interest risk

  The Group is not exposed to significant interest rate risk as it has no interest-bearing liabilities at the year end.

Credit risk

  The Group is exposed to credit risk as services are invoiced on completion. This risk is mitigated as most large customers have been customers for several years and have exemplary credit ratings. The board also ensure robust procedures are in place to ensure all services are invoiced promptly and all payments received in a timely manner.

As at the year end, 13% of debtors included in trade receivables are past their due dates.  Included in trade receivables are provisions of £42,000.

Liquidity risk

  Liquidity risk is the risk that Group will encounter difficulty in meeting the obligations associated with financial liabilities.

  The responsibility for liquidity risks management rest with the Board of Directors, which has established appropriate liquidity risk management framework for the management of the Group's short term and long-term funding risks management requirements.

  During the year under review, the Group has not utilised any borrowing facilities. The Group manages liquidity risks by maintaining adequate reserves and reserve borrowing facilities by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Capital risk

The Group's objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

24. Lease liabilities

At 30 September 2020, the maturity of the Group's gross contractual undiscounted cashflows due on the Group's lease liabilities (excluding short-term and low-value leases) is set out below:

Group	Land and Buildings £000	Other £000	Total £000
Discounted future cash flows; Not later than one year	(9)	(4)	(13)
Later than one year and not later than five years	(15)	(15)	(30)
Later than five years	-	-	-
Total discounted future cash flows at 30 September 2020	(24)	(19)	(43)

Company	Land and Buildings £000	Other £000	Total £000
Discounted future cash flows; Not later than one year	(9)	-	(9)
Later than one year and not later than five years	(15)	-	(15)
Later than five years	-	-	-
Total discounted future cash flows at 30 September 2020	(24)	-	(24)

 

END

 

 

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