Full year results for the year ended 31 March 2019
Mind Gym PLC
("Mind Gym", the "Group" or the "Company")
Full year results for the year ended 31 March 2019
Mind Gym (AIM:MIND), the global provider of human capital and business improvement solutions, is pleased to announce its audited full year results for the year ended 31 March 2019.
Financial highlights
|
|
12 months to 31 Mar 2019 (FY19) |
12 months 31 Mar 2018 (FY18) |
Change |
|
Revenue |
£42.1m |
£37.0m |
+14% |
|
Gross profit margin |
80.6% |
79.3% |
+1.3pps |
|
Adjusted EBITDA* |
£8.7m |
£7.9m |
+11% |
|
Adjusted EBITDA* margin |
20.7% |
21.3% |
-0.6pps |
|
Adjusted EBIT/PBT* |
£8.5m |
£7.7m |
+12% |
|
Adjusted EBIT* margin |
20.3% |
20.7% |
-0.4pps |
|
Statutory PBT |
£5.1m |
£6.2m |
-17% |
|
Basic EPS |
4.08p |
4.94p |
-17% |
|
Adjusted Diluted* EPS |
6.85p |
5.77p |
+19% |
|
Total Dividend per share ** |
2.4p |
n/a |
- |
|
Net Cash |
£8.3m |
£5.5m |
+50% |
|
Adjusted* EBITDA cash conversion*** |
113% |
79% |
+34pps |
|
EBITDA cash conversion*** |
142% |
77% |
+65pps |
*Adjustments include foreign exchange gains/losses (prior year only), IPO transaction costs and aborted transaction advisory fees, employee share option surrender bonuses and share-based payment charges. A reconciliation of these adjustments is shown in Note 6.
** Post-IPO dividends only shown. Note 11 sets out details of pre-IPO dividends.
***EBITDA cash conversion defined as cash generated from operations/EBITDA
· Revenues up 14% to £42.1 million (FY18: £37.0 million). On a constant currency basis revenues grew 13%
· Gross profit margin up to 80.6% (FY18: 79.3%), driven by improved sales mix towards higher margin services
· Adjusted* EBIT margin slightly decreased to 20.3% (FY18: 20.7%), principally the result of investment in people
· Adjusted* diluted EPS increased by 19% to 6.85p (FY18: 5.77p)
· Cash balance of £8.3 million despite £2.3m IPO related cash costs and £3.2 million pre-IPO dividend
· Final dividend of 1.6p per share will be paid in August 2019, bringing the total dividend for the year to 2.4p
Operating highlights
· Revenue growth fuelled by both new client acquisition and demand from existing clients, with 84% of revenues coming from clients who have engaged with Mind Gym in one or more of the past three years
· Digital revenues grew by 72% to £3.6 million, representing 9% of total revenues (FY18: 6%), supported by 13 new e-workouts and contributing to gross profit margin improvement
· Average number of employees during the year increased by 13%, ensuring Mind Gym can meet the rapidly growing demand for its services globally
· Product innovation highlights:
o Development soft launch of a new diagnostics tool in Q4 to support digital growth;
o Roll out of 13 more digital workouts;
o Successful launch of a suite of new instructor-led and digital products to help clients prevent and address bullying and harassment at work; and
o Development of a customer service 'Point of View', launching in FY20, which will create new revenue opportunities.
· Investment in operations to support future growth including a number of new hires, most notably a Chief Operating Officer to drive data and efficiencies.
· The percentage of participants rating their Mind Gym experience as 'Excellent' (5/5) rose from 50.4% to 53.3%% in 2019, and those rating it as either "Very Good" (4/5) or "Excellent" (5 /5) from 87.7% to 88.5%
Octavius Black, Chief Executive Officer of Mind Gym, said:
"We are pleased with the Group's performance in our first financial year as a listed business.
With people and talent issues high on corporate leaders' agenda, this is an exciting time for a disruptive, behavioural change company with a track record of delivering lasting impact in many of the world's largest businesses. The opportunity in a growing learning market is substantial and Mind Gym is well positioned with a clear growth strategy to help meet the worldwide demand for behavioural science-based solutions.
The global market for Learning and Development is over $240bn - half of this in behavioural areas that we believe can be directly addressed by Mind Gym - and with growth of 9% in the last year, the market shows no sign of slowing.
We feel confident about the Group's future and further progress following a strong start to FY2020."
Enquiries:
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Mind Gym plc Octavius Black, Chief Executive Officer Richard Steele, Chief Financial Officer
|
|
+44 (0)20 7376 0626
|
|
Liberum (Nominated Adviser and Sole Broker) Bidhi Bhoma Joshua Hughes Euan Brown
|
|
+44 (0)20 3100 2200 |
|
|
|
|
|
Maitland/AMO (Public Relations Advisor) Al Loehnis Sam Cartwright |
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+44 (0)20 7379 5151
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About Mind Gym
Mind Gym is a company that delivers business improvement solutions using scalable, proprietary products which are based on behavioural science. The Group operates in three global markets: business transformation, human capital management and learning & development.
Mind Gym is listed on the London Stock Exchange Alternative Investment Market (ticker: MIND) and headquartered in London. The business has offices in London, New York and Singapore.
Further information is available at www.themindgym.com
Board Chair's Statement
On behalf of the Board, I am delighted to introduce Mind Gym's first set of full year results as a public company.
The Group, a market leader in the growing workplace learning market, has made good progress in 2019 with a 14% increase in revenue to £42.1 million (2018: £37.0 million).
Notably, we have seen 72% growth in digital revenue and increased gross profit margin of 80.6% (2018: 79.3%). Adjusted EBIT has increased by 12% to £8.5 million (2018: £7.7 million) and strong cash generation resulted in year-end cash of £8.3 million and no debt.
Setting the Agenda
As the global war for talent continues, organisations are becoming increasingly aware of the importance of developing the people they have and of the significant impact employee performance has on their businesses.
Behavioural science features more often than ever in those conversations and we are very proud that Mind Gym senior leaders and academic board members - Dr Sebastian Bailey, Dr Mary Clare Race, and Prof. Tomas Chumorro Premuzic - have this year had sell out appearances at the US ATD conference and The Society of Industrial and Organisational Psychology in the US. In Europe, our CEO has helped to shape the conversation in the business media and senior leaders have appeared at the Longevity Forum and CogX. Mind Gym's work continues to be fascinating, meaningful and timely.
Market Opportunity
Our significant market opportunity is reflected in the size of the global corporate training market, estimated at $240 billion with both face-to-face and digital markets growing. The market is highly fragmented and Mind Gym remains the only provider of globally scaleable behavioural learning interventions. The opportunity for growth remains significant.
Reinforcing for Future Growth
Looking ahead, the Board has been pleased to support investment in the leadership and infrastructure that will be needed to power the business' growth for its next phase. Part of the success of the Group to date has been in the strength of its senior leaders, particularly in innovation and client relationships. This year has seen longer term planning for operational strength, most notably by the addition of an experienced COO and the establishment of business transformation and digital strategy teams which will drive Mind Gym's digital offering.
People and Culture
Mind Gym has a unique culture informed by our people's passion for what we do. We want working at Mind Gym to be the best career experience our people will have, just as what we do sets out to improve the working life of every Mind Gym participant. As the business continues to grow in size, it is seeing an increasing number of employees rejoin after time developing skills in larger organisations.
Once again, the Group has delivered good organic growth, EBIT margin and cash conversion while delivering excellent customer experience. This could not have been achieved without the passion, skill and dedication of our senior management team and our hardworking, talented employees. There is a wonderful spirit and energy among Mind Gym's people across every one of our offices as they deliver on a shared mission to delight clients. On behalf of the Board I thank them all.
I would also like to thank my fellow Board Directors whose breadth of experience and views and attentive hard work ensure that the Board operates effectively to the benefit of the business as it looks forward to its next chapter of growth as a PLC.
Dividend
In line with our current dividend policy of paying out not less than 35% of adjusted profit after tax which provides optionality for investment to fund future growth, the Board is pleased to recommend a final dividend of 1.6 pence per share. Following the interim payment of 0.8 pence per share, the total dividend for the year ending 31 March 2019 will amount to 2.40 pence per share.
Summary and Outlook
This is an exciting time for the business with the right structure and strategy for growth, in a growing learning market. A combination of this and the strong start to the current financial year, gives the Board confidence in the Group's prospects and we expect to see further progress during FY2020.
Joanne Cash
Board Chair
CEO's Review
Mind Gym was started at my kitchen table in 2000 and the same entrepreneurial zeal and spirit informs its culture and drives its growth today as a 250 employee global business with clients across the world.
The IPO has given us welcome profile and elevated standing with our clients as well as optionality as we consider different routes to growth. On the anniversary of our listing we are pleased to have delivered on our commitments and to share our plans to build value for all our stakeholders: clients, employees and investors.
Our vision remains the same: to be the leading global provider of behavioural change in the workplace. We are better placed than ever to achieve that goal.
Trading performance
Mind Gym has delivered a positive performance in our first year as a public company, with 14% growth in revenue and an Adjusted EBIT margin of 20.3%.
During the year, the business generated revenues from c. 600 clients and delivered learning programmes in over 60 countries, through its two main offices in the UK and US, and a small support office in Singapore. Revenues are segmented into EMEA (UK) or US regions according to where the principal client relationship is held and/or where the majority of training takes place. In the year to 31 March 2019, EMEA generated revenues of £20.4 million, a 16% increase on the prior year and which represented 48% of total revenues. US revenues of £21.7 million represented a 12% year on year increase.
Our clients are widely spread across industries as well as geographic locations. This gives Mind Gym better protection against a change in economic conditions in any particular region or market.
We continue to deliver for our global clients across the world and are delighted to see growth in clients in APAC, most recently winning significant new work with clients with headquarters in Hong Kong and Australia. As a result, we plan to increase the size of our APAC coach network by over a third during the coming year.
We have seen growth across a wide range of industries including pharmaceuticals, technology, FMCG and hospitality. We have had particular success in financial services where our recently launched proposition on ethics has opened up new relationships and opportunities within existing clients. We have run a number of very successful pilot programmes on ethics, conduct and respect in banks and with insurers, and expect this to continue to grow in FY2020.
We have also increased focus on cash conversion and in our first year as a public company we have improved adjusted cash conversion from 79% to 113%.
Adjusted, fully diluted Earnings Per Share (EPS) have increased by 19% to 6.85 pence (2018: 5.77 pence).
Deepening client relationships
One of our founding values is that clients are delighted with our offering and this is at the core of our client retention strategy.
When we are brought in to deal with a priority issue like performance management or diversity and inclusion, the impact we deliver allows us to grow the client relationship and become the client's partner to address other aspects of cultural and behavioural change. Examples this year included progressing from delivering the transformation of some major clients' performance management to supporting their diversity and inclusion strategy; addressing middle management behaviours so effectively that we have been invited to work with all senior leaders and moving from years as a trusted partner on management performance to build out a global client's ethics programme. All of this helps establish Mind Gym as the client's preferred partner for all aspects of cultural and behavioural change.
Market-leading innovation
Part of Mind Gym's success lies in its ability to identify and address the most pertinent and challenging behavioural issues with the science that works. This year has seen some exciting new innovation completed including the successful launch of a suite of new instructor-led and digital products to help clients prevent and address bullying and harassment at work and the development of a customer service point of view, which will launch in FY20.
Digital innovation has seen the development of another 13 digital workouts and included the soft launch, in March 2019, of our first psychometrically validated diagnostic which measures an individual's judgement (JQ) as it applies to ethics, inclusion and respect.
As we said at the IPO, we see the use of individual diagnostics and aggregated data as an important part of our strategy to build a personalized and evidence-based approach to behavioural change.
This diagnostic has been developed in partnership with the psychologists who developed Hogan X (Hogan X is the shorter version of Hogan, one of the most robust and respected diagnostics on the market) and both the IP and the aggregated data are owned completely by Mind Gym.
Our first JQ client is running the diagnostic as part of an overall programme to address inclusion and is very impressed with the completion rate of participants (over 80%) and quality of the personalised de-brief.
We intend to apply the insights from this, our first psychometrically validated diagnostic, to develop further Mind Gym diagnostics and other measurement tools.
Digital delivery
The market has responded very positively to our e-workouts. Revenue from digital sales grew by 72% on the year coming mainly from existing clients, who tend to use them as additive in key areas like performance management and diversity & inclusion ("D&I"). The strategy for the digital offering is two-fold. They can be used to supplement existing live delivery for managers and so sustain the change in behaviour or to reach a wider base of participants who would otherwise be inaccessible.
The D&I suite of e-workouts has been especially popular with 50% of total e-workout users participating in these courses and, as a result, we have translated them into 10 languages.
Our digital offering has also helped to bring in a number of new clients who have come to Mind Gym for the first time attracted by our high quality integrated, blended (digital with live) solution.
As with all our products, the scientific rigour and focus on quality is paying dividends in client feedback and satisfaction. When a suite of e-workouts were introduced at a major US airline, the sponsor expected the same level of participation as they are used to with e-learning: less than 10%. They were delighted when 70% of the addressable audience voluntarily completed all the courses and everyone rated them either 4 or 5 stars out of 5.
In under 2 years since we first launched the e-workouts, we have successfully broken into the digital learning space and laid strong foundations from which to expand our longer term share of this market.
Infrastructure to support growth
We finish FY19 having significantly upgraded the operational strength and systems in the business. This year has seen the creation of a new Business Transformation team and the appointment of a Digital Strategy Director, both overseen by our experienced new COO.
The Business Transformation team is charged with driving internal efficiency and covers a wide range of areas from process simplification, codification and automation to analysis of business management information and management of our extensive IP.
Digital strategy will include supporting and integrating the new offerings as well as ensuring that management of data and internal technology supports the intended growth of the business.
US Mid-market
As we continue to penetrate the US enterprise market, we are trialing a parallel and additive mid-market client team to reach US mid-market companies, which we define as those with fewer than 2,000 employees.
The route to market will be entirely inside sales (telephone, email, etc but no live visits) and the proposition will be based around proven products, both digital and instructor-led.
The new Houston based team of 6, of whom 5 are already hired, are already testing and refining the proposition though we do not anticipate significant revenue from this mid-market segment until the second half of FY 2020.
Enhanced quality
An important differentiator for us in the market is the quality of our products, and a lead indicator of the performance of the business is how our live sessions are measured by the immediate feedback from participants.
We are pleased to have seen significant improvements in this measure of quality. The percentage of participants rating their Mind Gym experience as 'Excellent' (5/5) has risen from 50.4% to 53.3%, and those rating it as either 4 of 5 /5 from 87.7% to 88.5%.
Strong team
At the core of Mind Gym's continued success are our highly talented and deeply committed people.
We're delighted that we have continued to build the team, both by recruiting exceptional talent from outside the company and, just as importantly, by promoting from within. During the year, the total team grew by 31 to 223 and 52 colleagues were promoted to new roles. As the business continues to grow in size we are also delighted to be seeing an increasing number of employees return after time developing their skills in larger organisations.
We say to all potential joiners 'we don't hire you for who you are but for who you may become'. As a result, we invest heavily in growing the capabilities of our colleagues, both with Mind Gym's own learning programmes and also by supporting colleagues with external qualifications, including Masters and PhDs in psychology.
At Mind Gym, culture is a lot more than a set of values. We see our culture as central to who we are and we work every day to nurture the passion, generosity, respect and mutual support that means everyone can enjoy their work and feel proud of what we achieve together.
A huge thank you from me to all of the team for their excellent work and continued commitment.
Parent Gym
We very much believe that Mind Gym should be a leader of corporate social responsibility and at Mind Gym we are proud of and passionate about Parent Gym, our unique, impactful and growing CSR programme.
Recognising the impact that parenting has on a child's life chances, and the minimal attention paid to parenting capability by successive governments, we piloted a 6-week parenting programme in 2009. Today that programme is delivered by Parent Gym trained volunteers in over 100 state primary schools a term across the UK. All of this work has been and continues to be fully funded by Mind Gym.
Mind Gym employees are actively involved in many aspects of its work, including the design of the programme and some of our people cite it as one of the reasons they chose to work for Mind Gym. It speaks to our values and belief in what we do while a series of independent evaluations of the programme are further proof to clients of the impact Mind Gym delivers. We are delighted that last month saw the publication of a significant new peer reviewed study of the programme by Professor Geoff Lindsay at Warwick University, confirming that it is "effective in aiding the positive development of aspects of parenting behaviour, namely parents' self-efficacy, parenting satisfaction and mental well-being, when delivered in community settings". The impact on mental well-being had not previously been established academically and supports our belief that Parent Gym is transforming lives and life chances.
It is no surprise that a number of modern and enlightened corporate clients are recognising that providing the programme is a means of supporting the wellbeing and engagement of their people.
Summary and Outlook
"We are pleased with the Group's performance in our first financial year as a listed business.
With people and talent issues high on corporate leaders' agenda, this is an exciting time for a disruptive, behavioural change company with a track record of delivering lasting impact in many of the world's largest businesses. The opportunity in a growing learning market is substantial and Mind Gym is well structured with a clear growth strategy to help meet the worldwide demand for behavioural science-based solutions.
When Mind Gym first began not everyone got the importance of psychology, never mind psychology in the workplace. Now it leads business page stories while the vast global market for Learning and Development, estimated at $240bn, shows no sign of slowing.
We continue to trade in line with our expectations and having started FY20 strongly, we feel confident about the Group's future and further progress."
Octavius Black
Chief Executive Officer
Financial Review
Revenues
In the year ended 31 March 2019, revenues grew 14% (13% on a constant currency basis) to £42.1 million (2018: £37.0 million). The EMEA region generated revenues of £20.4 million, delivering a 16% year-on-year increase. In the US revenues of £21.7 million were generated representing a 12% year on year increase.
|
|
Year to |
Year to |
Change |
|
|
£000s |
£000s |
% |
|
EMEA |
20,390 |
17,586 |
16% |
|
US |
21,743 |
19,380 |
12% |
|
GLOBAL |
42,133 |
36,967 |
14% |
Repeat revenues (defined as revenues from clients that have purchased in the current year and in one or more of the previous three years) remained at a high level of 84% of total revenues (2018: 88%).
Revenue growth on a five-year compound annual growth basis is 21%.
Digital revenues in the year increased by 72% to £3.6 million (2018: £2.1 million) representing 9% of total revenues (2018: 6%). 13 new e-workouts were developed in the year taking the total e-workout product offer to 78, and 137,000 e-sessions took place.
The higher gross margin attributable to digital revenue was the principal reason for total Gross Profit margin increasing 1.3% in the year to 80.6% (2018: 79.3%). Revenues from live coach-led deliveries increased 9% on the year to £24.7 million (2018: £22.6 million) and represented 59% of total revenues (2018: 61%). The proportion of revenue from other revenue streams in 2019 was broadly in line with 2018.
|
Revenue mix by type compared to previous year |
|||
|
|
FY19 |
FY18 |
% change |
|
Live delivery |
59% |
61% |
-2% |
|
Design |
16% |
16% |
0% |
|
Licensing and certification |
11% |
11% |
0% |
|
Digital |
9% |
6% |
3% |
|
Other (e.g. project management) |
3% |
5% |
-2% |
|
Advisory |
2% |
1% |
1% |
|
Total |
100% |
100% |
0% |
Gross profit margin in the US (81.3%) was higher than in EMEA (79.8%) due principally to product mix. Licensing, certification and digital have the highest gross margin of revenue streams and represent 21% of revenues in the US compared to 18% in EMEA. Conversely, delivery and design are the lowest gross margin revenue streams and represent 74% of revenues in the US compared to 76% in EMEA.
|
|
Year ended 31 March 2019 |
||
|
Revenue type |
EMEA |
US |
Global |
|
Live delivery |
59% |
58% |
59% |
|
Design |
17% |
16% |
16% |
|
Digital |
10% |
8% |
9% |
|
Licensing and certification |
8% |
13% |
11% |
|
Other |
4% |
3% |
3% |
|
Advisory |
2% |
2% |
2% |
|
Total |
100% |
100% |
100% |
Profitability
Adjusted EBIT in the year to 31 March 2019 grew 12% to £8.5 million (2018: 7.7 million). Adjusted EBIT as a percentage of Revenue was 20.3% (2018: 20.7%) decreasing slightly as the Group invested to support the continued growth of the business, particularly in client-facing and operational roles. Overheads before adjustments rose 17% to £25.4 million (2018: £21.7 million). Staff costs represents 75% (2018: 75%) of total overheads increasing 17% on the year. The average number of staff during the year increased 13% to 208 (2018: 184). Adjusted EBIT as a percentage of revenue was 8% in the US and 33% in EMEA. The lower adjusted EBIT margin in the US is due to the royalty re-charges from the UK to the US.
Adjustments to EBIT
The Group uses Adjusted EBIT to provide a better understanding of the underlying profitability of the business. Adjusted EBIT excludes certain costs as detailed in Note 6 to the group financial statements.
Total Adjustments amounted to £3.4 million in the year to 31 March 2019 and mostly resulted from the Group's IPO in June 2018. Adjustments in 2018 were £1.5 million and included £0.8 million of non-recurring costs relating to the uncompleted sale of the business in January 2018.
|
Adjustments to EBIT |
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Transaction related costs |
1,500 |
815 |
|
Employee options surrender costs |
1,577 |
- |
|
Share based payment |
340 |
170 |
|
Foreign exchange losses (2018 only) |
- |
514 |
|
|
3,417 |
1,499 |
After Adjustments the Group reported profit before taxation of £5.1 million (2018: £6.2 million).
Taxation
The taxation charge for the year was £1.2 million (2018: £1.8 million) which represents an effective rate ("ETR") of 23.0% of profit before tax. There was a £0.5 million tax credit relating to the tax-deductible element of the costs disclosed as Adjustments. The ETR on profit excluding adjustments was 19.5%.
|
|
|
FY19 |
|
|
|
FY18 |
|
|
|
Adjusted |
Adjustments |
Reported |
|
Adjusted |
Adjustments |
Reported |
|
|
£'000 |
£'000 |
£'000 |
|
£'000 |
£'000 |
£'000 |
|
EBIT |
8,547 |
(3,417) |
5,130 |
|
7,663 |
(1,499) |
6,164 |
|
Interest |
- |
- |
- |
|
(2) |
- |
(2) |
|
PBT |
8,547 |
(3,417) |
5,130 |
|
7,661 |
(1,499) |
6,162 |
|
Tax |
(1,671) |
492 |
(1,179) |
|
(1,786) |
- |
(1,786) |
|
PAT (earnings) |
6,876 |
(2,925) |
3,951 |
|
5,875 |
(1,499) |
4,376 |
|
ETR % |
19.5% |
14.4% |
23.0% |
|
23.3% |
- |
29.0% |
Earnings per share
Adjusted diluted earnings per share grew by 19% to 6.85 pence (2018: 5.77 pence). Reported, basic earnings per share fell 17% to 4.08 pence (2018: 4.94 pence).
Dividends
At the time of the admission to AIM, the Company indicated that it would pay a dividend of not less than 35% of adjusted net profit after tax.
The Board is recommending a final dividend of 1.60p per share which, together with the 0.80p per share interim dividend paid in January 2019, gives a total post-IPO dividend of 2.40p per share. The final dividend will be paid on 30 August 2019 to shareholders on the register at 2 August 2019 (ex-dividend date 1 August 2019).
Cash flow and balance sheet
Cash generated from operations increased by £2.6 million or 153% to £7.5 million (2018: £4.9 million) mainly due to improvements in working capital increasing cash conversion to 142% (2018: 77%). Cash conversion is defined as cash generated from operations as a percentage of EBITDA. Adjusted cash generated from operations increased by £3.6 million to £9.8 million increasing adjusted cash conversion to 113% (2018: 79%). Adjusted cash conversion is defined as cash generated from operations before transaction related payments, employee option surrender payments and, in the case of prior year, exchange gains/(losses).
|
|
|
|
|
Cash conversion |
31-Mar |
31-Mar |
|
|
2019 |
2018 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Adjusted cash generated from operations |
9,816 |
6,221 |
|
Exchange gains (losses) |
- |
(514) |
|
Transaction related costs |
(1,500) |
(815) |
|
Employee options surrender costs |
(810) |
- |
|
Share based payments |
- |
- |
|
Cash generated from operations |
7,506 |
4,892 |
|
|
|
|
|
Adjusted EBITDA |
8,716 |
7,874 |
|
|
|
|
|
Reported EBITDA |
5,299 |
6,375 |
|
|
|
|
|
Adjusted cash conversion (Adjusted cash from operations /Adjusted EBITDA) |
113% |
79% |
|
|
|
|
|
Cash conversion (cash from operations /EBITDA) |
142% |
77% |
Over the year we reduced the time taken to invoice clients and improved the collection of overdue receivables. The number of days revenue tied up in Trade receivables and Accrued income fell by 12 days to 100 days (2018: 112 days), equivalent to a £1.4 million cash improvement. Overdue debt as a percentage of total trade receivables fell to 23% at the year end (2018: 44%) with the amount of overdue debt reducing £1.0 million to £2.4 million (2018: £3.4 million).
UK employees exercised EMI options at the IPO which generated UK corporation tax relief on the gain in the value of the shares. The resulting £2.7 million tax deduction is recognised in equity. A credit of £1.9 million was recognised in FY18 and a further credit of £0.8 million is recognised in FY19 due to the increase in value of the EMI options between 1 April 2018 and IPO. The deduction will be claimed in the FY19 tax computation. £1.2 million will offset the FY19 UK taxable profits and £1.2 million will be carried back to recover the UK tax paid for FY18 and is reflected in current assets. The remaining credit of £0.3 million will be carried forward to relieve future UK profits (see Note 9).
Non-UK EMI option holders were not eligible for the beneficial tax treatment available in the UK and received a cash bonus in return for surrendering their options of £0.8 million which was paid during the year. A further provision of £0.8 million has been made for further costs (see note 17).
Capital expenditure was £0.4 million (2018: £0.3 million) and corporation tax payments were £0.6 million (2018: £2.3 million).
The Group also paid £4.0 million of dividends in cash in the year consisting of £3.2 million of pre-IPO dividends and a £0.8 million post-IPO interim dividend in January 2019.
At the year end, the Group had net cash of £8.3 million and an undrawn £2.0 million uncommitted overdraft facility which expires in March 2020 and is intended to then be renewed.
Changes in accounting standards
The Group is not significantly affected by recent developments in accounting standards. The implementation in the year of IFRS 15, Revenue from Contracts with Customers and IFRS 9, Financial Instruments did not have a material impact on the financial statements. We will adopt IFRS 16, Leases in FY20 and anticipate this will add £1.9 million to both assets and liabilities and have an effect on operating profit and profit before tax of less than £0.1 million.
Financial risk management
The Group has a diverse portfolio of approximately 600 clients across many industrial sectors delivering coaching sessions in over 60 countries. The largest client accounted for less than 4% of Group revenue in the year.
The Group has translational foreign currency exposure arising on the consolidation of overseas company results into Sterling. Where possible the exposure is naturally hedged, for example by matching US dollar revenues with US dollar costs in the US subsidiary. The Group does not currently use forward exchange contracts or currency options to hedge currency risk.
Key performance indicators
Key Performance Indicators (KPI's) relate to sales, profit and cash flow. The sales of the business are tracked through monthly reviews of future confirmed and forecasted revenues against targets approved by the Board and against prior year by region and globally. The profitability of the business is managed through the review of revenues and product mix, gross profit margin and overheads against budget. Cashflow is reviewed on a Group basis aided by rolling cash flow forecasts. Working capital is reviewed using debtor days, overdue debt as a percentage of total debtors, and combined debtor, accrued income and deferred income ("net revenue") days. The Group intends to develop and add more non-financial KPI's during the current financial year.
Adjusted performance measures
This announcement contains certain financial measures that are not defined or recognised under IFRS including Adjusted EBITDA, Adjusted EBIT and Adjusted earnings per share. These adjusted measures exclude the effect of Adjustments. The Group use these measures for planning and budgeting and for its internal assessment of the operational performance of each business. Given the term Adjusted is not defined under IFRS, the Adjusted measures may not be comparable with similarly titled measures used by other companies. Reconciliations of the Adjusted measures to their IFRS equivalents are shown on the face of the Consolidated Statement of Comprehensive Income, on Note 4 Segmental Analysis and in Note 10 Earnings per share.
Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be constructed as a profit forecast.
Richard Steele
Chief Financial Officer
MIND GYM PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year to 31 March 2019 |
Year to 31 March 2018 |
|
|
Note |
£'000 |
£'000 |
|
Continuing operations |
|
|
|
|
Revenue |
4 |
42,133 |
36,967 |
|
Cost of sales |
|
(8,192) |
(7,635) |
|
Gross profit |
|
33,941 |
29,332 |
|
Administrative expenses |
|
(28,811) |
(23,168) |
|
Operating profit |
4, 5 |
5,130 |
6,164 |
|
Adjusted EBITDA |
|
8,716 |
7,874 |
|
Depreciation of property, plant and equipment |
13 |
(76) |
(83) |
|
Amortisation of intangible assets |
12 |
(93) |
(128) |
|
Adjusted EBIT |
|
8,547 |
7,663 |
|
Exchange losses (for 2018 only) |
6 |
- |
(514) |
|
Transaction related costs |
6 |
(1,500) |
(815) |
|
Employee options surrender costs |
6 |
(1,577) |
- |
|
Share based payments |
6, 22 |
(340) |
(170) |
|
|
|
|
|
|
Total adjustments |
6 |
(3,417) |
(1,499) |
|
Operating profit |
|
5,130 |
6,164 |
|
Finance costs |
|
- |
(2) |
|
Profit before taxation |
|
5,130 |
6,162 |
|
Tax on profit |
9 |
(1,179) |
(1,786) |
|
Profit for the financial period from continuing operations attributable to owners of the parent |
|
3,951 |
4,376 |
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss |
|
|
|
|
Exchange translation differences on consolidation |
|
38 |
(262) |
|
Other comprehensive income for the period attributable to the owners of the parent |
|
38 |
(262) |
|
Total comprehensive income for the period attributable to the owners of the parent |
|
3,989 |
4,114 |
|
|
|
|
|
|
Earnings per share (pence) |
10 |
|
|
|
Basic |
|
4.08p |
4.94p |
|
Diluted |
|
3.94p |
4.30p |
|
Adjusted earnings per share (pence) |
10 |
|
|
|
Basic |
|
7.10p |
6.63p |
|
Diluted |
|
6.85p |
5.77p |
|
|
|
|
|
MIND GYM PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
|
|
31 March 2019 |
31 March 2018 |
|
|
Note |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
Intangible assets |
12 |
445 |
325 |
|
Property, plant and equipment |
13 |
139 |
81 |
|
Deferred tax assets |
9 |
637 |
2,008 |
|
|
|
1,221 |
2,414 |
|
Current assets |
|
|
|
|
Inventories |
14 |
53 |
261 |
|
Trade and other receivables |
15 |
12,661 |
11,799 |
|
Current tax receivable |
|
1,196 |
88 |
|
Cash and cash equivalents |
|
8,294 |
5,542 |
|
|
|
22,204 |
17,690 |
|
Total assets |
|
23,425 |
20,104 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
16 |
8,832 |
7,278 |
|
Provisions |
17 |
767 |
- |
|
Redeemable preference shares |
19 |
50 |
- |
|
Current tax payable |
|
146 |
637 |
|
Total liabilities |
|
9,795 |
7,915 |
|
Net assets |
|
13,630 |
12,189 |
|
Equity |
|
|
|
|
Share capital |
21 |
1 |
1 |
|
Share premium |
|
112 |
- |
|
Share option reserve |
|
340 |
408 |
|
Retained earnings |
|
13,177 |
11,780 |
|
Equity attributable to owners of the parent Company |
|
13,630 |
12,189 |
The financial statements were approved and authorised for issue by the Board of Directors on 24 June 2019 and were signed on its behalf by:
Richard Steele
Chief Financial Officer
MIND GYM PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
|
Share capital |
Share premium |
Share option reserve |
Retained earnings |
Total equity |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 April 2017 |
|
1 |
- |
238 |
5,952 |
6,191 |
|
Profit for the period |
|
- |
- |
- |
4,376 |
4,376 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
Exchange translation differences on consolidation |
|
- |
- |
- |
(262) |
(262) |
|
Total comprehensive income for the period |
|
- |
- |
- |
4,114 |
4,114 |
|
Credit to equity for share based payments |
|
- |
- |
170 |
- |
170 |
|
Tax relating to share based payments |
|
- |
- |
- |
1,914 |
1,914 |
|
Dividends |
|
|
|
|
(200) |
(200) |
|
At 31 March 2018 |
|
1 |
- |
408 |
11,780 |
12,189 |
|
|
|
|
|
|
|
|
|
Profit for the period |
|
- |
- |
- |
3,951 |
3,951 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
Exchange translation differences on consolidation |
|
- |
- |
- |
38 |
38 |
|
Total comprehensive income for the period |
|
- |
- |
- |
3,989 |
3,989 |
|
Exercise of options |
21 |
- |
112 |
(408) |
408 |
112 |
|
Credit to equity for share based payments |
22 |
- |
- |
340 |
- |
340 |
|
Tax relating to share based payments |
9 |
- |
- |
- |
793 |
793 |
|
Dividends |
11 |
- |
- |
- |
(3,793) |
(3,793) |
|
At 31 March 2019 |
|
1 |
112 |
340 |
13,177 |
13,630 |
MIND GYM PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
Year to 31 March 2019 |
Year to 31 March 2018 |
|
|
Note |
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
|
Profit for the financial period |
|
3,951 |
4,376 |
|
Adjustments for: |
|
|
|
|
Amortisation of intangible assets |
12 |
93 |
128 |
|
Depreciation of tangible assets |
13 |
76 |
83 |
|
Net finance costs |
|
- |
2 |
|
Taxation charge |
9 |
1,179 |
1,786 |
|
Decrease in inventories |
|
208 |
21 |
|
Increase in trade and other receivables |
|
(862) |
(1,874) |
|
Increase in payables and provisions |
|
2,521 |
460 |
|
Other recognised gains and losses |
|
- |
(260) |
|
Share based payment charge |
22 |
340 |
170 |
|
Cash generated from operations |
|
7,506 |
4,892 |
|
Net tax paid |
|
(615) |
(2,345) |
|
Net cash generated from operating activities |
|
6,891 |
2,547 |
|
Cash flows from investing activities |
|
|
|
|
Purchase of intangible fixed assets |
|
(213) |
(238) |
|
Purchase of tangible fixed assets |
|
(137) |
(71) |
|
Net cash used in investing activities |
|
(350) |
(309) |
|
Cash flows from financing activities |
|
|
|
|
Repayment of borrowings |
|
- |
(51) |
|
Issuance of ordinary shares |
21 |
112 |
- |
|
Issuance of preference shares |
19 |
50 |
- |
|
Dividends paid |
11 |
(3,993) |
(310) |
|
Interest paid |
|
- |
(2) |
|
Net cash used in financing activities |
|
(3,831) |
(363) |
|
Net increase in cash and cash equivalents |
|
2,710 |
1,875 |
|
Cash and cash equivalents at beginning of period |
|
5,542 |
3,667 |
|
Effect of foreign exchange rate changes |
|
42 |
- |
|
Cash and cash equivalents at the end of period |
|
8,294 |
5,542 |
|
Cash and cash equivalents at the end of period comprise: |
|
|
|
|
Cash at bank and in hand |
|
8,294 |
5,542 |
MIND GYM PLC
NOTES TO THE GROUP FINANCIAL STATEMENTS
1. General information
The financial information set out in this document does not constitute the Group's statutory accounts for the year ended 31 March 2019 or 31 March 2018. Statutory accounts for the year ended 31 March 2018 were approved by the Board of Directors on 21 June 2018 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2019 have not yet been delivered to the Registrar nor have the auditors yet reported on them.
Mind Gym plc ("the Company") is a public limited company incorporated in England & Wales and its ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange ("AIM"). The address of the registered office is 160 Kensington High Street, London W8 7RG. The group consists of Mind Gym PLC and its subsidiaries, Mind Gym (USA) Inc., Mind Gym Performance (Asia) Pte. Ltd, Mind Gym Middle East FZ LLC (under liquidation) and Mind Gym (Canada) Inc. (together "the Group").
The Company was previously registered as Mind Gym Limited, a private company. On 22 June 2018 the Company was re-registered as a public company and the name of the Company was changed to Mind Gym plc.
The principal activity of the Group is to apply behavioural science to transform the performance of companies and the lives of the people who work in them. The Group does this primarily through research, strategic advice, management and employee development, employee communication, and related services.
2. Summary of significant accounting policies
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, including interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"), and with the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared on a going concern basis under the historical cost convention.
The consolidated financial statements are presented in Sterling. All values are rounded to £1,000 except where otherwise indicated.
The principal accounting policies in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.
Going concern
As at 31 March 2019 the Group had £8.3 million of cash and no debt. The Group is profitable with good cash conversion. After enquiry and review of available financial information including a detailed budget, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
New standards and interpretations applied for the first time
The Group adopted the following new or amended IFRSs and IFRIC interpretations from 1 April 2018:
· IFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
· IFRS 9, Financial Instruments
· IFRS 15, Revenue from Contracts with Customers
· IFRIC 22, Foreign Currency Transactions and Advance Consideration
The adoption of these new standards and interpretations did not have a material impact on the financial statements.
IFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
The amendments related to the following areas:
· The accounting for the effects of vesting conditions on cash-settled share-based payment transactions;
· The classification of share-based payment transactions with net settlement features for withholding tax obligations; and
· The accounting for a modification to the terms and conditions of a share-based payment that changes the transaction from cash-settled to equity settled.
The adoption of these amendments did not have any impact on the Consolidated Financial Statements.
IFRS 9, Financial Instruments
IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost; fair value through other comprehensive income; and fair value through profit or loss. The adoption of IFRS 9 did not result in any changes in the classification for any financial assets or liabilities held by the Group at 31 March 2018.
The impairment model under IFRS 9 reflects expected credit losses as opposed to only incurred credit losses under IAS 39. Under IFRS 9, it is not necessary for a credit event to have occurred before credit losses are recognised. Instead an entity accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses, if any, is updated at each reporting date. Write-offs of trade receivables have historically been very low. The adoption of IFRS 9 did not therefore result in a material change in credit losses recognised by the Group upon adoption.
IFRS 15, Revenue from Contracts with Customers
IFRS 15 introduces revised principles for the recognition of revenue with a new five-step model that focuses on the transfer of control instead of a risks and rewards approach. The Group's previous revenue recognition was consistent with the passing of control under IFRS 15. IFRS 15 has not affected the accounting for costs of obtaining a contract as the Group only pays sales commission for revenue that has been recognised in the accounts.
The Group applied the modified retrospective approach which does not require the restatement of comparatives. The adoption of IFRS 15 has not had a material impact on the Group's consolidated financial statements and there is no adjustment required to opening retained earnings.
IFRS 15 has resulted in the disclosure of additional information about revenue.
New standards and interpretations not yet applied
At the date of authorisation of these financial statements the following standards and interpretations were in issue but not yet effective for the financial period and have not been applied. The Directors plan to adopt these standards in line with their effective dates.
|
|
Applicable from |
|
IFRS 16, Leases |
1 April 2019 |
|
IFRIC 23, Uncertainty over Income Tax Treatments |
1 April 2019 |
|
Annual Improvements to IFRS Standards 2015-2017 cycle (IFRS 3, IFRS 11, IAS 12, IAS 23) |
1 April 2019
|
|
Amendments to References to the Conceptual Framework in IFRS Standards |
1 April 2020* |
|
Amendments to IFRS 3 Business Combinations |
1 April 2020* |
|
Amendments to IAS 1 and IAS 8: Definition of Material |
1 April 2020* |
*Not yet endorsed for use in the EU.
The Directors anticipate that the adoption of these standards and amendments will have no material impact on the financial statements except for IFRS 16, Leases.
IFRS 16, Leases introduces changes to lessee accounting by removing the distinction between operating and finance leases. It requires the recognition of a right-of-use asset and a lease liability at the lease commencement for virtually all leases.
The Group's operating leases impacted by IFRS 16 include real estate and office equipment leases.
The Group will elect to account for lease payments as an expense on a straight-line basis over the life of the lease for:
· Leases with a term of 12 months or less and containing no purchase options; and
· Leases where the underlying asset has a value of less than $5,000.
For other existing operating leases, the Group will apply the modified retrospective approach by measuring the right-of-use asset at an amount equal to the lease liability at the date of transition and therefore comparative information will not be restated. Upon transition the Group will also apply the following practical expedients:
· Exclude initial direct costs from the right-of-use assets;
· Use hindsight when assessing the lease term; and
· Not to reassess whether a contract is or contains a lease.
The lease liability is initially measured at the present value of the lease payments that are not paid at the transition date, discounted by using the rate implicit in the lease. If this rate cannot be determined, the Group will use an estimate of its incremental borrowing rate. The right of use asset will be depreciated on a straight-line basis and the lease liability will give rise to an interest charge.
The Group estimates that the financial impact of the adopting IFRS 16 will be to:
· Recognise a £1.9 million right-of-use asset and a £1.9 million lease liability on adoption;
· Increase FY2020 operating profit by £30,000; and
· Increase FY2020 finance costs by £63,000.
The undiscounted lease liability on adoption of £2.0 million is consistent with the £2.0 million minimum rental commitments under non-cancellable operating leases as at 31 March 2019 disclosed in Note 23 Operating Lease Commitments. The differences are due to the exclusion of short leases and leases of low value assets are small.
Basis of consolidation
The consolidated financial statements incorporate those of Mind Gym plc and its subsidiary undertakings (i.e. entities that the Group controls when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity). Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.
Foreign currency translation
The Group's presentation currency is Pound Sterling. The results and financial position of subsidiaries that have a functional currency different from Sterling are translated into Sterling as follows:
· Assets and liabilities are translated at the closing rate at the balance sheet date;
· Income and expenses are translated at average rates of exchange prevailing during the year.
All resulting exchange differences are recognised in equity.
Foreign currency transactions are initially recorded at the exchange rate ruling at the date of the transaction. Foreign exchange gains and losses resulting from settlement of such transactions and from the translation at exchange rates ruling at the balance sheet date of monetary assets or liabilities denominated in foreign currencies are recognised in income.
Revenue recognition
Revenue is recognised when control over a product or service is transferred to a customer. Due to the short-term nature of the trade receivables, the Group measures them at the original transaction price invoiced without discounting.
The Group generates revenue from business to business customers by satisfying the following performance obligations:
· Delivering coach led face to face and virtual training sessions. Revenue is recognised at a point in time on the date of delivery of the session.
· Developing training programmes customised to specific needs. Revenue is recognised at a point in time on the completion of all development work or, at the end of a stage of work when the contract provides an enforceable right to payment on completion of a stage.
· Licensing digital training modules to clients. When non-cancellable digital modules are provided to the client and hosted on the client's servers, revenue is recognised at a point in time on the date the modules are provided to the client. Where the client has a right to cancel, revenue is recognised at the start of the next committed period. When digital modules are hosted on the Group's servers, revenue is recognised over time across the life of the agreement.
· Training and certifying client staff to act as coaches. Revenue is recognised at a point in time on the date of delivery of the certification course.
Any advance consideration received from clients represents a contract liability and is disclosed in Note 16 under the heading deferred income. When the performance obligation has been satisfied but the income has not yet been invoiced, the amount represents a contract asset and is disclosed in Note 15 as accrued income.
The incremental costs of obtaining a contract principally consist of commissions paid to the Group's sales team. The sales team earn commission over time as the revenue they have generated is recognised. Commission costs are not therefore capitalised.
Share based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market performance conditions are taken into account by adjusting the number of equity instruments expected to vest at each Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market performance conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market performance condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to Consolidated Statement of Comprehensive Income over the remaining vesting period.
Defined contribution pension plan
The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in the Statement of Comprehensive Income when they fall due.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The current tax payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the period-end date.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is not recognised on temporary differences arising from the initial recognition of goodwill or other assets and liabilities in a transaction, other than a business combination, that affects neither the accounting nor the taxable profit.
Deferred tax is measured on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also recognised in equity.
Intangible assets
Externally acquired intangible assets are initially recognised at cost. Expenditure on internally developed assets is capitalised if it can be demonstrated that it is technically feasible to develop the product for it to provide expected future economic benefits, adequate resources are available to complete the development, there is an intention to complete the project and expenditure on the project can be measured reliably.
After recognition intangible assets are measured at cost less any accumulated amortisation and impairment losses. Intangible assets are amortised over their estimated useful lives as follows:
|
· Internally developed software |
2 to 5 years |
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group. All other repairs and maintenance costs are charged to profit or loss during the period in which they are incurred.
Assets are depreciated to their estimated residual value using the straight-line method over their estimated useful lives as follows:
|
· Leasehold land and buildings |
over the period of the lease |
|
· Fixtures, fittings and equipment |
2 to 5 years |
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate at each balance sheet date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Consolidated Statement of Comprehensive Income.
Inventories
Inventories comprise pack materials used in the delivery of courses and are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in, first out basis. Work in progress and finished goods include labour and attributable overheads. Net realisable value is the estimated selling price less costs to complete and sell.
At each reporting date, inventories are assessed for impairment. If stock is impaired, the carrying amount is reduced to its realisable value. The impairment loss is recognised immediately in profit or loss.
Financial instruments
Financial instruments are recognised when the Group becomes party to the contractual provisions of the instrument. The Group only enters into basic financial instruments and does not have any hedging instruments.
Financial assets and liabilities are offset, with the net amounts presented in the Financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Financial assets - Loans and receivables
All of the Group's financial assets fall into the loans and receivables category. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets included in loans and receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest rate method, less any impairment losses.
Financial assets are assessed for indicators of impairment at each reporting date.
A provision for impairment of trade receivables is made for expected lifetime credit losses based on past experience and general economic factors. Further provisions are made against specific trade and other receivables when there is objective evidence that one or more loss events that occurred after the initial recognition of the financial asset, have had an impact on the estimated future cash flows of the financial asset. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. Impaired debts are derecognised when they are assessed as uncollectible.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities - Other financial liabilities
All of the Group's financial liabilities fall into the other financial liabilities category. Such financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.
Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
Cash and cash equivalents
In the Statement of Cash Flows, cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the Statement of Financial Position, bank overdrafts are shown within borrowings in current liabilities.
Leases
A lease is classified at the inception date as a finance lease or an operating lease.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Operating lease payments (net of any lease incentives received) are recognised in the Statement of Comprehensive Income on a straight-line basis over the term of the lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.
Dividends
Dividend income is recognised when the right to receive payment is established.
Dividends payable are recognised as a liability in the period in which the dividends are approved by the shareholders of the Company or paid.
3. Critical accounting estimates and judgements in applying accounting policies
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported value of assets, liabilities, income and expense. Actual results may differ from these estimates. Judgements made by management that have a significant effect on the financial statements and estimates with a significant risk of a material adjustment in the next year are discussed below:
Provision for employee options surrender costs
Provisions at 31 March 2019 include an amount of £767,000 in relation to employee options surrender costs. In estimating the provision, management has made judgements on the interpretation and application of local country tax laws to internationally mobile employees. Employee options surrender costs have been treated as an adjustment (see Note 6). Any reduction in the amount settled from the amount provided would therefore not affect Adjusted EBIT.
Provisions against trade receivables and accrued income
A provision is initially made against trade receivables and accrued income for expected lifetime credit losses. Historic credit losses have been low and the provision rate is based on experience over the last two years. Balances are reviewed on a regular basis and provisions are increased to reflect any increase in credit risk where appropriate. The review takes into account factors such as the age of the debt, recovery since the reporting date and discussions with the customer. Provisions are raised where debtors are not considered recoverable in full or in part. Provisions are released when subsequent information supports the recovery.
Share based payments
The Group has share-based payment remuneration for employees under a Long-Term Incentive Plan. The fair value of share options at the date of grant is estimated using the Black-Scholes model based on certain assumptions. These assumptions are set out in Note 22 and include expected share price volatility, dividend yield, expected life and the numbers of options expected to vest.
4. Segmental analysis
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who is responsible for allocating resources and assessing performance of the business. The chief operating decision maker has been identified as the Board. The Group has two operating segments: EMEA (comprising the United Kingdom, Singapore and the United Arab Emirates) and America (comprising the United States and Canada).
Both segments derive their revenue from a single business activity, the provision of human capital and business improvement solutions.
The Group's business is not highly seasonal and the Group's customer base is diversified with no individually significant customer.
Segment results for the year ended 31 March 2019
Segment result
|
|
EMEA |
America |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue |
20,390 |
21,743 |
- |
42,133 |
|
Cost of sales |
(4,128) |
(4,064) |
- |
(8,192) |
|
Administrative expenses |
(15,231) |
(13,580) |
- |
(28,811) |
|
Profit before inter-segment charges |
1,031 |
4,099 |
- |
5,130 |
|
Inter-segment charges |
3,899 |
(3,899) |
- |
- |
|
Operating profit - segment result |
4,930 |
200 |
- |
5,130 |
|
Finance costs |
|
|
|
- |
|
Profit before taxation |
|
|
|
5,130 |
Adjusted EBITDA
|
|
EMEA |
America |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Operating profit - segment result |
4,930 |
200 |
- |
5,130 |
|
Depreciation |
47 |
29 |
|
76 |
|
Amortisation |
93 |
- |
- |
93 |
|
EBITDA |
5,070 |
229 |
- |
5,299 |
|
Transaction related costs |
1,426 |
74 |
- |
1,500 |
|
Employee options surrender costs |
26 |
1,551 |
- |
1,577 |
|
Share based payments |
340 |
- |
- |
340 |
|
Adjusted EBITDA |
6,862 |
1,854 |
- |
8,716 |
Segment assets
|
|
EMEA |
America |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
890 |
331 |
- |
1,221 |
|
Current assets |
16,427 |
5,777 |
- |
22,204 |
|
Liabilities |
(5,384) |
(4,411) |
- |
(9,795) |
|
Capital expenditure |
|
|
|
|
|
Intangible assets |
213 |
- |
- |
213 |
|
Property, plant and equipment |
75 |
62 |
- |
137 |
The mix of revenue for the year ended 31 March 2019 is set out below. Comparative figures are not required by IFRS 15 in the year of adoption.
|
|
EMEA |
America |
Group |
|
Delivery |
59.2% |
58.1% |
58.7% |
|
Design |
17.3% |
15.7% |
16.5% |
|
Digital |
9.4% |
7.8% |
8.6% |
|
Licensing and certification |
8.1% |
13.2% |
10.6% |
|
Other |
3.9% |
3.3% |
3.6% |
|
Advisory |
2.1% |
1.9% |
2.0% |
The vast majority of the Group's contracts are for the delivery of services within the next 12 months. The Group has therefore taken advantage of the practical expedient in paragraph 121(a) of IFRS 15 not to disclose information about remaining performance obligations.
Segment results for the year ended 31 March 2018
Segment result
|
|
EMEA |
America |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue |
17,586 |
19,380 |
1 |
36,967 |
|
Cost of sales |
(4,005) |
(3,718) |
88 |
(7,635) |
|
Administrative expenses |
(12,382) |
(10,786) |
- |
(23,168) |
|
Profit before inter-segment charges |
1,199 |
4,876 |
89 |
6,164 |
|
Inter-segment charges |
4,656 |
(4,656) |
- |
- |
|
Operating profit - segment result |
5,855 |
220 |
89 |
6,164 |
|
Finance costs |
|
|
|
(2) |
|
Profit before taxation |
|
|
|
6,162 |
Adjusted EBITDA
|
|
EMEA |
America |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Operating profit - segment result |
5,855 |
220 |
89 |
6,164 |
|
Depreciation and amortisation |
177 |
34 |
- |
211 |
|
EBITDA |
6,032 |
254 |
89 |
6,375 |
|
Share based payment expense |
170 |
- |
- |
170 |
|
Transaction related costs |
815 |
- |
- |
815 |
|
Foreign exchange losses |
147 |
367 |
- |
514 |
|
Adjusted EBITDA |
7,164 |
621 |
89 |
7,874 |
Segment assets
|
|
EMEA |
America |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
2,390 |
24 |
- |
2,414 |
|
Current assets |
9,533 |
8,146 |
11 |
17,690 |
|
Liabilities |
(5,043) |
(2,872) |
- |
(7,915) |
|
Capital expenditure |
|
|
|
|
|
Intangible assets |
238 |
- |
- |
238 |
|
Property, plant and equipment |
48 |
23 |
- |
71 |
5. Operating profit
Operating profit is stated after charging:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Coach costs |
5,171 |
5,222 |
|
Staff costs (Note 8) |
19,194 |
16,357 |
|
Amortisation of intangible assets |
93 |
128 |
|
Depreciation of property, plant and equipment |
76 |
83 |
|
Operating lease rentals - land and buildings |
645 |
543 |
|
Operating lease rentals - plant and machinery |
34 |
34 |
|
Impairment of trade receivables |
49 |
124 |
6. Adjustments
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Transaction related costs |
1,500 |
815 |
|
Employee options surrender costs |
1,577 |
- |
|
Share based payment |
340 |
170 |
|
Foreign exchange losses (2018 only) |
- |
514 |
|
|
3,417 |
1,499 |
Transaction related costs in 2019 consist of advisory fees related to the Company's successful Initial Public Offering ("IPO") and admission to the AIM market in June 2018, and in 2018, fees related to the aborted sale of the business in January 2018.
Employee options surrender costs relate to compensation paid to non-UK resident employees in consideration for surrendering Enterprise Management Initiative ("EMI") options which vested on the IPO.
Share based payment relates to the Group's Long-Term Incentive Share Option Plan and Share Incentive Plan (see Note 22). It is a non-cash cost and treated as an adjusting item.
Foreign exchange losses in 2018 mainly related to a high US dollar denominated intercompany balance and were treated as an adjustment in the 2018 financial statements. Foreign exchange losses of £239,000 in 2019 are considered to be in the normal course of business and are not treated as an as an adjustment.
The cash cost of Adjustments was £2,310,000 (2018: £1,329,000).
7. Auditor remuneration
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Fees for audit of the Company and consolidated financial statements |
59 |
64 |
|
Fees for audit of the Company's subsidiaries pursuant to legislation |
12 |
10 |
|
Total audit fees |
71 |
74 |
|
Tax compliance services |
73 |
38 |
|
Tax advisory services |
84 |
5 |
|
Corporate finance services |
250 |
- |
|
Other services |
10 |
- |
|
Total fees payable to the auditor |
488 |
117 |
8. Employees
Staff costs were as follows:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Wages and salaries |
16,673 |
14,182 |
|
Social security costs |
1,612 |
1,565 |
|
Pension costs - defined contribution plans |
569 |
440 |
|
Share based payments |
340 |
170 |
|
|
19,194 |
16,357 |
The average number of Group's employees by function was:
|
|
31 March 2019 |
31 March 2018 |
|
Delivery |
153 |
136 |
|
Support |
55 |
48 |
|
|
208 |
184 |
Key management personnel include all directors and a number of senior managers across the Group who together have responsibility and authority for planning, directing and controlling the activities of the Group. The compensation paid to key management personnel for services provided to the Group was:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Salaries, bonuses and other short-term employee benefits |
1,679 |
783 |
|
Post-employment benefits |
57 |
50 |
|
Share based payments |
314 |
160 |
|
Total compensation |
2,050 |
993 |
9. Tax
The tax charge for the year comprises:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
UK current tax |
1,288 |
1,240 |
|
UK adjustment in respect of prior periods |
(126) |
106 |
|
Foreign current tax |
257 |
445 |
|
Foreign adjustment in respect of prior periods |
- |
- |
|
Total current tax charge |
1,419 |
1,791 |
|
Deferred tax - current year |
(245) |
(5) |
|
Deferred tax - adjustment in respect of prior periods |
5 |
- |
|
Total deferred tax credit |
(240) |
(5) |
|
Total tax charge |
1,179 |
1,786 |
Tax on items charged/(credited) to equity:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Current tax credit on share-based payments |
(2,402) |
- |
|
Deferred tax charge/(credit) on share-based payments |
1,609 |
(1,914) |
|
Total tax credit in equity |
(793) |
(1,914) |
The tax charge for the year can be reconciled to accounting profit as follows:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Profit before tax |
5,130 |
6,162 |
|
Expected tax charge based on the standard rate of tax in the UK of 19% (2018: 19%) |
975 |
1,171 |
|
Differences in overseas tax rates |
14 |
166 |
|
Expenses not deductible for tax purposes |
280 |
324 |
|
Fixed asset differences |
- |
106 |
|
Foreign tax credits |
- |
(19) |
|
Adjustments to tax in respect of prior periods |
(121) |
- |
|
Other tax adjustments |
31 |
38 |
|
Total tax charge |
1,179 |
1,786 |
The US federal rate of tax reduced from 35% to 21% from 1 January 2018. The main UK corporation tax rate will reduce to 17% from 1 April 2020.
The main categories of deferred tax assets recognised by the Group are:
|
|
Tax losses |
Share based payments |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 April 2017 |
- |
- |
99 |
99 |
|
Charged to income |
- |
- |
3 |
3 |
|
Credited to equity |
- |
1,914 |
- |
1,914 |
|
Exchange differences |
- |
- |
(8) |
(8) |
|
At 31 March 2018 |
- |
1,914 |
94 |
2,008 |
|
Credited to income |
- |
50 |
190 |
240 |
|
Credited/(charged) to equity |
296 |
(1,914) |
9 |
(1,609) |
|
Exchange differences |
- |
- |
(2) |
(2) |
|
At 31 March 2019 |
296 |
50 |
291 |
637 |
A deferred tax credit was recognised in equity in the year ended 31 March 2018 in respect of the anticipated exercise of EMI options in the next financial year. The EMI options exercised in the year ended 31 March 2019 generated a tax deduction that relieved the UK current year tax payable and gave rise to a tax loss, part of which was carried back resulting in a current tax receivable, and part of which is carried forward.
Net deferred tax assets have been recognised on the basis that sufficient taxable profits are forecast to be available in the future for them to be utilised. The tax losses may be carried forward indefinitely.
10. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the year. The Company has potentially dilutive shares in respect of the share-based payment plans (see Note 22). Adjusted earning per share removes the effect of transaction related costs, employee option surrender costs, the non-cash share-based payment charge, and in 2018 exchange losses (see Note 6).
|
|
31 March 2019 |
31 March 2018 |
|
Weighted average number of shares in issue |
96,915,040 |
88,600,000 |
|
Potentially dilutive shares (weighted average) |
3,405,218 |
13,224,920 |
|
Fully diluted number of shares (weighted average) |
100,320,258 |
101,824,920 |
|
|
|
|
|
|
|
|
2019 |
|
|
2018 |
|
|
|
Basic eps |
Diluted eps |
|
Basic eps |
Diluted eps |
|
|
£'000 |
pence |
Pence |
£'000 |
pence |
pence |
|
Adjusted net profit after tax |
6,876 |
7.10 |
6.85 |
5,875 |
6.63 |
5.77 |
|
Adjustments (net of tax) |
(2,925) |
(3.02) |
(2.91) |
(1,499) |
(1.69) |
(1.47) |
|
Net profit attributable to shareholders |
3,951 |
4.08 |
3.94 |
4,376 |
4.94 |
4.30 |
11. Dividends
|
|
Per share |
Year to 31 March 2019 |
Year to 31 March 2018 |
|
|
Pence |
£'000 |
£'000 |
|
Pre-IPO dividend on F & G ordinary shares (paid April 2018) |
1.695 |
- |
200 |
|
Pre-IPO dividend on F ordinary shares (paid May 2018) |
38.983 |
2,300 |
- |
|
Pre-IPO dividend on G ordinary shares (paid May 2018) |
11.864 |
700 |
- |
|
Interim dividend on ordinary shares (paid Jan 2019) |
0.80 |
793 |
- |
|
|
|
3,793 |
200 |
|
Final dividend proposed |
1.60 |
1,592 |
- |
For dividends paid before 21 June 2018, per share amounts have been restated for the 10:1 share split and so are expressed in amounts per new share.
The final dividend proposed taken together with the interim dividend paid in January 2019 give a total post-IPO dividend for the year of £2,385,000 (2.40 pence per share).
12. Intangible assets
|
|
Patents |
Development costs |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
At 01 April 2017 |
63 |
1,382 |
1,445 |
|
Additions |
- |
238 |
238 |
|
At 31 March 2018 |
63 |
1,620 |
1,683 |
|
Additions |
- |
213 |
213 |
|
At 31 March 2019 |
63 |
1,833 |
1,896 |
|
Amortisation |
|
|
|
|
At 01 April 2017 |
63 |
1,167 |
1,230 |
|
Amortisation charge |
- |
128 |
128 |
|
At 31 March 2018 |
63 |
1,295 |
1,358 |
|
Amortisation charge |
- |
93 |
93 |
|
At 31 March 2019 |
63 |
1,388 |
1,451 |
|
Net book value |
|
|
|
|
At 31 March 2018 |
- |
325 |
325 |
|
At 31 March 2019 |
- |
445 |
445 |
|
|
|
|
|
13. Property, plant and equipment
|
|
Leasehold land and buildings |
Fixtures, fittings and equipment |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
Cost |
|
|
|
|
At 01 April 2017 |
235 |
1,015 |
1,250 |
|
Additions |
1 |
70 |
71 |
|
At 31 March 2018 |
236 |
1,085 |
1,321 |
|
Additions |
- |
137 |
137 |
|
Disposals |
(2) |
(5) |
(7) |
|
Exchange differences |
- |
24 |
24 |
|
At 31 March 2019 |
234 |
1,241 |
1,475 |
|
Depreciation |
|
|
|
|
At 01 April 2017 |
230 |
927 |
1,157 |
|
Depreciation charge |
1 |
82 |
83 |
|
At 31 March 2018 |
231 |
1,009 |
1,240 |
|
Depreciation charge |
- |
76 |
76 |
|
Disposals |
(2) |
- |
(2) |
|
Exchange differences |
- |
22 |
22 |
|
At 31 March 2019 |
229 |
1,107 |
1,336 |
|
Net book value |
|
|
|
|
At 31 March 2018 |
5 |
76 |
81 |
|
At 31 March 2019 |
5 |
134 |
139 |
|
|
|
|
|
14. Inventories
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Finished goods |
53 |
261 |
Write-downs of inventory amounted to £146,000 (2018: £16,000).
The cost of inventories recognised as an expense and included in cost of sales amounted to £1.7 million (2018: £1.2 million).
15. Trade and other receivables
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Trade receivables |
10,405 |
7,827 |
|
Less provision for impairment |
(114) |
(130) |
|
Net trade receivables |
10,291 |
7,697 |
|
Other receivables |
497 |
190 |
|
Prepayments |
601 |
206 |
|
Accrued income |
1,272 |
3,706 |
|
|
12,661 |
11,799 |
Trade receivables have been aged with respect to the payment terms as follows:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Not past due |
8,023 |
4,407 |
|
Past due 0-30 days |
1,177 |
1,483 |
|
Past due 31-60 days |
461 |
980 |
|
Past due 61-90 days |
275 |
231 |
|
Past due more than 90 days |
469 |
726 |
|
|
10,405 |
7,827 |
The movement in the allowance for impairment losses was:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
At the beginning of the period |
130 |
- |
|
Charges |
19 |
130 |
|
Utilisation of provision |
(40) |
- |
|
Foreign exchange adjustment |
5 |
- |
|
At the end of the period |
114 |
130 |
The requirement to use an expected loss method of impairment on adoption of IFRS 9 on 1 April 2018 did not have a material impact on the Group. The Group has applied the simplified approach to measuring expected credit losses, as permitted by IFRS 9, and recognises a loss allowance based on the lifetime expected credit loss.
16. Trade and other payables
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Trade payables |
2,203 |
1,261 |
|
Other taxation and social security |
982 |
480 |
|
Other payables |
467 |
405 |
|
Accruals |
3,214 |
3,129 |
|
Deferred income |
1,966 |
1,803 |
|
Dividends payable |
- |
200 |
|
|
8,832 |
7,278 |
17. Provisions
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
At the beginning of the year |
- |
- |
|
Charge for the year |
767 |
- |
|
At the end of the year |
767 |
- |
The provision is in respect of compensation paid to non-UK resident employees in consideration for surrendering EMI options which vested on the IPO. The amount payable depends on the interpretation and application of local country tax laws to internationally mobile employees. The provision is classified as a current liability.
18. Borrowing facilities
The Group entered into an uncommitted overdraft facility on 24 September 2018 with a limit of £2 million, which was undrawn at the year end. The facility carries an interest rate of 2.5% per annum over Bank of England base rate. The Facility is due to be reviewed in March 2020.
19. Redeemable preference shares
The Company allotted and issued 50,000 redeemable preference shares of £1.00 each to Octavius Black in June 2018. The shares are fully paid up. Under the Articles of Association, the Company may redeem the preference shares at their nominal amount at any time specified by either the Directors or the preference share holder. The preference share capital however counts towards the £50,000 minimum share capital required under the Companies Act 2006 and cannot therefore be redeemed unless the Company increases its other share capital. The preference shares are non-voting, give no rights to dividends or interest and entitle the holder to the return of the nominal value on a winding up.
20. Financial instruments and financial risk management
Financial instruments by category
Trade and other receivables (excluding prepayments), Cash and cash equivalents and Trade and other payables are initially measured at fair value and subsequently held at amortised cost.
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Net trade receivables |
10,291 |
7,697 |
|
Other receivables |
497 |
190 |
|
Cash and cash equivalents |
8,294 |
5,542 |
|
Financial assets at amortised cost |
19,082 |
13,429 |
|
Trade payables |
2,203 |
1,261 |
|
Other payables |
467 |
405 |
|
Financial liabilities at amortised cost |
2,670 |
1,666 |
The Group holds no assets or liabilities which are held at fair value through income statement or OCI.
As the trade and other receivables and trade and other payables have a maturity of less than one year, the notional amount is deemed to reflect the fair value.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure.
The Group's sources of funding currently comprise cash flows generated from operations, and equity contributed by shareholders. The Group has no borrowings and is not subject to any externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders to the extent allowed by the Company's articles or issue new shares.
Financial risk management
The Group's risk management is overseen by the Audit and Risk Committee. The Group is exposed to a variety of financial risks which result from its operations including credit risk, liquidity risk and foreign currency risk. Since the Group has no debt it is not significantly exposed to interest rate risk. The Group has not entered into any derivative transactions such as interest rate swaps or forward foreign exchange contracts.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks, or the methods used to measure them from pervious periods unless otherwise stated in this note.
Credit risk
Credit risk arises principally from the Group's trade receivables from customers and monies on deposit with financial institutions.
Credit risk on trade receivables is considered to be relatively low as the Group's customers mainly consist of large credit-worthy organisations. Credit exposure is spread over a large number of customers and so there is no significant concentration of credit risk. Outstanding and overdue balances are regularly reviewed and resulting actions are put in place on a timely basis. The Group establishes an allowance for impairment. This is based on a review of individual balances taking into account the results of credit control communications and our knowledge about the customer relationship. See Note 15 Trade and other receivables for further information on ageing and impairment of Trade receivables.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties are accepted and management maintain a close relationship with the Group's banks.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Trade receivables |
10,291 |
7,697 |
|
Other receivables |
497 |
190 |
|
Cash and cash equivalents |
8,294 |
5,542 |
|
At the end of the period |
19,082 |
13,429 |
Liquidity risk
The Group's ensures, as far as possible, that it has sufficient funds to meet foreseeable operational expenses. Cash flow forecasting is performed by Group Finance who monitor rolling forecasts of the Group's liquidity requirements. Such forecasting takes into consideration expected cash receipts, regular spending and payment of taxes such as VAT, payroll and corporate income tax.
Currently, the Group's liquidity risk is low as it is in a cash-generating position with a surplus of cash in all entities. All Group liabilities in the current and prior year are due within 3 months of the reporting date.
Foreign currency risk
The Group operates internationally and is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than Sterling. The currencies giving rise to this risk are primarily the US dollar and the Euro. Where possible the exposure is mitigated by a natural hedge. For example, US dollar revenues are partially matched by US dollar costs in the US subsidiary.
The Group holds cash in the UK in Sterling, Euro and USD bank accounts and in the USA in US dollar and Canadian dollar bank accounts.
Trade receivables and cash and cash equivalents are analysed by currency as follows:
|
|
GBP |
USD |
EUR |
Other |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 31 March 2019 |
|
|
|
|
|
|
Net trade receivables |
5,016 |
4,402 |
634 |
239 |
10,291 |
|
Cash and cash equivalents |
5,732 |
2,062 |
284 |
216 |
8,294 |
|
|
|
|
|
|
|
|
At 31 March 2018 |
|
|
|
|
|
|
Net trade receivables |
3,706 |
3,414 |
340 |
237 |
7,697 |
|
Cash and cash equivalents |
1,528 |
3,053 |
303 |
658 |
5,542 |
The Group does not currently use forward foreign exchange contracts or currency options to hedge currency risk.
21. Share capital
|
|
31 March 2019 |
31 March 2019 |
31 March 2018 |
31 March 2018 |
|
|
|
Cost |
|
Cost |
|
|
Number |
£'000 |
Number |
£'000 |
|
Ordinary shares of £0.0001 At 1 April |
8,860,000 |
1 |
8,860,000 |
1 |
|
Effect of 10:1 share split |
79,740,000 |
- |
- |
- |
|
Exercise of options (Note 22) |
10,762,375 |
- |
- |
- |
|
Issue of new shares to EBT |
130,835 |
- |
- |
- |
|
Ordinary shares of £0.00001 At 31 March |
99,493,210 |
1 |
8,860,000 |
1 |
On 21 June 2018, a share sub-division was entered into, whereby 8,860,000 shares with a nominal value of £0.0001 were exchanged for 88,600,000 E-ordinary shares with a nominal value of £0.00001. On this date, the total share capital remained unchanged at £886.
On 22 June 2018, an additional 10,762,375 ordinary shares were allotted and issued to option holders with a nominal value of £0.00001, bringing the total share capital to £994 and giving rise to share premium of £112,000.
An Employee Benefit Trust ("EBT") was established during the year in connection with the Group's Share Incentive Plan. The movements in own shares held by the Employee Benefit Trust and the market value of the shares held at the year end are shown below.
|
|
31 March 2019 |
31 March 2019 |
31 March 2018 |
31 March 2018 |
|
|
|
Cost |
|
Cost |
|
|
Number |
£'000 |
Number |
£'000 |
|
As at 1 April |
- |
- |
- |
- |
|
Issue of new shares to EBT |
130,835 |
- |
- |
- |
|
Ordinary shares of £0.00001 At 31 March |
130,835 |
- |
- |
- |
|
Market value at 31 March |
|
166 |
|
- |
22. Share based payments
The Group awards options to selected employees under a Long-Term Incentive Share Option Plan ("LTIP"). The options granted to date vest subject only to remaining employed up to the vesting date. Unexercised options do not entitle the holder to dividends or to voting rights.
The Group operates the Mind Gym plc Share Incentive Plan (SIP). An initial award of £1,000 of free shares was granted in October 2018 to all employees at the IPO price of 146 pence. The shares are held in an employee benefit trust and vest after three years subject only to remaining employed up to the vesting date. The holder is entitled to dividends over the vesting period.
Before the IPO, the Group also granted options to certain employees under Enterprise Management Incentive plans ("EMI plans"). All such options were exercised or forfeited on the IPO.
The total share-based payments expense was:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Equity settled share-based payments |
340 |
170 |
The movements in the number of share awards and share options and the weighted average exercise price of awards are:
|
|
|
31 March 2019 |
|
31 March 2018 |
|
|
Number |
Weighted average exercise price £ |
Number |
Weighted average exercise price £ |
|
|
|
|
|
|
|
Outstanding at the beginning of the period |
13,526,391 |
0.00971 |
13,097,572 |
0.00961 |
|
Granted during the period |
1,620,819 |
0.89504 |
500,220 |
0.00001 |
|
Forfeited during the period |
(2,778,401) |
0.00074 |
(71,401) |
0.00236 |
|
Exercised during the period |
(10,762,375) |
0.01040 |
- |
- |
|
Outstanding at the end of the period |
1,606,434 |
0.90305 |
13,526,391 |
0.00971 |
|
Exercisable at the end of the period |
nil |
|
nil |
|
|
Weighted average fair value of awards granted (£) |
0.67 |
|
0.31 |
|
The range of exercise prices and weighted average remaining contractual life of share awards and share options outstanding at 31 March were:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
£ nil |
116,000 |
13,526,391 |
|
£0.00001 |
496,812 |
- |
|
£1.46000 |
993,622 |
- |
|
|
1,606,434 |
13,526,391 |
|
Weighted average remaining contractual life (years) |
8.7 |
|
Share options awarded under the LTIP are valued using the Black-Scholes model. Shares awarded under the SIP are valued directly by reference to the share price at date of grant. Shares awarded in the year ended 31 March 2018 under the EMI plans were valued using the Black Scholes model and adjusted by a 30% discount for lack of marketability. The principal assumptions used in these valuations were:
|
|
Date of grant |
Share price at grant |
Exercise price |
Expected life |
Expected volatility |
Dividend yield |
Risk free rate |
Fair value |
|
|
|
£ |
£ |
years |
% |
% |
% |
£ |
|
|
|
|
|
|
|
|
|
|
|
EMI plans (weighted average)* |
FY 2018 |
5.82 |
0.01 |
2 |
24.5% |
0.0% |
1.0% |
4.21 |
|
LTIP (2 year vesting) |
27 Apr 2018 |
1.24 |
Nil |
2 |
n/a |
1.4% |
n/a |
1.20 |
|
LTIP (3 year vesting) |
27 Apr 2018 |
1.24 |
Nil |
3 |
n/a |
1.4% |
n/a |
1.19 |
|
LTIP (2 year vesting) |
25 Jun 2018 |
1.46 |
1.46 |
10 |
19% |
1.4% |
1.0% |
0.28 |
|
LTIP (3 year vesting) |
25 Jun 2018 |
1.46 |
1.46 |
10 |
19% |
1.4% |
1.0% |
0.28 |
|
SIP |
8 Oct 2018 |
1.67 |
Nil |
n/a |
n/a |
n/a |
n/a |
1.67 |
* share price and fair value of FY 2018 grants are expressed in amounts per old share and not adjusted for the share split.
23. Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are:
|
|
31 March 2019 |
31 March 2018 |
|
|
£'000 |
£'000 |
|
Within one year |
585 |
527 |
|
Between 1 and 5 years |
1,433 |
1,793 |
|
Later than 5 years |
- |
- |
|
|
2,018 |
2,320 |
24. Controlling party
The Group was controlled by O Black and J Cash by virtue of their joint shareholding in the Company throughout the period.
There were the following related party transactions during the year and balances at the end of the year:
· The payment of dividends to O Black and J Cash on their shareholding in the Company;
· The issuance of redeemable preference shares to O Black as disclosed in Note 19;
· Key management compensation as disclosed in Note 8.
· £26,000 was paid for corporate finance and tax services to Dixon Wilson, an accounting firm in which D Nelson is a partner.
· In June 2018, O Black, J Cash and S Bailey entered into a Relationship Agreement with the Company.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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