Arcontech Group PLC
Arcontech Group PLC
Arcontech Group PLC
Arcontech Group PLC
1st Floor, 11-21 Paul Street
1st Floor, 11-21 Paul Street
1st Floor, 11-21 Paul Street
1st Floor, 11-21 Paul Street
LONDON
LONDON
LONDON
LONDON
EC2A 4JU
EC2A 4JU
EC2A 4JU
EC2A 4JU
tel: +44 (0)20 7256 2300
tel: +44 (0)20 7256 2300
tel: +44 (0)20 7256 2300
tel: +44 (0)20 7256 2300
web: www.arcontech.com
web: www.arcontech.com
web: www.arcontech.com
web: www.arcontech.com
email: mail@arcontech.com
email: mail@arcontech.com
email: mail@arcontech.com
email: mail@arcontech.com
eport and
eport and
eport and
eport and
ear ended 30 June 201
ear ended 30 June 201
ear ended 30 June 2021
ear ended 30 June 2020
REGISTERED NUMBER: 04062416 (England and Wales)
Arcontech Group PLC
Annual Report and Accounts
Year ended 30 June 2021
1
Contents
Company Information
Chairman’s Statement
Chief Executive’s Review
Strategic Report
Board of Directors
Corporate Governance
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Group Income Statement and Statement of Comprehensive Income
Statement of Changes in Equity
Balance Sheets
Group Cash Flow Statement
Company Cash Flow Statement
Notes to the Financial Statements
ARCONTECH GROUP PLC
Page
1
2
3
4-6
7
8-18
19-20
21
22-26
27
28
29
30
31
32-56
Company Information
Directors
Geoff Wicks (Chairman and Non-Executive Director)
Matthew Jeffs (Chief Executive Officer)
Louise Barton (Non-Executive Director)
Company Secretary
Ben Hodges
Registered Office
Nominated Adviser and Broker
1st Floor
11-21 Paul Street
London EC2A 4JU
finnCap Ltd
1 Bartholomew Close
London EC1A 7BL
Registered Number
04062416
Solicitors
Auditors
Registrars
Principal Bankers
Faegre Baker Daniels LLP
7 Pilgrim Street
London
EC4V 6LB
PKF Littlejohn
Statutory Auditor
Chartered Accountants
15 Westferry Circus
Canary Wharf
London
E14 4HD
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Nat West Bank Plc
94 Moorgate
London
EC2M 6UR
Company website
www.arcontech.com
1
Chairman’s Statement
Following my first full year as Chairman I am pleased to be able to report that Arcontech has come through the pandemic so far in
good shape. The Company closed the year with revenue and profit as expected in line with last year’s performance. Profit before
taxation was £1,036,314 (2020: £1,040,969) flat on last year. These figures include accruals no longer required which are
unrelated to the underlying business amounting to £88,000 (2020: £86,500). After adjusting for release of these accruals, profit
before taxation is £948,314 (2020: £954,469). This was achieved at the same time as maintaining our focus and investment on
growing our sales and marketing capability, which will stand us in good stead as markets return to more normal conditions.
Turnover was £2,988,842 (2020: £2,955,314) up by £33,528 on last year. Our customers continue to be cautious and new projects
have largely been shelved. During this period of inertia in the market our focus has been on maintaining a high level of service to
our current customer base while continuing to build our list of potential customers. Our recurring revenue base of around 93%
provides stability and visibility of earnings and has allowed us to continue with our growth strategy with confidence.
Our cost base has been managed to good effect although we have not reduced staff numbers nor did we furlough any staff as we
continue to build relationships in the market and to make improvements to our products. Sales cycles have always been long for
the Company and more recently decision making in our market segment is largely being postponed, although interest in our
products and services is still growing.
Statutory earnings per share for the year to 30 June 2021 was 7.88p (2020: 9.22p), with the decline in earnings largely reflecting
the lower tax credit. At 30 June 2021 the Group has tax losses of approximately £8,500,000 (2020: £8,900,000) to offset against
future trading profits.
Financing
Cash balances were £5,395,457 (2020: £5,006,969) at the end of the year, an increase of 7.8%, providing a robust balance sheet
overall. This is a reflection of the close attention paid to the management of our cost base and allows us to have confidence to
continue with our progressive dividend policy and to continue to look at ways to grow the business through means other than
organically.
Dividend
I am pleased to announce that, subject to approval at the Annual General Meeting, we intend to pay a dividend of 2.75 pence per
share for the year ended 30 June 2021 (30 June 2020: 2.5 pence), an increase of 10%, to those shareholders on the register as at
the close of business on 10 September 2021 with an ex-dividend date of 9 September 2021.
Employees
Our first thoughts through this trying period have been for the safety and well-being of our staff. We are fortunate that they have
all been able to work from home and productivity has remained high. I am pleased that our staff have performed well during this
period and I would like to thank them for all their hard work adapting to new working practices and technologies.
Outlook
The future for our market remains uncertain and it may be some time until it returns to previous levels of activity. We continue to
work towards future sales and already have a high level of pent up demand, with the strongest list of prospective new customers
for a long time. However, due to the impact of Covid on net new sales in the 2020/21 financial year, this year’s profit is expected
to be flat or lower, as any pick up in revenue will not be fully reflected in our results until 2022/23. As the market comes out of
this difficult period we are confident we will return to growth given the flexibility provided by our strong balance sheet and the
strength of our customer relationships and product profile.
Geoff Wicks
Chairman and Non-Executive Director
ARCONTECH GROUP PLC
2
Chief Executive’s Review
I am pleased to report that despite a year of uncertainty and caution that we have achieved our strategic and financial goals and at
the same time, positioned the Company for continued stability and growth as normality returns to the market.
Cost control remained paramount within the context of investing in sales and despite the full year’s impact of the two additional
salesmen, statutory profit before tax remained broadly unchanged at £1,036,314 (2020: £1,040,969), equally, our preferred
measure of profit before tax which excludes accruals unrelated to the underlying business, at £948,314 (£954,469).
In terms of business development, we won a brand new Tier 1 bank client, added new business with an existing Tier 1 bank to
upgrade their system and integrate it with their in-house data feed but regrettably, lost a regional client whose requirements have
changed. The number of end users for our desktop software solution and Excelerator numbers remained stable.
Development work for the year consisted of adding functionality in response to specific requests from existing clients, completing
our newly developed alerting and monitoring capabilities to make them production ready and implementing the upgrade to our
Unix system interface to the in-house system for one of our Tier 1 clients.
We also made significant progress developing two new offerings for existing and potential clients in the form of a data
permissioning system and a tick history database. The new permissioning system rounds out our offering for a market-data
platform so that we can offer wholesale replacement rather than select components, whilst the tick history database will enable us
to address a related business case that operates in parallel with the areas we currently address.
The new software along with our existing systems is completely compatible with any deployment situation or combination of
situations a client requires: on-premise, data centre co-location or with any cloud provider.
During the year our sales team has been focused on uncovering new opportunities, resulting in numerous on-line presentations and
discussions. We have as a result identified and qualified prospects across 6 countries in which we do not currently have a
presence. With an initial online relationship established we look forward to strengthening ties with face-to-face visits when
possible. I should also note that the existing opportunities that were in our pipeline before the pandemic remain and as confirmed
by the clients and prospective clients, have simply been deferred.
For existing clients our exceptional support continues to be a differentiator. We have helped several clients with projects initiated
before the pandemic and continue to do so. At the same time we have helped with and resolved the usual day to day issues and
queries for clients who are, in the main, also facing similar challenges of remote working and restricted travel and the Board and I
are grateful to them.
Given the strength of our balance sheet we are taking a more proactive approach to potential opportunities in the market. We
believe that there may be potential beneficial acquisitions to explore as a result of current market conditions.
In the new financial year we are continuing to support our clients and we expect to gain from the armoury of new product
functionality, two new product solutions and the expanded lead base. However, face-to-face contact is still difficult with prospects
outside of the U.K. which continues to hamper the winning of new business. We expect this to change as vaccination programs
roll out across the world, international travel resumes and clients return to offices.
Matthew Jeffs
Chief Executive
ARCONTECH GROUP PLC
3
Strategic Report
The Directors present the group strategic report for Arcontech Group plc and its subsidiaries for the year ended 30 June 2021.
Principal activities
The principal activities of the Company and its subsidiaries during the year were the development and sale of proprietary software
and provision of computer consultancy services.
Review of the business and prospects
A full review of the operations, financial position and prospects of the Group is given in the Chairman’s Statement and Chief
Executive’s Review on pages 2 to 3.
Key performance indicators (KPIs)
The Directors monitor the business using management reports and information, reviewed and discussed at monthly Board
meetings. Financial and non-financial KPIs used in this report include:
Financial KPIs:
Revenue £2,988,842 (2020: £2,955,314; 2019: £2,841,362)
Adjusted profit £959,110 (2020: £1,131,203; 2019: £835,248)
Cash £5,395,457 (2020: £5,006,969; 2019: £4,063,484)
Earnings per share (basic) 7.88p (2020: 9.22; 2019: 7.51p)
Earnings per share (diluted) 7.79p (2020: 9.03p; 2019: 7.42p)
Non-financial KPIs:
Staff retention rate (net) 93% (2020: 91%; 2019: 100%)
Measurement:
Revenue from sales made to all customers (excluding
intra-group sales which eliminate on consolidation)
Performance:
Continued growth driven by increased sales of our product
offering
Measurement:
Profit after tax and before release of accruals for
administrative costs in respect of prior years
Performance:
Continued growth reflects increase in revenues whilst
continuing to maintain tight cost control
Measurement:
Cash and cash equivalents held at the end of the year
Performance:
The Group continues to maintain healthy cash balances
subject to any exceptional circumstances or acquisition
opportunities
Measurement:
Earnings after tax divided by the weighted average
number of shares
Performance:
Continued growth
Measurement:
Earnings after tax divided by the fully diluted number of
shares
Performance:
Continued growth
Measurement:
Net retention after adjusting for joiners and leavers during
the year
Performance:
Staff morale from our dedicated employees remains
strong, reflected in the stable retention rate
ARCONTECH GROUP PLC
4
Strategic Report (continued)
Principal risks and uncertainties
The Group’s performance is affected by a number of risks and uncertainties, which the Board monitor on an ongoing basis in
order to identify, manage and minimise their possible impact. General risks and uncertainties include changes in economic
conditions, interest rate fluctuations and the impact of competition. The Group’s principal risk areas and the action taken to
mitigate their outcome are shown below:
Risk area
Mitigation
Competition
Ongoing investment in research and development
Responding to the changing needs of clients to remain competitive
Loss of key personnel
Employee share option scheme in place
Covid-19 pandemic
The Directors and employees are operating remotely in order to protect their health and safety
At present the Company believes that there should be no significant material disruption to its work
Brexit
Arcontech is a global company and as such seeks growth across a geographically diverse customer base
Relations with shareholders
Section 172(1) Statement - Promotion of the Company for the benefit of the members as a whole
The Directors believe they have acted in the way most likely to promote the success of the Group for the benefit of its members as
a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
Consider the likely consequences of any decision in the long term;
•
• Act fairly between the members of the Company;
• Maintain a reputation for high standards of business conduct;
•
•
•
Consider the interests of the Company’s employees;
Foster the Company’s relationships with suppliers, customers and others; and
Consider the impact of the Company’s operations on the community and the environment.
The Group’s operation is the development and sale of proprietary software and provision of computer consultancy services. The
Board has identified its key stakeholders as its customers, shareholders, employees and suppliers. The Board keeps itself appraised
of its key stakeholders’ interests through a combination of both direct and indirect engagement, and the Board has regard to these
interests when discharging its duties.
The application of the s172 requirements can be demonstrated in relation to some of the key decisions made during the year to 30
June 2021:
• Allocation of the Group’s capital in a way which offers significant returns to shareholders in line with the Company’s
dividend policy, while also ensuring that the Group retains flexibility to continue to deploy capital towards profitable
growth;
• Adapting a rapid response to the working location restrictions arising from the Covid-19 pandemic, ensuring that the
Group continued to deliver both the high level of service and security that our customers depend on without
compromising the health and safety of employees.
ARCONTECH GROUP PLC
5
Strategic Report (continued)
During the year to 30 June 2021, the Board assessed its current activities between the Board and its stakeholders, which
demonstrated that the Board actively engages with its stakeholders and takes their various objectives into consideration when
making decisions. Specifically, actions the Board has taken to engage with its stakeholders over the last twelve months include:
• Attended the 2020 AGM to answer questions and receive additional feedback from investors;
• Arranged meetings with certain stakeholders to provide them with updates on the Company’s operational activities and
other general corporate updates;
• We discussed feedback from investors’ and analysts’ meetings following the release of our annual and half-year
announcements. We have an investor relations programme of meetings with existing and potential shareholders; and
• Monitored company culture and engaged with employees on efforts to continuously improve company culture and
morale.
The Board believes that appropriate steps and considerations have been taken during the year so that each Director has an
understanding of the various key stakeholders of the Company. The Board recognises its responsibility to contemplate all such
stakeholder needs and concerns as part of its discussions, decision-making, and in the course of taking actions, and will continue
to make stakeholder engagement a top priority in the coming years.
Approved on behalf of the board on 31 August 2021 by:
Matthew Jeffs
Chief Executive
ARCONTECH GROUP PLC
6
Board of Directors
Directors - Executive
Matthew Jeffs (Chief Executive Officer)
Matthew was appointed Chief Executive Officer in April 2013. Matthew spent 10 years with Barclays International, 10 years with
Dow Jones and then 6 years with Reuters in a variety of senior roles. In addition to the UK, he has wide experience in the Asia
Pacific region, working in Hong Kong, Japan, Korea (where he was country manager for Reuters and country representative for
Dow Jones), Thailand and Vietnam. In his most recent role, Matthew was the Managing Director, ICS International at Broadridge
Financial Solutions where he was responsible for the overall management of the Global Proxy business with offices in the U.K.,
U.S., Japan, Australia and India. Matthew has an MBA from Buckinghamshire Business School.
Directors – Non-Executive
Geoff Wicks (Chairman)
Geoff was appointed Non-Executive Director in July 2020, and Chairman and in September 2020. Geoff was most recently
Chairman of ULS Technology plc, the provider of online technology platforms for the UK conveyancing and financial
intermediary markets. Prior to this, he was CEO of Group NBT plc, a specialist in online brand protection and digital asset
management, from 2001 until he led the sale of the business to HGCapital in 2011. He remained part of the Group NBT business,
now renamed NetNames, as a non-executive director until 2013. Geoff spent much of his earlier career at Reuters, including
heading divisions in the UK, France and Nordic regions and latterly was director of corporate communications. Prior to Reuters,
Geoff worked in the banking and insurance industries.
Louise Barton
Louise was appointed Non-Executive Director in February 2007. She worked for five years with the Institute of Applied
Economic and Social Research in Melbourne before joining Prudential Portfolio Managers in 1979. She moved into stock
broking/investment banking in 1987, joining CCF Laurence Prust and subsequently moved to Investec Henderson Crosthwaite in
1990. She retired from the City in 2002 when she was ranked UK No 1 small company media analyst and is now an independent
consultant.
ARCONTECH GROUP PLC
7
Corporate Governance
Corporate governance report
The directors recognise the importance of, and are committed to, high standards of corporate governance. Of the two widely
recognised formal codes, the directors have decided to adhere to the Quoted Companies Alliance’s Corporate Governance code.
The Group’s compliance with this code is summarised below and can be found in full on the Group’s website at:
www.arcontech.com.
The working of the Board and its Committees
At 30 June 2021, the Board comprised two Non-Executive Directors, one of whom is the Chairman, and one Executive Director.
The Board is responsible to the shareholders for the proper management of the Group. It meets regularly to review financial and
non-financial performance. Matters for review by the Board are circulated before the Board Meetings.
All of the Directors are subject to election at the first Annual General Meeting following their appointment and to re-election at
least once every three years. Non-Executive Directors who have served for more than nine years on the Board are subject to re-
election annually. Louise Barton who was appointed on 15 January 2007 has served for longer than this period. The Board are of
the opinion that their shareholdings align their interests with other shareholders (Refer to page 18, ‘Directors share interests”). At
the 2020 Annual General Meeting 100% (2019: 100%) of shareholders voted in favour of their re-election. As such the Board
consider their independence is not affected.
Given Louise Barton’s length of service she will retire under Article 106 of the Company's articles of association and, being
eligible, offers herself to be re-elected as a non-executive Director of the Company.
The Chairman and Executive Director have other third-party commitments including directorships of other companies. The
Company is satisfied that these commitments have no significant impact on their ability to carry out their responsibilities
effectively. All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for
ensuring that Board procedures are followed, and that applicable rules and regulations are complied with. In addition, the
Company Secretary will ensure that the Directors receive appropriate training as necessary. All Directors are supplied with
information in a timely manner in a form, and of a quality, appropriate to enable them to discharge their duties.
During the year, certain Directors who were not Committee members attended meetings of the Audit Committee and
Remuneration Committee by invitation. These details have not been included in the table.
Board meeting attendance
Board
Meeting
Audit
Committee
Remuneration
Committee
Nomination
Committee
Executive Directors
Matthew Jeffs
Non-Executive Directors
Geoff Wicks (Independent)
Louise Barton (Independent)
Richard Last (Independent) 1
10/10
10/10
10/10
2/2
1 Richard Last ceased to be a director on 29th September 2020
Board performance
2/2
1/1
2/2
1/1
N/A
1/1
4/4
3/3
2/2
1/1
1/2
N/A
The Company has a formal process of annual performance evaluation for the Board, its Committees and individual Directors. The
Board and its Committees are satisfied that they are operating effectively. A performance evaluation of the Board, its Committees
and individual Directors is conducted annually.
ARCONTECH GROUP PLC
8
Corporate Governance (continued)
Corporate governance report (continued)
The review is based on key areas, to include Board composition, information, process, internal control, accountability, CEO and
top management and standards of conduct. The areas are scored by all members, reviewed by the Chairman and Company
Secretary and compared against the previous evaluation. Lower scores are discussed.
The Company has Directors’ and officers’ liability insurance in place.
Committees
The following committees deal with the Group’s affairs:
Audit Committee
Details of the Audit Committee are given in its Report on pages 10-11.
Remuneration Committee
Details of the Remuneration Committee are given in its Report on pages 12-18. This includes details of the Directors’
remuneration, interest in shares, interest in share options, and service contracts. No Director is involved in decisions about their
own remuneration.
Nomination Committee
The Nomination Committee assists the Board in discharging its responsibilities relating to the composition and make-up of the
Board and any committees of the Board. It is also responsible for periodically reviewing the Board’s structure and identifying
potential candidates to be appointed as Directors or committee members as the need may arise. The Nomination Committee is
responsible for evaluating the balance of skills, knowledge and experience and the size, structure and composition of the Board
and committees of the Board, retirements and appointments of additional and replacement Directors and committee members and
will make appropriate recommendations to the Board on such matters.
The Nomination Committee is chaired by Louise Barton. Geoff Wicks is the other committee member. The Nomination
Committee meets not less than once a year.
Geoff Wicks
Chairman and Non-Executive Director
31 August 2021
ARCONTECH GROUP PLC
9
Corporate Governance (continued)
Audit Committee report
The Audit Committee is responsible for ensuring that the financial position of the Group is properly monitored. The Audit
Committee generally meets twice a year and the Finance Director of the trading subsidiary, appointed to lead the finance function,
also attends by invitation. The Committee meets with the Group & Company Auditor (“Auditor”) at least twice during the annual
year end audit and has direct access to the Auditor at any time throughout the year. At 30 June 2021, the members of the Audit
Committee were:
Louise Barton (Chairman)
Geoff Wicks
Matthew Jeffs
During the year to 30 June 2021, Richards Last ceased to be a member of the Audit Committee upon resignation, Geoff Wicks
was appointed to the Audit Committee and Louise Barton assumed the position of Audit Committee Chairman.
Objectives and responsibilities
The role of the Audit Committee is to primarily monitor the Group’s financial statements, the effectiveness of financial controls
and systems and to oversee the relationship with external auditors.
Activities of the Audit Committee during the year
The Audit Committee focuses on financial reporting and the statutory audit, and the assessment of internal controls.
Financial reporting and statutory audit
The Audit Committee reviews the half year and annual financial statements with emphasis on:
-
-
-
-
-
the overall truth and fairness of the results and financial position;
the transparency and understandability of the accounts for users;
the appropriateness of the accounting policies;
the resolution of management’s significant accounting judgements or of matters raised by the external auditors;
the quality of the Annual Report as a whole.
The Audit Committee considers that the Annual Report taken as a whole is fair, balanced and understandable.
Accounting policies, practices and judgements
Issue
• Accounting policies
• Going concern review
Action
The Committee reviewed and discussed the significant
accounting policies with management and the external
auditor and reached the conclusion that each policy was
appropriate to the Group.
The Committee considered the ability of the Group to
operate as a Going Concern considering cash flow forecast
for the next 12 months and milestone achievements. It was
determined by the Committee that it was reasonable to
expect that the Group has or will have sufficient funds for
the next 12 months and that it was appropriate for the
Financial Statements to be prepared on a going concern
basis.
ARCONTECH GROUP PLC
10
Corporate Governance (continued)
Audit Committee report (continued)
Issue
•
Review of audit and non-audit services and fees
Action
The external auditor is not engaged by the Group to carry out
any non-audit work in respect of which it might, in the future,
be required to express an audit opinion. The Committee
reviewed the fees charged for the provision of audit and non-
audit services and determined that they were in line with fees
to companies of similar size and stage of
charged
development.
The Committee considered and was satisfied the external
auditor’s assessment of its own independence.
Internal audit
The Group does not have internal auditors as the Audit Committee considers that it is not yet of a size or complexity to necessitate
this.
Louise Barton
Audit Committee Chairman
31 August 2021
ARCONTECH GROUP PLC
11
Corporate Governance (continued)
Remuneration Committee report
Dear shareholder
I am pleased to introduce the Directors’ Remuneration Report for the year ended 30 June 2021.
The Chairman’s Statement on page 2 provides a summary of the progress the Group has made during the financial year. The
Remuneration Committee is committed to structuring executive remuneration that supports the Group’s strategy and performance
and to help it grow profitably. The Remuneration Committee is appointed by the Board and comprises the two independent Non-
Executive Directors.
Short-term performance is incentivised by an annual bonus scheme based on the achievement of certain financial performance
targets. Long-term performance is incentivised by the Group’s Share Option Scheme.
Louise Barton
Remuneration Committee Chairman
31 August 2021
Directors’ Remuneration Policy
This part of the Directors’ Remuneration Report sets out the Group’s remuneration policy.
Policy on Executive Remuneration
The Group’s remuneration policy is designed to ensure that the Company is able to attract, motivate and retain executives and
senior management to promote long-term success. The retention of key management and the alignment of management incentives
with the creation of shareholder value are key objectives of this policy.
The Remuneration Committee seeks to ensure that salaries are market competitive for similar companies.
Key elements of Remuneration
Remuneration
element
Base salary
Purpose
Operation
To attract and retain
key executives.
Potential
remuneration
The CEO’s base salary Not applicable.
Performance
metrics
Reviewed annually,
effective from 1 January/ was reviewed on:
1 July.
The review considers:
- Role, experience
and performance;
- Average workforce
i) 1 January 2017 and
was increased by 5% to
£157,500; and
ii) 1 July 2018 and
salary adjustments. was increased by 4.8% to
Salaries are benchmarked £165,000.
against companies of
similar size and sector. was increased by 3.0% to
iii) 1 July 2019 and
£170,000
iv) 1 July 2020 and was
increased by 2.9% to £175,000
ARCONTECH GROUP PLC
12
Corporate Governance (continued)
Remuneration Committee report (continued)
Key elements of Remuneration (continued)
Remuneration
element
Benefits
Purpose
Operation
Potential
remuneration
Performance
metrics
To attract and retain
key executives.
An Executive Director
is entitled to
participate in the
Company’s life
and medical insurance
schemes.
Premiums vary from
year to year. The
Remuneration
Committee monitors
the overall cost of the
benefits package.
Not applicable.
Pension
To attract and retain
key executives.
The Executive Directors The Company contributes Not applicable.
(together with all other
eligible staff) are entitled annum of basic salary into
to participate in the
Company’s workplace
pension scheme.
3% per
the scheme.
Executive Directors are
able to request that the
Company, at the discretion
of the Remuneration
Committee, makes additional
contributions where
salary or bonus has been
waived.
During the year the
company made pension contributions
of £5,250 (2020: £5,100).
Annual bonus
To incentivise the
achievement of the
company’s annual
financial and strategic
targets.
Performance is measured The CEO’s maximum
capped bonus potential
on an annual basis for
is 150% of salary.
each financial year.
Targets are established at
the beginning of each
financial year. At the end
of the year the
Remuneration Committee
determine the extent to
which these have been
achieved.
Bonuses are paid in cash
and/or pension
contributions
Any bonus is
discretionary and
subject to
achievement against
targets set by the
Remuneration
Committee.
The Remuneration
Committee has
discretion to adjust
the bonus to ensure
alignment of pay
with the performance
of the business in the
financial year.
Share Option Scheme
To motivate and facilitate Options to acquire shares The number of shares
share ownership.
The Remuneration
Committee may
impose certain
may be granted to eligible in respect of which
employees at the
discretion of the
Remuneration.
Committee
options can be
granted is limited in any performance
financial year to shares
with a market value of
no more than 100% of
salary.
conditions on any
option preventing its
exercise unless such
conditions have been
satisfied.
ARCONTECH GROUP PLC
13
Corporate Governance (continued)
Remuneration Committee report (continued)
Key elements of Remuneration (continued)
Remuneration
element
Chairman and
Non-Executive
Directors
Purpose
Operation
To attract and retain
Non-Executive
Directors of the
right calibre.
The Chairman and
Non-Executive
Directors’
remuneration
comprises fees
and share options.
The Chairman’s fee is
approved by the Board
on the recommendation
of the Non-Executive
Director and Executive
Directors.
Performance
metrics
Not applicable.
Potential
remuneration
Details of the fees
currently payable are set
out in the Annual Report
on Remuneration. The
fees are reviewed
periodically taking into
account the time
commitment and
responsibilities involved
and fees paid by other
companies of comparable
size and complexity.
Fees for the
Non-Executive Directors
are approved by the Board
on the recommendation
of the Chairman and
Executive Directors.
The Chairman and
Non-Executive Directors
are not involved in any
discussion or decision
about their own
remuneration.
The Chairman and
Non-Executive Directors
are entitled to be
reimbursed for reasonable
expenses.
Alignment of Executive Remuneration and the Market
The Remuneration Committee takes advantage of various annual AIM Directors’ Remuneration reports as well as available data
about similar companies. The Company aims to ensure that Directors’ salaries are set at a level sufficient to ensure there is
significant incentive and regard for better than average long-term results.
Consideration of Employee Pay
The Remuneration Committee takes account of pay and conditions of employees throughout the Group when setting pay and
benefits for Executive Directors. The Company endeavours to provide competitive remuneration packages for all employees.
Employees may be eligible to participate in the Share Option Scheme at the discretion of the Remuneration Committee. The
Company does not consult directly with its employees as part of the process for determining Executive pay.
Policy on recruitment
When appointing new Executive Directors, the Remuneration Committee will consider their remuneration by reference to the
Remuneration Policy set out in this Report. The Remuneration Committee would not usually expect to pay sign-on payments or
compensate new Directors for any variable remuneration forfeited from any employment prior to joining the Board other than in
exceptional circumstances, recognising that the Company needs to attract appropriately skilled and experienced individuals.
ARCONTECH GROUP PLC
14
Corporate Governance (continued)
Remuneration Committee report (continued)
Policy on recruitment (continued)
Salary and annual bonus will be set so as to be competitive with comparable companies and also taking into account the
experience, seniority and responsibility of the appointee coming into the new role. New Executive Directors will receive benefits
and pension contributions in line with the Company’s existing policy and to participate in the annual bonus scheme on a pro-rated
basis for the portion of the financial year for which they are in post.
Policy on Loss of Office
Executive Directors leaving employment from the Group, other than in circumstances of gross misconduct or incompetence,
serious dishonesty or wilful neglect of duty (in which cases no amount will be payable), will be entitled to receive salary in
accordance with their notice periods and pro-rated annual bonus to the date of leaving. The notice periods and the contractual
rights on termination of each Director are set out below. The Company’s Employee Share Option Scheme also provides leaver
provisions as follows:
An Executive Director who ceases to be a Director or employee of the Group by reason of death, retirement, ill-health, injury or
disability, redundancy or the sale of the company for which he works will be a good leaver. As such they will be permitted to
exercise their options. Where the cessation is on any other grounds the awards will lapse on the date of cessation, unless the
Remuneration Committee determines at its discretion prior to the date of cessation that the awards shall vest.
Share option awards held by good leavers that are already capable of being exercised at the date of cessation may, at the discretion
of the Remuneration Committee, be exercised up to 12 months of the leaving date (depending on the reason for leaving). If the
good leaver ceases to be an employee or Director before the end of the third anniversary of the grant of the award it may, at the
discretion of the Remuneration Committee, be allowed to vest on the normal vesting date.
External appointments
It is the Board’s policy to allow Executive Directors to accept directorships of other quoted and non-quoted companies provided
that they have obtained the consent of the Chairman of the group. Any such directorships must be formally notified to the Board.
Policy on Non-Executive Director Remuneration
The remuneration of the Chairman and the other Non-Executive Director comprises fees that are paid via the payroll. During the
year incoming Chairman, Geoff Wicks, was awarded 30,000 share options as a part of the on-boarding proess (refer to note 19).
The Chairman will not participate in the Company’s Share Options Scheme going forward. The Non-Executive Director no longer
participates in the Company’s Share Option Scheme. Fees are reviewed annually. The Non-Executive Directors are not involved
in any decisions about their own remuneration. No additional fees are payable to the chairmen of the Audit and Remuneration
Committees. Details of the remuneration paid in the year to 30 June 2021 are set out below:
Geoff Wicks (Chairman and Non-Executive Director)
Louise Barton (Non-Executive Director)
Richard Last
Director)
(former Chairman and Non-Executive
Directors fees Share Base Payments Total remuneration
28,477
21,000
7,875
28,477
21,000
7,875
-
-
-
ARCONTECH GROUP PLC
15
Corporate Governance (continued)
Remuneration Committee report (continued)
Directors’ Service Agreements
Executive Directors’ Service Agreements
Date of service agreement
Notice period
Basic salary
Annual bonus
Benefits
Share schemes
Pension contributions
Matthew Jeffs
29 April 2013
3 months’ notice given by either party
Currently £175,000 reviewed annually
Discretionary performance related
Participation in the Company’s life
assurance and medical insurance schemes
Eligible to participate in Company share
schemes
Currently 3% of basic salary contributed by
the Company into the Company’s
workplace pension scheme
Termination payments
The Company has discretion to pay a payment in lieu of notice to terminate the employment
forthwith in the event of notice being given
Non-Executive Directors’ Letters of Appointment
The Non-Executive Directors have Letters of Appointment stating that their appointment is for an initial term up until they are
required to retire by rotation. The Letters of Appointment provide for termination of the appointment on three months’ notice by
either party.
The current Non-Executive Directors’ appointments commenced on the following dates:
Geoff Wicks 20 July 2020
Louise Barton 15 January 2007
Annual Report on Remuneration
Introduction
The Annual Report on Remuneration sets out information about the remuneration of the Directors of the Company for the year
ended 30 June 2021.
Remuneration Committee
The Remuneration Committee consisted of the following Directors during the year ended 30 June 20121:
Geoff Wicks, Independent Non-Executive Director (appointed 20th July 2020) and Chairman of the Board, appointed 29th
September 2020
Louise Barton (Chairman), Independent Non-Executive Director
Richard Last, Independent Non-Executive Director and Chairman of the Board, resigned 29th September 2020
Role of the Remuneration Committee
The Remuneration Committee assists the Board in determining the remuneration and benefits package for the Executive Directors.
Activities of the Remuneration Committee during the year
The Remuneration Committee meets whenever it is appropriate. The committee met four times in the current year. In addition to
agreeing the remuneration report and reviewing the remuneration of the Executive Directors, the award of share options to
Directors and Employees was approved.
ARCONTECH GROUP PLC
16
Corporate Governance (continued)
Remuneration Committee report (continued)
Directors’ Remuneration
The detailed emoluments of the Executive and Non-Executive Directors are set out below.
Year ended 30 June 2021
Salary/fees
Benefits
Bonus Share options
Pension
Total
Chairman and Non-Executive Directors
Geoff Wicks (Chairman)
Louise Barton
Richard Last (former Chairman)
Total Non-Executive
28,477
21,000
7,875
57,352
16
10
621
647
-
-
-
-
-
-
-
- -
-
-
-
-
-
-
28,493
21,010
8,496
57,999
- 5,250 186,178
- 5,250 186,178
244,177
-
5,250
175,000
175,000
232,352
5,928
5,928
6,575
Executive Directors
Matthew Jeffs
Total Executives
Total remuneration
Analysis of bonuses:
Directors
Matthew Jeffs
Year ended 30 June 2020
Year ended 30 June 2021
Accrued
Paid
as cash
Paid
as pension
Total
(70,000)
-
(70,000)
70,000
-
70,000
-
5,250
5,250
-
5,250
5,250
Total
(70,000)
70,000
5,250
5,250
No bonuses were awarded to Directors during the financial year ended 30 June 2021.
Year ended 30 June 2020
Salary/fees
Benefits
Bonus Share options
Pension
Total
Chairman and Non -Executive Directors
Richard Last (Chairman)
Louise Barton
Total Non-Executive
31,500
21,000
52,500
797
-
797
-
-
-
- -
-
-
-
-
32,297
23,033
55,330
Executive Directors
Matthew Jeffs
Michael Levy*
Total Executives
Total remuneration
170,000
5,066
70,000
- 5,100 250,166
10,938
180,938
233,438
1,501
6,567
7,364
2,100
72,100
72,100
-
-
-
328
5,428
5,428
14,867
264,973
320,303
*Fees payable to Michael Levy & Co, Chartered Accountants, in which Michael Levy is the principal, in respect of accountancy
services are disclosed in note 23 to the Financial Statements. Michael Levy ceased to be a Director of the Company on 22 January
2020.
ARCONTECH GROUP PLC
17
Corporate Governance (continued)
Remuneration Committee report (continued)
Directors’ Remuneration (Continued)
Analysis of bonuses:
Directors
Matthew Jeffs
Year ended 30 June 2019
Year ended 30 June 2020
Michael Levy
Year ended 30 June 2019
Year ended 30 June 2020
Total
Directors’ share interests
Accrued
Paid
as cash
Paid
as pension
Total
(46,756)
70,000
23,244
(3,500)
1,050
(2,450)
20,794
46,756
-
46,756
3,500
1,050
4,550
51,306
-
5,100
5,100
-
-
-
5,100
-
75,100
75,100
-
2,100
2,100
77,200
The number of ordinary shares of the Company in which the Directors were beneficially interested at 30 June 2021 was:
Director
Geoff Wicks
Louise Barton
Matthew Jeffs
Directors’ share options interests
Director
At 1 July 2020
Granted
Exercised
Geoff Wicks
Louise Barton
Matthew Jeffs
-
40,000
20,000
100,000
50,000
-
30,000
-
-
-
-
50,000
-
-
-
-
-
-
30 June 2021
-
1,071,416
910,000
30 June 2020
n/a
1,071,416
910,000
At 30 June 2021
Exercise
price
164.50 pence
Normal exercise
period
30,000
3 0 Jun 23 – 2 Oct 30
40,000 23.75 pence 1 Sep 17 – 31 Aug 21
25 Apr 20 – 24 Apr 27
20,000
30 Jun 21 – 29 Jun 28
100,000
30 Jun 22 – 27 Sep 29
50,000
30 Jun 23 – 2 Oct 30
50,000
64.50 pence
110.00 pence
196.00 pence
164.50 pence
There are no performance conditions on the exercise of the options granted prior to 1 July 2018. The performance conditions of
the share options granted during the year are set out below, with the exception of the options issued to Mr. Wicks which are not
subject to any performance conditions.
The Options will be exercisable from 30 June 2023, dependent on the Company’s compound annual rate of growth in fully diluted
earnings* for the three financial years ending 30 June 2023. The Options will vest subject to performance criteria as follows:
- compound annual earnings growth of 10% or more - fully vested (100%);
- compound annual earnings growth between 5%-10% - partial vesting between 0% and 100% on a sliding scale; and
- compound annual earnings growth of 5% and below - nil.
Any Ordinary Shares arising from the vesting of Options must be held for a period of two years after vesting.
* Fully diluted earnings will be based on: (a) the Company’s pre-tax profit excluding exceptional items and the share option
charge and (b) the current UK corporation tax rate of 19%, such that the fully diluted earnings calculation takes no account of
R&D and deferred tax credits. For the purposes of the fully diluted earnings calculation, the applied rate of corporation tax will
remain constant at 19% irrespective of any current or future changes to corporation tax.
Louise Barton
Remuneration Committee Chairman
31 August 2021
ARCONTECH GROUP PLC
18
Directors’ Report
The Directors present their Report and financial statements for the year ended 30 June 2021.
General information
Arcontech Group plc is a public limited company which is listed on the AIM market of the London Stock Exchange and is
incorporated in the United Kingdom.
Results and dividends
Details of the results for the year are given on page 27. The Directors recommend the payment of a final dividend of 2.75 pence
per ordinary share (2020: 2.5 pence per share) to be paid on 8 October 2021 to ordinary shareholders on the register on 9
September 2021 £366,515 (2020: £330,263).
Directors
The Directors who have held office during the period from 1 July 2020 to the date of this report are as follows:
Geoff Wicks – appointed 20 July 2020
Matthew Jeffs
Louise Barton
Richard Last – ceased to be a Director on 29 September 2020
Geoff Wicks, who retires by rotation under Article 106 of the Company's articles of association and, who being eligible, offers
himself to be re-elected as a Director of the Company.
Richard Last resigned as a Director of the Company on 29 September 2020.
Except as disclosed in note 23 to the financial statements none of the Directors had an interest in any contracts with the Company
or its subsidiaries during the year.
Independence of Non-Executive Directors
Louise Barton was appointed Non-Executive Director on 19 February 2007 and has served for more than 10 years. The Board is
of the opinion that her shareholding aligns her interests with other shareholders, and, in addition, she offers herself for re-election
each year. At the 2020 Annual General Meeting 100% (2020: 100%) of shareholders voted in favour of her re-election. As such
the Board considers her independence is not affected.
Given her length of service she retires under Article 106 of the Company's articles of association and, being eligible, offers herself
to be re-elected as non-executive Directors of the Company.
Employees
The Directors recognise the importance of good communication with employees to ensure a common awareness of factors
affecting the Group. They also recognise their statutory responsibilities. Matters of current concern or interest are discussed with
staff on a regular basis.
Internal control
The Directors acknowledge their responsibilities for the Group’s system of internal control. The Board considers major business
and financial risks. All strategic decisions are referred to the Board, which meets monthly, for approval. Accepting that no system
of control can provide absolute assurance against material misstatement or loss, the Directors believe that the established systems
of internal control within the Group are appropriate to the business.
ARCONTECH GROUP PLC
19
Directors’ Report (continued)
Future developments
The outlook for the year ending 30 June 2022 may be flat or lower as any pick up in revenue will not be fully reflected in our
results until 2022/23. As the market comes out of this difficult period we are confident we will return to growth given the
flexibility provided by our strong balance sheet and the strength of our customer relationships and product profile.
Financial risk management
The Group's financial instruments comprise cash and cash equivalents, and items such as trade payables and trade receivables,
which arise directly from its operations.
The main risks arising from the Group’s financial instruments are interest rate fluctuations and liquidity risk. Refer to Note 26 for
further detail on the Group’s financial instruments and risk exposures. It is the Group’s policy to finance its operations through a
mixture of cash and, where appropriate, external finance and to review the projected cash flow requirements of the Group with an
acceptable level of risk exposure.
Going concern
On the basis of current projections and having regard to the Group’s existing cash reserves, the Directors consider that the Group
has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors have adopted the
going concern basis in the preparation of the financial statements (Refer to Note 1).
Research and Development
The Group continues to make progress in product development, while continuing to keep control of costs. Research and
development expenditure is charged to the income statement in the year incurred, unless it meets the capitalisation criteria under
IAS 38.
Directors’ and Officers’ Liability Insurance
Directors’ and Officers’ liability insurance is in place at the date of this report. The Board remains satisfied that an appropriate
level of cover is in place and a review of cover takes place annually.
Disclosures to auditors
In the case of each of the persons who are Directors at the time when the report is approved, the following applies:
-
-
so far as each of the Directors are aware, there is no relevant audit information of which the Company’s auditors are
unaware; and
each of the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware
of any relevant audit information and to establish that the Company’s auditors are aware of that information.
This information is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Auditors
A resolution to re-appoint PKF Littlejohn LLP will be proposed at the annual general meeting.
On behalf of the Board
Matthew Jeffs
Chief Executive
ARCONTECH GROUP PLC
20
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report, Directors' Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
elected to prepare the financial statements in accordance with applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with
the provisions of the Companies Act 2006. Under company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs of the company and of the group and of the profit or loss
of the group for that period. In preparing these financial statements, the Directors are required to:
-
select suitable accounting policies and then apply them consistently;
- make judgments and accounting estimates that are reasonable and prudent;
-
state whether applicable IFRSs as adopted by the European Union have been followed subject to any material departures
disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will
continue in business;
-
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that they meet their responsibilities under the AIM rules.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
ARCONTECH GROUP PLC
21
Independent Auditor’s Report to the members of
Arcontech Group PLC
Opinion
We have audited the financial statements of Arcontech Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 30 June 2021 which comprise the Group Income Statement and Statement of Comprehensive Income, the Group and
Company Balance Sheets, the Group and Company Statements of Changes in Equity, the Group and Company Cash Flow
Statements and notes to the financial statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and international accounting standards in conformity with
the requirements of the Companies Act 2006 and as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30
June 2021 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent
company’s ability to continue to adopt the going concern basis of accounting included a review of the forecast financial
information prepared by management, management’s assessment of going concern, and post year end information, including
contracted and committed expenditure. We have obtained an understanding of the key assumptions used to prepare this
information and provided appropriate challenge.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s or parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
Our application of materiality
Materiality
Performance Materiality
Basis for materiality
Group £44,800
Group £33,600
2% of revenue
(2019: £44,300)
(2019: £33,225)
Company £33,600
Company £25,200
Capped at 75% of group materiality
(2019: £33,325)
(2019: £24,994)
ARCONTECH GROUP PLC
22
Independent Auditor’s Report to the members of
Arcontech Group PLC (continued)
We consider revenue to be the most significant determinant of the group’s financial position and performance used by
shareholders. The going concern of the group is dependent on its ability to continue to generate profits through revenue growth.
Whilst materiality for the group financial statements as a whole was set at £44,800, materiality for the significant components was
set at a level of £33,600 with performance materiality set at 75%. We applied the concept of materiality both in planning and
performing our audit, and in evaluating the effect of misstatements.
We agreed with the audit committee that we would report to the committee all audit differences identified during the course of our
audit in excess of £2,240 as well as differences below these thresholds that, in our view, warranted reporting on qualitative
grounds.
Our approach to the audit
In designing our audit, we determined materiality and assessed the risk of material misstatement in the financial statements. In
particular, we looked at areas requiring the directors to make subjective judgements, for example in respect of assessing the
carrying value and recoverability of investments in subsidiaries at parent company level, and goodwill at group level, the
valuation of share-based payments, recoverability of deferred tax assets and the consideration of future events that are inherently
uncertain. We also addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
We considered revenue recognition to be a significant risk and key audit matter, and designed our audit procedures to address the
risk of misstatement of revenue, including consideration of key contractual terms within customer agreements and whether
recognition is therefore in accordance with IFRS 15 Revenue from Contracts with Customers.
An audit was performed on the financial information of the group’s significant operating components which, for the year ended 30
June 2021, were located in the United Kingdom.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
ARCONTECH GROUP PLC
23
Independent Auditor’s Report to the members of
Arcontech Group PLC (continued)
Key Audit Matter
How the scope of our audit responded to the key
audit matter
Revenue recognition (see Note 1 – Revenue
Recognition policy)
Our work in this area included:
tailored
information
The group generates sales from the licensing of its
time
proprietary software, which delivers real
market data
to customer
requirements, as well as support and maintenance
services.
Under IFRS 15 Revenue from Contracts with
Customers, a key consideration for the group is
whether the performance obligation/s within their
licensing arrangements are met at a point in time or
over time.
As certain revenue streams can be recognised at a
point in time whilst others have to be recognised
over time, there is a risk that there has been
incorrect recognition of revenue, recognising certain
transactions at a point in time rather than over time.
§ Updating our understanding of the business
and how Arcontech performs its services
for its clients;
§ Updating our documentation of the systems
and controls in place surrounding
significant income streams;
§ Performing a walkthrough test to
understand the internal control
environment in operation for the significant
income streams and ensure that the key
controls within these systems have been
operating in the period under audit;
§ Review the accounting treatment in respect
of revenue recognition under IFRS 15 and
conclude as to the appropriateness of the
proposed treatment;
§ Substantive transactional testing of income
recognised in the financial statements,
including testing of deferred income
balances; and
§ Reviewing post year end receipts to ensure
completeness of income recorded in the
accounting period.
ARCONTECH GROUP PLC
24
Independent Auditor’s Report to the members of
Arcontech Group PLC (continued)
Other information
The other information comprises the information included in the annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on
the group and parent company financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the
group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
ARCONTECH GROUP PLC
25
Independent Auditor’s Report to the members of
Arcontech Group PLC (continued)
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and
regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management and industry experience. We also selected a specific
audit team based on experience with auditing entities within this industry facing similar audit and business risks.
• We determined the principal laws and regulations relevant to the group and parent company in this regard to be those
arising from:
o Companies Act 2006
o AIM Rules
o UK employment law
o Local tax laws and regulations
• We designed our audit procedures to ensure the audit team considered whether there were any indications of non-
compliance by the group and parent company with those laws and regulations. These procedures included, but were not
limited to:
o Making enquiries of management;
o A review of Board minutes;
o A review of legal ledger accounts; and
o A review of RNS announcements.
• We also identified the risks of material misstatement of the financial statements due to fraud. Aside from the non-
rebuttable presumption of a risk of fraud arising from management override of controls, we did not identify any
significant fraud risks.
• As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit
procedures which included, but were not limited to: the testing of journals, reviewing accounting estimates for evidence
of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course
of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a
material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance
with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely
to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than
error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for
the opinions we have formed.
Joseph Archer (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
ARCONTECH GROUP PLC
26
Group Income Statement and Statement of Comprehensive Income
For the year ended 30 June 2021
Revenue
Administrative costs
Operating profit
Net finance (expense) / income
Profit before taxation
Taxation
Profit for the year after tax
Total comprehensive income for the year
Earnings per share (basic)
Adjusted* Earnings per share (basic)
Earnings per share (diluted)
Adjusted* Earnings per share (diluted)
Note
3
4
5
9
10
10
10
10
2021
£
2020
£
2,988,842
2,955,314
(1,945,481)
(1,917,502)
1,043,361
1,037,812
(7,047)
3,157
1,036,314
1,040,969
10,796
176,734
1,047,110
1,217,703
1,047,110
1,217,703
7.88p
7.22p
7..79p
7.14p
9.22p
8.56p
9.03p
8.39p
*Adjusted to exclude the release of accruals for administrative costs of £88,000 (2020: £86,500) in respect of prior years.
All of the results relate to continuing operations.
The notes on pages 32 to 56 form part of these financial statements
ARCONTECH GROUP PLC
27
Statement of Changes in Equity
For the year ended 30 June 2021
Group:
Balance at 30 June 2019
Profit for the year
Total comprehensive income for the year
Dividend paid
Share-based payments
Transfer between reserves
Balance at 30 June 2020
Profit for the year
Total comprehensive income for the year
Dividend paid
Exercise of options
Share
capital
£
1,651,314
Share
premium
£
56,381
-
-
-
-
-
-
-
-
-
1,651,314
-
56,381
-
-
-
-
-
-
14,663
35,979
Share
option
reserve
£
99,647
-
-
-
98,428
(9,436)
188,639
-
-
-
-
Share-based payments
-
-
115,866
Retained
earnings
£
2,842,966
Total
equity
£
4,650,308
1,217,703
1,217,703
1,217,703
1,217,703
(263,591)
(263,591)
-
98,428
9,436
3,806,514
-
5,702,848
1,047,110
1,047,110
1,047,110
1,047,110
(333,594)
(333,594)
-
-
50,642
115,866
Transfer between reserves
Balance at 30 June 2021
-
1,665,977
-
92,360
(33,298)
271,207
33,298
4,553,329
-
6,582,873
Company:
Balance at 30 June 2019
Profit for the year
Total comprehensive expense for the year
Dividend paid
Share-based payments
Transfer between reserves
Balance at 30 June 2020
Profit for the year
Total comprehensive income for the year
Dividend paid
Exercise of options
Share
capital
£
1,651,314
Share
premium
£
56,381
Share
option
reserve
£
99,647
Retained
earnings
£
4,378,109
Total
equity
£
6,185,451
-
-
-
-
-
-
-
-
-
1,651,314
-
56,381
-
-
-
-
-
-
14,663
35,979
-
-
-
326,348
326,348
326,348
326,348
(263,591)
(263,591)
98,428
(9,436)
188,639
-
-
-
-
-
98,428
9,436
4,450,302
-
6,346,636
181,744
181,744
181,744
181,744
(333,594)
(333,594)
-
-
50,642
115,866
Share-based payments
-
-
115,866
Transfer between reserves
Balance as at 30 June 2021
-
1,665,977
-
92,360
(33,298)
271,207
33,298
4,331,751
-
6,361,295
The notes on pages 32 to 56 form part of these financial statements.
ARCONTECH GROUP PLC
28
Balance Sheets
Registered number: 04062416
As at 30 June 2021
Non-current assets
Goodwill
Property, plant and equipment
Right of use asset
Investments in subsidiaries
Deferred tax asset
Trade and other receivables
Note
11
12
17
13
18
14
Group
2021
£
Group
2020
£
Company
2021
£
Company
2020
£
1,715,153
11,147
365,758
-
471,000
141,750
1,715,153
19,316
512,061
-
452,000
141,750
-
-
-
2,017,471
55,000
-
-
-
-
2,017,471
151,000
-
Total non-current assets
2,704,809
2,840,280
2,072,471
2,168,471
Current assets
Trade and other receivables
Cash and cash equivalents
14
15
470,317
5,395,457
192,632
5,006,969
3,263,467
1,077,741
3,181,410
1,146,700
Total current assets
Current liabilities
5,865,774
5,199,601
4,341,208
4,328,110
Trade and other payables
Lease liabilities
16
17
(1,643,407)
(148,450)
(1,851,037)
(141,693)
(52,384)
-
(149,945)
-
Total current liabilities
(1,791,857)
(1,992,730)
(52,384)
(149,945)
Non-current liabilities
Lease liabilities
17
(195,853)
(344,303)
Total Non-current liabilities
(195,853)
(344,303)
-
-
-
-
Net current assets
Net assets
Equity
Called up share capital
Share premium account
Share option reserve
Retained earnings
4,073,917
6,582,873
3,206,871
5,702,848
4,288,824
6,361,295
4,178,165
6,346,636
19
20
20
20
1,665,977
92,360
271,207
4,553,329
1,651,314
56,381
188,639
3,806,514
1,665,977
92,360
271,207
4,331,751
6,582,873
5,702,848
6,361,295
1,651,314
56,381
188,639
4,450,302
6,346,636
As permitted by s408 of the Companies Act 2006, the Company has not presented its own income statement. The parent Company
profit for the year was £181,744 (2020: £326,348).
Approved on behalf of the board on 31 August by:
Matthew Jeffs
Chief Executive
The notes on pages 32 to 56 form part of these financial statements.
ARCONTECH GROUP PLC
29
Group Cash Flow Statement
For the year ended 30 June 2021
Cash generated from operations
22
809,559
1,315,421
Note
2021
£
2020
£
Tax (paid)/recovered
Net cash generated from operating activities
Investing activities
Interest received
Purchases of plant and equipment
(8,204)
9,734
801,355
1,325,155
13,260
29,914
(1,482)
(12,750)
Net cash generated from investing activities
11,778
17,164
Financing activities
Proceeds from the issue of shares
Dividend paid
Payment of lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
50,642
-
(333,594)
(263,591)
(141,693)
(135,243)
(424,645)
(398,834)
388,488
943,485
5,006,969
4,063,484
Cash and cash equivalents at end of year
15
5,395,457
5,006,969
The notes on pages 32 to 56 form part of these financial statements.
ARCONTECH GROUP PLC
30
Company Cash Flow Statement
For the year ended 30 June 2021
Net cash generated by operating activities
22
210,920
320,462
Note
2021
£
2020
£
Tax paid
Net cash generated from operating activities
Investing activities
Interest received
Net cash generated from investing activities
Financing activities
Proceeds from the issue of shares
Dividend paid
(3,319)
-
207,601
320,462
6,392
6,392
11,074
11,074
50,642
-
(333,594)
(263,591)
Net cash used in financing activities
(282,952)
(263,591)
Net (decrease)/ increase in cash and cash equivalents
(68,959)
67,945
Cash and cash equivalents at beginning of year
1,146,700
1,078,755
Cash and cash equivalents at end of year
15
1,077,741
1,146,700
The notes on pages 32 to 56 form part of these financial statements.
ARCONTECH GROUP PLC
31
Notes to the Financial Statements
For the year ended 30 June 2021
1. Accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the period
covered by these financial statements except where changes have been noted below.
Reporting entity
Arcontech Group PLC (“the Company”) is a company incorporated in England and Wales. The consolidated financial
statements incorporate the financial statements of the Company and its subsidiaries (together referred to as “the Group”).
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
endorsed by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under
IFRS.
On the basis of current projections, confidence of future profitability and cash balances held, the Directors have adopted the
going concern basis in the preparation of the financial statements.
The financial statements have been prepared under the historical cost convention.
Going Concern
On the basis of current projections and having regard to the Group’s existing cash reserves, the Directors consider that the
Group has adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion the
Directors have taken into account of downside conditions considered reasonably possible in changes in trading performance
due to the impact of Covid-19. The Board has monitored business conditions caused by the Covid-19 pandemic and assessed
its impact on the Group’s performance over the last twelve months. The Group has been able to maintain its ability operate
successfully with no major detrimental impact to performance being experienced. Although the board acknowledges that
further virus waves could have a material impact on trading performance, the board notes the cushion provided by the strong
net cash position and the ability to cut costs. Accordingly, the Directors have adopted the going concern basis in the
preparation of the financial statements.
Changes in accounting policies and disclosures
a) New and amended Standards and Interpretations adopted by the Group and Company
No standards or Interpretations that came into effect for the first time for the financial year beginning 1 July 2020 have had
an impact on the Group.
b) New and amended Standards and Interpretations issued but not effective for the financial year beginning 1 July 2020
At the date of approval of these financial statements, the following standards and interpretations which have not been applied
in these financial statements were in issue but not yet effective (and in some cases had not been adopted by the UK):
- Amendments to References to Conceptual Framework in IFRS Standards – effective from 1 January 2020
- Definition of Material (Amendments to IAS 1 and IAS 8) – effective from 1 January 2020
- Amendments to IFRS 9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform - effective from 1 January 2020
- Amendment to IFRS 3 Business Combinations – effective 1 January 2020
- Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current –
effective 1 January 2023*
- Amendments to IFRS 3: Business Combinations – Reference to the Conceptual Framework – effective 1 January 2022*
- Amendments to IFRS 9, IAS 3, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform – Phase 2 - effective from
1 January 2021
- Amendments to IAS 16: Property, Plant & Equipment – effective 1 January 2022*
- Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets – effective 1 January 2022*
- Annual Improvements to IFRS Standards 2018-2020 Cycle – effective 1 January 2022*
ARCONTECH GROUP PLC
32
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
1. Accounting policies (continued)
Changes in accounting policies and disclosures (continued)
- Amendments to IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting
Policies – effective 1 January 2023*
- Amendments to IAS 8: Accounting policies, Changes in Accounting Estimates and Errors – Definition of Accounting
Estimates – effective 1 January 2023*
- Amendments to IFRS 16: Leases – Covid-19-Related Rent Concessions beyond 30 June 2021 – effective 1 April 2021
- Amendments to IAS 12: Income Taxes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction
– effective 1 January 2023*
*subject to UK endorsement
The new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be
material.
Basis of consolidation
The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries) prepared to 30 June 2021. Subsidiaries are entities controlled by the Group. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:
•
•
•
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee).
Exposure, or rights, to variable returns from its involvement with the investee
The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
•
•
•
The contractual arrangement with the other vote holders of the investee.
Rights arising from other contractual arrangements.
The Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are
included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to
control the subsidiary. The acquisition method is used to account for the acquisition of subsidiaries.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Business combinations and goodwill
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair value at the date of
acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as
goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount
on acquisition) is credited to the income statement in the period of acquisition. Goodwill arising on consolidation is
recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the
income statement and is not subsequently reversed.
ARCONTECH GROUP PLC
33
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
1. Accounting policies (continued)
Revenue recognition
Revenue is recognised in accordance with the transfer of promised services to customers (i.e. when the customer gains
control of the service) and is measured as the consideration which the group expects to be entitled to in exchange for those
services. Consideration is typically fixed on the agreement of a contract except for quarterly flexible license contracts.
Payment terms are agreed on a contract by contract basis.
A service is distinct if the customer can benefit from the service on its own or together with other resources that are readily
available to the customer and the entity's promise to transfer the service to the customer is separately identifiable from other
promises in the contract.
Contracts with customers do not contain a financing component.
Under IFRS 15, revenue earned from contracts with customers is recognised based on a five-step model which requires the
transaction price for each identified contract to be apportioned to separate performance obligations arising under the contract
and recognised either when the performance obligation in the contract has been performed (point in time recognition) or over
time as control of the performance obligation is transferred to the customer.
The group recognises revenue when it satisfies a performance obligation by transferring a promised service to the customer
as follows:
• Revenue from recurring license fees and other license fees is recognised on an over time basis via a straight line across the
period the services are provided. In reaching this conclusion the group has assessed that ongoing contractual obligations are
not separately identifiable from other promises in the contract and are not distinct from the licence, and hence are accounted
for as a single performance obligation. As the license is not distinct the combined performance obligation is recognised over
time.
In assessing whether a licence is distinct the Group considered the continuing requirement to:–
– optimise functionality;
– optimise performance; and
– provide enhancements to ensure user regulatory compliance.
• Revenue from flexible license contracts that include variable consideration are quarterly contracts assessed at the end of
each calendar quarter and revenue is recognised based on actual usage confirmed for that quarter at the point of customer
acceptance,
• Revenue from project work is recognised on satisfactory completion of each project, as this is considered to be the point in
time the customer gains control over the results of the project work.
Taxation
The tax charge/(credit) represents the sum of the tax payable/(receivable) and any deferred tax.
Research and development tax credits are recognised when received.
The tax payable/(receivable) is based on the taxable result for the year. The taxable result differs from the net result as
reported in the income statement 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 Company’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is
accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
ARCONTECH GROUP PLC
34
Notes to the Financial Statements
For the year ended 30 June 2010 (continued)
1. Accounting policies (continued)
Taxation (continued)
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset
realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to
settle its current assets and liabilities on a net basis.
Share-based payments
The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of
shares or share options, is recognised as an employee benefit expense in the income statement.
The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value
(excluding the effect of non market-based vesting conditions) at the date of grant. Fair value is measured by the use of the
Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the
effects of the non-transferability, exercise restrictions and behavioural considerations. A cancellation of a share award by the
Group or an employee is treated consistently, resulting in an acceleration of the remaining charge within the consolidated
income statement in the year of cancellation.
Impairment of tangible and intangible assets
The carrying amounts of the Group’s and Company’s tangible and intangible assets are reviewed at each year end date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is
estimated.
Expenses incurred on Research & Development are currently expensed through the income statement as the expenditure is
incurred on the maintenance and enhancement of existing products. The applicability of this treatment is reviewed regularly
by the Company.
For goodwill, the recoverable amount is estimated at each year end date, based on value in use. The recoverable amount of
other assets is the greater of their net selling price and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash
generating unit to which the asset belongs.
An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to
reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the
other assets in the unit on a pro rata basis.
A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
ARCONTECH GROUP PLC
35
Notes to the Financial Statements
For the year ended 30 June 2021 (continued
1. Accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, on the following bases:
Leasehold property
Computer equipment
Office furniture and equipment
- over the period of the lease
- 33% - 40% on cost
- 20% - 25% on cost or reducing balance
Investments in subsidiaries
Investments in subsidiaries are stated at cost less any provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party
to the contractual provisions of the instrument.
Financial assets
The Group does not hold any investments other than investments in subsidiaries.
Trade receivables are held in order to collect the contractual cash flows and are initially measured at the transaction price as
defined in IFRS 15, as the contracts of the Group do not contain significant financing components. Impairment losses are
recognised based on lifetime expected credit losses in profit or loss.
Other receivables are held in order to collect the contractual cash flows and accordingly are measured at initial recognition at
fair value, which ordinarily equates to cost and are subsequently measured at cost less impairment due to their short-term
nature. A provision for impairment is established based on 12-month expected credit losses unless there has been a
significant increase in credit risk when lifetime expected credit losses are recognised. The amount of any provision is
recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
Effective interest rate method
The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and allocating
interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash flows through the expected life of the financial asset or liability, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
ARCONTECH GROUP PLC
36
Notes to the Financial Statements
For the year ended 30 June 2021 (continued
1. Accounting policies (continued)
Financial instruments (continued)
(a) Classification
The Group classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through OCI or through profit or loss); and
those to be measured at amortised cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the
cash flows.
For assets measured at fair value, gains and losses will be recorded either in profit or loss or in OCI. For investments in
equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at
the time of initial recognition to account for the equity investment at fair value through other comprehensive income
(FVOCI). See Note 16 for further details.
(b) Recognition
Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase
or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have
expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Debt instruments
Amortised cost; Assets that are held for collection of contractual cash flows, where those cash flows represent solely
payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in
finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together
with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or
loss.
(d) Impairment
From 1 January 2018, the Group assesses, on a forward-looking basis, the expected credit losses associated with its debt
instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant
increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the receivables.
ARCONTECH GROUP PLC
37
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
1. Accounting policies (continued)
Leases
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
•
• Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
• Amounts expected to be payable by the Group under residual value guarantees;
•
•
The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period.
Right-of-use assets are measured at cost which comprises the following:
The amount of the initial measurement of the lease liability;
•
• Any lease payments made at or before the commencement date less any lease incentives received;
• Any initial direct costs; and
•
Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the
underlying asset’s useful life.
Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets (generally less than
£4k) are recognised on a straight-line basis as an expense in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation, legal or constructive, resulting from past events and it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the obligation.
Research and development
Research costs are charged to the income statement in the year incurred. Development expenditure is capitalised to the extent
that it meets all of the criteria required by IAS 38, otherwise it is charged to the income statement in the year incurred.
Pension costs and other post-retirement benefits
The Group makes payments to occupational and employees’ personal pension schemes. Contributions payable for the year
are charged in the income statement.
ARCONTECH GROUP PLC
38
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
1. Accounting policies (continued)
Foreign currencies
Transactions denominated in foreign currencies are translated into sterling at the exchange rate ruling when the transaction
was entered into. Where consideration is received in advance of revenue being recognised the date of the transaction reflects
the date the consideration is received. Foreign currency monetary assets and liabilities are translated into sterling at the
exchange rate ruling at the balance sheet date. Exchange gains or losses are included in operating profit.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker as required by IFRS 8 “Operating Segments”. The chief operating decision-maker responsible for allocating resources
and assessing performance of the operating segments has been identified as the Board of Directors. The accounting policies
of the reportable segments are consistent with the accounting policies of the group as a whole. Segment profit/(loss)
represents the profit/(loss) earned by each segment without allocation of foreign exchange gains or losses, investment
income, interest payable and tax. This is the measure of profit that is reported to the Board of Directors for the purpose of
resource allocation and the assessment of segment performance. When assessing segment performance and considering the
allocation of resources, the Board of Directors review information about segment assets and liabilities. For this purpose, all
assets and liabilities are allocated to reportable segments with the exception of cash and cash equivalents and current and
deferred tax assets and liabilities.
2. Critical accounting judgments and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting practice requires management to
make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of
contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the
reporting period.
Estimates and judgements are continually evaluated and are based on historic experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
Judgements
Determination of performance obligations and satisfaction thereof
For the purposes of recognising revenue, the Directors are required to identify distinct services in contracts and allocate the
transaction price to the performance obligations. Details of determining performance obligations, passing of control and
amounts recognised as costs incurred to obtain or fulfil a contract are given in Note 1 - Revenue recognition.
Capitalisation of development costs
As described in Note 1, the Group capitalises development costs when certain criteria are met including the probability of
relevant future economic benefits. The directors have assessed the likelihood of relevant future economic benefits and have
judged it appropriate to not capitalise any development costs (2020 - £Nil).
Estimates
Impairment of non-current assets
Determining whether non-current assets are impaired requires an estimation of the value in use of the cash generating units
to which non-current assets have been allocated. The value in use calculation requires the Group to estimate the future cash
flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. No
provision for impairment was made in the year to the carrying value of goodwill (see note 11) or investments in subsidiaries (see
note 13).
ARCONTECH GROUP PLC
39
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
2. Critical accounting judgments and key sources of estimation uncertainty (continued)
Recognition of deferred tax assets
As described in Note 1, the Group recognises deferred tax assets arising from unused tax losses when certain criteria are met
including the probability that future relevant taxable profits will be available. The directors have assessed the likelihood of
future taxable profits being available and have judged it appropriate to recognise deferred tax assets for unused losses. At the
year-end a deferred tax asset of £471,000 (2020 - £452,000) was recognised.
Share based payment transactions
The Company has made awards of options and over its unissued share capital to certain Directors and employees as part of
their remuneration package.
The valuation of these options involves making a number of critical estimates relating to price volatility, future dividend
yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in Note 19.
3. Revenue
An analysis of the Group’s revenue is as follows:
Software development, licence fees and project work
2,988,842
2,955,315
2021
£
2020
£
All of the Group’s revenue relates to continuing activities.
4. Operating profit for the year is stated after charging/(crediting):
Depreciation of plant and equipment (see note 12)
Depreciation of leased assets (see note 17)
Interest on leased assets (see note 17)
Staff costs (see note 8)
Research and development
Release of accruals for administrative costs in respect of prior years
5. Finance income and Finance costs:
Finance income
Income on cash and cash equivalents
Finance costs
Lease interest expense
Net finance (expense) / income
6. Auditor’s remuneration:
Fees payable to the Group’s auditor for the audit of the Group’s annual
accounts
Fees payable to the Group’s auditor for other services:
- audit of the Company’s subsidiaries
ARCONTECH GROUP PLC
2021
£
9,651
146,303
20,307
1,491,063
506,893
(88,000)
2020
£
8,444
146,303
26,757
1,401,227
468,680
(86,500)
2021
£
2020
£
13,260
29,914
(20,307)
(7,047)
(26,757)
3,157
2021
£
29,750
6,000
2020
£
28,750
6,000
40
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
7. Operating segments:
The Group reports internally to the Chief Operating Decision Maker (CODM), who is considered to be the Board.
Intersegment license fees and management charges are not included in the reports reviewed by the CODM during the year
but are calculated for statutory reporting purposes and therefore are excluded from the following revenue and operating
profit disclosures.
Revenue by segment
Software development and licence fees
External segment revenue
Operating profit by segment
2021
£
2020
£
2,988,842
2,988,842
2,955,315
2,955,315
Software development and licence fees
1,468,132
1,575,029
Unallocated overheads
Total operating profit
(445,078)
1,023,054
(563,976)
1,011,053
Finance income
Total profit before tax as reported in the Group income statement
13,260
1,036,314
29,916
1,040,969
Segment total of assets
Software development and licence fees
Unallocated assets
Less intercompany debtors
Total assets
Segment total of liabilities
Software development and licence fees
Unallocated liabilities
Less intercompany creditors
Total liabilities
2021
£
2020
£
7,337,340
6,514,118
4,492,208
11,829,548
4,533,110
11,047,228
(3,258,968)
8,570,580
(3,174,349)
7,872,879
2021
£
2020
£
5,193,528
5,360,835
53,150
5,246,678
150,546
5,511,381
(3,258,968)
1,987,710
(3,174,349)
2,337,032
ARCONTECH GROUP PLC
41
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
7. Operating segments (continued):
Additions of property, plant and equipment assets by segment
Software development and licence fees
Total additions
Depreciation of property, plant and equipment assets recognised in the
period by segment
Software development and licence fees
Total depreciation
Non-current assets by country
UK
Total non-current assets
2021
£
1,482
1,482
2021
£
9,651
9,651
2020
£
12,750
12,750
2020
£
8,444
8,444
2021
2020
£
2,704,809
2,704,809
£
2,840,280
2,840,280
Geographical information - External revenue
2021
2020
UK
Europe (excluding UK)
Africa
North America
Australia
Asia Pacific
£
2,065,903
771,541
42,500
83,637
11,838
13,423
2,988,842
£
2,000,457
821,193
45,000
78,177
4,267
6,221
2,955,315
During the year there were 3 customers (2020: 4) who accounted for more than 10% of the Group’s revenues as follows:
Customer 1
Customer 2
Customer 3
Customer 4
2020
2020
Value of
sales
£
668,122
522,149
375,168
-
1,565,439
% of Total
22%
17%
13%
-
52%
Value of
sales
£
659,327
516,605
371,536
300,696
1,848,164
These revenues are attributable to the software development and licence fees segment.
ARCONTECH GROUP PLC
% of Total
22%
17%
13%
10%
62%
42
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
8.
Staff costs:
a) Aggregate staff costs, including Directors’ remuneration
Wages and salaries
Social security costs
Pension contributions
Share-based payments
b) The average number of employees (including executive Directors) was:
Sales and administration
Development and support
c) Directors’ emoluments
Short-term employee benefits
Pension contributions
Share-based payments
Social security costs
Key management personnel compensation
Directors’ emoluments represent the staff costs of the parent company.
The average number of employees of the parent company is 3 (2020: 3)
The highest paid Director received remuneration of £186,178 (2020: £250,166).
2021
£
1,206,748
144,131
24,318
115,866
1,491,063
6
11
17
£
232,352
5,250
63,030
300,632
49,351
349,983
2020
£
1,139,695
140,611
22,493
98,428
1,401,227
5
11
16
£
312,902
5,428
57,432
375,762
37,536
413,298
The number of Directors that are members of a defined contribution pension scheme is 1 (2020: 1). Pension contributions
paid to a defined contribution scheme in respect of the highest paid Director amounted to £5,250 (2020: £5,100).
ARCONTECH GROUP PLC
43
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
9. Taxation
Current tax
Deferred tax
Total tax credit for the year
2021
£
(8,204)
19,000
10,796
2020
£
9,734
167,000
176,734
The difference between the total tax credit shown above and the amount calculated by applying the standard rate of UK
corporation tax to the profit before tax is as follows:
Profit on ordinary activities before tax
2021
£
1,036,314
2020
£
1,040,969
Profit on ordinary activities multiplied by the standard rate of corporation
tax in the UK of 19 % (2019: 19%)
196,900
197,784
Effects of:
Disallowed expenses
Temporary differences on deferred tax
Income taxes paid
Research and development tax credits
97
1,457
8,204
-
416
1,255
-
(9,734)
Deferred tax asset not previously recognised
(19,000)
(167,000)
Brought forward losses utilised/loss for the year carried forward
(198,454)
(199,455)
Total tax credit for the year
(10,796)
(176,734)
Factors which may affect future tax charges
At 30 June 2021 the Group has tax losses of approximately £8,500,000 (2020: £8,900,000) to offset against future trading
profits.
ARCONTECH GROUP PLC
44
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
10. Earnings per share
Earnings
Earnings for the purpose of basic and diluted earnings per share being net
profit attributable to equity shareholders
Number of shares
Weighted average number of ordinary shares for the purpose of basic
earnings per share
Number of dilutive shares under option
Weighted average number of ordinary shares for the purposes of dilutive
earnings per share
2021
£
2020
£
1,047,110
1,047,110
1,217,703
1,217,703
No.
No.
13,290,672
13,210,510
143,168
268,484
13,433,840
13,478,994
The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise
from share options. A calculation is done to determine the number of shares that could have been acquired at fair value,
based upon the monetary value of the subscription rights attached to outstanding share options.
11. Goodwill
Cost and net book amount
2021
£
2020
£
At 1 July 2020 and at 30 June 2021
1,715,153
1,715,153
Goodwill acquired in a business combination is allocated at acquisition, to the cash generating units (CGUs) that are
expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:
Arcontech Limited
2021
£
1,715,153
1,715,153
2020
£
1,715,153
1,715,153
The CGU used in these calculations is Arcontech Limited. The group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined
from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount
rates, growth rates and expected changes to selling prices and direct costs during the period. The discount rate is estimated
using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs.
Long-term growth rates are based on industry growth forecasts. Changes in selling prices a re based on past practices
and expectations of future changes in the market. Changes in direct costs are based on expected cost of inflation of 2.5%
and 1.8% after year 5.
Cashflow forecasts are based on the latest financial budgets and extrapolate the cashflows for the next five years based on an
estimated growth in revenue representing an average rate of 5% (2020: 5%) per annum, after which the UK long-term growth
rate of 1.8% is applied. The Directors consider that this rate is appropriate, given the level of new contracts achieved during
the year. Fluctuation in revenue is the most sensitive of assumptions. Should revenue fall by more than an average of 5% per
annum then this could result in the value of goodwill being impaired.
As the Group does not have any borrowings, the rate used to discount all the forecast cash flows is 8.8% (2020: 8.8%),
which represents the Group’s cost of capital.
Goodwill on the purchase of Arcontech Limited is attributable to the operating synergies that have arisen as a result of the
combination.
ARCONTECH GROUP PLC
45
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
12. Property, plant and equipment - Group
Cost
At 1 July 2019
Additions
At 1 July 2020
Additions
At 30 June 2021
Depreciation
At 1 July 2019
Charge for the year
At 1 July 2020
Charge for the year
At 30 June 2021
Net book amount at 30 June 2021
Net book amount at 30 June 2020
13. Investment in subsidiaries
Carrying amount
At 1 July 2020
Provisions written back
Amounts written off
At 30 June 2021
Leasehold
Property
£
Office
furniture &
equipment
£
Total
£
26,199
129,469
155,668
-
12,749
12,749
26,199
142,218
168,417
-
1,482
1,482
26,199
143,700
169,899
19,136
121,521
140,657
1,461
6,983
8,444
20,597
128,504
149,101
1,461
8,190
9,651
22,058
136,694
158,752
4,141
5,602
7,008
11,147
13,714
19,316
2021
£
2020
£
2,017,471
2,017,471
-
-
-
-
2,017,471
2,017,471
Details of the investments in which the Group and the Company holds 20% or more of the nominal value of any class of
share capital are listed below. The Goodwill recognised in Note 11 is in connection with investments made in subsidiaries:
Country of
Incorporation
Address
Arcontech Solutions Limited
England
Cognita Technologies Limited
England
Arcontech Limited
England
11-21 Paul Street, London
EC2A 4JU
11-21 Paul Street, London
EC2A 4JU
11-21 Paul Street, London
EC2A 4JU
Nature of business
Dormant
Ordinary
shares
held
100%
Software development
100%
Software development
and consultancy
100%
ARCONTECH GROUP PLC
46
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
14. Trade and other receivables
Group
2021
£
Group
2020
£
Company
2021
£
Company
2020
£
Due within one year:
Trade and other receivables
330,740
38,162
-
-
Amounts owed by group undertakings
-
-
3,258,868
3,174,150
Prepayments and accrued income
Due after more than one year:
Other receivables
139,577
470,317
Group
2021
£
141,750
141,750
154,470
192,632
4,599
3,263,467
7,160
3,181,310
Group
2020
£
141,750
141,750
Company
2021
£
Company
2020
£
-
-
-
-
Trade receivables, which are the only financial assets at amortised cost, are non-interest bearing and generally have a 30-
90 day term. Due to their short maturities, the carrying amount of trade and other receivables is a reasonable
approximation of their fair value. A provision for impairment of trade receivables is established using an expected loss
model. Expected loss is calculated from a provision based on the expected lifetime default rates and estimates of loss on
default.
As at 30 June 2021, trade receivables of £Nil were impaired (2020: £Nil) and during the year an impairment charge relating to
trade receivables of £Nil (2020: £Nil) was recognised. As at 30 June 2021 trade receivables of £100,469 (2020: £792) were
past due but not impaired. The ageing analysis of these trade receivables is as follows:
Group
2021
£
100,469
-
100,469
Group
2020
£
792
-
792
Company
2021
£
Company
2020
£
-
-
-
-
-
-
Up to 3 months past due
3 to 6 months past due
15. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.
ARCONTECH GROUP PLC
47
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
16. Trade and other payables
Trade payables
Amounts owed to group undertakings
Group
2021
£
52,881
-
Group
2020
£
76,765
-
Other tax and social security payable
113,083
52,033
Other payables and accruals*
388,137
527,109
Deferred income
1,089,306
1,643,407
1,195,130
1,851,037
Company
2021
£
Company
2020
£
4,155
100
8,844
39,285
-
52,384
21,199
100
10,475
118,171
-
149,945
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Trade payables and other payables and accruals constitute the financial liabilities within the category “Financial liabilities at
amortised cost” with a total value of £441,018 (2020: £603,874).
*Other payables and Accruals includes a provision for dilapidations for the Office premises of £50,000 (2019: £50,000).
Refer to note 1 for the Accounting Policy for Provisions.
17. Leases
Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for all leases on its balance sheet. The only
lease applicable under IFRS 16 is the Group’s office.
The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position are as follows:
As at 30 June 2021
Carrying value at 30 June 2020
Depreciation
Interest
Lease payments
Lease
liability
£
(485,996)
-
(20,307)
162,000
Right of
use asset
£
512,061
(146,303)
-
-
Income
statement
£
-
(146,303)
(20,307)
-
Carrying value at 30 June 2021
(344,303)
365,758
(166,610)
As at 30 June 2020
Balance on transition (1 July 2019)
Recognised on adoption of IFRS 16
Depreciation
Interest
Lease payments
Prepayments
£
37,125
(37,125)
-
-
-
Lease
liability
£
-
(621,239)
-
(26,757)
162,000
Right of use
asset
£
-
658,364
(146,303)
-
-
Income
statement
£
-
-
(146,303)
(26,757)
-
Carrying value at 30 June 2020
-
(485,996)
512,061
(173,060)
ARCONTECH GROUP PLC
48
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
17. Leases (continued)
Contractual maturity analysis of lease liabilities as at 30 June 2021
Less than
3 months
£
40,500
3 – 12
Months
£
121,500
1 – 5
Year
£
202,800
Longer than
5 years
£
-
Total
£
364,800
Lease liabilities
18. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using the tax rate of 17% which came
into effect from 1 April 2020. The movement on the deferred tax account is as shown below:
At 1 July
Tax credit recognised in group income
statement
Group
2021
£
452,000
Group
2020
£
285,000
Company
2021
£
151,000
Company
2020
£
125,000
19,000
167,000
(96,000)
26,000
At 30 June
471,000
452,000
55,000
151,000
The deferred tax asset has been recognised in relation to forecast taxable profits which are considered probable.
Losses to offset against future trading profits at 30 June 2021 amounted to approximately £8,500,000 (2020: £8,900,000).
ARCONTECH GROUP PLC
49
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
19. Share capital
Company
Allotted and fully paid:
2021
£
2020
£
13,327,811 (2020: 13,210,510) Ordinary shares of 12.5p each
1,665,976
1,651,314
Share options
Under the Company’s approved 2002 Share Option Scheme, certain Directors and employees held options at 30 June 2021
for unissued Ordinary Shares of 12.5 pence each as follows:
Share options
At 1 July
2020
Granted
Exercised
Forfeited
At 30 June
2021
Exercise price Normal exercise period
Employees:
80,000
125,000
50,000
55,000
-
-
-
-
-
75,000
Directors:
Michael Levy
20,635
16,666
555
Richard Last
24,762
-
-
-
-
Geoff Wicks
-
30,000
Louise Barton
40,000
20,000
Matthew Jeffs
100,000
-
-
-
50,000
-
-
50,000
(80,000)
-
-
-
-
(20,635)
(16,666)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(555)
-
-
-
-
-
-
-
-
23.75 pence
125,000
50,000
64.50 pence
110.00 pence
55,000
196.00 pence
1 Sep 17 – 31 Aug 21
25 Apr 20 – 24 Apr
27
30 Jun 21 – 29 Jun 28
30- Jun 22 – 27 Sep
29
75,000
164.50 pence
30 Jun 23 – 2 Oct 30
-
-
-
64.50 pence
110.00 pence
196.00 pence
24,762
64.50 pence
25 Apr 20 – 24 Apr
27
30 Jun 21 – 29 Jun 28
30- Jun 22 – 27 Sep
29
25 Apr 20 – 24 Apr
27
30,000
164.50 pence
30 Jun 23 – 2 Oct 30
40,000
23.75 pence
1 Sep 17 – 31 Aug 21
20,000
64.50 pence
100,000
110.00 pence
50,000
50,000
196.00 pence
164.50 pence
25 Apr 20 – 24 Apr
27
30 Jun 21 – 29 Jun 28
30- Jun 22 – 27 Sep
29
30 Jun 23 – 2 Oct 30
Total
582,618
155,000
(117,301)
(555)
619,762
Weighted
average exercise
price
92.9 pence
164.5 pence
43.2 pence
196.0 pence
120.2 pence
ARCONTECH GROUP PLC
50
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
19. Share capital (continued)
The number of options exercisable at 30 June 2021 was 359,762 (At 30 June 2020: 310,397), these had a weighted average
exercise price of 78.9 pence (2020: 128.98 pence).
The weighted average share price as at the exercise date of the shares exercised in the year was 43.2 pence (2020: Nil pence
and of the shares were forfeited in the year was 196.0 pence (2020: 64.5).
Options granted under the Company’s approved 2002 Share Option Scheme are forfeited when the Optionholder ceases to be
a Director or employee of a Participating Company. The Directors may before the expiry of 3 months following cessation of
employment permit an Optionholder to exercise their Option within a period ending no later than 12 months from the
cessation of employment.
The highest price of the Company’s shares during the year was 209.0 pence, the lowest price was 147.5 pence and the price
at the year-end was 165.0 pence.
The weighted average remaining contractual life of share options outstanding at 30 June 2021 was 7 years (2020: 6 years).
Share-based payments
The Group operates an approved Share Option Scheme for the benefit of Directors and employees. Options are granted to
acquire shares at a specified exercise price at any time following but no later than 10 years after the grant date. There are no
performance conditions on the exercise of the options granted prior to 1 July 2018. The performance conditions of those
granted after 1 July 2018 which apply to executive directors and certain key staff, are set out below.
The options issued in November 2018, September 2019 and in October 2020 will be exercisable from 30 June 2021, 30 June
2022 and 30 June 2023 respectively, dependent on the Company’s compound annual rate of growth in fully diluted
earnings* for the three financial years ending 30 June 2021, 2022 and 2023, respectively.
Options issued date
Exercisable from
November 2018
September 2019
October 2020
30 June 2021
30 June 2022
30 June 2023
The Options will vest subject to performance criteria as follows:
Dependent on the Company’s
compound annual rate of growth in
fully diluted earnings* for the three
financial years ending
30 June 2021
30 June 2022
30 June 2023
- compound annual earnings growth of 10% or more - fully vested (100%);
- compound annual earnings growth between 5%-10% - partial vesting between 0% and 100% on a sliding scale; and
- compound annual earnings growth of 5% and below - nil.
Any Ordinary Shares arising from the vesting of Options must be held for a period of two years after vesting.
* Fully diluted earnings will be based on: (a) the Company’s pre-tax profit excluding exceptional items and the share option
charge and (b) the current UK corporation tax rate of 19%, such that the fully diluted earnings calculation takes no account
of R&D and deferred tax credits. For the purposes of the fully diluted earnings calculation, the applied rate of corporation
tax
will remain constant at 19% irrespective of any current or future changes to corporation tax.
The fair value of options is valued using the Black-Scholes pricing model. An expense of £115,866 (2019: £98,428) has been
recognised in the period in respect of share options granted. The cumulative share option reserve at 30 June 2021 is £271,207
(2020: £188,639).
ARCONTECH GROUP PLC
51
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
19. Share capital (continued)
The inputs into the Black-Scholes pricing model are as follows:
Directors &
Employees
Grant date
Exercise price
Expected life
Expected volatility
Risk free rate of interest
Dividend yield
Fair value of option
1 Sep 2014
23.75 pence
6 years
65%
0.5%
Nil
19.64 pence
25 Apr 2017
64.5 pence
10 years
50%
0.5%
Nil
36.7 pence
29 Nov 2018
110.0 pence
10 years
50%
0.75%
Nil
57.0 pence
27 Sep 2019
196.0 pence
10 years
50%
0.75%
Nil
115.0 pence
2 Oct 2020
164.5 pence
10 years
49%
0.00%
0.01%
91.92 pence
Volatility has been estimated based on the historic volatility over a period equal to the expected term from the grant date.
20. Reserves
Details of the movements in reserves are set out in the Statement of Changes in Equity. A description of each reserve is set
out below.
Share premium account
This is used to record the aggregate amount or value of premiums paid when the Company’s shares are issued at a premium,
net of issue costs, less amounts cancelled by court order.
Share option reserve
This relates to the fair value of options granted which has been charged to the income statement over the vesting period of
the options, less amounts transferred to retained earnings.
Retained earnings
This relates to accumulated profits and losses together with distributable reserves arising from capital reductions, less
amounts distributed to shareholders.
21. Income statement
The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish
its individual income statement and related notes.
ARCONTECH GROUP PLC
52
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
22. Net cash generated from operations - Group
Operating profit
Depreciation charge
Non cash share option charges
Lease interest paid
Adjustment for IFRS 16
(Increase)/decreas in trade and other receivables
(Decrease)/increase in trade and other payables
2021
£
2020
£
1,043,361
1,037,812
155,954
115,867
(20,307)
-
(277,686)
(207,630)
154,747
98,428
(26,757)
(37,125)
71,244
17,072
Cash generated from operations
809,559
1,315,421
Net cash generated from operations - Company
Operating profit
Non cash share option charges
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
2021
£
274,671
115,867
(82,057)
(97,561)
2020
£
289,274
98,428
(107,891)
40,651
Cash generated by/(used in) operations
210,920
320,462
ARCONTECH GROUP PLC
53
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
23. Related party transactions
Group
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are disclosed in this part of the note.
Key management compensation
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of
the Group. In the opinion of the Board, the Group’s key management are the Directors of Arcontech Group PLC.
Information regarding their compensation is given in notes 8 and 19 for each of the categories specified in IAS 24 Related
Party Disclosures. All emoluments given in notes 8 and 19 relate to short-term employee benefits and there are no post-
employment or other long-term benefits.
The financial statements include the following amounts in respect of services provided to the Group:
Company
Transactions between the Parent Company and its subsidiaries during the year were as follows:
Management charges payable by subsidiaries £534,094 (2020: £670,640).
The amounts due from/to subsidiaries at the balance sheet date were as follows:
Amount due from subsidiaries
Less: Provision for impairment
Amount due from subsidiaries - net
2021
£
2020
£
7,223,539
7,324,474
(3,964,671)
3,258,868
(4,150,324)
3,174,150
During the year a provision of £185,654 was released (2020: £177,500) in respect of balances due from subsidiaries.
Amount due to subsidiaries
24. Dividends
2021
£
670,640
670,640
2020
£
670,640
670,640
A final dividend of 2.75 pence will be proposed at the Annual General Meeting but has not been recognised as it requires
approval (2020: 2.5 pence).
25. Material non-cash transactions
There were no material non-cash transactions during the period.
ARCONTECH GROUP PLC
54
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
26. Financial instruments
The Group's financial instruments comprise cash and cash equivalents, and items such as trade payables and trade
receivables, which arise directly from its operations. The main purpose of these financial instruments is to provide finance
for the Group's operations.
The Group’s operations expose it to a variety of financial risks including credit risk, liquidity risk and interest rate risk.
Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a
sub-committee of the Board. The policies set by the Board of Directors are implemented by the Company’s finance
department.
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables. The Group has implemented policies that require
appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual
counterparty is subject to a limit, which is reassessed annually by the Board. Trade receivables are considered in default and
subject to additional credit control procedures when they are more than 30 days past due in line with industry practice. Trade
receivables are only written off when there is no reasonable expectation of recovery due to insolvency of the debtor.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was:
Trade receivables
Group
2021
£
330,740
Group
2020
£
38,162
Company
2021
£
-
Company
2020
£
-
Cash and cash equivalents
5,395,457
5,006,969
1,077,741
1,146,700
Amounts owed by group undertakings
-
5,726,197
-
5,045,131
3,258,868
4,336,609
3,174,250
4,320,950
Interest rate risk
The Group has interest bearing assets and no interest-bearing liabilities. Interest bearing assets comprise only cash and cash
equivalents, which earn interest at a variable rate.
The Group has not entered into any derivative transactions during the period under review.
The Group does not have any borrowings.
The Group’s cash and cash equivalents earned interest at variable rates, between 0.15% below bank base rate and 0.5% above
bank base rate and at fixed/variable rates of between 0.25% and 1.50% (2020: 0.30% below bank base rate and 0.6% above
bank base rate and at fixed/variable rates of between 0.35% and 1.85%).
Liquidity risk
The Group has no short-term debt finance. The Group monitors its levels of working capital to ensure that it can meet its
liabilities as they fall due.
The Group’s only financial liabilities comprise trade payables and other payables and accruals, excluding deferred income,
with a carrying value equal to the gross cash flows payable of £441,018 (2020: £603,874) all of which are payable within 6
months.
ARCONTECH GROUP PLC
55
Notes to the Financial Statements
For the year ended 30 June 2021 (continued)
26. Financial instruments (continued)
Market risk and sensitivity analysis
Equity price risk
The Directors do not consider themselves exposed to material equity price risk due to the nature of the Group’s operations.
Foreign currency exchange risk
The Directors do not consider themselves exposed to material foreign currency risk due to the nature of the Group’s
operations. All invoices are raised in sterling.
Interest rate risk
The Group is exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn interest
at variable and fixed rates. As at 30 June 2021, if bank base rate had increased by 0.5% with all other variables held
constant, post-tax profit would have been £26,977 (2020: £25,035) higher and equity would have been £26,977 (2020: £25,035)
higher. Conversely, if bank base rate had fallen 0.5% with all other variables held constant, post-tax profit would have been
£26,977 (2019: £25,035) lower and equity would have been £26,977 (2019: £25,035) lower.
27. Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order
to provide returns for shareholders and maintain an optimal capital structure.
The Group defines capital as being share capital plus reserves. The Board of Directors continually monitors the level of
capital.
The Group is not subject to any externally imposed capital requirements.
28. Ultimate controlling party
There is no ultimate controlling party.
29. Copies of this statement
Copies of this statement are available from the Company Secretary at the Company’s registered office at 1st Floor, 11-21
Paul Street, London, EC2A 4JU or from the Company’s website at www.arcontech.com.
ARCONTECH GROUP PLC
56
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Arcontech Group PLC
Arcontech Group PLC
Arcontech Group PLC
Arcontech Group PLC
1st Floor, 11-21 Paul Street
1st Floor, 11-21 Paul Street
1st Floor, 11-21 Paul Street
1st Floor, 11-21 Paul Street
LONDON
LONDON
LONDON
LONDON
EC2A 4JU
EC2A 4JU
EC2A 4JU
EC2A 4JU
tel: +44 (0)20 7256 2300
tel: +44 (0)20 7256 2300
tel: +44 (0)20 7256 2300
tel: +44 (0)20 7256 2300
web: www.arcontech.com
web: www.arcontech.com
web: www.arcontech.com
web: www.arcontech.com
email: mail@arcontech.com
email: mail@arcontech.com
email: mail@arcontech.com
email: mail@arcontech.com
eport and
eport and
eport and
eport and
ear ended 30 June 201
ear ended 30 June 201
ear ended 30 June 2021
ear ended 30 June 2020