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
ear ended 30 June 2022
REGISTERED NUMBER: 04062416 (England and Wales)
Arcontech Group PLC
Annual Report and Accounts
Year ended 30 June 2022
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
Statements of Financial Position
Group Statement of Cash Flows
Company Statement of Cash Flows
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
NatWest Bank Plc
94 Moorgate
London
EC2M 6UR
Company website
www.arcontech.com
1
Chairman’s Statement
The market for our products continued to experience challenges through 2021/2022. Customers generally were streamlining
operations to manage costs and we have done well to maintain most of our customer base. As previously reported we lost two
customers and this impacted the second half of the year and will have an impact on our results for 2022/2023 as well. However, we
have closed some new sales towards the end of last year and we are well placed to make up some of the lost revenue during the
current year.
Turnover was £2,757,795 (2021: £2,988,842) down by £231,047 on last year as a result of the customer losses. Profit before taxation
was £758,573 (2021: £1,036,314) reflecting the lower second half revenue. Over 90% of our revenue is recurring and average
contract periods have increased over the last year so while revenue has reduced, it has increased in resilience and quality. Statutory
earnings per share for the year to 30 June 2022 were 4.57p (2021: 7.88p).
Through the pandemic it was difficult to visit our customer base in the UK and internationally with many of our usual contacts
working from home. Budgets were tightly controlled across the board with new projects put on hold and some consolidation taking
place. While this has impacted our business we remain in good shape, with a strong balance sheet, and able to take advantage of
opportunities as the market improves.
We have used this period to strengthen our sales and marketing team and have worked hard to maintain a high level of customer
support. Our product line has been upgraded and work is continuing on additions to products with some early-stage work on
extensions to our product range for new areas of the market.
Our recurring revenue base enables us to have confidence to continue with our strategy to grow our core business and to expand
into new market areas. We have made good progress with a number of prospective customers over the year but recognise that lead
times are longer than before the pandemic. In recent months we have seen signs of improvement in the market with new projects
being discussed with existing customers and prospective new customers.
Financing
Cash balances were £6,026,469 (2021: £5,395,457) at the period end, an increase of 11.7%. This strong balance sheet allows the
Company to invest in both organic growth and to identify complementary acquisitions.
Dividend
I am pleased to announce that subject to approval at the Annual General Meeting we intend to pay a dividend of 3.25p per share for
the year ended 30 June 2022 (2021: 2.75 pence) an increase of 18.2%, to those shareholders on the register as at the close of business
on 30 September 2022 with a dividend payment date of 24 October 2022.
Employees
Through the difficult period of the pandemic, we have retained most of our staff and where necessary we have been able to replace
leavers with candidates of a high calibre. Staff are back in the office for most of the week but we continue to operate a hybrid
working environment to allow greater flexibility.
Outlook
Several years of inactivity at many of our clients and prospects has created pent up demand which is demonstrated by our robust
pipeline. Although conditions remain uncertain, as economies globally face well documented challenges, we are confident that we
can convert some of the current interest to orders and start to build back the revenue we lost during the pandemic.
Geoff Wicks
Chairman and Non-Executive Director
ARCONTECH GROUP PLC
2
Chief Executive’s Review
The 2021/22 financial year was challenging reflecting the impact Covid had on our customer landscape and we performed well to
deliver revenues and profit before tax in line with market expectations.
Our pipeline is growing and prospects along with existing clients are beginning to engage. We have also managed to extend the
length of contracts with some of our larger clients to multi-year terms, reflecting their confidence and satisfaction in our products
and service.
The year has further seen us continue to improve and build out our software solutions to meet client needs and to differentiate us
from the competition. Our tick history server, which is a development of our desktop product, is close to being ready for alpha
testing as is our permissioning system. The tick history server which stores pricing data so that it can be used for other purposes,
will allow us to address new markets, currently occupied by two dominant providers, whilst our permissioning system which ensures
users only receive data they are licensed for allows us to replace incumbent platforms wholesale whilst targeting a wider range of
prospects.
At the request of a client we have also built additional feed handlers to enable direct delivery of data by content creators, in this
instance, for two of the largest inter-dealer brokers. These are currently in User Acceptance Testing at the client and add to the
direct feeds we will be able to integrate to all clients. This is a good example of how closely we work with our clients and highlights
the bespoke service we are able to provide.
The website and marketing materials have also been refreshed to better reflect what we do. This is a work in progress and we have
more improvements planned.
We continue to grow our cash resources which enables us to proactively look for suitable acquisitions. At the same time we are
researching alternative products linked to the services we already provide to create additional paths for organic growth. We are in
very early-stage discussions with several clients in this regard.
Our staff are a key asset to the Company and have continued to provide exemplary service and support to our clients. I would like
to express my thanks for their continued commitment.
During the year we made changes to our sales personnel which has enabled us to focus on new markets. We are also adding to our
support team to provide desktop support along with the technical support we have provided to date.
With clients returning to the office and travel restrictions largely over we are seeing encouraging signs from existing clients and
prospects alike. As a result we are cautiously optimistic for the year ahead and beyond.
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 2022.
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 £2,757,795 (2021: £2,988,842; 2020: £2,955,314)
Adjusted profit £601,566 (2021: £959,110; 2020: £1,131,203)
Cash £6,026,469 (2021: £5,395,457; 2020: £5,006,969)
Earnings per share (basic) 4.57p (2021: 7.88; 2020: 9.22p)
Earnings per share (diluted) 4.56p (2021: 7.79p; 2020: 9.03p)
Measurement:
Revenue from sales made to all customers (excluding intra-
group sales which eliminate on consolidation)
Performance:
Loss of two customers during the year impacted sales in the
second half of the year
Measurement:
Profit after tax and before release of accruals for
administrative costs in respect of prior years . This is an
alternative, non-IFRS performance measure,
is
considered relevant as it provides a more accurate
reflection of trading performance than net profit after tax.
The adjusted profit is Net profit after tax less the amount of
accruals for administrative costs released as disclosed in the
footnote to the Income Statement
Performance:
Decrease reflects the loss of two customers. However costs
continued to be controlled tightly
that
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:
Decrease due to the loss of two customers during the year
Measurement:
Earnings after tax divided by the fully diluted number of
shares
Performance:
Decrease due to the loss of two customers during the year
ARCONTECH GROUP PLC
4
Strategic Report (continued)
Non-financial KPIs:
Staff retention rate (net) 87% (2021: 93%; 2020: 91%)
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
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
Nature
Mitigation
Competition
Loss of business due to existing competition
Or new entrants into the market
Ongoing investment in research and development
Responding to the changing needs of clients to
remain competitive
Loss of key
personnel
Inability to execute business plan due to the risk of
losing key personnel
Employee share option scheme in place
Covid-19
pandemic
Inability to execute business plan due to staff absence.
Difficulty in winning new business due to potential
customers being hard to engage with due to remote
working
Business made difficult due to increased regulations
between the UK and Europe caused by Brexit
Brexit
Relations with shareholders
The Directors and employees returned to the office
on a hybrid basis, but maintain strict health and
safety protocols in order to protect staff.
At present the Company believes that there should
be no significant material disruption to its work
Arcontech is a global company and as such seeks
growth across a geographically diverse customer
base
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;
The desirability of the Company maintaining a reputation for high standards of business conduct; and
Consider the impact of the Company’s operations on the community and the environment.
Section 172(1) Companies Act 2006
The Board takes decisions with the long term in mind, and collectively and individually aims to uphold the highest standards of
conduct. Similarly, the Board understands that the Company can only prosper over the long term if it understands and respects the
views and needs of its customers, distributors, employees, suppliers and the wider community in which it operates.
A firm understanding of investor needs is also vital to the Company’s success. The Directors are fully aware of their responsibilities
to promote the success of the Company in accordance with Section 172(1) of the Companies Act 2006. The text of Section 172(1)
of the Companies Act 2006 has been sent out to each main Board Director.
ARCONTECH GROUP PLC
5
Strategic Report (continued)
The Board ensures that the requirements are met, and the interests of stakeholders are considered as referred to elsewhere in this
report and through a combination of the following:
A rolling agenda of matters to be considered by the Board through the year, which includes an annual strategy review
meeting, where the strategic options for the following year are developed;
At each board meeting, to receive and discuss a will report on customers, employees and other colleagues, and investors;
Standing agenda points and papers;
A review of certain of these topics through the Audit Committee and the Remuneration Committee agenda items referred
to in this report; and
Detailed consideration is given to of any of these factors where they are relevant to any major decisions taken by the Board
during the year.
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 2022:
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;
Implementing a new hybrid location working format for staff as working environments continue to evolve post Covid-19,
while 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.
During the year to 30 June 2022, 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:
All Directors attended the 2021 AGM to answer questions and receive additional feedback from investors;
The outcome of the AGM is published on the Company’s corporate website;
The Board receives regular updates on the views of shareholders through briefings and reports from the executive directors,
and the Company’s brokers;
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;
Monitored company culture and engaged with employees on efforts to continuously improve company culture and morale;
and
A range of corporate information (including all Company announcements) is also available to shareholders, investors and
the public on the Company’s corporate website: www.arcontech.com.
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 9 September 2022 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 (now Smoove 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
This Corporate Governance Report forms part of the Directors’ 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 2022, 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 2021 Annual General Meeting 99% (2020: 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)
10/10
10/10
10/10
2/2
2/2
2/2
N/A
4/4
4/4
2/2
2/2
0/2*
*Ms Barton abstained from attending Nomination Committee meetings as the primary purpose of both meetings was to discuss the appointment of a new Independent
Non-Executive Director to serve as a replacement to Ms Barton in due course. Mr Jeffs deputised for Ms Barton at the two meetings of the Nomination Committee.
Board performance
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
9 September 2022
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 2022, the members of the Audit
Committee were:
Louise Barton (Chairman)
Geoff Wicks
Matthew Jeffs
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
charged
to companies of similar size and stage of
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
9 September 2022
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 2022.
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
9 September 2022
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
v) 1 July 2021 and was
retained at £175,000
vi) 1 July 2022 and was
increased by 5.0% to £183,750
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 (2021: £5,250).
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. 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 2022 are set out below:
Geoff Wicks (Chairman and Non-Executive Director)
Louise Barton (Non-Executive Director)
Directors fees Total remuneration
£32,500
£21,000
£32,500
£21,000
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
Termination payments
Matthew Jeffs
29 April 2013
3 months’ notice given by either party
Currently £183,750 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
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 2022.
Remuneration Committee
The Remuneration Committee consisted of the following Directors during the year ended 30 June 2022:
Geoff Wicks, Independent Non-Executive Director and Chairman of the Board
Louise Barton (Chairman), Independent Non-Executive Director
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.
Chairman and Non-Executive Directors
Geoff Wicks (Chairman)
Louise Barton
Total Non-Executive
Executive Directors
Matthew Jeffs
Total Executives
Total remuneration
Analysis of bonuses & pension:
Directors
Matthew Jeffs
Year ended 30 June 2021
Year ended 30 June 2022
Total
Year ended 30 June 2022
Salary/fees
Benefits
Pension
Total
32,500
21,000
53,500
175,000
175,000
228,500
- -
-
-
-
-
32,500
21,000
53,500
3,214 5,250 183,464
3,214 5,250 183,464
236,964
3,214 5,250
Accrued
Paid
as cash
Paid
as pension
Total
-
-
-
-
-
-
-
-
5,250
5,250
10,500
5,250
5,250
10,500
10,500
10,500
No bonuses were awarded to Directors during the financial year ended 30 June 2022.
Chairman and Non-Executive Directors
Geoff Wicks (Chairman)
Louise Barton
Richard Last (former Chairman)
Total Non-Executive
Executive Directors
Matthew Jeffs
Total Executives
Total remuneration
Year ended 30 June 2021
Salary/fees
Benefits
Pension
Total
28,477
21,000
7,875
57,352
175,000
175,000
232,352
16 -
-
10
-
621
-
647
28,493
21,010
8,496
57,999
5,928 5,250 186,178
5,928 5,250 186,178
244,177
5,250
6,575
ARCONTECH GROUP PLC
17
Corporate Governance (continued)
Remuneration Committee report (continued)
Directors’ Remuneration (Continued)
Analysis of bonuses & pension:
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.
Directors’ share interests
The number of ordinary shares of the Company in which the Directors were beneficially interested at 30 June 2022 was:
Director
Geoff Wicks
Louise Barton
Matthew Jeffs
Directors’ share options interests
30 June 2022
-
1,121,416
935,000
30 June 2021
-
1,071,416
910,000
Director
At 1 July 2021
Granted
Lapsed
At 30 June 2022
Geoff Wicks
Matthew Jeffs
30,000
100,000
50,000
50,000
-
-
-
-
-
50,000
-
-
(50,000)
-
-
30,000
100,000
-
50,000
50,000
Exercise
price
164.50 pence
110.00 pence
196.00 pence
164.50 pence
130.50 pence
Normal exercise
period
30 Jun 23 – 2 Oct 30
30 Jun 21 – 29 Jun 28
30 Jun 22 – 27 Sep 29
30 Jun 23 – 2 Oct 30
30 Jun 24 – 11 Oct 31
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.
The Options granted in October 2021 will be exercisable from 30 June 2024, dependent on the Company’s compound annual rate
of growth in fully diluted earnings* for the three financial years ending 30 June 2024. 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
9 September 2022
ARCONTECH GROUP PLC
18
Directors’ Report
The Directors present their Report and financial statements for the year ended 30 June 2022.
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 3.25 pence per
ordinary share (2021: 2.75 pence per share) to be paid on 24 October 2022 to ordinary shareholders on the register on 30 September
2022 £434,616 (2021: £366,515).
Directors
The Directors who have held office during the period from 1 July 2021 to the date of this report are as follows:
Geoff Wicks
Matthew Jeffs
Louise Barton
Matthew Jeffs, 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.
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 2021 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 2023 may be flat or lower as any pick-up in revenue will not be fully reflected in our results
until 2023/24. As the market and practices continue to open up after this difficult period we are confident that we can start to convert
some of the current interest to orders and to build back some of the revenue we have lost.
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 UK 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 UK-adopted international accounting standards (IFRSs). 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 they comply with UK-adopted international accounting standards, 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 ‘company’) and its subsidiaries (the ‘group’) for the year
ended 30 June 2022 which comprise the Group Income Statement and Statement of Comprehensive Income, the Group and
Company Statements of Changes in Equity, the Group and Company Statements of Financial Position, the Group and Company
Statements of Cash Flows 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 UK-adopted international accounting
standards 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 2022 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with UK-adopted international accounting
standards;
the parent company financial statements have been properly prepared in accordance with UK-adopted international
accounting standards 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 directors’ 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 for the 12 months following the date of approval of these financial statements, management’s assessment
of going concern, and relevant post year end information such as regulatory news announcements, year to date financial information
and board minutes, including a review of contracted and committed expenditure. We have obtained an understanding of the key
assumptions used to prepare this information as follows:
Agreeing inputs (including contracted and committed expenditures) to underlying supporting documentation;
Ensuring the calculations applied in the forecasts are mathematically accurate; and
Stress-testing the forecast information, including comparison of forecasts with recent historical financial information to
consider accuracy of forecasting.
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.
ARCONTECH GROUP PLC
22
Independent Auditor’s Report to the members of
Arcontech Group PLC (continued)
Our application of materiality
Materiality
Performance Materiality
Basis for materiality
Group £55,000
Group £41,250
(2021: £44,800)
(2021: £33,600)
Company £54,500
Company £40,875
(2021: £33,600)
(2021: £25,200)
2% of revenue; performance materiality
at 75%
5% of net assets (capped below group
materiality); performance materiality at
75%
We consider revenue to be the most significant determinant of the group’s financial position and performance used by shareholders
as this drives profitability. The going concern of the group is dependent on its ability to continue to generate profits through revenue
growth. We consider net assets to be the key determinant of the company’s financial position as its underlying value is derived from
the recoverability of its investment in the main trading subsidiary, Arcontech Limited.
Whilst materiality for the group financial statements as a whole was set at £55,000 (2021: £44,800), materiality for the significant
components was set at a level of £54,500 (2021: £40,875) with performance materiality set at 75% (2021: 75%) for group and
company, a threshold considered appropriate for a group of this size and inherent risk profile. 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
group audit in excess of £2,750 (2021: £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 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 2022, were located in the United Kingdom. The audit for the year ended 30 June 2022 was performed remotely.
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)
The group generates sales from the licensing of its
proprietary software, which delivers real time market
data information tailored 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, and the identification of the differing contract
types and obligations therein is judgemental, there is
a risk that revenue is materially misstated and the
terms of the contracts with customers including the
performance obligations therein have not been
appropriately accounted for in accordance with IFRS
15.
Our work in this area included:
Updating our understanding of the business and
how the group performs its services for its
clients. Revenue streams are as follows:
o Revenue from fixed and floating
licences;
o Revenue
from
support
and
maintenance services;
o Revenue from ad hoc/project based
services.
Updating our documentation of the systems and
in place surrounding the above-
controls
mentioned revenue streams;
of
Performing walkthrough tests to confirm our
understanding
control
the
environment in operation for the significant
income streams and to ensure that the key
controls within
these systems have been
operating in the period under audit;
internal
Reviewing the accounting treatment in respect
of revenue recognition under IFRS 15 by
reference
terms and
to key contractual
concluding as to the appropriateness of the
proposed treatment;
Confirming whether
revenue has been
appropriately recognised at a point in time or
over time for the different revenue streams in
accordance with IFRS 15;
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 and the 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; and
o UK 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 regarding potential instances of non-compliance;
o Reviewing Board and other Committee meeting minutes during the year and post-year end;
o Reviewing the legal and professional fee ledger accounts; and
o Reviewing Regulatory News Service announcements during the year and post-year end.
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
9 September 2022
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 2022
Revenue
Administrative costs
Operating profit
Net finance income / (expense)
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
2022
£
2021
£
2,757,795
2,988,842
(1,999,523)
(1,945,481)
758,272
1,043,361
301
(7,047)
758,573
1,036,314
(148,007)
10,796
610,566
1,047,110
610,566
1,047,110
4.57p
4.50p
4.56p
4.49p
7.88p
7.22p
7.79p
7.14p
*Adjusted to exclude the release of accruals for administrative costs of £9,000 (2021: £88,000) in respect of prior years. This is a
non-IFRS alternative performance measure that the Board considers to be a more accurate indicator of underlying trading
performance. This measure has been adopted as a KPI and is disclosed in the Strategic Report on page 4.
All of the results relate to continuing operations.
There was no Other Comprehensive Income other than Profit for the year after tax for the year under review.
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 2022
Group:
Transfer between reserves
Balance at 30 June 2022
-
1,671,601
-
115,761
(116,994)
270,825
116,994
4,913,137
Company:
-
-
-
-
-
-
-
-
Balance at 30 June 2020
Profit for the year
Total comprehensive income
for the year
Dividend paid
Share
capital
£
1,651,314
Share
premium
£
56,381
Share option
reserve
£
188,639
Retained
earnings
£
3,806,514
Total
equity
£
5,702,848
-
-
-
-
-
-
1,047,110
1,047,110
1,047,110
1,047,110
(333,594)
(333,594)
Exercise of options
14,663
35,979
Share-based payments
-
-
115,866
Transfer between reserves
Balance at 30 June 2021
-
1,665,977
-
92,360
(33,298)
271,207
33,298
4,553,329
Profit for the year
Total comprehensive income
for the year
Dividend paid
-
-
-
-
-
-
Exercise of options
5,624
23,401
-
-
-
-
Share-based payments
-
-
116,612
610,566
610,566
(367,752)
(367,752)
Share
capital
£
1,651,314
Share
premium
£
56,381
Share option
reserve
£
188,639
Balance at 30 June 2020
Profit for the year
Total comprehensive expense
for the year
Dividend paid
-
-
-
-
-
-
Retained
earnings
£
4,450,302
181,744
181,744
(333,594)
(333,594)
Exercise of options
14,663
35,979
Share-based payments
-
-
115,866
Transfer between reserves
Balance at 30 June 2021
-
1,665,977
-
92,360
(33,298)
271,207
33,298
4,331,751
Profit for the year
Total comprehensive income
for the year
Dividend paid
-
-
-
-
-
-
Exercise of options
5,624
23,401
Share-based payments
Transfer between reserves
-
-
-
-
Balance as at 30 June 2022
1,671,601
115,761
-
-
-
-
116,612
(116,994)
270,825
273,286
273,286
(367,752)
(367,752)
-
-
116,994
4,354,279
29,025
116,612
-
6,412,466
-
-
-
-
-
-
50,642
115,866
-
6,582,873
610,566
610,566
29,025
116,612
-
6,971,324
Total
equity
£
6,346,636
181,744
181,744
50,642
115,866
-
6,361,295
273,286
273,286
The notes on pages 32 to 56 form part of these financial statements.
ARCONTECH GROUP PLC
28
Statements of Financial Position
Registered number: 04062416
As at 30 June 2022
Non-current assets
Goodwill
Property, plant and equipment
Right of use asset
Investments in subsidiaries
Deferred tax asset
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Lease liabilities
Group
2022
£
Group
2021
£
Company
2022
£
Company
2021
£
1,715,153
6,545
219,455
-
318,000
141,750
1,715,153
11,147
365,758
-
471,000
141,750
-
-
-
2,017,471
56,000
-
-
-
-
2,017,471
55,000
-
2,400,903
2,704,809
2,073,471
2,072,471
348,686
6,026,468
470,317
5,395,457
3,322,737
1,074,294
3,263,467
1,077,741
6,375,154
5,865,774
4,397,031
4,341,208
(1,608,880)
(148,450)
(1,643,407)
(148,450)
(58,036)
-
(52,384)
-
Note
11
12
17
13
18
14
14
15
16
17
Total current liabilities
(1,757,330)
(1,791,857)
(58,036)
(52,384)
Non-current liabilities
Lease liabilities
17
(47,403)
(195,853)
Total Non-current liabilities
(47,403)
(195,853)
-
-
-
-
Net current assets
Net assets
Equity
Called up share capital
Share premium account
Share option reserve
Retained earnings
4,617,824
6,971,324
4,073,917
6,582,873
4,338,995
6,412,466
4,288,824
6,361,295
19
20
20
20
1,671,601
115,761
270,825
4,913,137
1,665,977
92,360
271,207
4,553,329
1,671,601
115,760
270,825
4,354,279
1,665,977
92,360
271,207
4,331,751
6,971,324
6,582,873
6,412,466
6,361,295
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 £273,286 (2021: £181,744).
Approved on behalf of the board on 9 September by:
Matthew Jeffs
Chief Executive
The notes on pages 32 to 56 form part of these financial statements.
ARCONTECH GROUP PLC
29
Group Statement of Cash Flows
For the year ended 30 June 2022
Cash generated from operations
21
1,109,608
809,559
Note
2022
£
2021
£
Tax paid
Net cash generated from operating activities
Investing activities
Interest received
Purchases of plant and equipment
(2,642)
(8,204)
1,106,966
801,355
13,911
13,260
(2,688)
(1,482)
Net cash generated from investing activities
11,223
11,778
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
29,025
50,642
(367,752)
(333,594)
(148,450)
(141,693)
(487,177)
(424,645)
631,012
388,488
5,395,457
5,006,969
Cash and cash equivalents at end of year
15
6,026,469
5,395,457
For the year to 30 June 2022, the Group had no debt, and there were no material non-cash transactions.
The notes on pages 32 to 56 form part of these financial statements.
ARCONTECH GROUP PLC
30
Company Statement of Cash Flows
For the year ended 30 June 2022
Net cash generated by operating activities
21
330,075
210,920
Note
2022
£
2021
£
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
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
(1,221)
(3,319)
328,854
207,601
6,426
6,426
6,392
6,392
29,025
50,642
(367,752)
(333,594)
(338,727)
(282,952)
(3,447)
(68,959)
1,077,741
1,146,700
Cash and cash equivalents at end of year
15
1,074,294
1,077,741
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 2022
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 with a registered address at 1st
floor, 11-21 Paul Street, London, EC2A 4JU. The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries (together referred to as “the Group”).
Principal Activity
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.
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted international accounting standards and with
the requirements of the Companies Act 2006.
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. As at 30 June 2022 all assets and liabilities
are recorded at amortised cost, and there were no assets or liabilities recorded at fair value.
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 projected cash flow out twelve months from the date of signing this report. Revenue projection has been based
on recurring revenue streams from existing customers and a forecast for new revenue from additional sales that the Directors
feel is achievable, and in line with average new business generation pre-Covid-19. The Group has a highly stable cost base
which has been reviewed to incorporate the impact of additional costs for revenue generation activities such as industry trade
shows. The Directors have stress tested the cash flow projections assuming no new revenue generation and an increase in costs
of up to 15%, given the current inflationary environment. Under this scenario given expected cash generation from operations
and existing cash balances, the Group will have sufficient resources to continue trading for well in excess of the next twelve
months. 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
The International Accounting Standards Board (IASB) issued various amendments and revisions to International Financial
Reporting Standards and IFRIC interpretations. The amendments and revisions were applicable for the period year 30 June
2022 but did not result in any material changes to the financial statements of the Group.
b) New and amended Standards and Interpretations issued but not effective for the financial year beginning 1 July 2022
Standard
IAS 1 (Amendments)
IAS 1 (Amendments)
IAS 1 (Amendments)
IFRS 17 (Amendments)
Impact on initial application
Classification of Liabilities as Current or Non-Current
Disclosure of Accounting Policies
Definition of Accounting Estimates
Initial Application of IFRS 17 and IFRS 9 – Comparative
Information
Effective date
TBC
TBC
TBC
TBC
The new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be
material.
ARCONTECH GROUP PLC
32
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
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 2022. 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.
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.
ARCONTECH GROUP PLC
33
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Revenue recognition (continued)
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.
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.
ARCONTECH GROUP PLC
34
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
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.
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.
ARCONTECH GROUP PLC
35
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
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.
(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.
ARCONTECH GROUP PLC
36
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Financial instruments (continued)
(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
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.
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.
ARCONTECH GROUP PLC
37
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
1. Accounting policies (continued)
Leases (continued)
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. In order
for development expenditure to meet the capitalisation criteria of IAS 38, it must be both technically feasible to complete the
work, and there must be the intention to either use or sell the asset created.
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.
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.
ARCONTECH GROUP PLC
38
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
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. There has been
no change in the Group’s business model from the previous year and the Directors are satisfied that the revenue recognition
policy remains correct for the year under review.
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 key variable in making judgement of the correct treatment of development costs is new
product development versus modification and maintenance of existing products. The development work undertaken has been
to existing products, and having assessed the likelihood of future economic benefit, the Directors have judged it appropriate
to not capitalise any development costs (2021 - £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. The key
variables used in cash flow projections are: a timeline of fourteen years (the “time period”); the forecast for the next year which
is used as the base for future years; revenue and cost projections for the time period using the average rate of increase /
(decrease) achieved over the preceding ten years, 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).
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. The
key variables used in the calculation of deferred tax assets are: a timeline of three years out from reporting date; revenue and
cost projections on the same basis as used in the assessment of impairment of goodwill; a cost of capital of 8.44%. At the year-
end a deferred tax asset of £318,000 (2021 - £471,000) 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.
ARCONTECH GROUP PLC
39
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
3. Revenue
An analysis of the Group’s revenue is as follows:
Software development, licence fees and project work
2,757,795
2,988,842
All of the Group’s revenue relates to continuing activities.
2022
£
2021
£
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
2022
£
7,291
146,303
13,550
1,491,348
409,618
(9,000)
2021
£
9,651
146,303
20,307
1,491,063
506,893
(88,000)
5. Finance income and Finance costs:
Finance income
Income on cash and cash equivalents
Finance costs
Lease interest expense
Other interest expense
Net finance income / (expense)
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
2022
£
2021
£
13,911
13,260
(13,550)
(60)
301
(20,307)
-
(7,047)
2022
£
31,500
7,000
38,500
2021
£
29,750
6,000
35,750
ARCONTECH GROUP PLC
40
Notes to the Financial Statements
For the year ended 30 June 2022 (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
Software development and licence fees
Unallocated overheads
Total operating profit
2022
£
2021
£
2,757,795
2,757,795
2,988,842
2,988,842
1,193,637
1,468,132
(448,975)
744,662
(445,078)
1,023,054
Finance income
Total profit before tax as reported in the Group income statement
13,911
758,573
13,260
1,036,314
Segment total of assets
Software development and licence fees
7,541,527
7,337,340
2022
£
2021
£
Unallocated assets
Less intercompany debtors
Total assets
Segment total of liabilities
Software development and licence fees
Unallocated liabilities
Less intercompany creditors
Total liabilities
4,545,031
12,086,558
4,492,208
11,829,548
(3,310,501)
8,776,057
(3,258,968)
8,570,580
2022
£
2021
£
5,056,787
5,193,528
58,447
5,115,234
53,150
5,246,678
(3,310,501)
1,804,733
(3,258,968)
1,987,710
ARCONTECH GROUP PLC
41
Notes to the Financial Statements
For the year ended 30 June 2022 (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
2022
£
2,688
2,688
2022
£
2021
£
1,482
1,482
2021
£
7,291
7,291
9,651
9,651
2022
2021
£
2,400,903
2,400,903
£
2,704,809
2,704,809
Geographical information - External revenue
2022
2021
UK
Europe (excluding UK)
Africa
North America
Australia
Asia Pacific
£
2,013,140
581,981
40,000
89,447
12,603
20,624
2,757,795
£
2,065,903
771,541
42,500
83,637
11,838
13,423
2,988,842
During the year there were 4 customers (2021: 3) who accounted for more than 10% of the Group’s revenues as follows:
Customer 1
Customer 2
Customer 3
Customer 4
2022
Value of
sales
£
% of Total
716,386
520,990
353,975
241,556
1,832,907
28%
21%
14%
10%
73%
2021
Value of
sales
£
668,122
522,149
375,168
-
1,565,439
% of
Total
22%
17%
13%
-
52%
These revenues are attributable to the software development and licence fees segment.
ARCONTECH GROUP PLC
42
Notes to the Financial Statements
For the year ended 30 June 2022 (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 Directors) was:
Sales and administration
Development and support
c) Directors’ emoluments
Short-term employee benefits
Pension contributions
Share-based payments
Social security costs
Total Director compensation
Directors’ emoluments represent the staff costs of the parent company.
The average number of employees of the parent company is 3 (2021: 3)
The highest paid Director received remuneration of £183,464 (2021: £186,178).
2022
£
1,197,220
153,261
24,255
116,612
1,491,348
7
7
14
£
231,714
5,250
57,200
294,164
30,843
325,007
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
The number of Directors that are members of a defined contribution pension scheme is 1 (2021: 1). Pension contributions paid
to a defined contribution scheme in respect of the highest paid Director amounted to £5,250 (2021: £5,250).
ARCONTECH GROUP PLC
43
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
9. Taxation
Current tax
Deferred tax
Total tax charge (credit) for the year
2022
£
4,993
(153,000)
148,007
2021
£
(8,204)
19,000
(10,796)
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
Profit on ordinary activities multiplied by the standard rate of
corporation tax in the UK of 19 % (2021: 19%)
Effects of:
Disallowed expenses
Temporary differences on deferred tax
Income taxes paid
Research and development tax credits
Deferred tax asset movement
Brought forward losses utilised
Total tax / (credit) for the year
Factors which may affect future tax charges
2022
£
758,573
2021
£
1,036,314
144,128
196,900
288
796
-
(4,993)
153,000
97
1,457
8,204
-
(19,000)
(145,212)
(198,454)
148,007
(10,796)
At 30 June 2022 the Group has tax losses of approximately £8,300,000 (2021: £8,500,000) to offset against future trading
profits.
ARCONTECH GROUP PLC
44
Notes to the Financial Statements
For the year ended 30 June 2022 (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
2022
£
610,566
610,566
No.
2021
£
1,047,110
1,047,110
No.
13,364,195
13,290,672
25,145
143,168
13,389,340
13,433,840
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
2022
£
2021
£
At 1 July 2021 and at 30 June 2022
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
2022
£
1,715,153
1,715,153
2021
£
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 8.9% 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 4% (2021: 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 current sales pipeline. 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% (2021: 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 2022 (continued)
12. Property, plant and equipment - Group
Cost
At 1 July 2020
Additions
At 1 July 2021
Additions
Disposals
At 30 June 2022
Depreciation
At 1 July 2020
Charge for the year
At 1 July 2021
Charge for the year
Disposals
Leasehold
Property
£
Office
furniture &
equipment
£
Total
£
26,199
142,218
168,417
-
1,482
1,482
26,199
143,700
169,899
-
-
2,688
2,688
(40,447)
(40,447)
26,199
105,941
132,140
20,597
128,504
149,101
1,461
8,190
9,651
22,058
136,694
158,752
1,462
5,829
7,291
-
(40,447)
(40,447)
At 30 June 2022
23,520
102,076
125,596
Net book amount at 30 June 2022
Net book amount at 30 June 2021
13. Investment in subsidiaries
Carrying amount
At 1 July 2021
At 30 June 2022
2,679
4,141
3,865
7,008
2022
£
6,544
11,147
2021
£
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 2022 (continued)
14. Trade and other receivables
Due within one year:
Group
2022
£
Group
2021
£
Company
2022
£
Company
2021
£
Trade and other receivables
196,541
330,740
-
-
Amounts owed by group undertakings
-
-
3,310,401
3,258,868
Prepayments and accrued income
152,145
348,686
139,577
470,317
12,336
3,322,737
4,599
3,263,467
Due after more than one year:
Other receivables
Group
2022
£
Group
2021
£
Company
2022
£
Company
2021
£
141,750
141,750
141,750
141,750
-
-
-
-
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 2022, trade receivables of £Nil were impaired (2021: £Nil) and during the year an impairment charge relating to
trade receivables of £Nil (2021: £Nil) was recognised. As at 30 June 2022 trade receivables of £nil (2021: £100,469) were
past due but not impaired. The ageing analysis of these trade receivables is as follows:
Group
2022
£
-
-
-
Group
2021
£
100,469
-
100,469
Company
2022
£
Company
2021
£
-
-
-
-
-
-
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 2022 (continued)
16. Trade and other payables
Trade payables
Amounts owed to group undertakings
Group
2022
£
77,772
-
Group
2021
£
52,881
-
Other tax and social security payable
62,148
113,083
Company
2022
£
Company
2021
£
3,849
100
7,843
4,155
100
8,844
Other payables and accruals*
490,724
388,137
46,244
39,285
Deferred income
978,236
1,608,880
1,089,306
1,643,407
-
58,036
-
52,384
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 £568,496 (2021: £441,018).
*Other payables and Accruals includes a provision for dilapidations for the Office premises of £50,000 (2021: £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 2022
Carrying value at 30 June 2021
Depreciation
Interest
Lease payments
Lease
liability
£
(344,303)
-
(13,550)
162,000
Right of use
asset
£
365,758
(146,303)
-
-
Income
statement
£
-
(146,303)
(13,550)
-
Carrying value at 30 June 2022
(195,853)
219,455
(159,853)
Reconciliation of lease liabilities
As at 1 July 2021
Cash flows:
Interest paid
Liability reduction
Non-cash changes:
Interest expense
As at 30 June 2022
Operating cash
flow
£
-
Financing cash
flow
£
-
(13,550)
-
-
(13,550)
-
(148,450)
-
(148,450)
Non-cash
Total
£
-
-
-
13,550
13,550
£
344,303
(13,550)
(148,450)
13,550
(195,853)
ARCONTECH GROUP PLC
48
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
17. Leases (continued)
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)
Reconciliation of lease liabilities
As at 1 July 2020
Cash flows:
Interest paid
Liability reduction
Non-cash changes:
Interest expense
As at 30 June 2021
Operating cash
flow
£
-
Financing cash
flow
£
-
(20,307)
-
-
(20,307)
-
(141,693)
-
(141,693)
Non-cash
Total
£
-
-
-
20,307
20,307
£
485,996
(20,307)
(141,693)
20,307
(344,303)
Contractual maturity analysis of lease liabilities as at 30 June 2022
Less than
3 months
£
40,500
3 – 12
Months
£
121,500
1 – 5
Year
£
40,500
Longer than
5 years
£
-
Total
£
202,500
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 (de-recognised)/
recognised in group income
statement
Group
2022
£
471,000
Group
2021
£
452,000
Company
2022
£
55,000
Company
2021
£
151,000
(153,000)
19,000
1,000
(96,000)
At 30 June
318,000
471,000
56,000
55,000
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 2022 amounted to approximately £8,300,000 (2021: £8,500,000).
ARCONTECH GROUP PLC
49
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
19. Share capital
Company
Allotted and fully paid:
As at 1 July 2021
September 2021 - Exercise of options at 64.5p
As at 30 June 2022
Share options
Shares
of 12.5p each
13,327,811
45,000
13,372,811
Share Capital
£
1,665,976
5,625
1,671,601
Share Premium
£
92,360
23,401
115,761
Under the Company’s approved 2002 Share Option Scheme, certain Directors and employees held options at 30 June 2022 for
unissued Ordinary Shares of 12.5 pence each as follows:
Granted
Exercised
Lapsed
At 30 June
2022
Exercise price
Normal exercise period
Share options
Employees:
Directors:
Richard Last
Geoff Wicks
Louise Barton
Matthew Jeffs
At 1 July
2021
125,000
50,000
55,000
75,000
-
-
-
-
-
73,500
24,762
30,000
40,000
20,000
100,000
50,000
50,000
-
-
-
-
-
-
-
-
50,000
-
-
-
-
-
-
(25,000)
-
-
-
100,000
50,000
64.50 pence
110.00 pence
25 Apr 20 – 24 Apr 27
30 Jun 21 – 29 Jun 28
(23,000)
32,000
196.00 pence
30- Jun 22 – 27 Sep 29
-
-
75,000
164.50 pence
30 Jun 23 – 2 Oct 30
73,500
130.50 pence
30 Jun 24 – 11 Oct 31
(24,762)
-
64.50 pence
25 Apr 20 – 24 Apr 27
-
30,000
164.50 pence
30 Jun 23 – 2 Oct 30
(40,000)
(20,000)
-
-
-
23.75 pence
1 Sep 17 – 31 Aug 21
64.50 pence
25 Apr 20 – 24 Apr 27
-
-
-
-
-
(50,000)
-
-
100,000
-
50,000
50,000
110.00 pence
196.00 pence
164.50 pence
130.50 pence
30 Jun 21 – 29 Jun 28
30- Jun 22 – 27 Sep 29
30 Jun 23 – 2 Oct 30
30 Jun 24 – 11 Oct 31
Total
619,762
123,500
(45,000)
(137,762)
560,500
Weighted average
exercise price
120.2 pence
130.5 pence
64.5 pence
122.3 pence
126.4 pence
The number of options exercisable at 30 June 2022 was 282,000 (at 30 June 2021: 359,762), these had a weighted average
exercise price of 103.6 pence (2021: 78.9 pence).
The weighted average share price as at the exercise date of the shares exercised in the year was 64.5 pence (2021: 43.2 pence)
and of the shares were forfeited in the year was 122.3 pence (2021: 196.0).
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 175.0 pence, the lowest price was 72.0 pence and the price at
the year-end was 73.5 pence.
The weighted average remaining contractual life of share options outstanding at 30 June 2022 was 7 years (2021: 7 years).
ARCONTECH GROUP PLC
50
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
19.
Share capital (continued)
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**, October 2020 and in October 2021 will be exercisable from 30
June 2021, 30 June 2022, 30 June 2023 and 30 June 2024 respectively, dependent on the Company’s compound annual rate of
growth in fully diluted earnings* for the three financial years ending 30 June 2022, 2023, and 2024, respectively.
Options issued date
Exercisable from
November 2018
October 2020
October 2021
30 June 2021
30 June 2023
30 June 2024
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 2023
30 June 2024
- 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.
** 70,000 options issued in September 2019 lapsed on 30 June 2022 as compound annual earnings growth targets for the
financial years ended 30 June 2020, 2021 and 2022 were not achieved.
The fair value of options is valued using the Black-Scholes pricing model. An expense of £116,612 (2021: £115,866) has been
recognised in the period in respect of share options granted. The cumulative share option reserve at 30 June 2022 is £270,805
(2021: £271,207).
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
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
11 Oct 2021
130.5 pence
10 years
45%
0.60%
0.01%
70.03 pence
Volatility has been estimated based on the historic volatility over a period equal to the expected term from the grant date.
ARCONTECH GROUP PLC
51
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
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 capital reserve
This is used to record the aggregate nominal amount of the Company’s shares on issue.
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.
ARCONTECH GROUP PLC
52
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
21. Net cash generated from operations - Group
Operating profit
Depreciation charge
Non cash share option charges
Lease interest paid
Other interest paid
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
2022
£
758,272
153,594
116,612
(13,550)
(60)
126,624
(31,884)
2021
£
1,043,361
155,954
115,867
(20,307)
-
(277,686)
(207,630)
Cash generated from operations
1,109,608
809,559
Net cash generated from operations - Company
Operating profit
Non cash share option charges
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
2022
£
265,860
116,612
(59,270)
6,873
2021
£
274,671
115,867
(82,057)
(97,561)
Cash generated from operations
330,075
210,920
ARCONTECH GROUP PLC
53
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
22. 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 £536,216 (2021: £534,094).
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
2022
£
2021
£
7,098,581
7,223,539
(3,788,180)
3,310,401
(3,964,671)
3,258,868
During the year a provision of £176,491 was released (2021: £185,654) in respect of balances due from subsidiaries.
Amount due to subsidiaries
23. Dividends
2022
£
536,216
536,216
2021
£
534,094
534,094
A final dividend of 3.25 pence will be proposed at the Annual General Meeting but has not been recognised as it requires
approval (2021: 2.75 pence).
24. 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 2022 (continued)
25. 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
2022
£
196,541
Group
2021
£
330,740
Company
2022
£
-
Company
2021
£
-
Cash and cash equivalents
6,026,468
5,395,457
1,074,294
1,077,741
Amounts owed by group undertakings
-
6,223,009
-
5,726,197
3,310,401
4,384,695
3,258,868
4,336,609
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 1.20% below bank base rate and 0.2% below
bank base rate and at fixed/variable rates of between 0.06% below (2021: 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%).
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 £568,496 (2021: £441,018) all of which are payable within 6
months.
ARCONTECH GROUP PLC
55
Notes to the Financial Statements
For the year ended 30 June 2022 (continued)
25. 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 2022, if bank base rate had increased by 0.5% with all other variables held constant,
post-tax profit would have been £30,132 (2021: £26,977) higher and equity would have been £30,132 (2021: £26,977) higher.
Conversely, if bank base rate had fallen 0.5% with all other variables held constant, post-tax profit would have been £30,132
(2021: £26,977) lower and equity would have been £30,132 (2021: £26,977) lower.
26. 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.
27. Ultimate controlling party
There is no ultimate controlling party.
28. Copies of these statements
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
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