Beeks Financial Cloud Group PLC
30th June 2021
Registered Number SC521839
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Contents
Financial and Operational Highlights
Our Company at a Glance
Chairman’s Statement
Strategic Overview
Strategic Report - Chief Executive’s Review
Strategic Report - Financial Review
Strategic Report - Principal Risks and Uncertainties
Board of Directors
Directors’ Report
Report on Remuneration
Chairman’s Introduction
Report of the Audit Committee
Independent auditor’s report to the members
of Beeks Financial Cloud Group PLC
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow
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9-12
13-16
17-23
24-25
26-29
30-32
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46-57
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Notes to the Consolidated Financial Statements
62-93
Independent auditors’ report to the members
of Beeks Financial Cloud PLC
Company Statement of Financial Position
Company Statement of Changes in Equity
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Notes to the Company Financial Statements
107-109
Beeks Financial Cloud Group PLC
Financial and Operational Highlights
For the year ended 30 June 2021
Company
Highlights
FINANCIAL HIGHLIGHTS
/ Revenues increased 24% to
£11.62m (2020: £9.36m)
/ Institutional revenue represents
91% of total revenue (FY20: 85%)
/ Annualised Committed Monthly
Recurring Revenue (ACMRR) up
23% to £13.8m (2020: £11.2m)
/ Gross profit up 16% to £5.33m
(2020: £4.57m)
/ Underlying* EBITDA increased
24% to £4.14m (2020: £3.33m),
including additional IFRS 16
adjustment in year of £0.13m (an
increase of 20% excluding IFRS 16)
/ Underlying profit before tax**
increased 13% to £1.61m (2020:
£1.43m)
/ Underlying diluted EPS** 2.99p
(2020: 2.45p)
/ Net cash as at 30 June 2021 of
£1.89m (30 June 2020: Net debt
£0.75m)
OPERATIONAL HIGHLIGHTS
/ Continued strong growth in
Tier 1 customer base
/ Ongoing focus on innovative
product development with the
launch of two new products:
- Proximity Cloud, launched post
year end, alongside a launch
partner and with an initial $1m
of committed ACMRR which we
consider to be a transformative
solution for capital markets and
financial services
- Analytics as a Service, which we
consider to be an industry-first,
cloud-neutral monitoring solution
for the financial markets
/ Continued investment in our
team, with headcount increasing
to 80 (30 June 2020: 65) primarily
in revenue generating areas
such as sales and marketing and
product development to support
our growth objectives
/ Further expansion of our
data centre geographies with
operations now in Canada
and Australia
/ Successful integration of
Velocimetrics into the business
and rebranded as Beeks Analytics
to reflect the broadening of
Beeks’ offering
/ Developed and expanded
operational partnerships with
a number of counterparties
including SGX, IPC and MEMX,
increasing our ability to generate
substantial revenue through
these collaborations
/ Joined the STAC Benchmark
Council™ which comprises over
350 financial institutions and more
than 50 vendor organisations to
develop and promote the use of
standard technology benchmarks
OUTLOOK
/ Positive market environment,
notwithstanding the ongoing
impact of Covid-19, and
considerably increased sales
pipeline
/ Confident in securing additional
Tier 1 customers in the year ahead
/ ACMRR further increased to
£14.8m at 31 August 2021 following
a positive start to the new
financial year
STATUTORY EQUIVALENTS
The previous highlights are
based on underlying results.
Reconciliations between underlying
and statutory results are contained
within these financial statements.
The statutory equivalents of the
above results are as follows:
/ Profit before tax was £1.25m
(2020: £0.68m)
/ Basic EPS was 3.07p (2020: 1.13p)
* Underlying EBITDA is defined as earnings before amortisation, depreciation, finance costs, taxation, acquisition
costs, share based payments and exceptional non-recurring costs
** Underlying profit before tax and underlying EPS excludes amortisation on acquired intangibles, acquisition
costs, share based payments and exceptional non-recurring costs
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Celebrating
10 years
IN THE CLOUD BUSINESS
DEC
1983
PREMIERE
Trading Places movie
JUL
2011
FOUNDED
Named after a character from the
movie Trading Place, Beeks FX VPS was
the brainchild of Gordon McArthur and
Tony Doleman
APR
2014
COMING
TO AMERICA
Beeks entered America with the
purchase of Gallant VPS providing
access to the NY4 data centre
campus in New York
FEB
2015
FINANCIAL
CLOUD
The addition of bare metal server
packages to the solutions portfolio
was reflected in the name change to
Beeks Financial Cloud
NOV
2017
LONDON STOCK
EXCHANGE IPO
Beeks Financial Cloud plc (BKS)
was welcomed onto the AiM market
MAR
2019
FASTEST
GROWING
One of 130 UK companies named in
the Financial Times special report
FT:1000 Europe’s Fastest Growing
Companies alongside Deliveroo
and Boohoo
SEP
EXPANDED
ASSETS CLASSES
Now supporting Equities, Fixed
Income, Cryptocurrency, Futures
and Forex industries
MAY
2018
INFRASTRUCTURE
AS A SERVICE
The Group introduced fully managed
ECX services to provide Infrastructure
as a Service (IaaS) across all major
cloud providers including Microsoft
Azure, Google compute and Amazon
Web Services
DEC
UNIQUELY
ON DEMAND
A self-serve portal was
developed to offer on demand
compute – still the only one of
its kind in the market
APR
2020
BEEKS
ANALYTICS
Acquired network monitoring
and analytics firm Velocimetrics to
expand product offering into network
automation and trading analytics
SEP
ISO27001
Achieved the internationally
recognised standard for information
security management systems
(ISMS) certification
OCT
BEEKS
GROUP
Unveiled new trading name to
elevate brand appeal on a global
scale that not only embodies the
current portfolio of low-latency
compute, connectivity and analytics
solutions but futureproofs against
further product expansion
SEP
£100M
MARKET
CAP
ACMRR
REACHED
£15M
Milestone accounting benchmarks
signifying a strong growth trajectory
AUG
2021
PROXIMITY
CLOUD
LAUNCH
Launched the only fully configured,
pre-installed physical trading
environment that is fully optimised
for low latency trading conditions
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Beeks Financial Cloud Group PLC
Our Company at a Glance
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Chairman;s Statement
For the year ended 30 June 2021
Our Company
at a Glance
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Beeks Group has been the leading
managed cloud computing,
connectivity and analytics provider
in the financial markets since 2011.
Beeks deliver managed on demand
low-latency compute, connectivity
and analytics optimised exclusively
for global capital markets and
financial services.
With sub-millisecond latencies,
we can deliver infrastructure that will
greatly expedite the time taken from
placing a trade to its execution – a
critical factor given the time sensitivity
of our customers.
Our cloud-based Infrastructure
as a Service (IaaS) model allows
organisations the flexibility and
agility to deploy and connect to
a variety of exchanges, trading
venues and cloud service
providers at a fraction of the cost
of building their own networks and
infrastructure. Based in the UK with
a growing network of key financial
data centre locations worldwide,
Beeks supports its global customers
at scale in the leading financial
hubs including New York, London,
Hong Kong, Tokyo, and Singapore,
with 24-hour dedicated support.
OFFICE LOCATIONS
/ Glasgow, UK
/ London, UK
/ Tokyo, Japan
/ Surabaya, Indonesia
DATA CENTRE LOCATIONS
/ Frankfurt, Germany
/ London, UK
/ Illinois, US
/ Chicago, US
/ New York, US
/ Hong Kong
/ Tokyo, Japan
/ Singapore
/ Sydney, Australia
/ Paris, France
/ Toronto, Canada
The Company offers bare metal
and virtual private servers, as
well as connectivity, co-location,
dedicated fibre, market data, and
MT4/MT5 hosting. We have an
established connectivity footprint,
with over 200 pre-built connections
to venues and exchanges globally.
Our IaaS services are entirely
cloud based with our customers
self-provisioning infrastructure and
connectivity in the key financial
data centres with a minimum 30-
day customer commitment. Where
possible, we leverage automation
to allow our clients the ability to
reduce complexity in deploying
and managing IT environments.
Chairman’s
Statement
Beeks has delivered another
strong performance in the year,
in which the expansion of its Tier
1 customer base has driven 24%
growth in revenues. With financial
institutions increasingly looking
to the flexibility of the cloud to host
their IT infrastructure, The Group
increased investment in the year in
its people, product and network, to
capture more of this growing market,
resulting in the successful launch
of two new offerings, increasing its
attractiveness and opportunity.
Revenues grew by 24% and
underlying EBITDA also by 24%.
The Group exited the year with
£13.8m of Annualised Committed
Monthly Recurring Revenue
(ACMRR), an increase of 23%,
providing the business with strong
foundations for continued strong
growth going forward.
While Covid-19 continued to
present some challenges through
the year, in terms of reduced
access to data centres, some
increase in churn amongst smaller
customers and elongation of
sales cycles, the resilience of the
recurring revenue model and
strong progress within existing
Tier 1 customers ensured the
business delivered an overall
positive trading result and The
Group required the use of none
of the various government
furlough support schemes.
Following consultation with our
shareholders during our equity
raise in April, the Board has decided
to change our dividend policy
which has been in place since our
IPO in November 2017. For the last
few years we have been paying a
modest dividend whilst continuing
to re-invest in our business.
Notwithstanding our solid balance
sheet, the expected growth and
investment into the business
over the next few years, driven by
Proximity Cloud has led us to take
the decision that cash would be
better re-invested in the business to
compound growth for the benefit of
shareholders in the medium term.
Therefore subject to shareholder
approval at the forthcoming Annual
General Meeting, future dividend
distributions are expected to be
put on hold.
We were delighted to welcome of
Kevin Covington to the Board as an
independent Non-Executive Director
in January 2021. Kevin has had more
than 30 years’ experience working
internationally in the financial
services industry for both vendors
and banks, with a particular focus
on M&A and advisory. He brings
with him a wealth of industry
knowledge and experience, having
held a number of senior roles in
the fintech space and has already
made a valuable contribution to
The Group.
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I would like to thank all Beeks
employees for their continued
hard work, especially during these
continuing challenging times. The
Group has expanded considerably
over the past 18 months, through
the integration of the Velocimetrics
team and new hires across the
organisation, and yet there is a
clear sense of shared purpose and
passion which has been key to the
success of the Beeks journey to
date and will no doubt continue to
propel it forward in the year ahead.
We have entered the new financial
year in a strong position, with an
expanding offering, customer base
and market reach, and the Board is
confident in continued success in
this coming year and beyond.
MARK CUBITT
Chairman
24 September 2021
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Beeks Financial Cloud Group PLC
Strategic Overview
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Strategic Overview
For the year ended 30 June 2021
while also providing cost, revenue
and agility benefits. To realize these
benefits, firms should scale up
from discrete, targeted cloud use
cases and create a foundational
enterprise-wide cloud layer.
Accenture concluded that cloud’s
scale, resiliency and continuous
innovation mean it will likely form a
critical part of every future business
and technology roadmap2.
Our innovations, enhanced product
range, breadth of asset classes and
growing number of Tier 1 customers,
positions us well to benefit from the
growth in the market for automated
trading and the continued adoption
of Cloud computing by financial
services organisations.
Market
Overview
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According to a 2020 report from
Markets and Markets, the global
cloud computing market size is
expected to grow from USD 371.4
billion in 2020 to USD 832.1 billion
by 2025.
The global cloud infrastructure
services market to grow from USD
73.0 billion in 2019 to USD 166.6
billion by 2024, at a Compound
Annual Growth Rate (CAGR) of
18.0% during the forecast period.
The major growth drivers for
the market include low costs,
flexibility, scalability, and security.
The cloud infrastructure service
offerings provide accelerated
Time-to-Market (TTM) and speedy
application development and
running processes.
Increased user and resource
mobility, ongoing migration of
applications over the cloud, and the
emergence of more sophisticated
threats are leading organizations
toward the adoption of hybrid
cloud. Industries, such as BFSI, which
prioritize compliance, security, and
customer experience, opt for the
hybrid deployment model1.
Software as a Service model is
expected to witness the highest
adoption in the coming five years,
as enterprises are deploying this
service model to cut down on the
CAPEX cost and focus on their core
competencies instead of worrying
about the IT infrastructure.
1 Markets and Markets 2 Accenture
The complex nature of building
and managing a latency sensitive
infrastructure means financial
enterprises are moving away
from on premise data centres to
third party facilities. We believe
the decreased latency, increased
flexibility and cost-benefits of Cloud
computing that we facilitate will see
a gradual long-term shift to
this model.
As Cloud adoption in financial
services evolves, companies are
finding that the benefits are not
just about cost efficiencies but also
to do with resilience, agility and
innovation which brings additional
opportunities for by-products such
as analytics and scalable global
connectivity.
Our addressable market is
extensive with up to 20,000 financial
institutions, a large percentage
of which maintain their own IT
infrastructure and are yet to move
to the Cloud computing model.
In their 2020 report, Accenture
reported on the new cloud
imperative in capital markets and
noted that while Capital Markets
firms were once at the forefront
of technology innovation, they
now face being left behind by
innovations from other industries.
The realisation is that incremental
adoption of public cloud solutions
could enable firms to keep pace,
Business
Model
POWERED BY BEEKS
For over ten years Beeks has honed
their infrastructure provision and
software development approach in
direct response to their customers’
needs and requirements.
Beeks’ mission is to deliver ultra-low
latency compute power, ensure
maximum security and optimise
performance in the exceedingly
fast-moving capital markets sector.
Our global backbone of global data
centres provide cloud deployment
for capital markets and financial
services customers, helping them
to formulate a cloud strategy and
replicate that in different regions.
The Group continues to operate
successfully in a demanding,
time-sensitive industry and
is uniquely positioned to
take advantage of the rapid
acceleration of Cloud deployment
in financial services and the
growing need for analytics around
those infrastructure environments.
These latency sensitive
environments need to be built,
connected and analysed and Beeks
is one of the few companies in the
world that can provide this.
Our latest product evolution,
Proximity Cloud is a pre-configured
IAAS trading environment platform
dedicated to the demands of
capital trading markets and
financial institutions and is our most
comprehensive offering to date.
Proximity Cloud is a low latency
private cloud product pre-built into
a physical cabinet and delivered
to site in a stand-alone rack. It
comprises the whole range of
functionality to be expected from
Beeks Cloud, including resource
management automation, full
stack and trading analytics, packet
capture, latency monitoring, high
precision time services and support
for MultiCast and UniCast datasets,
and yet has the benefit of running
on the client’s own infrastructure
and under the care of their own IT
team – a pre-requisite for many
of the world’s largest financial
organisations With the ability to
now offer fully hosted, or private
cloud solutions, Beeks has the
ability to cater to the requirements
of all financial institutions, no matter
their size.
The expansion into trading analytics
and launch of Analytics as a Service
expanded our product offering
to include the required analytics
around those infrastructure
environments.
Beeks provides:
/ Dedicated bare metal and
virtual servers that host Capital
Markets and financial services
organisations in key financial data
centres around the world
/ Ultra-low latency connectivity
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between customers and key
financial venues and exchanges
/ Co-location for customers to
position their own computing
power in our space, benefiting
from our proximity to financial
hubs
/ In-house security software
in order to protect client
infrastructure from cyber attacks
/ The management of hybrid
Cloud deployments for customers
wishing to combine the Beeks IaaS
with the public Cloud
/ Our model focuses on efficiency
and flexibility, offering our
customers the ability to scale
up and scale down as needed.
Due to market fluctuations and
the inherent risk involved in
algorithmic trading, this makes
our services highly desirable
/ Beeks has a unique self-service
customer portal that facilitates
the same-day deployment
of a host of services allowing
customers to manage their
own servers
/ Beeks analytics: Comprehensive
monitoring and performance
analysis allows the user to
independently track and analyse
real-time performance of every
single price, quote or trade traversing
business critical processes
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Beeks Financial Cloud Group PLC
Strategic overview
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Strategic Report – Chief Executive’s Review
For the year ended 30 June 2021
Our
Strategy
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Our purpose is to provide a global rapid
deployment service using secure and scalable
environments, both public and private, which
are easy to consume for small, medium and
large financial enterprises.
Our vision is to empower our clients to work
with speed and agility, without the need for
long–term contracts or commitments.
Our main strategic priority
is to continue to grow our
institutional customer base both
for public, private and secure
Cloud deployment as well
as complementary analytics
solutions, while maintaining our
core low latency offering.
In order to satisfy existing demand
and attract new customers, we
will continue to develop innovative
new products like Proximity Cloud.
We also plan to expand into new
asset classes and geographies,
encouraged by the significant
opportunities we have identified.
Chief Executive’s
Review
OUR VISION IS SIMPLE: BUILD.
CONNECT. ANALYSE. PROVIDING
END TO END OUTSOURCING OF
FINANCIAL SERVICES COMPUTE
ENVIRONMENTS.
I am pleased to report on another
year of consistent performance, in
which we grew revenues, underlying
EBITDA and Annualised Committed
Monthly Revenues (ACMRR). Group
revenue is increase derived from
some of the world’s largest institutions,
transforming our long-term growth
prospects. Beeks is now recognised as
an established technology provider to
financial markets, with a track record
and compelling reference clients,
providing us with a strong foundation
to drive our business forward.
Importantly, we have delivered on
our investment objectives in the year,
culminating in the launch post year
end of our Proximity Cloud offering,
alongside a launch partner and an
initial $1m contract.
The attractions of our expanding
offering, our growing list of
reference able clients and the
expansion of our sales team,
means we have seen continued
strong growth in our Tier 1 customer
base, with nine now at various
stages of deployment. These
types of engagements take time
to reach full levels of deployment
and revenue contribution, providing
considerable future expansion
opportunity for The Group and a
pathway to accelerated growth.
The significant investments made
during this and the prior year across
our platforms, teams, offering and
operations, means we now have the
right platform to take advantage
of the rapid acceleration of Cloud
deployment taking place across
the financial services industry. We
are continuing to see an increase
in the number of financial services
organisations taking advantage of
the benefits of cloud infrastructure,
providing a significant long-term
opportunity for Beeks.
FINANCIAL PERFORMANCE
Revenue (excluding grant income)
in the period grew by 24% to £11.62m
(2020: £9.36m), resulting in an
increase in underlying EBITDA of 24%
to £4.14m (2020: £3.33m). The Group’s
business model drives high levels
of recurring revenue, with over 93%
of revenue recurring and customer
retention remained within target.
Group ACMRR grew 23% to £13.8m at
30 June 2021, increasing from £11.2m
at 30 June 2020. This figure further
increased to £14.8m at 31 August
2021 following a positive start to the
new financial year.
In line with our expectations,
operating profit margin decreased
in the Year, reflecting the significant
investment in both the analytics
and Proximity Cloud offerings, and
the hiring of a Head of Sales in New
York alongside additional sales,
marketing and customer delivery
teams. With phase 1 of Proximity
Cloud now launched, and a growing
proportion of our Tier 1 customers
now delivering revenue, operating
margin is expected to increase in the
years ahead.
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PRODUCT EXPANSION
We have been commenting that
FY21 would be the ‘year of product’, in
which we would invest in our offering
to enhance its value of to the Tier
1 segment of the financial services
market, increasing our competitive
positioning and addressable market.
This has been successfully achieved
and we now have a considerable
enhanced offering, providing us
with the ability to target a larger
segment of the market, resulting in a
growing average contract value and
increased sales pipeline.
During the year, we launched Beeks
Analytics as a Service. This is the first
cloud-neutral network monitoring and
trade analytics tool for the financial
markets, providing further competitive
differentiation and additional cross
sale opportunities. A new customer
secured in the year for the offering
was the new Members Exchange
(MEMX), the fastest growing U.S.
equities exchange, following their
review of packet capture, latency
and analytics solutions for Capital
Markets. We are now starting to see
an increased number of new and
cross-sell opportunities in our pipeline
and expect this to be a contributor to
revenue growth in the year ahead.
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Beeks Financial Cloud Group PLC
Strategic Report – Chief Executive’s Review
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Strategic Report – Chief Executive’s Review
For the year ended 30 June 2021
Chief Executive’s
Review
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The second launch, just after the end
of the year in August 2021, was of
our Private cloud offering: Proximity
Cloud. Throughout the year, we
have invested considerable time
and resources into its development,
alongside our Network Automation
activities, partly funded through
the support of existing and new
shareholders during the fund raise
in April 2021.
Beeks Proximity Cloud is our most
comprehensive offering to date, a
private cloud offering specifically
developed for capital market
participants and financial institutions.
Crucially, the system has the
ability to be deployed in a client
site, running on the client’s own
infrastructure and under the care of
their own IT team – a pre-requisite
for many of the world’s largest
financial organisations. This new
solution allows customer data to
remain within their own environment,
resulting in enhanced security and
reduced data sovereignty issues.
Proximity Cloud eliminates some of
the risks and a lot of the costs that
come with in-house infrastructure
solutions making it a lot easier to get
value to the customer.
With a $1m multiyear partner
signed just four weeks after lauch,
the offering has the potential to
be transformative for The Group’s
prospects over the medium term.
The private portal offered to Beeks
customers has been updated to
enable customers to more easily
consume Beeks services, with point
and click capability it improves the
user interface for a better end-user
experience as well as increasing
cross-sell opportunities.
model, with Beeks now becoming
the foundational managed hosting
infrastructure service provider
for IPC’s Connexus Infrastructure
Services, powered by Beeks. This
enhanced joint offering brings into
the market an array of easy to
deploy Beeks solutions.
Partnership Initiatives
In November 2020 we launched
a service collaboration with
Singapore Exchange (SGX), Asia’s
international, multi-asset exchange,
operating securities, fixed income
and derivatives markets. This new
Co-location as a Service (CaaS)
collaboration provides an on-demand
virtual or bare metal dedicated
infrastructure from the Beeks setup
within SGX Co-Location Tier-1 rack
space, and can be activated within
24 hours, reducing new trading
participant time to market. This
collaboration also allows Beeks to
provide direct connectivity from
Equinix SG1 into SGX for the first time,
connecting customers between
both locations within the Beeks
infrastructure via private dark fibre.
Our partnership with IPC, a leading
global provider of secure, compliant
communications and highly secure
cloud solutions for the global
financial markets, continues to
strengthen with the launch of an
enhanced managed infrastructure
offering. By expanding our strategic
partnership, IPC continues to
leverage a successful, proven
OPERATIONAL EXPANSION
This was another year of investment
across The Group, in which we
looked to expand our offering and
our team in order to strengthen
our position in the rapidly growing
cloud computing market.
Headcount increased to 80 as at 30
June 2021, up from 65 as at 30 June
2020 primarily in revenue generating
areas such as sales and marketing
and product development to
support our growth objectives, which
included a new Head of Sales in
New York who will be responsible for
targeting Tier 1 customers.
Considerable progress has been
made with the seven data centres
that were launched during the prior
period: Singapore SG1, London LD8
and LD4.2, Paris PA1, Sydney, and NY2
and NY5 in New York. All locations are
revenue generating. With operations
now in all of the key trading centres
around the world, we see less data
centre expansion moving forward.
We continue to invest in the
Velocimetrics team, operations and
product, as our ability to offer network
analytics is a key attraction of our
offering to Tier 1 customers. The revenue
contribution from Velocimetrics was
lower than anticipated, while product
updates took place and investment
was made in the senior management
team. This coupled whilst operating
within a COVID-19 environment
resulted in a delay in signing new
deals and overall a lower revenue
generation than was expected at
the time of acquisition. For prudency,
the goodwill of Velocimetrics has
therefore been impaired by £1m in
the current year.
We have however considerably
enhanced our offering and this
is expected to contribute to
revenue growth moving forward as
evidenced post year end in August
by securing a $1.1 million multiyear
analytics deal with a Tier 1 Bank for
their Asia deployment .In addition,
we see our analytics product as a
key differentiating factor within the
proximity cloud solution.
Our retail offering, which includes
the Commercial Network Services
(CNS) business, acquired in May
2019 experienced higher levels of
churn during the year, due to the
impact of COVID-19 on smaller
organisations and individuals.
As a result of this we are now
accelerating the useful life of the
customer list over five years rather
than eight years. As this is now a
considerably smaller part of our
overall business the impact on
Group revenue was minimal.
Following the year end in September
2021, we confirmed our purchase of
new premises for our headquarters
as planned, funded funded out of
existing Company cash balances
and a new debt facility of £1.5m
taken post year end. Our head office
will move from the Lumina Building to
Riverside/Braehead in early 2022 after
two years at our current address. This
move follows our impressive growth
over the past few years.
These larger premises will provide
the necessary space to fulfil
our growth potential while also
being able to accommodate our
employees and customers in our
new office as we continue to grow.
As a result of the impact of Covid-19, we
are introducing and supporting a flexible
‘hybrid working’ model to Beeks, in line
with all government guidelines and
see this continuing in the year ahead.
We are committed to a short–term
plan for a COVID-safe return including
employee communication and
reassurance about COVID-19 safe
measures to ensure we are providing
a safe working environment for
everyone. Some of these measures
include:
/ Appropriate risk assessments
/ Access to protective baseline
measures such as effective hand
hygiene facilities
/ Face coverings to wear where
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/ Robust regular deep cleaning
of the office and facilities
We will continue to build and maintain
meaningful communications
between employees and re-
establishing corporate culture
through a hybrid model.
CUSTOMER EXPANSION
Our customer base is growing and
comprises of institutions, both Tier 1
and mid-tier as well as retail. We have
a compelling offering for each of these
customers, but it is institutional and
in particular Tier 1 institutions which
offer the greatest growth opportunity.
Institutional revenue represents 91%
of total revenue, and we expect to
see this figure increase as we grow
our Tier 1 customer engagements
and continue to add to our
institutional client base.
We continue to see considerable
expansion of the types of customer
we support, with Beeks now catering
for banks, brokers, hedge funds,
crypto traders, exchanges,
insurance organisations, financial
markets technology providers and
payments providers.
We have now nine Tier 1 customers
at various stages of deployment,
secured both directly and via our
partner IPC, these contributed to
18% of overall revenue throughout
the year. Our infrastructure,
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connectivity and analytics are
being used to support customers
in a range of financial services
activities. Typically these services
are trialled in one data centre
before being rolled out to additional
Beeks locations. Of note in the year
has been the expansion of two of
our earliest Tier 1 customers.
We completed the successful full
deployment of the first stage of
an annualised $1m global private
Cloud solution for a global financial
markets technology provider which
has subsequently been extended
to further geographies. Committed
contract revenue at the year end
was $3m of annualised revenue
and further reached $3.7m by
the end of August 21 with further
expansion anticipated thereafter.
Another of our Tier 1 customers, an
open banking provider, has now
expanded its initial £1.1m three-year
contract, to 180% of the original
commitment, again with further
expansion opportunities ahead.
FUTURE GROWTH AND OUTLOOK
The prospects for Beeks have never
been more promising. The successes
with our Tier 1 clients means we are
now recognised as an established
technology provider to financial
markets, with a track record and
compelling reference clients,
providing us with a strong foundation
to drive our business forward.
Having completed the first stages
of our product investment, our
focus for the year ahead will be on
sales execution and delivery for
our customers. Whilst we continue
to assess the ongoing impact
of Covid-19 on our business and
operations, and the pipeline of
opportunities will take time to
convert, this pipeline is at a record
level which combined with the
expansion opportunities within our
current customer base gives us
confidence in another strong year
of growth ahead.
GORDON MCARTHUR
Chief Executive Officer
24 September 2021
Key Performance Indicator Review
2021
2020
Growth
Revenue
ACMRR
£11.62m
£9.36m
£13.8m
£11.2m
Underlying Gross margin
49.6%
50.8%
24%
23%
(1%)
Underlying EBITDA*
£4.14m
£3.33m
24%
Underlying EBITDA margin*
35.7%
35.6%
Underlying profit before tax**
£1.61m
£1.43m
Underlying EPS (note 24) **
Dividend per share
3.14p
0.20p
2.52p
0.35p
0%
12%
25%
(43%)
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^ Underlying gross margin is statutory gross margin excluding other income and acquired amortisation costs
* Underlying EBITDA is defined as earnings before amortisation, depreciation, finance costs, acquisition costs, share based payments, taxation and exceptional costs.
** Underlying profit before tax and underlying EPS excludes amortisation on acquired intangibles, acquisition costs, share based payments and exceptional non-recurring costs.
REVENUE
FY21 was a good year in terms of
revenue growth. Group revenues
grew by 24% to £11.62m (2020:
£9.36m), through the combination
of continued organic growth and
the full year impact of last year’s
acquisition of Velocimetrics (now
referred to as Beeks Analytics). The
analytics business contributed
£1.3m revenue to the overall Group.
Refer to page 75 for a further
breakdown of The Group’s revenues
93% of revenues were recurring with
Tier 1 customers now representing
18% of delivered revenue (2020: 11%).
GROSS PROFIT
Underlying gross profit earned
increased 21% to £5.76m (2020:
£4.75m), with gross margin largely
similar to last year. Following the
seven new Data centres last year,
we added Toronto this year and
now have presence in all of the
strategic financial hubs across the
world. The Group has continued
to invest in capacity to support
our increased revenues and
customer growth. In relation to
sales growth, fixed asset investment
and therefore depreciation has
increased at a higher rate, partly
due to the timing of sales order to
revenue recognition and the longer
sales cycle we have seen in the Tier
1 space. The Group has continued
to invest in developing innovative
technology solutions such as the
customer portal and the network
automation project, and has
incurred internal net capitalised
development costs to date of
£2.74m (2020: £1.34m).
OTHER OPERATING EXPENSES
Operational costs, which are
defined as operating expenses less
exceptional costs, share based
payments and non-recurring
costs, have increased by £0.8m
as we support both a growing
and more mature customer base
and to gear up for future growth
plans. Overall, they increased by
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27% to £3.9m (2020: £3.0m). Our
headcount over the year has grown
to 80 2020: 65. We had an average
headcount of 73 throughout the
year (2020: 41) therefore gross
staff costs have increased by
£1.9m, from £2.5m to £4.4m. A high
proportion of recruitment has been
across our software development
function to support our Proximity
Cloud development therefore net
staff costs (after capitalisation)
has increased by 11%. We have
recruited in some other key areas
including sales and HR. Most of our
recruitment has been to support
future product and sales growth
with a relatively small increase in
support staff given our automation
and self-service strategy.
Earnings before interest, tax,
depreciation, amortisation and
exceptional non-recurring costs
(“Underlying EBITDA”) increased by
24% to £4.14m (2020: £3.33m). The
growth in Underlying EBITDA has
been driven by continued organic
revenue growth.
Underlying EBITDA, underlying
profit before tax and underlying
earnings per share are alternative
performance measures,
considered by the Board to be a
better reflection of true business
performance than statutory
measures only.
Year ended
30 June 2021
Year ended
30 June 2020
£’000
£’000
PROFIT BEFORE TAX
Profit before tax for the year
1,255
678
Add back:
Acquisition costs/post acquisition
integration costs
Share Based payments
Other Non-recurring costs
140
546
165
Amortisation of acquired intangibles
806
Impairment of goodwill
994
Deduct:
Write back of contingent
consideration
Grant income
(1,989)
(309)
Underlying profit for the period
1,608
Underlying Profit before tax increased to £1.61m (2020: £1.43m).
205
312
61
237
-
-
(59)
1,434
TAXATION
The effective tax rate (‘ETR’) for the
period was -27.81%, (2020: 15.2%).
The ETR has substantially reduced in
the current year. The overall effective
tax rate has benefitted from the
non-taxable element of contingent
consideration, deferred tax on share
options not previously recognised and
prior year adjustments for R&D claim.
EARNINGS PER SHARE AND
DIVIDENDS
Underlying earnings per share
increased 25% to 3.14p (2020: 2.52p).
Underlying diluted earnings per share
increased to 2.99p (2020: 2.45p).
Basic earnings per share increased
to 3.07p (2020: 1.13p). The significant
increase in basic EPS has benefitted
from the gain on the revaluation
of the contingent consideration in
statutory profit after tax and the tax
credit in the year. Diluted earnings
per share has also increased to 3.07p
driven by the increased underlying
profitability and tax credits (2020: 1.13p).
Following consultation with our
shareholders during our equity
raise in April, the Board has decided
to change our dividend policy
which has been in place since
our IPO in November 2017. For
the last few years we have been
paying a modest dividend whilst
continuing to re-invest in our
business. Notwithstanding our solid
balance sheet, the expected growth
and investment into the business
over the next few years, driven by
Proximity Cloud has led us to take
the decision that cash would be
better re-invested in the business to
compound growth for the benefit of
shareholders in the medium term.
Therefore subject to shareholder
approval at the forthcoming Annual
General Meeting, future dividend
distributions are expected to be
put on hold.
CONTINGENT CONSIDERATION
Following the acquisition of VMX
(now Beeks Analytics) last year,
The Group pr ovided for the
likelihood of an earn out target
being met during this financial
year. This earn out was based
on achieving a very challenging
performance target for this year
only, which has not been met.
The revenue contribution from
Velocimetrics was lower than
anticipated, while product updates
took place and investment was
made in the senior management
team. This coupled whilst operating
within a COVID-19 environment
resulted in a delay in signing new
deals and overall a lower revenue
generation than was expected at
the time of acquisition.
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The earn out deal was structured
in a way that missing the revenue
targets was binary and that not
achieving the targets would mean
a pay out to the previous owners
of nil. The quantum and timing of
the new deals, of which one was
signed post year end, was key in
achieving the minimum revenue
earn out target. The contingent
consideration of £2m therefore
is fully released to the income
statement this year.
Having performed a full impairment
assessment including modelling
projected cash flows, weighted
sales pipeline, with appropriate
discount rates and a range of
sensitivities and analysis of CGU’s,
it was concluded that prudently
the goodwill was impaired by £1m.
We fully expect the Beeks Analytics
business to be an integral part of
our business going forward and the
pipeline across the customer base
and product suite remains strong,
as evidenced post year end in
August by securing a $1.1 million
multiyear analytics deal with a Tier 1
Bank for their Asia deployment.
We continue to invest in the
Analytics team, operations and
product, as our ability to offer
network analytics is a key attraction
of our offering to Tier 1 customers.
We also believe the analytics
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product to be an integral part of
the new proximity cloud offering.
STATEMENT OF FINANCIAL
POSITION AND CASH FLOWS
The statement of financial position
shows an increase in total assets
to £22.9m (2020: £16.8m). Our Equity
Raise in April 2021 saw us strengthen
our balance sheet by raising net
proceeds of £4.8m to fund the next
stage of our growth and to finance
our Proximity Cloud offering. We
referred to 2021 as our “Year of
Product” and have made significant
investment in our self-service portal
and network automation projects
of £2.0m (2020: £0.8m), offset by
depreciation and amortisation and
further helped by the Scottish
Enterprise Grant award of which
£0.6m was recognised against
the software intangible for the
year. Investment in property,
plant and equipment was again
significant with over £4.7m (2020:
£2.8m) of additions throughout our
expanding global network made
during the year.
During the year we moved banks
from Royal Bank of Scotland to
Barclays, repaying historic terms
loans of £1.8m and replacing them
with a new loan at more favourable
terms. We also now have access to
a new revolving credit facility of
£2.2m which matures in December
2022. Our net cash at the end of the
year is £1.89m (30 June 2020: net
debt £0.75m) and gross borrowings
at £1.49m are 0.36x Underlying
EBITDA of £4.15m which we believe
is a very comfortable level of debt
to carry given the recurring revenue
business model and strong cash
generation.
At 30 June 2021 net assets were
£13.8m compared to net assets
of £6.7m at 30 June 2020.
FRASER MCDONALD
Chief Financial Officer
24 September 2021
Principal Risks
and Uncertainties
BOARD
Risk identification and
management continues to be a key
role for the Board. The Board has
overall responsibility for The Group’s
risk management, processes
and reporting. Risk management
processes and internal control
procedures are the ultimate
responsibility of the Board.
AUDIT COMMITTEE
The Audit Committee has
responsibility for assessing and
challenging the robustness of
the internal control environment.
It directs and reviews local
management and Group finance
reports on internal control and risk
management throughout the year,
and reports the principal risks to
the Board.
RISKS RELATING TO BEEKS
AND ITS BUSINESS
a) Cyber Risk
An information security breach or
cyber-attack resulting in loss or
theft of data, content or intellectual
property could affect service to
our clients and cause reputational
damage. The risk is perceived to
have increased due to the higher
number of cyber-attacks globally.
Distributed Denial of Service (DDOS)
attacks are a particular concern
due to the nature of our systems
and client base. Mitigations include:
/ Improved internal anti-DDOS
infrastructure
/ Continuation of break-glass third
party anti-DDOS option
/ External testing and reporting
of cyber and IT infrastructure and
controls, including DDoS
/ External security audit on cyber
security management and
controls with full review identifying
no major issues
/ Obtained ISO 27001 (Information
Security Management)
certification on 21st August 2021.
This certification proves Beeks
Financial Cloud has structured its
IT and cyber security to effectively
manage risks and demonstrates
to customers our robust policies
protect against todays big cyber
threats to protect information and
infrastructure
/ IT and cyber risk framework
implemented and approved
b) Key systems failure,
disruption and interruption
Beeks’ position as a Cloud hosting
service provider exposes The
Group to risk in the event that its
technology or systems experience
any form of damage, interruption or
failure. This could result in a lack of
confidence in The Group’s products,
with a consequential material
adverse effect on The Group’s
business, financial condition,
prospects and operations. Many of
the vulnerabilities are not in Beeks
control, such as:
/ Natural disasters
/ Power loss
/ Third party telecommunication
failures
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/ Software failures or viruses
/ Acts of war or terrorism
Operational stability and
performance is the highest priority for
our technical staff and management
who take steps to make continuous
systems improvements on a regular
basis. Examples that assist in
mitigation of the risks are:
/ Upgrade and enhancement of
network infrastructure to improve
stability and resilience
/ Introduction of improved
monitoring tailored to our systems,
services and client base
/ Program of work to standardise
operating systems on network
and server infrastructure
/ Consultation for a deep dive
review of IT Infrastructure and
Security
/ Board Level focus on these risks
and mitigations
c) Actions of third parties
and suppliers
The Company is reliant to an
extent on third parties and
suppliers, including Data centres,
internet service providers and
trading venues. A breach or
disruption in these relationships
could be detrimental to the future
business, operating results and/or
profitability of the Company.
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This risk is being mitigated by:
/ For key infrastructure supply,
we now have multiple vendors in
place for each commodity so that
service to our clients should not
be affected with a disruption in
the relationship or service with any
one vendor
/ Larger suppliers have been
replaced with smaller more
dynamic vendors better suited
to our business model. This
reduces the risk of supply chain
and service affecting issues
by forging closer relationships
and better understanding of
our requirements and working
practices
/ We engage with our suppliers
on a regular basis to ensure
healthy ongoing relationship
and to identify and resolve any
potential issues
d) Reliance on key individuals
The Group’s business, development
and prospects are dependent on a
small number of key management
personnel. The loss of the services
of one or more of such key
management personnel may have
an adverse effect on The Group. The
Group’s ability to develop its business
and achieve future growth and
profitability will depend in large part
on the efforts of these individuals and
The Group’s ability when required
to attract new key management
personnel of a similar calibre. This risk
is being mitigated by:
/ The Directors believe The Group
operates a progressive and
competitive remuneration policy
which includes share incentives
and that the future development
and implementation of this
policy will play an important part
in retaining and attracting key
management personnel
e) Competition
The Group’s competitors include
generic data providers which, in
many cases, are significantly larger
enterprises with greater financial
and marketing resources. There may
also be new entrants to the market,
for example a trading platform
provider could change its strategy
and become a competitor. There
can be no guarantee that The
Group’s current competitors or new
entrants to the market will not bring
superior technologies, products or
services to the market or equivalent
products at a lower price which may
have an adverse effect on The Group’s
business. This risk is being mitigated by:
/ Beeks continues to win business
from existing competitors and
has a very low client cancellation
rate. The quality of service and
price of our products has allowed
us to grow historically without the
financial and marketing resources
of some other companies. We
are now focused on marketing
efforts that will allow The Group to
compete on more fronts
/ Beeks regularly reviews its
product and service range and
augments its offerings in line with
changing client requirements.
We continue to be dynamic and
consistently competitive on price
f) The Group relies on, inter alia the
internet and broadband internet
access and the development
and maintenance of internet and
telecommunications infrastructure
by third parties
The delivery of The Group’s
products and services depends
on third party telecommunications
and internet service providers to
continue to expand high-speed
internet access, to maintain
reliable and efficient networks
with the necessary speeds, quality
of service, capacity and security.
Deterioration in the infrastructure
may adversely affect the ability
or willingness of clients to use
The Group’s services. In addition,
increasing traffic, user numbers
or bandwidth requirements
may result in a decline in
internet or telecommunications
performance and/ or internet or
telecommunications reliability
may decline. Internet or
telecommunications outages,
intermittent disruptions or delays
could adversely affect The Group’s
ability to provide services to its
clients. All of these factors are out
of The Group’s control. This risk is
being mitigated by:
/ Beeks have continued to
increase the total available
telecommunications bandwidth
globally and introduce additional
telecommunications and internet
providers to mitigate the risk of
a degraded service from one or
more providers
g) Achievement of strategic aims
The value of an investment in
The Group is dependent on The
Group achieving its strategic aims.
While the Directors are optimistic
about the prospects for The Group,
there is no certainty that it will be
capable of achieving its strategy
or the anticipated revenues or
growth or that it will ultimately
become profitable on a sustainable
basis. The Group’s future operating
results will be highly dependent
upon how well it manages its
planned expansion strategy and
the timeframe within which that
strategy is executed. This risk is
being mitigated by:
/Beeks strategic aims are
regularly reviewed and tracked so
that the activities of the technical,
marketing and financial resources
are closely aligned
h) Damage to The Group’s
reputation or brand
The Beeks brand may be negatively
affected by any negative publicity,
commentary on social media
platforms or weblogs, regardless
of accuracy. This risk is being
mitigated by:
/ Beeks have introduced
marketing strategies including
regular social media and website
blogs, newsletter and press
releases that promote a positive
image of the Beeks brand
i) The Group’s counterparties
may become insolvent or their
circumstances may change
There is a risk that parties with
whom The Group trades or has
other business relationships
(including partners, clients,
suppliers, subcontractors and
other parties) may become
insolvent or their circumstances
may change, particularly given
the current climate. In the event
that a party with whom The Group
trades becomes insolvent or if
their circumstances change, this
could have an adverse impact on
the revenues and profitability of The
Group. This risk is being mitigated by:
/ Beeks policy is that no client
should represent more than ten
per cent of Group revenue without
Board approval. This reduces the
potential impact to The Group
of any one client’s change in
relationship with the business
/ For key infrastructure supply,
we now have multiple vendors in
place. This reduces the potential
impact to The Group of any one
supplier’s change in relationship
with the Business
j) Other Operational risks
The greatest operational risk
remains as the management of
any unexpected peaks or troughs
in service orders and ensuring
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that the appropriate levels of
resource are in place to maintain
the quality of service expected by
our clients. This risk is managed
by having a core of highly skilled
permanent staff along with a pool
of temporary staff that can be
brought in at short notice to help at
times of high volume. We continue
to supplement these resources by
engaging international businesses
to operate within our technology
platform, giving us further variable
cost capacity.
The use of technology helps
mitigate this risk by streamlining
processes as much as possible
and enabling efficient access to a
large, global and scalable pool of
independent contractors.
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SECTION 172(1) STATEMENT
The Directors consider, both
individually and collectively, that they
have taken decisions in a manner
they consider, in good faith, would be
most likely to promote the success
of The Group for the benefit of its
shareholders, having regard to the
matters set out in s172(1)(a-f) of the
Companies Act 2006. This is detailed
in the Corporate Governance Report
on pages 33 to 43 and below:
a) The likely consequences of
any decision in the long-term: the
long-term success of The Group is
always a key factor when making
strategic decisions.
b) The interests of The Group’s
employees: our employees are the
main asset of The Group and their
wellbeing and development are at
the heart of strategy for success.
Initiatives in extending benefits
in kind for all employees and
greater candidate and employee
engagement have moved the
Group forward during the year.
c) The need to foster business
relationships with suppliers,
customer and others; The Group
regularly meets with key suppliers
and customers to review operations
and explore mutually beneficial
future actions.
d) The impact of The Group’s
operations on the community and
the environment: the impact on both
the community and the environment
is factored in to The Group’s decision
making process.
e) The Group’s reputation for high
standards of business conduct:
integrity, both personally and
professionally, is embedded in
The Group’s culture and is led by
example by the Directors. The need
to act fairly between members
of The Group: no single set of
stakeholders is prioritised over other
stakeholders and all decisions are
made trying to be equitable to
all members.
The Board held twelve board
meetings in the year to address and
meet its obligations under Section
172 of the Companies Act 2006.
The following table covers the key
decisions made during the year and
the stakeholder group(s) impacted
by these decisions.
Key Impact
Key Decision Made
Key Stakeholder
Group’s impacted
Long term Strategy
and Acquisitions
Each year, the Board approves the budget of the Group and
reviews the Group’s strategy and growth plans. The Board
considers mergers and acquisitions as part of the long term growth
strategy and continually reviews the market for opportunities.
Shareholders,
Employees,
Customers,
Suppliers
During the year, the board reviewed the strategy and launch
timelines of the new proximity cloud offering and its potential
opportunities to both existing and new customers.
Performance
of the Group
including financial
performance
On a monthly basis, the Board reviews the trading performance
of the Group with detailed Board reports provided by the
CFO covering trading in the month and year to date, with
performance monitored against internal budget, external market
forecast and the previous financial year.
Shareholders,
Employees,
Customers,
Suppliers,
Environment
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At each Board meeting, the Board also receives detailed Board
reports covering commercial, operational and HR matters
prepared by senior managers of the business. These reports cover
sales and forecast pipeline, customers and suppliers, data centre
activity and various aspects of operational performance and key
employee activities.
During the year the Board continually assessed the performance
of the analytics business against the second year earn out target.
The board review the impact on the revaluation of the contingent
consideration and the resultant release to the profit and loss.
The board also considered, as a direct result, that this a potential
impairment indicator for the goodwill attributed to the acquisition.
The Board reviews the dividend policy and approves the interim
and annual dividends taking into account the results and
financial position of the Group, including the impact of Covid-19.
The Board discussed the dividend policy during the year, taking
cogniscence of the Group’s growth plans and investment. The
Board considered the current dividend policy as being subject to
change if this was welcomed by shareholders.
21
Beeks Financial Cloud Group PLC
Strategic Report - Principal Risks and Uncertainties
For the year ended 30 June 2021
Key Impact
Key Decision Made
Key Stakeholder
Group’s impacted
Governance,
Regulatory
requirements
and Risk
The Board reviews and approves the results announcements and
trading updates, the half year report and annual report and the
AGM statement. The Board receives regular briefings from the Chief
Executive Officer and Chief Financial Officer and the Operations
board members.
Shareholders,
Employees,
Customers,
Suppliers,
Environment
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
The Board takes regulatory responsibilities seriously and is
committed to ensuring that it is open and transparent with
regulators. In the current year, the Board met with our nominated
adviser to obtain an update on changes to AIM rules and market
abuse regulations to ensure Beek’s compliance with requirements.
In the current year, the Board has received updates on the internal
control framework and the Group risk register and the continued
compliance with the ISO27001 accreditation.
Risk control documents are presented at Board meetings on the
Group’s key risks which include an updated assessment of controls
and improvement actions required in respect of each major risk.
The Group has recruited a Head of HR and Talent Management in
the current year and the board has been presented with employee
strategies including growth, upskilling and employee retention.
As noted in the Chief Executive Officer’s report on page 9, Principal
Risks and Uncertainties on page 17 and the Corporate Governance
report on page 33, the Board has formally considered the risk
mitigating measures as a result of Covid-19.
In December 2020, a new trading arrangement was concluded
between the United Kingdom and the European Union. The
Group have undertaken a detailed assessment of the impact
of the Group, our operations and supply chain which was
presented to the Board. Although the Group has been slightly
impacted with getting goods across the borders, it does not
expose significant risks or impact as a result of the new trading
agreement in place. This will be continually monitored over the
coming year.
The strategic report on pages 4 to 23 has been approved by the board and signed on its behalf by:
GORDON MCARTHUR
Chief Executive Officer
24 September 2021
23
24
Beeks Financial Cloud Group PLC
Board of Directors
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Board of Directors
For the year ended 30 June 2021
Board of
Directors
MARK CUBITT
NON-EXECUTIVE CHAIRMAN
AGE 58
G
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V
E
R
N
A
N
C
E
Mark has extensive multinational
experience gained over the last
35 years, including 24 years in the
PLC environment and eight years
as chief financial officer at Wolfson
Microelectronics plc until its sale to
Cirrus Logic in August 2014. Mark is
currently non-executive chairman of
AIM listed Concurrent Technologies
plc and a non-executive director of
private company RHA Technologies
Ltd based in Glasgow. Previously
Mark was non-executive chairman
of Superglass Holdings plc and was
part of the team that turned around
the business before its sale in 2016.
He also served as VP of finance at
Jacobs Engineering and was finance
director of Babtie Group until the
sale of the company to Jacobs
Engineering in 2004. During his time
at Jacobs he also sat on the board
of highways maintenance firm BEAR
Scotland and was its chairman
in 2006. Mark has also worked at
Denholm Oilfield Services Limited,
Dawson International plc, Christian
Salvesen plc and its then subsidiary
Aggreko. Mark is a Chartered
Accountant and a member of the
Association of Corporate Treasurers,
and has a degree in Accountancy
and Computer Science from
Heriot-Watt University.
FRASER McDONALD,
CHIEF FINANCIAL OFFICER
AGE 46
Fraser McDonald has over 20 years’
experience in finance, management
and consulting roles. Having
commenced his finance career and
management accountancy training
(CIMA) with National Australia Group,
Fraser has gained experience
working for global organisations
such as Royal BAM Group, Lactalis
McLelland, and Serco Group PLC
across different industries including
Banking, Manufacturing and
Construction. Fraser has been in the
Technology sector since 2009, where
he has held senior roles including
Commercial Manager and Head of
Finance at ACCESS LLP (subsidiary of
Serco Group PLC). Fraser joined Beeks
on a consultancy basis in March 2016
to support the company through the
AIM admission process, before being
appointed on a permanent basis as
Group Financial Controller in March
2017, and then Chief Financial Officer
in October 2018. Fraser has a BA
(Hons) in Finance from the University
of Strathclyde, and a PgDip in
Information Technology from the
University of Paisley.
WILLIAM MELDRUM,
NON-EXECUTIVE DIRECTOR
AGE 53
William Meldrum is a senior vice
president, employee experience
and chief of staff at IHS Markit, a
world leader in critical information
and data analytics. Prior to joining
Markit in 2005, Will worked at
Deutsche Bank for four years
managing the bank’s interests
across a portfolio of investments with
a key focus on industry consortia,
electronic trading systems and data.
Will holds an MA from the University
of Edinburgh and an MBA from
London Business School.
G
O
V
E
R
N
A
N
C
E
GORDON MCARTHUR,
CHIEF EXECUTIVE OFFICER
AGE 45
Gordon McArthur founded Beeks in
2010 having become increasingly
frustrated by the lack of low latency
trading infrastructure available. He
has since grown the business from
a three man start up to its current,
profitable form. Gordon’s career in
software and IT solutions businesses
spans 20 years during which time
he has held commercial and
managerial roles at IBM and Versko,
an IT specialist for IBM software
platforms. During his time at IBM
Gordon worked in both financial
services and the industrial sector
and initially on SME businesses but
latterly covering IBM’s largest globally
integrated accounts in the Oil and
Gas sector. Gordon has a BA (Hons)
in Risk Management and a Masters
in Business Information Management
from Glasgow Caledonian University.
KEVIN COVINGTON,
NON-EXECUTIVE DIRECTOR
AGE 62
Kevin has had more than 30 years’
experience working internationally
in the financial services industry
for both vendors and banks, with
a particular focus on M&A and
advisory. Kevin currently runs a
boutique advisory firm, Change
Alley, which helps develop and grow
organisations in the fintech sector.
Kevin also acts as an adviser and
mentor to a number of companies
in the sector, including Adaptive
Financial Consulting, KA2, Enyx and,
prior to its acquisition by Beeks,
Velocimetrics. Previous positions
include CEO of a VC backed
Australian technology company,
Metamako, which was acquired by
Silicon Valley based Arista Networks
in late 2018 and CEO at technology
company ITRS Group Limited. For
a number of years Kevin has been
ranked in the top 40 most influential
people in Trading Technology by the
Institutional Investor Magazine.
25
26
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2021
Directors’
Report
G
O
V
E
R
N
A
N
C
E
RESULTS AND DIVIDENDS
The Group’s audited financial
statements for the year ended
30 June 2021 are set out on pages
58 to 93. The Group’s profit for the
year after tax amounted to £1.6m.
(2020: £0.58m).
The Directors will propose, at
the forthcoming AGM, to amend
the dividend policy following a
consultation with shareholders.
No final dividend is expected to
be paid for the year ended 30
June 2021 (2020: 0.35p). An interim
dividend was paid during the year
0.20p per share.
POST BALANCE SHEET EVENTS
Beeks headquarters will move from
the existing leased office to the
nearby Riverside Business Park,
King’s Inch Road, Braehead, PA4 8YU
in early 2022. In September 2021, The
Group finalised the purchase of the
property for £2.1m which was funded
out of existing Company cash
balances and a new debt facility
secured on the property of £1.5m.
RESEARCH AND DEVELOPMENT
The Group develops cloud
computing products including public,
private and proximity solutions.
FUTURE DEVELOPMENTS
The Group’s business activities,
together with the factors likely
to affect its future development,
performance and position are set
out in the Strategic Report on
pages 4 to 23.
DIRECTORS AND THEIR INTERESTS
The present membership of the
Board is set out on pages 24 and 25
and the Directors who served during
the year are listed on page 39. Details
of Directors’ interests in The Group’s
shares are set out below.
Gordon McArthur and his beneficial
interests (including those of their
immediate families) in the Company’s
£0.00125 ordinary share capital
are detailed in the substantial
shareholdings table further below. The
beneficial interest of the other directors
are detailed in the table below:
INSURANCE FOR DIRECTORS AND
OFFICERS
The Company has purchased and
maintains appropriate insurance
cover against legal action brought
against Directors and officers.
FINANCIAL RISK MANAGEMENT
OBJECTIVES AND POLICIES
The Group uses various financial
instruments which include cash,
leases, bank loans and items
such as trade debtors and trade
creditors that arise directly from
its operations. The main purpose
of these financial instruments is
to raise finance for The Group’s
operations. The main risks arising
from The Group’s financial
instruments are credit risk, liquidity
risk, exchange rate risk and
interest rate risk. The Directors
review these risks on an ongoing
basis. This policy has remained
unchanged from previous years.
Further information on financial risk
management is disclosed in note
15 of The Group accounts.
Mark Cubitt
William Meldrum
Fraser McDonald
2021
Shares
70,707
23,500
44,118
2021
Options
-
-
2020
Shares
70,707
23,500
2020
Options
-
-
713,369
-
651,667
CREDIT RISK
Credit risk is managed on a
Group basis. Credit risks arise from
cash and cash equivalents and
deposits with banks and financial
institutions, as well as credit
exposures to customers, including
outstanding receivables and
committed transactions.
The Group’s credit risk is primarily
attributable to its trade receivables.
It is the policy of The Group to
present the amounts in the
balance sheet net of allowances
for doubtful receivables, estimated
by The Group’s management
based on prior experience and the
current economic environment.
The Group reviews the reliability
of its customers on a regular
basis; such a review takes into
account the nature of The Group’s
trading history with the customer.
The credit risk on liquid funds is
limited because the majority of
funds are held with two banks with
high credit ratings assigned by
international credit-rating agencies.
Management does not expect
any losses from non-performance
of these counterparties. None of
the Group’s financial assets are
secured by collateral or other
credit enhancements.
LIQUIDITY RISK
The Group seeks to manage
financial risk by ensuring sufficient
liquidity is available to meet
foreseeable needs and to invest
cash assets safely and profitably.
EXCHANGE RATE RISK
The Group monitors its exposure to
exchange rate risk on an ongoing
basis. The Group has minimal
exposure to foreign exchange risk
as a result of natural hedges arising
between sales and cost transactions.
Details of exchange rate exposure
balances are disclosed in note 15 of
The Group accounts.
INTEREST RATE RISK
The Group has limited exposure
to interest rate risk in respect of
cash balances and long-term
borrowings held with banks and
other highly rated counterparties.
All loans and leases are at fixed
rates of interest therefore The
Group does not have exposure to
interest rate risk.
GOING CONCERN
The Group’s business activities,
together with the factors likely
to affect its future development,
performance and position are set
out in the Strategic report on pages
4 to 23 including the potential impact
of Covid-19. The financial position
of The Group, its cash flows, liquidity
position and borrowing facilities
are described in the Chief Financial
Officer’s Report on pages 13-16.
In the seventeen months since
the response to the Covid-19
pandemic was initiated in the UK,
G
O
V
E
R
N
A
N
C
E
there has been a limited impact
on Beeks’ trading from Covid-19.
We take great comfort from the
resilience of our business model
and are fortunate that we are
not significantly exposed to the
industries that are suffering the
worst effects. The level of customer
churn across our business has
remained low and cash collection
has been in line with our typical
profile. We do however remain
vigilant to the economic impact
the ongoing situation may create,
particularly on the SME segment
of the market.
Note 1 to the financial statements
includes The Group’s objectives,
policies and processes for
managing its capital; its financial
risk management objectives;
details of its financial instruments
and hedging activities; and its
exposures to credit risk and
liquidity risk.
27
28
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2021
Directors’
Report
G
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N
A
N
C
E
The directors are of the opinion that
The Group can operate within their
current debt facilities and comply
both with its gross borrowings to
adjusted EBITDA and minimum
adjusted cash banking covenants.
At the end of the financial year,
The Group had net cash of £1.89m
(2020: Net debt £0.75m) a level
which the Board is comfortable with
given the strong cash generation
of The Group and low level of debt
to EBITDA ratio. The Group was in
compliance with all covenants under
its banking facility arrangements
throughout the reporting period.
The Group has a diverse portfolio
of customers with relatively low
customer concentration split across
different geographic areas. As a
consequence, the directors believe
that The Group is well placed to
manage its business risks.
The directors have considered The
Group budgets and the cash flow
forecasts for the next two financial
years, and associated risks, including
the potential impact of Covid-19, and
the availability of bank and leasing
facilities. We have run appropriate
scenario and stress tests applying
reasonable downside sensitivities
and are confident we have the
resources to meet our liabilities as
they fall due including mitigating
actions to take should some loan
facilities not be made available
at the end of current terms, which
is December 2022 and coincides
with the end of management’s
assessment period. Within these
scenarios, we have taken into
consideration the acquisition of
the property referenced in the
subsequent events section. After
making enquiries, the directors
have a reasonable expectation
that The Group will be able to meet
its financial obligations and has
adequate resources to continue
in operational existence for the
foreseeable future. For this reason
they continue to adopt the going
concern basis in preparing the
financial statements.
AIM RULE COMPLIANCE REPORT
Beeks Financial Cloud PLC is quoted
on AIM and the Company has
complied with AIM Rule 31. Further
information on AIM compliance
is explained in the Corporate
Governance Report on pages 33 to 43.
STREAMLINED ENERGY AND
CARBON REPORTING
As the Company does not meet
the medium sized threshold, the
directors are not required to disclose
the reporting requirements of SECR.
DIRECTORS’ RESPONSIBILITIES
STATEMENT
The directors are responsible for
preparing the Strategic Report and
Directors’ Report and the financial
statements in accordance with
applicable law and regulations.
Company law requires the directors
to prepare financial statements for
each financial year. Under that law
the directors have to prepare the
financial statements in accordance
with international accounting
standards in conformity with the
requirements of the Companies
Act 2006 and have chosen to
prepare the Parent Company
financial statements in accordance
with United Kingdom Generally
Accepted Accounting Practice
Financial Reporting Standard 101,
‘Reduced Disclosure Framework’
(FRS 101). 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 and profit or loss of the
company and group for that
period. In preparing these financial
statements, the directors are
required to:
/ select suitable accounting
policies and then apply them
consistently;
/ make judgements and
accounting estimates that are
reasonable and prudent;
/ state whether applicable
international financial reporting
standards adopted pursuant to
Regulation (EC) No 1606/2002 as
it applies in the European Union
and international accounting
standards in conformity with the
requirements of the Companies
Act 2006 have been followed for
The Group financial statements
and whether United Kingdom
/ Generally Accepted Accounting
Practice FRS 101 (United Kingdom
Accounting Standards and
applicable laws) have been
followed for the Parent Company
financial statements, subject to
any material departures disclosed
and explained in the financial
statements.
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 hence
for taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
The directors confirm that:
/ so far as each director is
aware, there is no relevant
audit information of which the
company’s auditor is unaware;
and
/ 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 auditor is
aware of that information.
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.
INDEPENDENT AUDITOR AND
DISCLOSURE OF INFORMATION TO
AUDITOR
This information is given and should
be interpreted in accordance
with the provisions of s418 of the
Companies Act 2016.
AUDITOR
A resolution to reappoint the auditor,
Grant Thornton UK LLP and to
authorise the Directors to agree their
remuneration will be placed before
the forthcoming Annual General
Meeting of the Company.
By order of the Board.
G
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N
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E
FRASER MCDONALD
Chief Financial Officer
24 September 2021
29
30
Beeks Financial Cloud Group PLC
Report on Remuneration
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Report on Remuneration
For the year ended 30 June 2021
Report on
Remuneration
G
O
V
E
R
N
A
N
C
E
DIRECTORS’ REMUNERATION
REPORT FOR THE YEAR ENDED 30
JUNE 2021
On behalf of the Board, I am
pleased to present the Directors’
Remuneration Report for the year
ended 30 June 2021 which sets out
our Directors’ Remuneration policy
and provides details of amounts
earned by Directors in respect of
the year ended 30 June 2021.
As the Company is listed on the
Alternative Investment Market it
is not required to comply with the
provisions of the UK Corporate
Governance Code 2018 (“Code”)
issued by the Financial Reporting
Council, however, we continue to
provide disclosures in addition
to that which is required by AIM
Rule 19 on a voluntary basis to
enable shareholders to understand
and consider our remuneration
arrangements. If this was
prepared under the Companies
Act, additional disclosures would
be required in order to meet the
requirement.
REMUNERATION COMMITTEE
The Remuneration Committee
operates within defined
terms of reference. The
Remuneration Committee
reviews the performance of the
executive directors and makes
recommendations to the Board
on matters relating to their
remuneration and terms of service.
The Remuneration Committee
also makes recommendations
to the Board on proposals for the
granting of share options and
other equity incentives pursuant
to any employee share option
scheme or equity incentive plans
in operation from time to time.
The Remuneration Committee
meets as and when necessary.
The Remuneration Committee
comprises the Chairman and
the Non-Executive Director and is
chaired by Mark Cubitt.
REMUNERATION
COMMITTEE REPORT
The Remuneration Committee
reviews the performance of the
executive directors and makes
recommendations to the Board
on matters relating to their
remuneration and terms of service.
The Remuneration Committee
also makes recommendations
to the Board on proposals for the
granting of share options and
other equity incentives pursuant
to any employee share option
scheme or equity incentive plans
in operation from time to time.
The Remuneration Committee
meets as and when necessary.
The Remuneration Committee
comprises the Chairman and
the Non-Executive Director and is
chaired by Mark Cubitt.
During the period under review the
Remuneration Committee met two
times and has granted options over
ordinary shares in the company
to some senior management,
including executive directors, under
the Company’s Staff Long term
incentive scheme (LTIP). In granting
these options, the Remuneration
Committee’s objective was to
attract, motivate and retain key
staff over the long term, designed
to incentivise delivery of the
company’s growth objectives.
NON-EXECUTIVE DIRECTORS
The Board, based on a
recommendation by the Chairman
of the Remuneration Committee
or, in the case of the Chairman, the
remainder of the Board determines
the remuneration of the Non-
Executive Director.
SERVICE CONTRACTS
The Executive Directors have
entered into service contracts with
The Group that are terminable by
either party on no less than three
months’ prior notice.
SHARE OPTIONS
Share options were awarded to
staff (including Directors) during
the year in accordance with
the Company’s LTIP (Long Term
Incentive Plan). The details of
these are disclosed in Note 20.
Director’s Remuneration
2021
Executive directors
Gordon McArthur
Fraser McDonald^
Non-executive directors
Mark Cubitt
William Meldrum
Kevin Covinton*
Total
2020
Executive directors
Gordon McArthur
Fraser McDonald^
Non-executive directors
Mark Cubitt
William Meldrum
Christopher Livesey*
Total
G
O
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R
N
A
N
C
E
Basic
salary
£’000
Benefits
In kind ^
£’000
Total
£’000
Pension
£’000
30
104
35
35
17
221
60
96
35
35
32
258
-
43
-
-
-
43
-
-
-
-
-
-
30
147
35
35
17
264
60
96
35
35
32
258
1
3
-
-
-
4
2
3
-
-
-
5
* Chris Livesey resigned from the board on 27 May 2020 and Kevin John Covington was appointed on 23 December 2020
^ Benefits in kind includes the amount of gains realised on the exercise of share options during the year.
31
32
Beeks Financial Cloud Group PLC
Report on Remuneration
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
G
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A
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C
E
Share Options awarded to the Director, Fraser McDonald are shown below:
Date
of Grant
Share
Options
Vesting
Date
Lapse
Date
Exercise
Price (£)
Fraser McDonald
6 Sept 18
68,627
6 Sept 21
6 Sept 28
0.00125
Fraser McDonald
17 Oct 19
538,922
17 Oct 22
17 Oct 29
0.00125
Fraser McDonald
09 Oct 20
105,820
9 Oct 23
17 Oct 29
0.00125
During the year ended 30 June 2021, share options exercised by the Director, Fraser McDonald are shown below:
Fraser McDonald
6 Sept 18
44,118*
6 Sept 19
6 Sept 28
0.00125
The aggregate amount of gains
realised by Directors, who served
during the year, on the exercise of
share options during the year was
£43,180 (2020: £nil).
DIRECTORS’ SHARE INTERESTS
The Directors’ shareholdings in the
Company is shown in the Directors’
Report on page 26.
For the year ended 30 June 2021,
share options awards of up to 2.2m
options have been agreed by the
Remuneration Committee as part
of the LTIP. These options will have a
three year vest for senior executives
and between two and three years for
other staff. As with the previous LTIP
arrangements they will be based on
challenging performance conditions
in line with the existing plan.
MARK CUBITT
Chairman of the Remuneration
Committee
24 September 2021
Chairman’s
Introduction
As chairman of the Board it is
my responsibility to ensure that
the highest standards of corporate
governance are embraced
throughout The Group. All members
of the Board believe strongly in
the value and importance of good
corporate governance and in
The Group’s accountability to all
of Beek’s stakeholders, including
shareholders, staff, contractors,
clients and suppliers.
The corporate governance
framework which The Group
operates, including Board
leadership and effectiveness, Board
remuneration, and internal control
is based upon practices which the
Board believes are proportional
to the size, risks, complexity and
operations of the business and is
reflective of The Group’s values. Of
the two widely recognised formal
codes, The Group decided, on
admission of its shares to AIM in
November 2017, to adhere to the
Quoted Company Alliance’s (“QCA”)
Corporate Governance Code
for Small and Mid-Size Quoted
Companies (revised in April 2018 to
meet the current requirements of
AIM Rule 26).
The QCA Code is constructed
around ten broad principles and
a set of disclosures. The Group
has considered how it applied
each principle to the extent that
the Board judges these to be
appropriate in the circumstances,
and below there is an explanation
of the approach taken in relation
to each. The Board considers that
it does not depart from any of the
principles of the QCA Code.
Set out below is an explanation
at a high level of how The Group
currently applies the principles of
the QCA Code and, to the extent
applicable, those areas where The
Group’s corporate governance
structures and practices differ from
the expectations set out in the
QCA Code.
We are confident that our
approach to corporate governance
will underpin the development of a
strong organisation, well positioned
to take the business to the next
phase of growth.
PRINCIPLE 1: ESTABLISH A
STRATEGY AND BUSINESS
MODEL WHICH PROMOTES
LONG-TERM VALUE FOR
SHAREHOLDERS
Beeks Financial Cloud Plc
is a leading managed cloud
computing, connectivity and
analytics provider exclusively
for capital markets and financial
services, offering Infrastructure
as a Service (IaaS) to global
institutional and retail companies
across multiple asset classes.
Beeks’ strategy is to ensure
maximum security, optimise
performance and deliver
G
O
V
E
R
N
A
N
C
E
ultra-low latency compute power
in the exceedingly fast-moving
capital markets sector.
Beeks provides:
/ Managed private, hybrid and
public cloud solutions
/ Dedicated and virtual servers
that host traders and brokers in
data centres around the world
with secure set up
/ Ultra-low latency connectivity
between clients and key financial
venues and exchanges
/ Analytics; traditional
software-based solutions or
hosted in a Beeks environment
in key financial data centres
The business model focuses on
efficiency and flexibility, offering
our clients the ability to scale up
and scale down as needed. Due
to market fluctuations and the
inherent risk involved in algorithmic
trading strategies, this makes our
services highly attractive to clients.
The Group’s strategy can be viewed
on pages 4 to 23.
33
34
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Chairman’s
Introduction
G
O
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PRINCIPLE 2: SEEK TO
UNDERSTAND AND MEET
SHAREHOLDER NEEDS AND
EXPECTATIONS
The Group is committed to
open communication with all
its shareholders to ensure that
its strategy, business model
and performance are clearly
understood. Understanding what
analysts and investors think
about us, and in turn, helping
these audiences understand our
business, is a key part of driving our
business forward and we actively
seek dialogue with the market.
We do so via investor roadshows,
attending investor conferences and
through our regular reporting.
INSTITUTIONAL SHAREHOLDERS
The Directors hold regular meetings
with institutional shareholders to
discuss and review The Group’s
activities and objectives. The Chief
Executive Officer and CFO meet
institutional investors shortly after
the annual and interim results,
and on an ongoing basis as
required. Directors also undertake
consultation on certain matters
with major shareholders from
time to time. Through these
consultations, The Group maintains
a regular dialogue with institutional
shareholders and analysts.
Feedback is reported to the Board
so that all Directors develop an
understanding of the views of
major shareholders.
PRIVATE SHAREHOLDERS
Communication with private
shareholders is done via investor
events during the year such as
Mello, IMC and Sharesoc where the
Chief Executive Officer and CFO
present and are available to speak
to private investors on a one to
one basis. This is in addition to the
Annual General Meeting, where
attendance by shareholders is
encouraged and where the Board
is available to answer questions.
The Notice of AGM is sent to
shareholders at least 21 days before
the meeting. The Chairman of
the Board and the committees,
together with all other directors
attend the AGM and are available
to answer questions raised by
shareholders. For each vote, the
number of proxy votes received for,
against and withheld is announced
at the meeting. The results of the
AGM are subsequently published on
the Company’s corporate website.
Specific queries may be raised at
any time by any shareholder by
emailing Beeks’ investor relations
team at investor@beeksgroup.com.
The team ensures that the person
best placed to address each query
responds as soon as possible. The
Chief Executive Officer is responsible
for overseeing day-to-day
communications with shareholders.
The news and investor relations
sections of the Beeks website are
regularly updated and provide the
market with the latest business news
and shareholder updates. Following
major periods of communications,
our advisers consolidate feedback,
on an anonymised basis, from the
relevant parties which then forms
the basis of a briefing pack for
the Board to ensure awareness
of shareholder opinions.
PRINCIPLE 3: TAKE INTO
ACCOUNT WIDER STAKEHOLDER
AND SOCIAL RESPONSIBILITIES
AND THEIR IMPLICATIONS FOR
LONG TERM SUCCESS
In addition to its shareholders,
the Company believes its main
stakeholders are its employees and
clients. The Company dedicates
significant time to understanding
and acting on the needs and
requirements of these groups via
meetings dedicated to obtaining
feedback which is then, where
appropriate, considered by the
Board and acted upon.
The Company believe recruiting
and maintaining highly talented
and motivated staff is key to its
success. All staff have objectives
and regular communication with
management is encouraged as
part of the Company’s culture. Staff
are also encouraged to develop
their skills and budget is always
identified for staff training
and development.
The Company has low levels of staff
attrition and fosters a culture of
continuous improvement
and innovation.
PRINCIPLE 4: EMBED EFFECTIVE
RISK MANAGEMENT,
CONSIDERING BOTH
OPPORTUNITIES AND
THREATS, THROUGHOUT THE
ORGANIZATION
The Board is responsible for risk
management and internal controls,
supported and informed by the
executive team. The Board defines
risk appetite and monitors the
management of significant risks
to ensure that the nature and
extent of significant risks taken by
The Group are aligned with overall
goals and strategic objectives.
The Board takes responsibility
for establishing and maintaining
reliable systems of control in all
areas of operation. These systems
of control, especially of financial
control, can only provide reasonable
but not absolute assurance against
material misstatement or loss. The
key matters relating to the system of
internal control are set out below:
/ Beeks has established an
operational management
structure with clearly defined
responsibilities and regular
performance reviews
/ The Group operates a
comprehensive system for
reporting financial and
non-financial information to the
Board, including review of strategy
plans and annual budgets;
/ Financial results are monitored
against budgets, forecasts and
other performance indicators with
action dictated accordingly at
each meeting
/ A structured approval process
based on assessment of risk and
value delivered; and
/ Operational updates
highlighting any risks and/or
issues are communicated to the
Board at Board Meetings by the
Chief Executive Officer and the
COO
/ Sufficient resource is focused
to maintain and develop
internal control procedures and
information systems, especially in
financial management. The Board
considers that there have been no
substantial weaknesses in internal
financial controls that have
resulted in any material losses,
contingencies or uncertainties
that need to be disclosed in the
accounts
/ Beeks has implemented an
operational risk framework to
evaluate how we operate our
business. This enables Beeks
to measure outcomes and
understand the input to business
processes and assess risks before
making any significant decision
based on risk appetite. This will
reduce the likelihood of future
potential damages as a result of
operational impact
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More information on The Group’s
principal risks and internal control
procedures are set out on pages
17-23.
PRINCIPLE 5: MAINTAIN THE
BOARD AS A WELL-FUNCTIONING,
BALANCED TEAM LED BY
THE CHAIR
Subject to the Articles of
Association, UK legislation and
any directions given by special
resolution, the business of The
Group is managed by the Board.
The Code requires The Group to
have an effective Board whose role
is to develop strategy and provide
leadership to The Group as a whole.
It sets out a framework of controls
that allows the Board to apply these
principles for the identification,
assessment and management
of risk. Additionally, it ensures the
Board takes collective responsibility
for the success of The Group.
The Board’s main roles are
to provide leadership to the
management of The Group,
determine The Group’s strategy
and ensure that the agreed
strategy is implemented. The Board
takes responsibility for approving
potential acquisitions, annual
budgets, annual reports, interim
statements and Group financing
matters. Ultimate responsibility for
the quality of, and approach to,
corporate governance lies with
the chair of the board.
35
36
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Chairman’s
Introduction
G
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The Board appoints its members
and those of its principal Committees
following the recommendations of
the Nomination and Remuneration
Committee. The Board reviews the
financial performance and operation
of The Group’s businesses. The
Board also reviews the identification,
evaluation and management of the
principal risks faced by The Group,
and the effectiveness of The Group’s
system of internal control.
For the year ended 30 June 2021, the
PLC Board comprises the independent
Non-Executive Chairman, the Chief
Executive Officer, the CFO and the two
independent Non-Executive Directors.
The Board is highly committed and
experienced and is supported by
qualified executive and senior
management teams. The Chairman,
Mark Cubitt holds 70,707 ordinary
shares, William Meldrum holds 23,500
ordinary shares. The Company
considers the three Non-Executive
Directors to be independent.
The board believes the current
composition enables the board to
perform its duties effectively and there
is a clear division of responsibilities
between the running of the Board
and the Executives responsible for the
Company’s business, to ensure that
no one person has unrestricted
powers of decision.
The Executive Directors of the
Company are full time and do not
serve as non-executive directors in
any other organisation.
The Non-Executive Chairman also
serves as a non-executive director of
private company RHA Technologies
Ltd based in Glasgow and is also a
retained advisor to pureLiFi based in
Edinburgh. Non-Executive Directors
devote as much time as is necessary
for the proper performance of their
duties. The Non-Executive Directors
typically spend one to two days a
month on Company-related matters.
The Board met 12 times in the year
ended 30 June 2021. The attendance
of each director is shown on page 39.
ROLE OF CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
The Code requires that there should
be a clear division of responsibilities
between the running of the Board
and the executive responsible
for The Group’s business, so as to
ensure that no one person has
unrestricted powers of decision.
The Chairman is responsible for the
leadership of the Board, ensuring
its effectiveness and setting its
agenda. Once strategic and
financial objectives have been
agreed by the Board, it is the
Chief Executive Officer’s
responsibility to ensure they
are delivered upon. To facilitate
this, the Chief Executive Officer
regularly meets the Executive
Management Team (EMT) which
comprises representatives from
Operations, Technical Delivery,
Finance and Sales. The day to
day operations of The Group are
managed by the EMT.
COMPOSITION OF AND
APPOINTMENTS TO THE BOARD
The Code requires that there should
be a balance of Executive and
Non-Executive Directors and when
appointing new Directors to the
Board, there should be a formal,
rigorous and transparent procedure.
For the year ended 30 June 2021
the PLC Board comprises the
Non-Executive Chairman, the Chief
Executive Officer, the CFO and the
Non-Executive Directors. Short
biographies of the Directors are
given on pages 24 and 25. The
Board is satisfied with the balance
between Executive and Non-Executive
Directors. The Board considers that
its composition is appropriate in view
of the size and requirements of The
Group’s business and the need to
maintain a practical balance between
Executive and Non-Executive Directors.
Each member of the Board brings
different skills and experience to the Board
and the Board Committees. The Board
is satisfied that there is sufficient diversity
in the Board structure to bring a balance
of skills, experience, independence
and knowledge to The Group.
The Board recognises that to remain
effective it must ensure that it has
the right balance of skills, experience,
knowledge and independence to
enable it to discharge its duties and
responsibilities. The Company has
a highly committed and experienced
Board, which is supported by a
senior management team, with
the qualification and experience
necessary to run the Company.
Each member of the Board brings
different experience and skills to
the Board and its various committees.
The Board composition is kept under
review as this mix of skills and business
experience is a major contributing
factor to the proper functioning
of the Board, helping to ensure
matters are fully debated and that
no individual or group dominates the
Board decision-making process.
The Code requires that the
Board undertakes a formal and
rigorous annual evaluation of its
own performance and that of its
Committees and Directors. The
Board continues to annually review
its composition, to ensure there
is adequate diversity to allow for
its proper functioning and that the
Board works effectively together as
a unit. When a new appointment
to the Board is due to be made,
consideration will be given to the
particular skills, knowledge and
experience that a potential new
member could add to the existing
Board composition.
BOARD COMMITTEES
The Board has established
two committees to deal with
specific aspects of the Board’s
responsibilities: the Audit
Committee and the Nomination
and Remuneration Committee. The
Report of the Audit Committee can
be found on pages 44 to 45. The
Audit Committee is chaired by Mark
Cubitt and includes William Meldrum
and Kevin Covington.
The Nomination and Remuneration
Committee is chaired by Mark Cubitt
and includes William Meldrum and
Kevin Covington. The Committee
has overall responsibility for making
recommendations to the Board
of the remuneration packages of
the Executive Directors. The Board
considers it appropriate, due both
to the size of The Group and the
experience of the Board members,
to have a combined nomination
and remuneration committee.
These Board operate under the terms
of reference as set out in The Group’s
Financial Position and Prospects. The
Audit Committee and the Nominations
and Remuneration Committee met
three times during the year.
RE-ELECTION
Under the Code, Directors should
offer themselves for re-election at
regular intervals. It is proposed that
at least one of the directors will be
put forward for re-election at The
Group’s AGM which will be scheduled
during November 2021.
PRINCIPLE 6: ENSURE THAT
BETWEEN THEM THE DIRECTORS
HAVE THE NECESSARY
UP-TO-DATE EXPERIENCE,
SKILLS AND CAPABILITIES
Biographies of the Board of Directors
can be found on pages 24 and 25.
Each member of the Board brings
different skills and experience to the
Board and the Board Committees.
The Board is satisfied that there
is sufficient diversity in the Board
structure to bring a balance of skills,
experience, independence and
knowledge to The Group.
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The Chief Executive Officer’s role is
critical in developing and maintaining
the sustainability and effectiveness
of The Group. Specifically, the
Chief Executive Officer’s key
responsibilities include:
/ Leading the development and
execution of The Group’s vision and
strategy
/ Senior human resource
management: Recruit, retain and
motivate an appropriately skilled
executive management team
/ Representing The Group: The Chief
Executive Officer will be required to
consistently present The Group and
its objectives to key stakeholders
and the market in general
/ Lead and drive overall Merger and
Acquisition strategy
The Chief Executive Officer is
therefore expected to keep up to
date with the industry and market in
which the Company operates.
The primary function of the CFO is
to ensure that The Group’s Board is
able to make proper judgements
37
38
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Chairman’s
Introduction
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as to The Group’s financial position.
This encompasses responsibility
for The Group’s financial health,
that it has in place an appropriate
financial strategy to enable it to
achieve its wider strategic plan
objectives, its annual budget
outcomes and, most importantly,
is able to meet its obligations to
shareholders, the ‘market’, banks,
creditors, suppliers and other
stakeholders as required.
The CFO responsibilities also
encompass:
/ Internal and external financial
reporting
/ Corporate governance
/ Risk management and the
maintenance of effective systems
of internal control
/ Responsible for the Company
Secretary role
/ Tax compliance and planning
/ Liaising with the Nomad on a
regular basis
/ Compliance with AIM Rules
and MAR
The CFO is required to keep up to
date with any changes to accounting
standards and to ensure his skillset is
refreshed on an ongoing basis.
The Non-Executive Directors
hold senior positions with other
companies ensuring that their
knowledge is continuously refreshed.
Specific training will be provided to
the Board by the Company when
required to support the Directors
existing skillset.
PRINCIPLE 7: EVALUATE BOARD
PERFORMANCE BASED ON CLEAR
AND RELEVANT OBJECTIVES,
SEEKING CONTINUOUS
IMPROVEMENT
The Company was admitted to
trading on AIM on 27 November
2017. The Board was appointed in
advance of Admission with the
exception of the CFO who was
appointed at the Company’s AGM
on 24 October 2018. Since Admission,
evaluation of the performance
of the Company’s Board has
historically been implemented in
an informal manner. The Chairman
regularly communicates with Board
Members outside of Board meetings
to ensure that each director is
satisfied with the performance of
the Board and has the opportunity
to raise any issues of concern.
Similarly, the Chairman uses his
substantial experience of plc boards
to evaluate the Board effectiveness
on an ongoing basis.
The Chairman has been tasked with
assessing the individual contributions
of each of the members of the team
to ensure that:
/ Their contribution is relevant=
and effective
/ They are committed
/ Where relevant, they have
maintained their independence
The Board has established an
executive team with strength in
depth in each of its core functions
of network operations, software
development, sales & marketing
and finance which it will draw on,
together with appropriate external
appointments, in regards to
succession.
PRINCIPLE 8: PROMOTE A
CORPORATE CULTURE THAT IS
BASED ON ETHICAL VALUES AND
BEHAVIOURS
The Board places a high degree of
value on promoting a corporate
culture that reflects The Group’s
ethical principles and behaviours
in order to maximise the quality
of service that is passed on to the
customer. As The Group works
as an international team that is
spread across three continents,
a lot of importance is placed on
a culture of inclusivity and open
and honest communication;
ensuring that employees are
equally understood, trusted, and
that individual cultural values and
languages are respected. The
Company encourages innovation,
has flat management structures,
open plan offices and a culture of
continuous improvement. This helps
to ensure that communication and
understanding flows well within the
Company, and thereby provides
the most efficient and highest
quality of service to clients.
The Board has implemented formal
HR policies and procedures that
sets out details and guidelines on
the culture of the Company and
how this should be reflected in
employees’ individual conduct.
PRINCIPLE 9: MAINTAIN
GOVERNANCE STRUCTURES AND
PROCESSES THAT ARE FIT FOR
PURPOSE AND SUPPORT GOOD
DECISION MAKING BY THE BOARD
The Board comprises three
independent Non-executive Directors
and two Executive Directors.
BOARD PROGRAMME
The Board is scheduled to meet ten
times each year in accordance with
its scheduled meeting calendar.
The Group has a highly committed
and experienced Board and is
supported by qualified executive
and senior management teams.
Board meetings held during
the period under review and
the attendance of directors is
summarised below:
The Board and its Committees
receive appropriate and timely
information prior to each
meeting; a formal agenda is
produced for each meeting, and
Board and Committee papers
are distributed several days
before meetings take place. Any
Director may challenge Company
proposals and decisions are taken
democratically after discussion.
Any Director who feels that any
concern remains unresolved
after discussion may ask for
that concern to be noted in the
minutes of the meeting, which
are then circulated to all Directors.
Any specific actions arising from
such meetings are agreed by the
Board or relevant Committee and
then followed up by the Company’s
management.
All Directors receive regular
and timely information on
The Group’s operational and
financial performance. Relevant
information is circulated to the
Directors in advance of meetings.
The business reports monthly on
its headline performance against
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Executive Directors
Gordon McArthur
Fraser McDonald
Independent
Non-executive Directors
Mark Cubitt
William Meldrum
Kevin Covington
Board meetings
Audit Committee
Remuneration
Committee
Possible
Attended
Possible
Attended
Possible
Attended
12
12
12
12
6
12
12
12
12
6
-
4
4
4
2
-
4
4
4
2
2
2
2
2
2
2
2
2
2
2
39
40
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Chairman’s
Introduction
responsible for the leadership of
the Board, ensuring its effectiveness
and setting its agenda. Once
strategic and financial objectives
have been agreed by the Board,
it is the Chief Executive Officer’s
responsibility to ensure they are
delivered upon.
To facilitate this, the Chief Executive
Officer regularly meets the Executive
Management Team (EMT) which
comprises representatives from
Operations, Technical Delivery,
Finance, Sales and HR. The day to
day operations of The Group are
managed by the EMT.
BOARD COMMITTEES
The Board is supported by the
Audit, and Remuneration and
Nominations committees. Each
committee has access to such
resources, information and advice
as it deems necessary, at the cost
of the Company, to enable the
committee to discharge its duty.
Based on the current stage
of growth within the business,
the Board do not believe it is
requirement to have an internal
audit function, but this will be kept
this under review as the business
continues to grow or equivalent.
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its agreed budget and market
forecast and the Board reviews the
monthly update on performance
and any significant variances are
reviewed at each meeting.
The Board considers the
appropriateness of its accounting
policies on an annual basis. The
Board believes that its accounting
policies, in particular in relation to
income recognition and research
and development, are appropriate
and are informed by its Auditors
on future changes to such
accounting policies.
During the financial year ended
30 June 2021, the business reviewed
matters including the valuation
of Velocimetrics Limited including
contingent consideration, revenue
recognition and capitalisation of
R&D activities. Similar to the prior
year, technical accounting papers
were prepared, reviewed and
agreed by the Company’s auditor.
Financial results with comparisons
to budget and forecast results are
reported to the Board on a regular
basis, together with a commercial
report on strategic and operational
issues. Significant variances from
budget or strategy are discussed at
Board meetings and actions set in
place to address them.
There is a clear division of
responsibility at the head of
the Company. The Chairman is
PRINCIPLE 10: COMMUNICATE
HOW THE COMPANY IS
PERFORMING BY MAINTAINING A
DIALOGUE WITH SHAREHOLDERS
AND OTHER RELEVANT
STAKEHOLDERS
Trading updates and press releases
are issued as appropriate and
the Company’s brokers provide
briefings on shareholder opinion
and compile independent
feedback from investor meetings.
Information offered at the analysts’
meetings together with financial
press releases are available on the
Company’s website,
www.beeksgroup.com.
The Annual General Meeting is used
by the Directors to communicate
with both institutional and private
investors. Every shareholder will
have access to a full annual report
each year end and an interim
report at the half year end. Care
is taken to ensure that any price
sensitive information is released
to all shareholders, institutional
and private, at the same time in
accordance with London Stock
Exchange requirements. The
Company strives to give a full,
timely and realistic assessment
of its business in all price-sensitive
reports and presentations.
ENVIRONMENTAL, SOCIAL,
GOVERNANCE
People / Social
Our people are integral to the
success of the business. We are
committed to providing an inclusive
environment which enables our
people to thrive and be part of it’s
continuing growth.
The Beeks Group has introduced
several new forms of workforce
engagement over the last year,
which we felt was particularly
pertinent during the pandemic
when we were all working remotely.
As part of our initiative to improve
engagement across The Group, we
invested in an innovative employee
engagement platform that has
been rolled out to encourage
shared kudos, issue employee
surveys and ‘shout outs’ across the
business and effectively manage
the employee lifecycle as well as
being a comprehensive tool to
monitor employee performance
and streamline the reward process.
Another method of improving
engagement is the introduction
of bi-weekly senior management
meetings and quarterly Town Hall
meetings with the entire workforce,
hosted by the Chief Executive Officer.
These meetings are held to
discuss general business matters
including the Company’s financial
position in the marketplace,
customer engagement, strategy,
and values and behaviours as well
as using it as an opportunity for
all staff to share their views and
ask questions.
Positive Workplace Culture
To continue the development of a
positive working environment and
culture, a number of policies and
working practices were reviewed,
launched or relaunched during
2020-2021 including:
telephone support service. In
addition, and as part of our
expansion, we have purchased
a new Head Office in Glasgow at
which we which will include a gym
facility to promote and encourage
employee wellbeing.
/ Maternity Leave – an enhanced
Maternity Policy was introduced
aimed at providing greater
financial support for families
/ Family Friendly policies – the
relaunch of the Parental Leave,
Shared Parental Leave, Adoption
Leave and Compassionate Leave
/ Flexible Working – the relaunch
of the Flexible Working Policy
aimed at promoting work-life
balance, increasing motivation,
reducing stress, and improving
performance and productivity
Employee Benefits and Reward
As part of an overall benefits review,
the Company improved our private
medical offering by increasing the
level of cover across the business
to include mental health treatment
and therapy as standard, as well as
the introduction of a suite of remote
health benefits, which included
access to many services including:
/ 24/7 telephone support for
everyone
/ Debt, money and legal
information and support
/ Remote GP Services
We also introduced an Employee
Assistance Programme (‘EAP’)
which is a specialist 24/7
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As well as our wellbeing initiatives,
we also have the ability to enable
employees to benefit from the
success of The Group through share
ownership. An HMRC approved
Share Incentive Plan was introduced
in October 2020 to encourage
employee share ownership after
admission to AIM, with applications
exceeding expectations. This
scheme also acts as an incentive for
attracting potential candidates.
Recruitment, Tenure and Vacancies
The Company actively recruited
in all departments throughout
2020-2021 and the total number of
employees was 80 as at 30th June
2021. Through the continued focus
on supporting and encouraging
internal moves, we have various
internal promotions during the
year. The Company’s activities in
relation to workforce engagement
and the development of a positive
workforce culture are critical to
attracting and retaining talent and
experience.
Diversity and Equal Opportunities
At the heart of the Company’s
approach to people is the provision
of an environment where everyone
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Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Chairman’s Introduction
For the year ended 30 June 2021
Chairman’s
Introduction
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can fulfil their potential and where
colleagues from all backgrounds
can feel confident in their ability to
achieve their best. The Company
has a Diversity Policy in place and is
fully committed to the elimination of
unlawful and unfair discrimination.
The Company recognises and
values highly the benefits of
diversity in the workplace, of
which gender is one important
aspect, and maintains a policy of
employing the best candidates
available in every position,
regardless of gender, ethnic group
or background, and is committed
to fair and equal treatment.
As at 30 June 2021, the Company
had 80 employees of which 18%
were female.
Actions and initiatives launched
to deliver improvement include
Enhance Maternity Policy; Paternity
and Shared Paternity Leave policies
and Flexible Working Policy and
practices.
SUPPLIERS & CUSTOMERS
The Beeks Group believe strong
business relationships with suppliers
and customers are crucial to our
success. Our in-house teams are
focussed on regular and open
communication with customers to
ensure we meet their requirements
and deliver quality customer service.
Senior management have regular
meetings with key customers
to maintain visibility over their
technology roadmaps in order that
The Group’s development plans
remain aligned to our customers’
future strategies.
While travel was severely restricted
throughout 2021, the challenging
environment encouraged customers
to accept video meetings, and
good relationships were maintained
throughout this period. When travel
becomes widely possible again, we
are confident that customers will
continue to use video technology,
leading to more frequent, effective
communication and reducing travel
requirements, albeit face-to-face
meetings will remain key to building
and maintaining strong relationships.
ENVIRONMENT
Beeks are focussed on including
effective environmental goals into
our strategic decisions, operations
and supply chain. The proprietor
at our current main office in
Hillington, Glasgow are committed
to a reduction in emissions per unit
of energy consumed within their
operations worldwide and to have
several initiatives in place to support
this including:
/ Typical luminous efficiency of
fluorescent lighting systems is
50 – 100 lumens per watt this is
several times more efficient than
that of an incandescent
lamp - (light bulb)
/ Motion sensor operation
light fitting
/ If space available you could
have bins for food waste, plastic,
glass, paper and cardboard,
/ Eco chargers, Smart sockets,
Programmable thermostats,
LED light bulbs
The Group also conforms to Waste
Electrical and Electronic Equipment
recycling rules and regulations for the
disposal of materials from our site.
We have also made a commitment
to make several upgrades to our new
Head Office that we will be moving
into in H2 2022 to improve our
environmental performance.
In addition, our data centres
platform is expansive, secure
and sustainable and are
designed to the highest energy
efficiency standards. Equinix have
a long-term goal of using 100%
clean and renewable energy for
their global platform with more
than $129 million of investments
in energy efficiency upgrades,
retrofits and improvements and
are constantly seeking new ways
to innovate data centres.
Our data centres lead by example,
taking steps to minimise their
carbon footprint and reduce
our energy consumption by
reducing control systems, power
consumption and increasing
cooling capacity through active
airflow management using
intelligent, distributed sensors
and innovative control policies.
While this has been limited this
year due to the pandemic, there
has been support throughout the
organisation for organised runs for
The McMillan Cancer Charity as
well as plans to do a charity cycle
with our recently purchased office
Peloton bike.
By order of the Board.
In addition, the below initiatives are
also undertaken at our data centres:
/ Cold/hot aisle containment
/ Energy-efficient lighting systems
/ Fuel cells
/ High temperature chilled water
set points
LOCAL COMMUNITY
The Technical labour market has
been extremely buoyant in the last
12 months but we have committed
to hiring locally wherever possible
and using local recruitment
agencies when required.
The Beeks charity committee
is responsible for identifying
opportunities where we can assist
those in need in the local area.
MARK CUBITT
Chairman
24 September 2021
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Beeks Financial Cloud Group PLC
Report of the Audit Committee
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Report of the Audit Committee
For the year ended 30 June 2021
Report of the
Audit Committee
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COMMITTEE ACTIVITIES IN
THE FINANCIAL YEAR ENDING
30 JUNE 2021
The Audit Committee is chaired
by Mark Cubitt. The other members
are William Meldrum and Kevin
Covington. Attendance during the
year can be seen within the Board
programme on page 39.
The Committee met four times
in relation to the financial year
ended 30 June 2021, 2 of the
meetings were post year end,
with the 4th meeting to approve
he annual accounts. In addition
to standing items on the agenda,
the Committee:
/ received and considered, as
part of the review of interim and
annual financial statements,
reports from the Auditor in respect
of the Auditor’s review of the
interim results, the audit plan
for the year and the results of
the annual audit.
These reports included the
scope of the interim review and
annual audit, the approach to be
adopted by the Auditor to address
and conclude upon key estimates
and other key audit areas, the
basis on which the Auditor
assesses materiality, the terms
of engagement for the Auditor
and an on-going assessment of
the impact of future accounting
developments for The Group;
/ considered the Annual Report
and Accounts in the context
of being fair, balanced and
understandable;
/ considered the effectiveness
and independence of the
external audit;
/ review the enhanced
audit report.
Significant areas considered by the
Audit Committee in relation to the
2021 financial statements are set
out below:
Areas of estimates
Matter Considered and Role of the Committee
Recoverability of Investment in
VMX & Impairment of Goodwill
Revenue recognition
During the year ended 30 June 2021 the Committee
considered the impairment assessment prepared
by management and critically assessed the inputs
such as a consideration of the reasonableness of
discount rates applied, agreeing forecasts through
into going concern projections and the analysis of
CGU’(s) applied.
The committee considered the risk associated from
revenue recognition and considered new contracts
and sales awarded around the year end.
INDEPENDENCE AND OBJECTIVITY
OF THE AUDITOR
The Committee continues to
monitor the work of the Auditor
to ensure that the Auditor’s
objectivity and independence is
not compromised by it undertaking
inappropriate non-audit work. The
current Auditor, Grant Thornton UK
LLP, was appointed Auditor on 6
November 2017.
NON-AUDIT FEES
The Committee approves all
non-audit work commissioned from
the external auditors. During the year
the fees paid to the Auditor were
£65,000 for Group and subsidiary
audit and £4,500 for the interim
audit services.
OTHER MATTERS
The Committee is authorised to
seek any information it requires
from any Group employee in
order to perform its duties. The
Committee can obtain, at The
Group’s expense, outside legal or
other professional advice on any
matters within its terms of reference.
The Committee may call any
member of staff to be questioned
at a meeting of the Committee as
and when required.
REPORTING RESPONSIBILITIES
The Committee makes whatever
recommendations to the Board it
deems appropriate on any area
within its remit where action or
improvement is required. The
Committee ensures that it gives
due consideration to laws and
regulations, the provisions of the
Combined Code, the requirements
of the UK Listing Authority’s Listing
Rules, Prospectus and Disclosure
and Transparency Rules and
any other applicable rules as
appropriate. The Committee also
oversees any investigation of
activities which are within its terms
of reference. The Audit Committee
operates within agreed terms of
reference in accordance with
The Group’s Financial Position
and Prospects.
MARK CUBITT
Chairman of the Audit Committee
24 September 2021
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46
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
G
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OUR OPINION ON THE GROUP
FINANCIAL STATEMENTS IS
UNMODIFIED
We have audited The Group
financial statements of Beeks
Financial Cloud Group PLC for
the year ended 30 June 2021,
which comprise the consolidated
statement of comprehensive
income, the consolidated
statement of financial position,
the consolidated statement
of changes in equity, the
consolidated cash flow statement
and notes to the consolidated
financial statements, including
a summary of significant
accounting policies.
The financial reporting framework
that has been applied in their
preparation is applicable law and
international accounting standards
in conformity with the requirements
of the Companies Act 2006.
In our opinion, The Group
financial statements:
/ give a true and fair view of the
state of The Group’s affairs as at
30 June 2021 and of its profit for
the year then ended;
/ have been properly prepared
in accordance with international
accounting standards in
conformity with the requirements
of the Companies Act 2006; and
/ 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 Group financial
statements’ section of our report.
We are independent of The Group
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
We are responsible for concluding
on the appropriateness of the
directors’ use of the going concern
basis of accounting and, based
on the audit evidence obtained,
whether a material uncertainty
exists related to events or
conditions that may cast significant
doubt on The Group’s ability to
continue as a going concern.
If we conclude that a material
uncertainty exists, we are required
to draw attention in our report
to the related disclosures in the
financial statements or, if such
disclosures are inadequate, to
modify the auditor’s opinion. Our
conclusions are based on the audit
evidence obtained up to the date
of our report. However, future events
or conditions may cause The Group
to cease to continue as a going
concern.
Our evaluation of the directors’
assessment of The Group’s ability to
continue to adopt the going concern
basis of accounting included:
/ Obtaining management’s cash
flow forecasts for The Group
covering the period to December
2022. We assessed how these
forecasts were compiled, and
assessed their accuracy by
validating underlying information
and verifying mathematical
accuracy of the model used;
/ Challenged management on
the key assumptions used with
the forecasts testing the accuracy
of the assumptions and inputs
by corroborating to underlying
information. We also assessed
the mitigating actions available to
management and corroborated
these available actions to
supporting information;
/ Obtained forecast covenant
compliance workings for the going
concern period and reperformed
the calculations to ensure
mathematical accuracy;
directors’ use of the going
concern basis of accounting in
the preparation of the financial
statements is appropriate.
The responsibilities of the directors
with respect to going concern are
described in the ‘Responsibilities
of directors for The Group financial
statements’ section of this report.
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/ We performed a retrospective
review of management’s
forecasts by comparing the
forecasts to actuals in the
previous two financial years to
determine the accuracy of prior
year assessments. We also
compared actual results to date
to the forecasts; and
/ We assessed the adequacy
of the disclosures in the financial
statements, including the impact
of the disclosed post balance
sheet event to the going
concern model.
In our evaluation of the directors’
conclusions, we considered the
inherent risks associated with the
group’s business model including
effects arising from macro-economic
uncertainties such as Covid-19 and
Brexit, we assessed and challenged
the reasonableness of estimates
made by the directors and the
related disclosures and analysed
how those risks might affect The
Group’s financial resources or ability
to continue operations over the
going concern period.
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 ability to
continue as a going concern for a
period of at least twelve months from
when the financial statements are
authorised for issue.
In auditing the financial statements,
we have concluded that the
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
We performed full scope audit
procedures on the financial
statements of Beeks Financial Cloud
Group PLC, the parent company,
and on the financial information of
Beeks Financial Cloud Limited, the
UK trading company. We performed
an audit of one or more account
balances, classes of transactions
or disclosures on the financial
information of Velocimetrics
Limited and Beeks FX VPS USA
Inc. We performed analytical
procedures on the financial
information of the Japanese
component, Beeks Financial Cloud
Co. Ltd and on Velocimetrics Inc.
KEY AUDIT MATTERS
Key audit matters are those
matters that, in our professional
judgement, were of most
significance in our audit of The
Group financial statements of the
current period and include the
most significant assessed risks of
material misstatement (whether or
not due to fraud) that we identified.
These matters included those that
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 Group financial statements
as a whole, and in forming our opinion
thereon, and we do not provide a
separate opinion on these matters.
In the graph below, we have
presented the key audit matters,
significant risks and other risks
relevant to the audit.
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OUR APPROACH TO THE AUDIT
G
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OVERVIEW OF OUR AUDIT
APPROACH
Overall materiality: £174,000, which
represents approximately 1.5% of The
Group’s revenue.
Key audit matters were
identified as:
/ Revenue recognition (same as
previous year); and
/ Impairment of goodwill in
Velocimetrics Limited (new)
Our auditor’s report for the year
ended 30 June 2020 included two
key audit matters that have not
been reported as key audit matters
in our current year’s report. These
relate to acquisition accounting,
and the impact of the Covid-19
pandemic on going concern.
The Group did not undertake
any acquisitions in the year and
therefore this KAM was not relevant
for the current year. For the KAM
relating to the impact of Covid-19
on going concern, the risk was
rebutted for the current year given
management’s ability to show no
significant impact of Covid-19 on
the performance of the business, in
addition to The Group expanding,
the £5m equity raise carried out in
May 2020, developing new software
and signing new Tier 1 customers
allowing for increased revenue
income and cash balances
going forward.
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Key Audit Matter
How our scope addressed the matter
Impairment of goodwill
in Velocimetrics Limited
In responding to the key audit matter, we performed
the following audit procedures:
Revenue recognition
We identified revenue recognition as one of the most
significant assessed risks of material misstatement due
to fraud.
Group revenue recognised in the year has grown
from £9.4m last year to £11.6m for the year ended 30
June 2021.
We have pinpointed the significant risk in revenue
to be the impact of contract assets and contract
liabilities adjustment made at year end due to
the manual process and judgement involved in
determining the satisfaction of the performance
obligation. This differs from the revenue recognised,
and received, in the year where we note there is less
judgement involved.
In addition to this, the application of International
Financial Reporting Standard (IFRS) 15 ‘Revenue from
Contracts with Customers’, specifically in relation
to management judgement and complexities
regarding the revenue recognised under contract
accounting within Velocimetrics Limited, is
considered a significant risk..
We also identified a significant risk regarding the
recognition of non-recurring elements of revenue
and hardware sales around the year end to ensure
the risks and rewards of the goods had passed to the
customer prior to the year end.
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In responding to the key audit matter, we performed
the following audit procedures:
We utilised revenue data analytics on private and
wholesale revenue streams to identify any anomalies,
being transactions the software identifies that falls
out with the standard posting cycle. Any anomalies
identified were followed up with management and
traced to supporting evidence;
In addition to this, a substantive sample of invoices was
selected for testing to gain further evidence over the
occurrence of these sales;
Using the IFRS 15 technical paper provided by
management, we have obtained relevant invoices,
delivery notes and sales orders to agree the treatment
of accrued and deferred income. The entries were
traced into the consolidated statement of financial
position with the corresponding consolidated
statement of comprehensive income impact
confirmed as the movement between the opening and
closing position;
A sample of hardware sales and one-off sales
recognised at year end were traced to goods
dispatched notes or relevant supporting
documentation such as timesheets for professional
services to ensure revenue is recognised at the correct
point in time, being when control is passed to the
customer, or when the service has been provided;
We obtained an updated paper on the application
of IFRS 15 specific to Velocimetrics Limited and, via
a sample, assessed whether the revenue has been
recognised in line with the framework by reviewing
both existing and new revenue contracts and creating
expectations, comparing against actual revenue
recognised. This included selecting samples of contract
assets and contract liabilities and testing these for
accuracy; and
We reviewed and assessed the revenue recognition
policies at a group level for appropriateness.
Relevant disclosures in the Annual Report 2021
Our results
/ Financial statements: Note 1 - Summary of
significant accounting policies, Revenue recognition
and Note 2 – Critical accounting judgements and
key sources of estimation uncertainty, Revenue;
/ Strategic Report: Financial performance, Revenue;
and
/ Strategic Report: Principal risks and uncertainties,
Terms of client contracts.
Overall, our audit testing did not identify any evidence
of material misstatement in respect of group revenue
recognition.
We identified the impairment of goodwill in
Velocimetrics Limited as one of the most significant
assessed risks of material misstatement due to fraud
and error.
In the prior year, the acquisition of Velocimetrics Limited
resulted in goodwill of £1.8m.
Due to the performance of the newly acquired business
falling below expectation, evidenced by the fact that
£2.0m of previously accrued contingent consideration
was not paid out in the current year, there is a risk that
the goodwill value is impaired.
The process for assessing whether an impairment
exists under International Accounting Standard (IAS)
36 ‘Impairment of Assets’ is complex. Calculating the
value in use, through forecasting cash flows related
to CGUs and the determination of the appropriate
discount rate and other assumptions to be applied, is
highly judgemental and as a result of the subjectivity
of selecting the assumptions, can be subject to
management bias. The selection of certain inputs into
the cashflow forecast can significantly impact the
result of the impairment review.
The key inputs impacting the model are considered to be:
/ The pipeline of future sales opportunities;
/ The discount rate;
/ The allocation of costs and corporate assets; and
/ The growth rate.
As a result of this process management identified an
impairment of £994,000 within the goodwill in relation
to Velocimetrics Limited.
We obtained the impairment model and challenged
the core assumptions within these management
approved cashflows, specifically looking into forecast
v actual and the historic accuracy of management’s
forecasting;
We obtained management’s assessment of CGUs
and the allocation of cashflows and assets, including
corporate assets, to these CGUs;
Revenue growth within the forecasts was specifically
challenged given the underperformance of
Velocimetrics Limited since acquisition. The key
revenue driver in the model, being the pipeline of future
sales opportunities, was challenged and corroborating
evidence, such as contracts won post year end and
proposals issued at the tender stage, were obtained
and agreed back into the forecasts. We further
challenged the inputs into the run-rate, specifically
those values impacting the terminal value year;
Costs and the allocation of sufficient corporate
assets were considered and challenges made to
management with regards to the reasonableness of
overheads incorporated;
Our internal experts reviewed the reasonableness
of the discount rate applied including the workings
behind this discount rate;
Sensitivities were performed on the cashflows to bring
together all evidence to identify a potential undetected
impairment; and
Assessed whether group disclosures with respect to the
carrying value of the Group’s goodwill and intangible
assets are adequate and the key assumptions have
been disclosed, including management’s impairment
methodology being in line with IAS 36.
G
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Relevant disclosures in the Annual Report 2021
Our results
Overall, our testing did not identify any evidence of
an additional material impairment charge against
goodwill being required.
/ Financial statements: Note 1 – Summary of
significant accounting policies, Intangible assets
and amortisation and Impairment;
/ Financial statements: Note 2 – Critical accounting
judgements and key sources of estimation
uncertainty, Goodwill and other indefinite life
intangible assets;
/ Financial statements: Note 10 – Intangible assets;
and
/ Report of the Audit Committee: Areas of estimates.
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of
identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and
in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Country of incorporation
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial
statements that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of these financial
statements. We use materiality in determining the nature, timing and extent
of our audit work.
Materiality threshold
£174,000, which represents approximately 1.5% of the Group’s revenue.
Significant judgements
made by auditor in
determining the materiality
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In determining materiality, we made the following significant judgements:
We considered revenue to be the most appropriate benchmark given the
Group’s focus on driving revenue growth for the stakeholders.
Materiality for the current year is higher than the level that we determined
for the year ended 30 June 2020 to reflect an increase in revenue across the
group as a whole, including a full year of revenue from Velocimetrics Limited.
Performance materiality
used to drive the extent of
our testing
We set performance materiality at an amount less than materiality for the
financial statements as a whole to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
Performance
Materiality threshold
Significant judgements
made by auditor in
determining the materiality
Specific materiality
£121,800, which is 70% of financial statement materiality.
In determining performance materiality, we made the following significant
judgements:
We considered 70% of financial statement materiality to be appropriate for
performance materiality given the AIM listed status of the business. Prior
year unadjusted errors have also been considered, however these have
historically been immaterial individually and in aggregate. The internal
control environment is dependent upon a sufficiently sized and qualified
finance team which is considered appropriate for the current size and scale of
the business, which is further supported through robust Board oversight.
We determine specific materiality for one or more particular classes of
transactions, account balances or disclosures for which misstatements of
lesser amounts than materiality for the financial statements as a whole
could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific materiality for the following areas:
/ Directors’ remuneration; and
/ Related party transactions.
Communication
of misstatements to
the audit committee
We determine a threshold for reporting unadjusted differences
to the audit committee.
Threshold for
communication
£8,700 and misstatements below that threshold that, in ourview, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance
for potential uncorrected misstatements.
OVERALL MATERIALITY
G
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AN OVERVIEW OF THE SCOPE
OF OUR AUDIT
We performed a risk-based audit
that requires an understanding
of The Group’s business and in
particular matters related to:
Understanding The Group,
its components, and their
environments, including
group-wide controls
/ Our assessment of audit risk,
our evaluation of materiality and
our allocation of performance
materiality determines the
scope of our audit work for each
component within The Group,
which when taken together,
enables us to form an audit
opinion on The Group financial
statements. We take into account
size, risk profile, changes in the
business environment and other
factors when assessing the level
of work to be performed on each
component;
/ We obtained an understanding
of the component-level controls
of The Group as a whole, which
assisted us in identifying and
assessing the risks of material
misstatement due to fraud or
error, as well as assisting us in
determining the most appropriate
audit strategy.
Identifying significant
components
/ Of all components, two were
determined to be significant to
The Group – Beeks Financial Cloud
Group PLC, the parent company,
and Beeks Financial Cloud Limited.
Full scope audit procedures were
completed on these components.
/ Significant group components
were determined by calculating
benchmark percentages, with
anything identified above
15% considered a significant
component. Benchmarks reviewed
included revenue, profit before
tax, cash and cash equivalents
and total assets (excluding
intercompany).
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
G
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Type of work to be performed on
financial information of parent and
other components (including how it
addressed the key audit matters)
profit position. There are no other
material changes in the scope of
the current year from the scope
of the prior year.
/ audit of the financial information
of the component using
component materiality (full-scope
audit) for Beeks Financial Cloud
Group PLC and Beeks Financial
Cloud Limited;
/ audit of one or more account
balances, classes of transactions
or disclosures of the component
(specific-scope audit) for
Velocimetrics Limited and Beeks
FX VPS USA Inc.;
/ analytical procedures at group
level (analytical procedures) for
Beeks Financial Cloud Co. Ltd and
Velocimetrics Inc;
/ no component auditors were
utilised throughout this audit, all
work was performed by The Group
engagement team.
Performance of our audit
/ an interim visit was undertaken
to perform specific procedures
on the equity raises completed to
December and the re-finance in
the year;
/ the year-end audit was
undertaken remotely.
Changes in approach from
previous year
/ In the current year, specific
audit procedures were performed
at a USA component level due
to the high percentage of losses
making up the closing group
OTHER INFORMATION
The directors are responsible
for the other information. The
other information comprises the
information included in the annual
report, other than the financial
statements and our auditor’s
report thereon. Our opinion on
the 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.
In connection with our audit of
The Group financial statements,
our responsibility is to read
the other information and, in
doing so, consider whether the
other information is materially
inconsistent with The Group
financial statements or our
knowledge obtained in 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
there is a material misstatement
of The Group financial statements
or a material misstatement of the
other information. 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.
Our opinion on other matters
prescribed by the Companies
Act 2006 is unmodified
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 Group
financial statements are prepared
is consistent with The Group
financial statements; and the
strategic report and the directors’
report have been prepared in
accordance with applicable
legal requirements.
MATTER ON WHICH WE ARE
REQUIRED TO REPORT UNDER THE
COMPANIES ACT 2006
In the light of the knowledge
and understanding of The Group
and its environment obtained in
the course of the audit, we have
not identified material
misstatements in the strategic
report or the directors’ report.
MATTERS ON WHICH WE
ARE REQUIRED TO REPORT
BY EXCEPTION
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:
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
FOR THE GROUP FINANCIAL
STATEMENTS
As explained more fully in the
directors’ responsibilities statement,
the directors are responsible for the
preparation of The Group 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 group
financial statements that are
free from material misstatement,
whether due to fraud or error.
In preparing The Group financial
statements, the directors are
responsible for assessing The
Group’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 to cease
operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES
FOR THE AUDIT OF THE GROUP
FINANCIAL STATEMENTS.
Our objectives are to obtain
reasonable assurance about
whether The Group 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 group
financial statements.
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.
Explanation as to what extent the
audit was considered capable of
detecting irregularities, including
fraud
Irregularities, including fraud, are
instances of non-compliance
G
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N
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E
with laws and regulations. We
design procedures in line with our
responsibilities, outlined above, to
detect material misstatements in
respect of irregularities, including
fraud. Owing to the inherent
limitations of an audit, there is
an unavoidable risk that material
misstatements in the financial
statements may not be detected,
even though the audit is properly
planned and performed in
accordance with the ISAs (UK).
The extent to which our
procedures are capable of
detecting irregularities, including
fraud is detailed below:
/ We obtained an understanding
of the legal and regulatory
frameworks applicable to
The Group and the industry
in which it operates through
our general commercial
and sector experience. We
determined the following
laws and regulations were
most significant: international
accounting standards in
conformity with the requirements
of the Companies Act 2006, the
Companies Act 2006 and the
Quoted Companies Alliance
(QCA) Corporate Governance
Code. In addition, we concluded
that there are certain sector laws
and regulations that may impact
the financial statements, namely
GDPR regulations and Information
Security Management System
(ISMS) Standards;
55
56
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
G
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/ We obtained an understanding
of how The Group is complying
with these legal and regulatory
frameworks by making enquiries
of management, the Audit
Committee and reviewing legal
correspondence via sampling
invoices in relation to legal
expenditure. We corroborated
our enquiries through a review
of board minute papers.
Management and the Audit
Committee confirmed they were
not aware of any instances of
non-compliance and that they
had no knowledge of actual,
suspected or alleged fraud;
/ We assessed the susceptibility
of The Group’s financial
statements to material
misstatement, including how
fraud might occur, by evaluating
management’s incentives and
opportunities for manipulation
of the financial statements. Our
audit procedures were designed
to provide reasonable assurance
that the financial statements
were free from fraud or error.
However, detecting irregularities
that result from fraud is inherently
more difficult than detecting
those that result from error, as
those irregularities that result
from fraud may involve collusion,
deliberate concealment, forgery
or intentional misrepresentation.
The procedures included:
- Evaluation of the design
effectiveness of controls that
management has in place
to prevent and detected fraud;
- Journal entry testing, with
a focus on manual journals
with a profit impact or that
increase revenue;
- Challenging assumptions
and judgements made by
management in areas of
estimation and judgement;
- Assessing the extent of
compliance with the relevant
laws and regulations as part
of our procedures on legal
expenditure; and
- Performing audit procedures
to test whether the disclosures
required by international
accounting standards in
conformity with the requirements
of the Companies Act 2006
and the Companies Act 2006
are present within The Group
financial statements.
/ Our assessment of the
appropriateness of the collective
competence and capabilities of
the engagement team included
consideration of the team’s:
- Understanding of, and
practical experience with, audit
engagements of a similar
nature and complexity, through
appropriate training and
participation; and
- Knowledge of the industry in
which The Group operates.
/ Our communications, both
with management and the
Audit Committee, in respect of
non-compliance with laws and
regulations and fraud included
the potential for fraud in revenue
recognition and inaccurate
assumptions included within the
goodwill impairment assessment.
These are also reported as key
audit matters in the relevant
section of our report where
the matters are explained in
more detail;
/ In assessing the potential risk
of material misstatement, we
obtained an understanding of:
- The operations of The Group,
including the different revenue
streams, products and services
offered and the objectives and
strategies of The Group, in order
to understand the classes of
transactions, account balances,
expected disclosures and risk
areas; and
- The Group’s control
environment, including the
policies and procedures
implemented to comply with
regulatory requirements,
including the adequacy of
the training to inform staff
of changes in legislation,
internal review procedures and
resources available to ensure
that possible breaches of
requirements are appropriately
investigated and reported.
OTHER MATTERS
We have reported separately on
the parent company financial
statements of Beeks Financial
Cloud Group PLC for the year
ended 30 June 2021. That report
includes details of the parent
company key audit matters;
how we applied the concept
of materiality in planning and
performing our audit; and an
overview of the scope of our audit.
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.
JAMES CHADWICK
Senior Statutory Auditor for and
on behalf of Grant Thornton UK LLP
Statutory Auditor,
Chartered Accountants, Glasgow
24 September 2021
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57
58
Beeks Financial Cloud Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Consolidated Statement of Financial Position
For the year ended 30 June 2021
2021
£000
11,615
309
2020
£000
9,360
59
Non-current assets
Intangible assets
(6,591)
(4,845)
Property, plant and equipment
Revenue
Other Income
Cost of sales
Gross profit
Administrative expenses
Operating (loss)/profit
Analysed as
Earnings before depreciation, amortisation, acquisition
costs, share based payments and non-recurring costs:
Depreciation
Amortisation – acquired intangible assets
Amortisation – other intangible assets
Impairment of intangible assets
Non-recurring acquisition integration costs
Share based payments
Other non-recurring costs
Operating (loss)/profit
F
I
N
A
N
C
E
Gain on revaluation of contingent consideration
Finance income
Finance costs
Profit before taxation
Taxation
Profit after taxation for the year attributable to the owners
of Beeks Financial Cloud Group PLC
Other comprehensive income
Amounts which may be reclassified to profit and loss
Currency translation differences
Total comprehensive income for the year attributable
to the owners of Beeks Financial Cloud Group PLC
Basic earnings per share
Diluted earnings per share
Note
3
3
4
10
9
9
9
4
20
4
15
5
8
24
24
5,333
4,574
(5,783)
(3,619)
(450)
955
4,452
3,394
2,020
1,474
806
231
994
140
546
165
(450)
1,989
5
(289)
1,255
349
1,604
(157)
1,447
237
150
-
205
312
61
955
-
2
(279)
678
(103)
575
43
618
pence
pence
3.07
3.07
1.13
1.13
Note
2021
£000
2020
£000
9
10
11
12
13
16
16
15
11
17
15
16
16
19
21
19
6,008
10,390
896
17,294
2,210
3,372
5,582
6,741
6,755
380
13,876
1,525
1,433
2,958
22,876
16,834
896
2,210
-
617
3,723
4,143
-
656
589
5,388
1,461
1,991
1,957
531
5,940
2,449
488
544
697
4,178
9,111
10,118
13,765
6,716
70
9,452
1,261
2,982
13,765
64
4,309
909
1,434
6,716
F
I
N
A
N
C
E
Deferred tax
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Lease liabilities
Contingent consideration due on acquisitions
Deferred tax
Total non-current liabilities
Current liabilities
Trade and other payables
Contingent consideration
Lease liabilities
Borrowings
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share premium
Reserves
Retained earnings
Total equity
These financial statements were
approved by the Board of Directors on
24 September 2021 and were signed
on its behalf by:
GORDON MCARTHUR,CHIEF
EXECUTIVE OFFICER,
Beeks Financial Cloud Group Plc,
Company number: SC521839
The above income statement should be read in conjunction with the accompanying notes.
The above statement of changes in equity should be read in conjunction with the accompanying notes.
59
60
Beeks Financial Cloud Group PLC
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Consolidated Statement of Cash Flow
For the year ended 30 June 2021
64
145
705
(315)
374
4,309
1,434
6,716
Operational cash flows after movement in working capital
1,604
1,604
Net cash inflow from operating activities
Corporation tax paid
Issued
capital
£000
Foreign
currency
reserve
£000
Merger
reserve
£000
Other
reserve
£000
Share
based
payments
£000
Share
premium
Reserve
£000
Retained
earnings
£000
Total
equity
£000
As at 1 July 2019
64
102
372
(315)
63
4,309
1,037
5,632
Profit after income tax expense
for the year
Currency translation difference
Total comprehensive income
Deferred tax
Issue of share capital
Share based payments
Dividends paid
Total transaction with owners
Balance at 30 June 2020
and 1 July 2021
Profit after income tax expense
for the year
Currency translation difference
Total comprehensive income
Deferred tax
Issue of share capital
Share based payments
Exercise of share options
Dividends paid
Total transaction with owners
Balance at
30 June 2021
F
I
N
A
N
C
E
-
-
-
-
-
-
-
-
-
43
43
-
-
-
-
-
-
-
-
-
333
-
-
333
-
-
-
-
-
-
-
-
-
-
-
-
-
311
-
311
-
-
-
-
-
-
-
-
575
575
-
575
-
-
-
43
618
-
333
311
(178)
(178)
(178)
466
-
-
-
-
6
-
-
-
6
-
(157)
(157)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
547
(38)
-
-
-
-
-
5,143
-
-
-
-
(157)
1,604
1,447
86
86
-
-
38
5,149
547
-
(180)
(180)
509
5,143
(56)
5,602
70
(12)
705
(315)
883
9,452
2,982
13,765
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Cash flows from operating activities
Profit before taxation for the year
Adjustments for:
Depreciation and amortisation
Share options
Gain on revaluation of contingent consideration
Impairment
Foreign exchange
Interest received
Finance fees and interest
Operating cash flows
(Increase) in receivables
Increase/ (decrease) in payables
Note
2021
£000
2020
£000
1,255
678
3,059
546
(1,989)
994
(6)
(5)
190
1,861
312
-
-
17
(2)
192
4,044
3,058
(874)
2,336
5,506
(33)
5,473
(2,005)
(4,746)
(555)
669
(419)
678
3,317
(23)
3,294
(720)
(2,819)
(750)
115
F
I
N
A
N
C
E
Cash flows from investing activities
Capitalised development costs
Payments for property, plant and equipment
Payments for prior period acquisition
Proceeds from grant income
9
10
Net cash (outflow)/ inflow from investing activities
(6,637)
(4,174)
Cash flows from financing activities
Repayment of existing loan borrowings
(3,736)
(324)
Dividends paid
Lease liabilities
Interest on lease liabilities
Deferred consideration
Issue of loans
Finance fees and interest
Interest received
Proceeds from the issue of share capital
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
5
(180)
(485)
(99)
(460)
3,050
(190)
5
5,198
3,103
1,939
1,433
(178)
(731)
(87)
-
1,485
(192)
2
-
(25)
(905)
2,338
Cash and cash equivalents at end of year
13
3,372
1,433
The above statement of changes in equity should be read in conjunction with the accompanying notes.
61
62
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Notes to
Financial Statements
F
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A
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1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
CORPORATE INFORMATION
Beeks Financial Cloud Group PLC
is a public limited company which
is listed on the AIM Market of the
London Stock Exchange and is
incorporated in Scotland. The
address of its registered office is
Lumina Building, 40 Ainslie Road,
Ground Floor, Hillington Park,
Glasgow, UK, G52 4RU. The principal
activity of The Group is the provision
of information technology services.
The registered number of the
Company is SC521839.
The financial statements are
prepared in pounds sterling and
rounded to the nearest thousand.
In certain cases, amounts in the
report have been rounded to the
nearest pound.
The principal accounting policies
adopted in the preparation of the
financial statements are set out
below. These policies have been
consistently applied to all the years
presented, unless otherwise stated.
BASIS OF PREPARATION
These financial statements have
been prepared in accordance with
applicable International Financial
Reporting Standards (IFRS) in
conformity with the requirements
of the Companies Act 2006.
The financial statements have been
prepared on the historical cost
basis except for the valuation of
certain financial instruments that
are measured at fair values at each
reporting period, as explained in
the accounting policies below.
The measurement bases and
principle accounting policies of
The Group are set out below and
are consistently applied to all years
presented unless otherwise stated.
International Financial Reporting
Standards and Interpretations
issued but not yet effective
New and revised IFRSs in issue but
not yet effective and have not been
adopted by The Group at the date
of authorisation of these financial
statements, the following standards,
interpretations and amendments
have been issued but are not yet
effective and have no material
impact on The Group’s financial
statements:
/ IFRS 17 - Insurance Contracts;
/ IAS 1 – Classification of assets as
current or non-current
/ Annual improvements to IFRS
Standards 2018-2020 cycle
Adoption of new and revised
Standards - amendments to IFRS
that are mandatorily effective for
the current year
The Group applied the amendments
to IAS 1 and IAS 8 Definition of Material
for the first time as this is effective for
annual periods beginning on or after
1 January 2020. The amendments
provide a new definition of material
that states, “information is material
if omitting, misstating or obscuring
it could reasonably be expected to
influence decisions that the primary
users of general purpose
financial statements make on the
basis of those financial statements,
which provide financial information
about a specific reporting entity.”
The amendments clarify that
materiality will depend on the
nature or magnitude of information,
either individually or in combination
with other information, in the
context of the financial statements.
A misstatement of information is
material if it could reasonably be
expected to influence decisions
made by the primary users.
The Directors consider that this
amendment had no impact on the
financial statements of The Group,
nor is there expected to be any
future impact to The Group.
During the year, the below revised
IFRSs took effect. The Group have
made an assessment on the
standards and amendments
below and has concluded that
there is no material impact on the
financial statements:
/ Definition of a Business
(Amendments to IFRS 3)
/ Amendments to ‘References to
the Conceptual Framework in IFRS
Standards’
/ Amendments to IFRS 9, IAS
39 and IFRS 7 – Interest Rate
benchmark reform phase 2
CHANGE IN ACCOUNTING
ESTIMATES
During the year, as part of the
impairment review carried out on
acquired intangible assets, The
Group reviewed the appropriateness
of the remaining useful life of
the customer relationship list of
CNS, acquired in 2019. The Group
deemed it appropriate to reduce the
estimated useful life from 8 years to
4 years. The impact on the current
and remaining years’ amortisation
charge for this asset is an additional
annual charge of £70,000.
GOING CONCERN
The Directors have assessed the
current financial position of Beeks
Financial Cloud Group PLC, taking
account of its business activities,
together with the factors likely to affect
its future development, performance
and position as set out in the
Strategic report on pages 4 to 23.
The key factors considered by the
Directors were:
/ historic and current trading and
profitability of The Group,
/ the rate of growth in sales both
historically and forecast,
/ the competitive environment in
which The Group operates,
/ the current level of cash
reserves,
/ current level of debt obligations
/ Ability to comply with existing
covenants
/ Potential further impact of
Covid-19
/ the finance facilities available
to The Group, including the
availability of any short term
funding required.
The Group’s business activities,
together with the factors likely
to affect its future development,
performance and position are set
out in the Strategic report on pages
4 to 23 including the potential impact
of Covid-19. The financial position
of The Group, its cash flows, liquidity
position and borrowing facilities
are described in the Chief Financial
Officer’s Report on pages 13 to 16.
In the past eighteen months since
the response to the Covid-19
pandemic was initiated in the UK,
there has been limited impact
on Beeks’ trading from Covid-19.
We take great comfort from the
resilience of our business model
and are fortunate that we are
not significantly exposed to the
industries that are suffering the
worst effects. The level of customer
churn across our business has
remained low and cash collection
has been in line with our typical
profile. We do however remain
vigilant to the economic impact
the ongoing situation may create,
particularly on the SME segment
of the market. Note 1 to the
financial statements includes The
Group’s objectives, policies and
F
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E
processes for managing its capital;
its financial risk management
objectives; details of its financial
instruments and hedging activities;
and its exposures to credit risk and
liquidity risk.
The directors are of the opinion that
The Group can operate within their
current debt facilities and comply
with its banking covenants. At the
end of the financial year, The Group
had net cash of £1.9m (2020: Net
debt £0.75m) a level which the Board
is comfortable with given the strong
cash generation of The Group and
low level of debt to EBITDA ratio. The
Group has a diverse portfolio of
customers with relatively low customer
concentration which are split across
different geographic areas. As a
consequence, the directors believe
that The Group is well placed to
manage its business risks.
The directors have considered The
Group budgets and the cash flow
forecasts for the next two financial
years, and associated risks, including
the potential impact of Covid-19, and
the availability of bank and leasing
facilities. We have run appropriate
scenario and stress tests applying
reasonable downside sensitivities
and are confident we have the
resources to meet our liabilities as
they fall due including mitigating
actions to take should some loan
facilities not be made available
at the end of current terms, which
is December 2022 and coincides
63
64
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Notes to
Financial Statements
F
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E
with the end of management’s
assessment period. Within these
scenarios, we have taken into
consideration the acquisition of
the property referenced in the
subsequent events section. After
making enquiries, the directors
have a reasonable expectation
that The Group will be able to meet
its financial obligations and has
adequate resources to continue
in operational existence for the
foreseeable future. For this reason
they continue to adopt the going
concern basis in preparing the
financial statements.
Accordingly, the Directors have
adopted the going concern basis
in preparing the Report for the year
ending 30 June 2021.
PRINCIPLES OF CONSOLIDATION
Subsidiaries are all entities over
which The Group has control. The
Group controls an entity when The
Group is exposed to, or has rights to,
variable returns from its involvement
with the subsidiary and has the
ability to affect those returns through
its power over the entity. Subsidiaries
are fully consolidated from the date
on which control is transferred to
The Group. They are deconsolidated
from the date that control ceases.
The Group applies the acquisition
method to account for business
combinations. The consideration
transferred for the acquisition of a
subsidiary or a business is the fair
values of the assets transferred, the
liabilities incurred to former owners
of the acquiree and the equity
interests issued to The Group. The
consideration transferred includes
the fair values of any asset or
liability resulting from a contingent
consideration arrangement.
Identifiable assets acquired
and liabilities and contingent
liabilities assumed in a business
combination are measured initially
at their fair values on the acquisition
date. Acquisition related costs are
expensed as incurred. As each of the
subsidiaries are 100% wholly owned,
The Group has full control over
each of its investees. Intercompany
transactions, unrealised gains and
losses on intragroup transactions and
balances between group companies
are eliminated on consolidation.
Foreign currency transactions
Foreign currency transactions
translated into pound sterling using
the exchange rates prevailing at
the dates of the transactions.
Foreign exchange gains and losses
resulting from the settlement of
such transactions and from the
translation at financial year-end
exchange rates of monetary assets
and liabilities denominated in
foreign currencies are recognised
in profit or loss. Foreign exchange
gains and losses resulting from
the retranslation of inter-company
balances are recognised in the
profit and loss account. Non
monetary assets are translated at
the historical rate.
Foreign operations
The assets and liabilities of foreign
operations are translated into pound
sterling using the exchange rates
at the reporting date. The revenues
and expenses of foreign operations
are translated into Pound sterling
using the average exchange rates,
which approximate the rates at the
dates of the transactions, for the
period. All resulting foreign exchange
differences are recognised in other
comprehensive income through the
foreign currency reserve in equity.
Business Combinations
Acquisitions of subsidiaries are
accounted for using the acquisition
method. The acquisition method
involves the recognition at fair value
of all identifiable assets and liabilities,
including contingent liabilities of
the subsidiary, at the acquisition
date, regardless of whether or not
they were recorded in the financial
statements of the subsidiary prior to
acquisition. On initial recognition, the
assets and liabilities of the subsidiary
are included in the statement of
financial position at their fair values,
which are also used as the bases
for subsequent measurement
in accordance with The Group
accounting policies.
Where The Group’s assessment of
the net fair value of a subsidiary’s
identifiable assets acquired and
liabilities assumed is less than
the fair value of the consideration
including contingent consideration
of the business combination then
the excess is treated as goodwill.
Where The Group’s assessment of
the net fair value of a subsidiary’s
net assets and liabilities exceeds
the fair value of the consideration
including contingent consideration
of the business combination then the
excess is recognised through profit or
loss immediately.
Where an acquisition involves a
potential payment of contingent
consideration the estimate of any
such payment is based on its fair
value. To estimate the fair value
an assessment is made as to the
amount of contingent consideration
which is likely to be paid having
regard to the criteria on which any
sum due will be calculated and
is probability based to reflect the
likelihood of different amounts
being paid. Where a change is
made to the fair value of contingent
consideration within the initial
measurement period as a result
of additional information obtained
on facts and circumstances that
existed at the acquisition date then
this is accounted for as a change
in goodwill. Where changes are
made to the fair value of contingent
consideration as a result of events
that occurred after the acquisition
date then the adjustment is
accounted for as a charge or credit
to profit or loss.
When the consideration transferred
by The Group in a business
combination includes a contingent
consideration arrangement,
the contingent consideration is
measured at its acquisition-date
fair value and included as part of
the consideration transferred in a
business combination. Changes
in fair value of the contingent
consideration that qualify as
measurement period adjustments
are adjusted retrospectively, with
corresponding adjustments against
goodwill. Measurement period
adjustments are adjustments that
arise from additional information
obtained during the ‘measurement
period’ (which cannot exceed one
year from the acquisition date)
about facts and circumstances
hat existed at the acquisition date.
Deferred consideration is recognised
at fair value at the acquisition date.
Subsequent changes to the fair
value of the deferred consideration,
which is deemed to be an asset or
liability, are recognised either in the
profit and loss account or in other
comprehensive income.
REVENUE RECOGNITION
Revenue arises from the provision
of Cloud-based localisation. To
determine whether to recognise
revenue, The Group follows a 5-step
process as follows:
1. Identifying the contract with a
customer
2. Identifying the performance
conditions
3. Determining the transaction price
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4. Allocating the transaction price
to the performance conditions
5. Recognising revenue when/
as performance obligation(s) are
satisfied.
Revenue is measured at transaction
price, stated net of VAT and other
sales related taxes, if applicable.
Infrastructure services
The Group’s core business
provides managed Cloud computing
infrastructure and connectivity. The
Group considers the performance
obligation to be the provision of
access and use of servers to our
clients. As the client receives and
consumes the benefit of this use
and access over time, the related
revenue is recognised evenly over
the life of the contract.
Monitoring software and
maintenance services
Following the acquisition of
Velocimetrics, The Group also
provides software products that
analyse and monitor IT infrastructure.
Revenue from the provision of
software licences is split between
the delivery of the software licence
and the ongoing services associated
with the support and maintenance.
The supply of the software licence
is recognised on a point in time
basis when control of the goods has
transferred, being the delivery of
the item to the customer, whilst the
ongoing support and maintenance
service is recognised evenly over the
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Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Notes to
Financial Statements
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period of the service being rendered
on an over time basis. The Group
applies judgement to determine
the percentage of split between the
licence and maintenance portions,
which includes an assessment of the
pricing model and comparison to
industry standards
Revenue from the provision of
perpetual licences in exchange for
a minimum guaranteed royalty
fee, is recognised at a point in time
basis when the delivery of the item
is complete.
Set up fees
Set up fees charged on contracts
are reviewed to consider the
material rights of the set-up fee.
When a set-up fee is arranged,
Beeks will consider the material
rights of the set-up fee, if in
substance it constitutes a payment
in advance, the set-up fee will be
deemed to be a material right.
The accounting treatment for both
material rights and non-material
rights set-up fees is as follows:
/ Any set up fees that are material
rights are spread over The Group’s
average contract term
/ Set up fees that are not material
rights are recognised over the
enforceable right period, i.e. 1
to 3 months depending on the
termination period
equipment is completed on a point
in time basis.
Hardware and software sales
Revenue from the supply of
hardware or software is recognised
when control of the goods has
transferred, being when delivery
to the customer of the item is
completed, on a point in time basis.
The Group has concluded it acts as a
principal in each sales transaction vs
an agent. This has been determined
by giving consideration to whether
The Group holds inventory risk,
has control over the pricing over a
particular service, takes the credit risk,
and whether responsibility ultimately
sits within The Group to service the
promise of the agreements.
Professional services
and training services
Revenue from Consultancy services
are recognised as these services
are rendered and the performance
obligation satisfied. Any unearned
portion of revenue( i.e. amounts
invoiced in advance of the service
being provided) is included in
payables as deferred revenue.
Revenue recognised over time and at
a point in time is disclosed at note 3 of
the notes to the financial statements.
will be received, and all attached
conditions will be complied with.
When the grant relates to an
expense item, it is recognised as
income on a systematic basis over
the periods that the related costs, for
which it is intended to compensate,
are expensed. When the grant relates
to an asset, it is deducted from
carrying amount of the intangible
asset over the expected useful life
of the related asset. Note 3 Revenue
provides further information on
Government grants.
COST OF SALES
Costs considered to be directly
related to revenue are accounted
for as cost of sales. All direct
production costs and overheads,
including indirect overheads that
can reasonably be allocated, have
been classified as cost of sales.
INTEREST
Interest revenue is recognised as
interest accrues using the effective
interest method. This is a method of
calculating the amortised cost of a
financial asset and allocating the
interest income over the relevant
period using the effective interest
rate, which is the rate that exactly
discounts estimated future cash
receipts through the expected life of
the financial asset to the net carrying
amount of the financial asset.
Revenue in respect of installation
or training, is recognised when
delivery and installation of the
GOVERNMENT GRANT INCOME
Grants from Government agencies
are recognised where there is
reasonable assurance that the grant
EXCEPTIONAL COSTS
The Group defines exceptional items
as costs incurred by The Group which
relate to material non-recurring
costs. These are disclosed separately
where it is considered it provides
additional useful information to the
users of the financial statements.
TAXATION AND
DEFERRED TAXATION
The income tax expense or income
for the period is the tax payable on
the current period’s taxable income.
This is based on the national income
tax rate enacted or substantively
enacted for each jurisdiction with
any adjustment relating to tax
payable in previous years and
changes in deferred tax assets and
liabilities attributable to temporary
differences between the tax bases of
assets and liabilities and their carrying
amounts in financial statements.
Deferred tax assets and liabilities
are recognised for temporary
differences at the tax rates expected
to be applicable when the asset or
liability crystallises based on current
tax rates and laws that have been
enacted or substantively enacted by
the reporting date. The relevant tax
rates are applied to the cumulative
amounts of deductible and taxable
temporary differences to measure
the deferred tax asset or liability.
A deferred tax asset is regarded
as recoverable and therefore
recognised only when, on the basis
of all available evidence, it can be
regarded as more likely than not that
there will be suitable taxable profits
against which to recover carried
forward tax losses and from which
the future reversal of temporary
differences can be deducted.
The carrying amount of deferred
tax assets are reviewed at each
reporting date.
CURRENT AND NON-CURRENT
CLASSIFICATION
Assets and liabilities are presented
in the statement of financial
position based on current and
non-current classification.
An asset is classified as current
when: it is either expected to be
realised or intended to be sold or
consumed in The Group’s normal
operating cycle; it is held primarily
for the purpose of trading; it is
expected to be realised within
12 months after the reporting
period; or the asset is cash or cash
equivalent unless restricted from
being exchanged or used to settle
a liability for at least 12 months after
the reporting period. All other assets
are classified as non-current.
A liability is classified as current when:
it is either expected to be settled in
The Group’s normal operating cycle;
it is held primarily for the purpose of
trading; it is due to be settled within
12 months after the reporting period;
or there is no unconditional right to
defer the settlement of the liability
for at least 12 months after the
reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are
always classified as non-current.
CASH AND CASH EQUIVALENTS
Cash at bank, overnight and longer
term deposits which are held for the
purpose of meeting short term cash
commitments are disclosed within
cash and cash equivalents.
FINANCIAL INSTRUMENTS
A financial instrument is any contract
that gives rise to a financial asset
in one entity and a financial liability
or equity instrument in another
and is recognised when The Group
becomes party to the contractual
provisions of the instrument.
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Financial assets and liabilities are
recognised initially at fair value, and
subsequently measure at amortised
costs, with any directly attributable
transaction costs adjusted against
fair value at initial recognition and
recognised immediately in the
consolidated income statement
as a profit or loss.
FINANCIAL ASSETS
Trade and other receivables
Trade and other receivables are
initially recognised at transaction
price, less allowances for impairment.
These are subsequently measured
at amortised costs using effective
interest method. An allowance for
impairment of trade and other
receivables is established when
there is evidence that Beeks Financial
Cloud Group PLC will not be able to
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Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Notes to
Financial Statements
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collect all amounts due according to
the original terms of the receivables.
Significant financial difficulties
of the debtors, probability that
the debtor will enter bankruptcy
or financial reorganisation, and
default or delinquency in payments
(more than 90 days overdue)
are considered indicators that
the trade and other receivables
may be impaired. The amount
of the allowance is the difference
between the asset’s carrying
amount and the present value
of estimated future cash flows,
discounted at the original effective
interest rate. The carrying amount
of the asset is reduced through
the use of an allowance account,
and the amount of the loss is
recognised in the profit or loss
within ‘administrative expenses’.
When a trade or other receivable
is uncollectible, it is written off
against the allowance account
for trade and other receivables.
Subsequent recoveries of amounts
previously written off are credited
against ‘admin costs’ in the income
statement.
that is subject to the expected
credit loss model is trade
receivables, which consist of billed
receivables arising from contracts.
The Group has applied the
simplified approach to providing
for expected credit losses (“ECL”)
prescribed by IFRS 9, which permits
the use of lifetime expected loss
provision for all trade receivables.
The ECL model reflects a probability
weighted amount derived from a
range of possible outcomes. To
measure the ECL, trade receivables
and contract assets have been
grouped based on shared credit
risk characteristics and the
days past due. The Group has
established a provision matrix
based on the payment profiles
of historic and current sales and
the corresponding credit losses
experienced. The historical loss
rates are adjusted to reflect current
and forward-looking information
that might affect the ability of
customers to settle the receivables,
including macroeconomic factors
as relevant.
IFRS 9 requires an expected
credit loss (“ECL”) model which
requires The Group to account
for expected credit losses and
changes in those expected credit
losses at each reporting date to
reflect changes in credit risk since
initial recognition of the financial
assets. The main financial asset
Provision against trade and other
receivables is made when there
is evidence that The Group will
not be able to collect all amounts
due to it in accordance with the
original terms of those receivables.
The amount of the write-down
is determined as the difference
between the asset’s carrying
amount and the present value
of estimated future cash flows.
An assessment for impairment
is undertaken at least at each
reporting date.
FINANCIAL LAIBILITIES
Trade and other payables
Trade and other payables are
recognised initially at fair value
and subsequently measured at
amortised cost using the effective
interest method. These amounts
represent liabilities for goods and
services provided to Beeks Financial
Cloud Group plc prior to the end
of the financial period which are
unpaid as well as any outstanding
tax liabilities.
Borrowings
Loans and borrowings are initially
recognised at the fair value
of the consideration received,
net of transaction costs. They
are subsequently measured at
amortised cost using the effective
interest method.
Defined contribution schemes
The defined contribution scheme
provide benefits based on the
value of contributions made.
Contributions to the defined
contribution superannuation plans
are expensed in the period in which
they are incurred.
Fair value measurement
When an asset or liability, financial
or non-financial, is measured at fair
value for recognition or disclosure
purposes, the fair value is based on
the price that would be received
to sell an asset or paid to transfer
a liability in an orderly transaction
between market participants at the
measurement date; and assumes
that the transaction will take place
either: in the principal market; or in
the absence of a principal market, in
the most advantageous market.
Fair value is measured using
the assumptions that market
participants would use when pricing
the asset or liability, assuming they
act in their economic best interests.
For non-financial assets, the fair
value measurement is based on
its highest and best use. Valuation
techniques that are appropriate in
the circumstances and for which
sufficient data are available to
measure fair value, are used,
maximising the use of relevant
observable inputs and minimising
the use of unobservable inputs.
Share based payments
The Group operates equity-settled
share based remuneration plans for
its employees Options are measured
at fair value at grant date using the
Black Scholes model. The fair value
is expensed on a straight line basis
over the vesting period, based on an
estimate of the number of options
that will eventually vest.
Under The Group’s share option
scheme, share options are granted
to directors and selected employees.
The options are expensed in the period
over which the share based payment
vests. A corresponding increase
to the share option reserve under
shareholder’s funds is recognised.
When share options are exercised,
the company issues new shares.
The nominal share value from the
proceeds received are credited
to share capital and proceeds
received above nominal value, net
of attributable transaction costs,
are credited to the share premium
when the options are exercised.
When share options are forfeited,
cancelled or expire, the corresponding
fair value is transferred to the
accumulated losses reserve.
The Group has no legal or
constructive obligation to repurchase
or settle the options in cash.
Property, plant
and equipment (PPE)
PPE is stated at historical cost
less accumulated depreciation.
Historical cost includes expenditure
that is directly attributable to the
acquisition of the items. Subsequent
costs are included in the asset’s
carrying amount or recognised as
a separate asset, as appropriate,
only when it is probable that future
economic benefits associated with
the item will flow to Beeks Financial
Cloud Group PLC and the cost of the
item can be measured reliably. All
other repairs and maintenance are
charged to profit or loss during
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the financial period in which they are
incurred.
Depreciation on IT infranstructure
and fixtures and fittings is
calculated using the straight line
method to allocate their cost or
revalued amounts, net of their
residual values, over their estimated
useful lives, as follows:
/ Leasehold property and
improvements
over the lease period
/ Computer Equipment
5 years and over the length
of lease
/ Office equipment 5 years
The residual values, useful lives and
depreciation methods are reviewed,
and adjusted if appropriate, at each
reporting date.
Leasehold improvements and
plant and equipment under lease
are depreciated over the unexpired
period of the lease or the estimated
useful life of the assets, whichever
is shorter.
An item of property, plant and
equipment is derecognised upon
disposal or when there is no
future economic benefit to The
Group. Gains and losses between
the carrying amount and the
disposal proceeds are taken to
profit or loss. Any revaluation
surplus reserve relating to the item
disposed of is transferred directly
to retained profits.
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Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Notes to
Financial Statements
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Leases
A lease is defined as a contract,
or part of a contract, that conveys
the right to use of an asset (the
underlying asset) for a period of
time in exchange for consideration.
To apply this definition The Group
assesses whether the contract
meets three key evaluations which
are whether the contract contains
an identified asset, which is either
explicitly identified in the contract
or implicitly specified by being
identified at the time the asset
is made available to The Group;
The Group has the right to obtain
substantially all of the economic
benefits from use of the identified
asset throughout the period of
use, considering its rights within
the defined scope of the contract;
and The Group has the right to
direct the use of the identified asset
throughout the period of use.
At the lease commencement date,
The Group recognises a right-of-use
asset and a corresponding lease
liability on the balance sheet. The
right-of-use asset is measured at
cost, which is made up of the initial
measurement of the lease liability
measured at the present value of
future lease payments, any initial
direct costs incurred by The
Group The Group depreciates
the right-of-use assets on a
straight-line basis from the lease
commencement date to the earlier
of the end of the useful life of the
right-of-use asset or the end of the
lease term. The Group assesses the
right-of-use asset for impairment
under IAS 36 ‘Impairment of Assets’
where such indicators exist.
Lease liabilities are presented on
two separate lines in the balance
sheet for amounts due within one
year and amounts due after more
than one year. The lease liability is
initially measured at the present
value of lease payments that are
not paid at the commencement
date, discounted using the rate
implicit in the lease. If this rate
cannot readily be determined,
The Group applies an incremental
borrowing rate. The lease liability
is subsequently measured by
increasing the carrying amount to
reflect interest on the lease liability
and by reducing the liability by
payments made. The Group re-
measures the lease liability (and
adjusts the related right-of-use
asset) whenever the lease term
has changed or a lease contract is
modified and the modification is not
accounted for as a separate lease.
Lease payments included in the
measurement of the lease liability
can be made up of fixed payments
and an element of variable charges
depending on the estimated
future price increases, whether
these are contractual or based
on management’s estimate of
potential increases. Subsequent
to initial measurement, the liability
will be reduced for payments
made and increased for interest.
It is re-measured to reflect any
reassessment or modification,
or if there are changes in fixed
payments. When the lease liability
is re-measured, the corresponding
adjustment is reflected in the
right-of-use asset, or profit and loss
if the right-of-use asset is already
reduced to zero.
The Group has elected to account
for short-term leases and leases of
low-value assets using the practical
expedients available under IFRS 16.
Instead of recognising a right-of-use
asset and lease liability, the payments
in relation to these are recognised
as an expense in profit or loss on a
straight line basis over the lease term.
Under IFRS 16, The Group
recognises depreciation of the
right-of-use asset and interest on
lease liabilities in the consolidated
statement of comprehensive
income over the period of the
lease. On the balance sheet, right-
of-use assets have been included
in leasehold property and
improvement and lease liabilities
have been included in lease
liabilities due within one year and
after more than one year.
INTANGIBLE ASSETS AND
AMORTISATION
Goodwill
Goodwill represents the excess of the
cost of an acquisition over the fair
value of the assets and
liabilities assumed at the date
of acquisition. Goodwill acquired
in business combinations is not
amortised. Instead, goodwill is tested
for impairment annually or more
frequently if events or changes in
circumstances indicate that it might
be impaired, and is carried at cost
less accumulated impairment losses.
Intangible assets carried forward
from prior years are re-valued at the
exchange rate in the current financial
year. Impairment testing is carried
out by assessing the recoverable
amount of the cash generating
unit to which the goodwill relates. A
bargain purchase is immediately
released to the Income Statement in
the year of acquisition.
Customer relationships
Included within the value of
intangible assets are customer
relationships. These represent the
purchase price of customer lists
and contractual relationships
purchased on the acquisition of
the business and assets of Gallant
VPS Inc., and Commercial Network
Services. These relationships are
carried at cost less accumulated
amortisation or impairment losses
where applicable. Amortisation is
calculated using the straight line
method over periods of between
five and ten years and is charged to
cost of sales.
Development costs
Expenditure on research (or the
research phase of an internal
project) is recognised as an expense
in the period in which it is incurred.
Development costs incurred are
capitalised when all the following
conditions are satisfied:
/ completion of the intangible asset
is technically feasible so that it will
be available for use or sale;
/ The Group intends to complete
the intangible asset and use or
sell it;
/ The Group has the ability to use
or sell the intangible asset;
/ the intangible asset will generate
probable future economic benefits;
/ there are adequate technical,
financial and other resources to
complete the development and to
use or sell the intangible
asset, and
/ the expenditure attributable
to the intangible asset during its
development can be measured
reliably.
Development costs not meeting
the criteria for capitalisation are
expensed as incurred. The costs
which do meet the criteria range
from new product development
to the enhancement of existing
services such as mail platforms.
The scope of the development
team’s work continues to evolve
as The Group continues to
deliver business critical solutions
to a growing customer base.
Development costs capitalised
are amortised on a straight-line
basis over the estimated useful life
of the asset. The estimated useful
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life is deemed to be five years
for all developments capitalised.
Amortisation charges are
recognised through cost of sales in
the income statement in the period
in which they are incurred.
IMPAIRMENT
Goodwill and assets with an
indefinite useful life are tested
annually for impairment, or more
frequently if events or changes in
circumstances indicate that they
might be impaired. Other non-
financial assets are reviewed for
impairment whenever events or
changes in circumstances indicate
that the carrying amount may not
be recoverable. An impairment loss
is recognised for the amount by
which the asset’s carrying amount
exceeds its recoverable amount.
Recoverable amount is the higher
of an asset’s fair value less costs
of disposal and value-in-use. The
value-in-use is the present value
of the estimated future cash flows
relating to the asset using a pre-tax
discount rate specific to the asset
or cash-generating unit to which
the asset belongs. Assets that do
not have independent cash flows
are grouped together to form a
cash-generating unit.
EQUITY
Ordinary shares are classified as
equity. An equity instrument is
any contract that evidences a
residual interest in the assets of
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Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Notes to
Financial Statements
Beeks Financial Cloud Group plc
after deducting all of its liabilities.
Equity instruments issued by Beeks
Financial Cloud Group plc are
recorded at the proceeds received
net of direct issue costs.
The share capital account
represents the amount subscribed
for shares at nominal value.
VALUE-ADDED TAX (‘VAT’)
AND OTHER SIMILAR TAXES
Revenues, expenses and assets
are recognised net of the amount
of associated VAT, unless the VAT
incurred is not recoverable from
the tax authority. In this case it is
recognised as part of the cost of
the acquisition of the asset or as
part of the expense.
Receivables and payables are
stated inclusive of the amount of
VAT receivable or payable. The net
amount of VAT recoverable from,
or payable to, the tax authority is
included in other receivables or
other payables in the statement
of financial position.
Cash flows are presented on a gross
basis. The VAT components of cash
flows arising from investing or financing
activities which are recoverable from,
or payable to the tax authority, are
presented as operating cash flows.
Commitments and contingencies
are disclosed net of the amount of
VAT recoverable from, or payable
to, the tax authority.
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EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is
calculated by dividing the profit
attributable to the owners of
Beeks Financial Cloud Group PLC,
excluding any costs of servicing
equity other than ordinary shares,
by the weighted average number of
ordinary shares outstanding during
the financial year, adjusted for bonus
elements in ordinary shares issued
during the financial year.
Diluted earnings per share
Diluted earnings per share
adjusts the figures used in the
determination of basic earnings
per share to take into account
the after income tax effect of
interest and other financing costs
associated with dilutive potential
ordinary shares and the weighted
average number of shares
assumed to have been issued
for no consideration in relation to
dilutive potential ordinary shares.
Underlying EBITDA
Underlying EBITDA is defined as
earnings before amortisation,
depreciation, finance costs,
taxation, acquisition costs, share
based payments and exceptional
non-recurring costs.
Underlying EBITDA is a common
measure used by investors
and analysts to evaluate the
operating financial performance
of companies, particularly in the
sector that The Group operates.
The accounting policies set out
above have, unless otherwise
stated, been applied consistently by
The Group to all periods presented
The Group considers adjusted
EBITDA to be a useful measure of
operating performance because
it approximates the underlying
operating cash flow by eliminating
the charges mentioned above. It
is not a direct measure of liquidity,
which is shown in the consolidated
statement of cash flows, and needs
to be considered in the context of
The Group’s financial commitments.
ALTERNATIVE PERFORMANCE
MEASURES
In addition to measuring financial
performance of The Group based
on statutory profit measures, The
Group also measures performance
based on adjusted EBITDA, adjusted
profit before tax and adjusted
diluted earnings per share.
Underlying profit before tax
Underlying profit before tax
is defined as profit before tax
adjusted for the following:
/ amortisation charges on
acquired intangible assets;
/ share-based payment charges;
/ M&A activity including:
- Professional fees;
- Any non-recurring integration
costs; Any gain or loss on the
revaluation of contingent
consideration where it is
material; and
- Any material non-recurring
costs where their removal
is necessary for the proper
understanding of the underlying
profit for the period.
The Group considers underlying
profit before tax to be a useful
measure of performance because
it eliminates the impact of certain
non-recurring items including those
associated with acquisitions and
other charges commonly excluded
from profit before tax by investors
and analysts for valuation
purposes.
Underlying diluted earnings per share
Underlying diluted earnings
per share is calculated by taking
the adjusted profit before tax as
described after deducting an
appropriate taxation charge
and dividing by the total
weighted average number of
ordinary shares in issue during the
year and adjusting for the dilutive
potential ordinary shares relating
to share options.
The Group considers adjusted
diluted earnings per share to be a
useful measure of performance for
the same reasons as underlying
profit before tax. In addition, it is
used as the basis for consideration
to the level of dividend payments.
2. CRITICAL ACCOUNTING
JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
KEY JUDGEMENTS
The key judgements in preparation
of the financial statements are
as follows:
Revenue
The Group applies judgment for
elements of revenue recognition. The
key areas of assessment include
whether The Group acts as a principal
vs an Agent for the sale of hardware,
where third parties are utilised, and the
percentage of split between licence
and maintenance for the sale of
software licences. Full details of The
Group’s revenue recognition policy
and these judgements can be
found on page 65.
Right of Use assets and liabilities
The Group applies judgement for
elements of capitalising leases
under IFRS 16. The key areas of
assessment include the treatment
of the lease where the term is
not clearly defined as well as
the applicable discount rate
applied. Where the term is not
clearly defined, management use
judgement to determine the likely
term of the lease by reference to
comparable contracts and terms
as well as the future needs and
strategy of the business.
F
I
N
A
N
C
E
The Group do not consider that there
are any other critical accounting
judgements in the preparation of
the financial statements.
KEY ESTIMATIONS
The key assumptions concerning
the future, and other key sources of
estimation uncertainty at the year
end, that have a significant risk of
causing a material adjustment to
the carrying amounts of assets and
liabilities within the next financial
year, are discussed below.
Goodwill and other indefinite life
intangible assets
The Group tests annually, or
more frequently if events or
changes in circumstances
indicate impairment, whether
goodwill and other indefinite life
intangible assets have suffered any
impairment, in accordance with
the accounting policy stated in
note 1. The recoverable amounts of
cash-generating units have been
determined based on value-in-use
calculations. These calculations
require the use of assumptions,
including estimated discount rates
based on the current cost of capital
and growth rates of the estimated
future cash flows. Sensitivity
analysis is also performed to
reduce growth assumptions and
increase discount rates in order to
ascertain if there is still sufficient
headroom in the asset, see note 10.
73
74
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Revenues by operating segment, further dissagregated are as follows:
Notes to
Financial Statements
F
I
N
A
N
C
E
Development costs
The Group reviews half yearly
whether the recognition criteria for
development costs have been met.
This is necessary as the economic
success of any product development
is uncertain and may be subject
to future technical problems at
the time of recognition. In addition,
all internal activities related to the
development of new products which
are not finalised by the period end
are continuously monitored by the
Directors and assessed for any
indications of impairment. See note
10 for further information.
Share based payments
The Group operates equity-settled
share based remuneration plans
for its employees. All goods and
services received in exchange
for the grant of any share based
payment are measured at their
fair values. Where employees
are rewarded using share
based payments, the fair values
of employees’ services are
determined indirectly by reference
to the fair value of the instrument
granted to the employee. This fair
value is appraised at the grant.
If vesting periods or other
non-market vesting conditions
apply, the expense is allocated
over the vesting period, based
on the best available estimate
of the number of share options
expected to vest. Estimates are
subsequently revised if there is any
indication that the number of share
based incentives expected to vest
differs from previous estimates.
The two key judgements are on
the vesting conditions that apply
to share options (relating to the
achievement of annual objectives)
and on continuous employment.
Any cumulative adjustment prior to
vesting is recognised in the current
period. No adjustment is made to
any expense recognised in prior
periods if share based incentives
ultimately exercised are different to
that estimated on vesting.
3. SEGMENT INFORMATION
Operating segments are reporting
in a manner consistent with the
internal reporting provided to the
chief operating decision makers.
The chief operating decision
makers, who are responsible for
allocating resources and assessing
performance of operating segments,
have been identified as the
executive directors.
During the year ended 30 June
2021, The Group was organised into
three main business segments for
revenue purposes, institutional,
private and analytics customers.
The Group added analytics as a
segment duing the year, as The
Group benefitted from a full year’s
revenue generation following the
acquisition of Velocimetrics Ltd
in April 2020. The Group does not
place reliance on any specific
customer and has no individual
customer that generates 10% or
more of its total group revenue.
Performance is assessed by a
focus on the change in revenue
across both institutional and retail
revenue. Cost is reviewed at a
cost category level but not split by
segment. Assets are used across
all segments and are therefore
not split between segments so
management review profitability
at a group level.
Year ended 30/06/21
£000
Year ended 30/06/20
£000
Institutional
Retail
Analytics
Total
Institutional
Retail
Analytics
Total
8,701
1,080
-
146
-
-
-
685
42
9,781
7,127
1,365
685
187
-
39
-
-
-
158
-
8,492
158
39
8,847
1,080
727
10,653
7,166
1,365
158
8,688
299
-
69
368
-
-
-
-
38
556
-
594
337
556
69
962
486
-
52
538
-
-
-
-
-
134
-
134
486
134
52
672
Points over time
Infrastructure
as a service
Maintenance
Professional
services
Point over time
total
Point in time
Hardware /
Software resale
Software
licences
Set up fees
Point in time
total
Total revenue
9,215
1,080
1,321
11,615
7,704
1,365
291
9,360
Revenues by geographic location are as follows:
United Kingdom
Europe
United States
Rest of World
Total
Non-Current Assets by geographic location are as follows:
United Kingdom - Property, plant and equipment
Europe - Property, plant and equipment
Rest of World - Intangible assets
Rest of World - Goodwill
Rest of World - Property, plant and equipment
US – Property, plant and equipment
Total Non-Current Assets
F
I
N
A
N
C
E
3,214
2,282
2,003
4,116
11,615
3,980
727
4,640
1,368
3,878
1,805
2,720
1,180
1,906
3,554
9,360
2,028
478
4,458
2,283
3,003
1,246
16,398
13,496
75
76
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Intangible assets have been classified as “Rest of World” due to the fact they represent products that are available
to customers throughout the World as well as the US intangible assets referred to in note 9.
The Group has taken advantage of the practical expedient permitted by IFRS 15 and has therefore not disclosed
the amount of the transaction price allocated to unsatisfied performance obligations or when it expects to
recognise that revenue, as the majority of contracts have an expected duration of less than one year. Longer term
contracts continue to be paid on a monthly basis.
During the year, £309k was recognised in other income for grant income received from Scottish Enterprise.
4. OPERATING PROFIT
Operating Profit is stated after charging:
Staff costs
Depreciation
Depreciation right-of-use assets
Amortisation of acquired intangibles
Amortisation of other intangibles
Other cost of sales*
Impairment of intangible
Foreign exchange losses
Non-recurring acquisition integration costs
Share based payments
Other non-recurring costs – refinancing
F
I
N
A
N
C
E
Other non-recurring costs – head office relocation
Other non-recurring costs
Note
6
10
10
9
9
9
20
2021
£000
4,408
1,396
626
806
231
3,319
994
47
140
546
37
25
103
2020
£000
2,526
891
583
96
291
2,984
-
17
205
312
-
-
61
6. AVERAGE NUMBER OF EMPLOYEES AND EMPLOYEE BENEFITS EXPENSE
Including directors, the average number of employees
(at their full time equivalent) during the year was as follows:
Management and administration
Support and development staff
Average numbers of employees
The employee benefits expense during the year was as follows:
Wages and salaries
Social security costs
Other pension costs
Total employee benefits expense
Share based payments (note 20)
2021
£000
2020
£000
25
48
73
3,870
453
86
4,408
546
12
29
41
2,214
265
46
2,526
312
Wages and salaries directly attributable to the development of R&D products are capitalised in intangible assets (note 9).
7. DIRECTORS EMOLUMENTS
Aggregate remuneration in respect of qualifying services
Aggregate amounts of contributions to pension
schemes in respect of qualifying services
Gain on exercise of options
Total Directors’ emoluments
Highest paid director - aggregate remuneration (excluding share based payments)
2021
£000
221
4
43
268
104
2020
£000
258
5
-
263
96
F
I
N
A
N
C
E
*Included within other cost of sales are the direct costs associated with the business including data centre connectivity, software licences, security and other direct support costs
There are two directors (2020: two) who are accruing retirement benefits in respect of qualifying services.
Auditors remuneration
Audit
Auditors services
Fees payable for the audit of the consolidation and the parent
company accounts including the audit of the acquisition
Fees payable for the audit of the subsidiaries
Non Audit
Fees payable for the interim review of the group
5. FINANCE COSTS
Bank charges
Loans and leasing
Total finance costs
2021
£000
2020
£000
37
28
5
70
2021
£000
92
197
289
34
27
10
71
2020
£000
89
190
279
8. TAXATION EXPENSE
Current tax
UK tax
Foreign tax on overseas companies
Total current tax
Origination and reversal of temporary differences
Total deferred tax
Tax on profit on ordinary activities
2021
£000
2020
£000
(32)
28
(4)
(345)
(345)
(349)
(16)
25
9
94
94
103
The differences between the total tax credit above and the amount calculated by applying the standard rate of UK
corporation tax to the profit before tax, together with the impact of the effective tax rate, are as follows:
77
78
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Profit before tax
Profit on ordinary activities multiplied by
the standard rate of corporation
tax in the UK of 19% (2020: 19%)
Effects of:
Expenses not deductible for tax purposes
R&D tax credits relief
Income not taxable
Share option deduction
Prior year over-provision
Prior year deferred tax adjustments
Adjustment for tax rate differences
Foreign tax suffered
Other
Total tax charge
The effective tax rate (‘ETR’) for the year was –27.81%, (2020: (15.2%)).
%ETR
movement
2021
£000
1,255
238
19%
(81)
(95)
(377)
9
(32)
(73)
58
4
-
(6,45%)
(7.57%)
(30.04%)
0.72%
(2.55%)
(5.82%)
4.62%
0.32%
-
(349)
(27.81%)
2020
£000
678
129
33
(72)
(0.01)
59
-
(49)
-
2
1
103
F
I
N
A
N
C
E
As at 1 July 2020
Recognised during the year
As at 30 June 2021
UK
unrelieved
trading
losses
£000
547
1,856
2,403
Foreign
unrelieved
trading
losses
£000
-
-
-
Total
unrelieved
trading
losses
£000
547
1,856
2,403
%ETR
movement
9. INTANGIBLE ASSETS
Acquired
Customer
Lists £000
Development
Costs
£000
Trade
Name
£000
Goodwill
£000
Total
£000
19%
4.87%
(10.62%)
(0.00%)
8.70%
-
(7.23%)
-
0.29%
0.15%
15.19%
Tax
effect
£000
104
353
457
Cost
Balance at 1 July 2019
Acquisition of trading assets
Additions
Grant funding received
Foreign exchange movements
Balance at 30 June 2020
Additions
Grant funding received
Foreign exchange movements
As at 30 June 2021
Accumulated Depreciation
Balance at 1 July 2019
Charge for the year
Foreign exchange movements
Balance at 30 June 2020
Charge for the year
Impairment
Foreign exchange movements
As at 30 June 2021
N.B.V. 30 June 2020
N.B.V. 30 June 2021
1,383
1,097
-
-
53
2,533
-
-
(150)
2,383
(402)
(150)
-
(552)
(277)
-
56
(773)
1,981
1,611
821
1,253
720
(221)
-
2,573
1,977
(560)
-
3,990
(101)
(230)
-
(331)
(733)
-
-
(1,064)
2,242
2,926
-
137
-
-
-
519
1,846
-
-
-
137
2,365
-
-
-
137
-
(7)
-
(7)
(27)
-
-
(34)
130
103
28
-
(57)
2,336
9
-
14
23
-
(994)
3
(968)
2,388
1,368
2,723
4,333
720
(221)
53
7,608
2,005
(560)
(207)
8,846
(494)
(387)
14
(867)
(1,037)
(994)
59
(2,839)
6,741
6,008
F
I
N
A
N
C
E
Included within Customer lists are
customer relationships in relation
to the acquisition of CNS of £1.0m.
During the year, the Group has
elected to reduce the remaining
useful life of the asset, which has
been revised from 8 to 4 years.
The impact on the current and
remaining 4 years is an additional
annual depreciation charge of
£0.07m. Also included are customer
relationships in relation to the VMX
business of £1.1m with a useful life
of 10 years.
Development costs have been
recognised in accordance with
IAS 38 in relation to the creation of
the company’s self-service portal,
website and cyber-attack prevention
software (DDoS). As at 30 June 2021
the remaining useful lives of these
assets are 1 year and 7 months, 1
year and 6 months and 1 year and 5
months respectively. Development
costs also include £1.3m of acquired
VMX software which is being
amortised over a useful life of five
years. In addition, there are £1.3m of
development costs relating to the
network automation project and
£0.6m development costs relating
to analytics development, which has
yet to be amortised. All costs incurred
during the preliminary stages of
development projects are charged
to the income statement.
IMPAIRMENT TEST FOR GOODWILL
For this review, goodwill was
allocated to individual cash
generating units (CGU) on the
basis of the Group’s operations
as disclosed in the segemental
analysis. As the Board reviews
results on a segmental level, the
Group monitors goodwill and
annually asseses it on the same
basis for impairment..
79
80
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
The carrying value of goodwill by each CGU is as follows:
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
10. NON-CURRENT ASSETS -
PROPERTY, PLANT AND EQUIPMENT
Computer
equipment
£000
Office
equipment
£000
Leasehold
Property and
improvement
£000
2021
£000
883
109
376
1,368
2020
£000
1,846
122
420
2,388
that reflects current market
assessments of the time value
of money and the risks specific
to these asset, of 12% and 14.5%
was used. Based on an analysis
of the impairment calculation’s
sensitivities to changes in
key parameters (growth rate,
discount rate and post-tax cash
flow projections) there was no
reasonably possible scenario
where these recoverable amounts
would fall below their carrying
amounts therefore as at 30 June
2021, no change to the impairment
provision against the carrying value
of intangibles was required for
institutional or retail goodwill. The
revaluation of these from prior
year represents exchange
adjustment only.
Beeks Analytics
Retail
Institutional
Total goodwill
The recoverable amount of all
CGUs has been determined by
using value-in-use calculations,
estimating future cash inflows
and outflows from the use of the
assets and applying an appropriate
discount rates to those cash flows
to ensure that the carrying value
of each individual asset is still
appropriate.
In performing these reviews,
under the requirements of
IAS 36 “Impairment of Assets”
management prepare forecasts
for future trading over a useful life
period of up to five years.
F
I
N
A
N
C
E
These cash flow projections are
based on financial budgets and
market forecasts approved by
management using a number of
assumptions including;
/ Historic and current trading
/ Weighted sales pipeline
/ Potential changes to cost base
(including staff to support the
CGU)
/ External factors including
competitive landscape and
market growth potential
Forecasts that go beyond the
approved budgets are based on
long term growth rates on a
macro-economic level.
Management performed a full
impairment assessment on the
goodwill of Beeks Analytics. This
included including modelling
projected cash flows based
on the current weighted sales
pipeline, a discount rate based on
the calculated pre-tax weighted
average cost of capital (15.5%) and
cost base assumptions that included
contingency and investment to
deliver against the weighted sales
pipeline. A mid-term growth rate
(post sales pipeline) from year 2
was assumed at 3% and a terminal
value of 2% was used following
the 5 year cash flow projection.
Sensitivities were then performed
against a range of possible
downside scenarios including further
weighting against the sales pipeline
and changing of the discount rate.
It was noted that a 1% change on
the discount rate would impact the
future net present value of the future
cash flows by £0.2m.
Management concluded, based
on the range of possible outcomes,
and sensitivity of both the sales
pipeline and discount rate, that an
impairment charge of £1.0m should
be processed against goodwill.
For institutional and retail goodwill,
a pre-tax discount discount rate,
Balance at 1 July 2019
Acquisition of subsidiaries
Additions
Disposals
Balance at 30 June 2020
Exchange adjustments
Additions
As at 30 June 2021
Depreciation
Balance at 1 July 2019
Charge for the year
Disposals
Balance at 30 June 2020
Charge for the year
Exchange adjustments
As at 30 June 2021
N.B.V. 30 June 2020
N.B.V. 30 June 2021
4,839
6
2,784
(39)
7,590
(12)
4,733
12,311
(2,411)
(873)
10
(3,274)
(1,381)
8
(4,647)
4,316
7,664
23
-
35
-
58
-
13
71
(11)
(12)
-
(23)
(15)
-
(38)
35
33
Total
£000
4,862
6
5,811
(39)
10,641
(12)
5,661
-
-
2,993
-
2,993
-
915
3,908
16,290
-
(589)
-
(589)
(626)
-
(1,215)
2,404
2,693
(2,422)
(1,474)
10
(3,886)
(2,022)
8
(5,900)
6,755
10,390
Of the total additions in the year of
£5.6m, £0.9m relates to right-of-use
assets.
of sales. Non-revenue generating
depreciation charges are included
with admin costs.
Short term leases have been
accounted for in accordance with
the recognition exemption in IFRS 16
and hence related payments are
expensed as incurred. The Group
has also made use of the option to
apply the recognition exemption
for low value assets, which means
that related payments have been
expensed as incurred.
All revenue generating depreciation
charges are included within cost
11. NON-CURRENT ASSETS -
DEFERRED TAX
Deferred tax is recognised at the
standard UK corporation tax of 25%
for fixed assets in the UK (2019: 19%).
Deferred tax in the US is recognised
at an average rate of 21% for 2020
(2019: 21%). The deferred tax asset
relates to the difference between
the amortisation period of the US
acquisitions for tax and reporting
purposes as well as the impact of
the share options exercised during
F
I
N
A
N
C
E
the year and tax losses carried
forward in both UK and overseas
companies. Deferred tax assets
and liabilities on balance sheets
prepared after the substantive
enactment of the new tax rate are
calculated using a tax rate of 25%
to the extent that the temporary
differences will reverse after 2023
useful lives of these assets are 1
year and 7 months, 1 year and 6
months and 1 year and 5 months
81
82
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
The split of fixed and intangible asset are summarised as follows:
Deferred tax liabilities
Deferred tax asset
Total deferred tax
Movements
Opening balance
Charged to profit or loss (note 8)
Charged to goodwill/equity
Closing balance
The movement in deferred income tax assets and liabilities during the year is as follows:
At July 2019
Charge to income
Charge to equity
Deferred tax on acquired assets
F
I
N
A
N
C
E
As at 30 June 2020
Charge to income
Charge to equity
As at 30 June 2021
Share
Options
£000
-
-
-
-
-
138
85
223
Tax
losses
carried
forward
£000
35
152
-
138
325
305
-
630
Accelerated
tax
depreciation
£000
101
(46)
-
-
55
(12)
-
43
12. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Trade receivable
Less: allowance for impairment of receivables
Prepayments
Contract asset
Other taxation
Other receivables
2021
£000
(617)
896
279
(151)
345
85
279
Total
deferred
tax
asset
£000
136
106
-
138
380
431
85
896
2021
£000
1,032
(19)
1,013
723
191
241
42
2020
£000
(531)
380
(151)
88
(94)
(145)
(151)
Total
deferred
tax
liability
£000
(48)
(200)
-
(283)
(531)
(86)
-
(617)
2020
£000
791
(20)
771
721
-
-
33
2,210
1,525
The credit risk relating to trade receivables is analysed as follows:
Trade receivables
Less: allowance for impairment of receivables
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional allowance recognised
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
2021
£000
1,032
(19)
1,013
20
46
(47)
-
19
2020
£000
791
(20)
771
63
20
(65)
2
20
The Directors consider that the carrying amount of trade and other receivables is approximately equal to their
fair value. The group has applied the simplified approach to providing for expected credit losses prescribed by
IFRS 9, which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit loss
allowance under IFRS 9 as at 30 June 2021 is £8k (2021 - £13k).
Trade receivables consist of a large number of customers across various geographical areas. The aging below
shows that almost all are less than three months old and historic performance indicates a high probability of
payment for debts in this aging. Those over three months relate to customers without history of default for which
there is a reasonable expectation of recovery.
Past due but not impaired
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of the customers
based on recent collection practices.
F
I
N
A
N
C
E
The aging of trade receivables at the reporting date is as follows:
Not yet due
Past due 1 to 3 months
Past due 3 to 6 months
More than 6 months past due
13. THE CREDIT RISK RELATING TO TRADE RECEIVABLES IS ANALYSED AS FOLLOWS:
Cash and bank balances
2021
£000
706
307
19
0
1,032
2020
£000
505
275
0
11
791
3,372
3,372
1,433
1,433
The credit risk on cash and cash equivalents is considered to be negligible because over 99% of the balance is
with counter parties that are UK and US banking institutions.
83
84
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
14. CURRENT ASSETS -
FINANCIAL INSTRUMENTS AND
RISK MANAGEMENT
Financial risk management
objectives and policies
The Group’s principal financial
instruments comprise cash
and cash equivalents, short
term deposits and bank and
other borrowings.
The carrying amount of all financial
assets presented in the statement
of financial position are measured
at amortised cost.
The carrying amount of all
financial liabilities presented in
the statement of financial position
are measured at amortised costs
with the exception of contingent
consideration with is measured at
Fair Value through profit or loss.
The Group’s financial liabilities
per the fair value hierarchy
classifications under IFRS 13
‘Financial Instruments: Disclosures’
are described below:
There have been no changes
to valuation techniques or any
amounts recognised through ‘Other
Comprehensive Income’.
The main purpose of these financial
instruments is to finance The
Group’s operations. The Group has
other financial instruments which
mainly comprise trade receivables
and trade payables which arise
directly from its operations.
Risk management is carried out
by the finance department under
policies approved by the Board
of Directors. The Group finance
department identifies, evaluates
and manages financial risks. The
Board provides guidance on overall
risk management including foreign
exchange risk, interest rate risk,
credit risk, and investment of
excess liquidity.
The impact of the risks required
to be discussed under IFRS 7 are
detailed below:
As at 30 June 2021, contingent
consideration due on acquisitions is
£nil (2020: £2.445m) - refer to note 15.
MARKET RISK
Foreign exchange risk
Foreign exchange risk arises when
future commercial transactions or
recognised assets or liabilities are
denominated in a currency that is
not the functional currency of the
operations. The Group has minimal
exposure to foreign exchange
risk as a result of natural hedges
arising between sales and cost
transactions. A 10% movement in
the USD rate would have an impact
on The Group’s profit and equity
by approximately £172,000. A 10%
movement in the Euro rate would
have an impact on The Group’s
profit and equity by approximately
£49,000.
The Group had potential
exchange rate exposure within USD
trade payable balances of £1,210,143
as at 30 June 2021 (£77,617 at 30
June 2020).
Cash flow and interest rate risk
The Group has limited exposure to
interest rate risk in respect of cash
balances and long-term borrowings
held with banks and other highly
rated counterparties. All loans and
leases are at fixed rates of interest
therefore The Group does not have
exposure to interest rate risk.
F
I
N
A
N
C
E
Credit risk
The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the
reporting date, as summarised below:
2021
£000
2020
£000
Cash and cash equivalents
Trade receivables
Contract asset
Other receivables
3,372
1,032
191
43
4,638
1,433
791
223
28
2,475
Credit risk is managed on a Group
basis. Credit risks arise from cash
and cash equivalents and deposits
with banks and financial institutions,
as well as credit exposures to
customers, including outstanding
receivables and committed
transactions. Credit risk refers to the
risk that a counterparty will default
on its contractual obligations
resulting in financial losses to
The Group. The Group provides
standard credit terms (normally 30
days) to all of its customers which
has resulted in trade receivables of
£981,000 (2020: £751,000) which are
stated net of applicable allowances
and which represent the total
amount exposed to credit risk.
The Group’s credit risk is primarily
attributable to its trade receivables.
The Group present the amounts in
the balance sheet net of allowances
for doubtful receivables, estimated
by The Group’s management based
on prior experience and the current
economic environment. The Group
reviews the reliability of its customers
on a regular basis, such a review
takes into account the nature of
The Group’s trading history with the
customer, along with managements
view of expected future events and
market conditions.
EBITDA and minimum adjusted cash
banking covenants. Judgement is
required in assessing what items
are allowable for the adjusted
components.
The credit risk on liquid funds is
limited because the majority of
funds are held with two banks with
high credit-ratings assigned by
international credit-rating agencies.
Management does not expect any
losses from non-performance of
these counterparties.
None of The Group’s financial assets
are secured by collateral or other
credit enhancements.
Liquidity risk
The Group closely monitors its
access to bank and other credit
facilities in comparison to its
outstanding commitments on a
regular basis to ensure that it has
sufficient funds to meet obligations
of The Group as they fall due. The
Group monitors it’s current debt
facilities and comply both with
its gross borrowings to adjusted
The Board receives regular debt
management forecasts which
estimate the cash inflows and
outflows over the next twelve
months, so that management can
ensure that sufficient financing is
in place as it is required. Surplus
cash within The Group is put on
deposit in accordance with limits
and counterparties agreed by
the Board, the objective being to
maximise return on funds whilst
ensuring that the short-term cash
flow requirements of The Group
are met.
As at 30 June 2021, The Group’s
financial liabilities (excluding
leases disclosed in Note 17) have
contractual maturities (including
interest payments where applicable)
as summarised below:
F
I
N
A
N
C
E
Trade and other payables
Borrowings
Within
1 month
£
995
-
Current
1–3
months
£
1,958
147
3–12
months
£
1,192
442
Non-Current
1–5
years
£
-
897
After
5 years
£
-
-
The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of
the liabilities at the reporting date.
85
86
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
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 benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares
or sell assets to reduce debts.
Total equity
Cash and cash equivalents
Capital
Total equity
Other loans
Lease liabilities
Overall financing
Capital-to-overall financing ratio
15. CONTINGENT CONSIDERATION DUE ON ACQUISITIONS
Contingent consideration due on the acquisition of VMX Ltd
2021
£000
13,765
3,372
17,137
13,765
1,485
2,866
18,116
0.95
2020
£000
6,716
1,433
8,149
6,716
2,158
2,535
11,409
0.71
2021
£000
-
2020
£000
2,445
F
I
N
A
N
C
E
At the prior year end, there was £0.49m of contingent consideration in relation to the first year earn out and £1.96m
for the second year earn out for the acquisition of Velocimetrics Ltd.
During the current year, the group settled the deferred consideration and the contingent consideration in relation
to the first year earn out in full at a total of £0.49m against the provision of £0.48m.
In the current period, the fair value of the final contingent consideration has been reassessed. Given the minimum
earn out revenue target was not met in the period, the full contingent consideration of £1.96m was credited to the
income statement.
16. NON-CURRENT LIABILITIES - BORROWINGS AND OTHER FINANCIAL LIABILITIES
Other loans
Lease liabilities
Other loans
Under one year
Between one to five years
2021
£000
896
2,210
3,106
589
896
1,485
2020
£000
1,461
1,991
3,452
697
1,461
2,158
The bank loan derives from a £1.8m term loan facility taken out from Barclays Bank in December 2020 and is
repayable in 8 quarterly instalments of £0.15m which commenced in March 2021 along with a bullet balance
repayable at Maturity. This, along with the Group’s revolving credit facility available of £2.2m, is used to fund the Group’s
working capital requirements when required. The revolving credit facility balance was nil as at 30 June 2021.
Barclays have been given security for the facility of the UK assets of the Group.
Costs of £21,500 have been amortised over the life of the loan and aged in line with the capital repayments.
Changes in liabilities arising from financing activities:
Balance at 1 July 2020
Lease liabilities additions IFRS 16
Impact of effective interest rate
Proceeds from new loans
Repayment of old loans
Loan repayments
Lease repayments
Balance at 30 June 2021
Lease
liabilities
2,535
915
(3)
-
-
-
(581)
2,866
Loans
2,158
-
-
3,050
(2,186)
(1,537)
-
1,485
Total
4,693
915
(3)
1,800
(1,806)
(667)
(581)
4,351
Included within loans is £14,000 of unamortised bank arrangement fees in respect of the new bank facilities following
the re-financing with Barclays. These costs have been capitalised and amortised over the term of the facility.
17. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Note
Trade payables
Other loans
Lease liability
Accruals
Contract liabilities
Other taxation and social security
Other payables
VAT
Deferred consideration
Contingent consideration
15
2021
£000
2,538
589
656
472
982
128
23
-
-
-
5,388
2020
£000
F
I
N
A
N
C
E
699
697
544
1,019
-
96
16
67
552
488
4,178
87
88
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
18. LEASES
The Group leases assets including the space in data centres in order to provide infrastructure services to its
customers, and for the Head Office lease in relation to its Glasgow Headquarters. Information about leases for
which The Group is a lessee is presented below:
Amounts recognised in the consolidated statement of cash flows:
Right-of-use assets
Balance at 1 July 2020
Additions
Depreciation
Balance at 30 June 2021
Leasehold
Property and
improvement
£000
2,357
915
(619)
2,653
The right-of-use assets in relation to leasehold property are disclosed as PPE (note 10).
Amounts payable under leases:
Short-term and low value lease expense
Repayment of lease liabilities within cash flows from financing activities
2021
£000
2020
£000
25
558
25
214
19. EQUITY - ISSUED CAPITAL
2021
shares
2020
shares
Ordinary shares - fully paid
56,051,149
51,228,258
2021
£000
70
Movements in ordinary share capital
Lease Liabilities
Maturity analysis:
Within one year
Within two to five years
After more than five years
Add: unearned interest
Total lease liabilities
Analysed as:
Non-current
Current
F
I
N
A
N
C
E
Note
2021
£000
2020
£000
Details
Balance
Date
Shares
Issue price
30 June 2018
50,043,100
(806)
(2,269)
-
209
(643)
(2,195)
-
303
EMI Share options exercised
31 August 2018
EMI Share options exercised
24 October 2018
EMI Share options exercised
20 June 2019
New share issue
14 April 2020
677,700
32,200
111,800
363,458
30 June 2020
51,228,258
(2,866)
(2,535)
EMI Share options exercised
9 November 2020
14
14
(2,210)
(656)
(1,991)
(544)
(2,866)
(2,535)
New share issue
New share issue
Balance
15 December 2020
26 April 2021
44,118
430,946
4,347,827
30 June 2021
56,051,149
£.00125
£.00125
£.00125
£.00125
£.00125
£.00125
£.00125
The Group does not face a significant liquidity risk with regard to its lease liabilities. The interest expense on lease
liabilities amounted to £99,026 for the year ended 30 June 2021. Lease liabilities are calculated at the present value
of the lease payments that are not paid at the commencement date.
The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12
months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight
line basis. During the year ended 30 June 2021, in relation to leases under IFRS 16, The Group recognised the
following amounts in the consolidated statement of comprehensive income:
Short-term and low value lease expense
Depreciation charge
Interest expense
2021
£000
25
619
99
2020
£000
25
582
87
Ordinary shares
During the year 4,778,773 ordinary shares were issued for a total consideration of £5.42m resulting in a premium
over the nominal value of £5,973. Transaction costs of £0.27m were netted off against the premium (see note 18).
The Director, F McDonald, exercised 44,118 share options during the year. The share price at the exercise date
was £0.98.
20. SHARE BASED PAYMENTS
The movements in the share options during the year, were as follows:-
Outstanding at the beginning of the year
Exercised during the year
Issued during the year
Outstanding at the end of the year
Exercisable at the end of the year
2021
£000
2020
£000
1,889,662
308,824
(44,118)
-
1,071,429
1,580,838
2,916,973
1,889,662
-
-
89
2020
£000
64
£000
62
1
-
1
-
64
-
1
5
70
F
I
N
A
N
C
E
90
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
The Group granted a total of 1,071,429 share options to members of its management team on 9th October 2020.
These share options outstanding at the end of the year have the following expiry dates and exercise prices:
23. RELATED PARTY TRANSACTIONS
Parent entity
Beeks Financial Cloud Group PLC is the parent entity.
Shares
Grant 1
264,706
Grant 3
Grant 4
Total
1,580,838
1,071,429
2,916,973
Subsidiaries
Interests in subsidiaries are set out in note 25.
Date of grant
6th September 2018
17th October 2019
9th October 2020
Exercise price
£0.00125
£0.00125
£0.00125
Vesting date
6th September 2021
17th October 2022
9th October 2023
Transactions with related parties
The following transactions occurred with related parties:
These share options vest under challenging performance conditions based on underlying profitability growth during
the three year period.
Withdrawals from the director, Gordon McArthur
2021
£000
4
2020
£000
11
The Black Scholes model was used to calculate the fair value of these options, the resulting fair value is expensed over
the vesting period. The following table lists the range of assumptions used in the model:
The loan account owed by the director; Gordon McArthur was repaid in full before the year end.
F
I
N
A
N
C
E
Shares
Share price (£)
Volatility
Annual risk free rate
Exercise strike price (£)
Time to maturity (yrs)
Grant 1
Grant 3
Grant 4
Total
2,916,973
264,706
1,580,838
1.02
5%
4%
0.00125
1.1667
0.84
5%
4%
0.00125
1.3333
1,071,429
0.945
5%
4%
0.00125
2.3333
The total expense recognised from
share based payments transactions
on the group’s profit for the year was
£546,363 (2020: £311,713).
These share options vest on the
achievement of challenging
growth targets. It is management’s
intention that the Company will meet
these challenging growth targets
therefore, based on management’s
expectations, the share options
are included in the calculation of
underlying diluted EPS in note 24.
21. EQUITY - RESERVES
The foreign currency retranslation
reserve represents exchange gains
and losses on retranslation of
foreign operations. Included in this
is revaluation of opening balances
from prior years.
difference between the nominal value
of the share capital in Beeks Financial
Cloud Group Limited and the value
of The Group being acquired, Beeks
Financial Cloud Limited.
During the prior year £333,000
was recognised within the merger
reserve, which arose on the share
for share exchange reflecting the
difference between the nominal
value of the share capital issued
from Beeks Financial Group Plc and
the value of the shares issued to
the owners of Velocimetrics Ltd at
the date of acquisition.
Share premium represents the
excess over nominal value of the
fair value of consideration received
for equity shares, net of expenses of
the share issue.
The merger reserve arose on the share
for share exchange reflecting the
Retained earnings represents
retained profits.
The other reserve arose on the
share for share exchange and
reflects the difference between
the value of Beeks Financial Cloud
Group Limited and the share capital
of The Group being acquired
through the share for share
exchange. Also included in the
other reserve is the fair value of the
warrants issued on the acquisition
of VDIWare LLC.
Any transaction costs associated
with the issuing of shares are
deducted from share premium, net
of any related income tax benefits.
22. CAPITAL AND OTHER
COMMITMENTS
Excluding the contingent liabilities
associated with the contingent
consideration (Note 1), there are
no contingent assets or contingent
liabilities as at 30 June 2021
(2020: nil).
Beeks Financial Cloud Limited provided services in the normal course of its business and at arm’s length to Ofelia
Algos Limited, a company owned by Gordon McArthur. During the financial year Beeks Financial Cloud Limited
made sales of £123,480 (2020: £120,540) to Ofelia Algos Limited and the amounts due to Beeks Financial Cloud
Limited at the year-end were £20,682 (2020: £35,090).
Key management personnel
Compensation paid to key management (which comprises the executive and non-executive PLC Board members)
during the year was as follows:
Wages and salaries including social security costs
Other pension costs
Other benefits in kind
Share based payments
24. EARNINGS PER SHARE
Profit after income tax attributable to the
owners of Beeks Financial Cloud Group PLC
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary shares
used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Weighted average number of ordinary shares
used in calculating diluted earnings per share
2021
£000
221
4
2
141
2021
£000
1,604
Pence
3.07
3.07
F
I
N
A
N
C
E
2020
£000
258
5
-
115
2020
£000
575
Pence
1.13
1.13
Number
Number
52,276,498
50,942,258
15,351
48,132
52,291,848
50,990,391
91
92
Beeks Financial Cloud Group PLC
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 30 June 2021
Profit before tax for the year
Acquisition costs
Share Based payments
Amortisation on acquired intangibles
Exceptional non-recurring costs
Impairment of Intangibles assets / goodwill
Grant income
Gain on revaluation of contingent consideration
Tax effect
Underlying profit for the year
2021
£000
1,255
140
546
806
165
994
(309)
(1,989)
34
1,642
2020
£000
575
205
312
236
61
-
(59)
-
(45)
1,285
Weighted average number of shares in issue - basic
Weighted average number of shares in issue - diluted
52,276,498
54,915,279
50,942,258
52,409,256
Underlying earnings per share - basic
Underlying earnings per share - diluted
3.14
2.99
2.52
2.45
Included in the weighted average number of shares for the calculation of underlying diluted EPS are share options
outstanding but not exercisable. It is management’s intention that the Company will meet the challenging growth
targets therefore, based on management expectations, the share options are included in the calculation of
underlying diluted EPS.
25. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
held by the company In accordance with the accounting policy described in note 1.
The subsidiary undertakings are all 100% owned, with 100% voting rights.
F
I
N
A
N
C
E
Company name
Country of
incorporation
Principal place
of business/
Registered office
Beeks Financial Cloud Co Ltd
Japan
Beeks FX VPS USA Inc.
Delaware, USA
Beeks Financial Cloud Limited
Scotland
Velocimetrics Limited
England
Velocimetrics Inc
New York, USA
FARO 1F, 2-15-5,
Minamiaoyama, Minato-Ku,
Tokyo, Japan.
874 Walker Road, Suite C,
Dover, Kent, Delaware, 19904,
USA.
Lumina Building, 40 Ainslie
Road, Ground Floor, Hillington
Park, Glasgow, UK, G52 4RU
Birchin Court, 230 Park Avenue
20 Birchin Lane, Suite 300 West,
London, England, EC3V 9DU
230 Park Avenue, 10th Floor,
New York 10169, USA.
Activity
Non-trading
Non-trading
Cloud Computing
Services
Software Services
Software Services
In accordance with S479A of the Companies Act 2006, Velocimetrics Limited (06943398) have not prepared
audited accounts. Beeks Financial Cloud Group plc guarantees all outstanding liabilities in this company at the
year ended 30 June 2021, until they are satisfied in full.
26. EVENTS AFTER THE REPORTING PERIOD
Beeks headquarters will move from the existing leased office to the nearby Riverside Business Park, King’s Inch
Road, Braehead, PA4 8YU in early 2022. In September 2021, the Group finalised the purchase of the property for
£2.1m which was funded out of existing Company cash balances and a new debt facility of £1.5m taken post
year end.
27. ULTIMATE CONTROLLING PARTY
The Directors have assessed that there is no ultimate controlling party.
F
I
N
A
N
C
E
93
94
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
F
I
N
A
N
C
E
OPINION
Our opinion on the parent
company financial statements is
unmodified
We have audited the parent
company financial statements of
Beeks Financial Cloud Group PLC
for the year ended 30 June 2021,
which comprise the company
statement of financial position,
he company statement of
changes in equity and notes
to the company financial
statements, including a summary
of significant accounting policies.
The financial reporting framework
that has been applied in their
preparation is applicable law
and United Kingdom Accounting
Standards, including Financial
Reporting Standard 101 ‘Reduced
Disclosure Framework’ (United
Kingdom Generally Accepted
Accounting Practice).
In our opinion, the parent company
financial statements:
/ give a true and fair view of the
state of the parent company’s
affairs as at 30 June 2021;
/ have been properly prepared
in accordance with United
Kingdom Generally Accepted
Accounting Practice; and
/ 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 parent company
financial statements’ section of our
report. We are independent of the
parent company in accordance
with the ethical requirements
that are relevant to our audit of
the parent company 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
We are responsible for concluding
on the appropriateness of the
directors’ use of the going concern
basis of accounting and, based
on the audit evidence obtained,
whether a material uncertainty
exists related to events or
conditions that may cast significant
doubt on the parent company’s
ability to continue as a going
concern. If we conclude that a
material uncertainty exists, we are
required to draw attention in our
report to the related disclosures
in the financial statements or, if
such disclosures are inadequate,
to modify the auditor’s opinion. Our
conclusions are based on the audit
evidence obtained up to the date
of our report. However, future events
or conditions may cause the parent
company to cease to continue as a
going concern.
Our evaluation of the directors’
assessment of the parent
company’s ability to continue to
adopt the going concern basis of
accounting was undertaken as part
of our evaluation of The Group. This
evaluation included:
/ Obtaining management’s cash
flow forecasts for The Group
covering the period to December
2022. We assessed how these
forecasts were compiled, and
assessed their accuracy by
validating underlying information
and verifying mathematical
accuracy of the model used;
/ Challenged management on
the key assumptions used with
the forecasts testing the accuracy
of the assumptions and inputs
by corroborating to underlying
information. We also assessed
the mitigating actions available to
management and corroborated
these available actions to
supporting information;
/ Obtained forecast covenant
compliance workings for the going
concern period and reperformed
the calculations to ensure
mathematical accuracy;
/ We performed a retrospective
review of management’s
forecasts by comparing the
forecasts to actuals in the
previous two financial years to
determine the accuracy of prior
year assessments. We also
compared actual results to date
to the forecasts; and
/ We assessed the adequacy
of the disclosures in the financial
statements, including the impact
of the disclosed post balance
sheet event to the going
concern model.
In our evaluation of the directors’
conclusions, we considered the
inherent risks associated with the
parent company’s business model
including effects arising from
macro-economic uncertainties
such as Covid-19 and Brexit, we
assessed and challenged the
reasonableness of estimates
made by the directors and the
related disclosures and analysed
how those risks might affect
the parent company’s financial
resources or ability to continue
operations over the going
concern period.
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 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.
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.
The responsibilities of the directors
with respect to going concern are
described in the ‘Responsibilities of
directors for the parent company
financial statements’ section of
this report.
F
I
N
A
N
C
E
95
96
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
OUR APPROACH TO THE AUDIT
Key audit matters were identified as:
/ Impairment of investment in
Velocimetrics Limited (new)
We performed a full scope audit
of the financial statements of the
parent company.
Our auditor’s report for the year
ended 30 June 2020 included one
key audit matter that has not been
reported as key audit matter in
our current year’s report, which
related to the impact of Covid-19
on going concern. This risk was
rebutted for the current year given
management’s ability to show no
significant impact of Covid-19 on
the performance of the business
and a strong cash balance due to
multiple equity raises in the year.
F
I
N
A
N
C
E
OVERVIEW OF OUR AUDIT
APPROACH
Overall materiality: £114,000,
which represents 1% of the parent
company’s total assets at the
planning stage of the audit.
KEY AUDIT MATTERS
Key audit matters are those matters
that, in our professional judgement,
were of most significance in our
audit of the parent company
financial statements of the current
period and include the most
significant assessed risks of material
misstatement (whether or not due
to fraud) that we identified. These
matters included those that 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 parent
company financial statements as
a whole, and in forming our opinion
thereon, and we do not provide a
separate opinion on these matters.
In the graph below, we have
presented the key audit matters,
significant risks and other risks
relevant to the audit.
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
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Independent
Auditors’ Report
Key Audit Matter
How our scope addressed the matter
Impairment of investment in Velocimetrics Limited
We identified the impairment of the investment in
Velocimetrics Limited as one of the most significant
assessed risks of material misstatement due to
fraud and error.
In the prior year, the acquisition of Velocimetrics
Limited resulted in an investment in shares in group
undertakings with a carrying value of £4.083m on the
company’s balance sheet. There is a risk that these
values are now impaired which is further evidenced
by the release of £2.0m of accrued contingent
consideration in the year. The process for assessing
whether an impairment exists under International
Accounting Standard (IAS) 36 ‘Impairment of Assets’
is complex and requires calculating the value in
use through forecasting cash flows related to cash
generating units (CGUs) and the determination of
the appropriate discount rate and other assumptions
to be applied is highly judgemental and subject to
management bias. The selection of certain inputs into
the cashflow forecast can significantly impact the
result of the impairment review.
The key inputs impacting the model
are considered to be:
/ The pipeline of future sales opportunities;
/ The discount rate;
/ The allocation of costs and corporate assets; and
/ The growth rate.
As a result of this process, management identified
an impairment of £784,000 within the Investment in
relation to Velocimetrics Limited.
Relevant disclosures in the Annual Report 2021
/ Financial statements: Note 2, Investments
In responding to the key audit matter, we performed the
following audit procedures:
We obtained management’s impairment assessment
and challenged the assumptions within this, including:
checking how these forecasts were replicated within
the going concern forecasting; and considering
management’s assessment of CGUs and the allocation
to assets (including corporate assets) against these
CGUs. We also confirmed the cashflows have been
management approved;
Revenue growth within the forecasts was specifically
challenged given the underperformance of Velocimetrics
post acquisition. The key revenue driver in the model, being
the pipeline of sales opportunities, was challenged and
corroborating evidence, such as contracts won post
year end and proposals out at the tender stage, were
obtained and agreed back into the forecasts. We also
challenged the inputs into the run-rate specifically
those values impacting the terminal value year;
Costs were considered and challenges made to
management with regards to the reasonableness
of overheads incorporated;
Our internal experts reviewed the reasonableness of the
discount rate applied to the impairment model including
the workings behind this discount rate;
Sensitivities were performed on the cashflows to bring
together all evidence to identify a potential undetected
impairment; and
We reviewed the disclosures and accounting policies
relating to the impairment assessment and investment
balances to assess whether these were in accordance
with FRS 101.
Our results
Overall, our audit testing did not identify any evidence
of a further material impairment charge being required
against the carrying value of investments.
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of
identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in
forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Parent Company
Materiality for financial
statements as a whole
Materiality threshold
We define materiality as the magnitude of misstatement in the financial
statements that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of these
financial statements. We use materiality in determining the nature, timing
and extent of our audit work.
£114,000, which represents 1% of the parent company’s total assets at the
planning stage of the audit. We chose not to revise our materiality during
the course of the audit once the final total assets figure, which was higher,
was known.
Significant judgements
made by auditor in
determining the materiality
In determining materiality, we made the following significant judgements:
We considered total assets to be the most appropriate benchmark given
that the parent company does not trade and its primary purpose is that of
holding investments for the group.
Materiality for the current year is higher than the level that we determined
for the year ended 30 June 2020 to reflect the increase in total assets,
particularly in intercompany receivables and cash, at the year end.
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Performance materiality
used to drive the extent of
our testing
We set performance materiality at an amount less than materiality for
the financial statements as a whole to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
Performance materiality
threshold
Significant judgements
made by auditor
in determining the
performance materiality
£79,800, which is 70% of financial statement materiality.
In determining performance materiality, we made the following significant
judgements:
We considered 70% of financial statement materiality to be appropriate for
performance materiality given the AIM listed status of the business. Prior
year unadjusted errors have also been considered, however these have
historically been immaterial individually and in aggregate. The internal
control environment is dependent upon a sufficiently sized and qualified
finance team which is considered appropriate for the current size and scale of
the business, which is further supported through robust Board oversight.
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
Specific Materiality
We determine specific materiality for one or more particular classes of
transactions, account balances or disclosures for which misstatements of
lesser amounts than materiality for the financial statements as a whole could
reasonably be expected to influence the economic decisions of users taken
on the basis of the financial statements.
Specific Materiality
We determined a lower level of specific materiality for the following areas:
/ Directors’ remuneration; and
/ Related party transactions.
Communication of
misstatements to the audit
committee
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We determine a threshold for reporting unadjusted differences to the audit
committee.
Threshold for
communication
£5,700 and misstatements below that threshold that, in our view, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for
potential uncorrected misstatements.
OVERALL MATERIALITY
AN OVERVIEW OF THE SCOPE OF
OUR AUDIT
We performed a risk-based audit
that requires an understanding of
the parent company’s business and
in particular matters related to:
Understanding the parent
company, its environment,
including controls
/ Our assessment of audit risk,
our evaluation of materiality,
our allocation of performance
materiality and the procedures
performed as part of the audit,
enables us to form an opinion
on the parent company financial
statements. We take into
consideration account sizes, risk
profile, changes in the business
environment and other factors
when assessing the level of work
to be performed on each scoped
item;
/ We have obtained an
understanding of the entity-level
controls of the parent company,
which assisted us in identifying
and assessing the risks of material
misstatement due to fraud or
error, as well as assisting us in
determining the most appropriate
audit strategy;
Work to be performed on financial
information of parent company
(including how it addressed the key
audit matters)
/ We performed a full scope audit
of the financial statements of the
parent company;
/ The key focus for the audit of
the parent company, as identified
within the key audit matters
section, is the valuation of the
investment in Velocimetrics
Limited, where the impairment
assessment was audited to gain
assurance over the valuation of
the investment at year end;
Performance of our audit
/ An interim visit was undertaken
to perform specific audit
procedures on equity raises
completed to December 2020;
and
/ The year-end audit was
undertaken remotely.
Changes in approach from
previous year
/ There were no material changes
in the scope of the current year
from the scope of the prior year.
OTHER INFORMATION
The directors are responsible
for the other information. The
other information comprises the
information included in the annual
report, other than the financial
statements and our auditor’s report
thereon. Our opinion on the 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.
In connection with our audit of
the parent company financial
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statements, our responsibility is to
read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the parent company financial
statements or our knowledge
obtained in 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 there is a
material misstatement of the parent
company financial statements or a
material misstatement of the other
information. 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.
OUR OPINION ON OTHER MATTERS
PRESCRIBED BY THE COMPANIES
ACT 2006 IS UNMODIFIED
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 parent company
financial statements are prepared
is consistent with the parent
company financial statements; and
/ the strategic report and the
directors’ report have been
prepared in accordance with
applicable legal requirements.
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Independent
Auditors’ Report
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MATTER ON WHICH WE ARE
REQUIRED TO REPORT UNDER
THE COMPANIES ACT 2006
In the light of the knowledge and
understanding of the parent
company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in the strategic report
or the directors’ report.
MATTERS ON WHICH WE
ARE REQUIRED TO REPORT
BY EXCEPTION
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
FOR THE PARENT COMPANY
FINANCIAL STATEMENTS
As explained more fully in the
directors’ responsibilities statement,
the directors are responsible for the
preparation of the 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 parent
company financial statements that
are free from material misstatement,
whether due to fraud or error.
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 parent
company financial statements.
In preparing the parent company
financial statements, the directors
are responsible for assessing
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 parent
company or to cease operations,
or have no realistic alternative but
to do so.
AUDITOR’S RESPONSIBILITIES
FOR THE AUDIT OF THE
PARENT COMPANY FINANCIAL
STATEMENTS
Our objectives are to obtain
reasonable assurance about
whether the parent company
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
A further description of our
responsibilities for the audit of
the parent company 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.
EXPLANATION AS TO WHAT
EXTENT THE AUDIT WAS
CONSIDERED CAPABLE OF
DETECTING IRREGULARITIES,
INCLUDING FRAUD
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. Owing to the inherent
limitations of an audit, there is
an unavoidable risk that material
misstatements in the financial
statements may not be detected,
even though the audit is properly
planned and performed in
accordance with the ISAs (UK).
The extent to which our procedures
are capable of detecting
irregularities, including fraud, is
detailed below:
/ We obtained an understanding
of the legal and regulatory
frameworks applicable to the
parent company and the industry
in which it operates through our
general commercial and sector
experience. We determined the
following laws and regulations
were most significant: Financial
Reporting Standard 101 ‘Reduced
Disclosure Framework’, the
Companies Act 2006 and the
Quoted Companies Alliance
(QCA) Corporate Governance
Code. In addition, we concluded
that there are certain sector laws
and regulations that may impact
the financial statements, namely
GDPR regulations and Information
Security Management System
(ISMS) Standards;
/ We obtained an understanding
of how the parent company is
complying with these legal and
regulatory frameworks by making
enquiries of management, the
Audit Committee and reviewing
legal correspondence. We
corroborated our enquiries
through a review of board minute
papers. Management and the
Audit Committee confirmed they
were not aware of any instances
of non-compliance and had no
knowledge of actual, suspected or
alleged fraud;
/ We assessed the susceptibility
of the parent company’s
financial statements to material
misstatement, including how
fraud might occur, by evaluating
management’s incentives and
opportunities for manipulation
of the financial statements. Our
audit procedures were designed
to provide reasonable assurance
that the financial statements
were free from fraud or error.
However, detecting irregularities
that result from fraud is inherently
more difficult than detecting
those that result from error, as
those irregularities that result
from fraud may involve collusion,
deliberate concealment, forgery
or intentional misrepresentation.
The procedures included:
- Evaluation of the design
effectiveness of controls that
management has in place to
prevent and detected fraud;
- Journal entry testing, with a
focus on manual journals with a
profit impact;
- Challenging assumptions
and judgements made by
management in areas of
estimation and judgement;
- Assessing the extent of
compliance with the relevant laws
and regulations as part of our
procedures on legal expenditure;
and
- Performing audit procedures to
test whether all the disclosures
required by FRS 101 and the
Companies Act 2006 were made
in the financial statements.
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/ Our assessment of the
appropriateness of the collective
competence and capabilities of
the engagement team included
consideration of the engagement
team’s:
- Understanding of, and practical
experience with, engagements
of similar nature and complexity,
through appropriate training and
participation; and
- Knowledge of the industry
in which the parent company
operates.
/ Our communications, both
with management and the
Audit Committee, in respect of
non-compliance with laws and
regulations and fraud pertain to
inaccurate assumptions included
within the investment impairment
assessment. This is reported as
key audit matter in the relevant
section of our report where the
matter is explained in more detail;
/ In assessing the potential risk
of material misstatement, we
obtained an understanding of:
- The operations of the parent
company, including the objectives
and strategies, in order to
understand the classes of
transactions, account balances,
expected disclosures and risk
areas; and
- The control environment,
including the policies and
procedures implemented
to comply with regulatory
requirements, including the
adequacy of the training to inform
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud PLC
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Company Statement of Financial Position
For the year ended 30 June 2021
Independent
Auditors’ Report
staff of changes in legislation,
internal review procedures and
resources available to ensure
that possible breaches of
requirements are appropriately
investigated and reported.
OTHER MATTERS
We have reported separately on
The Group financial statements of
Beeks Financial Cloud Group PLC
for the year ended 30 June 2021.
That report includes details of The
Group key audit matters; how we
applied the concept of materiality in
planning and performing our audit;
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and an overview of the scope of
our audit.
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.
JAMES CHADWICK
Senior Statutory Auditor for and
on behalf of Grant Thornton UK LLP
Statutory Auditor,
Chartered Accountants
Glasgow
24 September 2021
Assets
Non-current assets
Investments
Deferred tax
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Contingent Consideration
Deferred tax
Current liabilities
Trade and other payables
Net current assets
Net assets
Equity
Issued capital
Share premium
Reserves
Retained earnings
Total equity
Note
4
5
6
10
5
8
9
9
9
2021
£000
4,045
313
4,358
7,275
1,930
9,205
13,563
-
-
-
383
8,822
13,180
70
9,452
1,588
2,070
13,180
2020
Restated
£000
4,647
-
4,647
4,246
8
4,254
8,901
1,961
3
1,964
1,301
2,953
5,636
64
4,309
1,079
184
5,636
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The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its
own profit and loss account in these financial statements. The parent company’s profit after tax for the year was
£1,958,641 (2020: £106,000).
These financial statements were approved by the Board of Directors and were authorised for issue on 24
September 2021 and are signed on its behalf by:
GORDON MCARTHUR
Chief Executive Officer
Company name, Beeks Financial Cloud Group PLC
Company number, SC521839
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Beeks Financial Cloud Group PLC
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2021
Share
based
payments
£000
63
-
-
311
-
Issued
capital
£000
64
-
-
-
-
Merger
relief
£000
Share
premium
£000
Retained
earnings
£000
372
-
333
-
-
4,309
-
-
-
-
Total
equity
£000
4,938
106
333
311
130
106
-
-
(178)
(178)
374
64
705
4,309
58
5,510
374
64
705
4,309
-
-
-
547
(38)
-
883
-
-
6
-
-
70
-
-
-
-
-
-
-
5,143
-
-
705
9,452
126
184
126
5,636
1,959
1,959
1,959
1,959
69
-
-
38
(180)
2,070
69
5,149
547
-
(180)
13,180
As at 1 July 2019
Profit after income tax
expense for the year
Issue of share capital
Share based payments
Dividends paid
As at 30 June 2020 and 1
July 2020 (as previously
stated)
Prior periods share
expense (note 4)
As at 30 June 2020 and 1
July 2020 (restated)
Profit after income tax
expense for the year
Total comprehensive
income
Deferred tax
Issue of share capital
Share based payments
Issue of share capital
Dividends paid
As at 30 June 2021
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1. COMPANY INFORMATION
Beeks Financial Cloud Group PLC
(the “Company”) is a public limited
company which is listed on the
AIM Market of the London Stock
Exchange and incorporated in
Scotland.
The address of the registered
office is: Lumina Building, 40 Ainslie
Road, Ground Floor, Hillington
Park, Glasgow, UK, G52 4RU. Beeks
Financial Cloud Group PLC was
incorporated on 4 December
2015 and has subsequently been
converted to a public limited
company “plc” on 8 November 2017.
The principal activity of the
Company and its subsidiaries is the
provision of information technology
services. The company number
is SC521839.
2. ACCOUNTING POLICIES
Basis of preparation
These financial statements have
been prepared in accordance with
applicable accounting standards
and in accordance with Financial
Reporting Standard 101 – The
Reduced Framework (FRS 101).
The principal accounting policies
adopted in preparation of the
financial statements are set out
on pages 62 to 93. These policies
have been applied consistently
throughout the year unless
otherwise stated.
The financial statements have been
prepared on an historic cost basis.
The financial statements are
presented in pounds sterling.
Disclosure exemptions adopted
In preparing these financial
statements the Company has
taken advantage of all disclosure
exemptions conferred by FRS 101.
These financial statements do not
include:
/ A statement of cash flows and
related notes,
/ Disclosure of key management
personnel compensation,
/ The effect of future accounting
standards not adopted,
/ Related party transactions with
other group entities,
/ Share based payments
disclosures,
/ Financial instrument disclosures.
Going concern
The Company has net current
assets of £8.8m at 30th June 2021
(2020: £3.0m).
After making enquiries, the directors
have a reasonable expectation that
the Company will be able to meet
its financial obligations and has
adequate resources to continue
in operational existence for the
foreseeable future (being a period
extending at least twelve months
from the date of approval of these
financial statements). For this
reason they continue to adopt the
going concern basis in preparing
the financial statements.
Revenue
Revenue arises from intercompany
management charges, stated net
of VAT.
Investments
Investments held as fixed assets
are stated at cost less provision
for any permanent diminution in
value. On an annual basis, in order
to assess any potential impairment
of investments, the carrying value
of the investment in all companies
is considered against future cash
flows and reviewed for events or
changes in circumstances that
indicate that the carrying amount
may be impaired.
Contingent consideration
Where an acquisition involves a
potential payment of contingent
consideration the estimate of
any such payment is based on
its fair value. To estimate the fair
value an assessment is made
as to the amount of contingent
consideration which is likely to
be paid having regard to the
criteria on which any sum due will
be calculated and is probability
based to reflect the likelihood of
different amounts being paid.
Where a change is made to the fair
value of contingent consideration
within the initial measurement
period as a result of additional
information obtained on facts
and circumstances that existed
at the acquisition date then this
is accounted for as a change in
goodwill. Where changes are made
to the fair value of contingent
consideration as a result of events
that occurred after the acquisition
date then the adjustment is
accounted for as a charge or
credit to profit or loss.
Deferred consideration is
recognised at fair value at the
acquisition date. Subsequent
changes to the fair value of the
deferred consideration, which is
deemed to be an asset or liability,
are recognised either in the profit
and loss account or in other
comprehensive income.
Prior period adjustment
During the year, it was identified
that the full share based payment
charges for options awarded to
employees across The Group
had been apportioned incorrectly
through the parent company only.
The correct treatment should have
been to apportion the charge to the
subsidiary companies where the
employees receiving the options
were contracted.
As a consequence, the value of
investment and retained earnings in
the Beeks Financial Cloud Group PLC
(the “Company”) were understated
in the prior period. The error has
been corrected by restating the
value of investments in the prior
year from £4.52m to £4.65m and
retained earnings from £0.05m to
£0.18m. This resulted in an overall
increase in net assets from £5.51m
to £5.64m.
Critical accounting judgements
and key sources of estimation
uncertainty
The key judgements in preparation
of the financial statements are
below and opposite:
Carrying value of investments
The Company carries out an
impairment review whenever
events or changes in circumstance
indicates that the carrying value of
a investment is possible. In addition,
the Company carries out an annual
impairment review. An impairment
is recognsed when the recoverable
amount is less than the carrying
amount. The impairment tests are
carried out by cash generating unit
and reflect the latest projections
from the subsidiary.
The value in use calculation
requires an estimate to be made
of the timing and of the amount of
future cash flows to be generated
and the application of a suitable
discount rate in order to calculate
the present value. A change in
the assumptions selected by
management and used in the cash
flow projections could significantly
affect the impairment calculation.
During the year, the impairment
review identified an impairment
to the carrying value of the
investment, with a change to
the P&L of £784,000 recognised
in the year.
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Beeks Financial Cloud Group PLC
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2021
2021
2020
7. Current liabilities – Trade and other payables
3. Staff Costs
i)
Average monthly number of employees
(including directors) by activity:
Management and administration
ii)
Cost of employment (including directors):
Wages and salaries
Social security costs
Pension costs
Number
22
Number
17
£000
1,399
170
34
1,603
2021
£000
4,045
£000
942
112
22
1,076
2020
Restated
£000
4,647
4. Investments
Shares in Group undertakings
During the year, the Group
issued share options of £308,144
to employees of the subsidiary
companies.
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During 2021, the Group identified
that the full share based payment
charges for options awarded to
employees across the group had
been apportioned incorrectly
through the parent company only.
This has been adjusted in the year,
with prior year being restated. As
a result of this, Investments have
been increased by £126,179 and
retained earnings have decreased
by £126,179.
Following an impairment review,
the investment in Velocimetrics
Limited was impaired by £784,000
(2020 - £nil).
5. Deferred Tax
Tax losses carried forward
Share based payments, recognised in equity
Deferred tax asset
Deferred tax liability
6. Current assets – Trade and other receivables
Repayments and accrued interest
Amounts due from Group undertakings
2021
£000
244
69
313
2021
£000
75
7,200
7,275
2020
£000
-
-
-
3
2020
£000
48
4,198
4,246
Trade payables
Accruals
Other taxes
Other payables
Deferred consideration
Contingent consideration
8. EQUITY – ISSUED CAPITAL
For details of the issued share
capital see note 19 in the
Group notes.
Financial Cloud Group Limited
and the value of The Group being
acquired, Beeks Financial Cloud
Limited.
9. EQUITY - RESERVES
Ordinary shares are classified
as equity. An equity instruments
is a contract that evidences a
residential interest in the assets
of Beeks Financial Cloud Group Plc
after deducting all of its liabilities.
Every instrument issued by Beeks
Financial Cloud Group Plc are
recorded at the proceeds received
net of direct issue costs.
The share capital amount
represents the amount subscribed
for shares at nominal value. Any
transactional costs associated with
the issuing of share are deducted
from the share premium, net of
any related taxation benefits. The
accounting policies set out above
have, unless otherwise stated, have
been applied consistently by The
Group to all periods presented.
During the prior year £333,000
was recognised within the merger
reserve, which arose on the share
for share exchange reflecting the
difference between the nominal
value of the share capital issued
from Beeks Financial Group plc
and the value of the shares issued
to the owners of Velocimetrics Ltd
at the date of acquisition.
10. RELATED PARTY
TRANSACTIONS
As permitted by FRS 101, related
party transactions by wholly
owned members of The Group
have not been disclosed. Related
party transactions regarding
remuneration and dividends
paid to key management of the
company have been disclosed
in note 23 of The Group financial
statements.
The merger reserve arose on the
share for share exchange reflecting
the difference between the nominal
value of the share capital in Beeks
11. CAPITAL COMMITMENTS
The Company had no material
capital commitments at 30
June 2021.
2021
£000
23
148
205
7
-
-
383
2020
£000
14
53
189
5
552
488
1,301
12. CONTINGENT LIABILITIES
The Company had no material
contingent liabilities at 30 June 2021.
13.POST BALANCE SHEET EVENTS
Beeks headquarters will move
from the existing leased office to the
nearby Riverside Business Park, King’s
Inch Road, Braehead, PA4 8YU in
early 2022. In September 2021, The
Group finalised the purchase of
the property for £2.1m which was
funded out of existing Company
cash balances and a new debt
facilities of £1.5m taken post
year end.
14. ULTIMATE
CONTROLLING PARTY
The Directors have assessed
that there is no ultimate
controlling party.
F
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109
Notes
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Lumina Building, 40 Ainslie Road
Hillington, Glasgow G52 4RU
beeksgroup.com